-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZCOBMPDk0T1qAYuCi5yLH2XIOFysIbRWFtQXOYA4Qx9cSozZqDFudkCV0i0J2R8 a15KwnDfPYhXE/4bpmN1rw== 0000068366-97-000025.txt : 19970926 0000068366-97-000025.hdr.sgml : 19970926 ACCESSION NUMBER: 0000068366-97-000025 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970925 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: THIOKOL CORP /DE/ CENTRAL INDEX KEY: 0000068366 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 362678716 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06179 FILM NUMBER: 97685498 BUSINESS ADDRESS: STREET 1: 2475 WASHINGTON BLVD CITY: OGDEN STATE: UT ZIP: 84401 BUSINESS PHONE: 8016292000 FORMER COMPANY: FORMER CONFORMED NAME: MORTON THIOKOL INC DATE OF NAME CHANGE: 19890705 FORMER COMPANY: FORMER CONFORMED NAME: MORTON NORWICH PRODUCTS INC/DE DATE OF NAME CHANGE: 19821004 10-K 1 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-6179 THIOKOL CORPORATION Incorporated in the State of Delaware IRS Employer Identification No. 36-2678716 Principal Executive Offices 2475 Washington Boulevard, Ogden, Utah 84401 Telephone Number: (801) 629-2000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange Common Stock, par value on Which Registered $1.00 per share New York Stock Exchange Common Stock Purchase Rights Chicago Stock Exchange Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Aggregate market value of Registrant's voting stock held by non-affiliates, based upon the closing price of said stock on the New York Stock Exchange-Composite Transaction Listing on August 29, 1997, ($79.625 per share): $1,455,933,889 Number of shares of Common Stock outstanding as of August 29, 1997: 18,284,884 DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Annual Report to Stockholders for the fiscal year ended June 30, 1997: Parts I, II, and IV. 2. Portions of definitive Proxy Statement dated September 12, 1997: Parts III and IV. ============================================================================== PART I ITEM 1. BUSINESS - ---------------- Thiokol Corporation (the "Company") manufactures solid rocket propulsion systems and related products, ordnance, flares, gas generators, and actuators, and provides services for the aerospace and defense markets and specialty fastening systems for aerospace and industrial applications. Founded in 1930, Thiokol Corporation and its successor, Thiokol Chemical Corporation (old Thiokol), operated in various corporate forms until merged in 1982 with Morton-Norwich Products, Inc., and operated thereafter as a division of Morton Thiokol, Inc. After the 1989 spin-off of the specialty chemicals, salt, and automotive-restraint businesses to a newly-formed publicly-traded company, Morton International, Inc., the Company's aerospace and defense business operated independently as Thiokol Corporation. In 1991, the Company acquired the aerospace and industrial fastener business of Huck Manufacturing Company. The Company operates this fastening systems segment of the business as a wholly-owned subsidiary, Huck International, Inc. ("Huck"). Huck acquired the threaded lock bolts, locknuts, and related product line assets of the Deutsch Manufacturing Company in 1994 and acquired the assets of Automatic Fastener Company, manufacturer of blind fasteners for automotive and industrial applications, in January 1995. The Company established the Defense and Launch Vehicles Division in 1995 reflecting the consolidation of certain of its defense and solid propulsion product lines. During fiscal year 1997, the Company consolidated its Space Defense and Launch Vehicle Divisions and Science and Engineering into a single operating unit, the Propulsion Group. The Company's management and operations at the government-owned Army ammunition plants in Texas and Louisiana have been discontinued. During fiscal year 1996, the Company and The Carlyle Group, a private merchant investment firm (ACarlyle"), formed a jointly-owned company, Blade Acquisition Corp. (ABlade"). The Company owns 49 percent and Carlyle owns 51 percent of the outstanding Blade voting common stock. In December 1995, Blade completed the acquisition of Howmet Corporation ("Howmet"). The Shareholders' Agreement between the Company and Carlyle provides the Company with a call option, exercisable during a three-year period commencing the third year from the Closing Date (December 13, 1998) to purchase all of the voting common stock of Blade owned by Carlyle. The call option price is set by a purchase price valuation process set forth in the Shareholders' Agreement or by negotiation. The Company's decision to exercise its option to acquire the Howmet shares will be dependent on various factors including financial and operating performance, condition of the financial markets and the applicable valuation. The Company and Carlyle could also agree on alternatives for the Company to increase its ownership in Blade. The Shareholders' Agreement contains a change in control provision which provides the Company the right to accelerate the exercise of the call option in the event of a change of control of Carlyle. In the event of a change of control of the Company as defined by terms of the Shareholders' 1 Agreement, the Company may effectively lose the call option. Equity Investment in Howmet - --------------------------- Howmet is a manufacturer of investment castings for aircraft turbine engines and components and industrial gas turbine engines. The Howmet Cercast Group is a producer of high quality aluminum and investment castings used in the defense electronics and commercial aerospace industries. Howmet's aerospace castings consist of super alloy and titanium castings for aircraft turbine engines and structural airframe and engine applications. Products include airfoils consisting of blades (rotating foils) and vanes (non-rotating foils) as well as integral castings such as turbine rotors and nozzle rings for smaller engines involving an entire set of blades and related components cast together. Structural components include support components of engines such as engine castings, frames, and bearing housings and other airframe components. Howmet's aerospace castings are designed and manufactured for commercial and military applications and sold to original equipment aircraft manufacturers and aftermarket customers. Industrial gas turbine products consist of airfoils (including moving blades and stationery vanes) for gas turbines used for power generation primarily by the electric utility industry and mechanical drive applications for industrial and pipeline operations, oil and gas processing and offshore drilling. Howmet's Cercast subsidiary produces aluminum investment castings for the commercial aerospace and defense markets. Applications include electronic packaging, electro-optical system housings, engine parts, pumps and compressors. Howmet also provides products and services to third parties including machining components, component coating and specialty alloys. Howmet also participates in a joint venture in Japan with Komatsu manufacturing investment cast components for industrial gas turbine and aerospace customers primarily in Japan and other Asian countries. Howmet's aerospace castings represent 52%; Industrial gas turbine castings 33%; and aluminum castings 8% of its revenues. Howmet's principal customers are General Electric, Pratt & Whitney Aircraft Division of United Technologies Corporation, Allied Signal, Inc., Rolls Royce plc and SNECMA, S.A. Sales to the top ten customers represent approximately 60% of Howmet's sales. Howmet's major investment casting competitor is Precision Castparts Corp. ("PCC"). Howmet competes with PCC and others primarily on technological sophistication, quality, price, service and delivery for orders from large, well-capitalized customers with significant market power. Superalloy castings represent a substantial 2 cost component to Howmet's and its competitor's customers who are increasingly focused on reducing costs and responding to increased competition in their markets. Howmet's major customers for these castings are intensely price competitive with each other, and this price competition increases their incentives to reduce costs from their suppliers. Aluminum casting manufacturers also compete on the basis of price. Howmet, based in Greenwich, Connecticut, generated annual sales of $1.2 billion in the twelve-month period ended June 30, 1997. Howmet operates 27 manufacturing facilities located in the United States, Canada, France, the United Kingdom and Japan and employs approximately 10,000 people worldwide. Howmet operates a research and development facility employing 170 people in Whitehall, Michigan. Business Segments - ----------------- The Company operates in two business segments: (i) the Propulsion Group; and (ii) Fastening Systems. This business segmentation reflects the Company's consolidation of its Space, Defense and Launch Vehicle divisions and Science and Engineering unit into one business segment, the Propulsion Group, during fiscal year 1997. Propulsion Group. The propulsion segment consists of solid rocket propulsion systems and related products, research and development and launch support services for the National Aeronautics and Space Administration ("NASA"), Department of Defense and commercial space applications. Such systems include the Reusable Solid Rocket Motor ("RSRM") used for NASA's Space Shuttle. The current Buy III Space Shuttle contract awarded to the Company in 1991 to build 142 solid rocket motor boosters for the NASA Space Shuttle program has approximately $700 million remaining through its projected completion date in fiscal year 2001. The Buy III contract is a Acost plus award fee" contract with an award fee based on the degree of the Company's success, as rated by NASA, of meeting contract standards relating to program safety, management, reliability, quality assurance, delivery, and hardware flight performance on the contract. The Company also receives a cost-incentive fee for meeting certain predetermined cost-reduction targets. The delivery rate and the Company's contract accrual rate for financial statement purposes are subject to continuing NASA funding, NASA's Shuttle flight scheduling (currently seven flights per year), and program performance. The NASA contract is subject to termination for convenience by the federal government with the Company retaining such rights of recovery for costs and expenses provided by the government procurement laws and regulations, and contract terms and conditions. NASA is reorganizing the Shuttle program under one prime contractor, United Space Alliance, to manage many of the program functions now managed by NASA. Such restructuring will occur over a transition period of several years. The Company's position as a contractor to NASA is expected over time to shift to the role of a subcontractor to the prime contractor, 3 although there can be no assurance that such shift will occur. Currently, the Company is the only qualified manufacturer of the RSRM. The Company believes the time and cost to qualify a second source of supply would be prohibitively expensive in light of declining government expenditures for the space program. After completion of the Buy III contract, the Company anticipates continuing participation in the Shuttle program under the Buy IV contract, the terms of which are to be negotiated. The Company expects NASA to issue a request for proposal for the Buy IV contract during early fiscal year 1998. The Company expects to submit its proposal during the second half of 1998 with negotiations following in fiscal year 1999. The Company retains certain Shuttle RSRM solid rocket motor launch oversight activities at the Kennedy Space Center. The Company's family of CASTOR solid rocket motors is used in the first and second stages of a number of expendable launch vehicles and as strap-on boosters for medium and heavy lift vehicles for space, defense, and commercial applications. The Company's CASTOR 120 motor, designed as a low-cost 120,000 pound class motor for the small launch vehicle market, has been selected as the propulsion system for the Lockheed Launch Vehicle ("LLV") and the Orbital Science Taurus launch vehicle. The Company is under contract to provide nine CASTOR 120 motors to Lockheed/Martin Aeronautics for its LLV family of launch vehicles and three motors to Orbital Science. During fiscal year 1998, five CASTOR 120 motor launches are planned. The CASTOR IVA motor is designed with 110,000 pounds of thrust for use as a strap-on booster. The Company currently has orders for the production of 88 motors for Lockheed/Martin Aeronautics for the Atlas IIAS program, which also has options to purchase 32 additional CASTOR IVA motors. The Company's CASTOR IVB motors equipped with thrust vector control deliver 100,000 pounds of thrust and have been selected to support the United States Department of Defense's Target Critical Measurement Program, and the Spanish government Capricornio launch vehicle program. The Company received federal government regulatory clearance and license to export CASTOR motor and case technology in support of the Japanese HII-A launch vehicle. During fiscal year 1997, there were four successful CASTOR IV motor flights, including flights on the Atlas IIAS program. During fiscal year 1998, seven commercial flights and one NASA flight are planned. The Company's family of STAR motors provides upper stage propulsion systems for a number of launch vehicle systems. The STAR motors also provide satellite positioning for space, defense, and commercial applications. During fiscal year 1997, the Company's STAR motors successfully completed 22 missions including the Global Positioning Satellites, Korea Sat, and INMARSAT. The Company's propulsion and gas generator inflated airbags products were successfully deployed on the Mars Pathfinder mission. 4 For strategic and tactical markets, the Company produces, or is otherwise a qualified producer, of a number of propulsion-related programs and products. Major strategic programs include a joint venture arrangement with Alliant Technologies, Inc., which was restructured and consolidated by the Navy during 1995 to produce the first, second and third stages of United States Navy submarine launched Trident II missile systems. During fiscal year 1997, program qualification test motor firings were conducted, and production motors are being delivered. The Company utilizes the percentage of completion method to recognize sales and profits on this cost-plus incentive type contract. Profit recognition under the contract includes the Company's and its partner's estimate of their respective performances on such contract. The Trident production rate is expected to decline significantly, thereby reducing sales and profitability of the program. The Company is positioned as the lead propulsion supplier on the Alliant Tech Systems and TRW program teams, as prime contractor, for the Minuteman propulsion replacement program to extend the life of the Air Force Minuteman ICBMs. The success of this program is dependent on the level of START treaty ICBM reductions and government funding. The Company also participates in the Trident II and Minuteman Technical Insertion programs. The Company remains a qualified supplier with modest levels of activity on the HARM, MK66 and Harpoon programs. The Company's Propulsion Group also manufactures gas generants for space, defense and commercial applications; visible and infrared flares and demilitarization technology has been developed for both liquid and solid propulsion systems. The Company continues work on a number of product developments including support work on a heavy-lift launch vehicle system, hybrid propulsion, booster technologies, propellant, and nozzle technology for Theater Missile Defense applications. Development work continues in both solid and liquid explosives technologies for both commercial and military applications. Present technology used in conjunction with the Company's propulsion motor case is being developed and tested for commercial applications. The Company's TCR Composites Division has been organized for the commercial development of a lower cost carbon fiber resin technology used for structural and recreation applications. Through a joint technical development agreement, the Company works with Autoliv (formerly the Automotive Safety Products Division of Morton International) on the development of non-sodium azide gas generant airbag and initiator technology. The Company's Propulsion Group maintains ongoing research projects funded under various Company, commercial, and government programs. Federal export laws, controls, and regulations impact or otherwise restrict the export of the Company's propulsion products and technical knowledge. Loading operations managed by the Company under contract for the Army-owned ammunition facilities near Marshall, Texas and Shreveport, Louisiana were discontinued during fiscal year 1997. 5 Fastening Systems. The fastening systems segment consists of the development, production, and sale of threaded and non-threaded fasteners consisting of lock bolts, blind bolts, locknuts, blind rivets, cap screws, and product installation tooling. Fasteners and fastening systems are sold to customers directly by the Company and through a distribution network in both domestic and foreign markets. The fasteners are manufactured from high strength metal and metal alloys and are sold under various trade names and trademarks to aerospace and industrial markets for original equipment and other market use. Product installation tooling is also manufactured and marketed to provide customers complete fastener installation systems. The aerospace market consists of both commercial and military aerospace manufacturing companies, domestic and foreign. Customer product qualification required by domestic and foreign regulatory agencies such as the Federal Aviation Administration as to plant and product quality and lot traceability is important for the aerospace market acceptance of the Company's fasteners. The Company's fasteners have been qualified by major domestic and foreign aerospace companies in order for such customers to use such fasteners in original equipment and aftermarket aircraft products. Principal domestic and foreign industrial markets include automotive, truck, trailer, railcar, and mining applications. The construction industry utilizes the Company's fastening systems for certain structural applications such as bridges and building columns. Competition - ----------- Propulsion Group. The Company is the sole source supplier of RSRM solid rocket motors, the only domestic human-rated solid rocket propulsion, for NASA's Space Shuttle program. The Shuttle Buy III contract was placed directly by NASA. The Company, as the only qualified supplier for the RSRM, does not compete with other manufacturers. The Company, Alliant Technologies, Inc., and the CSD Division of United Technologies, Inc. are the major suppliers of heavy-lift solid propulsion launch vehicles for space and strategic applications and are competitive with each other with regard to medium, light, and strap-on launch vehicles for commercial space applications. Both foreign governments and foreign private enterprises have solid rocket propulsion systems competitive with propulsion systems manufactured by the Company. Liquid propulsion systems and excess strategic ballistic missile inventory may be competitive with the Company's propulsion systems, especially in the commercial launch market. Liquid propulsion systems that may be competitive with the RSRM are under study, but are not yet developed. For Propulsion Group products other than the RSRM solid rocket motors sold to the federal government or federal government prime contractors, the primary method of competition is through the Company responding to a request for proposal or complying with other government procurement procedures under federal acquisition regulations in competition with others. Commercial launch vehicle products are sold primarily through responding to the terms and conditions of a request for proposal or negotiated contracts in 6 competition with others. Principal competitive factors are cost, technical performance, quality, reliability, depth and capability of personnel and adequacy of facilities. Except for the sole-sourced RSRM solid rocket motor, the Company's propulsion products are sold primarily on basis of price. Reductions in Department of Defense expenditures, the decline in the availability of new programs, and lower quantities being procured for strategic and tactical solid rocket motor programs have substantially increased the competitive pressure for these products. The Company's competitive strength is also affected by the technical performance, quality, and reliability of its solid propulsion products for space launch applications. The Company's propulsion systems, services and related products are competitive with Alliant Technologies, Inc., CSD, Aerojet Division of Gen Corp., and the ARC Division of Sequa Corporation and various liquid propulsion systems. Fastening Systems. Fastening systems are manufactured by a number of competitors with no one manufacturer having a major position in the aerospace or industrial fastener markets. Alternative fastening methods compete with the Company's threaded and non-threaded fastener systems. Competition for orders from aerospace original equipment manufacturers is often dependent on customer qualification of the Company's fasteners as required by government regulations. The Company's fastening system products compete not only on price, but also product quality and the Company's ability to provide customer service and delivery. Fastening systems applications and tooling help differentiate the Company's fastening systems products from those of its competitors. Aerospace fastener competition is primarily through responding to requests for proposals made by major aerospace contractors and distributors and purchase orders. Industrial fastener competition is primarily through requests for proposals, purchase order quotations and negotiated contracts in competition with others. The Company's fastening systems compete on quality, delivery, price, and ability to provide customer fastening installation solutions through specific-purpose tooling and fasteners. The Company maintains a proprietary patented position for certain of its fastener designs for which certain limited licenses have been granted to competitors. The Company also manufactures certain fasteners under licenses from competitors. Research and Development - ------------------------ Company-sponsored research and development activities relate to new products and services and improvement of existing products and services. The Company's R&D cost was $12.5 million, $13.3 million, and $15.0 million and represented 1.4 percent, 1.5 percent and 1.6 percent of revenues for fiscal years 1997, 1996, and 1995, respectively; the amount spent during the same periods for customer-sponsored R&D (primarily U.S. government-funded) was $75.7 million, $56.6 million, and $25.1 million, respectively. 7 Environmental Matters - --------------------- Compliance with federal, state, and local environmental requirements with respect to the Company's facilities, including formerly owned and operated facilities, while having the potential to be a significant cost and liability, are not at this time expected to have a material adverse effect on the Company's financial condition or upon the competitive position of the Company or its subsidiaries. Capital expenditures and amounts expensed relating to environmental matters respectively were $1.1 million and $6.6 million for fiscal year 1997 and are estimated to be $1.3 million and $7.0 million for fiscal year 1998, although no assurance can be given as to the exact amount. The Company will report "Environmental Remediation Liabilities" under the American Institute of Certified Public Accountants Statement of Position 96-1 for fiscal year 1998. The Company does not expect the change in such accounting recognition of environmental liabilities to have a material impact on the Company's existing recorded liabilities. The Company maintains ongoing programs for environmental site evaluations, continues its cooperation with federal and state agencies in site investigations, and engages in environmental remediation activities of its sites and sites of third parties where appropriate. The Company is involved with two Environmental Protection Agency ("EPA") superfund sites designated under the Comprehensive Environmental Response, Compensation and Liability Act in Morris County, New Jersey. These sites were operated about thirty years ago by the Company for government contract work. The Company has negotiated a consent decree with the EPA concerning the Rockaway Borough Well Field Site. At this site, the Company's estimated cost for response costs, site remediation, and future operation and maintenance costs is $6.2 million of which approximately $0.8 million will be spent during fiscal year 1998. In 1996, the Company negotiated a consent decree with the State of New Jersey for the Rockaway Township Well Field Site. At this site, the Company's estimated cost for response costs, site remediation, and future operations and maintenance costs is $5.1 million of which approximately $0.5 million will be spent in fiscal year 1998. During fiscal year 1996, the Company settled a third party claim covering environmental issues at the Woodbine, Georgia, site operated by the Company from 1963 to 1976. Under the terms of the agreement, the Company paid $0.4 million for past costs incurred by the third party relating to ownership of the site. The Company is also investigating and remediating certain solid waste management units related to past operations conducted by the Company at this site. The third party retains all other environmental liability for the site. The total estimated investigation and remediation costs for the site is approximately $0.6 million of which approximately $0.2 million will be spent in fiscal year 1998. The Company estimates that the eventual cost for site remediation matters known at this time, before any recoveries from insurance and third party contributions 8 by other responsible parties including the federal government, will be approximately $21 million. The Company has established a receivable in the amount of $2.3 million for expected reimbursement or recovery for environmental claims, costs and expenses from third parties, including the federal government. During fiscal years 1997 and 1996, the Company settled outstanding environmental liability claims with insurance carriers and received payments of $9.5 million from such carriers of which $5.3 million was used to settle reimbursement claims with the federal government for fiscal years 1990 through 1996. The Company's policy and accounting for environmental matters is set forth in Note 1 and Note 12 of the Company's consolidated financial statements. The Company believes that after recoveries from third parties and the federal government, any net liability for which it may ultimately be responsible in excess of amounts currently accrued, would not be material to the Company's financial condition and results of operations. The Company has negotiated an agreement with the federal government to recover certain environmental costs and expenses incurred in connection with the performance of government contracts in the forward pricing on certain of the Company's government contracts. Employees - --------- The approximate number of employees of the Company on June 30, 1997, was 5,300 compared to 5,900 on June 30, 1996. Propulsion Group employment at June 30, 1997 was approximately 3,500 compared to approximately 4,000 at June 30, 1996. Fastening Systems employment was approximately 1,500 on June 30, 1997, compared to approximately 1,600 on June 30, 1996. The reduced employment level for the Propulsion Group reflects reductions as a result of consolidating the Space and Defense, Launch, and Science and Engineering groups and discontinued operations at the Army Ordnance operations in Texas and Louisiana. Fastening Systems' employment levels reflect production efficiencies being achieved as the result of manufacturing reorganization and consolidations. Raw Materials - ------------- Although most of the raw materials used by the Company are readily available, certain key raw material suppliers (such as suppliers of propellant raw materials and nozzle and case component materials) must be approved by the federal government. With a limited number of such approved suppliers, delivery of these materials could be disrupted at the supplier level at any time and have a material adverse impact on production and delivery schedules until government approval of alternative suppliers is obtained. The Company has received notification that a major qualified manufacturer of rayon, a material used in propulsion motor cases, will discontinue production. The Company believes it has a sufficient inventory of material to meet current production demand until a replacement source of material is qualified. 9 Seasonality - ----------- The business of the Company is not subject to seasonal fluctuations. Patents and Trademarks - ---------------------- The Company has approximately 400 patents and patent applications, of which 300 relate to the Propulsion Group business segment, and 100 relate to the Fastening Systems segment. As a government contractor, the Company conducts independent research and development ("IR&D") to enable it to maintain its competitive position. Research and development work is also performed under contracts with the Department of Defense, NASA, and other government agencies. Approximately ninety percent of the Company's patents in the Propulsion Group business segment were developed under Company-funded IR&D related budgets. The Company has full ownership interest in its patents developed under these budgets and lesser rights in the patents it developed under Contract R&D programs. The Propulsion Group business segment patents have the following remaining duration: approximately seventy-five percent of the patents have a duration of more than 10 years; twenty percent, 5-10 years; and five percent, less than 5 years. Patent coverage includes propulsion system design, case, nozzle, and propellants. Patents also cover gas generators, ordnance, flare-related products, and the Company's fiber resin technology. Patents cover non-sodium azide gas generant technology used by Autoliv pursuant to agreements with the Company. Under contracts with the federal government, licenses have been granted to the government for limited use of certain patented technology. Fastening Systems segment patents have the following remaining duration: approximately fifty percent of the patents have a duration of more than 10 years; thirty percent, 5-10 years; and twenty percent less than 5 years. Major aerospace fastening systems covered by patents include a lightweight grooved proportional lock bolt and the "Unimatic" blind bolt rivet. Major industrial fastening systems covered by patents include "Huck-Fit" lock bolts, "Magna-Lok" blind rivets, AUltra-Twist" blindbolt for box beam construction applications and "Magna-Grip" lock bolts with patent lives remaining of more than five years. Certain of the Company's fastener products are manufactured under licenses from competitors. Although the Company believes that its present competitive position is enhanced by its patents and its technical expertise, know-how and proprietary information, no individual patent or group of patents is material to the conduct of the business of the Company. Trademarks are important for product identification in the fastening systems 10 segment of the business, but are not significant to the Company's propulsion business. Customers - --------- The customers of the Propulsion Group are primarily the federal government and its prime contractors and subcontractors. Commercial propulsion customers, primarily in the light and medium launch vehicle market, are being developed, but are not yet material to the Company's customer base. Federal government contracts and subcontracts entered into by the Company are by their terms subject to termination by the government or the prime contractor either for convenience or default. Such contracts are also subject to funding appropriations by Congress. Since the federal government provided, directly and indirectly, approximately sixty percent of the Company's revenues in fiscal year 1997, the termination or discontinuance of funding of a substantial portion of such business would have a material adverse effect on its operations. No single non-government customer is material to the overall business conducted by the Company. Fastening systems customers consist of industrial and aerospace original equipment manufacturers and distributors, domestic and foreign. Foreign customers and a foreign sales base are still developing, but are not yet material to the Company's customer and sales base. Backlog Orders - -------------- The Company's backlog of propulsion systems orders on June 30, 1997, and June 30, 1996, was $1.1 billion and $1.4 billion, respectively. The NASA Space Shuttle solid rocket motor booster and related contracts comprise approximately 58 percent of the backlog. It is expected that approximately 51 percent of the orders in backlog on June 30, 1997, will be completed by June 30, 1998; and the remainder thereafter through fiscal year 2000. The backlog represents the value of contracts for which goods and services are to be provided and includes approximately $530 million in government contracts for which funds have been approved. Although contracts can be changed or canceled, the backlog is believed to consist of firm contracts. The Company does not believe that a material change or cancellation of a single contract (other than the RSRM) would be materially significant to its' business. The contract backlog consists of a combination of cost-plus award fee, cost-plus fixed fee, cost-plus incentive fee, fixed price incentive fee, and firm fixed price contracts. The Company's fastening systems backlog was approximately $117 million on June 30, 1997. ITEM 2. PROPERTIES The Company operates manufacturing, research, and development facilities at ten locations, and administrative and sales offices, warehouses, and service centers worldwide. The Company considers its manufacturing facilities, warehouses, and other properties to be in generally good operating condition and suitable for their intended 11 purposes. Facilities are considered adequate and sufficient to meet the operating needs of the Propulsion Group and Fastening Systems business units. All Company-owned property is held in fee with no encumbrances. Company leased property obligations are set forth in Note 13 of the Company's consolidated financial statements. The Company's operations have been discontinued and facilities closed at Marshall, Texas and Shreveport, Louisiana. During fiscal year 1997, the Company relocated its fastening systems installation tooling division to a new Company-owned facility in Kingston, New York. During fiscal year 1997, additions to property, plant, and equipment totaled $33.1 million. 12 The following table sets forth the Company's manufacturing locations and the approximate square footage. Buildings (000's Square Feet) -------------------------------- Manufacturing Location Company Government by Segment Owned Leased Owned Total ---------- ----- ------ ----- ----- Propulsion Group - ---------------- Northern Utah 3,192 640 6 3,838 Elkton, Maryland 378 378 Fastening Systems Segment - ------------------------- Domestic Branford, Connecticut 74 74 Carson, California 153 153 Kingston, New York(1) 105 105 Lakewood, California 115 115 Tucson, Arizona 67 67 Waco, Texas 371 371 International - ------------- Us, France 61 61 Shropshire, United Kingdom 50 50 - -------------------------- (1) Land is leased. 13 ITEM 3. LEGAL PROCEEDINGS Litigation and Regulation - ------------------------- McDonnell Douglas v. Thiokol Corporation, United States District Court, Central District of California, was filed in July 1992 by plaintiff McDonnell Douglas claiming damages of $17 million for breach of warranty and prejudgment interest of $19 million. The action was based upon the failure in 1984 of two STAR 48 satellite placement motors manufactured by the Company in accordance with plaintiff's acceptance requirements to lift telecommunication satellites into geosynchronous orbit. Plaintiff sought recovery of its costs incurred to conduct its failure analysis and motor redesign. After trial on the merits during fiscal year 1996, the Court ruled in the Company's favor on all counts. On September 15, 1997, the Ninth Circuit Court of Appeals affirmed the District Court's favorable ruling for the Company finding the Company did not breach its contractual obligations and thus is not liable to McDonnell Douglas. The Company defended the suit and the appeal under an agreement with its insurance carrier pursuant to which the Company's past and future costs of defense are being reimbursed subject to a reservation of rights. Thiokol Corporation v. The United States of America. On July 17, 1996, the Company filed an action in the United States Court of Federal Claims seeking payment of costs that arose under its cost-reimbursement contracts with the Government for operation and management of Government-owned, contractor-operated Army ammunition plants in Texas and Louisiana. The Company seeks to recover its costs incurred for Government-approved benefits that workers earned during their years of service at these plants. These benefits include: (i) post-retirement health benefits; (ii) long-term disability benefits; (iii) workers' compensation benefits; and (iv) severance benefits. The Company seeks recovery of $44.0 million for these costs, with interest. It is the Company's position that approximately $10.1 million of this amount reflects benefit claims which have been paid to employees by the Company but not reimbursed by the Army, as required by contract. The Company's litigation costs are unallowable expenses for government contract purposes; but are not expected to be material. If the Company does not prevail in this litigation, it would recognize in that period material non-cash and cash charges. See Note 11 to the Company's consolidated financial statements. Sharp v. Thiokol et al. On July 22, 1997, the Company was served with a Complaint filed in state court in Weber County, Utah. Plaintiffs Don Sharp and Sharp Construction Co., Inc. seek certification as a class action by all shareholders of American Pacific Corporation (AMPAC), parent of Western Electrochemical Company ("WECCO"), during a period in 1993. WECCO is one of two U.S. makers of ammonium perchlorate, an oxidizer used in the production of solid rocket motor propellant. 14 Plaintiffs allege that a Declaratory Judgment action filed by the Company against WECCO in a 1993 contract dispute was so baseless as to give rise to a claim by AMPAC's shareholders for a loss in market value of $136 million alleged to have been the direct result of the filing of the action by the Company. In a 1993 AMPAC class action shareholder suit, the issue of AMPAC's disclosures to the public of its contract disputes with the Company was litigated. The trial court and the U.S. Court of Appeals for the Ninth Circuit found in favor of AMPAC and against the shareholders. The Company believes the Sharp claim also is without merit and is vigorously defending it. Miscellaneous ------------- The Company is involved in a number of other pending legal and administrative proceedings which are not expected individually or in the aggregate to have a material adverse effect upon the Company's financial condition. Depending on the amount and the timing of an unfavorable resolution of these matters, it is possible that the Company's future results of operations or cash flows could be materially affected in a particular period. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Company's stockholders during the fourth quarter of fiscal year 1997. EXECUTIVE OFFICERS OF THE REGISTRANT (as required by Instruction 3. to Item 401(b) of Registration S-K) Generally, Executive Officers are elected by the Board of Directors at its first meeting following the Annual Meeting of Stockholders. The officers generally serve until the next such meeting, or until their successors are elected and qualified. The next Annual Meeting of Stockholders will be held on October 23, 1997. The Executive Officers of the Company on June 30, 1997, were: Positions Held During Past Five Name and Age Years and Terms of Office - ------------ ------------------------------- James R. Wilson (56).................Chairman of the Board, President and Chief Executive Officer since October 1993; Executive Vice President, Chief Financial Officer and Treasurer (1992- October 1993); Vice President and Chief Financial Officer (1989-92). 15 Richard L. Corbin (51).................Senior Vice President and Chief Financial Officer since May 1994; Chief Financial Officer and Vice President, Administration Space Systems Division of General Dynamics Corporation (1976- 94). James E. McNulty (53)..................Executive Vice President Human Resources and Administration since 1991; Vice President Human Resources (1989-91). Robert L. Crippen (59).................Vice President and President of Propulsion Group since December 1996, Vice President of Training Simulator Systems, Lockheed Martin, April 1995 to October 1996; Director of John F. Kennedy Space Center, 1992 to January 1995. Bruce M. Zorich (43)...................Vice President and President of Huck International since April 1996. 1993 to 1996, Vice President, Worldwide Automotive Operations, 1989 to 1993 Vice President & General Manager, OEM Products, Senior Flexonics. Joseph A. Lombardo (64)................Vice President Space Operations since April 1992;(1989-April 1992) Assistant General Manager Space Operations; prior to 1989, NASA Marshall Space Flight Center. Winston N. Brundige (52)...............Vice President and General Manager, Defense and Launch Vehicles Division since July 1994; Vice President and Divi- sion Manager Elkton Division (1991-June 1994); Director of Production (1990-91). Daniel S. Hapke, Jr. (51)..............Vice President and General Counsel since February 1997. 1984 to 1997 General Dynamics Corporation including the position of Vice President and General Counsel of its Electric Boat subsidiary 1994 to 1997. 16 Robert K. Lund (59)....................Vice President, Science and Engineering and Technical Director since 1991; Tech- nical Director Advanced Technology (1989-91). Michael R. Ayers (46)..................Vice President and Controller since January 1996; Vice President Strategic Development (1994-1996); Director Finance & Administration Space Operations (1986-1994). Nicholas J. Iuanow (37)................Treasurer since 1994; Assistant Treasurer of the Company (1989-93) . Edwin M. North (52)....................Secretary since 1990. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information concerning the market for the Company's common equity and related security holder matters is included in the section "Quarterly Financial Highlights" on page 51, "Dividends and Recent Market Prices" on page 61 of the Company's Annual Report to Stockholders for fiscal year 1997, and is incorporated herein by reference in Exhibit Number 13. As of August 29, 1997, there were 5,455 stockholders of record. ITEM 6. SELECTED FINANCIAL DATA Selected financial data for the five fiscal years ended June 30, 1997 is included on page 62 of the Company's Annual Report to Stockholders for fiscal year 1997 and is incorporated herein by reference in Exhibit Number 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations for the three fiscal years ended June 30, 1997, is included on pages 52 through 61 of the Company's Annual Report to Stockholders for fiscal year 1997 and is incorporated herein by reference in Exhibit Number 13. 17 The Company sets forth below ACautionary Statements" for the purpose of the Asafe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Many of the factors described below are discussed in both current and prior Company SEC filings and to the extent not otherwise discussed in forward-looking statements should be considered in assessing the various risks associated with the Company's conduct of its business and financial condition. Risks which may impact the accuracy of the Company's forward-looking statements include, but are not necessarily limited to, the following: (i) The Company's NASA RSRM contract for the Space Shuttle program is subject to substantial performance and financial risks. Without cause, the contract may be terminated for the convenience of the U.S. Government (government). Deliveries under the contract may be delayed or extended at the election of the government. Congress may change the funding available to the contract. Actions by the government or the Company may make the amount of the contract fee already booked inappropriate, thus causing a retroactive award fee adjustment including possible reimbursement to the government of fees the government has paid to the Company. There is no assurance the Company will be awarded additional RSRM contracts as a follow-on upon completion of the current ABuy III@ contract expected to continue until fiscal year 2001. If the Company is awarded such a follow-on contract, the profitability and cash flow from such contract may not be at current levels. NASA's privatization of the Space Shuttle Program through United Space Alliance could adversely impact the Company's RSRM contract in the out-years. Competing propulsion systems and technology not yet qualified could compete with or adversely impact the Company's RSRM contract in future years. Poor Company performance on the RSRM contract could also result in termination for default and/or substantially lower award fees. (ii) The Company's maintenance of non-RSRM space and defense contracts and programs (collectively "programs") and the availability and award of future programs with the government and prime contractors are subject to the risk of termination or renegotiation by the government or failure of such programs to be funded. The Company's ability to successfully compete for and win new programs or retain current programs is also dependent on the availability of program funding; competition by others with the Company for such programs on price, quality, technology, facilities, delivery, and product performance; changes in Congressional funding objectives; and federal agency demand and program management including but not limited to program termination, consolidation, or privatization. The Company's business also can be affected by factors such as the degree to which the Company successfully manages current programs, its ability to obtain or retain new and existing programs, and the profitability of such programs with satisfactory return on investment on lower prices, costs, and unit volumes in a shrinking and competitive government procurement environment. 18 Competitive propulsion systems and technologies as well as ballistic missile surplus propulsion inventory (both domestic and foreign) can adversely impact the success of the Company's commercial launch programs and ability to compete successfully for government strategic and tactical propulsion programs. (iii) The products and services sold by the Company to domestic and international commercial aerospace markets are subject to the risks of the cyclical nature of the aircraft market and the phase of such cycle at any point in time. Delay or changes in aircraft and component orders and build schedules may impact the future demand for Company products, delivery, and profitability. The Company's major aerospace customers are large and may exercise their market power among a number of vendors, including the Company, competing for their business by exerting pricing pressure, delivery, inventory, and unit volume requirements. Risks to the Company include management's ability to maintain both product and manufacturing qualifications, meet the needs of its major customers and regulatory agencies and maintain or improve margins and return on investment in light of competitive pricing pressures, unit demand and product qualification, and product substitutions by major customers. The Company's potential inability to maintain product pricing, as well as availability, delivery, and service are important risk factors. (iv) The products and services sold by the Company for domestic and international, and industrial commercial markets, primarily through the fastening systems business segment and the Company's minority equity investment in Howmet Corporation, are subject to the risks of the level of general economic activity and industry capacity in mature industrial markets, product applications, and technology associated primarily with aircraft, automotive, transportation, power generation, construction, and other industrial applications. The Company's business can also be affected by factors such as management's ability to successfully expand new and existing product lines, to improve margins and returns on investment by successfully implementing asset management, pricing and cost reduction strategies. The Company's ability to maintain competitive products, pricing, availability, delivery, and service are important factors in maintaining customer relationships and effectively competing with other manufacturers. (v) Many of the Company's products and manufacturing processes utilize highly energetic and hazardous materials. Major liability, employee safety, production disruptions, and asset destruction or impairment risks exist. The designation of the Company as a potentially responsible party by the Environmental Protection Agency or similar state environmental agency and environmental claims by third parties could have a material adverse effect on the Company's results of operations or financial position. 19 (vi) The Company's decision and timing of increasing its ownership of Howmet will, in part, be dependent on the valuation of Howmet, favorable operational and financial performance, favorable economic conditions, and the availability of financing at reasonable costs and on reasonable terms from the capital markets at the time the Company makes its decision to exercise. (vii) Supplier and customer product qualifications are important to the Company as a purchaser and as a supplier. As a supplier, loss or failure to maintain product or manufacturing qualifications from major customers including the government and major commercial aerospace and aircraft manufacturers may result in loss of markets and business for the Company. Qualified vendors, component parts, and raw materials qualifications are important to the Company in the manufacture of its products including major propulsion systems such as the RSRM. Vendor, component parts and raw materials may be limited and the loss of a major vendor as a supplier such as the announcement by a major rayon manufacturer to discontinue production has the potential to cause a major and material delay in production or program performance. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated balance sheets of the Company as of June 30, 1997 and 1996, and the consolidated statements of income, cash flows, and stockholders' equity for each of the three years in the period ended June 30, 1997 and notes to consolidated financial statements are included on pages 35 through 51 of the Company's Annual Report to Stockholders for fiscal year 1997 and are incorporated herein by reference in Exhibit Number 13. Quarterly financial highlights are included on page 51 of the Company's Annual Stockholders' Report to Stockholders for the fiscal year ended June 30, 1997, and are incorporated herein by reference in Exhibit Number 13. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the Company's directors and nominees for director is included on pages 4 through 6 of the Company's definitive Proxy Statement dated September 12, 1997, and is incorporated herein by reference. Information concerning disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is set forth on page 8 of the Company's definitive Proxy Statement dated September 12, 1997, and is incorporated herein by reference. Information concerning the Company's Executive Officers is included on pages 15 through 17 of Part I hereof. ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation for fiscal year 1997 is included on pages 8 through 13 of the Company's definitive Proxy Statement dated September 12, 1997, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning beneficial ownership of the Company's common stock is included on page 8 of the Company's definitive Proxy Statement dated September 12, 1997, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. 21 PART IV ITEM 14. EXHIBITS,FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THIS REPORT 1. Financial Statements ----------------------- The following consolidated financial statements are included on pages 34 through 51 of the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1997, and are incorporated herein by reference in Exhibit Number 13: Consolidated Statements of Income -- Years ended June 30, 1997, 1996 and 1995. Consolidated Balance Sheets -- June 30, 1997 and June 30, 1996. Consolidated Statements of Cash Flows -- Years ended June 30, 1997, 1996 and 1995. Consolidated Statements of Stockholders' Equity -- Years ended June 30, 1997, 1996 and 1995. Notes to Consolidated Financial Statements. Management's Report on Financial Statements. Report of Ernst & Young LLP, Independent Auditors. 2. Financial Statement Schedules -------------------------------- All schedules for which provision is made under the applicable accounting regulation of the Securities and Exchange Commission are omitted as they are either not required under the related instructions or are otherwise inapplicable. 22 3. Index to Exhibits -------------------- Exhibit Number Description ------ ----------- (3) Certificate of Incorporation and By-Laws. 3.01 Restated Certificate of Incorporation of the Company, effective July 3, 1989: Incorporated by reference as Exhibit 3 to Form 10-K for fiscal year ended June 30, 1989. 3.02 Amended By-Laws of the Company: Incorporated by reference to Annex IV to Proxy Statement/Prospectus dated May 22, 1989, for Special Stockholders meeting held June 23, 1989. 3.03 Amended By-Laws of the Company June 19, 1997 increasing Board of Directors: Incorporated by reference as Exhibit 3 to Form 10-K for fiscal year ended June 30, 1997. (4) Instruments defining the rights of security holders including indentures. 4.01 Rights Agreement between Thiokol Corporation and First Chicago Trust Company of New York: Incorporated by reference to Exhibit 4 to Form 8-A dated May 28, 1997. 4.02 See Exhibits 3.01, 3.02, and 3.03 above. (10) Material contracts. 10.0 (1)1989 Stock Awards Plan: Incorporated by reference to Annex VI to Proxy Statement/Prospectus dated May 22, 1989, for Special Stockholders Meeting held June 23, 1989. 10.02 (1)1989 Stock Awards Plan as amended by stockholder approval October 15, 1993: Incorporated by reference to the definitive Proxy Statement dated September 11, 1992. 10.03 (1)Survivor Income Benefits Plan, amended through March 24, 1983: Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1989. 23 10.04 (1)Arrangements whereby the Company compensates its independent auditors for tax services to certain key executives for which there is no written document: Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1989. 10.05 (1)Form of Employment Agreement between the Company and certain of its executive officers including the Chief Executive Officer and the other four highest paid executive officers: Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1989. 10.06 Amended Form of Employment Agreement between certain of its executive officers including the five most highly compensated: Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1990. 10.07 Credit Agreement dated September 30, 1993 among Thiokol Corporation and The First National Bank of Chicago, Bank of America National Trust and Savings Association, NBD Bank, N.A., and The Northern Trust Company: Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1994. 10.08 (1)Thiokol Corporation Pension Plan (Second Restatement Effective January 1, 1989): Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1994. 10.09 Huck International, Inc. Personal Retirement Account Plan (Second Restatement Effective as of January 1, 1992): Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1995. 10.10 Huck International, Inc. Supplemental Executive Retirement Plan (Effective January 1, 1992): Incorporated by reference as Exhibit 10 to Form 10-K for fiscal year ended June 30, 1995. 10.11 Stock Purchase Agreement by and among Thiokol Holding Company, Carlyle-Blade Acquisition Partners L.P., and Blade Acquisition Corp. dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 24 10.12 Shareholders' Agreement by and among Thiokol Holding Company, Carlyle-Blade Acquisition Partners, L.P., and Blade Acquisition Corp. dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.13 Registration Rights Agreement by and between Blade Acquisition Corp., Thiokol Holding Company and Carlyle-Blade Acquisition Partners, L.P. dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.14 Holding Management Agreement by and between Howmet Corporation and Thiokol Holding Company dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.15 Thiokol Transaction Fee Agreement by and between Howmet Holdings Acquisition Corp. and Thiokol Corporation dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.16 Amended Certificate of Designations, Preferences and Relative, Participating, Optional, and Other Special Rights of Preferred Stock and Qualifications, Limitations, and Restrictions thereof of 9.0% Series A Senior Cumulative Preferred Stock of Blade Acquisition Corp.: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.17 Standstill Agreement by and among Thiokol Holding Company, Thiokol Corporation, Carlyle-Blade Acquisition Partners, L.P. et al. dated as of December 13, 1995: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.18 Collateral Custodial Agreement by and among Carlyle-Blade Acquisition Partners L.P., Thiokol Holding Company, and the First National Bank of Chicago: Incorporated by reference as Exhibit 10 to Form 10-Q for the quarterly period ended December 31, 1995. 10.19 Credit Agreement dated as of May 23, 1996, among Thiokol Corporation and The First National Bank of Chicago. Incorporated by reference as Exhibit 10 to Form 10-K for fiscal 25 year ended June 3, 1996. 10.20 Thiokol Corporation 1996 Stock Awards Plan: Incorporated by reference as Exhibit A to Proxy Statement dated September 20, 1996. 10.21 (1)Thiokol Corporation Supplemental Executive Retirement Plan amended and restated effective June 16, 1997. 10.22 Thiokol Corporation Executive Bonus Plan as amended and restated effective June 16, 1997. 10.23 (1)Thiokol Corporation Key Executive Bonus Plan as amended and restated effective June 16, 1997. 10.24 (1)Thiokol Corporation Key Executive Long-Term Incentive Plan as amended and restated effective June 16, 1997. 10.25 (1)Huck International, Inc. Excess Benefit Plan for Selected Employees amended and restated effective June 16, 1997. 10.26 (1)Thiokol Corporation Grant Agreement Incentive Stock Option amended and restated June 16, 1997. 10.27 (1)Thiokol Corporation Grant Agreement Non-qualified Stock Option amended and restated June 16, 1997. (11) Statement re computation of per share earnings. Statement re computation of per share earnings of the Company and subsidiaries for the three years ended June 30, 1997, 1996, and 1995. (13) Annual Report to security holders. Applicable sections of the Annual Report to Stockholders of the Company for fiscal year 1997 incorporated by reference. (21) Subsidiaries of the registrant. Subsidiaries of the Company. (24) Consents. Consent of Ernst & Young LLP, independent auditors. 26 (27) Financial Data Schedule. (b) REPORTS ON FORM 8-K Form 8-K filed May 22, 1997. Item 5 - Other Events - related to the Rights Agreement between Thiokol Corporation and First Chicago Trust Company of New York dated May 22, 1997. (d) SEPARATE FINANCIAL STATEMENTS OF SUBSIDIARIES NOT CONSOLIDATED AND FIFTY PERCENT OR LESS OWNED PERSONS Financial statements for Blade Acquisition Corp. required pursuant to Rule 3-09 of Regulation S-X will be filed as amendment to this report on Form 10-K within 90 days after the end of Blade Acquisition Corp. fiscal year ending December 31, 1997. - ------------- (1)Management contract or compensatory plan or arrangement has been filed as an Exhibit to this Form 10-K pursuant to Item 14c. 27 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 24th day of September 1997. THIOKOL CORPORATION (Registrant) By /s/ Richard L. Corbin __________________________ Richard L. Corbin Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated, as of the 24th day of September 1997. SIGNATURE TITLE --------- ----- /s/ James R.Wilson Chairman of the Board, President, __________________________ Chief Executive Officer and Director James R. Wilson (Principal Executive Officer) /s/ Richard L. Corbin Senior Vice President and Chief __________________________ Financial Officer(Principal Financial Richard L. Corbin Officer) /s/ Michael R. Ayers Vice President and Controller __________________________ (Principal Accounting Officer) Michael R. Ayers 28 /s/ Neil A. Armstrong _________________________________ Neil A. Armstrong Director /s/ U. Edwin Garrison _________________________________ U. Edwin Garrison Director /s/ Michael P.C. Carns _________________________________ Michael P.C. Carns Director /s/ Edsel D. Dunford ________________________________ Edsel D. Dunford Director /s/ L. Dennis Kozlowski ________________________________ L. Dennis Kozlowski Director /s/ Charles S. Locke ________________________________ Charles S. Locke Director /s/ D. Larry Moore ________________________________ D. Larry Morre Director /s/ James M. Ringler _________________________________ James M. Ringler Director /s/ William O. Studeman __________________________________ William O. Studeman Director /s/ Donald C. Trauscht ___________________________________ Donald C. Trauscht Director 29 EXHIBIT (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS THIOKOL CORPORATION (in thousands, except per share data) Year Ended June 30 ------------------------------ 1997 1996 1995 ------ ------ ------ Primary - ------- Average shares outstanding: 18,272 18,228 18,538 Additional shares assuming exercise of dilutive stock options--based on treasury stock method using average market prices: 416 338 256 ------ ------ ----- Total shares: 18,688 18,556 18,794 ====== ====== ====== Net income (loss): $82,429 $58,298 $47,463 Earnings per share (loss): $ 4.41 $ 3.14 $ 2.53 ====== ====== ======= Fully Diluted - ------------- Average shares outstanding: 18,272 18,228 18,538 Additional shares assuming exercise of dilutive stock options--based on treasury stock method using the year-end market price, if higher than average market price: 558 368 326 ------ ------ ------ Total shares: 18,830 18,596 18,864 ====== ====== ====== Net income (loss): $82,429 $58,298 $47,463 Earnings per share (loss): $ 4.38 $ 3.13 $ 2.52 ====== ====== ====== 30 EXHIBIT (21) SUBSIDIARIES OF THIOKOL CORPORATION The following is a list of operating subsidiary corporations of the Company as of June 30, 1997. Certain subsidiaries not considered significant have been omitted. State or Other Jurisdiction of Incorporation ---------------- Huck International, Inc............................................Delaware Huck S.A.............................................................France Huck International Ltd.......................................United Kingdom Thiokol Holding Company............................................Delaware 31 EXHIBIT (24) Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Thiokol Corporation of our report dated August 1, 1997, included in the 1997 Annual Report to Shareholders of Thiokol Corporation. We also consent to the incorporation by reference in the Registration Statements Form S-3 No. 333-1753, and Form S-8, Nos. 33-18630, 33-2921, 33-10316, 2-76672, 2-90885, 33-38322, and 33-22965 pertaining to certain Retirement Savings and Investment Plans and Stock Option Plans of Thiokol Corporation of our report dated August 1, 1997, with respect to the consolidated financial statements of Thiokol Corporation incorporated by reference in the Annual Report (Form 10-K) of Thiokol Corporation for the year ended June 30, 1997. ERNST & YOUNG LLP Salt Lake City, Utah September 24, 1997 32 EX-13 2 FINANCIAL INFORMATION Consolidated Statements of Income 2 Consolidated Balance Sheets 3 Consolidated Statements of Cash Flows 4 Consolidated Statements of Stockholders' Equity 5 Notes to Consolidated Financial Statements 6 Management's Report on Financial Statements 24 Report of Ernst & Young LLP, Independent Auditors 25 Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Selected Financial Data 44
CONSOLIDATED STATEMENTS OF INCOME Year Ended June 30 -------------------------------------------- (in millions, except per share data) 1997 1996 1995 - -------------------------------------------------------------------------------------------------------- Net sales $890.1 $889.5 $956.8 Operating expenses: Cost of sales 723.7 738.7 769.1 General and administrative 80.5 69.8 71.9 Research and development 12.5 13.3 15.0 Restructuring and impairment (2.2) 5.9 61.4 - -------------------------------------------------------------------------------------------------------- 814.5 827.7 917.4 Income from operations 75.6 61.8 39.4 Equity income, Howmet 30.5 4.5 Interest income 10.9 30.2 46.2 Interest expense (1.7) (3.9) (9.3) - -------------------------------------------------------------------------------------------------------- Income before income taxes and extraordinary item 115.3 92.6 76.3 Income taxes 32.9 34.3 24.0 - -------------------------------------------------------------------------------------------------------- Income before extraordinary item 82.4 58.3 52.3 Extraordinary item - loss on early retirement of debt (4.8) - -------------------------------------------------------------------------------------------------------- Net income $ 82.4 $ 58.3 $ 47.5 ======================================================================================================= Net income per share: Income before extraordinary item $ 4.41 $ 3.14 $ 2.78 Extraordinary item ( .25) - -------------------------------------------------------------------------------------------------------- Net income $ 4.41 $ 3.14 $ 2.53 ========================================================================================================
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS June 30 -------------------------- (in millions) 1997 1996 - ----------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 51.4 $ 15.1 Receivables 146.4 162.6 Inventories 84.6 91.4 Deferred income tax assets and prepaid expenses 29.3 31.4 - ----------------------------------------------------------------------------------------------- Total Current Assets 311.7 300.5 Property, Plant and Equipment Land 17.2 17.4 Buildings and improvements 231.2 224.8 Machinery and equipment 332.7 338.9 Construction in progress 14.0 13.2 - ----------------------------------------------------------------------------------------------- 595.1 594.3 Less allowances for depreciation (311.9) (307.6) - ----------------------------------------------------------------------------------------------- 283.2 286.7 Other Assets Equity investment in Howmet 178.0 150.5 Costs in excess of net assets of businesses acquired, net 26.7 27.7 Patents and other intangible assets, net 14.1 16.4 Other noncurrent assets 40.7 36.5 - ----------------------------------------------------------------------------------------------- 259.5 231.1 - ----------------------------------------------------------------------------------------------- $ 854.4 $ 818.3 =============================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term debt $ 22.7 $ 62.7 Accounts payable 36.3 25.9 Accrued compensation 43.1 42.2 Other accrued expenses and liabilities 37.4 51.0 - ----------------------------------------------------------------------------------------------- Total Current Liabilities 139.5 181.8 Noncurrent Liabilities Accrued retiree benefits other than pensions 70.4 70.4 Deferred income taxes 41.3 39.8 Accrued interest and other noncurrent liabilities 82.1 78.4 - ----------------------------------------------------------------------------------------------- Total Noncurrent Liabilities 193.8 188.6 Commitments and Contingent Liabilities Stockholders' Equity Common stock (par value $1.00 per share) Authorized - 200 shares Issued - 20.5 shares including shares in treasury 20.5 20.5 Additional paid-in capital 44.7 44.2 Retained earnings 514.3 445.1 - ----------------------------------------------------------------------------------------------- 579.5 509.8 Less common stock in treasury, at cost (2.1 shares at June 30, 1997 and 2.3 shares at June 30, 1996) (58.4) (61.9) - ----------------------------------------------------------------------------------------------- Total Stockholders' Equity 521.1 447.9 - ----------------------------------------------------------------------------------------------- $ 854.4 $ 818.3 =============================================================================================== See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended June 30 ------------------------------------- (in millions) 1997 1996 1995 - ---------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 82.4 $ 58.3 $ 47.5 Adjustments to reconcile net income to net cash provided by operating activities: Restructuring and impairment (2.2) 5.9 61.4 Extraordinary item 4.8 Depreciation 30.0 33.0 34.5 Amortization 10.2 9.0 5.5 Equity income (30.5) (4.5) Deferred income taxes (7.8) (11.7) 5.0 Changes in operating assets and liabilities: Receivables 16.1 103.9 (69.5) Inventories and prepaid expenses 6.8 41.8 (8.1) Accounts payable and accrued expenses 1.8 (17.3) 13.0 Income taxes 9.5 (9.5) 8.7 Other -- net (2.2) (26.1) (1.3) - ---------------------------------------------------------------------------------------------------- Net cash provided by operating activities 114.1 182.8 101.5 INVESTING ACTIVITIES Investment in Howmet (146.0) Acquisition, net of acquired cash (8.9) Purchases of property, plant and equipment (33.1) (29.1) (33.8) Proceeds from disposal of assets 2.6 6.1 .4 - ---------------------------------------------------------------------------------------------------- Net cash used for investing activities (30.5) (169.0) (42.3) FINANCING ACTIVITIES Net change in short-term debt (38.0) 2.5 32.6 Repayment of long-term debt (.1) (.2) (85.7) Premiums paid on early retirement of debt (4.8) Purchase of common stock for treasury (4.3) (19.8) Stock option transactions 4.0 2.5 4.2 Dividends paid (13.2) (12.4) (12.6) - ---------------------------------------------------------------------------------------------------- Net cash used for financing activities (47.3) (11.9) (86.1) - ---------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 36.3 1.9 (26.9) Cash and cash equivalents at beginning of year 15.1 13.2 40.1 - ---------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 51.4 $ 15.1 $ 13.2 ==================================================================================================== See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Additional Total Common Stock Paid-In Retained Treasury Stock Stockholders' ----------------- -------------------- (in millions) Shares Amount Capital Earnings Shares Amount Equity - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1994 20.5 $20.5 $46.2 $364.3 (1.8) $(46.5) $384.5 - ------------------------------------------------------------------------------------------------------------------------------- Net income 47.5 47.5 Dividends paid (12.6) (12.6) Purchase of common stock for treasury (.7) (19.8) (19.8) Exercise of stock options and related income tax benefits (1.7) .2 5.9 4.2 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1995 20.5 20.5 44.5 399.2 (2.3) (60.4) 403.8 - ------------------------------------------------------------------------------------------------------------------------------- Net income 58.3 58.3 Dividends paid (12.4) (12.4) Purchase of common stock for treasury (.1) (4.3) (4.3) Exercise of stock options and related income tax benefits (.3) .1 2.8 2.5 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1996 20.5 20.5 44.2 445.1 (2.3) (61.9) 447.9 - ------------------------------------------------------------------------------------------------------------------------------- Net income 82.4 82.4 Dividends paid (13.2) (13.2) Exercise of stock options and related income tax benefits .5 .2 3.5 4.0 - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 1997 20.5 $20.5 $44.7 $514.3 (2.1) $(58.4) $521.1 =============================================================================================================================== See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------- Basis of Consolidation and Use of Estimates: The consolidated financial statements include the accounts of Thiokol Corporation and its wholly-owned subsidiaries. The Company participates in teaming arrangements and records its share of sales and profits related to such ventures on the percentage of completion method. The Company's minority interest in Howmet is accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated from the consolidated financial statements. The consolidated financial statements are prepared in conformity with generally accepted accounting principles which requires management to make estimates and assumptions. Estimates of contract costs and revenues are utilized in the earnings recognition process that affect reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates. Revenue Recognition Under Long-Term Contracts: Propulsion systems sales encompass products and services performed principally under contracts and subcontracts with various United States Government (government) agencies and aerospace prime contractors. Sales under cost-type contracts are recognized as costs are incurred and include a portion of total estimated earnings to be realized in the ratio that costs incurred relate to estimated total costs. Sales under fixed-price-type contracts are recognized generally on the percentage of completion method, when deliveries are made or upon completion of specified tasks. Cost or performance incentives are incorporated into certain contracts and are generally recognized when awards are earned, or when realization is reasonably assured and amounts can be estimated. Adjustments in estimates, which can affect both revenues and earnings, are made in the period in which the information necessary to make the adjustment becomes available. Provisions for estimated losses on contracts are recorded when identified. Cash and Cash Equivalents: Cash and cash equivalents represent cash and short-term investments that are highly liquid maturing within three months. Inventories: Inventories are stated at the lower of cost or market. Propulsion systems inventories include estimated recoverable costs related to long-term fixed price contracts, including direct production costs and allocable indirect costs, less related progress payments received. In accordance with industry practice, such costs include amounts which are not expected to be realized within one year. The government may acquire title to, or a security interest in, certain inventories as a result of progress payments made on contracts and programs. Inventories for the fastening systems segment are determined by the first in, first out (FIFO) method. Property, Plant and Equipment: Property, plant and equipment is carried at cost and depreciated over the assets' estimated useful lives, using either the straight-line or accelerated methods. Building and improvements useful lives vary between 15 and 40 years and other assets lives vary between 3 and 20 years. Intangibles: Costs in excess of the net assets acquired (goodwill), patents, and other intangible assets are being amortized on a straight-line basis over periods between 10 and 40 years. Accumulated amortization amounted to $40.9 and $37.6 million at June 30, 1997 and 1996, respectively. Impairment of Long-Lived Assets: In accordance with Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than net book value. Contingent Matters: The Company accrues costs for contingent matters when it is probable that a liability has been incurred and the amount can be reasonably determined. At the time a liability is recognized, a receivable is recorded for the estimated future recovery from third parties, insurance carriers, or from the government. Costs allocated to commercial business or not otherwise recoverable from third parties are expensed when the liability is recorded. Except for current amounts receivable and payable, contingent amounts are included in "other noncurrent assets" and in "accrued interest and noncurrent liabilities". Foreign Currency Translation: The financial statements of the Company's foreign operations are translated into United States dollars in accordance with SFAS No. 52, "Foreign Currency Translation." Foreign exchange gains and losses incurred on foreign currency transactions are included in net income. The Company operates its business in various foreign currencies. As a result, it is subject to translation exposures that arise from foreign currency exchange rate movements over time periods which generally do not exceed three months. The Company enters into forward exchange contracts to hedge identifiable export sales and purchases with any resulting gain or loss deferred and accounted for as part of the transaction. Foreign currency exchange contracts are not significant. Income Taxes: Provisions for federal, state, local, and foreign income taxes are calculated based on current tax laws. The provision for income taxes includes, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Deferred taxes are provided to recognize the income tax effects of amounts which are included in different reporting periods for financial statement and tax purposes. Income Per Share: Income per share is calculated based on the weighted average common and common equivalent shares outstanding. The equivalent shares, in thousands, for 1997, 1996, and 1995 were 18,688, 18,566, and 18,794, respectively. In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings per Share". This statement replaces the previous standard, Accounting Principles Board (APB) Opinion No. 15, "Earnings per Share". Effective for periods ending after December 15, 1997, SFAS No. 128 requires companies to report both "basic" and "diluted" earnings per share. Beginning with the second quarter ending December 1997, the Company will report both "basic" and "diluted" earnings per share for all periods. The impact of SFAS No. 128 on the Company's earnings per share is not expected to be significant. New Accounting Standards: In June 1997, the FASB issued two new statements, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company believes the new standards will not have an impact the Company's financial statements. Reclassification: Certain reclassifications were made to the 1995 and 1996 financial statements to conform with the 1997 presentation. NOTE 2. RESTRUCTURING AND IMPAIRMENT - ------------------------------------ The Company's propulsion and fastening systems restructuring programs were completed in the second quarter of fiscal year 1997. The restructuring programs, initiated to reduce the Company's operating costs and improve profitability, involved personnel reductions, closing of certain locations and relocating operations in the United States and Europe. Charges included severance, goodwill write-off and fixed assets disposals. The propulsion system restructuring plan announced in the third quarter of fiscal 1995, included domestic pre-tax charges of $61.4 million. The fastening system restructuring plan announced in the second quarter of fiscal 1996 included foreign pre-tax charges of $5.9 million. During the second quarter of 1997, the restructuring was substantially completed and excess reserves from both programs were closed and credited to income. The propulsion and the fastening systems segments recognized $1.4 million and $.8 million in income, respectively. The restructuring plan included charges for certain issues that have not currently been resolved and the Company believes remaining reserves will be adequate to cover future costs. NOTE 3. RECEIVABLES - ------------------- The components of receivables are as follows:
June 30 ------------------------- (in millions) 1997 1996 - ------------------------------------------------------------------------------------------ Receivables under U.S. Government contracts and subcontracts: Amounts billed $ 63.7 $ 48.1 Unbilled costs and accrued profits 28.7 53.9 - ------------------------------------------------------------------------------------------ Total U.S. Government receivables 92.4 102.0 Trade accounts receivable 52.8 54.3 Income tax refund receivable and related interest 5.7 Other current receivables 1.2 .6 - ------------------------------------------------------------------------------------------ $146.4 $162.6 ==========================================================================================
Unbilled costs and accrued profits consist primarily of revenues recognized on contracts that have not been billed. Such amounts are billed based on contract terms and delivery schedules. It is expected that approximately $5 million of the unbilled amounts at June 30, 1997, will not be billed within one year. The balance includes approximately $10.1 million of disputed costs with the federal government related primarily to government approved benefit costs that arose under cost reimbursement contracts with Army ammunition plants in Texas and Louisiana. The Company has filed a suit seeking reimbursement of these and future costs with interest. Cost and incentive-type contracts and subcontracts are subject to government audit and review. It is anticipated that adjustments, if any, will not have a material effect on the Company's results of operations or financial condition. Cost management award fees totaling $84.8 million, at June 30, 1997, have been recognized on the current Space Shuttle Reusable Solid Rocket Motor (RSRM) contract. Realization of such fees is reasonably assured based on actual and anticipated contract cost performance. However, all cost management award fees remain at risk until contract completion and final NASA review. The current RSRM contract is expected to be completed in fiscal year 2001. Unanticipated program problems which erode cost management performance could cause some or all of the recognized cost management award fees to be reversed and would be offset against receivable amounts from the government or be directly reimbursed. Circumstances which could erode cost management performance include, but are not limited to, failure of a Company supplied component, performance problems with the RSRM leading to a major redesign and/or requalification effort, manufacturing problems including supplier problems which result in RSRM production interruptions or delays, and major safety incidents. NOTE 4. INVENTORIES - ------------------- Inventories are summarized as follows:
June 30 --------------------- (in millions) 1997 1996 - --------------------------------------------------------------------------------------------------- Finished goods $27.0 $42.4 Raw materials and work-in-process 55.7 43.1 Inventoried costs related to U.S. Government and other long-term contracts 27.8 22.6 Progress payments received on long-term contracts (25.9) (16.7) - --------------------------------------------------------------------------------------------------- $84.6 $91.4 ===================================================================================================
NOTE 5. EQUITY INVESTMENT IN HOWMET - ----------------------------------- During the second quarter of fiscal year 1996, the Company and the Carlyle Group (Carlyle), a private merchant investment bank, formed a jointly owned company, Blade Acquisition Corp. (Blade), to acquire Howmet Corporation and the Cercast Group of companies, referred to collectively in the financial statements as Howmet. Howmet manufactures and sells its products in both domestic and foreign markets. Carlyle owns 51 percent and Thiokol owns 49 percent of Blade voting common stock. In addition to the Company's initial $96 million equity investment in Blade voting common stock, the Company also invested $50 million in Blade for 9 percent paid-in-kind non-voting preferred stock. The Company accounts for its 49 percent minority investment in Blade using the equity method. On December 13, 1995, the Howmet acquisition was completed for approximately $771.6 million ($746.4 million plus an additional $25.2 million of related fees and expenses). The Howmet acquisition by Blade was accounted for by the purchase method. The acquisition was financed by a $250 million equity investment from the Company and Carlyle, $470.2 million of Howmet nonrecourse debt, and a $51.4 million receivable facility. The Company has a three-year option to acquire Carlyle's interest in Howmet at fair market value beginning after December 13, 1998. Subject to favorable Howmet financial and operating performance and favorable conditions in the financial markets, the Company expects to exercise its option, or otherwise increase its ownership percentage. As part of the purchase, Howmet received indemnifications from the seller, secured by bank letters of credit, for liabilities over amounts reserved relating to environmental and certain other obligations existing at the purchase date. A summary of Howmet financial information is as follows: June 30 ----------------------------- (in millions) 1997 1996 - ---------------------------------------------------------------------- Current assets $ 316.6 $ 324.7 Noncurrent assets 692.0 782.2 - ---------------------------------------------------------------------- Total assets $1,008.6 $1,106.9 ====================================================================== Current liabilities $ 251.8 $ 260.3 Current portion long-term debt 50.2 78.6 - ---------------------------------------------------------------------- Total current liabilities 302.0 338.9 Long-term debt 238.1 366.7 Other noncurrent liabilities 164.8 150.3 - ---------------------------------------------------------------------- Total liabilities 704.9 855.9 Preferred stock 57.4 52.5 Common stockholders' equity 246.3 198.5 - ---------------------------------------------------------------------- Total liabilities and equity $1,008.6 $1,106.9 ====================================================================== July 1, 1996 December 14, 1995 to to (in millions) June 30, 1996 June 30, 1997 - ------------------------------------------------------------------------- Net sales $1,205.0 $596.2 Cost of goods sold 898.4 463.4 Gross profit 306.6 132.8 Operating income 138.3 51.2 Net income 57.1 6.7 - ------------------------------------------------------------------------- A reconciliation of Howmet's net income to the Company's equity income and investment in Howmet follows: June 30 -------------------------- (in millions) 1997 1996 - --------------------------------------------------------------------------- Howmet net income $ 57.1 $ 6.7 Less preferred paid-in-kind (4.9) (2.5) - --------------------------------------------------------------------------- Net income available to common shareholders 52.2 4.2 - --------------------------------------------------------------------------- Company's 49% interest in Howmet 25.6 2.0 Add preferred paid-in-kind dividend 4.9 2.5 - --------------------------------------------------------------------------- Thiokol equity income 30.5 4.5 Less currency translation adjustment (3.0) - --------------------------------------------------------------------------- Beginning investment in Howmet 150.5 146.0 - --------------------------------------------------------------------------- Ending investment in Howmet $178.0 $150.5 =========================================================================== NOTE 6. FINANCING ARRANGEMENTS - ------------------------------ The Company has credit commitments from a group of banks aggregating $165 million under two Revolving Credit Agreements, of which $162.8 million was available at June 30, 1997. The funds available under the credit facilities may be used for any corporate purpose and are available through October 1997 ($15 million) and May 2001 ($150 million). The credit agreements contain covenants restricting, among other things, the Company's ability to incur funded debt, limitations on sale and leaseback transactions, and the sale of assets. Short-term debt consisted of borrowings with various domestic and foreign banks. The weighted average interest rate on short-term debt outstanding was 3.37 percent and 5.15 percent at June 30, 1997 and 1996, respectively. In March 1995, the Company retired $85.5 million of private placement notes which were due to mature on June 30, 1996 ($37 million) and June 30, 1999 ($48.5 million). An extraordinary loss of $4.8 million (net of a tax benefit of $2.9 million) was recorded for the payment of redemption premiums and expenses. A long term obligation is included in "accrued interest and other noncurrent liabilities" of $1.9 and $2.4 million in 1997 and 1996 respectively. NOTE 7. INCOME TAXES - -------------------- The provision for income taxes applicable to both domestic and foreign operations are as follows: (in millions) 1997 1996 1995 - ---------------------------------------------------------------------------- Current Taxes: Federal $34.3 $39.3 $14.8 Foreign 1.1 1.4 .5 State 5.3 5.3 3.7 - ---------------------------------------------------------------------------- 40.7 46.0 19.0 Deferred Taxes: Federal (5.7) (9.6) 4.6 Foreign (1.2) (.8) State (.9) (1.3) .4 - ---------------------------------------------------------------------------- (7.8) (11.7) 5.0 - ---------------------------------------------------------------------------- $32.9 $34.3 $24.0 ============================================================================ A reconciliation of the United States statutory rate to the effective income tax rate applicable to income before the cumulative effect of accounting changes follows: 1997 1996 1995 - ---------------------------------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% Effect of: State taxes, net of federal benefit 2.3 3.0 3.5 R&D and other credits (4.5) (11.2) Tax refund (2.6) (.3) (11.8) Non-deductible restructuring charge 4.1 13.1 Dividend received deduction (7.4) (1.4) Other 1.2 1.1 2.9 - ---------------------------------------------------------------------------- Effective rate 28.5% 37.0% 31.5% ============================================================================ Deferred income taxes arise because of differences in the treatment of income and expense items for financial reporting and income tax purposes. Deferred income taxes are not provided on certain unremitted earnings of international subsidiaries as the earnings are deemed to be indefinitely reinvested and the effect of such taxes would not be significant after foreign tax credits. The effect of temporary differences that give rise to deferred tax balances are as follows:
June 30 ------------------------ (in millions) 1997 1996 - ------------------------------------------------------------------------------------------ Recognition of income on contracts reported on different methods for tax purposes than for financial reporting $ 52.1 $ 46.3 Tax refund interest income 1.6 Depreciation expense 48.2 45.3 Employee benefit expenses 12.9 11.6 Other 5.2 3.8 - ------------------------------------------------------------------------------------------ Gross deferred tax liabilities 118.4 108.6 Provision for estimated expenses (46.0) (40.3) Employee benefit expenses (48.3) (46.9) Foreign losses (13.5) (14.5) Other (9.0) (9.1) - ------------------------------------------------------------------------------------------ Gross deferred tax assets (116.8) (110.8) Valuation allowance 13.1 14.2 - ------------------------------------------------------------------------------------------ Net deferred tax assets (103.7) (96.6) - ------------------------------------------------------------------------------------------ Net deferred tax liabilities $ 14.7 $ 12.0 ========================================================================================== Balance Sheet Classification: Current assets $ (26.6) $ (27.8) Noncurrent liabilities 41.3 39.8 - ------------------------------------------------------------------------------------------ Net deferred tax liabilities $ 14.7 $ 12.0 ==========================================================================================
Total income tax payments were $31.9, $55.8, and $34.8 million during 1997, 1996, and 1995, respectively. Due to the completion of a Federal tax audit of fiscal years 1983 through 1985, the Company recorded, in 1995, a refund receivable, including interest, of $85.4 million. After provision for payment of taxes on the interest received in 1996, the Company netted approximately $65 million in cash. The refund related primarily to additional research and development tax credits and the timing of certain income and deduction items. A portion of the refund ($17.5 million) was applied to reduce the 1995 income tax expense and $43.5 million of the refund was recognized as interest income in 1995. The remainder of the refund ($24.4 million) related to timing issues and was used to increase liabilities for deferred taxes and related interest for future tax payments. During fiscal year 1996, the Internal Revenue Service (IRS) completed its audit of federal income tax returns for fiscal years 1986 through 1993. Based upon anticipated final results for the years under audit, interest accruals were decreased in 1996 resulting in recognition of $27.5 million of interest income. Also, as a result of substantial audit completion, $4.2 million of research and other tax credits were recognized. During fiscal 1997, the anticipated tax refund in the amount of $3.2 million was received, along with $20.4 million in interest. Of those amounts, $3 million was applied to reduce 1997 income tax expense. Approximately $8.7 million was recognized as interest income and the remaining $11.9 million was used to increase liabilities for deferred taxes and related interest for future tax payments. NOTE 8. PREFERRED STOCK PURCHASE RIGHTS - --------------------------------------- On May 22, 1997, the Board of Directors adopted a new stockholders' rights plan and redeemed the existing stockholders' rights under the old plan. Under the new plan, the Company declared a dividend distribution of one Preferred Share Purchase Right for each outstanding common share. Each Right entitles its holder to buy one one-hundredth of a share of a new series of the Company's preferred stock at an exercise price of $240. The Rights will only become exercisable if a person or group acquires or makes an offer to acquire 15 percent or more of the Company's common stock. If any person or group acquires 15 percent or more of the Company's common stock, each Right will entitle the holder (other than such acquirer) to purchase common stock of the Company having a market value of twice the exercise price of the Right. If the Company is acquired in a merger or other business combination, after a person has acquired 15 percent or more of the Company's common stock, each Right will entitle the holder to purchase common stock of the acquiring company having a market value of twice the exercise price of the Right. The Rights may be redeemed by the Company at the price of $.01 per Right prior to the acquisition of 15 percent or more of the Company's common stock. The Rights expire on May 22, 2007. NOTE 9. RETIREMENT PLANS - ------------------------ The Company has noncontributory defined benefit pension plans covering certain employees. The benefits for participating employees are based on an average of the employee's highest five consecutive years' earnings during the ten years preceding retirement and on credited service. The Company's funding policy is to contribute amounts to the plans sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus any additional amounts which the Company may determine to be appropriate. The annual cost for all Company-sponsored defined benefit pension plans, exclusive of the curtailment gain in 1995, includes the following components: (in millions) 1997 1996 1995 - ---------------------------------------------------------------------------- Service cost $ 12.7 $ 12.7 $ 12.6 Interest cost 41.0 37.5 36.7 Actual gain on plan assets (59.1) (115.0) (32.5) Net amortization and deferral 8.1 66.9 (12.9) - ---------------------------------------------------------------------------- Net pension cost $ 2.7 $ 2.1 $ 3.9 ============================================================================ Reconciliation of the funded status of all defined benefit pension plans at June 30 is as follows:
(in millions) 1997 1996 - ----------------------------------------------------------------------------------------- Actuarial present value of benefits: Vested benefits $507.9 $464.1 Non vested benefits 7.7 4.7 - ----------------------------------------------------------------------------------------- Accumulated benefit obligation 515.6 468.8 Effect of projected future compensation increases 82.8 79.1 - ----------------------------------------------------------------------------------------- Projected benefit obligation 598.4 547.9 Fair value of plan assets 622.7 605.3 - ----------------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 24.3 57.4 Unrecognized net losses 47.7 17.6 Unrecognized transition obligation (17.4) (20.9) Unrecognized prior service cost 9.3 (.7) - ----------------------------------------------------------------------------------------- Pension asset $ 63.9 $ 53.4 =========================================================================================
The accumulated benefit obligation and the corresponding unrecognized net experience loss and prior service cost increased in 1997 principally due to changing the retirement age assumption and changing to the 1994 Group Annuity Mortality table. Additional assumptions used in determining net pension cost for all defined benefit pension plans were as follows: 1997 1996 1995 - ---------------------------------------------------------------------------- Discount rate 7.5% 7.5% 8.0% Rate of increase in compensation levels 4.75 4.75 5.5 Expected long-term rate of return on assets 9.0 9.0 9.0 - ---------------------------------------------------------------------------- Assets of the Company-sponsored plans are invested primarily in equities and bonds. Certain pension plans contain restrictions on using excess pension plan assets in the event of a change in control of the Company. Generally pension costs charged to and recovered through government contracts approximate amounts contributed to pension plans. Pension costs for financial statement purposes are calculated in conformity with SFAS No. 87, "Employers' Accounting for Pensions." Historically, the annual amount of pension cost recovered through government contracts and included in sales has exceeded the amount of pension cost included in the financial statements. As a result, the Company has deferred $47.2 million of revenues to provide a better matching of revenues and expenses. This revenue will be recognized when the financial statement pension cost exceeds amounts charged to contract pension cost. The $47.2 million of deferred revenue is netted against the pension asset in "other noncurrent assets" in the balance sheet. Under provisions of SFAS No. 88, "Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," workforce reductions and benefit freezes resulted in the recognition of $6.1 million of net curtailment gains in 1995. The Company sponsors certain supplemental plan arrangements to provide retirement benefits to specified groups of participants. Contributions are included in an Internal Revenue Code (IRC) qualified restricted trust which is subject to the Company's creditors. The Company has matching and nonmatching 401 (k) savings plans for eligible employees. Company contributions to the matching savings plans, which are based on a limited percentage of participant contributions, were $6.0, $6.4, and $7.3 million in 1997, 1996, and 1995, respectively. NOTE 10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - ---------------------------------------------------- The Company provides certain nonvested health care and life insurance benefits for substantially all of its retirees and eligible dependents. The plan is contributory, with retiree contribution levels adjusted annually, and contains other cost-sharing features including deductibles and coinsurance. The Company's cost for retiree medical is limited to a 4 percent annual increase for employees retiring after February 1, 1993. Current eligibility requirements include ten years of credited service after attaining age forty-five. The Company's policy is to fund the cost of retiree medical benefits at management's discretion or as amounts are expended. Voluntary Employees' Beneficiary Association trusts and other trusts under IRC regulations were established in 1994 for government contract reimbursement purposes. The amounts funded are tax deductible in the year of contribution. The annual retiree medical and life insurance costs include the following components: (in millions) 1997 1996 1995 - ---------------------------------------------------------------------------- Service cost - attributed to service during the period $ 2.6 $ 2.2 $2.3 Interest cost on accumulated postretirement benefit obligation 8.2 8.0 7.3 Return on assets (1.3) (1.8) (.6) Net amortization and deferral 1.5 1.9 .5 - ---------------------------------------------------------------------------- Retiree medical and life insurance costs $11.0 $10.3 $9.5 ============================================================================ The following table reconciles the plan's funded status to the amount included in the Company's balance sheet at June 30:
(in millions) 1997 1996 - ----------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $106.0 $ 89.2 Fully eligible active plan participants 10.7 9.3 Other active plan participants 19.8 15.7 - ----------------------------------------------------------------------------------------- Total accumulated postretirement benefit obligation 136.5 114.2 Plan assets at fair value, primarily listed stocks and bonds (19.2) (16.4) - ----------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation in excess of plan assets 117.3 97.8 Unrecognized net experience loss (46.9) (27.4) - ----------------------------------------------------------------------------------------- Accrued retiree benefits other than pensions $ 70.4 $ 70.4 =========================================================================================
Accumulated postretirement benefit obligation and the corresponding unrecognized net experience loss increased in 1997 principally due to changing the retirement age assumption and changing to the 1994 Group Annuity Mortality table. Additional assumptions to measure the accumulated postretirement obligation and cost were as follows:
1997 1996 1995 - --------------------------------------------------------------------------------------------------- Discount rate 7.5% 7.5% 8.0% Health care cost trend rate decreasing to 6% by 2001 8.0% 8.0% 9.0% Expected long-term rate of return on assets 8.0% 8.0% 8.0% - ---------------------------------------------------------------------------------------------------
Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation at June 30, 1997 and 1996, by approximately $6.8 and $5.7 million, respectively, and increase retiree medical costs by approximately $.4 million each year. NOTE 11. CONTINGENT MATTERS - --------------------------- On July 17, 1996, the Company filed an action seeking payment of government-approved benefits costs that arose under its cost-reimbursement contracts with the government for operation and management of government-owned, contractor-operated (GOCO) Army ammunition plants in Texas and Louisiana. The Company seeks $10.1 million for costs incurred to date and $33.9 million for future estimated payments with interest. The Company expects to prevail in this litigation, but if it does not, the Company would as of June 30, 1997, recognize approximately $10.1 million in non-cash charges. The Company is also currently involved in a number of lawsuits and other contingencies which are not expected individually or in the aggregate to have a material adverse effect upon the Company's financial condition. However, depending on the amount and timing of an unfavorable resolution of these contingencies, it is possible that the Company's future results of operations or cash flows could be materially affected in a particular period. NOTE 12. ENVIRONMENTAL MATTERS - ------------------------------ The Company is involved with two Environmental Protection Agency (EPA) superfund sites in Morris County, New Jersey formerly operated by the Company for government contract work. The Company has not incurred any significant costs relating to these environmental sites. The Company has signed a consent decree with the EPA on the Rockaway Borough Well Field site and on the Rockaway Township Well Field site. The Company has recorded a $11.3 million liability for response costs, site remediation, and future operation and maintenance costs on both sites. In addition to the above sites the Company is involved with other locations involving environmental issues. The Company's estimated liability for all environmental remediation is $21 million, and is classified in "other accrued expenses and liabilities" and "accrued interest and other noncurrent liabilities." The Company believes that any liability exceeding amounts recorded will not have a material adverse effect on the Company's future results of operations or financial position. The Company has collected approximately $9.5 million in environmental related recoveries from insurance companies through fiscal year June 30, 1997. The Company expects to recover from the government additional amounts as expenses are incurred. The Company estimates it will spend approximately $2.1 and $4.2 million of the total liability, respectively, over the next two years. NOTE 13. LEASE COMMITMENTS - -------------------------- The Company has operating leases that are principally short-term and primarily for building and office space and other real estate. Rental expense charged was $14.5, $10.9, and $10.8 million in 1997, 1996, and 1995, respectively. Renewal and purchase options are available on certain of these leases. Future minimum rental commitments under non-cancelable operating leases total approximately $37 million with $9.1 and $8.1 million committed in 1998 and 1999 respectively, and in declining amounts thereafter. Certain plant facilities and equipment are provided for use by the government under short-term or cancelable arrangements. NOTE 14. STOCK OPTION AND PERFORMANCE UNIT PLANS - ------------------------------------------------ The Company's Stock Option Plans provide that grants of stock options, shares of restricted stock, and other awards may be made to key Company employees and its affiliates in which the Company has a direct or indirect equity interest. Stock option activity is summarized as follows:
Weighted Average Shares Per Share - ----------------------------------------------------------------------------------------------------------------- Options outstanding at June 30, 1994, (648,935 exercisable shares) 818,035 $17.04 Granted 173,500 $24.43 Lapsed (4,000) $24.44 Exercised (246,964) $14.95 - ----------------------------------------------------------------------------------------------------------------- Options outstanding at June 30, 1995, (571,071 exercisable shares) 740,571 $19.49 Granted 433,800 $35.58 Lapsed (25,175) $26.59 Exercised (104,902) $19.77 - ----------------------------------------------------------------------------------------------------------------- Options outstanding at June 30, 1996, (625,394 exercisable shares) 1,044,294 $25.97 Granted 198,024 $39.50 Lapsed (5,400) $35.95 Exercised (129,297) $23.20 - ----------------------------------------------------------------------------------------------------------------- Options outstanding at June 30, 1997, (692,021 exercisable shares) 1,107,621 $28.67 =================================================================================================================
Options outstanding at June 30, 1997, have expiration dates ranging from June 1998 to February 2007. Limited appreciation rights were outstanding covering 84,225 option shares. Limited appreciation rights are paid automatically in cash in lieu of other related options upon a change in control of the Company. During fiscal year 1996, 230,000 stock options were contingently granted to certain Howmet employees. Such options were granted at $35.50 per option (190,000) and $40.94 per option (40,000), the market price on the date of grant, but will only vest if the Company acquires 100 percent of Howmet. In the event the Company does acquire 100 percent of Howmet, any increase in market price from the date of grant to the date of acquisition (vesting date) will be expensed by the Company. At June 30, 1997, this would have resulted in a charge to earnings of $7.7 million. Shares of common stock reserved for both outstanding and future grants of options and other stock-based awards at June 30, 1997 and 1996 were 2,057,340 and 1,186,637 shares, respectively. On July 1, 1996, the Company adopted SFAS No. 123 "Accounting for Stock-Based Compensation". In accordance with the provisions of SFAS No. 123, the Company has chosen to continue to account for stock-based compensation using the intrinsic value method under APB Opinion No. 25 and, accordingly, does not recognize compensation cost. If the Company recognized compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, net income and earnings per share on a pro forma basis would have been reduced approximately 2 percent in both 1997 and 1996. Information regarding stock options outstanding and exercisable as of June 30, 1997, is as follows:
Price Range - ---------------------------------------------------------------------------------------------------------------- $11.69 $24.06 $35.50 $40.94 to $15.31 to $34.38 to $38.63 to $55.69 - ---------------------------------------------------------------------------------------------------------------- Options Outstanding: Number 279,791 405,730 356,800 65,300 Weighted average exercise price $14.81 $28.62 $36.96 $43.00 Weighted average remaining contractual life 4.4 years 7.3 years 8.8 years 8.9 years Options Exercisable: Number 279,791 405,730 0 6,500 Weighted average exercise price $14.81 $28.62 $0.00 $41.69 - ----------------------------------------------------------------------------------------------------------------
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------- Under SFAS No. 107, "Fair Value Disclosures about Financial Instruments," the Company is required to disclose the fair value of financial instruments, including off-balance-sheet financial instruments, when fair value can be reasonably estimated. The following methods and assumptions were used in estimating fair values: Cash and cash equivalents: The carrying amount approximates fair value. Receivables: The fair value of receivables, due to the collection of certain receivables over an extended period, is based on the discounted value of expected future cash flows. The carrying amount approximates fair value. Short-term and long-term debt: The carrying value of short-term debt approximates fair value. The fair value of long-term debt is estimated based on the current borrowing rates for similar issues and also approximates the carrying amount. Off-balance-sheet instruments: Foreign currency exchange contracts are not significant. NOTE 16. OPERATIONS BY INDUSTRY SEGMENT - --------------------------------------- The Company previously reported its operations under three business segments: space, defense, and fastening systems. In conjunction with the Company's consolidation of its space and defense operations, the Company is reporting results under two business segments: propulsion and fastenings systems. The previously reported space and defense systems amounts have been combined to conform with the current presentation. The propulsion systems segment consists of solid rocket propulsion for NASA, the Department of Defense, and various commercial customers for space applications, as well as, gas generator and ordnance products, metal and composite components, and services relating to such systems. The fastening systems segment consists of specialty fastening systems for a broad range of aerospace and industrial applications worldwide. The following table summarizes segment information:
Year Ended June 30 ----------------------------------- (in millions) 1997 1996 1995 - --------------------------------------------------------------------------------------------- Net sales Propulsion systems $606.1 $651.1 $729.1 Fastening systems 284.0 238.4 227.7 - --------------------------------------------------------------------------------------------- Consolidated net sales $890.1 $889.5 $956.8 ============================================================================================= Segment operating profit (loss) Propulsion systems(1) $ 55.1 $ 77.1 $ 25.6 Fastening systems(2) 27.0 (6.3) 19.2 - --------------------------------------------------------------------------------------------- Segment operating profit 82.1 70.8 44.8 Equity income, Howmet 30.5 4.5 Interest income 10.9 30.2 46.2 Interest expense (1.7) (3.9) (9.3) Unallocated corporate expense (6.5) (9.0) (5.4) - --------------------------------------------------------------------------------------------- Consolidated income before income taxes, and extraordinary item $115.3 $ 92.6 $ 76.3 ============================================================================================= Total Assets Propulsion systems $350.2 $384.6 $436.3 Fastening systems 247.5 242.7 268.1 Corporate 256.7 191.0 106.3 - --------------------------------------------------------------------------------------------- Consolidated assets $854.4 $818.3 $810.7 ============================================================================================= Depreciation and Amortization Expense Propulsion systems $ 27.7 $ 28.9 $ 28.5 Fastening systems 11.9 12.3 11.0 Corporate .6 .8 .5 - --------------------------------------------------------------------------------------------- Consolidated depreciation and amortization expense $ 40.2 $ 42.0 $ 40.0 ============================================================================================= Capital Expenditures Propulsion systems $ 10.4 $ 17.2 $ 16.5 Fastening systems 15.1 11.2 17.1 Corporate 7.6 .7 .2 - --------------------------------------------------------------------------------------------- Consolidated capital expenditures $ 33.1 $ 29.1 $ 33.8 ============================================================================================= - ---------- (1) Propulsion systems included a $61.4 million restructuring charge in 1995. (2) The fastening systems loss in 1996 included a $5.9 million restructuring charge and $12.2 million of inventory charges.
A proportionate share of Corporate general and administrative expense is allocated and reimbursed through propulsion systems contracts. Intersegment, foreign operations, and export sales are not material. Net sales under government contracts and subcontracts amounted to $543.7, $618.4, and $689.5 million for 1997, 1996, and 1995, respectively. The sales as a percentage of consolidated net sales were 61, 70, and 72 percent for 1997, 1996, and 1995, respectively. Corporate assets consist principally of cash and cash equivalents; income tax receivable; property, plant, and equipment; investment in Howmet; and other noncurrent assets. NOTE 18. QUARTERLY FINANCIAL HIGHLIGHTS (Unaudited) - ---------------------------------------------------
Fiscal Year 1997 Three Months Ended ----------------------------------------------------------- (in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30 - --------------------------------------------------------------------------------------------------------- Net sales $255.6 $226.5 $210.0 $198.0 Gross profit 45.5 42.2 44.4 34.3 Net income(1) 23.7 20.8 18.7 19.2 Net income per share(1) 1.26 1.12 1.00 1.03 Cash dividends paid per share .20 .17 .17 .17 Market price High 76.25 60.88 47.38 46.88 Low 54.88 44.50 41.25 34.63 - --------------------------------------------------------------------------------------------------------- Fiscal Year 1996 Three Months Ended ----------------------------------------------------------- (in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30 - --------------------------------------------------------------------------------------------------------- Net sales $227.8 $228.9 $209.9 $222.9 Gross profit 37.5 36.7 34.4 42.2 Net income(2) 13.3 9.5 22.3 13.2 Net income per share(2) .71 .52 1.20 .71 Cash dividends paid per share .17 .17 .17 .17 Market price High 44.75 44.63 35.88 37.13 Low 38.50 32.38 32.88 29.75 - --------------------------------------------------------------------------------------------------------- - ---------- (1) The first quarter of 1997 included the recognition of interest income related to income taxes of $7 million and a $3 million tax credit ($7.3 million or $.39 per share after-tax). The third and fourth quarters of 1997 included recognition of interest income related to income taxes of $.8 million and $.9 million ($.5 million and $.6 million or $.03 per share after tax in each quarter), respectively. (2) The second quarter of 1996 included the recognition of interest income related to income taxes of $27.5 million and $3.5 million related to research and other tax credits ($20.6 million or $1.11 after-tax). Also included was a restructuring charge of $5.9 million and a $12.2 million inventory charge resulting in a net after-tax charge of $14.4 million or $.78 per share.
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS - ------------------------------------------- Management has prepared, and is responsible for, the consolidated financial statements and all related financial information contained in the Annual Report. The consolidated financial statements, which include amounts based on estimates and judgments, were prepared in accordance with generally accepted accounting principles appropriate in the circumstances and applied on a consistent basis. Other financial information in this report is consistent with that in the consolidated financial statements. Management maintains an accounting system and related internal controls which it believes provide reasonable assurance, at appropriate cost, that transactions are properly executed and recorded, that assets are safeguarded, and that accountability for assets is maintained. An environment that provides an appropriate level of control is maintained and monitored and includes examinations by an internal audit staff. Management recognizes its responsibilities for conducting the Company's affairs in an ethical and socially responsible manner. The Company has written standards of business conduct, including its business code of ethics which emphasize the importance of personal and corporate conduct, that demands compliance with federal and state laws governing the Company. The importance of ethical behavior is regularly communicated to all employees through ongoing education and review programs designed to create a strong compliance environment. The Audit Committee of the Board of Directors is composed of five outside directors. This Committee meets periodically and also meets separately with representatives of the independent auditors, Company officers, and the internal auditors to review their activities. The consolidated financial statements have been examined by Ernst & Young LLP, independent auditors, whose report follows. /s/ Richard L. Corbin --------------------------- Richard L. Corbin Senior Vice President and Chief Financial Officer REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS - ------------------------------------------------- To the Stockholders and Board of Directors Thiokol Corporation: We have audited the accompanying consolidated balance sheets of Thiokol Corporation as of June 30, 1997 and 1996, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thiokol Corporation at June 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young - ----------------------- Ernst & Young Salt Lake City, Utah August 1, 1997 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996 Net income for 1997 was $82.4 million or $4.41 per share, an increase of 40 percent compared to $58.3 million or $3.14 last year. Net income for 1996 included recognition of $21.3 million after-tax ($1.15 per share) of income related to income taxes and after-tax fastening systems charges of $8.5 million ($.46 per share) for inventory and $5.9 million for restructuring ($.32 per share). Net income for 1997 included after-tax income related to income tax refunds and interest on the refunds and restructuring credits totaling $9.7 after-tax or $.52 per share. Summary unaudited financial information for the twelve months ended June 30, 1997 follows:
(in millions except per share data) - ----------------------------------- Better/ 1997 1996 (Worse) Percent - ---------------------------------------------------------------------------------------------------- Sales Propulsion systems $606.1 $651.1 $(45.0) (7)% Fastening systems 284.0 238.4 45.6 19 - ---------------------------------------------------------------------------------------------------- Total sales $890.1 $889.5 $ 0.6 - % ==================================================================================================== Operating income Propulsion systems $ 55.1 $ 77.1 $(22.0) (29)% Fastening systems 27.0 (6.3) 33.3 - Unallocated corporate expense (6.5) (9.0) 2.5 28 - ---------------------------------------------------------------------------------------------------- Total Operating income 75.6 61.8 13.8 22 Equity income, Howmet 30.5 4.5 26.0 578 Interest income 10.9 30.2 (19.3) (64) Interest expense (1.7) (3.9) 2.2 56 Income taxes (32.9) (34.3) 1.4 4 - ---------------------------------------------------------------------------------------------------- Net income $ 82.4 $ 58.3 $ 24.1 41 % ==================================================================================================== Earnings per share $ 4.41 $ 3.14 $ 1.27 40 % ==================================================================================================== Average equivalent shares outstanding 18.7 18.6 .1 - ====================================================================================================
Business Segment Sales and Income For The Year - ---------------------------------------------- Propulsion systems sales declined compared to the prior year due to defense sales being down $60 million partially offset by an increase in space programs of $15 million. Propulsion systems income was down $22 million compared to last year as a result of completion of the shuttle processing contract in 1996, reduced margins on the RSRM contract, and additional start-up and warranty costs on commercial launch motors. Defense related programs income declined $11.2 million due to lower activity as a result of reduced government spending, completion of several defense programs during fiscal year 1996, and closure of two government-owned contractor-operated (GOCO) plants. Fastening systems sales and income increased $45.6 million and $33.3 million, respectively, over the prior year. Commercial aerospace sales were up $38.9 million. The increase in sales provided a corresponding increase in income. Cost reductions due to plant closures and consolidations, and closure of the subsidiary headquarters also contributed to income. The current year's pre-tax income benefited $.8 million from the reversal of excess restructuring reserves versus the prior year's $18.1 million pre-tax charges for inventory and restructuring. Excluding both non-recurring items, current year income increased 121 percent. Current year fastening systems margins increased to 9.2 percent from 5 percent in the prior year excluding unusual items. Net income for 1997 included $28.3 million or $1.52 per share from the Company's investment in Howmet Corporation. Also affecting income was a 28.5 percent effective tax rate for the current year compared to 37 percent for the prior year, reflecting the lower 7 percent tax rate on higher equity income from Howmet. The following unaudited table summarizes the impact on earnings and earnings per share of major unusual items affecting both years:
(in millions, except per share data) - ----------------------------------------------------------------------------------------------------------- 1997 1997 1996 1996 After-tax Earnings After-tax Earnings income per share income per share ------------ -------------- ------------- ------------ Income before unusual items $72.7 $3.89 $51.4 $2.77 Restructuring credit (charge) 1.3 .07 (5.9) (.32) Huck inventory charges - - (8.5) (.46) Income tax interest income/credits 8.4 .45 21.3 1.15 - ----------------------------------------------------------------------------------------------------------- Net income $82.4 $4.41 $58.3 $3.14 ===========================================================================================================
Excluding unusual items in both years, net income in the current year increased by 40 percent or $1.12 per share. General and administrative expense for 1997 increased 15 percent or $10.7 million compared to the prior year. General Corporate expense increased $7.7 million while selling and administrative costs increased $3 million in the fastening systems segment. Interest expense decreased $2.2 million as a result of the reduction in short-term debt. Prior Years Restructuring and Impairment - ---------------------------------------- As a result of a comprehensive review of the Company's operating performance in Europe, a pre-tax restructuring charge of $5.9 million was recognized in the second quarter of 1996 relating to the anticipated shutdown of the fastening system's Germany operations. During the third quarter of fiscal year 1996, the Company notified the 82 affected employees of the Germany plant shutdown. The charge included $3.6 million of employee severance expense and $1.7 million write down of long-lived assets. During the 1993-1994 defense industry down turn, pricing pressures required the Company to review operations and reduce operating costs to remain competitive. During the third quarter of 1995, the Board of Directors determined a consolidation of the Company's manufacturing facilities and associated write down of assets was required. The Company recorded a $61.4 million pre-tax defense systems restructuring and related impairment charge including a $20 million write down for impaired long-lived assets and a $23.6 million write down of goodwill. Fair value of goodwill and fixed asset write downs was determined by estimating discounted cash flows from future defense and non-shuttle vehicle operations. Also included was an estimated restructuring loss of $10.5 million on the disposition of fixed assets from two manufacturing facilities (Huntsville and Omneco), and a $7.3 million cash restructuring charge for costs related to the facility closures including $2.3 million of employee severance costs. The restructuring included 360 employee terminations. Fair value of the Huntsville and Omneco assets was based on estimated cash proceeds from asset sales net of the costs of disposal. During the second quarter of 1997, the restructuring was substantially completed and excess reserves from both programs were closed and credited to income. The propulsion and the fastening systems segments recognized $1.4 million and $.8 million in income, respectively. The restructuring plan included charges for certain issues that have not currently been resolved and the Company believes remaining reserves will be adequate to cover future costs. A summary of restructuring reserve activity by program follows:
U.S. Germany Plants Plant (in millions) Shutdown Shutdown Total - ------------------------------------------------------------------------------------- Reserve Balance at March 31, 1995 $17.8 $ 17.8 Reductions (noncash) (.5) (.5) Payments made (.3) (.3) - ------------------------------------------------------------------------------------- Balance at June 30, 1995 17.0 17.0 Fastening systems restructuring $ 5.9 5.9 Reductions (noncash) (8.7) (2.3) (11.0) Payments made (.9) (.9) - ------------------------------------------------------------------------------------- Balance at June 30, 1996 7.4 3.6 11.0 Reductions (noncash) (5.2) (2.8) (8.0) Payments made (.8) (.8) - ------------------------------------------------------------------------------------- Fiscal year 1997 restructuring credit $ 1.4 $ .8 $ 2.2 =====================================================================================
The Company has successfully negotiated with the government for recovery of certain of these costs. The Company estimates approximately $9 million to be recognized in Company profits during fiscal year 1998 through fiscal year 2000. Equity Investment in Howmet - --------------------------- In December 1995 the Company purchased 49 percent of Howmet Corporation. The Company's 1997 results include equity income of $30.5 million, reflecting a full year of Howmet ownership compared to $4.5 million of equity income for the 28 weeks of Company ownership in 1996. Howmet experienced an 18.5 percent increase in sales for the twelve months ended June 30, 1997, compared to the same period in the prior year, reflecting an increased demand in the commercial aerospace market and continued strength in the industrial gas turbine market. Howmet's income increased in 1997 due to: sales increasing 18.5 percent, additional revenue of $9.7 million from the finalization of a pricing adjustment with a major customer, fixed cost containment, variable cost reduction, and other operational improvements, a lower effective tax rate of 44 percent in 1997 compared to 60 percent in 1996, and lower interest expense due to lower debt and lower interest rates in 1997 compared to 1996. Partially offsetting the above increases were additional stock appreciation rights expense of $20.7 million recorded in 1997 versus 1996. 1997 Fourth Quarter Results - --------------------------- Summary unaudited financial information for the three months ended June 30, 1997 follows:
(in millions except per share data) - ----------------------------------- Better/ 1997 1996 (Worse) Percent ------------ ------------- ------------- ------------- Sales Propulsion systems $173.8 $164.7 $ 9.1 6 % Fastening systems 81.8 63.0 18.8 30 - ----------------------------------------------------------------------------------------------------- Total sales $255.6 $227.7 $27.9 12 % ===================================================================================================== Operating income Propulsion systems $ 10.8 $ 18.6 $(7.8) (42)% Fastening systems 10.6 4.0 6.6 165 Unallocated corporate expense (1.6) (4.1) 2.5 61 - ----------------------------------------------------------------------------------------------------- Total Operating income 19.8 18.5 1.3 7 ===================================================================================================== Equity income, Howmet 11.7 2.8 8.9 318 Interest income 1.7 0.2 1.5 750 Interest expense (0.2) (0.9) 0.7 78 Income taxes (9.3) (7.3) (2.0) (27) - ----------------------------------------------------------------------------------------------------- Net income $ 23.7 $ 13.3 $10.4 78 % ===================================================================================================== Earnings per share $ 1.26 $ .71 $ .55 77 % ===================================================================================================== Average equivalent shares outstanding 18.8 18.6 .2 - =====================================================================================================
Propulsion systems sales increased over the prior year due to higher commercial launch motor and technology sales and Space Shuttle RSRM program sales. Partially offsetting the sales increase were lower sales on various completed defense programs and the closing of two GOCO plants. Lower propulsion margins and program completions reduced quarterly income compared to the prior year. The two plant closings also contributed to the decrease in income. Fastening systems sales and income increased due to higher sales in both the aerospace and industrial markets, excluding last year's charges. Aerospace sales and income increased $14.6 million and $6.5 million, respectively, while industrial sales and income increased $4.1 million and $.1 million respectively. Income growth was paced by commercial aerospace markets. Worldwide sales increases combined with emphasis on cost reduction resulted in improved margins over both last quarter and the prior year's quarter. Fastener margins improved to 13 percent for the quarter versus 6.3 percent for the prior year period on a recurring basis. Equity Investment in Howmet - --------------------------- The 1997 fourth quarter results include $10.9 million after-tax ($.58 per share) of equity income related to Thiokol's 49 percent ownership of Howmet. This was $8.3 million higher than the 1996 fourth quarter after-tax amount. Howmet's sales of $330.4 million in the fourth quarter of 1997 were 16.6 percent higher than 1996. Howmet operating income of $47.2 million was 81.8 percent higher than 1996 despite including a $2.1 million higher last-in first-out (LIFO) charge and $7.2 million higher stock appreciation rights expense. Howmet net income increased due to a 16.6 percent increase in sales over the prior year quarter, additional revenue of $6.3 million from the finalization of a pricing adjustment with a major customer, fixed cost containment, variable cost reduction, and other operational improvements, a 41 percent tax rate for the 1997 quarter compared to 60 percent in 1996, and a $2.4 million decrease in interest expense for 1997 compared to the same quarter in 1996. RESULTS OF OPERATIONS FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 Net income for 1996 was $58.3 million or $3.14 per share, an increase of 11 percent compared to $52.3 million or $2.78 per share before an extraordinary charge in 1995. Income for 1996 included recognition of $21.3 million after-tax of income related to income taxes or $1.15 per share after-tax. Results for 1996 also reflected fastening systems charges of $12.2 million for inventory and $5.9 million for restructuring. Income for 1995 included a refund of income taxes of $17.5 million and related interest income of $43.5 million, resulting in a net after-tax impact of $44.5 million or $2.37 per share. Results for 1995 were also impacted by a defense systems restructuring charge of $61.4 million or $2.62 per share. Net income for 1995 was $47.5 million or $2.53 per share including an extraordinary loss of $4.8 million related to the early retirement of debt. Summary unaudited financial information for the twelve months ended June 30 follows:
(in millions, except per share data) - ------------------------------------ Better 1996 1995 (Worse) Percent ------------ ------------ ---------- ----------- Sales Propulsion systems $651.1 $729.1 $(78.0) (11)% Fastening systems 238.4 227.7 10.7 5 - ----------------------------------------------------------------------------------------------------- Total sales $889.5 $956.8 $(67.3) (7)% ===================================================================================================== Operating Income Propulsion systems $ 77.1 $ 87.0 $ (9.9) (11)% Fastening systems (0.4) 19.2 (19.6) (102) Restructuring and impairment (5.9) (61.4) 55.5 90 Unallocated corporate expense (9.0) (5.4) (3.6) (67) - ----------------------------------------------------------------------------------------------------- Operating income 61.8 39.4 22.4 57 Equity income, Howmet 4.5 4.5 Interest income 30.2 46.2 (16.0) (35) Interest expense (3.9) (9.3) 5.4 58 Income taxes (34.3) (24.0) (10.3) (43 - ----------------------------------------------------------------------------------------------------- Income before extraordinary item 58.3 52.3 6.0 11 % Extraordinary item - debt retirement (4.8) 4.8 - ----------------------------------------------------------------------------------------------------- Net income $ 58.3 $ 47.5 $ 10.8 23 % ===================================================================================================== Earnings per share $ 3.14 $ 2.53 $ .61 24 ===================================================================================================== Average equivalent shares outstanding 18.6 18.8 .2 1 =====================================================================================================
Operating income was favorably impacted by recognition of cost management fees on the RSRM contract, and lower general and administrative and research and development costs. Adversely impacting operating income were lower margins and the restructuring charges and inventory write down for the fastening systems segment, Castor IV(R) motor requalification costs and completion of the Shuttle Processing Contract during the first quarter of 1996. Business Segment Sales and Income For 1996 - ------------------------------------------ Propulsion systems sales decreased due to NASA reducing the RSRM flight sets from eight to seven per year, continued Company emphasis on cost reductions on the RSRM program ($30 million), as well as the first quarter termination of the RSRM processing work at the Kennedy Space Center ($22.5 million). Castor IV(R) motor and Castor 120(R) motor sales also declined while STAR motor sales increased. The sales decrease also was caused by significantly lower operating levels at the GOCO ammunition plants ($17.8 million), and lower Standard missile ($12.6 million) and Trident ($11.5 million) production. A sales increase in flares ($19.2 million) and Minuteman sales ($8.6 million) partially offset the decrease. The decrease in income is primarily related to Castor IV(R) requalification costs ($3.6 million), lower RSRM motor production ($3.4 million), the completion of the RSRM processing contract ($3.1 million), and lower margins in other space programs. The 1995 income included a $6.1 million pension curtailment gain which accounts for a portion of the 1996 decline. The decrease was partially offset by higher RSRM income recognized as a result of higher cost management fees ($10.1 million). Fastening systems income for 1996 decreased 38 percent to $11.8 million, excluding $18.1 of inventory and restructuring charges, from $19.2 million in 1995. Domestic and international aerospace sales increased significantly in 1996. Earnings from aerospace continue to be impacted by losses at the Lakewood facility due to manufacturing inefficiencies. The Lakewood losses declined significantly in the fourth quarter of 1996. Industrial operating results were impacted by weak transportation markets. Lower international operating margins resulted from the Germany plant losses, lower margin sales, and new product marketing costs. The Company announced in the second quarter of fiscal year 1996 the closure of the Germany operations. The following unaudited table summarizes the impact on earnings and earnings per share of major unusual items affecting both years:
(in millions except per share data) - ----------------------------------- 1996 1996 1995 1995 After-tax Earnings After-tax Earnings Income Per Share Income Per Share ----------- ------------- ------------- ------------ Income before charges $51.4 $2.77 $ 57.0 $ 3.03 Restructuring charges (5.9) (.32) (49.2) (2.62) Fastening systems inventory charges (8.5) (.46) Income tax interest income/credits 21.3 1.15 27.0 1.44 Income tax refund 17.5 .93 - --------------------------------------------------------------------------------------------------- Income before extraordinary item $58.3 $3.14 $ 52.3 $ 2.78 Extraordinary item-debt retirement (4.8) (.25) - --------------------------------------------------------------------------------------------------- Net income $58.3 $3.14 $ 47.5 $ 2.53 ===================================================================================================
General and administrative expense for 1996 of $69.8 million decreased 3 percent or $2.1 million compared to 1995. General Corporate expense decreased $3.9 million while selling and administrative costs increased $1.8 million in the fastening systems segment. Interest expense decreased $5.4 million as a result of the reduction in long-term debt in the third quarter of 1995. During fiscal year 1996 Thiokol purchased 49 percent of Howmet Corporation in December 1995. The investment in Howmet is accounted for on the equity method and equity income of $4.5 million was recognized in 1996. Howmet sales of $1,017.1 million for the twelve months ended June 30, 1996 increased $127.4 million from $889.7 million or 14.3 percent over 1995. Income from operations for 1996, before amortization of acquisition related assets, was $82.1 million, a 22.4 percent increase over 1995. Also impacting income was a 37 percent effective income tax rate compared to 31.5 percent for 1995 reflecting lower research tax credits, refunds, and nondeductible restructuring charges. Future Operations/Business Environment - -------------------------------------- The Company's largest business segment is propulsion systems which produces high-technology solid propellant motors for space and defense applications. Production of and services for the RSRM represented 42 percent of 1997 consolidated sales and 52 percent of consolidated operating income before recognition of the restructuring credit. The current contract with the NASA extends the Company's production of the RSRM through fiscal year 2001. NASA planning includes follow-on RSRM contracts with the Company and projects replacing the shuttle program with another system in 2012. RSRM Buy 3 contract incentives to reduce costs over the life of the contract should result in higher incentive fees in the future based on actual and anticipated contract cost performance. Cost management award fees of $84.8 million have been recognized on the current RSRM Buy 3 contract. Realization of such fees is reasonably expected based on actual and anticipated contract cost performance. However, all of the cost management award fees remain at risk until completion of the current contract and final NASA review. Unanticipated program problems which erode cost management performance could cause some or all of the recognized cost management award fees to be reversed and would be offset against receivable amounts from the government or be directly reimbursed. Circumstances which could erode cost management performance include, but are not limited to, a failure of a Company supplied component, performance problems with the RSRM leading to a major redesign and/or requalification effort, manufacturing problems including supplier problems which result in RSRM production interruptions or delays, and major safety incidents. During the year, the Company consolidated it's Northern Utah Propulsion operations to provide a more efficient and competitive solid rocket motor design, development, and manufacturing organization. Consolidation costs, consisting primarily of employee severance expense, were minimal and were offset by savings in the periods incurred. The level of United States Government funding of Space programs including the Space Station may impact the Space Shuttle launch schedule. Significant reductions in the launch schedule would lower the Company's production rates and reduce related revenue and profits to the Company . The Company participates in the commercial satellite launch business through the Castor and Star series of motors. This business is projected to grow during the next few years. A second Castor 120(R) flight is planned in the first quarter of fiscal year 1998. The success of the second flight is important to the viability of the program. During the fiscal year 1997, the Company expanded its international participation in the commercial launch market with contract wins in Japan and Spain. With continuing reductions in federal government defense spending, the Company expects its defense sales and income to continue declining in fiscal year 1998 and begin to stabilize in 1999. Generally the industry is characterized by significant over capacity. Decreased defense spending has created a highly competitive pricing environment for tactical programs and has reduced margins on existing programs and new program opportunities. In fiscal year 1998 the Company will be competing to remanufacture the United States' existing Minuteman ballistic missiles. During fiscal year 1997, the Company recorded sales of $9.5 million and a loss of $1.1 million related to the Louisiana and Longhorn GOCO facilities. Effective June 30, 1997, the Army terminated all existing production and maintenance contracts related to these facilities. Sales and profits from the ordnance operations will be insignificant in 1998 as these facilities are closed. In conjunction with the GOCO closing, the Company has filed a $40 million legal action against the U.S. Army to recover future expenditures for employee post retirement benefits. The Company expects a favorable resolution of this issue with the Army. The fastening systems segment operates in both aerospace and industrial markets. The aerospace segment is greatly influenced by build schedules of commercial aircraft which have increased significantly over last year and are anticipated to increase again in fiscal year 1998. The industry has historically been quite cyclical and the Company anticipates a modest reduction in late fiscal year 1999 or fiscal year 2000. Military aircraft spending is expected to continue at low production levels. As a result of higher sales, continued improvements in operations, and the closure of the Germany facility, the Company has improved operating margins in the fastening systems segment. Industrial sales in 1998 are expected to increase over 1997 levels if the build schedules in the transportation industry continue to rise. Howmet is a leading manufacturer of investment cast turbine engine components for the jet aircraft and industrial gas power generation markets. Howmet operates in four major business areas: aerospace castings, blades and vanes, aerospace structural components, industrial gas turbine (IGT) castings and aluminum castings. Howmet manufactures airfoils for every major jet aircraft turbine engine program currently in production or under development by its major customers. The aerospace castings market is strongly influenced by both the level of new aircraft construction and demand for commercial air travel both of which are expected to continue to increase. Howmet is also a leading producer of airfoils for land-based industrial gas turbine engines. These engines are primarily used in utility power generation, as well as in mechanical drive applications for oil and gas processing and off-shore drilling. Airfoil products manufactured by Howmet for the IGT market have performance and reliability requirements similar to those produced for the aerospace market, but generally are significantly larger in size. Other Matters - ------------- The Company has operating leases, the majority of which are short-term and real estate related. Rental expense amounted to $14.5 million in 1997. Renewal and purchase options are available on certain of these leases. Future minimum rental commitments under non-cancelable operating leases total approximately $37 million with $9.1 and $8.1 million committed in 1998 and 1999, respectively, and in declining amounts thereafter. The Company is involved in various legal proceedings and uncertainties including those related to environmental matters as discussed in Notes 11 and 12 to the consolidated financial statements. Liquidity and Capital Resources - ------------------------------- Cash flow provided by operations was $114.1 million compared to $182.8 million in 1996. The decrease in cash flows primarily reflects collection of a $79.6 federal income tax receivable during fiscal year 1996. Current year cash flow reflects a smaller positive cash flow from reductions in inventory and prepaid expenses of $6.8 million compared to $41.8 million for 1996. The current year benefited $8.7 million from interest income related to income tax refunds and from a $3 million tax credit. The prior year recognition of $27.5 million of interest income related to income taxes and the $18.1 million fastening system charge did not affect cash flow. Investing activities consisted primarily of capital spending on property, plant and equipment of $33.1 million compared to $29.1 million in 1996. The prior year benefited from $3.5 million of additional proceeds from fixed asset disposals. Last year's investing activities also reflects the Company's 49 percent investment in Howmet Corporation for $146 million. Financing activities used $47.3 million of cash compared to cash used in the prior year of $11.9 million. Short term debt decreased $38 million compared to an increase in the prior year of approximately $2.5 million. Last year also reflected the repurchase of 124,600 shares of the Company's common stock for approximately $4.3 million. The Company's current ratio increased to 2.2 from 1.7 and the debt to equity ratio declined to 4.7 percent from 14.5 percent during the fiscal year, primarily the result of a higher cash balance and a decrease in short-term debt. Working capital of $172.2 million at June 30, 1997, increased $53.5 million from June 30, 1996. The Company's current ratio and working capital increased reflecting the Company's financial strength. Estimated future cash flows from operations, current financial resources, and available credit facilities are expected to be adequate to fund the Company's anticipated working capital requirements, capital expenditures, dividend payments, and stock repurchase program. Significant additional debt may be incurred in the event the Company exercises its option to acquire Carlyle's 51 percent equity interest in Howmet. The combined companies' consolidated debt would significantly increase the Company's debt-to-equity ratio. In May of 1997 the Board of Directors, authorized the repurchase of up to 1.5 million additional shares of common stock in amounts and timing as the Company deems appropriate. This authorization replaces prior outstanding authorizations. At June 30, 1997, the Company had available $165 million in revolving credit facilities with $162.8 million unused. The Company's $300 million shelf registration statement filed with the Securities and Exchange Commission became effective October 16, 1996, and permits the Company access to public markets to issue long-term financing with amounts, type, and timing as considered appropriate. Howmet Liquidity - ---------------- Howmet generated $176.6 million cash flow from operations for the twelve months ending June 30, 1997, and reduced long-term debt $157 million during that period. Summary financial information is provided in Note 5 to the consolidated financial statements. On May 6, 1997, Howmet entered into an agreement to sell certain assets of its refurbishment business. The sale is subject to government antitrust review under the Hart-Scott-Rodino Antitrust Improvements Act. Howmet expects net after-tax cash proceeds of approximately $40 million and such proceeds will be used to further reduce debt and to fund capital expenditures. The sale transaction is not expected to have a material effect on future net income. Howmet expects future cash flows from operations, current financial resources, and available credit facilities to be adequate to fund anticipated working capital requirements, capital expenditures, and debt retirement. Risk Factors - ------------ Except for the historical information contained herein, certain statements in this annual report are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties, including but not limited to changing economic and political conditions in the United States and in other countries, changes in governmental spending and budgetary policies, governmental laws and regulations surrounding various matters such as environmental remediation, contract pricing, and international trading restrictions, outcome of union negotiations, customer product acceptance, and continued access to capital markets. All forecasts and projections in this report are "forward-looking statements," and are based on management's current expectations of the Company's results, based on current information available pertaining to the Company and its products including the aforementioned risk factors. Actual future results and trends may differ materially from projections made herein. Dividends and Recent Market Prices - ---------------------------------- Dividends paid were $.71 per share for 1997, including a $.01 per share redemption of stockholders' rights and $.68 per share for 1996 and 1995. The Company increased its annual dividend rate for 1998 to $.80 per share. The high and low market prices of Thiokol common stock for fiscal year 1997 were $76.25 per share and $34.63 per share, respectively. The principal market for the Company's common stock is the New York Stock Exchange and prices are based on the Composite Tape (ticker symbol TKC).
SELECTED FINANCIAL DATA (dollars in millions, except per share data) 1997 1996 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------- Summary of operations - --------------------- Net sales by industry segment Propulsion systems $606.1 $651.1 $729.1 $ 868.2 $1,042.8 Fastening systems 284.0 238.4 227.7 175.7 158.9 - ----------------------------------------------------------------------------------------------------------------------------- Consolidated net sales 890.1 889.5 956.8 1,043.9 1,201.7 Operating profit (loss) by industry segment Propulsion systems (1) $ 55.1 $ 77.1 $ 25.6 $ 86.8 $ 117.8 Fastening systems (2) 27.0 (6.3) 19.2 16.9 7.8 - ----------------------------------------------------------------------------------------------------------------------------- Segment operating profit 82.1 70.8 44.8 103.7 125.6 Income from operations (1)(2) 75.6 61.8 39.4 99.3 120.6 Equity Income, Howmet 30.5 4.5 Interest income (3)(4)(5) 10.9 30.2 46.2 12.9 6.6 Interest expense 1.7 3.9 9.3 14.4 25.5 Income before extraordinary item and cumulative effect of accounting changes 82.4 58.3 52.3 60.3 63.8 Net income (loss) 82.4 58.3 47.5 (3.5) 63.8 Income (loss) per share - ----------------------- Income before extraordinary item and cumulative effect of accounting changes $ 4.41 $ 3.14 $ 2.78 $ 3.02 $ 3.13 Extraordinary item (0.25) Cumulative effect of accounting changes (3.20) - ----------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 4.41 $ 3.14 $ 2.53 $ (.18) $ 3.13 Financial - --------- Total assets $854.4 $818.3 $810.7 $ 805.3 $ 834.2 Working capital 172.2 118.7 217.7 216.5 217.7 Current ratio 2.2 1.7 2.1 2.4 2.2 Short-term and long-term debt $ 24.6 $ 65.1 $ 65.4 $ 115.1 $ 149.6 Debt-to-equity 4.7% 14.5% 16.2% 29.9% 33.8% Stockholders' equity $521.1 $447.9 $403.8 $ 384.5 $ 443.2 Stockholders' equity per share 27.88 24.12 22.14 20.52 21.94 Return on stockholders' equity (6) 18.4% 14.4% 13.6% 13.6% 16.5% Capital expenditures $ 33.1 $ 29.1 $ 33.8 $ 21.2 $ 19.8 Provision for depreciation 30.0 33.0 34.5 36.0 38.6 Cash dividends paid 13.2 12.4 12.6 13.3 9.4 Cash dividends declared per share (7) .71 .68 .68 .68 .47 General - ------- Average number of common and common equivalent shares outstanding (in thousands) 18,688 18,566 18,794 19,973 20,384 Approximate number of stockholders of record (8) 5,500 6,000 6,500 7,000 8,500 Approximate number of employees 5,300 5,900 7,200 8,000 9,300 - ----------------------------------------------------------------------------------------------------------------------------- (1) Includes pre-tax restructuring charge of $61.4 million in 1995. (2) Includes pre-tax restructuring and inventory charges of $18.1 million in 1996. (3) Includes $8.7 million of interest income from an income tax refund in 1997. (4) Includes $27.5 million of interest income relating to income taxes in 1996. (5) Includes $43.5 million of interest income from an income tax refund in 1995. (6) Based on income before an extraordinary item in 1995 and the cumulative effects of an accounting change in 1994 and calculated on beginning of year stockholders' equity. (7) The 1997 dividends included $.01 per share for redemption of stockholders' rights. (8) As of July 31 of the calendar year.
EX-10 3 THIOKOL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Amended and Restated Effective June 16, 1997 Table of Contents Section Page 1 - PURPOSE OF PLAN..................................................3 2 - ESTABLISHMENT OF PLAN............................................3 3 - DEFINITIONS......................................................3 4 - ELIGIBILITY FOR PARTICIPATION....................................5 5 - BENEFITS.........................................................5 6 - DISABILITY.......................................................8 7 - DEATH............................................................8 8 - FORM OF BENEFIT PAYMENT..........................................9 9 - CHANGE OF CONTROL AND TAX GROSS UP..............................10 10 - ADMINISTRATION OF PLAN..........................................13 11 - AMENDMENT OR TERMINATION OF PLAN................................13 12 - CORPORATE SUCCESSORS............................................13 13 - PLAN NOT A CONTRACT OF EMPLOYMENT...............................13 14 - SPENDTHRIFT CLAUSE..............................................14 15 - EXPENSES........................................................14 16 - SEVERABILITY....................................................14 17 - CONSTRUCTION....................................................14 18 - GOVERNING LAW...................................................14 19 - NO REQUIREMENT TO FUND..........................................14 20 - PAYMENT DUE AN INCOMPETENT......................................15 2 THIOKOL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN SECTION 1 - PURPOSE OF PLAN - --------------------------- The Thiokol Corporation Supplemental Executive Retirement Plan has been established by the Board of Directors as a non-tax qualified and unfunded supplemental retirement plan for the purpose of providing benefits to: (i)......Recruit and retain certain selected key executive employees; (ii) Bridge and supplement loss of future retirement benefits for such employees resulting from their leaving another employer for the employ of the Corporation; and (iii) Facilitate a discretionary nondiscounted supplemental early retirement benefit for certain key employees designated by the Chairman of the Board or President of the Corporation. SECTION 2 - ESTABLISHMENT OF PLAN - --------------------------------- The Thiokol Corporation Supplemental Executive Retirement Plan is established effective July 1, 1992. Effective June 16, 1997 the Plan was amended and restated. SECTION 3 - DEFINITIONS - ----------------------- "Accrued Benefit" means the percentage of the Normal Retirement Benefit, Early Retirement Benefit, or Late Retirement Benefit accrued for each Year of Service and fractional Year of Service completed to the nearest 1/12 of a year the Participant works for the Corporation. The percentage of each years accrued benefit is set forth in Table I. The maximum accrued benefit is 60% of the Participant's average five highest consecutive years of Compensation as described in Section 5 hereof. "Board of Directors" means the Board of Directors as constituted from time to time. "Cause" means (i) a material breach by the Participant of his job duties and obligations (other than as the result of an incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Participant's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the 3 Corporation and which is not remedied in a reasonable period of time after receipt of notice from the Corporation or (ii) the conviction of the Participant of a felony involving moral turpitude. "Chairman of the Board" means the Chairman of the Board of the Corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Compensation Committee of the Board of Directors. "Compensation" means a Participant's earnings as that term is defined in Section 4.8 (a)(1) of the Corporation's Retirement Plan calculated without regard to the limitation in Section 4.8(a)(2) of the Corporation's Retirement Plan, plus any short term bonus award amounts subject to deferred income taxation under the Code. "Corporation" or "Company" means Thiokol Corporation and its subsidiaries. "Corporation's Retirement Plan" means the Thiokol Corporation Pension Plan. "Early Retirement Benefit" means the Accrued Benefit that may be paid to a Participant described in Section 5.2.2 prior to the Participant's Normal Retirement Date. "Excess Pension Plan" mans the unfunded excess pension plan maintained by the Corporation for payment of retirement benefits that exceed the tax qualified and other limits of the Corporation's Retirement Plan. "Late Retirement Benefit" means the Accrued Benefit that may be paid to a Participant subsequent to his Normal Retirement Date as described in Section 5.2.3. "Normal Retirement Benefit" means the Accrued Benefit that may be paid to a Participant subsequent to his Normal Retirement Date as described in Section 5.2.3. "Normal Retirement Date" means the last day in the month a Participant attains age 65. "Participant" means the key employee of the Corporation selected and so designated as a participant by the Committee as described in Section 4. "Plan" means the Thiokol Corporation Supplemental Executive Retirement Plan. "President" means the President of the Corporation. "Surviving Spouse" means the surviving spouse as the term is defined in the Corporation's Retirement Plan. 4 "Years of Service" means years of Benefit Service as that term is defined in Section 4.7 of the Corporation's Retirement Plan. SECTION 4 - ELIGIBILITY FOR PARTICIPATION - ----------------------------------------- To be eligible for participation in the Plan, a person must be a key employee of the Corporation designated by the Chairman of the Board or President as a Participant and such designation acknowledged to the Participant in writing by the Chairman of the Board or President of the Corporation. The Participant shall remain an active Participant in this Plan so long as he is actively employed by the Corporation and thereafter for so long as the Participant or Participant's Surviving Spouse is eligible to receive benefits and until all benefits to which the Participant or Surviving Spouse are entitled have been paid. By participating in this Plan, a person as a Participant waives his rights to receive any benefit from the Corporation's Excess Benefit Plan. In the event a person is no longer actively employed by the Corporation, has not received any benefits from the Plan, and does not have a vested and nonforfeitable right to any Accrued Benefits, the person shall be eligible to participate in the Corporation's Excess Benefit Plan subject to the terms and conditions of the Excess Benefit Plan. SECTION 5 - BENEFITS - -------------------- 5.1 Benefits Formula; Benefits payable under this Plan to a Participant who has completed twelve Years of Service at the Participant's Normal Retirement Date shall be an amount equal to sixty percent (60%) of the Participant's average five highest consecutive years of Compensation during the last ten (10) Years of Service with the Corporation reduced by an amount equal to all benefits the Participant is eligible to receive from any of the following sources: (i) The Corporation's Retirement Plan; (ii) The defined benefit pension plans, annuities, and other regular and recurring benefits, including supplemental benefit plans and other nonqualifed benefit plans, received from prior employers or entities related to prior employers; and (iii) Governmental and military pension plans or programs but not including payments made under the federal social security system. For Years of Service less than twelve, the retirement benefit shall be the Accrued Benefit represented by the Years of Service and fractional years thereof computed to the nearest one-twelfth as set forth in Table 1. 5 5.2 Accrual of a Benefit and Vesting: Subject to the forfeiture provisions of this Section 5.2 and Section 6, Plan Participants shall accrue the percentage of the Normal Retirement, Early Retirement, or Late Retirement benefit, as the case may be, for each Year of Service with the Corporation set forth in Table 1 below. The Participant shall have a vested and nonforfeitable right to such Accrued Benefit upon the date of the earliest occurrence of any one of the following events: (i) Completion of twelve Years of Service; (ii) Involuntary termination of employment for reasons other than for Cause as defined in Section 3 hereof including but not limited to a reduction in force; (iii) Early retirement if the Participant is so selected in writing by the Chairman of the Board, or President as set forth in Section 5.2.2 herein; (iv) Permanent disability; (v) Death; or (vi) Retirement at the Participant's Normal or Late Retirement Date. In no event shall a Benefit be payable to a Participant under this Plan in a month the Participant receives Compensation from the Corporation. In the event a Participant voluntarily terminates employment with the Corporation, the Accrued Benefit unless otherwise vested under any of the vesting provisions listed in subsection (i) through (vi) of this Section 5.2 shall be forfeited and the Participant shall receive no benefits under this Plan. In the event that a Participant is eligible to receive or is otherwise receiving a benefit under this Plan and such Participant is employed or engaged in any activity, business or enterprise alone or in concert with others competitive with the business of the Corporation, the Committee in its sole discretion may declare such benefits under this Plan forfeited and cease making further payments under this Plan. 6 TABLE I ACCRUED BENEFIT SCHEDULE Percent of Benefit Accrual Years of Service For Years of Service 1 8.333 2 16.667 3 25.000 4 33.333 5 41.667 6 50.000 7 58.333 8 66.667 9 75.000 10 83.333 11 91.667 12 100.000 Fractional years shall be completed to the nearest 1/12 of a year. 5.2.1 Normal Retirement Benefit -- The Normal Retirement Benefit is the Participant's Accrued Benefit based on each Year of Service determined from Table 1 and paid to a Participant on the last day of the month subsequent to the date the Participant attains his Normal Retirement Date. 5.2.2 Early Retirement -- With the written authorization and approval solely in the discretion and not as an obligation of either the Chairman of the Board or the President of the Corporation, an Early Retirement Benefit may be paid to a Participant who has attained at least age 55 and who has completed not less than five Years of Service. Such Early Retirement Benefit shall be an amount equal to the Participant's Accrued Benefit derived from Table 1 as of the date of such early retirement based on each Year of Service reduced by the rate of 3% per year and fractional amount thereof each month that the Participant is granted early retirement prior to the Normal Retirement Date. The early retirement benefit shall commence the last day of the month subsequent to the date such early retirement is authorized in writing. 5.2.3 Late Retirement -- The Late Retirement Benefit shall be the Participant's Accrued Benefit derived from Table 1 based on each Year of Service payable the last day of the month subsequent to the date the Participant retires from the Corporation after the Participant attains his Normal Retirement Date. 5.2.4 Vested Involuntary Termination -- In the event a Participant is involuntarily terminated from employment with the Corporation prior to attainment of 7 his Normal Retirement Date other than for Cause as defined in Section 3 hereof or the completion of twelve Years of Service, the Participant shall be entitled to a retirement benefit equal to his Accrued Benefit derived from Table 1 based upon the Years of Service with the Company on the date of such involuntary termination. Such benefits shall commence the last day of the month subsequent to the Participant's Normal Retirement Date. At such time such terminated Participant is eligible to receive Early Retirement Benefits, such Participants shall be eligible and may elect to receive Early Retirement Benefits payable in the form set forth in Section 8 hereof without the consent required from the Chairman of the Board or President as set forth in Section 5.2.2 hereof. SECTION 6 - DISABILITY - ---------------------- In the event the Participant is totally and permanently disabled as hereinafter defined and remains totally and permanently disabled until attainment of his Normal Retirement Date, the Participant shall receive a Normal Retirement Benefit based upon the Years of Service accrued to the Normal Retirement Date and calculated on the Compensation in effect on the date of disability as if such compensation had continued to be paid at the same rate until the Participant's Normal Retirement Date. In the event the Participant recovers from such disability to return to active employment, the period of time of such disability shall be credited towards the Years of Service for benefit accrual purposes. In the event of death, such disabled Participant's Surviving Spouse will be entitled to the benefits described in Section 7 hereof. In the event that such Participant recovers from such disability and is actively employed by another employer or self-employed, the Participant shall be deemed to have terminated employment on such date he would otherwise have been eligible to return to active employment with the Corporation and such Accrued Benefit forfeited if twelve Years of Service as of such date of the commencement of disability had not been completed. For the purposes of the Plan, a Participant shall be deemed to be totally and permanently disabled if eligible for and receives long-term disability benefits from the Corporation's long-term disability program. Eligibility for disability retirement benefits under this Plan shall continue notwithstanding any expiration of benefit payments due to the passage of time from the Corporation's disability program so long as there has been no change in the status of the total and permanent nature of the Participant's disability. In the event the Corporation does not maintain a long-term disability program on the date of such disability, permanent disability shall be determined by procedures established by the Committee. SECTION 7 - DEATH - ----------------- If a married Participant dies while he is an active employee of the Company, his benefits under this Plan shall be 100% vested on the date of his death and payable to his Surviving Spouse in the form of a single life annuity commencing on the last day of the month following the date the Participant would have otherwise attained at age 55. 8 The benefit shall be based on the Accrued Benefit (unreduced for early retirement) that would have been paid to the Participant if he had continued his employment with the Company and retired at his Normal Retirement Date. Such surviving spouse may elect to receive the death benefit provided in this Section 7 in the form of a cash lump sum distribution of an accrued normal retirement benefit in the manner provided in Section 8 hereof. If a married Participant dies while he is not an active employee of the Company, any vested Accrued Benefits to which the Participant had a vested and nonforfeitable right the time of his death shall be paid to his Surviving Spouse in the form of a single life annuity. Such Surviving Spouse may elect to receive the accrued Normal Retirement, Early Retirement, or Late Retirement Benefit, as the case may be, at the same time and in the same manner the Participant would have been eligible to elect to receive his Accrued Benefit if he had survived. Any benefits payable to a Surviving Spouse shall be reduced by benefits such Surviving Spouse shall be entitled to receive as the result of the Participant's death from any of the following: (i) The Corporation's Retirement Plan; (ii) The defined benefit pension plans, annuities, and other regular and recurring benefits, including supplemental benefit plans and other nonqualifed benefit plans, received from prior employers or entities related to prior employers; and (iii)Governmental and military pension plans or programs but not including payments made under the federal social security system. If an unmarried Participant dies, no benefits will be paid under this Plan. SECTION 8 - FORM OF BENEFIT PAYMENT - ----------------------------------- The accrued Normal Retirement, Early Retirement, or Late Retirement Benefit, as the case may be, shall be payable to a Participant in the same form as payable to the Participant by written election under the terms of the Corporation's Retirement Plan. Except for the Early Retirement Benefit reduction factor described in Section 5.2.2 hereof which shall be used for calculation of the retirement benefits from this Plan, all other actuarial factors used to compute the Normal Retirement, Early or Late Retirement Benefit and optional forms of benefit payments from the Corporation's Retirement Plan shall be used to compute the retirement benefits from this Plan. In the event that the Accrued Benefit is payable as an Early Retirement Benefit prior to age 65 with written authorization by the Chairman of the Board or President of the Corporation, such Accrued Benefit shall be reduced by the annual rate of 3% and a 9 fraction thereof for each month for each year such early retirement precedes the Participants Normal Retirement Date. In the case of a late retirement, the Participant shall continue to accrue Years of Service for benefit accrual purposes to the extent that the Participant has not accrued twelve years of service as of his Normal Retirement Date. The Participant shall provide the Committee with such proof of benefit payments from other retirement plans or programs both public and private as the Committee may reasonably request. Absent such proof, the Committee may suspend benefit payments until such proof or other verification as may be reasonably required has been provided by the Participant. SECTION 9 - CHANGE OF CONTROL AND TAX GROSS UP - ---------------------------------------------- In the event of a Change in Control of the Company as hereinafter defined, the Participant shall be entitled to receive on the date of such Change in Control a vested nonforfeiture retirement benefit equal to 100% of the Participant's unreduced accrued Normal Retirement Benefit based on such Participant's compensation as of the date of such Change in Control. The Participant shall be entitled to receive a cash lump sum distribution of the actuarial equivalent value of such accrued Normal Retirement Benefit without reduction for benefits received or which the Participant is otherwise eligible to receive from other employer defined benefit plans, government and military plans or programs. The amount of such lump sum distribution shall be calculated without reduction for early retirement using the actuarial assumptions used in the Corporation's Retirement Plan. In addition to such lump sum distribution, the Participant shall also receive as a cash payment a "Tax Gross Up" amount as hereafter described. All such cash payments required by this Section 9 shall be paid by the Corporation to the Participant not later than the earliest date of (i) 30 days after the date of the Change of Control; or (ii) as provided by the terms and conditions of any Change of Control Agreement between the Corporation and a Participant in this Plan. In the event there is a conflict between this Plan and the terms and conditions of a Participant's Change in Control Agreement with the Corporation, as the case may be, the terms and conditions of the Change of Control Agreement shall govern to the extent there is a conflict with the terms of the Plan. For the purposes of this Plan, a Change in Control shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding share of Common Stock of the Company (the "Outstanding Company Common Stock") 10 or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"): provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by a corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 9 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) Approval by the stockholders of the Company of a reorganization, merge, consolidation in each case, unless following such reorganization, merger or consolidation, (i) more than 60% of, respectively, then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectivel, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, or the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no person (excluding the Company, an employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors 11 of the corporaiton resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly, or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no person (excluding the Company and any employee benefit plan (related trust) of the Company or such corporation and any person beneficially owning, immediately prior to such sale or other disposition, directly or indrectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of direcotrs of such corporation were members of the Incumber Board at the time of the execution of the initial agreement or action of the Board providing for such sale or disposition of assets of the Company. In addition to the Cash Payment for the actuarial equivalent value of the Participant's 100% accrued Normal Retirement Benefit, the Participant shall receive an additional cash payment in such amont as to "Gross Up" the Participant by the amount of any and all federal, state and local income tax the Participant is liable to pay as the result of such cash lump sum payment required by this Section 9 together with such amount necessary to Gross Up the Participant for all such tax Gross Up payments. In the event that a Participant is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties are hereinafter collectively referred to as the Excise Tax) the Participant shall receive a further tax Gross Up payment in an amount that such after payment by the Participant of all taxes (including any interests or penalties imposed with respect to such taxes) including without limitation any such income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the Gross Up Payment. 12 SECTION 10 - ADMINISTRATION OF PLAN - ----------------------------------- The Plan shall be administered by the Committee. The Committee shall have plenary authority, subject to the express provisions hereof, to resolve any questions arising under the Plan; to correct any defect or supply an omission or reconcile any inconsistency; to establish amend and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration and continued successful operation of the Plan. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee shall act only by a majority of its members then in office and its actions shall be recorded in minutes of the Committee meetings which shall be conclusive of all such actions taken. The Committee shall have the right to delegate such Plan administration as it shall determine to the Chairman or the Chairman's designee. SECTION 11 - AMENDMENT OR TERMINATION OF PLAN - --------------------------------------------- Subject to the provisions of this Section 11, the Compensation Committee shall have the right at any time, from time-to-time, with notice to Participants to suspend, discontinue or amend this Plan in any respect whatsoever. No amendment or termination of the Plan shall directly or indirectly deprive or otherwise reduce the Accrued Benefit of any Participant or the payment of any benefits payable to a Participant or Surviving Spouse under the Plan which have commenced prior to the effective date of such resolution amending or terminating the Plan. Upon termination or discontinuance of the Plan, such Participants shall become vested in a nonforfeitable right to their Accrued Benefits. Payment of such amount shall be in the manner provided in the Plan on the date such Participant is or becomes eligible to receive payment of benefits from the Corporation's Retirement Plan. SECTION 12 - CORPORATE SUCCESSORS - --------------------------------- The Plan shall not be automatically terminated by a transfer or sale of assets of the Corporation or by the merger or consolidation of the Corporation into or with any other corporation or other entity that is not a Change of Control as defined and described in Section 9 hereof but the Plan shall be continuted as a binding obligation on any successor after such sale, merger or consolidation. In the event the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 11. SECTION 13 - PLAN NOT A CONTRACT OF EMPLOYMENT - ---------------------------------------------- Neither this Plan, nor participation in it, shall be construed in any manner as a contract of continuing employment with the Corporation either expressed or implied. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Corporation for any period of time or to continue a 13 Participant's present or any other rate of compensation. No employee shall have a right to be selected as a Participant, or having been so selected, to be selected again as a Participant. SECTION 14 - EXPENSES - --------------------- In the event any Participant or surviving spouse incurs costs, fees or expenses including attorney's fees in the enforcement of any rights to receive payment of benefits under this Plan, the Company shall reimburse such participant or surviving spouse such costs, fees and expenses to such participant or surviving spouse is the prevailing party. SECTION 15 - SPENDTHRIFT CLAUSE - ------------------------------- No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Surviving Spouse or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Surviving Spouse. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. SECTION 16 - SEVERABILITY - ------------------------- In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. SECTION 17 - CONSTRUCTION - ------------------------- Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. SECTION 18 - GOVERNING LAW - -------------------------- The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Utah unless superseded by federal law. SECTION 19 - NO REQUIREMENT TO FUND - ----------------------------------- The Employer is not required to fund this Plan. 14 SECTION 20 - PAYMENT DUE AN INCOMPETENT - --------------------------------------- If the Plan Administration Committee receives evidence that a Participant or Surviving Spouse entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole discretion, direct the payment to any other person or trust which has been legally appointed by the courts. IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be signed by its duly appointed officers and its corporate seal to be hereunto affixed as of this 16th day of June 1997. /s/ James R. Wilson By: ________________________________ Chairman of the Board, President and Chief Executive Officer ~ Seal ~ ATTESTED: /s/ Edwin M. North By: ________________________________ Secretary EX-10 4 THIOKOL CORPORATION EXECUTIVE BONUS PLAN AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1997 TABLE OF CONTENTS SECTION PAGE - ------- ---- 1 PURPOSE OF PLAN 1 2 DEFINITIONS 1 3 ELIGIBILITY FOR PARTICIPATION 6 4 TARGET BONUS OPPORTUNITY 6 5 SETTING THE PERFORMANCE GOALS AND 8 PARTICIPANT GOALS 6 CALCULATION OF THE ACTUAL BONUS AWARD 8 7 SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS 17 8 COMPENSATION NATURE OF THE TARGET BONUS 17 OPPORTUNITY AND ACTUAL BONUS AWARD 9 METHOD OF PAYMENT OF ACTUAL BONUS AWARD 18 AND TAX WITHHOLDING 10 TERMINATION OF EMPLOYMENT, CROSS-TRANSFER, 18 PROMOTION AND DEMOTION 11 CHANGE OF CONTROL 20 12 ADMINISTRATION AND MODIFICATION OF THE PLAN 23 13 AMENDMENT OR TERMINATION OF PLAN AND 24 DURATION OF PLAN 14 PLAN NOT A CONTRACT OF EMPLOYMENT 25 15 NON-ASSIGNABILITY OF RIGHTS 25 THIOKOL CORPORATION ------------------- EXECUTIVE BONUS PLAN -------------------- SECTION 1 - PURPOSE OF THE PLAN - ------------------------------- The Thiokol Executive Bonus Plan is principally designed as a short-term incentive compensation bonus plan for selected employees of Thiokol Corporation whose positions of responsibility enable them to affect the success and profitability of the Corporation. Adopted by the Board of Directors of the Corporation June 18, 1992 and amended and restated June 16, 1997, the Plan provides an annual cash bonus opportunity to each Participant based on the respective performance of the Corporation or the Participant's Division or Operating Unit towards specific pre-determined financial goals and the Participant's achievement of specified individual objectives. SECTION 2 - DEFINITIONS - ----------------------- 2.0 As used herein the terms below shall have the following meanings. Any of these terms, unless the context otherwise requires, may be used in the singular or plural depending upon the reference. 2.1 "Actual Bonus Award" means the actual bonus award earned by a Participant as incentive compensation for each Plan Year calculated in the manner described in Section 6 hereof. 2.2 "Actual Performance Results" means: (i) the actual Earnings Per Share and Participant Goals achieved for the Plan Year for Group A Participants; (ii) actual, Operating Unit Net Profit and Participant Goals achieved for the Plan Year for Group B Participants, and; (iii) the Division Net Profit and Participant Goals achieved for the Plan Year for Group C Participants. 2.3 "Base Annual Salary" means the Participant's base annualized salary for the Salary Grade for which a Participant is assigned by the Committee July 1 of the Plan Year. The Base Annual Salary on which the Actual Bonus Award will be paid shall be adjusted for the amount of any increase (or decrease) granted a Participant within the Participant's designated Salary Grade during the Plan Year. Such adjustment shall be the weighted average of the Base Salary for the period comprising the number of months in the Plan Year at the rate in effect on July 1 and the number of months at the rate in effect subsequent to such increase (or decrease) or increases or decreases if more than one during the Plan Year. 2.4 "Board of Directors" means the Board of Directors of the Corporation as constituted from time to time. 2.5 "Chairman" means the Chairman of the Board of Directors of the Corporation. 2.6 "Committee" means the Compensation Committee of the Board of Directors charged with administering the Plan. 2.7 "Consolidated Balance Sheet" means the balance sheet of the Corporation and its subsidiaries prepared on a consolidated basis in accordance with generally accepted accounting practices. 2.8 "Consolidated Income Statement" of the Corporation means the income statement of the Corporation and its subsidiaries prepared on a consolidated basis in accordance with generally accepted accounting practices. -2- 2.9 "Corporation" or "Company" means Thiokol Corporation and its subsidiaries. 2.10 "Corporation Performance Goals" means the Earnings Per Share performance goals set by the Committee for Group A Participants. 2.11 "Division" means a distinct measurable profit center of the Corporation or any subsidiary, division, or a branch, domestic or foreign, of the Corporation, designated by the Committee as a division for the purposes of this Plan and may include the consolidation of business units. 2.12 "Division Net Profit" means the net pre-tax profit of the Division net of all year-end adjustments included in the Consolidate Income Statement of the Corporation for the Plan Year. 2.13 "Division Net Profit Goal" means the division net profit goal set by the Committee at the beginning of the Plan Year on which the Target Opportunity is based. 2.14 "Division Performance Goals" means the division net profit performance goals set by the Committee for Group C Participants. 2.15 "Earnings Per Share" means the earnings per share shown on the Corporation's Consolidated Statement of Income at the end of the Plan Year. 2.16 "Earnings Per Share Goal" means the earnings per share goal set by the Committee at the beginning of the Plan Year on which the Target Bonus Opportunity is based. -3- 2.17 "Group A Participant" means those persons designated by the Committee for the Plan Year to be Group A Participants. 2.18 "Group B Participant" means those persons designated by the Committee for the Plan Year to be Group B Participants. 2.19 "Group C Participant" means those persons designated by the Committee for the Plan Year to be Group C Participants. 2.20 "Operating Unit" means a distinct measurable profit center of the Corporation or any subsidiary, division, or a branch, domestic or foreign, of the Corporation designated by the Committee as an operating unit for the purposes of this Plan and may include the consolidation of business units. 2.21 "Operating Unit Net Profit" means the net pre-tax profit of the Operating Unit net of all year-end adjustments included in the Consolidated Income Statement of the Corporation for the Plan Year. 2.22 "Operating Unit Net Profit Goal" means the Operating Unit Net Profit set by the Committee at the beginning of the Plan Year on which the Target Bonus Opportunity is based. 2.23 "Operating Unit Performance Goals" means the Operating Unit Net Profit Goal performance goals set by the Committee for Group B Participants. 2.24 "Participant" means any person, selected by the Committee for participation in this Plan, as either a Group A Participant, a Group B Participant, a Group C Participant or a Special Participant and who has agreed to participate in this Plan as provided in Section 3, hereof. -4- 2.25 "Performance Goals" means the Corporation Performance Goals, Division Performance Goals and Operating Unit Performance Goals set by the Committee as the performance goals to be achieved for the Plan Year. 2.26 "Plan" means the Thiokol Corporation Executive Bonus Plan. The first Plan shall be effective for the Corporation's fiscal year beginning July 1, 1997. 2.27 "Plan Year" means the fiscal year of the Corporation July 1 through June 30. 2.28 "Salary Grade" means the salary classification to which a Participant is assigned by the Committee. 2.29 "Special Participant" means an individual designated as a special participant by the Committee to receive a discretionary bonus as set forth in Section 7 hereof. 2.30 "Participant Goals" means the individual goals set forth in writing by each Participant at the beginning of the Plan Year approved by the Committee defining the goals and objectives for each Participant to achieve during the Plan Year. Each of such goal, which may be either a financial or qualitative goal or a combination thereof for each such Participant, shall be assigned a weight such as to rank it's relative importance in relation to the other goals and the sum total of the weights for all such goals shall equal one hundred (100). In the event any such goals requires more than twelve months to complete, a written measurable criteria shall be included in each of such goals against which performance results towards achieving such goals can be measured for the Plan Year. At the end of the Plan Year the Committee shall review the goals achieved in relationship to these goals set -5- at the beginning of the Plan Year and determine if each such Goal was either (i) not met; (ii) partially met; (iii) all met; or (iv) exceed as set forth on Table 5. 2.31 "Subsidiary" means a corporation, both domestic and foreign, at least eighty-five percent (85%) of the outstanding voting stock of which is owned, directly or indirectly, by the Corporation or any subsidiary of the Corporation. 2.32 "Target" means the percentage determined by the Participant's Salary Grade, as set forth in Table 1 in Section 4 hereof, on which the Target Bonus Opportunity is calculated. 2.33 "Target Bonus Opportunity" means the dollar value of the incentive bonus opportunity awarded to each Participant at the beginning of each Plan Year based upon the Participant's Base Annual Salary, Salary Grade and corresponding Target. SECTION 3 - ELIGIBILITY FOR PARTICIPATION - ----------------------------------------- To be eligible for participation in the Plan, a person must be designated either a Group A Participant, Group B Participant, Group C Participant or Special Participant by the Committee and agree in writing to be a participant in the Plan bound by the terms and conditions hereof by executing the participant acknowledgment. Special Participants shall participate upon such terms and conditions as the Committee may designate. SECTION 4 - TARGET BONUS OPPORTUNITY - ------------------------------------ The Target Bonus Opportunity for each Participant is set at the beginning of each Plan -6- Year and shall be based on the Salary Grade and Target expressed as a percent set forth in Table 1: ============================================================================== TABLE 1 ------- TARGET BONUS OPPORTUNITY ============================================================================== SALARY GRADE TARGET (PERCENT) ============================================================================== 3 30% - ------------------------------------------------------------------------------ 2 25% - ------------------------------------------------------------------------------ 1 20% - ------------------------------------------------------------------------------ The Target Bonus Opportunity shall equal the amount of the Participant's Base Annual Salary multiplied by the corresponding Target, expressed as a percent set forth opposite the Participant's Salary Grade shown in Table 1. The Target Bonus Opportunity is calculated by the following formula: Target Bonus Opportunity = Base Annual Salary X Target(1) _________________________________________ (1)Target expressed as a percent based on Participant's Salary Grade-Table 1. -7- SECTION 5 - SETTING THE PERFORMANCE GOALS AND PARTICIPANT GOALS - --------------------------------------------------------------- At the beginning of the Plan Year the Committee shall set the Performance Goals and approve Participant Goals. SECTION 6 - CALCULATION OF THE ACTUAL BONUS AWARD - ------------------------------------------------- The Actual Bonus Award that may be earned by a Participant for the Plan Year is expressed as a percentage of the Target Bonus Opportunity based on the Actual Performance Results achieved for the Plan Year. The Actual Bonus Award is calculated as hereinafter described. Group A Participants: For Group A Participants, the amount of the Actual Bonus Award that may be earned shall be based on an attainment of the Corporation Performance Goals and Participant Goals expressed as a percentage of the Participant's Target Bonus Opportunity in Table 2 and Table 5. The value of the Actual Bonus Award Earned by Group A Participants is defined by the following formula: -8- EARNINGS PER SHARE ------------------ LINE A Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 2. PLUS OR (MINUS) --------------- PARTICIPANT GOALS ----------------- LINE B Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 5. EQUALS ___________________ ------ Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD -9- ============================================================================== TABLE 2 ------- GROUP A PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== Actual EPS Achieved measured against Percent of Target Bonus Opportunity EPS Goals which may be earned as an Actual Bonus Award ============================================================================== Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 25% - ------------------------------------------------------------------------------ 95% of Goal 47.5% - ------------------------------------------------------------------------------ 100% of Goal 70% - ------------------------------------------------------------------------------ 105% of Goal 97% - ------------------------------------------------------------------------------ 110% of Goal 123% - ------------------------------------------------------------------------------ 115% of Goal 150% - ------------------------------------------------------------------------------ Above 115% of Goal 150% - ------------------------------------------------------------------------------ For performance results between the EPS rates shown, linear interpolation set forth in Exhibit A will be used to compute the Actual Bonus Award. ============================================================================== -10- Group B Participants: For Group B Participants, the amount of the Actual Bonus Award that may be earned shall be based on attainment of both the Operating Unit Performance Goals and Participant Goals in Table 3 and Table 5. The value of the Actual Bonus Award Earned by Group B Participants is defined by the following formula: OPERATING UNIT NET PROFIT ------------------------- LINE A Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 3. PLUS OR (MINUS) --------------- PARTICIPANT GOALS ----------------- LINE B Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 5. EQUALS ___________________ -------- Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD -11- ============================================================================== TABLE 3 ------- GROUP B PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== Actual Operating Unit Net Percentage of Target Bonus Opportunity Profit Achieved measured against which may be earned as an Actual Operating Unit Net Profit Goal Bonus Award ============================================================================== Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 25% - ------------------------------------------------------------------------------ 95% of Goal 47.5% - ------------------------------------------------------------------------------ 100% of Goal 70% - ------------------------------------------------------------------------------ 105% of Goal 97% - ------------------------------------------------------------------------------ 110% of Goal 123% - ------------------------------------------------------------------------------ 115% of Goal 150% - ------------------------------------------------------------------------------ Above 115% of Goal 150% ============================================================================== For performance results between the Operating Unit Net Profit rates shown, linear interpolation set forth in Exhibit A-1 will be used to compute the Actual Bonus Award. ============================================================================== -12- Group C Participants: For Group C Participants, the amount of the Actual Bonus Award that may be earned shall be based on attainment of the Division Performance Goals and Participant Goals expressed as a percentage of the Participant's Target Bonus Opportunity in Table 4 and Table 5. The value of the Actual Bonus Award Earned by Group C Participants is defined by the following formula: DIVISION NET PROFIT ------------------- LINE A Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 4. PLUS OR (MINUS) --------------- PARTICIPANT GOALS ----------------- LINE B Percentage of Target Bonus Opportunity Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD Award from Table 5. EQUALS ___________________ ------ Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD -13- ============================================================================== TABLE 4 ------- GROUP C PARTICIPANTS DIVISION UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== Actual Division Net Profit Percentage of Target Bonus Opportunity measured against Division which may be earned as an Actual Bonus Net Pre-Tax Profit Goal Award ============================================================================== Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 25% - ------------------------------------------------------------------------------ 95% of Goal 47.5% - ------------------------------------------------------------------------------ 100% of Goal 70% - ------------------------------------------------------------------------------ 105% of Goal 97% - ------------------------------------------------------------------------------ 110% of Goal 123% - ------------------------------------------------------------------------------ 115% of Goal 150% - ------------------------------------------------------------------------------ Above 115% of Goal 150% ============================================================================== For performance results between the Division Net Profit, linear interpolation set forth in Exhibit A-2 will be used to compute the Actual Bonus Award. ============================================================================== -14- Participant Goals: - ------------------ For Group A Participants, Group B Participants and Group C Participants, the Actual Bonus Award that may be earned by Participants is set forth in Table 5 based on attainment of Participant Goals. Either the attainment or failure to attain the Participant Goals, as the case may be, is interrelated to the amount of the Actual Bonus Award earned and paid. Based on the level of Participant success in achieving Participant Goals, the Committee may declare either a positive or negative bonus amount based on the level of Participant Goals achieved by the Participant as (i) "objectives not met"; (ii) "objectives partially met"; (iii) "objectives all met"; and (iv) "objectives all exceeded" as set forth on Table 5. In the event of poor performance in achieving Participant Goals, the Committee award of a negative bonus amount will be subtracted from any Bonus Opportunity earned for achievement of Performance Goals in calculating the Actual Bonus Award earned. In the event Participant Goals are not met, no Actual Bonus Award will be earned. -15- ============================================================================== TABLE 5 ------- GROUP A, GROUP B AND GROUP C PARTICIPANTS PARTICIPANT GOALS ============================================================================== Actual Participant Goals Percentage of Target Bonus Opportunity Achieved measured against which may be earned as an Actual Bonus Participant Goals Set Award ============================================================================== Goals Not Met -175%(1) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Goals Partially Met -50% to 15% - ------------------------------------------------------------------------------ Goals All Met 16% to 30% - ------------------------------------------------------------------------------ Goals All Exceeded 31% to 50% - ------------------------------------------------------------------------------ The Committee shall determine the Percentage of the Target Bonus Opportunity, either positive or negative as the case may be, which may be earned as an Actual Bonus Award for each level of Participant Goals achieved. (1) No Bonus will be paid when Goals are not met. ============================================================================== -16- Maximum and Minimum Bonus Award: The Maximum Actual Bonus Award paid from this Plan is 175% of the Target Bonus Opportunity based on the Performance Goals and Participant Goals achieved. No Actual Bonus Award will be paid if Participant Goals are not met and the Actual Bonus Award will be partially reduced if a Participant's performance in achieving Participant Goals is poor or otherwise unsatisfactory as determined by the Committee. SECTION 7 - SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS - -------------------------------------------------------- 7.0 The Committee may designate Special Participants for Plan participation on terms and conditions as may be determined from time to time by the Committee. Such individuals designated as Special Participants shall be Participants upon agreeing in writing to the terms and conditions set by the Committee for such participation. 7.1 The Committee may pay a discretionary bonus to any such individual or group of individuals on such terms and conditions as the Committee may determine. SECTION 8 - COMPENSATION NATURE OF THE TARGET BONUS OPPORTUNITY - --------------------------------------------------------------- AND ACTUAL BONUS AWARD - ---------------------- The Target Bonus opportunity granted to a Participant at the beginning of the Plan Year as incentive compensation and payable to the Participant at the end of the Plan Year in the amount of the Actual Bonus Award earned is a binding compensation obligation of the Corporation to the Participant for the Plan Year in which the Actual Bonus Award is earned. -17- SECTION 9 - METHOD OF PAYMENT OF ACTUAL BONUS AWARD AND TAX - ----------------------------------------------------------- WITHHOLDING - ----------- The amount of the Actual Bonus Award earned by a Participant shall be paid by the Corporation to the Participant in cash within sixty (60) days subsequent to the end of the Plan Year. The Corporation shall withhold all applicable federal, state and local income taxes and other amounts required by law to be withheld for compensation. SECTION 10 - TERMINATION OF EMPLOYMENT, CROSS-TRANSFER, - ------------------------------------------------------- PROMOTION AND DEMOTION - ---------------------- 10.1 In the event a Participant terminates employment either voluntarily or involuntarily including by retirement under the terms of the Corporation's retirement program, death or permanent disability prior to January 1 of the Plan Year, the Participant shall receive no Actual Bonus Award. 10.2 In the event a Participant terminates employment either voluntarily or involuntarily (other than by Cause as hereinafter defined) including by retirement under the terms of the Corporation's retirement program, death or permanent disability, subsequent to January 1 of the Plan Year, the Participant shall be eligible to receive a pro rata Actual Bonus Award based on the number of months completed in the Plan Year. Such pro rata payment, if any, shall be made in the manner set forth in Section 9 and paid at the end of the Plan Year in accordance with the terms of this Plan. A Participant who is terminated during the Plan Year for Cause shall receive no Actual Bonus Award. 10.3 For the purposes of this Plan, (i) a Participant shall be considered permanently disabled on the date that such Participant qualifies for long- -18- term disability payments under the Corporation's long-term disability program: and (ii) "Cause" means (a) a material breach by the Participant of his job duties and obligations (other than as the result of an incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Participant's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Corporation and which is not remedied in a reasonable period of time after receipt of notice from the Corporation or (b) the conviction of the Participant of a felony involving moral turpitude. 10.4 In the event a Participant is cross-transferred to the Corporation, to another Division or to another Operating Unit ("Location") at the same Salary Grade, the Participant will continue participating in the Plan but the Actual Bonus Award will be pro rated based on the time and performance results achieved at each Location. The Participant will become an active Participant in the corresponding Plan for the Corporation, Division or the Operating Unit to which the Participant is transferred at the beginning of the next Plan if selected by the Committee as a Participant. 10.5 In the event a Participant is promoted to a new Salary Grade, the Participant's participation in the Plan will continue until the end of the Plan Year and will be eligible to receive an Actual Bonus Award as provided by the terms of the Plan. The Participant will become an active Participant at the new Salary Grade in the corresponding Plan for the Corporation, Division or Operating Unit to which the Participant is promoted at the beginning of the next Plan Year if selected by the Committee. 10.6 In the event of a demotion to a lower Salary Grade the Participant will continue participating in such Plan until the end of the Plan Year and receive an Actual Bonus Award as provided by the terms of the Plan. The -19- Participant will become an active Participant in such Plan in effect at the new Salary Grade for the Corporation, Division or Operating Unit as a result of such demotion at the beginning of the next Plan Year if selected by the Committee as a Participant. SECTION 11 - CHANGE OF CONTROL - ------------------------------ In the event of a Change of Control of the Company as hereinafter defined below in this Section 11, not withstanding any other provision of this Plan to the contrary the greater of either the Target Bonus Award or Actual Bonus Award, for the Plan in which a Participant participates, shall become irrevocably due and payable to Participants on the date of such Change of Control. Payment shall be made to the Participant not later than thirty days after such Change of Control. For the purposes of this agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by a corporation pursuant to a reorganization, merger -20- or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 13 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) Approval by the stockholders of the Company of a reorganization, merger, consolidation in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, or the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no person (excluding the Company, an employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any person beneficially owning, immediately prior to such -21- reorganization, merger or consolidation, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly, or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no person (excluding the Company and any employee benefit plan (related trust) of the Company or such corporation and any person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively the then outstanding shares of Common Stock of such corporation and the combined voting power of the then -22- outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) a least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or disposition of assets of the Company. SECTION 12 - ADMINISTRATION AND MODIFICATION OF THE PLAN - -------------------------------------------------------- 12.1 The Plan shall be administered by the Committee. The Committee shall have plenary authority, subject to the express provisions hereof, to resolve any questions arising under the Plan; to correct any defect or supply an omission or reconcile any inconsistency; to establish amend and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration and continued successful operation of the Plan. The Committee will have discretion at any time, or from time to time, to accelerate the time at which and the extent to which the Actual Bonus Award may be payable to Participants. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee shall act only by a majority of its members then in office and its actions shall be recorded in minutes of the Committee meetings which shall be conclusive of all such actions taken. 12.2 The Committee shall have the right but not an obligation to modify the Plan and to adjust Performance Goals, including but not limited to Earnings Per Share to reflect non-recurring financial changes or changes in business structure or organization including by way of illustration and not as a limitation changes in accounting methods or requirements; accounting adjustments not in the usual and ordinary course of business resulting in non-recurring charges or additions in income, assets, liabilities or stockholders equity; tax -23- rates and Corporate reorganizations including: recapitalization, mergers, acquisitions, divestitures and spin-offs. 12.3 Unless otherwise amended by resolution of the Committee, the Chairman, who shall not be a Participant in the Plan, shall have the administrative power to act on behalf of the Committee to: (i) select and designate individual Participants for Plan Participation as either Corporate Participants, Operating Unit Participants, or Division Participants; (ii) set Participant Salary Grades and Base Annual Salary; (iii) set Performance Goals; (iv) approve Participant Goals; and (v) determine the level of Participant Objectives achieved for the purpose of determining the percentage of the Target Bonus Opportunity achieved or not achieved, as the case may be, with respect to Participant Goals. The Chairman may delegate such administration to the Vice President of Human Resources and Administration as the Chairman determines. SECTION 13 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF PLAN - ------------------------------------------------------------------ 13.1 Subject to the provisions of subsection 13.2 below, the Compensation Committee shall have the right at any time, from time to time, without notice -24- to Participants to suspend, discontinue or amend this Plan in any respect whatsoever, except that administration of the Plan cannot be removed from the Compensation Committee. 13.2 Upon termination or discontinuance of the Plan, such Participants shall receive a pro rata amount of the Actual Bonus Award for the Plan Year based on the number of months completed in the Plan Year as of the date of the termination. Payment of such amount shall be in the manner provided in the Plan. 13.3 This Plan is an annual Plan and there is no obligation for the Committee or the Board of Directors to renew such Plan each Plan Year. SECTION 14 - PLAN NOT A CONTRACT OF EMPLOYMENT - ---------------------------------------------- Neither this Plan, nor participation in it, shall be construed in any manner as a contract of employment either expressed or implied. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Corporation for any period of time or to continue a Participant's present or any other rate of compensation. No employee shall have a right to be selected as a Participant, or having been so selected, to be selected again as a Participant. SECTION 15 - NON-ASSIGNABILITY OF RIGHTS - ---------------------------------------- No Participant's interest in the Plan shall be sold, assigned, transferred, hypothecated, pledged, or otherwise disposed of by a Participant prior to the actual receipt of such payment except by Will, the law of decent and distribution or a qualified domestic relations order as defined by the Employee Retirement Income Security Act of 1974. Participants may name, from time to time, beneficiaries (who may be named -25- contingently or successively) to whom benefits the Plan will be paid in the event of their death before they receive any or all such benefit. Each designation will revoke all prior designations by the same Participant, shall be in the form prescribed by the Committee, and will be effective only when filed by the Participant with the Committee during the Participant's life time. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. Except as otherwise permitted by action taken by the Committee, the rights of any Participant under the Plan will immediately terminate if such Participant: (i) attempts to, or does sell or assign, transfer, hypothecate, pledge or otherwise dispose of any right hereunder prior to the right to receive payment except as permitted above or (i) becomes insolvent or bankrupt, or becomes involved in any matter which in the opinion of the Committee might result in a Participant's rights under the Plan being taken to satisfy the Participant's debts or liabilities. IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be signed by its duly appointed officers and its corporate seal to be hereunto affixed as of this 16th day of June 1997. /s/ James R. Wilson By:________________________________ Chairman of the Board, President and Chief Executive Officer -Seal- ATTESTED: /s/ Edwin M. North By:__________________________ Secretary -26- ============================================================================== THIOKOL CORPORATION EXECUTIVE BONUS PLAN EXHIBIT A LINEAR INTERPOLATION CHART GROUP A PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE EARNED AS AN ACTUAL BONUS AWARD - ------------------------------------------------------------------------------ 90% 25% - ------------------------------------------------------------------------------ 91% 29.5% - ------------------------------------------------------------------------------ 92% 34% - ------------------------------------------------------------------------------ 93% 38.5% - ------------------------------------------------------------------------------ 94% 43% - ------------------------------------------------------------------------------ 95% 47.5% - ------------------------------------------------------------------------------ 96% 52% - ------------------------------------------------------------------------------ 97% 56.5% - ------------------------------------------------------------------------------ 98% 61% - ------------------------------------------------------------------------------ 99% 65.5% - ------------------------------------------------------------------------------ 100% 70% - ------------------------------------------------------------------------------ 101% 75.3% - ------------------------------------------------------------------------------ 102% 80.7% - ------------------------------------------------------------------------------ 103% 86% - ------------------------------------------------------------------------------ 104% 91.3% - ------------------------------------------------------------------------------ 105% 96.6% - ------------------------------------------------------------------------------ 106% 102% - ------------------------------------------------------------------------------ 107% 107.3% - ------------------------------------------------------------------------------ 108% 112.6% - ------------------------------------------------------------------------------ 109% 118% - ------------------------------------------------------------------------------ 110% 123.3% - ------------------------------------------------------------------------------ 111% 128.6% - ------------------------------------------------------------------------------ 112% 134% - ------------------------------------------------------------------------------ 113% 139.3% - ------------------------------------------------------------------------------ 114% 144.6% - ------------------------------------------------------------------------------ 115% 150% - ------------------------------------------------------------------------------ -27- ============================================================================== THIOKOL CORPORATION EXECUTIVE BONUS PLAN EXHIBIT A-1 LINEAR INTERPOLATION CHART GROUP B PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS ACHIEVED MEASURED OPPORTUNITY WHICH MAY BE AGAINST OPERATING UNIT EARNED AS AN ACTUAL BONUS NET PROFIT GOAL AWARD - ------------------------------------------------------------------------------ 90% 25% - ------------------------------------------------------------------------------ 91% 29.5% - ------------------------------------------------------------------------------ 92% 34% - ------------------------------------------------------------------------------ 93% 38.5% - ------------------------------------------------------------------------------ 94% 43% - ------------------------------------------------------------------------------ 95% 47.5% - ------------------------------------------------------------------------------ 96% 52% - ------------------------------------------------------------------------------ 97% 56.5% - ------------------------------------------------------------------------------ 98% 61% - ------------------------------------------------------------------------------ 99% 65.5% - ------------------------------------------------------------------------------ 100% 70% - ------------------------------------------------------------------------------ 101% 75.3% - ------------------------------------------------------------------------------ 102% 80.7% - ------------------------------------------------------------------------------ 103% 86% - ------------------------------------------------------------------------------ 104% 91.3% - ------------------------------------------------------------------------------ 105% 96.6% - ------------------------------------------------------------------------------ 106% 102% - ------------------------------------------------------------------------------ 107% 107.3% - ------------------------------------------------------------------------------ 108% 112.6% - ------------------------------------------------------------------------------ 109% 118% - ------------------------------------------------------------------------------ 110% 123.3% - ------------------------------------------------------------------------------ 111% 128.6% - ------------------------------------------------------------------------------ 112% 134% - ------------------------------------------------------------------------------ 113% 139.3% - ------------------------------------------------------------------------------ 114% 144.6% - ------------------------------------------------------------------------------ 115% 150% - ------------------------------------------------------------------------------ -28- ============================================================================== THIOKOL CORPORATION EXECUTIVE BONUS PLAN EXHIBIT A-2 LINEAR INTERPOLATION CHART GROUP C PARTICIPANTS DIVISION UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== ACTUAL DIVISION NET PROFIT PERCENTAGE OF TARGET BONUS ACHIEVED MEASURED AGAINST OPPORTUNITY WHICH MAY BE DIVISION NET PRE-TAX EARNED AS AN ACTUAL BONUS PROFIT GOAL AWARD - ------------------------------------------------------------------------------ 90% 25% - ------------------------------------------------------------------------------ 91% 29.5% - ------------------------------------------------------------------------------ 92% 34% - ------------------------------------------------------------------------------ 93% 38.5% - ------------------------------------------------------------------------------ 94% 43% - ------------------------------------------------------------------------------ 95% 47.5% - ------------------------------------------------------------------------------ 96% 52% - ------------------------------------------------------------------------------ 97% 56.5% - ------------------------------------------------------------------------------ 98% 61% - ------------------------------------------------------------------------------ 99% 65.5% - ------------------------------------------------------------------------------ 100% 70% - ------------------------------------------------------------------------------ 101% 75.3% - ------------------------------------------------------------------------------ 102% 80.7% - ------------------------------------------------------------------------------ 103% 86% - ------------------------------------------------------------------------------ 104% 91.3% - ------------------------------------------------------------------------------ 105% 96.6% - ------------------------------------------------------------------------------ 106% 102% - ------------------------------------------------------------------------------ 107% 107.3% - ------------------------------------------------------------------------------ 108% 112.6% - ------------------------------------------------------------------------------ 109% 118% - ------------------------------------------------------------------------------ 110% 123.3% - ------------------------------------------------------------------------------ 111% 128.6% - ------------------------------------------------------------------------------ 112% 134% - ------------------------------------------------------------------------------ 113% 39.3% - ------------------------------------------------------------------------------ 114% 144.6% - ------------------------------------------------------------------------------ 115% 150% - ------------------------------------------------------------------------------ -29- EX-10 5 THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1997 TABLE OF CONTENTS SECTION PAGE - ------- ---- 1 PURPOSE OF THE PLAN 1 2 DEFINITIONS 1 3 ELIGIBILITY FOR PARTICIPATION 7 4 TARGET BONUS OPPORTUNITY 7 5 SETTING THE PERFORMANCE GOALS 8 6 CALCULATION OF THE ACTUAL BONUS AWARD 9 7 SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS 19 8 COMPENSATION NATURE OF THE TARGET BONUS OPPORTUNITY AND ACTUAL BONUS AWARD 19 9 METHOD OF PAYMENT OF ACTUAL BONUS AWARD AND TAX WITHHOLDING 20 10 TERMINATION OF EMPLOYMENT, CROSS- TRANSFER, PROMOTION AND DEMOTION 20 11 CHANGE OF CONTROL 22 12 ADMINISTRATION AND MODIFICATION OF THE PLAN 25 13 AMENDMENT OR TERMINATION OF PLAN AND DURATION OF PLAN 26 14 PLAN NOT A CONTRACT OF EMPLOYMENT 27 15 NON-ASSIGNABILITY OF RIGHTS 27 THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN SECTION 1 - PURPOSE OF THE PLAN - ------------------------------- The Thiokol Key Executive Bonus Plan is principally designed as a short-term incentive compensation bonus plan for selected key executive officers and employees of Thiokol Corporation whose positions of responsibility enable them to significantly affect the success and profitability of the Corporation. Adopted by the Board of Directors of the Corporation, June 18, 1992 and amended and restated June 16, 1997, the Plan provides an annual cash bonus opportunity to each Participant based on the respective performance of the Corporation, or the Participant's Division or Operating Unit towards specific pre-determined financial goals and the individual Participant's achievement of specified Strategic Goals. SECTION 2 - DEFINITIONS - ----------------------- 2.0 As used herein the terms below shall have the following meanings. Any of these terms, unless the context otherwise requires, may be used in the singular or plural depending upon the reference. 2.1 "Actual Bonus Award" means the actual bonus award earned by a Participant as incentive compensation for each Plan Year calculated in the manner described in Section 6 hereof. 2.2 "Actual Performance Results" means: (i) the actual Earnings Per Share and Corporate Strategic Goals achieved for the Plan Year for Group A Participants; (ii) actual Earnings Per Share, Operating Unit Net Profit and Operating Unit Strategic Goals achieved for the Plan Year for Group B 1 Participants, and; (iii) the Operating Unit Net Profit, Division Net Profit, and Division Strategic Goals achieved for the Plan Year for Group C Participants. 2.3 "Base Annual Salary" means the Participant's base annualized salary for the Salary Grade for which a Participant is assigned by the Committee July 1 of the Plan Year. The Base Annual Salary on which the Actual Bonus Award will be paid shall be adjusted for the amount of any increase (or decrease) granted a Participant within the Participant's designated Salary Grade during the Plan Year. Such adjustment shall be made by the weighed average of the Base Salary for the period comprising the number of months in the Plan Year at the rate in effect on July 1 and the number of months at the rate in effect subsequent to such increase (or decrease) or increases or decreases if more than one during the Plan Year. 2.4 "Board of Directors" means the Board of Directors of the Corporation as constituted from time to time. 2.5 "Chairman" means the Chairman of the Board of Directors of the Corporation. 2.6 "Committee" means the Compensation Committee of the Board of Directors charged with administering the Plan. 2.7 "Consolidated Balance Sheet" means the balance sheet of the Corporation and its subsidiaries prepared on a consolidated basis in accordance with generally accepted accounting practices. 2.8 "Consolidated Income Statement" of the Corporation means the income statement of the Corporation and its subsidiaries prepared on a 2 consolidated basis in accordance with generally accepted accounting practices. 2.9 "Corporate Strategic Goals" means the written and weighted Strategic Goals of the Corporation for each Group A Participant approved by the Committee for the Plan Year. 2.10 "Corporation" or "Company" means Thiokol Corporation and its subsidiaries. 2.11 "Corporation Performance Goals" means the performance goals set by the Committee for Group A Participants comprised of two components: (i) the Earnings Per Share Goal and (ii) the Corporate Strategic Goals. 2.12 "Division" means a distinct measurable profit center of the Corporation or any subsidiary, division or a branch, domestic or foreign, of the Corporation, designated by the Committee as a division for the purposes of this Plan and may include the consolidation of business units. 2.13 "Division Net Profit" means the net pre-tax profit of the Division net of all year-end adjustments included in the Consolidate Income Statement of the Corporation for the Plan Year. 2.14 "Division Net Profit Goal" means the division net profit goal set by the Committee at the beginning of the Plan Year on which the Target Opportunity is based. 2.15 "Division Performance Goals" means the performance goals set by the Committee for Group C Participants comprised of three components: (i) the Operating Unit Net Profit Goal, (ii) Division Net Profit Goal, and (iii) the Division Strategic Goals. 3 2.16 "Division Strategic Goals" means the written and weighted Strategic Goals of the Division of the Corporation for each Group C Participant approved by the Committee for the Plan Year. 2.17 "Earnings Per Share" means the earnings per share shown on the Corporation's Consolidated Statement of Income at the end of the Plan Year. 2.18 "Earnings Per Share Goal" means the Earnings Per Share Goal set by the Committee at the beginning of the Plan Year on which the Target Bonus Opportunity is based. 2.19 "Group A Participant" means those persons designated by the Committee for the Plan Year to be Group A Participants. 2.20 "Group B Participant" means those persons designated by the Committee for the Plan Year to be Group B Participants. 2.21 "Group C Participant" means those persons designated by the Committee for the Plan Year to be Group C Participants. 2.22 "Operating Unit" means a distinct measurable profit center of the Corporation or any subsidiary, division, or a branch, domestic or foreign, of the Corporation designated by the Committee as an operating unit for the purposes of this Plan and may include the consolidation of business units. 2.23 "Operating Unit Net Profit" means the net pre-tax profit of the Operating Unit net of all year-end adjustments included in the Consolidated Income Statement of the Corporation for the Plan Year. 4 2.24 "Operating Unit Net Profit Goal" means the Operating Unit Net Profit set by the Committee at the beginning of the Plan Year on which the Target Bonus Opportunity is based. 2.25 "Operating Unit Performance Goals" means the performance goals set by the Committee for Group B Participants comprised of three components (i) the Earnings Per Share Goal, (ii) Operating Unit Net Profit Goal and (iii) the Operating Unit Strategic Goal. 2.26 "Operating Unit Strategic Goals" means the written and weighted Strategic Goals of the Operating Unit for each Group B Participant approved by the Committee for the Plan Year. 2.27 "Participant" means any person, selected by the Committee for participation in this Plan, as either a Group A Participant, a Group B Participant, a Group C Participant or a Special Participant and who has agreed to participate in this Plan as provided in Section 3, hereof. 2.28 "Performance Goals" means the Corporation Performance Goals, Division Performance Goals and Operating Unit Performance Goals set by the Committee as the performance goals to be achieved for the Plan Year. 2.29 "Plan" means the Thiokol Corporation Key Executive Bonus Plan. The first Plan shall be effective for the Corporation's fiscal year beginning July 1, 1997. 2.30 "Plan Year" means the fiscal year of the Corporation July 1 through June 30. 5 2.31 "Salary Grade" means the salary classification to which a Participant is assigned by the Committee. 2.32 "Special Participant" means an individual designated as a special participant by the Committee to receive a discretionary bonus as set forth in Section 7 hereof. 2.33 "Strategic Goals" means the Corporate Strategic Goals, Division Strategic Goals and Operating Unit Strategic Goals. The Strategic Goals are the strategic goals set forth in writing for each Participant at the beginning of the Plan Year approved by the Committee defining the Strategic Goals and direction of the Corporation for each Group A Participant, the Operating Unit for each Group B Participant and Division for each Group C Participant and the specific goals to be achieved by each such Participant. Each of such Strategic Goals, which may be either a financial or qualitative goal or a combination thereof for each such Participant, shall be assigned a weight such as to rank it's relative importance in relation to the other Strategic Goals and the sum total of the weights for all such goals shall equal one hundred (100). In the event any such goals requires more than twelve months to complete, a written measurable criteria shall be included in each of such goals against which performance results towards achieving such goals can be measured for the Plan Year. At the end of the Plan Year the Committee shall review the Strategic Goals achieved in relationship to these Strategic Goals set at the beginning of the Plan Year and determine if each such Strategic Goal was either (i) not met; (ii) partially met; (iii) substantially met or (iv) all met as set forth in Table 7 hereof. 2.34 "Subsidiary" means a corporation, both domestic and foreign, at least eighty-five percent (85%) of the outstanding voting stock of which is owned, directly or indirectly, by the Corporation or any subsidiary of the 6 Corporation. 2.35 Target" means the percentage determined by the Participant's Salary Grade, as set forth in Table 1 in Section 4 hereof, on which the Target Bonus Opportunity is calculated. 2.36 "Target Bonus Opportunity" means the dollar value of the incentive compensation bonus opportunity awarded to each Participant at the beginning of each Plan Year based upon the Participant's Base Annual Salary, Salary Grade and corresponding Target. SECTION 3 - ELIGIBILITY FOR PARTICIPATION - ----------------------------------------- To be eligible for participation in the Plan, a person must be designated either a Group A Participant, Group B Participant, Group C Participant or Special Participant by the Committee and agree in writing to be a participant in the Plan bound by the terms and conditions hereof by executing the participant acknowledgment. Special Participants shall participate upon such terms and conditions as the Committee may designate. SECTION 4 - TARGET BONUS OPPORTUNITY - ------------------------------------ The Target Bonus Opportunity for each Participant is set at the beginning of each Plan Year and shall be based on the Salary Grade and Target expressed as a percent set forth in Table 1: 7 ============================================================================== TABLE 1 TARGET BONUS OPPORTUNITY ============================================================================== SALARY GRADE TARGET - ------------------------------------------------------------------------------ 7 70% - ------------------------------------------------------------------------------ 6 55% - ------------------------------------------------------------------------------ 5 50% - ------------------------------------------------------------------------------ 4 40% - ------------------------------------------------------------------------------ 3 30% - ------------------------------------------------------------------------------ The Target Bonus Opportunity shall equal the amount of the Participant's Base Annual Salary multiplied by the corresponding Target, expressed as a percent set forth Opposite the Participant's Salary Grade shown in Table 1. The Target Bonus Opportunity is calculated by the following formula: Target Bonus Opportunity = Base Annual Salary X Target(1) SECTION 5 - SETTING THE PERFORMANCE GOALS - ----------------------------------------- At the beginning of the Plan Year, the Committee shall set the Performance Goals consisting of the Corporate Performance Goals for Group A Participants; the Operating Unit Goals for Group B Participants; and the Division Goals for Group C Participants. __________________________________________ (1) Target expressed as a percent based on Participant's Salary Grade-Table 1. 8 SECTION 6 - CALCULATION OF THE ACTUAL BONUS AWARD - ------------------------------------------------- The Actual Bonus Award that may be earned by a Participant for the Plan Year is expressed as a percentage of the Target Bonus Opportunity based on the Actual Performance Results achieved for the Plan Year. The Actual Bonus Award is calculated as hereinafter described. Group A Participants: - --------------------- For Group A Participants, the amount of the Actual Bonus Award that may be earned shall be based on an attainment of the Earnings Per Share Goals and Participant Strategic Goals expressed as a percentage of the Participant's Target Bonus Opportunity in Table 2 and Table 7. The value of the Actual Bonus Award Earned by Group A Participants is defined by the following formula: 9 EARNINGS PER SHARE ------------------ LINE A Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned =$ Award as an Actual Bonus Award from Table 2 PLUS OR MINUS ------------- CORPORATE STRATEGIC GOALS --------------- LINE B Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned =$ Award as an Actual Bonus Award from Table 7 -------- EQUALS ------ Total Value of Actual Bonus Award (Line A +(-) Line B) = $ Award 10 ============================================================================== TABLE 2 GROUP A PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== Actual EPS Achieved measured against Percentage of Target Bonus Opportunity EPS Goal which may be earned as an Actual Bonus Award - ------------------------------------------------------------------------------ Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 35% - ------------------------------------------------------------------------------ 95% of Goal 67.5% - ------------------------------------------------------------------------------ 100% of Goal 100% - ------------------------------------------------------------------------------ 105% of Goal 133% - ------------------------------------------------------------------------------ 110% of Goal 167% - ------------------------------------------------------------------------------ 115% of Goal 200% - ------------------------------------------------------------------------------ Above 115% of Goal 200% - ------------------------------------------------------------------------------ For performance results between the EPS rates shown, linear interpolation set forth in Exhibit A will be used to compute the Actual Bonus Award. ============================================================================== Group B Participants: For Group B Participants, the amount of the Actual Bonus Award that may be earned shall be based on attainment of the Earnings Per Share Performance Goal, Operating Unit Net Profit Performance Goal, and Operating Strategic Goal expressed as a percentage of the Participant's Target Bonus Opportunity in Table 3, Table 4 and Table 7. The value of the Actual Bonus Award Earned by Group B Participants is defined by the following formula: 11 EARNINGS PER SHARE ------------------ LINE A Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $Award as an Actual Bonus Award from Table 3 PLUS ---- OPERATING UNIT NET PROFIT LINE B Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $ Award as an Actual Bonus Award from Table 4 PLUS OR MINUS ------------- OPERATING UNIT STRATEGIC GOALS --------------- LINE C Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $ Award as an Actual Bonus Award from Table 7 -------- EQUALS ------ Total Value of Actual Bonus Award (Line A + Line B +(-) Line C) = $ Award 12 ============================================================================== TABLE 3 GROUP B PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== Actual EPS Achieved measured Percentage of Target Bonus Opportunity against EPS Goal which may be earned as an Actual Bonus Award - ------------------------------------------------------------------------------ Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 10% - ------------------------------------------------------------------------------ 95% of Goal 17.5% - ------------------------------------------------------------------------------ 100% of Goal 25% - ------------------------------------------------------------------------------ 105% of Goal 33% - ------------------------------------------------------------------------------ 110% of Goal 42% - ------------------------------------------------------------------------------ 115% of Goal 50% - ------------------------------------------------------------------------------ Above 115% of Goal 50% - ------------------------------------------------------------------------------ For performance results between the EPS rates shown, linear interpolation set forth in Exhibit A-1 will be used to compute the Actual Bonus Award. ============================================================================== 13 ============================================================================== TABLE 4 GROUP B PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== Actual Operating Unit Net Percentage of Target Bonus Profit Achieved measured Opportunity which may be earned against Operating Unit as an Actual Bonus Award Net Profit Goal - ------------------------------------------------------------------------------ Below 90% of Goal 0% ----------------------------------------------------------------------------- 90% of Goal 25% - ------------------------------------------------------------------------------ 95% of Goal 50% - ------------------------------------------------------------------------------ 100% of Goal 75% - ------------------------------------------------------------------------------ 105% of Goal 100% ----------------------------------------------------------------------------- 110% of Goal 125% - ------------------------------------------------------------------------------ 115% of Goal 150% - ------------------------------------------------------------------------------ Above 115% of Goal 150% ----------------------------------------------------------------------------- For performance results between the Operating Unit Net Profit rates shown, linear interpolation set forth in Exhibit A-2 will be used to compute the Actual Bonus Award. ============================================================================== Group C Participants: For Group C Participants, the amount of the Actual Bonus Award that may be earned shall be based on attainment of the Operating Unit Net Profit Performance Goal, Division Net Profit Performance Goal and Participant's Strategic Goals expressed as a percentage of the Participant's Target Bonus Opportunity in Table 5, Table 6 and Table 7. The value of the Actual Bonus Award Earned by Group C Participants is defined by the following formula: 14 OPERATING UNIT NET PROFIT ------------------------- LINE A Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $ Award as an Actual Bonus Award from Table 5 PLUS ---- DIVISION NET PROFIT ---------- LINE B Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $ Award as an Actual Bonus Award from Table 6 PLUS OR MINUS ------------- DIVISION STRATEGIC GOALS --------------- LINE C Percent of Target Bonus Target Bonus Opportunity X Opportunity which may be earned = $ Award as an Actual Bonus Award from Table 7 -------- EQUALS ------ Total Value of Actual Bonus Award (Line A + Line B +(-) Line C) = $ Award 15 ============================================================================== TABLE 5 GROUP C PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== Actual Operating Unit Net Percentage of Target Bonus Profit Achieved measured against Opportunity which may be earned Operating Unit Net Profit Goal as an Actual Bonus Award - ------------------------------------------------------------------------------ Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 10% - ------------------------------------------------------------------------------ 95% of Goal 17.5% - ------------------------------------------------------------------------------ 100% of Goal 25% - ------------------------------------------------------------------------------ 105 % of Goal 33% - ------------------------------------------------------------------------------ 110% of Goal 42% - ------------------------------------------------------------------------------ 115% of Goal 50% - ------------------------------------------------------------------------------ Above 115% of Goal 50% ============================================================================== For performance results between the Operating Unit Net Profit rates shown, linear interpolation set forth in Exhibit A-3 will be used to compute the Actual Bonus Award. ============================================================================== 16 ============================================================================== TABLE 6 GROUP C PARTICIPANTS DIVISION NET PROFIT PERFORMANCE GOAL ============================================================================== Actual Operating Unit Net Profit Percentage of Target Bonus Achieved measured against Operating Opportunity which may be earned Unit Net Profit Goal as an actual Bonus Award ============================================================================== Below 90% of Goal 0% - ------------------------------------------------------------------------------ 90% of Goal 25% - ------------------------------------------------------------------------------ 95% of Goal 50% - ------------------------------------------------------------------------------ 100% of Goal 75% - ------------------------------------------------------------------------------ 105% of Goal 100% - ------------------------------------------------------------------------------ 110% of Goal 125% - ------------------------------------------------------------------------------ 115% of Goal 150% - ------------------------------------------------------------------------------ Above 115% of Goal 150% ============================================================================== For performance results between the Division Net Profit rates shown, linear interpolation set forth in Exhibit A-4 will be used to compute the Actual Bonus Award. ============================================================================== 17 Strategic Goals: For Group A Participants, Group B Participants and Group C Participants, the Actual Bonus Award that may be earned by Participants based on attainment of Strategic goals is set forth in Table 7. Either the attainment or failure to attain the Strategic Goals, as the case may be, is independent and separate from the Actual Bonus Award paid for the attainment of the Earnings Per Share Goal for Group A Participants; attainment of the Earnings Per Share and Operating Unit Net Profit Goal for Group B Participants; and attainment of the Operating Unit Net Profit Goal and Division Net Profit Goal for Group C Participants. No Actual Bonus Award will be earned is Strategic Goals are not met. ============================================================================== TABLE 7 GROUP A, GROUP B AND GROUP C PARTICIPANTS STRATEGIC GOALS ============================================================================== Actual Strategic Goals Achieved Percentage of Target Bonus measured against Strategic Goals Set Opportunity which may be earned as an Actual Bonus Award - ------------------------------------------------------------------------------ Goals Not Met -200%(1) - ----------------------------------------------------------------------------- Goals Partially met Minus 50% - 14% - ------------------------------------------------------------------------------ Goals Substantially Met 15% - 20% - ------------------------------------------------------------------------------ Goals All Met 21% - 25% - ------------------------------------------------------------------------------ The Committee shall determine the Percentage of the Target Bonus Opportunity which may be earned as an Actual Bonus Award within each goal range achieved. ============================================================================== (1) No Bonus will be paid when goals are not met. 18 Maximum Bonus Award: The Maximum Actual Bonus Award paid from this Plan is 200% of the Target Bonus Opportunity. No Bonus Award: No Bonus Award will be paid from the Plan if Strategic Goals are not met. SECTION 7 - SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS - -------------------------------------------------------- 7.0 The Committee may designate Special Participants for Plan participation on terms and conditions as may be determined from time to time by the Committee. Such individuals designated as Special Participants shall be Participants upon agreeing in writing to the terms and conditions set by the Committee for such participation. 7.1 The Committee may pay a discretionary bonus to any such individuals or group of individuals on such terms and conditions as the Committee may determine. SECTION 8 - COMPENSATION NATURE OF THE TARGET BONUS OPPORTUNITY - --------------------------------------------------------------- AND ACTUAL BONUS AWARD - ---------------------- The Target Bonus Opportunity granted to a Participant at the beginning of the Plan Year as incentive compensation and payable to the Participant at the end of the Plan Year in the amount of the Actual Bonus Award earned is a binding compensation obligation of the Corporation to the Participant for the Plan Year in which the Actual Bonus Award is earned. 19 SECTION 9 - METHOD OF PAYMENT OF ACTUAL BONUS AWARD AND TAX - ----------------------------------------------------------- WITHHOLDING - ----------- The amount of the Actual Bonus Award earned by a Participant shall be paid by the Corporation to the Participant in cash within sixty (60) days subsequent to the end of the Plan Year. The Corporation shall withhold all applicable federal, state and local income taxes and other amounts required by law to be withheld for compensation. SECTION 10 - TERMINATION OF EMPLOYMENT, CROSS-TRANSFER, - ------------------------------------------------------- PROMOTION AND DEMOTION - ---------------------- 10.1 In the event a Participant terminates employment either voluntarily or involuntarily including retirement under the terms of the Corporation's retirement program, death or permanent disability prior to January 1 of the Plan Year, the Participant shall receive no Actual Bonus Award. 10.2 In the event a Participant terminates employment either voluntarily or involuntarily (other than for Cause as to hereinafter defined) including by retirement under the terms of the Corporation's retirement program, death or permanent disability, subsequent to January 1 of the Plan Year, the Participant shall be eligible to receive a pro rata Actual Bonus Award based on the number of months completed in the Plan Year. Such pro rata payment, if any, shall be made in the manner set forth in Section 9. A participant who is terminated during the Plan Year for Cause shall receive no Actual Bonus Award. 10.3 For the purposes of this Plan, (i) a Participant shall be considered permanently disabled on the date that such Participant qualifies for long- term disability payments under the Corporation's long-term disability program, and (ii) "Cause" means (a) a material breach by the Participant of 20 his job duties and obligations (other than as the result of an incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Participant's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Corporation and which is not remedied in a reasonable period of time after receipt of notice from the Corporation or (b) the conviction of the Participant of a felony involving moral turpitude. 10.4 In the event a Participant is cross-transferred to the Corporation, to another Division or to another Operating Unit ("Location") at the same Salary Grade, the Participant will continue participating in the Plan, but the Actual Bonus Award will be pro rated on the time and performance results achieved at each Location. The Participant will become an active Participant in the corresponding Plan for the Corporation, Division or the Operating Unit to which the Participant is transferred at the beginning of the next Plan if selected by the Committee as a Participant. 10.5 In the event a Participant is promoted to a new Salary Grade, the Participant's participation in the Plan will continue until the end of the Plan Year and will be eligible to receive an Actual Bonus Award as provided by the terms of the Plan. The Participant will become an active Participant at the new Salary Grade in the corresponding Plan for the Corporation, Division or Operating Unit to which the Participant is promoted at the beginning of the next Plan Year if selected by the Committee. 10.6 In the event of a demotion to a lower Salary Grade the Participant will continue participating in such Plan until the end of the Plan Year and receive an Actual Bonus Award as provided by the terms of the Plan. The Participant will become an active Participant in such Plan in effect at the new Salary Grade for the Corporation, Division or Operating Unit as a result of such 21 demotion at the beginning of the next Plan Year if selected by the Committee as a Participant. SECTION 11 - CHANGE OF CONTROL - ------------------------------ In the event of a Change of Control of the Company as hereinafter defined below in this Section 11, not withstanding any other provision of this Plan to the contrary the greater of either the Target Bonus Award or Actual Bonus Award, for the Plan in which a Participant participates, shall become irrevocably due and payable to Participants on the date of such Change of Control. Payment shall be made to Participants not later than thirty days after the date of such change in control otherwise made pursuant to the terms of a Change of Control Agreement between the Company and the Participant. In the event there is a conflict between this Plan and the terms and conditions of a participant's Change in Control Agreement with the Corporation, as the case may be, the terms and conditions of the Change of Control Agreement shall govern to the extent there is a conflict with the terms of the Plan. For the purposes of this agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"): provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the 22 Company or (iv) any acquisition by a corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 11 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) Approval by the stockholders of the Company of a reorganization, merger, consolidation in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, or the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no person (excluding the Company, an employee benefit plan (or 23 related trust) of the Company or such corporation resulting from such reorganization, merger or consolidation and any person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly, or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (13) no person (excluding the Company and any employee benefit plan (related trust) of the Company or such corporation and any person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 15% or more of the Outstanding 24 Company Common Stock or Outstanding Company Voting Securities, as the case may be, beneficially owns, directly or indirectly, 15% or more of, respectively the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) a least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or disposition of assets of the Company. SECTION 12 - ADMINISTRATION AND MODIFICATION OF THE PLAN - -------------------------------------------------------- 12.1 The Plan shall be administered by the Committee. The Committee shall have plenary authority, subject to the express provisions hereof, to resolve any questions arising under the Plan; to correct any defect or supply an omission or reconcile any inconsistency; to establish amend and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration and continued successful operation of the Plan. The Committee will have discretion at any time, or from time to time, to accelerate the time at which and the extent to which the Actual Bonus Award may be payable to Participants. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee shall act only by a majority of its members then in office and its actions shall be recorded in minutes of the Committee meetings which shall be conclusive of all such actions taken. 12.2 The Committee shall have the right but not an obligation to modify the Plan and to adjust Performance Goals including but not limited to Earnings Per Share to reflect non-recurring financial changes or changes in business structure or organization including by way of illustration and not as a limitation changes in accounting methods or requirements; accounting adjustments not in the usual and ordinary course of business resulting in 25 non-recurring charges or additions in income, assets, liabilities or stockholders equity; tax rates and Corporate reorganizations including: recapitalization, mergers, acquisitions, divestitures and spin-offs. 12.3 Unless otherwise amended by resolution of the Committee, the Chairman shall have the power to act on behalf of the Committee with respect to individuals Salary Grade 3 and below under this Plan to: (i) select Participants and designate such Participants as Group A, Group B and Group C Participants; (ii) set the Salary Grade and Base Annual Salary for each such Participant; (iii) set the Performance Goals; (iv) Adjust Target Bonus Opportunities; and (v) Assess Strategic Goals achievement. SECTION 13 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF - ------------------------------------------------------------- PLAN - ---- 13.1 Subject to the provisions of subsection 13.2 below, the Compensation Committee shall have the right at any time, from time to time, without notice to Participants to suspend, discontinue or amend this Plan in any respect whatsoever, except that administration of the Plan cannot be removed from the Compensation Committee. 13.2 Upon termination or discontinuance of the Plan, such Participants shall receive a pro rata amount of the Actual Bonus Award for the Plan Year based on the number of months completed in the Plan Year as of the date of the termination. Payment of such amount shall be in the manner provided in the Plan. 13.3 This Plan is an annual Plan and there is no obligation for the Committee or the Board of Directors to renew such Plan each Plan Year. 26 SECTION 14 - PLAN NOT A CONTRACT OF EMPLOYMENT - ---------------------------------------------- Neither this Plan, nor participation in it, shall be construed in any manner as a contract of employment either expressed or implied. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Corporation for any period of time or to continue a Participant's present or any other rate of compensation. No employee shall have a right to be selected as a Participant, or having been so selected, to be selected again as a Participant. SECTION 15 - NON-ASSIGNABILITY OF RIGHTS - ---------------------------------------- No Participant's interest in the Plan shall be sold, assigned, transferred, hypothecated, pledged, or otherwise disposed of by a Participant prior to the actual receipt of such payment except by Will, the law of decent and distribution or a qualified domestic relations order as defined by the Employee Retirement Income Security Act of 1974. Participants may name, from time to time, beneficiaries (who may be named contingently or successively) to whom benefits the Plan will be paid in the event of their death before they receive any or all such benefit. Each designation will revoke all prior designations by the same Participant, shall be in the form prescribed by the Committee, and will be effective only when filed by the Participant with the Committee during the Participant's life time. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. Except as otherwise permitted by action taken by the Committee, the rights of any Participant under the Plan will immediately terminate if such Participant: (i) attempts to, or does sell or assign, transfer, hypothecate, pledge or otherwise dispose of any right hereunder prior to the right to receive payment except as permitted above or (i) becomes insolvent or bankrupt, or becomes involved in any matter which in the opinion of the Committee might result in a Participant's rights under the Plan being taken to satisfy the Participant's debts or liabilities. 27 IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be signed by its duly appointed officers and its corporate seal to be hereunto affixed as of this 16th day of June 1997. /s/ James R. Wilson By:______________________________ Chairman of the Board, President and Chief Executive Officer ATTESTED: --Seal-- /s/ Edwin M. North By:________________________________ Corporate Secretary 28 ============================================================================== THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN EXHIBIT A LINEAR INTERPOLATION CHART GROUP A PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE EARNED AS AN ACTUAL BONUS AWARD - ------------------------------------------------------------------------------ 90.0% 35.0% - ------------------------------------------------------------------------------ 91.1% 42.2% - ------------------------------------------------------------------------------ 92.0% 48.0% - ------------------------------------------------------------------------------ 94.0% 61.0% - ------------------------------------------------------------------------------ 95.0% 67.5% - ------------------------------------------------------------------------------ 96.0% 74.0% - ------------------------------------------------------------------------------ 97.0% 80.5% - ------------------------------------------------------------------------------ 98.0% 87.0% - ------------------------------------------------------------------------------ 99.0% 93.5% - ------------------------------------------------------------------------------ 100.0% 100.0% - ------------------------------------------------------------------------------ 101.0% 106.7% - ------------------------------------------------------------------------------ 102.0% 113.3% - ------------------------------------------------------------------------------ 103.0% 120.0% - ------------------------------------------------------------------------------ 104.0% 126.7% - ------------------------------------------------------------------------------ 105.0% 133.3% - ------------------------------------------------------------------------------ 106.0% 140.0% - ------------------------------------------------------------------------------ 107.0% 146.7% - ------------------------------------------------------------------------------ 108.0% 153.4% - ------------------------------------------------------------------------------ 109.0% 160.0% - ------------------------------------------------------------------------------ 110.0% 166.7% - ------------------------------------------------------------------------------ 111.0% 173.4% - ------------------------------------------------------------------------------ 112.0% 180.0% - ------------------------------------------------------------------------------ 113.0% 186.7% - ------------------------------------------------------------------------------ 114.0% 193.4% - ------------------------------------------------------------------------------ 115.0% 200.0% ============================================================================== 29 THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN EXHIBIT A-1 LINEAR INTERPOLATION CHART GROUP B PARTICIPANTS EARNINGS PER SHARE PERFORMANCE GOAL ============================================================================== ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE EARNED AS AN ACTUAL BONUS AWARD ============================================================================== 90.0% 10.0% - ------------------------------------------------------------------------------ 91.0% 11.5% - ------------------------------------------------------------------------------ 92.0% 13.0% - ------------------------------------------------------------------------------ 93.0% 14.5% - ------------------------------------------------------------------------------ 94.0% 16.0% - ------------------------------------------------------------------------------ 95.0% 17.5% - ------------------------------------------------------------------------------ 96.0% 19.0% - ------------------------------------------------------------------------------ 97.0% 20.5% - ------------------------------------------------------------------------------ 98.0% 22.0% - ------------------------------------------------------------------------------ 99.0% 23.5% - ------------------------------------------------------------------------------ 100.0% 25.0% - ------------------------------------------------------------------------------ 101.0% 26.7% - ------------------------------------------------------------------------------ 102.0% 28.3% - ------------------------------------------------------------------------------ 103.0% 30.0% - ------------------------------------------------------------------------------ 104.0% 31.7% - ------------------------------------------------------------------------------ 105.0% 33.3% - ------------------------------------------------------------------------------ 106.0% 35.0% - ------------------------------------------------------------------------------ 107.0% 36.7% - ------------------------------------------------------------------------------ 108.0% 38.3% - ------------------------------------------------------------------------------ 109.0% 40.0% - ------------------------------------------------------------------------------ 110.0% 41.7% - ------------------------------------------------------------------------------ 111.0% 43.3% - ------------------------------------------------------------------------------ 112.0% 45.0% - ------------------------------------------------------------------------------ 113.0% 46.7% - ------------------------------------------------------------------------------ 114.0% 48.3% - ------------------------------------------------------------------------------ 115.0% 50.0% ============================================================================== 30 ============================================================================== THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN EXHIBIT A-2 LINEAR INTERPOLATION CHART GROUP B PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS ACHIEVING MEASURED AGAINST OPPORTUNITY WHICH MAY BE OPERATING UNIT NET PROFIT GOAL EARNED AS AN ACTUAL BONUS AWARD - ------------------------------------------------------------------------------ 90.0% 25.0% - ------------------------------------------------------------------------------ 91.0% 30.0% - ------------------------------------------------------------------------------ 92.0% 35.0% - ------------------------------------------------------------------------------ 93.0% 40.0% - ------------------------------------------------------------------------------ 94.0% 45.0% - ------------------------------------------------------------------------------ 95.0% 50.0% - ------------------------------------------------------------------------------ 96.0% 55.0% - ------------------------------------------------------------------------------ 97.0% 60.0% - ------------------------------------------------------------------------------ 98.0% 65.0% - ------------------------------------------------------------------------------ 99.0% 70.0% - ------------------------------------------------------------------------------ 100.0% 75.0% - ------------------------------------------------------------------------------ 101.0% 80.0% - ------------------------------------------------------------------------------ 102.0% 85.0% - ------------------------------------------------------------------------------ 103.0% 90.0% - ------------------------------------------------------------------------------ 104.0% 95.0% - ------------------------------------------------------------------------------ 105.0% 100.0% - ------------------------------------------------------------------------------ 106.0% 105.0% - ------------------------------------------------------------------------------ 107.0% 110.0% - ------------------------------------------------------------------------------ 108.0% 115.0% - ------------------------------------------------------------------------------ 109.0% 120.0% - ------------------------------------------------------------------------------ 110.0% 125.0% - ------------------------------------------------------------------------------ 111.0% 130.0% - ------------------------------------------------------------------------------ 112.0% 135.0% - ------------------------------------------------------------------------------ 113.0% 140.0% - ------------------------------------------------------------------------------ 114.0% 145.0% - ------------------------------------------------------------------------------ 115.0% 150.0% ============================================================================== 31 ============================================================================== THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN EXHIBIT A-3 LINEAR INTERPOLATION CHART GROUP C PARTICIPANTS OPERATING UNIT NET PROFIT PERFORMANCE GOAL ============================================================================== ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS ACHIEVED MEASURED AGAINST OPERATING OPPORTUNITY WHICH MAY BE UNIT NET GOAL EARNED AS AN ACTUAL BONUS AWARD - ------------------------------------------------------------------------------ 90.0% 10.0% - ------------------------------------------------------------------------------ 91.0% 11.5% - ------------------------------------------------------------------------------ 92.0% 13.0% - ------------------------------------------------------------------------------ 93.0% 14.5% - ------------------------------------------------------------------------------ 94.0% 16.0% - ------------------------------------------------------------------------------ 95.0% 17.5% - ------------------------------------------------------------------------------ 96.0% 19.0% - ------------------------------------------------------------------------------ 97.0% 20.5% - ------------------------------------------------------------------------------ 98.0% 22.0% - ------------------------------------------------------------------------------ 99.0% 23.5% - ------------------------------------------------------------------------------ 100.0% 25.0% - ------------------------------------------------------------------------------ 101.0% 26.7% - ------------------------------------------------------------------------------ 102.0% 28.3% - ------------------------------------------------------------------------------ 103.0% 30.0% - ------------------------------------------------------------------------------ 104.0% 31.7% - ------------------------------------------------------------------------------ 105.0% 33.3% - ------------------------------------------------------------------------------ 106.0% 35.0% - ------------------------------------------------------------------------------ 107.0% 36.7% - ------------------------------------------------------------------------------ 108.0% 38.3% - ------------------------------------------------------------------------------ 109.0% 40.0% - ------------------------------------------------------------------------------ 110.0% 41.7% - ------------------------------------------------------------------------------ 111.0% 43.3% - ------------------------------------------------------------------------------ 112.0% 45.0% - ------------------------------------------------------------------------------ 113.0% 46.7% - ------------------------------------------------------------------------------ 114.0% 48.3% - ------------------------------------------------------------------------------ 115.0% 50.0% ============================================================================== 32 ============================================================================== THIOKOL CORPORATION KEY EXECUTIVE BONUS PLAN EXHIBIT A-4 LINEAR INTERPOLATION CHART GROUP C PARTICIPANTS DIVISION NET PROFIT PERFORMANCE GOAL ============================================================================== ACTUAL NET PROFIT ACHIEVED PERCENTAGE OF TARGET BONUS MEASURED AGAINST DIVISION NET OPPORTUNITY WHICH MAY BE PRE-TAX PROFIT GOALS EARNED AS AN ACTUAL BONUS AWARD - ------------------------------------------------------------------------------ 90.0% 25.0% - ------------------------------------------------------------------------------ 91.0% 30.0% - ------------------------------------------------------------------------------ 92.0% 35.0% - ------------------------------------------------------------------------------ 93.0% 40.0% - ------------------------------------------------------------------------------ 94.0% 45.0% - ------------------------------------------------------------------------------ 95.0% 50.0% - ------------------------------------------------------------------------------ 96.0% 55.0% - ------------------------------------------------------------------------------ 97.0% 60.0% - ------------------------------------------------------------------------------ 98.0% 65.0% - ------------------------------------------------------------------------------ 99.0% 70.0% - ------------------------------------------------------------------------------ 100.0% 75.0% - ------------------------------------------------------------------------------ 101.0% 80.0% - ------------------------------------------------------------------------------ 102.0% 85.0% - ------------------------------------------------------------------------------ 103.0% 90.0% - ------------------------------------------------------------------------------ 104.0% 95.0% - ------------------------------------------------------------------------------ 105.0% 100.0% - ------------------------------------------------------------------------------ 106.0% 105.0% - ------------------------------------------------------------------------------ 107.0% 110.0% - ------------------------------------------------------------------------------ 108.0% 115.0% - ------------------------------------------------------------------------------ 109.0% 120.0% - ------------------------------------------------------------------------------ 110.0% 125.0% - ------------------------------------------------------------------------------ 111.0% 130.0% - ------------------------------------------------------------------------------ 112.0% 135.0% - ------------------------------------------------------------------------------ 113.0% 140.0% - ------------------------------------------------------------------------------ 114.0% 145.0% - ------------------------------------------------------------------------------ 115.0% 150.0% ============================================================================== 33 EX-10 6 THIOKOL CORPORATION KEY EXECUTIVE LONG-TERM INCENTIVE PLAN AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1997 TABLE OF CONTENTS SECTION PAGE - ------- ---- 1 - PURPOSE OF PLAN 1 2 - DEFINITIONS 2 3 - ELIGIBILITY FOR PARTICIPATION 9 4 - TARGET INCENTIVE AWARD 9 5 - SETTING THE BONUS OPPORTUNITIES AND PERFORMANCE GOALS 10 6 - CALCULATION OF THE VALUE OF THE ACTUAL INCENTIVE AWARD EARNED BY PARTICIPANTS 10 7 - SPECIAL PARTICIPANTS AND GRANDFATHER PARTICIPANTS 14 8 - COMPENSATION NATURE OF THE TARGET INCENTIVE AWARD AND ACTUAL INCENTIVE AWARD 14 9 - METHOD OF PAYMENT OF THE ACTUAL INCENTIVE AWARD 15 10 - COMMON STOCK AWARD UNDER THE PLAN 15 11 - TAX WITHHOLDING FROM THE CASH AWARD AND COMMON STOCK 17 12 - TERMINATION OF EMPLOYMENT, CROSS TRANSFER, PROMOTION AND DEMOTION 18 13 - DEFERRAL OF ACTUAL INCENTIVE AWARDS 20 14 - CHANGE IN CONTROL 20 15 - ADMINISTRATION AND MODIFICATION OF THE PLAN 24 16 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF PLAN 25 17 - PLAN NOT A CONTRACT OF EMPLOYMENT 26 18 - NON-ASSIGNABILITY OF RIGHTS 26 THIOKOL CORPORATION ------------------- KEY EXECUTIVE LONG-TERM INCENTIVE PLAN -------------------------------------- SECTION 1 - PURPOSE OF PLAN - --------------------------- The Thiokol Corporation Key Executive Long-Term Incentive Plan is principally designed to provide long-term compensation incentives for selected key executive officers and employees of Thiokol Corporation and its subsidiaries who have substantial control and responsibility for the overall profitability, rate of return and growth of the Corporation. The Plan was adopted by the Board of Directors June 18, 1992 and was amended and restated June 16, 1997. The plan provides for bonus awards in the form of cash and/or grants of the Corporation's stock with the following objectives: (i) Create incentives for executive actions which enhance long- term shareholder value; (ii) Promote executive decisions compatible with longer-term strategic and performance goals; (iii) Provide executive compensation at levels sufficient to attract and retain highly qualified senior executives; and (iv) Encourage ownership by executives of the Corporation's Common Stock. 1 SECTION 2 - DEFINITIONS - ----------------------- 2.0 As used herein, the terms below shall have the following meanings. Any of these terms, unless the context otherwise requires, may be used in the singular or plural depending upon the reference. 2.1 "Accounts Payable" means the accounts payable net of reserves shown on the books of the Division. 2.2 "Accrued Liabilities" means the accrued liabilities net of reserves shown on the books of the Division. 2.3 "Actual Incentive Award" means the actual bonus award earned (50% Cash and 50% in shares of the Company's Common Stock) by a Participant as long-term incentive compensation for each Plan in which a Participant participants calculated in the manner described in Section 6 hereof. 2.4 "Actual Performance Results" means the actual Earnings Per Share and Return on Total Capital results achieved by the Corporation during each year of the Performance Period and the actual Growth in Net Pre-Tax Profit and Return on Total Investment achieved by each Division during each year of the Performance Period. 2.5 "Base Annual Salary" means the Participant's base annualized salary for the Participant's Salary Grade in effect on each respective July 1, and shall not include any pending salary increases or future salary increases during a Plan's Performance Period. 2.6 "Board of Directors" means the Board of Directors of the Corporation as constituted from time to time. 2 2.7 "Bonus Opportunity" means the Threshold Bonus Opportunity, Target Bonus Opportunity and Maximum Bonus Opportunity set by the Committee in relationship to the Performance Goals for each year of the Performance Period. 2.8 "Committee" means the Compensation Committee of the Board of Directors charged with administering the Plan. The Compensation Committee shall be comprised of two (2) or more disinterested directors of the Corporation, as required by Rule 16b-3(c)(1), under Section 16 of the Securities Exchange Act of 1934, appointed from time to time by the Board of Directors, who are not, and were not at any time within one (1) year prior to appointment, eligible for selection as Participants in the Plan or any other program or plan of the Corporation or any of its affiliates providing for the allocation or granting thereunder of stock, stock options or stock appreciation rights. 2.9 "Chairman" means the Chairman of the Board of Directors of the Corporation. 2.10 "Common Stock" means the $1.00 par value common stock of the Corporation. 2.11 "Consolidated Balance Sheet" means the balance sheet of the Corporation and its subsidiaries prepared on a consolidated basis in accordance with generally accepted accounting practices. 2.12 "Consolidated Income Statement" means the income statement of the Corporation and its subsidiaries prepared on a consolidated basis in accordance with generally accepted accounting practices. 2.13 "Corporate After-Tax Net Income" means the consolidated after-tax net 3 income set forth on the Corporation's Consolidated Balance Sheet for each year of the Performance Period. 2.14 "Corporation" or "Company" means Thiokol Corporation and its subsidiaries. 2.15 "Corporation Performance Goals" means the performance goals set by the Committee for Group A Participants and are comprised of two components: (i) Earnings Per Share ("EPS") and (ii) Return on Total Capital ("ROTC") each weighted fifty percent (50%) with respect to each such goal's relative importance. 2.16 "Debt" means all debt including short-term, long-term, and capitalized lease obligations shown on the Corporation's Consolidated Balance Sheet for each year of the Performance Period. 2.17 "Division" means a distinct measurable, profit center of the Corporation or any subsidiary, division, or a branch, domestic or foreign, of the Corporation designated by the Committee as a division for the purposes of the Plan and may include the consolidation of other business units. 2.18 "Division Net Pre-Tax Profit" means the net pre-tax profit of the Division net of all year-end adjustments as reflected in the Consolidated Income Statement of the Corporation for each year of the Performance Period. 2.19 "Division Performance Goals" means the performance goals set by the Committee for Group B Participants and are comprised of two components: (i) Growth in Net Pre-Tax Profit ("GNP") and (ii) Return on Total Investment ("ROTI") each weighted fifty percent (50%) with respect to each such goal's relative importance. 4 2.20 "Earnings Per Share" means the earnings per share shown on the Corporation's Consolidated Statement of Income for each year during the Performance Period. 2.21 "Group A Participant" means those persons designated by the Committee as Group A Participants. 2.22 "Group B Participant" means those persons designated by the Committee as Group B Participants. 2.23 "Growth in Net Pre-Tax Profit" ("GNP") means the growth in Division Net Pre- Tax Profit measured from the base year beginning on June 30 of the fiscal year preceding the beginning of each Performance Period and ending June 30 of each Performance Period as set forth on Exhibit B for Group B Participants. 2.24 "Interest Expense" means the interest expense shown on the Corporation's Consolidated Statement of Income for each year of the Performance Period. 2.25 "Market Value" means the average of the high and low price of the Common Stock as reported on the New York Stock Exchange composite tape on the day such Market Value is to be determined, or if no sales were reported that day, then on the next preceding day on which there were reports of sales of Common Stock on such Exchange. 2.26 "Maximum Bonus Opportunity" means the maximum Actual Incentive Award that may be earned by a Participant based upon achievement of the maximum EPS and ROTC performance goals set forth on Exhibit A for Group A Participants and the maximum GNP and ROTI Performance Goals set forth on Exhibit B of Group B Participants. 5 2.27 "Participant" means persons, selected by the Committee for participation in this Plan, as either a Group A Participant, Group B Participant, or a Special Participant, and who has agreed to participate in this Plan as provided in Section 3, hereof. 2.28 "Performance Goals" means the Corporation Performance Goals and the Division Performance Goals set by the Committee as the respective performance goals to be achieved for each year of the Performance Period. 2.29 "Performance Period" means the three-year period for each of the Plans established hereunder, unless sooner terminated pursuant to the provisions hereof. 2.30 "Plan" or "Plans" means respectively the Thiokol Corporation Key Executive Long-Term Plan and any or all of the three-year Key Executive Long-Term Plans established by the Committee hereunder. The first Plan shall be for the period July 1, 1997 through June 30, 2000. 2.31 "Return on Total Capital" ("ROTC") means the ratio the numerator of which is the Corporate Net Income multiplied by one minus the Tax Rate plus Interest Expense multiplied by one minus the Tax Rate and the denominator of which is Stockholder Equity plus all Debt. ROTC is expressed by the following formula: ROTC =(Corporate Net Income)(1 - Tax Rate)+(Interest Expense)(1 - Tax Rate) - --------------------------------------------------------------------------- Stockholder Equity + Debt 2.32 "Return on Total Investment" ("ROTI") means the ratio the numerator of which is the Division Net Pre-Tax Profit and the denominator of which is Total Division Assets minus Accounts Payable and Accrued Liabilities, net 6 of adjustments included in the Consolidated Balance Sheet of the Corporation for each year of the Performance Period. ROTI is expressed by the following formula: ROTI = Division Net Pre-Tax Profit ------------------------------------------------------ Total Division Assets - (Accounts Payable + Accrued Liabilities) 2.33 "Salary Grade" means the salary classification to which a Participant is assigned by the Committee. 2.34 "Special Participant" means an individual designated by the Committee as a special participant to receive a bonus opportunity on such terms and conditions as the Committee determines pursuant to Section 7. 2.35 "Stockholders Equity" means the Stockholders Equity shown on the Corporation's Consolidated Balance Sheet for each year of the Performance Period. 2.36 "Subsidiary" means a corporation, both domestic and foreign, at least eighty-five percent (85%) of the outstanding voting stock of which is owned, directly or indirectly, by the Corporation or subsidiary of the Corporation. 2.37 "Target" means the percentage determined by the Participant's Salary Grade, as set forth in Table 1 in Section 4 hereof, on which the Target Incentive Award is calculated. 2.38 "Target Bonus Opportunity" means the Actual Incentive Award that may be earned by a Participant based on achievement of target EPS and ROTC performance goals set forth on Exhibit A for Group A Participants and the Target GNP and ROTI performance goals set forth on Exhibit B for Group 7 B Participants. 2.39 "Target Incentive Award" means the value (denominated 50% in Cash and 50% in shares of the Company Common Stock) of the long-term incentive compensation bonus opportunity awarded to each Participant at the beginning of each Performance Period based upon the Participant's Base Annual Salary, Salary Grade and corresponding Target at the beginning of the Performance Period. The number of shares of Company Common Stock shall be determined by dividing 50% of the dollar value of the Target Incentive Award by the Market Value of the Company's Common Stock on the date of the beginning of the Performance Period. 2.40 "Tax Rate" means the effective tax rate as set forth in the Notes to the Consolidated Financial Statements of the Corporation for each year of the Performance Period and if not in such Notes, as declared by the Committee. 2.41 "Threshold Bonus Opportunity" means the minimum Actual Incentive Award that may be earned by a Participant based on achievement of the minimum EPS and ROTC performance goals set forth on Exhibit A for Group A Participants and the minimum GNP and ROTI Performance Goals set forth on Exhibit B for Group B Participants. 2.42 "Total Division Assets" means the total assets of the Division or Subsidiary included in the Consolidated Balance Sheet of the Corporation for each year of the Performance Period. 8 SECTION 3 - ELIGIBILITY FOR PARTICIPATION - ----------------------------------------- To be eligible for participation in the Plan, a person must be designated either a Group A Participant, Group B Participant, or a Special Participant by the Committee or the Chairman, as the case may be, and agree in writing to be a participant in the Plan bound by the terms and conditions hereof by executing a participant acknowledgment. Special Participants shall participate upon such terms and conditions as the Committee may designate. SECTION 4 - TARGET INCENTIVE AWARD - ---------------------------------- The Target Incentive Award for each Participant set at the beginning of each Performance Period for each Plan shall be based on the Salary Grade and Target expressed as a percent set forth in Table 1: =========================================================================== TABLE 1 TARGET INCENTIVE AWARD =========================================================================== SALARY TARGET GRADE (PERCENT) 7 100% - --------------------------------------------------------------------------- 6 95% - --------------------------------------------------------------------------- 5 85% - --------------------------------------------------------------------------- 4 75% - --------------------------------------------------------------------------- 3 65% =========================================================================== For each Plan, the dollar amount of the Target Incentive Award (denominated as 50% in Cash and 50% in shares of Company Common Stock) shall equal the amount of the Participant's Base Annual Salary multiplied by the corresponding Target, expressed as a percent set forth opposite the Participant's Salary Grade shown in Table 1. For each Plan, the amount of the Target Incentive Award for Group A 9 Participants shall be set forth on Exhibit A and for Group B Participants set forth on Exhibit B. In its discretion, the Committee or the Chairman, as the case may be, may adjust a Participants' Target Incentive Award in a range of plus or minus twenty percent (20%). The Target Incentive Award is calculated by the following formula: Target Incentive Award = Base Salary X Target1 SECTION 5 - SETTING THE BONUS OPPORTUNITIES AND PERFORMANCE - ----------------------------------------------------------- GOALS - ----- At the beginning of the Performance Period for each Plan, the Committee shall set the Performance Goals and the Bonus Opportunity for each year of the Performance Period consisting of the Threshold Bonus Opportunity, Target Bonus Opportunity and Maximum Bonus Opportunity that must be achieved by the Actual Performance Results when measured against the Performance Goals in order for an Actual Incentive Award to be earned by a Participant. The Performance Goals and Bonus Opportunities shall be set forth on Exhibit A for Group A Participants and Exhibit B for Group B Participants. Actual Performance Results shall be recorded on Exhibit A and Exhibit B for each year of the Performance Period. SECTION 6 - CALCULATION OF THE VALUE OF THE ACTUAL INCENTIVE AWARD - ------------------------------------------------------------------ EARNED BY PARTICIPANTS - ---------------------- The Actual Incentive Award that may be earned by a Participant is expressed as an percentage of the Target Incentive Award. If the Actual Performance Results achieved by either the Corporation for Group A Participants or a Division for Group B Participants meet the Performance Goals set for the Bonus Opportunity an Actual Incentive Award may be earned. - -------------------------------- (1)Target expressed as a percent based on Participant's Salary Grade -Table 1 10 The measurement of the Actual Performance Results achieved against the Performance Goals is expressed as a percent of the Target Incentive Award that may be earned as an Actual Incentive Award for each Bonus Opportunity set forth in Table 2. =========================================================================== TABLE 2 BONUS OPPORTUNITY =========================================================================== Actual Performance Achieved Percent of Target Incentive Award measured against Performance which may be earned as an Actual Incentive Award =========================================================================== Below Threshold Bonus Opportunity 0% - --------------------------------------------------------------------------- Threshold Bonus Opportunity 25% - --------------------------------------------------------------------------- Target Bonus Opportunity 100% - --------------------------------------------------------------------------- Maximum Bonus Opportunity 200% - --------------------------------------------------------------------------- For Actual Performance Results between the threshold and maximum bonus opportunity, linear interpolation, as set forth in Exhibit C, will be used to compute the Actual Incentive Award. =========================================================================== The value of the Actual Incentive Award earned by Group A and Group B Participants is determined by the following formula: 11 GROUP A PARTICIPANTS -------------------- Earnings Per Share ("EPS") -------------------------- Line A Percent of Target Incentive Target Incentive Award X 50% X Award which may be earned = $ Award as an Actual Incentive Award from Table 2(2) Plus ---- Return on Total Capital ("ROTC") -------------------------------- Line B Percent of Target Incentive Target Incentive Award X 50% X Award which may be earned = $ Award as an Actual Incentive Award from Table 2(3) EQUALS ------------- ------ Total Value of the Actual Incentive Award Earned (Line A + Line B) = $ Award The value of the Actual Incentive Award that is paid pursuant to Section 9 hereof shall consist of 50% cash and 50% in shares of the Company's Common Stock. The number of shares of Company Common Stock shall be determined by dividing 50% of the dollar value of the Actual Incentive Award by the Market Value of the Company's Common Stock on the date of the beginning of the Performance Period. _____________________________________________ (2) Actual EPS performance results measured against the Threshold, Target and Maximum Bonus opportunity. (3) Actual ROTC perfromance results measured against the Threshold, Target and Maximum Bonus opportunity. 12 GROUP B PARTICIPANTS - -------------------- Growth in Net Pre-Tax Profits ("GNP") ------------------------------------- Line A Percent of Target Incentive Target Incentive Award X 50% X Award which may be earned = $ Award as an Actual Incentive Award from Table 2(4) Plus ---- Return on Total Investment ("ROTI") ----------------------------------- Line B Percent of Target Incentive Target Incentive Award X 50% X Award which may be earned = $ Award as an Actual Incentive Award from Table 2(5) EQUALS _________________ ------ Total Value of the Actual Incentive Award Earned (Line A + Line B) = $ Award The value of the actual Incentive Award that is paid pursuant to Section 9 hereof shall consist of 50% cash and 50% in shares of the Company's Common Stock. The number of shares of Company Common Stock shall be determined by dividing 50% of the dollar value of the Actual Incentive Award by the Market Value of the Company's Common Stock on the date of the beginning of the Performance Period. _______________________________________ (4) Actual GNP perfromance results measured against the Threshold, Target and Maximum Bonus opportunity. (5) Actual ROTI performance results measured against the Threshold, Target and Maximum Bonux opportunity. 13 The maximum Actual Incentive Award earned by a Participant in the Plan shall not exceed two-hundred percent (200%) of the Participants' Target Incentive Award. If the threshold Bonus Opportunity is not achieved by Actual Performance Results then no Actual Incentive Award shall be paid for such component of the Performance Goal not achieved. SECTION 7 - SPECIAL PARTICIPANTS AND GRANDFATHER PARTICIPANTS - ------------------------------------------------------------- The Committee may designate Special Participants for Plan participation on terms and conditions as may be determined from time to time by the Committee. Such individuals designated as Special Participants shall be Participants upon agreeing in writing to the terms and conditions set by the Committee for such participation. The Actual Incentive Award shall be calculated based on the terms and conditions of participation set by the Committee. The Committee may designate certain participants as Special Participants under this Plan who shall participate on the terms and conditions of the Plan in effect on the date prior to the Plan's June 16, 1997 Amendment and Restatement ("Grandfather Participants"). Such Grandfather Participants shall participate on the terms of the Plan effective June 18, 1992. The terms and conditions for such Grandfather Participants are incorporated herein by reference. SECTION 8 - COMPENSATION NATURE OF THE TARGET INCENTIVE AWARD - ------------------------------------------------------------- AND ACTUAL INCENTIVE AWARD - -------------------------- The Target Incentive Award granted to a Participant at the beginning of each Plan, as long-term incentive compensation, is contingent compensation. It is only payable to the Participant at the end of the Performance Period for each Plan in the amount of the Actual Incentive Award if it is earned. 14 No Actual Incentive Award is payable under this Plan for a Participant terminated for Cause. For the purpose of this Plan forfeiture, "Cause" means (i) a material breach by the Participant of his job duties and obligations (other than as the result of an incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Participant's part, which is committed in bad faith or without reasonable belief that such breach is the best interests of the Corporation and which is not remedied in a reasonable period of time after receipt of notice from the Corporation or (ii) the conviction of the Participant of a felony involving moral turpitude. SECTION 9 - METHOD OF PAYMENT OF THE ACTUAL INCENTIVE AWARD - ----------------------------------------------------------- At the end of the Plan Period, the Actual Incentive Award earned by a Participant shall be paid in two parts: (i) cash and (ii) shares of Company Common Stock. Cash Award: The amount of the Cash Award shall be determined before adjustment for tax withholding by multiplying the total value of the Actual Incentive Award Earned by 50%. Common Stock Award: The number of shares of Company Common Stock comprising the stock award shall be determined by dividing 50% of the value of the Actual Incentive Award earned by the Market Value of the Company's Common Stock on the date of the beginning of the Performance Period. SECTION 10 - COMMON STOCK AWARD UNDER THE PLAN - ---------------------------------------------- The Common Stock awarded to Participants under the Plan shall be made from the 15 Common Stock authorized under the Corporation's 1989 and 1996 Stock Awards Plans ("Stock Awards Plan") as amended from time to time and the terms, conditions and restrictions thereunder. The shares of the Common Stock shall be contingently awarded to Participants at the beginning of each Plan Period. Such contingency shall lapse when the Actual Incentive Award is earned at the end of each Performance Period. Participants shall bear the risk of loss and recognize any gain or loss of Market Value of the Company Common Stock during the contingency period. Participants by participating in this Plan waive and shall have no claim against the Company and the Company shall have no liability or obligation to Participants with respect to changing Market Value of the Company's Common Stock including without limitation any loss in market value caused by delay in delivery of Common Stock or loss sustained by nontransferability or other restriction on transferability imposed by the Company under this Plan, the Stock Awards Plan or federal or state securities laws. The Company reserves the right to hold the Common Stock awarded for the benefit of the Participant for a period of six months and one day from the end of the Performance Period for each Plan before delivery of the certificates of the Common Stock to Participants. Participants in whose name such Common Stock shall be registered during the restriction period shall be entitled to vote such shares, to receive such cash and other distributions declared payable to stockholders of record during the restriction period. The Company reserves the right to place such restrictive legends on the shares of Common Stock issued to Participants as the Company deems necessary for compliance with Federal and State Securities laws. No Participant shall sell or otherwise transfer, assign, pledge, hypothecate, encumber, sell short or otherwise dispose of such shares of Common Stock during such restriction period. Within thirty (30) days of the lapse of the restriction period the Corporation will deliver the certificate of Common Stock to Participants conditioned upon the Corporation's receipt of a written undertaking by the Participant with respect to compliance with the federal and state securities laws. Such Common Stock shall be subject to the requirements and the limitations on distribution imposed by the Requirements of the 16 Securities Act of 1933, Rule 16(b) of the Securities and Exchange Act of 1934 and the exemption from registration requirements under Rule 144 of the Securities and Exchange Commission. The delivery of such Common Stock to Participants under the terms of this Plan shall not in any manner obligate the Corporation to file any registration statement with the Securities and Exchange Commission or require the Corporation to supplement or amend any registration statement which the Corporation may have on file with the Securities and Exchange Commission. The Committee may suspend delivery of any certificates of Common Stock to Participants, so long as the Committee determines that securities exchange listings or registrations or qualifications under any Securities Law is required in connection therewith and has not been completed on terms acceptable to the Committee. The number of shares of Common Stock contingently granted under the Plan shall be adjusted to reflect any stock split, stock dividend or any other changes in the Company's Common Stock during the Performance Period. No dividend will be paid on the Common Stock until the first record date that such Common Stock is registered in the name of the Participant on the stock book of the Company. SECTION 11 - TAX WITHHOLDING FROM THE CASH AWARD AND COMMON STOCK - ----------------------------------------------------------------- From the cash portion of the Actual Incentive Award payment, the Corporation shall withhold all applicable federal, state, and local income tax and other amounts required by law ("withholding obligations") to be withheld based on the total value of the Actual Incentive Award payable to a Participant. The net proceeds of the cash payment portion of the Actual Incentive Award shall be payable within sixty (60) days subsequent to the end of the Performance Period of each Plan. In the event that the cash portion of the Actual Incentive Award is not sufficient to satisfy the withholding obligation, shares of Common Stock may be used to satisfy such 17 withholding obligation in a manner prescribed by the Committee. At the Participant's election, to the extent permitted by the Federal and State Income Tax laws, such withholding obligation may be satisfied by a Participant making payment to the Company before the date such withholding obligation is due for deposit by the Company with Federal and State tax authorities and before the Company transfers the Common Stock to the Participant. SECTION 12 - TERMINATION OF EMPLOYMENT, CROSS TRANSFER, - ------------------------------------------------------- PROMOTION AND DEMOTION - ---------------------- 12.1 In the event a Participant terminates employment either voluntarily or involuntarily other than by retirement under the terms of the Corporation's retirement program, death or permanent disability prior to the end of the Performance Period for each such Plan in which the Participant is participating, the Participant shall receive no Actual Incentive Award. 12.2 In the event the Participant terminates employment due to death, permanent disability or retirement either an early, normal or late retirement under the terms of the Corporation's retirement program, the Participant shall be eligible to receive a pro rata award for each Plan in which the Participant is participating at the date of such termination, based on the number of years and fractional years, computed to the nearest one-twelfth of a year, completed in each such Plan bears to the years remaining to be completed in each such Plan. Such pro rata amount of the Actual Incentive Award for each such Plan shall be paid following the end of the Plan Period in the manner described in Section 9, Section 10, and Section 11. For the purposes of this Plan, a Participant shall be considered permanently disabled on the date that such Participant qualifies for long-term disability payments under the Corporation's long-term disability program. 18 12.3 In the event a Participant is cross-transferred to another Division or to another position within the Corporation at the same Salary Grade, the Participant will continue participating in each Plan in which participating on the effective date of such cross-transfer and the Participant shall become an active Participant in the Plan for the Division or the location within the Corporation to which the Participant is transferred on the date of the next Plan. At the end of the Performance Period for each such Plan in which the Participant was participating at the date of such cross-transfer, the Participant shall receive an Actual Incentive Award based on the Target Bonus Opportunity, Performance Goals and Actual Performance Results for each such Plan. For each such Plan in which the Participant becomes an active Participant as the result of the cross-transfer, at the end of the Performance Period for each such Plan, the Participant shall receive an Actual Incentive Award based on the Target Bonus Opportunity, Performance Goals and Actual Performance Results for each such Plan. 12.4 In the event a Participant is promoted to a new Salary Grade, the Participant's participation in each Plan in which participating shall continue on the effective date of such promotion and the Participant shall become an active Participant at the new Salary Grade in the Plan for the Division or the location within the Corporation to which the Participant is promoted on the date of the next Plan. At the end of the Performance Period for each such Plan in which the Participant was participating at the date of such promotion, the Participant shall receive an Actual Incentive Award based on the Target Bonus Opportunity, Performance Goals and Actual Performance Results for each such plan. For each such Plan in which the Participant becomes an active participant as the result of the promotion, at the end of the Performance Period for each such Plan, the Participant shall receive an Actual Incentive Award based on the Target Bonus Opportunity, Performance Goals and Actual Performance Results for each such Plan. 19 12.5 In the event of a demotion to a lower Salary Grade the Participant will continue participating in each such Plan as of the date of such demotion and shall become an active Participant on the date of the next Plan in effect at the new Salary Grade for the Division or location within the Corporation as a result of such demotion. The Participant shall receive the Actual Incentive Award for each of the Plans in which the Participant was participating prior and subsequent to the demotion in Salary Grade determined in the same manner as for promotions described in the immediately preceding paragraph. SECTION 13 - DEFERRAL OF ACTUAL INCENTIVE AWARDS - ------------------------------------------------ At the Committee's discretion and not as an obligation, the Committee may provide that a Participant may irrevocably elect to defer the payment of the Actual Incentive Award for the Plan for which the election to defer was made. Such deferral will be for such period of time as the Committee may determine. Such election must be in writing and delivered to the Committee prior to January 1 of the year for which each such Plan begins. Deferred amounts will be subject to such terms and conditions and shall accrue such earnings thereon as the Committee may determine. Payment of deferred amounts may be in cash, common stock or a combination thereof, as the Committee may determine. Deferred amounts shall be considered an award under the Plan. The Committee may establish a trust to hold deferred amounts or any portion thereof for the benefit of Participants. All such amounts deferred by Participants shall be subject to the general claims of creditors of this Corporation and such amounts when paid pursuant to the terms of this Plan shall be from the general assets of the Corporation. Neither the Participant nor the Participant's designated beneficiary shall have any specified claim on any assets of this Corporation. 20 SECTION 14 - CHANGE IN CONTROL - ------------------------------ In the event of a Change of Control of the Company as hereinafter defined below in this Section 14, not withstanding any other provision of this Plan to the contrary the greater of either of (i) the Target Incentive Award, or (ii) the Actual Incentive Award earned for each Plan in which a Participant participates, shall become irrevocably due and payable to Participants in cash as of the date of such Change of Control. Payment shall be made to Participants not later than thirty days after the date of such change in control otherwise made pursuant to the terms of a Change of Control Agreement between the Company and the Participant. In the event there is a conflict between this Plan and the terms and conditions of a Participant's Change in Control Agreement with the Corporation, as the case may be, the terms and conditions of the Change of Control Agreement shall govern to the extent there is a conflict with the terms of the Plan. For the purposes of this agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (i) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"): provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by a corporation pursuant 21 to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this Section 14 are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board)) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-1 1 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) Approval by the stockholders of the Company of a reorganization, merge, consolidation in each case, unless, following such reorganization, merger or consolidation, (i) more than 60% of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, or the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no person (excluding the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, 22 merger or consolidation and any person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no person (excluding the Company and any employee benefit plan (related trust) of the Company or such corporation and any person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of 23 Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company. SECTION 15 - ADMINISTRATION AND MODIFICATION OF THE PLAN - -------------------------------------------------------- 15.1 The Plan shall be administered by the Committee. The Committee shall have plenary authority, subject to the express provisions hereof, to resolve any questions arising under the Plan; to correct any defect or supply an omission or reconcile any inconsistency in any of the Plans; to establish, amend and rescind any rules and regulations relating to any of the Plans and to make all other determinations necessary or advisable for the administration and continued successful operation of the Plan. The Committee will have discretion at any time, or from time to time, to accelerate the time at which and the extent to which any Actual Incentive Award under any Plan may be payable to Participants. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive, except as provided in Section 16 hereof. The Committee shall act only by a majority of its members then in office and its actions shall be recorded in the minutes of the Committee meetings which shall be conclusive of all such actions taken. The Committee may, to the extent that any such action will not prevent the Plan from complying with Rule 16-b, delegate any of its authority, hereunder to such persons as it deems appropriate. The Committee shall have the right but not an obligation to modify any Plans in which a Participant is participating and to adjust Performance Goals 24 or the Target Bonus Opportunity to reflect non-recurring financial changes, including but not limited to earnings per share or changes in business structure or organization including by way of illustration and not as a limitation changes in accounting methods or requirements; accounting adjustments not in the usual and ordinary course of business resulting in an non-recurring charges or additions in income, assets, liabilities or stockholders equity; tax rates; and Corporate reorganizations including: recapitalization, mergers, acquisitions, divestitures and spin-offs. Unless otherwise amended by resolution of the Committee, the Chairman shall have the power to act on behalf of the Committee with respect to individuals Salary Grade 3 and below under this Plan to (i) select Participants and designate such Participants as Group A or Group B Participants, (ii) set the Salary Grade and Base Annual Salary for each such Participant, and (iii) set the Target Bonus Opportunities for such Participants. SECTION 16 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF - ------------------------------------------------------------- PLAN - ---- 16.1 Subject to the provisions of subsection 16.2 below, the Compensation Committee shall have the right at any time, from time to time, without notice to Participants to suspend, discontinue or amend this Plan in any respect whatsoever, except (i) administration of the Plan cannot be removed from the Compensation Committee and (ii) no person shall be eligible for membership who shall not qualify as a disinterested director of the Corporation as required by Rule 16b-3(C)(1) under Section 16 of the Securities Exchange Act of 1934. 16.2 Upon termination or discontinuance of the Plan, each Participant's rights will 25 be determined as of the date of termination by pro-rating all Performance Periods for each Plan in which the Participant participates on the date of termination for such Plans, such Participants shall receive a pro-rata amount of the Actual Incentive Award for the Performance Period for each such Plan completed as of the date of the termination. Payment of such amount shall be in the manner provided in the Plan. 16.3 The Plan shall continue in effect until the date of occurrence of the earliest event (i) termination of the Plan by the Compensation Committee or (ii) termination of the Corporation's 1996 Stock Awards Plan as amended with respect to the payment of awards in Common Stock. SECTION 17 - PLAN NOT A CONTRACT OF EMPLOYMENT - ---------------------------------------------- Neither this Plan, nor participation in it, shall be construed in any manner as a contract of employment either expressed or implied. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Corporation for any period of time or to continue a Participant's present or any other rate of compensation. No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. SECTION 18 - NON-ASSIGNABILITY OF RIGHTS - ---------------------------------------- No Participant's interest in any Plan in which such Participant participates may be sold, assigned, transferred, hypothecated, pledged, or otherwise disposed of by a Participant prior to the actual receipt of such payment except by Will, the laws of decent and distribution or a qualified domestic relations order as defined by the Employee Retirement Income Security Act of 1974. Participants may name, from time to time, beneficiaries (who may be named contingently or successively) to whom 26 benefits under any Plan in which a Participant participates are to be paid in the event of their death before they receive any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. Except as otherwise permitted by action taken by the Committee, the rights of any Participant under any Plan in which the Participant participates will immediately terminate if such Participant: (i) attempts to, or does sell or assign, transfer, hypothecate, pledge or otherwise dispose of any right hereunder prior to the right receive payment except as permitted above or (ii) becomes insolvent or bankrupt, or becomes involved in any matter which in the opinion of the Committee might result in a Participant's rights under this Plan or Plans being taken to satisfy the Participant's debts or liabilities. IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be signed by its duly appointed officers and its corporate seal to be hereunto affixed as of this 16th day of June 1997. /s/ James R. Wilson By:______________________________ Chairman of the Board, President and Chief Executive Officer -Seal- ATTESTED: /s/ Edwin M. North By:______________________________ Secretary 27 EXHIBIT A (Logo) _______________ Plan Year KEY EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT A (Covering Fiscal years ____, ____,____) CORPORATE - Performance Objectives for: Name_____________________ Title________________________Unit__________________ TARGET INCENTIVE AWARD Base Salary @ Beginning of performance Period:_________________ Target Award percentage ____________% Target Incentive Award:_____________ Adjusted Target Incentive Award:______________________________ INCENTIVE OPPORTUNITY At Threshold (25% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) At Target (100% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) At Maximum (200% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) _____________________ *TKC Stock @ $______ EPS GROWTH Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's) FY_______ $___ (EPS) 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL Threshold ___ ___ ___ ____ ___ ___ ___ _____ Target ____ ____ ____ ____ Maximum ____ ____ ____ ____ RETURN ON TOTAL CAPITAL (ROTC) Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's) FY_______ ________%ROTC 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL Threshold ____ ____ ____ _____ ____ ____ ____ _____ Target ____ ____ ____ ____ Maximum ____ ____ ____ ____ 28 EXHIBIT B (Logo) _______________ Plan Year KEY EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT A (Covering Fiscal years ____, ____,____) OPERATING UNIT - Performance Objectives for: Name_____________________ Title________________________Unit__________________ TARGET INCENTIVE AWARD Base Salary @ Beginning of performance Period:_________________ Target Award percentage ____________% Target Incentive Award:_____________ Adjusted Target Incentive Award:______________________________ INCENTIVE OPPORTUNITY At Threshold (25% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) At Target (100% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) At Maximum (200% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock) _____________________ *TKC Stock @ $______ PROFIT GROWTH Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's) FY_______ $___ (EPS) 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL Threshold ___ ___ ___ ____ ___ ___ ___ _____ Target ____ ____ ____ ____ Maximum ____ ____ ____ ____ RETURN ON TOTAL INVESTMENT (ROTI) Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's) FY_______ ________%ROTC 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL Threshold ____ ____ ____ _____ ____ ____ ____ _____ Target ____ ____ ____ ____ Maximum ____ ____ ____ ____ 29 EXHIBIT C LINEAR INTERPOLATION CHART The Committee or its designee shall prepare for each Plan the linear interpolation charts for each table set forth in the Plan. Such linear interpolation charts for each Plan shall be filed with the Plan and become an integral part hereof. 30 EX-10 7 HUCK INTERNATIONAL, INC. EXCESS BENEFIT PLAN FOR SELECTED EMPLOYEES (Effective November 1, 1991) (Amended and Restated Effective June 16, 1997) Table of Contents Section Page 1 - PURPOSE OF PLAN.............................................. 3 2 - ESTABLISHMENT OF PLAN........................................ 3 3 - DEFINITIONS.................................................. 3 4 - ELIGIBILITY FOR PARTICIPATION................................ 4 5 - BENEFITS..................................................... 4 6 - DEATH........................................................ 6 7 - INCOME TAX WITHHOLDING....................................... 6 8 - NO REQUIREMENT TO FUND....................................... 6 9 - ADMINISTRATION OF PLAN....................................... 7 10 - LIMITATION OF PARTICIPANT'S RIGHTS........................... 7 11 - AMENDMENT OR TERMINATION OF PLAN............................. 8 12 - SPENDTHRIFT CLAUSE........................................... 8 13 - PAYMENT DUE AN INCOMPETENT................................... 8 14 - CONSTRUCTION................................................. 8 15 - SEVERABILITY.......................-......................... 9 16 - GOVERNING LAW................................................ 9 2 HUCK INTERNATIONAL, INC. EXCESS BENEFIT PLAN FOR SELECTED EMPLOYEES SECTION 1 - PURPOSE OF PLAN The Huck International, Inc. Excess Benefit Plan for Selected Employees has been established to supplement the retirement benefits of certain key Employees who participate in the Huck International, Inc. Personal Retirement Account Plan ("PRA"), a tax-qualified retirement plan under Section 401(a) of the Internal Revenue Code of 1986, as amended, by expanding the compensation on which benefits are calculated, by providing a higher contribution rate than the PRA, and by providing benefits that cannot be paid by the PRA on account of limitations in the Internal Revenue Code. SECTION 2 - ESTABLISHMENT OF PLAN Effective November 1, 1991, Huck International, Inc., a wholly owned subsidiary of Thiokol Corporation, adopted the Huck International, Inc. Excess Benefit Plan for Selected Employees . This Plan is amended and restated effective June 16, 1997. SECTION 3 - DEFINITIONS "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Thiokol Corporation Plan Administration Committee. "Effective Date" means November 1, 1991. "Employee" means an employee of Huck International, Inc. "Employer" means Huck International, Inc. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Participant" means a key Employee of the Employer selected as a Participant by the Committee as described in Section 4. "Plan" means the Huck International, Inc. Excess Benefit Plan for Selected Employees. "Plan Compensation" means the employee's base salary (without regard to any salary reduction agreements under Code Sections 401(k) or 125), plus any amount awarded to the employee under one of Thiokol Corporation's executive bonus plans, other than 3 the long-term incentive program and stock options exercised and paid during the Plan Year, and the Huck International, Inc. Profit Sharing Incentive Plan. "Plan Year" means the 12-month period ending December 31. "PRA" means the Huck International, Inc. Personal Retirement Account Plan. "Prior Plan" means the Federal-Mogul Corporation Supplemental Executive Retirement Plan. Terms not defined herein shall be construed in reference to the same or similar terms as used in the PRA. SECTION 4 - ELIGIBILITY FOR PARTICIPATION Effective June 16, 1997, new Participants in the Plan must be eligible to participate in the PRA and be a key Employee of the Employer designated by the Committee as a Participant. Prior to June 16, 1997 the Employees listed on Appendix A were Participants in the Plan and continue to be eligible to participate in the Plan so long as they are active Employees of the Employer. Employees who participated in the Prior Plan on November 1, 1991 had the value of their accrued benefit in the Prior Plan transferred to this Plan as of the Effective Date, if they were still employed by the Employer on the Effective Date. SECTION 5 - BENEFITS 5.1 Benefits formula A separate unfunded book account is maintained for each Participant. A Participant's accrued benefit under the Plan is equal to the Participant's account balance. A Participant's account balance will equal the sum of the amounts in subsections (i), (ii), and (iii), and reduced by the amount in subsection (iv). (i) As of the Effective Date, an amount shall be credited to the Participant's account equal to the accrued benefit, if any, of the Participant in the Prior Plan plus interest for the period from November 1, 1991 to the Effective Date at the rate that was in effect under the Prior Plan on November 1, 1991. (ii) As of the last day of each calendar month of active Participation under the PRA, the following amount shall be credited to the Participant's account: 4 (a) 2-1/2 percent of Plan Compensation received by the Participant for each such calendar month which ends prior to his attainment of age 30; (b) 3-3/4 percent of Plan Compensation received by the Participant for each such calendar month which ends prior to his attainment of age 40 but subsequent to his attainment of age 30; (c) 5 percent of Plan Compensation received by the Participant for each such calendar month which ends prior to his attainment of age 50 but subsequent to his attainment of age 40; (d) 7-1/2 percent of Plan Compensation received by the Participant for each such calendar month which ends prior to his attainment of age 60 but subsequent to his attainment of age 50; and (e) 10 percent of Plan Compensation received by the Participant for each such calendar month subsequent to his attainment of age 60. (iii)Until January 1, 1997 a Participant's account balance shall receive a credit as of the last day of each calendar month equal to the product of (1) the interest rate used by the PBGC to value lump sum benefits for plans terminating as of the first day of the Plan Year, compounded monthly at a simple annual rate and (2) the Participant's account balance as of the last day of the calendar month. After January 1, 1997 a Participant's account balance shall receive a credit as of the last day of each calendar month equal to the product of the average yield on 1-year Treasury Constant Maturities for November of the preceding Plan Year plus 100 basis points and (2) the Participant's account balance as of the last day of the calendar month. (iv) A Participant's account balance shall be reduced by the account balance payable under the PRA (after taking into account the limitations imposed by Code Section 415). 5.2 Vesting and Forfeiture The vested percentage of a Participant's benefit under this Plan shall be equal to the vested percentage of the Participant's accrued benefit under the PRA; however, a Participant shall forfeit all benefits under the Plan if -- (i) the Participant engages in a willful, deliberate, or gross act of commission or omission which is injurious to the finances or reputation of the Employer or any of its affiliates; 5 (ii) prior to age 65, the Participant serves as a director, officer, partner, employee, consultant, agent, or representative of any business entity which sells any product or service in direct competition with any product or service sold by the Employer or any affiliate; or (iii) the Participant breaches any agreement with the Employer. In the event a Participant voluntarily terminates employment with the Employer, any benefits under this plan, unless vested under the vesting provisions of this Plan at the time the Employee terminates, shall be forfeited, and the Participant shall receive no benefits. 5.4 Payment of Benefits A Participant's entire account balance will be distributed in the form of a lump sum payment at the same time a Participant elects under the terms of the PRA to receive the first PRA benefit payment. In no event shall a benefit be payable to a Participant in a month the Participant receives Plan Compensation from the Employer. SECTION 6 - DEATH If a married Participant dies before his account balance is distributed to him, his account balance shall be 100% vested on the date of his death and the entire account balance shall be payable to his spouse at the same time the spouse elects under the terms of the PRA to receive the first PRA benefit payment. If an unmarried Participant dies before his annuity starting date, the vested portion of his account balance shall be paid to his estate or beneficiary, as appropriate. SECTION 7 - INCOME TAX WITHHOLDING The Employer shall deduct from all payments under this Plan the amount of any applicable income and employment tax withholding requirements. SECTION 8 - NO REQUIREMENT TO FUND The entire cost of providing benefits under the Plan shall be paid by the Employer out of its current operations, and the Employer's obligations under the Plan shall be an unfunded and unsecured promise to pay. The Employer shall not be obligated under any circumstances to fund its obligations under the Plan. No contributions by Participants are required or permitted under the Plan. 6 SECTION 9 - ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall have plenary authority, subject to the express provisions hereof, to select Employees eligible to participate in the Plan; resolve any questions arising under the Plan; to correct any defect or supply an omission or reconcile any inconsistency; to establish amend and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration and continued successful operation of the Plan. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee shall act only by a majority of its members then in office and its actions shall be recorded in minutes of the Committee meetings which shall be conclusive of all such actions taken. The Committee shall have the right to delegate such Plan administration as it shall determine to the Chairman or Chairman's designee. SECTION 10 - LIMITATION OF PARTICIPANT'S RIGHTS 10.1 Plan not a Contract of Employment Neither this Plan, nor participation in it, shall be construed in any manner as a contract of continuing employment with the Corporation either expressed or implied. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Corporation for any period of time or to continue a Participant's present or any other rate of compensation. No employee shall have a right to be selected as a Participant, or having been so selected, to be selected again as a Participant. 10.2 Unsecured Creditor The rights of any Participant or any person claiming through the Participant under the Plan shall be solely those of an unsecured general creditor of the Employer. Any Participant, or any person claiming through the Participant, shall only have the right to receive from the Employer those payments as specified in this Plan. Each Participant agrees that he or any person claiming through him shall have no rights or interests in any assets of the Employer. 10.3 No Trust No asset used or acquired by the Employer in connection with the liabilities it has assumed under the Plan shall be deemed to be held under any trust for the benefit of any Participant. Nor shall any such asset be considered security for the performance of the obligations of the Employer, but shall be, and remain, a general unpledged and unrestricted asset of the Employer, except as provided by separate agreement and as permitted under Internal Revenue Service and 7 Department of Labor rules and regulations for unfunded supplemental retirement plans. 10.4 Plan Binding The Plan is binding on the beneficiaries, executor, and administrator of the Participant, and upon the successors (by sale or otherwise) of the Company who succeed to substantially all the assets and the business of the Company. SECTION 11 - AMENDMENT OR TERMINATION Subject to the provisions of this Section 11, the Committee shall have the right at any time, from time-to-time, with notice to Participants to suspend, discontinue or amend this Plan in any respect whatsoever. No such amendment or termination shall reduce or otherwise affect the benefits payable to or on behalf of any Participant that have accrued prior to such amendment or termination without the written consent of the Participant (or beneficiary, if applicable). In addition, the complete or partial termination of this Plan shall have the same effect on the vesting of benefits accrued to date under this Plan as in the case of a complete or partial termination of the PRA. SECTION 12 - SPENDTHRIFT CLAUSE No right, title or interest of any kind in the Plan shall be transferable or assignable by any Participant or Surviving Spouse or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Participant or Surviving Spouse. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. SECTION 13 - PAYMENT DUE AN INCOMPETENT If the Plan Administration Committee receives evidence that a Participant or Surviving Spouse entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole discretion, direct the payment to any other person or trust which has been legally appointed by the courts. SECTION 14 - CONSTRUCTION Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. 8 SECTION 15 - SEVERABILITY In the event that any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. SECTION 16 - GOVERNING LAW The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of Utah unless superseded by federal law. IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be signed by its duly appointed officers and its corporate seal to be hereunto affixed as of this 16th day of June, 1997. /s/ Bruce M. Zorich By: ___________________________ President ~ Seal ~ ATTESTED: /s/ Edwin M. North By: ___________________________ Secretary EX-10 8 THIOKOL CORPORATION G R A N T A G R E E M E N T Incentive Stock Option Amended and Restated June 16, 1997 AGREEMENT, made this 26th day of August 1997 between Thiokol Corporation, a Delaware corporation ("Company" and Employee whose name appears on the Notice of Grant of Stock attached hereto ("Employee"). WHEREAS, the Committee (as defined in Section 1.4), has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the stock option provided for herein to the Employee in consideration of Employee's services to the company or a Company Subsidiary and as an incentive for increased efforts during the Employee's service to the Company or a Company Subsidiary, and has advised the Company thereof and instructed the undersigned officers to issue said Option; WHEREAS, the stock option subject to this agreement is granted pursuant to the terms of the Thiokol Corporation 1996 Stock Awards Plan dated August 15, 1996. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms which are not defined below shall have the meaning specified in the Plan. Section 1.1 - Beneficiary - ------------------------- "Beneficiary" shall mean the person or persons properly designated by the Employee, including his spouse or heirs at law, to exercise such Employee's rights under the Plan in the event of the Employee's death, or if the Employee has not designated such person or persons, or such person or persons shall all have pre-deceased the Employee, the executor or administrator of the Employee's estate. Designation, revocation and redesignation of Beneficiaries must be made in writing in accordance with rules established by the Committee and shall be effective upon delivery to the Committee. 1 Section 1.2 - Board - ------------------- "Board" shall mean the Board of Directors of the Company. Section 1.3 - Code - ------------------ "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.4 - Committee - ----------------------- "Committee" shall mean the Committee of the Board appointed as provided in the Plan. Section 1.5 - Company - --------------------- "Company" shall mean Thiokol Corporation, a Delaware corporation. Section 1.6 - Company Subsidiary - -------------------------------- "Company Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty (50%) or more of the total combined voting power of all classes of stock in one (1) of the other corporations in such chain. Section 1.7 - Date of Grant - ----------- --------------- "Date of Grant" shall mean the date on which the Board grants the option hereunder and from which the Anniversary Date set forth in the Vesting Schedule shall be determined. Section 1.8 - Exchange Act - -------------------------- "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.9 - Option - -------------------- "Option" shall mean the incentive stock option to purchase Common Stock of the Company granted under this Agreement. Section 1.10 - Plan - ------------------- "Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan. Section 1.11 - Rule 16b-3 - ------------------------- 2 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. Section 1.12 - Securities Act - ----------------------------- "Securities Act" shall mean the Securities Act of 1933, as amended. ARTICLE II GRANT OF OPTION --------------- Section 2.1 - Grant of Option. In consideration of Employee's services to the Company or Company Subsidiary, Thiokol Corporation grants to Employee the option to purchase shares of its Common Stock (par value $1 per share) at a purchase price set forth on the Notice of Grant of Stock attached hereto (the fair market value of such shares on the Date of Grant), subject to the conditions of this Agreement. Section 2.2 - Adjustments in Option. Subject to Section 5.3, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or property) of a reorganization, recapitalization, spin-off, stock dividend, stock split, combination, reclassification, reverse stock split, merger, consolidation, split-up, spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, or other similar corporate transaction or event or other increase or reduction in the number of issued shares of Common Stock, affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Option the Committee may, in order to prevent the dilution or enlargement of rights under awards, make such adjustments in any and all of the number and type of shares covered by the option, or with respect to which payments are measured under, outstanding awards and the exercise price specified herein as may be determined to be appropriate and equitable, to the end that after such event the optionees' proportionate interest shall be maintained as before the occurrence of such event.. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share; provided, however, that each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon the Employee, the Company, and all other interested persons. 3 ARTICLE III PERIOD OF EXERCISABILITY Section 3.1 - Commencement of EXERCISABILITY (a) Subject to subsection (b) and Section 3.4, the Option shall become exercisable (vested) as follows: OPTION VESTING SCHEDULE First Business Day Following the Portion of the Option Become Exercisable Anniversary Date from Date of Grant (Vested) on Such Anniversary Date - ----------------------------------- --------------------------------- One year from date of grant 33.3 percent Two years from date of grant 66.6 percent Three years from date of grant 100.0 percent No fractional share of a vested option is exercisable until such anniversary date from the date of grant as the remainder of such fractional share becomes exercisable. No part of the Option will be exercisable prior to the first business day following the expiration of one year from the Date of Grant set forth on the Notice of Grant of Stock attached hereto. (b) Subject to the exception for retirement set forth in Section 3.3(b), no portion of the Option (including any portion of the Option not yet vested under Section 3.1(a) which is unexercisable at termination of employment shall thereafter become exercisable. Section 3.2 - Duration of Exercisability. After the Option becomes exercisable pursuant to Section 3.1(a), the Option shall remain exercisable until it has been exercised or until it becomes unexercisable under Section 3.3. Section 3.3 - Expiration of Option. (a) The Option (or any portion of the Option not yet vested under Section 3.1(a) as the case may be) may not be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of ten (10) years from the date the Option was granted; or 4 (ii) Except in the event of a Change in Control of the Company as defined in Section 3.4 below or as otherwise provided herein, the expiration of three (3) months from the date of the Employee's termination of employment unless such termination of employment results from his death or his retirement pursuant to the terms of a pension plan of the Company; PROVIDED, HOWEVER, if during the first two years following a Change in Control of the Company, Employee's employment terminates other than pursuant to the terms of a pension plan of a Company and Employee's Option was exercisable on the date of termination of Employee's employment, it will remain exercisable for a period of six months and one day after termination of Employee's employment, or until the Expiration Date, whichever occurs first. (iii)Except in the event of a Change in Control of the Company as defined in Section 3.4 below, the close of business in the office of the Corporate Secretary of the Company ten years from the date of Grant set forth on the Notice of Grant of Stock attached hereto (the "Expiration Date"); PROVIDED, HOWEVER, if Employee should die while actively employed by the Company prior to the Expiration Date, Employee's Option will remain exercisable for a period of three months after the date of Employee's death. (iv) Except as provided in subsection (b), the expiration of two (2) years from the date of Employee's death while an employee of the Company or after Employee's retirement pursuant to the terms of a pension plan of the Company, as the case may be. (v) The effective date of the Committee's action under Section 5.3 (ii), (iii) or (iv) (except in the case of an action providing for assumption of the Option). (b) If Employee's employment with the Company terminates prior to the Expiration Date because of Employee's retirement pursuant to the terms of a pension plan of the Company, Employee's Option will remain exercisable until the Expiration Date so long as Employee is alive until the Expiration Date. Any portion of the Option not yet vested at the Employee's Date of Retirement will automatically vest with the passage of time (as if the retired employee had remained actively employed) pursuant to the Option Vesting Schedule set forth in Section 3.(a) so long as the Employee is alive. Section 3.4 - Acceleration Of Exercisability Upon Change In Control Of The Company. Notwithstanding any provision herein to the contrary, to the extent the Employee's Option has not been exercised previously or any portion of such Option has not yet vested under Section 3.1(a), Employee's Option shall become immediately and fully vested and shall be exercisable from and after the occurrence of a Change in Control of the Company; PROVIDED, HOWEVER, that this acceleration of Exercisability shall not take place if this Option becomes unexercisable 5 under Section 3.3 prior to the occurrence of a Change of Control of the Company; and PROVIDED, FURTHER, that no Option shall be exercisable by any Employee who is then subject to Section 16 of the Exchange Act until the expiration of the period ending six months and one day after the later of date the Option is granted or deemed regranted. A Change in Control of the Company shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15 percent or more of either (i) the then outstanding shares of Common Stock of the Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); PROVIDED, HOWEVER, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Corporation (excluding an acquisition by virtue of the exercise of a conversion privilege); (ii) any acquisition by the Corporation; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation; or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) below are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Board") of the Corporation (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; PROVIDED, HOWEVER, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation: (i) more than 60 percent of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, 6 of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be; (ii) no Person (excluding the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 15 percent or more of the Outstanding Corporation Common Stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15 percent or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors; and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Corporation of (i) a complete liquidation or dissolution of the Corporation; or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with respect to which following such sale or other disposition: (A) more than 60 percent of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be; (B) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to such sale of other disposition, directly or indirectly, 15 percent or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15 percent or more of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors; and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for 7 such sale or other disposition of assets of the Corporation. The Committee may make such determinations and adopt such rules and conditions as it, in its absolute discretion, deems appropriate in connection with such acceleration of exercisability, including, but not by way of limitation, provisions to ensure that any such acceleration and resulting exercise shall be conditioned upon the consummation of the contemplated corporate transaction. Section 3.5 - Incentive Stock Options. The Company intends that the Option shall be treated as an "incentive stock option" (within the meaning of Section 422 of the Code) to the extent permitted by the Code. To the extent that the Code does not permit the Option to be treated as an "incentive stock option," the Option shall be treated as a non-qualified option. Section 3.6 - Special Tax Consequences. The Employee acknowledges that, to the extent that the aggregate fair market value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code), including the Option, are exercisable for the first time by the Employee during any calendar year (under the Plan and all other incentive stock option plans of the Company and any Company Subsidiary) exceeds $100,000, such options shall be treated as not qualifying under Section 422 of the Code but rather shall be treated as non-qualified options to the extent required by Section 422 of the Code. The Employee further acknowledges that the rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For purposes of these rules, the fair market value of stock shall be determined as of the time the option with respect to such stock is granted. ARTICLE IV EXERCISE OF OPTION ------------------ Section 4.1 - Person Eligible to Exercise. During Employee's lifetime, Employee's option is exercisable only by Employee unless it has been disposed of pursuant to a Qualified Domestic Relations Order (AQDRO@). After the death of the Employee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by his Beneficiary. Section 4.2 - Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. Section 4.3 - Procedure for Exercise. The Option may be exercised with respect to shares of the Company's Common Stock granted to Employee in the amount specified ("Option Shares") at any time from the date that any portion of the Option described in the Vesting Schedule set forth in Section 3.1(a) becomes exercisable pursuant to Section 3.1(a) or 3.4 until the Option expires pursuant to Section 3.3 by: (i) delivery of written notification of exercise and payment in full either in cash or in Common Stock of the Company delivered to the Corporate Secretary of the Company for all Option Shares being purchased plus the amount of any federal and state 8 income taxes required to be withheld by reason of the exercise of Employee's option; and (ii) if requested, within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's legal counsel, be necessary or desirable to comply with federal and state tax and securities laws and (iii) if requested, a bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Employee or other person then entitled to exercise such Option or portion, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that the Employee or other person then entitled to exercise such Option or portion will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. The record date of Employee's ownership of all Option Shares purchased under this option shall be the date upon which the above-described notification and payment are received by the Company, provided that any requested representations, undertakings and agreements are delivered within the time specified. In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Employee, appropriate proof of the right of such person or persons to exercise the Option. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representations, undertakings and agreements and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection and the representations, undertakings and agreements referenced herein. Section 4.4 - Securities Law Restrictions. Employee understands and acknowledges that applicable securities laws govern and may restrict Employee's right to offer, sell, or otherwise dispose of any Option Shares. Employee may not offer, sell or otherwise dispose of any Option Shares unless Employee's offer, sale or other disposition thereof is registered under the Securities Act of 1933 (the "1933 Act") or an exemption from the registration requirements of the 1933 Act, such as the exemption afforded by Rule 144 of the Securities and Exchange Commission ("SEC"), is available. Employee further understands and acknowledges that one of the requirements of Rule 144 is that there shall be available adequate current public information with respect to the Company at the time of the proposed disposition of the Option Shares, and that the Company is not obligated hereunder to file reports with the SEC or otherwise make current public information available for such purpose or to take any other action to make available an exemption from the registration requirements of the 1933 Act. Employee agrees that Employee will not offer, sell or otherwise dispose of any Option Shares in any manner which would (i) require the Company to file any registration statement with the 9 SEC; (ii) require the Company to amend or supplement any registration statement which the Company at any time may have on file with the SEC; or (iii) violate the 1933 Act, the rules and regulations promulgated thereunder or any other state or federal law. Section 4.5 - Conditions to Issuance of Stock Certificates. The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole and absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company (or other employer corporation) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. Section 4.6 - Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder. ARTICLE V OTHER PROVISIONS Section 5.1 - Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final 10 and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. In its sole and absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the sole discretion of the Committee. Section 5.2 - Non-Transferability. Employee's option is personal to Employee and shall not be transferable by Employee otherwise than by will or the laws of descent and distribution or pursuant to a QDRO. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; PROVIDED, HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution or pursuant to QDRO. Acquisition or Liquidation of the Company and Other Corporate Events. Subject to the provisions of this Section 5.3, in the event of any transaction or event described in Section 2.2, a change in control, or similar transaction by the Company or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, if the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee in its discretion is hereby authorized to provide for such terms as it deems appropriate by action taken prior to the occurrence of such transaction or event: (i) for adjustments to the Option in order to prevent the dilution or enlargement of rights thereunder or to provide for acceleration of benefits thereunder; (ii) for either the purchase of the Option for an amount of cash equal to the amount that could have been attained upon the exercise of such option or realization of the Participant's rights had the Option been currently exercisable or payable or fully vested or the replacement of such Option with other rights or property selected by the Committee in its sole discretion; (iii) that it cannot be exercised after such event; (iv) that upon such event, the Option be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. No adjustment or action described in this Section 5.3 or in any other provision of this Agreement shall be authorized to the extent that such adjustment or action would cause the Agreement or the Plan or the Option to violate Section 422(b)(1) of the Code or would cause the Option to fail to so qualify under Section 162(m), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be 11 authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions or Rule 16b-3 unless the Committee determines that the option or other award is not to comply with such exemptive conditions. Section 5.4 - Shares to Be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. Section 5.5 - Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary, and any notice to be given to the Employee shall be addressed to him at the address maintained by the Corporation in its business records. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.5. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Section 5.6 - Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 5.7 - Approval by Shareholders. This grant is made pursuant to the 1996 Stock Awards Plan adopted by the Board of Directors on April 18, 1996. The Plan is subject to approval by the Shareholders within 12 months after April 18, 1996. Should the stockholders of the Company not approve such Plan, this Stock Option Grant Agreement shall become null and void and you shall have no rights hereunder. Section 5.8 - Notification of Disposition. The Employee shall give prompt notice to the Company of any disposition or other transfer of any shares of stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the date of granting the Option with respect to such shares or (b) within one (1) year after the transfer of such shares to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Employee in such disposition or other transfer. Section 5.9 - Governing Law. This Grant Agreement and the Plan shall be construed in accordance with and governed by the laws of the State of Utah. Section 5.10 - Conformity to Securities Laws. The Employee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and 12 may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Section 5.11 - Amendments. This Agreement and the Plan may be amended without the consent of the Optionee provided that such amendment would not impair any rights of the Optionee under this Agreement. No amendment of this Agreement shall, without the consent of the Optionee, impair any rights of the Optionee under this Agreement. Section 5.12 - Conformity With Plan. Employee's option is intended to conform in all respects with the Plan, a copy of which is attached hereto. Inconsistencies between this Grant Agreement and the Plan shall be resolved in accordance with the terms of the Plan. All definitions stated in the Plan shall be fully applicable to this Grant Agreement. Section 5.13 - Employment and Successors. Nothing herein or in the Plan confers any right or obligation on Employee to continue in the employ of the Company or Company Subsidiary or shall affect in any way Employee's right or the right of the Company or Company Subsidiary, as the case may be, which are hereby expressly reserved, to terminate Employee's employment at any time. Employee agrees that Employee is an Employee at will and can be terminated by the Company or Company Subsidiary, as the case may be, at any time. Nothing herein or in the Plan is to be interpreted as an express or implied contract of employment. This Grant Agreement and the Plan shall be binding upon any successor or successors of the Company. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of this 21st day of August 1997. THIOKOL CORPORATION EMPLOYEE By: ______________________________ By: _______________________ Corporate Secretary EX-10 9 THIOKOL CORPORATION G R A N T A G R E E M E N T Nonqualified Stock Option Amended and Restated June 16, 1997 AGREEMENT, made this 21st day of August 1997 between Thiokol Corporation, a Delaware corporation ("Company") and Employees whose name appears on the Note of Grant attached hereto ("Employee"). WHEREAS, the Committee (as defined in Section 1.4), has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the stock option provided for herein to the Employee in consideration of Employee's services to the Company or Affiliate and as an incentive for increased efforts during the Employee's service to the Company or Affiliate, and has advised the Company thereof and instructed the undersigned officers to issue said Option; WHEREAS, the stock option subject to this agreement is granted pursuant to the terms of the Thiokol Corporation 1996 Stock Awards Plan dated August 15, 1996. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS ----------- Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms which are not defined below shall have the meaning specified in the Plan. Section 1.1 - Affiliate "Affiliate" shall mean any entity in which the Company has a direct or indirect equity interest which is so designated by the committee. Section 1.2 - Beneficiary "Beneficiary" shall mean the person or persons properly designated by the Employee, including his spouse or heirs at law, to exercise such Employee's rights under the Plan in the event of the Employee's death, or if the Employee has not designated such person 1 or persons, or such person or persons shall all have pre-deceased the Employee, the executor or administrator of the Employee's estate. Designation, revocation and redesignation of Beneficiaries must be made in writing in accordance with rules established by the Committee and shall be effective upon delivery to the Committee. Section 1.3 - Board "Board" shall mean the Board of Directors of the Company. Section 1.4 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.5 - Committee "Committee" shall mean the Committee of the Board appointed as provided in the Plan. Section 1.6 - Company "Company" shall mean Thiokol Corporation, a Delaware corporation. Section 1.7 - Date of Grant "Date of Grant" shall mean the date on which the Board grants the option hereunder and from which the Anniversary Date set forth in the Vesting Schedule shall be determined. Section 1.8 - Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.9 - Option "Option" shall mean the nonqualified stock option to purchase Common Stock of the Company granted under this Agreement. Section 1.10- Plan "Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan. Section 1.11 - Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended in the future. 2 Section 1.12 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended. ARTICLE II GRANT OF OPTION --------------- Section 2.1 - Grant of Option. In consideration of Employee's services to the Company, Thiokol Corporation grants to Employee the option to purchase shares of its Common Stock (par value $1 per share) at a purchase price set forth on the Notice of Grant of Stock attached hereto (the fair market value of such shares on the Date of Grant), subject to the conditions of this Agreement. Section 2.2 - Adjustments in Option. Subject to Section 5.3, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), a reorganization, recapitalization, spin-off, stock dividend, stock split, combination, reclassification, reverse stock split, merger, consolidation, split-up, spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, or other similar corporate transaction or event or other increase or reduction in the number of issued shares of Common Stock affects the Commons Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available with respect to the Option, the Committee may, in order to prevent the dilution or enlargement of rights under awards, make such adjustments in any and all of the number and type of shares covered by the Option and the exercise price specified herein as may be determined to be appropriate and equitable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in the Option shall be made without change in the total price applicable to the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in the Option price per share. Any such adjustment made by the Committee shall be final and binding upon the Employee, the Company and all other interested persons. ARTICLE III PERIOD OF EXERCISABILITY ------------------------ Section 3.1 - Commencement of Exercisability 3 (a) Subject to subsection (b) and Section 3.4, the Option shall become exercisable (vested) as follows: OPTION VESTING SCHEDULE First Business Day Following the Portion of the Option Become Exercisable Anniversary Date from the Date of Grant (Vested) on Such Anniversary Date - -------------------------------------- --------------------------------- One year from date of grant 33.3 percent Two years from date of grant 66.6 percent Three years from date of grant 100.0 percent No fractional share of a vested option is exercisable until such anniversary date from the date of grant as the remainder of such fractional share becomes exercisable. No part of the Option will be exercisable prior to the first business day following the expiration of one year from the Date of Grant set forth on the Notice of Grant of Stock attached hereto. (b) Subject to the exception for retirement set forth in Section 3.3(b), no portion of the Option (including any portion of the Option not yet vested under Section 3.1(a) which is unexercisable at termination of employment shall thereafter become exercisable. Section 3.2 - Duration of Exercisability. After any portion of the Option becomes exercisable pursuant to Section 3.1(a), the Option shall remain exercisable until it has been exercised or until it becomes unexercisable under Section 3.3. Section 3.3 - Expiration of Option. (a) The Option (or any portion of the Option not yet vested under Section 3.1(a) as the case may be) may not be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of ten (10) years from the date the Option was granted; or (ii) Except in the event of a Change in Control of the Company as defined in Section 3.4 below or as otherwise provided herein, the expiration of three (3) months from the date of the employee's termination of employment unless such termination of employment results from his death or his retirement pursuant to the terms of a pension plan of the Company; PROVIDED, HOWEVER, if during the first two years following a 4 Change in Control of the Company Employee's, employment terminates other than pursuant to the terms of a pension plan of a Company and Employee's Option was exercisable on the date of termination of Employee's employment, it will remain exercisable for a period of six months and one day after termination of Employee's employment, or until the Expiration Date, whichever occurs first. (iii)Except in the event of a Change in Control of the Company as defined in Section 3.4 below, the close of business in the office of the Corporate Secretary of the Company ten years from the Date of Grant set forth on the Notice of Grant of Stock attached hereto (the "Expiration Date"); PROVIDED, HOWEVER, if Employee should die while actively employed by the Company prior to the Expiration Date, Employee's Option will remain exercisable for a period of three months after the date of Employee's death. (iv) Except as provided in subsection (b), the expiration of two (2) years from the date of Employee's death while an employee of the Company or after Employee's retirement pursuant to the terms of a pension plan of the Company, as the case may be. (v) The effective date of the Committee's action under Section 5.3(ii), (iii) or (iv) (except in the case of an action providing for assumption of the Option). (b) If Employee's employment with the Company terminates prior to the Expiration Date because of Employee's retirement pursuant to the terms of a pension plan of the Company, Employee's Option will remain exercisable until the Expiration Date so long as Employee is alive until the Expiration Date. Any portion of the Option not yet vested at the Employee's date of retirement will automatically vest with the passage of time (as if the retired Employee had remained actively employed) pursuant to the Option vesting schedule set forth in Section 3.(a) so long as the Employee is alive. Section 3.4 - Acceleration of Exercisability Upon Change in Control of the Company. Notwithstanding any provision herein to the contrary, to the extent the Employee's Option has not been exercised previously or any portion of such Option has not yet vested under Section 3.(a), Employee's Option shall be exercisable from and after the occurrence of a Change in Control of the Company; PROVIDED, HOWEVER, that this acceleration of exercisability shall not take place if this Option becomes unexercisable under Section 3.3 prior to the occurrence of a Change of Control of the Company; and PROVIDED, FURTHER, that no Option shall be exercisable by any Employee who is then subject to Section 16 of the Exchange Act until the expiration of the period ending six months and one day after the later of date the Option is granted or deemed regranted. A Change in Control of the Company shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act (a "Person") of beneficial 5 ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15 percent or more of either (i) the then outstanding shares of Common Stock of the Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); PROVIDED, HOWEVER, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Corporation (excluding an acquisition by virtue of the exercise of a conversion privilege); (ii) any acquisition by the Corporation; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation; or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) below are satisfied; or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Board") of the Corporation (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; PROVIDED, HOWEVER, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation: (i) more than 60 percent of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be; (ii) no Person (excluding the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization, merger or consolidation and any Person 6 beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 15 percent or more of the Outstanding Corporation Common Stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15 percent or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation, entitled to vote generally in the election of directors; and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (d) Approval by the shareholders of the Corporation of (i) a complete liquidation or dissolution of the Corporation; or (ii) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with respect to which following such sale or other disposition: (A) more than 60 percent of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be; (B) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to such sale of other disposition, directly or indirectly, 15 percent or more of the Outstanding Corporation Common Stock or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 15 percent or more of, respectively, the then outstanding shares of Common Stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors; and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Corporation. The Committee may make such determinations and adopt such rules and conditions as it, in its absolute discretion, deems appropriate in connection with such acceleration of exercisability, including, but not by way of limitation, provisions to ensure that any such acceleration and resulting exercise shall be conditioned upon consummation of the Change of Control of the Company. 7 ARTICLE IV EXERCISE OF OPTION ------------------ Section 4.1 - Person Eligible to Exercise. During Employee's lifetime, Employee's option is exercisable only by Employee unless it has been disposed of pursuant to a Qualified Domestic Relations Order ("QDRO"). After the death of the Employee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by his Beneficiary. Section 4.2 - Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. Section 4.3 - Procedure for Exercise. The Option may be exercised with respect to shares of the Company's Common Stock granted to Employee in the amount specified ("Option Shares") at any time from the date that any portion of the Option described in 3.(a) becomes exercisable pursuant to Section 3.1(a) or 3.4 until the Option expires pursuant to Section 3.3 by: (i) delivery of written notification of exercise and payment in full either in cash or in Common Stock of the Company delivered to the Corporate Secretary of the Company for all Option Shares being purchased plus the amount of any federal and state income taxes required to be withheld by reason of the exercise of Employee's option; and (ii) if requested, within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's legal counsel, be necessary or desirable to comply with federal and state tax and securities laws and (iii) a bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Employee or other person then entitled to exercise such Option or portion, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that the Employee or other person then entitled to exercise such Option or portion will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. The record date of Employee's ownership of all Option Shares purchased under this option shall be the date upon which the above-described notification and payment are received by the Company, provided that any requested representations, undertakings and agreements are delivered within the time specified. In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Employee, appropriate proof of the right of such person or persons to exercise the Option. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representations, 8 undertakings and agreements and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection and the representations, undertakings and agreements referenced herein. Section 4.4 - Securities Law Restrictions. Employee understands and acknowledges that applicable securities laws govern and may restrict Employee's right to offer, sell, or otherwise dispose of any Option Shares. Employee may not offer, sell or otherwise dispose of any Option Shares unless Employee's offer, sale or other disposition thereof is registered under the Securities Act of 1933 (the "1933 Act") or an exemption from the registration requirements of the 1933 Act, such as the exemption afforded by Rule 144 of the Securities and Exchange Commission ("SEC"), is available. Employee further understands and acknowledges that one of the requirements of Rule 144 is that there shall be available adequate current public information with respect to the Company at the time of the proposed disposition of the Option Shares, and that the Company is not obligated hereunder to file reports with the SEC or otherwise make current public information available for such purpose or to take any other action to make available an exemption from the registration requirements of the 1933 Act. Employee agrees that Employee will not offer, sell or otherwise dispose of any Option Shares in any manner which would (i) require the Company to file any registration statement with the SEC; (ii) require the Company to amend or supplement any registration statement which the Company at any time may have on file with the SEC; or (iii) violate the 1933 Act, the rules and regulations promulgated thereunder or any other state or federal law. Section 4.5 - Conditions to Issuance of Stock Certificates. The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole and absolute discretion, determine to be necessary or advisable; and 9 (d) The payment to the Company (or other employer corporation) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. Section 4.6 - Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder. ARTICLE V OTHER PROVISIONS ---------------- Section 5.1 - Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. In its sole and absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the sole discretion of the Committee. Section 5.2 - Non-Transferability. Employee's option is personal to Employee and shall not be transferable by Employee otherwise than by will or the laws of descent and distribution or pursuant to a QDRO. Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Employee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; PROVIDED, HOWEVER, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution or pursuant to QDRO. Section 5.3 - Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events. Subject to the provisions of this Section 5.3, in the event of any transaction or event described in Section 2.2, a change in control, or similar 10 transaction by the Company or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, if the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee in its discretion is hereby authorized to provide for such terms and conditions as it deems appropriate, by action taken prior to the occurrence of such transaction or event: (i) for adjustments to such award in order to prevent the dilution or enlargement of rights thereunder or to provide for acceleration of benefits thereunder; (ii) for either the purchase of the Option for an amount of cash equal to the amount that could have been attained upon the exercise of the Option or realization of the Participant's rights had such option been currently exercisable or the replacement of such option, right or award with other rights or property selected by the Committee in its sole discretion; (iii) that it cannot be exercised after such event; (iv) that upon such event, such option, right or award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. No adjustment or action described in this Section 5.3 or in any other provision of the Agreement shall be authorized to the extent that such adjustment or action would cause the Option to fail to qualify under Section 162(m), as the case may be, or any successor provisions thereto. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions or Rule 16b-3 unless the Committee determines that the option or other award is not to comply with such exemptive conditions. Section 5.4 - Shares to Be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. Section 5.5 - Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Corporate Secretary, and any notice to be given to the Employee shall be addressed to him at the address maintained by the Corporation in its business records. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Employee shall, if the Employee is then deceased, be given to the Employee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.5. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Section 5.6 - Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 11 Section 5.7 - Approval by Shareholders. This grant is made pursuant to the 1996 Stock Awards Plan adopted by the Board of Directors on April 18, 1996. The Plan is subject to approval by the Shareholders within 12 months after April 18, 1996. Should the stockholders of the Company not approve such Plan, this Stock Option Grant Agreement shall become null and void and you shall have no rights hereunder. Section 5.8 - Notification of Disposition. The Employee shall give prompt notice to the Company of any disposition or other transfer of any shares of stock acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the date of granting the Option with respect to such shares or (b) within one (1) year after the transfer of such shares to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Employee in such disposition or other transfer. Section 5.9 - Governing Law. This Grant Agreement and the Plan shall be construed in accordance with and governed by the laws of the State of Utah. Section 5.10 - Conformity to Securities Laws. The Employee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Section 5.11 - Amendments. This Agreement and the Plan may be amended without the consent of the Optionee provided that such amendment would not impair any rights of the Optionee under this Agreement. No amendment of this Agreement shall, without the consent of the Optionee, impair any rights of the Optionee under this Agreement. Section 5.12 - Conformity With Plan. Employee's option is intended to conform in all respects with the Plan, a copy of which is attached hereto. Inconsistencies between this Grant Agreement and the Plan shall be resolved in accordance with the terms of the Plan. All definitions stated in the Plan shall be fully applicable to this Grant Agreement. Section 5.13 - Employment and Successors. Nothing herein or in the Plan confers any right or obligation on Employee to continue in the employ of the Company or any Affiliate or shall affect in any way Employee's right or the right of the Company or any Affiliate, as the case may be, which are hereby expressly reserved, to terminate Employee's employment at any time. Employee agrees that Employee is an Employee at will and can be terminated by the Company or any Affiliate at any time. Nothing herein or in the Plan is to be interpreted as an express or implied contract of employment. This Grant Agreement and the Plan shall be binding upon any successor or successors of the Company. 12 IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of this 21st day of August 1997. THIOKOL CORPORATION EMPLOYEE By: __________________________ By: ________________________ Corporate Secretary 13 EX-27 10
5 This schedule contains summary financial information extracted from Thiokol Corporation's Consolidated Balance Sheet at June 30, 1997, and Consolidated Statements of Operations at June 30, 1997, and is qualified in its entirety by reference to such financial statements. YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 51,369 0 148,235 1,841 84,595 311,612 595,034 311,864 854,363 139,492 1,920 20,538 0 0 500,584 854,363 890,129 931,534 723,689 745,554 68,940 874 1,728 115,312 32,883 82,429 0 0 0 82,429 4.41 4.38
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