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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 [ ]
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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:
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[Textron Logo]
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NOTICE OF ANNUAL MEETING
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To The Shareholders of Textron Inc.:
The 1999 annual meeting of shareholders of Textron Inc. will be held on
Wednesday, April 28, 1999, at 10:30 a.m. AT THE CUSTOMER CENTER BUILDING, CESSNA
AIRCRAFT COMPANY, ONE CESSNA BOULEVARD, WICHITA, KANSAS for the following
purposes:
1. To elect five directors in Class III for a term of three years in
accordance with Textron's By-Laws (Item 1).
2. To approve the adoption of the Textron 1999 Long-Term Incentive
Plan, which is RECOMMENDED by the Board of Directors (Item 2).
3. To ratify the appointment of Ernst & Young LLP as Textron's
independent auditors for 1999, which is RECOMMENDED by the Board of
Directors (Item 3).
4. To consider and act upon the shareholder proposal set forth in the
accompanying Proxy Statement, which is OPPOSED by the Board of Directors
(Item 4).
5. 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 March 3, 1999. 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 1999 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/ Lewis B. Campbell
Lewis B. Campbell
Chairman and Chief Executive Officer
Providence, Rhode Island
March 25, 1999
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TEXTRON INC.
PROXY STATEMENT
GENERAL
This Proxy Statement, which is being mailed on or about March 31, 1999, 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 28, 1999, 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 March 3, 1999, will
be entitled to vote. As of March 3, 1999, Textron had outstanding 151,500,561
shares of Common Stock; 175,429 shares of $2.08 Cumulative Convertible Preferred
Stock, Series A; and 82,689 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 H.
Jesse Arnelle, John D. Macomber, Brian H. Rowe, Sam F. Segnar and Martin D.
Walker to Class III. Each nominee presently serves as a director of Textron. In
September 1998, to maintain desired balance among classes and preserve
continuity, the Board of Directors appointed Jean Head Sisco, then a Class III
director, to fill a vacancy in Class II resulting from a newly created
directorship in such class, and Mr. Macomber, then a Class I director, to fill
the vacancy in Class III resulting from Mrs. Sisco's appointment to Class II.
Information is furnished below with respect to each nominee for election and
each director continuing in office.
NOMINEES FOR DIRECTOR
CLASS III -- NOMINEES FOR TERMS EXPIRING IN 2002
(Photo of H. Jesse Arnelle)
H. JESSE ARNELLE DIRECTOR SINCE 1993
Mr. Arnelle, 65, 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., Waste Management, Inc., Eastman
Chemical Corporation, Armstrong World Industries and Union
Pacific Resources, Inc. and served from November 1990 through
1998 as a director of Wells Fargo Bank, N.A. and Wells Fargo &
Company. Mr. Arnelle is the past Chairman of the Board of
Trustees of Pennsylvania State University and a director of
the National Football Foundation and College Hall of Fame.
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(Photo of John D. Macomber)
JOHN D. MACOMBER DIRECTOR SINCE 1993
Mr. Macomber, 71, 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 The Brown
Group, Inc., IRI International, Lehman Brothers Holdings Inc.,
and Mettler-Toledo International Inc. 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, the National
Executive Services Corps and the National Board of the
Smithsonian Institution.
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(Photo of Brian H. Rowe)
BRIAN H. ROWE DIRECTOR SINCE 1995
Mr. Rowe, 67, 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. 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., Cincinnati Bell Inc., Convergys and
Dynatech Corporation.
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(Photo of Sam F. Segnar)
SAM F. SEGNAR DIRECTOR SINCE 1982
Mr. Segnar, 71, 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 and Gulf
States Utilities Company, 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.
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(Photo of Martin D. Walker)
MARTIN D. WALKER DIRECTOR SINCE 1986
Mr. Walker, 66, is Chairman and chief executive officer of M. A. Hanna
Company, an international specialty chemicals company, a
position he was elected to in October 1998. He held this
position previously from September 1986 until December 1996,
and then continued as Chairman of the Board until June 1997,
when he retired. Mr. Walker is a director of Comerica, Inc.,
The Timken Company, The Goodyear Tire & Rubber Co. and Lexmark
International, Inc.
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DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERMS EXPIRE IN 2000
(Photo of Teresa Beck)
TERESA BECK DIRECTOR SINCE 1996
Ms. Beck, 44, is President of American Stores Company, one of the nation's
largest food and drug retailers. She joined American Stores
Company in 1982 and progressed through various executive
positions. Ms. Beck was named Senior Vice President of Finance
and Assistant Secretary in 1989, became Executive Vice
President, Administration in 1992 and Executive Vice
President, Finance in 1994 and served as chief financial
officer from 1995 until assuming her current position in 1998.
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.
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(Photo of Lewis B. Campbell)
LEWIS B. CAMPBELL DIRECTOR SINCE 1994
Mr. Campbell, 52, is Chairman and chief executive officer of Textron. He
joined Textron in 1992 as Executive Vice President and chief
operating officer, became President and chief operating
officer in 1994, assumed the title of chief executive officer
and relinquished the title of chief operating officer in July
1998 and assumed the title of Chairman and relinquished the
title of President in February 1999. 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 Bristol Myers Squibb Co.
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(Photo of R. Stuart Dickson)
R. STUART DICKSON DIRECTOR SINCE 1984
Mr. Dickson, 69, 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.
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(Photo of Joe T. Ford)
JOE T. FORD DIRECTOR SINCE DECEMBER 1998
Mr. Ford, 61, is Chairman of the Board and chief executive officer of
ALLTEL Corporation, a telecommunications and information
services company. He was named President of ALLTEL upon its
formation in 1983 from a merger between Allied Telephone
Company in Little Rock and Mid-Continental Telephone
Corporation, became chief executive officer in 1987 and
assumed his current position in 1991. Mr. Ford is a director
of The Dial Corporation.
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(Photo of John A. Janitz)
JOHN A. JANITZ DIRECTOR SINCE MARCH 1999
Mr. Janitz, 56, is President and chief operating officer of Textron. He
joined Textron in 1996 as Chairman, President and chief
executive officer of Textron Automotive Company and assumed
his present position in March 1999. From 1990 to 1996 he was
Executive Vice President and General Manager of TRW Inc.'s
Occupant Restraint Group based in Cleveland, Ohio, a worldwide
business that develops, manufactures and markets air bags,
seat belts and fastening systems. Prior to joining TRW, he was
President of Wickes Manufacturing Company, an automotive
supplier based in Southfield, Michigan.
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CLASS II -- TERMS EXPIRE IN 2001
(PHOTO OF LAWRENCE K. FISH)
LAWRENCE K. FISH DIRECTOR SINCE FEBRUARY 1999
Mr. Fish, 54, is Chairman, President and chief executive officer of
Citizens Financial Group, Inc., a multi-state bank holding
company headquartered in Providence, Rhode Island, a position
he has held since joining the bank in 1992. He is a director
of the Royal Bank of Scotland Group. Mr. Fish is a member of
the Federal Reserve Advisory Council and the past co-chair of
the Rhode Island Economic Development Council. He is the
founding Chairman of the Rhode Island Commission for National
and Community Service, an overseer of the Boston Symphony
Orchestra and Beth Israel Deaconess Medical Center, a trustee
and Chairman of the Audit Committee of the Rhode Island School
of Design and a trustee of the New England Conservatory of
Music and Drake University.
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(Photo of Paul E. Gagne)
PAUL E. GAGNE DIRECTOR SINCE 1995
Mr. Gagne, 52, was President and chief executive officer of Avenor Inc., a
forest products company, and is now a consultant in the area
of corporate strategic planning and acquisitions. He joined
Avenor in 1976, became President and chief operating officer
in 1990 and assumed the additional position of chief executive
officer in 1991 serving in that capacity until November 1997,
when he left the company. In 1998, Mr. Gagne joined Kroger
Inc., a major privately held producer of paper and tissue, as
advisor, corporate strategy and acquisitions. He is a director
of Inmet Mining Corporation, Wajax Limited, Celanese Canada
Limited and Kroger Tissue Group (U.K.), and a member of the
board of the C.D. Howe Institute.
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(Photo of Dana G. Mead)
DANA G. MEAD DIRECTOR SINCE 1996
Mr. Mead, 63, 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, Unisource Worldwide, Inc. and
Newport News Shipbuilding Inc., a former Tenneco subsidiary.
Mr. Mead is Chairman of the Business Roundtable, 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.
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(Photo of Jean Head Sisco)
JEAN HEAD SISCO DIRECTOR SINCE 1975
Mrs. Sisco, 73, is a partner in the international trade consulting firm of
Sisco Associates. She is a director of The Neiman Marcus
Group, Inc., Newmont Mining Corporation, Chiquita Brands
International, Inc., K-Tron International, Inc., American
Funds -- Series I and Socrates Technology. 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.
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(Photo of Thomas B. Wheeler)
THOMAS B. WHEELER DIRECTOR SINCE 1993
Mr. Wheeler, 62, is Chairman 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, President and chief executive
officer in 1988 and Chairman and chief executive officer in
1996. He relinquished the title of chief executive officer in
January 1999. 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 a trustee of Springfield College, the
Basketball Hall of Fame and the Springfield Orchestra
Association.
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THE BOARD OF DIRECTORS
Meetings and Organization
During 1998, the Board of Directors met twelve times and the Executive
Committee of the Board met once. 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 $55,000 plus $1,500 for each meeting of the Board attended.
Non-employee directors who serve on the Executive Committee or one of the
standing committees receive $1,500 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 $25,000 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 annual retainer for 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 22 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 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 lives of 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
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
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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: Mr. Gagne (Chairman), Ms. Beck, Mr.
Segnar, Mr. Walker and Mr. Wheeler. During 1998, the Audit Committee met five
times. Various members of management are regularly invited to be present at
Audit Committee meetings. The Vice President Internal Audit 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 must submit timely notice
of nomination within the time limits described below under the heading
"Shareholder Proposals and Other Matters for 2000 Annual Meeting" on page 32 of
this Proxy Statement, to the Nominating and Board Affairs Committee, c/o the
Corporate 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 comprise the Nominating and Board Affairs
Committee: Mr. Dickson (Chairman), Mr. Mead, Mr. Rowe, Mrs. Sisco and Mr.
Wheeler. During 1998, the Nominating and Board Affairs Committee met twice.
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 five non-employee
directors presently comprise the Organization and Compensation Committee: Mr.
Macomber (Chairman), Mr. Arnelle, Mr. Mead, Mr. Rowe and Mrs. Sisco. During
1998, the Organization and Compensation Committee met nine 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 four non-employee directors
presently comprise the Pension Committee: Mr. Arnelle, Ms. Beck, Mr. Segnar and
Mr. Walker. During 1998, the Pension Committee met twice.
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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, 1998:
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------- ----------------- --------
Common Stock.................. State Street Bank and 24,519,500 shares(1) 15.8%
Trust Company
225 Franklin Street
Boston, Massachusetts 02101
Common Stock.................. FMR Corp. 16,480,121 shares(2) 10.4%
82 Devonshire Street
Boston, Massachusetts 02109
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(1) State Street Bank and Trust Company has informed Textron that the reported
number includes 1,893,689 shares as to which it has sole voting power and
22,469,111 shares as to which it shares voting power, 2,165,239 shares as to
which it has sole investment power and 22,354,261 shares as to which it
shares investment power and 22,354,261 shares (14.5% of the class) as to
which it holds as Trustee under the Textron Savings Plan and 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 FMR Corp. with the Securities and Exchange
Commission in accordance with Rule 13d-1 of the Securities Exchange Act of
1934, FMR Corp. has reported that it has sole voting power over 912,791
shares and sole investment power over 16,480,121 shares.
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SECURITY OWNERSHIP OF MANAGEMENT
Set forth below in the column headed "Number of Shares of Common Stock" is
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 17 of this Proxy Statement and by all current
directors and executive officers as a group. Directors and executive officers as
a group beneficially owned less than 1% of the outstanding shares of Common
Stock. Ownership indicated is as of December 31, 1998, except that ownership
indicated for Mr. Fish and Mr. Hardymon is as of February 28, 1999.
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, 1998, 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....................................... 2,136 7,631
Teresa Beck............................................ 2,100 4,638
John D. Butler......................................... 24,096 59,692
Lewis B. Campbell...................................... 382,756 562,550
R. Stuart Dickson...................................... 41,236 50,001
Lawrence K. Fish....................................... 1,000 1,000
Joe T. Ford............................................ 2,000 2,058
Paul E. Gagne.......................................... 2,086 5,182
James F. Hardymon...................................... 348,915 957,961
John J. Janitz......................................... 85,149 192,242
Herbert L. Henkel...................................... 106,628 201,237
Stephen L. Key......................................... 119,088 217,126
John D. Macomber....................................... 11,264 19,024
Dana G. Mead........................................... 2,068 5,005
Brian H. Rowe.......................................... 2,101 5,685
Sam F. Segnar.......................................... 4,095 21,499
Jean Head Sisco........................................ 4,209 19,820
Martin D. Walker....................................... 3,680 20,813
Thomas B. Wheeler...................................... 2,236 16,648
All current directors and executive officers as a group
(19 persons)......................................... 919,444(3) 1,560,959
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(1) Includes the following shares as to which voting and investment powers are
shared: Mr. Dickson -- 34,000 and Mr. Segnar -- 1,000.
(footnotes continued on following page)
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(footnotes continued from preceding page)
(2) Includes the following shares obtainable upon the exercise of stock options
exercisable within 60 days of December 31, 1998: Mr. Campbell -- 368,109;
Mr. Hardymon -- 306,440; Mr. Henkel -- 90,448; Mr. Janitz -- 84,000; Mr. Key
-- 118,000; and Mr. Butler -- 23,499.
(3) Includes 795,372 shares obtainable upon the exercise of stock options
exercisable within 60 days of December 31, 1998.
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REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee (the "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 if outstanding performance is
achieved. Total compensation opportunities for 1998 for the chief executive
officers 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 24 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 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 17 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 1998. 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 1998, 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. As a general rule, adjustments in
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salary are relatively modest, in as much as the primary drivers of the
compensation program are intended to be delivered by the variable components
described below.
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in Textron's Annual Incentive
Compensation Plan. In 1998, target annual incentive compensation opportunities
were established so that the combination of base salary and target annual
incentive awards (70% of salary for the chief executive officer and either 60%,
55% or 50% 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 1998 incentive
compensation payments for executive officers included the degree to which
certain overall corporate and individual performance objectives were achieved.
For example, in determining the level of 1998 annual incentive compensation for
the executive officers, the Committee evaluated performance relative to four key
corporate financial objectives: earnings per share, free cash flow, operating
margins and return on equity. The 1998 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 17 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.
1998 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 1998 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. During 1998, two Named Officers were
granted stock options to supplement their 1997 grants as a result of promotions
during 1998. 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 1998 to the Named Officers appears in the table on
page 18 of this Proxy Statement.
1998 Payouts of Previously Granted Performance Share Units
The 1998 payouts to executive officers were for performance share units
granted for the three-year performance cycle ending January 2, 1999. The
Committee recommended to the Board of Directors payouts in a range of 88% 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 common stock performance versus Textron's proxy peers) and
the executive officer's performance. The 1998 payout for four executive officers
was for performance share units granted for a two-year performance cycle ending
January 2, 1999. Information on the 1998 payouts to the Named Officers of
previously granted performance share units is
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reported in the "LTIP Payouts" column of the Summary Compensation Table on page
17 of this Proxy Statement.
1998 Performance Share Unit Grants
For the three-year performance cycle starting at the beginning of 1999,
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 1999-2001 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 1999-2001
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 1999-2001 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 1998, performance share units were also
granted to two newly appointed executive officers. One of these officers was
granted performance share units for a special 1998-1999 performance cycle and
both officers were granted performance share units for the 1998-2000 performance
cycle. Also during 1998, two Named Officers were granted performance share units
to supplement previous grants as a result of promotions during 1998. Such grants
were made as described above. Information on the 1998 grants of performance
share units appears in the "Long-Term Incentive Plan Awards in Last Fiscal Year"
table on page 19 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
Mr. Campbell, previously President and chief operating officer ("COO"),
assumed the additional title of chief executive officer ("CEO") and relinquished
the title of COO on July 1, 1998. He succeeded Mr. Hardymon, who remained
Chairman of Textron's Board of Directors until his retirement on January 31,
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1999. Mr. Campbell assumed the additional title of Chairman on February 1, 1999.
Accordingly, CEO compensation is reported for both Messrs. Hardymon and
Campbell.
Mr. Hardymon
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 17 of this Proxy Statement,
Mr. Hardymon's salary remained at $1,050,000 for 1998. In determining not to
increase his salary, the Committee took into account the fact that Mr.
Hardymon's 1997 base salary was at the 75th percentile of base salary paid to
chief executive officers at the surveyed companies.
The Committee recommended and the Board approved a 1998 annual incentive
award of $1,000,000 which compared to an award of $1,500,000 for 1997. The lower
award for 1998 does not reflect a decline in performance. On the contrary, the
award reflects Mr. Hardymon's strong performance against all of his objectives
but it also takes into consideration that Mr. Hardymon held the CEO position for
only half of 1998. In assessing Mr. Hardymon's performance the Committee
determined that all of his objectives were either met or exceeded, 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 goals relative to (1) the transition of
the CEO position, (2) diversity, (3) shareholder value versus peers, (4)
organization requirements, (5) growth in international markets and by
acquisitions, (6) company-to-company benchmarking and (7) maintaining Textron's
high level public image. Although Mr. Hardymon's performance was considered
strong, his annual compensation (salary plus annual incentive compensation) was
at the 37th percentile of the surveyed companies, reflecting the fact that Mr.
Hardymon held the CEO position for only six months.
The Committee determined that all of the performance share units granted to
Mr. Hardymon for the 1996-1998 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 price, book value per common share, annual dividend
rate and common stock price versus Textron's proxy peers. The value of the
1996-1998 performance share units earned by Mr. Hardymon was $3,703,000 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 over 100% increase in the market
value of Textron Common Stock since the units were granted in December 1995.
Mr. Hardymon did not receive a grant of performance share units in 1998 as
a result of his retirement effective January 31, 1999. Mr. Hardymon did not
receive a grant of stock options in 1998 and he has not been granted any stock
options since 1993. Instead, the Committee granted Mr. Hardymon 1,000,000 (on a
post-split basis) retirement stock incentive units in 1994. For a description of
these units see Employment Contracts and Change in Control Arrangements on page
22 of this Proxy Statement.
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 17 and 18 of this Proxy Statement).
Mr. Campbell
In determining the overall level of Mr. Campbell's compensation and each
component thereof, the Committee took into consideration information provided by
independent, professional compensation consultants.
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The Committee recommended and the Board approved a salary increase of
$25,000, effective January 1, 1998, bringing Mr. Campbell's base salary to
$725,000. Upon his promotion to CEO effective July 1, 1998, the Committee
recommended and the Board approved a salary increase of $275,000, bringing Mr.
Campbell's salary to its current level of $1,000,000, which falls at the 50th
percentile of 1998 competitive practice.
The Committee recommended and the Board approved a 1998 annual incentive
award of $1,000,000, compared to an award of $700,000 for 1997. In determining
the level of the award, the Committee took into consideration the following
factors: performance against objectives, competitive practice for the CEO
position, the fact that Mr. Campbell held the CEO position for six months, Mr.
Campbell's 1997 award and Mr. Hardymon's 1998 award. The Committee determined
that Mr. Campbell achieved or exceeded all of his objectives, and the Committee
was extremely pleased with Mr. Campbell's performance relative to the CEO
transition as well as the sale of Avco Financial Services, which was not part of
Mr. Campbell's objectives. Mr. Campbell's key financial objective was to achieve
the 1998 operating plan with emphasis on free cash flow and operating margins.
Mr. Campbell's non-financial objectives consisted of goals relative to (1) the
acceleration of his involvement in strategic planning and investor relations,
(2) company growth, (3) succession planning, (4) diversity and (5) the CEO
transition. Although Mr. Campbell's performance was considered outstanding by
the Committee, his award of $1,000,000 positioned his annual cash compensation
(base salary and bonus) at about the 35th percentile of competitive practice for
the CEO position. The Committee deemed this appropriate considering that he was
COO for half a year and CEO for half a year.
The Committee determined that all of the performance share units granted to
Mr. Campbell for the 1996-1998 performance cycle were earned since aggregate
earnings per share (upon which 60% of the award was based) exceeded the targeted
level for that period; performance objectives in the following areas (upon which
20% of the award was based) were achieved or exceeded: balance sheet
strength/asset management and shareholder value, as measured by common stock
prices, book value per common share, annual dividend rate and common stock price
versus proxy peers; and performance relative to the Operating Committee, which
was subsequently replaced by the Executive Leadership Team (upon which 20% of
the award was based). The value of the 1996-l998 performance share units earned
by Mr. Campbell was $2,221,800 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 over 100% increase in the market value of Textron Common Stock since the
units were granted in December 1995.
In December 1997, Mr. Campbell was granted 43,000 stock options and 16,000
performance share units for the 1998-2000 cycle. Upon his promotion to CEO in
July 1998, Mr. Campbell received a supplemental grant of 42,000 stock options
and 15,000 performance share units for the 1998-2000 cycle. These additional
grants, coupled with the December 1997 grant, placed the combined grants at
approximately the 60th percentile of 1997 competitive practice for the CEO
position. Mr. Campbell also received additional performance share units in July
to supplement previously granted performance share units in recognition of his
promotion to CEO. He was granted an additional 4,000 and 8,000 performance share
units for the 1996-1998 and 1997-1999 cycles, respectively. In December 1998,
Mr. Campbell was granted 100,000 stock options and 30,000 performance share
units for the 1999-2001 cycle. These grants placed Mr. Campbell's long-term
incentive compensation at the 54th percentile of competitive practice. The
Committee and the Board thought a grant at that level was appropriate as it
brought Mr. Campbell's total direct compensation (base salary and annual and
long-term incentive compensation) to the 50th percentile of competitive
practice.
Mr. Campbell also received compensation under various Textron benefit and
compensation plans (see footnote (5) of the Summary Compensation Table on page
18 of this Proxy Statement).
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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
on page 17 of this Proxy Statement, 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 and stock options to be granted under the proposed Textron 1999
Long-Term Incentive Plan (the "1999 Plan"), referred to below under the heading
"The 1999 Plan," will also qualify. 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. Awards earned for a major portion of performance
share units granted under the 1999 Plan will qualify as Performance-Based
Compensation, as will restricted stock awards. Textron will continue to preserve
Committee discretion under Textron's Annual Incentive Compensation Plan and a
portion of the 1994 Plan and the 1999 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 in 1997 of a substantial portion of performance share units as
Performance-Based Compensation, Textron believes that the $1 million limitation
of Section 162(m) of the Internal Revenue Code will not have a material effect
on Textron's income tax expense in the near term. The Committee will continue to
assess the effect of these tax rules on Textron.
THE 1999 PLAN
The Committee recommends to the shareholders that they approve the adoption
of the 1999 Plan. The 1999 Plan continues the strategy of the Committee and the
Board of Directors of basing a substantial component of executive officers'
compensation on the value they generate for Textron's shareholders and reflects
their belief that the best measure of shareholder value is the performance of
Textron Common Stock. The 1999 Plan is described on pages 24 through 28 below.
This report is submitted by the Organization and Compensation Committee.
JOHN D. MACOMBER, CHAIRMAN
H. JESSE ARNELLE
DANA G. MEAD
BRIAN H. ROWE
JEAN HEAD SISCO
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EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation of (i) Textron's chief executive officer at the end of 1998 and
(ii) the four most highly compensated executive officers of Textron, other than
the chief executive officer, who were serving as executive officers at the end
of 1998 (collectively, the "Named Officers") for Textron's 1996, 1997 and 1998
fiscal years. Compensation which was deferred by the Named Officers under the
Deferred Income Plan is included below as compensation paid.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------- --------------------------------------------
AWARDS PAYOUTS
------------------------------- -------
RESTRICTED SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL STOCK AWARDS UNDERLYING PAYOUTS COMPENSATION
POSITION(1) YEAR SALARY ($) BONUS ($) ($)(4) OPTIONS/SARS (#) ($) ($)(5)
- ------------------------ ---- ---------- --------- ------------ ---------------- ------- ------------
J.F. Hardymon 1998 $1,050,000 $1,321,956(2) $ 321,956 -0- $3,703,000 $ 52,000
Chairman 1997 1,050,000 1,661,675 161,675 -0- 3,568,800 52,500
1996 1,050,000 1,613,019 113,019 -0- 1,856,800 348,555
L.B. Campbell 1998 862,500 1,000,000 -0- 142,000 2,221,800 43,125
Chairman and Chief 1997 700,000 700,000 -0- 43,000 1,784,400 35,000
Executive Officer 1996 600,000 600,000 -0- 64,000 1,114,080 169,320
H.L. Henkel 1998 432,500 602,454(2) 62,454 43,000 651,728 21,625
President and Chief 1997 335,000 308,297 38,296 17,500 499,632 16,750
Operating Officer 1996 295,000 250,000 1,376,250 24,000 306,372 76,244
S.L. Key 1998 430,000 464,090(2) 84,090 24,000 918,344 21,500
Executive Vice President 1997 430,000 384,048 44,047 22,000 832,720 21,500
and Chief Financial 1996 405,000 340,000 -0- 32,000 649,880 20,250
Officer
J.D. Butler 1998 400,000 605,959(2) 85,959 19,000 470,300 20,000
Executive Vice President 1997 200,000 362,500(3) 12,500 47,000 250,000 5,000
Administration and Chief
Human Resources Officer
(1) Mr. Campbell, previously President and Chief Operating Officer, succeeded
Mr. Hardymon as Chief Executive Officer on July 1, 1998, and as Chairman on
February 1, 1999. Mr. Henkel, previously President Textron Industrial
Products, became Executive Vice President and Chief Operating Officer on
July 1, 1998, and President and Chief Operating Officer on February 24,
1999. Mr. Henkel relinquished the position of President and Chief Operating
Officer on March 12, 1999, and will terminate his employment with Textron in
April 1999. Mr. Butler joined Textron in July 1997 as Executive Vice
President and Chief Human Resources Officer and became Executive Vice
President Administration and Chief Human Resources Officer on January 1,
1999.
(2) The amounts listed as paid to Messrs. Hardymon, Henkel, Key and Butler for
1998 include vested contributions made by Textron in the amounts of
$321,956, $62,454, $84,090 and $85,959, respectively, as a result of their
elections to defer compensation into the stock unit fund of the Deferred
Income Plan. It also includes for Mr. Butler $200,000 to replace a lost
compensation award from his prior employer.
(3) The amount listed as paid to Mr. Butler for 1997 includes a hiring bonus of
$100,000 and a vested contribution made by Textron in the amount of $12,500
as a result of his election to defer compensation into the stock unit fund
of the Deferred Income Plan.
(4) Amounts listed for Messrs. Hardymon, Henkel, Key, and Butler for 1998 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 2, 1999, 5,386, 1,053, 1,418
and 1,334 unvested stock units with a market value of $408,999, $79,962,
$107,679 and $101,301 were credited to the accounts of Messrs. Hardymon,
Henkel, Key and Butler, respectively. Upon Mr. Hardymon's retirement from
Textron on January 31, 1999, he received 100,000 shares of Textron
(footnotes continued on following page)
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(footnotes continued from preceding page)
Common Stock, the value of which on January 2, 1999, and January 31, 1999,
was $7,593,750 and $7,451,563, respectively. Mr. Campbell will receive the
cash equivalent of 50,000 shares of Textron Common Stock, provided he
remains in Textron's employment through January 1, 2001, or in certain
cases, if his employment ends earlier. As of January 2, 1999, the market
value of the 50,000 shares was $3,796,875. 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 would have received the cash equivalent of
30,000 shares of Textron Common Stock, had he remained in Textron's
employment through January 1, 2002. As of January 2, 1999, the market value
of the 30,000 shares was $2,278,125. Mr. Key will receive the cash
equivalent of 40,000 shares of Textron Common Stock following his
retirement, provided he retires from Textron at or after age 65 or in
certain cases, if his employment ends earlier. As of January 2, 1999, the
market value of the 40,000 shares was $3,037,500.
(5) Amounts listed as "All Other Compensation" for 1998 are Textron's
contributions under the Textron Savings Plan and the Savings Plan component
of the Supplemental Benefits Plan.
------------------------
STOCK OPTION GRANTS
The following table sets forth information on grants of stock options under
the 1994 Plan during Textron's 1998 fiscal year to the Named Officers. The
number of stock options granted to the Named Officers during Textron's 1998
fiscal year is also listed in the Summary Compensation Table on page 17 of this
Proxy Statement in the column entitled "Securities Underlying Options/SARs."
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF
------------------------------------------------------------- STOCK PRICE
NUMBER PERCENT OF APPRECIATION
OF TOTAL EXERCISE FOR OPTION/SARS
SECURITIES OPTIONS/SARS OR TERM($)(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.............. 42,000(3) 2.2% 72.78125 6/30/08 1,922,413 4,871,772
100,000 5.2% 74.9375 12/09/08 4,712,779 11,943,108
H.L. Henkel................ 10,000(3) 0.5% 72.78125 6/30/08 457,717 1,159,946
33,000 1.7% 74,9375 12/09/08 1,555,217 3,941,225
S.L. Key................... 24,000 1.3% 74.9375 12/09/08 1,131,067 2,866,346
J.D. Butler................ 19,000 1.0% 74.9375 12/09/08 895,428 2,269,190
- ---------------
(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 10, 1998, except for 42,000 options granted to Mr.
Campbell and 10,000 options granted to Mr. Henkel on July 1, 1998, as a
result of their promotions to Chief Executive Officer and Chief Operating
Officer, respectively. 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. All
options granted to Mr. Henkel in 1998 will expire immediately upon
termination of his employment in April 1999.
(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 $122.07 and
$194.37, respectively, at the end of the
(footnotes continued on following page)
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20
(footnotes continued from preceding page)
ten-year term of the options granted on December 10, 1998. The corresponding
stock prices for options granted on July 1, 1998, would be $118.55 and
$188.78, respectively.
(3) Granted on July 1, 1998, to supplement Messrs. Campbell's and Henkel's
December 1997 grants as a result of their promotions to Chief Executive
Officer and Chief Operating Officer, respectively. All options granted to
Mr. Henkel in 1998 will expire immediately upon termination of his
employment in April 1999.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information, with respect to the Named
Officers, concerning: (i) the exercise during Textron's 1998 fiscal year of
stock options and (ii) unexercised options held as of the end of Textron's 1998
fiscal year, which were granted to the Named Officers during 1998 and in prior
fiscal years under either the 1994 Plan or a predecessor plan. All shares are
shown on a post-split basis.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
J.F. Hardymon..................... 8,210 $$429,099 306,440 -0- $16,805,391 $ -0-
L.B. Campbell..................... 2,441 76,423 368,109 163,500 15,576,993 511,391
H.L. Henkel....................... 8,270 390,744 90,448 51,750 3,455,317 178,039
S.L. Key.......................... -0- -0- 118,000 35,000 4,367,313 166,656
J.D. Butler....................... -0- -0- 23,499 42,501 236,788 255,805
LONG-TERM INCENTIVE PLAN
The following table provides information concerning performance share unit
awards made during Textron's 1998 fiscal year to the Named Officers pursuant to
the 1994 Plan for the 1999-2001 performance cycle and for the prior performance
cycles referred to in the footnotes below.
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......................... -0- -- --
L.B. Campbell......................... 4,000(1) 3 years 4,000
8,000(2) 3 years 8,000
15,000(3) 3 years 15,000
30,000 3 years 30,000
H.L. Henkel........................... 1,000(1) 3 years 1,000
2,000(2) 3 years 2,000
4,500(3) 3 years 4,500
12,000 3 years 12,000
S.L. Key.............................. 8,000 3 years 8,000
J.D. Butler........................... 7,000 3 years 7,000
- ---------------
(1) Granted in July 1998 to supplement Messrs. Campbell's and Henkel's December
1995 grant for the 1996-1998 performance cycle as a result of their
promotions to Chief Executive Officer and Chief
(footnotes continued on following page)
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(footnotes continued from preceding page)
Operating Officer, respectively. All performance share units granted to Mr.
Henkel in 1998 will be cancelled immediately upon termination of his
employment in April 1999.
(2) Granted in July 1998 to supplement Messrs. Campbell's and Henkel's December
1996 grant for the 1997-1999 performance cycle as a result of their
promotions to Chief Executive Officer and Chief Operating Officer,
respectively. All performance share units granted to Mr. Henkel in 1998
will be cancelled immediately upon termination of his employment in April
1999.
(3) Granted in July 1998 to supplement Messrs. Campbell's and Henkel's December
1997 grant for the 1998-2000 performance cycle as a result of their
promotions to Chief Executive Officer and Chief Operating Officer,
respectively. All performance share units granted to Mr. Henkel in 1998
will be cancelled immediately upon termination of his employment in April
1999.
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.
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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.
PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35
- --------------- -- -- -- -- -- --
$ 500,000 $ 73,636 $ 110,454 $ 147,273 $ 184,091 $ 220,909 $ 257,727
600,000 88,636 132,954 177,273 221,591 265,909 310,227
750,000 111,136 166,704 222,273 277,841 333,409 388,977
1,000,000 148,636 222,954 297,273 371,591 445,909 520,227
1,250,000 186,136 279,204 372,273 465,341 558,409 651,477
1,500,000 223,636 335,454 447,273 559,091 670,909 782,727
1,750,000 261,136 391,704 522,273 652,841 783,409 913,977
2,000,000 298,636 447,954 597,273 746,591 895,909 1,045,227
2,250,000 336,136 504,204 672,273 840,341 1,008,409 1,176,477
2,500,000 373,636 560,454 747,273 934,091 1,120,909 1,307,727
2,750,000 411,136 616,704 822,273 1,027,841 1,233,409 1,438,977
3,000,000 448,636 672,954 897,273 1,121,591 1,345,909 1,570,227
3,250,000 486,136 729,204 972,273 1,215,341 1,458,409 1,701,477
3,500,000 523,636 785,454 1,047,273 1,309,091 1,570,909 1,832,727
3,750,000 561,136 841,704 1,122,273 1,402,841 1,683,409 1,963,977
4,000,000 598,636 897,954 1,197,273 1,496,591 1,795,909 2,095,227
4,250,000 636,136 954,204 1,272,273 1,590,341 1,908,409 2,226,477
4,500,000 673,636 1,010,454 1,347,273 1,684,091 2,020,909 2,357,727
4,750,000 711,136 1,066,704 1,422,273 1,777,841 2,133,409 2,488,977
5,000,000 748,636 1,122,954 1,497,273 1,871,591 2,245,909 2,620,227
5,250,000 786,136 1,179,204 1,572,273 1,965,341 2,358,409 2,751,477
5,500,000 823,636 1,235,454 1,647,273 2,059,091 2,470,909 2,882,727
5,750,000 861,136 1,291,704 1,722,273 2,152,841 2,583,409 3,013,977
6,000,000 898,636 1,347,954 1,797,273 2,246,591 2,695,909 3,145,227
6,250,000 936,136 1,404,204 1,872,273 2,340,341 2,808,409 2,276,477
6,500,000 973,636 1,460,454 1,947,273 2,434,091 2,920,909 3,407,727
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(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 17 of this Proxy Statement. As of January
2, 1999, the years of credited service for the Named Officers were as follows:
Mr. Hardymon, 9 years; Mr. Campbell, 6 years; Mr. Henkel, 11 years; Mr. Key, 4
years; and Mr. Butler, 2 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 are 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, also
participate in the Supplemental Retirement Plan for Textron Key Executives,
which provides benefits to participants who remain in the employ of Textron
until at least age 60. 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 if they remain in
the employ of Textron until age 65 (and a reduced benefit if they remain in the
employ of Textron until at least age 60).
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EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Hardymon had an employment contract with Textron through December 1999
which provided that during the term of the contract, his base salary would not
be reduced and he would remain eligible for participation in Textron's executive
compensation and benefit plans. Mr. Hardymon was granted 1,000,000 (on a
post-split basis) retirement stock incentive units in 1994, whereby he was to
receive a cash payment following his retirement on or after November 30, 1999,
equal to the increase in market price of Textron Common Stock at the time of
payment over the market price on the date the units were granted, which was
24.593750 (on a post-split basis). Additionally, upon Mr. Hardymon's retirement
from Textron on or after November 30, 1999, he was to receive 100,000 (on a
post-split basis) shares of Textron Common Stock. In November 1998 the Board of
Directors approved an early retirement agreement with Mr. Hardymon. The
agreement provided for (i) retirement on January 31, 1999, (ii) a cash payment
on February 1, 1999 for the 1,000,000 retirement stock incentive units equal to
the difference between the volume weighted average price of Textron Common Stock
on November 16, 1998, which was $75.97370 and the market price on the date the
units were granted, for a total payment amount of $51,379,950, (iii) issuance of
the 100,000 shares of Textron Common Stock immediately following January 31,
1999, and (iv) a pension benefit calculated as if retirement was effective
November 30, 1999, with pension payments commencing February 1999.
Messrs. Campbell, Key, Butler and two other executives had employment
contracts with Textron through December 2000 which provided that during the term
of the contract, base salary would not be reduced and the executives would
remain eligible for participation in Textron's executive compensation and
benefit plans. These contracts were automatically extended each January for an
additional year unless contrary notice was given. Under certain circumstances an
executive's employment status would be converted to that of an
employee-consultant for the remaining term of the contract. In July 1998 the
contracts were replaced with new agreements that are more market competitive.
The agreements provide for a three year initial term with a one year renewal
provision. The concept of employee-consultant was eliminated and the new
agreements permit immediate termination of employment. The agreements provide
for specified levels of severance protection based on the reason for termination
including change in control, irrespective of the remaining term of the
agreements. The agreements provide excise tax protection for change in control
terminations. The agreements provide that base salary will not be reduced and
the executives will remain eligible for participation in Textron's executive
compensation and benefit plans during the term of the agreements. Mr. Henkel,
who previously did not have an employment agreement, entered into an agreement
with Textron having provisions similar to the new agreements described above
following his promotion to chief operating officer in July 1998. Mr. Henkel's
agreement will expire upon termination of his employment in April 1999.
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.
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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
Supplemental Retirement Plan for Textron Key Executives provides that in the
event of a change in control of Textron, participants will be fully vested. 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. 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 1998, 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 $442,183. In December 1998, Textron
Turf Care & Specialty Products Division of Textron entered into an agreement
with Customized Transportation, Inc. ("CTI"), also a subsidiary of CSX, pursuant
to which CTI will provide third party logistics services to the division,
including freight rate negotiations and freight bill audits and payments. No
fees for such services were payable in 1998, and it is expected that fees in
1999 will be approximately $4,500,000.
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PERFORMANCE GRAPH
Set forth below is a stock performance graph which shows the change in
market value of $100 invested on December 31, 1993, 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 22 companies in comparable industries in the
following Standard & Poor's 500 price index industry groups:
aerospace/defense -- Boeing, General Dynamics Corporation, Lockheed Martin
Corporation and Northrup Grumman; auto parts & equipment -- ITT Industries, Inc.
and TRW Inc.; consumer finance -- Household International Inc.; defense
electronics -- Raytheon Company; diversified machinery -- Dover Corporation;
diversified manufacturing -- Aeroquip-Vickers, AlliedSignal Inc., Crane Co.,
Illinois Tool Works Inc., Johnson Controls Inc., Tenneco Inc., Tyco
International LTD. and United Technologies Corporation; electrical
equipment -- Rockwell International Company; iron & steel -- Allegheny Teledyne
Incorporated; specialized manufacturing -- Millipore, Pall Corp. and Parker
Hannifin Corp. The companies in the indices are weighted by market
capitalization. Textron's disposition of its interest in Avco Financial Services
eliminated its operations in the consumer finance business making inclusion of
Household International Inc., a consumer finance company, 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 that company.
TEXTRON INC. S&P 500 PEER GROUP I PEER GROUP II
------------ ------- ------------ -------------
Dec. 31, 1993 100.00 100.00 100.00 100.00
Dec. 31, 1994 88.78 101.32 100.86 100.18
Dec. 31, 1995 121.93 139.40 149.16 147.39
Dec. 31, 1996 173.81 171.41 194.29 190.14
Dec. 31, 1997 234.41 228.59 220.94 218.45
Dec. 31, 1998 289.42 293.92 226.28 219.73
APPROVAL OF THE TEXTRON 1999 LONG-TERM INCENTIVE PLAN
On February 24, 1999, the Board of Directors adopted, subject to
shareholder approval, the Textron 1999 Long-Term Incentive Plan (the "1999
Plan") as part of a continuing program to attract, retain and motivate key
employees. Textron's employee benefit programs have included long-term incentive
plans approved by the shareholders in 1982, 1987, 1990 and 1994. Through the
grant of awards based on Textron's long-term
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performance, these plans have increased the personal involvement of officers and
other selected employees in Textron's continued growth and success. The 1982,
1987 and 1990 Long-Term Incentive Plans have expired, and no further awards can
be made thereunder. If the 1999 Plan is approved by the shareholders, it would
become effective on April 28, 1999, and replace the current 1994 Plan, under
which no further awards would be made.
The 1999 Plan authorizes the granting of awards to key employees of Textron
and its related companies in any one or more of the following forms: (i) options
to purchase Textron Common Stock, (ii) performance share units and (iii)
restricted stock. Awards may be granted to any key employee of Textron, its
segments, divisions or subsidiaries, including full-time employees who are
directors. Directors who are not full-time employees of Textron, its divisions
or its subsidiaries are not eligible to receive awards under the 1999 Plan.
The total number of shares of Textron Common Stock for which options may be
granted under the 1999 Plan is 8,000,000, and the maximum number of stock
options that may be granted to any individual in any calendar year is 75,000, in
each case subject to adjustment as described below. Shares of Textron Common
Stock issued upon exercise of options may be either authorized but unissued
shares or previously issued shares held in the treasury. The maximum number of
performance share units which may be granted under the 1999 Plan is 1,000,000,
and the maximum number of performance share units that may be granted to any
individual for any award period is 60,000, in each case subject to adjustment as
described below. The maximum number of shares of restricted stock which may be
granted under the 1999 Plan is 500,000, and the maximum number of shares of
restricted stock which may be granted to any individual in any one calendar year
is 200,000. The closing price of Textron Common Stock as reported for New York
Stock Exchange Composite Transactions on March 3, 1999, was $77.56.
The 1999 Plan will be administered by the Organization and Compensation
Committee of the Board of Directors (the "Committee") which will determine the
key employees to whom awards will be granted, the form and amount of awards, the
dates of grant and the terms and provisions of each award (which need not be
identical). No member of the Committee will be eligible to receive an award
under the 1999 Plan. The Committee members will certify that they are "outside
directors" under the Internal Revenue Code definition. The Board of Directors
may delegate the Committee's responsibilities to one or more officers or
committees of Textron, but all decisions concerning the 1999 Plan that relate to
executive officers of Textron will be made by the Committee.
STOCK OPTIONS
The 1999 Plan provides for both incentive stock options ("Incentive
Options"), as defined in Section 422 of the Internal Revenue Code, and
non-qualified options.
All options granted under the 1999 Plan will be evidenced in writing. Each
option will be at a purchase price per share of not less than 100% of the fair
market value of Textron Common Stock at the time the option is granted. The
purchase price must be paid in full at the time of exercise. The purchase price
may be paid in cash, in shares of Common Stock with a value equal to the
exercise price or in a combination thereof. The term of each option will be for
such period as the Committee determines, but no Incentive Option may be
exercised later than ten years after the date of grant.
The 1999 Plan contains a provision allowing the plan to be modified to
comply with local country laws.
If an optionee ceases to be an employee during the term of an option, the
optionee may exercise the option within specified periods after such
termination. Discharge for cause, however, terminates all option rights
immediately. In the case of death of an optionee, the option may be exercised by
the optionee's estate within one year after death or until expiration of the
option, whichever occurs first. During an optionee's lifetime, options may be
exercised only by the optionee or the optionee's legal guardian or
representative.
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PERFORMANCE SHARE UNITS
Performance share units are fictional shares of Textron Common Stock which
are valued for payment purposes at the market value of Textron Common Stock on
the date the performance share units are earned.
All performance share unit grants under the 1999 Plan will be evidenced in
writing. In making each grant of performance share units, the Committee will
establish the applicable performance targets or measures. With respect to
performance share units based on performance targets, the Committee will
establish targets only in terms of one or more of the following: Textron's
earnings per share, net operating profit, after-tax profit, return on equity,
return on invested capital, economic profit, cash flow and shareholder value.
Additionally, attainment of a primary performance target will result in the
earning of 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
for corporate officers only. Failure to attain a minimum performance target will
result in the failure to earn any performance share 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 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 measures may be expressed in terms of any standard,
financial or otherwise, as the Committee may determine. Performance share units
related to one or more performance measures shall be earned only as determined
by the Committee and may not exceed more than 100% of the value of such units.
For purposes of determining whether performance targets have been met, the
Committee may equitably restate Textron's earnings per share, net operating
profit, return on equity or any other factor utilized in establishing the
performance targets to take into account the effect of acquisitions or
dispositions, extraordinary and non-recurring events, recapitalizations, stock
dividends, stock splits or other similar events or any change in accounting
practices, tax laws or other laws or regulations that significantly affect
Textron's financial performance. Payment of earned performance share units will
be in cash in an amount equal to the product of the number of performance share
units earned and the current value of Textron Common Stock for the date on which
the performance share units have been earned. Prior to making such payment, the
Committee will certify that the goals have been attained or satisfied.
In the case of the death, disability or normal or early retirement of a
grantee more than one year into an award period, performance share units may
continue to be earned on a pro rata basis. In other cases in which Textron
employment ends more than one year into an award period, a former employee will
continue to earn related performance share units on a pro rata basis only as
determined by the Committee. Upon any termination of employment for less than
acceptable performance, all outstanding performance share units will be
cancelled.
RESTRICTED STOCK
A restricted stock award represents an award made in shares of Textron
Common Stock. The terms of an award will be set forth in a written agreement.
Such terms may include, but are not limited to, continued employment with
Textron and/or achievement of performance goals. With respect to restricted
stock based on performance targets, the Committee will establish targets only in
terms of one or more of the following: Textron's earnings per share, net
operating profit, after-tax profit, return on equity, return on invested
capital, economic profit, cash flow and shareholder value.
The Committee may provide that a restricted stock award earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or credited to a grantee's account. Any crediting of dividends or
dividend equivalents may be made subject to such restrictions and conditions as
the Committee may establish, including reinvestment in additional shares or
share equivalents.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax consequences with
respect to Incentive Options, non-qualified options, performance share units and
restricted stock.
Incentive Options
An optionee will not realize taxable income and Textron will not receive
any deduction at the time of a grant or exercise of Incentive Options. If shares
acquired upon the exercise of Incentive Options are not disposed of within two
years from the date of grant, nor within one year from the date of exercise, any
gain or loss realized upon disposition of the shares will be treated as
long-term capital gain or loss. If the shares received upon exercise of an
Incentive Option are disposed of prior to the end of the applicable holding
periods described above, the difference between (a) the lesser of the fair
market value of the shares on the date of exercise or the price received upon
disposition of the shares and (b) the exercise price will be taxable to the
optionee as ordinary income in the year in which such disposition occurs, and
Textron will be entitled to a deduction in the amount of such ordinary income
recognized by the optionee. Any further gain or loss upon disposition will be
treated as short-term or long-term capital gain or loss depending on the holding
period of the shares. If Incentive Options are exercised with Textron Common
Stock previously owned by the optionee, such exercise will not be considered a
taxable disposition of the previously owned stock unless such stock was itself
received on exercise of Incentive Options and the holding periods described
above for the exchanged stock have not been satisfied. To the extent that the
aggregate option price of an optionee's Incentive Options which become
exercisable in any year exceeds $100,000, such options will be treated as
non-qualified options. If Incentive Options are exercised more than three months
after the optionee's employment with Textron has ended, the Incentive Options
will be treated as non-qualified options. For purposes of the alternative
minimum tax only, the excess of the fair market value of the shares at the time
of exercise of Incentive Options over the option price will be treated as
additional income unless such shares are disposed of in the year of exercise.
Non-qualified Options
An optionee will not recognize taxable income and Textron will not receive
any deduction at the time of a grant of non-qualified options. Upon the exercise
of non-qualified options, the excess of the fair market value on the date of
exercise of the shares received over the exercise price for such shares will be
taxable to the optionee as ordinary income, and Textron will be entitled to a
deduction at that time for the amount of such ordinary income recognized by the
optionee. The subsequent sale of such shares by the optionee will be treated as
short-term or long-term capital gain or loss, as the case may be, in an amount
equal to the difference between the amount realized on such sale and the fair
market value of the shares at the time of exercise. If options are exercised
with Textron Common Stock previously owned by the optionee, such exercise will
not be considered a taxable disposition of the previously owned stock and no
gain or loss will be recognized with respect to such stock upon such exercise.
If additional shares are received by the optionee, the excess of the fair market
value of all of the shares received over the sum of the fair market value of all
of the shares surrendered and any cash payment made by the optionee upon
exercise will be taxable as ordinary income to the optionee and will be
deductible by Textron.
Performance Share Units
An employee will not recognize taxable income and Textron will not receive
any tax deduction by reason of the grant or award of a performance share unit.
The employee will recognize ordinary income equal to the cash paid to the
employee at the time a performance share unit is earned and paid, and Textron
will be entitled to deduction for the amount of such ordinary income recognized
by the employee.
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Restricted Stock
An employee will not recognize taxable income and Textron will not receive
any tax deduction by reason of the grant of restricted stock. However, when
restrictions on restricted stock lapse there are federal income tax
consequences. Generally, the fair market value of the stock will not be taxable
to the grantee as ordinary income until the year in which the grantee's interest
in the stock is freely transferable or is no longer subject to a substantial
risk of forfeiture. However, the grantee may elect to recognize income when the
stock is received. If this election is made, the amount taxed to the grantee as
ordinary income is determined as of the date of receipt of the restricted stock.
Section 162(m) of the Internal Revenue Code
See summary under the heading "Tax Considerations" on page 16 of this Proxy
Statement for a description of the implications of Section 162(m) of the
Internal Revenue Code.
GENERAL
It is presently expected that in the first year following approval of the
1999 Plan approximately 60 key executives, including executive officers, will
receive awards of performance share units coupled with stock options, that
approximately 1,000 other employees who are not executive officers will receive
stock options without awards of performance share units and that fewer than 5
key executives, including executive officers, will receive awards of restricted
stock. Information relating to the most recent prior awards to the Named
Officers under the 1994 Plan is contained in the Summary Compensation Table and
the Stock Option/SAR Grants in Last Fiscal Year and Long-Term Incentive Plan
Awards in Last Fiscal Year tables on pages 17, 18 and 19 of this Proxy
Statement.
The maximum number of shares of Textron Common Stock that may be subject to
options, the maximum number of Performance Share Units available for grant, the
number of shares of Common Stock covered by each outstanding option of
Performance Share Unit and the price per share thereof, and the maximum number
of options that may be granted to any individual employee will be adjusted in
the event of a recapitalization, stock dividend, stock split or other similar
event. In addition, shares which are subject to options which expire unexercised
or which are terminated or cancelled will be added to the remaining maximum
number of shares of Textron Common Stock that may be subject to options.
The Board of Directors may at any time terminate the 1999 Plan or any part
thereof and may from time to time amend the 1999 Plan as it may deem advisable,
but the Board may not, without shareholder approval, increase the aggregate
number of shares of Textron Common Stock which may be issued under the 1999 Plan
(except as such number may be adjusted in the event of a recapitalization, stock
dividend, stock split or similar event), or extend the period during which an
Incentive Stock Option may be exercised beyond ten years. Termination or
amendment may not, without the consent of the participant, affect the
participant's rights under an award previously granted.
Awards granted under the 1999 Plan are not assignable or transferable by
the recipient thereof, except by will or by the laws of descent and
distribution.
The 1999 Plan provides that outstanding options will be exercisable
immediately and in full, all outstanding performance share units will be deemed
earned and payable immediately and in full, and all shares of restricted stock
will vest immediately in the event of certain changes in control of Textron
described in the 1999 Plan, unless determined otherwise by the Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF
THE 1999 LONG-TERM INCENTIVE PLAN (ITEM 2 ON THE PROXY CARD).
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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 1999, and recommends to the
shareholders ratification of the appointment of Ernst & Young LLP as independent
auditors for 1999. 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 3 ON THE PROXY CARD).
SHAREHOLDER PROPOSAL
Mercy Consolidated Asset Management Program and six other shareholders have
notified Textron that they intend to propose the following resolution at the
1999 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 Corporate Secretary of Textron):
WHEREAS the proponents of this resolution believe that the Board of Textron
should establish criteria to guide management in their defense contract
bidding and implementation activities;
WHEREAS we believe that economic decision-making has both an ethical and a
financial component;
WHEREAS we believe our company's ethical responsibilities include analyzing
the effects of its decisions with respect to employees, communities, and
nations;
WHEREAS we believe decisions to develop and to produce weapons can have
grave consequences to the lives and/or freedoms of people worldwide, if the
company has not considered its ethical responsibilities ahead of time;
therefore be it
RESOLVED that the shareholders request the Board of Directors to establish
a committee to research this issue and to develop criteria for the bidding,
acceptance and implementation of military contracts and to report the
results of its study to shareholders at its 2000 annual meeting.
Proprietary information may be omitted and the cost limited to a reasonable
amount.
The proponents have submitted the following statement in support of this
proposal:
The proponents of this resolution believe that all human beings are
called to seek justice and peace. An ethic of stewardship of the earth must
include respect for humanity and for creation. Because we believe that
corporate social responsibility in a successful free enterprise system
demands ethical reflection and action upon activities that are socially
useful as well as economically profitable, we recommend that the Board
study include the following subjects:
M Arms sales to governments that repress their citizens,
M The connection between arms sales and geographical or political
instability,
M Lobbying and marketing activities, both in the United States and abroad,
including costs,
M Sales of weapons, parts, technology, and components convertible to
military use (dual-use) to foreign governments,
M Transfers of technology, including co-production agreements.
A YES vote recommends that the Board consider the above-listed criteria in
a study of our company's military sales and production activities.
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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 committed to doing business in full compliance with all
applicable laws and regulations and in accordance with Textron policies and
procedures regarding such matters as standards of business conduct; export
controls; transactions with governments; political contributions and activities;
relationships with customers and suppliers; protection of intellectual property;
environmental protection, health and safety; and employee and community
relations. These policies apply to all Textron operations, including those
involving military contracts. Thus, Textron's business leaders must determine
that Textron's military contract activities meet applicable legal requirements,
adhere to Textron's ethics policies and satisfy standards of sound business
judgment. The Board of Directors believes that Textron's existing process for
reviewing the types of matters raised in the proposal is already sufficient.
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
five nominees in Class III 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 approval of the adoption of the 1999 Plan and for
ratification of the appointment of Ernst & Young LLP as independent auditors and
against the shareholder proposal 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 Corporate Secretary of Textron or by
submitting a subsequent proxy or by voting in person at the meeting.
The five 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. Approval of the
adoption of the 1999 Plan, ratification of the appointment of auditors and the
shareholder proposal require the favorable vote of a majority of shares present
in person at the 1999 annual meeting or represented by proxy and entitled to
vote thereon. All shareholders vote as one class. Abstaining from voting on the
adoption of the 1999 Plan, ratification of the appointment of auditors and the
shareholder proposal will have the same effect as voting against such proposals.
Broker non-votes on the adoption of the 1999 Plan, ratification of appointment
of auditors and the shareholder proposal will not be included in the calculation
of shares entitled to vote for such proposals 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 Corporate 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.
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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
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 adoption of the 1999 Plan,
election of directors, ratification of appointment of auditors and the
shareholder proposal, 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
shareholder proposal, 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 $13,500, plus reasonable out-of-pocket expenses.
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SHAREHOLDER PROPOSALS AND OTHER MATTERS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting
of shareholders must be received by Textron on or before November 26, 1999, 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.
In order for a shareholder to bring other business before a shareholder
meeting, timely notice must be received by Textron in advance of the meeting.
Under Textron's By-Laws, such notice must be received not less than 90 nor more
than 120 days before the anniversary date of the immediately preceding annual
meeting of shareholders (but if the annual meeting is called for a date that is
not within 30 days of such anniversary date, then such notice must be received
within 10 days after notice of the meeting is mailed or other public disclosure
of the meeting is made) or between December 30, 1999, and January 29, 2000, for
the 2000 annual meeting. Such notice must include a description of the proposed
business, the reasons therefor, and other specified matters. These requirements
are separate from and in addition to the requirements a shareholder must meet to
have a proposal included in Textron's proxy statement. The foregoing time limits
also apply in determining whether notice is timely for purposes of rules adopted
by the Securities and Exchange Commission relating to the exercise of
discretionary voting authority by Textron.
By order of the Board of Directors,
/s/ Frederick K. Butler
Frederick K. Butler
Vice President Business Ethics and
Corporate Secretary
March 25, 1999
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.
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34
TEXTRON INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS APRIL 28, 1999
R
The undersigned hereby appoint(s) Lewis B. Campbell, John A. Janitz and
O Frederick K. Butler, or any one or more of them, attorneys with 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 28, 1999, 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
Customer Center Building
Cessna Aircraft Company
One Cessna Boulevard
Wichita, Kansas 67277
(316) 517-6000
35
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 proposals 2 and 3 and AGAINST proposal 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 PROPOSALS 2 AND 3.
- -----------------------------------------------------------------------------------------------------------------------------------
FOR* WITHHELD FROM ALL NOMINEES: FOR AGAINST ABSTAIN
1. Election of [ ] [ ] H. Jesse Arnelle 2. Adoption of Textron [ ] [ ] [ ]
Directors John D. Macomber 1999 Long-Term Incentive Plan
Brian H. Rowe
Sam F. Segnar 3. Ratification of appointment
Martin D. Walker of independent auditors [ ] [ ] [ ]
The Board of Directors recommends that you vote
AGAINST proposal 4.
* Except vote withheld from the CHANGE OF ADDRESS/
following nominee(s): [ ] COMMENTS ON
REVERSE SIDE.
4. Shareholder proposal [ ] [ ] [ ]
relating to Ethical
Criteria
- -----------------------------------------------------------------------------------------------------------------------------------
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 28, 1999
10:30 a.m.
Customer Center Building
Cessna Aircraft Company
One Cessna Boulevard
Wichita, Kansas
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.
36
[LETTERHEAD OF LEWIS B. CAMPBELL]
March 1999
Dear Fellow Participant:
Textron's annual meeting of shareholders will take place on April 28,
1999. 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 1998 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 23, 1999, 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 five nominees for Director listed in ITEM 1, and FOR ITEM
2 and FOR ITEM 3. The Board of Directors recommends that you instruct the
Trustee to vote AGAINST ITEM 4.
Thank you for your continued support.
Sincerely,
/s/ LEWIS B. CAMPBELL
Enclosures