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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Textron Inc.
(Name of Registrant as Specified In Its Charter)
Textron Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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Textron Logo
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NOTICE OF ANNUAL MEETING
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To The Shareholders of Textron Inc.:
The 1997 annual meeting of shareholders of Textron Inc. will be held on
Wednesday, April 23, 1997, at 10:30 a.m. AT THE WORTHINGTON HOTEL, 200 MAIN
STREET, FORT WORTH, TEXAS for the following purposes:
1. To elect five directors in Class I for a term of three years in
accordance with Textron's By-Laws (Item 1).
2. To approve the amendment of Article Fourth of Textron's Restated
Certificate of Incorporation to increase the number of authorized shares of
Textron Common Stock to 500 million, which is RECOMMENDED by the Board of
Directors (Item 2).
3. To approve an amendment to the Textron 1994 Long-Term Incentive
Plan, which is RECOMMENDED by the Board of Directors (Item 3).
4. To ratify the appointment of Ernst & Young LLP as Textron's
independent auditors for 1997, which is RECOMMENDED by the Board of
Directors (Item 4).
5. To transact such other business as may properly come before the
meeting.
You are entitled to vote all shares of Common and Preferred Stock
registered in your name at the close of business on February 28, 1997. If you
attend the meeting and desire to vote in person, your proxy will not be used. If
your shares are held in the name of your broker or bank and you wish to attend
the meeting in person, you should request your broker or bank to issue you a
proxy covering your shares.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS
SOON AS POSSIBLE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
A list of shareholders entitled to vote at the 1997 annual meeting will be
open to examination by any shareholder, for any purpose germane to the meeting,
for ten days prior to the meeting at Textron's corporate office, 40 Westminster
Street, Providence, Rhode Island 02903.
/s/ James F. Hardymon
James F. Hardymon
Chairman and
Chief Executive Officer
Providence, Rhode Island
March 12, 1997
<PAGE> 3
TEXTRON INC.
PROXY STATEMENT
GENERAL
This Proxy Statement, which is being mailed on or about March 12, 1997, to
each person entitled to receive the accompanying Notice of Annual Meeting, is
furnished in connection with the solicitation by the Board of Directors of
Textron Inc. of proxies to be voted at the annual meeting of shareholders to be
held on April 23, 1997, and at any adjournments thereof. Textron's principal
executive office is located at 40 Westminster Street, Providence, Rhode Island
02903.
All shareholders of record at the close of business on February 28, 1997,
will be entitled to vote. As of February 28, 1997, Textron had outstanding
83,027,315 shares of Common Stock; 239,498 shares of $2.08 Cumulative
Convertible Preferred Stock, Series A; and 105,085 shares of $1.40 Convertible
Preferred Dividend Stock, Series B (preferred only as to dividends), each of
which is entitled to one vote with respect to each matter to be voted upon at
the meeting.
ELECTION OF DIRECTORS
The Board of Directors is composed of three classes of directors,
designated Class I, Class II and Class III. One class of directors is elected
each year to hold office for a three-year term and until successors of such
class are duly elected and qualified. It is the intention of the persons named
in the accompanying proxy, unless otherwise instructed, to vote to elect Teresa
Beck, Lewis B. Campbell, R. Stuart Dickson, John D. Macomber and John W. Snow to
Class I. Each nominee presently serves as a director of Textron. Information is
furnished below with respect to each nominee for election and each director
continuing in office.
NOMINEES FOR DIRECTOR
CLASS I -- NOMINEES FOR TERMS EXPIRING IN 2000
(PHOTO OF TERESA BECK)
TERESA BECK DIRECTOR SINCE 1996
Ms. Beck, 42, is chief financial officer and a member of
the Executive Council of American Stores Company, one of the
nation's largest food and drug retailers. She joined American
Stores Company in 1982 and progressed through various
executive positions. Ms. Beck was named Senior Vice President
of Finance and Assistant Secretary in 1989, became Executive
Vice President, Administration in 1992 and served as Executive
Vice President, Finance from 1994 until assuming her current
position in 1995. She is a member of the Board of Directors of
The Children's Center (Utah) and Utah Partnership for
Educational and Economic Development, Inc.
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(PHOTO OF LEWIS B. CAMPBELL)
LEWIS B. CAMPBELL DIRECTOR SINCE 1994
Mr. Campbell, 50, is President and chief operating
officer of Textron. He joined Textron in 1992 as Executive
Vice President and chief operating officer and assumed his
present position in 1994. Prior to joining Textron he was a
Vice President of General Motors Corporation and General
Manager of its GMC Truck Division. He began his career at
General Motors in 1968 and progressed through various product
design, engineering, manufacturing and management positions.
Mr. Campbell served as a Vice President of General Motors and
General Manager of its Flint Automotive Division
Buick-Oldsmobile-Cadillac Group from 1988 to 1991 and became
General Manager of its GMC Truck Division in 1991. Mr.
Campbell is a director of Avco Financial Services, Inc., The Paul Revere
Corporation and Citizens Financial Group, Inc.
(PHOTO OF R. STUART DICKSON)
R. STUART DICKSON DIRECTOR SINCE 1984
Mr. Dickson, 67, was Chairman of the Board of Ruddick
Corporation, a diversified holding company with interests in
industrial sewing thread and regional supermarkets, from 1968
until 1994. Mr. Dickson currently serves as Chairman of the
Ruddick Executive Committee. Mr. Dickson is a director of
Ruddick Corporation, First Union Corporation, PCA
International, United Dominion Industries and Dimon
Incorporated. He is Chairman of the Charlotte-Mecklenburg
Hospital Authority and a trustee of Davidson College.
(PHOTO OF JOHN D. MACOMBER)
JOHN D. MACOMBER DIRECTOR SINCE 1993
Mr. Macomber, 69, is Principal of JDM Investment Group, a
private investment firm. He joined the firm as Principal in
1992. Mr. Macomber was chief executive officer of Celanese
Corporation, a diversified chemical company, from 1977 to 1986
and also served as Chairman from 1980 to 1986. He served as
Chairman and President of the Export-Import Bank of the United
States from 1989 to 1992. He is a director of Bristol Myers
Squibb Co., The Brown Group, Inc., Lehman Brothers Holdings
Inc., Pilkington Ltd. and Xerox Corporation. He is also a
director of The Atlantic Council of the United States, The
French-American Foundation and the National Executive Services
Corps. Mr. Macomber is on the Advisory Board of the Center for Strategic and
International Studies and STRIVE. He is a trustee of The Folger Library and a
member of the Council on Foreign Relations and the Bretton Woods Committee. Mr.
Macomber is Chairman of the Council for Excellence in Government and a trustee
of the Carnegie Institute of Washington.
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DIRECTORS CONTINUING IN OFFICE
CLASS II -- TERMS EXPIRE IN 1998
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(PHOTO OF JOHN W. SNOW)
JOHN W. SNOW DIRECTOR SINCE 1991
Mr. Snow, 57, is Chairman, President and chief executive
officer of CSX Corporation, an international transportation
company that offers a variety of rail, container-shipping,
trucking and barge services. He joined a predecessor company
of CSX Corporation in 1977 as Vice President-Government
Affairs and progressed through various executive positions.
Mr. Snow became President and a director of CSX Corporation in
1988, chief executive officer in 1989 and Chairman in 1991.
Mr. Snow is a director of USX Corporation, NationsBank
Corporation, Bassett Furniture Industries, Inc. and Circuit
City Stores, Inc. He is Chairman of the Business Roundtable and a member of the
board of trustees of Johns Hopkins University.
PAUL E. GAGNE DIRECTOR SINCE 1995
(PHOTO OF PAUL E. GAGNE)
Mr. Gagne, 50, is President and chief executive officer
of Avenor Inc., a forest products company. He joined Avenor in
1981 as chief internal auditor and progressed through various
executive positions. Mr. Gagne became President and chief
operating officer in 1990 and assumed his present position in
1991. Mr. Gagne is Chairman of Pacific Forest Products Ltd., a
subsidiary of Avenor, a director of Inmet Mining Corporation,
Wajax Limited, Celanese Canada Limited and Textron Canada
Limited. He is a member of the board of C.D. Howe Institute
and the Conference Board of Canada and a director of the World
Business Council for Sustainable Development.
(PHOTO OF JAMES F. HARDYMON)
JAMES F. HARDYMON DIRECTOR SINCE 1989
Mr. Hardymon, 62, is Chairman and chief executive officer
of Textron. He joined Textron in 1989 as President and chief
operating officer, became chief executive officer in 1992,
assumed the additional title of Chairman in 1993 and
relinquished the title of President to Mr. Campbell in 1994.
Prior to joining Textron, Mr. Hardymon was President, chief
operating officer and a director of Emerson Electric Co., a
global manufacturer of electrical and electronic products and
systems. Mr. Hardymon joined Emerson Electric's Browning
Manufacturing Division in 1961 and progressed through various
executive positions at Emerson. Mr. Hardymon served as Vice
Chairman and chief operating officer of Emerson from 1987 to
1988, and then served as President and chief operating officer of Emerson until
joining Textron in 1989. Mr. Hardymon also served as a director of Emerson from
1987 until he joined Textron. Mr. Hardymon is a director of Avco Financial
Services, Inc., The Paul Revere Corporation and Fleet Financial Group, Inc., a
trustee of the University of Kentucky and a member of the board of the National
Association of Manufacturers.
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(PHOTO OF DANA G. MEAD)
DANA G. MEAD DIRECTOR SINCE 1996
Mr. Mead, 61, is Chairman and chief executive officer of
Tenneco Inc., a global manufacturing company that owns and
manages businesses in two sectors: automotive parts and
packaging. He joined the company as President and chief
operating officer in 1992 and assumed his current position in
1994. Prior to joining Tenneco, Mr. Mead was Executive Vice
President and a director of International Paper Company, a
manufacturer of paper, pulp and wood products. He joined
International Paper in 1978, became Senior Vice President in
1981 and Executive Vice President in 1988. Mr. Mead is also a
director of Unisource Worldwide, Inc. and Baker Hughes Incorporated in addition
to Newport News Shipbuilding Inc. and Case Corporation, both former Tenneco
subsidiaries. Mr. Mead is the U.S. Business Chairman of the Transatlantic
Business Dialogue, Chairman of The Citizens Democracy Corps, a lifetime trustee
of the West Point Association of Graduates and a member of the M.I.T.
Corporation. He was the 1995-1996 Chairman of the National Association of
Manufacturers and Chairs its Executive Committee. Mr. Mead is also a
Presidential Commissioner on White House Fellowships.
(PHOTO OF BARBARA SCOTT PREISKEL)
BARBARA SCOTT PREISKEL DIRECTOR SINCE 1975
Mrs. Preiskel, 72, is a director of American Stores
Company, General Electric Company, Massachusetts Mutual Life
Insurance Company and The Washington Post Company. She is a
trustee of Wellesley College and Tougaloo College. Mrs.
Preiskel is a former Senior Vice President and General Counsel
of the Motion Picture Association of America, Inc. She joined
the Association in 1959 as Deputy Attorney, was elected a Vice
President in 1971 and served as Senior Vice President from
1977 to 1983.
(PHOTO OF THOMAS B. WHEELER)
THOMAS B. WHEELER DIRECTOR SINCE 1993
Mr. Wheeler, 60, is Chairman and chief executive officer
of Massachusetts Mutual Life Insurance Company. He was a
member of the Massachusetts Mutual field sales force from 1962
to 1983, served as Executive Vice President of Massachusetts
Mutual's insurance and financial management line from 1983 to
1986, became President and chief operating officer in 1987 and
assumed his current position in 1988. He is a director of The
Bank of Boston Corporation and Chairman of Oppenheimer
Acquisition Corp. and David L. Babson & Co. Inc. Mr. Wheeler
is Chairman of Jobs for Massachusetts and Springfield College
and a trustee of the Basketball Hall of Fame and the
Springfield Orchestra Association.
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CLASS III -- TERMS EXPIRE IN 1999
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H. JESSE ARNELLE DIRECTOR SINCE 1993
(PHOTO OF H. JESSE ARNELLE)
Mr. Arnelle, 63, is senior partner in the law firm of
Arnelle, Hastie, McGee, Willis & Greene, San Francisco. The
firm of Arnelle and Hastie, which he co-founded in 1985,
merged with McGee, Willis & Greene in 1994. He is a director
of FPL Group, Inc., Wells Fargo & Company and Wells Fargo
Bank, N.A., WMX Technologies, Inc., Eastman Chemical
Corporation, Armstrong World Industries and Union Pacific
Resources, Inc. Mr. Arnelle is Chairman of the Board of
Trustees of Pennsylvania State University and a director of
the National Football Foundation and College Hall of Fame.
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BRIAN H. ROWE DIRECTOR SINCE 1995
(PHOTO OF BRIAN H. ROWE)
Mr. Rowe, 65, is the retired Chairman and now a
consultant of GE Aircraft Engines, General Electric Company, a
manufacturer of combustion turbine engines for aircraft,
marine and industrial applications, and Executive Vice
Chairman of American Regional Aircraft Industry, Inc. He
joined General Electric in 1957 and held various senior
management positions with GEAE. Mr. Rowe became President and
chief executive officer of GEAE in 1979 and Chairman in 1993,
serving in that capacity until his retirement in 1994. Mr.
Rowe is a director of Atlas Air, Inc., B/E Aerospace, Canadian
Marconi, Fifth Third Bank, Stewart & Stevenson Services, Inc.
and Cincinnati Bell Inc.
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SAM F. SEGNAR DIRECTOR SINCE 1982
(PHOTO OF SAM F. SEGNAR)
Mr. Segnar, 69, is the retired Chairman and chief
executive officer of Enron Corporation and former Chairman of
the Board of Vista Chemical Co. and Collecting Bank, N.A.,
Houston, TX. Mr. Segnar is a director of Seagull Energy
Corporation, Gulf States Utilities Company, ProBank, N.A. and
Mapco Inc. and an advisory director of Pilko and Associates
Inc. He is a trustee of the John Cooper School, the Texas A&M
Institute of Bio-Science and Technology and the Texas A&M
School of Business Administration. He is a member of the
National Advisory Board of The First Commercial Bank
Corporation, Little Rock, AK.
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JEAN HEAD SISCO DIRECTOR SINCE 1975
(PHOTO OF JEAN HEAD SISCO)
Mrs. Sisco, 71, is a partner in the international trade
consulting firm of Sisco Associates. She is a director of The
Neiman Marcus Group, Inc., Santa Fe Pacific Gold Corporation,
Chiquita Brands International, Inc., Washington Mutual
Investors Fund, Inc., K-Tron International, Inc. and American
Funds -- Series I. She held various executive offices with the
Washington, D.C. department store chain of Woodward & Lothrop
from 1950 to 1974. She served as a consultant on governmental
and public affairs to the American Retail Federation from 1974
to 1977. She is Treasurer of Reading is Fundamental, past
Chairman of the National Association of Corporate Directors,
Chairman of the Leadership Foundation and Secretary of the International Women's
Forum.
<PAGE> 8
MARTIN D. WALKER DIRECTOR SINCE 1986
(PHOTO OF MARTIN D. WALKER)
Mr. Walker, 64, is Chairman of M. A. Hanna Company, an
international specialty chemicals company. He joined the
company in 1986 as Chairman and chief executive officer, and
relinquished the title of chief executive officer in January,
1997. From 1982 to 1986, Mr. Walker was Executive Vice
President and a member of the Office of the Chief Executive of
Rockwell International Corporation, a multi-industry company
engaged in electronics, aerospace, automotive and graphics
businesses. Mr. Walker served as Senior Vice President of
Rockwell and President of its Automotive Operations from 1978
to 1982. Mr. Walker was a director of Ex-Cell-O Corporation
from 1983 until its acquisition by Textron in 1986. Mr. Walker
is a director of Comerica, Inc., The Reynolds and Reynolds Company and The
Timken Company.
THE BOARD OF DIRECTORS
Meetings and Organization
During 1996, the Board of Directors met ten times and the Executive
Committee of the Board met once. The Board has standing Audit, Nominating and
Board Affairs, Organization and Compensation, and Pension Committees.
Compensation of Directors
For their service on the Board, non-employee directors are paid an annual
retainer of $41,000 plus $1,200 for each meeting of the Board attended.
Non-employee directors who serve on the Executive Committee or one of the
standing committees receive $1,200 for each committee meeting attended; and the
chairman of each standing committee receives an additional $5,000 per year.
Textron maintains a deferred income plan for non-employee directors under
which they may defer all or part of their cash compensation until retirement
from the Board. Deferrals are made either into an interest bearing account or
into an account consisting of Textron stock units, which are equivalent in value
to Textron Common Stock. Directors must defer a minimum of $16,000 of their
annual retainer into the stock unit account. At the end of each calendar
quarter, Textron will contribute to the stock unit account an additional amount
equal to 25 percent of the amount deferred by the director into this account
during the quarter. One half of this additional amount will vest on December 31
of the year in which payment was deferred and one-half on the next December 31.
Textron also credits dividend equivalents to the stock unit account. In
addition, once a year, on April 30, Textron will contribute to the stock unit
account an amount equal to 20 percent of the then current annual retainer to
each director who is serving as a director on the date of Textron's annual
meeting of shareholders and has been a director for more than three months.
Each non-employee director has received 1,000 restricted shares of Textron
Common Stock. Except in the case of the director's death or disability or a
change in control of Textron (as described below under the heading "Employment
Contracts and Change In Control Arrangements" on page 19 of this Proxy
Statement), the director may not sell or transfer the shares until he or she has
completed all of his or her successive terms as a director and at least 5 years
of Board service.
Employee directors do not receive fees or other compensation for their
service on the Board or its committees. Each member of the Board is reimbursed
for expenses incurred in connection with each Board or committee meeting
attended.
<PAGE> 9
Audit Committee
The Audit Committee recommends to the Board the selection of independent
auditors to conduct the annual audit of Textron's financial statements; reviews
the scope and costs of the audit plans of the independent auditors and internal
auditors and the scope and costs of non-audit services provided by the
independent auditors; reviews with management and the independent auditors
Textron's annual financial statements; reviews Textron's compliance programs;
and reviews with management, the independent auditors and the internal auditors
Textron's internal accounting controls. The Audit Committee is available to meet
privately and separately with the independent auditors and the internal auditors
without management being present. The following four non-employee directors
presently comprise the Audit Committee: Mrs. Sisco (Chairman), Mr. Dickson, Mr.
Gagne and Mr. Wheeler. During 1996, the Audit Committee met five times. Various
members of management are regularly invited to be present at Audit Committee
meetings. The Vice President-Audit and Business Ethics has direct access to the
Audit Committee and to Textron's chief executive officer.
Nominating and Board Affairs Committee
The Nominating and Board Affairs Committee reviews the qualifications of,
and recommends to the Board, individuals for nomination by the Board as
directors of Textron. Textron's By-Laws contain a provision which imposes
certain requirements upon nominations for directors other than those made by the
Board. In making its recommendations to the Board, the Nominating and Board
Affairs Committee will consider suggestions regarding possible candidates from a
variety of sources, including shareholders. Shareholders wishing to recommend
individuals as candidates for nomination by the Board should submit their
recommendations in writing by December 1 of the year preceding the annual
meeting of shareholders to the Nominating and Board Affairs Committee, c/o the
Secretary of Textron, along with a description of the proposed candidate's
qualifications and other pertinent biographical information as well as a written
consent from the proposed candidate. In addition, the Nominating and Board
Affairs Committee conducts reviews and makes recommendations to the Board on the
organization of the Board, Board compensation, overall performance of the Board
and other matters of corporate governance. The following four non-employee
directors presently comprise the Nominating and Board Affairs Committee: Mrs.
Preiskel (Chairman), Mr. Macomber, Mr. Rowe and Mr. Segnar. During 1996, the
Nominating and Board Affairs Committee met three times.
Organization and Compensation Committee
The Organization and Compensation Committee recommends to the Board
compensation arrangements for senior executive officers and approves
compensation arrangements for other executive officers. In addition, the
Organization and Compensation Committee reviews the responsibilities and
performance of senior executive officers, plans for their succession, and
approves changes in executive officers. The following five non-employee
directors presently comprise the Organization and Compensation Committee: Mr.
Walker (Chairman), Mr. Arnelle, Mr. Macomber, Mrs. Preiskel and Mr. Segnar.
During 1996, the Organization and Compensation Committee met four times.
Pension Committee
The Pension Committee is responsible for overseeing the operations of
Textron's tax-qualified retirement plans. The Pension Committee recommends to
the Board the selection of independent actuaries and auditors for the major
qualified plans and reviews the management of investments, the accounting for
and the valuation of plans, and any material changes in their design and
funding. The following four non-employee directors presently comprise the
Pension Committee: Mr. Wheeler (Chairman), Mr. Arnelle, Mr. Rowe and Mr. Snow.
During 1996, the Pension Committee met twice.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table lists all shareholders known by Textron to own
beneficially more than five percent of any class of Textron's voting stock as of
December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------------- --------------------------------- ----------------- --------
<S> <C> <C> <C>
Common Stock............... Bankers Trust Company, 280 Park 15,158,267 shares(1) 18.3%
Avenue, New York, New York 10017
Common Stock............... The Capital Group Companies, Inc. 4,227,100 shares(2) 5.1%
333 South Hope Street Los Ange-
les, California 90071
</TABLE>
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(1) Bankers Trust Company has informed Textron that the reported number
includes 2,320,765 shares as to which it has sole investment power and 5,000
shares as to which it shares investment power, 38,550 shares which it holds as
Trustee under the Paul Revere Savings Plan and as to which it disclaims any
beneficial interest and 12,793,952 shares (15.45% of the class) which it holds
as Trustee under the Textron Savings Plan and as to which it disclaims any
beneficial interest. Shares held by Bankers Trust Company as Trustee under the
Textron Savings Plan and Paul Revere Savings Plan will be voted at the annual
meeting in accordance with instructions from the participants in the Plans, or,
in the absence of instructions, by Bankers Trust Company as Trustee in
accordance with the Plans.
(2) Pursuant to a statement filed by The Capital Group Companies, Inc. with
the Securities and Exchange Commission in accordance with Rule 13d of the
Securities Exchange Act of 1934 on behalf of itself, The Capital Group
Companies, Inc. has reported that it has sole voting power over 1,764,700 shares
and sole investment power over 4,227,100 shares. The Capital Group Companies,
Inc. disclaims any beneficial interest in the shares.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below in the column headed "Number of Shares of Common Stock" are
the number of shares of all classes of Textron stock beneficially owned by each
director of Textron, by each executive officer of Textron named in the Summary
Compensation Table on page 15 of this Proxy Statement and by all current
directors and executive officers as a group. Directors and executive officers as
a group beneficially owned 1.08% of the outstanding shares of Common Stock. No
director or executive officer beneficially owned in excess of 1% of the
outstanding shares of Common Stock. Ownership indicated is as of December 31,
1996.
The column headed "Number of Shares of Common Stock" includes shares held
for Textron executive officers by the bank trustee under the Textron Savings
Plan, shares obtainable upon the exercise of stock options exercisable within 60
days of December 31, 1996, and shares held jointly. Each director and officer
has sole voting and investment power over his or her shares, except in those
cases in which the voting or investment power is shared with the bank trustee
under the Textron Savings Plan or as otherwise noted. An objective of Textron's
director and executive compensation programs is to align the financial interests
of the directors and the executive officers with that of shareholders.
Accordingly, the value of a significant portion of the directors' and the
executive officers' total compensation is dependent upon the value they generate
on behalf of shareholders. The column headed "Total Common Stock-Based Holdings"
includes Common Stock beneficially owned and other Common Stock-based holdings
in the form of stock units, performance share
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<PAGE> 11
units, restricted stock, retirement stock incentive units and cash equivalent
share awards (the value of which will increase or decrease in relation to the
increase or decrease in the price of Common Stock).
<TABLE>
<CAPTION>
NUMBER TOTAL
OF SHARES COMMON STOCK-
NAME OF COMMON STOCK(1)(2) BASED HOLDINGS
- ------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
H. Jesse Arnelle....................................... 1,133 3,316
Teresa Beck............................................ 1,050 1,153
Lewis B. Campbell...................................... 131,461 216,689
R. Stuart Dickson...................................... 20,591 24,376
Paul E. Gagne.......................................... 1,014 1,845
James F. Hardymon...................................... 175,408 957,477
Wayne W. Juchatz....................................... 20,418 39,367
Stephen L. Key......................................... 19,035 59,660
John D. Macomber....................................... 5,597 8,413
Dana G. Mead........................................... 1,000 1,184
Barbara Scott Preiskel................................. 2,783 10,945
Brian H. Rowe.......................................... 1,016 2,173
Sam F. Segnar.......................................... 1,997 9,059
Jean Head Sisco........................................ 2,035 8,163
John W. Snow........................................... 2,000 7,262
Martin D. Walker....................................... 1,787 8,664
William F. Wayland..................................... 58,160 118,864
Thomas B. Wheeler...................................... 1,082 6,663
All current Directors and Executive Officers as a Group
(38 persons)......................................... 892,386(3) 2,108,200
</TABLE>
- ---------------
(1) Includes the following shares as to which voting and investment powers
are shared: Mr. Dickson -- 17,000; Mr. Segnar -- 500; and Mr. Snow -- 1,000.
(2) Includes the following shares obtainable upon the exercise of stock
options exercisable within 60 days of December 31, 1996: Mr. Campbell --
127,000; Mr. Hardymon -- 157,325; Mr. Juchatz -- 15,249; Mr. Key -- 18,750; and
Mr. Wayland -- 51,750.
(3) Includes 1,819 shares as to which voting and investment powers are
shared and 731,018 shares obtainable upon the exercise of stock options
exercisable within 60 days of December 31, 1996.
------------------------
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation:
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of Textron's executive compensation program is to attract and
retain the most qualified executives to lead our diversified corporation and to
motivate them to produce strong financial performance for the benefit of our
shareholders. To meet this objective, the total compensation program is designed
to be competitive with the total compensation programs provided by other
corporations of comparable revenue size in industries with which we compete for
customers and executives, and to provide total compensation opportunities at or
above the 75th percentile of those corporations for achieving outstanding
performance. Total compensation opportunities for 1996 for the chief executive
officer and for the other executive officers in
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general were consistent with this philosophy. In determining competitive
compensation for each of the components of executive compensation described
below, Textron analyzes data from several independent compensation surveys. The
companies included in the compensation surveys (the "surveyed companies") are
not identical to those included in the peer group compiled for the performance
graph on page 20 of this Proxy Statement, although many companies are included
in both groups. The number of surveyed companies is greater than the number of
companies included in the peer group.
EXECUTIVE COMPENSATION PROGRAM
Each year the Organization and Compensation Committee, which is comprised
entirely of non-employee directors, recommends to the Board of Directors
compensation arrangements for senior executive officers, including the officers
named in the Summary Compensation Table on page 15 of this Proxy Statement (the
"Named Officers") and approves compensation arrangements for other executive
officers. Such compensation arrangements include annual salary levels, salary
grade ranges, annual and long-term incentive plan design, participation and
grants thereunder, standards of performance for new grants, and payouts from
past grants. The full Board of Directors unanimously approved the
recommendations made by the Organization and Compensation Committee for 1996.
Messrs. Hardymon and Campbell did not, however, participate in the deliberations
of the Organization and Compensation Committee or Board of Directors regarding
their own compensation.
Textron's executive compensation program is comprised of three principal
components: salary, annual incentive compensation and long-term incentive
compensation.
SALARY
Salary ranges for Textron's executive officers, which were increased by 2.7
percent for 1996, were set so that the midpoints of the ranges approximate the
50th percentile for comparable positions at the surveyed companies. Individual
salaries were considered for adjustment periodically, based on position in
salary range, individual performance and potential, and/or change in duties or
level of responsibility.
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in Textron's Annual Incentive
Compensation Plan. In 1996, target annual incentive compensation opportunities
were established so that the combination of base salary and target annual
incentive awards (60% of salary for the chief executive officer and the chief
operating officer and either 50% or 45% of salary for the other Named Officers)
would approximate the 50th percentile of compensation for comparable positions
in the surveyed companies. Annual incentive payments are generally limited to
twice the target award level, but the Committee can make payments above these
levels if it deems performance warrants. The factors considered by the Committee
in recommending 1996 incentive compensation payments for executive officers
included the degree to which certain overall corporate and individual
performance objectives were achieved. In determining the level of 1996 annual
incentive compensation for the executive officers, the Committee evaluated
performance relative to three key corporate financial objectives: earnings per
share, free cash flow and return on equity. The 1996 results exceeded each of
these objectives. Individual awards were also based on the Committee's
assessment of each executive officer's performance against non-financial
objectives which reflect their specific responsibilities. The annual incentive
compensation earned by the Named Officers is reported in the "Bonus" column of
the Summary Compensation Table on page 15 of this Proxy Statement.
LONG-TERM INCENTIVE COMPENSATION
Under the Textron 1994 Long-Term Incentive Plan (the "1994 Plan"),
executive officers may be granted awards of stock options, performance share
units, or both. Ranges established by the Committee for stock option and
performance share unit grants enable the Committee to make grants that can
produce total
11
<PAGE> 13
compensation opportunities at or above the 75th percentile for comparable
positions at the surveyed companies as warranted by performance.
1996 Grants of Stock Options
Pursuant to the 1994 Plan, the Committee recommended to the Board of
Directors the number of stock options to be granted based on the executive
officer's functions and responsibilities, past and expected future performance,
potential contributions to Textron's profitability and growth and prior option
grants. Overall past corporate performance was not considered in determining the
number of stock options to be granted. In accordance with the 1994 Plan, stock
options granted in 1996 were at a purchase price equal to 100% of the fair
market value of Textron Common Stock at the time of the option grant. The grants
were made within the ranges referred to above under the heading, "Long-Term
Incentive Compensation." Information on the stock options granted during fiscal
year 1996 to the Named Officers appears in the table on page 16 of this Proxy
Statement.
1996 Payouts of Previously Granted Performance Share Units
The 1996 payouts to executive officers were for performance share units
granted for the three-year performance cycle ending December 28, 1996. The
Committee recommended to the Board of Directors payouts in a range of 50% to
100% of such performance share unit grants. The payouts were generally based 75%
on three-year aggregate earnings per share and 25% on the Committee's evaluation
of free cash flow, balance sheet strength, succession planning, shareholder
value and the executive officer's performance. The 1996 payouts for several
executive officers, including Messrs. Key and Juchatz, both of whom joined
Textron in 1995, were for performance share units granted for a two-year
performance cycle ending December 28, 1996. Information on the 1996 payouts to
the Named Officers of previously granted performance share units is reported in
the "LTIP Payouts" column of the Summary Compensation Table on page 15 of this
Proxy Statement.
1996 Performance Share Unit Grants
For the three-year performance cycle starting at the beginning of 1997,
each performance share unit granted and earned under the 1994 Plan will be
valued for payment purposes at the market value of Textron Common Stock at the
end of the three-year performance period. The Committee recommended to the Board
of Directors the number of performance share units to be granted to executive
officers for the 1997-1999 performance cycle based on the functions and
responsibilities of the executive officer and the executive officer's potential
contributions to Textron's profitability and growth. The number of performance
share units granted in prior years was taken into consideration in making the
new grants, but past corporate performance was not specifically taken into
consideration. Grants of 1997-1999 performance share units were made to
executive officers within the ranges previously referred to under the heading,
"Long-Term Incentive Compensation," on page 11 of this Proxy Statement. The
number of 1997-1999 performance share units that will actually be earned will
generally be based 75% on earnings per share growth and 25% on the Committee's
evaluation of balance sheet strength/asset management, shareholder value (common
stock price, book value per common share, dividends, and common stock price
performance versus proxy peer group) and the executive officer's individual
performance. During 1996, performance share units were also granted to two newly
named executive officers for a special 1997-1998 performance cycle and the
1997-1999 performance cycle. Such grants were made as described above.
Information on the 1996 grants of performance share units appears in the
"Long-Term Incentive Plan Awards in Last Fiscal Year" table on page 17 of this
Proxy Statement.
STOCK OWNERSHIP
An objective of Textron's executive compensation program is to align the
financial interests of the executive officers with the best interests of
shareholders. The Committee also seeks to promote stock
12
<PAGE> 14
ownership and to base a substantial component of the executive officers' total
compensation on the value they generate on behalf of Textron's shareholders.
In addition to the Long-Term Incentive Plan described above, the Textron
Deferred Income Plan, in which all Named Officers participate, provides that
annual incentive compensation earned in excess of 100% of target must be
deferred in stock units which are equivalent in value to shares of Textron
Common Stock. The Deferred Income Plan also provides participants the
opportunity to defer up to 25% of base salary and up to 100% of annual and
long-term incentive compensation. Elective deferrals may be invested in either
an interest bearing account or in a stock unit account. Textron contributes a
25% premium on amounts the executives elect to defer in the stock unit account.
At least 50% of elective deferrals must be invested in stock units.
CEO COMPENSATION
As in the past, in determining the overall level of Mr. Hardymon's
compensation and each component thereof, the Committee took into consideration
information provided by independent, professional compensation consultants. As
reported in the Summary Compensation Table on page 15 of this Proxy Statement,
Mr. Hardymon's salary was $1,050,000 for 1996. In determining this amount, the
Committee took into account his performance and the fact that Mr. Hardymon's
1995 base salary of $925,000 was at the 60th percentile of compensation paid to
chief executive officers at the surveyed companies. The increase for 1996 placed
Mr. Hardymon's base salary at approximately the 70th percentile for his
position.
The Committee recommended and the Board approved a 1996 annual incentive
award of $1,500,000 reflecting the Committee's assessment of Mr. Hardymon's
performance against his objectives. Specifically, the Committee determined that
Mr. Hardymon exceeded all of his objectives, including the objectives relative
to three of the key financial measurements in the Textron plan: earnings per
share, free cash flow and return on equity. Mr. Hardymon's non-financial
objectives consisted of (1) maintaining shareholder value at or above that of
Textron's proxy peer group, (2) bringing "challenged" divisions to an acceptable
return level or rationalizing or divesting them, (3) putting emphasis on the
growth (international markets and acquisitions) portion of Textron's long-term
strategic plan, (4) developing a thorough plan for the role that Paul Revere
will play in the future of Textron, and (5) continuing to maintain the favorable
public image enjoyed by Textron with each of its constituencies. All of the
non-financial objectives were fully achieved and Mr. Hardymon's performance was
considered outstanding by the Committee and the Board. Based on competitive
compensation information which the Committee has reviewed, the Committee
believes that for 1996, Mr. Hardymon's annual compensation (salary plus annual
incentive compensation) was in the top quartile of the surveyed companies, which
is consistent with Textron's executive compensation philosophy considering
Textron's performance.
The Committee determined that all of the performance share units granted to
Mr. Hardymon for the 1994-1996 performance cycle were earned since aggregate
earnings per share (upon which 75% of the award was based) exceeded the targeted
level for that period and performance objectives in the following areas (upon
which 25% of the award was based) were achieved or exceeded: aggregate
three-year free cash flow, balance sheet strength/asset management, succession
planning and shareholder value, as measured by common stock prices, book value
per common share, annual dividend rate and common stock price versus proxy peer
group. The value of the 1994-1996 performance share units earned by Mr. Hardymon
was $1,856,800 and was determined by multiplying the number of earned
performance share units by the market price of Textron Common Stock for a ten
day period following the end of the award period in accordance with the terms of
the 1994 Plan. The value of the units earned was favorably impacted by the
significant (over 60%) increase in the market value of Textron Common Stock
since the units were granted in December 1993.
Mr. Hardymon received an award of 22,000 performance share units for the
1997-1999 cycle. This award compares to 25,000 performance share units granted
for the 1996-1998 cycle. The decrease in the number of
13
<PAGE> 15
the performance share units granted for the 1997-1999 cycle reflects the
increased market value of Textron Common Stock. Mr. Hardymon was not granted any
stock options in 1994, 1995 or in 1996, and the Committee does not intend to
grant him any further stock options. Instead, the Committee granted Mr. Hardymon
500,000 retirement stock incentive units in 1994, designed to retain him and
reward him commensurately with total shareholder returns during the five year
period ending in 1999. The retirement stock incentive units, which are payable
in cash upon retirement, or earlier in certain cases, provide incentive
compensation opportunities identical to stock options, since payouts will equal
the increase in market price of Textron Common Stock on the date of payment over
the market price on the date the units were granted.
Mr. Hardymon also received compensation under various Textron benefit and
compensation plans (see footnotes (2), (4) and (5) to the Summary Compensation
Table on page 15 of this Proxy Statement).
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code provides that no U.S. income
tax deduction is allowable to a publicly held corporation for compensation in
excess of $1 million paid to the chief executive officer or any other employee
whose compensation is required to be reported in the Summary Compensation Table,
if those individuals are employed by the corporation at year end.
"Performance-Based Compensation" is exempt from the $1 million limitation.
Performance-Based Compensation must be based upon meeting pre-established and
objective performance goals under a plan which has been approved by
shareholders. Performance goals are not objective if the Committee has any
discretion to pay amounts in excess of those earned in accordance with the
achievement of pre-established performance criteria or to pay such compensation
when the performance criteria are not met. Compensation deferred under the
Deferred Income Plan for Textron Key Executives is not subject to the $1 million
limitation.
Textron's policy has been to preserve Committee discretion in determining
awards earned under Textron's annual and long-term incentive plans. Textron
stock options granted under the 1994 Plan do qualify as Performance-Based
Compensation. To further reduce the amount of compensation that will not qualify
for a tax deduction, the Committee is recommending an amendment to the 1994 Plan
to qualify as Performance-Based Compensation awards earned for a major portion
of performance share units granted under the 1994 Plan. This amendment is
described under the heading "Amendment to Textron 1994 Long-Term Incentive Plan"
on page 23 of this Proxy Statement. Textron will continue to preserve Committee
discretion under Textron's Annual Incentive Compensation Plan and a portion of
the 1994 Plan.
The Deferred Income Plan for Textron Key Executives encourages individuals,
including those whose income might otherwise be subject to the $1 million
limitation, to defer incentive compensation amounts until the individual's
employment with Textron ends, at which time the deductibility of such
compensation will not be subject to Section 162(m). In addition, annual
incentive compensation payable to executive officers in excess of target levels
must be deferred. Consequently, Textron believes that the $1 million limitation
of Section 162(m) of the Internal Revenue Code will not have a material effect
on Textron's income tax expense in the near term. The Committee will continue to
assess the effect of these tax rules on Textron.
This report is submitted by the Organization and Compensation Committee.
MARTIN D. WALKER, CHAIRMAN
H. JESSE ARNELLE
JOHN D. MACOMBER
BARBARA SCOTT PREISKEL
SAM F. SEGNAR
14
<PAGE> 16
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation of (i) Textron's chief executive officer at the end of 1996 and
(ii) the four most highly compensated executive officers of Textron other than
the chief executive officer, who were serving as executive officers at the end
of 1996 (collectively, the "Named Officers"), for Textron's 1994, 1995 and 1996
fiscal years. Compensation which was deferred by the Named Officers under
Textron's Deferred Income Plan is included below as compensation paid.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ------------------------------------------------
AWARDS PAYOUTS
----------------------------------- -----------
RESTRICTED SECURITIES LTIP
NAME AND PRINCIPAL STOCK AWARDS UNDERLYING PAYOUTS ALL OTHER
POSITION(1) YEAR SALARY ($) BONUS ($) ($)(4) OPTIONS/SARS (#) ($) COMPENSATION ($)(5)
- ------------------- ----- ---------- ------------ ----------------- ---------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. F. Hardymon 1996 $1,050,000 $1,613,019(2) $ 113,019 $-0- $1,856,800 $ 348,555
Chairman and 1995 925,000 1,472,000 122,000 -0- 1,449,000 325,393
Chief Executive 1994 825,000 1,000,000 -0- 500,000 481,000 257,878
Officer
L. B. Campbell 1996 600,000 600,000 -0- 32,000 1,114,080 169,320
President and 1995 530,000 550,000 1,848,438 40,000 514,395 159,016
Chief Operating 1994 450,000 530,000 -0- 50,000 235,363 138,826
Officer
W. F. Wayland 1996 425,000 357,500(2) 12,500 16,000 631,312 110,647
Executive Vice 1995 385,000 320,000 -0- 17,500 492,660 105,754
President 1994 350,000 350,000 -0- 23,000 184,075 100,590
Administration and
Chief Human
Resources Officer
S. L. Key 1996 405,000 340,000 -0- 16,000 649,880 20,250
Executive Vice 1995 272,700 927,000(3) 1,138,750 37,500 -0- 4,010
President and 1994
Chief Financial
Officer
W.W. Juchatz 1996 340,000 260,000 -0- 13,000 603,460 17,000
Executive Vice 1995 243,750 890,510(3) -0- 30,500 -0- 6,634
President and 1994
General Counsel
</TABLE>
(1) Mr. Key joined Textron as Executive Vice President and Chief Financial
Officer in April 1995. Mr. Juchatz joined Textron as Executive Vice
President and General Counsel in April 1995.
(2) The amounts listed as paid to Messrs. Hardymon and Wayland for 1996 include
vested contributions made by Textron ($113,019 in the case of Mr. Hardymon,
and $12,500 in the case of Mr. Wayland) as a result of their respective
elections to defer compensation into the stock unit fund of the Deferred
Income Plan.
(3) The amounts listed as paid to Messrs. Key and Juchatz for 1995 include
$557,000 and $550,510, respectively, to replace lost compensation awards
from their prior employers.
(4) Amounts listed for Messrs. Hardymon and Wayland are not restricted stock but
are unvested contributions made by Textron under the Deferred Income Plan as
a result of such officers' elections to defer compensation into the stock
unit fund of the Deferred Income Plan. These contributions are credited in
the form of stock units, which are not actual shares of stock but are units
paid in cash with a value that varies with the price of Textron Common
Stock.
(footnotes continued on following page)
15
<PAGE> 17
(footnotes continued from preceding page)
As of December 28, 1996, 1,551 unvested stock units with a market value of
$144,825 were credited to the account of Mr. Hardymon and 173 unvested stock
units with a market value of $16,154 were credited to the account of Mr.
Wayland. Upon Mr. Hardymon's retirement from Textron on or after November
30, 1999, or if his employment ends earlier because of disability or death,
he or his estate will be entitled to receive 50,000 shares of Textron Common
Stock, the value of which on December 28, 1996 was $4,668,750. The amount
listed for Mr. Campbell was the market value at the time of grant of a
retention award, pursuant to which Mr. Campbell will receive the cash
equivalent of 25,000 shares of Textron Common Stock provided he remains in
Textron's employment through January 1, 2001. As of December 28, 1996, the
market value of the 25,000 shares was $2,334,375. The amount listed for Mr.
Key was the market value of a stock award, pursuant to which Textron will
pay Mr. Key the cash equivalent of 20,000 shares of Textron Common Stock
following his retirement provided he retires from Textron at or after age
65. As of December 28, 1996, the market value of the 20,000 shares was
$1,867,500.
(5) Amounts listed as "All Other Compensation" for 1996, are comprised of the
following: (i) Textron's contributions under the Textron Savings Plan and
the Savings Plan component of the Supplemental Benefits Plan of $52,500,
$30,000, $21,250, $20,250, and $17,000 for Messrs. Hardymon, Campbell,
Wayland, Key and Juchatz, respectively, and (ii) Textron's contributions
under the Profit Sharing component of the Supplemental Benefits Plan of
$296,055, $139,320 and $89,397 for Messrs. Hardymon, Campbell and Wayland,
respectively.
STOCK OPTION GRANTS
The following table sets forth information on grants of stock options under
the 1994 Plan during Textron's 1996 fiscal year to the Named Officers. The
number of stock options granted to the Named Officers during Textron's 1996
fiscal year is also listed in the Summary Compensation Table on page 15 of this
Proxy Statement in the column entitled "Securities Underlying Options/SARs."
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
---------------------------------------------------------- RATES OF
PERCENT OF STOCK PRICE
NUMBER TOTAL APPRECIATION
OF OPTIONS/SARS EXERCISE FOR OPTION/SARS
SECURITIES GRANTED TO OR TERM($)(1)
UNDERLYING EMPLOYEES BASE -------------------------
OPTIONS/SARS IN FISCAL PRICE EXPIRATION FIVE TEN
NAME GRANTED(#) YEAR ($/SHARE) DATE PERCENT PERCENT
- -------------------------------- ------------ ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. F. Hardymon.................. -0- --% $ -- -- $ -- $ --
L. B. Campbell.................. 32,000 3.0% 91.75 12/11/06 1,846,435 4,679,229
W. F. Wayland................... 16,000 1.5% 91.75 12/11/06 923,218 2,339,614
S. L. Key....................... 16,000 1.5% 91.75 12/11/06 923,218 2,339,614
W. W. Juchatz................... 13,000 1.2% 91.75 12/11/06 750,114 1,900,937
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
five percent and ten percent rates set by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the price of Textron Common Stock. At a five
percent and ten percent annual rate of stock price appreciation, the stock
price would be approximately $149.45 and $237.98, respectively, at the end
of the ten-year term of the options.
16
<PAGE> 18
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information, with respect to the Named
Officers, concerning: (i) the exercise during Textron's 1996 fiscal year of
stock options and (ii) unexercised options held as of the end of Textron's 1996
fiscal year, which were granted to the Named Officers during 1996 and in prior
fiscal years under either the 1994 Plan or a predecessor plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J.F. Hardymon........... -0- $ -0- 157,325 -0- $8,025,334 $ -0-
L.B. Campbell........... -0- -0- 127,000 52,000 4,901,000 440,750
W.F. Wayland............ -0- -0- 51,750 24,750 1,921,391 196,078
S.L. Key................ -0- -0- 18,750 34,750 534,453 560,453
W. W. Juchatz........... -0- -0- 15,249 28,251 435,885 457,084
</TABLE>
- ---------------
LONG-TERM INCENTIVE PLAN
The following table provides information concerning performance share unit
awards made during Textron's 1996 fiscal year to the Named Officers pursuant to
the 1994 Plan for the 1997-1999 performance cycle.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD
PERFORMANCE UNTIL MATURATION ESTIMATED FUTURE PAYOUTS UNDER
NAME SHARE UNITS (#) OR PAYOUT NON-STOCK PRICE BASED PLANS
- ---------------------------- --------------- ----------------- ------------------------------
TARGET NUMBER OF
PERFORMANCE SHARE UNITS (#)
<S> <C> <C> <C>
J.F. Hardymon............... 22,000 3 years 22,000
L.B. Campbell............... 11,000 3 years 11,000
W.F. Wayland................ 5,500 3 years 5,500
S.L. Key.................... 5,500 3 years 5,500
W.W. Juchatz................ 5,100 3 years 5,100
</TABLE>
The number of performance share units earned by the Named Officers at the
end of the three-year performance cycle will be determined by the Board of
Directors upon the recommendation of the Organization and Compensation Committee
and will be generally based 75% on earnings per share growth and 25% on
discretionary performance measures, including balance sheet strength/asset
management, shareholder value and the Named Officer's individual performance.
Payouts of performance share units upon attainment of performance targets and
measures are determined as described under the heading "Performance Share Units"
on page 24 of this Proxy Statement. Payouts, which are made in cash, will be
determined by multiplying the number of performance share units earned by the
then current market value of Textron Common Stock at the end of the performance
period.
17
<PAGE> 19
PENSION PLAN
The following table sets forth the estimated annual pension benefits
payable upon retirement under the Textron Pension Plan formula to persons in the
specified remuneration and years of service classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35
- --------------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 .......... $ 73,791 $110,687 $ 147,582 $ 184,478 $ 221,374 $ 258,269
600,000 .......... 88,791 133,187 177,582 221,978 266,374 310,769
750,000 .......... 111,291 166,937 222,582 278,228 333,874 389,519
1,000,000 .......... 148,791 223,187 297,582 371,978 446,374 520,769
1,250,000 .......... 186,291 279,437 372,582 465,728 558,874 652,019
1,500,000 .......... 223,791 335,687 447,581 559,478 671,374 783,269
1,750,000 .......... 261,291 391,937 522,582 653,228 783,874 914,519
2,000,000 .......... 298,791 448,187 597,582 746,978 896,374 1,045,769
2,250,000 .......... 336,291 504,437 672,582 840,728 1,008,874 1,177,019
2,500,000 .......... 373,791 560,687 747,582 934,478 1,121,374 1,308,269
2,750,000 .......... 411,291 616,937 822,582 1,028,228 1,233,874 1,439,519
3,000,000 .......... 448,791 673,187 897,582 1,121,978 1,346,374 1,570,769
3,250,000 .......... 486,291 729,437 972,582 1,215,728 1,458,874 1,702,019
3,500,000 .......... 523,791 785,687 1,047,582 1,309,478 1,571,374 1,833,269
</TABLE>
- ---------------
(1) Based on highest consecutive five-year average compensation.
Benefits under the Textron Pension Plan formula are based upon the salaried
employee's highest consecutive five-year average compensation. Compensation for
such purposes means compensation listed in the "Salary" and "LTIP Payouts"
columns, and annual incentive compensation included in the "Bonus" column, of
the Summary Compensation Table on page 15 of this Proxy Statement. As of
December 28, 1996, the years of credited service for the Named Officers were as
follows: Mr. Hardymon, 7 years; Mr. Campbell, 4 years; Mr. Wayland, 12 years;
Mr. Key, 2 years; and Mr. Juchatz, 2 years.
Annual pension amounts shown in the table above are not subject to any
offset for Social Security benefits. The Textron Pension Plan is integrated with
Social Security, however, and the amounts in the table reflect that integration.
Annual pension amounts shown in the table are subject to annual pension
limitations imposed by the Internal Revenue Code of 1986, as amended ("IRC"). To
compensate certain Textron executives, including the Named Officers, for the
effect of these limitations, Textron maintains a Supplemental Benefits Plan.
Certain Textron executives, including the Named Officers, also participate in
the Textron Executive Supplemental Retirement Plan, which provides benefits to
participants who remain in the employ of Textron until age sixty-five. Under
this plan, the Named Officers are entitled to receive an annual supplemental
pension benefit equal to fifty percent of their highest consecutive five-year
average compensation reduced by any amounts to which they are entitled under the
plans of Textron and any prior employer.
Under an agreement with Textron, Mr. Campbell is entitled to receive
supplemental pension payments in an amount equal to his non-vested benefits
accrued under the Textron Pension Plan if his employment is terminated by
Textron prior to the completion of five years of service. Under an agreement
with Textron, Mr. Wayland is entitled to receive supplemental pension payments
equal to the excess, if any, of amounts payable under the provisions of the
Textron Pension Plan for the period of his employment plus eight years of
additional credited service, over the amounts he actually receives from the
plans of Textron and a prior employer. Under an agreement with Textron, Mr.
Juchatz will be credited with an additional 12 years of credited service upon
completing 5 years of employment with Textron.
18
<PAGE> 20
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
All of the Named Officers have employment contracts with Textron through
December 1999 which provide that during the term of the contract, their base
salary will not be reduced and they will remain eligible for participation in
Textron's executive compensation and benefit plans. The contracts are
automatically extended each January for an additional year unless contrary
notice is given.
Certain benefit plans and arrangements in which the Named Officers
participate have provisions that will apply in the event of a change in control
of Textron under the plans. Generally, a "change of control" under the plans
will occur upon (i) any non-Textron person or group becoming the beneficial
owner of more than thirty percent of the then outstanding voting stock of
Textron, (ii) during any two-year period, directors elected or nominated by the
Board ceasing to constitute a majority thereof, (iii) shareholder approval of a
merger or consolidation of Textron with any other corporation, other than a
merger or consolidation in which the voting securities of Textron would continue
to represent more than eighty percent of the combined voting power of the voting
securities of Textron or such surviving entity, or (iv) shareholder approval of
a plan of complete liquidation of Textron or an agreement for the sale or
disposition by Textron of all or substantially all of its assets. The Survivor
Benefit Plan provides that, upon a change in control, certain assets (generally,
paid up life insurance in a face amount equal to two times the base salary of an
active or former executive) will be transferred to each active or former
executive or beneficiary. The Supplemental Benefits Plan and the Deferred Income
Plan provide that in the event of a change in control of Textron, the amounts
accrued under such plans will become payable immediately. However, supplemental
savings accounts under the Supplemental Benefits Plan may be distributed only
upon death, disability, retirement or termination from Textron. The Annual
Incentive Compensation Plan establishes minimum incentive compensation awards
for the fiscal year in which the change in control occurs. The 1994 Plan
provides that outstanding options will become exercisable immediately and in
full, and the stated value of all outstanding performance share units will be
deemed earned and will be payable immediately and in full in the event of a
change in control of Textron. The Textron Savings Plan provides for full vesting
of the accounts of participants whose employment ends within two years after a
change in control of Textron. The Textron Pension Plan provides that (i) if the
Textron Pension Plan is terminated within three years after a change in control
of Textron, surplus assets will be applied to increase the benefits of active
participants up to maximum limits provided by the IRC, and (ii) in the event of
a plan merger, consolidation or transfer within three years after such a change
in control, the vested accrued benefit of each affected individual will be
increased as provided in item (i), will be fully vested, and will be satisfied
through the purchase of a guaranteed annuity contract. Mr. Hardymon's retirement
stock incentive units and Mr. Campbell's retention award are payable immediately
in the event of a change in control of Textron.
TRANSACTIONS WITH MANAGEMENT
During 1996, Surplus Notes (the "Notes") in the aggregate principal amount
of $16,000,000 of Massachusetts Mutual Life Insurance Company, of which Mr.
Wheeler is President and chief executive officer, were held in various
investment accounts of The Paul Revere Insurance Group. The Notes, which were
purchased in the ordinary course of business for the accounts, are due November
15, 2023, and bear interest at the rate of 7.625 percent a year. The maximum
outstanding balance of this indebtedness during 1996 was $16,000,000 and the
balance outstanding as of January 15, 1997, was $16,000,000. Textron owns
approximately 83 percent of The Paul Revere Corporation, the parent corporation
of the companies of The Paul Revere Insurance Group. Textron Automotive Company,
a Textron subsidiary, has an agreement with Customized Transportation, Inc.
("CTI"), a subsidiary of CSX Corporation, of which Mr. Snow is Chairman,
President and chief executive officer, pursuant to which CTI provides third
party logistic services to Textron Automotive, including freight rate
negotiations and freight bill audits and payments. During 1996, CTI was
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<PAGE> 21
paid approximately $384,000 for such services. It is expected that fees in 1997
will be approximately the same amount.
PERFORMANCE GRAPH
Set forth below is a stock performance graph which shows the change in
market value of $100 invested on December 31, 1991, in Textron Common Stock,
Standard & Poor's 500 Stock Index and a peer group index. The cumulative total
shareholder return assumes dividends are reinvested. Textron is a global,
multi-industry company with market-leading operations in four core business
segments -- Aircraft, Automotive, Industrial and Finance. The Company also has
operations in Aerospace Systems and Components. The peer group consists of every
company in the following Standard & Poor's 500 price index industry groups:
aerospace/defense, conglomerates, financial/life insurance, financial/personal
loans and manufacturing (diversified industrial). The peer group also includes
two diversified companies in comparable industries in the miscellaneous
industrials group -- AlliedSignal and TRW, Inc. The companies in the indices are
weighted by market capitalization.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Textron Inc. S&P 500 Peer Group
<S> <C> <C> <C>
Dec. 31, 1991 100.00 100.00 100.00
Dec. 31, 1992 116.27 107.62 115.68
Dec. 31, 1993 154.82 118.46 142.70
Dec. 31, 1994 137.54 120.03 143.07
Dec. 31, 1995 188.96 165.13 208.36
Dec. 31, 1996 269.39 203.05 265.76
</TABLE>
AMENDMENT OF ARTICLE FOURTH OF
THE RESTATED CERTIFICATE OF INCORPORATION
Subject to approval by the shareholders, the Board of Directors has
approved an amendment to Article Fourth of the Restated Certificate of
Incorporation to increase the authorized Common Stock from 250,000,000 shares to
500,000,000 shares (the "Proposed Amendment"). If approved, the first sentence
of Article Fourth of the Restated Certificate of Incorporation will be amended
to read in its entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 515,000,000 of which
15,000,000 shares, without par value, are to be of a class
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<PAGE> 22
designated "Preferred Stock" and 500,000,000 shares of the par value of
$.125 each are to be of a class designated "Common Stock."
Subject to approval by the shareholders and the effectiveness of the
Proposed Amendment, the Board of Directors has declared a two-for-one stock
split (the "Stock Split") in the form of a stock dividend of Common Stock.
Pursuant to the Stock Split, one additional share of Common Stock will be issued
for each outstanding share of Common Stock, and one additional share of Common
Stock will be reserved for each share currently reserved for issuance upon the
conversion of convertible securities and exercise of stock options. If the
Proposed Amendment is approved by the shareholders, the stock distribution will
be made on June 1, 1997 to shareholders of record at the close of business on
May 9, 1997. A total of approximately 89.4 million additional shares of Common
Stock would be issued as a result of the Stock Split. No change in the number of
authorized shares of Preferred Stock is proposed. If the Proposed Amendment is
not approved, the Proposed Amendment will not become effective and the Stock
Split will not take place.
As of February 28, 1997, there were 250 million shares of Common Stock
authorized, of which approximately 83 million shares were issued and outstanding
(exclusive of treasury shares), and 6.4 million shares were reserved for
issuance in connection with the conversion of convertible securities and
exercise of stock options. Thus, there were approximately 161 million shares of
Common Stock available for issuance. Although that is a sufficient number of
shares for the Stock Split, in order to maintain, proportionately, the same
number of shares available for future issuance after the Stock Split as before
the Stock Split, the Proposed Amendment will authorize 250 million additional
shares of Common Stock. The Board believes these additional shares will provide
future flexibility, although there are no present plans for their use.
The holders of Common Stock have no preemptive rights as to additional
issues of Common Stock or securities convertible into or entitling the holder to
purchase Common Stock. The additional authorized shares would be available for
issuance in the future for such corporate purposes as the Board of Directors
deems advisable from time to time without further action by the shareholders,
except to the extent that shareholder approval may be required to meet certain
requirements of the IRC, in connection with employee benefit plans and of the
New York Stock Exchange in connection with the listing of additional shares.
The Board of Directors believes that the Stock Split and Proposed Amendment
are in the best interests of Textron and its shareholders because it will place
the market price of Common Stock in a range more attractive to investors,
particularly individuals, and may broaden the market for, and increase the
liquidity of, Common Stock.
In accordance with the terms of Textron's Annual and Long-Term Incentive
Plans and other employee benefit and compensation Plans, upon the effectiveness
of the Stock Split appropriate adjustments will be made to the number of shares
of Common Stock reserved for issuance, the number of shares of Common Stock and
performance share units available for future awards, the exercise price of stock
options, valuation of performance share units and other awards and performance
measures under such plans.
Under existing law and regulation, the Stock Split will not result in any
gain or loss or any other form of taxable income to the shareholders for federal
income tax purposes. The laws of jurisdictions other than the United States may
impose income taxes on the issuance of the additional shares in connection with
the Stock Split, and shareholders subject to those laws are urged to consult
their tax advisors. A shareholder's basis in his or her shares held before the
Stock Split will be allocated between such shares and the new shares for the
purpose of determining future gain or loss on a sale of any of the shares, and
the holding period of new shares will include the holding period of the shares
with respect to which they were issued.
After the Stock Split, purchases and sales of Common Stock by an individual
shareholder may be subject to somewhat higher brokerage charges and applicable
stock transfer taxes than on a pre-split transaction of
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<PAGE> 23
equivalent market value because of the greater number of shares of Common Stock
outstanding after the Stock Split. However, the Stock Split should also reduce
the expenses of buying or selling a single "round lot" of Common Stock in some
cases. Textron will incur certain expenses in connection with the Stock Split,
such as listing fees and the cost of preparing and delivering to shareholders
new certificates representing the additional shares.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an anti-takeover effect (for example, by diluting
the stock ownership of a person seeking to effect a change in the composition of
the Board of Directors or contemplating a tender offer or other transaction for
the combination of Textron with another company), immediately after the Stock
Split, the number of shares of Common Stock available for future issuance would
be, on a proportionate basis, equal to the number of shares of Common Stock
available for future issuance prior to the Stock Split. The Proposed Amendment
is not the result of any specific effort to accumulate Textron's securities or
to obtain control of Textron by means of a merger, tender offer, solicitation in
opposition to management or otherwise. Moreover, the Proposed Amendment is not
part of a plan by management to adopt a series of amendments to Textron's
Restated Certificate of Incorporation or By-Laws, and management has no current
intention to propose anti-takeover measures in future proxy solicitations.
Textron's existing Restated Certificate of Incorporation and By-Laws also
include certain other provisions which could be characterized as having an
anti-takeover effect. For example, the Restated Certificate of Incorporation and
By-Laws classify the Board of Directors into three classes of directors with
staggered terms of office, provide that Board vacancies may be filled by the
directors remaining in office, provide that the number of directors shall be
determined by the Board of Directors, provide that shareholder action may be
taken in the absence of a meeting only by the unanimous consent of all
shareholders entitled to vote (except certain actions which may be taken solely
upon the vote or consent of holders of preferred stock) and provide that special
meetings of shareholders may be called only by the chief executive officer or by
order of the Board of Directors. Textron's Restated Certificate of Incorporation
also requires certain forms of consideration, minimum price and procedural
requirements to be met, or alternatively, the vote of holders of 66-2/3 percent
of the stock entitled to vote, in order for there to be consummated specified
business combinations with certain shareholders, unless such combinations are
approved by a majority of continuing directors who are not affiliated with such
shareholders. Textron's Restated Certificate of Incorporation does not permit
cumulative voting in the election of directors. Textron has also adopted a
shareholder rights plan pursuant to the Renewed Rights Agreement, dated as of
September 27, 1995, between Textron and First Chicago Trust Company of New York
(the "Rights Agreement") which could have a deterrent effect against a takeover
of Textron. If the Proposed Amendment is approved and the Stock Split is
effected, following the Stock Split and in accordance with the terms of the
Rights Agreement, each share of Common Stock (including shares issued pursuant
to the Stock Split) will carry one-half a preferred stock purchase right which
will trade automatically with the Common Stock and become exercisable only upon
the occurrence of certain events which are fully described in the Rights
Agreement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENT (ITEM 2 ON THE PROXY CARD).
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<PAGE> 24
AMENDMENT TO TEXTRON 1994 LONG-TERM INCENTIVE PLAN.
On February 23, 1994, the Board of Directors adopted, and on April 27, 1994
the shareholders approved, the Textron 1994 Long-Term Incentive Plan (the "1994
Plan") as part of a continuing program to attract, retain and motivate key
employees. Through the grant of awards based on Textron's long-term performance,
the 1994 Plan, like Textron's prior long-term incentive plans approved by
shareholders in 1982, 1987 and 1990 (which have either expired or under which no
further awards may be made), has increased the personal involvement of officers
and other selected employees in Textron's continued growth and success. Stock
option awards under the 1994 Plan qualify for the Performance-Based Compensation
exception under Section 162(m) of the IRC (see discussion under heading "Tax
Considerations" on page 14 of this Proxy Statement). To further reduce the
amount of compensation that will not qualify for a tax deduction, the Board of
Directors has adopted an amendment to the 1994 Plan (the "Amended 1994 Plan"),
subject to shareholder approval, to qualify as Performance-Based Compensation
performance share unit awards based on performance targets by (i) placing a
limitation on the number of performance share units that can be granted to any
individual in any award period, (ii) requiring that only objective measures be
used in establishing performance targets, (iii) prohibiting awards in excess of
100 percent of the value of performance share units granted to any corporate
officer, (iv) requiring that any awards for attainment between the primary and
minimum performance targets be determined by a pre-established formula, except
that the size of any such awards may be reduced or eliminated but may not be
increased, and (v) the Committee will certify prior to payment of awards, that
the goals have been attained or satisfied. Performance share units based on
discretionary performance measures will continue not to qualify for the
Performance-Based Compensation exception. The principal features of the Amended
1994 Plan are described below:
The Amended 1994 Plan authorizes the granting of awards to key employees of
Textron and its related companies in either or both of the following forms: (i)
options to purchase Common Stock and (ii) performance share units. Awards may be
granted to any key employee of Textron, its divisions or its subsidiaries,
including full-time employees who are directors. Directors who are not full-time
employees of Textron, its divisions or its subsidiaries are not eligible to
receive awards under the 1994 Plan.
The total number of shares of Common Stock for which options may be granted
under the Amended 1994 Plan is 5,000,000, and the maximum number of stock
options that may be granted to any individual in any calendar year is 75,000, in
each case subject to adjustment as described below. Shares of Common Stock
issued upon exercise of options may be either authorized but unissued shares or
previously issued shares held in the treasury. The maximum number of performance
share units which may be granted under the Amended 1994 Plan is 1,200,000, and
the maximum number of performance share units that may be granted to any
individual for any award period is 30,000, in each case subject to adjustment as
described below. The closing price of Textron Common Stock as reported for New
York Stock Exchange Composite Transactions on February 28, 1997, was $98.63.
The Amended 1994 Plan is administered by the Organization and Compensation
Committee of the Board of Directors (the "Committee") which determines the key
employees to whom awards will be granted, the form and amount of awards, the
dates of grant and the terms and provisions of each award (which need not be
identical). No member of the Committee is eligible to receive an award under the
Amended 1994 Plan. The Committee members will certify that they are "outside
directors" under the IRC definition. The Board of Directors may delegate the
Committee's responsibilities to one or more officers or committees of Textron,
but all decisions concerning the Amended 1994 Plan that relate to executive
officers of Textron are made by the Committee.
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<PAGE> 25
STOCK OPTIONS
The Amended 1994 Plan provides for both incentive stock options ("Incentive
Options"), as defined in section 422 of the IRC, and non-qualified options.
All options granted under the Amended 1994 Plan will be evidenced in
writing. Each option will be at a purchase price per share of not less than 100
percent of the fair market value of Common Stock at the time the option is
granted. The purchase price must be paid in full at the time of exercise. The
purchase price may be paid in cash, in shares of Common Stock with a value equal
to the exercise price or in a combination thereof. The term of each option will
be for such period as the Committee determines, but no Incentive Option may be
exercised later than ten years after the date of grant.
If an optionee ceases to be an employee during the term of an option, the
optionee may exercise the option within specified periods after such
termination. Discharge for cause, however, terminates all option rights
immediately. In the case of death of an optionee, the option may be exercised by
the optionee's estate within one year after death or until expiration of the
option, whichever occurs first. During an optionee's lifetime, options may be
exercised only by the optionee or the optionee's legal guardian or
representative.
PERFORMANCE SHARE UNITS
Performance share units are fictional shares of Textron Common Stock which
are valued for payment purposes at the market value of Textron Common Stock on
the date the performance share units are earned.
All performance share unit grants under the Amended 1994 Plan will be
evidenced in writing. In making each grant of performance share units, the
Committee will establish the applicable performance targets or measures. With
respect to performance share units based on performance targets, the Committee
will establish targets only in terms of one or more of the following: Textron's
earnings per share, net operating profit, after-tax profit, return on equity,
return on invested capital, economic profit, cash flow and shareholder value.
Additionally, attainment of a primary performance target will result in the
earning of 100 percent of the value of the performance share units related to
that target. Awards may not exceed 100 percent of the value of the performance
share units for corporate officers only. Failure to attain a minimum performance
target will result in the failure to earn any performance share units related to
that performance target. Attainment between the primary and minimum performance
targets will result in earning a portion of the performance share units related
to those performance targets determined by a pre-established mathematical
formula. The Committee may determine an award less than that determined by the
formula but may not, however, determine an award more than that derived by the
formula. Performance share units based on discretionary performance measures do
not qualify as Performance-Based Compensation. Such measures may be expressed in
terms of any standard, financial or otherwise, as the Committee may determine.
Performance share units related to one or more performance measures shall be
earned only as determined by the Committee and may not exceed more than 100% of
the value of such units. For purposes of determining whether performance targets
have been met, the Committee may equitably restate Textron's earnings per share,
net operating profit, return on equity or any other factor utilized in
establishing the performance targets to take into account the effect of
acquisitions or dispositions, extraordinary and non-recurring events,
recapitalizations, stock dividends, stock splits or other similar events or any
change in accounting practices, tax laws or other laws or regulations that
significantly affect Textron's financial performance. Payment of earned
performance share units will be in cash in an amount equal to the product of the
number of performance share units earned and the current value of Textron Common
Stock for the date on which the performance share units have been earned. Prior
to making such payment, the Committee will certify that the goals have been
attained or satisfied.
In the case of the death, disability or normal or early retirement of a
grantee more than one year into an award period, performance share units may
continue to be earned as if the grantee's employment had not
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ended. In other cases in which Textron employment ends more than one year into
an award period, a former employee will continue to earn related performance
share units only as determined by the Committee. Upon any termination of
employment for less than acceptable performance, all outstanding performance
share units will be cancelled.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax consequences with
respect to Incentive Options, non-qualified options and performance share units.
Incentive Options
An optionee will not realize taxable income and Textron will not receive
any deduction at the time of a grant or exercise of Incentive Options. If shares
acquired upon the exercise of Incentive Options are not disposed of within two
years from the date of grant, nor within one year from the date of exercise, any
gain or loss realized upon disposition of the shares will be treated as
long-term capital gain or loss. If the shares received upon exercise of an
Incentive Option are disposed of prior to the end of the applicable holding
periods described above, the difference between (a) the lesser of the fair
market value of the shares on the date of exercise or the price received upon
disposition of the shares and (b) the exercise price will be taxable to the
optionee as ordinary income in the year in which such disposition occurs, and
Textron will be entitled to a deduction in the amount of such ordinary income
recognized by the optionee. Any further gain or loss upon disposition will be
treated as short-term or long-term capital gain or loss depending on the holding
period of the shares. If Incentive Options are exercised with Textron Common
Stock previously owned by the optionee, such exercise will not be considered a
taxable disposition of the previously owned stock unless such stock was itself
received on exercise of Incentive Options and the holding periods described
above for the exchanged stock have not been satisfied. To the extent that the
aggregate option price of an optionee's Incentive Options which become
exercisable in any year exceeds $100,000, such options will be treated as
non-qualified options. If Incentive Options are exercised more than three months
after the optionee's employment with Textron has ended, the Incentive Options
will be treated as non-qualified options. For purposes of the alternative
minimum tax only, the excess of the fair market value of the shares at the time
of exercise of Incentive Options over the option price will be treated as
additional income unless such shares are disposed of in the year of exercise.
Non-qualified Options
An optionee will not recognize taxable income and Textron will not receive
any deduction at the time of the grant of non-qualified options. Upon the
exercise of non-qualified options, the excess of the fair market value on the
date of exercise of the shares received over the exercise price for such shares
will be taxable to the optionee as ordinary income, and Textron will be entitled
to a deduction at that time for the amount of such ordinary income recognized by
the optionee. The subsequent sale of such shares by the optionee will be treated
as short-term or long-term capital gain or loss, as the case may be, in an
amount equal to the difference between the amount realized on such sale and the
fair market value of the shares at the time of exercise. If options are
exercised with Textron Common Stock previously owned by the optionee, such
exercise will not be considered a taxable disposition of the previously owned
stock and no gain or loss will be recognized with respect to such stock upon
such exercise. If additional shares are received by the optionee, the excess of
the fair market value of all of the shares received over the sum of the fair
market value of all of the shares surrendered and any cash payment made by the
optionee upon exercise will be taxable as ordinary income to the optionee and
will be deductible by Textron.
Performance Share Units
An employee will not recognize taxable income and Textron will not receive
any deduction by reason of the grant or award of a performance share unit. The
employee will recognize ordinary income equal to the cash
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<PAGE> 27
paid to the employee at the time a performance share unit is earned and paid,
and Textron will be entitled to a deduction for the amount of such ordinary
income recognized by the employee.
GENERAL
In 1996, twenty-two executive officers received awards of performance share
units coupled with stock options, one executive officer was granted performance
share units only, thirty-two non-executive officers were granted performance
share units coupled with stock options and four hundred and fifteen other
employees who are not executive officers received stock options without awards
of performance share units. Information relating to the most recent prior awards
to the Named Officers under the 1994 Plan is contained in the Summary
Compensation Table and the Stock Option/SAR Grants in Last Fiscal Year and
Long-Term Incentive Plan Awards in Last Fiscal Year tables on pages 15, 16 and
17 of this Proxy Statement.
The maximum number of shares of Textron Common Stock that may be subject to
options, the maximum number of Performance Share Units available for grant, the
number of shares of Common Stock covered by each outstanding option or
Performance Share Unit and the price per share thereof, and the maximum number
of options that may be granted to any individual employee will be adjusted in
the event of a recapitalization, stock dividend, stock split or other similar
event. In addition, shares which are subject to options which expire unexercised
or which are terminated or cancelled will be added to the remaining maximum
number of shares of Textron Common Stock that may be subject to options.
The Board of Directors may at any time terminate the Amended 1994 Plan or
any part thereof and may from time to time amend the Amended 1994 Plan as it may
deem advisable, but the Board may not, without shareholder approval, increase
the aggregate number of shares of Textron Common Stock which may be issued under
the Amended 1994 Plan (except as such number may be adjusted in the event of a
recapitalization, stock dividend, stock split or similar event), or extend the
period during which an Incentive Stock Option may be exercised beyond ten years.
Termination or amendment may not, without the consent of the participant, affect
the participant's rights under an award previously granted.
Awards granted under the Amended 1994 Plan are not assignable or
transferable by the recipient thereof, except by will or by the laws of descent
and distribution.
The Amended 1994 Plan provides that outstanding options will be exercisable
immediately and in full, and all outstanding performance share units will be
deemed earned and payable immediately and in full, in the event of certain
changes in control of Textron described in the Plan, unless determined otherwise
by the Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED 1994
PLAN (ITEM 3 ON THE PROXY CARD).
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to audit
Textron's consolidated financial statements for 1997, and recommends to the
shareholders ratification of the appointment of Ernst & Young LLP as independent
auditors for 1997. If this resolution is defeated, the Board of Directors will
reconsider its selection. A representative of Ernst & Young LLP will be present
at the annual meeting, will have the opportunity to make a statement and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP (ITEM 4 ON THE PROXY CARD).
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VOTING OF PROXIES
Each valid proxy in the enclosed form received by Textron will be voted by
the persons named therein. Unless the shareholder specifies otherwise, the
shares represented by the proxy will be voted in favor of the election of the
five nominees in Class I described in this Proxy Statement on pages 2 through 4.
The Board of Directors knows of no reason why any of the nominees so named would
be unavailable for election. If any nominee should be unavailable for election
by reason of death or otherwise, the proxies may be voted for the election of
such other person as may be recommended by the Board of Directors.
Unless the shareholder specifies otherwise, the shares represented by the
proxy will be voted for approval of the Proposed Amendment, for approval of the
Amended 1994 Plan and for ratification of the appointment of Ernst & Young LLP
as independent auditors. Any shareholder giving a proxy has the power to revoke
it at any time before it is exercised by delivering a written notice of
revocation to the Secretary of Textron or by submitting a subsequent proxy or by
voting in person at the meeting.
The five nominees for director receiving the greatest number of votes cast
in person or by proxy will be elected. Abstentions and broker non-votes will
have no effect on the outcome of the election of directors. Approval of the
Proposed Amendment, the Amended 1994 Plan and ratification of the appointment of
auditors require the favorable vote of a majority of shares present in person at
the 1997 annual meeting or represented by proxy and entitled to vote thereon.
All shareholders vote as one class, except that approval of the Proposed
Amendment also requires the affirmative vote of a majority of the outstanding
shares of Common Stock represented at the meeting, voting separately as a class.
Abstaining from voting on the Proposed Amendment, the Amended 1994 Plan or the
appointment of auditors will have the same effect as voting against such
proposals. Broker non-votes on the Proposed Amendment, the Amended 1994 Plan and
the ratification of appointment of auditors will not be included in the
calculation of shares entitled to vote for such proposals and will have no
effect on the outcome.
Textron's policy on confidential voting provides that no proxy, ballot or
voting materials that identify the vote of a specific shareholder will be
disclosed to Textron or its directors, officers or employees except (a) as
required by law or for the defense of legal proceedings, (b) if the shareholder
requests disclosure or (c) in a proxy contest if the party soliciting proxies in
opposition does not agree to observe Textron's confidential voting policy.
Comments of shareholders written on proxies or ballots are transcribed and
provided to the Secretary of Textron. Votes are counted by employees of First
Chicago Trust Company of New York, Textron's independent transfer agent and
registrar, and certified by Inspectors of Election who are employees of First
Chicago Trust Company of New York.
FOR SAVINGS PLAN PARTICIPANTS: For participants in the Textron Savings Plan
(the "TSP") and the Paul Revere Savings Plan (the "PRSP"), the accompanying
proxy card indicates the number of shares allocated to the participant's account
under the TSP and the PRSP and the number of shares, if any, allocated to the
participant's Tax Credit Account under the TSP by Bankers Trust Company, trustee
for the TSP and the PRSP ("Bankers Trust"). When a participant's proxy card is
returned properly signed, Bankers Trust will vote the participant's
proportionate interest in the shares of Common Stock held by Bankers Trust under
the TSP and the PRSP in the manner the participant directs, or if the
participant makes no direction, Bankers Trust will vote, with respect to the
election of directors, the Proposed Amendment, the Amended 1994 Plan and
ratification of appointment of auditors, the participant's proportionate
interest in the shares of Common Stock held by Bankers Trust under the TSP
(except shares allocated to the participant's Tax Credit Account) and the PRSP
in proportion to instructions received from other TSP or PRSP participants.
Shares allocated to a participant's Tax Credit Account under the TSP will be
voted only as the participant directs. For participants in the Textron Canada
Savings Plan (the "TCSP") and the Paul Revere Canada Savings Plan (the "PRCSP"),
the accompanying proxy card indicates the number of shares allocated to the
participant's
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<PAGE> 29
account under the TCSP and the PRCSP by Royal Trust Corporation of Canada,
trustee for the TCSP and the PRCSP ("Royal Trust"). When the participant's proxy
card is returned properly signed, Royal Trust will vote such shares in the
manner the participant directs, or if the participant makes no direction, Royal
Trust will vote with respect to the election of directors, the Proposed
Amendment, the Amended 1994 Plan and the ratification of appointment of
auditors, all shares of Common Stock allocated to the participant's accounts
under the TCSP and the PRCSP in proportion to instructions received from other
TCSP or PRCSP participants.
All such directions will be held in confidence.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors does not know of any matters which will be brought
before the meeting other than those specifically set forth in the notice
thereof. If any other matter properly comes before the meeting, it is intended
that the persons named in and acting under the enclosed form of proxy or their
substitutes will vote thereon in accordance with their best judgment.
SOLICITATION OF PROXIES
All expenses incurred in connection with this solicitation will be borne by
Textron. Textron may request banks and brokers to solicit their customers who
have a beneficial interest in Textron's stock registered in the names of
nominees and will reimburse such banks and brokers for their reasonable
out-of-pocket expenses of such solicitations. In addition to the use of the
mails, solicitation may be made by employees of Textron by telephone, other
electronic means and personal interview, without additional compensation for
such services. Textron has retained D. F. King & Co., Inc. of New York, New
York, a proxy soliciting organization, to solicit management proxies for the
annual meeting. The fees of such organization in connection therewith are
estimated to be $13,000, plus reasonable out-of-pocket expenses.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 annual meeting
of shareholders must be received by Textron on or before November 12, 1997 for
inclusion in the proxy statement and form of proxy relating thereto. Textron's
By-Laws contain provisions which impose certain additional requirements upon
shareholder proposals.
By order of the Board of Directors,
/s/ Frederick K. Butler
Frederick K. Butler
Vice President and Secretary
March 12, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON, PLEASE FILL IN, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENVELOPE PROVIDED.
28
<PAGE> 30
[LETTERHEAD OF JAMES F. HARDYMON]
MARCH 1997
Dear Fellow Participant:
Textron's Annual Meeting of Shareholders will take place on April 23,
1997. As a participant in a Textron Savings Plan, you are entitled to instruct
the Plan's Trustee as to how to vote your shares of Textron stock. YOUR VOTE
IS IMPORTANT.
Enclosed with this letter is the proxy statement for the meeting, along
with our 1996 Annual Report to Shareholders, and a voting card. Please
complete your voting card and mail it in the enclosed envelope. If the Trustee
does not receive this card by April 18, 1997, your shares will be voted in
accordance with the provisions of the Plan.
The subject of each proposal to be voted on is shown on the voting card
and is explained in greater detail in the proxy statement. The Board of
Directors recommends that you instruct the Trustee to vote FOR the election of
the five nominees for Director listed in ITEM 1 and FOR ITEMS 2, 3 AND 4.
Thank you for your continued support.
Sincerely,
/s/ JAMES F. HARDYMON
Enclosures
<PAGE> 31
TEXTRON INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS APRIL 23, 1997
R
The undersigned hereby appoints James F. Hardymon, Lewis B. Campbell and
O Frederick K. Butler, or any one or more of them, attorneys will full power
of substitution and revocation to each, for and in the name of the
X undersigned with all the powers the undersigned would possess if
personally present, to vote the shares of the undersigned in Textron
Inc. as indicated on the proposals referred to on the reverse side hereof
at the annual meeting of its shareholders to be held April 23, 1997, and
at any adjournments thereof, and in their or his discretion upon any
other matter which may properly come before said meeting.
This card also constitutes voting instructions (i) to the respective
Trustees under the Textron Savings Plan and Paul Revere Savings Plan to
vote, in person or by proxy, the proportionate interest of the undersigned
in the shares of Common Stock of Textron Inc. held by the Trustees under
such Plans and (ii) to the respective Trustees under the Textron Canada
Savings Plan and Paul Revere Canada Savings Plan to vote, in person or by
proxy, all shares of Common Stock of Textron Inc. allocated to the accounts
of the undersigned under such Plans, in each case as described in the proxy
statement.
(CHANGE OF ADDRESS/COMMENTS)
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)
----------------
SEE REVERSE
SIDE
----------------
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[TEXTRON LOGO]
ANNUAL MEETING
OF
TEXTRON SHAREHOLDERS
THE WORTHINGTON HOTEL
---------------------
200 Main Street
Fort Worth, TX 76102
(817) 870-1000
<PAGE> 32
Please mark your
[x] votes as in this
example.
This proxy, when properly executed, will be voted as directed by the
undersigned shareholder(s). If no direction is made, this proxy will be voted
FOR the nominees listed below and FOR proposals 2, 3 and 4, or if this card
constitutes voting instructions to a savings plan trustee, such trustee will
vote as described in the proxy statement.
<TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED BELOW AND FOR ALL PROPOSALS.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR* WITHHELD FROM ALL NOMINEES: FOR AGAINST ABSTAIN
1. Election of [ ] [ ] H. Jesse Arnelle 2. Amendment of Restated
Directors Brian H. Rowe Certificate of Incorporation to [ ] [ ] [ ]
Sam F. Segnar increase number of authorized
Jean Head Sisco shares of Common Stock
Martin D. Walker
3. Amendment to 1994 Long- [ ] [ ] [ ]
* Except vote withheld from the CHANGE OF ADDRESS/ Term Incentive Plan
following nominee(s): [ ] COMMENTS ON
REVERSE SIDE. 4. Ratification of appointment [ ] [ ] [ ]
of independent auditors
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN EXACTLY AS NAME(S) APPEAR HEREON. JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
-----------------------------------------------------------------
-----------------------------------------------------------------
SIGNATURE(S) DATE
</TABLE>
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[TEXTRON LOGO]
ANNUAL MEETING
OF
TEXTRON SHAREHOLDERS
Wednesday, April 23, 1997
10:30 a.m.
The Worthington Hotel
200 Main Street
Fort Worth, TX 76102
IMPORTANT NOTICE
----------------
IT IS IMPORTANT THAT YOU VOTE, SIGN AND
RETURN THE ABOVE PROXY AS SOON AS POSSIBLE.
BY DOING SO, YOU MAY SAVE TEXTRON THE
EXPENSE OF ADDITIONAL SOLICITATION.
