<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section
240.142-12
SUNDSTRAND CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / 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:
- ------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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>
[Sundstrand Corporation Trademark: Circle S Logo]
SUNDSTRAND CORPORATION
ROCKFORD, ILLINOIS
TO THE STOCKHOLDERS OF
SUNDSTRAND CORPORATION:
The 1994 Annual Meeting of Stockholders of Sundstrand Corporation is to be
held in the Wallingford Center at the Clock Tower Resort & Conference Center,
7801 East State Street, Rockford, Illinois, on Tuesday, April 19, 1994, at 11:00
a.m., Central Time. Stockholders will be called upon to elect four directors for
a term of three years and to vote upon such other matters as may properly come
before the meeting. The Board of Directors cordially invites you to attend the
meeting. The Wallingford Center is located on the first floor of the Clock Tower
Resort & Conference Center.
A copy of the Annual Report of the Company for the year 1993 is enclosed.
At your earliest convenience, please sign and return the enclosed proxy
card so that your shares will be represented at the meeting.
Very truly yours,
/s/ Harry C. Stonecipher
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
March 2, 1994
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE DATE, SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A RETURN ENVELOPE IS PROVIDED.
<PAGE>
SUNDSTRAND CORPORATION
4949 HARRISON AVENUE
P.O. BOX 7003
ROCKFORD, ILLINOIS 61125-7003
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 2, 1994
Notice is hereby given that the Annual Meeting of Stockholders of
Sundstrand Corporation, a Delaware corporation (the "Company"), will be held in
the Wallingford Center at the Clock Tower Resort & Conference Center, 7801 East
State Street, Rockford, Illinois, on Tuesday, April 19, 1994, at 11:00 a.m.,
Central Time, for the following purposes:
1. To elect four directors for a term of three years; and
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on February 18,
1994, as the time for taking a record of the stockholders entitled to notice of
and to vote at the meeting. A list of such stockholders will be available from
the Director, Investor Relations at the offices of Sundstrand Corporation, 4949
Harrison Avenue, Rockford, Illinois 61125 on and after March 22, 1994.
By order of the Board of Directors,
RICHARD M. SCHILLING,
SECRETARY
<PAGE>
SUNDSTRAND CORPORATION
4949 HARRISON AVENUE
P.O. BOX 7003
ROCKFORD, ILLINOIS 61125-7003
MARCH 2, 1994
--------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 1994
The enclosed proxy is being solicited by the Board of Directors of the
Company and may be revoked prior to the voting thereof. The cost of soliciting
proxies by mail, telephone, telegraph, or in person, as needed, will be borne by
the Company. The Company has retained Georgeson & Company Inc. to assist in
soliciting proxies from stockholders, including brokers' accounts, at a fee of
$6,000 plus out-of-pocket expenses, to be paid by the Company. Also, officers or
regular employees of the Company may engage in the solicitation of proxies by
telegraph, telecopy, telephone or personal calls.
VOTING SECURITIES
The record date for determining the stockholders entitled to vote at the
meeting is February 18, 1994. On this date, the Company had 32,847,332 shares of
Common Stock outstanding which are entitled to vote at the meeting. Stockholders
are entitled to one vote for each share held. The holders of a majority of the
stock issued and outstanding and entitled to vote, present in person or
represented by proxy, as determined by election inspectors appointed for the
meeting, will constitute a quorum. The election inspectors will also tabulate
votes that are received. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum and as a nonaffirmative vote for purposes of determining
the approval of any matter submitted to the stockholders for a vote. If a broker
or other nominee indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, such shares will
be treated as present and entitled to vote for purposes of determining the
presence of a quorum but as nonvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote.
The following table sets forth the name and address of each person known to
the Company to be the beneficial owner of 5 percent or more of the Company's
Common Stock, the number of shares beneficially owned by each such person and
the percentage of the Company's Common Stock so owned.
1
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------ ------------------------- ----------------
<S> <C> <C>
Oppenheimer Group, Inc.*
Oppenheimer Tower
World Financial Center 3,826,045 10.93%
New York, New York 10281
The Capital Group, Inc. and
Capital Research and Management Company**
333 South Hope Street 2,835,000 8.1%
Los Angeles, California 90071
Delaware Management Company, Inc.***
1818 Market Street 2,729,400 7.8%
Philadelphia, Pennsylvania 19103
- ----------------
<FN>
*As reported in a Securities and Exchange Commission Schedule 13G report
dated February 1, 1994, by Oppenheimer Group, Inc., the beneficial
ownership of 3,826,045 shares by Oppenheimer Group, Inc. includes the
beneficial ownership of 3,542,845 shares by Oppenheimer Capital, an
investment adviser registered under the Investment Advisers Act of 1940 and
a subsidiary of Oppenheimer Group, Inc.
**As reported in a Securities and Exchange Commission Schedule 13G report
dated February 11, 1994, filed by The Capital Group, Inc., a parent holding
company, and by Capital Research and Management Company, an
investment adviser registered under the Investment Advisers Act of 1940 and
a subsidiary of The Capital Group, Inc.
***As reported in a Securities and Exchange Commission Schedule 13G report
dated December 31, 1993, filed by Delaware Management Company, Inc., an
investment adviser registered under the Investment Advisers Act of 1940.
</TABLE>
ELECTION OF DIRECTORS
Article Ninth of the Restated Certificate of Incorporation of the Company
provides that the number of directors from time to time shall be not less than
eight nor more than twelve as fixed by the Company's by-laws. The Company's
by-laws currently provide for eleven directors. Article Ninth of the Restated
Certificate of Incorporation also requires that the Board of Directors be
classified into three classes as nearly equal in number as possible, each
director being elected for a term of three years.
Four directors are to be elected at the meeting for a term of three years
or thereafter until their successors are duly elected and qualified. The Board
of Directors has nominated Donald E. Nordlund, John A. Puelicher, Don R. O'Hare
and Charles Marshall for the three-year terms. Each is presently serving as a
director of the Company. Unless otherwise directed, the proxy holders intend to
vote the proxies received by them for the election of these nominees. The
election of each nominee will require the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or represented by proxy
at the meeting. If, on account of death or unforeseen contingencies, any of said
persons is unavailable for election, the proxies will be voted for a substitute
nominee designated by the Board of Directors.
2
<PAGE>
The nominees and the seven continuing Board members, the year each first
became a director (set forth underneath his picture), his age, description of
his principal occupation for the past five years, directorships held in publicly
owned companies, and certain other directorships are as set forth below:
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING 1997
DONALD E. NORDLUND, 72, SINCE JUNE 1, 1988, THE
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
STALEY CONTINENTAL, INC., ROLLING MEADOWS,
ILLINOIS, A HOLDING COMPANY FOR A.E. STALEY
MANUFACTURING COMPANY, DECATUR, ILLINOIS, A
Photo of DIVERSIFIED COMPANY ENGAGED IN GRAIN PROCESSING AND
Donald E. Nordlund, FOOD SERVICE DISTRIBUTION, AND CFS CONTINENTAL,
Director INC., CHICAGO, ILLINOIS, A FOOD SERVICE
DISTRIBUTION COMPANY. MR. NORDLUND IS A DIRECTOR OF
AMSTED INDUSTRIES, INC., CHICAGO, ILLINOIS, A
DIVERSIFIED MANUFACTURING COMPANY; AND SENTRY
INSURANCE, STEVENS POINT, WISCONSIN, A MUTUAL
INSURANCE COMPANY.
1976
JOHN A. PUELICHER, 73, A DIRECTOR AND SINCE
DECEMBER 30, 1992, A RETIRED OFFICER OF MARSHALL &
ILSLEY CORPORATION, MILWAUKEE, WISCONSIN, A
MULTI-BANK HOLDING COMPANY. FROM APRIL 1979 TO
DECEMBER 30, 1992, MR. PUELICHER WAS THE CHAIRMAN
Photo of OF THE BOARD OF MARSHALL & ILSLEY CORPORATION, AND
John A. Puelicher, SINCE JANUARY 10, 1989, THE RETIRED CHAIRMAN OF THE
Director BOARD OF M&I MARSHALL & ILSLEY BANK, MILWAUKEE,
WISCONSIN. MR. PUELICHER IS A DIRECTOR OF W. R.
GRACE & CO., BOCA RATON, FLORIDA, A SPECIALTY
CHEMICALS COMPANY WITH A LEADING POSITION IN HEALTH
CARE; AND SENTRY INSURANCE, STEVENS POINT,
WISCONSIN, A MUTUAL INSURANCE COMPANY.
1977
DON R. O'HARE, 71, SINCE AUGUST 20, 1991, THE
RETIRED CHAIRMAN OF THE BOARD OF SUNDSTRAND
CORPORATION, A POSITION WHICH HE HELD FROM JANUARY
1, 1989, TO AUGUST 20, 1991. MR. O'HARE IS A
Photo of DIRECTOR OF MODINE MANUFACTURING COMPANY, RACINE,
Don R. O'Hare, WISCONSIN, A MANUFACTURER OF HEAT TRANSFER
Director PRODUCTS; MARSHALL & ILSLEY CORPORATION, MILWAUKEE,
WISCONSIN, A MULTI-BANK HOLDING COMPANY; AND SAUER
INC., AMES, IOWA, A HOLDING COMPANY FOR BUSINESSES
ENGAGED IN THE MANUFACTURE OF HYDROSTATIC
TRANSMISSIONS FOR USE IN OFF-HIGHWAY MOBILE
EQUIPMENT.
1979
3
<PAGE>
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING 1997
CHARLES MARSHALL, 64, SINCE JUNE 1989, A RETIRED
OFFICER OF AMERICAN TELEPHONE AND TELEGRAPH
COMPANY, NEW YORK, NEW YORK, A COMPANY INVOLVED IN
INFORMATION MOVEMENT, MANAGEMENT SYSTEMS AND
COMMUNICATIONS. FROM APRIL 1985 TO JUNE 1989, MR.
Photo of MARSHALL WAS VICE CHAIRMAN OF AMERICAN TELEPHONE
Charles Marshall, AND TELEGRAPH COMPANY. MR. MARSHALL IS A DIRECTOR
Director OF HARTMARX CORPORATION, CHICAGO, ILLINOIS, A
COMPANY INVOLVED IN THE MANUFACTURE OF CLOTHING;
GRUMMAN CORPORATION, BETHPAGE, NEW YORK, A
DIVERSIFIED COMPANY IN AEROSPACE, DATA SERVICES AND
TRUCK BODIES; CERIDIAN CORPORATION, MINNEAPOLIS,
MINNESOTA, A DIVERSIFIED COMPANY IN FINANCIAL AND
1989 EDUCATIONAL SERVICES; GATX CORPORATION, CHICAGO,
ILLINOIS, A COMPANY INVOLVED IN THE OPERATION OF
RAIL CARS AND GREAT LAKES VESSELS, BULK LIQUID
TERMINALS, AND FINANCING FOR CAPITAL EQUIPMENT AND
REAL ESTATE; SONAT, INC., BIRMINGHAM, ALABAMA, A
HOLDING COMPANY FOR ENERGY AND ENERGY SERVICES; AND
ZENITH ELECTRONICS CORPORATION, GLENVIEW, ILLINOIS,
A MANUFACTURER OF CONSUMER ELECTRONICS AND RELATED
PRODUCTS.
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1995
WARD SMITH, 63, A DIRECTOR AND SINCE MAY 8, 1991,
CHAIRMAN OF NACCO INDUSTRIES, INC., MAYFIELD
HEIGHTS, OHIO, A COAL MINING COMPANY AND A
MANUFACTURER AND SELLER OF SMALL HOME APPLIANCES
AND FORK LIFT TRUCKS. FROM APRIL 1, 1989, TO MAY 8,
Photo of 1991, MR. SMITH WAS CHAIRMAN AND CHIEF EXECUTIVE
Ward Smith, OFFICER OF NACCO INDUSTRIES, INC., AND FROM AUGUST
Director 1, 1987, TO MARCH 31, 1989, HE WAS ITS CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE OFFICER. MR. SMITH IS
A DIRECTOR OF HYSTER-YALE MATERIALS HANDLING, INC.,
PORTLAND, OREGON, A MANUFACTURER OF FORK-LIFT
TRUCKS; AND A TRUSTEE OF VARIOUS MUTUAL FUNDS
MANAGED BY MASSACHUSETTS FINANCIAL SERVICES
COMPANY, BOSTON, MASSACHUSETTS, AN INVESTMENT
1983 ADVISER.
4
<PAGE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1995
J. P. BOLDUC, 54, A DIRECTOR AND SINCE JANUARY 1,
1993, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF W.
R. GRACE & CO., BOCA RATON, FLORIDA, A SPECIALTY
CHEMICALS COMPANY WITH A LEADING POSITION IN HEALTH
CARE. FROM AUGUST 2, 1990, TO JANUARY 1, 1993, MR.
BOLDUC WAS THE PRESIDENT AND CHIEF OPERATING
Photo of OFFICER OF W. R. GRACE & CO. AND FROM NOVEMBER 6,
J. P. Bolduc, 1986, TO AUGUST 2, 1990, HE WAS ITS VICE CHAIRMAN.
Director MR. BOLDUC IS A DIRECTOR OF MARSHALL & ILSLEY
CORPORATION, MILWAUKEE, WISCONSIN, A MULTI-BANK
HOLDING COMPANY; UNISYS CORPORATION, BLUE BELL,
PENNSYLVANIA, A COMPUTER MANUFACTURER AND
INFORMATION TECHNOLOGY COMPANY; NEWMONT MINING
CORPORATION, DENVER, COLORADO, A GOLD MINING AND
1991 PRODUCING COMPANY; AND BROTHERS GOURMET COFFEES,
INC., BOCA RATON, FLORIDA, A SPECIALTY COFFEE
COMPANY.
GERALD GRINSTEIN, 61, A DIRECTOR AND SINCE OCTOBER
1990, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
BURLINGTON NORTHERN INC., FORT WORTH, TEXAS, A
DIVERSIFIED COMPANY IN RAILROADS AND OTHER
Photo of BUSINESSES. FROM JANUARY 1989 TO OCTOBER 1990, MR.
Gerald Grinstein, GRINSTEIN WAS PRESIDENT AND CHIEF EXECUTIVE OFFICER
Director OF BURLINGTON NORTHERN INC. MR. GRINSTEIN IS A
DIRECTOR OF BROWNING-FERRIS INDUSTRIES, INC.,
HOUSTON, TEXAS, A WASTE DISPOSAL COMPANY; DELTA AIR
LINES, INC., ATLANTA, GEORGIA, A COMMERCIAL
AIRLINE; AND SEATTLE-FIRST NATIONAL BANK, SEATTLE,
WASHINGTON, A NATIONAL BANK.
1991
TERM EXPIRING 1996
THOMAS G. POWNALL, 72, SINCE MAY 1, 1988, THE
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
MARTIN MARIETTA CORPORATION, BETHESDA, MARYLAND, A
DIVERSIFIED MANUFACTURER OF TECHNOLOGY BASED
Photo of SYSTEMS AND PRODUCTS FOR VARIOUS INDUSTRIES. MR.
Thomas G. Pownall, POWNALL IS A DIRECTOR OF THE TITAN CORPORATION, SAN
Director DIEGO, CALIFORNIA, A CORPORATION INVOLVED IN THE
DESIGN, MANUFACTURE AND INSTALLATION OF
HIGH-TECHNOLOGY INFORMATION AND ELECTRONIC PRODUCTS
AND SYSTEMS FOR GOVERNMENT, COMMERCIAL AND
INTERNATIONAL CLIENTS; AND WESTLAND GROUP PLC,
YEOVIL, SOMERSET, ENGLAND, A MANUFACTURER OF
HELICOPTERS, HOVERCRAFT, AEROSPACE EQUIPMENT AND
1978 SYSTEMS, AND FUEL TANKS.
5
<PAGE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1996
KLAUS H. MURMANN, 62, A DIRECTOR AND SINCE APRIL
16, 1989, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
SAUER INC., AMES, IOWA, A HOLDING COMPANY FOR
BUSINESSES ENGAGED IN THE MANUFACTURE OF
Photo of HYDROSTATIC TRANSMISSIONS FOR USE IN OFF-HIGHWAY
Klaus H. Murmann, MOBILE EQUIPMENT AND FROM JANUARY 11, 1987, TO
Director MARCH 1990, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF
SUNDSTRAND-SAUER COMPANY, AMES, IOWA, A HOLDING
COMPANY FOR BUSINESSES ENGAGED IN THE MANUFACTURE
OF HYDROSTATIC TRANSMISSIONS FOR USE IN OFF-HIGHWAY
MOBILE EQUIPMENT. SINCE JANUARY 1, 1987, MR.
MURMANN HAS ALSO BEEN CHAIRMAN OF THE CONFEDERATION
OF GERMAN EMPLOYERS' ASSOCIATIONS, A TRADE
1981 ASSOCIATION THAT REPRESENTS GERMAN EMPLOYERS IN
DEALINGS WITH THE GERMAN GOVERNMENT AND UNIONS. MR.
MURMANN IS A MEMBER OF THE SUPERVISORY BOARDS OF
FRIED. KRUPP AG HOESCH-KRUPP, ESSEN, A GERMAN
INDUSTRIAL COMPANY; GILDEMEISTER AG, BIELEFELD, A
GERMAN MANUFACTURER OF MACHINE TOOLS; PREUSSEN
ELEKTRA AG, A GERMAN UTILITY CONCERN; AND
GERLING-KONZERN ALLGEMEINE VERSICHERUNGS-AG,
COLOGNE, A GERMAN INSURANCE CONCERN.
HARRY C. STONECIPHER, 57, CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SUNDSTRAND
CORPORATION SINCE AUGUST 20, 1991, AND FROM JANUARY
1, 1989, TO AUGUST 20, 1991, MR. STONECIPHER WAS
Photo of ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER. MR.
Harry C. Stonecipher, STONECIPHER IS A DIRECTOR AND THE NON-EXECUTIVE
Director CHAIRMAN OF THE BOARD OF PRECISION CASTPARTS CORP.,
PORTLAND, OREGON, A MANUFACTURER OF STRUCTURAL
CASTINGS AND PRECISION CAST AIRFOILS FOR THE
AEROSPACE INDUSTRY. MR. STONECIPHER IS ALSO A
DIRECTOR OF CINCINNATI MILACRON, INC., CINCINNATI,
OHIO, A MANUFACTURER OF MACHINE TOOLS AND PLASTICS
MACHINERY; LUKENS, INC., COATESVILLE, PENNSYLVANIA,
1987 A MANUFACTURER OF STEEL AND SAFETY PRODUCTS; AND
SENTRY INSURANCE, STEVENS POINT, WISCONSIN, A
MUTUAL INSURANCE COMPANY.
ROBERT J. SMULAND, 58, EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER, AEROSPACE OF SUNDSTRAND
Photo of CORPORATION SINCE AUGUST 7, 1990, AND FROM FEBRUARY
Robert J. Smuland, 16, 1989, TO AUGUST 6, 1990, MR. SMULAND WAS GROUP
Director VICE PRESIDENT, ADVANCED TECHNOLOGY GROUP OF
SUNDSTRAND CORPORATION. MR. SMULAND IS A DIRECTOR
OF AMCORE FINANCIAL, INC., ROCKFORD, ILLINOIS, A
BANK HOLDING COMPANY.
1993
6
<PAGE>
VOTING SECURITIES HELD BY NOMINEES, DIRECTORS AND OFFICERS
The following table lists the number of shares of the Common Stock of the
Company beneficially owned by directors, nominees, and the five most highly
compensated executive officers of the Company and by nominees, directors and
officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY
NAME OWNED AS OF FEBRUARY 1, 1994*
- --------------------------- -----------------------------------
<S> <C>
Donald E. Nordlund 8,166
John A. Puelicher 2,642
Don R. O'Hare 88,330
Charles Marshall 4,000
Ward Smith 4,247
J. P. Bolduc 0
Gerald Grinstein 1,000
Thomas G. Pownall 8,732
Klaus H. Murmann 4,000
Harry C. Stonecipher 200,000
Robert J. Smuland 67,884
Berger G. Wallin 66,720
Paul Donovan 53,500
Richard M. Schilling 61,220
All Nominees, Directors and Officers as a Group
(18 persons, including those named above) 666,529
- -----------------
<FN>
* No nominee, director or officer beneficially owns more than 1 percent of
the outstanding Common Stock of the Company and all officers, nominees
and directors as a group own 1.99 percent of the outstanding Common Stock
of the Company.
</TABLE>
BOARD OF DIRECTORS' COMPENSATION, MEETINGS AND COMMITTEES
During 1993 non-officer directors were compensated by an annual fee of
$26,000, plus a $1,200 fee for each Board meeting attended and a $1,000 fee for
each meeting of a committee of the Board of Directors attended. Non-officer
directors are also reimbursed for expenses and costs in connection with
attendance at meetings. Under the policy of the Board of Directors, no such fees
are paid to directors who are also officers of the Company. During 1993 the
Company provided the use of Company planes to Messrs. Murmann and O'Hare which
amounted to $17,315 and $1,690, respectively.
Upon Mr. O'Hare's retirement from his position of officer, Chairman of the
Board, the Company entered into a consulting agreement with him. The consulting
agreement has been extended through September 30, 1994, with the annual fee
being $125,000. In addition, Mr. O'Hare is entitled to reimbursement of expenses
incurred in performing his duties and is provided with an office and secretarial
and administrative services. Under the agreement, Mr. O'Hare is required to
provide such advice and assistance to the Chairman of the Board, President and
Chief Executive Officer of the Company as is requested by him.
The Director Emeritus Retirement Plan was adopted on July 20, 1989, by the
Board of Directors. Under the plan, any director in office on or after that date
is eligible to receive,
7
<PAGE>
upon cessation of his service as a director, a retirement benefit equal to the
annualized rate of compensation being paid to directors (excluding board and
committee meeting attendance fees) in effect at the time he ceases to be a
director, payable quarterly until the earlier of his death or the expiration of
a period of time equal to that of his service as a director of the Company. In
the event of the death of the eligible director prior to commencement of the
retirement benefit or prior to the receipt of payments for a period equal to the
period of his service as a director, the plan provides that retirement benefit
payments will be paid to the director's surviving spouse or beneficiary, as
designated by the director, or to his estate in the absence of such designation,
for such service period or the remainder of such service period. The plan
provides for the lump sum payment of the entire retirement benefit in the event
of a change of control (as defined in the plan) of the Company.
There were five meetings of the Board of Directors during 1993 and on one
occasion action was taken through consent resolutions signed by all directors,
which reflected decisions reached following discussions among the directors.
Messrs. Puelicher and Smuland participated in fewer than 75 percent of the
aggregate of the Board of Directors meetings and meetings of the Board
committees on which they served. Present Board-appointed committees are the
Audit, Compensation, Finance and Nominating Committees.
The Audit Committee reviews the Company's financial statements audited by
the Company's independent certified public accountants and is advised by
management of any significant problems in completing the audit and of any
significant accounting changes. In addition, the Audit Committee reviews with
the Company's independent certified public accountants the annual report of
audit and accompanying management letter and consults with such accountants as
to the adequacy of the Company's internal accounting controls. The Audit
Committee also makes recommendations to the Board of Directors concerning the
engagement of independent certified public accountants to audit the annual
financial statements of the Company and approves in advance the scope of the
audit services to be performed by such accountants and the estimated cost of
such services. The Audit Committee meets at least twice annually with the
Company's Director, Audit Services to review internal audit activities performed
during the prior and current years and the internal audit plan for the current
year. The Audit Committee also receives reports, at least twice annually, from
the Company's Vice President, Aerospace Contracts, Compliance and Management
Services and from the Chairman of the Company's Corporate Business Conduct and
Ethics Committee. The Audit Committee reviews proxy materials relating to
director and executive officer compensation and to charter amendments prior to
such proxy materials being mailed to the Company's stockholders. The Audit
Committee also monitors and evaluates the effectiveness of the Company's (a)
policies and procedures designed to effect compliance with laws, regulations,
and contract provisions regarding procurement and performance of government
contracts, and (b) existing government contract compliance educational programs
for managers involved in supervising the procurement or performance of
government contracts. The Audit Committee also requires such managers to certify
on an annual basis their awareness of and compliance with the Company's policies
regarding the procurement and performance of government contracts. The Audit
Committee met three times during 1993. The present members of the Audit
Committee are Ward Smith (Chairman), Thomas G. Pownall, Charles Marshall, J. P.
Bolduc, and Gerald Grinstein.
8
<PAGE>
The Compensation Committee reviews and recommends to the Board of Directors
salary and other forms of compensation for the Company's elected officers, and
reviews with the Chairman of the Board, President and Chief Executive Officer of
the Company the perquisites being provided to directors and elected officers of
the Company and makes recommendations as to appropriateness. In addition, the
Compensation Committee administers the Company's Restricted Stock and Stock
Incentive Plans and, with respect to elected officers, authorizes the sale and
issuance of restricted shares of the Company's Common Stock under both plans and
the grant of stock options under the Stock Incentive Plan. The Compensation
Committee met three times, including one telephonic meeting, during 1993. The
present members of the Compensation Committee are Donald E. Nordlund (Chairman),
Klaus H. Murmann, John A. Puelicher, Ward Smith, and Gerald Grinstein.
The Finance Committee reviews the Company's financial condition and
requirements for funds, reviews proposed financing activities of the Company,
reviews and recommends to the Board of Directors proposals to change the capital
structure of the Company, reviews the Company's risk management program and its
adequacy to safeguard the Company against extraordinary liabilities or losses,
approves the Company's investment and hedging policies and has the
responsibility and authority to control and manage the operation of the employee
benefit plans of the Company and its subsidiaries which are subject to Title I
of the Employee Retirement Income Security Act of 1974 (other than the authority
to appoint trustees and make certain changes in the plans, which authorities are
reserved to the full Board of Directors) and the nonqualified supplemental
retirement plans of the Company. The Finance Committee met one time during 1993.
The present members of the Finance Committee are Don R. O'Hare (Chairman), John
A. Puelicher, Donald E. Nordlund, J. P. Bolduc, and Harry C. Stonecipher.
The Nominating Committee reviews the size and composition of, and
recommends appropriate changes to, the Board of Directors. It recommends to the
Board of Directors candidates to fill vacancies which occur on the Board of
Directors prior to the annual stockholders meeting or arising with respect to
those directors whose term of office expires at the annual stockholders meeting.
Generally, non-employee directors are selected on the basis of recognized
achievements in business, educational or professional fields. The Nominating
Committee also recommends for approval of the Board of Directors the directors
to serve on the various committees of the Board. The Nominating Committee met
one time during 1993. The present members of the Nominating Committee are
Charles Marshall (Chairman), Klaus H. Murmann, Thomas G. Pownall, and J. P.
Bolduc.
The Company's by-laws provide that any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election as
a director at a meeting only if such stockholder has given written notice of
such stockholder's intent to make such nomination or nominations, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Company not later than ninety days prior to the anniversary date of the
immediately preceding annual meeting (with respect to an election to be held at
an annual meeting of stockholders) or, with respect to an election to be held at
a special meeting of stockholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and
9
<PAGE>
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission as then in effect; and (e) the consent
of each nominee to serve as a director of the Company if so elected. The
presiding officer of the annual or special meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The present members of the Compensation Committee are Donald E. Nordlund
(Chairman), Klaus H. Murmann, John A. Puelicher, Ward Smith and Gerald
Grinstein. During the last fiscal year and presently, Mr. Murmann, Chairman,
Chief Executive Officer and a director of Sauer, Inc., Ames, Iowa, served on the
Company's Compensation Committee. During this period Mr. Schilling, Vice
President and General Counsel and Secretary of the Company, also served as a
director of Sauer, Inc.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised solely of
outside directors.
OBJECTIVES OF COMPENSATION PROGRAM
The objectives of the Company's executive compensation program are: to
provide a competitive compensation package that will enable the Company to
attract and retain key executives; to tie a significant portion of executive
compensation to past and anticipated individual and Company performance; and to
align the financial interest of executives with the long-term interests of the
Company and its stockholders through employee stock ownership.
In 1992, the Compensation Committee retained an independent compensation
consultant to conduct a comprehensive review of the Company's executive
compensation program. The consultant compared the Company's compensation program
with a peer group of selected companies engaged in aerospace and/or industrial
businesses similar to those of the Company. Of the twenty-three companies
selected, nine are in the Standard & Poors Aerospace/Defense Index and one is in
the Standard & Poors Diversified Manufacturing Index, which indices are
incorporated into the performance graph and table on page 21 of this proxy
statement. Based on the consultant's report, adjustments in the Company's
executive compensation package were made for 1993 to place greater emphasis on
those compensation elements which are aligned with the long-term interests of
the Company and its stockholders, such as stock options and restricted stock.
The Compensation Committee has determined that compensation paid by the
10
<PAGE>
Company to its executives should be near the median being paid to executives of
the peer group of companies as adjusted to reflect the performance of the
Company and the executive.
COMPONENTS OF COMPENSATION
The primary components of the Company's executive compensation program are
a base salary, an annual incentive cash bonus, and stock option and restricted
stock awards. The Company also provides life insurance, medical, retirement and
other benefits generally available to Company employees.
BASE SALARY
The Compensation Committee annually reviews each officer's salary. In such
review, the factors which the Committee considers are the officer's salary
compared to that for the comparable position at the selected peer group of
companies, the salary history of the officer, and the performance review and
salary recommendation for the officer by Mr. Stonecipher. Generally, with the
exception of officers who are responsible for specific manufacturing operations,
the Company's or operating segment's performance is not a factor in setting
salaries.
In 1993, only one officer's salary was increased with the other officers'
salaries remaining frozen since they were at or above the targeted median salary
for comparable positions at the selected peer group of companies. The salary for
Mr. Wallin, Executive Vice President and Chief Operating Officer, Industrial,
was increased from $325,000 to $360,000 since his salary was below the median
salary for comparable positions and to reflect the increased operating profit of
the Company's Industrial segment.
Mr. Stonecipher's base salary of $650,000 per year was set effective
September 1, 1990, and remained frozen by the Committee through the end of 1993,
since it is at the median for comparable positions within the selected peer
group of companies.
OFFICER INCENTIVE COMPENSATION
Under the Company's Officer Incentive Plan (the "Bonus Plan"), an annual
bonus may be paid to officers if the Company meets predetermined performance
levels. The Bonus Plan allows the Compensation Committee to delegate to the
Chairman, President and Chief Executive Officer the determination for each
officer other than himself the Company performance levels, weight to be assigned
to each element, and the officer's bonus tier of participation as set forth
below. The Compensation Committee is responsible for determining any bonus for
Mr. Stonecipher, which bonus will generally be based on the level of achievement
by the Company with respect to selected performance elements.
Under the Bonus Plan, the Company's performance is determined based upon a
combination of elements selected by the Committee or, as applicable, Mr.
Stonecipher. Failure to attain the threshold achievement level applicable to a
particular performance element would result in the officer not receiving any
credit towards determination of a bonus award for such
11
<PAGE>
element. If each Company performance element is achieved at the expected
achievement level the bonus generally will be at the target percentage of base
salary. If actual performance is greater or less than the target (but not less
than the threshold) the bonus amount will vary as a percentage of base salary.
Bonus Plan compensation as a percentage of base salary is determined based on
the following tiers and bonus opportunity levels established by the Compensation
Committee:
<TABLE>
<CAPTION>
BONUS OPPORTUNITY LEVELS
--------------------------
POSITION/TIER OF PARTICIPATION THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------------------- --------- ------ -------
<S> <C> <C> <C>
Chairman of the Board, President and Chief Executive Officer 25% 50% 80%
Executive Vice Presidents and Vice President and General Counsel 20% 40% 64%
All Other Elected Officers 15% 30% 48%
</TABLE>
The Compensation Committee or, as applicable, Mr. Stonecipher may, at its
or his discretion, adjust upward or downward any bonus determined on the basis
of achievement of the various elements. Despite the discretionary adjustments
that may be made, it is the Compensation Committee's intent that any bonus
amount paid under the Bonus Plan reflect the performance of the Company and the
officer. No bonus may be paid under the plan in any year in which the Company's
return on average total equity for such year is twelve percent or less.
For the 1993 plan year the Compensation Committee, prior to delegating to
Mr. Stonecipher the authority to determine the Company performance elements for
such year for the other Company officers, reviewed favorably Mr. Stonecipher's
recommendation in this regard. The target levels for earnings per share and
operational cash flow were adjusted to reflect the sale of the Sundstrand Data
Control business and working capital improvement was changed from average
working capital to year-end working capital as a more appropriate measure. The
recommended elements and target levels, as adjusted, were: earnings per share -
$2.95; working capital improvement - to $.34 per sales dollar; cash flow before
financing - $53.0 million; and return on average equity - 20.0%.
Following the end of the year the Committee ascertained the Company's
performance level with respect to each element selected and received Mr.
Stonecipher's report with respect to the performance of the various officers.
The Committee determined the amount of bonus for each officer based on the
performance of the Company as compared to the performance elements and Mr.
Stonecipher's recommendation. The bonuses awarded approximated the amounts
determined based upon the achievement level of the various Company performance
elements. In 1993, each of the Company performance elements was equally
weighted with adjustments being made for unusual and nonrecurring accounting
items.
For the 1993 plan year, the Compensation Committee determined Mr.
Stonecipher's bonus to be $186,875, representing approximately 29 percent of his
base salary. In determining Mr. Stonecipher's bonus, the Compensation Committee
decided that the Company performance elements which would be applicable would be
the same as indicated above for the other officers.
12
<PAGE>
STOCK OPTIONS AND RESTRICTED STOCK
The Compensation Committee presently intends that under the Company's Stock
Incentive Plan (the "Stock Plan") stock options and restricted stock will be
granted in alternate years.
The terms and conditions adopted by the Committee applicable to stock
options granted under the plan provide that options granted to an individual
will be exercisable in increments of twenty-five percent on each of the second
through fifth anniversary dates of the grant, but no later than the tenth
anniversary of the grant, at an exercise price equal to the fair market value of
a share of the Company's common stock on the date of grant. No stock options
were awarded to any of the officers in 1993 under the Stock Plan.
The terms and conditions adopted by the Committee relating to restricted
stock granted under the Stock Plan provide that such stock will vest in
increments of twenty percent per year on each of the fifth through ninth
anniversary dates of the grant. The price paid for each share of restricted
stock granted is to be the par value of each share, payable on the date of the
grant.
On December 1, 1993, the Compensation Committee awarded restricted stock to
officers of the Company. The grants ranged from 2,000 to 18,000 shares, the
latter number being awarded to Mr. Stonecipher. The number of shares granted to
the officers other than Mr. Stonecipher was reflective of the recommendation
made by Mr. Stonecipher which was based upon the survey conducted by the
independent compensation consultant in 1992. The number of shares granted to
Mr. Stonecipher was also based upon the aforementioned survey.
SUMMARY
The Compensation Committee is of the opinion that the combination of base
salary and bonuses based upon individual and corporate performance, in
conjunction with equity-based compensation aligning executives' interests with
the interests of the Company's stockholders, provides a competitive program
which reflects the Company's compensation objectives described above. The
Committee further believes that these policies are specifically reflected in the
1993 compensation levels of the Company's executives.
COMPENSATION COMMITTEE
Donald E. Nordlund, Chairman
Klaus H. Murmann
Ward Smith
John A. Puelicher
Gerald Grinstein
13
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the five most highly
compensated executive officers of the Company for services rendered in all
capacities for each of the Company's last three completed fiscal years.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ----------------------
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(6)(7) (#) ($)(8)
- ------------------ ---- -------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harry C. Stonecipher 1993 $650,000 $186,875 $ 67,109 (1) $711,000 - $8,970
Chairman of the 1992 $650,000 $440,000 $115,515 (1) - 45,000 $8,970
Board, President 1991 $650,000 $295,750 $130,393 (1) $971,250 - $9,555
and Chief Executive
Officer
Robert J. Smuland 1993 $450,000 $103,500 $ 97,122 (2) $355,500 - $6,210
Executive Vice 1992 $450,000 $225,000 $ 63,642 (2) - 23,125 $6,210
President and Chief 1991 $450,000 $163,800 $ 86,592 (2) $485,625 - $6,615
Operating Officer,
Aerospace
Berger G. Wallin 1993 $360,000 $ 82,800 $ 21,306 (3) $355,500 - $4,968
Executive Vice 1992 $325,000 $160,000 $ 22,421 (3) - 21,250 $4,485
President and Chief 1991 $300,980 $109,200 $ 24,962 (3) $323,750 - $4,424
Operating Officer,
Industrial
Paul Donovan 1993 $300,000 $ 69,000 $ 79,800 (4) $177,750 - $4,140
Executive Vice 1992 $300,000 $150,000 $ 20,683 (4) - 10,625 $4,140
President and Chief 1991 $300,000 $109,200 $ 78,617 (4) $388,500 - $4,410
Financial Officer
Richard M. Schilling 1993 $220,000 $ 50,600 $ 46,395 (5) $118,500 - $3,036
Vice President and 1992 $220,000 $120,000 $ 43,849 (5) - 8,125 $3,036
General Counsel 1991 $220,000 $ 80,000 $ 54,639 (5) $242,813 - $3,234
and Secretary
- ---------------------
<FN>
(1) The amounts set forth include the incremental cost of Mr. Stonecipher's
personal use of Company planes totaling $46,334, $92,368, and $92,330 for
the years 1993, 1992, and 1991, respectively.
(2) The amounts set forth include the incremental cost of Mr. Smuland's
personal use of Company planes totaling $80,069, $40,388, and $61,649 for
the years 1993, 1992, and 1991, respectively.
(3) The amounts set forth include the incremental cost of Mr. Wallin's personal
use of Company planes totaling $6,504, $6,744, and $7,097 for the years
1993, 1992, and 1991, respectively.
(4) The amounts set forth include the incremental cost of Mr. Donovan's
personal use of Company planes totaling $71,260, $1,632, and $52,586 for
the years 1993, 1992, and 1991, respectively.
</TABLE>
14
<PAGE>
(5) The amounts set forth include the incremental cost of Mr. Schilling's
personal use of Company planes totaling $39,152, $21,501, and $34,323 for
the years 1993, 1992, and 1991, respectively, and a payment of taxes
(gross-up) of $4,200 on a special bonus for the year 1992.
(6) The amounts set forth represent the fair market value of the shares of
restricted stock awarded to the named executive officer in 1993 and 1991,
respectively, less the purchase price paid by the executive officer.
Dividends on restricted stock are paid at the same time and in the same
amounts as paid on Common Stock, but such amounts are not included in this
column.
(7) On December 31, 1993, Mr. Stonecipher held 168,000 shares of restricted
stock which had an aggregate market value of $6,972,000; Mr. Smuland held
64,000 shares of restricted stock which had an aggregate market value of
$2,656,000; Mr. Wallin held 47,600 shares of restricted stock which had an
aggregate market value of $1,975,400; Mr. Donovan held 50,300 shares of
restricted stock which had an aggregate market value of $2,087,450; and Mr.
Schilling held 28,500 shares of restricted stock which had an aggregate
market value of $1,182,750.
(8) The amounts set forth represent the dollar value of term life insurance
premiums paid by the Company for the group term life insurance component of
the Executive Life Insurance Program, and an imputed value based upon the
equivalent of term life insurance premiums for the survivor income benefit
component of the Executive Life Insurance Program.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
No options were exercisable in 1993. The following table sets forth the
number of options which were not exercisable and the value of such options based
upon the difference between the exercise price and the market price of the
underlying shares as of December 31, 1993.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- ------------------------- -------------------------
<S> <C> <C>
Harry C. Stonecipher 0 / 45,000 $0 / $151,875
Robert J. Smuland 0 / 23,125 $0 / $ 78,047
Berger G. Wallin 0 / 21,250 $0 / $ 71,719
Paul Donovan 0 / 10,625 $0 / $ 35,859
Richard M. Schilling 0 / 8,125 $0 / $ 27,422
- -------------------
</TABLE>
RETIREMENT PLANS
Generally, the retirement benefit to which an executive officer will be
entitled upon retirement is provided under the tax-qualified Sundstrand
Corporation Retirement Plan-Aerospace (the "Retirement Plan") and the
non-tax-qualified supplemental retirement plan (the "Supplemental Plan"). The
eligibility for and forms of benefit payment are the same under both plans.
15
<PAGE>
The following table sets forth estimated annual retirement benefits for
representative years of service and three-year average annual earnings amounts.
<TABLE>
<CAPTION>
HIGHEST CONSECUTIVE
THREE-YEAR ESTIMATED ANNUAL RETIREMENT BENEFIT
AVERAGE ANNUAL EARNINGS FOR REPRESENTATIVE YEARS OF SERVICE
- ----------------------- --------------------------------------------------
30 OR
10 YEARS 15 YEARS 20 YEARS 25 YEARS MORE YEARS
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 66,670 $100,005 $133,340 $166,675 $ 200,010
450,000 100,005 150,008 200,010 250,013 300,015
600,000 133,340 200,010 266,680 333,350 400,020
950,000 211,122 316,683 422,243 527,804 633,365
1,150,000 255,568 383,353 511,137 638,921 766,705
1,400,000 311,127 466,690 622,253 777,817 933,380
- ----------
</TABLE>
Generally, the combined amounts shown in the Salary and Bonus columns of
the Summary Compensation Table on page 14 of this proxy statement are expected
to approximate the three-year average annual earnings of an executive officer
which would be used to determine his total retirement benefit under the
Retirement Plan and the Supplemental Plan.
Messrs. Stonecipher, Smuland, Wallin, Donovan and Schilling upon attainment
of age 65, the normal retirement age under the plans, will have 14.4, 11.6,
41.0, 24.0 and 34.2 actual years of service with the Company, respectively.
Although the Retirement Plan benefit formula includes a reduction for 50%
of a participant's monthly primary Social Security benefit earned at retirement,
the amounts shown in the table do not reflect this reduction. The benefit
amounts shown in the table are calculated based upon the straight life annuity
form of payment.
At the time of their employment with the Company separate unfunded
retirement agreements were entered into with Messrs. Stonecipher and Smuland.
The agreement with Mr. Stonecipher, as amended, provides that he will receive a
non-qualified benefit which, when combined with his benefits under the
Retirement Plan and the Supplemental Plan, will equal the benefits that would be
payable from these plans if it is assumed at such time that he had twice his
actual years of service with the Company. The agreement with Mr. Smuland
provides that he will receive (a) a non-qualified benefit which, when combined
with his benefits under the Retirement Plan and the Supplemental Plan and any
pension received from his prior employer, will equal the benefits that would be
payable from these plans if it is assumed at such time that he had twice his
actual years of service with the Company, or, (b) if greater, a nonqualified
benefit which when combined with his Retirement Plan and Supplemental Plan
benefits will equal the benefits that would be payable from these plans if it is
assumed that he accrued service at double the normal rate during his first five
years of service with the Company.
The estimated annual pension benefit payable under the retirement
agreements to Messrs. Stonecipher and Smuland at their normal retirement age,
which benefit is in addition to the benefit payable under the Retirement Plan
and Supplemental Plan, is $348,817 and $75,004,
16
<PAGE>
respectively. The benefit for Mr. Smuland was calculated in accordance with
option (b) set forth in the immediately preceding paragraph, which management
believes will provide the greater benefit.
Messrs. Stonecipher and Smuland, as directors of the Company, also are
accruing a benefit under the Director Emeritus Retirement Plan, which plan is
described on pages 7-8 of this proxy statement.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (the "Agreement") with
Mr. Stonecipher that is designed to assure the Company of his continued
employment in an executive capacity. The "Employment Period" under the
Agreement commenced on January 1, 1987, and will expire on July 19, 1996. Unless
written notice is given to the contrary, the Employment Period with Mr.
Stonecipher annually will be automatically extended for an additional year.
The Agreement provides that throughout the Employment Period, the Company
shall neither demote Mr. Stonecipher nor assign to him any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities and status at the time he entered into the Agreement. Under
the Agreement, Mr. Stonecipher shall receive during the Employment Period a
salary not less than $650,000 per year, paid vacations, fringe benefits and
perquisites, and shall remain eligible to participate in the Company's employee
benefit plans, policies, practices and arrangements, and such stock, incentive
and bonus plans as are then in effect.
The Agreement sets forth certain conditions of employment such as the
Company not assigning duties to Mr. Stonecipher which would require him to move
the location of his principal business office or principal place of residence
outside Rockford, Illinois. In addition, under the Agreement, Mr. Stonecipher
covenants not to compete with the Company or to disclose confidential
information concerning the Company during the Employment Period. In the event
the Company fails to perform any covenant or agreement set forth in the
Agreement, Mr. Stonecipher will be entitled to receive for the remainder of the
Employment Period the salary and benefits he would have received if his
employment had continued for such period. These benefits would not be payable,
however, in the event his employment is terminated by reason of (a) conviction
of a felony, (b) death, or (c) during the Employment Period breach of either his
covenant not to compete or his covenant not to disclose confidential information
and failure to cure such breach (the "Enumerated Reasons"). The Agreement also
provides for reimbursement of legal expenses incurred in connection with certain
claims or legal proceedings brought under or involving the Agreement.
Under the Agreement, the Company also is required to make an additional
"gross-up payment" to Mr. Stonecipher to offset fully the effect of any excise
tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), on any payment made to him under the Agreement, the 1982 and 1989
Restricted Stock Plans, the Stock Incentive Plan, or any other incentive
compensation or bonus plan (the "Gross-up Payment"). The amount of the Gross-up
Payment to be paid, if any, may be substantial and will depend upon
17
<PAGE>
numerous factors, including the price per share of the Common Stock of the
Company and the extent, if any, that payments or benefits made to Mr.
Stonecipher constitute "excess parachute payments" within the meaning of Section
280G of the Code.
The Agreement provides that upon a "Change in Control" (as described below)
during the Employment Period the following will occur: (a) all restrictions on
any stock purchased by or otherwise granted to Mr. Stonecipher pursuant to the
Company's 1982 and 1989 Restricted Stock Plans, the Company's Stock Incentive
Plan and any other restricted stock plan sponsored by the Company shall lapse
and all such stock shall immediately vest and be delivered to Mr. Stonecipher,
and all outstanding stock options held by him shall become fully vested and
immediately exercisable; and (b) commencing at the time of Mr. Stonecipher's
termination of employment, he shall be provided with the same health care
coverage as provided to other eligible retirees at that time and with a life
insurance benefit of one time his annual base salary at the higher of the annual
rate in effect at the time of his termination of employment or immediately prior
to the Change in Control. The Agreement also provides that upon his
termination of employment following a Change in Control in addition to all other
amounts payable under the Agreement, he will within five days of such
termination be paid in a single lump sum all accrued but unpaid salary and other
compensation and benefits plus, if his employment is terminated for any reason
other than the Enumerated Reasons, a bonus equal to the largest bonus received
during the three years preceding the termination of employment multiplied by a
fraction, which will not be less than one, the numerator of which is the number
of months remaining in his Employment Period and the denominator of which is 12,
or, if his employment is terminated for one of the Enumerated Reasons, a bonus
equal to the incentive award that would have been paid if it were assumed his
employment had continued to the end of the year and it were assumed all
performance targets and goals were met multiplied by a fraction, the numerator
of which is the number of months remaining in the year through the date of
termination and the denominator of which is 12.
Assuming a Change in Control occurred on March 1, 1994, and his employment
were terminated by the Company on that date for a reason other than an
Enumerated Reason, Mr. Stonecipher would have been eligible to receive a bonus
of $1,158,676. In addition, he would have been entitled to receive 144,000
shares of restricted stock and 45,000 stock options held by him would have
become fully vested and exercisable. Mr. Stonecipher also would have been
entitled to have his base salary continued for the Employment Period which would
result in payments during that time totaling $1,752,084 and he would have been
entitled to continue to receive incentive compensation and other personal
benefits. He also would accrue additional service for his retirement which
would be paid under the provisions of the Retirement and Supplemental Plans as
described on pages 15-17 of this proxy statement.
On July 20, 1989, the Company entered into substantially identical
employment agreements with Mr. Donovan and Mr. Schilling, which agreements were
amended on August 7, 1990. On August 7, 1990, and on August 18, 1992, the
Company entered into agreements with Mr. Wallin and Mr. Smuland, respectively,
which are substantially identical to the other two as amended. The four
agreements are hereinafter collectively referred to as the "Employment
Agreement." The rights and obligations set forth in the Employment Agreement
arise for a period of up to three years following a "Change in Control" (as
described below)
18
<PAGE>
provided the Change in Control occurs during the "Protected Period" defined in
the Employment Agreement (the "Term"). The Employment Agreement sets forth the
terms and conditions of the executive's employment, annual base salary and
participation by the executive in the Company's benefit plans. If the
executive's employment is terminated during the Term (a) by the Company other
than for "Cause" (as defined in the Employment Agreement), (b) by the executive
for "Good Reason" (as defined in the Employment Agreement) or (c) by the
executive for any reason or without reason during the 60-day period which
commences on the date six months following a Change in Control, he will be
entitled to receive (w) a "Pro-Rata Bonus" (as defined in the Employment
Agreement), (x) a lump sum cash payment equal to three times the sum of his base
salary and bonus (the base salary at least equal to his base salary in effect
prior to a Change in Control and the bonus equal to the "Bonus Amount" as
defined in the Employment Agreement), subject to certain adjustments, (y)
continuation of life insurance, disability, medical, dental and hospitalization
benefits for a period of up to 36 months and (z) a lump sum cash payment
reflecting certain retirement benefits he would have been entitled to receive
had he remained employed by the Company for an additional three years, subject
to certain adjustments. In addition, all restrictions on any outstanding
incentive awards will lapse and become fully vested, and all outstanding stock
options shall become fully vested and immediately exercisable. The Employment
Agreement also provides that the Company will pay all legal fees and related
expenses incurred by the executive arising out of his employment or termination
of employment if, in general, the circumstances for which he has retained legal
counsel occurred on or after a Change in Control. The Employment Agreement also
provides for a Gross-up Payment.
Assuming a Change in Control occurred on March 1, 1994, and their
employment were terminated on that date, the approximate amount of cash payments
that would have been made pursuant to the Employment Agreement as described
above (other than the Gross-up Payment, if applicable) would have been
$2,227,603 for Mr. Smuland, $928,748 for Mr. Wallin, $1,381,562 for Mr. Donovan
and $1,013,145 for Mr. Schilling. The number of shares of restricted stock they
would have been entitled to receive and the number of stock options they would
have become fully vested in and been able to exercise would have been 64,000
shares and 23,125 stock options for Mr. Smuland, 43,200 shares and 21,250 stock
options for Mr. Wallin, 47,900 shares and 10,625 stock options for Mr. Donovan
and 26,500 shares and 8,125 stock options for Mr. Schilling. In addition,
personal benefits would continue for the term of the Employment Agreement, and
as set forth above, each of the executives would also have for a period of up to
36 months continued life insurance, disability, medical, dental and
hospitalization benefits. The retirement benefit to which each of the
executives would be entitled would be paid pursuant to the Retirement and
Supplemental Plans and in addition, the pension benefit payable to Mr. Smuland
under his retirement agreement would be paid, all as discussed on pages 15-17 of
this proxy statement.
In general, for purposes of the Agreement and the Employment Agreement, a
"Change in Control" is defined as any of the following events: (a) the
acquisition (other than from the Company) by any person (as such term is defined
in Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 33 percent or more of the combined voting
power of the Company's then outstanding voting securities; (b) the individuals
19
<PAGE>
who, as of the date the agreements were executed, are members of the Board (the
"Incumbent Board"), cease for any reason to constitute a majority of the Board,
unless the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of a majority of the Incumbent Board,
and such new director shall, for purposes of the Agreement and the Employment
Agreement, be considered as a member of the Incumbent Board; or (c) approval by
stockholders of the Company of (i) a merger or consolidation involving the
Company if the stockholders of the Company, immediately before such merger or
consolidation, do not, as a result of such merger or consolidation, own,
directly or indirectly, more than 67 percent of the combined voting power of the
then outstanding voting securities of the corporation resulting from such merger
or consolidation in substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Company outstanding
immediately before such merger or consolidation or (ii) a complete liquidation
or dissolution of the Company or an agreement for the sale or other disposition
of all or substantially all of the assets of the Company. A Change in Control
shall not be deemed to occur by reason of an acquisition referred to in clause
(a) above because 33 percent or more of the combined voting power of the
Company's then outstanding securities is acquired by (x) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
by the Company or any of its subsidiaries or (y) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.
LOANS
On October 17, 1984, the Board of Directors adopted the 1984 Elected
Officers' Loan Program (the "Loan Program") pursuant to which elected officers
could borrow from the Company for a period of up to eight years. All loans
outstanding under the program are collateralized. As of February 1, 1994,
executive officers with loans in excess of $60,000 under the Loan Program were
as follows: Mr. Stonecipher - $1,400,000; Mr. Smuland - $1,428,000; Mr. Donovan
- - $957,000; Mr. Schilling - $870,000; Kenelm A. Groff, Vice President,
International Relations and Business Development - $527,816; James F. Ricketts,
Vice President and Treasurer - $640,000; Gary J. Hedges, Vice President,
Personnel and Public Relations - $275,000; and DeWayne J. Fellows, Vice
President and Controller - $538,000. The interest rate charged on the loans is
5.89 percent. The indicated amounts were the largest aggregate amounts
outstanding during 1993 with respect to each of the Company's executive officers
except with respect to Messrs. Donovan and Groff for whom the largest aggregate
amount outstanding during 1993 was $1,200,000 and $532,816, respectively.
Effective October 1, 1992, the Company discontinued making loans under the Loan
Program with existing loans being permitted to continue to maturity.
PERFORMANCE GRAPH AND TABLE
The following performance graph and table compare the five-year cumulative
total stockholder return, assuming reinvestment of dividends, on $100 invested
on December 31, 1988, in each of Sundstrand Corporation, Standard & Poors 500
Stock Index, Standard & Poors Aerospace/Defense Index and Standard & Poors
Diversified Manufacturing Index. The
20
<PAGE>
Standard & Poors' Aerospace/Defense and Diversified Manufacturing Indices were
selected as properly reflecting the Company's involvement in the aerospace
market and industrial market segments, the sales of which segments were
approximately 54% and 46%, respectively, of the Company's total sales in 1993.
[PERFORMANCE GRAPH OMITTED - REPRESENTED BY THE FOLLOWING TABLE:]
<TABLE>
<CAPTION>
COMPANY/INDEX 1988 1989 1990 1991 1992 1993
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sundstrand $100 133 124 163 183 197
S&P 500 $100 132 128 166 179 197
S&P Aerospace/Defense $100 118 123 147 155 202
S&P Diversified Mfg. $100 112 111 136 147 179
</TABLE>
OTHER BUSINESS TO BE TRANSACTED
At the date of this statement the foregoing is the only business which
management intends to present or knows that others will present at the meeting.
In the event that any other matters shall properly come before the meeting, it
is the intention of the persons named in the enclosed proxy to vote such proxy
in accordance with their judgment on such matters.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young was the Company's independent certified public accountants
for 1993 and has been selected by the Company as its independent certified
public accountants for 1994. Representatives of this accounting firm will be
present at the meeting and will be given an opportunity to make any comments
they wish and will be available to respond to appropriate questions raised at
the meeting.
21
<PAGE>
STOCKHOLDERS' PROPOSALS FOR 1995 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting in
1995 and which are to be included in the Company's 1995 Proxy Statement and form
of proxy relating to that meeting must be received by the Company not later than
November 3, 1994.
If you will be unable to be present in person at the 1994 Annual Meeting,
you are urged to date, sign and return the enclosed proxy card in order that
your shares may be represented at the meeting.
By order of the Board of Directors,
RICHARD M. SCHILLING
SECRETARY
Rockford, Illinois
March 2, 1994
22
<PAGE>
- --------------------------------------------------------------------------------
PROXY/VOTING INSTRUCTION CARD
SUNDSTRAND CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON APRIL 19, 1994
The undersigned hereby appoints Harry C. Stonecipher and Richard M. Schilling as
proxies, with powers to be exercised by both or either of them, and with full
power of substitution, to vote as designated on the reverse side all Common
Stock of SUNDSTRAND CORPORATION according to the number of shares the
undersigned is entitled to vote if personally present at the Annual Meeting of
Stockholders of Sundstrand Corporation to be held in the Wallingford Center at
the Clock Tower Resort & Conference Center, 7801 East State Street, Rockford,
Illinois, on April 19, 1994, at 11:00 a.m., Central Time or at any adjournment
thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX
ON THE REVERSE SIDE.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
This Proxy will be voted in accordance with specifications made. The Board of Directors recommends a vote
FOR Proposal 1. If no choice is indicated, this Proxy will be voted FOR Proposal 1.
FOR ALL
FOR WITHHOLD (Except Nominee(s) written below)
/ / / / / /
<S> <C>
1. Election of Directors--
Nominees: Donald E. Nordlund, John A. Puelicher THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE
Don R. O'Hare and Charles Marshall. 1994 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT.
________________________________________________ Signature(s)_______________________________________
2. In their discretion, the proxies are authorized ___________________________________________________
to vote upon such other business as may properly (Please sign your name exactly as imprinted hereon.
come before the meeting or any adjournment In case of multiple or joint ownership, all should
thereof. sign. Persons signing in a fiduciary capacity
should indicate their position.)
[LABEL] Dated:_________________________,1994
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
