SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. )
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by Rule 14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Crompton & Knowles Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
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[X] No fee required.
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C&K Logo CROMPTON & KNOWLES
CORPORATION
Dear Stockholder:
You are cordially invited to attend the annual meeting of
stockholders of Crompton & Knowles Corporation to be held at
11:15 a.m. on Tuesday, April 28, 1998, at the Tara Stamford
Hotel, 2701 Summer Street, Stamford, Connecticut.
Information about the business of the meeting and the nominees
for election as members of the Board of Directors is set forth
in the formal meeting notice and Proxy Statement on the
following pages. This year you are asked to elect two
directors and to ratify the Board of Directors' selection of an
independent auditor for the fiscal year ending December 26,
1998.
It is important that your shares be represented at the meeting.
Whether or not you plan to attend the session in person, we
hope that you will vote on the matters to be considered and
sign, date and return your proxy in the enclosed envelope as
promptly as possible.
The Company's fiscal year 1997 Annual Report is being mailed to
stockholders herewith, but it is not part of the proxy
solicitation material.
Respectfully yours,
/s/Vincent A. Calarco
Vincent A. Calarco
Chairman, President &
Chief Executive Officer
March 27, 1998
_________________________________________________________
Notice of 1998 Annual Meeting of the Stockholders
_________________________________________________________
To the Stockholders:
The 1998 annual meeting of the stockholders of Crompton &
Knowles Corporation will be held at the Tara Stamford Hotel,
2701 Summer Street, Stamford, Connecticut, on Tuesday, April
28, 1998, at 11:15 a.m. in the morning, local time, to consider
and act upon the following matters:
1. The election of two directors to serve for a term
expiring in 2001, 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 1998,
described beginning at page 14; and
3. Such other business as may properly come before the
meeting.
Your attention is directed to the accompanying Proxy
Statement for additional information with respect to the
matters to be considered at the meeting.
Stockholders of record at the close of business on February
27, 1998, 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,
/s/JOHN T. FERGUSON II
JOHN T. FERGUSON II
Secretary
March 27,1998
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 28, 1998, at the Tara Stamford Hotel, 2701 Summer Street,
Stamford, Connecticut, and at any adjournment thereof.
Holders of Common Stock of the Corporation of record at
the close of business on February 27, 1998, 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 74,369,397 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 27, 1997, 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 27, 1998.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following persons were 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 27, 1998:
Common Loomis Sayles & Company, L.P. 7,532,450 10.1%
One Financial Center
Boston, MA 02111
Common The Equitable Companies Incorporated 7,519,542 10.1%
1290 Avenue of the Americas
New York, NY 10104
ELECTION OF TWO 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 nine
directors in office, two of whom are standing for election at
this year's meeting as Class I directors whose term will expire
at the 2001 annual meeting, three of whom are Class II
directors whose term expires at the 1999 annual meeting and
three of whom are Class III directors whose term expires at the
2000 annual meeting. The Board has nominated the two persons
named below to serve as Class I directors for a three-year term
expiring at the 2001 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 are members of the present Board who have served as
directors since the dates set forth after their names. The two
nominees and all of the incumbent directors have previously
been elected by the stockholders. If either of the nominees is
not available, an event not anticipated, the proxies will be
voted for the other nominee and for a substitute if any is
designated by the Board of Directors. Mr. Huber, who has
reached age 70, the normal retirement age for directors,
retires from the Board effective on the date of the 1998
annual meeting.
Nominees For Director
CLASS I (to serve until the annual meeting of stockholders
in 2001):
James A. Bitonti, 67, is Chairman and Chief Executive
Officer of BITCO International, Inc., a privately held
multinational company involved with global purchasing, direct
investment, and systems integration services and development,
McLean, VA. Mr. Bitonti is a former 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, Armonk, NY. Mr. Bitonti has
been a director of the Corporation since 1983 and is Chairman
of the Executive Compensation Committee and a member of the
Nominating Committee. He also serves as a member of the Board
of Directors of Raytheon E-Systems, Inc., TCOM, L.P. and
Management Consulting and Research, Inc.
Patricia K. Woolf, Ph.D., 63, 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 and the Nominating
Committee. Dr. Woolf is also a director of the American
Balanced Fund, Fundamental Investors, the Growth Fund of
America, Inc., the Income Fund of America, Inc., Smallcap World
Fund, Inc., the National Life Insurance Co. of Vermont and
General Public Utilities Corporation. She serves as a trustee
of the New Economy Fund.
Incumbent Directors
CLASS II (to serve until the annual meeting of
stockholders in 1999):
Vincent A. Calarco, 55, Chairman of the Board, President
and Chief Executive Officer of the Corporation. Mr. Calarco
has been a director since 1985 and is a member of the Finance
Committee.
Charles J. Marsden, 57, Senior Vice President and Chief
Financial Officer of the Corporation. Mr. Marsden has been a
director of the Corporation since 1985.
C.A. (Lance) Piccolo, 57, is President and Chief Executive
Officer of HealthPic Consultants, Inc., a strategic health-care
consulting firm, Lincolnshire, IL. Prior to the merger of
Caremark International Inc. and MedPartners/Mullikin, Inc., he
was the Chairman and Chief Executive Officer of Caremark
International Inc., a provider of alternate-site health-care
services, North Brook, 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 also
serves as a director and Vice Chairman of the Board of
MedPartners, Inc.
CLASS III (to serve until the annual meeting of
stockholders in 2000):
Robert A. Fox, 60, 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 the Chairman of
the Nominating Committee and a member of the Executive
Compensation Committee. He is also a director of the American
Balanced Fund, Compucook, Fundamental Investors, the Growth
Fund of America, Inc., the Income Fund of America, Inc. and the
New Perspective Fund. He serves as a trustee of the Euro-
Pacific Growth Fund.
Roger L. Headrick, 61, 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 the
Chairman of the Finance Committee and a member of the Executive
Compensation Committee. He also serves as a member of the
Board of Directors of MedPartners Inc. and Rahr Malting
Company.
Leo I. Higdon, Jr., 51, is the President of Babson
College, Babson Park, MA, and a former Dean of the Darden
Graduate School of Business Administration at the University of
Virginia, Charlottesville, VA. Mr. Higdon is also 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 Finance
Committee. He is a director of CPC International Corporation
and Newmont Mining Corp.
Board Meetings and Committees
The Board of Directors held four regular meetings during
1997. 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 1997.
The Board has established four 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, 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 1997.
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 Crompton & Knowles
Corporation 1993 Stock Option Plan for Non-Employee Directors,
the Crompton & Knowles Corporation Restricted Stock Plan for
Directors and the Corporation's 1988 Long-Term Incentive Plan
(the "1988 Plan"). The Executive Compensation Committee held
three meetings during 1997.
The Finance Committee is composed of directors, a majority
of whom are not employees of the Corporation. The Committee
has the authority, which it may exercise when the Board is not
in session, to approve certain debt financings and reviews and
makes recommendations to the Board regarding the issuance or
reacquisition of securities, major debt financings, capital
expenditures, acquisitions, divestitures and other
expenditures, dividend policy, management of pension assets,
and risk management policy and strategy. The Finance Committee
met once in 1997.
The Nominating Committee is 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 did not meet in 1997.
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 $25,000 (committee chairmen receive an additional
retainer of $2,500) and a fee of $8,500 for Board and committee
meeting service, and are reimbursed for expenses incurred in
attending meetings. The Corporation provides 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
an amount equal to twice 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. Options to be granted under the plan are
non-qualified 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 27, 1998, 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...... 1,848,074(2) 2.5%
Common James A. Bitonti........ 38,597(3)
Common Robert A. Fox........... 38,180(4)
Common Roger L. Headrick....... 66,234(5)
Common Leo I. Higdon, Jr....... 9,371(6)
Common Michael W. Huber........ 28,645(7)
Common Charles J. Marsden...... 390,894(8)
Common C.A. (Lance) Piccolo.... 23,250(9)
Common Patricia K. Woolf....... 10,593(10)
Common Alfred F. Ingulli....... 389,587(11)
Common Robert W. Ackley........ 387,159(12)
Common William A. Stephenson... 149,342(13)
Common Directors and Executive
Officers as a Group
(18 persons)............ 4,036,505(14) 5.3%
___________
(1) Except as noted below, the executive officers and
directors have both sole voting and sole investment power over
the shares reflected in this table.
(2) Includes 913,262 shares which Mr. Calarco had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; 547,753 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 29,831 shares held by him or his wife as custodian for
their children, as to which he disclaims beneficial ownership.
(3) Includes 8,039 shares which Mr. Bitonti had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; 11,200 shares owned jointly by Mr. Bitonti
with his wife; 12,383 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 8,039 shares which Mr. Fox had the right to
acquire through stock options exercisable within 60 days of
February 27, 1998; and 10,337 shares held under the Restricted
Stock Plan for Directors.
(5) Includes 8,039 shares which Mr. Headrick had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; and 12,062 shares held under the Restricted
Stock Plan for Directors.
(6) Includes 7,197 shares which Mr. Higdon had the right to
acquire through stock options exercisable within 60 days of
February 27, 1998; and 1,823 shares held under the Restricted
Stock Plan for Directors.
(7) Includes 8,039 shares which Mr. Huber had the right to
acquire through stock options exercisable within 60 days of
February 27, 1998; and 9,249 shares held under the Restricted
Stock Plan for Directors.
(8) Includes 165,238 shares which Mr. Marsden had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; 88,862 shares held under the 1988 Plan and
the Employee Stock Ownership Plan, as to which he has voting
but no investment power; and 23,000 shares owned by his wife as
to which he disclaims beneficial ownership.
(9) Includes 8,039 shares which Mr. Piccolo had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; and 10,872 shares held under the Restricted
Stock Plan for Directors.
(10) Includes 6,264 shares which Dr. Woolf had the right to
acquire through stock options exercisable within 60 days of
February 27, 1998; and 3,624 shares held under the Restricted
Stock Plan for Directors.
(11) Includes 266,230 shares which Mr. Ingulli had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998.
(12) Includes 128,500 shares which Mr. Ackley had the right
to acquire through stock options exercisable within 60 days of
February 27, 1998; 88,813 held under the 1988 Plan and the
Employee Stock Ownership Plan as to which he has voting but no
investment power; and 2,596 shares owned by his wife as to
which he disclaims beneficial ownership.
(13) Includes 106,293 shares which Mr. Stephenson had the
right to acquire through stock options exercisable within 60
days of February 27, 1998.
(14) Includes 2,041,505 shares which the executive officers
and directors in the group had the right to acquire through
stock options exercisable within 60 days of February 27, 1998.
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 stockholders 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 in the third quartile 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 earnings performance versus targeted
performance.
. Annual actual sales performance versus targeted
performance.
. Annual actual working capital performance versus
targeted performance.
. Annual actual cash flow performance versus targeted
performance.
. Annual actual return on capital versus targeted
performance.
. Three-year average annual return on capital 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.
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 1997 was
in the third quartile of all companies included in industrial
company survey data available to the Committee. The factors
used to award options include overall corporate performance,
industrial company percentile rankings, base salary, and total
compensation.
Compensation of Chief Executive Officer
The Committee increased Mr. Calarco's base salary to
$730,000 during fiscal year 1997. The Committee believes Mr.
Calarco has continued to manage the Corporation extremely well
in a particularly challenging business climate and has achieved
above average long-term results in comparison to others in the
chemical industry. The annual stock option granted to Mr.
Calarco during 1997 is consistent with the design of the
Corporation's executive compensation program as described
above. In recognition of the increase in shareholder value
resulting from the merger with Uniroyal Chemical Corporation
consummated in 1996 and of Mr. Calarco's pivotal role in the
transaction, the Committee in its discretion awarded Mr.
Calarco a cash bonus for 1997 of $800,000.
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 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. The 1998 Management Incentive Plan is
"performance-based" under section 162(m) of the Internal
Revenue Code. Amounts paid under the plan will be fully
deductible.
Committee on Executive Compensation
Decisions on compensation of the Corporation's executive
officers are made by the four 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 which has access to independent
compensation data to evaluate the Corporation's executive
compensation program.
The Committee on Executive Compensation:
James A. Bitonti, Chairman
Robert A. Fox
Roger L. Headrick
Michael W. Huber
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 Graphs
shall not be deemed incorporated by reference into any such
filings.
PERFORMANCE GRAPHS
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 21 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, 1992, and the reinvestment of all
dividends. The peer group investment is weighted based on
total market capitalization at the beginning of each fiscal
year.
Graph
Comparison of Five-Year Cumulative Return
Crompton & Knowles Corporation, S&P 500, S&P Specialty
Chemicals, and Peer Group
$300
$250 S&P 500
S&P Specialty
$200 Chemicals
Peer Group
$150 C&K
$100
$50
$0
1992 1993 1994 1995 1996 1997
C&K $100 $101 $ 76 $ 64 $ 95 $131
S&P 500 $100 $110 $112 $153 $189 $251
Peer Group $100 $104 $ 99 $117 $122 $136
S&P Spec. Chem $100 $114 $100 $131 $134 $166
The graph below shows the cumulative total return to the
Corporation's stockholders since December 31, 1984, shortly
before Mr. Calarco became President and CEO, compared with the
same indices shown on the previous graph, thus illustrating the
relative performance of the Corporation's Common Stock during
Mr. Calarco's entire tenure with the Corporation.
Graph
Comparison of Thirteen-Year Cumulative Return
Crompton & Knowles Corporation, S&P 500,
Peer Group, and S&P Specialty Chemicals
$3,000
$2,500 C&K
S&P 500
$2,000 Peer Group
S&P Specialty Chemicals
$1,500
$500
$0
1984 1985 1986 1987 1988 1989
C&K $100 $132 $188 $216 $337 $695
S&P 500 $100 $132 $156 $164 $192 $252
Peer Group $100 $133 $159 $177 $196 $255
S&P Spec. Chem $100 $137 $156 $162 $177 $216
1990 1991 1992 1993 1994 1995
C&K $792 $2,032 $2,122 $2,135 $1,620 $1,366
S&P 500 $245 $ 319 $ 343 $ 378 $ 383 $ 526
Peer Group $274 $ 410 $ 454 $ 474 $ 450 $ 530
S&P Spec. Chem $207 $ 292 $ 310 $ 353 $ 308 $ 405
1996 1997
C&K $2,020 $2,787
S&P 500 $ 647 $ 863
Peer Group $ 555 $ 618
S&P Spec. Chem $ 416 $ 515
The members of the Peer Group are as follows: 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., 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 following two companies have been deleted from
the peer group: Loctite Corporation which was acquired in
January 1997 and,therefore, information on this company is no
longer available to the registrant; and Petrolite Corporation
which went private in July 1997 (the figures have been
reweighted for the period August 1, 1997, through December 31,
1997).
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 1995, 1996 and 1997, except as noted, and
options granted to and exercised by the same individuals during
the period indicated.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
Restricted Securities All Other
Name and Stock Underlying Compen-
Principal Salary Bonus Awards Options ation
Position Year ($) ($) ($)(1) (#) ($)(2)
Vincent
A. Calarco 1997 727,500 800,000 -- 120,000 137,271
Chairman of
the Board 1996 607,916 650,000 2,752,000 620,000 134,213
President
and CEO 1995 495,000 415,000 -- 110,000 89,687
Charles
J. Marsden 1997 300,000 180,000 -- 30,000 52,649
Senior
Vice
President 1996 268,331 160,000 608,250 130,000 506,656
Chief
Financial
Officer 1995 250,000 55,000 -- 28,000 39,512
Alfred
F. Ingulli 1997 271,667 180,000(3) -- 20,000 27,853
Executive
Vice
Pres., 1996 253,333 120,000 354,000 120,000 29,114
Crop
Protection 1995 243,000 165,000 -- -- 30,013
Uniroyal Chemical Company, Inc.
Robert
W. Ackley 1997 244,083 165,000 - 20,000 34,061
President.. 1996 232,583 75,000 424,000 120,000 32,190
Davis-
Standard
Corp... 1995 216,000 117,000 -- 26,500 36,714
William A.
Stephenson 1997 246,833 170,000(3) -- 20,000 24,113
Executive
Vice Pres., 1996 235,000 110,000 354,000 120,000 45,867
Specialties 1995 225,833 90,000 -- -- 18,431
Uniroyal Chemical Company, Inc.
(1) The entire restricted stock grant in 1996 for each of
the persons shown in the table must be earned during the 1996-
1998 performance cycle by achievement of targeted returns on
capital and after-tax earnings growth 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 1998-2000 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
unvested shares will be forfeited. Total restricted stock
outstanding for the persons shown in the table at the end of
fiscal year 1997: Vincent A. Calarco, 573,745 shares valued
at $14,684,286, of which 429,745 shares valued at $10,998,786
are forfeitable; Charles J. Marsden, 148,587 shares valued at
$3,802,899, of which 104,587 shares valued at $2,676,774 are
forfeitable; Alfred F. Ingulli, 42,000 shares valued at
$1,074,938, all of which shares are forfeitable; Robert W.
Ackley, 97,870 shares valued at $2,504,860, of which 70,870
shares valued at $1,813,829 are forfeitable; and William A.
Stephenson, 42,000 shares valued at $1,074,938, 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 1997 under
the Corporation's Supplemental Medical and Dental Reimbursement
Plans (SMD), the Uniroyal Chemical Retirement Reserve Fund Plan
(RFP), and the Uniroyal Chemical split dollar life insurance
plan (SDP), or as employer contributions under 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,
$687(SMD), $55,101 (ESOP), $81,483 (IARP); Mr. Marsden, $6,650
(SMD), $18,399 (ESOP), $27,600 (IARP); Mr. Ingulli, $13,798
(SDP), $14,055 (RFP); Mr. Ackley, $2,154 (SMD), $12,762 (ESOP),
$19,145 (IARP); and Mr. Stephenson, $12,852 (SDP), $11,261
(RFP).
(3) Bonus applies to five quarters including fourth quarter
1996.
Option Grants In Last Fiscal Year(1)
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
Percent
Number of Total
of Options
Securities Granted to
Underlying Employees Exercise Expir-
Options in Fiscal Price ation
Name Granted(#) Year ($/Sh) Date 5% ($) 10%($)
V.A.
Calarco
120,000(2) 20.0% 26.4063 11/06/07 2,013,550 5,114,808
C.J.
Marsden
30,000(2) 5.0% 26.4063 11/06/07 503,387 1,278,702
A.F.
Ingulli
20,000(2) 3.3% 26.4063 11/06/07 335,591 852,468
R.W.
Ackley
20,000(2) 3.3% 26.4063 11/06/07 335,591 852,468
W.A.
Stephenson
20,000(2) 3.3% 26.4063 11/06/07 335,591 852,468
(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 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. 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. 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.
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 Options
cised Options at at FY-End($)
FY-End(#) 12/27/97 - FMV $25.5938
Shares Value
Acquired on Realized Exercis- Unexer- Exercis- Unexer-
Name Exercise (#) ($)(2) able cisable able cisable
V.A.
Calarco
(1) 289,898 5,501,354 913,262 580,000 12,382,976 4,960,625
C.J.
Marsden
(1) 106,638 1,568,777 205,238 125,000 2,850,707 1,018,281
A.F.
Ingulli
- - 266,230 110,000 3,848,035 974,687
R.W.
Ackley
(1) - - 128,500 110,000 1,213,421 974,687
W.A.
Stephenson
- - 106,293 110,000 1,434,199 974,687
(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 and Huber 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.
Retirement Plans
Each of the persons shown in the Summary Compensation
Table on page 10 is covered by a supplemental retirement
agreement 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 (in the case of Messrs. Calarco,
Marsden and Ackley) or Uniroyal Chemical Company, Inc.'s
("Uniroyal") defined benefit pension plan (in the case of
Messrs. Ingulli and Stephenson) to each officer at normal
retirement age will be supplemented by the Corporation (or
Uniroyal, as the case may be) so that the total annual benefit
payable to him for life will be 50%, 55% or 60% 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, or in the case of Messrs. Ingulli
and Stephenson, an alternate benefit determined under a
previous supplemental retirement agreement with Uniroyal. 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 defined in the agreement), the officer will be
vested in an unreduced benefit equal to 50%, 55% or 60%
(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 (or, in the case of Messrs. Ingulli and Stephenson, on their
normal retirement date), 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 or Uniroyal's defined
benefit pension plan, 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.............. $654,799
Charles J. Marsden.............. 185,133
Alfred F. Ingulli............... 219,679
Robert W. Ackley................ 165,016
William A. Stephenson........... 173,751
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, Ingulli, Ackley and Stephenson. Each agreement is
operative 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 except that Messrs. Ingulli and
Stephenson have agreements which require that they be paid
severance payments in the event that they are terminated
without cause or they resign for good reason (as defined in the
agreements) during an annually renewable two-year period. 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 two or three
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 two or three 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 two or three 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 1998 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
1999 must be received by the Corporation at its principal
executive offices by November 28, 1998, in order to be
considered for inclusion in the Proxy Statement and form of
proxy relating to the 1999 meeting.
AMENDMENT OF BY-LAWS
At its regular meeting on April 29, 1997, the Board of
Directors voted unanimously to amend Article III, Section 8 of
the By-Laws of the Corporation to delete from the first
paragraph thereof the words "books of account, and accounting
records,". This deletion was made to the provision describing
the office of the Treasurer to reflect the current functions of
the Treasurer.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 stockholders 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 1997
all filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were complied
with, with the exception of one filing by Mr. Marvin H. Happel,
Vice President - Organization and Administration of the
Corporation, reflecting the sale of shares in December 1996
that should have been reported in January 1997, but was
reported in January 1998.
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 two nominees for Class I directorships named
herein, and (ii) in favor of the selection of KPMG Peat Marwick
LLP as auditor for fiscal year 1998.
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,
/S/JOHN T. FERGUSON II
JOHN T. FERGUSON II
Secretary
Dated: March 27, 1998
[PROXY CARD]
CROMPTON & KNOWLES CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
For Annual Meeting on April 28, 1998, at Tara Stamford Hotel
2701 Summer Street, Stamford, Connecticut, 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 Tuesday, April
28, 1998, 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 therefor, 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 and 2.
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
CROMPTON & KNOWLES CORPORATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 and 2.
1. Election of James A. Bitonti and Patricia K. Woolf, Ph.D.
to serve for a term expiring in 2001.
FOR ALL NOMINEES WITHHOLD AUTHORITY
with exceptions noted FOR ALL NOMINEES
(To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
2. Approval of the selection by the Board of KPMG Peat Marwick
LLP as independent auditors for 1998.
FOR AGAINST ABSTAIN
PROXY
PLEASE MARK YOUR VOTES or X
Dated: , 1998
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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
