June 24, 1996
Page 1
TOWN & COUNTRY CORPORATION
25 Union Street
Chelsea, Massachusetts 02150
June 24, 1996
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 18, 1996, at
State Street Bank and Trust Company, 225 Franklin Street, 33rd Floor, Boston,
Massachusetts. All the members of the Board of Directors look forward to
greeting you at the meeting.
Enclosed are the Proxy Statement, Proxy Card and the 1996 Annual Report to
Stockholders. All holders of Class A, Class B and Convertible Redeemable
Preferred stock will be asked to vote on the re-election of one Director.
The Board has given due consideration to the proposal to re-elect one Director
and has concluded that its 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 this Company proposal,
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 18, 1996
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, 33rd Floor, Boston, Massachusetts, on Thursday, July 18, 1996,
at 10:30 A.M., for the following purposes:
1. To re-elect one Director.
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The close of business on May 31, 1996 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 24, 1996
<PAGE>
TOWN & COUNTRY CORPORATION
25 Union Street
Chelsea, Massachusetts 02150
(617) 884-8500
PROXY STATEMENT
This statement is furnished in connection with the 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 18, 1996, 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 24,
1996. 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 May 31, 1996, 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, 21,928,303 shares of Class A Common Stock and
2,664,941 shares of Class B Common Stock were outstanding and entitled to be
voted at the meeting. In addition, as of such date, 1,977,905 shares of the
Company's Convertible Redeemable Preferred Stock (the "Convertible Preferred" or
"Convertible Preferred Stock") were outstanding. Each share of Convertible
Preferred is convertible into two shares of Class A Common Stock and votes as if
such share had been converted by the holder. Accordingly, on an as-converted
basis, 25,884,113 shares of Class A Common Stock were outstanding as of May 31,
1996 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.
Unless otherwise specified herein, all references in this proxy statement to the
Class A Common Stock shall be deemed to include the Class A Common Stock into
which the Convertible Preferred may be converted. Unless otherwise specified
herein, all references in this proxy statement to the Common Stock shall be
deemed to include the Class A Common Stock into which the Convertible Preferred
may be converted, the Class A Common Stock and the Class B Common Stock.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor 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 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
2,973,679 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 254,571 shares of Class A Common
Stock and 140,253 shares of Class B Common Stock. As of May 31, 1996, Mr. C.
William Carey and trusts created for the benefit of his children owned, in the
aggregate, approximately 8.6% of the Company's Class A Common Stock and 99.8% of
the Company's Class B Common Stock. Following the exercise of the Company's
stock options that are exercisable within 60 days of May 31, 1996 (1,000,000 of
which are held by Mr. Carey) Mr. Carey's ownership would be increased to 11.4%
of the Company's outstanding Class A Common Stock.
The Annual Report of the Company, including financial statements for the fiscal
year ended February 25, 1996, 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 shall 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, William Schawbel and Marcia C.
Morris will serve until the 1997 Annual Meeting, and until their successors are
duly elected and qualified. C. William Carey and Richard E. Floor will serve
until the 1998 Annual Meeting, and until their successors are duly elected and
qualified. The Board has nominated Charles Hill, who is currently a Director of
the Company, for re-election at the 1996 Annual Meeting to serve until the 1999
Annual Meeting, and until his successor is duly elected and qualified.
The Company's by-laws provide that a plurality of the votes cast by the holders
of the Class A and Class B Common Stock and holders of Convertible Preferred
Stock voting together as a single class represented in person or by proxy and
entitled to vote at the 1996 Annual Meeting is required to re-elect Mr. Hill as
a Director.
The Board of Directors recommends that stockholders vote FOR the re-election of
Mr. Hill.
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, shares represented
by a proxy that withholds authority to vote for the nominee and broker non-votes
will not be considered to be voting on the election of Mr. Hill as a Director.
<PAGE>
The following table sets forth certain information as of May 31, 1996 regarding
the Directors of the Company and the nominee for Director based on the
information furnished by them to the Company.
<TABLE>
<CAPTION>
Shares of
Name and Principal First Common Percent
Occupation for Past Became a Class Stock of
Five Years Age Director of Stock Owned Class (1)
<S> <C> <C> <C> <C> <C>
C. William Carey 59 1965 Class A 3,228,250 (2) 11.4%
Chairman and Chief Class B 2,660,040 (3) 99.8%
Executive 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 56 1972 Class A 153,000(4)(5) *
Attorney whose professional Class B -- (4)
corporation is a partner in
the law firm of Goodwin,
Procter & Hoar LLP, the
Company's legal counsel;
Director, New America High
Income Fund.
Charles Hill 48 1986 Class A 26,000 (5) *
Chairman of Garber Travel Class B -- --
Service, Inc. since 1981;
Vice Chairman of Towle Mfg.
Co., Inc. (giftware)
1982-1983.
William Schawbel 56 1994 Class A 20,000 (6) *
Chief Executive Officer Class B -- --
of The Schawbel Corporation
(technology manufacturer)
since 1981.
Marcia C. Morris 47 1995 Class A 20,000 (6) *
Chief Legal Counsel, Class B -- --
Senior Vice President,
The Presbyterian Hospital
of New York City since
March 1995; Kennedy School
of Government, Harvard
University, 1992-93;
President, the Stride Rite
Children's Group, 1989-92.
</TABLE>
<PAGE>
(1) Included in calculating the percentages of the Company's Class A Common
Stock are 2,423,900 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 May 31,
1996, 1,000,000 of which are held by Mr. Carey.
(2) Includes 254,571 shares of Class A Common Stock (0.1% 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 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 25,000 shares of Class A Common Stock that Mr. Floor and Mr. Hill
could acquire by the exercise of stock options within 60 days of May 31, 1996.
(6) Includes 20,000 shares of Class A Common Stock that Mr. Schawbel and Ms.
Morris could acquire by the exercise of stock options within 60 days of May 31,
1996.
(*) 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
BOARD MEETINGS
The Board of Directors held four meetings during the 1996 fiscal year. The Board
has no nominating committee. Each of the incumbent Directors attended all of the
meetings of the Board of Directors and of the committees of which he or she was
a member which were held during the period he or she was a Director or committee
member.
COMPENSATION COMMITTEE
This committee held one meeting 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 Hill and Schawbel.
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 selects the
independent auditors for appointment by the Board.
The committee members are Directors Floor, Hill and Schawbel.
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 or her duties as a Director. Pursuant to the
1994 Non-Employee Directors' Nonqualified Stock Option Plan, each non-employee
Director, upon his or her initial election to the Board of Directors, receives
an option to purchase 20,000 shares of Class A Common Stock. Each non-employee
Director who is a Director on the last day of the Company's fiscal year which is
more than four full years after the date of the initial option grant will
receive on such date and annually thereafter an option to purchase 4,000
additional shares of Class A Common Stock. All such options will be immediately
exercisable at the fair market value of the Class A Common Stock on the date of
issuance.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth information as of May 31, 1996, except where a
different date is indicated by a 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 8.6%
and 99.8% of the Company's Class A and Class B securities, respectively,
entitled to vote at the 1996 annual meeting are owned by Mr. Carey and by trusts
established for his children. See the table and accompanying footnotes below.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount Beneficially Percent
Beneficial Owner Owned of Class (1)
<S> <C> <C> <C>
Class A Common Stock C. William Carey 3,228,250 (2) 11.4%
$.01 par value Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Francis X. Correra 607,960 (3) 2.1%
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
Northeast Investors Trust 1,652,401 (4) 5.8%
50 Congress Street
Boston, Massachusetts 02109
Directors and Executive 4,055,210 (5) 14.3%
Officers as a Group
(6 Persons)
Class B Common Stock
$.01 par value C. William Carey 2,660,040 (6) 99.8%
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 2,661,502 (6) 99.9%
as a Group (6 Persons)
</TABLE>
<PAGE>
(1) Included in calculating the percentages of the Company's Class A Common
Stock are 2,423,900 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 May 31,
1996.
(2) Includes all of the shares set forth in footnote 2 above to Election of
Directors.
(3) Includes 600,000 shares which Mr. Correra could acquire by the exercise of
stock options within 60 days of May 31, 1996, 1,000,000 of which are held by Mr.
Carey.
(4) As reported by Northeast Investors Trust in a Schedule 13G dated February 5,
1996 and filed with the Securities and Exchange Commission. The number of shares
of Class A Common Stock owned by Northeast Investors Trust results from the
assumed conversion of their 286,473 shares of the Company's Convertible
Preferred Stock (two shares of Class A Common Stock for each share of
Convertible Preferred Stock) added to 1,079,455 Class A Common Shares currently
owned.
(5) Includes all of the shares set forth in footnote 2 above to Election of
Directors. And also includes 1,690,000 shares which Directors and executive
officers could acquire by the exercise of stock options within 60 days of May
31, 1996.
(6) Includes all of the shares set forth in 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 25, 1996:
Name Age Capacities in which Served
C. William Carey 59 Chairman and Chief Executive Officer, Treasurer and
President of the Company since its incorporation in
1965.
Francis X. Correra 58 Senior Vice President and Chief Financial Officer since
1983; associated with the Company since 1979.
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by or paid to
each of the Company's executive officers for services rendered to the Company
during fiscal 1996. Information with respect to salary, bonus, other annual
compensation and options is included for the 1994, 1995 and 1996 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>
Other
Annual
Name Fiscal Year Salary Bonus Compensation (2) Options (4)
<S> <C> <C> <C> <C> <C>
C. William Carey 1996 $833,000 (1) 1,000,000
1995 $975,000
1994 $973,558 $546,000 $9,333 (3)
Francis X. Correra 1996 $374,125 600,000
1995 $373,915
1994 $364,231 $127,750 $9,333 (3)
</TABLE>
(1) Effective August 6, 1995, Mr. Carey's salary was reduced to an annualized
rate of $750,000.
(2) In fiscal years 1994, 1995 and 1996, 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.
(3) 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 $0.40 per share. Two-thirds of the shares purchased were
subject to restrictions on voting and disposition which lapsed ratably through
May 1993.
(4) In fiscal 1996, the Company repriced the May 14, 1993 options to purchase
1,000,000 and 500,000 shares of Class A Common Stock granted to C. William Carey
and Francis X. Correra, respectively. In addition, the Company repriced options
to purchase 100,000 shares of Class A Common Stock granted to Mr. Correra under
the 1985 Amended and Restated Stock Option Plan. See "REPORT ON TEN-YEAR OPTION
REPRICINGS".
<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised stock
options held by the named executive officers as of the end of fiscal 1996. No
stock options were granted to or exercised by any of the named executive
officers during the 1996 fiscal year, although the May 14, 1993, stock options
granted to Mr. Carey and Mr. Correra were repriced, as were the options granted
to Mr. Correra under the 1985 Amended and Restated Stock Option Plan. No stock
appreciation rights have been granted or are outstanding.
OPTION EXERCISES DURING 1996 FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Shares Number of Unexercised In-the-Money Options
Acquired on Value at Options at 1996 at 1996 Fiscal Year End
Name Exercise Realization Fiscal Year End ($) (1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
C. William Carey 0 0 750,000 250,000 0 0
Francis X. Correra 0 0 475,000 125,000 0 0
</TABLE>
(1) The closing price for the Company's Class A Common Stock on February 26,
1996, as reported by the American Stock Exchange was $0.6875.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Percent Potential Realizable
of Total Value at Assumed Rates
Options Exercise of Stock Price
Number of Securities Granted to or Appreciation for
Underlying Options Employees Base Price Expiration Option
Name Granted (1) in Fiscal Year (1) ($/Sh) Date Term
5% 10%
<S> <C> <C> <C> <C> <C> <C>
C. William Carey 1,000,000 21.85% $0.8125 5/13/2003 330,769 770,833
Francis X. Correra 500,000 10.93% $0.8125 5/13/2003 165,385 385,416
Francis X. Correra 25,000 0.55% $0.8125 5/23/2000 5,613 12,401
Francis X. Correra 50,000 1.09% $0.8125 4/28/1999 8,755 18,854
Francis X. Correra 25,000 0.55% $0.8125 6/6/1998 3,188 6,723
</TABLE>
(1) In fiscal 1996, the Company repriced the May 14, 1993, options to purchase
1,000,000 and 500,000 shares of Class A Common Stock granted to C. William Carey
and Francis X. Correra, respectively. In addition, the Company repriced options
to purchase 100,000 shares of Class A Common Stock granted to Mr. Correra under
the 1985 Amended and Restated Stock Option Plan. See "REPORT ON TEN YEAR OPTION
REPRICINGS". All repriced options are considered grants for the purpose of this
table.
(2) Represents the value of options at the end of option terms if the price of
the Company's Class A Common Stock were to appreciate annually by 5% and 10%,
respectively. There is no assurance that the stock price will appreciate at the
rates shown in the table. If the stock price appreciates, the value of stock
held by all shareholders will increase.
<PAGE>
REPORT ON TEN-YEAR OPTION REPRICINGS
The members of the Compensation Committee of the Board of Directors of the
Company, whose names are set forth on page 5, have provided the following report
on option repricings.
The table below sets forth information pertaining to repricing of options held
by Messrs. Carey and Correra during fiscal year 1996. Options are considered to
be repriced whenever the Company adjusts or amends the exercise price of stock
options previously granted, whether through amendment, cancellation or
replacement grants, or any other means.
In fiscal 1996, the Compensation Committee reviewed the existing stock options
of all Company employees and, in view of the fact that nearly all of the
outstanding options granted to employees under the Town & Country Corporation
1985 Amended and Restated Stock Option Plan had exercise prices well above the
recent historical trading prices for the Company's Class A Common Stock,
concluded that it was advisable to reprice such outstanding options. The Board
of Directors also reviewed the May 14, 1993, options to purchase 1,000,000
shares of Class A Common Stock granted to C. William Carey and options to
purchase 500,000 shares of Class A Common Stock granted to Francis X. Correra,
all of which were priced at $2.75 per share, and concluded it was advisable to
reprice these options as well. Accordingly, all outstanding options under the
1985 Restated and Amended Stock Option Plan and options granted to Messrs. Carey
and Correra on May 14, 1993, were repriced at the exercise price of $0.8125 per
share, the closing price on Town & Country Class A Common Stock on September 18,
1995, the date on which the Compensation Committee deemed repricing advisable.
Existing vesting schedules were unaffected by the repricing.
<TABLE>
<CAPTION>
Number of Length of
Securities Market Exercise New Original Option
Underlying Price Price Exercise Term Remaining
Date of Options of Stock at Time Price at Date
Repricing Repriced at Time of of
of Repricing Repricing Repricing
<S> <C> <C> <C> <C> <C> <C>
C.William Carey 9/18/95 1,000,000 $0.8125 $2.75 $0.8125 Approximately
seven years
Francis X. Correra 9/18/95 500,000 $0.8125 $2.75 $0.8125 Approximately
seven years
Francis X. Correra 9/18/95 25,000 $0.8125 $5.625 $0.8125 Approximately
five years
Francis X. Correra 9/18/95 50,000 $0.8125 $6.75 $0.8125 Approximately
four years
Francis X. Correra 9/18/95 10,000(1) $0.8125 $3.125 $0.8125 Approximately
three years
Francis X. Correra 9/18/95 15,000 $0.8125 $6.875 $0.8125 Approximately
three years
</TABLE>
(1) Options to purchase 10,000 shares of Class A Common Stock granted to Mr.
Correra on 6/6/88 were originally priced at $6.875 and were repriced to $3.125
on 8/23/90 and are included in the 9/18/95 repricing.
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed on Messrs. Hill and Schawbel. The
Compensation Committee believes that the Company's employment agreements with
Messrs. Carey and Correra provide competitive levels of compensation, link
management's bonus to Company performance and promote the best interest of the
Company and its shareholders. Under his employment agreement, Mr. Carey is
entitled to receive 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.
Correra's employment 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. Recognizing the
Company's performance, in fiscal 1996 Mr. Carey requested and received
authorization from the Board of Directors for a reduction in his base salary
from $975,000 to an annualized rate of $750,000. That reduction went into effect
on August 6, 1996, and Mr. Carey's salary for fiscal 1996 was $833,000. Neither
Mr. Carey nor Mr. Correra received bonuses in fiscal year 1996 as 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) failed to
equal or exceed certain targeted earnings per share levels.
Messrs. Charles Hill and William Schawbel
PERFORMANCE GRAPH
The following graph compares changes in the cumulative total shareholder return
on the Company's Class A Common Stock for the previous five-years to the
Standard & Poor's 500 Composite Index and to a peer group of publicly traded
companies.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG TOWN & COUNTRY
CORPORATION, S&P 500 INDEX AND PEER COMPANY GROUP INDEX
2/92 2/93 2/94 2/95 2/96
<S> <C> <C> <C> <C> <C>
Town & Country Corp. Class A $110.00 $105.00 $100.00 $ 35.00 $ 25.00
S&P 500 Comp-Ltd. $115.99 $128.34 $139.04 $149.28 $201.08
Peer Group Weighted Average $101.70 $ 71.96 $ 94.86 $ 92.67 $140.47
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS
In fiscal 1995, the Company entered 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 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 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. During
fiscal 1994, the Compensation Committee recommended, and the full Board of
Directors approved, new employment agreements for Mr. Carey and Mr. Correra. The
Board of Directors sought and received shareholder approval at the 1994 Annual
Meeting of the performance-based compensation arrangements set forth in the new
employment agreements for Messrs. Carey and Correra.
The 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. However, Mr. Carey's base salary was reduced,
effective August 6, 1995, to an annualized rate of $750,000. 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.
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
Name and Position Dollar Value
C. William Carey, Chairman, President
and Treasurer (1)
Francis X. Correra, Senior Vice President
and Chief Financial Officer (1)
(1) Pursuant to the performance-based compensation arrangements contained in Mr.
Carey's and Mr. Correra's employment agreements, Mr. Carey is eligible to
receive a bonus of up to 120% of his base salary, currently $750,000 and Mr.
Correra is eligible to receive a bonus of up to 110% of his base salary,
currently $374,125. 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>
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 25, 1996, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than ten
percent beneficial owners were complied with, except in the case of one report
for each of Messrs. Carey and Correra which were inadvertently filed late.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
During fiscal year 1996, the Company leased a portion of its Chelsea,
Massachusetts facility comprising approximately 39,000 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, which was revised on March 1,
1996, expires on August 31, 1998 and provides the Company with three ten-year
options to renew. The current lease provides for an annual rental payment of
approximately $350,000. 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 LLP, which
provides legal services for the Company.
In connection with the private placement of the Convertible Preferred Stock on
November 23, 1994 (the "Private Placement"), the Company entered into a
Registration Rights Agreement with, among others, Northeast Investors Trust.
Pursuant to this agreement, the Company agreed to use its best efforts (i) to
file a registration statement covering the Convertible Preferred Stock and the
Class A Common Stock issuable upon conversion (collectively, the "Securities")
held by the Northeast Investors Trust and other holders of the Company's
Convertible Preferred Stock (collectively, "the Registered Shareholders") within
60 days after November 23, 1994, and (ii) to keep such registration statement
effective until the earlier of (x) the date on which the Registered Shareholders
notify the Company that they may dispose of the Securities which were acquired
pursuant to the Private Placement pursuant to rule 144(k) under the Securities
Act of 1933, as amended, or (y) the date on which the Registered Shareholders no
longer may own any of such Securities. Under this agreement, if such
registration statement is not continuously effective for 120 days during any six
month period, the Company will make a cash payment to the Registered
Shareholders equal to the product of (a) .00125 and (b) the aggregate
liquidation value of the Securities owned by the Registered Shareholders as of
the date of such payment which were acquired pursuant to the Private Placement
(the "Illiquidity Payment"). In the event that the Company fails to satisfy this
test for four consecutive months, the amount of the cash payment required to be
made by the Company will be increased by 100% of the Illiquidity Payment for
such calendar month and for each consecutive calendar month thereafter in which
the Company is obligated to make an Illiquidity Payment. The Company filed a
registration statement on Form S-2 (No. 33-57407) dated April 12, 1995 (the
"Registration Statement") with the Securities and Exchange Commission. On March
28, 1996, the Registration Statement was suspended as contemplated by Section 5
of the Registration Rights Agreement.
<PAGE>
INDEPENDENT ACCOUNTANTS
Management has selected the firm of Arthur Andersen LLP, independent public
accountants, to serve as the Company's independent accountants for the fiscal
year ending February 25, 1996. Arthur Andersen LLP has served as the Company's
independent accountants 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.
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, telefax 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 1997 Annual Meeting must be
received by the Company for inclusion in the Company's proxy statement and form
of proxy by February 25, 1997. 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 24, 1996
