<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 3, 1999 or
/_/ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-10582
ALLIANT TECHSYSTEMS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1672694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 SECOND STREET N.E.
HOPKINS, MINNESOTA 55343-8384
(Address of principal executive office) (Zip Code)
(612) 931-6000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed under Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No /_/
As of October 31, 1999, the number of shares of the registrant's common
stock, par value $.01 per share, outstanding was 9,978,515 (excluding 3,885,098
treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Income Statements (Unaudited)
<TABLE>
<CAPTION>
(In thousands except QUARTERS ENDED SIX MONTHS ENDED
per share data) ---------------------------- ----------------------------
October 3 September 27 October 3 September 27
1999 1998 1999 1998
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sales $ 252,789 $ 258,998 $525,510 $ 515,319
Cost of sales 200,708 213,564 425,369 424,654
-------- --------- -------- ---------
Gross margin 52,081 45,434 100,141 90,665
Operating expenses:
Research and development 2,918 2,137 4,805 3,732
Selling 5,088 5,734 10,569 14,486
General and administrative 14,307 13,162 26,740 24,080
-------- --------- -------- ---------
Total operating expenses 22,313 21,033 42,114 42,298
-------- --------- -------- ---------
Income from operations 29,768 24,401 58,027 48,367
Miscellaneous income 17 77 18 41
-------- --------- -------- ---------
Income before interest and income taxes 29,785 24,478 58,045 48,408
Interest expense (8,307) (5,192) (17,462) (10,876)
Interest income 140 323 247 667
-------- --------- -------- ---------
Income from continuing operations before
income taxes 21,618 19,609 40,830 38,199
Income tax provision 5,621 2,941 10,232 5,730
-------- --------- -------- ---------
Income from continuing operations 15,997 16,668 30,598 32,469
Gain on disposal of discontinued
operations, net of income taxes 9,450 - 9,450 -
-------- --------- -------- ---------
Income before extraordinary loss 25,447 16,668 40,048 32,469
Extraordinary loss on early extinguishment
of debt, net of income taxes - (14,627) - (14,627)
-------- --------- -------- ---------
Net income $ 25,447 $ 2,041 $ 40,048 $ 17,842
======== ========= ======== =========
Basic earnings per common share:
Income from continuing operations $ 1.56 $ 1.33 $ 2.99 $ 2.58
Discontinued operations .92 - .92 -
Extraordinary loss - (1.17) - (1.16)
-------- --------- -------- ---------
Basic earnings per common share $ 2.48 $ .16 $ 3.91 $ 1.42
======== ========= ======== =========
Diluted earnings per common share:
Income from continuing operations $ 1.53 $ 1.30 $ 2.92 $ 2.51
Discontinued operations .90 - .90 -
Extraordinary loss - (1.14) - (1.13)
-------- --------- -------- ---------
Diluted earnings per common share $ 2.43 $ .16 $ 3.82 $ 1.38
======== ========= ======== =========
Average number of common shares
(thousands) 10,240 12,502 10,233 12,607
======== ========= ======== =========
Average number of common and
dilutive shares (thousands) 10,457 12,813 10,471 12,918
======== ========= ======== =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
---------------------- --------------------
(In thousands except share data) October 3, 1999 March 31, 1999
---------------------- --------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 28,871 $ 21,078
Receivables 225,217 233,499
Net inventory 50,508 44,030
Deferred income tax asset 41,912 41,912
Other current assets 5,520 2,589
--------------- -----------------
Total current assets 352,028 343,108
Net property, plant, and equipment 332,562 335,751
Goodwill 125,092 127,799
Prepaid and intangible pension assets 77,738 77,552
Other assets and deferred charges 8,995 10,108
--------------- -----------------
Total assets $ 896,415 $ 894,318
=============== =================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 51,375 $ 36,500
Line of credit borrowings 17,000 -
Accounts payable 61,355 93,991
Contract advances and allowances 35,116 49,456
Accrued compensation 24,841 32,433
Accrued income taxes 18,546 13,075
Other accrued liabilities 56,751 61,033
--------------- -----------------
Total current liabilities 264,984 286,488
Long-term debt 305,118 305,993
Post-retirement and post-employment benefits liability 124,006 128,279
Other long-term liabilities 54,999 54,835
--------------- -----------------
Total liabilities $ 749,107 $ 775,595
Contingencies
Common stock - $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding 10,153,939 shares at
October 3, 1999 and 10,284,530 at March 31, 1999 $ 139 $ 139
Additional paid-in-capital 237,247 238,513
Retained earnings 163,405 123,357
Unearned compensation (3,418) (3,289)
Pension liability adjustment (2,940) (2,940)
Common stock in treasury, at cost (3,704,674 shares held at
October 3, 1999 and 3,579,083 at March 31, 1999) (247,125) (237,057)
--------------- -----------------
Total stockholders' equity $ 147,308 $ 118,723
--------------- -----------------
Total liabilities and stockholders' equity $ 896,415 $ 894,318
=============== =================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(In thousands) SIX MONTHS ENDED
------------------- --------------------
October 3, 1999 September 27, 1998
------------------- --------------------
<S> <C> <C>
Operating activities
Net income $ 40,048 $ 17,842
Adjustments to net income to arrive at cash provided by
(used for) operations:
Depreciation 19,917 19,424
Amortization of intangible assets and unearned
compensation 4,587 2,954
Extraordinary loss on early extinguishment
of debt - 17,208
Loss on disposal of property 499 367
Changes in assets and liabilities:
Receivables 8,282 2,052
Inventory (6,478) 2,320
Accounts payable (32,636) (12,588)
Contract advances and allowances (14,341) (12,927)
Accrued compensation (7,592) (8,788)
Accrued income taxes 5,471 1,837
Accrued restructuring and facility consolidation - (2,295)
Accrued environmental liability (42) (274)
Pension and post-retirement benefits (4,067) (4,273)
Other assets and liabilities (7,027) (23,475)
-------------- -------------
Cash provided by (used for) operations 6,621 (616)
-------------- -------------
Investing activities
Capital expenditures (17,219) (13,688)
Acquisition of business - (1,100)
Proceeds from disposition of property, plant, and equipment (59) 260
-------------- -------------
Cash used for investing activities (17,278) (14,528)
-------------- -------------
Financing activities
Net borrowings on line of credit 17,000 159,000
Payments made on bank debt (15,000) (8,834)
Payments made to extinguish high yield debt - (152,997)
Proceeds from issuance of long-term debt 29,000 -
Net purchase of treasury shares (13,868) (29,213)
Proceeds from exercised stock options 1,318 1,626
--------------- -------------
Cash provided by (used for) financing activities 18,450 (30,418)
-------------- -------------
Increase (decrease) in cash and cash equivalents 7,793 (45,562)
Cash and cash equivalents - beginning of period 21,078 68,960
-------------- -------------
Cash and cash equivalents - end of period $ 28,871 $ 23,398
============== =============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Notes to Consolidated Financial Statements (Unaudited)
1. During the six-months ended October 3, 1999, the Company made principal
payments on its bank term debt of $15.0 million. At October 3, 1999, the
Company had borrowings of $17.0 million against its $250 million bank
revolving credit facility. Additionally, the Company had outstanding
letters of credit of $41.0 million, which further reduced amounts available
on the revolving facility to $192.0 million at October 3, 1999.
The remaining scheduled minimum loan payments on outstanding long-term debt
are as follows: fiscal 2000, $23.6 million; fiscal 2001, $55.7 million;
fiscal 2002 through 2004, $69.2 million, per year; fiscal 2005, $69.7
million.
2. The major categories of current and long-term accrued liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
Period Ending
------------------------------------------------------------
October 3, 1999 March 31, 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Employee benefits and insurance $ 21,994 $ 30,231
Legal accruals 10,391 10,045
Other accruals 24,366 20,757
---------------------------------------------------------------------------------------------------------
Other accrued liabilities-current $ 56,751 $ 61,033
---------------------------------------------------------------------------------------------------------
Environmental remediation liability $ 18,002 $ 18,044
Deferred tax liability 25,870 25,870
Supplemental employee retirement plan 11,159 10,953
Other (32) (32)
---------------------------------------------------------------------------------------------------------
Other long-term liabilities $ 54,999 $ 54,835
---------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in employee benefits and insurance since March 31, 1999 is
reflective of payments made during the six-month period ended October 3,
1999, for previously accrued employee payroll taxes.
3. Tax payments of $4.7 and $1.3 million were paid for alternative minimum
taxes during the six-month periods ended October 3, 1999, and September 27,
1998, respectively.
The Company's provision for income taxes included both federal and state
income taxes. Income tax expense on continuing operations was $5.6 and
$10.2 million for the three and six-month periods ended October 3, 1999,
compared to $2.9 and $5.7 million for the comparable prior periods. Income
tax provisions for interim periods are based on estimated effective annual
income tax rates. The estimated effective tax rate for the current fiscal
year ending March 31, 2000 is reflective of the Company's best estimate of
the fiscal 2000 tax effects associated with its business strategies, as
well as the resolution of tax matters during the year.
4. On December 15, 1998, the Company completed the repurchase of 1.7 million
shares of its common stock at a price of $77 per share, or approximately
$130 million in total. The repurchase occurred via the terms and conditions
of a modified "Dutch auction" tender offer (Dutch auction) and was financed
under the Company's bank credit facilities.
In connection with the completion of the Dutch auction, the Company's Board
of Directors authorized the Company to repurchase up to an additional 1.1
million shares of its common stock. As of October 3, 1999, repurchases of
638 thousand shares have been made under the program, aggregating
approximately $48.6 million. On October 26, 1999 the Company's Board of
Directors authorized the Company to make additional share repurchases (over
and above the 1.1 previously authorized) of up to 1.0 million shares of its
common stock. Any repurchases made under these authorizations would be
subject to market conditions and
<PAGE>
the Company's compliance with its debt covenants. As of October 3, 1999, the
Company's debt covenants would allow the Company to make additional
repurchases of approximately $90 million of the Company's stock. There can be
no assurance that the Company will purchase all or any portion of the shares,
or as to the timing or terms thereof.
5. Contingencies:
Environmental Matters - The Company is subject to various local and national
laws relating to protection of the environment and is in various stages of
investigation or remediation of potential, alleged, or acknowledged
contamination. At October 3, 1999, the accrued liability for environmental
remediation of $31.1 million represents management's best estimate of the
present value of the probable and reasonably estimable costs related to the
Company's known remediation obligations. It is expected that a significant
portion of the Company's environmental costs will be reimbursed to the
Company. As collection of those reimbursements is estimated to be probable,
the Company has recorded a receivable of $9.6 million, representing the
present value of those reimbursements at October 3, 1999. Such receivable
primarily represents the expected reimbursement of costs associated with the
Aerospace operations acquired from Hercules in the Aerospace acquisition,
whereby the Company generally assumed responsibility for environmental
compliance at Aerospace facilities. It is expected that much of the
compliance and remediation costs associated with these facilities will be
reimbursable under U.S. Government contracts, and that those environmental
remediation costs not covered through such contracts will be covered by
Hercules under various indemnification agreements, subject to the Company
having appropriately notified Hercules of issues identified prior to the
expiration of the stipulated notification periods (March 2000 or March 2005,
depending on site ownership). The Company's accrual for environmental
remediation liabilities and the associated receivable for reimbursement
thereof, have been discounted to reflect the present value of the expected
future cash flows, using a discount rate, net of estimated inflation, of
approximately 4.5 percent.
The following is a summary of the Company's amounts recorded for environmental
remediation at October 3, 1999 (in thousands):
<TABLE>
<CAPTION>
Accrued Environmental Costs --
Environmental Liability Reimbursement Receivable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amounts (Payable)/Receivable $(40,421) $13,351
Unamortized Discount 9,351 (3,706)
- -----------------------------------------------------------------------------------------------------------
Present Value Amounts
(Payable)/Receivable $(31,070) $ 9,645
- -----------------------------------------------------------------------------------------------------------
</TABLE>
At October 3, 1999, the estimated discounted range of reasonably possible
costs of environmental remediation is between $31 and $46 million. The Company
does not anticipate that resolution of the environmental contingencies in
excess of amounts accrued, net of recoveries, will materially affect future
operating results.
In future periods, new laws or regulations, advances in technologies, outcomes
of negotiations/litigations with regulatory authorities and other parties,
additional information about the ultimate remedy selected at new and existing
sites, the Company's share of the cost of such remedies, changes in the extent
and type of site utilization, the number of parties found liable at each site
and their ability to pay are all factors that could significantly change the
Company's estimates. It is reasonably possible that management's current
estimates of liabilities for the above contingencies could change in the near
term, as more definitive information becomes available.
Legal Matters - As a U.S. Government contractor, the Company is subject to
defective pricing and cost accounting standards non-compliance claims by the
Government. Additionally, the Company has
<PAGE>
substantial Government contracts and subcontracts, the prices of which are
subject to adjustment. The Company believes that resolution of such claims and
price adjustments made or to be made by the Government for open fiscal years
(1994 through 1999) will not materially exceed the amount provided in the
accompanying balance sheets.
The Company is a defendant in a number of lawsuits that arise out of, and are
incidental to, the conduct of its business. Such matters arise out of the
normal course of business and relate to product liability, intellectual
property, government regulations, including environmental issues, and other
issues. Certain of the lawsuits and claims seek damages in very large
amounts. In these legal proceedings, no director, officer, or affiliate is a
party or a named defendant.
The Company has agreed to settle the civil action captioned United States v.
Alliant Techsystems Inc., which was filed in the U.S. District Court for the
District of Minnesota on March 10, 1997, alleging violations of the False
Claims Act, the Truth in Negotiations Act, and common law and equitable
theories of recovery, in connection with a contract for the AT4 shoulder-fired
weapon. Under the terms of the settlement, the Company will pay $1.3 million,
including interest, but will not admit to any liability for either fraud or
violation of the False Claims Act.
The patent infringement case brought against the Company by Cordant
Technologies (formerly Thiokol Corporation), which was filed in the U.S.
District Court for the District of Delaware on November 15, 1995, was
dismissed by the U.S. Court of Appeals for the Federal Circuit on September
29, 1999. The dismissal followed an agreement by the parties to dismiss the
action with prejudice and to resolve future rocket motor patent related
disputes, if any, under a specified alternative dispute resolution mechanism.
During fiscal 1998, the Company substantially completed the requirements of
the M117 Bomb reclamation contract. The contract contained a priced option,
having approximate contract value less than $5 million, whereby the customer
could require the reclamation of additional quantities, given that such option
be exercised within the terms and conditions of the contract. On August 4,
1997, the customer informed the Company that it was exercising the option. The
Company, based on advice from its counsel, maintained that the option exercise
was invalid and therefore did not perform on the option. The Company's appeal
of the validity of the option to the United States Court of Appeals for the
Federal Circuit, and subsequent request for a hearing en banc related to the
option's validity, were both denied. In late December 1997, the Company was
informed by the customer that the Company was being terminated for default on
the contract option. Depending on the outcome of the termination for default
litigation, which involves allegations unrelated to the validity of the
option, management currently believes that the impact to the Company's future
operating earnings will not be material.
During fiscal 1998, the Company identified potential technical and safety
issues on its Explosive "D" contracts that, depending on the outcome of the
continuing evaluation of these risks and the potentially mitigating solutions,
could add cost growth to the program. These potential technical and safety
issues have caused the Company to delay contract performance until the issues
are resolved to the satisfaction of the Company. As a result, the Government
customer has provided the Company notification that it has been terminated for
default on the contracts. The Company is currently working closely with the
customer to resolve these matters. Based on information known at this time,
management believes that the range of reasonably possible additional cost
impact that could occur as a result of the potential technical and safety
issues on the Explosive "D" program will not be material. However, the
ultimate outcome is dependent on the extent to which the Company is able to
mitigate these potential risks and ultimately resolve the contractual
performance issues on a mutually agreeable basis.
The Company does not believe that the above contract terminations will have a
material adverse impact on the Company's future results of operations, its
liquidity, or its financial position.
<PAGE>
While the results of litigation cannot be predicted with certainty,
management believes, based upon the advice of counsel, that the actions
seeking to recover damages against the Company either are without merit,
are covered by insurance and reserves, do not support any grounds for
cancellation of any contract, or are not likely to materially affect the
financial condition or results of operations of the Company, although the
resolution of any such matters during a specific period could have a
material adverse effect on the quarterly or annual operating results for
that period.
6. Interest paid during the six-month periods ended October 3, 1999, and
September 27, 1998, totaled $17.0 million and $11.2 million, respectively.
Interest charges under the Company's revolving credit facility are
primarily at the London Inter Bank Offering Rate (LIBOR), plus 2.00 percent
(which totaled 7.5 percent at October 3, 1999), and will be subject to
change in the future, as changes occur in market conditions and in the
Company's financial performance and leverage ratios.
7. Consistent with the Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share", the Company presents basic earnings per share
(EPS) and diluted EPS, instead of the primary and fully diluted EPS that
were previously required. Basic EPS is computed based upon the weighted
average number of common shares outstanding for each period presented.
Diluted EPS is computed based on the weighted average number of common
shares and common equivalent shares. Common equivalent shares represent the
effect of redeemable common stock and stock options outstanding during each
period presented, which, if exercised, would have a dilutive effect on EPS.
In computing EPS for the three and six month periods ended October 3, 1999
and September 27, 1998, net income as reported for each respective period,
is divided by:
<TABLE>
<CAPTION>
Three-Months Ended Six-Months Ended
---------------------------------------------------------------------
Oct. 3, 1999 Sept. 27, 1998 Oct. 3, 1999 Sept. 27, 1998
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic EPS:
- Average Shares Outstanding 10,240 12,502 10,233 12,607
================================================================================================================
Diluted EPS:
- Average Shares Outstanding 10,240 12,502 10,233 12,607
- Dilutive effect of options and 217 311 238 311
redeemable common shares
----------------------------------------------------------------------------------------------------------------
Diluted EPS Shares Outstanding 10,457 12,813 10,471 12,918
================================================================================================================
</TABLE>
Due to the option price being greater than the average market price of the
common shares, there were 274,600 and 273,100 stock options, respectively,
that were not included in the computation of diluted EPS for the three and
six-month periods ended October 3, 1999, and 500 and 138,850 stock options,
respectively, that were not included in the computation of diluted EPS for
the comparable periods of the prior year. In addition, for the three and
six-month periods ended September 27, 1998, 271,000 common shares, which
were subject to the put/call agreement with Hercules were not included in
the calculation of diluted EPS, as inclusion of those redeemable shares
would have been anti-dilutive.
8. During the quarter ended October 3, 1999, the Company recognized a $9.5
million gain on disposal of discontinued operations (net of $.1 million in
taxes), due to resolution of an insurance settlement related to the
Company's former demilitarization operations in Ukraine.
9. The figures set forth in this quarterly report are unaudited but, in the
opinion of the Company, include all adjustments necessary for a fair
presentation of the results of operations for the three and six-month
periods ended October 3, 1999, and September 27, 1998. The Company's
accounting policies are described in the notes to financial statements in
its fiscal 1999 Annual Report on Form 10-K.
<PAGE>
10. In March 1998, the AICPA issued Statement of Position (SOP) 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Effective April 1, 1999, the Company adopted this SOP. It
did not have a material impact to the Company's results of operations or
its financial position for the three or six-month periods ended October 3,
1999.
11. Certain reclassifications have been made to the fiscal 1999 financial
statements, as previously reported, to conform to current classification.
These reclassifications did not affect the net income from operations as
previously reported.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Sales
Sales for the quarter ended October 3, 1999 totaled $252.8 million, a decrease
of $6.2 million, or 2.4 percent, from $259.0 million for the comparable quarter
in the prior year. Aerospace segment sales were $102.8 million, compared to
$103.0 million for the comparable quarter in the prior year. Conventional
Munitions segment sales were $95.6 million, a decrease of $21.4 million, or 18.3
percent, from $117.0 million for the comparable quarter in the prior year. The
decrease was primarily attributable to decreased tank ammunition and propellant
sales due to timing of contractual production requirements and replacement of a
current production program with the next-generation-round development program.
Defense Systems segment sales were $56.4 million, an increase of $16.2 million,
or 40.3 percent, from $40.2 million for the comparable quarter in the prior
year. The increase was driven primarily by an increase in volume on anti-tank
munitions programs and defense electronic sales on the AAR47 contract, which is
a missile warning system.
Sales for the six-month period ended October 3, 1999 totaled $525.5 million, an
increase of $10.2 million, or 2.0 percent, from $515.3 million for the
comparable period of the prior year. Aerospace segment sales for the six-month
period ended October 3, 1999 were $221.2 million, an increase of $27.0 million
or 13.9 percent, compared to $194.2 million for the comparable period of the
prior year. The increase is attributable to higher space propulsion sales,
primarily driven by increased sales on the Titan and Delta propulsion programs.
Conventional Munitions segment sales were $202.1 million, a decrease of $36.2
million, or 15.2 percent from $238.3 million for the comparable quarter in the
prior year. The decrease was primarily attributable to decreased tank ammunition
and propellant sales due to timing of contractual production requirements and
replacement of a current production program with the next-generation-round
development program. Defense Systems segment sales were $106.6 million, an
increase of $21.3 million, or 25.0 percent, compared to $85.3 million for the
comparable period of the prior year. The increase was primarily driven by an
increase in anti-tank munitions volume.
Company sales for fiscal 2000 are expected to be approximately $1.1 billion.
Gross Margin
The Company's gross margin in the quarter ended October 3, 1999, was $52.1
million or 20.6 percent of sales, compared to $45.4 million, or 17.5 percent of
sales for the comparable quarter of the prior year. Margin improvements in the
current year are due to improved cost performance on certain Defense Systems
fuzing and munitions programs, and also due to increased margins on tank
ammunition programs at Conventional Munitions. The current year quarter included
approximately $3 million of margin arising out of the resolution of cost
reimbursement matters, on now complete fuzing contracts. These increases were
offset by lower gross margins in the Aerospace segment, due to timing of flight
incentives and lower contract revenues as new programs ramp up. Gross margin for
the six-month period ended October 3, 1999 totaled $100.1 million, or 19.1
percent of sales, compared to $90.7 million, or 17.6 percent of sales for the
comparable period of the prior year. The increase is primarily attributable to
improved margins on certain Defense Systems fuzing and munitions programs.
<PAGE>
Fiscal 2000 gross margin, as a percent of sales, is expected to be approximately
19.0 percent.
Operating Expenses
The Company's operating expenses for the quarter ended October 3, 1999, totaled
$22.3 million, or 8.8 percent of sales, compared to $21.0 million, or 8.1
percent of sales for the comparable quarter of the prior year. Operating
expenses for the six-month period ended October 3, 1999 totalled $42.1 million,
or 8.0 percent of sales, compared to $42.3 million, or 8.2 percent of sales for
the comparable period of the prior year. The overall decrease was driven by
reduced selling costs due to the timing of program pursuits in the prior year
period, which included significant costs in the Defense Systems segment as well
as in the Conventional Munitions segment, which spent approximately $1.7 million
in pursuit of the E3 tank ammunition program. These decreases were partially
offset by one-time legal and consulting expenditures made during the current
year period on certain internal company initiatives.
Fiscal 2000 operating expenses, stated as a percent of sales, are expected to be
approximately 8.0 - 8.5 percent.
Interest Expense
The Company's net interest expense for the quarter ended October 3, 1999, was
$8.2 million, an increase of $3.3 million, compared to $4.9 million for the
comparable quarter in the prior year. Net interest expense for the six-month
period ended October 3, 1999 was $17.2 million, an increase of $7.0 million,
compared to $10.2 million for the comparable period of the prior year. The
increase in the current year expense was driven by higher average outstanding
borrowings in the current periods, which was primarily driven by repurchases of
the company's stock in fiscal 1999. See discussion of the Company's share
repurchases below.
Income before Income Taxes
The Company's income before income taxes (earnings before taxes, or "EBT") for
the quarter ended October 3, 1999 was $21.6 million, compared to $19.6 million
for the comparable quarter of the prior year. Aerospace segment EBT for the
quarter ended October 3, 1999, was $7.8 million, a decrease of $5.4 million,
compared to $13.2 million for the comparable quarter of the prior year. The
decrease was driven by the timing of flight incentives and lower overall
contract margin rates as new programs ramp up. Conventional Munitions segment
EBT for the quarter ended October 3, 1999, was $4.1 million, compared to $4.4
million for the comparable quarter of the prior year. The decrease is primarily
reflective of reduced tank ammunition and propellant sales due to timing of
contractual requirements and replacement of a current production program with
the next-generation-round development program. Defense Systems segment EBT for
the quarter ended October 3, 1999 was $4.2 million, compared to $(2.9) million
for the comparable quarter of the prior year. The increase in the current year
quarter reflects improved program performance on certain fuzing and munitions
programs and an increase of approximately $3 million arising out of resolution
of cost-reimbursement matters on now complete fuzing contracts.
EBT for the six-month period ended October 3, 1999 totaled $40.8 million, an
increase of $2.6 million, compared to $38.2 million for the comparable period of
the prior year. Aerospace segment EBT for the six-month period ended October 3,
1999, was $27.4 million, compared to $28.2 million for the comparable period of
the prior year. Conventional Munitions segment EBT for the six-month period
ended October 3, 1999 was $5.3 million, a decrease of $1.3 million,
<PAGE>
compared to $6.6 million for the comparable period of the prior year. The
decrease is primarily due to current year cost growth on ordnance reclamation
projects, and reduced tank ammunition and propellant sales. Defense Systems EBT
for the six-month period ended October 3, 1999 was $1.0 million, an increase of
$7.8 million, compared to $(6.8) million for the comparable period of the prior
year. The current year increase is driven by improved program performance on
certain fuzing and munitions programs and an increase of approximately $3
million arising out of the resolution of cost reimbursement matters on now
complete fuzing contracts, offset by a non-recurring charge of approximately
$4.0 million to re-value certain long-term assets (primarily fixed assets) to
the estimated net realizable value, as the segment's management has elected to
pursue disposal by sale of certain assets no longer deemed critical to the
business.
Income Taxes
Income tax expense was $5.6 and $10.2 million for the three and six-month
periods ended October 3, 1999, compared to $2.9 and $5.7 million for the
comparable periods of the prior year. Income tax provisions for interim periods
are based on estimated effective annual income tax rates. The estimated
effective tax rate for the current fiscal year ending March 31, 2000, is
reflective of the Company's best estimate of the fiscal 2000 tax effects
associated with its business strategies, as well as the resolution of tax
matters during the year.
Discontinued Operations
During the quarter ended October 3, 1999, the Company recognized a $9.5 million
gain on disposal of discontinued operations (net of $.1 million in taxes) due to
the resolution of an insurance settlement related to the Company's former
demilitarization operations in Ukraine.
Net Income
Net income reported for the quarter ended October 3, 1999, was $25.4 million, an
increase of $23.4 million, when compared with net income of $2.0 million for the
comparable quarter of the prior year. The overall increase is primarily the
result of the absence of an extraordinary loss incurred in the prior year due to
the early extinguishment of debt, current year increased gross margins in the
Defense Systems segment and an insurance settlement on discontinued operations,
offset by current year increases in interest and income tax expenses. Net income
for the six-month period ended October 3, 1999 was $40.0 million, an increase of
$22.2 million, compared to net income of $17.8 million for the comparable period
of the prior year. The increase was primarily driven by the absence of an
extraordinary loss incurred in the prior year due to the early extinguishment of
debt, current year increased gross margins in the Defense Systems segment, and
an insurance settlement on discontinued operations, partially offset by current
year increased interest and income tax expense.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
- -----------------------------------------------------
Cash provided by operations totaled $6.6 million for the six-months ended
October 3, 1999, an increase in cash of $7.2 million, when compared with cash
used by operations of $0.6 million in the comparable period of the prior year.
The increased level of cash provided from operations during the current year
period was driven by increased net income due primarily to the resolution of an
insurance settlement related to the company's former demilitarization operations
in Ukraine. In addition, cash improved due to the absence of approximately $13
million in payments for legal settlements which occurred in the prior year
period including payments for previously settled qui-
<PAGE>
tam lawsuits. These increases were partially offset by an increase in current
year cash used for payables payments.
Cash used by investing activities for the six-months ended October 3, 1999, was
$17.3 million, a $2.8 million increase in cash used, compared to cash used by
investing activities of $14.5 million in the comparable period of the prior
year. This increase primarily represents increased capital expenditures in the
current year in the Aerospace segment to support composites structure business
growth associated with the Delta family of rockets. Fiscal 2000 capital
expenditures are currently expected to approximate fiscal 1999 expenditures.
Cash provided by financing activities for the six-months ended October 3, 1999,
was $18.5 million, a $48.9 million increase in cash provided compared to cash
used by financing activities of $30.4 million in the comparable period of the
prior year. This current year increase is due primarily to prior year borrowings
associated with the Company's stock repurchase.
As of October 3, 1999, the Company had borrowings of $17.0 million against its
$250 million bank revolving credit facility. Additionally, the Company had
outstanding letters of credit of $41.0 million, which further reduced amounts
available on the revolving credit facility to $192.0 million at October 3, 1999.
During the six-months ended October 3, 1999, the Company made additional
borrowings under its bank term debt facilities of $29.0 million. These
borrowings were made to finance, on a long-term basis, a portion of the
Company's stock repurchases which had been made primarily in late fiscal 1999.
Scheduled minimum loan payments on the Company's outstanding long-term debt is
as follows: fiscal 2000, $23.6 million; fiscal 2001, $55.7 million; fiscal 2002
through 2004, $69.2 million, per year; fiscal 2005, $69.7 million. The Company's
total debt (line of credit borrowings, current portion of long-term debt, and
long-term debt) as a percentage of total capitalization, was 72 percent on
October 3, 1999 and 74 percent on March 31, 1999.
On December 15, 1998, the Company completed the repurchase of 1.7 million shares
of its common stock at a price of $77 per share, or approximately $130 million
in total. The repurchase occurred via the terms and conditions of a modified
"Dutch auction" tender offer (Dutch auction) and was financed under the
Company's bank credit facilities.
In connection with the completion of the Dutch auction, the Company's Board of
Directors authorized the Company to repurchase up to an additional 1.1 million
shares of its common stock. As of October 3, 1999, repurchases of approximately
638 thousand shares have been made under the program, aggregating approximately
$48.6 million. On October 26, 1999, the company's Board of Directors authorized
the Company to make additional share repurchases (over and above the 1.1
previously authorized) of up to 1.0 million shares of its common stock. Any
repurchases made under these plans would be subject to market conditions and the
Company's compliance with its debt covenants. As of October 3, 1999, the
Company's debt covenants would allow the Company to make additional repurchases
of approximately $90 million of the Company's stock. There can be no assurance
that the Company will purchase all or any portion of the shares, or as to the
timing or terms thereof.
Based on the financial condition of the Company at October 3, 1999, the Company
believes that future operating cash flows, combined with the availability of
funding, if needed, under its bank revolving credit facilities, will be adequate
to fund future growth of the Company as well as service its long-term
obligations.
<PAGE>
Contingencies
Environmental Matters - The Company is subject to various local and national
laws relating to protection of the environment and is in various stages of
investigation or remediation of potential, alleged, or acknowledged
contamination. At October 3, 1999, the accrued liability for environmental
remediation of $31.1 million represents management's best estimate of the
present value of the probable and reasonably estimable costs related to the
Company's known remediation obligations. It is expected that a significant
portion of the Company's environmental costs will be reimbursed to the Company.
As collection of those reimbursements is estimated to be probable, the Company
has recorded a receivable of $9.6 million, representing the present value of
those reimbursements at October 3, 1999. Such receivable primarily represents
the expected reimbursement of costs associated with the Aerospace operations
acquired from Hercules in the Aerospace acquisition, whereby the Company
generally assumed responsibility for environmental compliance at Aerospace
facilities. It is expected that much of the compliance and remediation costs
associated with these facilities will be reimbursable under U.S. Government
contracts, and that those environmental remediation costs not covered through
such contracts will be covered by Hercules under various indemnification
agreements, subject to the Company having appropriately notified Hercules of
issues identified prior to the expiration of the stipulated notification periods
(March 2000 or March 2005, depending on site ownership). The Company's accrual
for environmental remediation liabilities and the associated receivable for
reimbursement thereof, have been discounted to reflect the present value of the
expected future cash flows, using a discount rate, net of estimated inflation,
of approximately 4.5 percent.
The following is a summary of the Company's amounts recorded for environmental
remediation at October 3, 1999 (in thousands):
<TABLE>
<CAPTION>
Accrued Environmental Costs --
Environmental Liability Reimbursement Receivable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amounts (Payable)/Receivable $(40,421) $13,351
Unamortized Discount 9,351 (3,706)
- --------------------------------------------------------------------------------------------------------------------
Present Value Amounts
(Payable)/Receivable $(31,070) $ 9,645
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
At October 3, 1999, the estimated discounted range of reasonably possible costs
of environmental remediation is between $31 and $46 million. The Company does
not anticipate that resolution of the environmental contingencies in excess of
amounts accrued, net of recoveries, will materially affect future operating
results.
In future periods, new laws or regulations, advances in technologies, outcomes
of negotiations/litigations with regulatory authorities and other parties,
additional information about the ultimate remedy selected at new and existing
sites, the Company's share of the cost of such remedies, changes in the extent
and type of site utilization, the number of parties found liable at each site
and their ability to pay are all factors that could significantly change the
Company's estimates. It is reasonably possible that management's current
estimates of liabilities for the above contingencies could change in the near
term, as more definitive information becomes available.
Legal Matters - As a U.S. Government contractor, the Company is subject to
defective pricing and cost accounting standards non-compliance claims by the
Government. Additionally, the Company has substantial Government contracts and
subcontracts, the prices of which are subject
<PAGE>
to adjustment. The Company believes that resolution of such claims and price
adjustments made or to be made by the Government for open fiscal years (1994
through 1999) will not materially exceed the amount provided in the accompanying
balance sheets.
The Company is a defendant in a number of lawsuits that arise out of, and are
incidental to, the conduct of its business. Such matters arise out of the
normal course of business and relate to product liability, intellectual
property, government regulations, including environmental issues, and other
issues. Certain of the lawsuits and claims seek damages in very large amounts.
In these legal proceedings, no director, officer, or affiliate is a party or a
named defendant.
The Company has agreed to settle the civil action captioned United States v.
Alliant Techsystems Inc., which was filed in the U.S. District Court for the
District of Minnesota on March 10, 1997, alleging violations of the False Claims
Act, the Truth in Negotiations Act, and common law and equitable theories of
recovery, in connection with a contract for the AT4 shoulder-fired weapon.
Under the terms of the settlement, the Company will pay $1.3 million, including
interest, but will not admit to any liability for either fraud or violation of
the False Claims Act.
The patent infringement case brought against the Company by Cordant Technologies
(formerly Thiokol Corporation), which was filed in the U.S. District Court for
the District of Delaware on November 15, 1995, was dismissed by the U.S. Court
of Appeals for the Federal Circuit on September 29, 1999. The dismissal
followed an agreement by the parties to dismiss the action with prejudice and to
resolve future rocket motor patent related disputes, if any, under a specified
alternative dispute resolution mechanism.
During fiscal 1998, the Company substantially completed the requirements of the
M117 Bomb reclamation contract. The contract contained a priced option, having
approximate contract value less than $5 million, whereby the customer could
require the reclamation of additional quantities, given that such option be
exercised within the terms and conditions of the contract. On August 4, 1997,
the customer informed the Company that it was exercising the option. The
Company, based on advice from its counsel, maintained that the option exercise
was invalid and therefore did not perform on the option. The Company's appeal
of the validity of the option to the United States Court of Appeals for the
Federal Circuit, and subsequent request for a hearing en banc related to the
option's validity, were both denied. In late December 1997, the Company was
informed by the customer that the Company was being terminated for default on
the contract option. Depending on the outcome of the termination for default
litigation, which involves allegations unrelated to the validity of the option,
management currently believes that the impact to the Company's future operating
earnings will not be material.
During fiscal 1998, the Company identified potential technical and safety issues
on its Explosive "D" contracts that, depending on the outcome of the continuing
evaluation of these risks and the potentially mitigating solutions, could add
cost growth to the program. These potential technical and safety issues have
caused the Company to delay contract performance until the issues are resolved
to the satisfaction of the Company. As a result, the Government customer has
provided the Company notification that it has been terminated for default on the
contracts. The Company is currently working closely with the customer to resolve
these matters. Based on information known at this time, management believes
that the range of reasonably possible additional cost impact that could occur as
a result of the potential technical and safety issues on the Explosive "D"
program will not be material. However, the ultimate outcome is dependent on the
extent to which the Company is able to mitigate these potential risks and
ultimately resolve the contractual performance issues on a mutually agreeable
basis.
<PAGE>
The Company does not believe that the above contract terminations will have a
material adverse impact on the Company's future results of operations, its
liquidity, or its financial position.
While the results of litigation cannot be predicted with certainty, management
believes, based upon the advice of counsel, that the actions seeking to recover
damages against the Company either are without merit, are covered by insurance
and reserves, do not support any grounds for cancellation of any contract, or
are not likely to materially affect the financial condition or results of
operations of the Company, although the resolution of any such matters during a
specific period could have a material adverse effect on the quarterly or annual
operating results for that period.
YEAR 2000
- ---------
Background - The Company utilizes a significant amount of information technology
("IT"), such as computer hardware and software, and operating systems ("IT
systems"), and non-IT systems, such as applications used in manufacturing,
product development, financial business systems and various administrative
functions ("non-IT systems"). To the extent that these IT systems and non-IT
systems contain source code that is unable to distinguish the upcoming calendar
year 2000 from the calendar year 1900 (the "Year 2000 Issue"), some level of
modification or replacement of such systems has been necessary. The Company has
established a Year 2000 Project Management Plan ("Year 2000 Plan") to identify
and address systems requiring such modification or replacement. The Year 2000
Plan also involves assessing the extent to which the Company's suppliers and
customers are addressing the Year 2000 Issue. Company management has identified
certain business systems, suppliers, and customers as critical to its ongoing
business needs ("business critical"). Failure of these business critical
systems, suppliers, or customers to become Year 2000 compliant in a timely
manner could have a material adverse impact to the Company.
State of Readiness - The Year 2000 Plan, which encompasses both IT and non-IT
systems, involves the following five-phase approach to the Year 2000 Issue, with
the indicated timetable for completion of business critical items:
<TABLE>
<CAPTION>
Timetable
Phase Activity for Completion Status
----- -------- -------------- ------
<S> <C> <C> <C>
1 Ensure Company-wide awareness of the Year 2000 Issue.......... September 30, 1997 Completed
2 Assess the impact of the Year 2000 Issue on the Company, and
conduct inventories, analyze systems, prioritize modification
or replacement, and develop contingency plans................. January 31, 1998 Completed
3 Begin modification, replacement or elimination of selected
platforms, applications, databases and utilities, and modify
interfaces, as appropriate.................................... August 31, 1998 Completed
4 Complete work begun in Phase 3, and test, verify and validate
all systems................................................... September 30, 1999 Completed
5 Implement modified or replaced platforms, applications,
databases and utilities....................................... September 30, 1999 Completed
</TABLE>
The Company is not aware of any problems reasonably likely to occur as a result
of third party failures to address the Year 2000 Issue. Extensive work was done
to ensure supplier issues were
<PAGE>
highlighted and prioritized. Suppliers were requested to provide a Year 2000
Issue status on their products, operating systems, suppliers and facilities and
visits were made to numerous key suppliers. Contact is occurring on a periodic
basis to secure additional information from suppliers on specific Year 2000
Issues and to ensure that no issues arise as the year progresses. Phase 4
activity encompasses supplier visits and phone interviews, final testing, and
preparation for complete system implementation. Critical actions and completion
dates have been identified to ensure that no business critical system will pass
its respective time-horizon-to-failure date.
The Company has utilized the services of several independent industry
consultants to assist it in assessing the reliability of its risk and cost
estimates. The Company's schedule for completing all internal Year 2000 actions,
other than manual actions required on January 1, 2000, has been substantially
completed.
Costs - The Company currently estimates that costs associated with modifying or
replacing systems affected by the Year 2000 Issue, including the amounts
expended in connection with the Company's ongoing, normal course-of-business
efforts to upgrade or replace business critical systems and software
applications as necessary, will be approximately $13 million (over three fiscal
years), compared to the Company's normal, annual IT operating budget of
approximately $30 million. These costs are being funded through cash flows from
operations. Costs associated with incremental personnel costs, consulting, and
hardware and software modifications are being expensed as incurred. The costs of
newly purchased hardware and software are being capitalized in accordance with
normal policy. The majority of estimated project costs were incurred during
fiscal year 1999 and early fiscal 2000, as approximately $12 million had been
expended through October 3, 1999. Approximately 40% of the total amount
ultimately expended is expected to be for systems modification, and the balance
for systems replacement. There are no IT projects which the Company has had to
delay due to the Year 2000 Issues that would have a material impact on the
Company's results of operations or financial position. The Company continues to
review its contractual obligations relative to the Year 2000 Issue, and
currently believes that there are no such obligations that would have material
impact to the Company's results of operations or its financial position.
Risks - The failure to resolve a material Year 2000 Issue could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial position. Due to the general
uncertainty inherent in the Year 2000 Issue, resulting in part from the
uncertainty of the Year 2000 Issue readiness of third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of failures resulting from the Year 2000 Issue will have a material
impact on the Company's results of operations, liquidity or financial position.
The Year 2000 Plan is expected to significantly reduce the Company's level of
uncertainty about the Year 2000 Issue and, in particular, about the Year 2000
Issue compliance and readiness of its business critical systems, suppliers, and
customers.
The most significant risk to the Company is the potential impact of
circumstances beyond its control, such as the failure of its business critical
suppliers and/or customers (particularly the U.S. Government) to resolve their
Year 2000 Issues, with a resulting inability of such suppliers to supply
critical goods and services to the Company, or of such customers to pay for
their purchases from the Company. A related significant risk to the Company is
that an inability of its business critical suppliers to resolve their Year 2000
Issues could result in the Company not being able to meet its contractual
obligations. Another significant risk to the Company could be the significant
loss of critical personnel on its Year 2000 Plan team.
<PAGE>
The Company currently believes that there is minimal risk that its Year 2000
Plan will not be successfully implemented in a timely manner. In the event that
the Company is ultimately unable to implement its Year 2000 Plan in a timely
manner, the Company believes that its contingency plans, described below,
adequately accommodate its business critical systems in a way that would not
result in a material adverse impact to the Company's results of operations, its
liquidity, or its financial position. However, there can be no assurance that
the Company and/or relevant third parties will successfully resolve all of their
Year 2000 Issues or that the Company's contingency plans will be entirely
successful in mitigating those issues. Any such failure could have a material
adverse effect on the Company's operations, liquidity, or its financial
position.
Contingency Plans - The Company has been informed that the U.S. Government has
resolved the Year 2000 Issues affecting its payment system as of March 1999,
which allows about 9 months for testing of the payment system. (The Company is
working with the Government payment office on a contingency plan that will
accommodate a manual billing and payment process in the event the Year 2000
Issues affecting the Government payment system are not successfully resolved in
a timely manner.) Contingency plans have been established for all business
critical Company systems identified as Year 2000 Issues, and contingency plans
have also been developed for certain critical suppliers, including
identification of back-up supply sources, and consideration of the need to
purchase additional critical supplies. Additionally, the Company has developed
plans addressing the operation of its facilities during and immediately after
the beginning of calendar 2000, to prepare for the possibility of infrastructure
failure (i.e., power system failure). All contingency plans will continue to be
reviewed during the third quarter of the fiscal year.
Cautionary Statement - The costs of the Year 2000 Plan and the timing in which
the Company believes it will implement the Year 2000 Plan are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources and
other factors. However, there can be no assurance that these estimates will be
achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the success of the Company in identifying systems and programs
having Year 2000 Issues, the nature and amount of programming required to
upgrade or replace the affected programs, the availability and cost of personnel
trained in this area, and the extent to which the Company might be adversely
impacted by the failure of third parties (i.e., suppliers, customers, etc.) to
remediate their own Year 2000 issues. Failure by the Company and/or its
suppliers and customers (in particular, the U.S. Government, on which the
Company is materially dependent) to complete Year 2000 Issue compliance work in
a timely manner could have a material adverse effect on the Company's
operations, its liquidity, and/or its financial position.
INFLATION
- ---------
In the opinion of management, inflation has not had a significant impact upon
the results of the Company's operations. The selling prices under contracts, the
majority of which are long term, generally include estimated cost to be incurred
in future periods. These cost projections can generally be negotiated into new
buys under fixed-price government contracts, while actual cost increases are
recoverable on cost-type contracts.
<PAGE>
RISK FACTORS
- ------------
Certain of the statements made and information contained in this report,
excluding historical information, are "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include those relating to fiscal 2000 sales, gross margin, operating
expenses, and capital expenditures. Also included are statements relating to the
repurchase of Company common stock, the funding of future growth, long-term debt
repayment, environmental remediation costs and reimbursement prospects, the
financial and operating impact of the resolution of environmental and litigation
contingencies in general, the M117 and Explosive "D" contract terminations for
default in particular, and the ultimate cost and impact of the Company's Year
2000 Issue compliance effort. Such forward-looking statements involve risks and
uncertainties that could cause actual results or outcomes to differ materially.
Some of these risks and uncertainties are set forth in connection with the
applicable statements. Additional risks and uncertainties include, but are not
limited to, changes in government spending and budgetary policies, governmental
laws and other rules and regulations surrounding various matters such as
environmental remediation, contract pricing, changing economic and political
conditions in the United States and in other countries, international trading
restrictions, outcome of union negotiations, customer product acceptance, the
Company's success in program pursuits, program performance, continued access to
technical and capital resources, supply and availability of raw materials and
components, timely compliance with the technical requirements of the Year 2000
Issue, including timely compliance by the Company's vendors and customers, and
merger and acquisition activity within the industry. All forecasts and
projections in this report are "forward-looking statements," and are based on
management's current expectations of the Company's near-term results, based on
current information available pertaining to the Company, including the
aforementioned risk factors. Actual results could differ materially.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
The appeals in the patent infringement action captioned Thiokol Corporation
(now known as Cordant Technologies Inc.) vs. Alliant Techsystems Inc. and
Hercules Incorporated (which was filed in the U.S. District Court for the
District of Delaware on November 15, 1995, and decided in the Company's favor on
March 25, 1999) were dismissed by the U.S. Court of Appeals for the Federal
Circuit on September 29, 1999. The dismissal followed an agreement by the
parties to dismiss the appeals with prejudice and to resolve future rocket motor
patent related disputes, if any, under a specified alternative dispute
resolution mechanism.
The Company has agreed to settle the civil action captioned United States
v. Alliant Techsystems Inc., which was filed in the U.S. District Court for the
District of Minnesota on March 10, 1997, alleging violations of the False Claims
Act, the Truth in Negotiations Act, and common law and equitable theories of
recovery, in connection with a contract for the AT4 shoulder-fired weapon.
Under the terms of the settlement, the Company will pay $1.3 million, including
interest, but will not admit to any liability for either fraud or violation of
the False Claims Act.
Incorporated herein by reference is note 5 of Notes to Consolidated
Financial Statements included in Item 1 of Part I of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On August 3, 1999, the registrant held its annual meeting of
stockholders.
(b) At the above annual meeting, the following persons were elected
directors to serve until the next annual meeting of stockholders:
Peter A. Bukowick; Gilbert F. Decker, Thomas L. Gossage; Joel M.
Greenblatt; Jonathan G. Guss; David E. Jeremiah; Gaynor N.
Kelley; Joseph F. Mazzella; Paul David Miller; Daniel L. Nir; and
Michael T. Smith.
(c) At the above annual meeting, the stockholders voted upon the
following proposals: (1) election of directors; (2) ratification
of the selection of Deloitte & Touche as independent accountants
for the fiscal year ending March 31, 2000; and (3) a stockholder
proposal. The votes cast on each of the above proposals were as
follows:
<PAGE>
Proposal Number 1:
-----------------
For Withheld
--- --------
Peter A. Bukowick........ 8,883,915 65,248
Gilbert F. Decker........ 8,899,116 50,047
Thomas L. Gossage........ 8,871,966 77,197
Joel M. Greenblatt....... 8,869,065 80,098
Jonathan G. Guss......... 8,885,025 64,138
David E. Jeremiah........ 8,924,991 24,172
Gaynor N. Kelley......... 8,867,041 82,122
Joseph F. Mazzella....... 8,889,095 60,068
Paul David Miller........ 8,897,037 52,127
Daniel L. Nir............ 8,875,305 73,858
Michael T. Smith......... 8,927,982 21,181
Broker non-votes: None
Proposal Number 2:
-----------------
For.................. 8,907,695
Against.............. 26,328
Abstain.............. 15,140
Broker non-votes..... None
Proposal Number 3:
-----------------
For.................. 283,702
Against.............. 7,735,018
Abstain.............. 261,658
Broker non-votes..... 668,785
ITEM 5. OTHER INFORMATION
Attached to this report as Exhibit 99 is a list of the registrant's
directors and executive officers, as of the date of this report, which reflects
the following changes since August 12, 1999: new titles: Richard N. Jowett, Vice
President and Treasurer; Mark L. Mele, Vice President - Investor Relations and
Strategic Planning; and Scott S. Meyers, Vice President and Chief Financial
Officer.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Alliant Techsystems Inc. Management Deferred
Compensation Plan (incorporated by reference from
Exhibit 4 to the registrant's registration
statement on Form S-8 filed August 4, 1999
(registration no. 333-84445))
10.2 Trust Agreement for Alliant Techsystems Inc.
Management Deferred Compensation Plan
10.3 Separation Agreement and General Release between
the registrant and John L. Lotzer
27 Financial Data Schedule
99 Alliant Techsystems Inc. Directors and Executive
Officers
(b) Reports on Form 8-K.
During the quarterly period ended October 3, 1999, the registrant
filed no reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANT TECHSYSTEMS INC.
Date: November 12, 1999 By: /s/ Charles H. Gauck
Name: Charles H. Gauck
Title: Vice President and Secretary
(On behalf of the registrant)
Date: November 12, 1999 By: /s/ Scott S. Meyers
Name: Scott S. Meyers
Title: Vice President and Chief Financial
Officer (Principal Financial Officer)
<PAGE>
ALLIANT TECHSYSTEMS INC.
FORM 10-Q
EXHIBIT INDEX
The following exhibits are filed herewith electronically or incorporated herein
by reference. The applicable Securities and Exchange Commission File Number is
1-10582.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Method of Filing
------- ---------------------- ----------------
<S> <C> <C>
10.1 Alliant Techsystems Inc. Management Deferred Incorporated by reference from
Compensation Plan........................................... Exhibit 4 to the registrant's
registration statement on Form S-8
filed August 4, 1999 (registration
no. 333-84445)
10.2 Trust Agreement for Alliant Techsystems Inc. Management
Deferred Compensation Plan.................................. Filed herewith electronically
10.3 Separation Agreement and General Release between the
registrant and John L. Lotzer............................... Filed herewith electronically
27 Financial Data Schedule..................................... Filed herewith electronically
99 Alliant Techsystems Inc. Directors and Executive Officers... Filed herewith electronically
</TABLE>
<PAGE>
Exhibit 10.2
TRUST AGREEMENT
FOR
ALLIANT TECHSYSTEMS INC.
MANAGEMENT DEFERRED COMPENSATION PLAN
Effective September 1, 1999
<PAGE>
TRUST AGREEMENT
FOR
ALLIANT TECHSYSTEMS INC.
MANAGEMENT DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS.................................................. 2
1.1. Beneficiary........................................... 2
1.2. Board of Directors.................................... 2
1.3. Change of Control..................................... 2
1.4. Code.................................................. 3
1.5. Committee............................................. 3
1.6. Effective Date........................................ 3
1.7. ERISA................................................. 3
1.8. Funding Amount........................................ 3
1.9. General Creditors..................................... 3
1.10. Insolvent............................................. 3
1.11. Investment Manager.................................... 3
1.12. Participant........................................... 3
1.13. Plan Administrator.................................... 3
1.14. Trust Agreement....................................... 3
1.15. Trust Fund............................................ 4
1.16. Trustee............................................... 4
1.17. Valuation Date........................................ 4
SECTION 2. ESTABLISHMENT OF THE TRUST................................... 4
2.1. Trust................................................. 4
2.2. Description of Trust.................................. 4
2.3. Irrevocability........................................ 5
2.4. Acceptance by the Trustee............................. 5
SECTION 3. CONTRIBUTIONS................................................ 6
3.1. Trust Requirements.................................... 6
3.2. Amounts Contributed to the Trust...................... 6
3.3. Obligations of Trustee................................ 6
3.4. Contributions......................................... 6
3.5. No Dilution of Trust.................................. 6
</TABLE>
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<TABLE>
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SECTION 4. ACCOUNTING AND ADMINISTRATION................................ 7
4.1. Trustee Record Keeping................................ 7
4.2. Alliant Record Keeping................................ 7
4.3. Periodic Accounting................................... 7
4.4. Administrative Powers of Trustee...................... 7
SECTION 5. INVESTMENTS.................................................. 10
5.1. Generally............................................. 10
5.2. Investment Powers of Trustee.......................... 10
5.3. Investment Managers................................... 15
5.4. Single Fund........................................... 16
SECTION 6. PAYMENTS FROM THE TRUST...................................... 16
6.1. Obligation of Trustee to Make Payments to Participants 16
6.2. Obligation of Alliant to Make Payments to Participants 16
6.3. Authorization for Distributions....................... 16
6.4. Insufficient Trust Fund Assets........................ 17
6.5. Payment to Alliant.................................... 17
6.6. Withholding of Taxes.................................. 17
SECTION 7. PAYMENTS ON INSOLVENCY OF THE EMPLOYERS...................... 18
7.1. No Security Interest.................................. 18
7.2. Determination of Insolvency........................... 18
7.3. Payments When the Employers are Insolvent............. 19
7.4. Resumption of Duties after Insolvency................. 19
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE............................ 20
8.1. Resignation or Removal of Trustee..................... 20
8.2. Successor Trustee..................................... 20
8.3. Duties of Retiring and Successor Trustees............. 21
SECTION 9. AMENDMENT AND TERMINATION OF TRUST........................... 21
9.1. Amendment............................................. 21
9.2. Termination........................................... 22
</TABLE>
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<TABLE>
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SECTION 10. GENERAL PROVISIONS........................................... 22
10.1. Coordination with Plan............................... 22
10.2. Litigation........................................... 22
10.3. Trustee's Action Conclusive.......................... 22
10.4. No Guarantee or Responsibility....................... 23
10.5. Liabilities Mutually Exclusive....................... 23
10.6. Indemnification...................................... 23
10.7. Expenses and Compensation............................ 23
10.8. Notice............................................... 24
10.9. Anti-Assignment Clause............................... 24
10.10. True and Correct Document............................ 24
10.11. Waiver of Notice..................................... 24
10.12. Counterparts......................................... 24
10.13. Gender and Number.................................... 24
10.14. Successors........................................... 25
10.15. Severability......................................... 25
10.16. Applicable Law....................................... 25
EXHIBIT A -- ALLIANT TECHSYSTEMS INC. MANAGEMENT DEFERRED
COMPENSATION PLAN............................................ A-1
</TABLE>
<PAGE>
TRUST AGREEMENT
FOR
ALLIANT TECHSYSTEMS INC.
MANAGEMENT DEFERRED COMPENSATION PLAN
THIS TRUST AGREEMENT is made this ____ day of _______________, 1999, by and
between Alliant Techsystems Inc., a Delaware corporation ("Alliant"), and U.S.
Bank National Association, a national banking association organized under the
laws of the United States ("Trustee"), and any successor provided for in the
Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, Alliant and certain affiliated business organizations (together,
the "Employers") have established and maintain the Alliant Techsystems Inc.
Management Deferred Compensation Plan (hereinafter referred to as the "Plan"),
an unfunded deferred compensation plan, a copy of which is attached hereto as
Exhibit A, for the benefit of certain highly paid or management level employees;
and
WHEREAS, The Employers have incurred and expect to incur liabilities
pursuant to the terms of the Plan and wish to establish an irrevocable trust
(hereinafter referred to as the "Trust") and to contribute to such Trust assets
that shall be held therein subject to the claims of the creditors of the
Employers in the event the Employers become Insolvent, until paid to Plan
Participants and their Beneficiaries in such manner and at such times as
specified in the Plan or to be applied as otherwise provided for herein; and
WHEREAS, It is the intention of the Employers that amounts contributed to
the Trust and the earnings thereon shall be used, subject to the claims of the
creditors of the Employers in the event the Employers become Insolvent, to
provide the Employers with a source of funds to assist in satisfying the
liabilities under the Plan, and, upon satisfaction of all liabilities of the
Employers with respect to all Plan Participants (and their Beneficiaries, if
applicable), or, if excess assets are held in the Trust as herein defined, the
assets, if any, remaining in the Trust shall revert to Alliant; and
WHEREAS, The Employers and the Trustee intend that the existence of the
Trust shall not alter the characteristics of the Plan as an unfunded plan
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974, and shall not be
construed to provide income for Federal income tax purposes to a Plan
Participant (or his or her Beneficiary) prior to the actual payment of benefits
under the Plan; and
WHEREAS, The Trustee has agreed to serve as trustee of such Trust.
NOW, THEREFORE, In consideration of the mutual undertakings of Alliant and
the Trustee, the parties do hereby establish the Trust and agree that the Trust
shall be comprised, held, and disposed of as follows:
<PAGE>
SECTION 1
DEFINITIONS
Unless the context requires otherwise, definitions as used herein shall have the
same meaning as in the Plan when applied to said Plan.
1.1. Beneficiary -- shall mean the person or persons designated by a
Participant or otherwise determined pursuant to the terms of the Plan.
1.2. Board of Directors -- the Board of Directors of Alliant or its successor.
"Board of Directors" shall also mean and refer to any properly authorized
committee of the Board of Directors.
1.3. Change of Control -- shall mean the occurrence of any of the following:
(a) The acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934 (excluding for this purpose, any employee
benefit plan of Alliant or any of its "subsidiaries" which
acquires beneficial ownership of voting securities of Alliant) of
beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934) of 50% or more of either the
then outstanding shares of stock or the combined voting power of
then outstanding voting securities of Alliant, in one transaction
or a series of transactions; or
(b) Individuals who, as of August 3, 1999, constituted the Board of
Directors (the "Continuing Directors") cease for any reason to
constitute at least a majority of the Board of Directors,
provided that any person becoming a director of Alliant
subsequent to August 3, 1999, whose election, or nomination for
election by the stockholders of Alliant, was approved by a vote
of at least a majority of the Continuing Directors (other than an
election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened
solicitation with respect to the election or removal of directors
of Alliant, as such terms are used in Rule 14a-11 of Regulation
14A under the Securities Exchange Act of 1934) shall be, for
purposes of the Plan, considered as though such person were a
Continuing Director; or
(c) (i) the occurrence of a merger, consolidation or reorganization
of Alliant in which, as a consequence of the transaction, either
the Continuing Directors do not constitute a majority of the
directors of the continuing or surviving corporation or any
person, entity or "group," within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Securities Exchange Act of 1934,
controls 50% or more of the combined voting power of the
<PAGE>
continuing or surviving corporation; (ii) the occurrence of any
sale, lease or other transfer, in one transaction or a series of
transactions, of all or substantially all of the assets of
Alliant (at least 80%); or (iii) the adoption by Alliant of a
plan for its liquidation or dissolution.
(d) For purposes of this definition of "Change of Control," the term
"subsidiary" shall mean any corporation, the majority of the
outstanding voting stock of which is owned, directly or
indirectly, by Alliant.
1.4. Code -- shall mean the Internal Revenue Code of 1986, as amended.
1.5. Committee -- the Alliant Pension and Retirement Committee ("PRC")
consisting of not less than three members who are officers of Alliant appointed
by and serving at the pleasure of the Board of Directors.
1.6. Effective Date -- shall mean September 1, 1999.
1.7. ERISA -- shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.8. Funding Amount -- shall mean the amount that is sufficient to pay each
Plan Participant or his or her Beneficiary the benefits to which such Plan
Participants or their Beneficiaries (excluding any supplemental death benefit
under the second sentence of Section 7.4.2 of the Plan document) would be
entitled pursuant to the terms of the Plan as of the date on which such amount
is determined.
1.9. General Creditors -- shall mean the general unsecured creditors of the
Employers.
1.10. Insolvent and Insolvency -- shall mean that Alliant or any participating
Employer
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
1.11. Investment Manager -- shall mean the investment manager or investment
managers, as that term is defined under Section 3(38) of ERISA, appointed by the
Committee to direct the investment of any part or all of the assets of the Trust
Fund in accordance with Section 5.
1.12. Participant -- shall mean an individual who participates in the Plan
pursuant to the terms of the Plan. Except after a Change of Control as provided
in Section 3, the Board of Directors or the Chief Executive Officer of Alliant
may (subject to the terms of the Plan) add or delete Participants.
1.13. Plan Administrator -- shall mean Alliant.
<PAGE>
1.14. Trust Agreement -- shall mean this written instrument, which is intended
to constitute an irrevocable, grantor trust, of which Alliant is the grantor,
within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of
the Code and shall be construed accordingly, as the same may be amended from
time to time.
1.15. Trust Fund -- shall mean all sums of money and other property, all
investments and reinvestments made therewith, or the proceeds thereof, and all
investment earnings and profits thereon held by the Trustee under this Trust
Agreement.
1.16. Trustee -- shall mean the trustee named herein, and any successor trustee
appointed pursuant to Section 8.
1.17. Valuation Date -- shall mean (a) each Valuation Date under the Plan, (b)
the date on which a Change of Control occurs, (c) the effective date of a
Trustee's resignation or removal, (d) the date of termination of the Trust, and
(e) such other dates as Alliant and the Trustee may mutually determine.
SECTION 2
ESTABLISHMENT OF THE TRUST
2.1. Trust. Alliant hereby establishes the Trust with the Trustee, which Trust
shall consist of such sums of money and other property acceptable to the Trustee
as from time to time have been and shall be paid or delivered by Alliant to the
Trustee as provided herein. The Trust Fund shall be held in trust by the
Trustee, and shall be dealt with in accordance with the provisions of this Trust
Agreement.
2.2. Description of Trust. Alliant represents and agrees that:
(a) the Trust is intended to be a grantor trust, of which Alliant is
the grantor, within the meaning of subpart E, part I, subchapter
J, chapter 1, subtitle A of the Code and shall be construed
accordingly;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A, and
Alliant shall file with the Trustee, promptly upon its adoption,
a true and correct copy of each amendment to the Plan;
(c) the Trust is intended to provide a source of funds to assist the
Employers in meeting liabilities under the Plan as provided
herein subject to the claims of General Creditors in the event of
Insolvency, and subject to and in accordance with Section 6.5
hereof, the balance of the Trust Fund, if any, remaining after
payment of the obligations of Alliant under the Plan will revert
to Alliant in accordance with the Trust Agreement;
<PAGE>
(d) contributions by the Employers to the Trust which are made
coincident with and subsequent to the Effective Date shall be in
amounts determined under Section 3 hereof, and Alliant agrees
that contributions will be made to the Trust as provided therein;
(e) the principal of the Trust and any earnings thereon shall be held
by the Trustee separate and apart from other funds of the
Employers for the benefit of Plan Participants, their
Beneficiaries and the General Creditors as herein set forth;
(f) the Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan as an unfunded plan;
(g) Participants and their Beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, assets of the
Trust, to the extent that any rights are created under the Plan
and the Trust, any such rights shall be mere unsecured
contractual rights of Participants and their Beneficiaries
against the Employers under the Plan, and such Participants, or
their Beneficiaries, shall have only the unsecured promise of the
Employers that such payments will be made, any assets held by the
Trust will be subject to the claims of General Creditors under
federal and state law in the event of Insolvency, as defined
herein, with no preference whatsoever given to claims of
Participants or their Beneficiaries over claims of other general
unsecured creditors of Alliant; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees,
and as such is exempt from the requirements of Parts 2, 3 and 4
of ERISA, and Alliant further represents that the Plan is not a
qualified plan subject to the requirements of Section 401(a) of
the Code and, therefore, is not subject to any requirements under
the Code that are applicable to tax-qualified plans.
2.3. Irrevocability. The Trust shall be irrevocable from the Effective Date,
and the assets of the Trust Fund shall be held in accordance with the provisions
hereof for the purpose of providing assets to assist the Employers in meeting
the obligations to Participants under the Plan and to satisfy the claims of
General Creditors in the event of Insolvency, and defraying the expenses of the
Trust. Except as otherwise provided herein and in the event of Insolvency, no
part of the income or corpus of the Trust Fund shall be recoverable by or for
the benefit of Alliant.
2.4. Acceptance by the Trustee. By executing this Trust Agreement, the Trustee
accepts the Trust established under this Trust Agreement on the terms and
subject to the provisions set forth herein, and agrees to discharge and perform
fully and faithfully all of the duties and obligations imposed upon it under
this Trust Agreement.
<PAGE>
SECTION 3
CONTRIBUTIONS
3.1. Trust Requirements. The Trust is intended to constitute a valid trust
under the law of the State of Minnesota.
3.2. Amounts Contributed to the Trust. The Trustee shall receive and hold as
part of the Trust Fund such assets as may be transferred or contributed to it
from time to time by the Employers pursuant to this Trust Agreement to assist in
satisfying obligations to Participants pursuant to the terms of the Plan;
provided, however, that the Employers shall contribute sufficient amounts so
that assets of the Trust Fund shall be at least 90% of the Funding Amount as of
the end of each Plan Year (as determined by the independent organization
selected by Alliant to administer the Plan).
3.3. Obligations of Trustee. The Trustee shall not be responsible for the
administration of the Plan, but shall only have the responsibility to hold,
invest, reinvest, dispose of and administer the Trust Fund in accordance with
this Trust Agreement as now in effect or hereafter amended.
3.4. Contributions. Alliant shall initially deposit with the Trustee in trust
an amount determined by Alliant in its sole discretion, which amount shall
become the principal of the Trust. Thereafter, the Employers in their sole
discretion, may at any time, or from time to time, make additional deposits of
cash or other property in trust with the Trustee to augment the principal to be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement. Neither the Trustee nor any Plan Participant or Beneficiary shall
have any right to compel additional deposits. However, in the event of a Change
of Control, Alliant shall, as soon as possible, but in no event longer than
thirty (30) days following the Change of Control, make an irrevocable
contribution to the Trust of an amount equal to the Funding Amount (less Trust
assets) as determined as of the date on which the Change of Control occurred. As
of each Valuation Date following a Change of Control, and until the entire Trust
Fund has been distributed, the independent public accountants for Alliant shall
recalculate the Funding Amount. During the life of the Trust following a Change
of Control but no later than thirty (30) days after the end of each calendar
year, Alliant shall contribute to the Trust for each calendar year such amount
as is necessary to cause the Trust assets to be equal to the Funding Amount
determined as of the last day of such calendar year. The independent public
accountants for Alliant shall provide the Trustee with written notice of the
amount of the necessary contribution on or before the date such contribution is
due to the Trust. Any such payments to the Trustee do not discharge or release
the Employers of their obligations under the Plan or Section 6.2 hereof to pay
benefits to Plan Participants or their Beneficiaries, and shall at all times be
subject to the provisions of Section 7.
3.5. No Dilution of Trust.
(a) Participants Benefitting from Trust Frozen on Change of Control.
As soon as administratively feasible following the end of each
quarter of the Plan Year, the independent organization selected
by Alliant to administer
<PAGE>
the Plan will provide to Alliant and to the Trustee a list of the
then Participants (the "Participant List"). After a Change of
Control, only the Participants (and their beneficiaries) who are
listed on the latest Participant List so provided to the Trustee
before the date of the Change of Control (the "Latest Participant
List") shall be eligible for payments from the Trust Fund. Except
as described in Section 3.5(b), The Trustee shall have no
liability, responsibility or obligation with respect to any
Participant who is not named in the Latest Participant List.
(b) Exception for New Participants if Funding Added. Notwithstanding
the foregoing, one or more Participants may be added to the
Latest Participant List if: (a) Alliant delivers to the Trustee a
determination by the independent public accountants of Alliant of
a revised Funding Amount calculated based upon the Participants
named in the Latest Participant List and the proposed additional
Participants (the "New Funding Amount") and (b) the Employers
deliver to the Trustee additional assets in an amount necessary
to make the Trust assets equal to the New Funding Amount. If the
Trustee determines that assets of the Trust Fund, including such
additional assets, equal or exceed the New Funding Amount, the
Trustee shall add such new Participants to the Latest Participant
List.
SECTION 4
ACCOUNTING AND ADMINISTRATION
4.1. Trustee Record Keeping. The Trustee shall keep or cause to be kept
accurate and detailed records of all investments, receipts, disbursements, and
all other transactions related to the Trust Fund made by the Trustee hereunder.
All such records shall be open to inspection and audit at all reasonable times
by any person designated by Alliant. All such records shall be preserved (in
original form, or on microfilm, magnetic tape, or any other similar process) for
such period as Alliant may determine and Trustee shall agree but such records
shall be maintained and available for examination for a period of at least seven
years, and the Trustee may only destroy such records after first notifying
Alliant in writing of its intention to do so, and transferring to Alliant any of
such records requested by Alliant.
4.2. Alliant Record Keeping. Alliant shall keep full, accurate, and detailed
books and records with respect to the Participants and benefits paid and payable
under the Plan, which records shall be made available to the Trustee at its
request.
4.3. Periodic Accounting. Within sixty (60) days following a Valuation Date,
the Trustee shall deliver to Alliant a written accounting, dated as of the
Valuation Date, of its administration of the Trust Fund during the period from
the most recent Valuation Date to the date of such current Valuation Date, which
accounting shall be in accordance with the following provisions:
<PAGE>
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected by the Trustee
during the period from the most recent Valuation Date to the date
of such current Valuation Date, including a description of all
securities and investments purchased and sold, with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash,
securities and other property held in the Trust Fund at the end
of such year or other period, as the case may be. In making a
valuation, all cash, securities or other property held in the
Trust Fund shall be valued at their then fair market value and
insurance policies shall be valued at net cash surrender value.
The accounting shall be in a format as may be mutually agreed
upon by the Trustee and Alliant.
(b) If within ninety (90) days after the delivery of such written
accounting, Alliant has not delivered to the Trustee notice of
any objection to any act or transaction of the Trustee, the
initial accounting shall become an account stated as between the
Trustee and Alliant. If any objection has been delivered to the
Trustee by Alliant, and if Alliant is satisfied that it should be
withdrawn, Alliant shall signify its approval of the accounting
in writing filed with the Trustee, and the accounting shall
become an account stated as between the Trustee and Alliant. If
the accounting is adjusted following an objection thereto, the
Trustee shall file and deliver the adjusted accounting to
Alliant. If within fifteen (15) days after such filing of an
adjusted accounting, Alliant has not delivered to the Trustee
notice of any objection to the transactions as so adjusted, the
adjusted accounting shall become an account stated as between the
Trustee and Alliant.
4.4. Administrative Powers of Trustee. Except to the extent that authority with
respect to the administration of the Trust has been allocated to others in
accordance with this Trust Agreement and subject to Sections 5 and 7, the
Trustee shall have exclusive authority and discretion to manage and administer
the Trust. The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Alliant which is contemplated by, and
in conformity with, the terms of the Plan or this Trust Agreement and is given
in writing by Alliant. In the event of a dispute between Alliant and a party,
the Trustee may apply to a court of competent jurisdiction to resolve the
dispute. The responsibility for maintenance of individual benefit records shall
be retained by Alliant, and may be delegated to such person or entity as Alliant
may employ from time to time. Except as otherwise provided herein, the Trustee
shall have, without exclusion, all powers conferred on trustees by law and,
without limiting the foregoing, shall have the following administrative powers,
rights, and duties in addition to those provided elsewhere in this Trust
Agreement:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall
decide, provided,
<PAGE>
however, that if Alliant delivers written instructions to the
Trustee prior to a Change of Control, the Trustee shall follow
such instructions;
(b) when directed by Alliant pursuant to Section 6, to make payments
from the Trust Fund to Participants or Beneficiaries, and when
required by Section 7 to distribute the Trust Fund pursuant to
the provisions thereunder;
(c) except as provided in Section 6 and Section 7, to waive, modify,
reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts,
damages, or demands of any nature in favor of or against the
Trustee or all or any part of the Trust Fund;
(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust
in, or commence or defend, any litigation the Trustee considers
in its discretion necessary in connection with the Trust Fund;
(e) to withhold, prior to a Change of Control, if Alliant so directs,
all or any part of any payment required to be made hereunder as
may be necessary and proper to protect the Trustee or the Trust
Fund against any liability or claim on account of any estate,
inheritance, income or other tax or assessment attributable to
any amount payable hereunder, and to discharge any such liability
with any part or all of such payment so withheld in accordance
with Section 6.6;
(f) to maintain records reflecting all receipts and payments under
this Trust Agreement and such other records as Alliant may
specify and to which the Trustee agrees, which records may be
audited from time to time by Alliant or anyone named by Alliant;
and to furnish a written accounting to Alliant as of each
Valuation Date, as provided in Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, the
Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy;
(h) to furnish Alliant with such information for tax or other
purposes which Alliant may reasonably request and which the
Trustee may not unreasonably withhold;
(i) to employ actuaries, accountants, advisors, agents, legal counsel
(who, except following a Change of Control, may be legal counsel
to Alliant and who are not in the Trustee's reasonable judgment
deemed to have a conflict of interest), consultants, custodians,
depositories, experts and other providers of services, to consult
with them with respect to the implementation and construction of
this Trust Agreement, the duties of the
<PAGE>
Trustee hereunder, the transactions contemplated by this Trust
Agreement, or any act which the Trustee proposes to take or omit,
and to reasonably rely upon the advice of and services performed
by such persons, the reasonable expenses of which shall be
charged to the Trust Fund unless otherwise paid by Alliant; to
delegate discretionary powers to such persons and to reasonably
rely upon information and advice furnished by such persons;
provided that each such delegation and the acceptance thereof by
each such person shall be in writing, and provided further that
the Trustee may not delegate its responsibilities as to the
management or control of the assets of the Trust Fund;
(j) subject to Section 7, to make payments to Participants or
Beneficiaries, including after a Change of Control, as provided
in Section 6 hereof;
(k) to determine whether Alliant (or any other participating Employer
under the Plan) is Insolvent, and to hold assets of the Trust
Fund for the benefit of General Creditors in the event of
Insolvency, as provided in Section 7 hereof;
(l) to perform all other acts which in the Trustee's judgment are
appropriate for the proper protection, management, investment,
and distribution of the Trust Fund, and to carry out the purposes
of the Trust.
SECTION 5
INVESTMENTS
5.1. Generally. With respect to assets for which the Trustee has investment
responsibility, the Trustee shall invest and reinvest the principal and income
of the Trust as provided in this Trust Agreement, subject to the standard in
Section 4.4, and keep the Trust Fund invested, without distinction between
principal and income, in accordance with the written investment guidelines
mutually agreed upon by Alliant and the Trustee prior to a Change of Control,
and provided to the Trustee by Alliant.
5.2. Investment Powers of Trustee. Except to the extent that authority with
respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust Agreement, the Trustee shall
have exclusive authority and discretion to manage and control the Trust Fund,
subject only to the investment guidelines that are mutually agreed upon by the
Trustee and Alliant from time to time. The authority to assume responsibility
for investment of assets of the Trust Fund has been retained by the Committee
prior to a Change of Control. The authority to hold assets of the Trust Fund may
be allocated to one or more custodians or insurance companies but only in the
sole discretion of the Trustee. Except as otherwise provided herein, the Trustee
shall have, without exclusion, all powers conferred on trustees by applicable
law and, without limiting the foregoing, shall have the following powers,
rights, and duties in addition to those provided elsewhere in this Trust
Agreement:
<PAGE>
(a) to invest and reinvest in any property wherever situated, whether
real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including
convertible stocks and securities), shares of registered
investment companies (i.e., mutual funds, including mutual funds
for which the Trustee or any affiliate of the Trustee serves as
investment advisor, custodian or other service provider as
disclosed in the current mutual fund prospectus to be provided to
Alliant), leaseholds, mortgages (including, without limitation,
any collective or part interest in any bond and mortgage or note
and mortgage), certificates of deposits, life insurance
contracts, guaranteed investment contracts, and guaranteed
annuity contracts, all regardless of diversification and without
being limited to investments authorized by law for the investment
of trust funds;
(b) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a
legal reserve life insurance company in accordance with an
agreement between the Trustee and such insurance company, a group
annuity contract or life insurance policies issued by such
insurance company to the Trustee as contract holder, any interest
bearing deposits held by any financial institution having total
capital and surplus of at least Fifty Million Dollars
($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and
any mutual, common, commingled or collective trust funds or
pooled investment funds, and to diversify such investments so as
to minimize the risk of losses;
(c) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust
fund which has been or may hereafter be established and
maintained by the Trustee, or by any other institution and to
make withdrawals therefrom; provided that to the extent that any
part or all of the assets of the Trust Fund for which the Trustee
has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund
which is maintained by a bank or other institution (including a
bank or trust company acting as Trustee), the provisions of the
documents under which such common, collective or commingled trust
fund or pooled investment fund are maintained shall govern any
investment therein and provided further that prior to investing
any portion of the Trust Fund for the first time in any such
common, collective, or commingled trust fund, the Trustee shall
advise Alliant of its intent to make such an investment and
furnish to Alliant any information it may reasonably request with
respect to such common, collective, or commingled trust fund
(other than a trust fund established by Alliant), and provided
further that the Trustee shall maintain separate records with
respect to each other trust of such trust fund;
(d) Unless the following powers have been retained by Alliant as
evidenced in writing and except for any securities (including
shares of mutual funds)
<PAGE>
affiliated with or serviced by the Trustee for which those powers
are retained by Alliant, the Trustee shall have all the rights,
powers, privileges and responsibilities of an owner of
securities, including, without limiting the foregoing, the power
to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect
to such stock or other voting securities to such proxy), to
exercise subscription, conversion and other rights and options
(and make payments from the Trust Fund in connection therewith),
to take any action and to abstain from taking any action with
respect to any reorganization, consolidation, merger,
dissolution, recapitalization, refinancing and any other plan or
change affecting any property constituting a part of the Trust
Fund (and in connection therewith to delegate the Trustee's
discretionary powers and pay assessments, subscriptions and other
charges from the Trust Fund), to hold or register any property
from time to time in the Trustee's name or in the name of a
nominee or to hold it unregistered or in such form that title
shall pass by delivery; and to borrow from anyone, including
itself (to the extent permitted by law), such amounts from time
to time as the Trustee considers desirable to carry out this
Trust (and to mortgage or pledge all or part of the Trust Fund as
security); to participate in any plan or reorganization,
consolidation, merger, combination, liquidation, or other similar
plan relating to any such property, and to consent to or oppose
any such plan or any action thereunder, or any contract lease,
mortgage, purchase, sale, or other action by any corporation or
other entity any of the securities of which may at any time be
held in the Trust Fund, and to do any act with reference thereto;
(e) to retain in cash or other investments which are unproductive of
income so much of the Trust Fund as it may deem advisable (e.g.,
Trust Fund assets pending investment or disbursement) which may
include retention of Trust Fund assets in non-interest bearing
accounts in any depository including the banking department of
the Trustee or of any affiliate thereof, notwithstanding the
banking department's or other entity's receipt of "float" from
such uninvested cash; provided such depository must have total
capital and surplus of at least Fifty Million Dollars
($50,000,000);
(f) when directed by Alliant prior to a Change of Control, and
subject to Section 4.4(g), to apply for, pay premiums on, and
maintain in force individual, ordinary, variable, or universal
life insurance policies on the lives of Participants, which
policies may contain provisions which Alliant may approve or
direct; to receive or acquire such policy or policies from
Alliant, but the Trustee may purchase a life insurance policy
from a person other than the insurer which issues a policy only
if the Trustee pays, transfers, or otherwise exchanges an amount
no more than the cash surrender value of the policy or policies,
and the policy is not subject to a mortgage or similar lien which
the Trustee would be required to assume; to have with respect to
such policy or policies any rights, powers, options,
<PAGE>
privileges, and benefits usually comprised in the term "incidents
of ownership" and normally vested in an owner of such policy or
policies to be exercised only pursuant to the directions of
Alliant prior to a Change of Control;
(g) to retain any property at any time received by it;
(h) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect
to, any property at any time held by it, by public or private
sale, for cash or on credit or partly for cash and partly for
credit;
(i) to deposit any such property with any protective, reorganization,
or similar committee; to delegate discretionary power to any such
committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited;
(j) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act
with reference thereto, including the exercise of options, the
making of agreements or subscription, and the payment of
expenses, assessment or subscription, which may be deemed
necessary or advisable in connection therewith, and to hold and
retain any securities or other property which it may so acquire;
(k) to extend the time of payment of any obligation held in the Trust
Fund;
(l) to enter into standby agreements for future investment either
with or without a standby fee;
(m) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the
rate of interest on any indebtedness or mortgage or to any other
modification or change in the terms of any indebtedness or
mortgage, or of any guarantee thereto, in any manner and to any
extent that may be deemed advisable for the protection of the
Trust Fund or the preservation of any covenant or condition of
any indebtedness or mortgage or in the performance of any
guarantee, or to enforce any default in such manner and to such
extent as may be deemed advisable; and to exercise and enforce
any and all rights of foreclosure, to bid on any property in
foreclosure, to take a deed in lieu of foreclosure with or
without paying a consideration therefor, and in connection
therewith to release the obligation on the bond secured by such
mortgage; and to exercise and enforce in any action, suit or
proceeding at law or in equity any rights or remedies in respect
of any such indebtedness or mortgage or guarantee;
(n) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance,
contracts, waivers, releases, or
<PAGE>
other instruments in writing necessary or proper for the
accomplishment of any of the foregoing powers;
(o) to organize under the laws of any state one or more corporations,
partnerships, or trusts for the purpose of acquiring and holding
title to any property that it is authorized to acquire under this
Trust Agreement and to exercise with respect thereto any or all
of the powers set forth in this Trust Agreement;
(p) notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within
the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code;
(q) generally to do all acts, whether or not expressly authorized,
that the Trustee deems necessary or desirable for the protection
of the Trust Fund, and to carry out the purposes of the Trust;
and
(r) to the fullest extent permitted by law, the Trustee is expressly
authorized to (i) retain the services of U.S. Bancorp Piper
Jaffray Inc. and/or U.S. Bancorp Investments, Inc., each being
affiliates of U.S. Bank National Association, and/or any other
registered broker-dealer organization hereafter affiliated with
U.S. Bank National Association, and any future successors in
interest thereto (collectively for the purposes of this paragraph
referred to as the "Affiliated Entities"), to provide services to
assist in or facilitate the purchase or sale of investment
securities in the Trust Fund, (ii) acquire as assets of the Trust
Fund shares of mutual funds to which Affiliated Entities
provides, for a fee, services in any capacity and (iii) acquire
in the Trust Fund any other services or products of any kind or
nature from the Affiliated Entities regardless of whether the
same or similar services or products are available from other
institutions. The Trust Fund may directly or indirectly (through
mutual funds fees and charges for example) pay management fees,
transaction fees and other commissions to the Affiliated Entities
for the services or products provided to the Trust Fund and/or
such mutual funds at such Affiliated Entities' standard or
published rates without offset (unless required by law) from any
fees charged by the Trustee for its services as Trustee. The
Trustee may also deal directly with the Affiliated Entities
regardless of the capacity in which it is then acting, to
purchase, sell, exchange or transfer assets of the Trust Fund
even though the Affiliated Entities are receiving compensation or
otherwise profiting from such transaction or are acting as a
principal in such transaction. Each of the Affiliated Entities
is authorized to (i) effect transactions on national securities
exchanges for the Trust Fund as directed by the Trustee, and (ii)
retain any transactional fees related thereto, consistent with
Section 11(a)(1) of the Securities Exchange Act of 1934, as
<PAGE>
amended, and related Rule 11a2-2(T). Included specifically, but
not by way of limitation, in the transactions authorized by this
provision are transactions in which any of the Affiliated
Entities are serving as an underwriter or member of an
underwriting syndicate for a security being purchased or are
purchasing or selling a security for its own account. In the
event the Trustee is directed by Alliant or any designated
investment manager, as applicable hereunder (collectively
referred to for purposes of this paragraph as the "Directing
Party"), the Directing Party shall be authorized, and expressly
retains the right hereunder, to direct the Trustee to retain the
services of, and conduct transactions with, Affiliated Entities
fully in the manner described above.
5.3. Investment Managers. Alliant may appoint one or more Investment Managers
to direct the investment of any part or all of the assets of the Trust Fund by
the Trustee. Appointment of an Investment Manager shall be made by written
agreement between Alliant and the Investment Manager. The Trustee shall receive
a copy of each such agreement and all amendments, modifications, and
terminations thereof and shall give written acknowledgment of receipt of same.
Until receipt of a copy of each such amendment, modification, or termination,
the Trustee shall be fully protected in assuming the continuing authority of
such Investment Manager under the terms of the original agreement with Alliant.
The agreement between Alliant and the Investment Manager shall specify those
powers, rights, and duties of the Trustee under this Trust that are allocated to
the Investment Manager(s) and the portion of the assets of the Trust Fund
subject to the Investment Manager(s). The Trustee shall have custody of the
assets comprising the portion of the Trust Fund with respect to which the
investment manager has investment authority. After such written agreement has
been so executed between Alliant and the Investment Manager(s) the Trustee shall
have no obligation or responsibility for those investment duties and powers
which are allocated to an Investment Manager. One of those powers is voting
proxies; however, the Investment Manager will not have that power if the
agreement described herein expressly precludes the Investment Manager from
voting proxies (and the Trustee shall have the power subject to the powers
retained by Alliant). An Investment Manager so appointed pursuant to this
Section 5.3 shall be (i) a registered investment adviser under the Investment
Advisers Act of 1940, (ii) if not registered as an investment adviser under such
Act because of paragraph (1) of section 203A(a) of such Act, is registered as an
investment adviser under the laws of the State (referred to in such paragraph
(1)) in which it maintains its principal office and place of business and
satisfied any applicable filing requirements, (iii) a bank, as defined in said
Act, or (iv) an insurance company qualified to manage, acquire and dispose of
the assets of the Plan under the laws of more than one State of the United
States. Any such Investment Manager shall acknowledge to Alliant in writing that
it accepts such appointment. The Trustee shall not be liable for any loss or
diminution of any assets managed by an Investment Manager, including without
limitation any loss or diminution caused by any action or inaction taken or
omitted by it at the direction of an Investment Manager. In addition, the
Trustee shall not be liable for the diversification of any assets managed by
Investment Managers of Alliant, each of which shall be solely the responsibility
of Alliant. An Investment Manager may resign at any time upon written notice to
the Trustee and Alliant. Alliant may remove an Investment Manager at any time by
written notice to the Investment Manager and the Trustee.
<PAGE>
Alliant may, prior to a Change of Control, by written notice to the Trustee
assume investment responsibility for any portion or all of the Trust assets.
The Trustee shall have no responsibility or liability for the investment of such
assets for which Alliant has assumed such investment responsibility except to
act with respect to such assets as directed by Alliant.
5.4. Single Fund. All assets of the Trust Fund and of each investment fund, and
the income thereon, shall be held and invested as a single fund and the Trustee
shall not make any separate investment of the Trust Fund, or make any separate
investment fund, for the account of any Participant or other General Creditors
prior to receipt of directions to make payments to such Participant or other
General Creditors in accordance with Section 6 or Section 7. All rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with Participants.
SECTION 6
PAYMENTS FROM THE TRUST
6.1. Obligation of Trustee to Make Payments to Participants. The Trustee's
obligation to distribute to any Participant or Beneficiary out of the assets of
the Trust Fund shall be limited to payment at such times and in such amounts as
are properly in conformance with the provisions of Section 6.3. Payments to
Participants or their Beneficiaries pursuant to this Section 6 shall be made by
the Trustee to the extent that funds in the Trust Fund are sufficient for such
purpose and shall at all times be subject to the provisions of Section 7. In the
event Alliant determines that it will pay benefits directly to Participants or
their Beneficiaries as they become due under the terms of the Plan, Alliant
shall notify the Trustee of its decision prior to the time amounts are payable
to Participants or their Beneficiaries.
6.2. Obligation of Alliant to Make Payments to Participants. Notwithstanding
anything in the Trust Agreement to the contrary, Alliant shall have the
obligation for the payment of any benefits payable under the Plan. Distributions
to Participants or their Beneficiaries from the Trust Fund shall discharge,
reduce, and offset the obligation of Alliant to pay benefits payable to or on
behalf of the Participant, to the extent of the distributions, with respect to
the Plan. If the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Alliant shall arrange to make the balance of each such payment as it falls
due. The Trustee shall notify Alliant when principal and earnings are not
sufficient.
6.3. Authorization for Distributions. Distributions which shall be made from
the Trust Fund to pay benefits in accordance with the Plan shall be initiated by
written direction to the Trustee from Alliant, which direction shall indicate
the amount payable in respect of a Plan Participant (and his or her
Beneficiary), the form in which such amount is to be paid (or provided for or
available under the Plan) or manner in which distribution is to be made and
reported, and the time of commencement of payment of such amount, including any
federal, state, or local income taxes to be withheld, and the Trustee shall make
or commence the directed distributions after receipt of such written direction.
The determination of whether a Plan Participant or his or
<PAGE>
her Beneficiary is eligible to receive benefits under the Plan shall be made by
Alliant or such party as it shall designate under the Plan, and any claim for
such benefits shall be considered and reviewed under the procedures set out in
the Plan.
6.4. Insufficient Trust Fund Assets. If Alliant determines that the Trust Fund
does not have sufficient funds to provide for the payment of all amounts
otherwise payable to Participants (or their Beneficiaries) from the Trust under
the Plan, it shall notify the Trustee of the amount of the deficiency, and,
within forty-five (45) days of such notice, Alliant shall deposit in trust with
the Trustee the additional amounts needed to make such payments. Upon receipt of
such amounts by the Trustee from Alliant, proceeds shall first be used by the
Trustee to pay any benefits previously due and remaining unpaid, in the order in
which they were due, pursuant to instructions from Alliant.
6.5. Payment to Alliant. Subject to Section 7 and this Section 6.5, Alliant
shall have no right or power to direct the Trustee to return to Alliant or to
divert to others any of the Trust Fund until payment of all benefits has been
made to all Participants (or their Beneficiaries) pursuant to the terms of the
Plan. Unless otherwise prohibited by the requirements applicable with respect to
grantor trusts, and subject to Section 7:
(a) upon receipt of written certification from Alliant (or, after a
Change in Control, from the independent public accountants for
Alliant) that Trust assets exceed 110% of total Plan benefits,
the Trustee shall distribute such excess to Alliant, and
(b) upon receipt of written certification from Alliant (or, after a
Change in Control, from the independent public accountants for
Alliant) that all obligations of Alliant to Participants with
respect to the Plan have been satisfied pursuant to the terms of
the Plan, and if the Trust Fund shall have any assets remaining,
the Trustee shall distribute such remaining assets of the Trust
Fund to Alliant, subject to the Trustee's right to retain an
amount for compensation and expenses as provided in Section 10.7.
Once payment of all benefits has been made to all Participants (or their
Beneficiaries) pursuant to the terms of the Plan and the balance of the Trust
Fund distributed to Alliant, the Trust shall terminate as provided in Section
9.2.
6.6. Withholding of Taxes. Any amount paid to a Participant or Beneficiary by
the Trustee in accordance with this Section 6 shall be reduced by the amount of
taxes required to be withheld, and the Trustee shall inform Alliant of all
amounts so withheld. For such payments, the Trustee shall have full
responsibility for the payment of all withholding taxes to the appropriate
taxing authorities. Each Participant shall be furnished with the appropriate tax
information form evidencing payments under the Trust and the amount(s) thereof.
SECTION 7
PAYMENTS ON INSOLVENCY OF THE EMPLOYERS
<PAGE>
7.1. No Security Interest. No Participant shall have any claim on or beneficial
ownership interest in the Trust Fund before such assets are paid to the
Participant, except as a general unsecured creditor of the Employers. The
Employers shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust as provided in this Section 7 hereof, the principal and income of
the Trust Fund shall be subject to the claims of General Creditors under federal
and state law. If at any time the Trustee has received notice as provided below
that the Employers are Insolvent, the Trustee shall discontinue payments to
Participants and Beneficiaries, and shall hold assets of the Trust Fund for the
benefit of the General Creditors of the Employers, pursuant to the provisions of
Section 7.3, with no preference whatsoever given claims of employees over claims
of other general unsecured creditors of the Employers.
7.2. Determination of Insolvency. Notwithstanding any other provisions of this
Trust Agreement, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of Alliant
shall have the duty and responsibility to notify the Trustee
promptly in writing that the Employers are Insolvent, and the
Trustee shall be entitled to conclusively rely upon written
certifications of the Board of Directors or the Chief Executive
Officer of Alliant when determining whether the Employers are
Insolvent.
(b) If the Trustee has actual knowledge that the Employers are
Insolvent or has determined that the Employers are Insolvent, the
Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of Alliant that the
Employers are Insolvent or from a person claiming to be a
creditor and claiming that the Employers are Insolvent, the
Trustee shall have no duty to inquire whether the Employers are
Insolvent. If the Trustee receives a written allegation from a
person claiming to be a creditor that the Employers are
Insolvent, the Trustee shall request that the independent public
accountants for Alliant determine whether the Employers are
Insolvent, and shall suspend benefit payments pending such
determination. If the independent public accountants for Alliant
advise the Trustee that the Employers are not Insolvent, it shall
resume payments in accordance with this Trust Agreement. If the
Trustee receives notice of the Insolvency of the Employers
pursuant to this Section 7.2(c), it shall act in accordance with
this Section and Section 7.3 hereof.
7.3. Payments When the Employers are Insolvent. Notwithstanding any other
provision of this Trust Agreement to the contrary, if the Trustee has actual
knowledge or has made a determination as described in Section 7.2(b), has been
advised pursuant to Section 7.2(c), or receives actual notice described in
Section 7.2(a) that the Employers are Insolvent:
<PAGE>
(a) by reason of Section 1.10(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension,
and shall hold the Trust Fund for the benefit of the General
Creditors, and shall pay and deliver the entire amount of the
Trust Fund only as a court competent jurisdiction, or duly
appointed receiver or other person authorized to act by such
court, may order or direct to make the Trust Fund available to
satisfy the claims of the General Creditors (payments to
Participants in accordance with the terms of the Plan may be
resumed only pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.10(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension,
and shall (i) hold the Trust Fund for the benefit of General
Creditors or (ii) pay over all or a portion of the Trust Fund to
General Creditors if directed by Alliant or an appropriate
judicial forum.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their Beneficiaries to pursue their rights as general unsecured
creditors of the Employers with respect to benefits due under the Plan, or
otherwise. If the entire amount of the Trust Fund is distributed pursuant to
this Section 7.3, the Trust shall terminate as provided in Section 9.2.
7.4. Resumption of Duties after Insolvency. In the absence of notice of a court
order to the contrary, the Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with this Trust Agreement
within thirty (30) days of the Trustee's receipt of a determination from the
independent public accounting firm for Alliant that the Employers are not
Insolvent or are no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors, then
as soon as practicable after the Employers are no longer
Insolvent, the Employers shall deposit into the Trust Fund a sum
equal to the Funding Amount, determined as of the date the
Employers are no longer Insolvent, which date shall be a
Valuation Date. Alliant (or, after a Change of Control, Alliant's
independent public accountants) shall provide the Trustee with
written certification of such Funding Amount. If the Funding
Amount is not paid by the Employers within ninety (90) days of
the Trustee's receipt of such notice, the Trustee shall demand
payment and commence legal action to compel payment to the
Trustee if the Trustee so determines such action to be necessary
or appropriate.
(b) Determination of Payment Amount; Resumption of Payments. Provided
that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 7.3 and subsequently resumes such payments, the first
payment following such discontinuance shall include the aggregate
amount of all payments due to Participants or their Beneficiaries
under the terms of the Plan for the period of such
discontinuance, as determined by Alliant, less the aggregate
amount
<PAGE>
of any payments made to Participants or their Beneficiaries by
the Employers in lieu of the payments provided for hereunder
during any such period of discontinuance. If the Trustee suspends
a payment to a Participant or a Participant's Beneficiary under
this Section 7 and subsequently makes such payment, the payment
shall include interest at the rate of interest per annum equal to
the 1 year Treasury Note rate as of the immediately preceding
March 31 for each day from the date of suspension to the date of
payment, as calculated by Alliant.
SECTION 8
RESIGNATION OR REMOVAL OF TRUSTEE
8.1. Resignation or Removal of Trustee. The Trustee may resign for any reason
or for no reason and at any time by giving thirty (30) days prior written notice
to the Committee (or such shorter notice as may be agreed to by the Committee
and the Trustee). Subject to Section 8.2(b) hereof, the Board of Directors may
remove the Trustee for any reason or for no reason and at any time by giving
thirty (30) days prior written notice to the Trustee (or such shorter notice as
may be agreed to by the Board of Directors and the Trustee).
8.2. Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed by the effective date of such
resignation or removal. The Board of Directors shall give notice of any such
appointment to the retiring Trustee and the successor Trustee. A successor
Trustee shall be appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Board of Directors. If a Trustee should
resign or be removed, and the Board of Directors does not notify
the Trustee of the appointment of a successor Trustee within
forty-five (45) days of the notice of the Trustee's resignation
or removal, then the Board of Directors shall be deemed to have
appointed Alliant's Chief Executive Officer, Chief Financial
Officer and Vice President Human Resources as successor Trustees.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may not be
removed by the Board of Directors for three (3) years from the
date of the Change of Control. If a Trustee determines to resign
within three (3) years from the date of a Change of Control, the
Trustee shall, prior to the effective date of such resignation,
apply to a court of competent jurisdiction for the appointment of
a successor Trustee or for instructions.
(c) Notwithstanding Section 8.1, no resignation by or removal of the
Trustee shall be effective prior to the effective date of the
appointment of a successor Trustee by Alliant or a court of
competent jurisdiction.
<PAGE>
8.3. Duties of Retiring and Successor Trustees. In the event of the resignation
or removal of a Trustee, the retiring Trustee shall within sixty (60) days after
the effective date of resignation or removal furnish to the successor Trustee
and the Board of Directors a final accounting of its administration of the
Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring Trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment and further
assurance as the successor Trustee may reasonably require. All of the provisions
of the Trust Agreement set forth herein with respect to the Trustee shall relate
to each successor Trustee with the same force and effect as if such successor
Trustee had been originally named as the Trustee hereunder. Unless otherwise
required by law, the successor Trustee shall not be required to examine the
accounts, records, or acts of the prior Trustee. In no event shall the successor
Trustee be liable to Alliant for the acts or omissions to act by its
predecessors.
SECTION 9
AMENDMENT AND TERMINATION OF TRUST
9.1. Amendment. Except as otherwise provided in Section 2.3 of this Trust
Agreement and except any amendment that would cause the loss of the status of
the Trust as a grantor trust, the Trust Agreement may be amended (but may not be
revoked unless all of the obligations of Alliant with respect to the Plan have
been satisfied) by a written instrument executed by the Trustee and Alliant,
which amendment shall include the effective date of such amendment. Any
amendment of the Trust Agreement may be made: (a) prior to a Change of Control,
without limitation and in any manner and effective as of any date, including a
retroactive effective date if accompanied by the written certification that no
Change of Control has occurred, or (b) after a Change of Control, only if a
period of three (3) years has elapsed since the Change of Control, and either
(i) such amendment is accompanied by the specific written consent to the
amendment by the Participants whose accounts under the Plan, computed by the
independent public accountants for Alliant as of the effective date of such
amendment, represent at least fifty-one percent (51%) of the total of all
accounts under the Plan, or (ii) such amendment is accompanied by the opinion of
legal counsel satisfactory to the Trustee that the amendment is necessary for
the purpose of conforming the Trust Agreement to any present or future federal
or state law (including revenue laws) relating to trusts of this or similar
nature, as such laws may be amended from time to time, and a certification that
a copy of such notice and opinion of counsel has been delivered to each Plan
Participant. However, no amendment shall conflict with the terms of the Plan or
operate to reduce the Funding Amount. No amendment shall operate to change the
duties and liabilities of the Trustee without its consent or make the Trust
Agreement revocable unless Alliant has satisfied all obligations it may have
with respect to the Plan on the date of such amendment. Alliant and the Trustee
shall execute such amendments of the Trust Agreement as shall be necessary to
give effect to any amendment made in accordance with this section.
9.2. Termination. After all assets of the Trust Fund have been distributed by
the Trustee either to the Participants or their Beneficiaries in accordance with
the terms of the Plan and Section 6 or pursuant to the provisions of Section 7,
the Trustee shall render an accounting, which shall be the final accounting, in
the manner provided for in Section 4.3. Upon acceptance
<PAGE>
of the accounting by Alliant or a court of competent jurisdiction pursuant to
Section 7, and after deduction of such reasonable amount for compensation and
expenses as provided for in Section 10.7, the assets remaining in the Trust
Fund, if any, shall be returned to Alliant in the manner provided in Section
6.5, and the Trust shall terminate thereupon. The Trust and all the right,
titles, powers, duties, discretions and immunities imposed on or reserved to the
Trustee and Alliant, shall continue in effect until all assets of the Trust Fund
have been distributed as provided herein.
SECTION 10
GENERAL PROVISIONS
10.1. Coordination with Plan. The responsibilities of the Trustee shall be
governed solely by the terms of this Trust Agreement. The Trustee shall
discharge its duties and responsibilities in accordance with its rules and
procedures. Alliant shall discharge its responsibilities and duties under the
Trust Agreement in accordance with the Trust Agreement and shall have the
exclusive authority, which may not be delegated, to:
(a) amend this Trust Agreement and to terminate the Trust;
(b) appoint or remove a Trustee or accept the resignation of a
Trustee; and
(c) appoint or remove an Investment Manager.
10.2 Litigation. In any action or proceeding regarding the Trust, Alliant, any
assets of the Trust Fund, or the administration of the Trust Agreement, any
creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of Alliant to such creditor.
10.3. Trustees Action Conclusive. Subject to applicable law, the Trustees
reasonable exercise or non-exercise of its powers and discretion in good faith
shall be conclusive on all persons. No one other than Alliant shall be obliged
to see to the application of any money paid or property delivered to the
Trustee. The certificate of the Trustee that it is acting according to this
Trust Agreement will protect all persons dealing with the Trustee.
10.4. No Guarantee or Responsibility. Notwithstanding any other provision of
this Trust Agreement to the contrary, the Trustee does not guarantee payment of
any amount which may become due and payable to a Participant or a Beneficiary.
Except as required by applicable law, the Trustee shall have no responsibility
for the disclosure to Participants regarding the terms of the Plan or of this
Trust Agreement, or for the validity thereof. The Trustee shall not be
responsible for administrative functions under the Plan and shall have only such
responsibilities
<PAGE>
under this Trust Agreement as specifically set forth herein. The Trustee will be
under no liability or obligation to anyone with respect to any failure on the
part of Alliant, the Plan, or the independent public accounting firm for
Alliant, an Investment Manager, or a Participant to perform any of their
respective obligations under the Plan or this Trust Agreement. The Trustee shall
be protected in relying upon any notice or direction provided to it from Alliant
in connection with the Trustees duties hereunder which the Trustee in good faith
believes to be genuine, and executed and delivered in accordance with this Trust
Agreement. Nothing in this Trust Agreement shall be construed as requiring the
Trustee to make any payment in excess of the amounts held in the Trust Fund at
the time of such payment or otherwise to risk or expend its own funds.
10.5. Liabilities Mutually Exclusive. Each of the Trustee and Alliant shall be
responsible only for its own acts or omissions.
10.6. Indemnification. If the Trustee undertakes or defends any litigation with
a third party arising in connection with the Trust, Alliant agrees to indemnify
to the extent permitted by law the Trustee and hold it harmless against Trustees
costs, expenses and liabilities (including, without limitations, attorneys' fees
and expenses) relating thereto and to be primarily liable for such payments,
provided that the Trustee did not act dishonestly, or in willful or negligent
violation of the law, or in bad faith in the performance of its responsibilities
hereunder pursuant to which such liability, cost or expense arose, and provided
further that Alliant receives notice of any such litigation and been given the
opportunity to defend or respond to such litigation. If Alliant does not pay
such costs, expenses and liabilities in a reasonably timely manner, and it has
received notice of such litigation as provided in the preceding sentence, then
the Trustee may obtain payment from the Trust. Furthermore, Alliant agrees to
indemnify the Trustee and hold it harmless from and against all claims,
liabilities, losses, costs and expenses (including, without limitation,
attorneys fees and expenses) that may be imposed on, incurred by or asserted
against the Trustee by reason of the Trustee taking or refraining from taking
any action in connection with this Trust Agreement or the Trust Fund, whether
the Trustee is a party to a legal proceeding or otherwise, provided that the
Trustee did not act dishonestly or in a willful or negligent violation of its
duties under this Trust Agreement or of any law or regulation (as found by a
final judgment of a court of competent jurisdiction). This Section 10.6 shall
survive the termination of the Trust.
10.7. Expenses and Compensation. The Trustee shall be paid compensation by
Alliant in an amount agreed to by Alliant and the Trustee. The Trustee shall be
reimbursed by Alliant for reasonable and necessary expenses incurred by it in
the management and administration of this Trust Agreement; and if the Trustee is
not timely reimbursed with respect to amounts due pursuant to this Section 10.7,
the Trustee may charge such amounts against the Trust Fund. Any compensation or
expenses so agreed upon or otherwise payable not paid by Alliant on a timely
basis may be charged to the Trust Fund no more frequently than quarterly upon
notice to Alliant.
10.8. Notice. Any notice to the Trustee or to Alliant required or permitted
under this Trust Agreement shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
<PAGE>
U.S. Bank National Association
Institutional Financial Services
601 Second Avenue South
Minneapolis, Minnesota 55402
Re: Alliant Techsystems Inc. Management Deferred Compensation Plan
and to Alliant at:
Alliant Techsystems Inc.
Attn: Pension and Retirement Committee
MN11-1030
600 Second Street NE
Hopkins, Minnesota 55343-8384
or to such other address as the Trustee or Alliant may specify by written notice
to the other.
10.9. Anti-Assignment Clause. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
10.10. True and Correct Document. Any persons dealing with the Trustee may rely
upon a copy of this Trust Agreement and any amendments thereto certified to be
true and correct by the Trustee.
10.11. Waiver of Notice. Any notice required under this Trust Agreement may be
waived by the person entitled to such notice.
10.12. Counterparts. This Trust Agreement may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.13. Gender and Number. Words denoting the masculine gender shall include the
feminine and neuter genders and the singular shall include the plural and the
plural shall include the singular wherever required by the context.
10.14. Successors. This Trust Agreement shall be binding on all persons entitled
to payments hereunder and their respective heirs and legal representatives, and
on Alliant, the Trustee, and their respective successors.
10.15. Severability. If any provision of this Trust Agreement is held to be
illegal or invalid, such illegality or invalidity shall not affect the remaining
provisions of this Trust Agreement which shall be construed and enforced as if
such illegal or invalid provisions had never been inserted herein.
<PAGE>
10.16. Applicable Law. To the extent not preempted by the laws of the United
States, the Trust shall be governed by the laws of the State of Minnesota and
the Trust Agreement shall be operated and construed in accordance with such
laws.
IN WITNESS WHEREOF, Alliant Techsystems Inc. and the Trustee have caused
this Trust Agreement to be signed by their duly authorized representatives, and
have caused their respective seals to be hereunto affixed, as of the day and
year first above written.
ALLIANT TECHSYSTEMS INC.
By __________________________________
Its ______________________________
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By __________________________________
Its ______________________________
<PAGE>
Exhibit 10.3
SEPARATION AGREEMENT AND GENERAL RELEASE
- ------------------------------------------------------------------------------
This Separation Agreement and General Release (Agreement), is made and entered
into this day of 30 September 1999, by and between John L. Lotzer ("you"), a
--
resident of the state of Minnesota and Alliant Techsystems Inc. ("Alliant"), a
Delaware corporation with its principal place of business in Hopkins, Minnesota.
You and Alliant have agreed that your employment will conclude as provided in
this Agreement and, in connection with the termination of your employment,
Alliant has agreed to provide you with certain payments to which you would not
be entitled absent your execution of this Agreement. Further, you and Alliant
desire to settle any and all disputes related directly or indirectly to your
employment by Alliant and/or your termination from employment, in accordance
with the terms and conditions set forth in this Agreement. Therefore, in
consideration of the mutual covenants and agreements set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, you and Alliant agree as follows:
1. Termination of Employment.
-------------------------
(a) Effective as of the close of business on December 31, 1999:
(i) you will no longer be an employee of Alliant and, except as otherwise
set forth in this Agreement, or as set forth in the applicable
employee benefit plan, all of your privileges as an Alliant employee
will end; and
(ii) you acknowledge and agree that you voluntarily resign from the office
of Vice President - Tax and Investments of Alliant.
(b) Effective as of the close of business on September 30, 1999:
(i) except as otherwise set forth in this Agreement or as otherwise
mutually agreed between you and Alliant, you will cease to have any
signature authority or management authority previously delegated to
you as an employee of Alliant; and
(ii) you acknowledge and agree that you voluntarily resign as Vice
President and Treasurer of Alliant International Holdings Inc. and as
a director of Alliant Techsystems Foreign Sales Corporation B.V.
2. Payments.
--------
(a) In connection with your termination of employment, Alliant will provide you
the following payments and benefits:
(i) Weekly Severance. Alliant will pay to you the sum of $30,001.85
----------------
as Severance Payments. This severance amount will be paid in
accordance with Alliant's normal payroll disbursements beginning
on October 1, 1999 and ending December 31, 1999. Alliant will
withhold required deductions, including deductions for applicable
state and federal taxes, social security and all other standard
deductions. This amount will be considered "Earnings" or
"Recognized Compensation" for purposes of Alliant's qualified and
non-qualified employee benefit plans.
(ii) Additional Non-Severance Payment. Alliant will pay to you an
--------------------------------
additional sum of $15,000.00: This amount will be paid to you on
or about December 31, 1999. Alliant will withhold required
deductions,
<PAGE>
including deductions for applicable state and federal taxes,
social security and all other standard deductions. This amount
will be considered "Earnings" or "Recognized Compensation" for
purposes of Alliant's qualified and non-qualified employee benefit
plans.
(iii) Executive Outplacement Services. You will be entitled, at the
-------------------------------
expense of Alliant, to receive outplacement services (from a
nationally recognized firm of your selection), up to a total
amount, not to exceed 15% of your annual base salary, which amount
is calculated to be $19,500.00, upon presentation of an invoice
for the costs thereof which are (a) not paid for by a prospective
or subsequent employer, and (b) incurred prior to January 31,
2000.
(iv) Accrued but Unused Vacation. As soon as administratively
---------------------------
feasible after your Lay Off date (September 30, 1999) as set forth
above, or as dictated by state law, Alliant will pay to you any
amount owed to you of accrued and unused vacation. This sum will
be paid regardless of whether you execute this Agreement. Vacation
time will not be earned or accrued during the period October 1
through December 31, 1999.
(v) Employee Benefit Plans. Your rights to benefits under all
----------------------
other Alliant employee benefit plans will be governed by the terms
of such plans.
(vi) MIP. You will be eligible to receive a Management Incentive
---
Plan (MIP) payment for the 6 Month Portion of Fiscal Year 2000
that you were an active employee, i.e., the period from April 1,
1999 through September 30, 1999. Such payment will be based on the
performance criteria already agreed upon between you and Alliant
prior to the beginning of such 2000 Fiscal Year and actual
individual and corporate performance. This amount will be paid in
a single lump sum payment in cash at the same time as all other
MIP participants receive payment. This amount will be considered
"Earnings" or Recognized Compensation" for purposes of Alliant's
qualified or non-qualified employee benefit plans.
(vii) Stock Option. Non-vested stock options shall be forfeited
------------
effective on you termination date. Vested stock options are
exercisable for a period which is equal to the lesser of a) three
(3) years from your termination date as set forth in paragraph 1,
or b) the stock option's normal expiration date, whichever is
sooner. You have 6,499 vested options.
(viii) Performance Shares. Performance Shares covered by the May 10,
------------------
1999 letter from Paul David Miller are canceled.
(ix) Executive Life Insurance. The Executive Life Insurance Plan in
------------------------
which you are currently covered will be continued at its current
amount and under its current terms through December 31, 1999, and
Alliant will not maintain it in effect thereafter. It is
understood that the policy shall be transferred to you on such
date but that any cash surrender value remaining on December 31,
1999 will not be transferred to you.
(x) Income Security Plan. As of the date hereof, you waive any and
--------------------
all right to receive payments and/or benefits under, and release
Alliant from any and all obligation to you under, Alliant's Income
Security Plan (the "Income Security Plan"), and agree that you
shall not be deemed a Participant (as defined in the Income
Security Plan) for any purpose.
(xi) Financial Planning. You will continue to be eligible to
------------------
receive benefits under the ATK Financial Planning Program until
December 31, 1999.
<PAGE>
(b) Except as provided above, or as provided in Attachment 1 or as provided in
a Consulting Agreement to be entered into effective January 1, 2000, you
acknowledge that you have received all other compensation and benefits due
and owing to you from Alliant and that you have no further claim to any
compensation or employee benefits from Alliant. You acknowledge that you
are not entitled to the payment in paragraph 2(a)(i) and (ii) above unless
you sign this Agreement and that Alliant has agreed to provide this payment
solely as consideration for your signing this Agreement.
3. Your Death. Alliant agrees that the compensation described in paragraph
-----------
2(a)(i) and (ii) above will be paid to your estate in the event of your death,
on the condition that you have signed this Agreement and have not exercised your
right to rescind.
4. Unemployment Compensation. Alliant agrees not to challenge your
-------------------------
entitlement to unemployment compensation benefits as provided by law.
5. Attorneys' Fees and Expenses. You agree that you are responsible for
----------------------------
payment of all of your own attorneys' fees and expenses incurred in conjunction
with the review of this Agreement and resolution of any and all claims you may
have against Alliant.
6. Confidential Information. You acknowledge that in the course of your
------------------------
employment with Alliant or any of its predecessor companies, you have had access
to confidential information and trade secrets relating to business affairs of
Alliant and/or its predecessor or related companies and entities. You agree that
you will maintain the confidentiality of Alliant's confidential information
and/or trade secrets. You agree that at no time following your execution of this
Agreement, will you disclose or otherwise make available to any person, company
or other party confidential information or trade secrets. This Agreement shall
not limit any obligations you have under any other Alliant confidentiality
agreement or applicable federal or state law.
7. Return of Alliant Property. You acknowledge that prior to your last day of
--------------------------
active employment, you will return all property owned by Alliant which is in
your possession, including, but not limited to, any company credit card (or
credit card on which Alliant is a guarantor), computer, telephone, pager, fax or
printer. Further, you agree to repay to Alliant the amount of any permanent or
temporary advances previously made to you by Alliant which remain outstanding
and any balance owing on any credit cards of any moneys due and owing Alliant or
for which Alliant is a guarantor.
8. Release. You fully release and discharge the companies and individuals
-------
listed below from all liability for damages or claims of any kind arising out of
any action, inaction, decision, or event occurring through the date of your
execution of this Agreement:
. Alliant, and its predecessor companies; . Alliant's current and
. All companies owned by, connected with, former Directors, Officers,
or affiliated with Alliant; and Managers, Employees Agents,
Insurers, Counsel, and
Shareholders.
You understand that you are giving up any and all manner of actions or
causes of actions, suits, debts, claims, complaints, or demands of any kind
whatsoever, whether direct or indirect, fixed or contingent, known or unknown,
in law or in equity, that you have or may have for claims arising under or based
on, but not limited to, the:
<PAGE>
<TABLE>
<S> <C>
. Minnesota Human Rights Act, Minn. Stat. (SS) . Family and Medical Leave Act, 29 U.S.C. (SS) 2601, et seq.;
363.01, et seq. or any other similar state statute . National Labor Relations Act, 29 U.S.C. (SS) 151, et seq.;
applicable in your state of residence; . Occupational Safety and Health Act, 29 U.S. C. (SS) 651, et
. Age Discrimination in Employment Act, 29 U.S.C. (SS) seq.;
621, et seq., as amended by the Older Workers . Rehabilitation Act, 29 U.S.C. (SS) 701 et seq.;
Benefit Protection Act; . Title VII, as amended by the Civil Rights Act of 1991, 42 U.S.C
. Americans with Disabilities Act, 42 U.S.C. (SS) (SS) 2000e, et seq.;
12101, et seq.; . Worker Adjustment and Retaining Notification Act of 1988, 29
. Employee Retirement Income and Security Act, 29 U.S.C. (SS) 2101, et seq.; or
U.S.C. (SS) 1001, et seq.; . Any other federal, state or local law, including any attorneys'
. Fair Labor Standards Act, 29 U.S.C. (SS) 201, et seq.; fees that could be awarded in connection with these or any
other claims.
</TABLE>
You further understand that this Agreement extends to, but is not limited
to, all claims that you have or may have in contract or tort theories. This
includes, but is not limited to, the following potential claims:
<TABLE>
<S> <C>
. Wrongful discharge, or wrongful discharge in . Retaliation, or intentional or negligent infliction of
violation of public policy; emotional distress;
. Breach of contract, breach of an express or implied . Defamation (including all forms of libel, slander, and
promise, breach of the implied covenant of good self-defamation);
faith and fair dealing, or breach of fiduciary duty; . Negligent hiring, retention or supervision; and/or
. Interference with contractual relations; . Any other claim otherwise based on any theory, whether
. Promissory estoppel; developed or undeveloped, arising from or related to your
. Breach of employee handbooks, manuals or other policies; employment or the termination of your employment with Alliant,
. Assault or battery; or any other fact or matter occurring prior to your execution
. Intentional or negligent misrepresentation, or of this Agreement.
fraud;
</TABLE>
You further agree that you will not institute any claim for damages,
or any other relief, nor request any other party or entity, to institute any
claim for damages on your behalf. You understand that you waive your right to
money damages or other legal or equitable relief awarded as a result of any
claim filed on your behalf by any other person, entity or governmental agency.
9. Consideration Period. You have been informed that the terms of this
---------------------
Agreement shall be open for consideration by you for a period of at least forty
five (45) calendar days after the date set forth above, during which time you
may consider whether or not to accept this Agreement and seek legal counsel to
advise you of your rights. You agree that changes to this Agreement, whether
material or immaterial, will not restart this acceptance period. You further
understand that you are not required to take the entire forty five (45) day
period to decide whether you wish to execute the Agreement and that you may do
so on an accelerated basis without prejudice to your own or Alliant's rights
under this Agreement.
10. Right to Rescind. You understand that you have the right to rescind this
-----------------
Agreement for any reason by informing Alliant of your intent to rescind this
Agreement within fifteen (15) calendar days after you sign it. You understand
that this Agreement will not become effective or enforceable unless and until
you execute the Agreement and the applicable rescission period has expired. Any
such rescission must be in writing and hand-delivered to the person listed below
or, if sent by mail, must be received by such person within the applicable time
period, sent by certified mail, return receipt requested, and addressed as
follows:
<PAGE>
Sandy Ketchmark, MN11-1025
Alliant Techsystems
600 2/nd/ Street NE
Hopkins, MN 55343
In the event that you effectively rescind the Agreement, neither you nor Alliant
will have any rights or obligations whatsoever under this Agreement. Any
rescission, however, does not affect your termination of employment from
Alliant, effective as of the date set forth in paragraph 1.
11. Effective Date. This Agreement does not become effective until sixteen
--------------
(16) calendar days after you sign it and return it to the person named above and
then only if it has not been rescinded by you under the procedures of paragraph
10.
12. No Admission. This Agreement is not an admission by Alliant that any of
------------
its actions or inactions are unjustified, unwarranted, discriminatory, wrongful
or in violation of any federal, state or local law and this Agreement shall not
be interpreted as such. Alliant disclaims any liability to you or any other
person on the part of itself and/or its current or former directors, officers,
employees, representatives, and agents. You agree and acknowledge that this
Agreement shall not be interpreted to render either party to be a prevailing
party for any purpose including, but not limited to, an award of attorney's fees
under any statute or otherwise.
13. Effect of Breach. In the event that you breach any provision of this
----------------
Agreement, Alliant will have no further obligations under paragraph 2(a)(i) and
(ii) of this Agreement. You agree that in the event of your breach Alliant will
be entitled to repayment of all moneys paid to you under such section together
with the attorneys' fees and costs incurred to collect the money and to seek
injunctive relief.
14. No Adequate Remedy. You agree that it is impossible to measure in money
------------------
all of the damages which will accrue to Alliant by reason of your breach of any
of your obligations under this Agreement. Therefore, if Alliant shall institute
any action or proceeding to enforce the provisions hereof, you hereby waive the
claim or defense that Alliant has an adequate remedy at law, and you shall not
raise in any such action or proceeding the claim or defense that Alliant has an
adequate remedy at law.
15. No Assignment. This Agreement is personal to you and may not be assigned
-------------
by you.
16. Enforceable Contract. This Agreement shall be governed by the laws of the
---------------------
State of Minnesota. If any part of this Agreement is construed to be in
violation of any law, such part shall be modified to achieve the objective of
the parties to the fullest extent permitted and the balance of this Agreement
shall remain in full force and effect.
17. Entire Agreement. You agree that this Agreement contains the entire
-----------------
agreement between you and Alliant with respect to the subject matter hereof and
there are no promises, undertakings or understandings outside of this Agreement,
except with respect to your continued requirement to not reveal confidential,
secret or top secret information, patent, trademark or similar matters and as
specifically set forth herein. This Agreement supersedes all prior or
contemporaneous discussions, negotiations and agreements, whether written or
oral, except as specifically set forth herein. Your right to payments or
employee benefits from Alliant are specified exclusively and completely in this
Agreement. Any modification or addition to this Agreement must be in writing,
signed by an officer of Alliant and you.
18. Acknowledgment. You affirm that you have read this Agreement, and have had
---------------
adequate time to consider the terms of the Agreement. Further, you have been
advised that you should consult with an attorney prior to signing this
Agreement. You acknowledge that the provisions of this
<PAGE>
Agreement are understandable to you and to the extent that you have not
understood any section, paragraph, sentence, clause or term, you have taken
steps to ensure that it was explained to you. You have entered into this
Agreement freely and voluntarily.
IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures
below.
Employee -
Dated: September 30, 1999 John L. Lotzer - [social security
number]
/s/ John L. Lotzer
------------------
Your signature
********************************************************************************
HR Administrator -
Dated: September 30, 1999 Alliant Techsystems Inc.
Robert E. Gustafson /s/ RG /s/ Scott S. Meyers
- --------------------------- -------------------
(Print name) Signature
Vice President & CFO
--------------------
Title
<PAGE>
Attachment 1
------------
[This agreement, which is intentionally omitted, provides Mr. Lotzer with the
opportunity to earn incentive compensation aggregating up to a maximum of
$262,000 if certain predetermined results are achieved in connection with
projects assigned to Mr. Lotzer. Any such incentive compensation will be paid
within 60 days of achieving the predetermined results, and will not be
considered "Earnings" or "Recognized Compensation" for purposes of the
registrant's qualified and non-qualified employee benefit plans.]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q FILING
FOR THREE MONTHS ENDED 10/3/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> OCT-03-1999 SEP-27-1998
<CASH> 28,871 21,078
<SECURITIES> 408 408
<RECEIVABLES> 225,217 233,499
<ALLOWANCES> 1,056 1,056
<INVENTORY> 50,508 44,030
<CURRENT-ASSETS> 352,028 343,108
<PP&E> 563,408 547,114
<DEPRECIATION> (230,846) (211,363)
<TOTAL-ASSETS> 896,415 894,318
<CURRENT-LIABILITIES> 264,984 286,488
<BONDS> 305,118 305,993
0 0
0 0
<COMMON> 139 139
<OTHER-SE> 147,169 118,584
<TOTAL-LIABILITY-AND-EQUITY> 896,415 894,318
<SALES> 525,510 515,319
<TOTAL-REVENUES> 525,510 515,319
<CGS> 425,369 424,654
<TOTAL-COSTS> 425,369 424,654
<OTHER-EXPENSES> 4,805 3,732
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 17,462 10,876
<INCOME-PRETAX> 40,830 38,199
<INCOME-TAX> 10,232 5,730
<INCOME-CONTINUING> 30,598 32,469
<DISCONTINUED> 9,450 0
<EXTRAORDINARY> 0 14,627
<CHANGES> 0 0
<NET-INCOME> 40,048 17,842
<EPS-BASIC> 3.91 1.42
<EPS-DILUTED> 3.82 1.38
</TABLE>
<PAGE>
Exhibit 99
ALLIANT TECHSYSTEMS INC.
DIRECTORS AND EXECUTIVE OFFICERS
November 12, 1999
<TABLE>
<CAPTION>
Name (Age) Position
---------- --------
<S> <C>
Paul David Miller (57) Director, Chairman of the Board and Chief Executive Officer
Peter A. Bukowick (55) Director, President and Chief Operating Officer
Gilbert F. Decker (62) Director
Thomas L. Gossage (65) Director
Joel M. Greenblatt (41) Director
Jonathan G. Guss (40) Director
David E. Jeremiah (65) Director
Gaynor N. Kelley (68) Director
Joseph F. Mazzella (46) Director
Daniel L. Nir (38) Director
Michael T. Smith (56) Director
Geoffrey B. Courtright (51) Vice President - Information Technology and Chief Information Officer
Charles H. Gauck (61) Vice President and Secretary
Robert E. Gustafson (51) Vice President - Human Resources
Richard N. Jowett (54) Vice President and Treasurer
John L. Lotzer (43) Vice President - Tax and Investments
William R. Martin (58) Vice President - Washington, D.C. Operations
Mark L. Mele (42) Vice President - Investor Relations and Strategic Planning
Scott S. Meyers (46) Vice President and Chief Financial Officer
Paula J. Patineau (45) Vice President and Controller
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name (Age) Position
---------- --------
<S> <C>
Paul A. Ross (62) Senior Group Vice President - Aerospace
Don L. Sticinski (48) Group Vice President - Defense Systems
Nicholas G. Vlahakis (51) Group Vice President - Conventional Munitions
Daryl L. Zimmer (56) Vice President and General Counsel
</TABLE>
