<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
Sundstrand Corporation
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Sundstrand Corporation
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(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 transactions 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:
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[Sundstrand Corporation Trademark: Circle S Logo]
SUNDSTRAND CORPORATION
ROCKFORD, ILLINOIS
To the Stockholders of
SUNDSTRAND CORPORATION:
The 1995 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 18, 1995,
at 11:00 a.m., Central Time. Stockholders will be called upon to elect three
directors for a term of three years; to approve for nonemployee directors of
the Company a proposed Sundstrand Corporation Nonemployee Director Stock Option
Plan and a proposed Sundstrand Corporation Nonemployee Director Compensation
Plan; 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 1994 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/ Don R. O'Hare
Chairman of the Board
and Chief Executive Officer
March 7, 1995
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.
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SUNDSTRAND CORPORATION
4949 HARRISON AVENUE
P.O. BOX 7003
ROCKFORD, ILLINOIS 61125-7003
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 7, 1995
Notice is hereby given that the Annual Meeting of Stockholders of
Sundstrand Corporation, a Delaware corporation, will be held in the Wallingford
Center at the Clock Tower Resort & Conference Center, 7801 East State Street,
Rockford, Illinois, on Tuesday, April 18, 1995, at 11:00 a.m., Central Time,
for the following purposes:
1. To elect three directors for a term of three years;
2. To consider and vote upon a proposed Sundstrand Corporation
Nonemployee Director Stock Option Plan for nonemployee directors,
which plan is set forth in the Proxy Statement;
3. To consider and vote upon a proposed Sundstrand Corporation
Nonemployee Director Compensation Plan for nonemployee directors,
which plan is set forth in the Proxy Statement; and
4. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on February 21,
1995, 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 24, 1995.
By order of the Board of Directors,
RICHARD M. SCHILLING,
Secretary
<PAGE> 4
CONTENTS
<TABLE>
<S> <C>
Proxy Statement
Voting Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
[ ] Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nominees for Election to Board of Directors . . . . . . . . . . . . . . . . . . 2
Members of Board of Directors Continuing in Office . . . . . . . . . . . . . . 3
Ownership of Sundstrand Common Stock . . . . . . . . . . . . . . . . . . . . . 7
Board of Directors' Compensation, Meetings and Committees . . . . . . . . . . . 8
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . 11
Compensation Committee Report on Executive Compensation . . . . . . . . . . . . 11
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Option Grants in Last Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 18
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values . . . . . . . . . . . . . . . . . . . . . 19
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Performance Graph and Table . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 16 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
[ ] Adoption of the Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . 25
[ ] Adoption of the Compensation Plan . . . . . . . . . . . . . . . . . . . . . . . 27
Other Business to be Transacted . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . 28
Stockholders' Proposals for 1996 Annual Meeting . . . . . . . . . . . . . . . . 29
Exhibits
Exhibit A - Sundstrand Corporation Nonemployee Director Stock Option Plan
Exhibit B - Sundstrand Corporation Nonemployee Director Compensation Plan
</TABLE>
[ ] To be voted on at the meeting
_________________________
EVERY STOCKHOLDER'S VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY CARD.
<PAGE> 5
SUNDSTRAND CORPORATION
4949 HARRISON AVENUE
P.O. BOX 7003
ROCKFORD, ILLINOIS 61125-7003
MARCH 7, 1995
__________________
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 18, 1995
The enclosed proxy is being solicited by the Board of Directors of the
Sundstrand Corporation (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 telecopy, telephone or personal calls.
VOTING SECURITIES
The record date for determining the stockholders entitled to vote at the
meeting is February 21, 1995. On this date, the Company had 31,639,043 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.
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
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of Directors be classified into three classes as nearly equal in number as
possible, each director being elected for a term of three years.
Three 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 Ward Smith, J. P. Bolduc and Gerald Grinstein
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.
The nominees and the eight 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 1998
WARD SMITH, 64, a director and since May 11, 1994, the
retired Chairman of NACCO Industries, Inc., Mayfield
[Photo of Heights, Ohio, a coal mining company and a manufacturer and
Ward Smith, seller of small home appliances and fork lift trucks. From
Director] May 8, 1991, through May 10, 1994, Mr. Smith was Chairman
of NACCO, Industries, Inc., and from April 1, 1989, to May
8, 1991, Mr. Smith was its Chairman and Chief Executive
Officer. Mr. Smith is a trustee of various mutual funds
1983 managed by Massachusetts Financial Services Company,
Boston, Massachusetts, an investment adviser.
J. P. BOLDUC, 55, a director and since January 1, 1993,
President and Chief Executive Officer of W. R. Grace &
[Photo of Co., Boca Raton, Florida, the world's largest specialty
J. P. Bolduc, chemicals company with a leading position in health care.
Director] From August 2, 1990, to January 1, 1993, Mr. Bolduc was the
President and Chief Operating Officer of W. R. Grace & Co.
and from November 6, 1986, to August 2, 1990, he was its
Vice Chairman. Mr. Bolduc is a director of Marshall &
1991 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 producing company; and Brothers
Gourmet Coffees, Inc., Boca Raton, Florida, a specialty
coffee company.
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NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING 1998
GERALD GRINSTEIN, 62, a director and since October 1990,
Chairman and Chief Executive Officer of Burlington Northern
[Photo of Inc., Fort Worth, Texas, a diversified company in railroads
Gerald Grinstein, and other businesses. From January 1989 to October 1990,
Director] Mr. Grinstein was President and Chief Executive Officer 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,
1991 a commercial airline; and Seattle-First National Bank,
Seattle, Washington, a national bank.
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1996
THOMAS G. POWNALL, 73, since May 1, 1988, the retired
Chairman of Martin Marietta Corporation, Bethesda,
[Photo of Maryland, a diversified manufacturer of technology-based
Thomas G. Pownall, systems and products for various industries. Mr. Pownall
Director] is a director of The Titan Corporation, San Diego,
California, a corporation involved in the design,
manufacture and installation of high-technology information
and electronic products and systems for government,
1978 commercial and international clients.
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1996
KLAUS H. MURMANN, 63, a director and since April 16, 1989,
Chairman and Chief Executive Officer of Sauer Inc., Ames,
[Photo of Iowa, a holding company for businesses engaged in the
Klaus H. Murmann, manufacture of hydrostatic transmissions for use in off-
Director] highway mobile equipment and from January 11, 1987, to
March 1990, Chairman and Chief Executive Officer of
Sundstrand-Sauer Company, Ames, Iowa, a holding company for
businesses engaged in the manufacture of hydrostatic
1981 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 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; and Preussen Elektra AG, Hannover, a German
utility concern. Mr. Murmann is vice-chairman of the Board
of Gothaer Versicherungsbank, Gottingen/Cologne, a German
insurance company; and is a member of the board of
BankgesellschaftBerlin AG, Berlin, a German bank.
ROBERT J. SMULAND, 59, Executive Vice President and Chief
Operating Officer, Aerospace of Sundstrand Corporation
[Photo of since August 7, 1990, and from February 16, 1989, to August
Robert J. Smuland, 6, 1990, Mr. Smuland was Group Vice President, Advanced
Director] Technology Group of Sundstrand Corporation. Mr. Smuland is
a director of AmCore Financial, Inc., Rockford, Illinois, a
bank holding company.
1993
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1996
BERGER G. WALLIN, 64, Executive Vice President for Special
Projects of Sundstrand Corporation since January 2, 1995,
[Photo of Executive Vice President and Chief Operating Officer,
Berger G. Wallin, Industrial of Sundstrand Corporation, from August 7, 1990,
Director] to January 1, 1995, and from October 19, 1989, to August 6,
1990, Mr. Wallin was Group Vice President, Industrial of
Sundstrand Corporation.
1995
TERM EXPIRING 1997
DONALD E. NORDLUND, 73, since June 1, 1988, the retired
Chairman and Chief Executive Officer of Staley Continental,
[Photo of Inc., Rolling Meadows, Illinois, a holding company for A.E.
Donald E. Nordlund, Staley Manufacturing Company, Decatur, Illinois, a
Director] diversified company engaged in grain processing and food
service distribution, and CFS Continental, Inc., Chicago,
Illinois, a food service distribution company. Mr.
Nordlund is a director of Amsted Industries, Inc., Chicago,
1976 Illinois, a diversified manufacturing company; and Sentry
Insurance, Stevens Point, Wisconsin, a mutual insurance
company.
JOHN A. PUELICHER, 74, a director and since December 30,
1992, the retired Chairman of Marshall & Ilsley
[Photo of Corporation, Milwaukee, Wisconsin, a multi-bank holding
John A. Puelicher, company. From April 1979 to December 30, 1992, Mr.
Director] Puelicher was the Chairman of the Board of Marshall &
Ilsley Corporation, and since January 10, 1989, the retired
Chairman of the Board of M&I Marshall & Ilsley Bank,
Milwaukee, Wisconsin. Mr. Puelicher is a director of W. R.
1977 Grace & Co., Boca Raton, Florida, the world's largest
specialty chemicals company with a leading position in
health care; and Sentry Insurance, Stevens Point,
Wisconsin, a mutual insurance company.
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 1997
DON R. O'HARE, 72, Chairman of the Board and Chief
Executive Officer of Sundstrand Corporation since September
[Photo of 26, 1994. From August 20, 1991, to September 25, 1994, Mr.
Don R. O'Hare, O'Hare was a consultant to the Company, and from January 1,
Director] 1989, to August 19, 1991, he was Chairman of the Board of
Sundstrand Corporation. Mr. O'Hare is a director of
Marshall & Ilsley Corporation, Milwaukee, Wisconsin, a
multi-bank holding company; and Sauer Inc., Ames, Iowa, a
1979 holding company for businesses engaged in the manufacture
of hydrostatic transmissions for use in off-highway mobile
equipment.
CHARLES MARSHALL, 65, since June 1989, the retired Vice
Chairman of American Telephone and Telegraph Company, New
[Photo of York, New York, a company involved in information movement,
Charles Marshall, management systems and communications. Mr. Marshall is a
Director] director of Hartmarx Corporation, Chicago, Illinois, a
company involved in the manufacture of clothing; Ceridian
Corporation, Minneapolis, Minnesota, a diversified company
in financial and educational services; GATX Corporation,
1989 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.
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OWNERSHIP OF SUNDSTRAND COMMON STOCK
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by (i) each person or group that is
known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock, (ii) each of the directors and nominees,
the Company's current Chairman of the Board and Chief Executive Officer, the
Company's former Chairman of the Board, President, and Chief Executive Officer
who retired effective September 24, 1994, and the Company's other two most
highly compensated executive officers, and (iii) by nominees, directors and
current officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF COMMON
NAME BENEFICIALLY OWNED STOCK OUTSTANDING
- ---------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Oppenheimer Group, Inc. 2,607,294 8.24% (1)
The Capital Group Companies, Inc. and Capital
Research and Management Company 2,720,400 8.59% (2)
John A. Levin & Co., Inc. and John A. Levin 1,668,308 5.27% (3)
Ward Smith 4,771 * **
J. P. Bolduc 409 * **
Gerald Grinstein 1,409 * **
Thomas G. Pownall 9,141 * **
Klaus H. Murmann 4,286 * **
Robert J. Smuland 75,202 * ** (4)
Berger G. Wallin 70,033 * ** (4)
Donald E. Nordlund 8,575 * **
John A. Puelicher 3,051 * **
Don R. O'Hare 88,739 * **
Charles Marshall 4,409 * **
Paul Donovan 49,056 * ** (4)
Richard M. Schilling 59,051 * ** (4)
Harry C. Stonecipher 128,150 * ** (4)
All Nominees, Directors and Current Officers as a Group
(17 persons, including those named
above except Mr. Stonecipher) 435,800 * 1.38% (4)
</TABLE>
* Shares owned as of February 1, 1995.
** Less than 1 percent.
(1) Based on Schedule 13G dated February 1, 1995, shares held of record by
Oppenheimer Group, Inc., Oppenheimer Tower, World Financial Center, New
York, New York 10281, as a parent holding company on behalf of itself
and Oppenheimer Capital, an investment adviser registered under the
Investment Advisers Act of 1940 and a subsidiary of Oppenheimer Group,
Inc.
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(2) Based on Schedule 13G dated February 8, 1995, shares held of record by
The Capital Group Companies, Inc., 333 South Hope Street, Los Angeles,
California 90071, as 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.
(3) Based on Schedule 13D dated December 22, 1994, shares held of record as
of December 21, 1994, by John A. Levin & Co., Inc. and John A Levin, One
Rockefeller Plaza, New York, New York 10020. John A. Levin & Co., Inc.
is an investment adviser registered under the Investment Advisers Act of
1940.
(4) The number of shares of Common Stock beneficially owned include stock
options awarded under the Company's Stock Incentive Plan that such
persons have a right to exercise within 60 days as follows: Mr. Smuland
-- 5,781; Mr. Wallin -- 5,312; Mr. Donovan -- 2,656; Mr. Schilling --
2,031; Mr. Stonecipher -- 45,000; and all nominees, directors and
current officers as a group -- 20,967. The number of shares
beneficially owned by Mr. Donovan also includes 1,800 shares owned by
his children who reside with him.
BOARD OF DIRECTORS' COMPENSATION, MEETINGS AND COMMITTEES
During 1994 nonofficer directors were compensated by an annual retainer
fee of $26,000, plus $1,200 for each Board meeting attended and $1,000 for each
meeting of a committee of the Board attended. Pursuant to the proposed
Sundstrand Corporation Nonemployee Director Compensation Plan (the
"Compensation Plan"), which plan is set forth as Exhibit B to this proxy
statement, the annual retainer covering the period from August 1, 1994, through
the 1995 Annual Meeting of Stockholders, was paid in Sundstrand Common Stock,
with the number of shares determined based on the market price as of August 1,
1994. Accordingly, in 1994, nonemployee directors received approximately
$15,200 and 409 shares of Sundstrand stock as payment of the annual retainer
through the 1995 Annual Meeting of Stockholders. Assuming stockholder approval
of the Compensation Plan, nonemployee directors will receive as of April 18,
1995, their annual retainer fee covering the period between the 1995 and 1996
Annual Meetings of Stockholders of $26,000 in stock valued as of the April 18,
1995 Annual Meeting of Stockholders. Nonofficer directors are also reimbursed
for expenses and costs in connection with attendance at meetings. Under the
policy of the Board of Directors, no fees are paid to directors who are also
officers of the Company. During 1994 the Company provided the use of Company
planes to Messrs. Murmann and Smith which amounted to $18,002 and $4,676,
respectively.
During the period from October 1, 1990, through September 25, 1994, the
Company maintained a consulting agreement with Mr. O'Hare with the annual fee
for the last year being at the rate of $125,000. Under the consulting
agreement, Mr. O'Hare was entitled to reimbursement of expenses incurred in
performing his duties and was provided with an office and secretarial and
administrative services. Under the agreement, Mr. O'Hare was required to
provide such advice and assistance to the Chairman of the Board, President and
Chief Executive Officer of the Company as was requested by him. The consulting
agreement was terminated
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effective September 25, 1994, in connection with Mr. O'Hare's election to the
position of Chairman of the Board and Chief Executive Officer of the Company.
The Director Emeritus Retirement Plan was adopted on July 20, 1989, by
the Board of Directors. Under the plan, any director in office after that date
is eligible to receive, 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 seven meetings of the Board of Directors, including one
telephonic meeting, during 1994 and on one occasion action was taken through
consent resolutions signed by all directors, which reflected decisions reached
following discussion among the directors. Mr. Nordlund participated in fewer
than 75 percent of the aggregate of the Board of Directors meetings and
meetings of the Board committees on which he 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 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
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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 twice during 1994. The present members of
the Audit Committee are Ward Smith (Chairman), Thomas G. Pownall, Charles
Marshall, J. P. Bolduc and Gerald Grinstein.
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 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. If the
proposed Sundstrand Corporation Nonemployee Director Stock Option Plan ("Stock
Option Plan") and Compensation Plan are approved by the shareholders, the
Compensation Committee also will administer these plans. The Compensation
Committee met nine times, including three telephonic meetings, during 1994 and
on one occasion action was taken through consent resolutions signed by all
committee members. Six of the nine meetings were expanded to include all of
the outside directors. 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,
and reviews and recommends to the Board of Directors proposals to change the
capital structure of the Company. The Finance Committee also 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 plan of the Company.
The Finance Committee met twice during 1994. The present members of the
Finance Committee are Don R. O'Hare (Chairman), John A. Puelicher, Donald E.
Nordlund and J. P. Bolduc.
The Nominating Committee reviews the size and composition of the board
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, nonemployee 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 once during 1994. The present members of the Nominating
Committee are Charles Marshall (Chairman), Klaus H. Murmann, Thomas G. Pownall
and J. P. Bolduc.
10
<PAGE> 15
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 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
and Chief Executive Officer and a director of Sauer Inc., Ames, Iowa, served on
the Company's Compensation Committee. During this period Mr. O'Hare and Mr.
Schilling, Vice President and General Counsel and Secretary of the Company,
served as directors 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; tie a significant portion of executive
compensation to past and anticipated individual and Company performance; and
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
11
<PAGE> 16
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-two companies selected, eight are in the
Standard & Poors Aerospace/Defense Index and two are in the Standard & Poors
Diversified Manufacturing Index, which indices are incorporated into the
performance graph and table on page 24 of this proxy statement. During 1994,
the Committee had the compensation consultant update its 1992 review and report
the results to the Committee. Based on the updated information from the
consultant, the Committee concluded that as a whole, compensation for
executives of the Company is in line with the Committee's objectives that, as
adjusted to reflect the performance of the Company and the executive, salary
compensation should be near the calculated median salary being paid to
executives of the peer group of companies and total direct compensation (salary
and bonus combined) should be near the calculated 75th percentile total being
paid to executives of the peer group of companies.
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 to its executives, the value and suitability of
which is annually reviewed by the Compensation Committee.
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 as reflected in the independent compensation consultant's survey, the
salary history of the officer and the performance review and salary
recommendation for the officer by the Company's Chief Executive Officer.
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.
Effective January 1, 1994, the salary of five officers was increased
with the salary of the remaining four officers being frozen since they were at
or above the targeted salary and/or total direct compensation objectives for
comparable positions at the selected peer group of companies. The salary for
Mr. Smuland, Executive Vice President and Chief Operating Officer, Aerospace;
Mr. Wallin, Executive Vice President and Chief Operating Officer, Industrial;
Mr. Ricketts, Vice President and Treasurer; and Mr. Hedges, Vice President,
Personnel and Public Relations, was increased from $450,000, $360,000, $160,000
and $175,000, respectively, to $500,000, $400,000, $170,000 and $185,000,
respectively, to reflect their performance and to maintain their salaries
and/or total direct compensation around the targeted amounts for comparable
positions. The salary for Harry C. Stonecipher, former Chairman of the Board,
President and Chief Executive Officer of the Company, also was increased
effective January 1, 1994, from $650,000 to $725,000 to reflect the positive
steps the Company had taken under his direction to deal with the difficult
economic conditions it faced. Mr. Stonecipher left the Company in September
1994 to become the President and Chief Executive Officer of McDonnell Douglas
Corporation.
12
<PAGE> 17
The Compensation Committee in November 1994, reviewed with Mr. O'Hare
the performance of the officers and his salary recommendations which were based
upon the updated information from the compensation consultant. As a result of
Mr. O'Hare's review, the Committee, effective as of January 1, 1995, increased
the salary of Mr. Wallin from $400,000 to $440,000 and the salary of Mr.
Donovan, Executive Vice President and Chief Financial Officer, from $300,000 to
$330,000. These increases were consistent with the aforementioned objectives
of the Committee. The increase for Mr. Wallin reflected the improving
performance of the Company's industrial segment businesses while in Mr.
Donovan's case, the increase reflected the fact that his position has
responsibilities in addition to those customarily held by persons holding the
chief financial officer position with the peer group of selected companies.
On September 26, 1994, Mr. O'Hare was elected Chairman of the Board and
Chief Executive Officer of the Company replacing Mr. Stonecipher. The
Compensation Committee, expanded to include all outside directors, determined
that Mr. O'Hare's annual salary, during the "Employment Period" under his
employment agreement, which agreement is described on page 21 under the heading
"Employment Agreements," should be $650,000. Since Mr. O'Hare prior to his
retirement had filled several positions with the Company, including Chairman of
the Board, and, after his retirement was engaged by the Company as a
consultant, the Committee determined that he was uniquely qualified to assume
the Chairman and Chief Executive Officer position until a permanent replacement
is located. Accordingly, Mr. O'Hare's salary was set to provide an appropriate
incentive for him to change from his consultancy arrangement to the position of
Chairman and Chief Executive Officer and to reflect the Committee's
determination that his salary should be near the calculated median for
comparable positions within the selected peer group of companies. While Mr.
O'Hare was a consultant to the Company, he was compensated at the annual rate
of $125,000.
OFFICER INCENTIVE COMPENSATION
Under the Company's Officer Incentive Compensation 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 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. O'Hare, 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, the
Chief Executive Officer. Failure to attain the threshold achievement level
applicable to a particular performance element would result in the officer not
receiving, with respect to such element, any credit towards determination of a
bonus award. 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
13
<PAGE> 18
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 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, the Chief Executive
Officer 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 1994 plan year the Compensation Committee accepted the following
Company performance elements and target levels to determine bonuses for the
Company's officers, including Mr. O'Hare: earnings per share -- $2.80; working
capital improvement -- to $.33 per sales dollar; cash flow before financing --
$115.0 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, certain of which
elements were adjusted, and received Mr. O'Hare'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 with
the performance elements and Mr. O'Hare's recommendation. The bonus awarded
to each of the officers, other than Mr. O'Hare, approximated the amounts
determined based upon the achievement level of the various Company performance
elements. For 1994, each of the Company performance elements was equally
weighted, with adjustments being made for unusual and nonrecurring accounting
items.
For 1994, the Compensation Committee determined Mr. O'Hare's bonus to be
$100,000, representing approximately 62 percent of the base salary paid to him
during the period he was Chairman of the Board and Chief Executive Officer.
The amount of such bonus took into account the performance of the Company as
compared with the performance elements and other factors which the Committee
determined to be appropriate.
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 become exercisable in
14
<PAGE> 19
increments of twenty-five percent on each of the second through fifth
anniversary dates of the grant, and generally will remain exercisable until 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.
The Compensation Committee awarded stock options to the officers on
November 15, 1994. The stock options awarded to the officers have a purchase
price equal to the fair market value of $44.75 per share at the date of grant
with grants ranging from 4,500 to 45,000 options, the latter number being
awarded to Mr. O'Hare. The number of options granted to the officers other
than Mr. O'Hare was reflective of the recommendation made by Mr. O'Hare which
was based on the updated information provided by the compensation consultant.
The number of options granted to Mr. O'Hare is reflective of his willingness to
fill the position of Chairman and Chief Executive Officer of the Company while
the Board locates a permanent replacement for Mr. Stonecipher. The Committee
determined that the terms of the options granted to Mr. O'Hare should be the
same as for all other employees, except the expiration date would be extended
to cover the five year period following termination of his employment agreement
rather than the one year period following his employment termination which
would otherwise have been applicable.
The terms and conditions adopted by the Committee which would be
applicable 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. No shares of restricted stock were granted to any of the
officers in 1994 under the Stock Plan or any other plan.
Under Section 162(m) of the Internal Revenue Code, certain annual
compensation in excess of $1 million paid to the named executive officers is
not deductible for federal income tax purposes. The Company's policy is to
utilize, to the extent practicable, legally available tax deductions and the
Compensation Committee, when determining executive compensation programs,
considers all relevant factors, including its freedom to craft appropriate
compensation programs, the tax deductibility of the compensation and the
overall best interest of the shareholders. The Committee presently believes
the best interest of the shareholders is served by retaining its executive
compensation philosophy and the individual compensation components thereunder,
since they provide the performance incentives to the executive officers which
the Committee has determined to be appropriate. The Committee believes that
under the current compensation program there will be very little, if any,
nondeductible executive compensation paid in 1995. The Committee, however,
will continue to evaluate the executive compensation program and, in the event
the Company begins paying any significant amount of nondeductible compensation,
may consider changes to address the situation.
STONECIPHER SEVERANCE
The Compensation Committee, expanded to include all outside directors,
after considering the circumstances of Mr. Stonecipher's retirement, the
objectives of the Company's 1982 and 1989 Restricted Stock Plans and the Stock
Plan, the reasonableness of the compensation, the
15
<PAGE> 20
Company's favorable performance during the recent difficult economic conditions
which it faced, the tax consequences of any restricted stock released to him,
and after receiving the advice of legal counsel and input from the Committee's
compensation consultant, decided to release Mr. Stonecipher from his
employment agreement and permit him to receive a bonus covering the period in
1994 for which he was employed, which bonus was subsequently determined to be
$261,544, representing approximately 48 percent of the base salary paid to him
during 1994. The amount of the bonus was based upon the performance of the
Company as compared with the performance elements referred to above. In
addition, the Committee determined that it would allow the release of 40,000
shares of restricted stock to him, but would exercise the Company's option to
repurchase for $.50 per share, 104,000 of his restricted shares, and would
allow the 45,000 options previously granted to Mr. Stonecipher to become
immediately exercisable and remain exercisable for one year following his
termination of employment. In recognition of his valuable service to the
Company, the Committee also elected him a director emeritus of the Company.
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 believes that these policies are reflected in the 1994 compensation
levels of the Company's executives.
COMPENSATION COMMITTEE
Donald E. Nordlund, Chairman
Klaus H. Murmann
Ward Smith
John A. Puelicher
Gerald Grinstein
The following directors, as indicated above, also participated in the
Compensation Committee meetings at which the employment agreement with Mr.
O'Hare, including the establishment of his annual compensation, was approved
and at which the severance arrangements with Mr. Stonecipher were determined.
J. P. Bolduc
Charles Marshall
Thomas G. Pownall
16
<PAGE> 21
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's current
Chairman of the Board and Chief Executive Officer for services rendered in all
capacities for the Company's last completed fiscal year. The table also sets
forth the compensation of the Company's former Chairman of the Board, President
and Chief Executive Officer who retired effective September 24, 1994, and the
Company's other four most highly compensated executive officers 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 ($) ($) ($) ($)(6)(7) (#) ($)
- --------------------- ---- -------- -------- ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Don R. O'Hare 1994 $162,500 $100,000 - - 46,000 $ 136,262 (8)
Chairman of the
Board and Chief
Executive Officer
Harry C. Stonecipher 1994 $543,754 $261,544 - - - $2,800,334 (9)
Retired Chairman 1993 $650,000 $186,875 $ 67,109 (1) $711,000 - $ 8,970
of the Board, 1992 $650,000 $440,000 $115,515 (1) - 45,000 $ 8,970
President and Chief
Executive Officer
Robert J. Smuland 1994 $500,000 $192,400 - - 20,000 $ 6,900 (10)
Executive Vice 1993 $450,000 $103,500 $97,122 (2) $355,500 - $ 6,210
President and Chief 1992 $450,000 $225,000 $63,642 (2) - 23,125 $ 6,210
Operating Officer,
Aerospace
Berger G. Wallin 1994 $400,000 $153,920 - - 20,000 $ 5,520 (10)
Executive Vice 1993 $360,000 $ 82,800 $21,306 (3) $355,500 - $ 4,968
President for 1992 $325,000 $160,000 $22,421 (3) - 21,250 $ 4,485
Special Projects
Paul Donovan 1994 $300,000 $115,440 - - 10,000 $ 4,140 (10)
Executive Vice 1993 $300,000 $ 69,000 $79,800 (4) $177,750 - $ 4,140
President and Chief 1992 $300,000 $150,000 $20,683 (4) - 10,625 $ 4,140
Financial Officer
Richard M. Schilling 1994 $220,000 $ 84,656 $47,216 (5) - 7,000 $ 3,036 (10)
Vice President and 1993 $220,000 $ 50,600 $46,395 (5) $118,500 - $ 3,036
General Counsel 1992 $220,000 $120,000 $43,849 (5) - 8,125 $ 3,036
and Secretary
</TABLE>
(1) The amounts set forth include the incremental cost of Mr. Stonecipher's
personal use of Company planes totaling $46,334 and $92,368 for the years
1993 and 1992, respectively.
(2) The amounts set forth include the incremental cost of Mr. Smuland's
personal use of Company planes totaling $80,069 and $40,388 for the years
1993 and 1992, respectively.
17
<PAGE> 22
(3) The amounts set forth include the incremental cost of Mr. Wallin's
personal use of Company planes totaling $6,504 and $6,744 for the years
1993 and 1992, respectively.
(4) The amounts set forth include the incremental cost of Mr. Donovan's
personal use of Company planes totaling $71,260 and $1,632 for the years
1993 and 1992, respectively.
(5) The amounts set forth include the incremental cost of Mr. Schilling's
personal use of Company planes totaling $38,848, $39,152, and $21,501 for
the years 1994, 1993 and 1992, respectively.
(6) The amounts set forth represent the fair market value of the shares of
restricted stock awarded to the named executive officer in 1993 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 dividends paid
on Common Stock, but such amounts are not included in this column.
(7) On December 31, 1994, Mr. Smuland held 56,000 shares of restricted stock
which had an aggregate market value of $2,516,500; Mr. Wallin held 40,200
shares of restricted stock which had an aggregate market value of
$1,806,488; Mr. Donovan held 42,900 shares of restricted stock which had
an aggregate market value of $1,927,819; and Mr. Schilling held 23,300
shares of restricted stock which had an aggregate market value of
$1,047,044.
(8) The amount set forth includes $91,352 earned pursuant to a consulting
agreement which terminated effective September 25, 1994, $6,000 in board
meeting fees, $2,000 in committee meeting fees, $15,167 for the portion
of the annual board of director retainer fee payable between January 1
and August 1, 1994, and 409 shares of Common Stock valued at $19,453 and
$47 in cash for the portion of such annual retainer fee payable between
August 1, 1994, and the 1995 Annual Meeting of Stockholders pursuant to
the Compensation Plan. The remaining $2,243 of the amount set forth
represents the dollar value of term life insurance premiums paid by the
Company as further described in footnote (10) below.
(9) The amount set forth includes a lump sum payment of $1,171,390 pursuant
to the Supplemental Plan referred to on page 20 of this proxy statement
and a lump sum payment of $1,608,400 pursuant to a retirement agreement
entered into with the Company at the time of his employment. The
remaining $20,504 consists of $13,000 paid pursuant to the Director
Emeritus Retirement Plan referred to on page 9 of this proxy statement
and $7,504 representing the dollar value of term life insurance premiums
paid by the Company as further described in footnote (10) below.
(10) The amounts set forth represent the dollar value of term life insurance
premiums paid by the Company for the group term life insurance component
of the Executive Life Insurance Program, and an imputed value based upon
the equivalent of term life insurance premiums for the survivor income
benefit component of the Executive Life Insurance Program.
OPTION GRANTS IN LAST FISCAL YEAR
During 1994, the only grants of nonqualified stock options under the
Stock Incentive Plan to named executive officers are as set forth below. In
addition, on August 1, 1994, as set forth below, 1,000 stock options were
awarded to Mr. O'Hare under the provisions of the proposed Sundstrand
Corporation Nonemployee Director Stock Option Plan (the "Stock Option Plan") as
further described on pages 25-27 of this proxy statement.
18
<PAGE> 23
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL OPTIONS EXERCISE OF
OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (1) IN FISCAL YEAR ($/SHARE) DATE PRESENT VALUE (2)
- -------------- ----------- -------------------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Don R. O'Hare 1,000 N/A $47.5625 08/01/04 19,456
45,000 15% $44.75 11/15/04 855,765
Robert J. Smuland 20,000 7% $44.75 11/15/04 380,340
Berger G. Wallin 20,000 7% $44.75 11/15/04 380,340
Paul Donovan 10,000 3% $44.75 11/15/04 190,170
Richard M. Schilling 7,000 2% $44.75 11/15/04 133,119
</TABLE>
(1) Options become exercisable at a rate of 25% of each grant on the
second through fifth anniversary dates of the date of grant,
provided that in the event of a "Change in Control" as defined on
page 23 of this proxy statement, such options shall become
immediately exercisable as described on page 22 of this proxy
statement.
(2) Grant Date Present Value was calculated with the Black-Scholes
option pricing model using the following assumptions: (a) a stock
price volatility of .3193 for the 1,000 options awarded on August
1, 1994, and .3158 for the options awarded on November 15, 1994,
both based on the 21 consecutive periods of quarterly prices of
Sundstrand Common Stock and dividends paid prior to the respective
grant dates; (b) a risk-free interest rate of 7.39 percent for the
1,000 options awarded on August 1, 1994, and 8.06 percent for the
options awarded on November 15, 1994, both based on a ten-year zero
coupon Treasury bond with a maturity date corresponding to that of
the maximum option term; (c) a dividend yield of 2.5 percent which
approximates the dividend yield on Sundstrand Common Stock at the
time of the respective grants; and (d) an exercise term of ten
years corresponding to the maximum option term.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
None of the named executive officers exercised stock options in 1994.
The following table sets forth the number of options which were exercisable and
the number of options which were not exercisable in 1994 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, 1994.
<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>
Don R. O'Hare 0 / 46,000 $ 0 / $ 30,938
Harry C. Stonecipher 45,000 / 0 $ 306,563 / $ 0
Robert J. Smuland 5,781 / 37,344 $ 39,385 / $131,904
Berger G. Wallin 5,313 / 35,937 $ 36,191 / $122,324
Paul Donovan 2,656 / 17,969 $ 18,096 / $ 61,162
Richard M. Schilling 2,031 / 13,094 $ 13,838 / $ 46,327
</TABLE>
19
<PAGE> 24
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 both plans is the same. The Supplemental Plan provides a lump
sum option for the total accrued benefit, while the Retirement Plan provides a
lump sum option for the portion of the benefit accrued through December 31,
1991.
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
</TABLE>
Generally, the combined amounts shown in the Salary and Bonus columns of
the Summary Compensation Table on page 17 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. Smuland, Wallin, Donovan and Schilling upon attainment of age 65,
the normal retirement age under the plans, will have 11.6, 41.0, 24.0 and 34.2
actual years of service with the Company, respectively. Mr. O'Hare is accruing
no additional benefit under the Retirement Plan or the Supplemental Plan.
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 his employment with the Company a separate unfunded
retirement agreement was entered into with Mr. Smuland. This agreement
provides that he will receive (a) a nonqualified 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
20
<PAGE> 25
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
agreement to Mr. Smuland at his normal retirement age, which benefit is in
addition to the benefit payable under the Retirement Plan and Supplemental
Plan, is $75,004. This benefit was calculated in accordance with alternative
(b) set forth in the immediately preceding paragraph, which management believes
will provide the greater benefit.
Messrs. O'Hare, Smuland and Wallin, as directors of the Company, also are
accruing a benefit under the Director Emeritus Retirement Plan, which plan is
described on page 9 of this proxy statement.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (the "Agreement")
with Mr. O'Hare that is designed to assure the Company of his continued
services until a new chief executive officer is hired. The "Employment Period"
under the Agreement commenced on September 26, 1994, and, except as otherwise
provided, will expire upon the earlier of September 25, 1996, or the employment
by the Company of a new chief executive officer. Under the Agreement, Mr.
O'Hare will receive during the Employment Period a salary of $650,000 per year,
paid vacations, reasonable expenses, certain fringe benefits and perquisites
and shall be eligible to participate in the Company's Bonus Plan, disability
plan and group life insurance plan.
The Agreement sets forth certain conditions of employment such as the
Company not assigning duties to Mr. O'Hare 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. O'Hare
covenants not to compete with the Company or to disclose confidential
information concerning the Company during the Employment Period. The Agreement
provides that Mr. O'Hare shall provide such assistance to the Board as is
reasonably requested by the Board with respect to its efforts to identify and
hire a new chief executive officer. Upon the hiring of a new chief executive
officer, the Agreement provides that Mr. O'Hare is to resign and may become a
consultant to the new chief executive officer until the earlier of Mr.
O'Hare's death, termination of the consultant position or September 25, 1996.
During the period Mr. O'Hare serves as a consultant under the Agreement, his
compensation is limited to a consultant's fee of $650,000 per year. In the
event of either the termination of the consulting arrangement or Mr. O'Hare's
death prior to September 25, 1996, Mr. O'Hare or his estate will be paid a
single lump sum amount equal to $1.3 million less the sum of all salary
compensation and consultant compensation previously paid to Mr. O'Hare under
the Agreement. In the event Mr. O'Hare does not become a consultant following
the hiring of a new chief executive officer, the Agreement provides that Mr.
O'Hare will be paid a lump sum amount equal to $1.3 million less the amount of
all salary compensation previously paid to Mr. O'Hare under the Agreement.
On July 20, 1989, the Company entered into substantially identical
employment agreements with Mr. Donovan and Mr. Schilling, which agreements were
amended on August
21
<PAGE> 26
7, 1990. On August 7, 1990, and on August 18, 1992, the Company entered into
employment agreements with Mr. Wallin and Mr. Smuland, respectively, which are
substantially identical to the other two employment agreements, 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) 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. Under the Employment
Agreement, the Company also is required to make an additional "gross-up
payment" to the executive 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 Employment 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 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 the executive
constitute "excess parachute payments" within the meaning of Section 280G of
the Code.
Assuming a Change in Control occurred on March 1, 1995, 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, $437,603 for Mr. Wallin, $1,474,718 for Mr.
Donovan and $1,043,145 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 as a result of
the change in control would have been 56,000 shares and 37,344 stock options
for Mr. Smuland, 35,800 shares and 35,938 stock options for Mr. Wallin, 40,500
shares and 17,969 stock options for Mr.
22
<PAGE> 27
Donovan and 21,300 shares and 13,094 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 20-21
of this proxy statement.
In general, for purposes of 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 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, 1995,
executive officers with loans in excess of $60,000 under the Loan Program were
as follows: Mr. Smuland -- $1,428,000; Mr. Donovan -- $957,000; Mr. Schilling
- -- $870,000; 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
23
<PAGE> 28
1994 with respect to each of the Company's executive officers. Effective
October 1, 1992, the Company discontinued making loans under the Loan Program
with existing loans being permitted to continue to maturity. Each of the loans
will mature on September 1, 2000.
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, 1989, in each of Sundstrand Corporation, Standard
& Poors 500 Stock Index, Standard & Poors Aerospace/Defense Index and Standard
& Poors Diversified Manufacturing Index. The 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 52%
and 48%, respectively, of the Company's total sales in 1994.
[PERFORMANCE GRAPH OMITTED - REPRESENTED BY THE FOLLOWING TABLE:]
<TABLE>
<CAPTION>
COMPANY/INDEX 1989 1990 1991 1992 1993 1994
- ------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sundstrand $100 93 122 137 148 164
S&P 500 $100 97 126 136 150 152
S&P Aerospace/Defense $100 104 125 131 171 182
S&P Diversified Mfg. $100 99 122 132 160 164
</TABLE>
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, to file initial reports of
beneficial ownership of Common Stock and report changes in beneficial ownership
of Common Stock with the Securities and Exchange Commission and the New York
Stock Exchange.
24
<PAGE> 29
Based upon its review of forms received by it with respect to 1994, and
written representations from certain reporting persons, the Company believes
that all Section 16(a) filing requirements applicable to its directors and
officers have been met, except that Mr. Smuland filed one late report on Form 4
covering one transaction, and Kenelm A. Groff, retired Vice President,
International Relations and Business Development, filed one late report on Form
4 covering one transaction which occurred several months after his retirement.
ADOPTION OF THE STOCK OPTION PLAN
The Board of Directors recommends that the stockholders adopt the
Sundstrand Corporation Nonemployee Director Stock Option Plan under which one
thousand nonqualified stock options for shares of the Company's Common Stock
shall be awarded to each nonemployee director on an annual basis. The Board of
Directors believes that the Stock Option Plan is desirable and that adoption of
the plan shall promote the success and enhance the value of the Company by
strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable nonemployee directors, and by linking the
personal interests of nonemployee directors to those of the Company's
stockholders. The total number of shares available for grant under the plan is
132,000 shares. A brief description of the Stock Option Plan follows and a
complete copy of the plan is attached to this proxy statement as Exhibit A.
DESCRIPTION OF THE STOCK OPTION PLAN
Pursuant to the provisions of the Stock Option Plan, as of the date of
each Annual Meeting of Stockholders, one thousand nonqualified stock options
shall be awarded to each nonemployee director elected on such date or
continuing in office. Currently there are eight nonemployee directors on the
Board. Each option shall be exercisable for one share of Common Stock.
Options are exercisable in increments of 25% on each of the second through
fifth anniversary dates of the grant, but no later than the tenth anniversary
date 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 options may be
granted under the plan on or after August 1, 2004. In the event a nonemployee
director's membership on the Board ceases for any reason, including death, all
outstanding options previously granted to such director shall immediately
become exercisable by the director or his estate and shall remain exercisable
for up to one year thereafter. In the event of a "Change in Control" as
defined on page 23 of this proxy statement under the heading "Employment
Agreements," any and all outstanding stock options granted under the plan shall
become immediately exercisable, unless specifically prohibited by the terms of
applicable law and regulation.
The plan provides that it will be administered by the Compensation
Committee of the Board, but in no event will the Committee have the power to
determine those persons eligible to participate, or the number, price or timing
of options to be granted under the plan, all such determinations being
automatic pursuant to plan provisions.
The Stock Option Plan may be terminated, amended or modified by the
Board, provided that the plan may not be amended more than once every six
months other than to bring it into
25
<PAGE> 30
compliance with changes in certain laws and regulations and provided further,
that any such change will be subject to stockholder approval if such approval
is required by the federal securities law, any national securities exchange or
system on which the shares are then listed or reported, or a regulatory body
having jurisdiction with respect thereto.
STOCK OPTION GRANT AND NEW PLAN BENEFITS
On August 1, 1994, subject to stockholder approval of the plan at the
April 18, 1995, Annual Meeting, 1,000 stock options were awarded to each of the
nine nonemployee directors, without cost to the recipients and at the exercise
price of $47.5625 per share. Such stock options shall be exercisable in
increments of 25% of an individual grant on each of the second through fifth
anniversary dates and such options shall expire on August 1, 2004. On February
1, 1995, the closing price of the Company's Common Stock on the New York Stock
Exchange was $45.50. If the Company's stockholders do not approve the plan,
the grant of stock options shall be of no force or effect.
The table below sets forth the benefits received under the Stock Option
Plan by the participants therein.
<TABLE>
<CAPTION>
STOCK OPTION PLAN
---------------------------------------------------
POSITION GRANT DATE NUMBER OF OPTIONS EXERCISE PRICE
- ----------------------------------- ---------- ----------------- --------------
<S> <C> <C> <C>
Named Executive Officers - - -
Executive Group - - -
Nonexecutive Director Group 8/1/94 9,000 $47.5625
Nonexecutive Officer Employee Group - - -
</TABLE>
FEDERAL TAX CONSIDERATIONS OF STOCK OPTIONS
Under federal income tax law as currently in effect, the grant of a
nonqualified stock option would not be a taxable event for the participant nor
a tax deductible event for the Company. However, in general, under current
federal income tax law, upon the exercise of a nonqualified stock option, the
participant would realize ordinary income measured by the excess of the fair
market value of the acquired shares of Common Stock at the time of exercise
over the option price paid, and the Company would be entitled to a deduction in
a corresponding amount. Upon subsequent sale or other disposition of the
acquired shares of Common Stock, the basis in the shares for determining gain
or loss would be the sum of the option price paid and the gain realized upon
exercise, and generally any such gain or loss upon sale or other disposition
would be a long-term or short-term capital gain or loss depending upon the
holding period preceding disposition. The above discussion does not purport to
cover all tax consequences related to the exercise of nonqualified stock
options.
DIRECTORS' RECOMMENDATION
The approval of the Stock Option Plan will require the affirmative vote
of the holders of a majority of the shares of the Company's Common Stock
present in person or represented by
26
<PAGE> 31
proxy at the meeting. If the Stock Option Plan is not approved by the
stockholders, no awards could be made under the Stock Option Plan, and the
August 1, 1994, grant of nonqualified stock options will be of no force or
effect. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR
OF THE STOCK OPTION PLAN.
ADOPTION OF THE COMPENSATION PLAN
The Board of Directors recommends that the stockholders adopt the
Sundstrand Corporation Nonemployee Director Compensation Plan under which the
annual retainer fee (which is currently $26,000 and which may be increased at
the discretion of the Board) is to be paid to nonemployee directors in the form
of the Company's Common Stock rather than in cash. The Board of Directors
believes that the Compensation Plan is desirable and that adoption of the plan
shall promote the success and enhance the value of the Company by linking the
personal interests of nonemployee directors to those of the Company's
stockholders. The total number of shares available for issuance under the plan
is 100,000 shares. A brief description of the Compensation Plan follows and a
complete copy of the plan is attached to this proxy statement as Exhibit B.
DESCRIPTION OF THE COMPENSATION PLAN
Pursuant to the provisions of the Compensation Plan, as of the date of
each Annual Meeting of Stockholders, the annual retainer fee for the succeeding
year shall be paid in Common Stock of the Company, the fair market value of
which on the date of the Annual Meeting, together with the amount of cash
necessary to prevent the issuance of any fractional share shall equal the
annual retainer. Accordingly, this plan operates only to change the form of
payment of the retainer from cash to stock. No shares may be issued under the
plan on or after August 1, 2004. The Compensation Plan also provides that the
Company has the power to withhold, or to require a participant to remit to the
Company, an amount sufficient to satisfy taxes required by law to be withheld
with respect to any taxable event arising out of or as a result of the plan.
The plan provides that it will be administered by the Compensation
Committee of the Board, but in no event will the Committee have the power to
determine those persons eligible to participate, or the number, price or timing
of shares to be issued under the plan, all such determinations being automatic
pursuant to plan provisions.
The Compensation Plan may be terminated, amended or modified by the
Board, provided that the plan may not be amended more than once every six
months other than to bring it into compliance with changes in certain laws and
regulations and provided further, that any such change will be subject to
stockholder approval if such approval is required by the federal securities
law, any national securities exchange or system on which the shares are then
listed or reported, or a regulatory body having jurisdiction with respect
thereto.
SHARE GRANT AND NEW PLAN BENEFITS
On August 1, 1994, 409 shares of the Company's Common Stock were issued
to each of the nine nonemployee directors. The value of such shares was equal
to the unpaid amount of
27
<PAGE> 32
the annual retainer for the period between August 1, 1994, and the 1995 Annual
Meeting of Stockholders. The fair market value of such shares on such date,
together with the amount of cash necessary to prevent the issuance of any
fractional share equalled such portion of the annual retainer. These shares
were paid to nonemployee directors in lieu of cash. Mr. Murmann, who is not a
United States citizen, had 123 shares withheld by the Company to pay mandatory
taxes.
Currently there are eight nonemployee directors. The table below sets
forth the annual benefits that would be received under the Compensation Plan by
the recipients thereof, assuming that the annual retainer fee remains at
$26,000 and the number of nonemployee directors remains at eight.
<TABLE>
<CAPTION>
COMPENSATION PLAN
---------------------------------------------
POSITION DOLLAR VALUE $ NUMBER OF UNITS
- ----------------------------------- -------------- -----------------------
<S> <C> <C>
Named Executive Officers - -
Executive Group - -
Nonexecutive Director Group $208,000 Varies with stock price
Nonexecutive Officer Employee Group - -
</TABLE>
DIRECTORS' RECOMMENDATION
The approval of the Compensation Plan will require the affirmative vote
of the holders of a majority of the shares of the Company's Common Stock
present in person or represented by proxy at the meeting. If the Compensation
Plan is not approved by the stockholders, the Board may choose to terminate the
plan pursuant to the plan provisions. THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE IN FAVOR OF THE COMPENSATION PLAN.
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 LLP were the Company's independent certified public
accountants for 1994 and have been selected by the Company as its independent
certified public accountants for 1995. 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.
28
<PAGE> 33
STOCKHOLDERS' PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting
in 1996 and which are to be included in the Company's 1996 Proxy Statement and
form of proxy relating to that meeting must be received by the Company not
later than November 8, 1995.
If you will be unable to be present in person at the 1995 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 7, 1995
29
<PAGE> 34
Exhibit A
SUNDSTRAND CORPORATION
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Article 1. Establishment, Purposes and Duration
1.1 Establishment of the Plan. Sundstrand Corporation, a Delaware
corporation (the "Company"), hereby establishes a stock option plan to be
known as the "Sundstrand Corporation Nonemployee Director Stock Option
Plan" (the "Plan"), as set forth in this document. The Plan permits the
grant of Options (as defined below), and is established pursuant to
Section 16 of the Exchange Act (as defined below) and the rules
thereunder. Upon approval by an affirmative vote of a majority of shares
of Common Stock of the Company voting at the Company's April 18, 1995
Annual Meeting of Stockholders, the Plan shall be deemed to have become
effective as of August 1, 1994 (the "Effective Date"), and shall remain
in effect as provided in Section 1.3 herein. Options may be granted
prior to stockholder ratification of the Plan and the date of grant of
such Options shall be determined without reference to the date of
stockholder ratification of the Plan; provided, however, that in the
event stockholder ratification of the Plan is not obtained, all
outstanding Options granted shall become null and void.
1.2 Purposes of the Plan. The purposes of the Plan are to promote the
success and enhance the value of the Company by
(a) strengthening the Company's ability to attract and retain the
services of experienced and knowledgeable Nonemployee
Directors (as defined below) by enabling them to acquire
shares of the Company's Common Stock through the grant of
Options, and
(b) linking, through the grant of Options, Nonemployee Directors'
personal interests to those of the Company's stockholders.
1.3 Duration of the Plan. Subject to the right of the Board of Directors of
the Company (the "Board") to terminate the Plan at any time pursuant to
Article 9 herein, the Plan shall remain in effect until all Shares (as
defined below) subject to the Plan shall have been acquired according to
the Plan's provisions. However, in no event may any Option be granted
under the Plan on or after August 1, 2004.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meaning set
forth below:
(a) "Change in Control" means any of the following events:
(i) The acquisition (other than from the Company) by any person
(as such term is defined in Sections 13(d) or 14(d) of the
Exchange Act) of beneficial
<PAGE> 35
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of thirty-three percent (33%) or more of
the combined voting power of the Company's then outstanding
voting securities; or
(ii) The individuals who, as of the date hereof, 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
this Agreement, be considered as a member of the Incumbent
Board; or
(iii) Approval by stockholders of the Company of (A) 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 sixty-seven percent (67%)
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 (B) 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.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to subsection (i), solely because thirty-
three percent (33%) or more of the combined voting power of the
Company's then outstanding securities is acquired by (A) a trustee
or other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its Subsidiaries
or (B) 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.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(c) "Fair Market Value" means the average of the highest and lowest
quoted selling prices for Shares on the relevant date, or (if there
were no sales on such date) the average of the means between the
highest and lowest quoted selling prices for Shares on the nearest
day before and the nearest day after the relevant date, as
determined by the Committee (as defined in Section 3.1 hereof).
(d) "Nonemployee Director" means any member of the Board who is not
otherwise employed by the Company or a Subsidiary.
(e) "Option" means a nonqualified stock option to purchase Shares
granted under Section 6.1 hereof, at the Option Price, for the
Option Duration and exercisable on and after the Option Purchase
Dates.
<PAGE> 36
(f) "Option Certificate" means a certificate setting forth the number
of Options granted, the Option Price, the Option Duration and the
Option Purchase Dates.
(g) "Option Duration" means the ten (10) calendar year period which
commences on the date the Option is granted.
(h) "Option Price" means the price at which a Share may be purchased
pursuant to an Option, which price shall be the Fair Market Value
of a Share as of the date the Option is granted.
(i) "Option Purchase Dates" means the following:
(i) the second anniversary date of any Option grant, on or after
which date a Nonemployee Director possessing the Option may
purchase up to twenty-five percent (25%) of the Shares
covered by the Option, subject to and in accordance with Plan
provisions;
(ii) the third anniversary date of any Option grant, on or after
which date a Nonemployee Director possessing the Option may
purchase up to an additional twenty-five percent (25%) of the
Shares covered by the Option, subject to and in accordance
with Plan provisions;
(iii) the fourth anniversary date of any Option grant, on or after
which date a Nonemployee Director possessing the Option may
purchase up to an additional twenty-five percent (25%) of the
Shares covered by the Option, subject to and in accordance
with Plan provisions; and
(iv) the fifth anniversary date of any Option grant, on or after
which date a Nonemployee Director possessing the Option may
purchase up to an additional twenty-five percent (25%) of the
Shares covered by the Option, subject to and in accordance
with Plan provisions.
(j) "Retirement" means the cessation of a Nonemployee Director's
membership on the Board for any reason including death.
(k) "Share" means a share of the Common Stock of the Company.
(l) "Subsidiary" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least fifty
percent (50%) of the total combined voting power of all classes of
stock, or any other entity (including, but not limited to,
partnerships and joint ventures) in which the Company owns at least
fifty percent (50%) of the combined equity thereof.
Article 3. Administration
3.1 Compensation Committee. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee"), subject to the
restrictions set forth in the Plan.
<PAGE> 37
3.2 Administration. The Committee shall have the full power, discretion and
authority to interpret and administer the Plan consistent with Plan
provisions; provided, however, in no event shall the Committee have the
power to determine the persons eligible to participate in the Plan, or
the number, price or timing of Options to be granted under the Plan, all
such determinations being automatic pursuant to Plan provisions. Any
action taken by the Committee with respect to the administration of the
Plan which would result in any Nonemployee Director ceasing to be a
"disinterested person" for purposes of any other plan maintained by the
Company within the meaning of Rule 16b-3 of the Exchange Act, shall be
null and void.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to Plan provisions and all related orders or
resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company and its successors or assigns, and on its
stockholders, employees, Nonemployee Directors, and their respective
estates and beneficiaries.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2
herein, the total number of Shares available for grant under the Plan
shall be 132,000 Shares. Such Shares may be either authorized but
unissued, reacquired or a combination thereof.
4.2 Adjustments in Available Shares and Options. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
stock dividend, split-up, Share combination, or other change in the
capital structure of the Company affecting the Shares, such adjustment
shall be made in the number of Options which may be granted under the
Plan, and in the number of and/or price of Shares subject to outstanding
Options under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution
or enlargement of rights; provided that the number of Shares subject to
any Option shall always be a whole number.
Article 5. Participation
Persons eligible to participate in the Plan shall be limited to
Nonemployee Directors, and when applicable, their beneficiaries, heirs or
estate.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options shall be granted as follows:
(a) as of the Effective Date, one thousand (1,000) Options to
each Nonemployee Director then in office; and
(b) as of the date of each Annual Meeting of Stockholders of the
Company after the Effective Date, one thousand (1,000)
Options to each Nonemployee Director elected to such office
on such date or continuing in such office.
<PAGE> 38
6.2 Option Certificate. Each Option grant shall be evidenced by an Option
Certificate.
6.3 Exercise of Options. Options shall be exercisable at the Option Price on
and after the Option Purchase Date applicable to such Options, and except
as otherwise provided in the Plan, shall continue to be exercisable
during the Option Duration.
6.4 Payment and Delivery of Shares. Options shall be exercised by the
delivery of a written notice of exercise to the Secretary of the Company,
setting forth the number of Shares with respect to which the Option is to
be exercised, and accompanied by full payment for the Shares. As soon as
practicable after receipt of a written notice of exercise and full
payment, the Company shall cause to be delivered to the person exercising
the Option a certificate for the number of Shares purchased under the
Option.
6.5 Retirement. In the event of the Retirement of a Nonemployee Director,
all outstanding Options granted to such Nonemployee Director shall
immediately become exercisable by the Nonemployee Director, or as
applicable, his or her beneficiaries, heirs or estate, and shall remain
exercisable for the shorter period of the Option Duration of each such
Option grant, or one (1) calendar year after the date of Retirement.
6.6 Nontransferability of Options. All Options granted to a Nonemployee
Director under the Plan shall be exercisable during the life of such
Nonemployee Director only by such Nonemployee Director or by his or her
guardian or legal representative. No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, except in accordance with the Nonemployee Director's
beneficiary designation, by will, or by the laws of descent and
distribution.
Article 7. Beneficiary Designation
Each Nonemployee Director under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan shall accrue in case of such Nonemployee
Director's death. Each such designation shall be on the form provided for such
purpose, shall revoke all prior designations, and will be effective only when
filed by the Nonemployee Director with the Secretary of the Company during the
Nonemployee Director's lifetime. In the absence of any such designation,
benefits remaining at the Nonemployee Director's death shall accrue to the
Nonemployee Director's estate.
Article 8. Change in Control
Upon the occurrence of a Change in Control, unless specifically
prohibited by the terms of applicable law or regulation, any and all Options
granted hereunder shall become immediately exercisable.
Article 9. Amendment, Modification and Termination
The Board has the authority to amend, modify or terminate the Plan;
provided, however, that the Plan may not be amended more than once every six
months other than to bring it into compliance with changes in the Internal
Revenue Code, the Employee Retirement Income
<PAGE> 39
Security Act, or the rules thereunder. No such amendment, modification or
termination of the Plan may occur without the approval of the stockholders of
the Company, if stockholder approval for such amendment, modification or
termination is required by the federal securities laws, any national securities
exchange or system on which the Shares are then listed or reported, or a
regulatory body having jurisdiction with respect thereto.
Article 10. Successors
All obligations of the Company, with respect to Options granted under the
Plan, shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.
Article 11. Legal Construction
11.1 Requirements of Law. The granting of Options and the issuance of Shares
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
11.2 Securities Law Compliance. Transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors
under the Exchange Act.
11.3 Governing Law. To the extent not preempted by Federal law (or foreign
law, in the case of grants to Nonemployee Directors who are not United
States citizens), the Plan, and any agreement pursuant to the Plan, shall
be construed in accordance with and governed by the laws of the State of
Delaware.
11.4 Severability. In the event any provision of the Plan or any action taken
pursuant to the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included, and the illegal or invalid
action shall be deemed null and void.
<PAGE> 40
Exhibit B
SUNDSTRAND CORPORATION
NONEMPLOYEE DIRECTOR COMPENSATION PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Sundstrand Corporation, a Delaware
corporation (the "Company"), hereby establishes a plan to be known as the
"Sundstrand Corporation Nonemployee Director Compensation Plan" (the
"Plan"), as set forth in this document. The Plan provides that the
Annual Retainer (as defined below) of Nonemployee Directors shall be paid
in the Company's Common Stock and is established pursuant to Section 16
of the Exchange Act (as defined below) and the rules thereunder. The
Plan is effective as of August 1, 1994 (the "Effective Date"), and shall
remain in effect as provided in Section 1.3 herein, provided, however,
that in the event stockholder approval of the Plan is not obtained at the
Company's April 18, 1995 Annual Meeting of Stockholders, the Plan may be
terminated pursuant to Article 8 hereunder and all shares issued under
subsection (a) of Article 6 shall remain issued and outstanding.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Nonemployee Directors (as defined below) to those of the Company's
stockholders.
1.3 Duration of the Plan. Subject to the right of the Board of Directors of
the Company (the "Board") to terminate the Plan at any time pursuant to
Article 8 herein, the Plan shall remain in effect until all Shares (as
defined below) subject to the Plan shall have been acquired according to
the Plan's provisions. However, in no event may any Shares be issued
under the Plan on or after August 1, 2004.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meaning set
forth below:
(a) "Annual Retainer" means the annual retainer paid by the Company to
Nonemployee Directors for serving on the Board, but shall not
include any Board or Board committee meeting attendance fees.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(c) "Fair Market Value" means the average of the opening and closing
prices for Shares on the New York Stock Exchange on the relevant
date.
<PAGE> 41
(d) "Nonemployee Director" means any member of the Board who is not
otherwise employed by the Company or a Subsidiary.
(e) "Share" means a share of the Common Stock of the Company.
(f) "Subsidiary" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least fifty
percent (50%) of the total combined voting power of all classes of
stock, or any other entity (including, but not limited to,
partnerships and joint ventures) in which the Company owns at least
fifty percent (50%) of the combined equity thereof.
Article 3. Administration
3.1 Compensation Committee. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee"), subject to the
restrictions set forth in the Plan.
3.2 Administration. The Committee shall have the full power, discretion and
authority to interpret and administer the Plan consistent with Plan
provisions; provided, however, in no event shall the Committee have the
power to determine the persons eligible to participate in the Plan, or
the number, price or timing of Shares to be issued under the Plan, all
such determinations being automatic pursuant to Plan provisions. Any
action taken by the Committee with respect to the administration of the
Plan which would result in any Nonemployee Director ceasing to be a
"disinterested person" for purposes of any other plan maintained by the
Company within the meaning of Rule 16b-3 of the Exchange Act, shall be
null and void.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to Plan provisions and all related orders or
resolutions of the Board and the Committee shall be final, conclusive and
binding on all persons, including the Company and its successors and
assigns, and on its stockholders, employees, Nonemployee Directors and
their respective estates and beneficiaries.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2
herein, the total number of Shares available for issuance under the Plan
shall be 100,000 Shares. Such Shares may be either authorized but
unissued, reacquired or a combination thereof.
4.2 Adjustment in Available Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
stock dividend, split-up, Share combination, or other change in the
capital structure of the Company affecting the Shares, such adjustment
shall be made in the number of Shares which may be issued under the Plan,
as may be determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of rights.
<PAGE> 42
Article 5. Participation
Persons eligible to participate in the Plan shall be limited to
Nonemployee Directors.
Article 6. Payment in Shares
Subject to the terms and provisions of the Plan, the Annual Retainer of a
Nonemployee Director shall be paid as follows:
(a) as of the Effective Date, the portion of the Annual Retainer for
the period between August 1, 1994, and the 1995 Annual Meeting of
Stockholders shall be paid to each Nonemployee Director of the
Company then in office, in Shares, the Fair Market Value of which
on the Effective Date, together with the amount of cash necessary
to prevent the issuance of any fractional Share, shall equal such
Annual Retainer portion; and
(b) as of the date of each subsequent Annual Meeting of Stockholders of
the Company, the Annual Retainer for the succeeding year shall be
paid to each Nonemployee Director elected to such office on such
date or continuing in such office, in Shares, the Fair Market Value
of which on the date of such Annual Meeting, together with the
amount of cash necessary to prevent the issuance of any fractional
Share, shall equal the Annual Retainer.
The date of issuance of Shares pursuant to subsection (a) of Article 6
shall be determined without reference to the date of stockholder ratification
of the Plan.
Article 7. Restrictions on Transfer
All Shares issued hereunder may not be transferred for a period of six
months from the date of grant.
Article 8. Amendment, Modification and Termination
The Board has the authority to amend, modify or terminate the Plan;
provided, however, that the Plan may not be amended more than once every six
months other than to bring it into compliance with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. No such amendment, modification or termination of the Plan may
occur without the approval of the stockholders of the Company, if stockholder
approval for such amendment, modification or termination is required by the
federal securities laws, any national securities exchange or system on which
the Shares are then listed or reported, or a regulatory body having
jurisdiction with respect thereto.
Article 9. Tax Withholding
The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any and all Federal, state and local taxes required by law to be withheld with
respect to any taxable event arising out of or as a result of this Plan.
<PAGE> 43
Article 10. Successors
All obligations of the Company under the Plan shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business and/or assets of the Company.
Article 11. Legal Construction
11.1 Requirements of Law. The issuance of Shares under the Plan shall be
subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges
as may be required.
11.2 Securities Law Compliance. Transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors
under the Exchange Act.
11.3 Governing Law. To the extent not preempted by Federal law (or foreign
law, in the case of grants to Nonemployee Directors who are not United
States citizens), the Plan, and any agreement pursuant to the Plan, shall
be construed in accordance with and governed by the laws of the State of
Delaware.
11.4 Severability. In the event any provision of the Plan or any action taken
pursuant to the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included, and the illegal or invalid
action shall be deemed null and void.
<PAGE> 44
________________________________________________________________________________
PROXY/VOTING INSTRUCTION CARD
SUNDSTRAND CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON APRIL 18, 1995
The undersigned hereby appoints Don R. O'Hare 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 18, 1995, 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> 45
SUNDSTRAND CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
<TABLE>
<S><C>
[
]
This Proxy will be voted in accordance with specifications made. The Board of Directors recommends a vote "FOR" Proposals 1, 2
and 3. If no choice is indicated, this Proxy will be voted FOR Proposals 1, 2 and 3.
FOR ALL
(Except Nominee(s)
1. ELECTION OF DIRECTORS - FOR WITHHOLD written below) FOR AGAINST ABSTAIN
Nominees: Ward Smith, J.P. Bolduc
and Gerald Grinstein. / / / / / / 3. Proposal to adopt the Sundstrand / / / / / /
Corporation Nonemployee Director
Compensation Plan.
___________________________________
FOR AGAINST ABSTAIN
2. Proposal to adopt the Sundstrand / / / / / / 4. In their discretion, the proxies are authorized to vote
Corporation Nonemployee Director upon such other business as may properly come before
Stock Option Plan. the meeting or any adjournment thereof.
The undersigned hereby acknowledges receipt of
the 1995 Notice of Annual Meeting and Proxy
Statement.
Signature(s)
______________________________________________
______________________________________________
(Please sign your name exactly as imprinted
hereon. In case of multiple or joint ownership,
all should sign. Persons signing in a fiduciary
capacity should indicate their position.)
Dated: __________________ , 1995
</TABLE>
<PAGE> 46
[SUNDSTRAND CORPORATION LETTERHEAD]
To the Stockholders of
SUNDSTRAND CORPORATION:
On page 2 of the enclosed proxy statement dated March 7, 1995, and on
page 52 of the enclosed 1994 Annual Report, it is indicated that J. P. Bolduc,
a director of Sundstrand and a nominee for reelection to the Company's Board of
Directors, is the President and Chief Executive Officer of W. R. Grace & Co.
Mr. Bolduc has advised Sundstrand that he resigned from the aforementioned
positions with W. R. Grace & Co. effective as of March 3, 1995, and will retire
from employment with that company effective as of March 31, 1995. Mr. Bolduc
has indicated that, if elected to the Sundstrand Corporation Board of
Directors, he intends to complete his term of office as a director.
Very truly yours,
RICHARD M. SCHILLING
Secretary
