UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
þ	 	Filed by the Registrant	
 	 	 	
o	 	Filed by a Party other than the Registrant	
Check the appropriate box:
o	 	Preliminary Proxy Statement	
o	 	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))	
þ	 	Definitive Proxy Statement	
o	 	Definitive Additional Materials	
o	 	Soliciting Material Pursuant to §240.14a-12	
STRATTEC SECURITY CORPORATION
(Name of Registrant as Specified in Its Charter)
Registrant
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
þ	 	No fee required.	
 	 	 	
o	 	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:	

o	 	Fee paid previously with preliminary materials:	
 	 	 	
o	 	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.	

 	(1)	 	Amount previously paid:	
 	 	 	 	
 	(2)	 	Form, Schedule or Registration Statement No.:	
 	 	 	 	
 	(3)	 	Filing Party:	
 	 	 	 	
 	(4)	 	Date Filed:	

 

STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
 
Notice of Annual Meeting of Shareholders
To Be Held On October 5, 2010
 
The Annual Meeting of Shareholders of STRATTEC SECURITY CORPORATION, a Wisconsin corporation (the “Corporation” or “STRATTEC”), will be held at the Radisson Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin 53217, on Tuesday, October 5, 2010, at 8:00 a.m. local time, for the following purposes:
 
1. To elect one director to serve for a three-year term.
 
2. To consider and act on a proposal to amend and restate the STRATTEC SECURITY CORPORATION Stock Incentive Plan.
 
3. To take action with respect to any other matters that may be properly brought before the meeting and that might be considered by the shareholders of a Wisconsin corporation at their Annual Meeting.
 
By order of the Board of Directors
 
PATRICK J. HANSEN,
Secretary
 
Milwaukee, Wisconsin
September 1, 2010

Shareholders of record at the close of business on August 17, 2010 are entitled to vote at the meeting. Your vote is important to ensure that a majority of our stock is represented. Please complete, sign and date the enclosed proxy card and return it promptly in the enclosed envelope whether or not you plan to attend the meeting in person. If you later find that you may be present at the meeting or for any other reason desire to revoke your proxy, you may do so at any time before it is voted. Shareholders holding shares in brokerage accounts (“street name” holders) who wish to vote at the meeting will need to obtain a proxy form and voting instructions from the institution that holds their shares.

 
 
TABLE OF CONTENTS

Section	 	Page No.	
 	 	 	 	 	
General Information	 	 	1	 	
Proxies and Voting Procedures	 	 	1	 	
Shareholders Entitled to Vote	 	 	2	 	
Quorum; Required Vote	 	 	2	 	
Proposal 1: Election of Director	 	 	3	 	
Director Qualifications	 	 	3	 	
Directors’ Meetings and Committees	 	 	5	 	
Audit Committee	 	 	6	 	
Compensation Committee	 	 	6	 	
Nominating and Corporate Governance Committee	 	 	7	 	
Corporate Governance Matters	 	 	7	 	
Director Independence	 	 	7	 	
Board Leadership Structure	 	 	7	 	
The Board’s Role in Risk Oversight	 	 	8	 	
Director Nominations	 	 	8	 	
Communications between Shareholders and the Board of Directors	 	 	9	 	
Attendance of Directors at Annual Meetings of Shareholders	 	 	10	 	
Code of Business Ethics	 	 	10	 	
Audit Committee Matters	 	 	11	 	
Report of the Audit Committee	 	 	11	 	
Information Regarding Change of Auditors	 	 	12	 	
Fees of Independent Registered Public Accounting Firm	 	 	12	 	
Fiscal 2011 Independent Registered Public Accounting Firm	 	 	13	 	
Audit Committee Financial Expert	 	 	13	 	
Executive Officers	 	 	14	 	
Security Ownership	 	 	16	 	
Section 16(a) Beneficial Ownership Reporting Compliance	 	 	18	 	
Executive Compensation	 	 	19	 	
Compensation Discussion and Analysis	 	 	19	 	
Report of the Compensation Committee	 	 	31	 	
Summary Compensation Table	 	 	32	 	
Grants of Plan—Based Awards	 	 	35	 	
Outstanding Equity Awards at Fiscal Year End	 	 	36	 	
Option Exercises and Stock Vested	 	 	37	 	
Pension Benefits Table	 	 	38	 	
Employment Agreements	 	 	38	 	
Post-Employment Compensation	 	 	39	 	

 
 	 	 	 	 	
Section	 	Page No.	
 	 	 	 	 	
Director Compensation	 	 	43	 	
General Information	 	 	43	 	
Director Summary Compensation Table	 	 	44	 	
Transactions With Related Persons	 	 	45	 	
Related Person Transactions	 	 	45	 	
Review and Approval of Related Person Transactions	 	 	45	 	
Equity Compensation Plan Information	 	 	45	 	
Proposal 2: Approval of Amended and Restated Stock Incentive Plan	 	 	46	 	
Purpose and Effect of Proposal	 	 	46	 	
Description of the Stock Incentive Plan	 	 	46	 	
New Plan Benefits	 	 	49	 	
Vote Required	 	 	50	 	
Annual Report to the Securities and Exchange Commission on Form 10-K	 	 	50	 	
Shareholder Proposals	 	 	50	 	
Other Matters	 	 	51	 	

ii

 

STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
 
Proxy Statement for the 2010 Annual Meeting of Shareholders
To Be Held on October 5, 2010
 
Important Notice Regarding the Availability of Proxy Materials for the
2010 Annual Meeting of Shareholders to be held on October 5, 2010:
This Proxy Statement and the Accompanying Annual Report
are Available at www.strattec.com
 
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of STRATTEC SECURITY CORPORATION of proxies, in the accompanying form, to be used at the Annual Meeting of Shareholders of STRATTEC to be held at the Radisson Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin 53217, on Tuesday, October 5, 2010, at 8:00 a.m., local time, and any adjournments thereof. Only shareholders of record at the close of business on August 17, 2010 will be entitled to notice of and to vote at the meeting. There will be no presentation regarding our operations at the Annual Meeting of Shareholders. The only matters to be discussed are the matters set forth in the Proxy Statement for the 2010 Annual Meeting of Shareholders and such other matters as are properly raised at the Annual Meeting.
 
Our principal executive offices are located at 3333 West Good Hope Road, Milwaukee, Wisconsin 53209. It is expected that this Proxy Statement and the form of Proxy will be mailed to shareholders on or about September 1, 2010.
 
GENERAL INFORMATION
 
Proxies and Voting Procedures
 
The shares represented by each valid proxy received in time will be voted at the meeting and, if a choice is specified in the proxy, it will be voted in accordance with that specification. If no instructions are specified in a signed proxy returned to STRATTEC, the shares represented thereby will be voted in  FAVOR  of the election of the director listed in the enclosed proxy card and in

 
FAVOR of the proposal to amend and restate the STRATTEC SECURITY CORPORATION Stock Incentive Plan (the “Stock Incentive Plan”). If any other matters are properly presented at the Annual Meeting, including, among other things, consideration of a motion to adjourn the meeting to another time or place, the individuals named as proxies and acting thereunder will have the authority to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. If the Annual Meeting is adjourned or postponed, a proxy will remain valid and may be voted at the adjourned or postponed meeting. As of the date of printing of this Proxy Statement, we do not know of any other matters that are to be presented at the Annual Meeting other than the election of the director and the approval of the amended and restated Stock Incentive Plan.
 
Shareholders may revoke proxies at any time to the extent they have not been exercised. Attendance at the Annual Meeting will not automatically revoke a proxy, but a shareholder attending the Annual Meeting may request a ballot and vote in person, thereby revoking a prior granted proxy. The cost of solicitation of proxies will be borne by STRATTEC. Solicitation will be made primarily by use of the mail; however, some solicitation may be made by our employees, without additional compensation therefor, by telephone, by facsimile, by email or in person.
 
Shareholders Entitled to Vote
 
Only shareholders of record at the close of business on August 17, 2010 will be entitled to notice of and to vote at the Annual Meeting. On the record date, we had outstanding 3,322,074 shares of our common stock, $0.01 par value per share (the “Common Stock”), entitled to one vote per share.
 
Quorum, Required Vote
 
A majority of the votes entitled to be cast at the Annual Meeting, represented either in person or by proxy, shall constitute a quorum with respect to the meeting. Approval of each matter specified in the notice of the meeting, other than the election of the nominee director, requires the number of votes cast at the Annual Meeting in favor of approval to exceed the votes cast against approval. Approval of the election of the nominee director requires a plurality of the shares represented at the meeting. This means that the nominee with the most votes will be elected. Abstentions and broker nonvotes ( i.e. , shares held by brokers in street name, voting on certain matters due to discretionary authority or instructions from the beneficial owners but not voting on other matters due to lack of authority to vote on such matters without instructions from the beneficial owner) will count toward the quorum requirement but will not count toward the determination of whether such matters are approved or the director is elected. The Inspector of Election appointed by our Board of Directors will count the votes and ballots.
2

 
 
PROPOSAL 1:

ELECTION OF DIRECTOR
 
It is intended that shares represented by proxies in the enclosed form will be voted for the election of the nominee in the following table to serve as a director. Our Board of Directors is divided into three classes, with the term of office of each class ending in successive years. One director is to be elected at the Annual Meeting to serve for a term of three years expiring in 2013 and four directors will continue to serve for the terms designated in the schedule shown below. As indicated below, the individual nominated by our Board of Directors is an incumbent director. We anticipate that the nominee listed in this Proxy Statement will be a candidate when the election is held. However, if for any reason the nominee is not a candidate at that time, proxies will be voted for any substitute nominee designated by STRATTEC (except where a proxy withholds authority with respect to the election of directors).
 
Director Qualifications
 
The following table provides information as of the date of this proxy statement about the nominee for election to our Board of Directors at the Annual Meeting and about each of our incumbent directors who are continuing as directors of STRATTEC after the Annual Meeting. The information presented includes information each nominee or director has given us about his age, his principal occupation and business experience for the past five years, and the names of other publicly-held companies of which he currently serves as a director or has served as a director during the past five years. The Nominating and Corporate Governance Committee regularly evaluates the mix of experience, qualifications, attributes and skills of our directors using a matrix of areas that the Committee considers important for our business. In addition to the information presented below regarding the nominee’s specific experience, qualifications, attributes and skills that led our Nominating and Corporate Governance Committee to the conclusion that the nominee should serve as a director, our Nominating and Corporate Governance Committee also considered the qualifications and criteria described below under “Corporate Governance Matters — Director Nominations” with the objective of creating a complementary mix of directors.
 
Board of Directors Recommendation
 
The Board of Directors recommends that shareholders vote in FAVOR of the election of Frank J. Krejci as a director of STRATTEC.
3

 
 	 	 	 	 	 	 	 	 	
 	 	 	 	Director
	
Name, Principal Occupation for Past Five Years and Directorships	 	Age	 	Since	
 	 	 	 	 	 	 	 	 	
Nominee for election at the Annual Meeting (Class of 2013):	 	 	 	 	 	 	 	 	
FRANK J. KREJCI	 	 	60	 	 	 	1995	 	
President and Chief Operating Officer of the Corporation since January 1, 2010. President of Wisconsin Furniture, LLC (d/b/a The Custom Shoppe, a manufacturer of custom furniture), from June 1996 until December 31, 2009.	 	 	 	 	 	 	 	 	
Incumbent Directors (Class of 2011):	 	 	 	 	 	 	 	 	
MICHAEL J. KOSS	 	 	56	 	 	 	1995	 	
President and Chief Executive Officer of Koss Corporation (a manufacturer and marketer of high fidelity stereophones for the international consumer electronics market) since 1989. Director of Koss Corporation.	 	 	 	 	 	 	 	 	
On December 18, 2009, Koss Corporation (Koss) learned of certain unauthorized transactions made by Sujata Sachdeva, its former Vice President of Finance and Principal Accounting Officer. Koss subsequently learned that Ms. Sachdeva colluded with two other employees of the accounting department in the misappropriation and circumvention of Koss’ existing internal controls and established operating procedures. Ms. Sachdeva and these other former employees were terminated shortly after Koss learned of the unauthorized transactions. On January 20, 2010, Ms. Sachdeva was indicted in connection with these misappropriations from Koss. The following legal proceedings are on-going as a result of these unauthorized transactions:	 	 	 	 	 	 	 	 	
•   On January 15, 2010, a class action complaint was filed in federal court in Wisconsin against Koss, Michael Koss and Sujata Sachdeva. The suit alleges violations of Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act of 1934, as amended, relating to the unauthorized transactions and requests an award of compensatory damages in an amount to be proven at trial. See  David A. Puskala v. Koss Corporation, et al. , United States District Court, Eastern District of Wisconsin, Case No. 2:2010cv00041.
	 	 	 	 	 	 	 	 	
•   On January 26, 2010, the Securities and Exchange Commission’s Division of Enforcement advised Koss that it obtained a formal order of investigation in connection with the unauthorized transactions. Koss voluntarily brought the unauthorized transactions to the staff’s attention when they were discovered in December 2009, and is cooperating with the ongoing investigation.	 	 	 	 	 	 	 	 	

4

 
 	 	 	 	 	 	 	 	 	
 	 	 	 	Director
	
Name, Principal Occupation for Past Five Years and Directorships	 	Age	 	Since	
 	 	 	 	 	 	 	 	 	
•   On February 16 and 18, 2010, separate shareholder derivative suits were filed in Milwaukee County Circuit Court in connection with the previously disclosed unauthorized transactions. The first suit names as defendants Michael Koss, John Koss Sr., the other Koss directors, Sujata Sachdeva, Grant Thornton, LLP, and Koss (as a nominal defendant); the second suit names the same parties except Grant Thornton, LLP. Among other things, both suits allege various breaches of fiduciary and other duties, and seek recovery of unspecified damages and other relief. See  Ruiz v. Koss, et al. , Circuit Court, Milwaukee County, Wisconsin, No. 10CV002422 (February 16, 2010) and Mentkowski v. Koss, et al ., Circuit Court, Milwaukee County, Wisconsin, No. 10CV002290 (February 18, 2010). These two shareholder derivative suits have been consolidated under Master File No. 10CV002422.	 	 	 	 	 	 	 	 	
DAVID R. ZIMMER	 	 	64	 	 	 	2006	 	
Managing partner and co-founder of Stonebridge Equity LLC (d/b/a Stonebridge Business Partners, a provider of consulting services primarily to automotive-related manufacturing businesses seeking to develop and complement growth plans, strategic partnerships with foreign companies and merger and acquisition strategies), since 2004. Director of Twin Disc Inc. and Detrex Corporation.	 	 	 	 	 	 	 	 	
Incumbent Directors (Class of 2012)	 	 	 	 	 	 	 	 	
HAROLD M. STRATTON II	 	 	62	 	 	 	1994	 	
Chairman and Chief Executive Officer of the Corporation since	 	 	 	 	 	 	 	 	
February 1999. President of the Corporation from October 2004 to December 31, 2009. President and Chief Executive Officer of the Corporation from February 1995 to February 1999. Director and a member of the Compensation Committee of Twin Disc Inc. and a director of Smith Investment Company LLC.	 	 	 	 	 	 	 	 	
ROBERT FEITLER	 	 	79	 	 	 	1995	 	
Chairman of the Executive Committee of the Board of Directors of Weyco Group, Inc. (a designer, purchaser and distributor of men’s footwear) since April 1996. Director of Weyco Group, Inc.	 	 	 	 	 	 	 	 	
 
DIRECTORS’ MEETINGS AND COMMITTEES
 
Our Board of Directors held five meetings in fiscal 2010, and all of our nominee and incumbent directors attended 100% of the meetings of our Board of Directors and the committees thereof on which they served.
5

 
Executive sessions or meetings of outside (non-management) directors without management present are held regularly for a general discussion of relevant subjects. In fiscal 2010, the outside directors met in executive session four times.
 
The committees of our Board of Directors consist of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The chart below identifies the members of each of these committees as of the date of this Proxy Statement, along with the number of meetings held by each committee during fiscal 2010:

 	 	 	 	 	 	Nominating and
	
 	 	Audit	 	Compensation	 	Corporate Governance	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of Meetings	 	 	3	 	 	 	2	 	 	 	2	 	
Name of Director:	 	 	 	 	 	 	 	 	 	 	 	 	
Robert Feitler	 	 	X	 	 	 	X	 	 	 	X	*	
Michael J. Koss	 	 	X	 	 	 	X	*	 	 	X	 	
David R. Zimmer	 	 	X	*	 	 	X	 	 	 	X	 	

 	 	 	
X	 	= committee member; * = committee chairman	
 
Frank J. Krejci was a member of each of our committees during fiscal 2010 until December 9, 2009, at which point Mr. Krejci resigned as a member of each committee in contemplation of his appointment as our President and Chief Operating Officer effective January 1, 2010.
 
Audit Committee
 
The Audit Committee is responsible for assisting our Board of Directors with oversight of: (1) the integrity of our financial statements; (2) our compliance with legal and regulatory requirements; (3) our independent auditor’s qualifications and independence; and (4) the performance of our internal accounting function and independent auditors. Our Audit Committee has the direct authority and responsibility to appoint, compensate, oversee and retain the independent auditors, and is an “audit committee” for purposes of Section 3(a)(58)(A) of the Securities Exchange Act of 1934. We have placed a current copy of the Charter of the Audit Committee on our web site located at www.strattec.com.
 
Compensation Committee
 
The Compensation Committee, in addition to such other duties as may be specified by our Board of Directors: (1) oversees and reviews the compensation and benefits of our senior managers (including determining the compensation of our Chief Executive Officer); (2) makes appropriate recommendations to our Board of Directors with respect to our incentive compensation plans and equity-based plans; (3) administers our incentive compensation plans and equity-based plans in accordance with the responsibilities assigned to the Committee under any and all such plans, including under our Economic Value Added Plan for Executive Officers and Senior Managers and our Stock Incentive Plan; and (4) reviews and makes recommendations to our Board of Directors
6

 
with respect to the compensation of our outside directors. We have placed a current copy of the Charter of the Compensation Committee on our web site located at www.strattec.com.
 
Nominating and Corporate Governance Committee
 
The Nominating and Corporate Governance Committee is responsible for assisting our Board of Directors by: (1) identifying individuals qualified to become members of our Board of Directors and its committees; (2) recommending guidelines and criteria to the Board of Directors to determine the qualifications of potential directors; (3) making recommendations to the Board of Directors concerning the size and composition of the Board and its committees; (4) recommending to our Board of Directors nominees for election to the Board at the annual meeting of shareholders; (5) developing and recommending to our Board of Directors a set of corporate governance principles applicable to STRATTEC; and (6) assisting our Board of Directors in assessing director performance and the effectiveness of the Board of Directors. We have placed a current copy of the Charter of the Nominating and Corporate Governance Committee on our web site located at www.strattec.com.
 
CORPORATE GOVERNANCE MATTERS
 
Director Independence
 
Our Board of Directors has reviewed the independence of our continuing directors and the nominee for election to the Board at the 2010 Annual Meeting of Shareholders under the applicable standards of the NASDAQ Stock Market. Based on this review, our Board of Directors determined that each of the following directors is independent under those standards:
 
(1) Robert Feitler                 (3) David R. Zimmer
 
(2) Michael J. Koss
 
Based on such standards, Harold M. Stratton II and Frank J. Krejci are the only directors who are not independent because Mr. Stratton is our Chief Executive Officer and Mr. Krejci is our President and Chief Operating Officer.
 
Board Leadership Structure
 
We currently have the same person serving as our Chief Executive Officer and as Chairman of our Board of Directors. Harold M. Stratton II has served as our Chief Executive Officer and Chairman of the Board since February 1999. We do not currently have a lead independent director. Although our Board of Directors does not have a formal policy with respect to its leadership structure, we believe that currently combining the positions of Chief Executive Officer and Chairman serves as an effective link between management’s role of identifying, assessing and managing risks and the Board of Directors’ role of risk oversight. Mr. Stratton possesses in-depth knowledge of the issues, opportunities and challenges we face, and is thus best positioned to develop agendas and highlight issues that ensure that the Board of Directors’ time and attention are focused
7

 
on the most critical matters. In addition, our Board of Directors has determined that this leadership structure is optimal because it believes that having one leader serving as both the Chairman and Chief Executive Officer provides decisive, consistent and effective leadership, as well as clear accountability. Having one person serve as Chairman and Chief Executive Officer also enhances our ability to communicate our message and strategy clearly and consistently to our shareholders, employees, and business partners, particularly during times of turbulent economic and industry conditions. Although we believe that the combination of the Chairman and Chief Executive Officer roles is appropriate under current circumstances, we will continue to review this issue periodically to determine whether, based on the relevant facts and circumstances, separation of these offices would serve our best interests and the best interests of our shareholders.
 
The Board’s Role in Risk Oversight
 
The role of our Board of Directors in STRATTEC’s risk oversight process includes receiving reports from members of our senior management on areas of material risk to STRATTEC, including operational, financial, legal and regulatory, and strategic and reputational risks. The Board has authorized the Audit Committee to oversee and periodically review STRATTEC’s enterprise risk assessment and enterprise risk management policies.
 
Director Nominations
 
We have a standing Nominating and Corporate Governance Committee. Based on the review described under “Corporate Governance Matters — Director Independence,” our Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent under the applicable standards of the NASDAQ Stock Market.
 
The Nominating and Corporate Governance Committee will consider director nominees recommended by shareholders. A shareholder who wishes to recommend a person or persons for consideration as a nominee for election to the Board of Directors must send a written notice by mail, c/o Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road, Milwaukee, Wisconsin 53209, that sets forth: (1) the name, address (business and residence), date of birth and principal occupation or employment (present and for the past five years) of each person whom the shareholder proposes to be considered as a nominee; (2) the number of shares of our Common Stock beneficially owned (as defined by section 13(d) of the Securities Exchange Act of 1934) by each such proposed nominee; (3) any other information regarding such proposed nominee that would be required to be disclosed in a definitive proxy statement to shareholders prepared in connection with an election of directors pursuant to section 14(a) of the Securities Exchange Act of 1934; and (4) the name and address (business and residential) of the shareholder making the recommendation and the number of shares of our Common Stock beneficially owned (as defined by section 13(d) of the Securities Exchange Act of 1934) by the shareholder making the recommendation.
 
We may require any proposed nominee to furnish additional information as may be reasonably required to determine the qualifications of such proposed nominee to serve as a director. Shareholder recommendations will be considered only if received no less than 120 days nor more than 150 days
8

 
before the date of the proxy statement sent to shareholders in connection with the previous fiscal year’s annual meeting of shareholders.
 
The Nominating and Corporate Governance Committee will consider any nominee recommended by a shareholder in accordance with the preceding paragraph under the same criteria as any other potential nominee. The Nominating and Corporate Governance Committee believes that a nominee recommended for a position on our Board of Directors must have an appropriate mix of director characteristics, experience, diverse perspectives and skills. Qualifications of a prospective nominee that may be considered by the Nominating and Corporate Governance Committee include:

 	• 	personal integrity and high ethical character;	
 	 	 	
 	• 	professional excellence;	
 	 	 	
 	• 	accountability and responsiveness;	
 	 	 	
 	• 	absence of conflicts of interest;	
 	 	 	
 	• 	fresh intellectual perspectives and ideas; and	
 	 	 	
 	• 	relevant expertise and experience and the ability to offer advice and guidance to management based on that expertise and experience.	
 
We do not have a formal policy for the consideration of diversity by the Nominating and Corporate Governance Committee in identifying nominees for director. Diversity is one of the factors the Nominating and Corporate Governance Committee may consider and in this respect diversity may include race, gender, national origin or other characteristics.
 
Communications between Shareholders and the Board of Directors
 
Our shareholders may communicate with the Board or any individual director by directing such communication to our Secretary at the address of our corporate headquarters, 3333 West Good Hope Road, Milwaukee, Wisconsin 53209. Each such communication should indicate that the sender is a shareholder of the Corporation and that the sender is directing the communication to one or more individual directors or to the Board as a whole.
 
All communications will be compiled by our Secretary and submitted to the Board of Directors or the individual directors on a monthly basis unless such communications are considered, in the reasonable judgment of our Secretary, to be improper for submission to the intended recipient(s). Examples of shareholder communications that would be considered improper for submission include, without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to STRATTEC or our business or communications that relate to improper or irrelevant topics. Our Secretary may also attempt to handle a communication directly where appropriate, such as where the communication is a request for information about STRATTEC or where it is a stock-related matter.
9

 
 
Attendance of Directors at Annual Meetings of Shareholders
 
We expect that all of our directors and nominees for election as directors at our annual meeting of shareholders will attend the annual meeting, absent a valid reason, such as a schedule conflict. All of our directors attended the annual meeting of shareholders held on October 6, 2009.
 
Code of Business Ethics
 
We have adopted a Code of Business Ethics that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of the Code of Business Ethics is available on our web site which is located at www.strattec.com. We also intend to disclose any amendments to, or waivers from, the Code of Business Ethics on our web site.
10

 
 
AUDIT COMMITTEE MATTERS
 
Report of the Audit Committee
 
The Audit Committee is comprised of three members of our Board of Directors. Frank J. Krejci was a member of the Audit Committee during fiscal 2010 until his resignation from the Committee effective December 9, 2009. Based upon the review described above under “Corporate Governance Matters — Director Independence,” our Board of Directors has determined that each member of the Audit Committee is independent as defined in the applicable standards of the NASDAQ Stock Market and the Securities and Exchange Commission (the “Commission”).
 
The Audit Committee has:

 	• 	reviewed and discussed our audited financial statements for the fiscal year ended June 27, 2010 with our management and with our independent auditors;	
 	 	 	
 	• 	discussed with our independent auditors the matters required to be discussed by SAS 61, “Communications with Audit Committees,” as amended (AICPA Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and	
 	 	 	
 	• 	received and discussed with our independent auditors the written disclosures and the letter from our independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence.	
 
Based on such review and discussions with management and with the independent auditors, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended June 27, 2010, for filing with the Commission.
 
AUDIT COMMITTEE:

David R. Zimmer — Chairman
Robert Feitler
Michael J. Koss
11

 
 
Information Regarding Change of Auditors
 
On February 23, 2010, STRATTEC dismissed Grant Thornton LLP as its independent public accountants and appointed Deloitte & Touche LLP as its new independent public accountants. The decision to dismiss Grant Thornton LLP and to retain Deloitte & Touche LLP was approved by our Audit Committee on February 23, 2010.
 
Grant Thornton’s reports on our consolidated financial statements for each of the fiscal years ended June 28, 2009 and June 29, 2008 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principals.
 
During our fiscal years ended June 28, 2009 and June 29, 2008 and through February 23, 2010, there were no disagreements with Grant Thornton LLP on any matters of accounting principles or practices, financial statement disclosures or auditing scope or procedures which, if not resolved to Grant Thornton LLP’s satisfaction would have caused them to make reference to the subject matter in connection with their report on our consolidated financial statements for such years; and there were no reportable events, as listed in 304(a)(i)(v) of Commission Regulation S-K.
 
During our fiscal years ended June 28, 2009 and June 29, 2008 and through February 23, 2010, we did not consult with Deloitte & Touche LLP regarding any of the matters or events set forth in Items 304(a)(2)(i) and (ii) of Commission Regulation S-K.
 
Fees of Independent Registered Public Accounting Firm
 
The following table summarizes the fees we were billed for audit and non-audit services rendered by our independent auditors, Deloitte & Touche LLP and Grant Thornton LLP, during fiscal 2010 and 2009:

 	 	Deloitte & Touche	 	 	Grant Thornton	 	
 	 	Fiscal Year
	 	 	Fiscal Year
	 	 	Fiscal Year
	 	
 	 	Ending June 27,
	 	 	Ending June 27,
	 	 	Ending June 28,
	 	
Service Type	 	2010	 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Audit Fees(1)	 	$	210,000	 	 	$	21,000	 	 	$	150,500	 	
Audit-Related Fees(2)	 	 	—	 	 	 	—	 	 	 	36,000	 	
Tax Fees(3)(4)	 	 	191,000	 	 	 	—	 	 	 	5,000	 	
All Other Fees	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Fees Billed	 	$	401,000	 	 	$	21,000	 	 	$	191,500	 	

 
 	 	 	
(1)	 	Includes fees for professional services rendered in connection with the audit of our financial statements for the fiscal years ended June 27, 2010 and June 28, 2009; the reviews of the financial statements included in each of our quarterly reports on Form 10-Q during those fiscal years; and statutory and regulatory agency audits during those fiscal years.	
 	 	 	
(2)	 	Consists of fees for ERISA employee benefit plan audits and consultations for financial accounting matters, including conducting due diligence in connection therewith.	

12

 

(3)	 	Includes U.S. and international tax advice and compliance services paid to Deloitte & Touche LLP.	
 	 	 	
(4)	 	Consists of fees paid to Grant Thornton LLP for the preparation of Form 5500 statutory tax returns.	
 
The Audit Committee of our Board of Directors considered that the provision of the services and the payment of the fees described above are compatible with maintaining the independence of Deloitte & Touche LLP and, formerly, Grant Thornton LLP.
 
The Audit Committee is responsible for reviewing and pre-approving any non-audit services to be performed by our independent auditors. The Audit Committee has delegated certain of its pre-approval authority to the Chairman of the Audit Committee to act between meetings of the Audit Committee. Any pre-approval given by the Chairman of the Audit Committee pursuant to this delegation is presented to the full Audit Committee at its next regularly scheduled meeting. The Audit Committee or Chairman of the Audit Committee reviews and, if appropriate, approves non-audit service engagements, taking into account the proposed scope of the non-audit services, the proposed fees for the non-audit services, whether the non-audit services are permissible under applicable law or regulation and the likely impact of the non-audit services on the independence of the independent auditors.
 
Since the effective date of the Commission rules requiring pre-approval of non-audit services on May 6, 2003, each new engagement of our independent auditors to perform non-audit services has been approved in advance by our Audit Committee or the Chairman of our Audit Committee pursuant to the foregoing procedures.
 
Fiscal 2011 Independent Registered Public Accounting Firm
 
Our Board of Directors, upon recommendation of our Audit Committee, will select our independent registered public accounting firm for the 2011 fiscal year. It is expected that a representative of Deloitte & Touche LLP will be present at the Annual Meeting and will have the opportunity to make a statement if such representative desires to do so and will be available to respond to appropriate questions.
 
Audit Committee Financial Expert
 
Our Board of Directors has determined that at least one of the members of our Audit Committee qualifies as an “audit committee financial expert” as defined by the rules of the Commission. David Zimmer, the Chairman of the Audit Committee, qualifies as an “audit committee financial expert” based on his work experience and education.
13

 
 
EXECUTIVE OFFICERS
 
The following table sets forth the name, age (as of the date of this Proxy Statement), current position and principal occupation and employment during the past five years of our executive officers who are not nominees for or incumbent directors:

Name	 	Age	 	Current Position	 	Other Positions	
 	 	 	 	 	 	 	 	 	
Patrick J. Hansen	 	 	51	 	 	Senior Vice President since October 2005; Chief Financial Officer, Treasurer and Secretary since February 1999.	 	Vice President of STRATTEC from February 1999 to October 2005; Corporate Controller of STRATTEC from February 1995 to February 1999.	
Kathryn E. Scherbarth	 	 	54	 	 	Vice President — Milwaukee Operations since May 2003.	 	Plant Manager of STRATTEC from February 1996 to May 2003.	
Rolando J. Guillot	 	 	42	 	 	Vice President — Mexican Operations since September 2004.	 	General Manager — Mexican Operations of STRATTEC from September 2003 to September 2004. Plant Manager of STRATTEC de Mexico S.A. de C.V. from January 2002 to September 2003. Mr. Guillot served in various management positions for STRATTEC de Mexico S.A. de C.V. from September 1996 to January 2002.	
Dennis A. Kazmierski	 	 	58	 	 	Vice President — Marketing and Sales since March 1, 2005	 	Vice President — Engineered Systems Group Business Unit for Metalforming Technologies Inc. from January 1999 to February 28, 2005.	

14

 
 	 	 	 	 	 	 	 	 	
Name	 	Age	 	Current Position	 	Other Positions	
 	 	 	 	 	 	 	 	 	
Brian J. Reetz	 	 	52	 	 	Vice President — Security Products since October 1, 2008	 	Vice President Engineering, Product Development & Management of STRATTEC from January 2007 until October 2008; Executive Engineer of STRATTEC from August 2004 until January 2007.	
Richard P. Messina	 	 	44	 	 	Vice President — Access Control Products since December 1, 2008	 	Chief Engineer-Power Closures Engineering for North America and Asia for Delphi Corporation from 2006 until November 2008; Engineering group manager for Delphi Corporation from 2001 until 2006.	
15

 
 
SECURITY OWNERSHIP
 
The following table sets forth information regarding the beneficial ownership of shares of our common stock as of August 17, 2010 by (i) each director and named executive officer (as defined below), (ii) all directors and executive officers as a group, and (iii) each person or other entity known by us to beneficially own more than 5% of our outstanding common stock.
 
The following table is based on information supplied to us by the directors, officers and shareholders described above. We have determined beneficial ownership in accordance with the rules of the Commission. Shares of common stock subject to options that are either currently exercisable or exercisable within 60 days of August 17, 2010 are treated as outstanding and beneficially owned by the option holder for the purpose of computing the percentage ownership of the option holder. However, these shares are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The table lists applicable percentage ownership based on 3,322,074 shares outstanding as of August 17, 2010.

 	 	 	 	 	 	Nature of Beneficial Ownership	
 	 	Total Number
	 	 	 	Sole
	 	Sole
	 	Shared
	 	Shared
	 	Sole
	
 	 	of Shares
	 	 	 	Voting and
	 	Voting or
	 	Voting and
	 	Voting or
	 	Voting
	
Name and Address of Beneficial
	 	Beneficially
	 	Percent of
	 	Investment
	 	Investment
	 	Investment
	 	Investment
	 	Power
	
Owner(1)	 	Owned(2)	 	Class	 	Power	 	Power	 	Power	 	Power	 	Only(3)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
T. Rowe Price Associates, Inc.(4)	 	 	530,900	 	 	 	16.0	%	 	 	507,600	 	 	 	530,900	 	 	 	—	 	 	 	—	 	 	 	—	 	
GAMCO Investors, Inc.(5)	 	 	478,734	 	 	 	14.4	%	 	 	478,734	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
FMR LLC(6)	 	 	424,088	 	 	 	12.8	%	 	 	—	 	 	 	424,088	 	 	 	—	 	 	 	—	 	 	 	—	 	
PRIMECAP Management Company(7)	 	 	358,604	 	 	 	10.8	%	 	 	136,904	 	 	 	358,604	 	 	 	—	 	 	 	—	 	 	 	—	 	
Vanguard Horizon Funds(8)	 	 	217,000	 	 	 	6.5	%	 	 	—	 	 	 	217,000	 	 	 	—	 	 	 	—	 	 	 	—	 	
Shufro Rose & Co., LLC(9)	 	 	194,055	 	 	 	5.8	%	 	 	—	 	 	 	194,055	 	 	 	—	 	 	 	—	 	 	 	—	 	
Dimensional Fund Advisors LP(10)	 	 	186,822	 	 	 	5.6	%	 	 	186,822	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Robert Feitler	 	 	15,000	 	 	 	*	 	 	 	15,000	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Michael J. Koss	 	 	1,000	 	 	 	*	 	 	 	1,000	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
David R. Zimmer	 	 	300	 	 	 	*	 	 	 	300	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Harold M. Stratton II(11)	 	 	80,864	 	 	 	2.4	%	 	 	22,664	 	 	 	—	 	 	 	33,770	 	 	 	—	 	 	 	3,800	 	
Frank J. Krejci	 	 	1,940	 	 	 	*	 	 	 	440	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,500	 	
Patrick J. Hansen	 	 	7,950	 	 	 	*	 	 	 	800	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,100	 	
Dennis A. Kazmierski	 	 	19,620	 	 	 	*	 	 	 	200	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,100	 	
Rolando J. Guillot	 	 	7,630	 	 	 	*	 	 	 	1,200	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,100	 	
All directors and executive officers as a group (11 persons)	 	 	149,948	 	 	 	4.4	%	 	 	42,718	 	 	 	—	 	 	 	33,770	 	 	 	—	 	 	 	18,000	 	

 	 	 	
* 	 	Less than 1%.	
 	 	 	
(1)	 	Unless otherwise indicated in the other footnotes, the address for each person listed is 3333 West Good Hope Road, Milwaukee, Wisconsin 53209.	

16

 

(2)	 	Includes the rights of the following persons to acquire shares of common stock pursuant to the exercise of currently vested stock options or pursuant to stock options exercisable within 60 days of August 17, 2010: Mr. Stratton — 20,630 shares; Mr. Krejci — 0; Mr. Hansen — 4,050 shares; Mr. Kazmierski — 17,320 shares; Mr. Guillot — 4,330 shares; and all directors and executive officers as a group — 55,460 shares.	
 	 	 	
(3)	 	All shares listed are unvested restricted stock issued under the Stock Incentive Plan.	
 	 	 	
(4)	 	T. Rowe Price Associates, Inc. and on behalf of T. Rowe Price Small-Cap Stock Fund, Inc. and T. Rowe Price Small-Cap Value Fund, Inc. (collectively, “T. Rowe Price”), 100 East Pratt Street, Baltimore, Maryland 21202, filed a Schedule 13G dated February 9, 2000, as amended most recently by a Schedule 13G/A dated February 12, 2010, reporting that as of December 31, 2009 T. Rowe Price was the beneficial owner of 530,900 shares of Common Stock. The shares of Common Stock beneficially owned by T. Rowe Price include 507,600 shares as to which T. Rowe Price has sole voting power and 530,900 shares as to which T. Rowe Price has sole investment power.	
 	 	 	
(5)	 	Mario J. Gabelli and on behalf of certain entities which he directly or indirectly controls or for which he acts as Chief Investment Officer, including the following: GAMCO Asset Management, Gabelli Funds, LLC and Teton Advisors, Inc. (collectively “GAMCO”), One Corporate Center, Rye, New York 10580, filed a Schedule 13D dated March 27, 2009, as amended most recently by a Schedule 13D/A dated June 15, 2010, reporting that as of June 14, 2010 GAMCO beneficially owned 478,734 shares of Common Stock with sole voting and investment power over all such shares.	
 	 	 	
(6)	 	FMR LLC or its predecessor FMR Corp. (“FMR”), 82 Devonshire Street, Boston, Massachusetts 02109, filed a Schedule 13G dated February 12, 1999, as amended most recently by a Schedule 13G/A dated February 12, 2010, reporting that as of December 31, 2009 it was the beneficial owner of 424,088 shares of Common Stock. The shares of Common Stock beneficially owned by FMR include 424,088 shares as to which FMR has sole investment power and 81,300 shares as to which FMR has sole voting power. Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR, is the beneficial owner of all shares as a result of acting as an investment adviser to various investment companies registered under the Investment Company Act of 1940. Fidelity’s ownership of an investment company, the Fidelity Low Priced Stock Fund, comprised the entire 424,088 shares. Edward C. Johnson, the Chairman of FMR, and members of his family have the power to direct the disposition of the shares deemed owned by Fidelity.	
 	 	 	
(7)	 	PRIMECAP Management Company (“PRIMECAP”), 225 South Lake Avenue, Suite 400, Pasadena, California 91101-3005, filed a Schedule 13G dated June 17, 1999, as amended most recently by a Schedule 13G/A dated February 9, 2010, reporting that as of December 31, 2009 it was the beneficial owner of 358,604 shares of Common Stock. The shares of Common Stock beneficially owned by PRIMECAP include 136,904 shares as to which PRIMECAP has sole voting power and 358,604 shares as to which PRIMECAP has sole investment power.	
 	 	 	
(8)	 	Vanguard Horizon Funds, 100 Vanguard Boulevard, Malvern, Pennsylvania 19355, filed a Schedule 13G dated February 13, 2002, as amended most recently by a Schedule 13G/A dated	

17

 
 	 	 	
 	 	February 1, 2010, reporting that as of December 31, 2009 it was the beneficial owner of 217,000 shares of Common Stock, with sole voting power as to all such shares.	
 	 	 	
(9)	 	Shufro Rose & Co., LLC, 745 Fifth Avenue, Suite 2600, New York, New York 10151, filed a Schedule 13G dated February 12, 2010 reporting that as of December 31, 2009 it was the beneficial owner of 194,055 shares of Common Stock, with sole investment power over all such shares.	
 	 	 	
(10)	 	Dimensional Fund Advisors LP (“Dimensional”), Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746, filed a Schedule 13G dated February 9, 2009, as amended by a Schedule 13G/A dated February 10, 2010, reporting that as of December 31, 2009 it was the beneficial owner of 186,822 shares of Common Stock as a result of acting as an investment adviser to various investment companies, commingled group trusts and separate accounts. Dimensional has sole voting and investment power over all such shares.	
 	 	 	
(11)	 	Includes 25,504 shares owned directly by Mr. Stratton, 10,100 shares held in trusts as to which Mr. Stratton is co-trustee and beneficiary, 169 shares owned by Mr. Stratton’s spouse, 22,060 shares owned jointly by Mr. Stratton and his spouse, 938 shares as to which Mr. Stratton is custodian on behalf of his children, 1,441 shares held in trusts as to which Mr. Stratton is co-trustee and 22 shares held in the Employee Savings and Investment Plan Trust.	
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the Commission initial reports of beneficial ownership on Form 3 and reports of changes in beneficial ownership of our equity securities on Form 4 or 5. The rules promulgated by the Commission under Section 16(a) of the Exchange Act require those persons to furnish us with copies of all reports filed with the Commission pursuant to Section 16(a). Based solely upon a review of such forms actually furnished to us, and written representations of certain of our directors and executive officers that no forms were required to be filed, all directors, executive officers and 10% shareholders have filed with the Commission on a timely basis all reports required to be filed under Section 16(a) of the Exchange Act during Fiscal 2010, except Dennis Kazmierski filed a Form 4 report on November 20, 2009 disclosing a transaction occurring on November 16, 2009.
18

 
 
EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
Overview
 
This Compensation Discussion and Analysis addresses our compensation philosophy, objectives, process and actions specific to fiscal 2010, and the first part of fiscal 2011 prior to the date of this proxy statement, for our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers based on their total compensation in fiscal 2010. Throughout this proxy statement, we refer to these five executive officers as our “named executive officers.” Responsibility for establishing, implementing and monitoring the total compensation of our executive officers rests with the Compensation Committee of our Board of Directors.
 
Our Compensation Philosophy
 
We believe it is important to provide compensation that at a minimum reflects base levels which are competitive with executive officers in other industrial public companies of similar structure and size. We further believe that it is appropriate and desirable to have meaningful incentive plans for our executive officers to help attract and retain high performing individuals and drive positive economic performance and enhanced shareholder value. Further, these performance based incentive plans should provide opportunities for our executive officers to significantly augment their base compensation on a short term and long term basis. This philosophy is the foundation for the following objectives.
 
Our Compensation Objectives
 
The objectives of the Compensation Committee in establishing compensation arrangements for our executive officers are to:

 	• 	Attract and retain qualified executive managers with a straightforward, understandable compensation program;	
 	 	 	
 	• 	Provide strong financial incentives, at reasonable cost, for positive financial performance and enhanced value of our shareholders’ investment; and	
 	 	 	
 	• 	Utilize “at risk” cash bonus plans to recognize positive short-term performance and equity based plans that support the long-term needs and goals of STRATTEC and our shareholders.	
 
The compensation program that has been developed and is being implemented by our Compensation Committee to achieve these objectives has the following features:

 	• 	Nearly all of the compensation paid to our executive officers on a yearly basis is based on only three components — (1) base salary; (2) potential annual cash bonuses based on performance; and (3) equity compensation in the form of stock option grants (leveraged or otherwise) and grants of shares of restricted stock. We currently provide our executive officers with a very modest level of “perquisites” or other benefits that are not available to all	

19

 
 	 	 	
 	 	of our employees. “All Other Compensation” reported in the Summary Compensation Table in this proxy statement constituted less than 3% of “Total Compensation” for our named executive officers during fiscal 2010.	

 	• 	Each executive officer receives a base salary based on available comparable compensation data which we believe to be competitive and fair.	
 	 	 	
 	• 	Total compensation is higher for individuals with greater responsibility and a greater ability to influence company-wide performance. In addition, the compensation program is designed so that a significant portion of total potential compensation for our executive officers is at risk, in that it is contingent on actual company and personal performance.	
 	 	 	
 	• 	Our “Economic Value Added Bonus Plan for Executive Officers and Senior Managers” provides for annual bonus payouts based on (1) the achievement of specific company-wide objective financial criteria, including minimum financial performance targets that must be met as a condition to payouts under the Plan, and (2) achievement of individual performance objectives.	
 	 	 	
 	• 	Our Stock Incentive Plan (which is attached to this Proxy Statement and is the subject of a proposal to adopt certain amendments to the plan) provides the opportunity for leveraged stock option grants based on a formula related to the above described Economic Value Added Bonus Plan for Executive Officers and Senior Managers. Further, grants of other nonqualified stock options and/or shares of restricted stock are made from time to time at the discretion of the Compensation Committee. Our Stock Incentive Plan specifically prohibits discounted stock options.	
 	 	 	
 	• 	The Compensation Committee has the authority to grant discretionary cash bonuses if deemed appropriate, based on individual and/or company performance.	
 	 	 	
 	• 	Our retirement benefits include a defined benefit plan available to all salaried associates and a Supplemental Executive Retirement Plan available only to our executive officers.	
 	 	 	
 	• 	Severance benefits, and specific benefits triggered by a change of control, are provided to executive officers.	
 
The above noted compensation program features are described in detail in the following sections of this Compensation Discussion and Analysis, entitled “Our Compensation Process,” “Components of Executive Compensation” and “Change of Control and Severance Benefits.”
 
Our Compensation Process
 
Compensation for our executive officers and other key employees is evaluated and determined by the Compensation Committee of our Board of Directors. Our Compensation Committee consists of three independent directors under the applicable standards of the NASDAQ Stock Market. Michael J. Koss is the Chairman of our Compensation Committee and the other members of the Compensation Committee are David R. Zimmer and Robert Feitler. Frank J. Krejci was a member of our Compensation Committee until December 9, 2009 when he voluntarily resigned in contemplation
20

 
of his appointment as our President and Chief Operating Officer effective January 1, 2010. Additional information regarding our Compensation Committee is disclosed under “Directors’ Meetings and Committees — Compensation Committee” on pages 6 and 7 of this Proxy Statement.
 
Many key compensation decisions are made during the first quarter of the fiscal year as the Compensation Committee meets to review performance for the prior year under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers, determine awards under our Stock Incentive Plan and set compensation targets and objectives for the coming year. However, our Compensation Committee also views compensation as an ongoing process and may convene special meetings in addition to its regularly scheduled meetings throughout the year for purposes of evaluation, planning and appropriate action. The Compensation Committee held two meetings during fiscal 2010 as well as meetings held on July 22, 2010 and August 17, 2010 to review performance for fiscal 2010. At each meeting, the Compensation Committee held an executive session (without management present). The Compensation Committee receives and reviews materials in advance of each meeting, including materials that management believes will be helpful to the Committee as well as materials specifically requested by members of the Committee.
 
Our management assists the Compensation Committee in its oversight and determination of compensation. Management’s role includes assisting the Compensation Committee with evaluating employee performance, assisting with establishing individual and company-wide performance targets and objectives, recommending salary levels and option and other equity incentive grants, providing financial data on company performance, providing calculations and reports on achievement of performance objectives and furnishing other information requested by the Committee. Our Chief Executive Officer works with the Compensation Committee in making recommendations regarding our overall compensation policies and plans as well as specific compensation levels for our other executive officers and key employees. Members of management who were present during portions of Compensation Committee meetings held in fiscal 2010 and 2011 to date, included the Chief Executive Officer and the Chief Financial Officer. The Compensation Committee makes all decisions regarding the compensation of the Chief Executive Officer without the Chief Executive Officer or any other member of management present.
 
The Compensation Committee’s charter authorizes the Committee to engage any compensation consultants and other advisers as the Committee may deem appropriate, and requires that we provide the Committee with adequate funding to engage any advisers. During fiscal 2010 and 2011 to date, the Compensation Committee did not engage any consultants to assist it in reviewing our compensation practices and levels. In prior fiscal years, our Compensation Committee has periodically engaged RSM McGladrey to prepare for the Compensation Committee a comparative compensation report of a broad group of organizations within the durable goods manufacturing industry. This report is based upon industry-wide studies, and not necessarily companies in the automotive parts industry. Our Compensation Committee believes this industry-wide report represents a better cross section from which to draw executive talent and compare compensation levels. Our Compensation Committee last engaged RSM McGladrey in May 2008 and reviewed the results of their report and analysis during meetings held at the beginning of fiscal 2009. Given our performance and the economic outlook for the automotive industry during fiscal 2009, as noted below, our Compensation
21

 
Committee chose to reduce base salaries for our executive officers to their fiscal 2008 levels (and even lower in the case of Mr. Stratton). Additional information regarding our Compensation Committee’s actions with respect to setting the base salaries of our executive officers is shown below. Our Compensation Committee decided not to engage RSM McGladrey to prepare a similar analysis and report for fiscal 2010 and 2011. Our Compensation Committee, however, expects to continue to periodically engage RSM McGladrey and use their report and analysis in future fiscal years in connection with reviewing and establishing our compensation practices.
 
Components of Executive Compensation
 
For executive officers, the primary components of total compensation continue to be:

 	• 	base salary;	
 	 	 	
 	• 	annual incentive compensation bonuses; and	
 	 	 	
 	• 	long-term incentive compensation in the form of awards of stock options and shares of restricted stock.	
 
We evaluate targeted total compensation levels for our executive officers as well as how each component fits within the targeted total compensation levels. This evaluation is guided by our compensation objectives described above. A large portion of potential compensation for our executive officers is performance-based. For performance-based compensation, we combine annual cash incentive bonuses that are tied to both short-term, company-wide measures of operating performance and individual performance goals with long-term equity compensation in the form of awards of stock options that are subject to time-based vesting criteria and shares of restricted stock that vest on the three year anniversary of the date of grant. The long-term equity compensation awards promote our executive retention objectives and provide an incentive for long-term appreciation in our stock price.
 
Base Salary.  Base salary is a key component of our executive compensation. In determining base salaries, our Compensation Committee considers the executive officer’s qualifications and experience, the executive officer’s responsibilities, the executive officer’s past performance, the executive officer’s goals and objectives, and salary levels for comparable positions. Our Compensation Committee typically establishes base salaries for the new fiscal year for our executive officers at its regular meeting in August of each year where it reviews the prior fiscal years’ results.
 
The base salaries of the named executive officers were initially set by their respective employment agreements and were initially determined by evaluating the responsibilities of the position, the experience of the individual and the salaries for comparable positions in the competitive marketplace based upon a report prepared for the Compensation Committee by RSM McGladrey, as referenced above. Each executive officer’s employment agreement contains an evergreen renewal feature that automatically extends the agreement for an additional year each June 30, unless advance notice is provided. The base salary, as provided in the employment agreement, may not be decreased from the prior year’s level without the consent of the executive officer, but can be increased in the discretion of the Compensation Committee. In general, we have historically set the base salaries at or
22

 
near the median level derived from the RSM McGladrey report for similar positions. In determining salary adjustments for executive officers, our Compensation Committee considers various factors, including the individual’s performance and contribution, our performance, and the pay level for similar positions as reflected in the RSM McGladrey report. The Compensation Committee, where appropriate, also considers non-financial performance measures such as improvements in product quality, manufacturing efficiency gains and the enhancement of relations with our customers and employees. The Compensation Committee exercises discretion in increasing the base salaries of our executive officers from the prior fiscal year within the guidelines discussed above.
 
As noted above, we do not provide any standard annual raises in the base salaries of our executive officers. Instead, our Compensation Committee periodically reviews the base salaries of our executive officers based on the individual and company-wide performance criteria described above. During fiscal 2009, we reduced the base salaries of our executive officers to their fiscal 2008 levels, except with respect to Mr. Stratton. Mr. Stratton’s base salary was reduced from $409,000 to $327,000 on May 16, 2009, which was less than the base salary paid Mr. Stratton during fiscal 2008. The salary reductions were made at the discretion of our Compensation Committee based upon our company performance and the economic outlook for the automotive industry and continued during the first half of fiscal 2010. Effective January 1, 2010, our Compensation Committee re-evaluated our financial performance for the first part of fiscal 2010 and the performance and outlook in general for the automotive industry. Based upon the updated analysis, our Compensation Committee restored our officers’ base salaries to their September 1, 2008 levels. Accordingly, effective as of January 1, 2010, our named executive officers were paid the following base salaries:

Name	 	Base Salary	
 	 	 	 	 	
Harold M. Stratton II	 	$	409,000	 	
Frank J. Krejci	 	$	295,800	 	
Patrick J. Hansen	 	$	222,000	 	
Dennis Kazmierski	 	$	198,000	 	
Rolando J. Guillot	 	$	185,000	 	
 
The foregoing base salaries are expected to continue at the same levels through the end of fiscal 2011.
 
Annual Incentive Bonuses.  Executive officers and other full-time employees are eligible to receive annual incentive cash bonuses under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers (EVA Bonus Plan). While we principally rely on this Bonus Plan for annual cash incentive bonuses, in some years the Compensation Committee may decide to grant discretionary cash bonuses outside of the EVA Bonus Plan based on special circumstances such as the acquisition or disposition of a business. See “Discretionary Bonuses” below.
 
Participants under our EVA Bonus Plan for Executive Officers and Senior Managers include our executive officers and other senior managers determined by our Compensation Committee based upon recommendations from our Chief Executive Officer. The purpose of using Economic Value Added as a non-GAAP measure is to drive for continuous improvement year over year, enhance shareholder value and provide a framework for determining incentive compensation for our
23

 
executive officers that financially rewards them for increases in our shareholder value. We believe that Economic Value Added improvement is the financial performance measure most closely correlated with increases in our shareholder value.
 
In general, Economic Value Added (EVA) is our net operating profit after cash basis taxes, less a capital charge. The capital charge is intended to represent the return expected by the providers of our capital. The capital charge is determined by our weighted average debt and equity capital structure as defined by Stern, Stewart & Co., a management consultant firm that originated the concept of Economic Value Added. The amount of bonus which a participant is entitled to earn is derived from a Company Performance Factor and from an Individual Performance Factor. We determine the Company Performance Factor by reference to our financial performance relative to a targeted cash-based return on capital established by our Compensation Committee, which is intended to approximate our weighted cost of capital. We determine the Individual Performance Factor by reference to the level of attainment of certain quantifiable and non-quantifiable company or individual goals which contribute to increasing our value to our shareholders.
 
At the beginning of each fiscal year, we calculate STRATTEC’s cost of capital and expected Company EVA Performance Target. In fiscal 2010, the cost of capital was determined to be at 10.0% and the Company EVA Performance Target was a negative $7.5 million. Actual Company EVA Performance in fiscal 2010 was a negative $4.9 million. See below (in millions of dollars):

Net Operating Income After Cash-Basis Taxes:	 	 	 	 	 	$	3.1	 	
Average Net Capital Employed:	 	$	80.0	 	 	 	 	 	
Cost of Capital:	 	 	10.0	%	 	 	 	 	
Capital Charge:	 	 	 	 	 	$	8.0	 	
 	 	 	 	 	 	 	 	 	
Economic Value Added:	 	 	 	 	 	$	(4.9	)	
 
Average Net Capital Employed in the business is generally calculated by averaging the net amount of operating assets (i.e. operating assets less operating liabilities) used in our business during a particular period. In fiscal year 2008, our EVA Bonus Plan was modified to include cash and cash equivalents as part of our net capital employed in the business. Because cash and cash equivalents are a significant component of the capital employed in the business it can significantly increase our capital charge. This effect contributed to our negative EVA in fiscal 2010, 2009 and 2008.
 
EVA performance can be negative when the calculated capital charge (cost of capital X net monthly average capital employed in the business) exceeds our Net Operating Income After Cash-Basis Taxes. For purposes of our EVA Bonus Plan, the EVA, whether positive or negative, is compared to the Company EVA Performance Target for that particular year to determine whether any bonuses are earned under the plan.
 
As noted above, we determine our Cost of Capital at the beginning of each fiscal year. Our Compensation Committee reviews and sets the Cost of Capital based upon the methodology described below, but under the EVA Bonus Plan it retains the discretion to set the Cost of Capital at a level different than determined under the following methodology. The EVA Bonus Plan provides that our Cost of Capital shall be determined based upon averaging our cost of equity and our cost of
24

 
debt assuming a weighted average value for the equity of 80% and 20% for the debt. The cost of the equity is calculated by multiplying a market risk premium rate, using a methodology established by Stern, Stewart, by a transportation industry risk index (which is established by an independent third party for the transportation industry) and then adding that product to the average effective interest rate during the month of April each year that would be earned by investing in ten year U.S. Treasury Notes. The cost of our debt is calculated based upon our expected weighted average interest cost on our available borrowing base with our lender on an after tax basis. As a result, our Cost of Capital is predominantly affected by changes in interest rates and an evaluation of the risks and economic climate in the transportation industry that influence the determination of the market premium and the industry index rate.
 
Individual Target Incentive Awards under the EVA Bonus Plan for fiscal 2010 range from 75% of base compensation for our Chief Executive Officer to 65% of base compensation for our President and Chief Operating Officer to 35%-45% of base compensation for other officers. The formula for calculating bonuses under the EVA Bonus Plan is: Base Salary x Target Incentive Award x (50% of the Company Performance Factor + 50% of the Individual Performance Factor). A portion of this bonus amount, however, is subject to an at risk “Bonus Bank” described below.
 
The EVA Bonus Plan for Executive Officers and Senior Managers provides the powerful incentive of an uncapped bonus opportunity, but also uses a “Bonus Bank” to ensure that significant Economic Value Added improvements are sustained before significant bonus awards are paid out. Pursuant to the terms of the EVA Bonus Plan, the Bonus Bank feature applies to those participants determined by the Compensation Committee to be “Executive Officers,” which includes all of our named executive officers. Each year, any accrued bonus in excess of 125% of the target bonus award is added to the outstanding Bonus Bank balance for the named executive officer. The bonus actually paid to a participant for a year is equal to the accrued bonus for the year, up to a maximum of 125% of the target bonus, plus 33% of the Bonus Bank balance at the end of that year.
 
Because we use the Bonus Bank feature, we must experience significant Economic Value Added improvements for several years to ensure full payout of the accrued bonus to the executive officer. A Bonus Bank account is considered “at risk” in the sense that in any year the accrued bonus is negative, the negative bonus amount is subtracted from the outstanding Bonus Bank balance. A participant’s Bonus Bank balance may not be negative. On termination of employment due to death, disability or retirement or by us without cause, any balance in the Bonus Bank will be paid to the terminating executive officer or his or her designated beneficiary or estate. Executive officers who voluntarily leave to accept employment elsewhere or who are terminated for cause will forfeit any Bonus Bank balance.
 
During fiscal years (2006-2009) our actual performance did not exceed our fiscal year EVA targeted goals, and consequently no incentive bonus compensation was awarded to our associates or executive officers during those periods. However, during fiscal 2010 our actual performance exceeded the fiscal 2010 targeted goals and, accordingly, bonuses were awarded to our executive
25

 
officers and our executive officers increased their Bonus Bank accounts under our EVA Bonus Plan in the following amounts:

 	 	Fiscal 2010
	 	Fiscal 2010
	 	Fiscal 2010
	 	33% Payout
	 	Fiscal 2010
	
 	 	Total EVA
	 	Addition to
	 	125% of Target
	 	From
	 	Total Paid
	
Name	 	Bonus	 	Bonus Bank	 	Bonus Amount	 	Bonus Bank	 	Bonus Amount	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	$	455,870	 	 	$	120,839	 	 	$	335,031	 	 	$	40,280	 	 	$	375,311	 	
Frank J. Krejci	 	$	176,730	 	 	$	56,561	 	 	$	120,169	 	 	$	18,854	 	 	$	139,023	 	
Patrick J. Hansen	 	$	170,482	 	 	$	48,104	 	 	$	122,378	 	 	$	16,035	 	 	$	138,413	 	
Dennis Kazmierski	 	$	105,473	 	 	$	22,180	 	 	$	83,293	 	 	$	7,393	 	 	$	90,686	 	
Rolando J. Guillot	 	$	102,813	 	 	$	24,988	 	 	$	77,825	 	 	$	8,329	 	 	$	86,154	 	
 
At the Compensation Committee’s regular meeting held August 17, 2010, the Committee reviewed the data and calculation for the Company’s fiscal 2011 EVA Performance Target and subsequently approved an EVA Performance Target of a negative $4.6 million for fiscal 2011. Pursuant to the terms of the EVA Bonus Plan, the fiscal 2011 EVA Performance Target is determined by averaging the prior year performance target (i.e. the performance target for fiscal 2010) and the prior year actual EVA amount (i.e. actual EVA for fiscal 2010) and then adding an expected improvement amount set by our Board of Directors. For fiscal 2011, our Board of Directors set the expected improvement amount at $1.5 million.
 
Discretionary Bonuses.  While we have principally relied on our formula-based cash incentive plans, our named executive officers are eligible to receive discretionary cash bonuses awarded by our Compensation Committee. These discretionary bonuses allow us to recognize extraordinary performance by our named executive officers and to have the flexibility to maintain competitive compensation when needed. When determining whether to grant a discretionary bonus to a named executive officer, the Compensation Committee reviews performance for the prior fiscal year and considers specific performance metrics for STRATTEC for the fiscal year, such as stock performance or financial performance in key areas outside of the performance measures used for formula cash incentives, and other specific achievements during the fiscal year such as completed acquisitions or other significant strategic transactions or initiatives. No discretionary bonuses were awarded to our named executive officers for 2010.
 
Equity Based Compensation.  We believe that equity compensation is an effective means of aligning the long-term interests of our employees, including our executive officers, with our shareholders. Our Stock Incentive Plan authorizes the Compensation Committee to issue both stock options and restricted stock, as well as other forms of equity incentive compensation. We are proposing that our shareholders approve an amendment to our Stock Incentive Plan at the Annual Meeting to include our outside directors as eligible participants in the plan. To date, awards to our executive officers under the Stock Incentive Plan have consisted solely of leveraged stock options, traditional nonqualified stock options and shares of restricted stock.
 
In determining the total size of equity awards, the Compensation Committee considers various factors such as the outstanding number of options and shares of restricted stock, the amount of additional shares available for issuance under the Stock Incentive Plan, the level of responsibility of
26

 
the proposed recipient and his or her performance and the percent of the outstanding shares of our common stock represented by outstanding options and shares of restricted stock.
 
Prior to fiscal 2006, we primarily made grants of stock options in the form of leveraged stock options pursuant to our leveraged stock option program. The method of calculating the number of leveraged stock options granted to each executive officer and the method of determining their exercise price is set forth in our EVA Bonus Plan and the Stock Incentive Plan and generally is equal in value to the executive officer’s total bonus payout under the EVA Bonus Plan. Awards of leveraged stock options typically have an exercise price that simulates a stock purchase with 10:1 leverage. Essentially, the exercise price equals the product of 90% of the fair market value of our common stock on the date of grant, multiplied by the sum (taken to the 5th power) of (a) 1, plus (b) the Estimated Annual Growth Rate. The Estimated Annual Growth Rate equals the average daily closing 10-year U.S. Treasury note yield rate for the month of April immediately preceding the relevant plan year, plus 2%. All leveraged stock option grants to executive officers incorporate the following terms:

 	• 	the term of the option does not exceed five years;	
 	 	 	
 	• 	the grant price exceeds the market price of our common stock on the date of grant; and	
 	 	 	
 	• 	options vest on the third anniversary of the grant date.	
 
The maximum aggregate number of leveraged stock options to be granted each year is 40,000. If the total bonus payout under our Economic Value Added program produces more than 40,000 leveraged stock options in any fiscal year, then the leveraged stock options granted for that year will be reduced pro-rata based on proportionate total bonus payouts under the EVA Bonus Plan. The amount of any such reduction shall be carried forward to subsequent years and awarded in leveraged stock options to the extent the annual limitation is not exceeded in future years.
 
Based upon fiscal year 2010 performance, our Compensation Committee on August 17, 2010, made grants of leveraged stock options for 14,360 shares to Mr. Stratton, 5,320 shares to Mr. Krejci, 5,290 shares to Mr. Hansen, 3,470 shares to Mr. Kazmierski and 3,300 shares to Mr. Guillot. All of these options granted to our named executive officers have an exercise price of $22.47 per share (the closing price of our stock on August 17, 2010 was $19.53), a five-year term and vest on the third anniversary of the date of grant. The options had a grant date fair value per option of $7.48 as determined pursuant to FASB Accounting Standards Codification Topic 718.
 
In addition to leveraged stock options, our Compensation Committee, in its discretion, periodically approves grants of nonqualified stock options to our executive officers. The nonqualified stock option grants incorporate the following terms:

 	• 	the term of the option does not exceed ten years;	
 	 	 	
 	• 	the grant price is not less than the market price of our common stock on the date of grant; and	
 	 	 	
 	• 	options vest pro rata on the anniversary of the grant date over a four year period (i.e. 25% per year).	

27

 
 
In fiscal 2010, our Compensation Committee approved grants of nonqualified stock options to Frank J. Krejci for 12,000 shares, Patrick J. Hansen for 6,000 shares and Rolando J. Guillot for 6,000 shares. Our Compensation Committee awarded the nonqualified stock options to Mr. Krejci as an inducement grant upon him being appointed our President and Chief Operating Officer and awarded the nonqualified stock options to each of Mr. Hansen and Mr. Guillot in connection with their assumption of additional responsibilities due to the departure of a former executive officer. The options granted to Mr. Krejci had a grant date fair value per option of $9.47 and the options granted to Mr. Hansen and Mr. Guillot had a grant date fair value per option of $8.86, in each case as determined pursuant to FASB Accounting Standards Codification Topic 718.
 
As noted above, since 2005 our Compensation Committee has annually granted awards of shares of restricted stock to our named executive officers. The shares of restricted stock awarded under the Stock Incentive Plan vest three years after the grant date and have all the rights of our shares of common stock, including voting and dividend rights.
 
Our Compensation Committee awarded to each of our executive officers a grant of shares of restricted stock on August 18, 2009 based upon both our financial performance and each respective named executive officer’s individual performance for fiscal 2009. Mr. Stratton was awarded 1,000 shares of restricted stock. Mr. Hansen was awarded 600 shares of restricted stock and each of Mr. Kazmierski and Mr. Guillot were awarded 400 shares of restricted stock on August 18, 2009. Mr. Krejci was not awarded any shares of restricted stock. The shares of restricted stock all vest on the third anniversary of the grant date and have all the rights of our shares of common stock, including dividend and voting rights. The shares of restricted stock had a grant date fair value per share of $14.75 as determined pursuant to FASB Accounting Standards Codification Topic 718.
 
On August 17, 2010, the Compensation Committee also made specified grants of shares of restricted stock based upon fiscal 2010 performance of 2,000 shares to Mr. Stratton, 1,500 shares to Mr. Krejci, 1,200 shares to Mr. Hansen and 800 shares to each of Mr. Kazmierski and Mr. Guillot. The shares of restricted stock all vest on the third anniversary of the grant date and have all the rights of our shares of common stock, including dividend and voting rights. The shares of restricted stock had a grant date fair value per share of $19.53 as determined pursuant to FASB Accounting Standards Codification Topic 718.
 
Based upon our review and analysis of our director compensation and our desire to include an equity component in the outside (non-employee) director compensation to align their compensation with our overall compensation philosophy, we have proposed for approval at the Annual Meeting an amended and restated Stock Incentive Plan. We are proposing that our shareholders approve an amendment to the plan to expand the class of participants eligible to receive awards under the Stock Incentive Plan to include our outside directors. See “Proposal 2: Approval of Amended and Restated Stock Incentive Plan” for more information.
 
Perquisites and Other Compensation.  Our named executive officers participate in other benefit plans generally available to all employees on the same terms as similarly situated employees, including participation in medical, health, dental, disability, life insurance and 401(k) plans. In addition, our executive officers each receive at least two times their base salary up to $500,000 of
28

 
group term life insurance coverage and Mr. Kazmierski receives automobile allowance payments of $800 per month. These benefits are included in the Summary Compensation Table in the “All Other Compensation” column.
 
Retirement Benefits.  We maintain a defined benefit retirement plan that covers substantially all of our United States employees, including our executive officers. Under this retirement plan our employees receive an annual pension payable on a monthly basis at retirement equal to 1.6% of the employee’s average of the highest 5 years of compensation during the last 10 calendar years of service prior to retirement multiplied by the number of years of credited service, with an offset of 50% of Social Security benefits (prorated if years of credited service are less than 30). Compensation under this retirement plan includes the compensation as shown in the Summary Compensation Table under the headings “Salary,” “Bonus” and “Non-Equity Incentive Plan Compensation” subject to a maximum compensation amount set by law ($245,000 in 2010). Effective January 1, 2010, an amendment to the defined benefit retirement plan discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009.
 
Our executive officers also participate in a program which supplements benefits under the defined benefit retirement plan described above. Under our Supplemental Executive Retirement Plan, executive officers are provided with additional increments of (a) 0.50% of the employee’s average of the highest 5 years of compensation (as limited under the defined benefit retirement plan) per year of credited service over the benefits payable under the defined benefit retirement plan to nonbargaining unit employees and (b) 2.1% of the compensation exceeding the defined benefit retirement plan dollar compensation limit per year of credited service. We have created a Rabbi Trust for deposit of the aggregate present value of the benefits described above for our executive officers.
 
Change of Control and Severance Benefits
 
We have entered into an employment agreement and a change of control agreement with each of our named executive officers. The employment agreements set forth the current terms and conditions for employment of the executive officers, and include severance benefits, and noncompetition and confidentiality covenants restricting the executive’s activities both during and for a period of time after employment. The change of control employment agreements guarantee the employee continued employment following a “change of control” on a basis equivalent to the employee’s employment immediately prior to such change in terms of position, duties, compensation and benefits, as well as specified payments upon termination following a change in control. These change of control agreements become effective only upon a defined change in control of STRATTEC, or if the employee’s employment is terminated upon, or in anticipation of such a change in control, and automatically supersede any existing employment agreement. These agreements are summarized in more detail below under “Employment Agreements” and “Post-Employment Compensation.”
 
The employment agreements with the named executive officers provide for continuation of salary and dental and health coverage benefits for a period after termination of employment because of the death or disability of the executive officer or because of a termination of employment by us other than for cause (as defined in the employment agreements). We believe that these severance
29

 
benefits are important as a recruiting and retention device and represent reasonable consideration in exchange for the noncompetition, confidentiality and other restrictions applicable to the executive officers under the employment agreements. The terms of these arrangements and the amount of benefits available to the named executive officers are described below under “Post-Employment Compensation.”
 
Under the change of control agreements, if during the employment term (three years from the change in control) the employee is terminated other than for cause (as defined in the agreements) or if the employee voluntarily terminates his employment for good reason (as defined in the agreements) or during a 30-day window period one year after a change in control, the employee is entitled to specified severance benefits, including a lump sum payment of three or two (depending upon which executive officer) times the sum of the employee’s annual salary, a payment equal to the executive officer’s annual bonus (determined as provided in the agreement) and the continuation of certain benefits. Again, we believe that these severance benefits are important as a recruiting and retention device.
 
Additionally, under our Stock Incentive Plan, all outstanding stock options immediately vest upon a change of control and all forfeiture or other restrictions on the shares of restricted stock lapse upon a change of control.
 
Benchmarking
 
We do not believe that it is appropriate to establish compensation levels primarily based on benchmarking. However, the Compensation Committee does periodically review information regarding pay practices at other companies to evaluate whether our compensation practices are competitive in the marketplace and as one of several factors that it considers in assessing the reasonableness of compensation. As part of our Compensation Committee’s review of our compensation policies and practices, the committee has in prior fiscal years engaged RSM McGladrey to prepare a report of a broad peer group of organizations within the durable goods manufacturing industry that are similar in size to STRATTEC showing median compensation for executive officers with comparable positions as our executive officers.
 
Tax and Accounting Considerations
 
Deductibility of Executive Compensation.  Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public corporation for non-performance-based compensation over $1,000,000 paid for any fiscal year to each of the individuals who were, at the end of the fiscal year, the corporation’s chief executive officer and the four other most highly compensated executive officers. Through the end of fiscal 2010, we do not believe that any of the compensation paid to our executive officers exceeded the limit on deductibility in Section 162(m). Our Stock Incentive Plan is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, including the requirement that such plan be approved by our shareholders. As a result, we believe that awards under this plan satisfy the requirements for “performance-based compensation” under Section 162(m) and, accordingly, do not count against the $1,000,000 limit and are deductible by us. Other compensation paid or imputed to
30

 
individual executive officers covered by Section 162(m) may not satisfy the requirements for “performance-based compensation” and may cause non-performance-based compensation to exceed the $1,000,000 limit, and would then not be deductible by us to the extent in excess of the $1,000,000 limit. Although the Compensation Committee designs certain components of executive compensation to preserve income tax deductibility, it believes that it is not in the shareholders’ interest to restrict the Compensation Committee’s discretion and flexibility in developing appropriate compensation programs and establishing compensation levels and, in some instances, the Compensation Committee may approve compensation that is not fully deductible.
 
Timing of Equity Incentive Grants
 
We have a practice of making leveraged stock option grants (if any) to employees annually on the date of the quarterly meeting of our Board of Directors held in August of each year, after we announce earnings for the prior fiscal year. The Compensation Committee may, at its discretion, periodically approve grants of nonqualified stock options and/or shares of restricted stock to executive officers and other key employees. Typically, these grants are made for retention purposes. The grant date for all classes of stock options and restricted stock (other than inducement grants to new employees) is always the date of approval of the grant by our Board of Directors or the Compensation Committee, as applicable, and the grant date for inducement grants to new employees is the first date of employment. During fiscal 2010, the Compensation Committee approved awards to our executive officers and certain key employees of restricted stock grants at the Board of Directors regular meeting held August 18, 2009 and nonqualified stock option grants at the Board of Directors regular meeting held on December 9, 2009. Additionally, the Compensation Committee approved leveraged stock option grants and restricted stock grants to our executive officers and certain key employees at the Board of Directors regular meeting held August 17, 2010.
 
Report of the Compensation Committee
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this proxy statement with our management and, based on such review and discussions with management, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
 
COMPENSATION COMMITTEE:
 
Michael J. Koss (Chairman)
David R. Zimmer
Robert Feitler
31

 
 
Summary Compensation Table
 
The following table provides information for fiscal 2010 concerning the compensation paid by us to the person who served as our principal executive officer in fiscal 2010, the person who served as our principal financial officer in fiscal 2010 and our three other most highly compensated executive officers based on their total compensation in fiscal 2010. We refer to these five executive officers as our “named executive officers” in this proxy statement.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	Change in
	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Pension Value
	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	and Non-
	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	Non-Equity
	 	Qualified
	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	Incentive
	 	Deferred
	 	 	 	 	
 	 	 	 	 	 	 	 	Option
	 	Stock
	 	Plan
	 	Compensation
	 	All Other
	 	 	
 	 	Fiscal
	 	 	 	Bonus
	 	Awards
	 	Awards
	 	Compensation
	 	Earnings
	 	Compensation
	 	 	
Name and Principal Position	 	Year	 	Salary	 	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II,	 	 	2010	 	 	$	357,366	 	 	 	—	 	 	 	—	 	 	$	14,750	 	 	$	375,311	 	 	$	764,933	 	 	$	14,659	 	 	$	1,527,019	 	
Chairman and Chief	 	 	2009	 	 	$	373,814	 	 	 	—	 	 	$	51,732	 	 	$	23,200	 	 	 	—	 	 	$	24,922	 	 	$	6,841	 	 	$	480,509	 	
Executive Officer	 	 	2008	 	 	$	386,752	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	$	28,862	 	 	$	10,690	 	 	$	426,304	 	
Frank J. Krejci,	 	 	2010	 	 	$	147,900	 	 	 	—	 	 	$	113,640	 	 	 	—	 	 	$	139,023	 	 	 	—	 	 	$	37,496	 	 	$	438,059	 	
President and Chief
Operating Officer(*)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Patrick J. Hansen,	 	 	2010	 	 	$	217,560	 	 	 	—	 	 	$	53,160	 	 	$	8,850	 	 	$	138,413	 	 	$	198,866	 	 	$	7,893	 	 	$	624,742	 	
Senior Vice President,	 	 	2009	 	 	$	217,134	 	 	 	—	 	 	$	28,740	 	 	$	20,300	 	 	 	—	 	 	$	49,756	 	 	$	5,438	 	 	$	321,368	 	
Chief Financial Officer,	 	 	2008	 	 	$	212,234	 	 	 	—	 	 	 	—	 	 	$	28,668	 	 	 	—	 	 	$	4,556	 	 	$	7,462	 	 	$	252,920	 	
Treasurer and Secretary	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dennis A Kazmierski,	 	 	2010	 	 	$	190,385	 	 	 	—	 	 	 	—	 	 	$	5,900	 	 	$	90,686	 	 	$	67,448	 	 	$	14,646	 	 	$	369,065	 	
Vice President-	 	 	2009	 	 	$	195,798	 	 	 	—	 	 	$	21,076	 	 	$	14,500	 	 	 	—	 	 	$	128,213	 	 	$	17,145	 	 	$	376,732	 	
Marketing and Sales	 	 	2008	 	 	$	192,167	 	 	 	—	 	 	 	—	 	 	$	19,112	 	 	 	—	 	 	 	—	 	 	$	17,401	 	 	$	228,680	 	
Rolando J. Guillot,	 	 	2010	 	 	$	177,884	 	 	 	—	 	 	$	53,160	 	 	$	5,900	 	 	$	86,154	 	 	$	196,270	 	 	$	7,026	 	 	$	526,394	 	
Vice President-	 	 	2009	 	 	$	176,843	 	 	 	—	 	 	$	28,740	 	 	$	14,500	 	 	 	—	 	 	$	66,942	 	 	$	4,135	 	 	$	291,160	 	
Mexican Operations	 	 	2008	 	 	$	175,417	 	 	 	—	 	 	 	—	 	 	$	19,112	 	 	 	—	 	 	$	21,381	 	 	$	5,933	 	 	$	221,843	 	
 
Explanatory Notes for Summary Compensation Table:
 
1. These amounts represent awards of discretionary bonus payments made by our Compensation Committee. For fiscal years 2010, 2009 and 2008, the Compensation Committee decided not to award any discretionary bonus payments. See “Compensation Discussion and Analysis.”
 
2. The amounts in this column reflect the dollar value of long-term equity based compensation awards pursuant to our Stock Incentive Plan in the years indicated in the table. These amounts equal the grant date fair value of stock options, computed in accordance with FASB Accounting Standards Codification Topic 718. Assumptions used in the calculation of the grant date fair value are included under the caption “Accounting for Stock Based Compensation” in the Notes to our Consolidated Financial Statements in the fiscal year 2010 Annual Report on Form 10-K filed with the Commission on September 1, 2010 and such information is incorporated herein by reference.
32

 
3. The amounts in this column reflect the dollar value of long-term equity based compensation awards pursuant to our Stock Incentive Plan in the years indicated in the table. These amounts equal the grant date fair value of shares of restricted stock, computed in accordance with FASB Accounting Standards Codification Topic 718. Assumptions used in the calculation of the grant date fair value are included under the caption “Accounting for Stock Based Compensation” in the Notes to our Consolidated Financial Statements in the fiscal year 2010 Annual Report on Form 10-K filed with the Commission on September 1, 2010 and such information is incorporated herein by reference.
 
4. This column discloses the dollar value of all amounts earned by the named executive officers under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers for performance in the applicable fiscal year which where tied to long-term incentive performance targets. Amounts added to each named executive officer’s Bonus Bank with respect to the applicable fiscal year under the Economic Value Added Bonus Plan, but not paid with respect to that fiscal year, are not included in this column. Accordingly, amounts in this column include one-third of the Bonus Bank amount for fiscal 2010 that was paid to the name executive officer with respect to that fiscal year. No amounts were earned or paid under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers for fiscal years 2009 and 2008. See “Compensation Analysis and Discussion.”
 
5. “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” includes for the applicable fiscal year the aggregate increase in the actuarial present value of each named executive officer’s accumulated benefit under our defined benefit pension plan and supplemental executive retirement pension plan, using the same assumptions and measurement dates used for financial reporting purposes with respect to our audited financial statements for the applicable fiscal year. Based on changes in market rates, our actuary changed the assumed discount rate as of the end of fiscal 2010 to 5.41% from 6.86% at the end of fiscal 2009 (a decrease of 1.45 percentage points in the discount rate). This change in assumed discount rate caused a significant increase in the actuarial present value of the accumulated benefits over the prior year. See the caption “Retirement Plans and Post Retirement Costs” in the Notes to our Consolidated Financial Statements in the fiscal year 2010 Annual Report on Form 10-K filed with the Commission on September 1, 2010 for more information.
33

 
6. The table below shows the components of this column, which include our match for each individual’s 401(k) plan contributions, the cost of premiums paid by us for term life insurance under which the named executive officer is a beneficiary and perquisites consisting of an automobile allowance for Mr. Kazmierski and, with respect to fiscal 2009, a gift card in the amount of $2,000 and for Mr. Guillot, with respect to fiscal 2010, a gift card in the amount of $1,000. Additionally, for fiscal 2010 amounts for Mr. Krejci include director fees and the bonus paid to Mr. Krejci under our Economic Value Added Bonus Plan for Non-Employee Members of the Board of Directors prior to his becoming our President and Chief Operating Officer. See “Director Compensation” for additional information.

 	 	 	 	401(k)
	 	Life
	 	Director
	 	 	 	Total “All Other
	
Name	 	Year	 	Match	 	Insurance	 	Fees	 	Perquisites	 	Compensation”	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	 	2010	 	 	$	11,095	 	 	$	3,564	 	 	$	—	 	 	$	—	 	 	$	14,659	 	
 	 	 	2009	 	 	$	3,277	 	 	$	3,564	 	 	$	—	 	 	$	—	 	 	$	6,841	 	
 	 	 	2008	 	 	$	7,811	 	 	$	2,879	 	 	$	—	 	 	$	—	 	 	$	10,690	 	
Frank J. Krejci(*)	 	 	2010	 	 	$	7,395	 	 	$	1,782	 	 	$	28,319	 	 	$	—	 	 	$	37,496	 	
Patrick J. Hansen	 	 	2010	 	 	$	6,829	 	 	$	1,064	 	 	$	—	 	 	$	—	 	 	$	7,893	 	
 	 	 	2009	 	 	$	4,577	 	 	$	861	 	 	$	—	 	 	$	—	 	 	$	5,438	 	
 	 	 	2008	 	 	$	6,795	 	 	$	667	 	 	$	—	 	 	$	—	 	 	$	7,462	 	
Dennis A. Kazmierski	 	 	2010	 	 	$	3,300	 	 	$	1,746	 	 	$	—	 	 	$	9,600	 	 	$	14,646	 	
 	 	 	2009	 	 	$	3,812	 	 	$	1,733	 	 	$	—	 	 	$	11,600	 	 	$	17,145	 	
 	 	 	2008	 	 	$	6,197	 	 	$	1,604	 	 	$	—	 	 	$	9,600	 	 	$	17,401	 	
Rolando J. Guillot	 	 	2010	 	 	$	5,650	 	 	$	376	 	 	$	—	 	 	$	1,000	 	 	$	7,026	 	
 	 	 	2009	 	 	$	3,765	 	 	$	370	 	 	$	—	 	 	$	—	 	 	$	4,135	 	
 	 	 	2008	 	 	$	5,581	 	 	$	352	 	 	$	—	 	 	$	—	 	 	$	5,933	 	

 	 	 	
*	 	Mr. Krejci was appointed our President and Chief Operating Officer effective as of January 1, 2010.	

34

 
 
Grants of Plan-Based Awards
 
The following table sets forth information regarding all incentive plan awards that were granted to the named executive officers during fiscal year 2010, including incentive plan awards (equity-based and non-equity based) and other plan-based awards. Disclosure on a separate line item is provided for each grant of an award made to a named executive officer during the year. Non-equity incentive plan awards are awards that are not subject to FASB Accounting Standards Codification Topic 718 and are intended to serve as an incentive for performance to occur over a specified period, and include performance bonus awards under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers. We have not granted any equity incentive-based awards, which are equity awards subject to a performance condition or a market condition as those terms are defined by FASB Accounting Standards Codification Topic 718.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	All Other
	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Option
	 	 	All Other
	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Awards:
	 	 	Stock
	 	 	Exercise or
	 	 	Grant Date
	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Number of
	 	 	Awards:
	 	 	Base
	 	 	Fair Value
	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Securities
	 	 	Number of
	 	 	Price of
	 	 	of Stock
	 	
 	 	 	 	 	Estimated Future Payouts Under
	 	 	Underlying
	 	 	Shares of
	 	 	Option
	 	 	and Option
	 	
 	 	Grant
	 	 	Non-Equity Incentive Plan Awards(1)	 	 	Options
	 	 	Stock
	 	 	Awards
	 	 	Awards
	 	
Name	 	Date	 	 	Threshold	 	 	Target	 	 	Maximum	 	 	(2)	 	 	(3)	 	 	($/Sh.)	 	 	(4)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	 	08/18/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,000	 	 	 	—	 	 	$	14,750	 	
 	 	 	—	 	 	 	0	 	 	$	268,025	 	 	$	335,031	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Frank J. Krejci	 	 	01/01/10	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	12,000	 	 	 	—	 	 	$	18.49	 	 	$	113,640	 	
 	 	 	—	 	 	 	0	 	 	$	96,135	 	 	$	120,169	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Patrick J. Hansen	 	 	08/18/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	600	 	 	 	—	 	 	$	8,850	 	
 	 	 	—	 	 	 	0	 	 	$	97,902	 	 	$	122,378	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	12/09/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,000	 	 	 	—	 	 	$	17.59	 	 	$	53,160	 	
Dennis A. Kazmierski	 	 	08/18/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	400	 	 	 	—	 	 	$	5,900	 	
 	 	 	—	 	 	 	0	 	 	$	66,635	 	 	$	83,293	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Rolando J. Guillot	 	 	08/18/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	400	 	 	 	—	 	 	$	5,900	 	
 	 	 	—	 	 	 	0	 	 	$	62,260	 	 	$	77,825	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	12/09/09	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,000	 	 	 	—	 	 	$	17.59	 	 	$	53,160	 	

 	 	 	
(1)	 	These amounts show the range of payouts targeted for fiscal 2010 performance under our Economic Value Added Bonus Plan for Executive Officers and Senior Managers as described in “Compensation Discussion and Analysis.” The Economic Value Added Bonus Plan for Executive Officers and Senior Managers entitles our participants to earn bonus awards based upon our financial performance for a given fiscal year. The targeted bonus amounts are equal to a percentage of the executive officer’s base salary (see the “Summary Compensation Table”). The target was set at 75% of base salary for Mr. Stratton, 65% of base salary for Mr. Krejci, 45% of base salary for Mr. Hansen and 35% of base salary for Mr. Kazmierski and Mr. Guillot. Any amounts earned under the EVA Bonus Plan in excess of 125% of the target bonus are added to a Bonus Bank for each executive officer, with one-third of that excess being paid with respect to the current fiscal year and one-third being paid in each of the subsequent two fiscal years, with the payments in the subsequent two fiscal years being subject to certain “at-risk” provisions described above under “Compensation Discussion and Analysis.” The amount under the column “Maximum” is limited to 125% of the target bonus award. Amounts in excess of 125% of the	

35

 
 	 	 	
 	 	target award are placed into a Bonus Bank and are subject to certain “at risk” provisions referenced above. See “Compensation Discussion and Analysis” for the amount of the Bonus Bank paid to the named executive officers in fiscal 2010.	
 	 	 	
(2)	 	With respect to Mr. Krejci, the common stock option vests pro rata over a four-year period on each of January 1, 2011, January 1, 2012, January 1, 2013 and January 1, 2014 and expires on January 1, 2020. With respect to Mr. Hansen and Mr. Guillot, the common stock option vests pro rata over a four-year period on each of December 9, 2010, December 9, 2011, December 9, 2012 and December 9, 2013 and expires on December 9, 2019.	
 	 	 	
(3)	 	The restricted stock awards were granted on August 18, 2009 and vest on August 18, 2012, the three-year anniversary of the grant date.	
 	 	 	
(4)	 	The value of the restricted stock or option award is based upon the August 18, 2009, December 9, 2009 or January 1, 2010 grant date fair value of $14.75, $8.86 and $9.47 per share, respectively, determined pursuant to FASB Accounting Standards Codification Topic 718. The grant date fair value is the amount we expense in our financial statements over the award’s three year vesting schedule. See the notes to our consolidated financial statements filed with the Securities and Exchange Commission on September 1, 2010 as part of our Annual Report on Form 10-K filed with the Commission on September 1, 2010 for the assumptions we relied on in determining the value of these awards.	
 
Outstanding Equity Awards at Fiscal Year End
 
The following table sets forth information on outstanding option and restricted stock awards held by the named executive officers at June 27, 2010, including the number of shares underlying both exercisable and unexercisable portions of each stock option as well as the exercise price and expiration date of each outstanding option and the number of shares of restricted stock held at fiscal year end that have not yet vested.

 	 	Option Awards	 	 	Stock Awards	 	
 	 	Number of
	 	 	Number of
	 	 	 	 	 	 	 	 	 	 	 	Market Value of
	 	
 	 	Securities
	 	 	Securities
	 	 	 	 	 	 	 	 	Number of
	 	 	Shares or Units
	 	
 	 	Underlying
	 	 	Underlying
	 	 	 	 	 	 	 	 	Shares or Units
	 	 	of Stock That
	 	
 	 	Unexercised
	 	 	Unexercised
	 	 	Option
	 	 	Option
	 	 	of Stock That
	 	 	Have Not
	 	
 	 	Options (#)
	 	 	Options (#)
	 	 	Exercise
	 	 	Expiration
	 	 	Have Not
	 	 	Vested
	 	
Name	 	Exercisable	 	 	Unexercisable	 	 	Price ($)	 	 	Date	 	 	Vested (#)	 	 	($)(6)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	 	17,930	 	 	 	—	 	 	 	61.22	 	 	 	08/19/10	(1)	 	 	800	(7)	 	 	17,608	 	
 	 	 	2,700	 	 	 	8,100	 	 	 	10.92	 	 	 	02/26/19	(2)	 	 	1,000	(8)	 	 	22,010	 	
Frank J. Krejci	 	 	—	 	 	 	12,000	 	 	 	18.49	 	 	 	01/01/20	(3)	 	 	—	 	 	 	—	 	
Patrick J. Hansen	 	 	4,050	 	 	 	—	 	 	 	61.22	 	 	 	08/19/10	(1)	 	 	600	(9)	 	 	13,206	 	
 	 	 	—	 	 	 	4,500	 	 	 	10.92	 	 	 	02/26/19	(2)	 	 	700	(7)	 	 	15,407	 	
 	 	 	—	 	 	 	6,000	 	 	 	17.59	 	 	 	12/09/19	(4)	 	 	600	(8)	 	 	13,206	 	
Dennis A. Kazmierski	 	 	15,000	 	 	 	—	 	 	 	56.08	 	 	 	03/01/15	(5)	 	 	400	(9)	 	 	8,804	 	
 	 	 	1,220	 	 	 	—	 	 	 	61.22	 	 	 	08/19/10	(1)	 	 	500	(7)	 	 	11,005	 	
 	 	 	1,100	 	 	 	3,300	 	 	 	10.92	 	 	 	02/26/19	(2)	 	 	400	(8)	 	 	8,804	 	
Rolando J. Guillot	 	 	2,830	 	 	 	—	 	 	 	61.22	 	 	 	08/19/10	(1)	 	 	400	(9)	 	 	8,804	 	
 	 	 	1,500	 	 	 	4,500	 	 	 	10.92	 	 	 	02/26/19	(2)	 	 	500	(7)	 	 	11,005	 	
 	 	 	—	 	 	 	6,000	 	 	 	17.59	 	 	 	12/09/19	(4)	 	 	400	(8)	 	 	8,804	 	

36

 

(1)	 	The common stock option vested on August 19, 2008, the third anniversary of the grant date. All of these common stock options terminated on August 19, 2010 without exercise by the named executive officer.	
 	 	 	
(2)	 	The common stock option vests pro rata over a four-year period on each of February 26, 2010, February 26, 2011, February 26, 2012 and February 26, 2013.	
 	 	 	
(3)	 	The common stock option vests pro rata over a four-year period on each of January 1, 2011, January 1, 2012, January 1, 2013 and January 1, 2014.	
 	 	 	
(4)	 	The common stock option vests pro rata over a four-year period on each of December 9, 2010, December 9, 2011, December 9, 2012 and December 9, 2013.	
 	 	 	
(5)	 	The common stock option vested pro rata over a three-year period on each of March 1, 2006, March 1, 2007 and March 1, 2008.	
 	 	 	
(6)	 	Market value equals the closing market price of our common stock on June 25, 2010, the last trading day prior to our fiscal year end of June 27, 2010, which was $22.01, multiplied by the number of shares of restricted stock.	
 	 	 	
(7)	 	The shares of restricted stock vest on August 19, 2011, the third anniversary of the grant date.	
 	 	 	
(8)	 	The shares of restricted stock vest on August 18, 2012, the third anniversary of the grant date.	
 	 	 	
(9)	 	The shares of restricted stock vest on August 21, 2010, the third anniversary of the grant date.	
 
Option Exercises and Stock Vested
 
The following table sets forth information relating to the number of stock options exercised and the restricted stock awards that vested during fiscal 2010 for each of the named executive officers on an aggregate basis.

 	 	Option Awards	 	Stock Awards	
 	 	Number of Shares
	 	Value Realized
	 	Number of Shares
	 	 	
 	 	Acquired on
	 	on Exercise ($)
	 	Acquired on
	 	Value Realized on
	
Name	 	Exercise (#)	 	(1)	 	Vesting (#)	 	Vesting ($)(2)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Frank J. Krejci	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Patrick J. Hansen	 	 	1,500	 	 	 	24,240	 	 	 	800	 	 	 	11,800	 	
Dennis A. Kazmierski	 	 	—	 	 	 	—	 	 	 	600	 	 	 	8,850	 	
Rolando J. Guillot	 	 	—	 	 	 	—	 	 	 	600	 	 	 	8,850	 	

 	 	 	
(1)	 	Value realized equals the market value of our common stock at the time of exercise, minus the exercise price, multiplied by the number of shares acquired on exercise. The shares were acquired by Mr. Hansen on May 3, 2010 for an exercise price of $10.92 per share and sold on the same date at a price of $27.08 per share.	
 	 	 	
(2)	 	Value realized equals the market price of our common stock at the time of vesting, multiplied by the number of shares that vested. All of the shares vested on the third anniversary of the grant date or August 22, 2009. The closing market price of our common stock on the last trading day prior to vesting, or August 21, 2009, was $14.75.	

37

 
 
Pension Benefits Table
 
The following table sets forth the actuarial present value of each named executive officer’s accumulated benefit under each defined benefit plan, assuming benefits are paid at normal retirement age based on current levels of compensation. The valuation method and all material assumptions applied in quantifying the present value of the current accumulated benefit for each of the named executive officers are included under the caption “Retirement Plans and Postretirement Costs” included in the Notes to Consolidated Financial Statements in the fiscal year 2010 Annual Report on Form 10-K filed with the Commission on September 1, 2010, and such information is incorporated herein by reference. The table also shows the number of years of credited service under each plan, computed as of the same pension plan measurement date used in STRATTEC’s audited financial statements for the year ended June 27, 2010. The table also reports any pension benefits paid to each named executive officer during the year.

 	 	 	 	Number of Years
	 	Present Value of
	 	Payments During
	
 	 	 	 	Credited Service
	 	Accumulated Benefit
	 	Last Fiscal Year
	
Name	 	Plan Name	 	(#)	 	($)	 	($)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	STRATTEC SECURITY CORP. Retirement Plan	 	 	33	 	 	 	1,078,654	 	 	 	—	 	
 	 	Non-Qualified Supplemental Executive Retirement Plan	 	 	33	 	 	 	3,292,953	 	 	 	—	 	
Frank J. Krejci	 	STRATTEC SECURITY CORP. Retirement Plan	 	 	0	 	 	 	—	 	 	 	—	 	
 	 	Non-Qualified Supplemental Executive Retirement Plan	 	 	1	 	 	 	—	 	 	 	—	 	
Patrick J. Hansen	 	STRATTEC SECURITY CORP. Retirement Plan	 	 	16	 	 	 	363,403	 	 	 	—	 	
 	 	Non-Qualified Supplemental Executive Retirement Plan	 	 	11	 	 	 	116,339	 	 	 	—	 	
Dennis A. Kazmierski	 	STRATTEC SECURITY CORP. Retirement Plan	 	 	5	 	 	 	141,315	 	 	 	—	 	
 	 	Non-Qualified Supplemental Executive Retirement Plan	 	 	5	 	 	 	54,346	 	 	 	—	 	
Rolando J. Guillot	 	STRATTEC SECURITY CORP. Retirement Plan	 	 	20	 	 	 	445,598	 	 	 	—	 	
 	 	Non-Qualified Supplemental Executive Retirement Plan	 	 	6	 	 	 	23,076	 	 	 	—	 	
 
Employment Agreements
 
Each of our named executive officers has signed an employment agreement with STRATTEC. The term of each employment agreement automatically extends for one year each June 30 unless either party gives 30 days’ notice that the agreement will not be further extended. Under the agreement, the officer agrees to perform the duties currently being performed in addition to other
38

 
duties that may be assigned from time to time. We agree to pay the officer a salary of not less than that of the previous year and to provide fringe benefits that are provided to all of our other salaried employees who are in comparable positions.
 
The terms of these employment agreements generally include the following:

 	• 	each of these executive officers is entitled to participate in our bonus plans and Stock Incentive Plan;	
 	 	 	
 	• 	each of these executive officers is eligible to participate in any medical, health, dental, disability and life insurance policy that we maintain for the benefit of our other senior management;	
 	 	 	
 	• 	each of these executive officers will also receive at our expense group term life insurance coverage equal to two times their base salary subject to a maximum amount of coverage equal to $500,000;	
 	 	 	
 	• 	each of these executive officers has agreed not to compete with us during employment and for a period equal to the shorter of one year following termination of employment or the duration of the employee’s employment with us and has agreed to maintain the confidentiality of our proprietary information and trade secrets during the term of employment and for two years thereafter; and	
 	 	 	
 	• 	each employment agreement contains severance benefits, which are summarized below under “Post-Employment Compensation.”	
 
Post-Employment Compensation
 
401(k) Plan Benefits
 
Our U.S.-based executive officers are eligible to participate in our 401(k) plan on the same terms as our other U.S.-based employees. Historically, in any plan year, we normally contributed to each participant a matching contribution equal to 50% on the first 6% of an employee’s annual wages. However, due to economic conditions, the salaried match in our 401(k) plan was reduced to 20% on the first 6% of an employee’s annual wages, effective January 1, 2009. Effective as of January 1, 2010, the salaried match in our 401(k) plan was increased to 100% on the first 5% of an employee’s annual wages. All of our executive officers participated in our 401(k) plan during fiscal 2010 and received matching contributions in accordance with the foregoing methodology.
 
Retirement Plan and Supplemental Executive Retirement Plan
 
We maintain a defined benefit retirement plan covering all executive officers and substantially all other employees in the United States. Under the defined benefit retirement plan, nonbargaining unit employees receive an annual pension payable on a monthly basis at retirement equal to 1.6% of the employee’s average of the highest 5 years of compensation during the last 10 calendar years of service prior to retirement multiplied by the number of years of credited service, with an offset of 50% of Social Security benefits (prorated if years of credited service are less than 30). Compensation
39

 
under the defined benefit retirement plan includes the compensation as shown in the Summary Compensation Table under the headings “Salary,” “Bonus,” and “Non-Equity Incentive Plan Compensation” subject to a maximum compensation amount set by law ($245,000 in 2010). Effective January 1, 2010, an amendment to the defined benefit retirement plan discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009.
 
Executive officers also participate in a program which supplements benefits under the defined benefit retirement plan. Under the Supplemental Executive Retirement Plan, executive officers are provided with additional increments of (a) 0.50% of the employee’s average of the highest 5 years of compensation (as limited under the defined benefit retirement plan ) per year of credited service over the benefits payable under the defined benefit retirement plan to nonbargaining unit employees and (b) 2.1% of the compensation exceeding the defined benefit retirement plan dollar compensation limit per year of credited service. A Rabbi Trust has been created for deposit of the aggregate present value of the benefits described above for executive officers.
 
The following table shows total estimated annual benefits payable from the defined benefit retirement plan and the Supplemental Executive Retirement Plan to executive officers upon normal retirement at age 65 at specified compensation and years of service classifications calculated on a single life basis and adjusted for the projected Social Security offset:

 	 	Annual Pension Payable for Life
	
 	 	After Specified Years of Credited Service	
Average Annual Compensation	 	10 Years	 	20 Years	 	30 Years	 	40 Years	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
$100,000	 	$	17,500	 	 	$	35,000	 	 	$	52,500	 	 	$	70,000	*	
150,000	 	 	28,000	 	 	 	56,000	 	 	 	84,000	 	 	 	105,000	*	
200,000	 	 	38,500	 	 	 	77,000	 	 	 	115,500	 	 	 	140,000	*	
250,000	 	 	49,000	 	 	 	98,000	 	 	 	147,000	 	 	 	175,000	*	
300,000	 	 	59,500	 	 	 	119,000	 	 	 	178,500	 	 	 	210,000	*	
350,000	 	 	70,000	 	 	 	140,000	 	 	 	210,000	 	 	 	245,000	*	
400,000	 	 	80,500	 	 	 	161,000	 	 	 	241,500	 	 	 	280,000	*	
450,000	 	 	91,000	 	 	 	182,000	 	 	 	273,000	 	 	 	315,000	*	
500,000	 	 	101,500	 	 	 	203,000	 	 	 	304,500	 	 	 	350,000	*	
550,000	 	 	112,000	 	 	 	224,000	 	 	 	336,000	 	 	 	385,000	*	
600,000	 	 	122,500	 	 	 	245,000	 	 	 	367,700	 	 	 	420,000	*	
650,000	 	 	133,000	 	 	 	266,000	 	 	 	399,000	 	 	 	455,000	*	
700,000	 	 	143,500	 	 	 	287,000	 	 	 	430,500	 	 	 	490,000	*	

 	 	 	
*	 	Figures reduced to reflect the maximum limitation under the plans of 70% of compensation.	
 
The above table does not reflect limitations imposed by the Internal Revenue Code of 1986, as amended, on pensions paid under federal income tax qualified plans. However, an executive officer covered by our program will receive the full pension to which he or she would be entitled in the absence of such limitations.
40

 
Potential Payments Upon Termination or Change of Control
 
We have entered into employment agreements and change of control employment agreements with each of our named executive officers that provide for severance benefits following a termination of employment, as well as provide employment benefits in connection with a change of control (as defined in the change of control agreements).
 
The employment agreements with our named executive officers provide that if the executive officer’s employment is terminated as a result of the death or disability of such executive officer, then the executive officer (or his or her beneficiary) is entitled to continuation of the executive officer’s then effective base salary for a period of six months after termination and continuation of medical and dental coverage for such six month period after termination of employment. If the executive officer’s employment is terminated by us without cause (as defined the employment agreements), then the executive officer will be entitled to continuation (1) of the executive officer’s then effective base salary for twelve months in the case of Mr. Stratton and Mr. Krejci and, for each other executive officer, for a minimum of six months after termination or a maximum of twelve months with each executive officer receiving one month credit for each year of service as an officer of STRATTEC and (2) of medical and dental coverage for such six to twelve month period, as applicable.
 
Each of our named executive officers has also signed a change of control employment agreement which guarantees the employee continued employment following a change in control (as defined in the agreements) on a basis equivalent to the employee’s employment immediately prior to such change in terms of position, duties, compensation and benefits, as well as specified payments upon termination following a change in control. Such agreements become effective only upon a defined change of control of STRATTEC, or if the employee’s employment is terminated upon, or in anticipation of such a change of control, and automatically supersede any existing employment agreement once they become effective. Under these agreements, if during the employment term (three years from the change in control), the employee is terminated other than for cause (as defined in the agreements) or if the employee voluntarily terminates his or her employment for good reason (as defined in the agreements) or during a 30-day window period one year after a change of control, then the executive officer is entitled to specified severance benefits, including (1) a lump sum payment of three (with respect to Mr. Stratton and Mr. Krejci) or two (with respect to each other executive officer) times the employee’s annual salary, (2) a payment equal to the executive’s officer’s highest annual bonus (determined as provided in the agreement) and (3) continuation of certain fringe and other benefits.
41

 
The following table sets forth the compensation that each of our named executive officers would have been eligible to receive if the applicable executive officer’s employment had been terminated as of June 27, 2010 under circumstances requiring payment of severance benefits as described above other than in connection with a change of control.
 
Potential Severance Under Employment Agreements

Name	 	Salary	 	Benefits(1)	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	$	409,000	 	 	$	13,035	 	 	$	422,035	 	
Frank J. Krejci	 	$	295,800	 	 	$	13,035	 	 	$	308,835	 	
Patrick J. Hansen	 	$	222,000	 	 	$	13,035	 	 	$	235,035	 	
Dennis A. Kazmierski	 	$	99,000	 	 	$	6,518	 	 	$	105,518	 	
Rolando J. Guillot	 	$	92,500	 	 	$	6,518	 	 	$	99,018	 	

 	 	 	
(1)	 	The benefits consist of expenses for the continuation of medical and dental coverage for a six to twelve month period, as applicable.	
 
The following table sets forth the compensation that each of our named executive officers would have been eligible to receive if the applicable executive officer’s employment had been terminated as of June 27, 2010 under circumstances requiring payment of severance benefits as described above in connection with a change of control.
 
Potential Severance Payments Under Change of Control Agreements
Following a Change of Control

Name	 	Salary	 	Bonus	 	Benefits(1)	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	$	1,227,000	 	 	$	375,311	 	 	$	13,035	 	 	$	1,615,346	 	
Frank J. Krejci	 	$	887,400	 	 	$	139,023	 	 	$	13,035	 	 	$	1,039,458	 	
Patrick J. Hansen	 	$	444,000	 	 	$	138,413	 	 	$	13,035	 	 	$	595,448	 	
Dennis A. Kazmierski	 	$	396,000	 	 	$	90,686	 	 	$	13,035	 	 	$	499,721	 	
Rolando J. Guillot	 	$	370,000	 	 	$	86,154	 	 	$	13,035	 	 	$	469,189	 	

 	 	 	
(1)	 	The benefits consist of expenses for the continuation of medical and dental coverage for a one year period.	
 
As described above, our Stock Incentive Plan also provides for immediate vesting of all outstanding options and the lapse of any forfeiture provisions or other restrictions on outstanding shares of restricted stock upon a change of control of STRATTEC. The following table sets forth the
42

 
unvested stock options and shares of restricted stock of our named executive officers as of June 27, 2010 that would become vested in the event of a change of control of STRATTEC.

 	 	 	 	 	 	Number of
	 	 	
 	 	Number of Shares
	 	Unrealized Value
	 	Restricted
	 	Unrealized Value of
	
 	 	Underlying
	 	of Unvested
	 	Shares that are
	 	Unvested Restricted
	
Name	 	Unvested Options	 	Options(1)	 	Unvested	 	Stock(2)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Harold M. Stratton II	 	 	8,100	 	 	$	89,829	 	 	 	1,800	 	 	$	39,618	 	
Frank J. Krejci	 	 	12,000	 	 	$	42,240	 	 	 	—	 	 	 	—	 	
Patrick J. Hansen	 	 	10,500	 	 	$	76,425	 	 	 	1,800	 	 	$	39,618	 	
Dennis A. Kazmierski	 	 	3,300	 	 	$	36,597	 	 	 	1,300	 	 	$	28,613	 	
Rolando Guillot	 	 	10,500	 	 	$	76,425	 	 	 	1,300	 	 	$	28,613	 	

 	 	 	
(1)	 	Unrealized value equals the closing market value of our common stock as of June 25, 2010, the last trading day prior to our fiscal year end of June 27, 2010, minus the exercise price, multiplied by the number of unvested shares of our common stock as of such date. The closing market value of our Common Stock on June 25, 2010 was $22.01.	
 	 	 	
(2)	 	Unrealized value equals the closing market value of our common stock as of June 25, 2010, the last trading day prior to our fiscal year end of June 27, 2010, multiplied by the number of unvested shares of our common stock as of such date. The closing market value of our common stock on June 25, 2010 was $22.01.	
 
DIRECTOR COMPENSATION
 
General Information
 
Each of our nonemployee directors receives an annual retainer fee of $18,000, a fee of $1,500 for each Board meeting attended and a fee of $1,000 for each committee meeting attended. The respective chairmen of the Board committees receive an additional retainer fee of $4,000 for the Audit Committee and $2,000 for the Compensation Committee and the Nominating and Corporate Governance Committee. Effective June 30, 1997, we implemented an Economic Value Added Bonus Plan for Non-Employee Members of the Board of Directors. The purpose of the Economic Value Added Bonus Plan for Non-Employee Members of the Board of Directors is to maximize long-term shareholder value by providing incentive compensation to non-employee directors in a form which relates the financial reward to an increase in our value to our shareholders and to enhance our ability to attract and retain outstanding individuals to serve as nonemployee directors. The Economic Value Added Bonus Plan for Non-Employee Members of the Board of Directors provides for the payment of a potential cash bonus to each non-employee director equal to the product of (a) 40% of the director’s retainer and meeting fees for the fiscal year, multiplied by (b) a Company Performance Factor. In general, the Company Performance Factor is determined by reference to our financial performance relative to a targeted cash-based return on capital, which is intended to approximate our weighted cost of capital (which was 10.0% for fiscal 2010).
 
Our Board of Directors retained RSM McGladrey in May 2008 to compile a survey of board of director compensation data from a peer group of companies. RSM McGladrey compiled board of
43

 
director pay practices data form six similar industry peer companies to STRATTEC. The selected organizations included Badger Meter, Inc., Gehl Company, Koss Corporation, Ladish Co., Inc., Twin Disc, Inc. and Weyco Group, Inc. The data compiled by the survey included an analysis of retainer fees for board and committee service, meeting fees, chairperson fees and incentive compensation. Based upon the survey results, the compensation levels of our directors was at or near the median compensation of the directors of the companies included in the survey. Our Board of Directors and our Compensation Committee discussed the results of this survey at meetings held in fiscal 2008 and subsequently formally approved matters relating to the compensation of our directors. Based upon this survey, effective for fiscal 2009, each of our nonemployee directors received an annual retainer of $18,000. At a meeting held on May 19, 2009, the Board of Directors approved a reduction in their annual retainer by 4%, effective with the bi-annual retainer payment to be made in October, 2009. At a meeting held on February 23, 2010, the Board of Directors approved restoring their annual retainer fee back to the $18,000 level. The action taken by the Board at its May 19, 2009 meeting reducing the Board retainer fee, and the action taken by the Board at its February 23, 2010 meeting restoring the current retainer fee, corresponded with similar actions taken by the Compensation Committee of the Board relating to temporary decreases in our executive officers’ base salaries. The temporary decreases were in response to our recent company performance and the economic outlook for the automotive industry.
 
Subject to shareholder approval of the amended and restated Stock Incentive Plan, on August 17, 2010, the Compensation Committee also approved specified grants of shares of restricted stock based upon fiscal 2010 performance of 600 shares to each of Mr. Koss, Mr. Feitler and Mr. Zimmer. If our shareholders approve the amendments to our Stock Incentive Plan at the Annual Meeting, these shares of restricted stock will be granted as of October 5, 2010, will all vest on the third anniversary of that grant date and will have all the rights of our shares of common stock, including dividend and voting rights. If the shareholders do not approve the amended and restated Stock Incentive Plan at the Annual Meeting, then these shares of restricted stock will not be granted.
 
Director Summary Compensation Table
 
The following table summarizes the director compensation for fiscal year 2010 for all of our non-employee directors. Mr. Stratton does not receive any additional compensation for his services as a director beyond the amounts previously disclosed in the Summary Compensation Table. Mr. Krejci received compensation as an outside (non-employee) director through December 31, 2009. Commencing as of January 1, 2010, Mr. Krejci was appointed one of our executive officers and subsequently stopped receiving any additional compensation for his services as a director. See the Summary Compensation Table for additional amounts paid to Mr. Krejci during or with respect to fiscal 2010.

 	 	Fees Earned or
	 	Non-Equity Incentive
	 	 	
Name	 	Paid in Cash ($)	 	Plan Compensation ($)(1)	 	Total ($)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Michael J. Koss	 	 	35,140	 	 	 	28,487	 	 	 	63,627	 	
Robert Feitler	 	 	33,140	 	 	 	26,866	 	 	 	60,006	 	
Frank J. Krejci	 	 	15,640	 	 	 	12,679	 	 	 	28,319	 	
David R. Zimmer	 	 	35,140	 	 	 	28,487	 	 	 	63,627	 	

44

 

 	 	 	
(1)	 	This column discloses the dollar value of all amounts earned by the director under our Economic Value Added Plan for Non-Employee Members of the Board of Directors for performance in fiscal 2010 which where tied to incentive performance targets.	
 
TRANSACTIONS WITH RELATED PERSONS
 
Related Person Transactions
 
During fiscal 2010, other than as described above under Executive Compensation, the Company did not engage in any related party transactions within the meaning of the rules of the Commission.
 
Review and Approval of Related Person Transactions
 
The charter for our Audit Committee provides that one of the responsibilities of our Audit Committee is to review and approve related party transactions in accordance with the listing requirements of the NASDAQ Stock Market. Although we do not currently have a formal written set of policies and procedures for the review, approval or ratification of related person transactions, we do have written procedures in place to identify related party transactions that may require Audit Committee approval. These procedures include annual submission of director and officer questionnaires. Where a related party transaction is identified, the Audit Committee reviews and, where appropriate, approves the transaction based on whether it believes that the transaction is at arms length and contains terms that are no less favorable than what we could have obtained from an unaffiliated third party.
 
EQUITY COMPENSATION PLAN INFORMATION
 
The following table summarizes share information, as of June 27, 2010, for the Stock Incentive Plan. This plan has been approved by STRATTEC’s shareholders.

 	 	 	 	 	Weighted
	 	 	 	 	
 	 	Number of
	 	 	Average
	 	 	 	 	
 	 	Common Shares to Be
	 	 	Exercise Price of
	 	 	Number of
	 	
 	 	Issued Upon Exercise
	 	 	Outstanding
	 	 	Common Shares
	 	
 	 	of Outstanding
	 	 	Options,
	 	 	Available for Future
	 	
 	 	Options, Warrants
	 	 	Warrants and
	 	 	Issuance Under Equity
	 	
Plan Category	 	and Rights	 	 	Rights	 	 	Compensation Plans	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity compensation plans approved by shareholders	 	 	297,650	 	 	$	33.01	 	 	 	250,893	 	
Equity compensation plans not approved by shareholders	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	297,650	 	 	$	33.01	 	 	 	250,893	 	

45

 
 
PROPOSAL 2:

APPROVAL OF AMENDED AND RESTATED

STOCK INCENTIVE PLAN
 
Purpose and Effect of Proposal
 
Proposed Adoption.  Subject to shareholder approval, our Board of Directors has approved amending and restating the Stock Incentive Plan to expand the eligible class of participants under the Stock Incentive Plan to include our outside (non-employee) directors. If the proposal is approved at the Annual Meeting by the shareholders, then we will be able to grant stock options, stock appreciation rights and shares of restricted stock under the Stock Incentive Plan to our outside directors. The Stock Incentive Plan was last amended and restated in 2005 at the annual meeting of our shareholders, and other than the inclusion of our outside directors as participants in the plan, the current proposed amendment does not materially alter the 2005 restated Stock Incentive Plan.
 
Purpose of the Amended and Restated Stock Incentive Plan.  As discussed in “Compensation Discussion and Analysis,” the objectives of our compensation arrangements include (1) attracting and retaining key service providers through competitive compensation arrangements, (2) providing strong financial incentives, at a reasonable cost to our shareholders, for performance that creates value for shareholders by generating returns in excess of our cost of capital and (3) linking compensation to corporate performance through equity-based awards that reward executives and other service providers for both gains in our stock price and meeting long-term EVA growth goals.
 
Our management and Board of Directors believe there are significant benefits to STRATTEC and our shareholders by aligning the performance incentives of the outside (non- employee) directors with those of our senior managers and executive officers. Including our outside directors as eligible participants in the Stock Incentive Plan accomplishes this alignment while remaining consistent to our compensation philosophy and arrangements designed by the Compensation Committee.
 
The proposed amended and restated Stock Incentive Plan reflects changes in our equity compensation programs that our Compensation Committee and Board of Directors plan to implement beginning in fiscal 2011. Under the amended and restated Stock Incentive Plan, we will be able to grant equity awards to our outside (non-employee) directors. In light of the current economic environment, our Board of Directors believes that restricted stock awards are a good way to provide significant equity compensation to our service providers, including officers, directors and key employees that is less subject to market volatility. In addition, we believe that restricted stock awards result in less compensation expense under applicable accounting standards than stock options exercisable for the same number of shares.
 
Description of the Stock Incentive Plan
 
A brief description of the Stock Incentive Plan, as proposed to be amended and restated, appears below. The following description is qualified in its entirety by reference to the text of the Stock Incentive Plan, as proposed to be amended and restated, which is attached as Appendix A to this Proxy Statement.
46

 
General.  The Stock Incentive Plan authorizes our Compensation Committee to grant stock incentive awards to our officers, directors and other key employees, including our subsidiaries and affiliates. Approximately 60 individuals participate in the Stock Incentive Plan. Our Compensation Committee administers the Stock Incentive Plan and has complete discretion, subject to the terms of the Stock Incentive Plan, to determine, among other things, which individuals will receive awards, the type, number and frequency of and the number of shares subject to such awards, and, to the extent not otherwise expressly provided in the Stock Incentive Plan, the terms and conditions of the awards.
 
Awards.
 
1. Stock Options.  Options granted under the Stock Incentive Plan may be incentive stock options (“ISOs”), as defined under and subject to Section 422 of the Internal Revenue Code (the “Code”), or non-qualified stock options (“NSOs”).
 
The options will be exercisable at such times and subject to such terms and conditions as the Compensation Committee may determine. All options will expire no later than ten years from the date of grant in the case of ISOs and ten years and one day from the date of grant in the case of NSOs. Generally, options will expire upon an optionee’s termination of service status for cause, one year following the termination of service status due to death, three years following termination due to retirement or disability, or three months after the termination of service status for any other reason; provided, however, that options will expire prior to said times if and at such time that the original option exercise term otherwise expires. Generally, options may be exercised only to the extent exercisable on the date of termination, death, disability or retirement. To the extent options are ISOs, they will retain such status, in general, only if exercised within three months following termination of employment. ISOs may not be granted to our outside (non-employee) directors.
 
The option price for any option will not be less than 100% of the fair market value of our common stock as of the date of grant and will be paid in cash, or, in certain circumstances, shares of our common stock (including restricted stock), at the time of exercise. When using shares of common stock in payment of the exercise price, an optionee may receive, in one transaction or a series of essentially simultaneous transactions, without making any out-of-pocket cash payment, shares equivalent in value to the excess of the fair market value of the shares subject to exercised option rights over the exercise price specified for such shares in the option.
 
Upon notice of exercise of a stock option, our Compensation Committee may, at its sole discretion, elect to cash out all of any portion of such option by paying a per share amount equal to the excess of the fair market value of the common stock on the exercise date over the option exercise price. Such payment may be in cash or common stock, which stock may, in certain circumstances, take the form of restricted stock.
 
Stock options are not transferable except by will or the laws of descent and distribution.
 
Shares of common stock available for distribution by our Compensation Committee under the Stock Incentive Plan may also be issued pursuant to our leveraged stock option (“LSO”) program. LSOs granted under the Stock Incentive Plan may be either ISOs or NSOs. The LSOs may be exercisable no earlier than three nor more than five years from the date of grant. The exercise price of LSOs shall be the
47

 
product of 90% of fair market value on the date of grant, multiplied by the sum (taken to the 5th power) of (a) 1, plus (b) the Estimated Annual Growth Rate, but in no event may the exercise price be less than fair market value on the date of grant. The Estimated Annual Growth Rate is intended to represent an annual percentage stock appreciation and equals the average daily closing 10 year U.S. Treasury note yield rate for the month of April immediately preceding the relevant plan year, plus 2%.
 
2. Stock Appreciation Rights.  Our Compensation Committee may also award stock appreciation rights (“SARs”) under the plan. SARs may be granted in conjunction with all or part of any stock option, will be exercisable only at such times as and to the extent the underlying stock option is exercisable and upon exercise is paid in cash, common stock or a combination thereof, at the discretion of our Compensation Committee, in a per share amount equal to the excess of the fair market value of the common stock on the exercise date over the related exercise price.
 
3. Restricted Stock.  Restricted stock may be granted contingent upon the attainment of specified performance goals or such other factors as our Compensation Committee may determine and, during the period of restriction, the holder of restricted stock may not sell, transfer, pledge or assign the restricted stock. In general, except for an award of restricted stock in lieu of cash compensation, the period of restriction for any grant of restricted stock will be based on the recipient’s continued status as a service provider to STRATTEC and will not be less than three years. Restricted stock may vest immediately or in installments over time following the minimum period of restriction, as determined by our Compensation Committee. The maximum number of shares of restricted stock that may be granted to all recipients in any year is 20,000 shares and the maximum number of shares of restricted stock that may be granted to any one individual in any year is 20% of the total number of shares of restricted stock granted in that year.
 
Change in Control Provisions.  Upon the occurrence of a “change in control” of STRATTEC, as defined in the Stock Incentive Plan, any outstanding SARs and stock options which are not then exercisable will become fully exercisable and vested. Likewise, the restrictions applicable to restricted stock will lapse and such shares and awards will be free of all restrictions and deemed fully vested under the terms of the original grant.
 
Upon a change in control, optionees may elect to surrender all or any part of their stock options and receive a per share amount in cash equal to the excess of the “change in control price” over the exercise price of the stock option. The “change in control price” will be the highest price per share paid in any transaction reported on the applicable NASDAQ Stock Market, or paid or offered to be paid in any bona fide transaction relating to a potential or actual change in control of STRATTEC at any time during the 60-day period immediately preceding the change in control as determined by the Compensation Committee.
 
If an optionee’s status as a service provider is terminated at or following a change in control (other than by death, disability or retirement), the exercise periods of an optionee’s stock options will be extended to the earlier of six months and one day from the date of such termination or the options’ respective expiration dates.
 
Miscellaneous.  The Stock Incentive Plan may be amended or discontinued by our Board of Directors, provided that the Board may not, without the approval of our shareholders, (a) increase the
48

 
number of shares reserved for distribution or decrease the option price of a stock option below 100% of the fair market value at grant or change the pricing terms applicable to stock purchase rights, except as expressly provided in the Stock Incentive Plan as described below with respect to certain events such as a merger, stock split, consolidation, recapitalization, stock dividend, reorganization or other capital event, (b) change or expand the class of service providers eligible to receive awards under the Stock Incentive Plan, or (c) extend maximum exercise periods for awards. No amendment or discontinuance may impair the rights of an optionee or recipient under an outstanding stock option or other award without the recipient’s consent.
 
In the event of any merger, stock split, consolidation, recapitalization, stock dividend, reorganization or other change in corporate structure affecting our shares of common stock, our Board of Directors may, in its sole discretion, make substitutions or adjustments in the aggregate number of shares reserved for issuance under the Stock Incentive Plan, in the number and option price of shares subject to outstanding options (and related stock appreciation rights), and in the number of shares subject to other awards granted under the Stock Incentive Plan.
 
New Plan Benefits
 
On August 17, 2010, we granted shares of restricted stock to our named executive officers under the Stock Incentive Plan. These grants are not contingent upon approval of the proposed amended and restated Stock Incentive Plan by our shareholders at the Annual Meeting. If shareholders do not approve the amended and restated Stock Incentive Plan at the Annual Meeting, these restricted stock grants will remain outstanding. See “Compensation Discussion and Analysis — Components of Executive Compensation — Equity Based Compensation” for additional information regarding these awards of restricted stock to our named executive officers. On August 17, 2010, we also approved grants of shares of restricted stock to our outside (non-employee) directors under the Stock Incentive Plan, contingent upon approval of the proposed amended and restated Stock Incentive Plan by our shareholders at the Annual Meeting. If shareholders do not approve the amended and restated Stock Incentive Plan at the Annual Meeting, these shares of restricted stock will not be granted.
 
The following table sets forth the number of shares of restricted stock granted or contingently approved under the Stock Incentive Plan on August 17, 2010 and the grant date dollar value of the shares of restricted stock awarded under the Stock Incentive Plan.

Name and Position or Group	 	Number of Shares	 	Dollar Value ($)	
 	 	 	 	 	 	 	 	 	
Harold M. Stratton	 	 	2,000	 	 	 	39,060	 	
Frank J. Krejci	 	 	1,500	 	 	 	29,295	 	
Patrick J. Hansen	 	 	1,200	 	 	 	23,436	 	
Dennis A. Kazmierski	 	 	800	 	 	 	15,624	 	
Rolando J. Guillot	 	 	800	 	 	 	15,624	 	
Executive Group	 	 	8,700	 	 	 	169,911	 	
Non-Executive Director Group	 	 	1,800	*	 	 	 	*	
Non-Executive Officer Employee Group	 	 	9,500	 	 	 	185,535	 	

49

 

*	 	Our Compensation Committee approved awards of 600 shares of restricted stock to each of our outside (non-employee) directors that are contingent upon shareholder approval of amendments to our Stock Incentive Plan at the Annual Meeting. Consequently, the dollar value of these awards is undeterminable. If the shares were actually issued as of August 17, 2010, then the dollar value of the awards to the Non-Executive Director Group would have equaled $35,154, in the aggregate.	
 
Vote Required
 
If a quorum exists, the proposed amended and restated Stock Incentive Plan will be adopted and approved if the votes cast at the Annual Meeting in favor of approval and adoption of the Stock Incentive Plan exceed the votes cast against approval of adoption. Any shares not voted at the meeting (whether by broker non-votes or otherwise) and any abstentions will have no impact on the vote.
 
The Board of Directors recommends a vote in “FAVOR” of amending and restating the Stock Incentive Plan. Shares of common stock represented at the Annual Meeting by executed but unmarked proxies will be voted in  “FAVOR”  of the proposal to amend and restate the Stock Incentive Plan, unless a vote against the proposal or to abstain from voting is specifically indicated on the proxy.
 
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K
 
We are required to file an annual report, called a Form 10-K, with the Securities Exchange Commission. A copy of Form 10-K for the fiscal year ended June 27, 2010 will be made available, without charge, to any person entitled to vote at the Annual Meeting. Written request should be directed to Patrick J. Hansen, Office of the Corporate Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road, Milwaukee, Wisconsin 53209.
 
SHAREHOLDER PROPOSALS
 
Any shareholder who desires to submit a proposal for inclusion in our 2011 Proxy Statement in accordance with Rule 14a-8 must submit the proposal in writing to Patrick J. Hansen, Chief Financial Officer and Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road, Milwaukee, Wisconsin 53209. We must receive a proposal by May 4, 2011 (120 days prior to the anniversary of the mailing date of this Proxy Statement) in order to consider it for inclusion in our 2011 Proxy Statement.
 
Proposals submitted other than pursuant to Rule 14a-8 that are not intended for inclusion in our 2011 Proxy Statement will be considered untimely if received after July 7, 2011 (90 days prior to the anniversary date of the previous year’s annual meeting of shareholders). If a shareholder gives notice of such a proposal after this deadline, Commission rules allow our proxy holders discretionary voting authority to vote against the shareholder proposal to the extent it is properly presented for consideration at the 2011 Annual Meeting of Shareholders.
50

 
 
OTHER MATTERS
 
Our directors know of no other matters to be brought before the meeting. If any other matters properly come before the meeting, including any adjournment or adjournments thereof, it is intended that proxies received in response to this solicitation will be voted on such matters in the discretion of the person or persons named in the accompanying proxy form.
 
BY ORDER OF THE BOARD OF DIRECTORS
STRATTEC SECURITY CORPORATION
 
Patrick J. Hansen,
Secretary
 
Milwaukee, Wisconsin
September 1, 2010
51

 
 
APPENDIX A

AMENDED AND RESTATED
STRATTEC SECURITY CORPORATION
STOCK INCENTIVE PLAN
(As amended and restated effective October 5, 2010)
 
1. Purpose; Definitions.  The purpose of the Plan is to advance the interests of the Company’s shareholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s shareholders.
 
For purposes of the Plan, the following terms are defined as set forth below:
 
(a) “Board” means the Board of Directors of the Company.
 
(b) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
 
(c) “Commission” means the Securities and Exchange Commission or any successor agency.
 
(d) “Committee” means the Committee referred to in Section 2.
 
(e) “Company” means STRATTEC SECURITY CORPORATION, a corporation organized under the laws of the State of Wisconsin, or any successor corporation.
 
(f) “Director” means a member of the Board.
 
(g) “Disability” means permanent and total disability as determined under procedures established by the Committee for purposes of the Plan.
 
(h) “Early Retirement” means, with respect to Employees, retirement, with the consent of and for purposes of the Company, from active employment with the Company, a subsidiary or affiliate pursuant to the early retirement provisions of the applicable pension plan of such employer.
 
(i) “Employee” means any person, including Officers and Directors, employed by the Company or any affiliate or subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its subsidiaries, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.
 
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.
 
(k) “Fair Market Value” means, except as provided in Sections 5(k) and 6(b)(ii): (i) with respect to Non-Qualified Stock Options granted in connection with the distribution of Stock
A-1

 
made by Briggs & Stratton Corporation to its shareholders, the average closing price of the Stock on the applicable NASDAQ Stock Market during the five trading days after the effective date of such distribution; and (ii) in all other instances, the mean, as of any given date, between the highest and lowest reported sales prices of the Stock on the applicable NASDAQ Stock Market or, if no such sale of Stock occurs on the applicable NASDAQ Stock Market on such date, the fair market value of the Stock as determined by the Committee in good faith.
 
(l) “Incentive Stock Option” means any Stock Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
 
(m) “Non-Employee Director” shall have the meaning set forth in Rule 16b-3(b)(3)(i), as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission.
 
(n) “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
 
(o) “Normal Retirement” means, with respect to Employees, retirement from active employment with the Company, a subsidiary or affiliate at or after age 65.
 
(p) ‘‘Officer” means a person who is an officer of the Company within the meaning of section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
 
(q) “Plan” means the Amended and Restated STRATTEC SECURITY CORPORATION Stock Incentive Plan, as set forth herein and as hereinafter amended from time to time.
 
(r) “Restricted Stock” means an award under Section 7.
 
(s) “Retirement” means Normal Retirement or Early Retirement.
 
(t) “Rule 16b-3” means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time.
 
(u) “Service Provider” means an Employee, Officer or Director.
 
(v) “Stock” means the Common Stock, $.01 par value per share, of the Company.
 
(w) “Stock Appreciation Right” means a right granted under Section 6.
 
(x) “Stock Option” or “Option” means an Option or Leveraged Stock Option granted under Section 5.
 
In addition, the terms “Change in Control” and “Change in Control Price” have the meanings set forth in Sections 8(b) and (c), respectively, and other capitalized terms used herein shall have the meanings ascribed to such terms in the relevant section of this Plan.
 
2. Administration.  The Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board, composed solely of two or more Non-Employee Directors, who shall be appointed by the Board and who shall serve at the pleasure of the Board. If at
A-2

 
any time no Committee shall be in office, the functions of the Committee specified in the Plan shall be exercised by the Board.
 
The Committee shall have plenary authority to grant to eligible Service Providers, pursuant to the terms of the Plan, Stock Options, Stock Appreciation Rights and Restricted Stock.
 
In particular, the Committee shall have the authority, subject to the terms of the Plan:
 
(a) to select the Service Providers to whom Stock Options, Stock Appreciation Rights and Restricted Stock may from time to time be granted;
 
(b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock or any combination thereof are to be granted hereunder; provided, however, Incentive Stock Options may not be granted to Non-Employee Directors;
 
(c) to determine the number of shares to be covered by each award granted hereunder;
 
(d) to determine the terms and conditions of any award granted hereunder (including, but not limited to, the share price, any restriction or limitation and any vesting acceleration or forfeiture waiver regarding any Stock Option or other award and the shares of Stock relating thereto, based on such factors as the Committee shall determine);
 
(e) to adjust the performance goals and measurements applicable to performance-based awards pursuant to the terms of the Plan;
 
(f) to determine under what circumstances a Stock Option may be settled in cash or Restricted Stock under Section 5(k); and
 
(g) to determine to what extent and under what circumstances Stock and other amounts payable with respect to an award shall be deferred.
 
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.
 
The Committee may act only by a majority of its members then in office, except that the members thereof may authorize any one or more of their number or any Officer to execute and deliver documents on behalf of the Committee.
 
Any determination made by the Committee pursuant to the provisions of the Plan with respect to any award shall be made in its sole discretion at the time of the grant of the award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants.
A-3

 
3. Stock Subject to Plan.  The total number of shares of Stock reserved and available for distribution under the Plan shall be 1,700,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
 
Subject to Section 6(b)(iv), if any shares of Stock that have been optioned cease to be subject to a Stock Option, if any shares of Stock that are subject to a Restricted Stock award are forfeited or if any Stock Option or other award otherwise terminates without a payment being made to the participant in the form of Stock, such shares shall again be available for distribution in connection with awards under the Plan.
 
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split or other change in corporate structure affecting the Stock, such substitution or adjustments shall be made in the aggregate number of shares reserved for issuance under the Plan, in the number and option price of shares subject to outstanding Stock Options and in the number of shares subject to other outstanding awards granted under the Plan as may be determined to be appropriate by the Board, in its sole discretion; provided, however, that the number of shares subject to any award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option.
 
4. Eligibility.  Service Providers of the Company, its subsidiaries and affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries or affiliates are eligible to be granted awards under the Plan; provided, however, Non-Employee Directors are not eligible to receive awards of Incentive Stock Options under the Plan.
 
5. Stock Options.  Stock Options may be granted alone or in addition to other awards granted under the Plan and may be of two types: Incentive Stock Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve.
 
Subject to the limitations contained herein, the Committee shall have the authority to grant to any optionee Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights); provided, however, Non-Employee Directors are not eligible to receive awards of Incentive Stock Options under the Plan.
 
Incentive Stock Options may be granted only to Employees of the Company and its subsidiaries (within the meaning of Section 425(f) of the Code). To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option.
 
Stock Options shall be evidenced by option agreements, the terms and provisions of which may differ. An option agreement shall indicate on its face whether it is an agreement for Incentive Stock Options or Non-Qualified Stock Options. The grant of a Stock Option shall occur on the date the Committee by resolution selects a Service Provider as a participant in any grant of Stock Options, determines the number of Stock Options to be granted to such Service Provider and specifies the terms and provisions of the option agreement. The Company shall notify a participant of any grant of
A-4

 
Stock Options, and a written option agreement or agreements shall be duly executed and delivered by the Company.
 
Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered nor shall any discretion or authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of the Code or, without the consent of the optionee affected, to disqualify any Incentive Stock Option under such Section 422.
 
Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions as the Committee shall deem desirable:
 
(a) Option Price.  The option price per share of Stock purchasable under a Stock Option shall be equal to the Fair Market Value of the Stock at time of grant or such higher price as shall be determined by the Committee at grant.
 
(b) Option Term.  The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than 10 years after the date the Option is granted, and no Non-Qualified Stock Option shall be exercisable more than 10 years and one day after the date the Option is granted.
 
(c) Exercisability.  Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine.
 
(d) Method of Exercise.  Subject to the provisions of this Section 5, Stock Options may be exercised, in whole or in part, at any time during the option period by giving written notice of exercise to the Company specifying the number of shares to be purchased.
 
Such notice shall be accompanied by the payment in full of the purchase price for such shares or, to the extent authorized by the Committee, by irrevocable instructions to a broker to promptly pay to the Company in full the purchase price for such shares. Such payment shall be made in cash, outstanding shares of Stock, in combinations thereof, or any other method of payment approved by the Committee; provided, however, that the deposit of any withholding tax shall be made in accordance with applicable law. If shares of Stock are being used in part or full payment for the shares to be acquired upon exercise of the Stock Option, such shares shall be valued for the purpose of such exchange as of the date of exercise of the Stock Option at the Fair Market Value of the shares. Any certificates evidencing shares of Stock used to pay the purchase price shall be accompanied by stock powers duly endorsed in blank by the registered holder of the certificate (with signatures thereon guaranteed). In the event the certificates tendered by the holder in such payment cover more shares than are required for such payment, the certificate shall also be accompanied by instructions from the holder to the Company’s transfer agent with regard to the disposition of the balance of the shares covered thereby.
 
If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock, such Restricted Stock (and any replacement shares
A-5

 
relating thereto) shall remain (or be) restricted in accordance with the original terms of the Restricted Stock award in question, and any additional Stock received upon the exercise shall be subject to the same forfeiture restrictions, unless otherwise determined by the Committee.
 
No shares of Stock shall be issued until full payment therefor has been made. Subject to any forfeiture restrictions that may apply if a Stock Option is exercised using Restricted Stock, an optionee shall have all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive dividends, with respect to shares subject to the Stock Option when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 12(a).
 
(e) Non-transferability of Options.  No Stock Option shall be transferable by the optionee other than by will or by laws of descent and distribution, and all Stock Options shall be exercisable, during the optionee’s lifetime, only by the optionee or by the guardian or legal representative of the optionee, it being understood that the terms “holder” and “optionee” include the guardian and legal representative of the optionee named in the option agreement and any person to whom an option is transferred by will or the laws of descent and distribution.
 
(f) Termination by Death.  Subject to Section 5(j), if an optionee’s status as a Service Provider terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent then exercisable or on such accelerated basis as the Committee may determine, for a period of one year (or such other period as the Committee may specify) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter.
 
(g) Termination by Reason of Disability.  Subject to Section 5(j), if an optionee’s status as a Service Provider terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination or on such accelerated basis as the Committee may determine, for a period of three years (or such shorter period as the Committee may specify at grant) from the date of such termination as a Service Provider or until the expiration of the stated term of such Stock Option, whichever period is shorter; provided, however, that, if the optionee dies within such three-year period (or such shorter period), any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter. With respect to an Employee, in the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
 
(h) Termination by Reason of Retirement.  Subject to Section 5(j), if an Employee optionee’s employment terminates by reason of Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of such Retirement or on such accelerated basis as the Committee may determine, for a period
A-6

 
of three years (or such shorter period as the Committee may specify at grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is shorter, provided, however, that, if the optionee dies within such three-year (or such shorter) period any unexercised Stock option held by such optionee shall, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
 
(i) Other Termination.  Unless otherwise determined by the Committee, if an optionee’s status as a Service provider terminates for any reason other than death, Disability or Retirement, the Stock Option shall thereupon terminate, except that such Stock Option, to the extent then exercisable, may be exercised for the lesser of three months following such termination or the balance of such Stock Option’s term in the event the Service Provider is not an Employee and may be exercised for the lesser of three months or the balance of such Stock Option’s term if the optionee is an Employee and is involuntarily terminated by the Company, a subsidiary or affiliate without cause. Notwithstanding the foregoing, if an optionee’s status as a Service Provider terminates at or after a Change in Control (as defined in Section 8(b)), other than by reason of death, Disability or Retirement, any Stock Option held by such optionee shall be exercisable for the lesser of (x) six months and one day, and (y) the balance of such Stock Option’s term pursuant to Section 5(b).
 
(j) Incentive Stock Option Limitations.  To the extent required for “incentive stock option” status under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Stock with respect to which Incentive Stock Options granted after 1986 are exercisable for the first time by the optionee during any calendar year under the Plan and any other stock option plan of any subsidiary or parent corporation (within the meaning of Section 425 of the Code) after 1986 shall not exceed $100,000.
 
The Committee is authorized to provide at grant that, to the extent permitted under Section 422 of the Code, if a participant’s employment with the Company and its subsidiaries is terminated by reason of death, Disability or Retirement and the portion of any Incentive Stock Option that is otherwise exercisable during the post-termination period specified under Sections 5(f), (g), or (h), applied without regard to this Section 5(j), is greater than the portion of such option that is exercisable as an “incentive stock option” during such post-termination period under Section 422, such post-termination period shall automatically be extended (but not beyond the original option term) to the extent necessary to permit the optionee to exercise such Incentive Stock Option (either as an Incentive Stock Option or, if exercised after the expiration periods that apply for the purposes of Section 422, as a Non-Qualified Stock Option).
 
(k) Cashing Out of Option; Settlement of Spread Value in Restricted Stock.  On receipt of written notice of exercise, the Committee may elect to cash out all or part of the portion of
A-7

 
any Stock Option to be exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Stock over the option price (the “Spread Value”) on the effective date of such cash out.
 
Cash outs relating to options held by optionees who are actually or potentially subject to Section 16(b) of the Exchange Act shall comply with the provisions of Rule 16b-3, to the extent applicable, and, in the case of cash outs of Non-Qualified Stock Options held by such optionees, the Committee may determine Fair Market Value under the pricing rule set forth in Section 6(b)(ii).
 
In addition, if the option agreement so provides at grant or is amended after grant and prior to exercise to so provide (with the optionee’s consent), the Committee may require that all or part of the shares to be issued with respect to the Spread Value payable in the event of a cash out of an unexercised Stock Option or the Spread Value portion of an exercised Stock Option take the form of Restricted Stock, which shall be valued on the date of exercise on the basis of the Fair Market Value of such Restricted Stock, determined without regard to the forfeiture restrictions involved. Notwithstanding any other provision of this Plan, upon a Change in Control (as defined in Section 8(b)) other than a Change in Control specified in clause (i) of Section 8(b) arising as a result of beneficial ownership (as defined therein) by the Plan participant of Outstanding Company Common Stock or Outstanding Company Voting Securities (as such terms are defined below), in the case of Stock Options other than Stock Options held by an Officer or Director of the Company (within the meaning of Section 16 of the Exchange Act) which were granted less than six months prior to the Change in Control, during the 60-day period from and after a Change in Control (the “Exercise Period”), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, in lieu of the payment of the exercise price of the shares of Stock being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the “Change in Control Price” (as defined in Section 8(c)) per share of Stock on the date of such election shall exceed the exercise price per share of Stock under the Stock Option multiplied by the number of shares of Stock granted under the Stock Option as to which the right granted under this Section 5(k) shall have been exercised.
 
(l) Leveraged Stock Options.  Any of the shares of Stock reserved and available for distribution under the Plan may be used for grants of “Leveraged Stock Options” pursuant to the Company’s Leveraged Stock Option Program described below (the “LSO Program”).
 
(i) Objectives.  The LSO Program is designed to build upon the Company’s Economic Value Added Bonus Plan (“EVA Plan”) by tying the interests of certain senior executives (“Senior Executives”) to the long term consolidated results of the Company. In this way, the objectives of Senior Executives will be more closely aligned with the Company’s shareholders. Whereas the EVA Plan provides for near and intermediate term rewards, the LSO Program provides a longer term focus by allowing Senior Executives to participate in the long-term appreciation in the equity value of the Company. In general,
A-8

 
the LSO Program is structured such that each year an amount equivalent to the Total Bonus Payout under the EVA Plan is invested on behalf of Senior Executives in options on the Company’s Stock (“LSOs”). These LSOs become exercisable after they have been held for three years, and they expire at the end of five years. The LSO Program is also structured so that a fair return must be provided to the Company’s shareholders before the options become valuable.
 
(ii) Leveraged Stock Option Grant.  For fiscal 1995 and subsequent years, the dollar amount to be invested in LSOs for each Senior Executive shall be equal to the amount of each Senior Executive’s Total Bonus Payout determined under the EVA Plan effective for the applicable fiscal year. The number of LSOs awarded shall be determined by dividing (a) the dollar amount of such LSO award by (b) 10% of the Fair Market Value of Company Stock on the date of the grant, as determined by the Committee, rounded (up or down) to the nearest 10 shares.
 
(iii) Term.  All LSOs shall be exercisable beginning on the third anniversary of the date of grant, and shall terminate on the fifth anniversary of the date of grant unless sooner exercised, unless the Committee determines other dates.
 
(iv) Exercise Price.  The exercise price for LSOs shall be the product of 90% of the Fair Market Value per share as determined above, times the sum taken to the fifth (5th) power of (a) 1, plus (b) the Estimated Annual Growth Rate, but in no event may the exercise price be less than Fair Market Value on the date of grant. The Estimated Annual Growth Rate is the average daily closing 10-year U.S. Treasury note yield rate for the month of April immediately preceding the relevant Plan year, plus 2%. So,
 
Exercise Price = (.9 × FMV) × (1 + Estimated Annual Growth Rate)5

 	Example:	$15 share price; 9.75% Estimated Annual Growth Rate (7.75% 10-year U.S. Treasury note rate, plus 2%): $13.50 (90% FMV) × (1.0975) 5  = $21.50	
 
(v) Limitations on LSO Grants and Carryover.  Notwithstanding subsection (l)(ii) above, the maximum number of LSOs that may be granted to all Senior Executives for any Plan year, shall be 40,000. In the event that the 40,000 limitation shall be in effect for any Plan year, the dollar amount to be invested for each Senior Executive shall be reduced by proration based on the aggregate Total Bonus Payouts of all Senior Executives so that the limitation is not exceeded. The amount of any such reduction shall be carried forward to subsequent years and invested in LSOs to the extent the annual limitation is not exceeded in such years. LSOs may not be awarded to Non-Employee Directors under the Plan
 
(vi) The Plan.  Except as modified herein, LSOs are Incentive Stock Options to the extent they are eligible for treatment as such under Section 422 of the Internal Revenue Code. If not eligible for Incentive Stock Option treatment, the LSOs shall constitute Non-Qualified Stock Options. Except as specifically modified herein, LSOs shall be governed by the terms of the Plan.
A-9

 
6. Stock Appreciation Rights.
 
(a) Grant and Exercise.  Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of grant of such Stock Option. No Stock Appreciation Rights may be granted to a Non-Employee Director if granted in conjunction with an Incentive Stock Option.
 
A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise determined by the Committee at the time of grant, a Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall not be reduced until the number of shares covered by an exercise or termination of the related Stock Option exceeds the number of shares not covered by the Stock Appreciation Right.
 
A Stock Appreciation Right may be exercised by an optionee in accordance with Section 6(b) by surrendering the applicable portion of the related Stock Option in accordance with procedures established by the Committee. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 6(b). Stock Options which have been so surrendered shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised.
 
(b) Terms and Conditions.  Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee, including the following:
 
(i) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate are exercisable in accordance with the provisions of Section 5 and this Section 6.
 
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash, shares of Stock or both equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment.
 
In the case of Stock Appreciation Rights relating to Stock Options held by optionees who are actually or potentially subject to Section 16(b) of the Exchange Act, the Committee may require that such Stock Appreciation Rights be exercised only in accordance with the applicable provisions of Rule 16b-3.
 
(iii) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Section 5(e).
 
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the
A-10

 
purpose of the limitation set forth in Section 3 on the number of shares of Stock to be issued under the Plan, but only to the extent of the number of shares issued under the Stock Appreciation Right at the time of exercise based on the value of the Stock Appreciation Right at such time.
 
7. Restricted Stock.
 
(a) Administration.  Shares of Restricted Stock may be issued either alone or in addition to other awards granted under the Plan. The Committee shall determine the Service Providers to whom and the time or times at which grants of Restricted Stock will be made, the number of shares to be awarded, the time or times within which such awards may be subject to forfeiture and any other terms and conditions of the awards, in addition to those contained in Section 7(c).
 
The Committee may condition the grant of Restricted Stock upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine. The provisions of Restricted Stock awards need not be the same with respect to each recipient.
 
(b) Awards and Certificates.  Each participant receiving a Restricted Stock award shall be issued a certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such award, substantially in the following form:
 
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the STRATTEC SECURITY CORPORATION Stock Incentive Plan. Copies of such Plan and Agreement are on file at the offices of STRATTEC SECURITY CORPORATION, 3333 West Good Hope Road, Milwaukee, Wisconsin 53209-2043.”
 
The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Restricted Stock award, the participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award.
 
(c) Terms and Conditions.  Shares of Restricted Stock shall be subject to the following terms and, conditions:
 
(i) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to in Section 7(c)(vii), during a period set by the Committee, commencing with the date of such award (the “Restriction Period”), the participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock. Within these limits and subject to Section 7(c)(iv), the Committee may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions, in whole or in part, based on service, performance and such other factors or criteria as the Committee may determine.
 
(ii) Except as provided in this paragraph (ii), and Section 7(c)(i), the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Unless otherwise determined by the Committee, cash dividends shall be automatically deferred
A-11

 
and reinvested in additional Restricted Stock and dividends payable in Stock shall be paid in the form of Restricted Stock.
 
(iii) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and Sections 7(c)(i) and (iv), upon termination of a participant’s status as a Service Provider for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant.
 
(iv) Except to the extent that an award of Restricted Stock is issued in lieu of cash compensation or in settlement of the spread value of Stock Options pursuant to Section 5(k), the Restriction Period for any grant of shares of Restricted Stock under this Plan shall comply with the following: (A) with respect to shares of Restricted Stock that vest or otherwise become unrestricted based upon the participant’s continued status as a Service Provider with the Company, the minimum Restriction Period shall be three years from the date of grant and after the end of such three year period the restrictions may lapse as to shares of Restricted Stock either immediately or in installments as determined by the Committee; and (B) at the discretion of the Committee, the remaining restrictions may be waived or lapse prior to the end of the Restriction Period in the event of the participant’s death, Disability or Retirement or in connection with certain transactions that may involve a Change in Control as provided in Section 8 of this Plan. Shares of Restricted Stock that are awarded in lieu of cash compensation or pursuant to Section 5(k) may have any Restriction Period as may be determined by the Committee. For purposes of this Section 7(c)(iv), shares of Restricted Stock shall be deemed to have been awarded in lieu of cash compensation to the extent that the aggregate Fair Market Value of the shares of Restricted Stock on the date of grant is not greater than the amount of any cash compensation that the participant agrees to forego as a condition to the grant.
 
(v) In the event of hardship or other special circumstances of a participant whose status as a Service Provider is involuntarily terminated (other than for cause), the Committee may waive in whole or in part any or all remaining restrictions with respect to such participant’s shares of Restricted Stock.
 
(vi) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unlegended certificates for such shares shall be delivered to the participant.
 
(vii) Each award shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement.
 
(viii) Notwithstanding the terms of Section 7(a), the maximum number of shares of Restricted Stock that may be granted to all participants for any Plan year, shall be 20,000. Moreover, the maximum number of shares of Restricted Stock that may be granted to any one individual for any Plan year is 20% of the total number of shares of Restricted Stock awarded in that Plan year.
A-12

 
8. Change In Control Provisions.
 
(a) Impact of Event.  Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control (as defined in Section 8(b)):
 
(i) Any Stock Appreciation Rights and Stock Options outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested to the full extent of the original grant.
 
(ii) The restrictions applicable to any Restricted Stock shall lapse and such Restricted Stock shall become free of all restrictions and fully vested to the full extent of the original grant.
 
(b) Definition of Change in Control.  For purposes of the Plan, a “Change in Control” shall mean the happening of any of the following events:
 
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d) (3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either [a] the then outstanding shares of Stock of the Company (the “Outstanding Company Common Stock”) or [b] the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (w) any acquisition directly from the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (z) any acquisition by any corporation pursuant to a transaction described in clauses [a], [b] and [c] of paragraph (iii) of this subsection (b) of this Section 8; or
 
(ii) Individuals who, as of February 27, 1995, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to February 27, 1995 whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
 
(iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation (a “Business Combination”), in each case, unless, following such Business Combination, [a] all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business
A-13

 
Combination (including, without limitation, a corporation which as a result of such transaction owns the Company through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, [b] no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and [c] at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
 
(iv) Approval by the shareholders of the Company of [a] a complete liquidation or dissolution of the Company or [b] the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) less than 20% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of the Company or such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale or disposition and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the Board.
 
(c) Change in Control Price.  For purposes of the Plan, “Change in Control Price” means the highest price per share paid in any transaction reported on the applicable NASDAQ Stock Market or paid or offered in any bona fide transaction related to a potential or actual change in control of the Company at any time during the preceding 60 day period as determined by the Committee, except that, in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, such price shall be based only on transactions reported for the date on which the Committee decides to cash out such options.
A-14

 
9. Amendments and Termination.  The Board may amend, alter or discontinue the Plan but no amendment, alteration or discontinuation shall be made (i) which would impair the rights of an optionee under a Stock Option or a recipient of a Stock Appreciation Right or Restricted Stock award theretofore granted without the optionee’s or recipient’s consent or (ii) which, without the approval of the Company’s shareholders, would:
 
(a) except as expressly provided in the Plan, increase the total number of shares reserved for the purpose of the Plan;
 
(b) except as expressly provided in the Plan, decrease the option price of any Stock Option to less than the Fair Market Value on the date of grant;
 
(c) change or expand the class of Service Providers eligible to participate in the Plan;
 
(d) extend the maximum option period under Section 5(b);
 
(e) otherwise materially increase the benefits to participants in the Plan; or
 
(f) amend Section 10 or this Section 9.
 
The Committee may amend the terms of any Stock Option or other award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without the holder’s consent.
 
Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules, as well as other developments.
 
10. Repricing.  Except for adjustments pursuant to Section 3, neither the per share option price for any Stock Option granted pursuant to Section 5 or the per share grant price for any Stock Appreciation Right granted pursuant to Section 6 may be decreased after the date of grant nor may an outstanding Stock Option or an outstanding Stock Appreciation Right be surrendered to the Company as consideration for the grant of a new Stock Option or new Stock Appreciation Right with a lower exercise or grant price without the approval of the Company’s shareholders.
 
11. Unfunded Status of Plan.  It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.
 
12. General Provisions.
 
(a) The Committee may require each person purchasing shares pursuant to a Stock Option to represent to and agree with the Company in writing that the optionee or participant is acquiring the shares without a view to the distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.
 
All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the
A-15

 
rules, regulations and other requirements of the Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
 
(b) Nothing contained in this Plan shall prevent the Company, a subsidiary or affiliate from adopting other or additional compensation arrangements for its Service Providers.
 
(c) The adoption of the Plan shall not confer upon any Service Provider any right to a continued relationship as a Service Provider nor shall it interfere in any way with the right of the Company, a subsidiary or affiliate to terminate such relationship at any time.
 
(d) No later than the dates as of which an amount first becomes includable in the gross income of the participant for federal income tax purposes with respect to any award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Company, withholding obligations may be settled with Stock, including Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company, its subsidiaries and affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant.
 
(e) At the time of grant, the Committee may provide in connection with any grant made under this Plan that the shares of Stock received as a result of such grant shall be subject to a right of first refusal pursuant to which the participant shall be required to offer to the Company any shares that the participant wishes to sell at the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee may specify at the time of grant.
 
(f) The Committee shall establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant’s death are to be paid.
 
(g) The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin.
 
(h) The reinvestment of dividends in additional Restricted Stock at the time of any dividend payment shall only be permissible if sufficient shares of Stock are available under Section 3 for such reinvestment (taking into account then outstanding Stock Options and other Plan awards).
A-16

 

Shareowner ServicesSM P.O. Box 64945 St. Paul, MN 55164-0945 TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD. STRATTEC SECURITY CORPORATION 2010 ANNUAL MEETING 1. Election of director: 01 Frank J. Krejci ??Vote FOR ??Vote WITHHELD (term expiring at the 2013 Annual Meeting) the nominee from the nominee 2. Approval of the proposal to amend and restate the Strattec Security ??Vote FOR ??Vote AGAINST ??ABSTAIN Corporation Stock Incentive Plan. the proposal the proposal 3. In their discretion, the Proxies are authorized to vote such other matters as may properly come before the meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSAL 1 AND FOR PROPOSAL 2. Date ___________________________ Address Change? Mark Box ??Indicate changes below: Signature(s) in Box If signing as attorney, executor, administrator, trustee or guardian, please add your full title as such. If shares are held by two or more persons, all holders must sign the Proxy.	

 

STRATTEC SECURITY CORPORATION ANNUAL MEETING OF SHAREHOLDERS Tuesday, October 5, 2010 8:00 a.m. Central Time Radisson Hotel 7065 North Port Washington Road Milwaukee, WI 53217 Proxy Statement for the 2010 Annual Meeting of Shareholders to be Held on October 5, 2010 Important Notice Regarding the Availability of Proxy Materials for the 2010 Annual Meeting of Shareholders to be held on October 5, 2010: This Proxy Statement and the Accompanying Annual Report are Available at www.strattec.com STRATTEC SECURITY CORPORATION 3333 West Good Hope Road proxy Milwaukee, WI 53209 STRATTEC SECURITY CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Harold M. Stratton II and Patrick J. Hansen, or either one of them, with full power of substitution and resubstitution, as proxy or proxies of the undersigned to attend the Annual Meeting of Shareholders of STRATTEC SECURITY CORPORATION to be held on October 5, 2010 at 8:00 a.m. Central Time, at the Radisson Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin 53217, and at any adjournment thereof, there to vote all shares of Common Stock which the undersigned would be entitled to vote if personally present as specified upon the following matters and in their discretion upon such other matters as may properly come before the meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and accompanying Proxy Statement, ratifies all that said proxies or their substitutions may lawfully do by virtue hereof, and revokes all former proxies. Please sign exactly as your name appears hereon, date and return this Proxy. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY TO ELECT THE NOMINATED DIRECTOR AND TO APPROVE THE AMENDED AND RESTATED STRATTEC SECURITY CORPORATION STOCK INCENTIVE PLAN. IF OTHER MATTERS COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGEMENT OF THE PROXIES APPOINTED. See reverse for voting instructions. 104129