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
[X] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
STRATTEC SECURITY CORPORATION
(Name of Registrant as Specified in Its Charter)
Registrant
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
[STRATTEC LOGO]
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of STRATTEC SECURITY CORPORATION, a
Wisconsin corporation (the "Corporation"), will be held at the Manchester East
Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin 53217, on Tuesday,
October 8, 2002, at 2 p.m. local time, for the following purposes:
1. To elect two directors, each to serve for a three-year term.
2. To approve and adopt an amendment to the STRATTEC SECURITY CORPORATION
Stock Incentive Plan (the "Incentive Plan") to increase the aggregate number of
shares of the Corporation's common stock that may be issued or transferred upon
exercise, payment or vesting of stock options and other equity incentive awards
granted pursuant thereto by 400,000. Most of the awards granted pursuant to the
Incentive Plan are leveraged stock options, each of which have an exercise price
that is based on an assumed rate of stock price growth over the five-year life
of the option. Using this formula, options granted on August 20, 2002 (subject
to approval of additional options for the Incentive Plan) were granted at an
exercise price of $58.59, based upon an average market price of the stock on
that date of $44.93. These options are typically exercisable between the third
and fifth anniversary of grant.
3. To take action with respect to any other matters that may be properly
brought before the meeting and that might be considered by the shareholders of a
Wisconsin corporation at their Annual Meeting.
By order of the Board of Directors
Milwaukee, Wisconsin
August 28, 2002
PATRICK J. HANSEN,
Secretary
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON AUGUST 20, 2002 ARE
ENTITLED TO VOTE AT THE MEETING. YOUR VOTE IS IMPORTANT TO ENSURE THAT A
MAJORITY OF THE STOCK IS REPRESENTED. PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. IF YOU LATER FIND THAT YOU MAY BE PRESENT AT THE
MEETING OR FOR ANY OTHER REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS VOTED.
[STRATTEC LOGO]
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
PROXY STATEMENT FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 8, 2002
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of STRATTEC SECURITY CORPORATION of proxies, in the
accompanying form, to be used at the Annual Meeting of Shareholders of the
Corporation to be held on October 8, 2002 and any adjournments thereof. Only
shareholders of record at the close of business on August 20, 2002 will be
entitled to notice of and to vote at the meeting. The shares represented by each
valid proxy received in time will be voted at the meeting and, if a choice is
specified in the proxy, it will be voted in accordance with that specification.
If no instructions are specified in a signed proxy returned to the Corporation,
the shares represented thereby will be voted in FAVOR of the election of the
directors listed in the enclosed proxy and in FAVOR of the proposal to amend the
STRATTEC SECURITY CORPORATION Stock Incentive Plan (the "Incentive Plan") to
increase the aggregate number of shares of the Corporation's common stock, par
value $0.01 per share (the "Common Stock"), that may be issued pursuant thereto
by 400,000. Most of the awards granted pursuant to the Incentive Plan are
leveraged stock options, each of which have an exercise price that is greater
than the fair market value of the Corporation's Common Stock on the date of
grant of such options. Shareholders may revoke proxies at any time to the extent
they have not been exercised. The cost of solicitation of proxies will be borne
by the Corporation. Solicitation will be made primarily by use of the mails;
however, some solicitation may be made by employees of the Corporation, without
additional compensation therefor, by telephone, by facsimile or in person. On
the record date, the Corporation had outstanding 3,755,523 shares of Common
Stock entitled to one vote per share.
A majority of the votes entitled to be cast with respect to each matter
submitted to the shareholders, represented either in person or by proxy, shall
constitute a quorum with respect to such matter. The election of the directors
requires the affirmative vote of a plurality of the shares represented at the
meeting and the approval and adoption of the proposed amendment to the Incentive
Plan requires the affirmative vote of a majority of the shares represented at
the meeting. Abstentions and broker non-votes (i.e., shares held by brokers in
street name, voting on certain matters due to discretionary authority or
instructions from the beneficial owners but not voting on other matters due to
lack of authority to vote on such matters without instructions from the
beneficial owner) will count toward the quorum requirement and will not count
toward the determination of whether such directors are elected or the amendment
to the Incentive Plan is approved. The Inspector of Election appointed by the
Board of Directors will count the votes and ballots.
The Corporation's principal executive offices are located at 3333 West Good
Hope Road, Milwaukee, Wisconsin 53209. It is expected that this Proxy Statement
and the form of Proxy will be mailed to shareholders on or about August 28,
2002.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes,
with the term of office of each class ending in successive years. Two directors
are to be elected at the Annual Meeting, each to serve for a term of three years
expiring in 2005, and three directors will continue to serve for the terms
designated in the following schedule. As indicated below, each individual
nominated by the Board of Directors is an incumbent director. The Corporation
anticipates that the nominees listed in this Proxy Statement will be candidates
when the election is held. However, if for any reason the nominee is not a
candidate at that time, proxies will be voted for any substitute nominee
designated by the Corporation (except where a proxy withholds authority with
respect to the election of directors).
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
ELECTION OF MICHAEL J. KOSS AND JOHN G. CAHILL AS DIRECTORS OF THE COMPANY.
DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND DIRECTORSHIPS AGE SINCE
---------------------------------------------------------------- --- --------
NOMINEES FOR ELECTION AT THE ANNUAL MEETING (CLASS OF 2005):
MICHAEL J. KOSS............................................... 48 1995
President and Chief Executive Officer of Koss Corporation
(manufacturer and marketer of high fidelity stereophones for the
international consumer electronics market) since 1989. Director
of Koss Corporation.
JOHN G. CAHILL................................................ 45 1995
President and Chief Operating Officer of the Corporation since
February 1999. Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Corporation from 1994 to
February 1999.
INCUMBENT DIRECTORS (CLASS OF 2003):
HAROLD M. STRATTON II......................................... 54 1994
Chairman of the Board and Chief Executive Officer of the
Corporation since February 1999. President and Chief Executive
Officer of the Corporation from 1994 to February 1999. Director
of Smith Investment Company.
ROBERT FEITLER................................................ 71 1995
Chairman of the Executive Committee of the Board of Directors of
Weyco Group, Inc. (manufacturer, purchaser and distributor of
men's footwear) since April 1996. Director of Weyco Group, Inc.
and Trustee of ABN AMRO Funds.
INCUMBENT DIRECTOR (CLASS OF 2004):
FRANK J. KREJCI............................................... 52 1995
President of Wisconsin Furniture, LLC (a manufacturer of custom
furniture) since June 1996.
2
DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board's Audit Committee is comprised of Messrs. Koss (Chairman), Feitler and
Krejci. The Audit Committee makes recommendations to the Board of Directors
regarding the engagement of independent public accountants to audit the books
and accounts of the Corporation and reviews with such accountants the audited
financial statements and their reports thereon. The Audit Committee also
consults with the independent public accountants with respect to the annual
audit scope and plan of audit and with respect to the adequacy of the
Corporation's internal controls and accounting procedures. The Audit Committee
met three times during fiscal 2002.
The Board's Compensation Committee is comprised of Messrs. Feitler
(Chairman), Koss and Krejci. The Compensation Committee, in addition to such
other duties as may be specified by the Board of Directors, reviews the
compensation and benefits of executive officers and senior managers and makes
appropriate recommendations to the Board of Directors, administers the
Corporation's Economic Value Added Plan for Executive Officers and Senior
Managers, administers the Incentive Plan and prepares on an annual basis a
report on executive compensation. The Compensation Committee met one time during
fiscal 2002.
The Board of Directors held four meetings in fiscal 2002, and all of the
directors attended all of the meetings of the Board of Directors and the
committees thereof on which they served.
INFORMATION REGARDING CHANGE OF AUDITORS
On May 30, 2002, the Corporation dismissed Arthur Andersen LLP as its
independent public accountants and appointed Deloitte & Touche LLP as its new
independent accountants. The decision to dismiss Arthur Andersen LLP and to
retain Deloitte & Touche LLP was recommended by the Corporation's Audit
Committee and approved by its Board of Directors on May 7, 2002, subject to
Deloitte & Touche LLP completing its internal formal client acceptance
procedures. Formal client acceptance was received by the Corporation on May 30,
2002. Arthur Andersen LLP's reports on the Corporation's consolidated financial
statements for each of the fiscal years ended July 1, 2001 and July 2, 2000 did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Corporation's two most recent fiscal years and through May 30, 2002,
there were no disagreements between the Company and Arthur Andersen LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Arthur Andersen LLP's
satisfaction, would have caused them to make reference to the subject matter in
connection with their report on the Corporation's consolidated financial
statements for such years; and there were no reportable events, as listed in
Item 304(a)(1)(v) of SEC Regulation S-K.
During the Corporation's two most recent fiscal years and through May 30,
2002, the Corporation did not consult Deloitte & Touche LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Corporation's consolidated financial statements, or any other matters or
reportable events listed in Items 304(a)(2)(i) and (ii) of SEC Regulation S-K.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three members of the Corporation's
Board of Directors. Each member of the Audit Committee is independent as defined
in Rule 4200(a)(14) for the listing standards of
3
the Nasdaq Stock Market. The duties and responsibilities of the Audit Committee
are set forth in the Audit Committee Charter, which has been adopted by the
Board of Directors.
The Audit Committee has:
- reviewed and discussed the Corporation's audited financial statements for
the fiscal year ended June 30, 2002, with the Corporation's management
and with Deloitte & Touche LLP;
- discussed with Deloitte & Touche LLP the matters required to be discussed
by SAS 61 (Codification for Statements on Auditing Standards); and
- received and discussed the written disclosures and the letter from
Deloitte & Touche LLP required by Independence Standards Board Statement
No. 1 (Independence discussions with Audit Committees).
Based on such review and discussions with management and Deloitte & Touche
LLP, the Audit Committee recommended that the audited financial statements be
included in the Corporation's Annual Report on Form 10-K for the fiscal year
ended June 30, 2002, for filing with the Securities and Exchange Commission (the
"Commission").
AUDIT COMMITTEE:
Michael J. Koss -- Chairman
Robert Feitler
Frank J. Krejci
FEES OF INDEPENDENT AUDITORS
Audit Fees. Deloitte & Touche LLP billed the Corporation $65,000 in fees
for professional services rendered for the audit of the Corporation's financial
statements for the fiscal year ended June 30, 2002. Arthur Andersen LLP billed
the Corporation $10,000 in fees for professional services rendered for the
review of the interim financial statements in the Corporation's Quarterly
Reports on Form 10-Q during the fiscal year ended June 30, 2002.
Statutory and Regulatory Agency Audits. Deloitte & Touche LLP billed the
Corporation $37,000 in fees for professional services rendered for statutory and
regulatory agency audits during the fiscal year ended June 30, 2002.
Financial Information Systems Design and Implementation Fees. Neither
Deloitte & Touche LLP nor Arthur Andersen LLP rendered any professional services
to the Corporation for information technology services or advice during the
fiscal year ended June 30, 2002.
All Other Fees. Deloitte & Touche LLP and Arthur Andersen LLP billed the
Corporation $19,000 and $78,000, respectively, in fees for all other
professional services, which consisted primarily of tax-related services,
rendered to the Corporation during the fiscal year ended June 30, 2002.
The Audit Committee of the Board of Directors of the Corporation considered
that the provision of the services and the payment of the fees described above
are compatible with maintaining the independence of Deloitte & Touche LLP, and
previously, of Arthur Andersen LLP.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Corporation receives an annual retainer
fee of $8,000, a fee of $750 for each Board meeting attended and a fee of $500
for each committee meeting attended. Effective June 30, 1997,
4
the Corporation implemented an Economic Value Added Plan for Non-Employee
Members of the Board of Directors (the "Director EVA* Plan"). The purpose of the
Director EVA Plan is to maximize long-term shareholder value by providing
incentive compensation to nonemployee directors in a form which relates the
financial reward to an increase in the value of the Corporation to its
shareholders and to enhance the Corporation's ability to attract and retain
outstanding individuals to serve as nonemployee directors of the Corporation.
The Director EVA Plan provides for the payment of a potential cash bonus to each
nonemployee director equal to the product of (a) 40% of the director's retainer
and meeting fees for the fiscal year, multiplied by (b) a Company Performance
Factor. In general, the Company Performance Factor is determined by reference to
the financial performance of the Corporation relative to a targeted cash-based
return on capital, which is intended to approximate the Corporation's weighted
cost of capital (which was 12% for fiscal 2002). For fiscal 2002, Messrs.
Feitler, Koss and Krejci each received a bonus of $7,124 pursuant to the
Director EVA Plan.
-------------------------
* EVA is a registered trademark of Stern, Stewart & Co.
5
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of July 31, 2002 by (i) each director and
named executive officer (as defined below), (ii) all directors and executive
officers as a group, and (iii) each person or other entity known by the
Corporation to beneficially own more than 5% of the outstanding Common Stock.
NATURE OF BENEFICIAL OWNERSHIP
--------------------------------------------------------------
TOTAL NUMBER SOLE SOLE SHARED SHARED SOLE
OF SHARES VOTING AND VOTING OR VOTING AND VOTING OR VOTING
BENEFICIALLY PERCENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT POWER
NAME OF BENEFICIAL OWNER OWNED(1) OF CLASS POWER POWER POWER POWER ONLY(2)
------------------------ ------------ -------- ---------- ---------- ---------- ---------- -------
FMR Corp.(3)........... 545,000 13.9 16,300 528,700 -- -- --
Krestrel Investment
Management(4)........ 211,300 5.4 197,300 14,000 -- -- --
PRIMECAP Management
Company(5)........... 402,700 10.3 182,700 220,000 -- -- --
The State of Wisconsin
Investment Board(6)... 413,600 10.6 413,600 -- -- -- --
T. Rowe Price
Associates, Inc.(7)... 579,700 14.8 83,900 495,800 -- -- --
Vanguard Horizon
Funds(8)............. 220,000 5.6 -- 220,000 -- -- --
Wellington Management
Company, LLP(9)...... 300,900 7.7 -- -- 180,300 120,600 --
John G. Cahill......... 18,110 * 486 -- -- -- 11
Robert Feitler......... 15,000 * 15,000 -- -- -- --
Michael J. Koss........ 1,000 * 1,000 -- -- -- --
Frank Krejci........... 40 * 40 -- -- -- --
Harold M. Stratton II... 165,639 4.1 42,543(10) -- 10,100(11) 169(12) 22
Patrick J. Hansen...... 4,068 * -- -- -- -- --
Gerald L. Peebles...... 6,557 * -- -- -- -- 193
Donald J. Harrod....... 3,720 * -- -- -- -- --
All directors and
executive officers as
a group (9 persons)... 214,150 5.3 59,069 -- 10,100 169 242
-------------------------
* Less than 1%.
(1) Includes the rights of the following persons to acquire shares pursuant to
the exercise of currently vested stock options: Mr. Cahill -- 17,613
shares; Mr. Stratton -- 112,805 shares; Mr. Hansen -- 4,068 shares; Mr.
Harrod -- 3,720 shares; Mr. Peebles -- 6,364 shares; and all directors and
executive officers as a group -- 144,570 shares.
(2) All shares are held in the Employee Savings and Investment Plan Trust.
6
(3) FMR Corp. ("FMR"), 82 Devonshire Street, Boston, Massachusetts 02109, filed
a Schedule 13G dated February 12, 1999, as amended by a Schedule 13G/A
dated February 14, 2000, a Schedule 13G/A dated March 10, 2000, a Schedule
13G/A dated February 14, 2001 and a Schedule 13G/A dated February 14, 2002,
reporting that as of February 14, 2002, it was the beneficial owner of
545,000 shares of Common Stock. The shares of Common Stock beneficially
owned by FMR include 16,300 shares as to which FMR has sole voting and
investment power and 528,700 shares to which FMR has sole investment power.
(4) Kestrel Investment Management Corporation ("Kestrel"), 411 Borel Avenue,
Suite 403, San Mateo, CA, 94402, filed a Schedule 13G dated February 13,
2002, reporting that as of February 13, 2002, it was the beneficial owner
of 211,300 shares of Common Stock. The shares of Common Stock beneficially
owned by Kestrel include 197,300 shares as to which Kestrel has sole voting
and investment power and 14,000 shares as to which Kestrel has sole
investment power.
(5) PRIMECAP Management Company ("PRIMECAP"), 225 South Lake Avenue, Suite 400,
Pasadena, California 91101-3005, filed a Schedule 13G dated June 17, 1999,
as amended by a Schedule 13G/A dated April 7, 2000 and a Schedule 13G/A
dated March 9, 2001, reporting that as of March 9, 2001, it was the
beneficial owner of 402,700 shares of Common Stock. The shares of Common
Stock beneficially owned by PRIMECAP include 182,700 shares as to which
PRIMECAP has sole voting and investment power and 220,000 shares as to
which PRIMECAP has sole investment power.
(6) The State of Wisconsin Investment Board, P.O. Box 7842, 121 East Wilson
Street, Madison, Wisconsin 53707, filed a Schedule 13G dated February 6,
1996, as amended by a Schedule 13G/A dated January 21, 1997, a Schedule
13G/A dated January 20, 1998, a Schedule 13G/A dated February 2, 1999, a
Schedule 13G/A dated February 9, 2000, a Schedule 13G/A dated February 9,
2001, a Schedule 13G/A dated June 8, 2001, a Schedule 13G/A dated February
13, 2002, a Schedule 13/GA dated June 6, 2002, and a Schedule 13G/A dated
June 10, 2002, reporting that as of June 10, 2002, it was the beneficial
owner of 413,600 shares of Common Stock, with sole voting and investment
power as to all of such shares.
(7) T. Rowe Price Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street,
Baltimore, Maryland 21202, filed a Schedule 13G/A dated February 9, 2000,
as amended by a Schedule 13G/A dated April 7, 2000, a Schedule 13G/A dated
February 12, 2001 and a Schedule 13G/A dated February 14, 2002, reporting
that as of February 14, 2002, it was the beneficial owner of 579,700 shares
of Common Stock. The shares of Common Stock beneficially owned by T. Rowe
Price include 83,900 shares as to which T. Rowe Price has sole voting and
investment power and 495,800 shares as to which T. Rowe Price has sole
investment power.
(8) Vanguard Horizon Funds, 100 Vanguard Boulevard, Malvern, Pennsylvania
19355, filed a Schedule 13G dated February 13, 2002, reporting that as of
February 13, 2002, it was the beneficial owner of 220,000 shares of Common
Stock, with sole voting and shared investment power as to all of such
shares.
(9) Wellington Management Company, LLP ("Wellington"), 75 State Street, Boston,
Massachusetts 02109, filed a Schedule 13G dated February 13, 2001 and a
Schedule 13G/A dated February 12, 2002, reporting that as of February 12,
2002, it was the beneficial owner of 300,900 shares of Common Stock. The
shares of Common Stock beneficially owned by Wellington include 180,300
shares as to which Wellington has shared voting and investment power and
120,600 shares as to which Wellington has shared investment power.
7
(10) Includes 1,479 shares as to which Mr. Stratton is custodian on behalf of
his children.
(11) Consists of 10,100 shares held in trusts as to which Mr. Stratton is
co-trustee and beneficiary.
(12) Consists of 169 shares owned by Mr. Stratton's spouse.
The above beneficial ownership information is based on information
furnished by the specified persons and is determined in accordance with Rule
13d-3, as required for purposes of this Proxy Statement. It is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and persons who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Commission initial reports of beneficial
ownership and reports of changes in beneficial ownership of the Corporation's
equity securities. The rules promulgated by the Commission under section 16(a)
of the Exchange Act require those persons to furnish the Corporation with copies
of all reports filed with the Commission pursuant to section 16(a). Based solely
upon a review of such forms actually furnished to the Corporation, and written
representations of certain of the Corporation's directors and executive officers
that no forms were required to be filed, all directors, executive officers and
10% shareholders have filed with the Commission on a timely basis all reports
required to be filed under section 16(a) of the Exchange Act.
PERFORMANCE GRAPH
The chart below shows a comparison of the cumulative return since June 27,
1997 had $100 been invested at the close of business on June 27, 1997 in each of
the Common Stock, the Nasdaq Composite Index (all issuers), and the Dow Jones
U.S. Auto Parts Index.
CUMULATIVE TOTAL RETURN COMPARISON*
THE CORPORATION VERSUS PUBLISHED INDICES
(NASDAQ COMPOSITE INDEX AND THE DOW JONES U.S. AUTO PARTS INDEX)
[BAR GRAPH]
DOW JONES U.S. PARTS
THE CORPORATION** NASDAQ COMPOSITE INDEX INDEX***
----------------- ---------------------- --------------------
6/27/97 100 100 100
6/26/98 147 130 117
6/25/99 173 177 117
6/30/00 157 276 89
6/29/01 167 150 109
6/28/02 267 102 119
* Total return assumes reinvestment of dividends.
** The closing price of the Common Stock on June 27, 1997 was $20.75, the
closing price on June 26, 1998 was $30.47, the closing price on June 25,
1999 was $36.00, the closing price on June 30, 2000 was $32.50, the closing
price on June 29, 2001 was $34.72 and the closing price on June 28, 2002 was
$55.32.
*** During 2002, Dow Jones discontinued its U.S. Automobiles & Parts Index,
which the Corporation used in its performance graph in 2001. Therefore, for
the above performance graph, the Corporation utilized a new index, the Dow
Jones U.S. Auto Parts Index.
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee (the "Committee"), which is
comprised of three outside directors of the Corporation, is responsible for
considering and approving compensation arrangements for senior management of the
Corporation, including the Corporation's executive officers and the chief
executive officer. The objectives of the Committee in establishing compensation
arrangements for senior management are to: (i) attract and retain key executives
who are important to the continued success of the Corporation; and (ii) provide
strong financial incentives, at reasonable cost to the shareholders, for senior
management to enhance the value of the shareholders' investment.
The primary components of the Corporation's executive compensation program
are (i) base salary, (ii) incentive compensation bonuses and (iii) stock
options.
The Committee believes that:
- The Corporation's incentive plans provide strong incentives for
management to increase shareholder value;
- The Corporation's pay levels are appropriately targeted to attract and
retain key executives; and
- The Corporation's total compensation program is a cost-effective strategy
to increase shareholder value.
BASE SALARIES
Executive officers' base salaries are reviewed annually by the Committee,
based on level of responsibility and individual performance. It is the
Corporation's objective that base salary levels, in the aggregate, be at
competitive salary levels. In fixing competitive base salary levels, the
Committee used a survey of a broad group of domestic industrial organizations
from all segments of industry. From this survey, the Committee determined a
competitive salary level for fiscal 2002 for each executive officer position
near the average derived from the survey for positions with similar
responsibilities at companies with a similar level of sales, also taking into
account additional factors such as the executive officer's performance. Because
the survey was based on industry-wide studies, the companies in the survey do
not correspond to the companies that make up the Dow Jones U.S. Auto Parts
Index, which is used by the Corporation as the published industry index for
comparison in the Performance Graph on page 9.
INCENTIVE BONUSES
The Corporation maintains an Economic Value Added ("EVA") Plan for
Executive Officers and Senior Managers (the "EVA Plan"), the purpose of which is
to provide incentive compensation to certain key employees, including all
executive officers, in a form which relates the financial reward to an increase
in the value of the Corporation to its shareholders. In general, EVA is the net
operating profit after taxes, less a capital charge. The capital charge is
intended to represent the return expected by the providers of the Corporation's
capital. The Corporation believes that EVA improvement is the financial
performance measure most closely correlated with increases in shareholder value.
For fiscal 2002, the amount of bonus which a participant was entitled to
earn was derived from a Company Performance Factor and from an Individual
Performance Factor. The Company Performance Factor was determined by reference
to the financial performance of the Corporation relative to a targeted
cash-based return on capital established by the Committee, which is intended to
approximate the
10
Corporation's weighted cost of capital. The Individual Performance Factor was
determined by reference to the level of attainment of certain quantifiable and
non-quantifiable company or individual goals which contribute to increasing the
value of the Corporation to its shareholders. Individual Target Incentive Awards
under the EVA Plan range from 75% of base compensation for the Chairman of the
Board and Chief Executive Officer to 35% of base compensation for other officers
for fiscal 2002. Mr. Stratton's fiscal 2002 bonus equals 129.75% of his Target
Incentive Award, a portion of which was subject to banking as described below.
The EVA Plan provides the powerful incentive of an uncapped bonus
opportunity, but also uses a "Bonus Bank" to ensure that significant EVA
improvements are sustained before significant bonus awards are paid out. The
Bonus Bank feature applies to those participants determined by the Committee to
be "Executive Officers" under the EVA Plan. All of the named executive officers
have been designated Executive Officers for fiscal 2002. Each year, any accrued
bonus in excess of 125% of the target bonus award is added to the outstanding
Bonus Bank balance. The bonus paid is equal to the accrued bonus for the year,
up to a maximum of 125% of the target bonus, plus 33% of the Bonus Bank balance
at the end of the year. Thus, significant EVA improvements must be sustained for
several years to ensure full payout of the accrued bonus. A Bonus Bank account
is considered "at risk" in the sense that in any year the accrued bonus is
negative, the negative bonus amount is subtracted from the outstanding Bonus
Bank balance. In the event the outstanding Bonus Bank balance at the beginning
of the year is negative, the bonus paid is limited to the accrued bonus up to a
maximum of 75% of the target bonus. The executive is not expected to repay
negative balances. On termination of employment due to death, disability or
retirement or by the Corporation without cause, any positive available balance
in the Bonus Bank will be paid to the terminating executive or his designated
beneficiary or estate. Executive officers who voluntarily leave to accept
employment elsewhere or who are terminated for cause will forfeit any positive
available balance. The executive is not expected to repay negative balances upon
termination or retirement.
STOCK INCENTIVE PLAN
In 1994, the Corporation established the Incentive Plan. The Incentive Plan
authorizes the Committee to grant to officers and other key employees stock
incentive awards in the form of one or any combination of the following: stock
options, stock appreciation rights, deferred stock, restricted stock and stock
purchase rights. During fiscal 2002, the Committee granted options to purchase
Common Stock to the executives as shown in the Summary Compensation Table.
On August 20, 2002, after publication of financial results for fiscal 2002,
and conditioned upon the approval of the proposed amendment to the Incentive
Plan (as described in Proposal No. 2 herein) by the shareholders of the
Corporation, the Committee granted leveraged stock options (LSOs) to 17 key
employees, including options to purchase 24,760 shares to Mr. Stratton, options
to purchase 19,940 shares to Mr. Cahill, options to purchase 5,190 shares to Mr.
Hansen, options to purchase 5,320 shares to Mr. Harrod and options to purchase
5,840 shares to Mr. Peebles, based on the amount of incentive bonus under the
EVA Plan earned for fiscal 2002. The method of calculating the number of options
granted to each executive, and the method of determining their exercise price,
is set forth in the EVA Plan and Incentive Plan. These leveraged stock options
have an exercise price of $58.59 per share and provide a form of option grant
that simulates a stock purchase with 10:1 leverage. The number of leveraged
options granted to Mr. Stratton for fiscal 2002 was determined in the manner
described and was based on his incentive bonus for fiscal 2002.
The maximum aggregate number of LSOs to be granted each year is 80,000. If
the Total Bonus Payout under EVA produces more than 80,000 LSOs in any year,
LSOs granted for that year will be reduced pro-rata based on proportionate Total
Bonus Payouts under the EVA Plan. The amount of any such reduction shall be
11
carried forward to subsequent years and invested in LSOs to the extent the
annual limitation is not exceeded in such years.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation awarded to Mr. Stratton reflects the basic philosophy
generally discussed above that compensation be based on Corporation and
individual performance.
The Committee determined Mr. Stratton's base salary for fiscal 2002 based
on the compensation survey and annual review described above. With respect to
the EVA Plan and the Stock Incentive Plan, Mr. Stratton's awards for fiscal 2002
were determined in the same manner as for all other participants in these plans.
COMPENSATION COMMITTEE:
Robert Feitler -- Chairman
Michael J. Koss
Frank J. Krejci
12
EXECUTIVE COMPENSATION
CASH COMPENSATION
The table which follows sets forth certain information for the years
indicated below concerning the compensation paid by the Corporation to the
Corporation's Chief Executive Officer and the four other most highly compensated
executive officers in fiscal 2002 (collectively, the "named executive
officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL AWARDS PAYOUTS
COMPENSATION(1) --------------------- -------------
NAME AND FISCAL -------------------- SECURITIES UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#)(2) PAYOUTS($)(3) COMPENSATION($)
------------------ ------ --------- -------- --------------------- ------------- ---------------
Harold M. Stratton II..... 2002 286,588 268,676 24,760 44,904 5,686(4)
Chairman of the Board and 2001 277,008 53,809 13,620 62,250 5,769(4)
Chief Executive Officer 2000 260,016 243,765 23,095 93,375 6,128(4)
John G. Cahill............ 2002 262,508 213,283 19,940 39,268 5,543(5)
President and Chief 2001 250,008 79,628 20,150 48,450 5,520(5)
Operating Officer 2000 234,000 190,125 18,660 72,675 5,477(5)
Patrick J. Hansen......... 2002 134,750 58,953 5,190 6,833 4,846(6)
Vice President and 2001 128,500 17,315 4,380 9,129 5,363(6)
Chief Financial Officer, 2000 122,000 53,375 4,770 13,694 5,161(6)
Secretary and Treasurer
Gerald L. Peebles......... 2002 142,167 62,198 5,840 11,715 5,183(7)
Vice President and 2001 135,500 25,467 6,440 13,964 4,500(7)
General Manager 2000 128,500 56,219 5,195 20,946 5,106(7)
Mexican Operations
Donald J. Harrod.......... 2002 136,917 59,901 5,320 7,425 5,791(8)
Vice President- 2001 131,500 20,918 5,300 9,401 5,979(8)
Engineering 2000 124,500 54,469 4,930 14,101 5,850(8)
-------------------------
(1) Represents amounts earned and paid with respect to each fiscal year.
(2) For fiscal 2000, all amounts are leveraged stock options granted on August
29, 2000 based on executive performance for fiscal 2000. For fiscal 2001,
all amounts are leveraged stock options granted on August 21, 2001 based on
executive performance for fiscal 2001. For fiscal 2002, all amounts are
leveraged stock options granted on August 20, 2002 based on executive
performance for fiscal 2002.
(3) Reflects the portion of EVA Plan bonus bank balance paid with respect to
each fiscal year. See "Compensation Committee Report on Executive
Compensation."
(4) For fiscal 2000, includes $5,100 in matching contributions to the
Corporation's Savings and Investment Plan (the "Plan") for the executive
officer and includes $1,028 of taxable employer paid group term life
insurance. For fiscal 2001, includes $5,355 in matching contributions to the
Plan for the executive officer and includes $414 of taxable employer paid
group term life insurance. For fiscal 2002, includes $5,272 in
13
matching contributions to the Plan for the executive officer and includes
$414 of taxable employer paid group term life insurance.
(5) For fiscal 2000, includes $5,085 in matching contributions to the Plan for
the executive officer and includes $392 of taxable employer paid group term
life insurance. For fiscal 2001, includes $5,340 in matching contributions
to the Plan for the executive officer and includes $180 of taxable employer
paid group term life insurance. For fiscal 2002, includes $5,325 in matching
contributions to the Plan for the executive officer and includes $218 of
taxable employer paid group term life insurance.
(6) For fiscal 2000, includes $4,938 in matching contributions to the Plan for
the executive officer and includes $223 of taxable employer paid group term
life insurance. For fiscal 2001, includes $5,183 in matching contributions
to the Plan for the executive officer and includes $180 of taxable employer
paid group term life insurance. For fiscal 2002, includes $4,666 in matching
contributions to the Plan for the executive officer and includes $180 of
taxable employer paid group term life insurance.
(7) For fiscal 2000, includes $4,103 in matching contributions to the Plan for
the executive officer and includes $1,003 of taxable employer paid group
term life insurance. For fiscal 2001, includes $3,726 in matching
contributions to the Plan for the executive officer and includes $774 of
taxable employer paid group term life insurance. For fiscal 2002, includes
$4,237 in matching contributions to the Plan for the executive officer and
includes $947 of taxable employer paid group term life insurance.
(8) For fiscal 2000, includes $4,874 in matching contributions to the Plan for
the executive officer and includes $976 of taxable employer paid group term
life insurance. For fiscal 2001, includes $5,205 in matching contributions
to the Plan for the executive officer and includes $774 of taxable employer
paid group term life insurance. For fiscal 2002, includes $5,017 in matching
contributions to the Plan for the executive officer and includes $774 of
taxable employer paid group term life insurance.
As described in more detail in "Compensation Committee Report on Executive
Compensation" above, the EVA Plan requires that any accrued bonus in excess of
125% of the target bonus award be added to the outstanding Bonus Bank balance
for each executive officer and remain at risk. A negative bonus in any year is
subtracted from the outstanding Bonus Bank balance. At the end of each year, 33%
of the positive Bonus Bank balance is paid out. The amounts of the accrued bonus
for fiscal 2002 that has been added to the Bonus Bank balance for the named
executive officers are as follows:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NONSTOCK PRICE-BASED PLANS
AMOUNTS UNTIL MATURATION -------------------------------
NAME BANKED($) OR PAYOUT MINIMUM($) MAXIMUM($)
---- --------- ---------------- ------------- -------------
Harold M. Stratton II................... 89,807 2003-2005 0 89,807
John G. Cahill.......................... 78,535 2003-2005 0 78,535
Patrick J. Hansen....................... 13,666 2003-2005 0 13,666
Gerald L. Peebles....................... 23,429 2003-2005 0 23,429
Donald J. Harrod........................ 14,850 2003-2005 0 14,850
14
STOCK OPTIONS
The Incentive Plan approved by shareholders provides for the granting of
stock options with respect to Common Stock.
The following tables set forth further information relating to stock
options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION
SECURITIES OPTIONS/SARS FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM($)(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------- ------------ -------- --------------- ---- --------
Harold M. Stratton II.... 13,620 12.0 45.44 August 21, 2006 -- 146,644
John G. Cahill........... 20,150 17.7 45.44 August 21, 2006 -- 216,955
Patrick J. Hansen........ 4,380 3.8 45.44 August 21, 2006 -- 47,159
Gerald L. Peebles........ 6,440 5.7 45.44 August 21, 2006 -- 69,339
Donald J. Harrod......... 5,300 4.7 45.44 August 21, 2006 -- 57,065
-------------------------
(1) The foregoing options are exercisable beginning on the third anniversary of
the date of grant and terminate on the fifth anniversary of the date of
grant.
(2) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Commission, and therefore are
not intended to forecast possible future appreciation, if any, in the Common
Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES*
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES ACQUIRED VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
NAME ON EXERCISE(#) REALIZED($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------- ----------- --------------------------- ---------------------------
Harold M. Stratton
II.................. 52,049 1,311,921 112,805/62,265 4,214,499/660,969
John G. Cahill........ 68,200 1,110,571 --/56,423 --/595,519
Patrick J. Hansen..... 7,086 68,828 --/13,218 --/140,475
Gerald L. Peebles..... 13,641 130,290 --/17,999 --/187,915
Donald J. Harrod...... 20,000 152,400 --/13,950 --/148,209
-------------------------
* No SARs are outstanding. Options at fiscal year end exclude leveraged stock
options granted on August 20, 2002, based on executive performance for fiscal
2002.
15
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes share information, as of June 30, 2002, for
the Incentive Plan.
NUMBER OF COMMON NUMBER OF COMMON
SHARES TO BE ISSUED WEIGHTED-AVERAGE SHARES AVAILABLE FOR
UPON EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, EQUITY COMPENSATION
PLAN CATEGORY WARRANTS, AND RIGHTS WARRANTS, AND RIGHTS PLANS
------------- -------------------- -------------------- ---------------------
Equity compensation plans approved by
shareholders........................... 420,207 $34.85 69,413
Equity compensation plans not approved by
shareholders........................... -- -- --
------- ------ ------
Total.................................... 420,207 $34.85 69,413
RETIREMENT PLAN AND SUPPLEMENTAL PENSION PLAN
The Corporation maintains a defined benefit retirement plan (the
"Retirement Plan") covering all executive officers and substantially all other
employees in the United States. Under the Retirement Plan, nonbargaining unit
employees receive an annual pension payable on a monthly basis at retirement
equal to 1.6% of the employee's average of the highest 5 years of compensation
during the last 10 calendar years of service prior to retirement multiplied by
the number of years of credited service, with an offset of 50% of Social
Security (prorated if years of credited service are less than 30). Compensation
under the Retirement Plan includes the compensation as shown in the Summary
Compensation Table under the heading "Salary and Bonus," subject to a maximum
compensation amount set by law ($200,000 in 2002).
Executive officers participate in a program which supplements benefits
under the Retirement Plan. Under the Supplemental Executive Retirement Plan (the
"Supplemental Pension Plan"), executive officers are provided with additional
increments of (a) 0.50% of compensation (as limited under the Retirement Plan)
per year of credited service over the benefits payable under the Retirement Plan
to nonbargaining unit employees and (b) 2.1% of the compensation exceeding the
Retirement Plan dollar compensation limit per year of credited service.
A Rabbi trust has been created for deposit of the aggregate present value
of the benefits described above for executive officers.
The following table shows total estimated annual benefits payable from the
Retirement Plan and the unfunded Supplemental Pension Plan to executive officers
upon normal retirement at age 65 at specified compensation and years of service
classifications calculated on a single life basis and adjusted for the projected
Social Security offset:
ANNUAL PENSION PAYABLE FOR LIFE
AVERAGE ANNUAL COMPENSATION AFTER SPECIFIED YEARS OF CREDITED SERVICE
IN HIGHEST 5 OF LAST 10 ---------------------------------------------
CALENDAR YEARS OF SERVICE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
--------------------------- -------- -------- -------- ---------
$100,000.......................................... $ 17,700 $ 35,300 $ 53,000 $ 70,000*
150,000.......................................... 28,200 56,300 84,500 105,000*
200,000.......................................... 38,700 77,300 116,000 140,000*
250,000.......................................... 49,200 98,300 147,500 175,000*
300,000.......................................... 59,700 119,300 179,000 210,000*
16
ANNUAL PENSION PAYABLE FOR LIFE
AVERAGE ANNUAL COMPENSATION AFTER SPECIFIED YEARS OF CREDITED SERVICE
IN HIGHEST 5 OF LAST 10 ---------------------------------------------
CALENDAR YEARS OF SERVICE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
--------------------------- -------- -------- -------- ---------
350,000.......................................... 70,200 140,300 210,500 245,000*
400,000.......................................... 80,700 161,300 242,000 280,000*
450,000.......................................... 91,200 182,300 273,500 315,000*
500,000.......................................... 101,700 203,300 305,000 350,000*
550,000.......................................... 112,200 224,300 336,500 385,000*
600,000.......................................... 122,700 245,300 368,000 420,000*
-------------------------
* Figures reduced to reflect the maximum limitation under the plans of 70% of
compensation.
The above table does not reflect limitations imposed by the Internal
Revenue Code of 1986, as amended, on pensions paid under federal income tax
qualified plans. However, an executive officer covered by the Corporation's
unfunded program will receive the full pension to which he would be entitled in
the absence of such limitations.
EMPLOYMENT AGREEMENTS
Each named executive officer of the Corporation has signed an employment
agreement which extended through June 30, 1999, with a one-year automatic
extension upon each anniversary date, unless either party gives 30 days' notice
that the agreement will not be further extended. Under the agreement, the
officer agrees to perform the duties currently being performed in addition to
other duties that may be assigned from time to time. The Corporation agrees to
pay the officer a salary of not less than that of the previous year and to
provide fringe benefits that are provided to all other salaried employees of the
Corporation in comparable positions.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Each executive officer of the Corporation has signed a change in control
employment agreement which guarantees the employee continued employment
following a "change in control" on a basis equivalent to the employee's
employment immediately prior to such change in terms of position, duties,
compensation and benefits, as well as specified payments upon termination
following a change in control. The Corporation currently has such agreements
with the five named executive officers. Such agreements become effective only
upon a defined change in control of the Corporation, or if the employee's
employment is terminated upon, or in anticipation of such a change in control,
and automatically supersede any existing employment agreement. Under the
agreements, if during the employment term (three years from the change in
control) the employee is terminated other than for "cause" or if the employee
voluntarily terminates his employment for good reason or during a 30-day window
period one year after a change in control, the employee is entitled to specified
severance benefits, including a lump sum payment of three times the sum of the
employee's annual salary and bonus and a "gross-up" payment which will, in
general, effectively reimburse the employee for any amounts paid under federal
excise taxes.
17
PROPOSAL NO. 2:
APPROVAL OF AMENDMENT TO INCENTIVE PLAN
PURPOSE AND EFFECT OF PROPOSED AMENDMENT
Proposed Amendment. Subject to shareholder approval, the Board of
Directors has amended the Incentive Plan to increase from 1,200,000 to 1,600,000
the aggregate number of shares of Common Stock that may be issued or transferred
thereunder upon the exercise or payment of stock options, stock appreciation
rights, deferred stock, restricted stock and stock purchase rights.
Purpose of Proposed Amendment. The Corporation recognizes the importance
of attracting and retaining key employees of merit and stimulating the active
interest of those individuals in the development and financial success of the
Corporation. The Board of Directors believes that the Incentive Plan is
critically important to the furtherance of these objectives. The Board of
Directors also believes that, through the Incentive Plan, the Corporation is
able to enhance the prospects for its business activities and objectives and
more closely align the interests of officers and other key employees with those
of shareholders by offering officers and other key employees the opportunity to
participate in the Corporation's future through proprietary interests in the
Corporation.
As of August 28, 2002, and absent shareholder approval of the proposed
amendment to increase the aggregate number of shares of Common Stock available
for issuance or transfer under the Incentive Plan, there would be only 61,413
shares of Common Stock remaining available for issuance upon exercise, payment
or vesting of all stock options granted thereunder and outstanding on such date,
excluding 80,000 LSOs granted to 17 officers and key employees on August 20,
2002, conditioned upon the approval of the proposed amendment to the Incentive
Plan by the shareholders of the Corporation. The absence of an adequate number
of shares of Common Stock available for issuance or transfer under the Incentive
Plan restricts both the ability and the flexibility of the Corporation to
effectively attract and retain and adequately compensate officers and other key
employees. The Board of Directors believes that it is both necessary and
desirable to increase from 1,200,000 to 1,600,000 the aggregate number of shares
of Common Stock available for issuance or transfer under the Incentive Plan in
order to continue to maintain the effectiveness of the Incentive Plan.
DESCRIPTION OF INCENTIVE PLAN
The following description of the Incentive Plan is qualified in its
entirety by reference to the Incentive Plan, as amended, which is attached as
Appendix A to this proxy statement.
General. The Incentive Plan authorizes the Compensation Committee (the
"Committee") to grant to officers and other key employees of the Company, its
subsidiaries and affiliates (excluding members of the Committee and any
non-employee directors) stock incentive awards. Approximately 17 employees are
participants in the Incentive Plan. The Committee administers the Incentive Plan
and has complete discretion, subject to the terms of the Incentive Plan, to
determine, among other things, which officers and key employees will receive
awards, the type, number and frequency of and the number of shares subject to
such awards, and, to the extent not otherwise expressly provided in the
Incentive Plan, the terms and conditions of the awards.
18
Awards.
1. Stock Options. Options granted under the Incentive Plan may be
incentive stock options ("ISOs"), as defined under and subject to Section 422 of
the Internal Revenue Code (the "Code"), or non-qualified stock options ("NSOs").
The options will be exercisable at such times and subject to such terms and
conditions as the Committee may determine. All options will expire no later than
ten years from the date of grant in the case of ISOs and ten years and one day
from the date of grant in the case of NSOs. Generally, options will expire upon
an optionee's termination of employment for cause, one year following the
termination of employment due to death, three years (or such shorter period as
the Committee may specify at grant) following termination due to retirement or
disability, or three months after the termination of employment for any other
reason; provided, however, that options will expire prior to said times if and
at such time that the original option exercise term otherwise expires.
Generally, options may be exercised only to the extent exercisable on the date
of termination, death, disability or retirement. To the extent options are ISOs,
they will retain such status, in general, only if exercised within three months
following termination of employment.
The option price for any option will not be less than 100% of the fair
market value of the Common Stock as of the date of grant and will be paid in
cash, or, in certain circumstances, shares of Common Stock (including restricted
and deferred stock), at the time of exercise. When using shares of Common Stock
in payment of the exercise price, an optionee may receive, in one transaction or
a series of essentially simultaneous transactions, without making any
out-of-pocket cash payment, shares equivalent in value to the excess of the fair
market value of the shares subject to exercised option rights over the exercise
price specified for such shares in the option.
Upon notice of exercise of a stock option, the Committee may, at its sole
discretion, elect to cash out all of any portion of such option by paying a per
share amount equal to the excess of the fair market value of the Common Stock on
the exercise date over the option exercise price. Such payment may be in cash or
Common Stock, which stock may, in certain circumstances, take the form of
deferred or restricted stock.
Stock options are not transferable except by will or the laws of descent
and distribution.
Shares of Common Stock available for distribution by the Committee under
the Incentive Plan may also be issued pursuant to the Leveraged Stock Option
("LSO") program. LSOs granted under the Incentive Plan may be either ISOs or
NSOs. The LSOs may be exercisable no earlier than three nor more than five years
from the date of grant. The exercise price of LSOs shall be the product of 90%
of fair market value on the date of grant, multiplied by the sum (taken to the
5th power) of (a) 1, plus (b) the Estimated Annual Growth Rate, but in no event
may the exercise price be less than fair market value on the date of grant. The
Estimated Annual Growth Rate is intended to represent annual percentage stock
appreciation at least in the amount of the Company's cost of capital (with due
consideration for dividends paid, risk and illiquidity) and equals the average
daily closing 30 year U.S. Treasury bond yield rate for the month of April
immediately preceding the relevant plan year, plus 2%.
2. Other Stock Awards. The Committee may also award stock appreciation
rights ("SARs"), restricted stock, deferred stock and stock purchase rights
under the plan. SARs may be granted in conjunction with all or part of any stock
option, will be exercisable only at such times as and to the extent the
underlying stock option is exercisable and upon exercise is paid in cash, Common
Stock or a combination thereof, at the discretion of the Committee, in a per
share amount equal to the excess of the fair market value of the Common Stock on
the exercise date over the related option exercise price. Restricted stock may
granted
19
contingent upon the attainment of specified performance goals or such other
factors as the Committee may determine and, during the period of restriction,
the holder of restricted Common Stock may not sell, transfer, pledge or assign
the restricted stock. A deferred stock award under the Incentive Plan is
essentially similar to an award of restricted stock, except that no Common Stock
is actually issued until the end of the deferral period. Accordingly, deferred
stock carries no voting rights, although it maintains dividend rights, until
such time as stock is actually issued. Stock purchase rights are generally
exercisable only for 30 days after grant and may be exercised to purchase Common
Stock at (a) fair market value, (b) 50% of fair market value, or (c) par value,
all values being determined as of the date of grant.
Change in Control Provisions. Upon the occurrence of a "change in control"
of the Company, as defined in the Incentive Plan, any outstanding SARs and stock
options which are not then exercisable will become fully exercisable and vested.
Likewise, the restrictions and deferral limitations applicable to restricted
stock, deferred stock and stock purchase rights will lapse and such shares and
awards will be free of all restrictions and deemed fully vested under the terms
of the original grant.
Upon a change in control, optionees may elect to surrender all or any part
of their stock options and receive a per share amount in cash equal to the
excess of the "change in control price" over the exercise price of the stock
option. The "change in control price" will be the highest price per share paid
in any transaction reported on the NASDAQ National Market System, or paid or
offered to be paid in any bona fide transaction relating to a potential or
actual change in control of the Company at any time during the 60-day period
immediately preceding the change in control as determined by the Committee.
If an optionee's employment is terminated at or following a change in
control (other than by death, disability or retirement), the exercise periods of
an optionee's stock options will be extended to the earlier of six months and
one day from the date of employment termination or the options' respective
expiration dates.
Miscellaneous. The Incentive Plan may be amended or discontinued by the
Board of Directors, provided that the Board may not, without the approval of the
Company's shareholders, (a) increase the number of shares reserved for
distribution or decrease the option price of a stock option below 100% of the
fair market value at grant or change the pricing terms applicable to stock
purchase rights, except as expressly provided in the Incentive Plan as described
below with respect to certain events such as a merger, stock split,
consolidation, recapitalization, stock dividend, reorganization or other capital
event, (b) change the class of employees eligible to receive awards under the
Incentive Plan, or (c) extend maximum exercise periods for awards. No amendment
or discontinuance may impair the rights of an optionee or recipient under an
outstanding stock option or other award without the recipient's consent.
In the event of any merger, stock split, consolidation, recapitalization,
stock dividend, reorganization or other change in corporate structure affecting
the Common Stock, the Board of Directors may, in its sole discretion, make
substitutions or adjustments in the aggregate number of shares reserved for
issuance under the Incentive Plan, in the number and option price of shares
subject to outstanding options (and related stock appreciation rights), in the
number and purchase price of shares subject to outstanding stock purchase
rights, and in the number of shares subject to other awards granted under the
Incentive Plan.
INCENTIVE PLAN BENEFITS
Set forth in the table below are the number of stock options granted in
fiscal 2002 and, conditioned upon the approval of the proposed amendment to the
Incentive Plan by the shareholders of the Corporation, the number of stock
options the Corporation granted in fiscal 2003 to each of the named executive
officers and
20
certain groups. Stock options were the only type of awards granted under the
Incentive Plan during 2002 and are the only type of awards the Corporation
currently contemplates awarding in 2003.
FISCAL 2002 FISCAL 2003
NAME AND POSITION OR GROUP NUMBER OF OPTIONS NUMBER OF OPTIONS
-------------------------- ----------------- -----------------
Harold M. Stratton II, Chairman of the Board and Chief
Executive Officer......................................... 13,620 24,760
John G. Cahill, President and Chief Operating Officer....... 20,150 19,940
Patrick J. Hansen, Vice President and Chief Financial
Officer, Secretary and Treasurer.......................... 4,380 5,190
Gerald L. Peebles, Vice President and General Manager
Mexican Operations........................................ 6,440 5,840
Donald J. Harrod, Vice President-Engineering................ 5,300 5,320
All executive officers, as a group.......................... 78,970 64,040
All directors who are not executive officers, as a group.... 0 0
All employees, as a group................................... 114,000 88,000
The types of awards and amounts thereof that may be granted under the
Incentive Plan to the above-named individuals and groups in the future are not
determinable at this time.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares of the Common Stock
present in person or by proxy at the Annual Meeting is required for approval of
the proposed amendment to the Incentive Plan.
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE INCENTIVE PLAN.
AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Deloitte & Touche LLP to be the Corporation's auditors for the 2002
fiscal year. The Audit Committee will not choose independent auditors for fiscal
2003 until after the Annual Meeting. It is expected that a representative of
Deloitte & Touche LLP will be present at the Annual Meeting and will have the
opportunity to make a statement if he desires to do so and will be available to
respond to appropriate questions. Arthur Andersen LLP was the Corporation's
auditors for the 2001 fiscal year and it is not expected that a representative
of Arthur Andersen LLP will be present at the Annual Meeting.
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K
The Corporation is required to file an annual report, called a Form 10-K,
with the Commission. A copy of Form 10-K for the fiscal year ended June 30, 2002
will be made available, without charge, to any person entitled to vote at the
Annual Meeting. Written request should be directed to Patrick J. Hansen, Office
of the
21
Corporate Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road,
Milwaukee, Wisconsin 53209.
SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 2003 Annual Meeting
of Shareholders pursuant to Rule 14a-8 under the Exchange Act must be received
at the Corporation's principal offices in Milwaukee, Wisconsin no later than
April 30, 2003 for inclusion in the proxy material for that meeting. Proposals
submitted other than pursuant to Rule 14a-8 will be considered untimely if
received after May 30, 2003 and the Corporation will not be required to present
any such proposal at the 2003 Annual Meeting of Shareholders. If the Board of
Directors decides to present a proposal despite its untimeliness, the people
named in the proxies solicited by the Board of Directors for the 2003 Annual
Meeting of Shareholders will have the right to exercise discretionary voting
power with respect to such proposal.
OTHER MATTERS
The directors of the Corporation know of no other matters to be brought
before the meeting. If any other matters properly come before the meeting,
including any adjournment or adjournments thereof, it is intended that proxies
received in response to this solicitation will be voted on such matters in the
discretion of the person or persons named in the accompanying proxy form.
BY ORDER OF THE BOARD OF DIRECTORS
STRATTEC SECURITY CORPORATION
Patrick J. Hansen, Secretary
Milwaukee, Wisconsin
August 28, 2002
22
STRATTEC SECURITY CORPORATION
STOCK INCENTIVE PLAN
(AS AMENDED EFFECTIVE OCTOBER 8, 2002)
1. Purpose; Definitions. The purpose of the Plan is to enable key
employees of the Company, its subsidiaries and affiliates to participate in the
Company's future by offering them proprietary interests in the Company. The Plan
also provides a means through which the Company can attract and retain key
employees of merit.
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(c) "Commission" means the Securities and Exchange Commission or any
successor agency.
(d) "Committee" means the Committee referred to in Section 2.
(e) "Company" means STRATTEC SECURITY CORPORATION, a corporation
organized under the laws of the State of Wisconsin, or any successor
corporation.
(f) "Deferred Stock" means an award made pursuant to Section 8.
(g) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(h) "Early Retirement" means retirement, with the consent of and for
purposes of the Company, from active employment with the Company, a
subsidiary or affiliate pursuant to the early retirement provisions of the
applicable pension plan of such employer.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(j) "Fair Market Value" means, except as provided in Sections 5(k) and
6(b)(ii): (i) with respect to Non-Qualified Stock Options granted in
connection with the distribution of Stock made by Briggs & Stratton
Corporation to its shareholders, the average closing price of the Stock on
the NASDAQ National Market System during the five trading days after the
effective date of such distribution; and (ii) in all other instances, the
mean, as of any given date, between the highest and lowest reported sales
prices of the Stock on the NASDAQ National Market System or, if no such
sale of Stock occurs on the NASDAQ National Market System on such date, the
fair market value of the Stock as determined by the Committee in good
faith.
(k) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
(l) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)(i), as promulgated by the Commission under the Exchange Act, or
any successor definition adopted by the Commission.
(m) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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(n) "Normal Retirement" means retirement from active employment with
the Company, a subsidiary or affiliate at or after age 65.
(o) "Plan" means the STRATTEC SECURITY CORPORATION Stock Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
(p) "Restricted Stock" means an award under Section 7.
(q) "Retirement" means Normal Retirement or Early Retirement.
(r) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
(s) "Stock" means the Common Stock, $.01 par value per share, of the
Company.
(t) "Stock Appreciation Right" means a right granted under Section 6.
(u) "Stock Option" or "Option" means an Option or Leveraged Stock
Option granted under Section 5.
(v) "Stock Purchase Right" means a purchase right granted under
Section 9.
In addition, the terms "Change in Control" and "Change in Control Price"
have the meanings set forth in Sections 10(b) and (c), respectively, and other
capitalized terms used herein shall have the meanings ascribed to such terms in
the relevant section of this Plan.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board or such other committee of the Board, composed solely of
two or more Non-Employee Directors, who shall be appointed by the Board and who
shall serve at the pleasure of the Board. If at any time no Committee shall be
in office, the functions of the Committee specified in the Plan shall be
exercised by the Board.
The Committee shall have plenary authority to grant to eligible employees,
pursuant to the terms of the Plan, Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock and Stock Purchase Rights.
In particular, the Committee shall have the authority, subject to the terms
of the Plan:
(a) to select the officers and other key employees to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and
Stock Purchase Rights may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock and Stock Purchase Rights or any combination thereof are to
be granted hereunder,
(c) to determine the number of shares to be covered by each award
granted hereunder,
(d) to determine the terms and conditions of any award granted
hereunder (including, but not limited to, the share price, any restriction
or limitation and any vesting acceleration or forfeiture waiver regarding
any Stock Option or other award and the shares of Stock relating thereto,
based on such factors as the Committee shall determine);
(e) to adjust the performance goals and measurements applicable to
performance-based awards pursuant to the terms of the Plan;
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(f) to determine under what circumstances a Stock Option may be
settled in cash, Deferred Stock or Restricted Stock under Section 5(k);
(g) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an award shall be deferred; and
(h) to determine the terms and conditions of Stock Purchase Rights,
the Stock purchased by exercising such Rights and any loans to be made by
the Company with respect thereto.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee pursuant to the provisions of the
Plan with respect to any award shall be made in its sole discretion at the time
of the grant of the award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all persons, including
the Company and Plan participants.
3. Stock Subject to Plan. The total number of shares of Stock reserved and
available for distribution under the Plan shall be 1,600,000 shares. Such shares
may consist, in whole or in part, of authorized and unissued shares or treasury
shares.
Subject to Section 6(b)(iv), if any shares of Stock that have been optioned
cease to be subject to a Stock Option, if any shares of Stock that are subject
to any Restricted or Deferred Stock award or Stock Purchase Right are forfeited
or if any Stock Option or other award otherwise terminates without a payment
being made to the participant in the form of Stock, such shares shall again be
available for distribution in connection with awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Stock, such substitution or adjustments shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Stock Options, in the
number and purchase price of shares subject to outstanding Stock Purchase Rights
and in the number of shares subject to other outstanding awards granted under
the Plan as may be determined to be appropriate by the Board, in its sole
discretion; provided, however, that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
4. Eligibility. Officers and other key employees of the Company, its
subsidiaries and affiliates (but excluding members of the Committee and any
person who serves only as a director) who are responsible for or contribute to
the management, growth and profitability of the business of the Company, its
subsidiaries or affiliates are eligible to be granted awards under the Plan.
5. Stock Options. Stock Options may be granted alone or in addition to
other awards granted under the Plan and may be of two types: Incentive Stock
Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
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The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights).
Incentive Stock Options may be granted only to employees of the Company and
its subsidiaries (within the meaning of Section 425(f) of the Code). To the
extent that any Stock Option does not qualify as an Incentive Stock Option, it
shall constitute a separate Non-Qualified Stock Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is an agreement for Incentive Stock Options or NonQualified Stock
Options. The grant of a Stock Option shall occur on the date the Committee by
resolution selects an employee as a participant in any grant of Stock Options,
determines the number of Stock Options to be granted to such employee and
specifies the terms and provisions of the option agreement. The Company shall
notify a participant of any grant of Stock Options, and a written option
agreement or agreements shall be duly executed and delivered by the Company.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be equal to the Fair Market Value of the Stock
at time of grant or such higher price as shall be determined by the
Committee at grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the Option is granted, and no Non-Qualified Stock
Option shall be exercisable more than 10 years and one day after the date
the Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee. If the Committee provides that any Stock Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine.
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option period by giving written notice of exercise to the Company
specifying the number of shares to be purchased.
Such notice shall be accompanied by the payment in full of the
purchase price for such shares or, to the extent authorized by the
Committee, by irrevocable instructions to a broker to promptly pay to the
Company in full the purchase price for such shares. Such payment shall be
made in cash, outstanding shares of Stock, in combinations thereof, or any
other method of payment approved by the Committee; provided, however, that
the deposit of any withholding tax shall be made in accordance with
applicable law. If shares of Stock are being used in part or full payment
for the shares to be acquired upon exercise of the Stock Option, such
shares shall be valued for the purpose of such exchange as of the date of
exercise of the Stock Option at the Fair Market Value of the shares. Any
certificates evidencing shares of Stock used to pay the purchase price
shall be accompanied by stock powers duly endorsed in blank by the
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registered holder of the certificate (with signatures thereon guaranteed).
In the event the certificates tendered by the holder in such payment cover
more shares than are required for such payment, the certificate shall also
be accompanied by instructions from the holder to the Company's transfer
agent with regard to the disposition of the balance of the shares covered
thereby.
If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock or
Deferred Stock, such Restricted Stock or Deferred Stock (and any
replacement shares relating thereto) shall remain (or be) restricted or
deferred, as the case may be, in accordance with the original terms of the
Restricted Stock award or Deferred Stock award in question, and any
additional Stock received upon the exercise shall be subject to the same
forfeiture restrictions or deferral limitations, unless otherwise
determined by the Committee.
No shares of Stock shall be issued until full payment therefor has
been made. Subject to any forfeiture restrictions or deferral limitations
that may apply if a Stock Option is exercised using Restricted Stock or
Deferred Stock, an optionee shall have all of the rights of a stockholder
of the Company, including the right to vote the shares and the right to
receive dividends, with respect to shares subject to the Stock Option when
the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation described in
Section 13(a).
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee other than by will or by laws of descent and
distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee, it being understood that the terms "holder"
and "optionee" include the guardian and legal representative of the
optionee named in the option agreement and any person to whom an option is
transferred by will or the laws of descent and distribution.
(f) Termination by Death. Subject to Section 5(j), if an optionee's
employment terminates by reason of death, any Stock Option held by such
optionee may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Committee may determine, for a period of one
year (or such other period as the Committee may specify) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) Termination by Reason of Disability. Subject to Section 5(j), if
an optionee's employment terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that, if the optionee dies within such three-year period
(or such shorter period), any unexercised Stock Option held by such
optionee shall, notwithstanding the expiration of such three-year (or such
shorter) period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment
by reason of Disability, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
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(h) Termination by Reason of Retirement. Subject to Section 5(j), if
an optionee's employment terminates by reason of Retirement, any Stock
Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of such Retirement or on such
accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify at grant) from
the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter,
provided, however, that, if the optionee dies within such three-year (or
such shorter) period any unexercised Stock option held by such optionee
shall, notwithstanding the expiration of such three-year (or such shorter)
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment
by reason of Retirement, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment terminates for any reason other than death,
Disability or Retirement, the Stock Option shall thereupon terminate,
except that such Stock Option, to the extent then exercisable, may be
exercised for the lesser of three months or the balance of such Stock
Option's term if the optionee is involuntarily terminated by the Company, a
subsidiary or affiliate without cause. Notwithstanding the foregoing, if an
optionee's employment terminates at or after a Change in Control (as
defined in Section 10(b)), other than by reason of death, Disability or
Retirement, any Stock Option held by such optionee shall be exercisable for
the lesser of (x) six months and one day, and (y) the balance of such Stock
Option's term pursuant to Section 5(b).
(j) Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which Incentive Stock Options granted after 1986 are
exercisable for the first time by the optionee during any calendar year
under the Plan and any other stock option plan of any subsidiary or parent
corporation (within the meaning of Section 425 of the Code) after 1986
shall not exceed $100,000.
The Committee is authorized to provide at grant that, to the extent
permitted under Section 422 of the Code, if a participant's employment with
the Company and its subsidiaries is terminated by reason of death,
Disability or Retirement and the portion of any Incentive Stock Option that
is otherwise exercisable during the post-termination period specified under
Sections 5(f), (g), or (h), applied without regard to this Section 5(j), is
greater than the portion of such option that is exercisable as an
"incentive stock option" during such post-termination period under Section
422, such post-termination period shall automatically be extended (but not
beyond the original option term) to the extent necessary to permit the
optionee to exercise such Incentive Stock Option (either as an. Incentive
Stock Option or, if exercised after the expiration periods that apply for
the purposes of Section 422, as a Non-Qualified Stock Option).
(k) Cashing Out of Option; Settlement of Spread Value In Deferred or
Restricted Stock. On receipt of written notice of exercise, the Committee
may elect to cash out all or part of the portion of any Stock Option to be
exercised by paying the optionee an amount, in cash or Stock, equal to the
excess of the Fair Market Value of the Stock over the option price (the
"Spread Value") on the effective date of such cash out.
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Cash outs relating to options held by optionees who are actually or
potentially subject to Section 16(b) of the Exchange Act shall comply with
the provisions of Rule 16b-3, to the extent applicable, and, in the case of
cash outs of Non-Qualified Stock Options held by such optionees, the
Committee may determine Fair Market Value under the pricing rule set forth
in Section 6(b)(ii)(b).
In addition, if the option agreement so provides at grant or is
amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the Spread Value payable in the event
of a cash out of an unexercised Stock Option or the Spread Value portion of
an exercised Stock Option take the form of Deferred or Restricted Stock,
which shall be valued on the date of exercise on the basis of the Fair
Market Value of such Deferred or Restricted Stock, determined without
regard to the deferral limitations or forfeiture restrictions involved.
Notwithstanding any other provision of this Plan, upon a Change in Control
(as defined in Section 10(b)) other than a Change in Control specified in
clause (i) of Section 10(b) arising as a result of beneficial ownership (as
defined therein) by the Participant of Outstanding Company Common Stock or
Outstanding Company Voting Securities (as such terms are defined below), in
the case of Stock Options other than Stock Options held by an officer or
director of the Company (within the meaning of Section 16 of the Exchange
Act) which were granted less than six months prior to the Change in
Control, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the
time of grant, an optionee shall have the right, in lieu of the payment of
the exercise price of the shares of Stock being purchased under the Stock
Option and by giving notice to the Company, to elect (within the Exercise
Period) to surrender all or part of the Stock Option to the Company and to
receive cash, within 30 days of such notice, in an amount equal to the
amount by which the "Change in Control Price" (as defined in Section 10(c))
per share of Stock on the date of such election shall exceed the exercise
price per share of Stock under the Stock Option multiplied by the number of
shares of Stock granted under the Stock Option as to which the right
granted under this Section 5(k) shall have been exercised.
(l) Leveraged Stock Options. Any of the shares of Stock reserved and
available for distribution under the Plan may be used for grants of
"Leveraged Stock Options" pursuant to the Company's Leveraged Stock Option
Program described below (the "LSO Program").
(i) Objectives. The LSO Program is designed to build upon the
Company's Economic Value Added Incentive Compensation Plan ("EVA Plan")
by tying the interests of certain senior executives ("Senior
Executives") to the long term consolidated results of the Company. In
this way, the objectives of Senior Executives will be more closely
aligned with the Company's shareholders. Whereas the EVA Plan provides
for near and intermediate term rewards, the LSO Program provides a
longer term focus by allowing Senior Executives to participate in the
long-term appreciation in the equity value of the Company. In general,
the LSO Program is structured such that each year an amount equivalent
to the Total Bonus Payout under the EVA Plan is invested on behalf of
Senior Executives in options on the Company's Stock ("LSOs"). These LSOs
become exercisable after they have been held for three years, and they
expire at the end of five years. The LSO Program is also structured so
that a fair return must be provided to the Company's shareholders before
the options become valuable.
(ii) Leveraged Stock Option Grant. For fiscal 1995 and subsequent
years, the dollar amount to be invested in LSOs for each Senior
Executive shall be equal to the amount of each Senior Executive's Total
Bonus Payout determined under the EVA Plan effective for the applicable
fiscal year. The number of LSOs awarded shall be determined by dividing
(a) the dollar amount of such
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LSO award by (b) 10% of the Fair Market Value of Company stock on the
date of the grant, as determined by the Committee, rounded (up or down)
to the nearest 10 shares.
(iii) Term. All LSOs shall be exercisable beginning on the third
anniversary of the date of grant, and shall terminate on the fifth
anniversary of the date of grant unless sooner exercised, unless the
Committee determines other dates.
(iv) Exercise Price. The exercise price for LSOs shall be the
product of 90% of the Fair Market Value per share as determined above,
times the sum taken to the fifth (5th) power of (a) 1, plus (b) the
Estimated Annual Growth Rate, but in no event may the exercise price be
less than Fair Market Value on the date of grant. The Estimated Annual
Growth Rate (intended to represent annual percentage stock appreciation
at least in the amount of the Company's cost of capital, with due
consideration for dividends paid, risk and illiquidity) is the average
daily closing 30-year U.S. Treasury bond yield rate for the month of
April immediately preceding the relevant Plan year, plus 2%. So,
Exercise Price = (.9 X FMV) X (1 + Estimated Annual Growth Rate)(5)
Example: $15 share price; 9.75% Estimated Annual Growth Rate (7.75%
30-year U.S. Treasury bond rate, plus 2%): $13.50 (90% FMV) X
(1.0975)(5) = $21.50
(v) Limitations on LSO Grants and Carryover. Notwithstanding
subsection (l)(ii), the maximum number of LSOs that may be granted to
all Senior Executives for any Plan year during the five (5) year term of
this LSO Program, shall be 80,000. In the event that the 80,000
limitation shall be in effect for any Plan year, the dollar amount to be
invested for each Senior Executive shall be reduced by proration based
on the aggregate Total Bonus Payouts of all Senior Executives so that
the limitation is not exceeded. The amount of any such reduction shall
be carried forward to subsequent years and invested in LSOs to the
extent the annual limitation is not exceeded in such years.
(vi) The Plan. Except as modified herein, LSOs are Incentive Stock
Options to the extent they are eligible for treatment as such under
Section 422 of the Internal Revenue Code. If not eligible for Incentive
Stock Option treatment, the LSOs shall constitute Non-Qualified Stock
Options. Except as specifically modified herein, LSOs shall be governed
by the terms of the Plan.
6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise determined by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall not be reduced until the number of
shares covered by an exercise or termination of the related Stock Option exceeds
the number of shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by
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the Committee. Upon such exercise and surrender, the optionee shall be entitled
to receive an amount determined in the manner prescribed in Section 6(b). Stock
Options which have been so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this Section
6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one share of Stock
over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options
held by optionees who are actually or potentially subject to Section 16(b)
of the Exchange Act, the Committee may require that such Stock Appreciation
Rights be exercised only in accordance with the applicable provisions of
Rule 16b-3.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 on the number of shares of Stock to be issued under the Plan,
but only to the extent of the number of shares issued under the Stock
Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees to whom and the time or times at which
grants of Restricted Stock will be made, the number of shares to be awarded, the
time or times within which such awards may be subject to forfeiture and any
other terms and conditions of the awards, in addition to those contained in
Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
(b) Awards and Certificates. Each participant receiving a Restricted Stock
award shall be issued a certificate in respect of such shares of Restricted
Stock. Such certificate shall be registered in the name of such participant and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the STRATTEC SECURITY CORPORATION Stock
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Incentive Plan. Copies of such Plan and Agreement are on file at the
offices of STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road,
Glendale, Wisconsin 53209-2043."
The Committee may require that the certificates evidencing such shares
be held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in blank, relating
to the Stock covered by such award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and, conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during a period set by the
Committee, commencing with the date of such award (the "Restriction
Period"), the participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber shares of Restricted Stock. Within these
limits, the Committee may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions, in whole or in
part, based on service, performance and such other factors or criteria as
the Committee may determine.
(ii) Except as provided in this paragraph (ii), and Section 7(c)(i),
the participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company, including the right to
vote the shares and the right to receive any cash dividends. Unless
otherwise determined by the Committee, cash dividends shall be
automatically deferred and reinvested in additional Restricted Stock and
dividends payable in Stock shall be paid in the form of Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i) and (iv), upon termination
of a participant's employment for any reason during the Restriction Period,
all shares still subject to restriction shall be forfeited by the
participant.
(iv) In the event of hardship or other special circumstances of a
participant whose employment is involuntarily terminated (other than for
cause), the Committee may waive in whole or in part any or all remaining
restrictions with respect to such participant's shares of Restricted Stock.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
participant.
(vi) Each award shall be confirmed by, and be subject to the terms of,
a Restricted Stock Agreement.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees to whom and the time or times at which Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded to
any participant, the duration of the period (the "Deferral Period") during
which, and the conditions under which, receipt of the Stock will be deferred and
any other terms and conditions of the award, in addition to those contained in
Section 8(b). The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals or such other factors or criteria as
the Committee shall determine. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
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(b) Terms and Conditions. Deferred Stock awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Deferred Stock
Agreement referred to in Section 8(b)(vii), Deferred Stock awards may not
be sold, assigned, transferred, pledged or otherwise encumbered during the
Deferral Period. At the expiration of the Deferral Period (or Elective
Deferral Period as defined in Section 8(b)(vi), where applicable), share
certificates shall be delivered to the participant for the shares covered
by the Deferred Stock award.
(ii) Unless otherwise determined by the Committee, amounts equal to
any dividends declared during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award will be awarded,
automatically deferred and deemed to be reinvested in additional Deferred
Stock.
(iii) Except to the extent otherwise provided in the applicable
Deferred Stock Agreement and Sections 8(b)(iv) and (v), upon termination of
a participant's employment for any reason during the Deferral Period, the
rights to the shares still covered by the Deferred Stock award shall be
forfeited.
(iv) Based on service, performance and such other factors or criteria
as the Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Deferred Stock award and waive the deferral limitations
for all or any part of such award.
(v) In the event of hardship or other special circumstances of a
participant whose employment is involuntarily terminated (other than for
cause), the Committee may waive in whole or in part any or all remaining
deferral limitations with respect to any or all of such participant's
Deferred Stock.
(vi) A participant may elect to further defer receipt of the Deferred
Stock payable under an award (or an installment of an award) for a
specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions adopted
by the Committee, such election must generally be made at least 12 months
prior to completion of the Deferral Period for the award (or for such
installment of an award).
(vii) Each award shall be confirmed by, and be subject to the terms
of, a Deferred Stock Agreement.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant Stock Purchase
Rights which shall enable the recipients to purchase Stock:
(i) at its Fair Market Value on the date of grant;
(ii) at 50% of such Fair Market Value on such date; or
(iii) at an amount equal to the par value of such Stock on such date.
The Committee may impose such terms and conditions as it shall determine on
such Stock Purchase Rights or the exercise thereof and may also provide for
deferral limitations or forfeiture restrictions with respect to the Stock
purchased.
Each Stock Purchase Right award shall be confirmed by, and be subject to
the terms of, a Stock Purchase Rights Agreement. The terms of such awards need
not be the same with respect to each participant.
A-11
(b) Stock Exercisability. Stock Purchase Rights shall be exercisable for
such period after grant as is determined by the Committee, not to exceed 30
days.
(c) Loans. If the Committee so determines, the Company shall make or
arrange for a loan to an employee with respect to the exercise of Stock Purchase
Rights. The Committee shall have full authority to decide whether such a loan
should be made and to determine the amount, term and other provisions of any
such loan, including the interest rate to be charged, whether the loan is to be
with or without recourse against the borrower, the security, if any, therefor,
the terms on which the loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no loan hereunder shall have a term
(including extensions) exceeding 10 years in duration or be in an amount
exceeding 90% of the total purchase price paid by the borrower.
10. Change In Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control (as defined in Section 10(b)):
(i) Any Stock Appreciation Rights and Stock Options outstanding as of
the date such Change in Control is determined to have occurred and not then
exercisable and vested shall become fully exercisable and vested to the
full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock and Stock Purchase Rights shall lapse, and
such Restricted Stock, Deferred Stock and Stock Purchase Rights shall
become free of all restrictions and fully vested to the full extent of the
original grant.
(b) Definition of Change in Control. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of Stock of the
Company (the "outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a transaction described
in clauses (i), (ii) and (iii) of paragraph (3) of this subsection (b) of
this Section 10; or
(ii) Individuals who, as of February 27, 1995, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to February 27, 1995 whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
A-12
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) less than 20% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation), except to the extent that such Person owned 20% or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities prior to the sale or disposition and (C) at least a majority of
the members of the board of directors of such corporation were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such sale or other disposition
of assets of the Company or were elected, appointed or nominated by the
Board.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the highest price per share paid in any transaction reported on the
NASDAQ National Market System or paid or offered in any bona fide transaction
related to a potential or actual change in control of the Company at any time
during the preceding 60 day period as determined by the Committee, except that,
in the case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, such price shall be based only on transactions reported
for the date on which the Committee decides to cash out such options.
A-13
11. Amendments and Termination. The Board may amend, alter or discontinue
the Plan but no amendment, alteration or discontinuation shall be made which
would impair the rights of an optionee under a Stock Option or a recipient of a
Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award and Stock
Purchase Right theretofore granted without the optionee's or recipient's consent
or which, without the approval of the Company's stockholders, would:
(a) except as expressly provided in the Plan, increase the total
number of shares reserved for the purpose of the Plan;
(b) except as expressly provided in the Plan, decrease the option
price of (i) any Stock Option to less than the Fair Market Value on the
date of grant or (ii) change the minimum price terms of Section 9(a);
(c) change the class of employees eligible to participate in the Plan;
or
(d) extend the maximum option period under Section 5(b) or the maximum
exercise period under Section 9(b).
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent. The Committee may
also substitute new Stock Options for previously granted Stock Options,
including previously granted Stock Options having higher option prices.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments.
12. Unfunded Status of Plan. It is presently intended that the Plan
constitute an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
13. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option or a Stock Purchase Right to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to the distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed and any applicable federal or state securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Company, a subsidiary
or affiliate from adopting other or additional compensation arrangements for its
employees.
(c) The adoption of the Plan shall not confer upon any employee any right
to continued employment nor shall it interfere in any way with the right of the
Company, a subsidiary or affiliate to terminate the employment of any employee
at any time.
A-14
(d) No later than the dates as of which an amount first becomes includable
in the gross income of the participant for federal income tax purposes with
respect to any award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, withholding obligations may be settled with Stock, including Stock that
is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company, its subsidiaries and affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the participant.
(e) At the time of grant, the Committee may provide in connection with any
grant made under this Plan that the shares of Stock received as a result of such
grant shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Deferred or Restricted
Stock at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 for such reinvestment
(taking into account then outstanding Stock Options, Stock Purchase Rights and
other Plan awards).
(g) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid.
(h) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Wisconsin.
A-15
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WI 53209 PROXY
--------------------------------------------------------------------------------
STRATTEC SECURITY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harold M. Stratton II and John G. Cahill,
or either one of them, with full power of substitution and resubstitution, as
proxy or proxies of the undersigned to attend the Annual Meeting of Shareholders
of STRATTEC SECURITY CORPORATION to be held on October 8, 2002 at 2:00 p.m.,
local time, at the Manchester East Hotel, 7065 North Port Washington Road,
Milwaukee, Wisconsin 53217, and at any adjournment thereof, there to vote all
shares of Common Stock which the undersigned would be entitled to vote if
personally present as specified upon the following matters and in their
discretion upon such other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and accompanying Proxy Statement, ratifies all that said
proxies or their substitutes may lawfully do by virtue hereof, and revokes all
former proxies.
Please sign exactly as your name appears hereon, date and return this
Proxy. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY
TO ELECT THE NOMINATED DIRECTORS AND TO APPROVE AND ADOPT THE AMENDMENT TO THE
STRATTEC SECURITY CORPORATION STOCK INCENTIVE PLAN. IF OTHER MATTERS COME BEFORE
THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF
THE PROXIES APPOINTED.
See reverse for voting instructions.
PLEASE DETACH HERE
--------------------------------------------------------------------------------
STRATTEC SECURITY CORPORATION 2002 ANNUAL MEETING
1. ELECTION OF DIRECTOR: 01 JOHN G. CAHILL [ ] Vote FOR [ ] Vote WITHHELD
(term expiring at the 02 MICHAEL J. KOSS all nominees from all nominees
2005 Annual Meeting) (except as marked)
(Instructions: To withhold authority to vote for
any indicated nominee, write the number(s) of ---------------------------
the nominee(s) in the box provided to the right.)
2. Approval and adoption of proposed amendment to [ ] For [ ] Against [ ] Abstain
the STRATTEC SECURITY CORPORATION Stock
Incentive Plan.
3. In their discretion, the Proxies are authorized to vote such other matters as
may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR PROPOSALS 1 AND 2.
Address change? Mark box [ ] Date
Indicate changes below: ------------------------------
----------------------------------
Signature(s) in Box
If signing as attorney, executor,
administrator, trustee or guardian,
please add your full title as such.
If shares are held by two or more
persons, all holders must sign the
Proxy.