`[C&K Logo] CROMPTON & KNOWLES
CORPORATION
_______________________________________________________________
Notice of 1995 Annual Meeting of the Stockholders
_______________________________________________________________
To the Stockholders:
The 1995 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 11,
1995, at 11:15 A.M. in the morning, local time, to consider and
act upon the following matters:
1. The election of three directors to serve for a term
expiring in 1998, described beginning at page 1 of
the Proxy Statement which follows;
2. A proposal to ratify the selection by the Board of
Directors of an independent auditor for 1995,
described beginning at page 13; and
3. 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 10, 1995, 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 10, 1995
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 11, 1995, 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 10, 1995, 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 48,450,207 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 31, 1994, 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 10, 1995.
PRINCIPAL HOLDERS OF VOTING SECURITIES
No person was known to the Board of Directors to be the
beneficial owner of more than 5% of the Corporation's
outstanding voting securities as of February 10, 1995.
ELECTION OF THREE 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 ten
directors in office, three of whom are standing for election at
this year's meeting as Class I directors whose term will expire
at the 1998 annual meeting, three of whom are Class II
directors whose term expires at the 1996 annual meeting and
three of whom are Class III directors whose term expires at the
1997 annual meeting. The Board has nominated the three persons
named below to serve as Class I directors for a three-year term
expiring at the 1998 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
I 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 Dr. Woolf,
who was elected by the Board on November 16, 1994. 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.
Howard B. Wentz, Jr., retired from the Board effective January
25, 1995. Dr. Warren A. Law will retire from the Board
effective on the date of the 1995 annual meeting.
Nominees For Director
CLASS I (to serve until the annual meeting of stockholders
in 1998):
James A. Bitonti, 64, 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, 67, 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.
Patricia K. Woolf, Ph.D., 60, is a private investor, and
lecturer in the Department of Molecular Biology, Princeton
University. She has been a director of the Corporation since
1994 and is a member of the Audit Committee. Dr. Woolf is also
a director of the American Balanced Fund, the Income Fund of
America, Inc., the Growth Fund of America, Inc., Smallcap World
Fund, Inc., the New Economy Fund, the National Life Insurance
Co. of Vermont, Cordis Corporation and General Public Utilities
Corporation.
Incumbent Directors
CLASS I (to serve until the annual meeting of stockholders
in 1995):
Warren A. Law, Ph.D., 70, 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. Dr. 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):
Vincent A. Calarco, 52, 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, 54, 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, 54, 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.
CLASS III (to serve until the annual meeting of stockholders
in 1997):
Robert A. Fox, 57, 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; and former Chairman and Chief
Executive Officer of Clarke Hooper America, an international
marketing services firm, Irvine, CA. 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, Inc., the New Perspective Fund and the Income
Fund of America, Inc. and a trustee of the Euro-Pacific Growth
Fund.
Roger L. Headrick, 58, 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., 48, 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 Chairman of
the Audit Committee and a member of the Nominating Committee.
He is a director of CPC International Corporation.
Board Meetings and Committees
The Board of Directors held six regular meetings during
1994. 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 1994.
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, provides general
oversight with respect to the accounting principles employed in
the Corporation's financial reporting, and reviews the
Corporation's annual report on Form 10-K prior to its filing
each year. 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 1994.
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
1994.
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 1994.
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.
The Crompton & Knowles Corporation 1993 Stock Option Plan
for Non-Employee Directors 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 10, 1995, 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...... 1,628,499(2) 3.3%
Common James A. Bitonti........ 25,912(3)
Common Robert A. Fox........... 17,923(4)
Common Roger L. Headrick....... 53,567(5)
Common Leo I. Higdon, Jr....... 1,254(6)
Common Michael W. Huber........ 15,934(7)
Common Warren A. Law........... 7,579(8)
Common Charles J. Marsden...... 495,526(9)
Common C.A. (Lance) Piccolo.... 11,047(10)
Common Patricia K. Woolf....... 1,712(11)
Common Robert W. Ackley........ 340,337(12)
Common John T. Ferguson II..... 49,250(13)
Common Edmund H. Fording, Jr... 85,039(14)
Common Directors and Executive
Officers as a Group
(18 persons)............ 3,136,737(15) 6.3%
___________
(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 825,160 shares which Mr. Calarco had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; 469,201 shares held under the 1988
Plan and the Employee Stock Ownership Plan, as to which he
has voting but no investment power; and 58,872 shares
owned by his wife and 18,107 shares held by him or his
wife as custodian for their children, as to which he
disclaims beneficial ownership.
(3) Includes 1,308 shares which Mr. Bitonti had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; 11,200 shares owned jointly by Mr.
Bitonti with his wife; 8,240 shares held under the
Restricted Stock Plan for Directors; and 4,800 shares
owned by his wife as to which he disclaims beneficial
ownership.
(4) Includes 1,308 shares which Mr. Fox had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 6,382 shares held under the
Restricted Stock Plan for Directors.
(5) Includes 1,308 shares which Mr. Headrick had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 7,919 shares held under the
Restricted Stock Plan for Directors.
(6) Includes 466 shares which Mr. Higdon had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 788 shares held under the
Restricted Stock Plan for Directors.
(7) Includes 1,308 shares which Mr. Huber had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 5,426 shares held under the
Restricted Stock Plan for Directors.
(8) Includes 1,308 shares which Dr. Law had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 1,471 shares held under the
Restricted Stock Plan for Directors.
(9) Includes 234,176 shares which Mr. Marsden had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; 126,673 shares held under the 1988
Plan and the Employee Stock Ownership Plan, as to which he
has voting but no investment power; and 18,000 shares
owned by his wife as to which he disclaims beneficial
ownership.
(10) Includes 1,308 shares which Mr. Piccolo had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 7,049 shares held under the
Restricted Stock Plan for Directors.
(11) Held under the Restricted Stock Plan for Directors.
(12) Includes 340,337 shares which Mr. Ackley had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; 91,425 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, as to which he disclaims beneficial
ownership.
(13) Includes 36,084 shares which Mr. Ferguson had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 11,666 shares held under the
1988 Plan, the Employee Stock Ownership Plan, and a
Benefit Equalization Plan Trust as to which he has voting
but no investment power.
(14) Includes 64,750 shares which Mr. Fording had the right to
acquire through stock options exercisable within 60 days
of February 10, 1995; and 11,818 shares held under the
1988 Plan and the Employee Stock Ownership Plan, as to
which he has voting but no investment power.
(15) Includes 1,605,317 shares which the officers and directors
in the group had the right to acquire through stock
options exercisable within 60 days of February 10, 1995.
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
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
business unit for which the officer is responsible. Assuming
a stipulated level for return on capital employed has been
attained, individual awards are based 60% on the achievement by
the applicable business unit of specific objectives with
respect to revenue, after-tax earnings, and return on capital,
and 40% on the achievement by the individual of individual
management objectives. 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 number of options granted in 1994 was
between the 50th and 75th percentiles of all companies included
in industrial company survey data available to the Committee.
The factors used to award options include overall corporate
performance, percentile rankings, base salary, and total
compensation.
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 1995 - 1997. 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
three having been distributed on December 9, 1992, December 6,
1993, and December 13, 1994, with the remaining two to be
distributed, one at the end of 1995 and a final one upon
retirement. The Corporation met the performance criteria
established under the 1988 Plan for the period 1992 - 1994.
Awards for the 1992 - 1994 period vest and are distributed to
individuals in Common Stock of the Corporation in four uniform
installments, one during each of the years 1994 - 1996, and the
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
The Committee reviewed Mr. Calarco's base salary and
believes that the current level of $495,000 is appropriate for
1995. 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 1994 and the achievement of
a return on year-end equity of 22.7%, earnings from operations
near the record level of 1993 and revenue growth of 6.0%, Mr.
Calarco earned $300,000 under the Annual Incentive Compensation
Plan for "A" Group of Senior Executives, which is 61% 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 1994 was 22.7%, which placed the Company
in the top quartile of 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 1994 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 option shares that one
individual may receive. The limit is 25% of the total share
authorization. Secondly, the Committee resolved to continue
the practice of not repricing options. Finally, at the 1994
annual meeting of shareholders, the shareholders approved the
material terms of the performance goal for the Annual Incentive
Compensation Plan for "A" Group of Senior Executives, which is
"performance-based" under Section 162(m) of the Internal
Revenue Code, and amounts paid under the plan are fully
deductible.
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.
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.
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return
on the Common Stock of the Corporation for the last five fiscal
years with the returns on the Standard & Poor's 500 Stock
Index, the Standard & Poor's Specialty Chemicals 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, the S&P Specialty Chemicals Index and the peer group
companies on December 31, 1989, and the reinvestment of all
dividends. The peer group investment is weighted based on
total market capitalization at the beginning of each fiscal
year.
<TABLE>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
C&K $100.0 $114 $292 $305 $307 $233
S&P 500 100.0 97 126 136 150 152
Peer Group 100.0 107 162 177 183 176
S&P Spec- 100.0 96 136 144 164 142
ialy
Chemicals
</TABLE>
The following 22 companies comprise the specialty chemical
peer group: Betz Laboratories, Inc., The Dexter Corporation,
Ecolab Inc., Engelhard Corporation, Ethyl Corporation, Ferro
Corporation, H.B. Fuller Company, Great Lakes Chemical
Corporation, M. A. Hanna Company, International Flavors &
Fragrances Inc., Lawter International, Inc., Loctite
Corporation, The Lubrizol Corporation, Nalco Chemical Company,
Pall Corporation, Petrolite Corporation, Quaker Chemical
Corporation, RPM, Inc., A. Schulman, Inc., Sigma-Aldrich
Corporation, Valspar Corporation, and Witco Corporation.
The S&P Specialty Chemicals Index companies are W.R. Grace
& Co., Great Lakes Chemical Corporation, Morton International
Inc. and Nalco Chemical Company.
EXECUTIVE COMPENSATION
The following tables set forth information concerning
compensation paid or to be paid to the chief executive officer
of the Corporation and each of the four most highly compensated
executive officers of the Corporation other than the chief
executive officer, for services to the Corporation in all
capacities during 1992, 1993 and 1994, and options granted to
and exercised by the same individuals during the period
indicated.
<TABLE>
Summary Compensation Table
Long Term Compensation
Awards
Annual Compensation
Restricted Securities All Other
Name and Stock Underlying Compen-
Principal Salary Bonus Awards Options sation
<S> <C> <C> <C> <C> <C>
Position Year ($) ($) ($)(1) (#) ($)(2)
Vincent A. Calarco.... 1994 493,000 300,000 -- 78,000 111,870
Chairman of the Board, 1993 472,917 495,000 -- 60,000 105,480
President and CEO 1992 445,834 450,000 4,298,781 50,000 96,049
Charles J. Marsden.... 1994 240,000 56,000 -- 22,000 42,121
Vice President - 1993 230,000 112,000 -- 17,000 44,393
Finance and Chief 1992 218,917 110,000 923,234 14,500 40,238
Financial Officer
Robert W. Ackley...... 1994 203,750 108,000 -- 20,000 36,383
V.P. and President - 1993 188,750 100,000 -- 16,000 33,357
Davis-Standard 1992 174,168 95,000 722,531 13,000 31,368
John T. Ferguson II... 1994 168,000 35,000 -- 12,500 29,656
General Counsel and 1993 156,667 67,000 -- 9,500 33,060
Secretary 1992 145,000 67,000 481,617 8,500 18,893
Edmund H. Fording,Jr.. 1994 166,000 29,000 -- 8,000 23,891
V.P. and President - 1993 166,000 59,000 -- 11,500 25,531
Dyes & Chemicals - 1992 158,213 54,000 573,438 8,000 23,690
Americas
</TABLE>
___________
(1) A portion (51.6%) of the restricted stock grant in 1992 was earned during
the 1992-1994 performance cycle based on after-tax earnings growth and
returns on equity during the period. The shares which were earned vest in
four equal installments, one at the end of each of the three years 1994-1996
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 1994: Vincent A.
Calarco, 359,777 shares valued at $5,846,376, of which 215,777 shares valued
at $3,506,376 are forfeitable; Charles J. Marsden, 106,069 shares valued at
$1,723,621, of which 62,069 shares valued at $1,008,621 are forfeitable;
Robert W. Ackley, 64,869 shares valued at $1,054,121, of which 37,869 shares
valued at $615,371 are forfeitable; John T. Ferguson II, 13,846 shares
valued at $224,998, all of which shares are forfeitable; and Edmund H.
Fording, Jr., 19,054 shares valued at $309,628, all of which shares 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) Includes the following amounts paid during 1994 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, $3,153 (SMD), $39,534 (ESOP), $69,183 (IARP); Mr.
Marsden, $3,474 (SMD), $14,066 (ESOP), $24,581 (IARP); Mr. Ackley, $4,230
(SMD), $12,174 (ESOP), $19,979 (IARP); Mr. Ferguson, $3,828 (SMD), $9,399
(ESOP), $16,429 (IARP); and Mr. Fording, $674 (SMD), $8,255 (ESOP), $14,962
(IARP).
<TABLE>
Option Grants In Last Fiscal Year(1)
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
Percent
Number of Total
of Options
Securities Granted to
Underlying Employees Exercise Expir-
Options in Fiscal Price ation
<S> <C> <C> <C> <C> <C> <C>
Name Granted(#) Year ($/Sh) Date 5%($) 10%($)
V.A. Calarco 71,163 (2) 25.9% 14.625 11/18/04 654,344 1,658,454
6,837 (3) 2.5% 14.625 10/18/04 62,866 159,336
C.J. Marsden 15,163 (2) 5.5% 14.625 11/18/04 139,424 353,374
6,837 (3) 2.5% 14.625 10/18/04 62,866 159,336
R.W. Ackley 13,163 (2) 4.8% 14.625 11/18/04 121,034 306,764
6,837 (3) 2.5% 14.625 10/18/04 62,866 159,336
J.T. Ferguson II 5,685 (2) 2.1% 14.625 11/18/04 52,274 132,489
6,815 (3) 2.5% 14.625 10/18/04 62,664 158,824
E.H. Fording 4,000 (2) 1.5% 14.625 11/18/04 36,780 93,220
4,000 (3) 1.5% 14.625 10/18/04 36,780 93,220
</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 19, 1994, 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>
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values (1)
Number of Securities Value of Unexercised
Underlying Unexer- In-the-Money
cised 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 - - 825,160 108,000 7,744,907 136,500
C.J. Marsden 15,000 250,425 234,176 30,500 1,995,786 38,500
R.W. Ackley - - 55,500 28,000 81,219 35,000
J.T. Ferguson II 1,500 24,960 36,084 17,250 72,991 21,875
E.H. Fording - - 64,750 13,750 313,548 14,000
</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, and Law 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 1994, Mr. Calarco served as a director of Caremark
International Inc., of which Mr. Piccolo is Chairman and Chief
Executive Officer.
Retirement Plans
Mr. Calarco, Mr. Marsden and Mr. Ackley 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.............. $422,292
Charles J. Marsden.............. 110,874
Robert W. Ackley................ 94,666
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, Ferguson and Fording. 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 LLP, which
has been the auditor of the Corporation for many years, to act
as auditor for the fiscal year 1995 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 LLP 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.
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
1996 must be received by the Corporation at its principal
executive offices by November 11, 1995, in order to be
considered for inclusion in the Proxy Statement and form of
proxy relating to the 1996 meeting.
OTHER MATTERS
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's officers and directors and persons
who own more than ten percent of a registered class of the
Corporation's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange
Commission and the New York Stock Exchange. Officers,
directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain
reporting persons that no forms 5 were required for those
persons, the Corporation believes that during fiscal year 1994,
all filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were complied
with except that one report, covering one transaction, was
filed late by Mr. Fox.
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 three nominees for Class I directorships named
herein, and (ii) in favor of the selection of KPMG Peat Marwick
LLP as auditor for fiscal year 1995.
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 10, 1995
