_________________________
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 Marine Midland Bank, One Marine Midland Plaza,
Community Room, 4th Floor, Rochester, New York, 14639 on
November 23, 1998 at 10:00 a.m., for the following
purposes:
1. To elect two (2) directors to serve until the 2001 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
KPMG Peat Marwick LLP as independent certified public
accountants for the Company for the fiscal year ending June 30, 1999; 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 24, 1998 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, 1998
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.
SMITH 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 Marine Midland Bank,
One Marine Midland Plaza, Community Room, 4th Floor,
Rochester, New York, 14639 on November 23, 1998 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, 1998.
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 24, 1998 (the Record Date) will
be entitled to notice of, and to vote at, the Meeting. As
of the Record Date, there were 2,983,372 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 KPMG Peat Marwick LLP as
the Company's independent certified public accountants for
the fiscal year ending June 30, 1999 (Fiscal 1999). It is
not anticipated that any matters other than those set forth
in the Notice of Annual Meeting dated October 1, 1998 (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.
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. Murray and Rosett, expire at the
1998 Annual Meeting of Stockholders. They have been
nominated for reelection through the 2001 Annual Meeting of
Stockholders or until a successor is elected and qualified.
The terms of Messrs. Colletti and Parts expire at the 1999
Annual Meeting of Stockholders. The term of Mr. Morgan
expires at the 2000 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 51, 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.
William J. Morgan
Mr. Morgan, age 44, 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., Pacholder Fund, Inc., and
ICO, Inc. Mr. Morgan has been a director of the Company
since February 28, 1997.
Michael J. Murray
Mr. Murray, age 63, has served as Executive Vice President
of Sales and Marketing for the Company since March 1, 1998.
Mr. Murray served as Vice President for Worldwide Sales,
Marketing and Technical Service Operations of Harris/RF
Communications Company, a manufacturer of military radios
from January 1993 to January 1995. 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 45, was elected as Chairman of the Board of the
Company on May 23, 1998 and President and Chief Executive Officer
on July 17, 1998. He 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 70, 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 Kemper
National Insurance Company, Hutchinson Technology and ORMEC
Systems Corporation. Dr. Rosett has been a director of the
Company since February 28, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
MR. MURRAY AND MR. ROSETT AS DIRECTORS.
Meetings and Committees of the Board
The Board of Directors met 11 times during the period from
July 1, 1997 to June 30, 1998 (Fiscal 1998). All directors
attended at least 90 percent of Board (and, where
applicable, Committee) meetings held in Fiscal 1998.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 one time during Fiscal 1998. 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 for
the forthcoming fiscal year; (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 is also responsible for approving in advance
all agreements between the Company and its affiliates.
During Fiscal 1998 the Audit Committee consisted of Messrs.
Murray, Parts and Rosett. Effective July 24, 1998 Mr.
Morgan replaced Mr. Parts as a member of the Audit
Committee.
The Compensation and Benefits Committee met five times
during Fiscal 1998. The Compensation and Benefits Committee
is responsible for (i) reviewing and approving matters
relating to executive officers compensation; (ii) reviewing
the structure of any long-term management incentive plans
and approving grants to officers under such plans; (iii)
reviewing and approving all employment and consulting
agreements between the Company and any of its officers; and
(iv) reviewing the retirement plans in which Company
officers participate. During Fiscal 1998 the Compensation
and Benefits Committee consisted of Messrs. Colletti and
Morgan. Effective July 24, 1998 Mr. Parts was elected as a
member of the Compensation and Benefits Committee.
Compensation of Directors
Directors who are employees of the Company do not receive
any additional compensation for their services as directors.
In Fiscal 1998, other directors were paid an annual fee of
$22,000 plus expenses. The Chairman of the Board was paid
an annual fee of $44,000 plus expenses. Committee members
who are not employees of the Company receive an attendance
fee of $500 plus expenses for each committee meeting
attended. Effective July 1, 1998 the Chairman of the Board
and director's annual fees will be reduced by 50 percent.
Executive Compensation
Set forth below is information concerning compensation of
the chief executive officer and the five other most highly
compensated executive officers of the Company (collectively
the "Named Executive Officers") for the year ended June 30,
1998.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Restricted Securities
Year Other Annual Stock Underlying LTIP All Other
Ending Salary Bonus Compensation Awards Options/SAR's Payouts Compensation
Name and Principal Positions June 30, ($)(4) ($)(5) ($)(6) ($)(7) (#)(8) ($)(9) ($)
W. Michael Driscoll 1998 260,585 - - 225,135 - 0 7,608(10)
President and 1997 (3) 183,243 100,000 - 187,491 - 0 3,816
Chief Executive Officer 1996 55,917 - - 0 - 0 21
John A. Piontkowski (2) 1998 210,000 - 30,405 174,574 - 0 35,116(10)(12)
Executive Vice President & 1997 208,000 138,605 1,817 80,285 - 0 25,667
Chief Financial Officer 1996 201,692 75,375 22,042 - - 0 53,322
Jerry L. Diener (11) 1998 155,635 - - 597 7,095 0 4,319 (10)
Sr. Vice President - 1997 130,816 53,719 - - - 0 4,167
Sales 1996 132,756 24,863 - - - 0 4,475
Michael W. Chernago 1998 135,000 - - 25,747 7,095 0 3,775(10)
Vice President - 1997 127,083 76,661 - - - 0 4,763
Operations 1996 105,506 46,456 - - - 0 4,187
John W. Wolff 1998 125,500 - - 25,747 7,095 0 3,550(10)
Vice President - 1997 96,641 52,744 - - - 0 3,715
Product Development 1996 85,871 29,899 4,373 - - 0 10,781
Gary J. Lynch 1998 100,000 - 24,294 597 7,095 0 30,350(10)(12)
Vice President - 1997 100,000 49,108 - - - 0 15,798
Treasurer 1996 85,325 28,069 - - - 0 3,124
</TABLE>
(1) Mr. Driscoll retired on July 17, 1998. Mr. Driscoll was named President
and Chief Executive Officer on February 28, 1997.
Mr. Driscoll was a consultant from October 14, 1996 until February 27, 1997.
(2) Mr. Piontkowski was named Executive Vice President and Chief Financial
Officer on May 5, 1997.
(3) Mr. Driscoll had terminated employment with the Company on December 15, 1995
prior to his return on October 14, 1996.
(4) Amounts shown include compensation deferred under the Company's Retirement
Savings and Investment Plan ("RSIP").
(5) Amounts shown include the bonus earned by the Named Executive
Officers under the Company's incentive compensation program in the year ended
June 30, 1997 and the year ended June 30, 1996, respectively.
(6) Amounts shown with respect to Mr. Piontkowski, Mr. Wolff and
Mr. Lynch represent amounts reimbursed during the fiscal year for the payment
of taxes.
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, 1998
are as follows: Mr. Driscoll, 70,188 shares/$386,034 , Mr.
Piontkowski 50,094 shares/$275,517, Mr. Diener 100 shares/$550,
Mr. Chernago 5,100 shares/$28,050, Mr. Wolff 5,100 shares/$28,050
and Mr. Lynch 100 shares/$550. 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.
(8) The Company does not grant Stock Appreciation
Rights ("SAR's").
(9) The Company has no long-term incentive plans.
For the year ended June 30, 1998, amounts shown include matching
contributions by the Company under the RSIP for Messrs. Driscoll,
Piontkowski, Diener, Chernago, Wolff and Lynch of $4,990, $3,180,
$4,282, $3,738, $3,513 and $3,013, respectively and term life
insurance premium payments by the Company for Messrs. Driscoll,
Piontkowski, Diener, Chernago, Wolff and Lynch of $2,617, $736,
$37, $37, $37 and $37, respectively.
(11) Mr. Diener terminated employment with the Company on May 15, 1998.
(12) Amounts shown includes mortgage assistance and housing and relocation
expenses for Mr. Piontkowski of $31,200 and Mr. Lynch of $27,300.
The following table sets forth certain specific information
regarding options granted to the Named Executive Officers under
the Company's Employee Stock Incentive Plan (as hereinafter
defined).
OPTION GRANTS IN FISCAL 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Number of
Securities
Underlying Percent of Total
Options Options Granted Exercise or Grant Date
Granted (1),(2) To Employees in Base Price(3) Expiration Present Value
Name # Fiscal Year(1) (S/Share) Date(4) ($)(5)
W. Michael Driscoll - - - - -
John A. Piontkowski - - - - -
Jerry L. Diener (6) 7,095 4.9% 6.125 6/23/02 27,245
Michael W. Chernago 7,095 4.9% 6.125 1/15/05 27,245
John W. Wolff 7,095 4.9% 6.125 1/15/05 27,245
Gary J. Lynch 7,095 4.9% 6.125 1/15/05 27,245
</TABLE>
(1) The Company does not grant SARs.
(2) All options in Fiscal 1998 were granted on January 15, 1998.
The options for Mr. Diener will vest 40 percent on March 1, 1999 and
60 percent on June 23, 1999. The options for Messrs. Chernago, Wolff and
Lynch will vest 40 percent on March 1, 1999, 20 percent on January 15, 2000,
20 percent on January 15, 2001 and 20 percent on January 15, 2002.
(3) The exercise price is the fair market value of the Company's Common Stock
on the date of the grant.
(4) The options granted to Mr. Diener expire June 23, 2002. The options granted
Messrs. Chernago, Wolff and Lynch expire the day before the seventh
anniversary of the date of grant.
The grant date present value, calculated using the Black-Scholes
option pricing method, is based on certain assumptions as to the
interest rates, stock price volatility and future dividend yield.
There is no assurance that these assumptions will prove to be
true in the future. The actual value, if any, that an executive
will realize upon exercise of an option will be the excess of the
stock price over the exercise price.
(6) Mr. Diener terminated employment with the Company on May 15,
1998
The following table sets forth certain information about
outstanding stock options held by the Named Executive Officers
pursuant to the Employee Stock Incentive Plan. No stock options
have been exercised under the Employee Stock Incentive Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C>
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired Fiscal Year-End(1) Fiscal
On Exercise Value Realized (#) Year-End(1)
Name # $ Exercisable Unexercisable ($)
W. Michael Driscoll - - - - -
John A. Piontkowski - - - - -
Jerry L. Diener - - 0 (2) 7,095 -
Michael W. Chernago - - 0 (3) 7,095 -
John W. Wolff - - 0 (3) 7,095 -
Gary J. Lynch - - 0 (3) 7,095 -
</TABLE>
(1) The Company does not grant SARs.
(2) On March 1, 1999, 2,838 options become exercisable and on June 23, 1999,
4,257 options become exercisable.
(3) The options become exercisable in each case 2,838 on March 1, 1999, 1,419
on January 15, 2000, 1,419 on January 15, 2001 and 1,419 on January 15, 2002.
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 (1)
<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.
As of September 1, 1996, Messrs. Driscoll, Piontkowski,
Diener, Chernago, Wolff and Lynch had 14, 6, 38, 24, 15 and
18 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
Jerry L. Diener $56,580
Michael W. Chernago $29,520
John W. Wolff $16,112
Gary L. Lynch $18,919
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,
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.
Effective July 17, 1998 Mr. Driscoll's employment with the
Company terminated, and he received an amount equal to his
12-month base salary.
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" means (i) a stock purchase by any
"person" (as such term is used in Sections 13(d) and 14(d)
(3) 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 percent 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 Compensation and Benefits Committee is responsible for
reviewing and recommending action with respect to matters
relating to executive compensation, any long-term management
incentives 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. Messrs. Colletti and Morgan were members of
the Compensation and Benefits Committee of the Board of
Directors of the Company during Fiscal 1998. The Committee
was comprised of directors who are not and have not been
employees of the Company. On July 24, 1998 Mr. Peter Parts
was elected as a member of the Compensation and Benefits
Committee. Mr. Parts is currently the Chairman, President
and Chief Executive Officer of the Company.
The Company adheres to a policy of blending several
components of executive compensation in order to attract and
retain top managers, reward 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 Third Amended Second Joint Plan of
Reorganization (the "POR") which became effective February
28, 1997.
During the fiscal year ended June 30, 1998, the Company's
executive compensation package consisted of:
- - base salary
- - senior officer stock
- - employee stock incentive plan
Base Salary. Base salaries of executive officers reflect
the Company's profitability and return on capital employed,
the individual executive's salary level 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, are
proposed to the Committee by the Chief Executive Officer.
Senior Officer Stock. 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 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 vest after the second anniversary of the
effective date of the POR.
Employee Stock Incentive Plan. Pursuant to the POR, the
Company implemented an employee stock incentive plan. The
plan provides 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 vest
after the second anniversary of the effective date of the
POR.
Compensation of the Chief Executive Officer
On October 14, 1996, with 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.
Compensation and Benefits Committee
Jerome A. Colletti
William J. Morgan
Peter N. Parts
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. A Peer Group was 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
office supply business which makes up 35.4 percent 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 $100.00 Invested on Feb. 28, 1997.
[COMMENT1]
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
June 30, 1997 51.86 96.97 110.73
September, 30, 1997 64.29 94.74 127.18
December 31, 1997 89.29 88.34 122.92
March 31, 1998 92.86 92.70 135.29
June 30, 1998 78.57 105.03 128.98
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of June 30, 1998, certain
information regarding beneficial ownership of Common Stock by (a)
each person known by the Company to own beneficially more than 5
percent 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.
Percent of
Common Stock
Number of Shares Outstanding
Pension Benefit Guaranty Corporation 830,000(1) 27.8%(1)
Millennium Chemical Inc. 487,000(2) 14.0%(2)
Peter N. Parts 10,586(4) *
W. Michael Driscoll 70,657(3) 2.4%(3)
Jerome Colletti 0 0
William J. Morgan 830,000(1) 27.8%(1)
Michael J. Murray 0 0
Ronald F. Stengel 0 0
Dr. Richard N. Rosett 500 *
John A. Piontkowski 50,094(3) 1.7%(3)
Michael W. Chernago 5,100(3) *
John W. Wolff 5,100(3) *
Gary J. Lynch 100(3) *
Jerry L. Diener 100(3) *
All directors and executive
officers as a group (11 persons) 147,237(1) 4.9%(1)
(1) The Pension Benefit Guaranty Corporation ("PBGC") is the
direct owner of the 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 has
disclaimed beneficial ownership of the shares. All directors and
executive officers as a group excludes the 830,000 shares.
(2) Represents warrants to purchase Common Stock. The exercise price is
set at $8.50 per share and the exercise period expires February 28, 1999.
Includes shares granted pursuant to the Restricted Stock Plan for
Messrs. Driscoll, Piontkowski, Diener, Chernago, Wolff and Lynch
of 70,188, 50,094,100, 5,100 and 5,100 and 100 respectively.
Rights to these shares shall not vest prior to the earlier of
February 28, 1999 or a Change of Control.
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 therein.
*Less than one percent of the outstanding shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Purchases of Materials
During the period from July 1, 1997 to June 30, 1998, the
Company purchased materials from Peter Parts Electronics,
Inc. to provide certain components for the manufacture of
typewriters and personal word processors. Peter Parts, who
has served as director of the Company since February 28,
1997, is President and Chief Executive Officer of Peter
Parts Electronics, Inc. and its principle stockholder. The
cost to the Company of products purchased from Peter Parts
Electronics, Inc. totaled approximately $778,349 in the year
ended June 30, 1998. The Company believes that the purchase
price of such materials is comparable to the price that
would have been paid to an unrelated party.
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.Millenium Chemicals Inc., a
holder of warrants to purchase 487,000 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 and 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 KPMG Peat Marwick LLP to
act as independent certified public accountants of the
Company for the fiscal year ending June 30, 1999. Services
to be performed by KPMG Peat Marwick LLP for the Company
during the fiscal year will include the examination of the
financial statements of the Company for inclusion in the
Annual Report on Form 10-K to be filed by the Company with
the Securities and Exchange Commission and consultations on
matters related to accounting, taxes and financial
reporting.
Deloitte & Touche LLP served as independent certified public
accountants for the Company during the fiscal year ended
June 30, 1998. Deloitte & Touche LLP was replaced as the
Company's independent certified public accountants upon
completion of the audit for the Company's consolidated financial
statements for the fiscal year ended June 30, 1998. During the
fiscal year ended June 30, 1998, there was no disagreement
between the Company and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement
disclosure or auditing scope of procedure.
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. A representative of KPMG Peat Marwick LLP is not
expected to be present at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION
OF APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE COMPANY.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Paul Fredrickson, who was Vice President/Marketing from
September 1997 to May 1998, filed a late Form 3 - Initial
Statement of Beneficial Ownership. Messrs. Driscoll and
Piontkowski each filed a late Form 4 - Statement of Changes in
Beneficial Ownership.
STOCKHOLDER PROPOSALS FOR 1999 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 1999 Annual Meeting
must be received by the Company at its principal executive
offices, not later than June 3, 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, 1998
Cortland, New York
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 Peter N. Parts 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 24, 1998, at the annual
meeting of the Stockholders to be held on November 23, 1998, 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.
(Instructions: To withhold authority to vote for any individual nominee,
1. ELECTION OF DIRECTORS strike a line in the nominee's name in the list below)
FOR all nominees WITHHOLD
listed (except as AUTHORITY Michael J. Murray Dr. Richard N. Rosett
marked to the to vote for all
contrary to the nominees listed
right) to the right
* (
2. PROPOSAL TO APPROVE THE
APPOINTMENT OF KPMG PEAT MARWICK
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 PLEASE MARK, SIGN, DATE
AND RETURN THE PROXY CARD PROMPTLY
DATA PROCESSING EQUIPMENT WILL USING THE ENCLOSED ENVELOPE.
RECORD YOUR VOTES
[COMMENT1]THE PERFORMANCE GRAPH AS PUBLISHED IN THE FINAL PROXY STATEMENT
WILL ONLY GO UP TO $200. WE WERE UNABLE TO SIMILARLY LIMIT THE GRAPH ON
OUR SYSTEM.
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