1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Revised Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Textron Inc.
(Name of Registrant as Specified In Its Charter)
Textron Inc.
(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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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:
- --------------------------------------------------------------------------------
2
[Textron Logo]
------------------------
NOTICE OF ANNUAL MEETING
------------------------
To The Shareholders of Textron Inc.:
The 1998 annual meeting of shareholders of Textron Inc. will be held on
Wednesday, April 22, 1998, at 10:30 a.m. AT THE RHODE ISLAND CONVENTION CENTER,
ONE SABIN STREET, PROVIDENCE, RHODE ISLAND for the following purposes:
1. To elect four directors in Class II for a term of three years in
accordance with Textron's By-Laws (Item 1).
2. To ratify the appointment of Ernst & Young LLP as Textron's
independent auditors for 1998, which is RECOMMENDED by the Board of
Directors (Item 2).
3. To consider and act upon two shareholder proposals set forth in
the accompanying Proxy Statement, which are OPPOSED by the Board of
Directors (Items 3 and 4).
4. To transact such other business as may properly come before the
meeting.
You are entitled to vote all shares of Common and Preferred Stock
registered in your name at the close of business on February 27, 1998. If you
attend the meeting and desire to vote in person, your proxy will not be used. If
your shares are held in the name of your broker or bank and you wish to attend
the meeting in person, you should request your broker or bank to issue you a
proxy covering your shares.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS
SOON AS POSSIBLE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
A list of shareholders entitled to vote at the 1998 annual meeting will be
open to examination by any shareholder, for any purpose germane to the meeting,
for ten days prior to the meeting at Textron's corporate office, 40 Westminster
Street, Providence, Rhode Island 02903.
/s/ James F. Hardymon
James F. Hardymon
Chairman and
Chief Executive Officer
Providence, Rhode Island
March 11, 1998
3
TEXTRON INC.
PROXY STATEMENT
GENERAL
This Proxy Statement, which is being mailed on or about March 11, 1998, to
each person entitled to receive the accompanying Notice of Annual Meeting, is
furnished in connection with the solicitation by the Board of Directors of
Textron Inc. of proxies to be voted at the annual meeting of shareholders to be
held on April 22, 1998, and at any adjournments thereof. Textron's principal
executive office is located at 40 Westminster Street, Providence, Rhode Island
02903.
All shareholders of record at the close of business on February 27, 1998,
will be entitled to vote. As of February 27, 1998, Textron had outstanding
163,079,162 shares of Common Stock; 198,713 shares of $2.08 Cumulative
Convertible Preferred Stock, Series A; and 91,803 shares of $1.40 Convertible
Preferred Dividend Stock, Series B (preferred only as to dividends), each of
which is entitled to one vote with respect to each matter to be voted upon at
the meeting.
ELECTION OF DIRECTORS
The Board of Directors is composed of three classes of directors,
designated Class I, Class II and Class III. One class of directors is elected
each year to hold office for a three-year term and until successors of such
class are duly elected and qualified. It is the intention of the persons named
in the accompanying proxy, unless otherwise instructed, to vote to elect Paul E.
Gagne, James F. Hardymon, Dana G. Mead and Thomas B. Wheeler to Class II. Each
nominee presently serves as a director of Textron. Information is furnished
below with respect to each nominee for election and each director continuing in
office.
NOMINEES FOR DIRECTOR
CLASS II -- NOMINEES FOR TERMS EXPIRING IN 2001
(Photo of Paul E. Gagne)
PAUL E. GAGNE DIRECTOR SINCE 1995
Mr. Gagne, 51, was President and chief executive officer
of Avenor Inc., a forest products company. He joined Avenor in
1981, became President and chief operating officer in 1990 and
assumed the additional position of chief executive officer in
1991. Mr. Gagne served in that capacity until November 1997,
when he left the Company. He is a director of Inmet Mining
Corporation, Wajax Limited and Celanese Canada Limited. He is
a member of the board of the C.D. Howe Institute and the
Conference Board of Canada.
2
4
(Photo of James F. Hardymon)
JAMES F. HARDYMON DIRECTOR SINCE 1989
Mr. Hardymon, 63, is Chairman and chief executive officer
of Textron. He joined Textron in 1989 as President and chief
operating officer, became chief executive officer in 1992,
assumed the additional title of Chairman in 1993 and
relinquished the title of President to Lewis B. Campbell in
1994. Prior to joining Textron, Mr. Hardymon was President,
chief operating officer and a director of Emerson Electric
Co., a global manufacturer of electrical and electronic
products and systems. Mr. Hardymon is a director of Avco
Financial Services, Inc., Air Products and Chemicals, Inc.,
Fleet Financial Group, Inc. and Schneider SA. He is a trustee
of the University of Kentucky and a member of the board of the
National Association of Manufacturers.
- --------------------------------------------------------------------------------
(Photo of Dana G. Mead)
DANA G. MEAD DIRECTOR SINCE 1996
Mr. Mead, 62, is Chairman and chief executive officer of
Tenneco Inc., a global manufacturing company that owns and
manages businesses in two sectors: automotive parts and
packaging. He joined the company as President and chief
operating officer in 1992 and assumed his current position in
1994. Prior to joining Tenneco, Mr. Mead was Executive Vice
President and a director of International Paper Company, a
manufacturer of paper, pulp and wood products. Mr. Mead is
also a director of Pfizer Inc., the Zurich Insurance Group and
Unisource Worldwide, Inc. in addition to Newport News
Shipbuilding Inc., a former Tenneco subsidiary. Mr. Mead is
the past U.S. Business Chairman of the Transatlantic Business
Dialogue, Chairman of The Citizens Democracy Corps, a lifetime
trustee of the West Point Association of Graduates and a
member of the M.I.T. Corporation. He was the 1995-1996
Chairman of the National Association of Manufacturers and
chairs its Finance Committee. Mr. Mead is also a Presidential
Commissioner on White House Fellowships.
- --------------------------------------------------------------------------------
(Photo of Thomas B. Wheeler)
THOMAS B. WHEELER DIRECTOR SINCE 1993
Mr. Wheeler, 61, is Chairman and chief executive officer
of Massachusetts Mutual Life Insurance Company. He was a
member of the Massachusetts Mutual field sales force from 1962
to 1983, served as Executive Vice President of Massachusetts
Mutual's insurance and financial management line from 1983 to
1986, became President and chief operating officer in 1987 and
President and chief executive officer in 1988. He assumed his
current position in 1996. He is a director of The Bank of
Boston Corporation and Chairman of Oppenheimer Acquisition
Corp. and David L. Babson & Co. Inc. Mr. Wheeler is Chairman
of Jobs for Massachusetts and Springfield College and a
trustee of the Basketball Hall of Fame and the Springfield
Orchestra Association.
3
5
DIRECTORS CONTINUING IN OFFICE
CLASS III -- TERMS EXPIRE IN 1999
(Photo of H. Jesse Arnelle)
H. JESSE ARNELLE DIRECTOR SINCE 1993
Mr. Arnelle, 64, was a senior partner in the law firm of
Arnelle, Hastie, McGee, Willis & Greene, San Francisco, with
which he had been associated from 1985 through his retirement
in 1996. Following his retirement, he became Of Counsel to the
North Carolina law firm of Womble, Carlyle, Sandridge & Rice.
Mr. Arnelle is a director of FPL Group, Inc., Wells Fargo &
Company and Wells Fargo Bank, N.A., WMX Technologies, Inc.,
Eastman Chemical Corporation, Armstrong World Industries and
Union Pacific Resources, Inc. Mr. Arnelle is the immediate
past Chairman of the Board of Trustees of Pennsylvania State
University and a director of the National Football Foundation
and College Hall of Fame.
- --------------------------------------------------------------------------------
(Photo of Brian H. Rowe)
BRIAN H. ROWE DIRECTOR SINCE 1995
Mr. Rowe, 66, is the retired Chairman and now a consultant
of GE Aircraft Engines, General Electric Company, a
manufacturer of combustion turbine engines for aircraft,
marine and industrial applications, and Executive Vice
Chairman of American Regional Aircraft Industry, Inc. He
joined General Electric in 1957, became President and chief
executive officer of GEAE in 1979 and Chairman in 1993,
serving in that capacity until his retirement in 1994. Mr.
Rowe is a director of Atlas Air, Inc., B/E Aerospace, Canadian
Marconi, Fifth Third Bank, Stewart & Stevenson Services, Inc.
and Cincinnati Bell Inc.
- --------------------------------------------------------------------------------
(Photo of Sam F. Segnar)
SAM F. SEGNAR DIRECTOR SINCE 1982
Mr. Segnar, 70, is the retired Chairman and chief
executive officer of Enron Corporation and former Chairman of
the Board of Vista Chemical Co. and Collecting Bank, N.A.,
Houston, TX. Mr. Segnar is a director of Seagull Energy
Corporation, Gulf States Utilities Company and Mapco Inc. and
an advisory director of Pilko and Associates Inc. He is a
trustee of the John Cooper School, the Texas A&M Institute of
Bio-Science and Technology and the Texas A&M School of
Business Administration. He is a member of the National
Advisory Board of The First Commercial Bank Corporation,
Little Rock, AR.
- --------------------------------------------------------------------------------
(Photo of Jean Head Sisco)
JEAN HEAD SISCO DIRECTOR SINCE 1975
Mrs. Sisco, 72, is a partner in the international trade
consulting firm of Sisco Associates. She is a director of The
Neiman Marcus Group, Inc., Newmont Gold Company, Newmont
Mining Corporation, Chiquita Brands International, Inc.,
K-Tron International, Inc. and American Funds -- Series I. She
held various executive offices with the Washington, D.C.
department store chain of Woodward & Lothrop from 1950 to
1974. She served as a consultant on governmental and public
affairs to the American Retail Federation from 1974 to 1977.
She is Treasurer of Reading is Fundamental, past Chairman and
a director of the National Association of Corporate Directors
and Chairman of the Leadership Foundation of the International
Women's Forum.
4
6
(Photo of Martin D. Walker)
MARTIN D. WALKER DIRECTOR SINCE 1986
Mr. Walker, 65, is the retired Chairman of M. A. Hanna
Company, an international specialty chemicals company. He
joined the company in 1986 as Chairman and chief executive
officer, relinquished the title of chief executive officer in
January 1997 and retired in July of that year. He is currently
Principal of Morwal Investments, a private investment firm.
Mr. Walker is a director of Comerica, Inc., The Reynolds and
Reynolds Company, The Timken Company, The Goodyear Tire &
Rubber Co., M. A. Hanna Company, Lexmark International and
Meritor Automotive Inc.
- --------------------------------------------------------------------------------
CLASS I -- TERMS EXPIRE IN 2000
(Photo of Teresa Beck)
TERESA BECK DIRECTOR SINCE 1996
Ms. Beck, 43, is chief financial officer and a member of
the Executive Council of American Stores Company, one of the
nation's largest food and drug retailers. She joined American
Stores Company in 1982, was named Senior Vice President of
Finance and Assistant Secretary in 1989, became Executive Vice
President, Administration in 1992 and served as Executive Vice
President, Finance from 1994 until assuming her current
position in 1995. She is a member of the Board of Directors of
The Children's Center (Utah) and the Utah Partnership for
Educational and Economic Development, Inc.
- --------------------------------------------------------------------------------
(Photo of Lewis B. Campbell)
LEWIS B. CAMPBELL DIRECTOR SINCE 1994
Mr. Campbell, 51, is President and chief operating officer
of Textron. He joined Textron in 1992 as Executive Vice
President and chief operating officer and assumed his present
position in 1994. Prior to joining Textron he was a Vice
President of General Motors Corporation and General Manager of
its GMC Truck Division. Mr. Campbell is a director of Avco
Financial Services, Inc. and Citizens Financial Group, Inc.
- --------------------------------------------------------------------------------
(Photo of R. Stuart Dickson)
R. STUART DICKSON DIRECTOR SINCE 1984
Mr. Dickson, 68, was Chairman of the Board of Ruddick
Corporation, a diversified holding company with interests in
industrial sewing thread and regional supermarkets, from 1968
until 1994. Mr. Dickson currently serves as Chairman of the
Ruddick Executive Committee. Mr. Dickson is a director of
Ruddick Corporation, First Union Corporation, PCA
International, United Dominion Industries and Dimon
Incorporated. He is Chairman of the Charlotte-Mecklenburg
Hospital Authority and a trustee of Davidson College.
5
7
(Photo of John D. Macomber)
JOHN D. MACOMBER DIRECTOR SINCE 1993
Mr. Macomber, 70, is Principal of JDM Investment Group, a
private investment firm. He joined the firm as Principal in
1992. He served as Chairman and President of the Export-Import
Bank of the United States from 1989 to 1992. Mr. Macomber was
chief executive officer of Celanese Corporation, a diversified
chemical company, from 1977 to 1986 and also served as
Chairman from 1980 to 1986. He is a director of Bristol Myers
Squibb Co., The Brown Group, Inc., Lehman Brothers Holdings
Inc., Mettler-Toledo International Inc., Pilkington Ltd. and
Xerox Corporation. Mr. Macomber is Chairman of the Council for
Excellence in Government and a trustee of the Carnegie
Institute of Washington and The Folger Library. He is Vice
Chairman of The Atlantic Council of the United States and a
director of the National Campaign to Prevent Teen Pregnancy,
The French-American Foundation and the National Executive
Services Corps.
- --------------------------------------------------------------------------------
(Photo of John W. Snow)
JOHN W. SNOW DIRECTOR SINCE 1991
Mr. Snow, 58, is Chairman, President and chief executive
officer of CSX Corporation, an international transportation
company that offers a variety of rail, container-shipping,
trucking and barge services. He joined a predecessor company
of CSX Corporation in 1977 as Vice President-Government
Affairs, became President and a director of CSX Corporation in
1988, chief executive officer in 1989 and Chairman in 1991.
Mr. Snow is a director of USX Corporation and Circuit City
Stores, Inc. He is a member of the Business Roundtable, the
Executive Committee of the Business Council and the board of
trustees of The Johns Hopkins University.
THE BOARD OF DIRECTORS
Meetings and Organization
During 1997, the Board of Directors met eight times. The Executive
Committee of the Board did not meet during 1997. The Board has standing Audit,
Nominating and Board Affairs, Organization and Compensation, and Pension
committees.
Compensation of Directors
For their service on the Board, non-employee directors are paid an annual
retainer of $41,000 plus $1,200 for each meeting of the Board attended.
Non-employee directors who serve on the Executive Committee or one of the
standing committees receive $1,200 for each committee meeting attended; and the
chairman of each standing committee receives an additional $5,000 per year.
Textron maintains a deferred income plan for non-employee directors under
which they may defer all or part of their cash compensation until retirement
from the Board. Deferrals are made either into an interest bearing account or
into an account consisting of Textron stock units, which are equivalent in value
to Textron Common Stock. Directors must defer a minimum of $16,000 of their
annual retainer into the stock unit account. At the end of each calendar
quarter, Textron will contribute to the stock unit account an additional amount
equal to 25% of the amount deferred by the director into this account during the
quarter. One half of this additional amount will vest on December 31 of the year
in which payment was deferred and one half on the next December 31. Textron also
credits dividend equivalents to the stock unit account. In addition, once a
year, on April 30, Textron will contribute to the stock unit account an amount
equal to 20% of the then current
6
8
annual retainer to each director who is serving as a director on the date of
Textron's annual meeting of shareholders and has been a director for more than
three months.
Each non-employee director has received 1,000 restricted shares of Textron
Common Stock. Except in the case of the director's death or disability or a
change in control of Textron (as described below under the heading "Employment
Contracts and Change In Control Arrangements" on page 18 of this Proxy
Statement), the director may not sell or transfer the shares until he or she has
completed all of his or her successive terms as a director and at least five
years of Board service.
Employee directors do not receive fees or other compensation for their
service on the Board or its committees. Each member of the Board is reimbursed
for expenses incurred in connection with each Board or committee meeting
attended.
As part of Textron's overall support for charitable institutions and to
provide an additional source of funding for the Textron Charitable Trust (the
"Charitable Trust"), Textron established a program under which it will
contribute up to $1,000,000 to the Charitable Trust on behalf of each director
upon his or her death, and the Charitable Trust will donate 50% of that amount
in accordance with the director's recommendation among up to five charitable
organizations. Payment of the contributions will ultimately be recovered from
life insurance policies that Textron maintains on the directors for this
purpose. The directors will not receive any financial benefit from this program
since the insurance proceeds and charitable deductions accrue solely to Textron.
The overall program will not result in a material cost to Textron.
Audit Committee
The Audit Committee recommends to the Board the selection of independent
auditors to conduct the annual audit of Textron's financial statements; reviews
the scope and costs of the audit plans of the independent auditors and internal
auditors and the scope and costs of non-audit services provided by the
independent auditors; reviews with management and the independent auditors
Textron's annual financial statements; reviews Textron's compliance programs;
and reviews with management, the independent auditors and the internal auditors,
Textron's internal accounting controls. The Audit Committee is available to meet
privately and separately with the independent auditors and the internal auditors
without management being present. The following five non-employee directors
presently comprise the Audit Committee: Mrs. Sisco (Chairman), Ms. Beck, Mr.
Dickson, Mr. Gagne and Mr. Wheeler. During 1997, the Audit Committee met five
times. Various members of management are regularly invited to be present at
Audit Committee meetings. The Vice President-Audit and Business Ethics has
direct access to the Audit Committee and to Textron's chief executive officer.
Nominating and Board Affairs Committee
The Nominating and Board Affairs Committee reviews the qualifications of,
and recommends to the Board, individuals for nomination by the Board as
directors of Textron. Textron's By-Laws contain a provision which imposes
certain requirements upon nominations for directors other than those made by the
Board. In making its recommendations to the Board, the Nominating and Board
Affairs Committee will consider suggestions regarding possible candidates from a
variety of sources, including shareholders. Shareholders wishing to recommend
individuals as candidates for nomination by the Board should submit their
recommendations in writing by December 1 of the year preceding the annual
meeting of shareholders to the Nominating and Board Affairs Committee, c/o the
Secretary of Textron, along with a description of the proposed candidate's
qualifications and other pertinent biographical information, as well as a
written consent from the proposed candidate. In addition, the Nominating and
Board Affairs Committee conducts reviews and makes recommendations to the Board
on the organization of the Board, Board compensation, overall performance of the
Board and other matters of corporate governance. The following five non-employee
directors presently
7
9
comprise the Nominating and Board Affairs Committee: Mrs. Preiskel (Chairman),
Mr. Macomber, Mr. Mead, Mr. Rowe and Mr. Segnar. Mrs. Preiskel is retiring from
the Board in April 1998. During 1997, the Nominating and Board Affairs Committee
met four times.
Organization and Compensation Committee
The Organization and Compensation Committee recommends to the Board
compensation arrangements for senior executive officers and approves
compensation arrangements for other executive officers. In addition, the
Organization and Compensation Committee reviews the responsibilities and
performance of senior executive officers, plans for their succession and
approves changes in executive officers. The following six non-employee directors
presently comprise the Organization and Compensation Committee: Mr. Walker
(Chairman), Mr. Arnelle, Mr. Macomber, Mr. Mead, Mrs. Preiskel and Mr. Segnar.
During 1997, the Organization and Compensation Committee met five times.
Pension Committee
The Pension Committee is responsible for overseeing the operations of
Textron's tax-qualified retirement and employee benefit plans. The Pension
Committee recommends to the Board the selection of independent actuaries and
auditors for the major qualified plans and reviews the management of
investments, the accounting for and the valuation of plans, and any material
changes in their design and funding. The following five non-employee directors
presently comprise the Pension Committee: Mr. Wheeler (Chairman), Mr. Arnelle,
Ms. Beck, Mr. Rowe and Mr. Snow. During 1997, the Pension Committee met twice.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table lists all shareholders known by Textron to own
beneficially more than 5% of any class of Textron's voting stock as of December
31, 1997:
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------- ----------------- --------
Common Stock.................. State Street Bank and 25,717,909 shares(1) 15.8%
Trust Company
225 Franklin Street
Boston, Massachusetts 02101
Common Stock.................. The Capital Group Companies, Inc. 8,257,600 shares(2) 5%
333 South Hope Street
Los Angeles, California 90071
- ---------------
(1) State Street Bank and Trust Company has informed Textron that the
reported number includes 2,107,591 shares as to which it has sole investment
power and 23,610,318 shares (14.5% of the class) which it holds as Trustee under
the Textron Savings Plan and as to which it disclaims any beneficial interest.
Shares held by State Street Bank and Trust Company as Trustee under the Textron
Savings Plan will be voted at the annual meeting in accordance with instructions
from the participants in the Plan, or in the absence of instructions, by State
Street Bank and Trust Company as Trustee in accordance with the Plan.
(2) Pursuant to a statement filed by The Capital Group Companies, Inc. with
the Securities and Exchange Commission in accordance with Rule 13d-1 of the
Securities Exchange Act of 1934, The Capital Group Companies, Inc. has reported
that it has sole voting power over 3,621,500 shares and sole investment power
over 8,257,600 shares. The Capital Group Companies, Inc. disclaims any
beneficial interest in the shares.
8
10
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below in the column headed "Number of Shares of Common Stock" are
the number of shares of all classes of Textron stock beneficially owned by each
director of Textron, by each executive officer of Textron named in the Summary
Compensation Table on page 15 of this Proxy Statement and by all current
directors and executive officers as a group. Directors and executive officers as
a group beneficially owned 1.21% of the outstanding shares of Common Stock. No
director or executive officer beneficially owned in excess of 1% of the
outstanding shares of Common Stock. Ownership indicated is as of December 31,
1997.
The column headed "Number of Shares of Common Stock" includes shares held
for Textron executive officers by the bank trustee under the Textron Savings
Plan, shares obtainable upon the exercise of stock options exercisable within 60
days of December 31, 1997, and shares held jointly. Each director and executive
officer has sole voting and investment power over his or her shares, except in
those cases in which the voting or investment power is shared with the bank
trustee under the Textron Savings Plan or as otherwise noted. An objective of
Textron's director and executive compensation programs is to align the financial
interests of the directors and the executive officers with that of shareholders.
Accordingly, the value of a significant portion of the directors' and the
executive officers' total compensation is dependent upon the value they generate
on behalf of shareholders. The column headed "Total Common Stock-Based Holdings"
includes Common Stock beneficially owned and other Common Stock-based holdings
in the form of stock units, performance share units, restricted stock,
retirement stock incentive units and cash equivalent share awards (the value of
which will increase or decrease in relation to the increase or decrease in the
price of Common Stock).
NUMBER TOTAL
OF SHARES COMMON STOCK-
NAME OF COMMON STOCK(1)(2) BASED HOLDINGS
---- --------------------- --------------
H. Jesse Arnelle....................................... 2,101 7,051
Teresa Beck............................................ 2,100 3,350
Lewis B. Campbell...................................... 330,206 481,093
R. Stuart Dickson...................................... 41,209 49,398
Paul E. Gagne.......................................... 2,057 4,482
James F. Hardymon...................................... 351,189 1,948,929
Herbert L. Henkel...................................... 87,456 159,812
Wayne W. Juchatz....................................... 92,475 132,638
Stephen L. Key......................................... 91,846 179,624
John D. Macomber....................................... 11,194 17,413
Dana G. Mead........................................... 2,034 3,727
Barbara Scott Preiskel................................. 5,627 23,805
Brian H. Rowe.......................................... 2,067 5,012
Sam F. Segnar.......................................... 3,045 18,826
Jean Head Sisco........................................ 4,141 18,087
John W. Snow........................................... 4,000 15,991
Martin D. Walker....................................... 3,635 19,099
William F. Wayland..................................... 136,038 267,092
Thomas B. Wheeler...................................... 2,200 15,084
All current directors and executive officers as a group
(38 persons)......................................... 1,972,105(3) 4,353,138
- ---------------
(1) Includes the following shares as to which voting and investment powers
are shared: Mr. Dickson -- 34,000; Mr. Segnar -- 1,000; and Mr. Snow -- 2,000.
9
11
(2) Includes the following shares obtainable upon the exercise of stock
options exercisable within 60 days of December 31, 1997: Mr. Campbell --
317,050; Mr. Hardymon -- 314,650; Mr. Henkel -- 77,968; Mr. Juchatz -- 74,000;
Mr. Key -- 91,000; and Mr. Wayland -- 127,826.
(3) Includes 1,641,132 shares obtainable upon the exercise of stock options
exercisable within 60 days of December 31, 1997.
------------------------
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation:
EXECUTIVE COMPENSATION PHILOSOPHY
The objective of Textron's executive compensation program is to attract and
retain the most qualified executives to lead our diversified corporation and to
motivate them to produce strong financial performance for the benefit of our
shareholders. To meet this objective, the total compensation program is designed
to be competitive with the total compensation programs provided by other
corporations of comparable revenue size in industries with which we compete for
customers and executives, and to provide total compensation opportunities at or
above the 75th percentile of those corporations for achieving outstanding
performance. Total compensation opportunities for 1997 for the chief executive
officer and for the other executive officers in general were consistent with
this philosophy. In determining competitive compensation for each of the
components of executive compensation described below, Textron analyzes data from
several independent compensation surveys. The companies included in the
compensation surveys (the "surveyed companies") are not identical to those
included in the two peer groups compiled for the performance graph on page 20 of
this Proxy Statement, although many companies are included in both the surveyed
companies and the two peer groups. The number of surveyed companies is greater
than the number of companies included in the two peer groups.
EXECUTIVE COMPENSATION PROGRAM
Each year the Organization and Compensation Committee, which is comprised
entirely of non-employee directors, recommends to the Board of Directors
compensation arrangements for senior executive officers, including the officers
named in the Summary Compensation Table on page 15 of this Proxy Statement (the
"Named Officers") and approves compensation arrangements for other executive
officers. Such compensation arrangements include annual salary levels, salary
grade ranges, annual and long-term incentive plan design, participation and
grants thereunder, standards of performance for new grants, and payouts from
past grants. The full Board of Directors unanimously approved the
recommendations made by the Committee for 1997. Messrs. Hardymon and Campbell
did not, however, participate in the deliberations of the Committee or Board of
Directors regarding their own compensation.
Textron's executive compensation program is comprised of three principal
components: salary, annual incentive compensation and long-term incentive
compensation.
SALARY
Salary ranges for Textron's executive officers, which were increased by
2.7% for 1997, were set so that the midpoints of the ranges approximate the 50th
percentile for comparable positions at the surveyed companies. Individual
salaries were considered for adjustment periodically, based on position in
salary range, individual performance and potential, and/or change in duties or
level of responsibility.
10
12
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in Textron's Annual Incentive
Compensation Plan. In 1997, target annual incentive compensation opportunities
were established so that the combination of base salary and target annual
incentive awards (60% of salary for the chief executive officer and the chief
operating officer and either 50% or 45% of salary for the other Named Officers)
would approximate the 50th percentile of compensation for comparable positions
in the surveyed companies. Annual incentive payments are generally limited to
twice the target award level, but the Committee can make payments above these
levels if it deems performance warrants. The factors considered by the Committee
in recommending 1997 incentive compensation payments for executive officers
included the degree to which certain overall corporate and individual
performance objectives were achieved. In determining the level of 1997 annual
incentive compensation for the executive officers, the Committee evaluated
performance relative to three key corporate financial objectives: earnings per
share, free cash flow and return on equity. The 1997 results exceeded each of
these objectives. Individual awards were also based on the Committee's
assessment of each executive officer's performance against non-financial
objectives which reflect their specific responsibilities. The annual incentive
compensation earned by the Named Officers is reported in the "Bonus" column of
the Summary Compensation Table on page 15 of this Proxy Statement.
LONG-TERM INCENTIVE COMPENSATION
Under the Textron 1994 Long-Term Incentive Plan (the "1994 Plan"),
executive officers may be granted awards of stock options, performance share
units, or both. Ranges established by the Committee for stock option and
performance share unit grants enable the Committee to make grants that can
produce total compensation opportunities at or above the 75th percentile for
comparable positions at the surveyed companies as warranted by performance.
1997 Grants of Stock Options
Pursuant to the 1994 Plan, the Committee recommended to the Board of
Directors the number of stock options to be granted based on the executive
officer's functions and responsibilities, past and expected future performance,
potential contributions to Textron's profitability and growth and prior option
grants. Overall past corporate performance was not considered in determining the
number of stock options to be granted. In accordance with the 1994 Plan, stock
options granted in 1997 were at a purchase price equal to 100% of the fair
market value of Textron Common Stock at the time of the option grant and become
exercisable in two installments, the first half after one year and the other
half after two years from date of grant. The grants were made within the ranges
referred to above under the heading, "Long-Term Incentive Compensation."
Information on the stock options granted during fiscal year 1997 to the Named
Officers appears in the table on page 16 of this Proxy Statement.
1997 Payouts of Previously Granted Performance Share Units
The 1997 payouts to executive officers were for performance share units
granted for the three-year performance cycle ending January 3, 1998. The
Committee recommended to the Board of Directors payouts in a range of 96% to
100% of such performance share unit grants. The payouts were generally based 75%
on three-year aggregate earnings per share and 25% on the Committee's evaluation
of balance sheet strength/asset management, shareholder value (including annual
rate of dividends and market capitalization) and the executive officer's
performance. The 1997 payout for one executive officer was for performance share
units granted for a two-year performance cycle ending January 3, 1998, and the
1997 payout for one other executive officer, who joined Textron in 1997, was for
a special one-year performance cycle also ending January 3, 1998, which was made
in consideration of a lost bonus with a prior employer. Information on the 1997
payouts to the Named Officers of previously granted performance share units is
reported in the "LTIP Payouts" column of the Summary Compensation Table on page
15 of this Proxy Statement.
11
13
1997 Performance Share Unit Grants
For the three-year performance cycle starting at the beginning of 1998,
each performance share unit granted and earned under the 1994 Plan will be
valued for payment purposes at the market value of Textron Common Stock at the
end of the three-year performance period. The Committee recommended to the Board
of Directors the number of performance share units to be granted to executive
officers for the 1998-2000 performance cycle based on the functions and
responsibilities of the executive officer and the executive officer's potential
contributions to Textron's profitability and growth. The number of performance
share units granted in prior years as well as the stock price at the time of
grant were taken into consideration in making the new grants, but past corporate
performance was not specifically taken into consideration. Grants of 1998-2000
performance share units were made to executive officers within the ranges
previously referred to above under the heading, "Long-Term Incentive
Compensation." The number of 1998-2000 performance share units that will
actually be earned will generally be based 75% on earnings per share growth and
25% on the Committee's evaluation of balance sheet strength/asset management,
shareholder value (common stock price, market capitalization, dividends and
common stock price performance versus Textron's proxy peers) and the executive
officer's individual performance. During 1997, performance share units were also
granted to two newly hired executive officers for a special 1997-1998
performance cycle and the 1997-1999 performance cycle. Additionally, one of
these executive officers was granted in 1997 performance share units for a
special 1997 cycle which was made in consideration of a lost bonus with a prior
employer. Such grants were made as described above. Information on the 1997
grants of performance share units appears in the "Long-Term Incentive Plan
Awards in Last Fiscal Year" table on page 17 of this Proxy Statement.
STOCK OWNERSHIP
An objective of Textron's executive compensation program is to align the
financial interests of the executive officers with the best interests of
shareholders. The Committee also seeks to promote stock ownership and to base a
substantial component of the executive officers' total compensation on the value
they generate on behalf of Textron's shareholders.
In addition to the Long-Term Incentive Plan described above, the Deferred
Income Plan for Textron Key Executives (the "Deferred Income Plan") in which all
Named Officers participate, provides that annual incentive compensation earned
in excess of 100% of target must be deferred in stock units which are equivalent
in value to shares of Textron Common Stock if the executive has not maintained a
minimum stock ownership level. The following minimum levels have been
established: five times base salary for the chief executive officer and chief
operating officer, three times base salary for other Named Officers and two
times base salary for the other executive officers. Newly named executives have
five years to bring their holdings up to the minimum levels. The Deferred Income
Plan also provides participants the opportunity to defer up to 25% of base
salary and up to 100% of annual and long-term incentive compensation. Elective
deferrals may be invested in either an interest bearing account or in a stock
unit account. Textron contributes a 25% premium on amounts the executives elect
to defer in the stock unit account. At least 50% of elective deferrals must be
invested in stock units.
CEO COMPENSATION
As in the past, in determining the overall level of Mr. Hardymon's
compensation and each component thereof, the Committee took into consideration
information provided by independent, professional compensation consultants. As
reported in the Summary Compensation Table on page 15 of this Proxy Statement,
Mr. Hardymon's salary remained at $1,050,000 for 1997. In determining not to
increase his salary, the Committee took into account the fact that Mr.
Hardymon's base salary was at the 70th percentile of compensation paid to chief
executive officers at the surveyed companies.
12
14
The Committee recommended and the Board approved a 1997 annual incentive
award of $1,500,000 reflecting the Committee's assessment of Mr. Hardymon's
performance against his objectives. Specifically, the Committee determined that
Mr. Hardymon's performance against all of his objectives exceeded expectations,
including the objectives relative to three of the key financial measurements in
the Textron plan: earnings per share, free cash flow and return on equity. Mr.
Hardymon's non-financial objectives consisted of (1) maintaining shareholder
value at or above that of Textron's proxy peers, (2) heading the effort to
document the organization that will be needed during the next five years to
successfully accomplish Textron's long-term strategic plan, (3) putting emphasis
on the growth (international markets and acquisitions) portion of the long-term
strategic plan, (4) successfully completing the Paul Revere divestiture, (5)
supporting the development and implementation of programs that will continue to
accelerate the pace of diversity at the corporate office, (6) increasing
company-to-company benchmarking to better understand successful marketing and
operational practices that have worked for global organizations and that might
be applied to Textron, and (7) continuing to maintain the favorable public image
enjoyed by Textron with each of its constituencies. Mr. Hardymon's performance
was considered outstanding by the Committee and the Board. Based on competitive
compensation information which the Committee has reviewed, the Committee
believes that for 1997, Mr. Hardymon's annual compensation (salary plus annual
incentive compensation) was in the top quartile of the surveyed companies, which
is consistent with Textron's executive compensation philosophy considering
Textron's performance.
The Committee determined that all of the performance share units granted to
Mr. Hardymon for the 1995-1997 performance cycle were earned since aggregate
earnings per share (upon which 75% of the award was based) exceeded the targeted
level for that period and performance objectives in the following areas (upon
which 25% of the award was based) were achieved or exceeded: balance sheet
strength/asset management, succession planning and shareholder value, as
measured by common stock prices, book value per common share, annual dividend
rate and common stock price versus proxy peer group. The value of the 1995-1997
performance share units earned by Mr. Hardymon was $3,568,800 and was determined
by multiplying the number of earned performance share units by the market price
of Textron Common Stock for a ten day period following the end of the award
period in accordance with the terms of the 1994 Plan. The value of the units
earned was favorably impacted by the significant (over 140%) increase in the
market value of Textron Common Stock since the units were granted in December
1994.
Mr. Hardymon received an award of 35,000 performance share units for the
1998-2000 cycle. This award compares to 44,000 (on a post-split basis)
performance share units granted for the 1997-1999 cycle. The decrease in the
number of the performance share units granted for the 1998-2000 cycle reflects
the increased market value of Textron Common Stock. The award of 35,000
performance share units in combination with one-fifth of the value of Mr.
Hardymon's retirement stock incentive units, which are described below, placed
Mr. Hardymon's long-term incentive compensation at approximately the 60th
percentile of competitive practice. The Committee and the Board thought a grant
at the 60th percentile was appropriate considering Mr. Hardymon's annual
compensation was in the top quartile of the surveyed companies. Mr. Hardymon has
not been granted any stock options since 1993, and the Committee does not intend
to grant him any further stock options. Instead, the Committee granted Mr.
Hardymon 1,000,000 (on a post-split basis) retirement stock incentive units in
1994, designed to retain him and reward him commensurately with total
shareholder returns during the five year period ending in 1999. The retirement
stock incentive units, which are payable in cash upon retirement, or earlier in
certain cases, provide incentive compensation opportunities identical to stock
options, since payouts will equal the increase in market price of Textron Common
Stock on the date of payment over the market price on the date the units were
granted.
Mr. Hardymon also received compensation under various Textron benefit and
compensation plans (see footnotes (2), (4) and (5) to the Summary Compensation
Table on pages 15 and 16 of this Proxy Statement).
13
15
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code provides that no U.S. income
tax deduction is allowable to a publicly held corporation for compensation in
excess of $1 million paid to the chief executive officer or any other employee
whose compensation is required to be reported in the Summary Compensation Table,
if those individuals are employed by the corporation at year end.
"Performance-Based Compensation" is exempt from the $1 million limitation.
Performance-Based Compensation must be based upon meeting pre-established and
objective performance goals under a plan which has been approved by
shareholders. Performance goals are not objective if the Committee has any
discretion to pay amounts in excess of those earned in accordance with the
achievement of pre-established performance criteria or to pay such compensation
when the performance criteria are not met. Compensation deferred under the
Deferred Income Plan is not subject to the $1 million limitation.
Textron's policy has been to preserve Committee discretion in determining
awards earned under Textron's annual and long-term incentive plans. Textron
stock options granted under the 1994 Plan do qualify as Performance-Based
Compensation. To further reduce the amount of compensation that will not qualify
for a tax deduction, an amendment to the 1994 Plan to qualify as
Performance-Based Compensation awards earned for a major portion of performance
share units granted under the 1994 Plan was approved by the shareholders in
April 1997. Textron will continue to preserve Committee discretion under
Textron's Annual Incentive Compensation Plan and a portion of the 1994 Plan.
The Deferred Income Plan encourages individuals, including those whose
income might otherwise be subject to the $1 million limitation, to defer
incentive compensation amounts until the individual's employment with Textron
ends, at which time the deductibility of such compensation will not be subject
to Section 162(m). Consequently, with the opportunity to defer compensation and
the qualification last year of a substantial portion of performance share units
as Performance-Based Compensation, Textron believes that the $1 million
limitation of Section 162(m) of the Internal Revenue Code will not have a
material effect on Textron's income tax expense in the near term. The Committee
will continue to assess the effect of these tax rules on Textron.
This report is submitted by the Organization and Compensation Committee.
MARTIN D. WALKER, CHAIRMAN
H. JESSE ARNELLE
JOHN D. MACOMBER
DANA G. MEAD
BARBARA SCOTT PREISKEL
SAM F. SEGNAR
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation of (i) Textron's chief executive officer at the end of 1997, (ii)
the four most highly compensated executive officers of Textron other than the
chief executive officer, who were serving as executive officers at the end of
1997 and (iii) Mr. Wayland, a former executive officer who would have been
included in (ii) above but for the fact that he was not serving as an executive
officer of Textron at the end of 1997 (collectively, the "Named Officers"), for
Textron's 1995, 1996 and 1997 fiscal years. Compensation which was deferred by
the Named Officers under the Deferred Income Plan is included below as
compensation paid.
14
16
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- --------------------------------------------------
AWARDS PAYOUTS
------------------------------------ -------
RESTRICTED SECURITIES LTIP
NAME AND PRINCIPAL STOCK AWARDS UNDERLYING PAYOUTS ALL OTHER
POSITION(1) YEAR SALARY ($) BONUS ($) ($)(4) OPTIONS/SARS (#) ($) COMPENSATION ($)(5)
- --------------------- ---- ---------- --------- ------------ ---------------- ------- -------------------
J. F. Hardymon 1997 $1,050,000 $1,661,675(2) $ 161,675 -0- $3,568,800 $ 52,500
Chairman and 1996 1,050,000 1,613,019 113,019 -0- 1,856,800 348,555
Chief Executive 1995 925,000 1,472,000 122,000 -0- 1,449,000 325,393
Officer
L. B. Campbell 1997 700,000 700,000 -0- 43,000 1,784,400 35,000
President and 1996 600,000 600,000 -0- 64,000 1,114,080 169,320
Chief Operating 1995 530,000 550,000 1,848,438 80,000 514,395 159,016
Officer
S. L. Key 1997 430,000 384,048(2) 44,047 22,000 832,720 21,500
Executive Vice 1996 405,000 340,000 -0- 32,000 649,880 20,250
President and 1995 272,700 927,000(3) 1,138,750 75,000 -0- 4,010
Chief Financial
Officer
W.W. Juchatz 1997 355,000 286,779(2) 26,779 17,000 773,240 17,750
Executive Vice 1996 340,000 260,000 -0- 26,000 603,460 17,000
President and 1995 243,750 890,510(3) -0- 61,000 -0- 6,634
General Counsel
H.L. Henkel 1997 335,000 308,297(2) 38,296 17,500 499,632 16,750
President 1996 295,000 250,000 1,376,250 24,000 306,372 76,244
Textron 1995 249,000 180,000 -0- 26,000 144,900 61,353
Industrial Products
W. F. Wayland 1997 425,000 443,602(2) 98,601 -0- 631,000 21,250
Executive Vice 1996 425,000 357,500 12,500 32,000 631,312 110,647
President 1995 385,000 320,000 -0- 35,000 492,660 105,754
Administration and
Chief Human
Resources Officer
(1) Mr. Key joined Textron as Executive Vice President and Chief Financial
Officer in April 1995. Mr. Juchatz joined Textron as Executive Vice
President and General Counsel in April 1995. Pursuant to an agreement
entered into between Mr. Wayland and Textron, which has been approved by the
Board of Directors, Mr. Wayland's employment status was converted into that
of an employee-consultant effective July 1, 1997, through December 31, 1999.
(2) The amounts listed as paid to Messrs. Hardymon, Key, Juchatz, Henkel and
Wayland for 1997 include vested contributions made by Textron in the amounts
of $161,675, $44,048, $26,779, $38,297 and $98,602, respectively, as a
result of their elections to defer compensation into the stock unit fund of
the Deferred Income Plan.
(3) The amounts listed as paid to Messrs. Key and Juchatz for 1995 include
$557,000 and $550,510, respectively, to replace lost compensation awards
from their prior employers.
(4) Amounts listed for Messrs. Hardymon, Key, Juchatz, Henkel and Wayland for
1997 are not restricted stock but are unvested contributions made by Textron
under the Deferred Income Plan as a result of such officers' elections to
defer compensation into the stock unit fund of the Deferred Income Plan.
These contributions are credited in the form of stock units, which are not
actual shares of stock but are units paid in cash with a value that varies
with the price of Textron Common Stock. As of January 3, 1998, 3,404, 945,
575, 822 and 2,116 unvested stock units with a market value of $213,176,
$59,181, $36,009, $51,478 and $132,515 were credited to the accounts of
Messrs. Hardymon, Key, Juchatz, Henkel and Wayland, respectively. Upon Mr.
Hardymon's retirement from Textron on or after November 30, 1999, or if his
employment ends earlier because of disability or death, he or his estate
will be entitled to receive 100,000 (on a post-split basis) shares of
Textron Common Stock, the value of which on January 3, 1998, was $6,262,500.
The amount listed for 1995 for Mr. Campbell was the market value at the time
of grant of a retention award, pursuant to which Mr. Campbell will receive
the cash equivalent of 50,000 (on a post-split basis) shares of Textron
Common Stock, provided he remains in Textron's employment through January 1,
2001. As of January 3, 1998, the market value of the 50,000 shares was
$3,131,250.
(footnotes continued on following page)
15
17
(footnotes continued from preceding page)
The amount listed for 1995 for Mr. Key was the market value of a stock
award, pursuant to which Textron will pay Mr. Key the cash equivalent of
40,000 (on a post-split basis) shares of Textron Common Stock following his
retirement, provided he retires from Textron at or after age 65. As of
January 3, 1998, the market value of the 40,000 shares was $2,505,000. The
amount listed for 1996 for Mr. Henkel was the market value at the time of
grant of a retention award, pursuant to which Mr. Henkel will receive the
cash equivalent of 30,000 (on a post-split basis) shares of Textron Common
Stock, provided he remains in Textron's employment through January 1, 2002.
As of January 3, 1998, the market value of the 30,000 shares was
$1,878,750.
(5) Amounts listed as "All Other Compensation" for 1997 are Textron's
contributions under the Textron Savings Plan and the Savings Plan component
of the Supplemental Benefits Plan.
------------------------
STOCK OPTION GRANTS
The following table sets forth information on grants of stock options under
the 1994 Plan during Textron's 1997 fiscal year to the Named Officers. The
number of stock options granted to the Named Officers during Textron's 1997
fiscal year is also listed in the Summary Compensation Table on page 15 of this
Proxy Statement in the column entitled "Securities Underlying Options/SARs."
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF
------------------------------------------------------------ STOCK PRICE
NUMBER PERCENT OF APPRECIATION
OF TOTAL EXERCISE FOR OPTION/SARS
SECURITIES OPTIONS/SARS OR TERM($)(2)
UNDERLYING GRANTED TO BASE ------------------------
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION FIVE TEN
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SHARE) DATE PERCENT PERCENT
---- ------------- -------------- --------- ---------- ------- -------
J. F. Hardymon............... -0- --% $ -- -- $ -- $ --
L. B. Campbell............... 43,000 3.2% 62.96875 12/10/07 1,702,832 4,315,306
S. L. Key.................... 22,000 1.7% 62.96875 12/10/07 871,217 2,207,831
W. W. Juchatz................ 17,000 1.3% 62.96875 12/10/07 673,213 1,706,051
H. L. Henkel................. 17,500 1.3% 62.96875 12/10/07 693,013 1,756,229
W. F. Wayland................ -0- -- -- -- -- --
- ---------------
(1) Fifty percent of the options granted may be exercised not earlier than one
year from the date of grant and the balance of the options granted may be
exercised not earlier than two years from the date of grant. All options
were granted on December 11, 1997. All options were granted at a purchase
price per share of 100% of the fair market value of Textron Common Stock on
the date of grant. Outstanding options will be exercisable immediately and
in full in the event of a change in control of Textron as defined in the
1994 Plan.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the price of Textron Common Stock. At a 5% and 10% annual rate of
stock price appreciation, the stock price would be approximately $102.57 and
$163.32, respectively, at the end of the ten-year term of the options.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information, with respect to the Named
Officers, concerning: (i) the exercise during Textron's 1997 fiscal year of
stock options and (ii) unexercised options held as of the end of Textron's 1997
fiscal year, which were granted to the Named Officers during 1997 and in prior
fiscal years under either the 1994 Plan or a predecessor plan. All shares are
shown on a post-split basis.
16
18
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
J.F. Hardymon..................... -0- $ -0- 314,650 -0- $13,040,068 $ -0-
L.B. Campbell..................... 8,950 180,459 317,050 75,000 10,200,861 536,000
S.L. Key.......................... -0- -0- 91,000 38,000 2,532,219 268,000
W.W. Juchatz...................... -0- -0- 74,000 30,000 2,061,781 217,750
H.L. Henkel....................... 2,032 54,801 77,968 29,500 2,321,158 201,000
W.F. Wayland...................... 9,174 331,387 127,826 16,000 3,941,737 268,000
LONG-TERM INCENTIVE PLAN
The following table provides information concerning performance share unit
awards made during Textron's 1997 fiscal year to the Named Officers pursuant to
the 1994 Plan for the 1998-2000 performance cycle.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
PERFORMANCE OR
NUMBER OF OTHER PERIOD
PERFORMANCE UNTIL MATURATION ESTIMATED FUTURE PAYOUTS UNDER
NAME SHARE UNITS (#) OR PAYOUT NON-STOCK PRICE BASED PLANS
---- --------------- ---------------- ------------------------------
TARGET NUMBER OF
PERFORMANCE SHARE UNITS (#)
J.F. Hardymon......................... 35,000 3 years 35,000
L.B. Campbell......................... 16,000 3 years 16,000
S.L. Key.............................. 8,000 3 years 8,000
W.W. Juchatz.......................... 7,000 3 years 7,000
H.L. Henkel........................... 6,500 3 years 6,500
W.F. Wayland.......................... -0- -- --
The number of performance share units earned by the Named Officers at the
end of the three-year performance cycle will be determined by the Board of
Directors upon the recommendation of the Organization and Compensation Committee
and will be generally based 75% on earnings per share growth and 25% on
discretionary performance measures, including balance sheet strength/asset
management, shareholder value and the Named Officer's individual performance.
Attainment of a primary performance target will result in earning 100% of the
value of the performance share units related to that target. Awards may not
exceed 100% of the value of the performance share units. Failure to attain a
minimum performance target will result in the failure to earn any performance
units related to that performance target. Attainment between the primary and
minimum performance targets will result in earning a portion of the performance
share units related to those performance targets determined by a pre-established
mathematical formula. The Organization and Compensation Committee may determine
an award less than that determined by the formula but may not, however,
determine an award more than that derived by the formula.
Performance share units based on discretionary performance measures do not
qualify as Performance-Based Compensation under Section 162(m) of the Internal
Revenue Code. Performance share units related to one or more performance
measures shall be earned only as determined by the Organization and Compensation
Committee and may not exceed more than 100% of the value of such units. Payouts,
which are made in cash, will be determined by multiplying the number of
performance share units earned by the then current market value of Textron
Common Stock at the end of the performance period.
PENSION PLAN
The following table sets forth the estimated annual pension benefits
payable upon retirement under the Textron Pension Plan formula to persons in the
specified remuneration and years of service classifications.
17
19
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35
- --------------- -- -- -- -- -- --
$ 500,000 $ 73,716 $ 110,574 $ 147,432 $ 184,290 $ 221,148 $ 258,006
600,000 88,716 133,074 177,432 221,790 266,148 310,506
750,000 111,216 166,824 222,432 278,040 333,648 389,256
1,000,000 148,716 223,074 297,432 371,790 446,148 520,506
1,250,000 186,216 279,324 372,432 465,540 558,648 651,756
1,500,000 223,716 335,574 447,432 559,290 671,148 783,006
1,750,000 261,216 391,824 522,432 653,040 783,648 914,256
2,000,000 298,716 448,074 597,432 746,790 896,148 1,045,506
2,250,000 336,216 504,324 672,432 840,540 1,008,648 1,176,756
2,500,000 373,716 560,574 747,432 934,290 1,121,148 1,308,006
3,000,000 448,716 673,074 897,432 1,121,790 1,346,148 1,570,506
3,500,000 523,716 785,574 1,047,432 1,309,290 1,571,148 1,833,006
4,000,000 598,716 898,074 1,197,432 1,496,790 1,796,148 2,095,506
4,500,000 673,716 1,010,574 1,347,432 1,684,290 2,021,148 2,358,006
5,000,000 748,716 1,123,074 1,497,432 1,871,790 2,246,148 2,620,506
5,500,000 823,716 1,235,574 1,647,432 2,059,290 2,471,148 2,883,006
6,000,000 898,716 1,348,074 1,797,432 2,246,790 2,696,148 3,145,506
6,500,000 973,716 1,460,574 1,947,432 2,434,290 2,921,148 3,408,006
- ---------------
(1) Based on highest consecutive five-year average compensation
Benefits under the Textron Pension Plan formula are based upon the salaried
employee's highest consecutive five-year average compensation. Compensation for
such purposes means compensation listed in the "Salary" and "LTIP Payouts"
columns, and annual incentive compensation included in the "Bonus" column, of
the Summary Compensation Table on page 15 of this Proxy Statement. As of January
3, 1998, the years of credited service for the Named Officers were as follows:
Mr. Hardymon, 8 years; Mr. Campbell, 5 years; Mr. Key, 3 years; Mr. Juchatz, 3
years; Mr. Henkel, 10 years; and Mr. Wayland, 13 years.
Annual pension amounts shown in the table above are computed on the basis
of a single life annuity, unless the participant receives another method of
payment, and not subject to any offset for Social Security benefits. The Textron
Pension Plan is integrated with Social Security, however, and the amounts in the
table reflect that integration. Annual pension amounts shown in the table are
subject to annual pension limitations imposed by the Internal Revenue Code. To
compensate certain Textron executives, including the Named Officers, for the
effect of these limitations, Textron maintains a Supplemental Benefits Plan.
Certain Textron executives, including the Named Officers other than Mr. Henkel,
also participate in the Textron Executive Supplemental Retirement Plan, which
provides benefits to participants who remain in the employ of Textron until age
65. Under this plan, the Named Officers are entitled to receive an annual
supplemental pension benefit equal to 50% of their highest consecutive five-year
average compensation reduced by any amounts to which they are entitled under the
plans of Textron and any prior employer.
Under an agreement with Textron, Mr. Juchatz will be credited with an
additional 12 years of credited service upon completing 5 years of employment
with Textron. Under an agreement with Textron, Mr. Wayland will receive full
benefits under the Textron Executive Supplemental Retirement Plan.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Hardymon has an employment contract with Textron through December 1999
which provides that during the term of the contract, his base salary will not be
reduced and he will remain eligible for participation in Textron's executive
compensation and benefit plans. Messrs. Campbell, Key, Juchatz and one other
officer have similar employment contracts with Textron except that they are
through December 2000 and are automatically extended each January for an
additional year unless contrary notice is given. Under an agreement with
Textron, Mr. Wayland's employment status was converted to that of an
employee-consultant through December 1999.
18
20
Certain benefit plans and arrangements in which the Named Officers
participate have provisions that will apply in the event of a change in control
of Textron under the plans. Generally, a "change of control" under the plans
will occur upon (i) any non-Textron person or group becoming (other than by
acquisition from Textron or a related company) the beneficial owner of more than
30% of the then outstanding voting stock of Textron, (ii) during any two-year
period, directors elected or nominated by the Board ceasing to constitute a
majority thereof, (iii) shareholder approval of a merger or consolidation of
Textron with any other corporation, other than a merger or consolidation in
which the voting securities of Textron would continue to represent more than 50%
of the combined voting power of the voting securities of Textron or such
surviving entity, or (iv) shareholder approval of a plan of complete liquidation
of Textron or an agreement for the sale or disposition by Textron of all or
substantially all of its assets. The Survivor Benefit Plan provides that, upon a
change in control, certain assets (generally, paid up life insurance in a face
amount equal to two times the base salary of an active or former executive) will
be transferred to each active or former executive or beneficiary. The
Supplemental Benefits Plan and the Deferred Income Plan provide that in the
event of a change in control of Textron, the amounts accrued under such plans
will become payable immediately. However, supplemental savings accounts under
the Supplemental Benefits Plan may be distributed only upon death, disability,
retirement or termination from Textron. The Annual Incentive Compensation Plan
establishes minimum incentive compensation awards for the fiscal year in which
the change in control occurs. The 1994 Plan provides that outstanding options
will become exercisable immediately and in full, and the stated value of all
outstanding performance share units will be deemed earned and will be payable
immediately and in full in the event of a change in control of Textron. The
Textron Savings Plan provides for full vesting of the accounts of participants
whose employment ends within two years after a change in control of Textron. The
Textron Pension Plan provides that (i) if the Textron Pension Plan is terminated
within three years after a change in control of Textron, surplus assets will be
applied to increase the benefits of active participants up to maximum limits
provided by the Internal Revenue Code, and (ii) in the event of a plan merger,
consolidation or transfer within three years after such a change in control, the
vested accrued benefit of each affected individual will be increased as provided
in item (i), will be fully vested, and will be satisfied through the purchase of
a guaranteed annuity contract. Mr. Hardymon's retirement stock incentive units
and Messrs. Campbell's and Henkel's retention awards are payable immediately in
the event of a change in control of Textron.
TRANSACTIONS WITH MANAGEMENT
During 1997, Surplus Notes (the "Notes") in the aggregate principal amount
of $16,000,000 of Massachusetts Mutual Life Insurance Company, of which Mr.
Wheeler is Chairman and chief executive officer, were held in various investment
accounts of The Paul Revere Insurance Group. The Notes, which were purchased in
the ordinary course of business for the accounts, are due November 15, 2023, and
bear interest at the rate of 7.625% a year. The maximum outstanding balance of
this indebtedness during 1997 was $16,000,000 and the balance outstanding as of
January 3, 1998, was $16,000,000. Textron owned approximately 83% of The Paul
Revere Corporation, the parent corporation of the companies of The Paul Revere
Insurance Group, until March 1997 when Textron's entire interest in the Company
was acquired by Provident Companies, Inc. In April 1997, the E-Z-GO Division of
Textron sold golf cars, utility vehicles and parts and accessories to The
Greenbrier, a subsidiary of CSX Corporation ("CSX"), of which Mr. Snow is
Chairman, President and chief executive officer, for a purchase price of
$474,825 less trade-in, payable pursuant to a conditional sales contract in
April 1998. Textron Automotive Company, a Textron subsidiary, has an agreement
with Customized Transportation, Inc. ("CTI"), also a subsidiary of CSX, pursuant
to which CTI provides third party logistics services to Textron Automotive,
including freight rate negotiations and freight bill audits and payments. During
1997, CTI was paid approximately $892,700 for such services. It is expected that
fees in 1998 will be approximately the same amount.
19
21
PERFORMANCE GRAPH
Set forth below is a stock performance graph which shows the change in
market value of $100 invested on December 31, 1992, in Textron Common Stock,
Standard & Poor's 500 Stock Index and two peer group indices. The cumulative
total shareholder return assumes dividends are reinvested. Textron is a global,
multi-industry company with market-leading operations in four business
segments -- Aircraft, Automotive, Industrial and Finance. The first peer group
("Peer Group I") consists of every company in the following Standard & Poor's
500 price index industry groups: aerospace/defense, conglomerates,
financial/life insurance, financial/personal loans and manufacturing
(diversified industrial). Peer Group I also includes two diversified companies
in comparable industries in the miscellaneous industrials group -- AlliedSignal
Inc. and TRW Inc. The companies in the indices are weighted by market
capitalization. Textron's disposition of its interest in The Paul Revere
Corporation significantly reduced its operations in the insurance business
making inclusion of insurance companies in Peer Group I less meaningful for
comparative purposes, and Textron has accordingly adopted a new peer group
("Peer Group II"), which is identical to Peer Group I except that it excludes
the companies in the financial/life insurance industry group.
Measurement Period
(Fiscal Year Covered) Textron Inc. S&P 500 Peer Group I Peer Group II
Dec. 31, 1992 100.00 100.00 100.00 100.00
Dec. 31, 1993 133.15 110.08 122.82 127.69
Dec. 31, 1994 118.29 111.53 122.19 130.19
Dec. 31, 1995 162.52 153.45 184.67 198.17
Dec. 31, 1996 231.52 188.68 236.42 255.95
Dec. 31, 1997 312.48 251.62 285.15 300.84
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to audit
Textron's consolidated financial statements for 1998, and recommends to the
shareholders ratification of the appointment of Ernst & Young LLP as independent
auditors for 1998. If this resolution is defeated, the Board of Directors will
reconsider its selection. A representative of Ernst & Young LLP will be present
at the annual meeting, will have the opportunity to make a statement and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP (ITEM 2 ON THE PROXY CARD).
20
22
SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSAL RELATING TO REPORT ON FOREIGN MILITARY SALES
Eight organizations have notified Textron that they intend to propose the
following resolution at the 1998 annual meeting of shareholders (the names and
addresses of, and the number of shares held by, each of the proponents can be
obtained upon request from the Office of the Secretary of Textron):
WHEREAS
in fiscal year 1996, the U.S. conducted $11.3 billion worth of foreign
military sales, controlling more than 35% of the world's arms market,
twice as much as Great Britain, our nearest competitor,
the U.S. increased its arms sales to developing nations from $4.1
billion in 1995 to $7.3 billion in 1996, almost 40% of sales to
developing nations,
our company is actively seeking foreign military sales contracts and/or
co-production agreements such as the $2 billion project to supply the
Romanian Army with 96 "Dracula" attack helicopters manufactured in
Romania,
Textron ranks 15 among the U.S. Department of Defense leading 100
contractors,
in 1993 when this resolution received 8.3% of the vote and company
officials recognized the need to work toward publishing the requested
report, proponents refrained from re-filing and have since met with
management several times concerning pertinent issues,
in the 1996 Annual Report (p. 30) our company finally published a four
sentence statement which provides virtually no factual information and
is seriously deficient in fulfilling the terms of the resolution,
RESOLVED
The shareholders request the Board of Directors to provide a
comprehensive report on Textron's foreign military sales. The report,
prepared at a reasonable cost, should be available to all shareholders
by December 1998, and may omit classified and proprietary information.
The proponents have submitted the following statement in support of this
proposal:
Global security is security of people. The Cold War notion of using arms
sales to maintain balances of power or support allies is discredited by
the 1990's experience, when alliances, governments and boundaries are in
flux. Arms sold to today's friends can become on the morrow a threat to
our own security as we have recently experienced.
We are disturbed at industry's claims which assert the only way to keep
jobs for U.S. workers is to promote foreign military sales. We believe
such statements are inconsistent with Textron's efforts to make
co-production agreements and to transfer technology to foreign
countries. Company statements that sales are made only after approval of
applicable Government Agencies ignores the reality that the defense
industry lobby is formative of Agency decisions.
We are also disturbed that our company would treat a legitimate concern
of shareholders so poorly.
Therefore, it is reasonable for shareholders to request a report setting
forth:
1. Company foreign military sales policy, including criteria for
choosing countries with which to do business.
21
23
2. Procedures used to negotiate sales directly with foreign
governments or through the U.S. government, e.g. What determines
which weapons are direct commercial arms sales; foreign military
sales?
3. Categories of military equipment exported for the past three
years, giving statistical information as permissible; contracts
for serving/maintaining equipment; offset agreements; licensing
and/or co-production with foreign governments.
4. Analysis of and actions taken toward legislation establishing a
code for U.S. arms transfers, e.g. no sales to governments that
violate their own citizens' human rights, engage in aggression,
come to power through undemocratic means or ignore international
arms-control arrangements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL.
The Board feels strongly that this proposal is contrary to the best
interests of Textron, its shareholders and its employees.
Textron is subject to the laws and regulations of the United States
Government which restrict the export of military goods, software and technology.
A foreign military sale may only be made when the United States Government has
determined that the sale is consistent with the national security, foreign
policy and economic interests of the United States. Textron has in place
extensive procedures to ensure that all foreign military sales are made in
strict compliance with all applicable United States laws and regulations. While
Textron reserves the right to refuse to make a particular foreign military sale,
the Board believes that Textron generally should rely on the approval process
for such sales established by our elected representatives and government
officials. Furthermore, the disclosures requested by the proposal would be of
limited use to the great majority of Textron's shareholders, but could provide
Textron's competitors with valuable information regarding Textron's sales
procedures, personnel matters and contract terms.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
(ITEM 3 ON THE PROXY CARD).
SHAREHOLDER PROPOSAL RELATING TO EXECUTIVE COMPENSATION
The Teamsters Affiliates Pension Fund, whose address and number of shares
held can be obtained upon request from the Office of the Secretary of Textron,
has notified Textron that it intends to propose the following resolution at the
1998 annual meeting of shareholders:
Resolved: That the shareholders of Textron Inc. request that the Board
of Directors establish a policy that no executive will be compensated
more than $1 million per year, regardless of when such compensation is
paid, unless the compensation is paid in accordance with a
performance-based plan disclosed to shareholders and approved by a
majority of the vote in a separate shareholder vote before the payment
of the compensation.
The Teamsters Affiliates Pension Fund has submitted the following in
support of its proposal:
In 1996 the New York Times ran an investigative series which focused on
deferred compensation which can be a detriment to shareholders in a
number of ways. Deferred compensation can prevent shareholders from
exercising their right to vote on certain compensation plans. Internal
Revenue Code Section 162(m) which eliminated the business expense
deduction for annual compensation of over $1 million, with some
exceptions, was designed to give shareholders the ability to reign in
excessive executive compensation. In approving this law, Congress did
not declare that executives be
22
24
paid less than $1 million. Rather, Congress said that shareholders must
approve performance-based compensation packages of more than $1 million
to preserve tax advantages.
One loophole corporate lawyers have exploited to avoid paying taxes and
at the same time to avoid seeking shareholder approval has been to put
ever-increasing amounts in deferred compensation. This seems to
circumvent part of the intent of the IRS Code by depriving shareholders
of their prerogative to vote.
Textron CEO James Hardymon received a salary of $1,050,000 in 1996 and a
bonus of $1,613,019, a portion of which a footnote in the proxy ascribes
to "vested contributions made by Textron . . . as a result of their
respective elections to defer compensation into the stock unit fund of
the Deferred Income Plan." In April 1997, Business Week compiled an
Executive Compensation Scorecard, comparing compensation of top
executives to both shareholder return and corporate profit with other
industry peers. In both categories Textron scored a 4 (on a scale of 5,
1 indicated the best performance; 5 indicated the worst.) Textron's top
executives were in the bottom third of their peers in terms of what they
gave shareholders for their money.
At the same time Textron's executive compensation committee states as
part of its philosophy that it seeks to "provide total compensation
opportunities at or above the 75th percentile" of peer corporations.
This contributes to the increasing ratchetting up of executive
compensation, as each year companies raise their compensation and
Textron must set its compensation even higher to remain in the
highest-paying quarter. We believe it may also undermine shareholder
confidence.
Deferred compensation should not be used as a way to obscure
compensation figures or to deprive shareholders of their right to make
such decisions. Executive compensation must fairly award executives on
the basis of what they achieve and not on the salary of their peers.
For the above reasons we urge you to vote FOR the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL.
The objective of Textron's executive compensation program is to attract and
retain the most qualified executives and to motivate them to produce strong
financial performance for the benefit of Textron's shareholders. To meet this
objective, Textron's executive compensation program is designed to be
competitive with the compensation programs provided by other corporations of
comparable revenue size in industries in which it competes.
Textron's executive compensation program is designed to provide total
compensation opportunities at or above the 75th percentile of peer corporations
for achieving outstanding performance. Textron does not routinely pay at the
75th percentile. Compensation is only paid at the 75th percentile when
outstanding performance is achieved and is only done so on an individual by
individual basis. Additionally, an objective of Textron's executive compensation
program is to align the financial interests of the executive officers with the
best interest of shareholders. Accordingly, a significant portion of Mr.
Hardymon's compensation is linked to Textron's stock price. For the 1994
Long-Term Incentive Plan performance cycles ending in 1996 and 1997 Mr.
Hardymon's payouts were favorably impacted by the significant (over 60% and
140%, respectively) increase in the market price of Textron Common Stock during
those cycles.
With regard to shareholder return, Textron has outperformed the S&P 500 and
its Proxy peer groups as illustrated on the performance graph on page 20 of this
Proxy Statement.
Survey data indicates that an overwhelming majority of Textron's peer
companies provide deferred compensation arrangements to executives, and the
Board of Directors believes Textron should also maintain a deferred income plan.
Deferred compensation is included in executive compensation reported in the
Summary
23
25
Compensation Table on page 15 of this Proxy Statement and therefore does not in
any way obscure compensation paid by Textron to its executives.
It has also been the Board's policy to preserve its discretion in
determining awards earned under Textron's annual incentive compensation plan as
well as a portion of the long-term incentive plan. Requiring that all annual
compensation over $1 million for any executive be paid under a performance-based
plan approved in advance by shareholders would restrict Textron's ability to
respond to competitive needs in the market for executive talent and impair its
ability to attract, retain and motivate the most qualified executives.
The Board believes that Textron's executive compensation program is
competitive and is effective in motivating Textron's executives to produce
strong financial performance for the benefit of its shareholders.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
(ITEM 4 ON THE PROXY CARD).
VOTING OF PROXIES
Each valid proxy in the enclosed form received by Textron will be voted by
the persons named therein. Unless the shareholder specifies otherwise, the
shares represented by the proxy will be voted in favor of the election of the
four nominees in Class II described in this Proxy Statement on pages 2 and 3.
The Board of Directors knows of no reason why any of the nominees so named would
be unavailable for election. If any nominee should be unavailable for election
by reason of death or otherwise, the proxies may be voted for the election of
such other person as may be recommended by the Board of Directors.
Unless the shareholder specifies otherwise, the shares represented by the
proxy will be voted for ratification of the appointment of Ernst & Young LLP as
independent auditors and against the two shareholder proposals described above.
Any shareholder giving a proxy has the power to revoke it at any time before it
is exercised by delivering a written notice of revocation to the Secretary of
Textron or by submitting a subsequent proxy or by voting in person at the
meeting.
The four nominees for director receiving the greatest number of votes cast
in person or by proxy will be elected. Abstentions and broker non-votes will
have no effect on the outcome of the election of directors. Ratification of the
appointment of auditors and the two shareholder proposals require the favorable
vote of a majority of shares present in person at the 1998 annual meeting or
represented by proxy and entitled to vote thereon. All shareholders vote as one
class. Abstaining from voting on the appointment of auditors and the two
shareholder proposals will have the same effect as voting against such
proposals. Broker non-votes on the ratification of appointment of auditors and
the two shareholder proposals will not be included in the calculation of shares
entitled to vote for such proposal and will have no effect on the outcome.
Textron's policy on confidential voting provides that no proxy, ballot or
voting materials that identify the vote of a specific shareholder will be
disclosed to Textron or its directors, officers or employees except (i) as
required by law or for the defense of legal proceedings, (ii) if the shareholder
requests disclosure or (iii) in a proxy contest if the party soliciting proxies
in opposition does not agree to observe Textron's confidential voting policy.
Comments of shareholders written on proxies or ballots are transcribed and
provided to the Secretary of Textron. Votes are counted by employees of First
Chicago Trust Company of New York, Textron's independent transfer agent and
registrar, and certified by Inspectors of Election who are employees of First
Chicago Trust Company of New York.
FOR SAVINGS PLAN PARTICIPANTS: For participants in the Textron Savings Plan
(the "TSP"), the accompanying proxy card indicates the number of shares
allocated to the participant's account under the TSP and the number of shares,
if any, allocated to the participant's Tax Credit Account under the TSP by State
24
26
Street Bank and Trust Company, trustee for the TSP ("State Street Bank and
Trust"). When a participant's proxy card is returned properly signed, State
Street Bank and Trust will vote the participant's proportionate interest in the
shares of Common Stock held by State Street Bank and Trust under the TSP in the
manner the participant directs, or if the participant makes no direction, State
Street Bank and Trust will vote, with respect to the election of directors,
ratification of appointment of auditors and the two shareholder proposals, the
participant's proportionate interest in the shares of Common Stock held by State
Street Bank and Trust under the TSP (except shares allocated to the
participant's Tax Credit Account) in proportion to instructions received from
other TSP participants. Shares allocated to a participant's Tax Credit Account
under the TSP will be voted only as the participant directs. For participants in
the Textron Canada Savings Plan (the "TCSP"), the accompanying proxy card
indicates the number of shares allocated to the participant's account under the
TCSP by Royal Trust Corporation of Canada, trustee for the TCSP ("Royal Trust").
When the participant's proxy card is returned properly signed, Royal Trust will
vote such shares in the manner the participant directs, or if the participant
makes no direction, Royal Trust will vote with respect to the election of
directors, the ratification of appointment of auditors and the two shareholder
proposals, all shares of Common Stock allocated to the participant's accounts
under the TCSP in proportion to instructions received from other TCSP
participants.
All such directions will be held in confidence.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors does not know of any matters which will be brought
before the meeting other than those specifically set forth in the notice
thereof. If any other matter properly comes before the meeting, it is intended
that the persons named in and acting under the enclosed form of proxy or their
substitutes will vote thereon in accordance with their best judgment.
SOLICITATION OF PROXIES
All expenses incurred in connection with this solicitation will be borne by
Textron. Textron may request banks and brokers to solicit their customers who
have a beneficial interest in Textron's stock registered in the names of
nominees and will reimburse such banks and brokers for their reasonable
out-of-pocket expenses of such solicitations. In addition to the use of the
mails, solicitation may be made by employees of Textron by telephone, other
electronic means and personal interview, without additional compensation for
such services. Textron has retained D. F. King & Co., Inc. of New York, New
York, a proxy soliciting organization, to solicit management proxies for the
annual meeting. The fees of such organization in connection therewith are
estimated to be $13,000, plus reasonable out-of-pocket expenses.
25
27
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 annual meeting
of shareholders must be received by Textron on or before November 12, 1998, for
inclusion in the proxy statement and form of proxy relating thereto. Textron's
By-Laws contain provisions which impose certain additional requirements upon
shareholder proposals.
By order of the Board of Directors,
/s/ Frederick K. Butler
Frederick K. Butler
Vice President and
Secretary
March 11, 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON, PLEASE FILL IN, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENVELOPE PROVIDED.
26
28
TEXTRON INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS APRIL 22, 1998
R
The undersigned hereby appoints James F. Hardymon, Lewis B. Campbell and
O Frederick K. Butler, or any one or more of them, attorneys will full power
of substitution and revocation to each, for and in the name of the
X undersigned with all the powers the undersigned would possess if
personally present, to vote the shares of the undersigned in Textron
Y Inc. as indicated on the proposals referred to on the reverse side hereof
at the annual meeting of its shareholders to be held April 22, 1998, and
at any adjournments thereof, and in their or his discretion upon any
other matter which may properly come before said meeting.
This card also constitutes voting instructions (i) to the Trustee under
the Textron Savings Plan to vote, in person or by proxy, the proportionate
interest of the undersigned in the shares of Common Stock of Textron Inc.
held by the Trustee under such Plan and (ii) to the Trustee under the
Textron Canada Savings Plan to vote, in person or by proxy, all shares of
Common Stock of Textron Inc. allocated to the account of the undersigned
under such Plan, in each case as described in the proxy statement.
(CHANGE OF ADDRESS/COMMENTS)
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)
----------------
SEE REVERSE
SIDE
----------------
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[TEXTRON LOGO]
ANNUAL MEETING
OF
TEXTRON SHAREHOLDERS
RHODE ISLAND CONVENTION CENTER
------------------------------
One Sabin Street
Providence, RI 02903
(401) 458-6000
29
Please mark your
[x] votes as in this
example.
This proxy, when properly executed, will be voted as directed by the
undersigned shareholder(s). If no direction is made, this proxy will be voted
FOR the nominees listed below, FOR proposal 2 and AGAINST proposals 3 and 4, or
if this card constitutes voting instructions to a savings plan trustee, such
trustee will vote as described in the proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED BELOW AND FOR PROPOSAL 2.
- -----------------------------------------------------------------------------------------------------------------------------------
FOR* WITHHELD FROM ALL NOMINEES: FOR AGAINST ABSTAIN
1. Election of [ ] [ ] Paul E. Gagne 2. Ratification of appointment
Directors James F. Hardymon of independent auditors [ ] [ ] [ ]
Dana G. Mead
Thomas B. Wheeler
The Board of Directors recommends that you vote
AGAINST proposals 3 and 4.
3. Shareholder proposal [ ] [ ] [ ]
* Except vote withheld from the CHANGE OF ADDRESS/ relating to Report on
following nominee(s): [ ] COMMENTS ON Foreign Military Sales
REVERSE SIDE.
4. Shareholder proposal [ ] [ ] [ ]
relating to Executive
Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN EXACTLY AS NAME(S) APPEAR HEREON. JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
-----------------------------------------------------------------
-----------------------------------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
[TEXTRON LOGO]
ANNUAL MEETING
OF
TEXTRON SHAREHOLDERS
Wednesday, April 22, 1998
10:30 a.m.
Rhode Island Convention Center
One Sabin Street
Providence, Rhode Island
IMPORTANT NOTICE
----------------
IT IS IMPORTANT THAT YOU VOTE, SIGN AND
RETURN THE ABOVE PROXY AS SOON AS POSSIBLE.
BY DOING SO, YOU MAY SAVE TEXTRON THE
EXPENSE OF ADDITIONAL SOLICITATION.
30
[LETTERHEAD OF JAMES F. HARDYMON]
March 1998
Dear Fellow Participant:
Textron's Annual Meeting of Shareholders will take place on April 22,
1998. As a participant in a Textron Savings Plan, you are entitled to
instruct the Plan's Trustee as to how to vote your shares of Textron stock.
YOUR VOTE IS IMPORTANT.
Enclosed with this letter is the proxy statement for the meeting,
along with our 1997 Annual Report to Shareholders and a voting card. Please
complete your voting card and mail it in the enclosed envelope. If the
Trustee does not receive this card by April 17, 1998, your shares will be
voted in accordance with the provisions of the Plan.
The subject of each proposal to be voted on is shown on the voting
card and is explained in greater detail in the proxy statement. The Board
of Directors recommends that you instruct the Trustee to vote FOR the
election of the four nominees for Director listed in ITEM 1, and FOR ITEM
2. The Board of Directors recommends that you instruct the Trustee to vote
AGAINST ITEM 3 and AGAINST ITEM 4.
Thank you for your continued support.
Sincerely,
/s/ JAMES F. HARDYMON
Enclosures