SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [ x ]
Filed by a party other than registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ x ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
TOWN & COUNTRY CORPORATION
- - - - - - - - - --------------------------
(Exact name of Registrant as specified in its charter)
Francis X. Correra, Senior Vice President & Chief Financial Officer
- - - - - - - - - -------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
<PAGE>
(1) Title of each class of securities to which transaction applies: N/A
----
(2) Aggregate number of securities to which transaction applies: N/A
----
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
----
(4) Proposed maximum aggregate value of transaction: N/A
----
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
----------------------------------
(2) Form, schedule or registration statement no.:
------------
(3) Filing party:
--------------------------------------------
(4) Date filed:
----------------------------------------------
<PAGE>
June 24, 1994
Securities & Exchange Commission
450 Fifth Street
Washington, DC 20549
RE: DEFINITIVE PROXY MATERIAL
Ladies and Gentlemen:
Pursuant to Rule 14a-6(c) promulgated by the Securities and Exchange Commission
(the "SEC") under the Securities Exchange Act of 1934, as amended (the "1934
Act"), the following material is electronically filed on behalf of Town &
Country Corporation (the "Company"):
(1) Definitive Notice of Annual Meeting of Stockholders and Proxy
Statement of the Company, and
(2) Definitive Form of Proxy to be solicited by the Board of
Directors of the Company.
The Definitive Proxy Materials have been prepared by the Company for use in
connection with its Annual Meeting of Stockholders to be held on Thursday, July
21, 1994.
Pursuant to Rule 14a-3(c) promulgated by the SEC under the 1934 Act, we are
forwarding under separate cover, seven (7) copies of the Company's Annual Report
for the fiscal year ended February 27, 1994. The Annual Reports are submitted
for the information of the SEC only and are not deemed "soliciting material" or
to be "filed" with the SEC. The financial statements in the Annual Report do
not reflect a change from the preceding year in any accounting principles or in
the method of applying any such principles or practices.
Pursuant to Rule 14a-6(m) promulgated by the SEC under the 1934 Act, attached
is Schedule 14A, Information Required in Proxy Statement.Pursuant to Item 10 of
Schedule 14A we are forwarding under separate cover three (3) three copies of
the proposed employment agreements with C. William Carey and Francis X.
Correra. The proposed employment agreements are submitted for the information
of the SEC only and are not deemed "soliciting material" or to be "filed" with
the SEC. The Company's stockholders are voting on the performance-based
compensation arrangements contained in the agreements.
Pursuant to the filing fee requirement of Rule 14a-6, the filing fee of $125 has
been wired to Mellon Bank, account number 910-8739, referencing CIK number
0000768608. This fee was designated to be non-restricted.
The Company is first mailing the Definitive Proxy Materials to its stockholders
on Monday, June 27, 1994.
Concurrently with this filing, three copies of (a) the Definitive Notice of
Annual Meeting of Stockholders and Proxy Statement of the Company, (b) the
Definitive Form of Proxy to be solicited by the Board of Directors of the
Company, and (c) the Company's Annual Report are being sent to the American
Stock Exchange, Inc.
<PAGE>
If you have any questions concerning any of the enclosed filings, you may call
the undersigned at (617) 884-8500.
Sincerely,
Robert C. MacCready
Vice President and
Corporate Controller
sdb
cc: One (1) Paper Filing and Seven (7) Annual Reports To
OFICS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, Virginia 22312-2413
<PAGE>
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
June 27, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Town
& Country Corporation to be held at 10:30 A.M. on Thursday, July 21, 1994 at
State Street Bank and Trust Company, 225 Franklin St., Boston, Massachusetts.
Your Board of Directors and I look forward to greeting you at the meeting.
Enclosed are the Proxy Statement, Proxy Card and the 1994 Annual Report to
Stockholders. All Class A stockholders will be asked to vote on the election
of two new Directors, and all stockholders will be asked to vote upon the
proposed arrangements for the payment of performance-based compensation to two
executive officers.
The Board has given due consideration to the proposals to elect two new
Directors to the Company's Board of Directors and to establish performance-based
compensation arrangements for the Company's two executive officers, and has
concluded that their adoption would be in the best interests of all the
stockholders. Accordingly, the Board suggests you carefully review the enclosed
Proxy Statement and strongly recommends that you vote for these Company
proposals, and urges you to sign, date and mail the enclosed proxy in the reply
envelope provided at your earliest convenience.
It is important that your shares be represented at the meeting whether or not
you are able to be present. Your cooperation will be appreciated.
Sincerely,
C. William Carey
Chairman
<PAGE>
Town & Country Corporation
Chelsea, Massachusetts 02150
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 21, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of Town &
Country Corporation will be held at State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts, on Thursday, July 21, 1994, at 10:30
A.M., for the following purposes:
1. To elect two Directors.
2. To approve performance-based compensaton arrangements for the Company's
two executive officers.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on June 6, 1994 has been fixed as the record date for the
determination of the stockholders entitled to notice of and to vote at the
meeting.
By order of the Board of Directors
Richard E. Floor, Clerk
Chelsea, Massachusetts
June 27, 1994
Management invites you to attend our annual meeting but if you are unable to be
present, please date, sign and return the enclosed proxy as promptly as
possible. No postage is required if the proxy is returned in the enclosed
envelope and mailed in the United States.
<PAGE>
TOWN & COUNTRY CORPORATION
25 Union Street
Chelsea, Massachusetts 02150
(617) 884-8500
PROXY STATEMENT
This statement is furnished in connection with solicitation by the Board of
Directors of Town & Country Corporation (hereinafter the "Company" or "Town &
Country") of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders of the Company to be held on Thursday, July 21, 1994, and at all
adjournments thereof (the "Annual Meeting"), for the purposes set forth in the
accompanying notice of the meeting. It is intended that this statement and the
proxies solicited hereby be mailed to stockholders on or shortly after June 27,
1994. A stockholder who shall sign and return a proxy in the form enclosed with
this statement has the power to revoke the proxy at any time before it is
exercised by giving written notice to the Company, attention, Clerk, to such
effect. A stockholder also may revoke a proxy by filing a duly executed proxy
bearing a later date or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the record date stated below
attending the Annual Meeting may vote in person whether or not a proxy has been
previously given, but the presence (without further action) of a stockholder at
the Annual Meeting will not constitute revocation of a previously given proxy.
Proxies properly executed and received in time for the meeting will be voted.
The close of business on June 6, 1994, has been fixed as the record date for the
determination of the stockholders entitled to notice of, and to vote at, the
meeting. As of such date, 20,756,096 shares of Class A Common Stock and
2,670,498 shares of Class B Common stock were outstanding and entitled to be
voted at the meeting. Each share of Class A Common Stock is entitled to one
vote and each share of Class B Common Stock is entitled to ten votes on all
matters voted on by that respective class at the meeting.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor of each of the proposals set
forth herein. In the discretion of the proxy holders the proxies will also be
voted for or against such other matters as may properly come before the meeting.
The Board of Directors is not aware that any other matters that are to
be presented for action at the meeting.
Mr. C. William Carey, Chief Executive Officer and Chairman of the Board of
Directors of the Company, owns of record and beneficially an aggregate of
2,542,250 shares of the Company's Class A Common Stock and 2,519,787 shares of
the Company's Class B Common Stock. In addition, Mr. Carey serves as a
co-trustee for trusts holding an additional 186,000 shares of Class A Common
Stock and 140,253 shares of Class B Common Stock. Mr. C. William Carey and
trusts created for the benefit of his minor children owned, in the aggregate,
approximately 10.7% of the Company's Class A Common Stock and 99.6% of the
Company's Class B Common Stock.
The Annual Report of the Company, including financial statements for the fiscal
year ended February 27, 1994, is being mailed to stockholders concurrently with
this proxy statement. The Annual Report, however, is not part of the proxy
solicitation material.
<PAGE>
ELECTION OF DIRECTORS (Item 1 on Proxy)
The Company's by-laws provide that the power to fix the number of Directors each
year shall rest with the Board and that any vacancies may be filled by a
majority vote of the Directors then in office. Effective as of the Annual
Meeting,the Board has set the number of Directors to serve until
the next annual meeting at five.
Pursuant to the Company's by-laws, the Board of Directors is divided into three
classes, as nearly equal in number as possible, with the members of each class
to serve for three years. Under this arrangement, C. William Carey and Richard
E. Floor will serve as Directors until the 1995 Annual Meeting, and Charles Hill
will serve until the 1996 Annual Meeting, and until their successors are duly
elected and qualified. The Board has nominated Mone Anathan III and William
Schawbel for election at the 1994 Annual Meeting to serve until the 1997 Annual
Meeting and until their successors are duly elected and qualified. Philip H.
Cahalin, whose term as a Director will expire at the 1994 Annual Meeting, is not
standing for reelection, having reached the retirement age for directors.
Information regarding the Board's two nominees for directors is set forth at
page 3.
In 1988, the Company amended its Articles of Organization to provide that at
least 25% of its Board of Directors would be elected by the Class A Shareholders
voting as a separate class. Messrs. Philip H. Cahalin and Donald H. Wheeler
were designated as Class A Directors at the 1988 Annual Meeting to serve until
1991. Mr. Cahalin was reelected at the Annual Meeting in 1991; however, no new
Class A Director was proposed to fill the vacancy created by Mr. Wheeler's death
in the spring of 1991. The Board has nominated Messrs. Anathan and Schawbel to
serve as the Class A Directors of the Company. Only holders of record of Class
A Common Stock on June 6, 1994 are entitled to vote in the election of the Class
A Directors.
C. William Carey and trusts created for the benefit of his minor children owned,
in the aggregate, approximately 10.7% of the shares of the Company's Class A
Common Stock. Following the exercise of the Company's stock options that are
exercisable within 60 days of June 6, 1994 (500,000 of which are held by Mr.
Carey) Mr. Carey's ownership would be increased to 12.2% of the Company's
outstanding Class A Common Stock.
The affirmative vote of the holders of a majority of the Class A Common Stock
voting as a single class represented in person or by proxy and entitled to vote
at the 1994 Annual Meeting is required to elect Messrs. Anathan and Schawbel as
Directors.
The Board of Directors recommends that holders of Class A Common Stock vote FOR
the election of Mr. Anathan and Mr. Schawbel.
In accordance with the provisions of Massachusetts law and the Company's
Articles of Incorporation and by-laws, the Company will treat abstentions and
broker non-votes as present at the Annual Meeting solely for purposes of
determining whether or not a quorum is present. Accordingly, abstentions and
broker non-votes will not be considered to be voting on the election of Messrs.
Anathan and Schawbel as Directors and will not be counted in determining whether
such election has been approved by a majority of votes cast by the stockholders
who are voting on such matter.
<PAGE>
The following table sets forth certain information as of June 6, 1994 regarding
the Directors of the Company and the nominees for Director based on the
information furnished by them to the Company.
<TABLE>
<CAPTION>
First
Name and Principal Occupation Became a Class of Shares of Common Percent
for Past Five Years Age Director Stock Stock Owned of Class(1)
<S> <C> <C> <C> <C> <C>
C. William Carey 57 1965 Class A 2,728,250(2) 12.2%
Chairman and Chief Executive Class B 2,660,040(3) 99.6%
Officer, Treasurer and
President of the Company
since its incorporation in
1965; Director, Prospect
Street High Income Portfolio,
Inc.; Director, Solomon
Brothers Limited, a Bahamas
corporation; Director and
Chairman Little Switzerland,
Inc., a Delaware corporation
Richard E. Floor 54 1972 Class A 163,000(4)(5) *
Attorney whose professional Class B (4) --
corporation is a partner in
the law firm of Goodwin,
Procter & Hoar, the Company's
legal counsel; Director, New
America High Income Fund
Philip H. Cahalin 67 1972 Class A 6,000(5) *
Partner in the law firm of Class B 975 *
Peabody & Arnold since 1984;
associated with Peabody &
Arnold since 1981.
Charles Hill 46 1986 Class A 6,000(5) *
Chairman of Garber Travel Class B -- --
Service, Inc. since 1981;
Vice Chairman of Towle Mfg.
Co., Inc. (giftware)
1982-1983.
Mone Anathan III 55 Nominee Class A -- --
President of Filene's Class B -- --
Basement, Inc. since 1982;
Director, Brookstone Company,
Inc.; Director, Medusa
Corporation; Director, Crane
Co.; Director, Filene's
Basement, Inc.
William Schawbel 54 Nominee Class A -- --
Chief Executive Officer of Class B -- --
The Schawbel Corporation
(technology manufacturer)
since 1981.
</TABLE>
<PAGE>
(1) Included in calculating the percentages of the Company's Class A Common
Stock are 1,599,650 shares of the Company's Class A Common Stock that could be
acquired by the exercise of stock options or warrants within 60 days of June 6,
1994, 500,000 of which are held by Mr. Carey.
(2) Includes 186,000 shares of Class A Common Stock (0.8% of the class)
beneficially owned by Mr. Carey and Mr. Floor in their capacities as co-trustees
of various irrevocable family trusts for the benefit of Mr. Carey's minor
children, which trusts give the trustees the shared power to vote and dispose
of these shares.
(3) Includes 140,253 shares of Class B Common Stock (5.3% of the class)
beneficially owned by Mr. Carey and Mr. Floor in their capacities as co-trustees
of the trusts described in footnote 2 above.
(4) Excludes the shares of Class A and Class B Common Stock beneficially owned
by Mr. Carey and Mr. Floor, as described above in footnotes 2 and 3.
(5) Includes 5,000 Shares of Class A Common Stock that each Director could
acquire by the exercise of stock options within 60 days of June 6, 1994.
(*) The amount of Common Stock held by this individual is less than one percent
of the outstanding shares of that class of Common Stock.
<PAGE>
BOARD MEETINGS, COMMITTEES, ATTENDANCE AND FEES
The Board of Directors held four meetings during the 1994 fiscal year. The
Board has no nominating committee. Each of the incumbent Directors attended
more than 75% of the aggregate of the total number of meetings of the Board of
Directors and of the committees of which he was a member which were held during
the period he was a Director or committee member.
COMPENSATION COMMITTEE
This committee held two meetings during the past fiscal year. This committee
reviews and makes recommendations to the Board concerning major compensation
policies, the granting of stock options, and compensation of officer-Directors.
The committee members are Directors Cahalin and Hill.
AUDIT COMMITTEE
This committee held one meeting during the past fiscal year. This committee is
responsible for reviewing the financial condition of the Company, its internal
controls and any action to be taken thereon by management. It reviews audit and
examination reports of the independent auditors. The committee elects the
independent auditors for appointment by the Board.
The committee members are Directors Cahalin and Floor.
STOCK OPTION COMMITTEE
This committee held one meeting during the past fiscal year. This committee
reviews and makes recommendations to the Board of Directors concerning the
granting of stock options to the executive officers of the Company.
The committee members are Directors Cahalin, Floor and Hill.
REMUNERATION OF DIRECTORS
Each Director of the Company, other than those who are officers, receives
$10,000 per year plus $2,500 per Board meeting. Directors serving on committees
receive $1,000 per meeting attended, other than those held in conjunction with
regularly scheduled Board meetings. Each Director is reimbursed for expenses
incurred in connection with his duties as Director.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of June 6, 1994 except where a
different date is indicated by footnote, with respect to the beneficial
ownership of the Company's voting securities by all persons known by the Company
to own more than 5% of either class of the Company's outstanding voting
securities, by the named executive officers, and by all Directors, nominees for
Director, and executive officers of the Company as a group. Approximately 10.7%
and 99.6% of the Company's Class A and Class B securities, respectively,
entitled to vote at the 1994 Annual Meeting are owned by Mr. Carey and by trusts
established for his minor children. See the table and accompanying footnotes
below.
<TABLE>
<CAPTION>
Amount Percent
Name and Address Beneficially of
Title of Class of Beneficial Owner Owned Class (1)
<S> <C> <C> <C>
Class A Common Stock C. William Carey 2,728,250(2) 12.2%
$.01 par value Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Francis X. Correra 469,960 2.1%
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
FMR Corp. 5,026,151(3) 22.5%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Directors and Executive Officers 3,384,810(4) 15.1%
as a Group (7 Persons)
Class B Common Stock C. William Carey 2,660,040(5) 99.6%
$.01 par value Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Francis X. Correra 1,462 *
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Directors and Executive Officers 2,662,477(6) 99.7%
as a Group (7 Persons)
</TABLE>
(1) Included in calculating the percentages of the Company's Class A Common
Stock are 1,599,650 shares of the Company's Class A Stock that could be acquired
by the exercise of stock options or warrants within 60 days of June 6, 1994.
(2) Includes all of the shares set forth in footnote 2 above to Election of
Directors.
<PAGE>
(3) As reported by FMR Corp. in an amended Schedule 13G dated February 11, 1994
and filed with the Securities and Exchange Commission.
(4) See footnote 2 above to Election of Directors. Includes 887,000 shares
which Directors and executive officers could acquire by the exercise of stock
options within 60 days of June 6, 1994.
(5) Includes all of the shares set forth in footnote 3 above to Election of
Directors.
(6) See footnote 3 above to Election of Directors.
(*) The amount of Common Stock held by this individual is less than one percent
of the outstanding shares of that class of common stock.
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the name, age and position held by each executive
officer of the Company during the fiscal year ended February 27, 1994:
<TABLE>
<CAPTION>
Name Age Capacities in which Served
<S> <C> <C>
C. William Carey 57 Chairman and Chief Executive Officer,
Treasurer and President of the Company
since its incorporation in 1965.
Francis X. Correra 56 Senior Vice President and Chief Financial
Officer since 1983; associated with the
Company since 1979.
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by or paid to
each of the Company's executive officers, including the Chief Executive Officer,
who were serving as executive officers at the end of fiscal 1994, for services
rendered to the Company during fiscal 1994. Information with respect to salary,
bonus, other annual compensation and options is included for the 1992, 1993 and
1994 fiscal years. The Company does not provide any long term incentive plans.
The Company has not granted any restricted stock awards or stock appreciation
rights, nor paid compensation that would qualify as "All Other Compensation".
<TABLE>
<CAPTION>
Fiscal Other Annual
Name Year Salary Bonus Compensation Options
<S> <C> <C> <C> <C> <C> <C>
C. William Carey 1994 $973,558 $546,000 $9,333 (1) (2)1,000,000
1993 $905,769 $37,333 (1) (2)
1992 $764,423 $750,000 $33,333 (1) (2)
Francis X. Correra 1994 $364,231 $127,750 $9,333 (1) (2) 500,000
1993 $327,597 $37,333 (1) (2)
1992 $254,808 $250,000 $33,333 (1) (2) 25,000
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits provided to
each named executive officer did not exceed the lesser of $50,000 or 10% of his
total annual salary and bonus.
(2) In fiscal 1992, Mr. Carey and Mr. Correra each purchased 20,000 shares of
Common Stock of Essex International Company, Ltd., a subsidiary of the Company,
at a purchase price of $0.40 per share. Two-thirds of the shares purchased were
subject to restrictions on voting and disposition which lapsed ratably through
May 1993.<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised stock
options held by the named executive officers as of the end of fiscal 1994. No
stock options were exercised by any of the named executive officers during the
1994 fiscal year. No stock appreciation rights have been granted or are
outstanding.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of
Total
Number of Options Potential Realizable
Securities Granted to Exercise Value at Assumed Rates
Underlying Employees or Base of Stock Price
Options in Fiscal Price Expiration Appreciation for Option
Name Granted Year ($/Sh) Date Term
<S> <C> <C> <C> <C> <C> <C>
5% ($) 10% ($)
C. William Carey 1,000,000 65% $2.75 5/13/2003 $1,729,460 $4,382,792
Francis X. Correra 500,000 33% $2.75 5/13/2003 $864,730 $2,191,396
</TABLE>
<PAGE>
OPTION EXERCISES DURING 1994 FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Value Value of Unexercised
Acquired at Number of Unexercised In-the-Money Options at
on Reali- Options at 1994 Fiscal 1994 Fiscal Year End
Name Exercise zation Year End ($) (1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
C. William Carey 0 0 250,000 750,000 0 0
Francis X. Correra 0 0 232,000 395,000 0 0
</TABLE>
(1) The closing price for the Company's Class A Common Stock on February 27,
1994, as reported by the American Stock Exchange was $2.50.
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee composed of Messrs. Cahalin and Hill met on April 12,
1994 following receipt of the preliminary financial results for fiscal 1994 to
fix bonuses for Messrs. Carey and Correra for the prior year and to recommend
new employment agreements for fiscal 1995.
In fixing bonuses, the Committee had previously set operating profit performance
goals for fiscal 1994 at a meeting held in August of 1993. The Committee had
determined that 60% of the bonus which could be paid to Mr. Carey and Mr.
Correra (a maximum of 80% of salary for Mr. Carey and 50% of salary for Mr.
Correra) would be determined by a formula based on the percentage achievement
of the targeted profit goals. Pursuant to this formula, Mr. Carey and Mr.
Correra each received one-half of the 60% formula-derived bonus. With respect
to the remaining 40% which the Committee had reserved for a discretionary award
when establishing the bonus criteria, the Committee reviewed Mr. Carey's and Mr.
Correra's contributions during fiscal 1994, particularly their efforts in
successfully addressing the Company's cash flow problems by completing a
recapitalization of the Company's outstanding debt. The Committee determined
that in light of the challenges presented by organizational changes and the
efforts involved in achieving the improvements in the balance sheet which had
been accomplished during fiscal 1994, the full discretionary portion of the
bonus should be awarded to each of Messrs. Carey and Correra.
The Committee noted that the Company's employment agreements with Mr. Carey and
Mr. Correra had expired on March 1, 1994. The Committee then reviewed the
importance of Messrs. Carey and Correra to the future of the business and
determined that it would be in the best interests of the Company and its
shareholders to maintain a long-term relationship with them. On this basis, the
Committee determined to negotiate with Messrs. Carey and Correra new five-year
employment agreements.
The Committee felt that a substantial portion of compensation should be tied
directly to the profit performance of the Company. As a result, the proposed
agreements contemplate only cost of living adjustments for base salaries over
the next five years from their present levels.
Under the new agreements, potential bonuses would be increased from 80% of
salary to 120% of salary for Mr. Carey and from 50% of salary to 110% of salary
for Mr. Correra. The actual bonus payable, if any, would be determined by the
achievement of specific and increasing earnings per share targets which the
Committee felt were ambitious but attainable and which the Committee believed
would constitute, even at the lowest targets, above average performance.
In addition, to provide specific long term incentive to develop the operations
at the Company's subsidiary, L. G. Balfour Company, Inc., the Committee
determined it would be appropriate to award to Messrs. Carey and Correra stock
incentives directly tied to the performance of this subsidiary. As a result,
the Committee has recommended, as part of the employment agreements, that Mr.
Carey be awarded stock options to purchase 2.5% of the outstanding common stock
of Balfour and that Mr. Correra be awarded stock options to purchase 1.5% of the
outstanding common stock of Balfour. The exercise price for these options will
be the stock's fair market value on the date of grant. Under the terms of
certain of the Company's loan agreements, these options require the consent of
the respective lenders. The Company is in the process of obtaining these
consents and will not grant the Balfour options until such consents have been
received. In the event that the necessary consents are not obtained, the
options will not be granted and alternative equity compensation will be
negotiated with Messrs. Carey and Correra.
Because Mr. Carey's proposed employment agreement provides for compensation
which could exceed $1 million in a single fiscal year, the Committee determined
to submit the performance-based compensation arrangements set forth in both Mr.
Carey's and Mr. Correra's agreements for shareholder approval to permit the
deduction of compensation paid in excess of $1 million pursuant to Section
162(m) of the Internal Revenue Code. If this approval is not received, the
Committee will attempt to negotiate alternative agreements with Messrs. Carey
and Correra.
Messrs. Philip H. Cahalin and Charles Hill
<PAGE>
PERFORMANCE GRAPH
The following graph compares changes in the cumulative total shareholder return
on the Company's Common Stock for the previous five-years to the Standard &
Poor's 500 Composite Index and to a peer group of publicly traded companies.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG TOWN & COUNTRY
CORPORATION, S&P 500 INDEX AND PEER COMPANY GROUP INDEX
(Graphic Line Chart)
<TABLE>
<CAPTION>
Feb. 1990 Feb. 1991 Feb. 1992 Feb. 1993 Feb. 1994
<S> <C> <C> <C> <C> <C>
Town & Country Corp. Class A $55.25 $26.32 $28.95 $27.63 $26.32
S&P 500 Comp-Ltd. $118.90 $136.34 $158.14 $174.98 $189.57
Peer Group Weighted Average $134.98 $164.57 $167.37 $118.42 $156.09
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS
The Company's employment agreement with its two executive officers, C. William
Carey and Francis X. Correra, expired on March 1, 1994. The Company has
proposed to enter into new five-year employment agreements with each of Messrs.
Carey and Correra. Information with respect to these proposed agreements is set
forth below under Approval of Performance-Based Compensation (Item 2 on Proxy).
On May 13, 1993, the Board of Directors issued options to purchase 1,000,000
shares of Class A Common Stock to C. William Carey and options to purchased
500,000 shares of Class A Common Stock to Francis X. Correra. The options are
exercisable at a price of $2.75 per share. Twenty-five percent of the options
vested upon issuance and twenty-five percent vest on each of the following
anniversary dates of the recapitalization of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers, and persons who own more than ten percent of the
Company's Common Stock to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock. Officers, Directors and greater than ten percent shareholders are
required by the SEC to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and representations that no other reports were
required, during the fiscal year ended February 27, 1994, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than ten
percent beneficial owners were complied with, except that Charles Hill, a
Director of the Company, did not timely file a Form 4 reporting one transaction
in the Company's common stock. This transaction was reported on a Form 5 filed
by Mr. Hill.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
During fiscal year 1994, the Company leased a portion of its Chelsea,
Massachusetts facility comprised of approximately 44,000 square feet of
administrative space from Carey Realty Trust, a Massachusetts business trust
(the "Trust") which is wholly owned by C. William Carey, the President and
principal stockholder of the Company. The lease expires on August 31, 1998 and
the Company has four five-year options to renew. The current lease provides for
an annual rental (subject to Consumer Price Index adjustment) on a net lease
basis of $475,000. The Company believes that these lease arrangements represent
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
The professional corporation of Richard E. Floor, the Clerk and a Director of
the Company, is a partner in the law firm of Goodwin, Procter & Hoar, which
provides legal services for the Company.
<PAGE>
In connection with the Company's recapitalization completed in May 1993, certain
funds managed by Fidelity Management & Research Company and Fidelity Management
Trust Company (the "Fidelity Funds") committed to purchase all of the Company's
11-1/2% Senior Secured Notes due September 15, 1997 (the "New Senior Secured
Notes") not purchased by other holders of the Company's then-outstanding
subordinated indebtedness. As a result of such commitment, the Fidelity Funds
purchased an aggregate of $27,000,000 principal amount of New Senior Secured
Notes. In exchange for their commitment to purchase all of the New Senior
Secured Notes not purchased by such other holders, the Company issued to the
Fidelity Funds 750,000 shares of Class A Common Stock and paid the fees and
expenses of the Fidelity Funds' legal counsel (approximately $220,000). As part
of the recapitalization, the Fidelity Funds exchanged the Company's 10-1/4%
Subordinated Notes due July 1, 1995 and the Company's 13% Senior Subordinated
Notes due December 15, 1998 held by them for an aggregate of $22,886,639
principal amount of the Company's 13% Senior Subordinated Notes due May 31, 1998
(the "New Senior Subordinated Notes"), 1,084,069 shares of the Company's
exchangeable preferred stock, $1.00 par value per share (the "Exchangeable
Preferred Stock"), and 4,276,160 shares of Class A Common Stock. In addition,
pursuant to an agreement with the Fidelity Funds, the Company has registered
under the Securities Act of 1933, as amended (the "Securities Act"), the New
Senior Secured Notes, the New Senior Subordinated Notes, the Exchangeable
Preferred Stock and the Class A Common Stock held by the Fidelity Funds and has
agreed to keep the registration statement covering such securities effective
until the earlier of (a) the date on which the Fidelity Funds notify the Company
that they may dispose of such securities without being subject to the
restrictions of Rule 144(e)(i) of the Securities Act or (b) the date on which
the Fidelity Funds no longer own any of such securities.
APPROVAL OF PERFORMANCE-BASED COMPENSATION (Item 2 on Proxy)
The Company is proposing to enter into new employment agreements with C. William
Carey, the Chairman, President and Treasurer of the Company, and Francis X.
Correra, the Senior Vice President and Chief Financial Officer of the Company.
Mr. Carey's proposed employment agreement may, in certain circumstances, provide
for the payment of compensation in excess of $1 million. Section 162(m) of the
Internal Revenue Code, recently enacted by Congress, provides that, with certain
exceptions, a public company may not deduct compensation in excess of $1
million. Deductions of amounts paid in excess of $1 million are allowed for
performance-based compensation that is paid solely on the basis of performance
goals established by an independent compensation committee and approved by the
corporation's shareholders. As discussed above in the Compensation Committee
Report on Executive Compensation, the Compensation Committee has recommended,
and the full Board of Directors has approved, new employment agreements for Mr.
Carey and Mr. Correra which include performance-based compensation that could
result in payments in excess of $1 million to Mr. Carey. Accordingly, to enable
the Company to deduct this compensation and take advantage of the tax benefits
to the Company that such deductions would provide, the Board of Directors has
decided to seek shareholder approval of the performance-based compensation
arrangements set forth in the proposed new employment agreements for Messrs.
Carey and Correra (the "Performance Arrangements").
<PAGE>
The proposed agreements provide for annual compensation and benefits for a
five-year term commencing March 1, 1994. Mr. Carey's agreement provides for a
base salary of $975,000 and an annual bonus, based on increasing earnings per
share targets, of up to 120% of his salary. Mr. Carey's base salary will remain
constant unless Section 162(m) is amended or repealed and thereafter would be
subject only to cost of living increases. Mr. Correra's agreement provides for
a base salary of $365,000, subject to annual cost of living increases, and an
annual bonus, based on increasing earnings per share targets, of up to 110% of
his base salary. The bonuses are linked to earnings per share goals which the
Compensation Committee and the Board of Directors believe would constitute, even
at the lowest levels, above average performance.
Each of Mr. Carey and Mr. Correra are eligible to receive a bonus if the
Company's net income per common share (excluding extraordinary items and
material capital transactions and after provision for the payment of any such
bonus) equals or exceeds certain targeted earnings per share levels. These
levels increase over the term of the employment agreements so that the targets
in each year are higher than the previous year's targets. If the applicable
target is not achieved, no bonus will be paid. The percentage bonus to be paid
depends upon the earnings per share target achieved. The maximum bonus which
may be paid to Mr. Carey is equal to 120% of his salary and the maximum bonus
which may be paid to Mr. Correra is equal to 110% of his salary. Neither the
Board of Directors nor the Compensation Committee has any power to alter the
performance targets contained in the employment agreements.
NEW PLAN BENEFITS
Employment Agreements with C. William Carey and Francis X. Correra
<TABLE>
<CAPTION>
Name and Position Dollar Value
<S> <C>
C. William Carey, Chairman, President
and Treasurer (1)
Francis X. Correra, Senior Vice President
and Chief Financial Officer (1)
</TABLE>
(1) Pursuant to the performance arrangements contained in Mr.
Carey's and Mr. Correra's proposed employment agreements, Mr. Carey is eligible
to receive a bonus of up to 120% of his base salary, currently $975,000, and Mr.
Correra is eligible to receive a bonus of up to 110% of his base salary,
currently $365,000. The amount of the bonuses to be paid, if any, is
indeterminate because such bonus payments will be based solely upon the
achievement of certain targeted earnings per share goals.
<PAGE>
The proposed agreements also provide for the grant of options to each of Mr.
Carey and Mr. Correra to purchase, respectively, 2.5% and 1.5% of the
outstanding common stock of L. G. Balfour Company, Inc., a wholly-owned
subsidiary of the Company. The exercise price for these options will be the
stock's fair market value on the date of grant. The grant of these options is
subject to the consent of certain of the Company's lenders. In the event that
such consents are not obtained, the options will not be granted and alternative
equity compensation will be negotiated with Messrs. Carey and Correra.
The affirmative vote of the holders of a majority of the Class A and Class B
Common Stock, voting together as a single class, represented in person or by
proxy and entitled to vote at the 1994 Annual Meeting is required to approve the
Performance Arrangements in the proposed new employment
agreements. Mr. Carey owns of record and beneficially, or serves as co-trustee
for trusts holding, shares of Class A and Class B Common Stock representing in
the aggregate 60.7% of the voting power of the Company. Mr. Carey has stated
that he intends to vote for the adoption of this proposal and the vote of these
shares in favor of this proposal will ensure its adoption.
The Board of Directors and the Compensation Committee have given due
consideration to the Performance Arrangements set forth in
the proposed employment agreements for Mr. Carey and Mr. Correra and believe
that approval of these arrangements by the shareholders is in the best interests
of the Company.
The Board recommends that shareholders vote FOR the approval of the
Performance Arrangements for Mr. Carey and Mr. Correra.
INDEPENDENT AUDITORS
Management has selected the firm of Arthur Andersen & Co., independent certified
public auditors, to serve as the Company's independent auditors for the fiscal
year ending February 28, 1995. Arthur Andersen & Co. has served as the
Company's independent auditors since 1981. A partner in that firm will be
present at the Annual Meeting of Stockholders to answer questions and will be
given the opportunity to make a statement, if he so desires.
<PAGE>
OTHER MATTERS
Management of the Company knows of no other matters to be presented for action
at the meeting by or on behalf of the Company or its management. If any other
matters shall be brought before the meeting, it is the intention of the persons,
named in the accompanying proxy to vote on such matters in accordance with their
judgment.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, officers and regular employees of the Company may solicit
proxies personally and by telephone, telegraph or other means, for which they
will receive no compensation in addition to their normal compensation.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons and the Company may
reimburse them for their reasonable out-of-pocket and clerical expenses.
Proxies, ballots and voting tabulations identifying stockholders are secret and
will not be available to anyone, except as actually necessary to meet legal
requirements.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the 1995 Annual Meeting must be
received by the Company for inclusion in the Company's proxy statement and form
of proxy by February 27, 1995. The by-laws of the Company provide that any
Director nominations by stockholders must be filed with the Clerk of the Company
not less than (i) with respect to an election to be held at an Annual Meeting
of stockholders, 90 days prior to the date one year from the date of the
immediately preceding Annual Meeting of stockholders, and (ii) 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.
Richard E. Floor
Clerk
June 27, 1994
