Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant xx
xxDefinitive Proxy Statement
Crompton & Knowles Corporation
Name of Registrant as Specified in its Charter
John T. Ferguson, II
Name of Person Filing Proxy Statement
Payment of Filing Fee
xx $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or
14a-6(j)(2)
Notice of 1994 Annual Meeting of the Stockholders
To the Stockholders:
The 1994 annual meeting of the stockholders of Crompton &
Knowles Corporation will be held at The Metropolitan Club, One
East
Sixtieth Street, New York, New York, on Tuesday, April 12,
1994, at
11:15 A.M. in the morning, eastern standard time, to consider
and
act upon the following matters:
1. The election of four directors to serve for a term
expiring in 1997, described beginning at page __ of
the Proxy Statement which follows;
2. A proposal to ratify the selection by the Board of
Directors of an independent auditor for 1994,
described beginning at page __;
3. A proposal to approve the material terms of the
performance goal under which annual incentive
compensation is determined under the Annual
Incentive Compensation Plan for "A" Group of Senior
Executives, described beginning at page __; and
4. Such other business as may properly come before the
meeting.
All stockholders of the Corporation are cordially invited
to
attend. Stockholders of record at the close of business on
February 11, 1994, are entitled to notice of the annual meeting
and
may vote at the meeting and any adjournment thereof. We urge
you
to date, sign and return the enclosed proxy promptly whether or
not
you plan to attend the annual meeting. If you attend the
meeting,
you may still vote your shares in person, if you wish.
By Order of the Board of Directors,
JOHN T. FERGUSON, II
Secretary
March 11, 1994
Crompton & Knowles Corporation, One Station Place, Metro
Center, Stamford, CT 06902
Proxy Statement
This statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Crompton
&
Knowles Corporation (the "Corporation") for use at the annual
meeting of the stockholders of the Corporation to be held on
April
12, 1994, at The Metropolitan Club, One East Sixtieth Street,
New
York, New York, and at any adjournment thereof.
Holders of Common Stock of the Corporation of record at
the
close of business on February 11, 1994, the record date, are
entitled to notice of and to vote at the meeting and any
adjournment thereof. On the record date there were outstanding
and
entitled to vote 51,306,868 shares of Common Stock, each of
which
is entitled to one vote. The Corporation has no other voting
securities issued and outstanding.
If a stockholder is participating in the Corporation's
Dividend Reinvestment Plan, the shares held in a person's
account under the Plan will be voted automatically in the same
way
that such person's shares held of record are voted.
Any stockholder giving a proxy may revoke it by executing
another proxy bearing a later date or by notifying the
Secretary in writing at any time prior to the voting of the
proxy.
Mere attendance at the annual meeting does not revoke a proxy.
The Corporation's annual report for the fiscal year ended
December 25, 1993, accompanies this Proxy Statement. It is not
proxy soliciting material nor is it incorporated herein by
reference.
This Proxy Statement and the enclosed form of proxy are
first
being sent to stockholders on or about March 11, 1994.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The only person known to the Board of Directors to have
been
the beneficial owner of more than 5% of the Corporation's
outstanding voting securities as of February 11, 1994, is as
follows:
Title Name and Address Amount and Nature Percent of
of
Class of Beneficial Owner of Beneficial Owner Class
Common Baring America Asset 2,832,228 5.5%
Management Company,Inc. Common Stock
150 Federal Street
Boston, MA 02110
ELECTION OF FOUR DIRECTORS
The By-Laws of the Corporation provide for a Board of Directors
of
not less than six nor more than fifteen members, as
determined from time to time by resolution of the Board,
divided into three classes. Directors of one class are elected
each year for a term of three years. There are presently
eleven directors in office, four of whom are to be elected at
this
year's meeting as Class III directors whose term will
expire at the 1997 annual meeting, three of whom are Class I
directors whose term expires at the 1995 annual meeting, and
four
of whom are Class II directors whose term expires at the 1996
annual meeting. The Board has nominated the four persons named
below to serve as Class III directors for a three-year term
expiring at the 1997 annual meeting and until their
respective successors are elected and have qualified. Shares
represented by the accompanying proxy are intended to be voted,
unless authority so to vote is withheld, for such nominees. The
Class III nominees include members of the present Board who
have
served as directors since the dates set forth after their
names.
All of the nominees and all of the incumbent directors have
previously been elected by the stockholders except Mr. Higdon,
who
was elected by the Board on October 20, 1993. If any of the
nominees is not available, an event not anticipated, the
proxies
will be voted for the other nominees and for a
substitute if any is designated by the Board of Directors. Mr.
Buchanan, who has reached age 70, the normal retirement age for
directors, retires from the Board effective on the date of the
1994
annual meeting.
Nominees For Director
CLASS III (to serve until the annual meeting of stockholders in
1997):
Robert A. Fox, 56, is President and Chief Executive Officer of
Foster Farms, a privately held, integrated poultry company,
Livingston, CA. He is former Executive Vice President of
Revlon, Inc., a cosmetics, fragrances and toiletries
manufacturer, New York, NY; former Chairman and Chief Executive
Officer of Clarke Hooper America, an international marketing
services firm, Irvine, CA; and former President and Chief
Operating Officer of Continental Can Company, Inc., a packaging
products company, Norwalk, CT. Mr. Fox has been a director of
the
Corporation since 1990 and is a member of the Executive
Compensation Committee and Nominating Committee. He is also a
director of the American Balanced Fund, the Growth Fund of
America, the New Perspective Fund and the Income Fund of
America, and a trustee of the Euro-Pacific Growth Fund.
Roger L. Headrick, 57, is President and Chief Executive Officer
of
the Minnesota Vikings Football Club, Eden Prairie, MN, and
President and Chief Executive Officer of ProtaTek
International, Inc., a biotechnology animal vaccine company,
St.
Paul, MN. Mr. Headrick is former Executive Vice President and
Chief Financial Officer of The Pillsbury Company, a food
processing
and restaurant company, Minneapolis, MN. He has been a
director of
the Corporation since 1988 and is Chairman of the Nominating
Committee and a member of the Executive
Compensation Committee. He also serves as a director of
Caremark International Inc.
Leo I. Higdon, Jr., 47, is Dean of the Darden Graduate School
of Business Administration at the University of Virginia,
Charlottesville, VA. He is a former
Managing Director and member of the Executive Committee of
Salomon Brothers, an investment banking firm, New York, NY.
Mr.
Higdon became a director of the Corporation in 1993 and is a
member
of the Audit Committee and the Nominating Committee. He is a
director of CPC International Corporation.
Howard B. Wentz, Jr., 64, is Chairman of the Board and a
Director of Esstar Corporation, a manufacturer of portable
electric tools and architectural hardware, New Haven, CT and
Chairman of the Board of Tambrands Inc., a manufacturer of
feminine personal products, White Plains, NY. He is former
Chairman, President and Chief Executive Officer of Amstar
Corporation, a manufacturer of sugar products and electric and
mechanical components and tools, Stamford, CT. Mr. Wentz has
been
a director of the Corporation since 1987 and is Chairman of the
Audit Committee. He also serves as a director of
Colgate-Palmolive Company.
Incumbent Directors
CLASS I (to serve until the annual meeting of stockholders in
1995):
James A. Bitonti, 63, is President and Chief Executive Officer
of
TCOM, L.P., an aerostat systems manufacturer, integrator and
operator, Columbia, MD. He is a retired Vice President of
International Business Machines Corporation, where he held the
positions of Assistant Group Executive of the Asia/Pacific
Group and President of the Communication Products Division.
Mr.
Bitonti has been a director of the Corporation since 1983 and
is
Chairman of the Executive Compensation Committee. He also
serves
as a director of E-Systems, Inc., and as a director and the
Chief
Executive Officer of KFX, Inc.
Michael W. Huber, 64, is retired Chairman of the Board of J. M.
Huber Corporation, a diversified manufacturing and natural
resource development company, Edison, NJ. He has been a
director of the Corporation since 1983 and is a member of the
Executive Compensation Committee and the Audit Committee. He
also
serves as a director of J. M. Huber Corporation.
Warren A. Law, 69, is Chairman of the Board of Mezzanine
Capital Corporation, a capital holding company, St. Helier,
Jersey,
Channel Isles, and retired Professor, Graduate School of
Business
Administration, Harvard University, Cambridge, MA. He has been
a
director of the Corporation since 1975 and is a member of the
Executive Compensation Committee and the Audit Committee. Mr.
Law
is also a director of Dynatech Corp. and Charter Power Systems,
Inc.
CLASS II (to serve until the annual meeting of stockholders in
1996):
Harry W. Buchanan, 70, is retired Chairman of the Board of
Virginia Chemicals Inc., an industrial chemicals manufacturer,
Portsmouth, VA, and a former Vice President of Celanese
Corporation. He has served as a director of the Corporation
since
1977 and is a member of the Audit Committee and the
Nominating Committee.
Vincent A. Calarco, 51, Chairman of the Board, President and
Chief
Executive Officer of the Corporation. He is former Vice
President
for Strategy and Development, Uniroyal, Inc., and former
President
of Uniroyal Chemical Company. Mr. Calarco has been a director
since 1985. Mr. Calarco also serves as a
director of Caremark International Inc. and J. M. Huber
Corporation.
Charles J. Marsden, 53, Vice President-Finance and Chief
Financial Officer of the Corporation. Mr. Marsden has been a
director of the Corporation since 1985.
C.A. (Lance) Piccolo, 53, is Chairman and Chief Executive
Officer of Caremark International Inc., a provider of
alternate-site health-care services, Northbrook, IL. He is
former
Executive Vice President of Baxter International Inc., a
supplier
of health-care products, Deerfield, IL. He has been a director
of
the Corporation since 1988 and is a member of the Audit
Committee
and the Nominating Committee. Mr. Piccolo is also a director
of
Orthomet, Inc.
Board Meetings and Committees
The Board of Directors held five regular meetings during
1993.
All of the directors attended at least 75% of the
aggregate of the meetings of the Board and of the committees on
which they served in 1993.
The Board has established three committees to assist it in
the
discharge of its responsibilities.
The Audit Committee, no member of which is an employee of
the
Corporation, meets periodically with the Corporation's
independent auditor to review the scope of the annual audit and
the
policies relating to internal auditing procedures and
controls and provides general oversight with respect to the
accounting principles employed in the Corporation's financial
reporting. The Audit Committee also recommends to the Board
each
year the selection of the auditor, has responsibility for
approving
professional non-audit services provided by the
independent auditor prior to the performance of such services,
considers the possible effect of providing such non-audit
services on the auditor's independence, and reviews the range
of
fees of the auditor for both audit and non-audit services. The
Audit Committee held two meetings during 1993.
The Committee on Executive Compensation is composed of
directors who are not employees of the Corporation. Its
functions include approval of the level of compensation for
executive officers serving on the Board, adoption of bonus and
deferred compensation plans and arrangements for executive
officers, and administration of the Corporation's stock option
plans and its 1988 Long-Term Incentive Plan (the "1988 Plan").
The
Executive Compensation Committee held two meetings during 1993.
The Nominating Committee is also composed of directors who
are
not employees of the Corporation. The Committee makes
recommendations with respect to the organization, size, and
composition of the Board, identifies suitable candidates for
Board
membership and reviews their qualifications, proposes a slate
of
directors for election by the stockholders at each annual
meeting,
and assists the Board in providing for orderly succession in
the
top management of the Corporation. The
Nominating Committee met twice in 1993.
Compensation of Directors
Directors who are employees of the Corporation receive no
additional compensation for services on the Board of Directors.
Members of the Board who are not employees receive an annual
retainer of $20,000 (committee chairmen receive an additional
retainer of $2,500) and a fee of $7,500 for meeting service,
and
are reimbursed for expenses incurred in attending meetings.
The
Corporation also provides $25,000 of term life insurance and
accidental death and travel insurance coverage for each non-
employee director.
Under the Crompton & Knowles Corporation Restricted Stock
Plan
for Directors, one quarter of each director's retainer and fees
is
paid in shares of the Corporation's Common Stock. A director
may
elect to receive any portion or all of the
remainder of the retainer and fees in Common Stock under the
plan.
All shares issued under the plan are held by the
Corporation until the recipient of the shares leaves the Board,
however the directors receive all dividends on the shares and
may
vote the shares.
At the 1993 annual meeting, the stockholders approved the
Crompton & Knowles Corporation 1993 Stock Option Plan for Non-
Employee Directors. The plan provides for the issuance to non-
employee directors on the date of the first meeting of the
Board each year of an option to purchase that number of full
shares
of the Corporation's Common Stock determined by dividing the
amount
of the annual retainer payable to non-employee
directors for service on the Board by the fair market value of
the
stock on the date of the grant. The exercise price of the
options
is to be equal to such fair market value on the date of grant.
The
options are to vest over a two year period and are to be
exercisable over a ten year period from the date of
grant. The plan provides for the grant of options with respect
to
a maximum of 100,000 shares of stock. Options to be granted
under
the plan are nonstatutory options not intended to qualify as
incentive stock options under the Internal Revenue Code of
1986.
Stockholder Nominations
The Nominating Committee will consider qualified
candidates proposed by stockholders for Board membership in
accordance with the procedure set forth in the By-Laws. Any
stockholder entitled to vote in the election of directors may
nominate one or more persons for election as directors at a
meeting
if written notice of such stockholder's intent to make such
nomination or nominations has been given, either by
personal delivery or by mail, postage prepaid, to the Secretary
of
the Corporation not later than (a) with respect to an
election to be held at an annual meeting of stockholders, 90
days
prior to the anniversary date of the immediately preceding
annual
meeting, and (b) with respect to an election to be held at a
special meeting of stockholders for the election of
directors, the close of business on the tenth day following the
date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth (i) the name and
address of the stockholder who intends to make the nomination
and
of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of
stock
of the Corporation entitled to vote at such meeting and intends
to
appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii)
a
description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv)
such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities
and
Exchange Commission; and (v) the consent of each nominee to
serve
as a director of the Corporation, if so elected. The presiding
officer of the meeting may refuse to acknowledge the nomination
of
any person not made in compliance with the
foregoing procedure.
SECURITY OWNERSHIP OF MANAGEMENT
The nominees and incumbent directors and the executive
officers of the Corporation have advised that they were
directly or indirectly the beneficial owners of outstanding
Common
Stock of the Corporation at the close of business on February
11,
1994, as set forth below, in each case
representing less than one percent of such shares outstanding
except as otherwise indicated.
Amount and
Nature of
Title Name of Beneficial Beneficial Percent of
of
Class Owner Ownership (1) Class
Common VINCENT A. CALARCO 1,557,878 (2) 3.0%
" JAMES A. BITONTI 22,985 (3)
" HARRY W. BUCHANAN 4,457
" ROBERT A. FOX 5,199
" ROGER L HEADRICK 49,249
" LEO I. HIGDON, JR. 321
" MICHAEL W. HUBER 11,535
" WARREN A. LAW 6,585
" CHARLES J. MARSDEN 488,684 (4)
" C.A. (LANCE) PICCOLO 8,305
" HOWARD B. WENTZ, JR. 21,229
" ROBERT W. ACKLEY 327,129 (5)
" EDMUND H. FORDING, JR. 75,754 (6)
" MARVIN H. HAPPEL 141,895 (7)
" DIRECTORS AND
EXECUTIVE OFFICERS
AS A GROUP
(18 persons) 2,999,094 (8) 5.7%
1 Except as noted below, the officers and directors have both
sole
voting and sole investment power over the shares reflected in
this
table.
2 Includes 770,160 shares which Mr. Calarco had the right to
acquire through stock options exercisable within 60 days of
February 11, 1994; 260,862 shares held under the 1988 Plan and
the
Employee Stock Ownership Plan, as to which he has voting but no
investment power; 252,974 shares owned jointly with his wife;
and
59,072 shares owned by his wife and 17,354 shares held by him
or
his wife as custodian for their children, as to which he
disclaims
beneficial ownership.
3 Includes 11,200 shares owned jointly by Mr. Bitonti with his
wife; and 4,800 shares
owned by his wife as to which he
disclaims beneficial ownership.
4 Includes 233,426 shares which Mr. Marsden had the right to
acquire through stock options exercisable within 60 days of
February 11, 1994; 94,602 shares held under the 1988 Plan and
the
Employee Stock Ownership Plan, as to which he has voting but no
investment power; and 20,000 shares owned by his wife as to
which
he disclaims beneficial ownership.
5 Includes 41,000 shares which Mr. Ackley had the right to
acquire through stock options exercisable within 60 days of
February 11, 1994; 50,865 shares held under the 1988 Plan and
the
Employee Stock Ownership Plan, as to which he has voting but no
investment power; and 2,400 shares owned by his wife and 2,400
shares in an estate for which he is co-executor, as to which he
disclaims beneficial ownership.
6 Includes 55,000 shares which Mr. Fording had the right to
acquire
through stock options exercisable within 60 days of February
11,
1994; and 12,704 shares held under the 1988 Plan and the
Employee
Stock Ownership Plan, as to which he has
voting but no investment power.
7 Includes 29,676 shares which Mr. Happel had the right to
acquire through stock options exercisable within 60 days of
February 11, 1994; 37,855 shares held under the 1988 Plan and
the
Employee Stock Ownership Plan, as to which he has voting but no
investment power; 15,231 shares owned jointly with his wife;
and
6,275 shares held as custodian for his children, as to which he
disclaims beneficial ownership.
8 Includes 1,202,226 shares which the officers and directors in
the
group had the right to acquire through stock options
exercisable within 60 days of February 11, 1994.
REPORT OF THE COMMITTEE ON EXECUTIVE COMPENSATION
Executive Compensation Philosophy
The compensation program for the Corporation's executive
officers is administered in accordance with a pay for
performance philosophy to link executive compensation with the
values, objectives, business strategy, management initiatives
and
financial performance of the Corporation. In addition, a
significant portion of each executive officer's compensation is
contingent upon the creation of shareholder value.
The Committee on Executive Compensation of the Board (the
"Committee") believes that stock ownership by management and
restricted stock-based performance compensation plans serve to
align the interests of management and other shareholders in the
enhancement of shareholder value. The Committee further
maintains that long-term strategic leadership commitment is
promoted through vesting a significant portion of restricted
stock
performance awards at retirement.
The compensation of the Corporation's executive officers
is
comprised of cash and equity components and is designed to be
competitive and highly leveraged based upon corporate
financial performance and shareholder returns. The
compensation program provides an opportunity to earn
compensation that is between the 50th to 75th percentile within
the
chemical industry as well as within a broader group of
companies of comparable size and complexity. Actual
compensation levels may be greater or less than average
competitive levels in surveyed companies based upon annual and
long-term performance of the Corporation as well as individual
performance. The measures of performance utilized under the
Corporation's compensation plans are as follows:
Annual actual after-tax earnings performance versus
targeted after-tax earnings performance
Annual actual return on capital performance versus
targeted return on capital performance
Annual actual revenue performance versus targeted revenue
performance
Three year average annual return on equity and cumulative
percentage after-tax earnings per share growth.
Base Salaries
Base salaries and salary ranges for the executive officers
are
based upon competitive norms gathered from several national and
highly recognized compensation services. The Committee on
Executive Compensation reviews and approves the salary ranges
for
the executive officers.
Management Incentive Plan
The Corporation's Management Incentive Plan is an annual
incentive program for executive officers and other key
managers. The purpose of the plan is to provide a direct
financial incentive in the form of an annual cash award to
executives who achieve the annual goals for their business unit
and
the Corporation. The plan includes the Annual Incentive
Compensation Plan for "A" Group of Senior Executives, which
provides for an annual incentive pool for eligible executives
based
upon the Corporation's return on stockholders' equity. Awards
from
the incentive pool are made annually by the
Committee on Executive Compensation, with the maximum award not
to
exceed 100% of a participant's base salary. At the present
time,
Mr. Calarco is the only participant authorized to receive such
awards.
The other officers named in the compensation table below
participate in a plan which provides for the payment of
annual awards from a fund established with reference to the
return
on capital employed of the Corporation as a whole, or of the
division for which the officer is responsible. Assuming a
stipulated level for return on capital employed has been
attained, individual awards are based on the achievement of
specific objectives related to both quantitative factors (such
as
budgeted sales and earnings) and qualitative measures of
performance. Target awards are set at a competitive level
within the chemical industry as well as a broader group of
companies of comparable size and complexity. The maximum
annual incentive award which may be earned under this plan is
50%
of an individual's base salary for the year.
Stock Options and Restricted Stock
The stock option and restricted stock program is a
long-term
incentive plan for the Corporation's executive officers and
other
key managers. The objectives of the program are to align
executive
and shareholder long-term interests by creating a strong and
direct
link between executive pay and shareholder return, and to
enable
executives to develop and maintain a
significant, long-term stock ownership position in the
Corporation's Common Stock.
The executive officers listed in the compensation table
below
receive a major portion of their compensation in the form of
shares
of the Corporation's Common Stock. They receive
annual grants of stock options, priced at fair market value on
the
date of grant. The 1993 grants were between the 50th and 75th
percentiles of all companies included in industrial
company survey data available to the Committee.
In addition, the Corporation's executive officers have
received the opportunity under the 1988 Plan to earn shares of
restricted stock based upon the Corporation's cumulative after
tax
earnings growth and return on equity over a three-year
period, the current period being 1992 - 1994. These grants
have
the potential to deliver above-average compensation if the
goals
are met. If the employment of an individual terminates after
an
award is earned for any reason other than death,
disability, retirement, or a change in control of the
Corporation, any shares that have not vested will be forfeited.
The Corporation exceeded the performance criteria established
under
the 1988 Plan for the period 1989 - 1991 . Awards for the 1989
- -
1991 period vest and are distributed to individuals in Common
Stock
of the Corporation in five installments, the first two having
been
distributed on December 9, 1992, and December 6, 1993, and the
three remaining to be distributed at the end of each of the
next
two years and a final one upon retirement. If the employment
of an
individual terminates for any reason other than death,
disability,
retirement or a change in control of the Corporation, all
shares
that have not vested will be forfeited.
Compensation of Chief Executive Officer
Mr. Calarco's base salary for 1993 was $475,000, an
increase of $25,000 over the 1992 level. This increase was
granted
in recognition of Mr. Calarco's strong personal
leadership in attaining record return on equity, earnings and
revenues during a recessionary period, and to maintain his base
compensation at a level which is competitive with that of other
executives in the chemical industry as well as executives in a
broader group of companies of a size and complexity comparable
to
that of the Corporation. The Board of Directors is
presenting the material terms of the performance goal for the
CEO's
annual incentive plan to the shareholders for approval so that
the
plan will be "performance-based" under Section 162(m) of the
Internal Revenue Code and amounts paid under the plan will be
fully
deductible. The Executive Compensation Committee administers
the
Annual Incentive Compensation Plan for "A"
Group of Senior Executives. Currently, the CEO is the only
participant in this plan. Each year, a pool of funds is made
available under this plan based upon the Company's return on
equity
(ROE). At higher ROE levels, larger percentages of net income
are
allocated to the pool. The maximum incentive which the CEO may
receive is equal to the lesser of 100% of salary or $650,000.
The
maximum award may be reduced if other goals, such as those for
revenue and earnings growth, are not
achieved. Based on the performance of the Company in 1993 and
the
achievement of a return on equity of 23.1%, growth in earnings
from operations of 20.0% and revenue growth of 8.0%, Mr.
Calarco earned
$495,000 under the Annual Incentive Compensation Plan for "A"
Group
of Senior Executives, which is 100% of his current
salary. The Committee believes Mr. Calarco has managed the
Corporation extremely well in a particularly challenging
business climate and has achieved above average results in
comparison to others in the chemical industry. For example,
the
Company's ROE for 1993 was 21.7% versus 15.7% for the peer
group of
22 specialty chemical companies reflected in the
performance graph on page 9 below. The stock options granted
to
Mr. Calarco during 1993 are consistent with the design of the
Corporation's executive compensation program and are shown in
the
compensation table below.
Tax Deductibility of Executive Compensation
The Committee's policy on the tax deductibility of
compensation paid to the Corporation's CEO and other executive
officers is to maximize deductibility to the extent possible
without
abdicating all of its discretionary power. To this end, the
Committee has reviewed all of the Corporation's plans and has
taken
several actions as follows. First, the Committee has assured
that
the gains on non-qualified stock option grants will be
deductible
by amending the 1988 Long-Term Incentive Plan to place a limit
on
the number of options shares that one individual may receive.
The
limit is 25% of the total share authorization. Secondly, the
Committee is requesting shareholder approval for the material
terms of the performance goal for the CEO's annual incentive
plan so that it will be fully deductible as performance-based
compensation. And, thirdly, the Committee has resolved to
continue the practice of not repricing options, incluidng all
options outstanding as of February 17, 1993.
Committee on Executive Compensation
Decisions on compensation of the Corporation's executive
officers are made by the five member Committee on Executive
Compensation, a committee of the Board of Directors composed of
the
persons listed below, all of whom are non-employee
directors. The Committee has retained an independent executive
compensation consultant to evaluate the Corporation's executive
compensation program and has access to independent compensation
data. In 1993, the Committee and the consultant met and the
consultant continues to believe that the Corporation's
executive compensation program was appropriately structured and
focused both on short and long-term performance; rewarded above
average corporate performance in terms of profitability and
growth
in shareholder value; and delivered competitive levels of
compensation when compared to the financial performance
among the Corporation's peer companies.
The Committee on Executive Compensation:
James A. Bitonti, Chairman
Robert A. Fox
Roger L. Headrick
Michael W. Huber
Warren A. Law
Notwithstanding anything to the contrary set forth in any
of
the Corporation's previous filings under the Securities Act of
1933
or the Securities Exchange Act of 1934 that might
incorporate future filings, including this Proxy Statement, in
whole or in part, the foregoing Report of the Committee on
Executive Compensation and the following Performance Graph
shall not be deemed incorporated by reference into any such
filings.
PERFORMANCE GRAPH
The following chart sets forth the data points for the
Performance Graph comparing the cumulative total return on the
Common Stock of the Corporation for the last five fiscal years
with
the comparable returns on the Standard & Poor's 500 Stock Index
and
a peer group of 22 specialty chemical companies,
assuming the investment of $100 in the Corporation's Common
Stock,
the S&P 500 Index and the peer group companies on
December 31, 1988 and the reinvestment of dividends. The peer
group investment is weighted based on total market
capitalization at the beginning of each year.
1988 1989 1990 1991 1992 1993
C&K $100 $206 $235 $603 $630 $634
S&P 500 $100 $132 $127 $166 $179 $197
Peer Group $100 $131 $141 $213 $234 $242
The following 22 companies comprise the specialty chemical
peer group: Betz Laboratories, Inc., The Dexter Corporation,
Ecolab
Inc., Engelhard Corporation, Ethyl Corporation, Ferro
Corporation,
H.B. Fuller Company, Great Lakes Chemical
Corporation, M. A. Hanna Company, International Flavors &
Fragrances Inc., Lawter International, Inc., Loctite
Corporation, The Lubrizol Corporation, Nalco Chemical Company,
Pall
Corporation, Petrolite Corporation, Quaker Chemical
Corporation, RPM, Inc., A. Schulman, Inc., Sigma-Aldrich
Corporation, Valspar Corporation, and Witco Corporation.
EXECUTIVE COMPENSATION
The following tables set forth information concerning
compensation paid or to be paid to the chief executive officer
of
the Corporation and each of the four most highly compensated
executive officers of the Corporation other than the chief
executive officer, for services to the Corporation in all
capacities during 1991, 1992 and 1993, and options granted to
and
exercised by the same individuals during the period
indicated.
<TABLE>
<CAPTION>Summary Compensation Table
Long Term Compensation
Awards
Annual
Name and Compensation Restricted Securities All Other
Principal Stock Underlying Compensa-
Position Year Salary Bonus Awards Options tion
($) ($) ($)(1) (#)(2) ($)(3)
<S> <C> <C> <C> <C> <C> <C>
V. A. Calarco 1993 472,917 495,000 -- 60,000 105,480
Chairman of 1992 445,834 450,000 4,298,781 50,000 96,049
the Board, 1991 398,750 400,000 -- 90,000 86,100
President &
CEO
Charles J. 1993 230,000 112,000 -- 17,000 44,393
Marsden,V.P.- 1992 218,917 110,000 923,234 14,500 40,238
Finance and 1991 207,000 110,000 -- 29,000 34,372
Chief Financial
Officer
Robert W. 1993 188,750 100,000 -- 16,000 33,357
Ackley,V.P. 1992 174,168 95,000 722,531 13,000 31,368
and Pres. 1991 163,750 90,000 -- 23,000 31,254
Davis-
Standard
Division
Edmund H. 1993 166,000 59,000 -- 11,500 25,531
Fording,Jr. 1992 158,213 54,000 573,438 8,000 23,690
V.P. and Pres. 1991 153,125 50,000 -- 16,000 20,772
Dyes & Chem. Div. -
U.S. Operations
Marvin H. 1993 151,000 72,800 -- 9,000 27,169
Happel,V.P. 1992 143,333 70,000 497,744 7,500 28,595
Organization 1991 135,333 70,000 -- 14,400 24,210
</TABLE>
1 Except as noted below, the entire restricted stock grant in 1992
for each of the persons shown in the table must be earned during
the 1992-1994 performance cycle by achievement of
targeted after-tax earnings growth and returns on equity during the
period. If an award is earned, it will be distributed in Common
Stock of the Corporation in four equal installments, one at the end
of each of the three years 1995-1997 and a final one upon
retirement. Should the employment of an individual
terminate after an award is earned for any reason other than death,
disability, retirement, or a change in control of the Corporation,
any shares that have not vested will be forfeited. In April, 1992,
Mr. Calarco was granted an additional 10,000 shares of restricted
stock which vest and are to be distributed in five equal, annual
installments beginning in 1993. If his employment terminates for
any reason other than death,
disability, retirement, or a change in control of the
Corporation, any shares that have not vested will be forfeited.
Total restricted stock outstanding for the persons shown in the
table at the end of fiscal year 1993: Vincent A. Calarco,
504,300 shares valued at $11,346,750 of which 360,300 shares
valued at $8,106,750 are forfeitable; Charles J. Marsden,
146,170 shares valued at $3,288,825, of which 102,170 shares valued
at $2,298,825 are forfeitable; Robert W. Ackley, 90,900 shares
valued at $2,045,250, of which 63,900 shares valued at $1,437,750
are forfeitable; Edmund H. Fording, Jr.,
34,100 shares valued at
$767,250, all of which shares are forfeitable; and Marvin H.
Happel, 69,060 shares valued at $1,553,850, of which 49,060 shares
valued at $1,103,850 are forfeitable. Dividends are paid on
restricted shares from the date of grant but do not vest and are
not distributed until the underlying shares are distributed.
2 1991 grants reflect the 2-for-1 stock split on May 22, 1992.
3 Includes the following amounts paid during 1993 under the
Corporation's Supplemental Medical and Dental Reimbursement Plans
(SMD), and employer contributions to the Corporation's Employee
Stock Ownership Plan (ESOP) and Individual Account Retirement Plan
(IARP) (with that portion of the ESOP and IARP contributions in
excess of the Section 401(k) and Section 415 limitations having
been paid into the Corporation's Benefit Equalization Plan): Mr.
Calarco, $4,144 (SMD), $36,732 (ESOP), $64,604 (IARP); Mr. Marsden,
$7,087 (SMD), $13,600 (ESOP), $23,706 (IARP); Mr. Ackley, $2,144
(SMD), $11,350 (ESOP),
$19,863 (IARP); Mr. Fording, $1,331 (SMD), $8,800 (ESOP),
$15,400 (IARP); and Mr. Happel, $2,860 (SMD), $8,839 (ESOP),
$15,470 (IARP).
<TABLE>
Option Grants In Last Fiscal Year(1)
<CAPTION> Individual Grants
Percent
Number of Total Potential Realizable
of Options Value at Assumed
Securities Granted to Annual Rates of Stock
Underlying Employees Exercise Expir- Price Appreciation
Options in Fiscal Price ation for Option Term
Granted(#) Year ($/Sh) Date 5%($) 10%($)
Name
<S> <C> <C> <C> <C> <C> <C>
V.A. Calarco 54,823(2) 25.9% 19.3125 11/19/03 665,962 1,687,315
5,177(3) 2.4% 19.3125 10/19/03 62,888 159,335
C.J. Marsden 11,823(2) 5.6% 19.3125 11/19/03 143,620 363,882
5,177(3) 2.4% 19.3125 10/19/03 62,888 159,335
R.W. Ackley 10,823(2) 5.1% 19.3125 11/19/03 131,472 333,105
5,177(3) 2.4% 19.3125 10/19/03 62,888 159,335
E.H. Fording 5,120(2) 2.4% 19.3125 11/19/03 62,195 157,581
6,380(3) 3.0% 19.3125 10/19/03 77,501 196,360
M.H. Happel 3,048(2) 1.4% 19.3125 11/19/03 37,026 93,810
5,952(3) 2.8% 19.3125 10/19/03 72,302 183,188
</TABLE>
1 An option entitles the holder to purchase one share of the Common
Stock of the Corporation at a purchase price equal to the fair
market value of the Corporation's Common Stock on
October 20, 1993, the date of grant of all of the options shown in
the table. All options are subject to expiration prior to the
dates shown in the table in case of death or termination of
employment. Fifty percent of the options shown in the table are
exercisable beginning on the first anniversary of the date of
grant, and fifty percent are exercisable beginning on the second
anniversary of the date of grant. The purchase price for stock on
the exercise of options may be paid in cash or in shares of the
Corporation's Common Stock already owned by the option holder, or
by a combination thereof. In the event of a change in control of
the Corporation, all of the options shown in the table will
immediately become exercisable.
2 Non-qualified options.
3 Incentive options.
<TABLE>
<CAPTION> Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values (1)
Number of Securi- Value of Unexer-
ties Underlying cised In-the-Money
Unexercised Options Options at FY-End
FY-End(#) ($)
Shares Value
Acquired on Realized Exercis- Unexer- Exercis- Unexer-
Name Exercise (#) ($)(2) able cisable able cisable
<S> <C> <C> <C> <C> <C> <C>
V.A. Calarco 256,492 5,252,199 770,160 85,000 12,265,584 279,375
C.J. Marsden 25,316 564,158 233,426 24,250 3,571,769 79,719
R.W. Ackley -- -- 41,000 22,500 272,062 73,938
E.H. Fording -- -- 55,000 15,500 611,610 50,875
M.H. Happel 19,474 303,162 29,676 12,750 241,507 41,906
</TABLE>
1 All numbers reflect the 2-for-1 stock split on May 22, 1992.
2 Fair market value at date of exercise less exercise price.
Compensation Committee Interlocks and Insider Participation
Messrs. Fox, Headrick, Huber, Law and Piccolo served as members and
Mr. Bitonti served as Chairman of the Executive
Compensation Committee of the Board during the last completed
fiscal year. No member of the Executive Compensation Committee is
a current or former officer or employee of the Corporation or any
of its subsidiaries.
During 1993, Mr. Calarco served as a director of Caremark
International Inc., of which Mr. Piccolo is Chairman and Chief
Executive Officer.
Retirement Plans
Each of the officers named in the summary compensation table
on page __ are covered by supplemental retirement
agreements with the Corporation. Under each supplemental
agreement, the aggregate benefit payable on an annualized basis
from employer contributions under the Corporation's Individual
Account Retirement Plan to each officer at normal retirement age
will be supplemented by the Corporation so that the total annual
benefit payable to him for life will be either 35% or 50% of the
average total compensation (including salary and bonus) paid to him
during the highest five years of the last ten years prior to his
normal retirement age. A supplemental benefit in a reduced amount
may be payable in the event of
termination of employment prior to normal retirement age. At any
time after the date on which benefit payments commence, the officer
may elect to receive a single lump sum equal to 90% of the
actuarial equivalent of the benefit otherwise payable to the
officer. An officer may elect to have his supplemental benefit
under the agreement paid in a form which will provide for the
continuation of benefits, to a beneficiary selected by him, upon
his death after retirement. Each agreement also
provides for the payment of a reduced benefit to the officer's
beneficiary in the event of his death prior to normal
retirement age and for the payment of disability benefits in
addition to those available under the Corporation's regular
disability insurance program. Benefits under each agreement are
payable only if the officer has completed at least five years of
service after entering into the agreement, does not voluntarily
terminate his employment unless such
termination is the result of his retirement under a retirement plan
or is with approval of the Board, and meets certain other
conditions set forth in the agreement.
Each of the supplemental retirement agreements also
provides that if, after a change in control of the Corporation (as
defined in the agreement) has occurred, the officer's
employment is terminated by the Corporation other than for
cause, disability, or death or the officer resigns for good reason
(as so defined), the officer will be vested in an
unreduced benefit equal to 35% or 50% (whichever level is
applicable to him under the agreement) of his average total
compensation over the highest five of the last ten years of his
employment. In the event the officer is under age 55 when
terminated, the benefit would be based on his final average total
compensation projected to age 55 in accordance with
certain assumptions set forth in the agreement. The benefit would
be paid annually for life commencing at age 65, with
provision made for payment to the officer's beneficiary of the
value of the expected benefit in the event of his death prior to
attaining that age.
The following table sets forth the estimated aggregate annual
benefit payable to each of the officers named in the table under
his supplemental retirement agreement, from
employer contributions to the IARP, and (in the case of Mr. Ackley)
under a retirement plan which was terminated in 1982, upon
retirement at or after normal retirement age based on each
officer's compensation history to date and assuming payment of such
benefit in the form of a life annuity:
Estimated Annual
Name of Individual Retirement Benefit
Vincent A. Calarco $412,958
Charles J. Marsden 110,454
Robert W. Ackley 87,652
Marvin H. Happel 70,663
Employment Agreements
Mr. Calarco is employed pursuant to an employment
agreement which was amended and restated in February 1988. The
amended agreement provides for Mr. Calarco's employment as
Chairman of the Board, President and Chief Executive Officer for a
term of three years, with automatic annual one year
extensions of the term unless the Corporation gives notice at least
60 days prior to the
anniversary of the date of the agreement that the term will not be
extended. The amended agreement calls for a base salary of not
less than $310,000 and for Mr. Calarco's continued
participation in employee benefit plans and other fringe
benefit arrangements substantially as in the past. In the
event Mr. Calarco's
employment is terminated by the Corporation other than for
cause, disability, or death or by Mr. Calarco for good reason (as
defined in the agreement), the Corporation is obligated to pay Mr.
Calarco his salary to the date of termination,
incentive compensation in an amount no less than the bonus paid to
him for the prior year pro-rated to that date, and a lump sum
termination payment equal to three times the sum of his then
current salary and the highest bonus paid to him during the three
years preceding his termination, to continue other employee
benefits provided under the agreement for a period of three years
or until he obtains other employment, and to make certain
additional payments to cover any excise tax imposed under the
Internal Revenue Code of 1986 on the amounts payable as a result of
his termination and any legal fees incurred by Mr. Calarco in
enforcing the Corporation's obligations under the agreement.
The Corporation has entered into employment agreements with
certain other key management employees, including Messrs. Marsden,
Ackley, Fording and Happel. Each agreement is
operative only upon the occurrence of a change in control (as
defined in the agreement) and is intended to encourage the
executive to remain in the employ of the Corporation by
providing him with greater security. Absent a change in
control, the agreement does not require the Corporation to
retain the executive or to pay him any specified level of
compensation or benefits. In the event of a change in control, the
agreement provides that there will be no change, without the
executive's consent, in the salary, bonus opportunity,
benefits, duties, and location of employment of the executive for
a period of one or two years after the change in control. If,
during such period, the executive's employment is
terminated by the Corporation other than for cause, disability, or
death or the executive resigns for good reason (as defined in the
agreement), the Corporation will pay the executive his salary to
the date of termination, incentive compensation in an amount no
less than the bonus paid to him for the prior year pro-rated to
that date, and a lump sum severance payment equal to one or two
times (depending on the executive) the sum of his base salary and
the highest bonus paid to him during the three years preceding his
termination and will continue other
employee benefits similar to those provided to the executive prior
to his termination for a period of one or two years or until his
earlier employment with another employer.
APPROVAL OF SELECTION OF INDEPENDENT AUDITOR
The Board of Directors has, subject to approval by the
stockholders, selected the firm of KPMG Peat Marwick, which has
been the auditor of the Corporation for many years, to act as
auditor for the fiscal year 1994 and to perform other
appropriate accounting services. The Board of Directors
recommends a vote for approval, and unless otherwise directed,
proxies will be voted in favor of this selection. The
affirmative vote of the holders of a majority of the shares of the
Corporation represented and entitled to vote at the meeting is
required for such approval.
The Corporation has been advised that representatives of KPMG
Peat Marwick will be present at the annual meeting, with the
opportunity to make a statement if they desire to do so and to
respond to appropriate questions raised at the meeting.
APPROVAL OF THE MATERIAL TERMS FOR PAYMENT OF ANNUAL INCENTIVE
COMPENSATION
Section 162(m) of the Internal Revenue Code, enacted into law
last year, prohibits the deduction by publicly held
corporations of certain performance-based employee compensation
exceeding one million dollars per year unless specified
conditions are satisfied. To be deductible, such compensation must
be paid solely on account of the attainment of one or more
performance goals established by, and the achievement of which is
certified by, a compensation committee consisting of two or more
outside directors. In
addition, the material terms of the performance goals used to
determine the compensation must be disclosed to and approved by the
stockholders of the corporation paying the compensation prior to
payment.
The Board of Directors seeks stockholder approval of the
material terms for the payment of annual incentive compensation
under the Annual Incentive Compensation Plan for "A" Group of
Senior Executives so that any such compensation will be fully
deductible by the Corporation under Section 162(m) of the
Internal Revenue Code. The approval of the stockholders will be a
condition of the payment of incentive compensation under the plan.
The Committee on Executive Compensation administers the Annual
Incentive Compensation Plan for "A" Group of Senior
Executives. Mr. Calarco is the only participant in this plan.
Each year, a pool of funds may be made available by the
Committee under this plan for the payment of incentive
compensation. The amount, if any, in the pool for any year is
determined based on the return on stockholder's equity achieved by
the Corporation for the year.
The maximum amount of annual incentive compensation which may
be paid to Mr. Calarco under the plan is the lesser of the funds,
if any, in the pool, 100% of salary (currently $495,000) or
$650,000. In 1994, Mr. Calarco received $495,000 under the plan
for fiscal year 1993.
The amount actually paid in any year may be less than the
maximum if the Committee on Executive Compensation determines that
goals for other performance measures, such as revenue and earnings
growth, have not been met.
The Board of Directors recommends a vote for approval of the
material terms of the performance goal, as described above, for
determination of annual incentive compensation under the Annual
Incentive Compensation Plan for "A" Group of Senior
Executives. The affirmative vote of the holders of a majority of
the shares of the Corporation represented and entitled to vote at
the meeting is required for such approval.
STOCKHOLDER PROPOSALS
Under rules of the Securities and Exchange Commission, any
proposal of a stockholder which is intended to be presented for
action at the annual meeting of the stockholders to be held in 1995
must be received by the Corporation at its principal
executive offices by November 11, 1994, in order to be
considered for
inclusion in the Proxy Statement and form of proxy relating to the
1995 meeting.
OTHER MATTERS
As of the date of this statement, the Board of Directors does
not know of any matter other than those referred to in this Proxy
Statement as to which action is expected to be taken at the annual
meeting of stockholders.
The affirmative vote of the holders of a plurality of the
shares which are present in person or represented by proxy at the
meeting is required to elect directors, and the affirmative vote of
the holders of a majority of the shares which are present in person
or represented by proxy is required to approve all other matters
listed in the notice of meeting. Proxies which are marked
"abstain" on the proposals to be voted upon at the meeting will be
counted for the purpose of determining the number of shares
represented in person and by proxy at the meeting. Such
proxies will thus have the same effect as if the shares
represented thereby were voted against the matters to be
considered at the meeting. Shares not voted on any such matter on
proxies returned by brokers will be treated as not
represented at the meeting as to such matter.
The shares represented by proxies in the form solicited by the
Board of Directors will be voted at the meeting. Where a choice is
specified on the proxy with respect to a matter to be voted upon,
the shares represented by the proxy will be voted in accordance
with the specification so made. If no choice is specified, such
shares will be voted for (i) the election as directors of the four
nominees for Class III directorships named herein, (ii) in favor of
the selection of KPMG Peat Marwick as auditor for fiscal year 1994,
and (iii) in favor of approval of the material terms of the
performance goal under the Annual Incentive Compensation Plan for
"A" Group of Senior Executives.
If any business not referred to in this Proxy Statement shall
properly come before the meeting, it is intended
that those persons named as proxies will vote the proxies in
accordance with their judgment of the best interests of the
Corporation and its stockholders.
The cost of solicitation will be borne by the Corporation. In
addition to solicitation by mail, the management of the
Corporation may solicit proxies personally or by telephone and has
retained the firm of D. F. King & Co., Inc. to assist in such
solicitation at a fee of $4,000. The Corporation may also request
brokerage firms and other nominees or fiduciaries to forward copies
of its proxy material to beneficial owners of stock held in their
names, and the Corporation may also
reimburse such persons for reasonable
out-of-pocket expenses incurred by them in connection
therewith.
By Order of the Board of Directors,
JOHN T. FERGUSON, II
Secretary
Dated: March 11, 1994<PAGE>
Appendix
Performance Graph
The performance graph comparing cumulative total shareholder return
over a five-year period to returns on the Standard & Poor's 500
Index and a peer group of 22 specialty chemical
companies appears on page 9 of the paper document disseminated to
stockholders. The electronic filing includes a chart under the
Section entitled "Performance Graph" that provides the data points
and describes the data in the graph.
FORM OF PROXY - FRONT
CROMPTON & KNOWLES CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
For Annual Meeting on April 12, 1994, at The Metropolitan Club
One East Sixtieth Street, New York, N.Y. 10022, 11:15 A.M.
The undersigned appoints VINCENT A. CALARCO, CHARLES J. MARSDEN,
and JOHN T. FERGUSON, II, or any of them, with power of
substitution, proxy and attorney for the undersigned to vote all
shares of stock of Crompton & Knowles Corporation which the
undersigned is entitled to vote at the Annual Meeting of the
Stockholders of said Corporation to be held on April 12, 1994, and
any adjournments thereof, with all powers the undersigned would
have if present, upon the proposals set forth on the reverse side
and in their discretion on all matters properly coming before the
meeting, including those described in the Notice and Proxy
Statement thereof, receipt of which is acknowledged.
This Proxy will be voted as directed, or where no direction is
given, will be voted "FOR" Proposals Nos. 1, 2, and 3. If any
nominee for the Board of Directors named in the Proxy Statement is
unavailable to serve, this Proxy will be voted for such substitute
nominee as may be recommended by the Board of Directors. The Board
of Directors is not aware of other matters to come before the
meeting.
CONTINUED, AND TO BE VOTED, SIGNED AND DATED ON THE REVERSE SIDE
FORM OF PROXY - BACK
CROMPTON & KNOWLES CORPORATION
The Board of Directors recommends a vote FOR Proposals 1, 2, and 3.
1. Election of Robert A. Fox, Roger L. Headrick, Leo I. Higdon, Jr.
and Howard B. Wentz, Jr.
FOR ALL NOMINEES with exceptions noted ____
(To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
_______________________________________________________________
WITHHOLD AUTHORITY FOR ALL NOMINEES ___
2. Approval of the selection by the Board of KPMG Peat Marwick as
independent auditors for 1994.
FOR ___ AGAINST ___ ABSTAIN ___
3. Approval of the material terms of the performance goal under the
Annual Incentive Compensation Plan for "A" Group of Senior
Executives.
FOR ___ AGAINST ___ ABSTAIN ___
PLEASE MARK VOTES xx OR x
DATED:____________________________________, 1994
__________________________________________________
SIGNATURE(S) OF STOCKHOLDER(S)
Note: Signature should agree with name stenciled hereon. When
signing as executor, administrator, trustee, or attorney, please
give full title as such. For joint accounts or co-fiduciaries, all
joint owners or co-fiduciaries should sign.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
