<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
STRATTEC SECURITY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Registrant
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
<PAGE> 2
STRATTEC LOGO
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of STRATTEC SECURITY CORPORATION, a
Wisconsin corporation (hereinafter called the Corporation), will be held at the
Manchester East Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin
53217, on Thursday, October 23, 1997, at 2 p.m. local time, for the following
purposes:
1. To elect two Directors to serve for a three-year term.
2. To consider and vote upon a proposal to approve an amendment to the
STRATTEC SECURITY CORPORATION Stock Incentive Plan to, among other things,
increase the aggregate number of shares of the Corporation's Common Stock that
may be issued or transferred upon exercise, payment or vesting of stock options
and other equity incentive awards granted under such plan from 788,817 to
1,200,000.
3. To take action with respect to any other matters that may be properly
brought before the meeting and that might be considered by the shareholders of a
Wisconsin corporation at their annual meeting.
By order of the Board of Directors
Milwaukee, Wisconsin
September 10, 1997
JOHN G. CAHILL,
Secretary
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON AUGUST 26, 1997 ARE
ENTITLED TO VOTE AT THE MEETING. YOUR VOTE IS IMPORTANT TO ENSURE THAT A
MAJORITY OF THE STOCK IS REPRESENTED. PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. IF YOU LATER FIND THAT YOU MAY BE PRESENT AT THE
MEETING OR FOR ANY OTHER REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
[STRATTEC LOGO]
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 1997
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of STRATTEC SECURITY CORPORATION of proxies, in the
accompanying form, to be used at the Annual Meeting of Shareholders of the
Corporation to be held on October 23, 1997 and any adjournments thereof. Only
shareholders of record at the close of business on August 26, 1997 will be
entitled to notice of and to vote at the meeting. The shares represented by each
valid proxy received in time will be voted at the meeting and, if a choice is
specified on the proxy, it will be voted in accordance with that specification.
If no instructions are specified in a signed proxy returned to the Corporation,
the shares represented thereby will be voted in FAVOR of the election of the
directors listed in the enclosed proxy and in FAVOR of the proposal to approve
the amendment to the STRATTEC SECURITY CORPORATION Stock Incentive Plan (the
"Incentive Plan"). Shareholders may revoke proxies at any time to the extent
they have not been exercised. The cost of solicitation of proxies will be borne
by the Corporation. Solicitation will be made primarily by use of the mails;
however, some solicitation may be made by employees of the Corporation, without
additional compensation therefor, by telephone, by facsimile, or in person. On
the record date, the Corporation had outstanding 5,667,150 shares of $.01 par
value common stock entitled to one vote per share.
A majority of the votes entitled to be cast with respect to each matter
submitted to the shareholders, represented either in person or by proxy, shall
constitute a quorum with respect to such matter. Approval of each matter
specified in the notice of the meeting requires the affirmative vote of a
majority, or in the case of the election of directors a plurality, of the shares
represented at the meeting. Abstentions and broker non-votes (i.e., shares held
by brokers in street name, voting on certain matters due to discretionary
authority or instructions from the beneficial owners but not voting on other
matters due to lack of authority to vote on such matters without instructions
from the beneficial owner) will count toward the quorum requirement and will not
count toward the determination of whether such matters are approved or directors
are elected. The Inspector of Election appointed by the Board of Directors will
count the votes and ballots.
The Corporation's principal executive offices are located at 3333 West Good
Hope Road, Milwaukee, Wisconsin 53209. It is expected that this Proxy Statement
and the form of Proxy will be mailed to shareholders on or about September 10,
1997.
<PAGE> 4
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors of the Corporation is divided into three classes,
with the term of office of each class ending in successive years. Two directors
are to be elected at the Annual Meeting to serve for a term of three years
expiring in 2000, and three directors will continue to serve for the terms
designated in the following schedule. As indicated below, the persons nominated
by the Board of Directors are incumbent directors. The Corporation anticipates
that the nominees listed in this Proxy Statement will be candidates when the
election is held. However, if for any reason a nominee is not a candidate at
that time, proxies will be voted for a substitute nominee designated by the
Corporation (except where a proxy withholds authority with respect to the
election of directors).
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND DIRECTORSHIPS AGE SINCE
- ---------------------------------------------------------------- --- --------
<S> <C> <C>
NOMINEES FOR ELECTION AT THE ANNUAL MEETING (CLASS OF 2000):
HAROLD M. STRATTON II........................................... 49 1994
President and Chief Executive Officer of the Corporation since
1994. Vice President of Briggs & Stratton Corporation and
General Manager of the Technologies Division of Briggs &
Stratton Corporation from 1989 to 1995.
ROBERT FEITLER.................................................. 66 1995
Chairman of the Executive Committee of the Board of Directors of
Weyco Group, Inc. (manufacturer, purchaser and distributor of
men's footwear) since April 1996. President and Chief Operating
Officer of Weyco Group, Inc. from June 1968 to April 1996.
Director of Weyco Group, Inc. and Associated Banc-Corp.
INCUMBENT DIRECTORS (CLASS OF 1999):
MICHAEL J. KOSS................................................. 43 1995
President and Chief Executive Officer of Koss Corporation
(manufacturer and marketer of high fidelity stereophones for the
international consumer electronics market) since 1989. Director
of Koss Corporation.
JOHN G. CAHILL.................................................. 40 1995
Executive Vice President, Chief Financial Officer, Treasurer and
Secretary of the Corporation since 1994. Vice President, Chief
Financial Officer, Secretary and Treasurer, Johnson Worldwide
Associates, Inc. (manufacturer and marketer of recreational and
marking systems products) from 1992 to 1994 and Corporate
Controller from 1989 to 1992.
INCUMBENT DIRECTOR (CLASS OF 1998):
FRANK J. KREJCI................................................. 47 1995
President of Wisconsin Furniture LLC (a manufacturer of custom
furniture) since June 1996. Vice President of WITECH Corp.
(venture capital subsidiary of Wisconsin Energy Corp., a public
utility) from May 1988 to June 1996.
</TABLE>
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board's Audit Committee is comprised of Messrs. Krejci, Koss and Feitler
(Chairman). The Audit Committee makes recommendations to the Board of Directors
regarding the engagement of independent public accountants to audit the books
and accounts of the Corporation and reviews with such accountants the audited
financial
2
<PAGE> 5
statements and their reports thereon. The Audit Committee also consults with the
independent public accountants with respect to the annual audit scope and plan
of audit and with respect to the adequacy of the Corporation's internal controls
and accounting procedures. The Audit Committee met two times during fiscal 1997
and all committee members were present at each meeting.
The Board's Compensation Committee is comprised of Messrs. Krejci
(Chairman), Koss and Feitler. The Compensation Committee, in addition to such
other duties as may be specified by the Board of Directors, reviews the
compensation and benefits of senior managers and makes appropriate
recommendations to the Board of Directors, administers the Corporation's
Economic Value Added Plan for Executive Officers and Senior Managers,
administers the STRATTEC SECURITY CORPORATION Stock Incentive Plan and prepares
on an annual basis a report on executive compensation. The Compensation
Committee met two times during fiscal 1997 and all committee members were
present at each meeting.
The Board of Directors held four meetings in fiscal 1997 and all of the
directors attended these meetings.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Corporation receives an annual retainer
fee of $8,000, a fee of $750 for each Board meeting attended and a fee of $500
for each committee meeting attended. Effective June 30, 1997, the Corporation
implemented an Economic Value Added Plan for Non-Employee Members of the Board
of Directors (the "Director EVA Plan"). The purpose of the Director EVA Plan is
to maximize long-term shareholder value by providing incentive compensation to
nonemployee directors in a form which relates the financial reward to an
increase in the value of the Corporation to its shareholders and to enhance the
Corporation's ability to attract and retain outstanding individuals to serve as
nonemployee directors of the Corporation. The Director EVA Plan provides for the
payment of an annual cash bonus to each nonemployee director equal to the
product of (a) 40% of the director's retainer and meeting fees for the fiscal
year, multiplied by (b) a Company Performance Factor. In general, the Company
Performance Factor is based upon the Corporation's net operating profit after
taxes, less a capital charge. The capital charge is intended to represent the
return expected by the providers of the Corporation's capital.
3
<PAGE> 6
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of common stock of the Corporation by each director, nominee
and named executive officer (as defined below), and by all directors and
executive officers as a group, as of August 31, 1997.
<TABLE>
<CAPTION>
NATURE OF BENEFICIAL OWNERSHIP
----------------------------------
TOTAL NO. OF SOLE VOTING SHARED SOLE
SHARES AND VOTING AND VOTING
BENEFICIALLY PERCENT INVESTMENT INVESTMENT POWER
DIRECTORS AND EXECUTIVE OFFICERS OWNED(1) OF CLASS POWER POWER ONLY(2)
- -------------------------------- ------------ -------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Frank J. Krejci.............................. 40 * 40 -- --
John G. Cahill............................... 75,811 1.3 5,800 -- 11
Michael J. Koss.............................. -- -- -- -- --
Harold M. Stratton........................... 137,374 2.4 31,183 11,169(3) 22
Robert Feitler............................... 10,000 * 10,000 -- --
Michael R. Elliott........................... 45,530 * 500 -- 30
Gerald L. Peebles............................ 50,193 * -- -- 193
Andrew G. Lechtenberg........................ 45,304 * -- 40 264
All directors and executive officers as a
group (8 persons).......................... 364,252 6.1 47,523 11,209 520
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes the rights of the following persons to acquire shares pursuant to
the exercise of currently vested stock options: Mr. Stratton -- 95,000
shares; Mr. Cahill -- 70,000 shares; Mr. Peebles -- 50,000 shares; Mr.
Elliott -- 45,000 shares; Mr. Lechtenberg -- 45,000 shares; and all
directors and executive officers as a group -- 305,000 shares.
(2) All shares are held in the Employee Savings and Investment Plan Trust.
(3) Includes 10,100 shares held in trust as to which Mr. Stratton is co-trustee
and beneficiary, 169 shares owned by Mr. Stratton's spouse and 900 shares as
to which Mr. Stratton is custodian on behalf of his children.
The above beneficial ownership information is based on information
furnished by the specified persons and is determined in accordance with Rule
13d-3, as required for purposes of this Proxy Statement. It is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
Pioneering Management Corporation, 60 State Street, Boston, Massachusetts
02109 filed a Schedule 13G dated January 16, 1996, as amended by Schedule 13G/A
dated January 27, 1997, reporting that as of January 27, 1997 it was the
beneficial owner of 340,000 shares of Common Stock, or 6.0% of the Common Stock
outstanding as of August 31, 1997, with sole voting power and shared investment
power as to all of such shares.
The State of Wisconsin Investment Board, P.O. Box 7842, Madison, Wisconsin
53707 filed a Schedule 13G dated February 6, 1996, as amended by Schedule 13G/A
dated January 21, 1997, reporting that as of January 21, 1997 it was the
beneficial owner of 440,600 shares of Common Stock, or 7.8% of the
4
<PAGE> 7
Common Stock outstanding as of August 31, 1997, with sole voting and investment
power as to all of such shares.
First Union Corporation, One First Union Center, Charlotte, North Carolina
28288-0137 filed a Schedule 13G dated February 3, 1997 reporting that as of
February 3, 1997 it was the beneficial owner of 364,568 shares of Common Stock,
or 6.4% of the Common Stock outstanding as of August 31, 1997. The shares of
Common Stock beneficially owned by First Union Corporation include 344,568
shares as to which First Union Corporation has sole voting power, 20,000 shares
as to which First Union Corporation has shared voting power, 344,000 shares as
to which First Union Corporation has sole investment power and 20,133 shares as
to which First Union Corporation has shared investment power.
The Prudential Insurance Company of America ("Prudential"), 751 Broad
Street, Newark, New Jersey 07102-3777 filed a Schedule 13G dated February 3,
1997 reporting that as of December 31, 1996 it was the beneficial owner of
482,900 shares of Common Stock, or 8.5% of the Common Stock outstanding as of
August 31, 1997. The shares of Common Stock beneficially owned by Prudential
include 180,800 shares as to which Prudential has sole voting and investment
power and 302,100 shares as to which Prudential has shared voting and investment
power.
Heartland Advisors, Inc. ("Heartland"), 790 North Milwaukee Street,
Milwaukee Wisconsin 53202, filed a Schedule 13G dated February 12, 1997
reporting that as of February 12, 1997 it was the beneficial owner of 629,100
shares of Common Stock, or 11.1 % of the Common Stock outstanding as of August
31, 1997. The shares of Common Stock beneficially owned by Heartland include
604,100 shares as to which Heartland has sole voting power and 629,100 shares as
to which Heartland has sole investment power.
Investment Counselors of Maryland, Inc. ("ICM"), 803 Cathedral Street,
Baltimore, Maryland 21201-5297 filed a Schedule 13G dated February 14, 1997
reporting that as of December 31, 1996 it was the beneficial owner of 305,000
shares of Common Stock, or 5.4% of the Common Stock outstanding as of August 31,
1997. The shares of Common Stock beneficially owned by ICM include 280,000
shares as to which ICM has sole voting power and 305,000 shares as to which ICM
has sole investment power.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and persons who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Corporation's equity securities. The rules
promulgated by the Commission under section 16(a) of the Exchange Act require
those persons to furnish the Corporation with copies of all reports filed with
the Commission pursuant to section 16(a). Based solely upon a review of such
forms actually furnished to the Corporation, and written representations of
certain of the Corporation's directors and executive officers that no forms were
required to be filed, all directors, executive officers and 10% shareholders
have filed with the Commission on a timely basis all reports required to be
filed under section 16(a) of the Exchange Act.
5
<PAGE> 8
PERFORMANCE GRAPH
The chart below shows a comparison of the cumulative return since February
27, 1995 had $100 been invested at the close of business on February 27, 1995 in
each of the Corporation's common stock, the Nasdaq Composite Index (all
issuers), and the Dow Jones Auto Parts and Equipment Index.
CUMULATIVE TOTAL RETURN COMPARISON*
THE CORPORATION VERSUS PUBLISHED INDICES
(NASDAQ COMPOSITE INDEX AND THE DOW JONES AUTO PARTS AND EQUIPMENT INDEX)
[LINE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD THE CORPORATION** NASDAQ COMPOSTIE DOW JONES AUTO
(FISCAL YEAR COVERED) INDEX PARTS AND
EQUIPMENT INDEX
<S> <C> <C> <C>
2/27/95 100 100 100
6/30/95 94 119 110
6/28/96 137 152 127
6/27/97 160 185 157
</TABLE>
* Total return assumes reinvestment of dividends.
** The closing price of the common stock of the Corporation on February 27, 1995
was $13.00, the closing price on June 30, 1995 was $12.25, the closing price
on June 28, 1996 was $17.75 and the closing on June 27, 1997 was $20.75.
6
<PAGE> 9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee (the "Committee"), which is
comprised of three outside directors of the Corporation, is responsible for
considering and approving compensation arrangements for senior management of the
Corporation, including the Corporation's executive officers and the chief
executive officer. The objectives of the Committee in establishing compensation
arrangements for senior management are to: (i) attract and retain key executives
who are important to the continued success of the Corporation; and (ii) provide
strong financial incentives, at reasonable cost to the shareholders, for senior
management to enhance the value of the shareholders' investment.
The primary components of the Corporation's executive compensation program
are (i) base salary, (ii) incentive compensation bonuses and (iii) stock
options.
The Committee believes that:
- The Corporation's incentive plans provide strong incentives for
management to increase shareholder value;
- The Corporation's pay levels are appropriately targeted to attract and
retain key executives; and
- The Corporation's total compensation program is a cost-effective strategy
to increase shareholder value.
BASE SALARIES
Executive Officers' base salaries are reviewed annually by the Committee,
based on level of responsibility and individual performance. It is the
Corporation's objective that base salary levels, in the aggregate, be at
competitive salary levels. In fixing competitive base salary levels, the
Committee used a survey of a broad group of domestic industrial organizations
from all segments of industry. From this survey, the Committee determined a
competitive salary level for fiscal 1997 for each executive officer position
near the average derived from the survey for positions with similar
responsibilities at companies with a similar level of sales, also taking into
account additional factors such as the executive officer's performance. Because
the survey was based on industry-wide studies, the companies in the survey do
not correspond to the companies that make up the Dow Jones Auto Parts and
Equipment Index, which is used by the Corporation as the published industry
index for comparison in the Performance Graph on page 6.
INCENTIVE BONUSES
The Corporation maintains an Economic Value Added ("EVA") Plan for
Executive Officers and Senior Managers (the "EVA Plan"), the purpose of which is
to provide incentive compensation to certain key employees, including all
executive officers, in a form which relates the financial reward to an increase
in the value of the Corporation to its shareholders. In general, EVA is the net
operating profit after taxes, less a capital charge. The capital charge is
intended to represent the return expected by the providers of the Corporation's
capital. The Corporation believes that EVA improvement is the financial
performance measure most closely correlated with increases in shareholder value.
For fiscal 1997, the amount of bonus which a participant was entitled to
earn was derived from a Company Performance Factor and from an Individual
Performance Factor. The Company Performance Factor was determined by reference
to the financial performance of the Corporation relative to a targeted
cash-based return on capital established by the Committee, which is intended to
approximate the
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<PAGE> 10
Corporation's weighted cost of capital. The Individual Performance Factor was
determined by reference to the level of attainment of certain quantifiable and
non-quantifiable company or individual goals which contribute to increasing the
value of the Corporation to its shareholders. Individual Target Incentive Awards
under the EVA Plan range from 65% of base compensation for the President and CEO
to 35% of base compensation for other officers for fiscal 1997. Mr. Stratton's
fiscal 1997 bonus equals 131% of his Target Incentive Award.
The EVA Plan provides the powerful incentive of an uncapped bonus
opportunity, but also uses a "Bonus Bank" to ensure that significant EVA
improvements are sustained before significant bonus awards are paid out. The
Bonus Bank feature applies to those participants determined by the Committee to
be "Executive Officers" under the EVA Plan. All of the named executive officers
have been designated Executive Officers for fiscal 1997. Each year, any accrued
bonus in excess of 125% of the target bonus award is added to the outstanding
Bonus Bank balance. The bonus paid is equal to the accrued bonus for the year,
up to a maximum of 125% of the target bonus, plus 33% of the Bonus Bank balance
at the end of the year. Thus, significant EVA improvements must be sustained for
several years to ensure full payout of the accrued bonus. A Bonus Bank account
is considered "at risk" in the sense that in any year the accrued bonus is
negative, the negative bonus amount is subtracted from the outstanding Bonus
Bank balance. In the event the outstanding Bonus Bank balance at the beginning
of the year is negative, the bonus paid is limited to the accrued bonus up to a
maximum of 75% of the target bonus. The executive is not expected to repay
negative balances. On termination of employment due to death, disability or
retirement or by the Corporation without cause, the available balance in the
Bonus Bank will be paid to the terminating executive or his designated
beneficiary or estate. Executive Officers who voluntarily leave to accept
employment elsewhere or who are terminated for cause will forfeit any positive
available balance.
STOCK INCENTIVE PLAN
In 1994, the Corporation established the STRATTEC SECURITY CORPORATION
Stock Incentive Plan ("Incentive Plan"). The Incentive Plan authorizes the
Committee to grant to officers and other key employees stock incentive awards in
the form of one or any combination of the following: stock options, stock
appreciation rights, deferred stock, restricted stock and stock purchase rights.
During fiscal 1997, the Committee granted options to purchase Corporation common
stock to the executives as shown in the Summary Compensation Table.
On August 20, 1997, after publication of financial results for fiscal 1997,
the Committee granted leveraged stock options (LSOs) to 12 key employees,
including all named executive officers shown in the Summary Compensation Table,
based on the amount of incentive bonus under the EVA Plan earned for fiscal
1997. The method of calculating the number of options granted to each executive,
and the method of determining their exercise price, is set forth in the EVA Plan
and Incentive Plan. These leveraged stock options have an exercise price of
$31.98 per share and provide a form of option grant that simulates a stock
purchase with 10:1 leverage. The number of leveraged options granted to Mr.
Stratton for fiscal 1997 was determined in the manner described and was based on
his incentive bonus for fiscal 1997.
The maximum aggregate number of LSOs to be granted each year is 80,000. If
the Total Bonus Payout under EVA produces more than 80,000 LSOs in any year,
LSOs granted for that year will be reduced pro-rata based on proportionate Total
Bonus Payouts under the EVA Plan. The amount of any such reduction shall be
carried forward to subsequent years and invested in LSOs to the extent the
annual limitation is not exceeded in such years.
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<PAGE> 11
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation awarded to Mr. Stratton reflects the basic philosophy
generally discussed above that compensation be based on Corporation and
individual performance.
The Committee determined Mr. Stratton's base salary for fiscal 1997 based
on the compensation survey and annual review described above. With respect to
the EVA Plan and the Stock Incentive Plan, Mr. Stratton's awards for fiscal 1997
were determined in the same manner as for all other participants in these plans.
COMPENSATION COMMITTEE:
Frank J. Krejci
Michael J. Koss
Robert Feitler
9
<PAGE> 12
EXECUTIVE COMPENSATION
CASH COMPENSATION
The table which follows sets forth certain information for the years
indicated below concerning the compensation paid by the Corporation (and its
predecessor) to the Corporation's Chief Executive Officer and the four other
most highly compensated executive officers in fiscal 1997 (collectively, the
"named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
FISCAL ------------------------ SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS/SARS(#)(2) COMPENSATION($)
--------------------------- ------ ------------ -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Harold M. Stratton II, ........... 1997 205,000 174,558 26,549 4,172(3)
President and Chief Executive 1996 186,533 97,000 23,660 3,867(3)
Officer
1995 163,755 177,756 122,206 4,074(3)
John G. Cahill,(4)................ 1997 166,400 108,493 16,501 5,098(5)
Executive Vice President and 1996 159,173 75,607 18,440 4,942(5)
Chief Financial Officer 1995 116,280 97,094 84,860 3,603(5)
Gerald L. Peebles, ............... 1997 112,000 43,198 6,570 4,464(6)
Vice President -- General 1996 107,400 22,554 5,500 3,139(6)
Manager Strattec de Mexico 1995 103,974 58,588 58,967 3,175(6)
Michael R. Elliott, .............. 1997 111,200 47,288 7,192 3,209(7)
Vice President Sales and 1996 105,931 32,441 7,910 3,100(7)
Marketing 1995 94,927 52,834 53,086 4,409(7)
Andrew G. Lechtenberg, ........... 1997 103,000 37,564 5,713 4,344(8)
Vice President -- Engineering 1996 97,700 29,066 7,090 3,802(8)
1995 90,890 50,818 52,778 4,265(8)
</TABLE>
- -------------------------
(1) For fiscal 1995, includes salary paid by Briggs & Stratton Corporation
("Briggs") during the 1995 fiscal year prior to the February 27, 1995
distribution of the common stock of the Corporation by Briggs & Stratton
Corporation (the "Distribution") as follows: $107,355 to Mr. Stratton,
$64,600 to Mr. Cahill, $69,174 to Mr. Peebles, $62,400 to Mr. Elliott and
$59,788 to Mr. Lechtenberg.
(2) For fiscal 1995, includes leveraged stock options granted on August 29, 1995
based on executive performance for fiscal 1995 as follows: Mr. Stratton
27,206 options, Mr. Cahill 14,860 options, Mr. Peebles 8,967 options, Mr.
Elliott 8,086 options and Mr. Lechtenberg 7,778 options. For fiscal 1996,
all amounts are leveraged stock options granted on August 21, 1996 based on
executive performance for fiscal 1996. For fiscal 1997, all amounts are
leveraged stock options granted on August 20, 1997 based on executive
performance for fiscal 1997.
(3) For fiscal 1995, represents $3,552 of matching contributions to the
Corporation's Savings and Investment Plan (the "Plan"), $1,860 of which was
paid by Briggs prior to the Distribution, and $522 of taxable employer paid
group term life insurance, $348 of which was paid by Briggs. For fiscal
1996, represents $3,214 in matching contributions to the Plan, and $653 of
taxable employer paid group term life
10
<PAGE> 13
insurance. For fiscal 1997, includes $3,650 in matching contributions to the
Plan for the executive officer and includes $522 of taxable employer paid
group term life insurance.
(4) Mr. Cahill was employed by Briggs commencing on October 3, 1994.
(5) For fiscal 1995, represents $3,488 of matching contributions to the Plan,
$1,938 of which was paid by Briggs prior to the Distribution, and $115 of
taxable employer paid group term life insurance, $49 of which was paid by
Briggs. For fiscal 1996, represents $4,694 in matching contributions to the
Plan, and $248 of taxable employer paid group term life insurance. For
fiscal 1997, includes $4,846 in matching contributions to the Plan for the
executive officer and includes $252 of taxable employer paid group term life
insurance.
(6) For fiscal 1995, represents $2,941 of matching contributions to the Plan,
$1,965 of which was paid by Briggs prior to the Distribution, and $234 of
taxable employer paid group term life insurance, $38 of which was paid by
Briggs. For fiscal 1996, represents $2,059 in matching contributions to the
Plan, and $1,080 of taxable employer paid group term life insurance. For
fiscal 1997, includes $3,357 in matching contributions to the Plan for the
executive officer and includes $1,107 of taxable employer paid group term
life insurance.
(7) For fiscal 1995, represents $4,146 of matching contributions to the Plan,
$3,234 of which was paid by Briggs prior to the Distribution, and $263 of
taxable employer paid group term life insurance, $173 of which was paid by
Briggs. For fiscal 1996, represents $2,724 in matching contributions to the
Plan, and $376 of taxable employer paid group term life insurance. For
fiscal 1997, includes $2,903 in matching contributions to the Plan for the
executive officer and includes $306 of taxable employer paid group term life
insurance.
(8) For fiscal 1995, represents $3,401 of matching contributions to the Plan,
$2,357 of which was paid by Briggs prior to the Distribution, and $864 of
taxable employer paid group term life insurance, $576 of which was paid by
Briggs. For fiscal 1996, represents $3,440 in matching contributions to the
Plan, and $362 of taxable employer paid group term life insurance. For
fiscal 1997, includes $4,038 in matching contributions to the Plan for the
executive officer and includes $306 of taxable employer paid group term life
insurance.
STOCK OPTIONS
The Incentive Plan approved by shareholders provides for the granting of
stock options with respect to common stock of the Corporation.
The following tables set forth further information relating to stock
options.
11
<PAGE> 14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM($)(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------- ------------ -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Harold M. Stratton II...... 23,660 29.6 19.68 August 21, 2001 128,710 284,157
John G. Cahill............. 18,440 23.1 19.68 August 21, 2001 100,314 221,464
Gerald L. Peebles.......... 5,500 6.9 19.68 August 21, 2001 29,920 66,055
Michael R. Elliott......... 7,910 9.9 19.68 August 21, 2001 43,030 94,999
Andrew G. Lechtenberg...... 7,090 8.9 19.68 August 21, 2001 38,570 85,151
</TABLE>
- -------------------------
(1) The foregoing options are exercisable beginning on the third anniversary of
the date of grant and terminate on the fifth anniversary of the date of
grant.
(2) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Commission, and therefore are
not intended to forecast possible future appreciation, if any, in the
Corporation's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES*
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
NAME (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------------------- ---------------------------
<S> <C> <C>
Harold M. Stratton II.......................... 95,000/50,866 855,000/65,309
John G. Cahill................................. 70,000/33,300 630,000/41,575
Gerald L. Peebles.............................. 50,000/14,467 450,000/19,066
Michael R. Elliott............................. 45,000/15,996 405,000/20,350
Andrew G. Lechtenberg.......................... 45,000/14,868 405,000/19,020
</TABLE>
- -------------------------
* No SARs are outstanding. Options at fiscal year end exclude leveraged stock
options granted on August 20, 1997, based on executive performance for fiscal
1997.
RETIREMENT PLAN AND SUPPLEMENTAL PENSION PLAN
The Corporation maintains a defined benefit retirement plan (the
"Retirement Plan") covering all executive officers and substantially all other
employees in the United States. Under the Retirement Plan, nonbargaining unit
employees receive an annual pension payable on a monthly basis at retirement
equal to 1.6% of the employee's average of the highest 5 years of compensation
during the last 10 calendar years of service prior to retirement multiplied by
the number of years of credited service, with an offset of 50% of Social
Security (prorated if years of credited service are less than 30). Compensation
under the Retirement Plan includes the compensation as shown in the Summary
Compensation Table under the heading "Salary and Bonus," subject to a maximum
compensation amount set by law ($160,000 in 1997).
Executive officers participate in an unfunded program which supplements
benefits under the Retirement Plan. Under the Supplemental Executive Retirement
Plan (the "Supplemental Pension Plan"), executive
12
<PAGE> 15
officers are provided with additional increments of (a) 0.50% of compensation
(as limited under the Retirement Plan) per year of credited service over the
benefits payable under the Retirement Plan to nonbargaining unit employees and
(b) 2.1% of the compensation exceeding the Retirement Plan dollar compensation
limit per year of credited service.
A trust has been created for deposit of the aggregate present value of the
benefits described above for executive officers upon occurrence of a change in
control of the Corporation, which trust would not be considered funding the
benefits for tax purposes.
The following table shows total estimated annual benefits payable from the
Retirement Plan and the unfunded Supplemental Pension Plan to executive officers
upon normal retirement at age 65 at specified compensation and years of service
classifications calculated on a single life basis and adjusted for the projected
Social Security offset:
<TABLE>
<CAPTION>
ANNUAL PENSION PAYABLE FOR LIFE
AVERAGE ANNUAL COMPENSATION AFTER SPECIFIED YEARS OF CREDITED SERVICE
IN HIGHEST 5 OF LAST 10 -----------------------------------------------------------
CALENDAR YEARS OF SERVICE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- --------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000.................................. $ 18,300 $ 36,700 $ 55,000 $ 70,000*
150,000.................................. 28,800 57,700 86,500 105,000
200,000.................................. 39,300 78,700 118,000 140,000*
250,000.................................. 49,800 99,700 149,500 175,000*
300,000.................................. 60,300 120,700 181,000 210,000*
350,000.................................. 70,800 141,700 212,500 245,000*
400,000.................................. 81,300 162,700 244,000 280,000*
450,000.................................. 91,800 183,700 275,500 315,000*
500,000.................................. 102,300 204,700 307,000 350,000*
</TABLE>
- -------------------------
* Figures reduced to reflect the maximum limitation under the plans of 70% of
compensation.
The above table does not reflect limitations imposed by the Internal
Revenue Code of 1986, as amended, on pensions paid under federal income tax
qualified plans. However, an executive officer covered by the Corporation's
unfunded program will receive the full pension to which he would be entitled in
the absence of such limitations.
EMPLOYMENT AGREEMENTS
Each executive officer of the Corporation has signed an employment
agreement which extends through December 31, 1997, with a one-year automatic
extension upon each anniversary date, unless either party gives 30 days' notice
that the agreement will not be further extended. Under the agreement, the
officer agrees to perform the duties currently being performed in addition to
other duties that may be assigned from time to time. The Corporation agrees to
pay the officer a salary of not less than that of the previous year and to
provide fringe benefits that are provided to all other salaried employees of the
Corporation in comparable positions.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Each executive officer of the Corporation has signed a change in control
employment agreement which guarantees the employee continued employment
following a "change in control" on a basis equivalent to the employee's
employment immediately prior to such change in terms of position, duties,
compensation and benefits, as well as specified payments upon termination
following a change in control. The Corporation
13
<PAGE> 16
currently has such agreements with the five named executive officers. Such
agreements become effective only upon a defined change in control of the
Corporation, or if the employee's employment is terminated upon, or in
anticipation of such a change in control, and automatically supersede any
existing employment agreement. Under the agreements, if during the employment
term (three years from the change in control) the employee is terminated other
than for "cause" or if the employee voluntarily terminates his employment for
good reason or during a 30-day window period one year after a change in control,
the employee is entitled to specified severance benefits, including a lump sum
payment of three times the sum of the employee's annual salary and bonus and a
"gross-up" payment which will, in general, effectively reimburse the employee
for any amounts paid under federal excise taxes.
APPROVAL OF AMENDMENT TO
STOCK INCENTIVE PLAN
(PROPOSAL NO. 2)
PURPOSE AND EFFECT OF PROPOSED AMENDMENT
Proposed Amendment. Subject to shareholder approval, the Board of Directors
has amended the Incentive Plan to (a) increase from 788,817 to 1,200,000 the
aggregate number of shares of Common Stock that may be issued or transferred
thereunder to all participants, and increase from 150,000 to 250,000 the
aggregate number of shares of Common Stock that may be issued or transferred
thereunder to any single participant, upon the exercise or payment of stock
options, stock appreciation rights, deferred stock, restricted stock and stock
purchase rights, (b) eliminate the reservation of shares of Common Stock
available for distribution pursuant to Leveraged Stock Options ("LSOs") and
provide that shares of Common Stock authorized for issuance under the Incentive
Plan may be used for awards of LSOs or other stock awards as the Committee may
determine in its sole discretion, and (c) make certain changes to conform the
Incentive Plan to current rules and regulations promulgated under section 16 of
the Exchange Act.
Purpose of Proposed Amendment. The Company recognizes the importance of
attracting and retaining key employees of merit and stimulating the active
interest of those individuals in the development and financial success of the
Company. The Board of Directors believes that the Incentive Plan is critically
important to the furtherance of these objectives. The Board of Directors also
believes that, through the Incentive Plan, the Company is able to enhance the
prospects for its business activities and objectives and more closely align the
interests of key employees with those of shareholders by offering key employees
the opportunity to participate in the Company's future through proprietary
interests in the Company.
As of August 31, 1997, and absent shareholder approval of the proposed
amendment to increase the aggregate number of shares of Common Stock available
for issuance or transfer under the Incentive Plan, there would be only 91,279
shares of Common Stock remaining available for issuance upon exercise, payment
or vesting of all stock options granted thereunder and outstanding on such date.
The absence of an adequate number of shares of Common Stock available for
issuance or transfer under the Incentive Plan restricts both the ability and the
flexibility of the Company to effectively attract and retain and adequately
compensate key employees. The Board of Directors believes that it is both
necessary and desirable to increase from 788,817 to 1,200,000 the aggregate
number of shares of Common Stock available for issuance or transfer under the
Incentive Plan in order to continue to maintain the effectiveness of the
Incentive Plan.
14
<PAGE> 17
DESCRIPTION OF INCENTIVE PLAN
The following description of the Incentive Plan is qualified in its
entirety by reference to the Incentive Plan, as amended, which is attached
hereto as Exhibit A.
General. The Incentive Plan authorizes the Compensation Committee (the
"Committee") to grant to officers and other key employees of the Company, its
subsidiaries and affiliates (excluding members of the Committee and any
non-employee directors) stock incentive awards. Approximately 32 employees are
participants in the Incentive Plan. The Committee administers the Incentive Plan
and has complete discretion, subject to the terms of the Incentive Plan, to
determine, among other things, which officers and key employees will receive
awards, the type, number and frequency of and the number of shares subject to
such awards, and, to the extent not otherwise expressly provided in the
Incentive Plan, the terms and conditions of the awards.
Awards
1. Stock Options. Options granted under the Incentive Plan may be incentive
stock options ("ISOs"), as defined under and subject to Section 422 of the
Internal Revenue Code (the "Code"), or non-qualified stock options ("NSOs").
The options will be exercisable at such times and subject to such terms and
conditions as the Committee may determine. All options will expire no later than
ten years from the date of grant in the case of ISOs and ten years and one day
from the date of grant in the case of NSOs. Generally, options will expire upon
an optionee's termination of employment for cause, one year following the
termination of employment due to death, three years following termination due to
retirement or disability, or three months after the termination of employment
for any other reason; provided, however, that options will expire prior to said
times if and at such time that the original option exercise term otherwise
expires. Generally, options may be exercised only to the extent exercisable on
the date of termination, death, disability or retirement. To the extent options
are ISOs, they will retain such status, in general, only if exercised within
three months following termination of employment.
The option price for any option will not be less than 100% of the fair
market value of the Common Stock as of the date of grant and will be paid in
cash, or, in certain circumstances, shares of Common Stock (including restricted
and deferred stock), at the time of exercise. When using shares of Common Stock
in payment of the exercise price, an optionee may receive, in one transaction or
a series of essentially simultaneous transactions, without making any
out-of-pocket cash payment, shares equivalent in value to the excess of the fair
market value of the shares subject to exercised option rights over the exercise
price specified for such shares in the option.
Upon notice of exercise of a stock option, the Committee may, at its sole
discretion, elect to cash out all of any portion of such option by paying a per
share amount equal to the excess of the fair market value of the Common Stock on
the exercise date over the option exercise price. Such payment may be in cash or
Common Stock, which stock may, in certain circumstances, take the form of
deferred or restricted stock.
Stock options are not transferable except by will or the laws of descent
and distribution.
Shares of Common Stock available for distribution by the Committee under
the Incentive Plan may also be issued pursuant to the Leveraged Stock Option
("LSO") program. LSOs granted under the Incentive Plan may be either ISOs or
NSOs. The LSOs may be exercisable no earlier than three nor more than five years
from the date of grant. The exercise price of LSOs shall be the product of 90%
of fair market value on the date
15
<PAGE> 18
of grant, multiplied by the sum (taken to the 5th power) of (a) 1, plus (b) the
Estimated Annual Growth Rate, but in no event may the exercise price be less
than fair market value on the date of grant. The Estimated Annual Growth Rate is
intended to represent annual percentage stock appreciation at least in the
amount of the Company's cost of capital (with due consideration for dividends
paid, risk and illiquidity) and equals the average daily closing 30 year U.S.
Treasury bond yield rate for the month of April immediately preceding the
relevant plan year, plus 2%.
2. Other Stock Awards. The Committee may also award stock appreciation
rights ("SARs"), restricted stock, deferred stock and stock purchase rights
under the plan. SARs may be granted in conjunction with all or part of any stock
option, will be exercisable only at such times as and to the extent the
underlying stock option is exercisable and upon exercise is paid in cash, Common
Stock or a combination thereof, at the discretion of the Committee, in a per
share amount equal to the excess of the fair market value of the Common Stock on
the exercise date over the related option exercise price. Restricted stock may
granted contingent upon the attainment of specified performance goals or such
other factors as the Committee may determine and, during the period of
restriction, the holder of restricted Common Stock may not sell, transfer,
pledge or assign the restricted stock. A deferred stock award under the
Incentive Plan is essentially similar to an award of restricted stock, except
that no Common Stock is actually issued until the end of the deferral period.
Accordingly, deferred stock carries no voting rights, although it maintains
dividend rights, until such time as stock is actually issued. Stock purchase
rights are generally exercisable only for 30 days after grant and may be
exercised to purchase Common Stock at (a) fair market value, (b)50% of fair
market value, or (c) par value, all values being determined as of the date of
grant.
Change in Control Provisions Upon the occurrence of a "change in control"
of the Company, as defined in the Incentive Plan, any outstanding SARs and stock
options which are not then exercisable will become fully exercisable and vested.
Likewise, the restrictions and deferral limitations applicable to restricted
stock, deferred stock and stock purchase rights will lapse and such shares and
awards will be free of all restrictions and deemed fully vested under the terms
of the original grant.
Upon a change in control, optionees may elect to surrender all or any part
of their stock options and receive a per share amount in cash equal to the
excess of the "change in control price" over the exercise price of the stock
option. The "change in control price" will be the highest price per share paid
in any transaction reported on the NASDAQ National Market System, or paid or
offered to be paid in any bona fide transaction relating to a potential or
actual change in control of the Company at any time during the 60-day period
immediately preceding the change in control as determined by the Committee.
If an optionee's employment is terminated at or following a change in
control (other than by death, disability or retirement), the exercise periods of
an optionee's stock options will be extended to the earlier of six months and
one day from the date of employment termination or the options' respective
expiration dates.
Miscellaneous The Incentive Plan may be amended or discontinued by the
Board of Directors, provided that the Board may not, without the approval of the
Company's shareholders, (a) increase the number of shares reserved for
distribution or decrease the option price of a stock option below 100% of the
fair market value at grant or change the pricing terms applicable to stock
purchase rights, except as expressly provided in the Incentive Plan as described
below with respect to certain events such as a merger, stock split,
consolidation, recapitalization, stock dividend, reorganization or other capital
event, (b) change the class of employees eligible to receive awards under the
Incentive Plan, or (c) extend maximum exercise periods for awards. No amendment
or discontinuance may impair the rights of an optionee or recipient under an
outstanding stock option or other award without the recipient's consent.
16
<PAGE> 19
In the event of any merger, stock split, consolidation, recapitalization,
stock dividend, reorganization or other change in corporate structure affecting
the Common Stock, the Board of Directors may, in its sole discretion, make
substitutions or adjustments in the aggregate number of shares reserved for
issuance under the Incentive Plan, in the number and option price of shares
subject to outstanding options (and related stock appreciation rights), in the
number and purchase price of shares subject to outstanding stock purchase
rights, and in the number of shares subject to other awards granted under the
Incentive Plan.
INCENTIVE PLAN BENEFITS
Set forth in the table below are the numbers of stock options granted in
fiscal 1997 to each of the named executive officers and certain groups. Stock
options were the only type of awards granted under the Incentive Plan during
1997.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OR GROUP OPTIONS
-------------------------- ---------
<S> <C>
Harold M. Stratton II, President and Chief Executive
Officer................................................... 23,660
John G. Cahill, Executive Vice President and Chief Financial
Officer................................................... 18,440
Gerald L. Peebles, Vice President -- General Manager
STRATTEC de Mexico........................................ 5,500
Michael R. Elliott, Vice President -- Sales and Marketing... 7,910
Andrew G. Lechtenberg, Vice President -- Engineering........ 7,090
All executive officers, as a group.......................... 62,600
All directors who are not executive officers, as a group.... 0
All employees as a group.................................... 160,000
</TABLE>
The types of awards and amounts thereof that may be granted under the
Incentive Plan to the above-named individuals and groups in the future are not
determinable at this time.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares represented, in person or
by proxy, at the Annual Meeting is required for approval of the proposed
amendment to the Incentive Plan.
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSED
AMENDMENT TO THE INCENTIVE PLAN.
AUDITORS
Arthur Andersen LLP served as independent auditors for the purpose of
auditing the financial statements of the Corporation for fiscal 1997. A
representative of Arthur Andersen LLP will be present at the Annual Meeting and
will have the opportunity to make a statement if he desires to do so and will be
available to respond to appropriate questions. The Audit Committee will not
choose independent auditors for fiscal 1998 until after the Annual Meeting.
17
<PAGE> 20
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K
The Corporation is required to file an annual report, called a Form 10-K,
with the Commission. A copy of Form 10-K for the fiscal year ended June 29, 1997
will be made available, without charge, to any person entitled to vote at the
Annual Meeting. Written request should be directed to John G. Cahill, Office of
the Corporate Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope
Road, Milwaukee, Wisconsin 53209.
SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 1998 Annual Meeting
of Shareholders must be received at the Corporation's principal offices in
Milwaukee, Wisconsin no later than May 13, 1998 for inclusion in the proxy
material for that meeting.
OTHER MATTERS
The Directors of the Corporation know of no other matters to be brought
before the meeting. If any other matters properly come before the meeting,
including any adjournment or adjournments thereof, it is intended that proxies
received in response to this solicitation will be voted on such matters in the
discretion of the person or persons named in the accompanying proxy form.
BY ORDER OF THE BOARD OF DIRECTORS
STRATTEC SECURITY CORPORATION
John G. Cahill, Secretary
Milwaukee, Wisconsin
September 10, 1997
18
<PAGE> 21
EXHIBIT A
STRATTEC SECURITY CORPORATION
STOCK INCENTIVE PLAN
(AS AMENDED EFFECTIVE OCTOBER 23, 1997)
1. Purpose; Definitions. The purpose of the Plan is to enable key employees
of the Company, its subsidiaries and affiliates to participate in the Company's
future by offering them proprietary interests in the Company. The Plan also
provides a means through which the Company can attract and retain key employees
of merit.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(c) "Commission" means the Securities and Exchange Commission or any
successor agency.
(d) "Committee" means the Committee referred to in Section 2.
(e) "Company" means STRATTEC SECURITY CORPORATION, a corporation
organized under the laws of the State of Wisconsin, or any successor
corporation.
(f) "Deferred Stock" means an award made pursuant to Section 8.
(g) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(h) "Early Retirement" means retirement, with the consent of and for
purposes of the Company, from active employment with the Company, a
subsidiary or affiliate pursuant to the early retirement provisions of the
applicable pension plan of such employer.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(j) "Fair Market Value" means, except as provided in Sections 5(k) and
6(b)(ii): (i) with respect to Non-Qualified Stock Options granted in
connection with the distribution of Stock made by Briggs & Stratton
Corporation to its shareholders, the average closing price of the Stock on
the NASDAQ National Market System during the five trading days after the
effective date of such distribution; and (ii) in all other instances, the
mean, as of any given date, between the highest and lowest reported sales
prices of the Stock on the NASDAQ National Market System or, if no such
sale of Stock occurs on the NASDAQ National Market System on such date, the
fair market value of the Stock as determined by the Committee in good
faith.
(k) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
(l) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)(i), as promulgated by the Commission under the Exchange Act, or
any successor definition adopted by the Commission.
A-1
<PAGE> 22
(m) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment with
the Company, a subsidiary or affiliate at or after age 65.
(o) "Plan" means the STRATTEC SECURITY CORPORATION Stock Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
(p) "Restricted Stock" means an award under Section 7.
(q) "Retirement" means Normal Retirement or Early Retirement.
(r) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
(s) "Stock" means the Common Stock, $.01 par value per share, of the
Company.
(t) "Stock Appreciation Right" means a right granted under Section 6.
(u) "Stock Option" or "Option" means an Option or Leveraged Stock
Option granted under Section 5.
(v) "Stock Purchase Right" means a purchase right granted under
Section 9.
In addition, the terms "Change in Control" and "Change in Control Price"
have the meanings set forth in Sections 10(b) and (c), respectively, and other
capitalized terms used herein shall have the meanings ascribed to such terms in
the relevant section of this Plan.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board or such other committee of the Board, composed solely of
two or more Non-Employee Directors, who shall be appointed by the Board and who
shall serve at the pleasure of the Board. If at any time no Committee shall be
in office, the functions of the Committee specified in the Plan shall be
exercised by the Board.
The Committee shall have plenary authority to grant to eligible employees,
pursuant to the terms of the Plan, Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock and Stock Purchase Rights.
In particular, the Committee shall have the authority, subject to the terms
of the Plan:
(a) to select the officers and other key employees to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and
Stock Purchase Rights may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock and Stock Purchase Rights or any combination thereof are to
be granted hereunder,
(c) to determine the number of shares to be covered by each award
granted hereunder,
(d) to determine the terms and conditions of any award granted
hereunder (including, but not limited to, the share price, any restriction
or limitation and any vesting acceleration or forfeiture waiver regarding
any Stock Option or other award and the shares of Stock relating thereto,
based on such factors as the Committee shall determine);
(e) to adjust the performance goals and measurements applicable to
performance-based awards pursuant to the terms of the Plan;
A-2
<PAGE> 23
(f) to determine under what circumstances a Stock Option may be
settled in cash, Deferred Stock or Restricted Stock under Section 5(k);
(g) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an award shall be deferred; and
(h) to determine the terms and conditions of Stock Purchase Rights,
the Stock purchased by exercising such Rights and any loans to be made by
the Company with respect thereto.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee pursuant to the provisions of the
Plan with respect to any award shall be made in its sole discretion at the time
of the grant of the award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all persons, including
the Company and Plan participants.
3. Stock Subject to Plan. The total number of shares of Stock reserved and
available for distribution pursuant to Stock Options under the Plan shall be
1,200,000 shares. Such shares may consist, in whole or in part, of authorized
and unissued shares or treasury shares.
Subject to Section 6(b) (iv), if any shares of Stock that have been
optioned cease to be subject to a Stock Option, if any shares of Stock that are
subject to any Restricted or Deferred Stock award or Stock Purchase Right are
forfeited or if any Stock Option or other award otherwise terminates without a
payment being made to the participant in the form of Stock, such shares shall
again be available for distribution in connection with awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Stock, such substitution or adjustments shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Stock Options, in the
number and purchase price of shares subject to outstanding Stock Purchase Rights
and in the number of shares subject to other outstanding awards granted under
the Plan as may be determined to be appropriate by the Board, in its sole
discretion; provided, however, that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
4. Eligibility. Officers and other key employees of the Company, its
subsidiaries and affiliates (but excluding members of the Committee and any
person who serves only as a director) who are responsible for or contribute to
the management, growth and profitability of the business of the Company, its
subsidiaries or affiliates are eligible to be granted awards under the Plan.
5. Stock Options. Stock Options may be granted alone or in addition to
other awards granted under the Plan and may be of two types: Incentive Stock
Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
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The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however, that
the maximum number of Stock Options and Stock Appreciation Rights that may be
granted to an individual during the term of the Plan is 250,000.
Incentive Stock Options may be granted only to employees of the Company and
its subsidiaries (within the meaning of Section 425(f) of the Code). To the
extent that any Stock Option does not qualify as an Incentive Stock Option, it
shall constitute a separate Non-Qualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is an agreement for Incentive Stock Options or NonQualified Stock
Options. The grant of a Stock Option shall occur on the date the Committee by
resolution selects an employee as a participant in any grant of Stock Options,
determines the number of Stock Options to be granted to such employee and
specifies the terms and provisions of the option agreement. The Company shall
notify a participant of any grant of Stock Options, and a written option
agreement or agreements shall be duly executed and delivered by the Company.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be equal to the Fair Market Value of the Stock
at time of grant or such higher price as shall be determined by the
Committee at grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the Option is granted, and no Non-Qualified Stock
Option shall be exercisable more than 10 years and one day after the date
the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee. If the Committee provides that any Stock Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine.
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option period by giving written notice of exercise to the Company
specifying the number of shares to be purchased.
Such notice shall be accompanied by the payment in full of the purchase
price for such shares or, to the extent authorized by the Committee, by
irrevocable instructions to a broker to promptly pay to the Company in full the
purchase price for such shares. Such payment shall be made in cash, outstanding
shares of Stock, in combinations thereof, or any other method of payment
approved by the Committee; provided, however, that the deposit of any
withholding tax shall be made in accordance with applicable law. If shares of
Stock are being used in part or full payment for the shares to be acquired upon
exercise of the Stock Option, such shares shall be valued for the purpose of
such exchange as of the date of exercise of the Stock Option at the Fair
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Market Value of the shares. Any certificates evidencing shares of Stock used to
pay the purchase price shall be accompanied by stock powers duly endorsed in
blank by the registered holder of the certificate (with signatures thereon
guaranteed). In the event the certificates tendered by the holder in such
payment cover more shares than are required for such payment, the certificate
shall also be accompanied by instructions from the holder to the Company's
transfer agent with regard to the disposition of the balance of the shares
covered thereby.
If payment of the option exercise price of a Non-Qualified Stock Option is
made in whole or in part in the form of Restricted Stock or Deferred Stock, such
Restricted Stock or Deferred Stock (and any replacement shares relating thereto)
shall remain (or be) restricted or deferred, as the case may be, in accordance
with the original terms of the Restricted Stock award or Deferred Stock award in
question, and any additional Stock received upon the exercise shall be subject
to the same forfeiture restrictions or deferral limitations, unless otherwise
determined by the Committee.
No shares of Stock shall be issued until full payment therefor has been
made. Subject to any forfeiture restrictions or deferral limitations that may
apply if a Stock Option is exercised using Restricted Stock or Deferred Stock,
an optionee shall have all of the rights of a stockholder of the Company,
including the right to vote the shares and the right to receive dividends, with
respect to shares subject to the Stock Option when the optionee has given
written notice of exercise, has paid in full for such shares and, if requested,
has given the representation described in Section 13(a).
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee other than by will or by laws of descent and
distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee, it being understood that the terms "holder"
and "optionee" include the guardian and legal representative of the
optionee named in the option agreement and any person to whom an option is
transferred by will or the laws of descent and distribution.
(f) Termination by Death. Subject to Section 5(j), if an optionee's
employment terminates by reason of death, any Stock Option held by such
optionee may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Committee may determine, for a period of one
year (or such other period as the Committee may specify) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) Termination by Reason of Disability. Subject to Section 5(j), if
an optionee's employment terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that, if the optionee dies within such three-year period
(or such shorter period), any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such three-year (or such
shorter) period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment
by reason of Disability, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
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(h) Termination by Reason of Retirement. Subject to Section 5(j), if
an optionee's employment terminates by reason of Retirement, any Stock
Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of such Retirement or on such
accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter,
provided, however, that, if the optionee dies within such three-year (or
such shorter) period any unexercised Stock option held by such optionee
shall, notwithstanding the expiration of such three-year (or such shorter)
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment
by reason of Retirement, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment terminates for any reason other than death,
Disability or Retirement, the Stock Option shall thereupon terminate,
except that such Stock Option, to the extent then exercisable, may be
exercised for the lesser of three months or the balance of such Stock
Option's term if the optionee is involuntarily terminated by the Company, a
subsidiary or affiliate without cause. Notwithstanding the foregoing, if an
optionee's employment terminates at or after a Change in Control (as
defined in Section 10(b)), other than by reason of death, Disability or
Retirement, any Stock Option held by such optionee shall be exercisable for
the lesser of (x) six months and one day, and (y) the balance of such Stock
Option's term pursuant to Section 5(b).
(j) Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted after 1986 are
exercisable for the first time by the optionee during any calendar year
under the Plan and any other stock option plan of any subsidiary or parent
corporation (within the meaning of Section 425 of the Code) after 1986
shall not exceed $100,000.
The Committee is authorized to provide at grant that, to the extent
permitted under Section 422 of the Code, if a participant's employment with the
Company and its subsidiaries is terminated by reason of death, Disability or
Retirement and the portion of any Incentive Stock Option that is otherwise
exercisable during the post-termination period specified under Sections 5(f),
(g), or (h), applied without regard to this Section 5(j), is greater than the
portion of such option that is exercisable as an "incentive stock option" during
such post-termination period under Section 422, such post-termination period
shall automatically be extended (but not beyond the original option term) to the
extent necessary to permit the optionee to exercise such Incentive Stock Option
(either as an Incentive Stock Option or, if exercised after the expiration
periods that apply for the purposes of Section 422, as a Non-Qualified Stock
Option).
(k) Cashing Out of Option; Settlement of Spread Value In Deferred or
Restricted Stock. On receipt of written notice of exercise, the Committee
may elect to cash out all or part of the portion of any Stock Option to be
exercised by paying the optionee an amount, in cash or Stock, equal to the
excess of the Fair Market Value of the Stock over the option price (the
"Spread Value") on the effective date of such cash out.
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Cash outs relating to options held by optionees who are actually or
potentially subject to Section 16(b) of the Exchange Act shall comply with
the provisions of Rule 16b-3, to the extent applicable, and, in the case of
cash outs of Non-Qualified Stock Options held by such optionees, the
Committee may determine Fair Market Value under the pricing rule set forth
in Section 6(b) (ii) (b).
In addition, if the option agreement so provides at grant or is amended
after grant and prior to exercise to so provide (with the optionee's consent),
the Committee may require that all or part of the shares to be issued with
respect to the Spread Value payable in the event of a cash out of an unexercised
Stock Option or the Spread Value portion of an exercised Stock Option take the
form of Deferred or Restricted Stock, which shall be valued on the date of
exercise on the basis of the Fair Market Value of such Deferred or Restricted
Stock, determined without regard to the deferral limitations or forfeiture
restrictions involved. Notwithstanding any other provision of this Plan, upon a
Change in Control (as defined in Section 10(b)) other than a Change in Control
specified in clause (i) of Section 10(b) arising as a result of beneficial
ownership (as defined therein) by the Participant of Outstanding Company Common
Stock or Outstanding Company Voting Securities (as such terms are defined
below), in the case of Stock Options other than Stock Options held by an officer
or director of the Company (within the meaning of Section 16 of the Exchange
Act) which were granted less than six months prior to the Change in Control,
during the 60-day period from and after a Change in Control (the "Exercise
Period"), unless the Committee shall determine otherwise at the time of grant,
an optionee shall have the right, in lieu of the payment of the exercise price
of the shares of Stock being purchased under the Stock Option and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all or
part of the Stock Option to the Company and to receive cash, within 30 days of
such notice, in an amount equal to the amount by which the "Change in Control
Price" (as defined in Section 10(c)) per share of Stock on the date of such
election shall exceed the exercise price per share of Stock under the Stock
Option multiplied by the number of shares of Stock granted under the Stock
Option as to which the right granted under this Section 5(k) shall have been
exercised.
(l) Leveraged Stock Options. Any of the shares of Stock reserved and
available for distribution under the Plan may be used for grants of
"Leveraged Stock Options" pursuant to the Company's Leveraged Stock Option
Program described below (the "LSO Program").
(i) Objectives. The LSO Program is designed to build upon the
Company's Economic Value Added Incentive Compensation Plan ("EVA Plan")
by tying the interests of certain senior executives ("Senior
Executives") to the long term consolidated results of the Company. In
this way, the objectives of Senior Executives will be more closely
aligned with the Company's shareholders. Whereas the EVA Plan provides
for near and intermediate term rewards, the LSO Program provides a
longer term focus by allowing Senior Executives to participate in the
long-term appreciation in the equity value of the Company. In general,
the LSO Program is structured such that each year an amount equivalent
to the Total Bonus Payout under the EVA Plan is invested on behalf of
Senior Executives in options on the Company's Stock ("LSOs"). These LSOs
become exercisable after they have been held for three years, and they
expire at the end of five years. The LSO Program is also structured so
that a fair return must be provided to the Company's shareholders before
the options become valuable.
(ii) Leveraged Stock Option Grant. For fiscal 1995 and subsequent
years, the dollar amount to be invested in LSOs for each Senior
Executive shall be equal to the amount of each Senior Executive's Total
Bonus Payout determined under the EVA Plan effective for the applicable
fiscal year. The number of LSOs awarded shall be determined by dividing
(a) the dollar amount of such
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LSO award by (b) 10% of the Fair Market Value of Company stock on the
date of the grant, as determined by the Committee, rounded (up or down)
to the nearest 10 shares.
(iii) Term. All LSOs shall be exercisable beginning on the third
anniversary of the date of grant, and shall terminate on the fifth
anniversary of the date of grant unless sooner exercised, unless the
Committee determines other dates.
(iv) Exercise Price. The exercise price for LSOs shall be the
product of 90% of the Fair Market Value per share as determined above,
times the sum taken to the fifth (5th) power of (a)1, plus (b) the
Estimated Annual Growth Rate, but in no event may the exercise price be
less than Fair Market Value on the date of grant. The Estimated Annual
Growth Rate (intended to represent annual percentage stock appreciation
at least in the amount of the Company's cost of capital, with due
consideration for dividends paid, risk and illiquidity) is the average
daily closing 30-year U.S. Treasury bond yield rate for the month of
April immediately preceding the relevant Plan year, plus 2%. So,
Exercise Price = (.9 X FMV) X (1 + Estimated Annual Growth Rate)(5)
Example: $15 share price; 9.75% Estimated Annual Growth Rate (7.75%
30-year U.S. Treasury bond rate, plus 2%): $13.50 (90%
FMV) X (1.0975)(5) = $21.50
(v) Limitations on LSO Grants and Carryover. Notwithstanding
subsection (l)(ii), the maximum number of LSOs that may be granted to
all Senior Executives for any Plan year during the five (5) year term of
this LSO Program, shall be 80,000. In the event that the 80,000
limitation shall be in effect for any Plan year, the dollar amount to be
invested for each Senior Executive shall be reduced by proration based
on the aggregate Total Bonus Payouts of all Senior Executives so that
the limitation is not exceeded. The amount of any such reduction shall
be carried forward to subsequent years and invested in LSOs to the
extent the annual limitation is not exceeded in such years.
(vi) The Plan. Except as modified herein, LSOs are Incentive Stock
Options to the extent they are eligible for treatment as such under
Section 422 of the Internal Revenue Code. If not eligible for Incentive
Stock Option treatment, the LSOs shall constitute Non-Qualified Stock
Options. Except as specifically modified herein, LSOs shall be governed
by the terms of the Plan.
6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such rights may be granted either
at or after the time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of
grant of such Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
except that, unless otherwise determined by the Committee at the time of
grant, a Stock Appreciation Right granted with respect to less than the
full number of shares covered by a related Stock Option shall not be
reduced until the number of shares covered by an exercise or termination of
the related Stock Option exceeds the number of shares not covered by the
Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established
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by the Committee. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in
Section 6(b). Stock Options which have been so surrendered shall no longer
be exercisable to the extent the related Stock Appreciation Rights have
been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee,
including the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 5
and this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one share of
Stock over the option price per share specified in the related Stock
Option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having
the right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options
held by optionees who are actually or potentially subject to Section
16(b) of the Exchange Act, the Committee may require that such Stock
Appreciation Rights be exercised only in accordance with the applicable
provisions of Rule 16b-3.
(iii) Stock Appreciation Rights shall be transferable only when and
to the extent that the underlying Stock Option would be transferable
under Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued
under the Stock Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee
shall determine the officers and key employees to whom and the time or
times at which grants of Restricted Stock will be made, the number of
shares to be awarded, the time or times within which such awards may be
subject to forfeiture and any other terms and conditions of the awards, in
addition to those contained in Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors or criteria
as the Committee shall determine. The provisions of Restricted Stock awards
need not be the same with respect to each recipient.
(b) Awards and Certificates. Each participant receiving a Restricted
Stock award shall be issued a certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of such
participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the STRATTEC SECURITY CORPORATION Stock
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Incentive Plan. Copies of such Plan and Agreement are on file at the
offices of STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road,
Glendale, Wisconsin 53209-2043."
The Committee may require that the certificates evidencing such shares
be held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in blank, relating
to the Stock covered by such award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and, conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during a period set by the
Committee, commencing with the date of such award (the "Restriction
Period"), the participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of Restricted Stock.
Within these limits, the Committee may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service, performance and
such other factors or criteria as the Committee may determine.
(ii) Except as provided in this paragraph (ii), and Section
7(c)(i), the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the Company,
including the right to vote the shares and the right to receive any cash
dividends. Unless otherwise determined by the Committee, cash dividends
shall be automatically deferred and reinvested in additional Restricted
Stock and dividends payable in Stock shall be paid in the form of
Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i) and (iv), upon
termination of a participant's employment for any reason during the
Restriction Period, all shares still subject to restriction shall be
forfeited by the participant.
(iv) In the event of hardship or other special circumstances of a
participant whose employment is involuntarily terminated (other than for
cause), the Committee may waive in whole or in part any or all remaining
restrictions with respect to such participant's shares of Restricted
Stock.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
participant.
(vi) Each award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees to whom and the time or times at
which Deferred Stock shall be awarded, the number of shares of Deferred
Stock to be awarded to any participant, the duration of the period (the
"Deferral Period") during which, and the conditions under which, receipt of
the Stock will be deferred and any other terms and conditions of the award,
in addition to those contained in Section 8(b). The Committee may condition
the grant of Deferred Stock upon the attainment of specified performance
goals or such other factors or criteria as the
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Committee shall determine. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
(b) Terms and Conditions. Deferred Stock awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Deferred Stock
Agreement referred to in Section 8(b)(vii), Deferred Stock awards may
not be sold, assigned, transferred, pledged or otherwise encumbered
during the Deferral Period. At the expiration of the Deferral Period (or
Elective Deferral Period as defined in Section 8(b)(vi), where
applicable), share certificates shall be delivered to the participant
for the shares covered by the Deferred Stock award.
(ii) Unless otherwise determined by the Committee, amounts equal to
any dividends declared during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award will be awarded,
automatically deferred and deemed to be reinvested in additional
Deferred Stock.
(iii) Except to the extent otherwise provided in the applicable
Deferred Stock Agreement and Sections 8(b)(iv) and (v), upon termination
of a participant's employment for any reason during the Deferral Period,
the rights to the shares still covered by the Deferred Stock award shall
be forfeited.
(iv) Based on service, performance and such other factors or
criteria as the Committee may determine, the Committee may provide for
the lapse of deferral limitations in installments and may accelerate the
vesting of all or any part of any Deferred Stock award and waive the
deferral limitations for all or any part of such award.
(v) In the event of hardship or other special circumstances of a
participant whose employment is involuntarily terminated (other than for
cause), the Committee may waive in whole or in part any or all remaining
deferral limitations with respect to any or all of such participant's
Deferred Stock.
(vi) A participant may elect to further defer receipt of the
Deferred Stock payable under an award (or an installment of an award)
for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval and
to such terms as are determined by the Committee. Subject to any
exceptions adopted by the Committee, such election must generally be
made at least 12 months prior to completion of the Deferral Period for
the award (or for such installment of an award).
(vii) Each award shall be confirmed by, and be subject to the terms
of, a Deferred Stock Agreement.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant Stock Purchase
Rights which shall enable the recipients to purchase Stock:
(i) at its Fair Market Value on the date of grant;
(ii) at 50% of such Fair Market Value on such date; or
(iii) at an amount equal to the par value of such Stock on such
date.
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The Committee may impose such terms and conditions as it shall determine on
such Stock Purchase Rights or the exercise thereof and may also provide for
deferral limitations or forfeiture restrictions with respect to the Stock
purchased.
Each Stock Purchase Right award shall be confirmed by, and be subject to
the terms of, a Stock Purchase Rights Agreement. The terms of such awards need
not be the same with respect to each participant.
(b) Stock Exercisability. Stock Purchase Rights shall be exercisable
for such period after grant as is determined by the Committee, not to
exceed 30 days.
(c) Loans. If the Committee so determines, the Company shall make or
arrange for a loan to an employee with respect to the exercise of Stock
Purchase Rights. The Committee shall have full authority to decide whether
such a loan should be made and to determine the amount, term and other
provisions of any such loan, including the interest rate to be charged,
whether the loan is to be with or without recourse against the borrower,
the security, if any, therefor, the terms on which the loan is to be repaid
and the conditions, if any, under which it may be forgiven. However, no
loan hereunder shall have a term (including extensions) exceeding 10 years
in duration or be in an amount exceeding 90% of the total purchase price
paid by the borrower.
10. Change In Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan
to the contrary, in the event of a Change in Control (as defined in Section
10(b)):
(i) Any Stock Appreciation Rights and Stock Options outstanding as
of the date such Change in Control is determined to have occurred and
not then exercisable and vested shall become fully exercisable and
vested to the full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock and Stock Purchase Rights shall lapse,
and such Restricted Stock, Deferred Stock and Stock Purchase Rights
shall become free of all restrictions and fully vested to the full
extent of the original grant.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following
events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of Stock of the Company (the "outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction described in clauses (i), (ii) and (iii) of
paragraph (3) of this subsection (b) of this Section 10; or
(ii) Individuals who, as of February 27, 1995, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any
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<PAGE> 33
individual becoming a director subsequent to February 27, 1995 whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination;
or
(iv) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to a corporation, with respect to which following such sale
or other disposition, (A) more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) less than 20% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by any Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation),
except to the extent that such Person owned 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities prior to the sale or disposition and (C) at least a majority
of the members of the board of directors of such corporation were
members of the Incumbent Board
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<PAGE> 34
at the time of the execution of the initial agreement, or of the action
of the Board, providing for such sale or other disposition of assets of
the Company or were elected, appointed or nominated by the Board.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the NASDAQ National Market System or paid or offered in any
bona fide transaction related to a potential or actual change in control of
the Company at any time during the preceding 60 day period as determined by
the Committee, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the
Committee decides to cash out such options.
11. Amendments and Termination. The Board may amend, alter or discontinue
the Plan but no amendment, alteration or discontinuation shall be made which
would impair the rights of an optionee under a Stock Option or a recipient of a
Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award and Stock
Purchase Right theretofore granted without the optionee's or recipient's consent
or which, without the approval of the Company's stockholders, would:
(a) except as expressly provided in the Plan, increase the total
number of shares reserved for the purpose of the Plan;
(b) except as expressly provided in the Plan, decrease the option
price of (i) any Stock Option to less than the Fair Market Value on the
date of grant or (ii) change the minimum price terms of Section 9(a);
(c) change the class of employees eligible to participate in the Plan;
or
(d) extend the maximum option period under Section 5(b) or the maximum
exercise period under Section 9(b).
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holder's consent. The
Committee may also substitute new Stock Options for previously granted
Stock Options, including previously granted Stock Options having higher
option prices.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting
rules, as well as other developments.
12. Unfunded Status of Plan. It is presently intended that the Plan
constitute an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
13. General Provisions.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option or a Stock Purchase Right to represent to and agree with
the Company in writing that the optionee or participant is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
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<PAGE> 35
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Commission, any stock exchange
upon which the Stock is then listed and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the Company, a
subsidiary or affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment nor shall it interfere in any way with the
right of the Company, a subsidiary or affiliate to terminate the employment
of any employee at any time.
(d) No later than the dates as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any award under the Plan, the participant shall
pay to the Company, or make arrangements satisfactory to the Company
regarding the payment of, any federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such amount. Unless
otherwise determined by the Company, withholding obligations may be settled
with Stock, including Stock that is part of the award that gives rise to
the withholding requirement. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements, and the Company, its
subsidiaries and affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
participant.
(e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a right of first refusal pursuant
to which the participant shall be required to offer to the Company any
shares that the participant wishes to sell at the then Fair Market Value of
the Stock, subject to such other terms and conditions as the Committee may
specify at the time of grant.
(f) The reinvestment of dividends in additional Deferred or Restricted
Stock at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 for such
reinvestment (taking into account then outstanding Stock Options, Stock
Purchase Rights and other Plan awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any
amounts payable in the event of the participant's death are to be paid.
(h) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Wisconsin.
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<PAGE> 36
PROXY
STRATTEC SECURITY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harold M. Stratton II and John G. Cahill,
or either one of them, with full power of substitution and resubstitution, as
proxy or proxies of the undersigned to attend the Annual Meeting of
Shareholders of STRATTEC SECURITY CORPORATION to be held on October 23, 1997 at
2:00 p.m., local time, at Manchester East Hotel, 7065 North Port Washington
Road, Milwaukee, Wisconsin 53217, and at any adjournment thereof, there to vote
all shares of Common Stock which the undersigned would be entitled to vote if
personally present as specified upon the following matters and in their
discretion upon such other matters as may properly come before the meeting.
1. ELECTION OF DIRECTORS (terms expiring at the 2000 Annual Meeting)
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
HAROLD M. STRATTON II AND ROBERT FEITLER
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
________________________________________________________________________
2. Approval and adoption of proposed amendment to the STRATTEC SECURITY
CORPORATION Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
(continued on reverse side)
<PAGE> 37
PROXY NO. NO. OF SHARES
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and accompanying Proxy Statement, ratifies all that
said proxies or their substitutes may lawfully do by virtue hereof, and revokes
all former proxies.
Please sign exactly as your name appears hereon, date and return this Proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY TO
ELECT THE NOMINATED DIRECTORS AND TO APPROVE AND ADOPT THE AMENDMENT TO THE
STRATTEC SECURITY CORPORATION STOCK INCENTIVE PLAN. IF OTHER MATTERS COME
BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST
JUDGMENT OF THE PROXIES APPOINTED.
DATED: ___________________, 1997
____________________________________
(SIGNATURE OF SHAREHOLDER)
____________________________________
(SIGNATURE IF JOINTLY HELD)
If signing as attorney, executor,
administrator, trustee or guardian, please
add you full title as such. If shares are
held by two or more persons, all holders must
sign the Proxy.
2
