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STRATTEC SECURITY CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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October 1, 2002
Mr. Ed Corrao
Fidelity Investments
Legal Department - Proxy Group
82 Devonshire Street - F7C
Boston, MA 02109
Dear Mr. Corrao:
As we have discussed, STRATTEC's management will recommend to its Board of
Directors, and specifically its outside Board members, all of who make up the
Compensation Committee, that they amend the STRATTEC SECURITY CORPORATION Stock
Incentive Plan. The recommended amendments should address the issues I have
discussed with you.
For your information, I am attaching a copy of the memo from Mr. Stratton,
STRATTEC's Chairman of the Board and CEO, to the Compensation Committee,
detailing the recommended changes. If the currently proposed amendment to the
Plan is approved by shareholders at the October 8th Annual Meeting of
shareholders, the attached memo will be a topic for discussion and action at the
next regularly scheduled Board meeting (which follows immediately upon the
conclusion of the Annual Meeting on October 8th).
Thank you for your interest and advice relative to our Stock Incentive Plan. We
hope that the recommended changes detailed in the attached memo will allow you
to vote for the amendment described in the Proxy Statement.
Sincerely,
/s/ Patrick J. Hansen
Patrick J. Hansen
Vice President & CFO
30 September 02
TO: Compensation Committee
FROM: H. M. Stratton
SUBJECT: STRATTEC SECURITY CORPORATION
Stock Incentive Plan
The subject Plan currently in place traces its roots to the Stock Incentive Plan
that was in place at Briggs & Stratton Corp. at the time we spun-off from that
company. It is a broadly written Plan, allowing the Compensation Committee
considerable flexibility and latitude in the types of stock incentives it can
provide to senior level corporate employees.
As you are aware, we have focused our stock incentive awards on those described
in Section 5 Stock Options of the subject Plan. Other forms of stock incentives
currently available under the Plan, specifically Restricted Stock, Deferred
Stock, and Stock Purchase Rights, have not been used to date.
Due to investors' recent changes in attitude toward stock incentive plans,
specific concerns expressed to us by certain STRATTEC stockholders, and our
belief that Restricted Stock, Deferred Stock and Stock Purchase Rights are not
forms of stock incentives we would likely use in the future, we recommend the
provisions relative to these types of incentives be removed from the subject
Plan (Sections 7, 8, and 9).
Due also to stockholder concerns, we further recommend revisions to the current
Section 11 Amendments and Termination. Section 11 would be revised as follows
(new text in bold):
11. Amendments and Termination. The Board may amend, alter or discontinue
the Plan but no amendment, alteration or discontinuation shall be made (I)
which would impair the rights of an optionee under a Stock Option or a
recipient of a Stock Appreciation Right, Restricted Stock Award, Deferred
Stock Award and Stock Purchase Right theretofore granted, without the
optionee's or recipient's consent, or (II) which, without the approval of
the Company's stockholders would:
(a) except as expressly provided in the Plan, increase the total number of
shares reserved for the purpose of the Plan;
(b) except as expressly provided in the Plan, decrease the option price of
(i) any Stock Option to less than the Fair Market Value on the date
of grant or (ii) change the minimum price terms of Section 9(a);
(c) change the class of employees eligible to participate in the Plan; or
(d) extend the maximum option period under Section 5(b) or the maximum
exercise period under Section 9(b).;
(E) OTHERWISE MATERIALLY INCREASE THE BENEFITS TO PARTICIPANTS IN THE
PLAN; OR
(F) AMEND SECTION "XX" OR THIS SECTION 11.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holder's consent. The
Committee may also substitute new Stock Options for previously granted
Stock Options, including previously granted Stock Options having higher
option prices.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax accounting rules, as
well as other developments.
Finally, we recommend a new Section "XX" to follow the current Section 11 which
would address the practice of option repricing. We have not repriced granted
options, nor do we believe it would be appropriate to do so. The current Plan
does not address this issue. Since we fundamentally do not believe repricing is
appropriate, except in the case of a stock split or stock dividend, and the
practice of repricing is an issue expressed by certain stockholders, we
recommend the addition of the following:
XX. Repricing. Except for adjustments pursuant to Section 3, neither the
per share option price for any Stock Option granted pursuant to Section 5
or the per share grant price for any Stock Appreciation Right granted
pursuant to Section 6 may be decreased after the date of grant nor may an
outstanding Stock Option or an outstanding Stock Appreciation Right be
surrendered to the Company as consideration for the grant of new Stock
Option or new Stock Appreciation Right with a lower exercise or grant price
without the approval of the Company's stockholders.
Your consideration of these recommendations is greatly appreciated. A draft of
the Plan with the recommended amendments, and resulting changes due to the
elimination of references to removed sections, will be available for your review
at the next Board meeting.
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