SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use of the
Commission Only (as Permit-
ted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Town & Country Corporation
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(Name of Registrant as Specified In Its Charter)
Veronica Zsolcsak, Chief Financial Officer
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(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)(I) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount of which the filing fee is
calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregated value of transactions:
N/A
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(5) Total fee paid:
N/A
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/ / Fee paid previously with preliminary material.
/ / 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:
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(2) Form, Schedule of Registation Statement No:
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(3) Filing Party:
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(4) Date Filed:
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TOWN & COUNTRY CORPORATION
25 Union Street
Chelsea, Massachusetts 02150
June 23, 1997
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 17, 1997, 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 1997 Annual Report to
Stockholders. All Class A Stockholders and Convertible Preferred Stockholders
will be asked to vote on the re-election of one Class A Director. All
Stockholders will be asked to vote on the re-election of one Non-Class A
Director and upon any other matters that properly come before the meeting or any
adjournment thereof.
The Board has given due consideration to the proposal to re-elect two Directors
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,
By: /s/ William Schawbel
----------------------------------------
Co-Chairman
By: /s/ Charles Hill
----------------------------------------
Co-Chairman
TOWN & COUNTRY CORPORATION
CHELSEA, MASSACHUSETTS 02150
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 17, 1997
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 17, 1997,
at 10:30 A.M., for the following purposes:
1. To re-elect one Class A Director and one Non-Class A Director.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on June 2, 1997 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 23, 1997
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 17, 1997, 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 23,
1997. A stockholder who shall sign and return a proxy in the form enclosed with
this statement has the power to revoke the proxy at any time before it is
exercised by giving written notice to the Company, attention Clerk, to such
effect. A stockholder also may revoke a proxy by filing a duly executed proxy
bearing a later date or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the record date stated below
attending the Annual Meeting may vote in person whether or not a proxy has been
previously given, but the presence (without further action) of a stockholder at
the Annual Meeting will not constitute revocation of a previously given proxy.
Proxies properly executed and received in time for the meeting will be voted.
The close of business on June 2, 1997 has been fixed as the record date (the
"Record Date") for the determination of the stockholders entitled to notice of,
and to vote at, the meeting. As of such date, 23,687,200 shares of Class A
Common Stock and 2,664,927 shares of Class B Common Stock were outstanding and
entitled to be voted at the meeting. In addition, as of such date, 1,263,741
shares of the Company's Convertible 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, 26,214,682 shares of Class A Common Stock were outstanding as of June 2,
1997 and entitled to be voted at the Annual 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
Annual 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 proposal 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 owns of record and beneficially an aggregate of 3,460,226
shares, including 1,566,545 shares which could be acquired by the exercise of
stock options within 60 days of June 2, 1997, 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 334,569 shares
of Class A Common Stock and 140,253 shares of Class B Common Stock. As of June
2, 1997, Mr. C. William Carey and trusts created for the benefit of his children
owned, in the aggregate, approximately 8.5% 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 June 2, 1997,
Mr. Carey's ownership would be increased to 13.1% of the Company's outstanding
Class A Common Stock. The Company also entered into a voting agreement with Mr.
Carey. See "Carey Separation Agreement."
The Annual Report of the Company, including financial statements for the fiscal
year ended February 23, 1997, is being mailed to stockholders concurrently with
this proxy statement. The Annual Report, however, is not part of the proxy
solicitation material.
Page 1
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 four.
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, Richard E. Floor will serve
until the 1998 Annual Meeting, and until his successor is duly elected and
qualified. Charles Hill will serve until the 1999 Annual Meeting, and until his
successor is duly elected and qualified. The Board has nominated William
Schawbel and Marcia C. Morris, who are currently Directors of the Company, for
re-election at the 1997 Annual Meeting to serve until the 2000 Annual Meeting,
and until their successors are duly elected and qualified.
The Company's Articles of Organization provide that 25% of its Board of
Directors be elected by the Class A Stockholders voting as a separate class. Mr.
Schawbel and Ms. Morris have been serving as the Class A Directors of the
Company. Only holders of record of Class A Common Stock as of June 2, 1997 are
entitled to vote in the election of the Class A Directors. The Board has
nominated Ms. Morris to continue to serve as a Class A Director of the Company
and Mr. Schawbel to continue to serve as a Non-Class A Director of the Company.
The presence, in person or by proxy, of holders of at least a majority of the
total number of shares of issued and outstanding Common Stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Shares held of record by holders or nominees of Common Stock who do not return a
signed and dated proxy or attend the Annual Meeting in person will not be
considered present or represented at the Annual Meeting and will not be counted
in determining the presence of a quorum. Shares that reflect abstentions or
"broker nonvotes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and, with respect to one or more
but not all issues, such brokers or nominees do not have discretionary voting
power to vote such shares) if any, will be counted for purposes of determining
whether a quorum is present for the transaction of business at the Annual
Meeting.
Under Massachusetts law, abstentions are not treated as votes cast and
accordingly abstentions will have no effect on the outcome of the election of
Directors. There are no broker nonvotes in the context of an election of
Directors because brokers have discretion to vote for Directors in the absence
of instructions from beneficial owners.
The Company's by-laws provide that, if a quorum is present, a plurality of the
votes cast by the holders of the Class A and Class B Common Stock voting
together as a single class represented in person or by proxy and entitled to
vote at the 1997 Annual Meeting is required to re-elect Mr. Schawbel as a
Director. The Company's by-laws provide that, if a quorum is present, a
plurality of the votes cast by the holders of the Class A Common Stock voting as
a single class represented in person or by proxy and entitled to vote at the
1997 Annual Meeting is required to re-elect Ms. Morris as a Director.
The Board of Directors recommends that holders of Common Stock vote FOR the
election of Mr. Schawbel and recommends that holders of Class A Common Stock
vote FOR the election of Ms. Morris.
Page 2
The following table sets forth certain information as of June 2, 1997 regarding
the Directors of the Company and the nominees for Director based on the
information furnished by them to the Company.
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First
Name and Principal Became a Class of Shares of Common Percent
Occupation for Past Five Years Age Director Stock Stock Owned of Class
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William Schawbel 57 1994 Class A 20,000 (1) *
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Co-Chairman, Chief Executive Class B -- --
Officer of the Company, Chief
Executive Officer of the Schawbel
Corporation (technology
manufacturer) since 1981.
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Charles Hill 49 1986 Class A 26,000(2) *
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Co-Chairman of the Company, Class B -- --
Chairman of Garber Travel Service,
Inc. since 1981; Vice Chairman of
Towle Mfg. Co., Inc. (giftware)
1982-1983.
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Richard E. Floor 57 1972 Class A 153,000 (3) (2) *
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Attorney whose professional Class B -- --
corporation is a partner in the law
firm of Goodwin, Procter & Hoar
LLP, the Company's legal counsel;
Director, New American High
Income Fund.
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Marcia C. Morris 48 1995 Class A 20,000 (1) *
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Chief Legal Counsel, Senior Vice Class B -- --
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.
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Page 3
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(1) Includes 20,000 shares of Class A Common Stock that could be acquired by
the exercise of stock options within 60 days of June 2, 1997.
(2) Includes 25,000 shares of Class A Common Stock that could be acquired by
the exercise of stock options within 60 days of June 2, 1997.
(3) Excludes the shares of Class A and Class B Common Stock beneficially owned
by Mr. Floor in his capacity as co-trustee of various irrevocable family
trusts for the benefit of the children of Mr. C. William Carey.
(*) 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 4
BOARD MEETINGS, COMMITTEES, ATTENDANCE AND FEES
BOARD MEETINGS
The Board of Directors held nineteen meetings during the 1997 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, received
$10,000 per year plus $2,500 per Board meeting in fiscal 1997. Directors serving
on committees received $1,000 per meeting attended, other than those held in
conjunction with regularly scheduled Board meetings. Each Director was
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, received 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 5
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table presents information as to the beneficial ownership of
Common Stock by (a) persons or entities known to the Company to be beneficial
owners of more than 5% of the Company's Common Stock as of December 31, 1996,
based on filings received by the Company on Schedules 13D and 13G on Form 13F
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(b) all of the Directors and executive officers of the Company as of the Record
Date, based on representations of the Directors and executive officers of the
Company.
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Amount
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner Owned Class (1)
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Class A Common Stock C. William Carey 3,794,795 (2) 13.1%
$.01 par value Carey & Associates, Inc.
177 Milk Street, Suite 605
Boston, MA 02110
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Francis X. Correra 607,960 (3) 2.1%
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
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William Schawbel 20,000 *
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
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Veronica Zsolcsak 65,600 *
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
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Northeast Investors Trust 1,678,529 (4) 5.8%
50 Congress Street Boston,
Massachusetts 02109
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Directors and Executive 892,560 (5) 3.1%
Officers as a Group
(6 Persons)
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Class B Common Stock C. William Carey 2,660,040 99.8%
$.01 par value Carey & Associates, Inc.
177 Milk Street, Suite 605
Boston, MA 02110
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Francis X. Correra 1,462 *
Town & Country Corporation
25 Union Street
Chelsea, Massachusetts 02150
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Directors and Executive 1,462 *
Officers as a Group
(6 Persons)
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Page 6
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(1) Included in calculating the percentages of the Company's Class A Common
Stock are 2,645,795 shares of the Company's Class A Common Stock that could
be acquired by the exercise of stock options or warrants within 60 days of
June 2, 1997.
(2) Includes 1,566,545 shares of Class A Common Stock held by Mr. Carey that
could be acquired by the exercise of stock options within 60 days of June
2, 1997.
(3) Includes 600,000 shares which Mr. Correra could acquire by the exercise of
stock options within 60 days of June 2, 1997.
(4) As reported by Northeast Investors Trust in a Schedule 13G dated February
11, 1997 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 299,537 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 755,600 shares which Directors and executive officers could
acquire by the exercise of stock options within 60 days of June 2, 1997.
(*) 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 7
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 23, 1997:
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Name Age Capacities in which Served
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C. William Carey 60 Resigned January 3, 1997, as Chairman and
Chief Executive Officer, Treasurer and
President of the Company.
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William Schawbel 57 Chief Executive Officer since January 1997
and Acting President since January 1997;
associated with the Company since 1994.
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Francis X. Correra 59 President of Fine Jewelry Division since
1996, Senior Vice President since 1983,
Chief Financial Officer 1983 - 1996.
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Veronica Zsolcsak 46 Chief Financial Officer and Treasurer
since January 1997; associated with the
Company since 1994. Previously, Chief
Financial Officer, DRI, a McGraw Hill Company
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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 1997. Information with respect to salary, bonus, other annual
compensation and options is included for the 1995, 1996 and 1997 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.
Other
Fiscal Annual All Other
Name Year Salary Bonus Compensation (1) Options (2) Compensation
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C. William 1997 $678,677 (3) $544,994 (4) 566,545 $4,406,620 (5)
Carey --------------------------------------------------------------------------------
1996 $833,000 (3) 1,000,000
--------------------------------------------------------------------------------
1995 $975,000
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Francis X. 1997 $428,012 $150,000 (4) $750,000 (6)
Correra --------------------------------------------------------------------------------
1996 $374,125 600,000
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1995 $373,915
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William 1997 $54,000 $23,500 (7)
Schawbel --------------------------------------------------------------------------------
1996
--------------------------------------------------------------------------------
1995 20,000
--------------------------------------------------------------------------------
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Veronica 1997 $155,000 $25,000
Zsolcsak --------------------------------------------------------------------------------
1996 $155,000 $9,500 200,000
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1995 $84,135 $10,663
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Page 8
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(1) In fiscal years 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.
(2) 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.
(3) Effective August 6, 1995, Mr. Carey's salary was reduced to an annualized
rate of $750,000.
(4) Mr. Carey and Mr. Correra received additional compensation related to the
sale of L. G. Balfour Company, Inc.
(5) Mr. Carey resigned from the Company on January 3, 1997. As part of his
separation agreement, the Company made payments to Mr. Carey of $4,125,345
and assigned the cash surrender value of an insurance policy the book value
of which at the time was $281,275. See "Carey Separation Agreement."
(6) As a term of Mr. Correra's employment contract, the Company made $750,000
in premium payments on an insurance policy which Mr. Correra established.
See "Employment Agreements."
(7) Compensation received by Mr. Schawbel as a Director.
Page 9
OPTION INFORMATION
The following tables set forth certain information concerning unexercised stock
options held by the named executive officers as of the end of fiscal 1997 and
options granted during the last fiscal year.
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Number
of Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options
on Value at Options at 1997 Fiscal Year End
Name Exercise Realization at 1997 Fiscal Year End ($) (1)
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Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------
C. William Carey 0 0 1,566,545 0 0 0
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Francis X. Correra 0 0 600,000 0 0 0
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William Schawbel 0 0 20,000 0 0 0
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Veronica Zsolcsak 0 0 65,600 134,400 0 0
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(1) The closing price for the Company's Class A Common Stock on February 23,
1997, as reported by the American Stock Exchange, Inc. was $0.375 per
share.
OPTION GRANTS IN LAST FISCAL YEAR
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Number of
Securities Percent of Total Potential Realizable Value
Underlying Options Granted Exercise or at Assumed Rates of Stock
Options to Employees in Base Price Expiration Price Appreciation for
Name Granted Fiscal Year ($/Sh) Date Option Term
- -----------------------------------------------------------------------------------------------------------
5% ($) 10%($)
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C. William Carey 360,000 100% $0.6250 1/3/2002 73,594 166,075
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C. William Carey 206,545 100% $0.6875 1/3/2002 46,446 104,812
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Page 10
EMPLOYMENT AGREEMENTS
In fiscal 1997, the Company entered into a new employment agreement with Francis
X. Correra, the President of the Fine Jewelry Division. During fiscal 1997, the
Compensation Committee recommended, and the full Board of Directors approved a
new employment agreement for Mr. Correra.
The new agreement provides for annual compensation and benefits for a five-year
term commencing July 15, 1996. Mr. Correra's agreement provides for a base
salary of $450,000 and an annual bonus based on increasing earnings per share
targets of up to 100% of his base salary. The bonus is 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. As part of
his employment agreement, Mr. Correra was paid $150,000 upon the completion of
the sale of the assets of L.G. Balfour Company, Inc. Also, the Company made
$750,000 in premium payments on an insurance policy.
Mr. Correra is 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 agreement so that the target in each year is higher than the previous
year's target. 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. Correra is equal to 100% of
his salary. Neither the Board of Directors nor the Compensation Committee has
any power to alter the performance targets contained in the employment
agreement.
Mr. Correra's employment agreement provides that if Mr. Correra's employment is
terminated without cause or Mr. Correra terminates his employment "With Good
Reason", he shall receive a severance. The amount of severance shall be equal to
the product of (A) an amount equal to the sum of the annual base salary then in
effect plus fifty percent (50%) of the highest annual bonus compensation paid to
him during the term of this agreement multiplied by (B) the greater of three (3)
years or the number of years (including a fraction for that portion of any
partial year remaining) that would remain in the term if the agreement had not
been terminated. With Good Reason includes a change in control of the Company or
a change in responsibilities. The Company shall also continue to maintain, at
Company expense, health insurance and life insurance until the earlier to occur
of the expiration of the term of this agreement or Mr. Correra obtaining
employment through which he is entitled to obtain equivalent health and life
insurance benefits without additional cost to himself.
If Mr. Correra's employment terminates as a result of the expiration of this
agreement he shall receive an amount equal to twice the average of the total
base salary and bonus compensation earned by him in the two fiscal years
immediately preceding termination. The Company shall also continue to maintain,
at the Company's expense, medical benefits until the earlier to occur of Mr.
Correra's employment with another person or entity or the expiration of five (5)
years from the termination date. If the Company has performed its obligations
under this termination section, the Company shall be entitled to the return of
the $750,000 payment made on an insurance policy.
Page 11
CAREY SEPARATION AGREEMENT
Mr. Carey resigned from his positions as President, Chief Executive Officer,
Director and Chairman of the Board of the Company on January 3, 1997. In
connection with his resignation Mr. Carey received a payment of $3,568,191. The
Company also assigned its rights under a life insurance policy, including the
cash surrender value thereof, and paid remaining premiums of $107,155. The
Company also entered into a consulting agreement with Mr. Carey for a period of
two years and related to this agreement made payments of $450,000 to Mr. Carey.
The Company has a voting agreement with Mr. Carey such that Mr. Carey agrees to
vote his Class B shares in a manner consistent with a preliminary vote of Class
A shares in any election of Directors of the Company in which a Director or a
slate of Directors is nominated for election by the Board of Directors of the
Company, the election of which nominee or nominees would not result in a
majority of the Board of Directors being directly or indirectly affiliated with
or otherwise representing the interests of a Control Group of Shareholders (as
hereinafter defined). As used herein, a "Control Group of Shareholders" shall
mean one or more persons or entities who, individually or in the aggregate, own
of record or beneficially 20% or more of any class of the Company's capital
stock or who, individually or in the aggregate, have the power, directly or
indirectly, to vote 20% or more of the combined voting power of all classes of
the Company's stock entitled to vote for election of the Company's Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. William Schawbel is a member of the Compensation Committee and is Chief
Executive Officer of the Company. Mr. Charles Hill is a member of the
Compensation Committee and provides consulting services to the Company. See
"Certain Transactions And Business Relationships."
Page 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The entire Board of Directors, with Mr. Schawbel abstaining, voted to compensate
Mr. Schawbel during the period that he functions as an Executive Officer, at the
rate of $2,000 per day for the days that he is performing services for the
Company.
The Compensation Committee is composed of Messrs. Hill and Schawbel. The
Compensation Committee believes that the Company's employment agreement with Mr.
Correra provides a competitive level of compensation, links management's bonus
to Company performance and promotes the best interests of the Company and its
shareholders. Mr. Correra's employment agreement provides for a base salary of
$450,000, and an annual bonus, based on increasing earnings per share targets,
of up to 100% of his base salary. Mr. Correra did not receive a bonus in fiscal
year 1997 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. The Compensation Committee approved a salary for Ms. Zsolcsak of
$200,000 for fiscal 1998 which the Committee believes provides a competitive
level of compensation.
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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG TOWN &
COUNTRY CORPORATION, S&P 500 INDEX AND PEER COMPANY GROUP INDEX
C H A R T
- --------------------------------------------------------------------------------
2/93 2/94 2/95 2/96 2/97
- --------------------------------------------------------------------------------
Town & Country Corp. Class A $95.45 $90.91 $31.82 $22.73 $11.35
- --------------------------------------------------------------------------------
S&P 500 Comp-Ltd. $110.67 $119.84 $128.72 $173.34 $218.73
- --------------------------------------------------------------------------------
Peer Group Weighted Average $70.76 $93.27 $91.12 $138.13 $155.44
- --------------------------------------------------------------------------------
Page 13
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act 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 23, 1997, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than ten
percent beneficial owners were complied with except that, to the Company's
knowledge Mr. Carey has filed no Form 4 or Form 5 with regard to the stock
options granted in fiscal 1997.
CERTAIN TRANSACTIONS AND
BUSINESS RELATIONSHIPS
During fiscal year 1997, the Company leased a portion of its Chelsea,
Massachusetts facility comprising approximately 39,000 square feet of
manufacturing and administrative space from Carey Realty Trust, a Massachusetts
business trust (the "Trust") which is wholly owned by C. William Carey, a major
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. In January 1997, the Company leased a warehouse
comprising approximately 22,000 square feet from Manchester Group Realty Trust,
which is wholly owned by Charles Hill, a Director of the Company. The lease is
for three years with an additional two year option. The lease provides for an
annual rental payment of approximately $37,000.
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.
Mr. Hill, since the resignation of Mr. Carey, has provided consulting services
to the Company as requested by Mr. Schawbel. In fiscal 1997, Mr. Hill was paid
$28,000, at a rate of $2,000 per day, in addition to his compensation as a
Director.
Page 14
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 22, 1998. 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 1998 Annual Meeting must be
received by the Company for inclusion in the Company's proxy statement and form
of proxy by February 23, 1998. 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 23, 1997
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