Schedule 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Material
[ ] Soliciting Material Pursuant to section 240.14a-12
Smith Corona Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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:
_________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
_________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Smith Corona Corporation (the "Company") will be held at Smith
Corona Corporation, 839 NYS Route 13 South, Cortland, New York
13045 on November 17, 1997 at 10:00 a.m., for the following
purposes:
1. To elect two (2) directors to serve until the 2000 Annual
Meeting of Stockholders and until their successors are elected and
qualified;
2. To consider and act upon a proposal to ratify the
appointment of Deloitte & Touche LLP as independent certified
public accountants for the Company for the fiscal year ending June
30, 1998; and
3. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on
September 19, 1997 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournments or postponements thereof.
By Order of the Board of
Directors,
/s/ G. William Sisley
G. William Sisley
Secretary
October 1, 1997
Cortland, New York
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY.<PAGE>
S MITH CORONA CORPORATION
839 NYS Route 13 South
Cortland, New York 13045
(607) 753-6011
_________________________
PROXY STATEMENT
_________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Smith Corona
Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held at Smith Corona Corporation, 839 NYS Route
13 South, Cortland, New York, 13045 on November 17, 1997 at 10:00
a.m. (the "Meeting"), and at any postponements or adjournments
thereof. This Proxy Statement and the related proxy card are first
being mailed to Stockholders on or about October 1, 1997.
Only holders of record of the Company's common stock, par
value $.001 per share (the "Common Stock"), as of the close of
business on September 19, 1997 (the "Record Date") will be entitled
to notice of, and to vote at, the Meeting. As of the Record Date,
there were 2,695,764 shares of Common Stock issued and outstanding,
each of which is entitled to one vote. There is no other class of
voting securities issued and outstanding. The presence in person
or by proxy of the holders of a majority of the outstanding Common
Stock will be necessary to constitute a quorum for the transaction
of business at the Meeting.
All shares represented by properly executed proxies will be
voted in accordance with the instructions indicated thereon unless
such proxies previously have been revoked. If any proxies do not
contain voting instructions, the shares represented by such proxies
will be voted (1) FOR the election of the nominees listed below and
(2) FOR the ratification of the appointment of Deloitte & Touche
LLP as the Company's independent certified public accountants for
the fiscal year ending June 30, 1998 ("Fiscal 1998"). It is not
anticipated that any matters other than those set forth in the
Notice of Annual Meeting dated October 1, 1997(the "Notice of
Meeting") will be brought before the Meeting. If any other matters
properly come before the Meeting, the shares represented by all
properly executed proxies will be voted in accordance with the
judgment of the persons named on such proxies. Shares abstaining,
and shares held in street name as to which a broker has not voted
on some matters but has voted on other matters ("Broker Non
Votes"), will be included in determining whether a quorum exists at
the Meeting. Approval of each matter specified in the Notice of
Meeting requires the affirmative vote of a majority, or, in the
case of the election of directors, a plurality, of shares of Common
Stock present in person or by proxy at the Meeting entitled to vote
thereon. Stockholders may not cumulate their votes. In
determining whether a proposal specified in the Notice of Meeting
has received the requisite number of affirmative votes, abstentions
and Broker Non-Votes will have the same effect as votes against the
proposal, except with respect to the election of directors where
abstentions and Broker Non-Votes will have no effect on the outcome
of the vote.
Any stockholder who executes and delivers a proxy may revoke
it at any time prior to its exercise by (1) delivering to the
Secretary of the Company a written notice of revocation prior to
the Meeting; (2) delivering to the Secretary of the Company a duly
executed proxy bearing a later date; or (3) attending the Meeting
and filing a written notice of revocation with the Secretary of the
Meeting.
In addition to solicitations by mail, some directors, officers
and employees of the Company may solicit proxies for the Meeting
personally or by telephone or telegram without extra remuneration
therefor. The Company will also provide persons, firms, banks and
corporations holding shares in their names or in the names of
nominees, which in either case are beneficially owned by others,
proxy materials for transmittal to such beneficial owners and will
reimburse such record owners for their expenses in doing so. The
costs of soliciting proxies will be borne by the Company.
Background
On July 5, 1995 the Company filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"). From July 5, 1995
to February 28, 1997, the Company operated as a debtor-in
possession.
On January 27, 1997 the Bankruptcy Court entered an order (the
"Confirmation Order") confirming the Company's Third Amended Second
Joint Plan of Reorganization (the "POR"). The Confirmation Order
was subject to satisfaction of certain conditions precedent to the
effective date of the POR. The Company satisfied the conditions
and emerged from bankruptcy proceedings on February 28, 1997.
Pursuant to the POR, the current members of the Company's Board of
Directors were appointed effective February 28, 1997. None of such
members, other than Mr. Ronald F. Stengel, were members of the
Company's Board of Directors prior to such time. In addition, the
Company's then outstanding shares of common stock, par value $.01
per share (the "Old Common Stock"), were canceled, the holders of
the Old Common Stock received warrants to purchase the Common
Stock, and the Common Stock was issued to certain of the Company's
creditors.
PROPOSAL 1.
ELECTION OF DIRECTORS
Nominees
The Board of Directors is divided into three classes serving
staggered three-year terms. The terms of office of two current
directors, Messrs. Morgan and Stengel, expire at the 1997 Annual
Meeting of Stockholders. They have been nominated for reelection
through the 2000 Annual Meeting of Stockholders or until a
successor is elected and qualified.
The terms of Messrs. Murray and Rosett expire at the 1998
Annual Meeting of Stockholders. The terms of Messrs. Colletti,
Driscoll and Parts expire at the 1999 Annual Meeting of
Stockholders.
Certain information is provided with respect to the members of
the Board of Directors below, including such individual's age and
principal occupation, a brief account of business experience during
at least the last five years, other directorships currently held
and the year in which the individual was first elected a director
of the Company.
Jerome A. Colletti
Mr. Colletti, age 50, has served as President and Chief
Executive Officer of the Alexander Group Inc., a marketing and
sales management consulting firm, since January 1985. Mr. Colletti
has been a director of the Company since February 28, 1997.
W. Michael Driscoll
Mr. Driscoll, age 51, has served as President and Chief
Executive Officer of the Company since February 28, 1997. From
October 14, 1996 to February 27, 1997, Mr. Driscoll served as
consultant to the Company pending his appointment to President and
Chief Executive Officer. From December 18, 1995 until September
30, 1996, Mr. Driscoll served as Chief Executive Officer of IPC
Technologies, Inc.,a manufacturer and marketer of personal desktop
and notebook computers and network servers. Prior to that time, he
served as Vice President/Operations for the Company from March 16,
1995 to December 15, 1995 and Vice President/Operations and
Engineering from July 1, 1992 to March 16, 1995. He served as
Director of Materials for the Company from February 17, 1992 to
July 1, 1992. Mr. Driscoll is currently a director of IPC
Holdings, Inc. and Tompkins Acquisition Corporation. Mr. Driscoll
has been a director of the Company since February 28, 1997.
William J. Morgan
Mr. Morgan, age 42, has served as President and Managing
Director of Pacholder Associates, Inc. (PAI), a national financial
services firm, since 1983. Mr. Morgan serves as a director of
Kaiser Ventures, Inc., USF&G Pacholder Fund, Inc., Duckwall
Alco Stores, and ICO, Inc.. Mr. Morgan has been a director of the
Company since February 28, 1997.
Michael J. Murray
Mr. Murray, age 62, has served as Vice President for Worldwide
Sales, Marketing and Technical Service Operations of Harris/RF
Communications Company, a manufacturer of military radios, since
April 1993. Mr. Murray served as Regional Business General Manager
and Vice President of the Office Imaging Division of Eastman Kodak
Company until his retirement in January 1993. Mr. Murray is
currently a director of Photikon Corporation. Mr. Murray has been
a director of the Company since February 28, 1997.
Peter N. Parts
Mr. Parts, age 44, has served as President and Chief Executive
Officer of Peter Parts Electronics, Inc., a North American sales
group for electronic manufacturers from Asia and Europe, since
1986. Mr. Parts has been a director of the Company since February
28, 1997.
Dr. Richard N. Rosett
Dr. Rosett, age 69, has served as Professor of Economics at
the Rochester Institute of Technology College of Business since
July 1996. From July 1990 to June 1996 Dr. Rosett was the Dean of
the Rochester Institute of Technology College of Business. Dr.
Rosett is currently a director of Hutchinson Technology and ORMEC
Systems Corporation. Dr. Rosett has been a director of the Company
since February 28, 1997.
Ronald F. Stengel
Mr. Stengel, age 49, was elected as Chairman of the Board of
the Company on March 7, 1997. He served as President, Chief
Executive Officer and Director from July 1, 1995 through February
28, 1997. Mr. Stengel is the President and Chief Executive Officer
of R.F. Stengel & Co., Inc., a crisis management and turnaround
consulting firm founded in 1985. Mr. Stengel has been a director
of the Company since July 1, 1995.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR MR.
MORGAN AND MR. STENGEL AS DIRECTORS.
Meetings and Committees of the Board
The Board of Directors met 17 times during the period from
July 1, 1996 to June 30, 1997 ("Fiscal 1997"). All directors
attended at least 90 % of Board (and, where applicable,
Committee)meetings held in Fiscal 1997.
The Board has two standing committees, the Audit Committee and
the Compensation and Benefits Committee.
The principal responsibilities of each of the standing
committees and the members of such committees are set forth below:
The Audit Committee met two times during Fiscal 1997. The
Audit Committee is responsible for (i) recommending to the Board of
Directors a firm of independent certified public accountants to
audit the Company's financial statements; (ii) reviewing the scope
and result of audits made by such firm; (iii) reviewing the
adequacy of internal accounting and auditing procedures; and (iv)
directing and supervising special audit inquiries. The Audit
Committee consists of Messrs. Murray, Parts and Rosett.
The Compensation and Benefits Committee met three times during
Fiscal 1997. The Compensation and Benefits Committee is
responsible for reviewing and recommending (i) matters relating to
executive compensation; (ii) any long-term management incentive
plans and grants to officers under such plans; (iii) all employment
and consulting agreements between the Company and any of its
officers; and (iv) the retirement plans in which officers of the
Company participate. The Compensation and Benefits Committee
consists of Messrs. Colletti, Morgan and Stengel.
Compensation Committee Interlocks and Insider Participation
As disclosed above, Mr. Stengel, a member of the Compensation and
Benefits Committee, was the President and Chief Executive Officer
of the Company from July 1, 1995 to February 28, 1997, pursuant to
a retention agreement dated June 29, 1995 (the "Retention
Agreement") between the Company and R.F. Stengel & Co., Inc.
("RFS"), a company of which Mr. Stengel is President. See "Certain
Relationships and Related Transactions - Transactions with
Management and Others - Retention Agreement" herein for a
description of the terms of the Retention Agreement.
Compensation of Directors
Directors who are employees of the Company do not receive any
additional compensation for their services as directors. Other
directors are paid an annual fee of $22,000 plus expenses. The
Chairman of the Board is paid an annual fee of $44,000 plus
expenses. Committee members who are not employees of the Company,
receive an attendance fee of $500 plus expenses for each committee
meeting attended.
Executive Compensation
Set forth below is information concerning compensation of both
persons who served as the chief executive officer and the other
four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") for the year ended
June 30, 1997.
Annual Compensation
<TABLE>
<S> <C> <C> <C> <C>
Fiscal
Year Other Annual
Ending Salary Bonus Compensation
Name and Principal Position June 30, ($)(6) ($)(7) ($)(9)
W. Michael Driscoll(1) 1997 183,243 100,000 -
President and 1996 55,917 - -
Chief Executive Officer 1995 120,650 - -
Ronald F. Stengel(2) 1997 - - -
Chairman of the Board 1996 - - -
1995 - - -
John A. Piontkowski(3) 1997 208,000 138,605 1,817
Executive Vice President 1996 201,692 75,375 22,042
Chief Financial Officer 1995 127,000 - -
Michael W. Chernago 1997 127,083 76,661 -
Vice President 1996 105,506 46,456 -
Operations 1995 99,375 - -
Jerry L. Diener 1997 130,816 53,719 -
Senior Vice President 1996 132,756 35,863 -
Sales 1995 118,025 - -
David P. Verostko 1997 119,750 60,344 -
Vice President 1996 107,162 46,456 -
Human Resources 1995 102,875 - -
Long-Term Compensation
Awards Payouts
Restricted Securities
Stock Underlying
Awards Options/ LTIP Compen-
SAR's Payouts sation
Name and Principal Position ($)(9) ($)(10) ($)(11) ($)
W. Michael Driscoll(1) 1997 187,491 0 3,816(12)
President and 1996 0 0 21(13)
Chief Executive Officer 1995 0 0 47
Ronald F. Stengel(2) 1997 0 0 -
Chairman of the Board 1996 0 0 -
1995 0 0 -
John A. Piontkowski(3) 1997 80,285 0 25,667(12,14)
Executive Vice President 1996 0 0 53,322(13,15)
Chief Financial Officer 1995 0 0 21,547
Michael W. Chernago 1997 0 0 4,763(12)
Vice President 1996 0 0 4,187(13)
Operations 1995 0 0 3,762
Jerry L. Diener 1997 0 0 4,167(12)
Senior Vice President 1996 0 0 4,475(13)
Sales 1995 0 0 3,997
David P. Verostko 1997 0 0 4,601(12)
Vice President 1996 0 0 4,237(13)
Human Resources 1995 0 0 3,952
</TABLE>
(1) Mr. Driscoll was named President and Chief Executive Officer on February
28, 1997. Mr. Driscoll was a consultant to the Company from October
14, 1996 until February 27, 1997.
(2) Mr. Stengel was elected Chairman of the Board on March 7, 1997. Pursuant
to the Retention Agreement, Mr. Stengel, President of RFS, was elected
Chief Executive Officer and President on July 1, 1995 and served until
February 28, 1997.
(3) Mr. Piontkowski was named Executive Vice President and Chief Financial
Officer on May 5, 1997.
(4) Mr. Driscoll terminated employment with the Company on December 15, 1995
prior to his return on October 14, 1996.
(5) Pursuant to the Retention Agreement and pursuant to Bankruptcy Court
approval, the Company retained RFS to provide interim management
services to the Company. Fees for these services were billed by and
paid to RFS. Mr. Stengel's daily rate was $2,500 from July 1, 1995
until February 28, 1997 and $375 per hour from March 1, 1997 until July
31, 1997. See "Certain Relationships and Related Transactions -
Transactions with Management and Others - Retention Agreements" below.
(6) Amounts shown include compensation deferred under the Company's
Retirement Savings and Investment Plan ("RSIP").
(7) Amounts shown include the bonus earned by the Named Executive Officers
under the Company's Incentive Compensation Program (as hereinafter
defined) in the year ended June 30, 1997 and the year ended June 30,
1996, respectively.
(8) Amounts shown with respect to Mr. Piontkowski for the year ended June
30, 1997 and the year ended June 30, 1996, and Mr. Diener for the year
ended June 30, 1995, represent amounts reimbursed during the fiscal year
for the payment of taxes.
(9) Restricted stock award values reflect the market price of the Common
Stock on the date of each grant. The aggregate number and value of
restricted stock holdings for each of the Named Executive Officers,
valued using the market close price as of June 30, 1997 are as follows:
Mr. Driscoll, 62,596 shares/$226,911 and Mr. Piontkowski 31,298
shares/$113,455. Rights to these shares vest the earlier of February
28, 1999 or a change in control (see "Employment Arrangements" for a
description of occurrences deemed to constitute a Change in Control).
The Company is restricted from paying dividends under the terms of its
borrowing agreement.
(10) The Company does not grant stock appreciation rights ("SAR's"). The
options listed consisted of options to purchase Old Common Stock.
Pursuant to the POR all of the outstanding stock options for the Old
Common Stock were canceled on February 28, 1997.
(11) The Company has no long-term incentive plans.
(12) For the year ended June 30, 1997, includes matching contributions by the
Company under the RSIP for Messrs. Driscoll, Piontkowski, Chernago,
Diener and Verostko of $0, $4,663, $4,716, $4,120 and $4,554,
respectively. Includes term life insurance premium payments by the
Company for Messrs. Driscoll, Piontkowski, Chernago, Diener and Verostko
of $3,816, $1,139, $47, $47 and $47, respectively.
(13) For the year ended June 30, 1996, includes matching contributions by the
Company under the RSIP for Messrs. Driscoll, Piontkowski, Chernago,
Diener and Verostko of $0, $6,029, $4,140, $4,429 and $4,190,
respectively. Includes net term life insurance premium payments by the
Company for Messrs. Driscoll, Piontkowski, Chernago, Diener and Verostko
of $21, $47, $47, $47, and $47, respectively.
(14) Includes amounts paid for relocation expenses, mortgage assistance and
housing expenses for Mr. Piontkowski of $15,600, $2,093 and $2,171,
respectively.
(15) Includes amounts paid for housing expenses and mortgage assistance for
Mr. Piontkowski of $30,501 and $16,745, respectively.
The table below illustrates the estimated annual benefits upon
retirement under the Smith Corona Corporation Salaried Employees' Retirement
Plan (the "Pension Plan") to persons in the specified compensation and
years-of-service classifications.
PENSION PLAN TABLE
Years of Service on 9/01/96
<TABLE>
<S> <C> <C> <C> <C> <C>
Remuneration on 9/01/96 15 20 25 30 35
$125,000 $24,380 $32,510 $40,640 $48,760 $48,760
$150,000 $30,010 $40,010 $50,010 $60,010 $60,010
$175,000 $30,010 $40,010 $50,010 $60,010 $60,010
$200,000 $30,010 $40,010 $50,010 $60,010 $60,010
$225,000 $30,010 $40,010 $50,010 $60,010 $60,010
$250,000 $30,010 $40,010 $50,010 $60,010 $60,010
$300,000 $30,010 $40,010 $50,010 $60,010 $60,010
$350,000 $30,010 $40,010 $50,010 $60,010 $60,010
$400,000 $30,010 $40,010 $50,010 $60,010 $60,010
$450,000 $30,010 $40,010 $50,010 $60,010 $60,010
$500,000 $30,010 $40,010 $50,010 $60,010 $60,010
</TABLE>
(1) Based on the Company's August 6, 1996 decision to discontinue future
benefit accruals as of
September 1, 1996.
The amounts set forth in the table above as estimated benefits are
computed on a straight life annuity basis and include an offset for a
percentage of Social Security benefits. Effective on January 1, 1989, the
amount of compensation taken into account under a qualified plan is limited
(the "Annual Compensation Limitation") under Section 401(a)(17) of the
Internal Revenue Code of 1986, as amended (the "Code"), subject to a
cost-of-living adjustment announced by the Secretary of the Treasury.
The cap on pension earnings has been limited to $150,000 as of
January 1, 1994 due to the Omnibus Budget Reconciliation
Act of 1993. This limit is reflected in
the above chart. The above chart does not, however, reflect any additional
benefits payable pursuant to grandfathering as a result of changes in the
earnings cap. This Annual Compensation Limitation may reduce future benefit
accruals payable to highly compensated individuals under the Pension Plan.
The total compensation set forth in the Summary Compensation Table above
is, in general, compensation covered by the Pension Plan for those respective
individuals. As of September 1, 1996, Messrs. Driscoll, Piontkowski,
Chernago, Diener and Verostko, had 13, 5, 23, 37 and 13 years of credited
service under the Pension Plan, respectively, for purposes of calculating
annual retirement benefits under the Pension Plan.
Summarized below are estimated accrued benefits under the Pension Plan
as of September 1, 1996 for the Named Executive Officers.
W. Michael Driscoll $24,048
John A. Piontkowski $ 8,090
Michael W. Chernago $29,520
Jerry L. Diener $56,580
David P. Verostko $19,370
These benefits represent the annual benefit payable at normal retirement
age. Unlike the Pension Plan Table, these benefits include the grandfathered
portion of the benefit attributable to the prior pay cap. Smith Corona has
decided to use the transitional method under the Omnibus Budget
Reconciliation Act of 1993 which produces the largest possible benefit under
the Pension Plan.
Employment Agreements
W. Michael Driscoll
On October 14, 1996, the Company entered into an employment agreement
with Mr. Driscoll providing that he would serve as President and Chief
Executive Officer from February 28, 1997 through February 28, 2000. The
agreement as amended on June 2, 1997, provides that Mr. Driscoll is to be
paid an initial annual base salary of $250,000. If Mr. Driscoll's employment
is terminated by the Company for reasons other than cause, or if he
terminates his employment following a Change of Control (as defined below),
he will continue to receive his base salary at the rate then in effect for
a period of 12 months.
John A. Piontkowski
On May 5, 1997, the Company entered into an employment agreement with
Mr. Piontkowski providing that he would serve as Executive Vice President and
Chief Financial Officer from March 1, 1997 through March 1, 2000. The
agreement provides that Mr. Piontkowski is to be paid an initial annual base
salary of $208,000. If Mr. Piontkowski's employment is terminated by the
Company for reasons other than cause, or if he terminates his employment
following a Change of Control, he will continue to receive his base salary
at the rate then in effect for a period of 12 months.
A "Change of Control" shall mean (i) a stock purchase by any "person"
(as such term is used in Sections 13(d) and 14(d) (2) of the Securities and
Exchange Act of 1934, as amended) who then owns or by virtue of such purchase
becomes the beneficial owner of, directly or indirectly, voting securities
of the Company representing 51% or more of the combined voting power of the
Company's then outstanding voting securities or (ii) any change in the
composition of the Company's Board in any one year which involves a majority
of such directors and which is not recommended by the Board.
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
ON EXECUTIVE COMPENSATION
The current members of the Compensation and Benefits Committee of the
Board of Directors of the Company were elected on March 7, 1997. The
Committee is comprised of directors who are not and have not been employees
of the Company. It is responsible for reviewing and recommending action with
respect to matters relating to executive compensation, any long-term
management incentive plans and grants to officers under such plans, all
employment and consulting agreements between the Company and any of its
officers, and the retirement plans in which officers of the Company
participate.
The Company adheres to a policy of blending several components of
executive compensation in order to attract and retain top employees, reward
its executives for performance that results in profits to the Company, and
motivate management to continue to optimize value for the Company's
shareholders. The Company's executive compensation package was modified
during the fiscal year ended June 30, 1997 pursuant to the POR which was
effective as of February 28, 1997.
During the fiscal year ended June 30, 1997, the Company's executive
compensation package consisted of:
- base salary
- short-term incentive compensation
- senior officer stock (post-POR)
- stock option plan (pre-POR)
- employee stock incentive plan (post-POR)
Base Salary. Base salaries of executive officers reflect the Company's
profitability and return on capital employed, the individual executive's
salary level as compared with those of similar executives of the Company's
competitors, and the individual executive's level of responsibility and
performance. Executive performance is measured using criteria established
by the Committee. Increases in base salary are considered annually, and
salary increases for executives other than the Chief Executive Officer who
have agreements are proposed to the Committee by the Chief Executive Officer.
Short-Term Incentive Compensation. In the first half of the fiscal year
ended June 30, 1997, the Company maintained a short-term incentive
compensation plan (the "Bonus Plan") which was approved by the Bankruptcy
Court. Pursuant to the Bonus Plan, employees were paid a bonus based upon
the financial performance of the Company compared to the pro forma budget
presented in the POR.
The Company adopted a modified new short-term incentive compensation
plan (the "Incentive Compensation Plan") solely for the second half of the
fiscal year ended June 30, 1997. The Incentive Compensation Plan was created
to help transition the Company into a new era which will primarily be based
upon the sale of new products. Therefore, the Incentive Compensation Plan
was activities based, with the express purposes of (i) maintaining existing
core business and products, (ii) developing new products, (iii) improving
marketing and operations, (iv) implementing certain finance and
administration projects and (v) increasing sales.
Senior Officer Stock. Pursuant to the POR, the Chief Executive Officer,
Chief Financial Officer, Senior Vice President/Sales and Marketing, and , at
the direction of the Chief Executive Officer, other Officers of the Company
may be granted up to a total of five (5) percent of the total shares of
Common Stock which are issued under the POR (not including the effect of the
exercise of any warrants). Rights to such shares will not vest prior to the
second anniversary of the effective date of the POR.
Stock Option Plan. In order to encourage executives to make decisions
for the Company based on long-range planning, and to stress the importance
of maximizing shareholder returns through strong performance, the Company
instituted the Stock Option Plan in 1990. The Company did not grant any
stock options pursuant to this Plan during the fiscal year ended June 30,
1997. Pursuant to the POR, the Stock Option Plan was terminated.
Employee Stock Incentive Plan. Pursuant to the POR, the Company shall
implement an employee stock incentive plan. The plan shall provide for the
issuance of up to ten (10) percent of the total shares of Common Stock issued
under the provisions of the POR (or options to acquire such shares)
determined on a fully-diluted basis (not including the effect of the exercise
of any warrants). Rights to such shares will not vest prior to the second
anniversary of the effective date of the POR. The employee stock incentive
plan has not yet been implemented.
Compensation of the Chief Executive Officer
On October 14, 1996, with the approval of the Bankruptcy Court, W.
Michael Driscoll entered into an employment agreement with the Company (the
"Employment Agreement") which established his base salary. Pursuant to the
Employment Agreement, Mr. Driscoll served as a consultant until the Effective
Date of the POR, February 28, 1997, at which time he replaced Ronald F.
Stengel as President and Chief Executive Officer of the Company. The
Committee used the same criteria to determine the Incentive Compensation Plan
award for the Chief Executive Officer as were used to determine the Incentive
Compensation Plan awards to the other executives of the Company as described
above.
Compensation and Benefits Committee
Jerome A. Colletti
William J. Morgan
Ronald F. Stengel
COMPANY PERFORMANCE
The chart below compares the performance of the Company's Common Stock
with the performance of the Russell 2000 Index and a Peer Group Index by
valuing the changes in common stock prices from February 28, 1997 plus
reinvested dividends and distributions. The Securities and Exchange
Commission requires that a company create a peer group index with which to
compare its own stock performance (if a published peer group index does not
exist) by selecting a grouping of companies that includes companies whose
lines of business are similar to its own. Because the Company is the only
U.S. manufacturer of portable electronic typewriters and personal word
processors whose stock is publicly traded, no grouping of companies could
closely mirror the Company's business. A "Peer Group" was, however, created
for comparison purposes by selecting several companies which had similar
market capitalization. Those companies selected (A.T. Cross, General Binding
Corporation, Gradco Systems, Inc., NU-Kote Holdings Inc., and Royal Appliance
Mfg. Co., Inc.) are manufacturers and sellers of consumer durable products
with like channels of distribution and compete for the same discretionary
consumer dollars. Some of the peer group companies were selected to parallel
the Company's supplies and accessories business which makes up 36.5% of the
Company's net sales. The chart assumes $100 was invested on February 28,
1997 in each of the Company's Common Stock, the Russell 2000 Index and the
Peer Group Index and reflects reinvestment of dividends and distributions on
a quarterly basis and market capitalization weighting.
Assumes Initial Investment of $100.00 and Reinvestment of Dividends.
<TABLE>
<S> <C> <C> <C>
Value at Smith Corona Peer Group Russell 2000
Common Stock Index Index
February 28, 1997 $100.00 $100.00 $100.00
March 31, 1997 37.50 87.03 95.28
April 30, 1997 42.86 86.10 95.55
May 31, 1997 64.29 91.64 106.18
June 30, 1997 51.86 96.96 110.73
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of June 30, 1997, certain information
regarding beneficial ownership of Common Stock by (a) each person known by
the Company to own beneficially more than 5% of its outstanding Common Stock,
(b) each director and nominee for director of the Company, (c) the Named
Executive Officers and (d) all directors and executive officers as a group.
Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated.
<TABLE>
<S> <C> <C>
Percent of
Number Common
of Shares Stock
Outstanding
Name of Beneficial Owner
Pension Benefit Guaranty Corporation 830,000(1) 30.1%(1)
Millennium Chemicals, Inc. 724,000(2) 20.8%(2)
Ronald F. Stengel 0 0
W. Michael Driscoll 63,065(3) 2.3%(3)
Jerome Colletti 0 0
William J. Morgan 830,000(1) 30.1%(1)
Michael J. Murray 0 0
Peter N. Parts 10,586(4) *
Dr. Richard N. Rosett 0 0
John A. Piontkowski 31,298(3) 1.1%(3)
Michael W. Chernago 0 0
Jerry L. Diener 0 0
David P. Verostko 0 0
All directors and executive officeers
as a group (16 persons) 934,949(1) 3.8%(1)
</TABLE>
(1) The Pension Benefit Guaranty Corporation ("PBGC") is the direct owner
of 830,000 shares. Mr. Morgan is the president and director of Pacholder
Associates, Inc. ("PAI"), a registered investment advisor. Pursuant to a
contract dated April 13, 1994 between the PBGC and PAI, on March 7, 1997 the
PBGC assigned PAI full and complete discretion over the shares, as well as
voting control over the shares. PAI and William J. Morgan have disclaimed
beneficial ownership of the shares. The business address of the PBGC is 1200
K Street, N.W., Washington, D.C. 20005.
(2) Represents warrants to purchase Common Stock. The exercise price is set
at $8.50 per share and the exercise period is from August 28, 1997 to
February 28, 1999. The business address of Millennium Chemicals, Inc. is 99
Wood Avenue South, Iselin, New Jersey 08830.
(3) Includes shares granted pursuant to the Senior Officer Stock Plan for
Messrs. Driscoll and Piontkowski of 62,596 and 31,298, respectively. Rights
to these shares shall not vest prior to the earlier of February 28, 1999 or
a Change of Control.
(4) The direct owner of the shares is Peter Parts Electronics, Inc. of which
Mr. Parts is the President and Chief Executive Officer as well as principal
stockholder. Mr. Parts has disclaimed beneficial ownership of the shares
except to the extent of his pecuniary interest in Peter Parts Electronics,
Inc..
*Less than one percent of the outstanding shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Retention Agreement
Effective July 1, 1995, and in connection with its filing for protection
under Chapter 11 of the Bankruptcy Code, the Company engaged RFS to provide
interim management services pursuant to the terms of the Retention Agreement
between the Company and RFS. The Retention Agreement was in effect until
February 28, 1997 and provided, among other things, that RFS would provide
the Company with leadership to guide the Company through its bankruptcy
proceedings and to work toward the confirmation and consummation of a plan
of reorganization. The terms of the Retention Agreement provided that Ronald
F. Stengel, President of RFS and its principal stockholder, would serve as
President, Chief Executive Officer and a director of the Company while the
Retention Agreement was in effect. RFS reported directly to the Company's
Board of Directors. On July 1, 1995, Mr. Stengel was elected President and
Chief Executive Officer of the Company, and was elected to the Board of
Directors of the Company. On July 1, 1995, Thomas A. Cawley, Vice President
and Secretary of RFS, was also elected a director of the Company, and on July
26, 1995, Mr. Cawley was elected Vice President-Administration of the Company
and served until February 28, 1997. RFS also agreed to provide additional
professional staff as necessary for RFS to perform its obligations under the
Retention Agreement.
Pursuant to the terms of the Retention Agreement, services would be
billed and payable monthly. The daily professional fees of Mr. Stengel and
Mr. Cawley were $2,500 and $1,700, respectively. During the period July 1,
1996 through February 28, 1997, the Company paid $669,744 for services and
expenses to RFS under the Retention Agreement. The Bankruptcy Court
authorized and approved the retention of RFS under Sections 327 and 328 of
the Bankruptcy Code pursuant to the terms of the Retention Agreement on July
5, 1995.
Effective March 1, 1997, the Company engaged RFS for the purpose of
effecting a smooth transition of certain activities and responsibilities in
progress at February 28, 1997 ( the "Transition Agreement"). On March 7,
1997, Mr. Stengel was elected Chairman of the Board of Directors of the
Company. Pursuant to the Transition Agreement RFS reported directly to the
President and Chief Executive Officer. During the period March 1, 1997
through June 30, 1997, the Company paid $147,270 for services and expenses
to RFS under the Transition Agreement.
Purchases of Materials
During the period from July 1, 1996 to June 30, 1997, the Company
purchased materials from Peter Parts Electronics, Inc. to provide certain
parts for the manufacture of typewriters and personal word processors. Peter
Parts, who has been a director of the Company since February 28, 1997, is
President and Chief Executive Officer of Peter Parts Electronics, Inc. and
its principal stockholder. The cost to the Company of products purchased
from Peter Parts Electronics, Inc. by the Company equaled approximately
$2,907,722 in the year ended June 30, 1997.
Cross-Indemnification Agreement
The Company and HM Holdings, Inc. ("HMH") entered into an Amended and
Restated Cross-Indemnification Agreement dated as of June 2, 1989 (the
"Cross-Indemnity Agreement"). In the Cross-Indemnity Agreement, the
Company agreed generally to indemnify HMH and Hanson PLC
("Hanson") against substantially
all liabilities relating to the business of the Company, including
environmental liabilities but excluding tax liabilities which are addressed
under the Tax Sharing Agreement (as defined below). HMH, in turn, agreed to
indemnify the Company against substantially all liabilities relating to the
business of Hanson (other than the business of the Company), including
environmental liabilities but excluding tax liabilities which are addressed
under the Tax Sharing Agreement described below. Millennium Chemicals Inc.,
a holder of warrants to purchase 724,000 shares of Common Stock, is an
affiliate of HMH and Hanson.
Tax Sharing Agreement
During the period March 1986 through August 3, 1989, while owned by
Hanson, the Company and its subsidiaries were included as members of the
Hanson affiliated group of corporations, which filed a consolidated United
States federal income tax return (the "Consolidated Group"). Subsequent to
August 3, 1989, pursuant to a public stock offering the Company no longer
qualified to be a member of the Consolidated Group for federal income tax
purposes. The Company and HMH entered into an Amended and Restated Tax
Sharing and Indemnification Agreement dated as of June 2, 1989 (the "Tax
Sharing Agreement"). Under the Tax Sharing Agreement, HMH generally will
indemnify the Company with respect to all income tax liabilities or
obligations in respect of all tax periods prior to August 3, 1989.
Similarly, the Company agreed to indemnify HMH for all income tax liabilities
or obligations imposed on the Company attributable to periods beginning on
or after August 3, 1989 and all other tax liabilities and obligations imposed
on the Company for all future periods. With respect to income tax
liabilities or obligations attributable to periods prior to August 3, 1989,
but which have been reserved for or accrued for in the ordinary course of
business prior to such date, the Company will indemnify HMH and HMH will be
under no obligation to indemnify the Company to the extent so reserved or
accrued at August 3, 1989. The Tax Sharing Agreement also provides that the
Company will assign to HMH (i) all refunds of taxes for which HMH indemnifies
the Company and (ii) any tax benefits realized by the Company on or after the
date on which the Company ceased to be a member of the Consolidated Group as
a result of payments by the Company pursuant to the Supplemental Performance
Plan (the "SPP") adopted by Hanson and the Company in 1986. The Tax Sharing
Agreement also provides that HMH generally will direct any audit, legal or
administrative proceedings concerning any tax matters for which HMH has
indemnified the Company or with respect to any refund to which HMH is
entitled. To implement the Tax Sharing Agreement, Hanson funded certain tax
liabilities which became liabilities of the Company after August 3, 1989.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
has appointed the firm of Deloitte & Touche LLP to continue as independent
certified public accountants of the Company for the fiscal year ending June
30, 1998. Deloitte & Touche LLP, or its predecessor, has served as
independent certified public accountants for the Company and its predecessor,
SCM Corporation, since 1958. Services performed by Deloitte & Touche LLP for
the Company during the past fiscal year have included the examination of the
financial statements of the Company for inclusion in the Annual Report on
Form 10-K filed by the Company with the Securities and Exchange Commission
and consultations on matters related to accounting, taxes, financial
reporting and the bankruptcy proceedings.
A representative of Deloitte & Touche LLP is expected to be present at
the Meeting, will be afforded an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions
raised at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE COMPANY.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Lynn F. Knopp, who was appointed Vice President/West Coast Operations
on December 1, 1996, and John W. Wolff, who was appointed Vice
President/Product Development on January 20, 1997, both filed a late Form 3 -
Initial Statement of Beneficial Ownership of Securities with the Securities
and Exchange Commission. Neither officer has any securities to report.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings, consistent with regulations adopted
by the Securities and Exchange Commission. Proposals to be considered for
inclusion in the Proxy Statement for the 1998 Annual Meeting must be received
by the Company at its principal executive offices, not later than June 3,
1998. Proposals should be directed to the attention of the Secretary, Smith
Corona Corporation, 839 Route 13 South, Cortland, NY 13045.
By Order of the Board of
Directors.
/s/ G. William Sisley
G. WILLIAM SISLEY
Secretary
October 1, 1997
Cortland, New York
PROXY
SMITH CORONA CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
839 NYS ROUTE 13 SOUTH
CORTLAND, NEW YORK 13045-0990
The undersigned hereby appoints John A. Piontkowski and G. William Sisley,
and each of them, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the
reverse side, all the shares of common stock of Smith Corona Corporation
held of record by the undersigned as of the close of business on September
19, 1997, at the annual meeting of the Stockholders to be held on November
17, 1997, or any adjournment thereof.
(Continued and to be signed on other side)
___________________________________________________________________________
[Reverse Side]
This proxy when properly executed will be voted in the manner
directed herein by the undersigned Stockholder. If no direction
is made, this proxy will be voted for the nominees listed in
Proposal 1, for Proposal 2 and in the proxies' discretion with
respect to Proposal 3.
1. ELECTION OF DIRECTORS
(Instructions: To withhold authority to
vote for any individual nominee, strike a
line through the nominee's name in the list
below)
FOR all nominees listed (except as marked to the contrary to the right)
WITHHOLD AUTHORITY to vote for all nominees listed to the right
Ronald F.Stengel William J. Morgan
2. PROPOSAL TO APPROVE THE
APPOINTMENT OF DELOITTE &
TOUCHE LLP AS THE
INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS OF THE
COMPANY
3. IN THEIR DISCRETION THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
FOR AGAINST ABSTAIN
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or the authorized officer. If a
partnership, please sign in partnership
name by authorized person.
DATED:
Signature
Signature, if held jointly
PLEASE MARK INSIDE BLUE
BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL
RECORD YOUR VOTES
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
