<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
THE MIDDLEBY CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3352497
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization) No.)
</TABLE>
2850 W. GOLF ROAD, SUITE 405
ROLLING MEADOWS, ILLINOIS 60008
(847) 758-3880
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
JOHN J. HASTINGS
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
2850 W. GOLF ROAD, SUITE 405
ROLLING MEADOWS, ILLINOIS 60008
(847) 758-3880
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------
Copies to:
NATHANIEL SACK DONALD H. MESSINGER
RUSSELL J. HERRON THOMPSON HINE & FLORY LLP
D'ANCONA & PFLAUM 3900 KEY CENTER
30 NORTH LASALLE STREET, SUITE 2900 127 PUBLIC SQUARE
CHICAGO, ILLINOIS 60602 CLEVELAND, OHIO 44114-1216
(312) 580-2000 (216) 566-5500
(312) 580-0923 (FACSIMILE) (216) 566-5800 (FACSIMILE)
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value.................. 3,001,500 shares $9.0625 $27,201,094 $8,243
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, based upon the
average of the high and low prices of the Common Stock as reported on the
Nasdaq National Market System on September 8, 1997.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 11, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
2,610,000 SHARES
[THE MIDDLEBY CORPORATION]
COMMON STOCK
$0.01 PAR VALUE
------------------
Of the 2,610,000 shares of Common Stock being offered hereby, 2,000,000
shares are being sold by The Middleby Corporation ("Middleby" or the "Company")
and 610,000 shares are being sold by the Selling Stockholders. See "Principal
and Selling Stockholders." The Company will not receive any proceeds from the
sale of shares by the Selling Stockholders.
The Company's Common Stock is traded on the Nasdaq National Market System
under the symbol "MIDD". On September 10, 1997, the last reported sale price for
the Company's Common Stock on the Nasdaq National Market System was $9.25 per
share. See "Price Range of Common Stock."
--------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS" COMMENCING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $
</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated expenses of $300,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 391,500 shares of Common Stock, on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
this option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock offered hereby are being offered by the
Underwriters, subject to prior sale and acceptance by the Underwriters and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about , 1997 at the offices of Schroder & Co. Inc., New York, New
York.
SCHRODER & CO. INC. BREAN MURRAY & CO., INC.
, 1997
<PAGE>
[PHOTOGRAPHS OF COMPANY'S PRODUCTS, TRADEMARKS AND A MAP OF THE COMPANY'S
DISTRIBUTION AND MANUFACTURING LOCATIONS WILL APPEAR ON THE INSIDE FRONT AND
BACK COVER PAGES OF THE PROSPECTUS.]
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE
AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO
COVER ALL OR SOME OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE
UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE, OR INCORPORATED BY REFERENCE, IN THIS PROSPECTUS. THE
COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY NEAREST DECEMBER 31. UNLESS OTHERWISE
INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
GENERAL
The Company is a leader in the design, manufacture, marketing and service of
a broad line of cooking and warming equipment used in all types of foodservice
operations, including quick-service restaurants, full-service restaurants,
retail outlets, and hotels and other institutions. The Company provides unique
integrated distribution and service capabilities to international markets,
enabling it to deliver a complete kitchen package to its customers seeking to
expand globally. Major customers include leading quick-service chains such as
Domino's, KFC, McDonald's, Papa John's, Pizza Hut and Wendy's, and full-service
chains such as Brinker, Denny's, Perkins, Rainforest Cafe and Red Lobster. As a
key equipment supplier to these chains, Middleby's products and services stand
behind many of the fastest growing foodservice brands.
Since the founding of Middleby Marshall Oven Company in 1888, the Company
has been a leading innovator in the baking equipment industry, and in the early
1980s positioned itself as a leading foodservice equipment manufacturer by
introducing the conveyor oven that revolutionized the pizza industry. Today, the
Company's product lines include some of the best-known and well-respected brands
in the industry: Middleby Marshall-Registered Trademark- conveyor oven
equipment, Toastmaster-Registered Trademark- toasters and counterline cooking
and warming equipment, Southbend-Registered Trademark- ranges, convection ovens
and heavy-duty cooking equipment, SteamMaster-Registered Trademark- steam
cooking equipment and CTX-Registered Trademark- infra-red conveyor cooking
systems. Middleby Marshall is the world's leader in conveyor cooking equipment,
and management believes that Southbend and Toastmaster are also leaders within
their respective markets.
The Company operates through the following domestic business divisions:
conveyor oven equipment (Middleby Marshall and CTX), counterline cooking
equipment and specialty products (Toastmaster and various distribution products)
and core cooking equipment (Southbend and SteamMaster). Additionally, the
Company provides its products and services to the international marketplace
through two operating subsidiaries: Asbury Associates, Inc. ("Asbury"), a
leading exporter and distributor of foodservice equipment in the global
marketplace, and Middleby Philippines Corporation ("Middleby Philippines"), one
of the principal suppliers of commercial kitchen fabrication and specialty
cooking equipment in the Asian, Pacific Rim and Middle Eastern markets.
The Company believes that its ability to support the domestic and
international growth of restaurant and hotel chains through its integrated
distribution and service networks provides it with a distinct competitive
advantage. Middleby is an industry leader in equipment installation programs and
after-sales support and service and provides a unique one-year parts and labor
warranty throughout the world. Asbury provides a broad range of one-source
services, including export documentation, freight forwarding, warehousing and
consolidation, installation and project management, to customers seeking to
expand in international markets, and has delivered and installed equipment in
over 100 countries throughout the world. Additionally, the Company has an
extensive independent service network consisting of over 80 distributors and
2,500 certified technicians in the U.S. and over 110 distributors and 3,000
technicians internationally, supported by thirteen factory-based technical
service engineers and fifteen internationally-based service managers.
3
<PAGE>
THE INDUSTRY
The foodservice equipment industry provides equipment and services to
operators in the commercial and institutional foodservice industry. The
foodservice industry consists of four principal categories: (i) fast food or
quick-service restaurants, including those that primarily offer pizza, (ii)
full-service restaurants, including casual-theme restaurants, (iii) retail
outlets, such as convenience stores, supermarkets and department stores, and
(iv) public and private institutions, such as hotels, resorts, schools,
hospitals, long-term care facilities, correctional facilities, stadiums,
airports, corporate cafeterias, military facilities and government agencies. In
1996, the U.S. foodservice industry had sales of approximately $314 billion
through over 740,000 outlets. The foodservice equipment industry had total
domestic sales of approximately $4.5 billion in 1996. In the U.S., the Company's
products compete primarily in the cooking and warming equipment market segment,
which had sales of approximately $1.1 billion in 1996 and is expected to grow
6.5% in 1997. Management believes that the broader international foodservice
equipment market that the Company serves had 1996 sales of approximately $10
billion, with expected annual growth of nearly twice the growth rate of the U.S.
market.
Middleby believes that the trends in the foodservice industry present
significant growth opportunities for the foodservice equipment industry. The
major quick-service and casual-theme restaurant chains are the fastest growing
segments of the foodservice industry and lead the industry in terms of
restaurant unit development. Leading U.S. quick-service and casual-theme
restaurant chains, as well as hotel chains, are targeting international markets
for a greater percentage of their new unit development. The Company believes
that the greatest long-term growth opportunity in the foodservice equipment
industry is in supporting the expansion of these chains, as well as the
development of local chain concepts, in the international markets. Additionally,
as quick-service restaurant chains look to modernize older U.S. stores,
significant opportunities exist to increase revenues as these chains replace and
upgrade existing equipment with products that offer innovative technology, food
product flexibility, reduced food waste and labor-saving and space-saving
features.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as a worldwide foodservice
equipment supplier by capitalizing on major foodservice industry trends, and
includes the following key elements:
FOCUS ON MAJOR CHAIN RELATIONSHIPS. The Company believes that long-term
revenue growth will result from continued development and enhancement of
relationships with fast growing restaurant chains. Middleby utilizes a key
account sales management approach to strengthen its existing relationships
and develop new relationships with major chains. Additionally, Middleby's
product development department works closely with major chains to develop
equipment to meet specialized needs and to satisfy global regulations and
utility requirements. The Company provides a technology center and over 40
worldwide demonstration centers for customers to work with newly developed
and prototype equipment.
DEVELOP INNOVATIVE EQUIPMENT SOLUTIONS. The Company continuously seeks to
improve the functionality and quality of its product offerings through its
own development efforts and by licensing products and technologies that it
believes have significant growth potential. Over 30 professionals support
the Company's product development and engineering activities, including
project engineers, computer-aided design ("CAD") operators, laboratory
technicians, model makers and engineering documentation and systems support
personnel. Currently, a significant portion of the Company's net sales are
derived from products and product extensions introduced in the past three
years.
SUPPORT THE INTERNATIONAL EXPANSION OF MAJOR CHAINS. Management believes
Middleby is uniquely positioned to provide comprehensive services to large
restaurant and hotel chains seeking to expand globally. The Company's
integrated international network enables it to offer a total store
4
<PAGE>
package ("TSP") of kitchen equipment to be delivered, installed and serviced
by Middleby virtually anywhere in the world. The Company believes this TSP
capability will enable it to continue to develop new business opportunities
abroad and will lead to significant growth and profitability in the future.
During the past several years, the Company has made significant investments
to establish international offices in Canada, Mexico, Spain, France, Saudi
Arabia, the Philippines, Taiwan, China, Indonesia, Japan and Korea.
The Company's sales growth has been more than double that of the industry
average, with an average growth rate of 15% per year since 1994 and 29% for the
first six months of 1997 compared to the first six months of 1996. Operating
income from continuing operations has grown an average of 15% per year since
1994 and 73% for the first six months of 1997 compared to the first six months
of 1996.
* * * *
The Company is a Delaware corporation with its principal executive offices
located at 2850 West Golf Road, Suite 405, Rolling Meadows, Illinois 60008,
Telephone (847) 758-3880.
THE OFFERING
Common Stock offered by:
<TABLE>
<S> <C> <C>
The Company.................................. 2,000,000 shares (1)
The Selling Stockholders..................... 610,000 shares
----------
Total...................................... 2,610,000 shares
----------
----------
Common Stock to be outstanding after the Offering.... 10,501,453 shares (1)(2)
Use of proceeds...................................... To repay indebtedness and for general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol........................ MIDD
</TABLE>
- ------------------------
(1) Does not include 391,500 shares which may be sold by the Company pursuant to
the Underwriters' over-allotment option.
(2) Does not include 447,600 shares of Common Stock reserved for issuance upon
exercise of outstanding stock options and warrants. Also does not include
shares of Common Stock issuable in connection with the establishment of
Middleby Japan Corporation ("Middleby Japan"), a subsidiary of the Company.
See "Capitalization."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) ----------------------
---------------------------------------------------------- JUNE 29, JUNE 28,
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2)(3)(4):
Net sales.......................... $ 90,415 $ 85,789 $ 94,158 $ 106,348 $ 124,765 $ 58,171 $ 74,780
Gross profit....................... 28,868 23,288 28,564 32,507 37,435 17,096 23,288
Income (loss) from operations...... 3,814 (246) 6,593 6,896 8,677 3,959 6,853
Earnings (loss) before income
taxes(5)......................... (950) 14,682 2,849 2,605 4,472 1,828 4,535
Net earnings (loss) from continuing
operations....................... $ (1,281) $ 14,411 $ 2,235 $ 2,745 $ 3,083 $ 1,167 $ 2,973
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) from continuing
operations per share............. $ (0.15) $ 1.72 $ 0.26 $ 0.31 $ 0.35 $ 0.13 $ 0.34
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of
shares outstanding............... 8,320,000 8,369,000 8,434,000 8,678,000 8,666,000 8,707,000 8,758,000
OTHER DATA(2)(3)(4):
Domestic sales..................... $ 62,390 $ 57,274 $ 60,971 $ 67,878 $ 78,594 $ 36,046 $ 47,479
International sales................ $ 28,025 $ 28,515 $ 33,187 $ 38,470 $ 46,171 $ 22,125 $ 27,301
International sales and
distribution offices(6).......... 2 4 5 6 9 9 11
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 28, 1997
----------------------------
ACTUAL AS ADJUSTED(7)
----------- ---------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................................... $ 30,367 $ 30,367
Total assets....................................................................... 93,892 93,892
Total debt......................................................................... 42,452 25,362
Stockholders' equity............................................................... 25,109 42,199
</TABLE>
- ------------------------------
(1) The Company's fiscal year ends on the Saturday nearest to December 31.
(2) The summary consolidated financial and operating data exclude the Company's
former subsidiary, Victory Refrigeration Company ("Victory"), which has been
accounted for as a discontinued operation. Additionally, the Company has
given retroactive effect to the change in accounting principle for the 1993
litigation settlement with Hussmann Corporation. See Notes 2(n) and 3 to the
Consolidated Financial Statements.
(3) Results relating to the Company's former Seco Division are included for
fiscal 1992 until its sale on August 21, 1992.
(4) Certain amounts in the prior years' financial data have been reclassified to
be consistent with the fiscal 1996 presentation.
(5) In 1993, the Company settled a dispute with Hussmann Corporation related to
the 1989 acquisition of the Foodservice Equipment Group which resulted in a
gain of $18.4 million. See Note 2 to the Consolidated Financial Statements.
(6) As of period end.
(7) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common
Stock in the offering and the application of the net proceeds therefrom as
set forth under "Use of Proceeds."
6
<PAGE>
RISK FACTORS
POTENTIAL PURCHASERS OF THE COMMON STOCK SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, BEFORE DECIDING TO PURCHASE THE COMMON STOCK OFFERED HEREBY.
QUARTERLY VARIATIONS IN OPERATING RESULTS
Results of the Company's operations have fluctuated from quarter to quarter
in the past, and may fluctuate significantly in the future. Such fluctuations
may result from a variety of factors, including the timing of orders from major
customers, the timing of new product introductions by the Company, its
competitors or third parties, the loss of any of its significant customers or
distributors, currency fluctuations, disruption in the supply of components for
the Company's products, changes in product mix or capacity utilization,
personnel changes, production delays or inefficiencies, seasonality and other
factors affecting sales and results of operations. Quarterly fluctuations in
results of operations may adversely affect the market price of the Common Stock.
A substantial portion of the Company's sales for each quarter results from
orders received during the same quarter. Consequently, the Company is dependent
on obtaining new orders in a particular quarter to achieve its sales objectives
for that quarter. Furthermore, the Company occasionally recognizes a significant
portion of its sales in the last month of a quarter, with sales occasionally
concentrated in the last weeks of a quarter. A substantial portion of the
Company's operating expenses are primarily related to personnel, product
development, marketing programs and facilities. The level of spending for such
expenses cannot be adjusted quickly, and is based, in significant part, on the
Company's expectations of future revenue. If actual revenue levels are below
management's expectations, the Company's business, financial condition and
results of operations may be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY CUSTOMERS; CYCLICAL RISKS
The Company's growth is strongly influenced by the growth of its key
customers, many of which are large quick-service and full-service restaurant
chains. The number of new store openings by these chains can vary from quarter
to quarter depending on internal growth plans, construction, seasonality and
other internal factors. If these chains were to conclude that the market for
their type of restaurant had become saturated, they could open fewer
restaurants. In addition, if there should be an economic downturn, key customers
could both open fewer restaurants and defer purchases of new equipment for
existing restaurants. Either of these conditions could have a material adverse
effect on the Company's future results of operations. While no single customer
accounts for more than 6% of net sales, the Company's top ten customers account
for approximately 25% of total net sales. See "Business-- Customers."
INTERNATIONAL EXPOSURE
For the 1994, 1995 and 1996 fiscal years, approximately 35%, 36% and 37%,
respectively, of the Company's net sales were derived from sales to customers in
foreign countries. The Company manufactures some of its products in the
Philippines through its majority-owned subsidiary Middleby Philippines, the
customers of which include Asian operations of major U.S. foodservice chains and
hotels. The Company anticipates that international sales will continue to
account for a significant portion of net sales in the foreseeable future. As a
result, the Company will be subject to certain risks, including tariffs and
other barriers, difficulty in staffing and managing foreign subsidiary
operations, difficulty in managing distributors and resellers, adverse tax
consequences, political and economic instability of governments, and difficulty
in accounts receivable collection. The Company is also subject to the risks
associated with the imposition of protective legislation and regulations,
including those relating to import or export or otherwise resulting from trade
or foreign policy. The Company cannot predict whether quotas, duties, taxes or
other charges or restrictions will be implemented by the U.S. or any other
country upon the
7
<PAGE>
import or export of the Company's products. There can be no assurance that any
of these factors or the adoption of restrictive policies will not have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company denominates some sales by
foreign subsidiaries in local currency, and an increase in the relative value of
the dollar against such currencies would lead to a reduction in sales and
earnings. Foreign currency exposures are not specifically hedged and there can
be no assurance that the Company's future results of operations will not be
adversely affected by currency fluctuations. The Company's international
operations have been somewhat affected by the recent devaluation of Southeast
Asian currencies and resulting financial market instability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION
The cooking and warming segment of the foodservice equipment industry is
highly competitive and fragmented. Within a given product line, the industry
remains fairly concentrated, with typically a small number of competitors
accounting for the bulk of the line's industry-wide sales. Industry competition
includes companies that manufacture a broad line of commercial foodservice
equipment products and those that specialize in a particular product line. Some
of the Company's competitors have greater financial and marketing resources and
name recognition than the Company. In addition, some competitors have different
pricing structures and may be able to deliver their products at lower prices.
Although the Company believes that the performance and price characteristics of
its products will provide competitive solutions for its customers' needs, there
can be no assurance that its customers will choose the Company's products over
products offered by competitors. Further, the market for the Company's products
is characterized by changing technology and evolving industry standards. The
Company is aware of other companies that are developing, and in some cases have
introduced, new ovens based on high-speed heating methods and technologies.
Accordingly, the Company's ability to compete successfully will depend, in large
part, on its ability to enhance and improve its existing products, complete
development of and introduce in a timely manner new products, and continue to
improve operating efficiencies and reduce manufacturing costs. There can be no
assurance that the Company will be able to compete successfully, that
competitors will not develop technologies or products that render the Company's
products obsolete or less marketable or that the Company will be able to
successfully enhance or adapt its products, develop new products or reduce
costs. See "Business--Competition."
DEVELOPMENT AND MARKET ACCEPTANCE OF NEW PRODUCTS
The Company's continued success and growth will depend upon its ability to
improve and market existing products and to develop, obtain regulatory approval
for and successfully market new products and product extensions. There can be no
assurance that the Company's current level of research and development spending
and scope will be adequate, or that the Company will successfully develop and
market enhancements to its existing products or new products on a timely basis.
From time to time, the Company or its competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of the Company's existing products. There can be no assurance that
announcements of new products will not cause customers to defer purchasing
existing Company products. See "Business--Industry Overview."
POTENTIAL PRODUCTS LIABILITY; WARRANTY EXPENSE
The Company is engaged in a business that could expose it to possible
liability claims from others, including foodservice operators and their staffs,
as well as from consumers, for personal injury or property damage due to alleged
design or manufacturing defects in the Company's products. The Company maintains
a general liability insurance policy (including products liability coverage)
that is subject to a $1 million per occurrence limit with a $2 million aggregate
limit and a $15 million umbrella liability insurance policy to cover claims in
excess of the limits of its liability insurance. There can be no
8
<PAGE>
assurance, however, that the Company's insurance will be sufficient to cover
potential claims or that an adequate level of coverage will be available in the
future at reasonable cost. A partially insured or a completely uninsured
successful claim against the Company could have a material adverse effect on the
Company. In addition, the Company generally warrants its products to be free
from defects in workmanship and materials for one year. These can be no
assurance that future warranty expenses will not have an adverse effect on the
Company. See "Business--Services and Product Warranty" and "--Legal
Proceedings."
LOSS OF PROPRIETARY RIGHTS
The Company's operating subsidiary, Middleby Marshall Inc. ("Middleby
Marshall"), has an exclusive license from Patentsmith II, Inc. ("Patentsmith")
to manufacture, use and sell Jetsweep air impingement ovens in the U.S. for
certain commercial food applications. The Patentsmith license covers numerous
patents, some of which extend beyond the year 2000. Middleby Marshall also holds
an exclusive sublicense from Lincoln Foodservice Products, Inc. ("Lincoln"), a
subsidiary of Welbilt Corporation, to manufacture, use and sell throughout the
world, other than the U.S. and Japan, air impingement ovens for certain
commercial food applications, and it holds a right of first refusal for a
similar sublicense in Japan. The Patentsmith license and the Lincoln sublicense
expire upon the expiration of the last patented improvement covered by the
license. The loss of the Patentsmith license or the Lincoln sublicense could
have a material adverse effect on the Company. See "Business--Licenses, Patents
and Trademarks."
RISKS RELATING TO INTELLECTUAL PROPERTY
The Company holds numerous patents covering technology and applications
related to various products, equipment and systems, and numerous trademarks and
trade names registered with the U.S. Patent and Trademark Office and in various
foreign countries, including the names CTX, Middleby Marshall, Southbend,
SteamMaster, Titan-Registered Trademark- and Toastmaster. There can be no
assurance as to the breadth or degree of protection that existing or future
patents or trademarks may afford the Company, that any pending patent
applications will result in issued patents or that any pending trademark
applications will result in registered trademarks, that the Company's patents,
registered trademarks or patent or trademark applications, if any, will be
upheld if challenged or that competitors will not develop similar or superior
methods or products outside the protection of any patents issued, licensed or
sublicensed to the Company. Although the Company believes that none of its
patents, technologies, products or trademarks infringe upon the patents,
technologies, products or trademarks of others, it is possible that its existing
patent, trademark or other rights may not be valid or that infringement of
existing or future patents, trademarks or proprietary rights may occur. In the
event that the Company's products are deemed to infringe upon the patent or
proprietary rights of others, the Company could be required to modify the design
of its products, change the name of its products or obtain a license for the use
of certain technologies incorporated into its products. There can be no
assurance that the Company would be able to do any of the foregoing in a timely
manner, upon acceptable terms and conditions, or at all, and the failure to do
so could have a material adverse effect on the Company. In addition, there can
be no assurance that the Company will have the financial or other resources
necessary to enforce or defend a patent, registered trademark or other
proprietary right, and, if the Company's products are deemed to infringe upon
the patents, trademarks or other proprietary rights of others, the Company could
become liable for damages, which could also have a material adverse effect on
the Company. See "Business-- Licenses, Patents and Trademarks."
DEPENDENCE ON OUTSIDE SUPPLIERS
The Company is dependent on outside suppliers to provide many of the raw
materials and components used in the Company's products. Although substantially
all of the components used in the Company's products are available from multiple
sources, the Company may experience shortages in
9
<PAGE>
supply due to various factors, including increases in market demand for certain
components that occur from time to time and the limited capacity of certain
suppliers. Some component parts are obtained from sole sources of supply. The
Company believes that the partial or complete loss of one or more of its
suppliers is not likely to have a material long-term impact on its operations.
Such a loss, however, could in the short-term result in significant production
delays, require the Company to seek alternative sources of supply and increase
its cost of goods sold and, therefore, could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Sources of Supply."
DEPENDENCE ON CERTAIN DISTRIBUTION AGREEMENTS
The Company has the exclusive right to distribute products for other
equipment manufacturers in various markets of the world pursuant to
distributorship agreements that can be terminated by either party upon notice
ranging from three to nine months. In addition, Middleby has the exclusive right
to distribute the RoFry-Registered Trademark- oil-less fryer in North America,
Mexico, Latin America and the Caribbean pursuant to a distributorship agreement
that can be terminated on ten months notice by either party. No notice of
termination has been given, but the termination of any of these agreements could
have a disruptive effect on the Company's operations resulting in a material
adverse effect on the Company's results of operations. See "Business--Business
Divisions and Products."
DEPENDENCE ON KEY PERSONNEL
The Company depends significantly on certain of its executive officers and
certain other key personnel, many of whom could be difficult to replace. The
incapacity, inability or unwillingness of certain of these people to perform
their services may have a material adverse effect on the Company. There can be
no assurance that the Company will be able to continue to attract, motivate and
retain personnel with the skills and experience needed to successfully manage
the Company's business and operations. See "Management."
ENVIRONMENTAL AND REGULATORY CONCERNS
The Company is subject to a variety of environmental regulations relating to
the use, storage, discharge and disposal of hazardous chemicals used during
manufacturing. Any failure by the Company to comply with present or future
regulations could subject it to future liabilities or the suspension of
production that could have a material adverse effect on the Company's results of
operations. Such regulations could also restrict the Company's ability to expand
its facilities or could require the Company to acquire costly equipment or to
incur other expenses to comply with such environmental regulations. Although the
Company believes that it is in material compliance with current environmental
rules and regulations, there can be no assurance that environmental laws and
regulations will not become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with a violation.
The Company's operations are subject to a variety of foreign, federal, state and
local regulatory requirements, including environmental, waste management, health
and safety matters. The cost to the Company of such compliance to date has not
materially affected the Company's business, financial condition or results of
operations. There can be no assurance, however, that violations will not occur
in the future as a result of human error, equipment failure or other causes. The
Company's customers are also subject to extensive regulations, including those
related to workplace safety and food preparation for consumers. The Company
cannot predict the nature, scope or effect of environmental legislation or
regulatory requirements that could be imposed or how existing or future laws or
regulations will be administered or interpreted. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of regulatory
agencies, could require substantial expenditures by the Company and could
adversely affect the Company's business, financial condition and results of
operations.
10
<PAGE>
CONCENTRATION OF OWNERSHIP
The Company's executive officers and directors will beneficially own an
aggregate of approximately 40.3% of the outstanding shares of Common Stock after
this offering (approximately 38.9% if the Underwriters' over-allotment option is
exercised in full). William F. Whitman, Jr., Chairman of the Board and a
director of the Company, and Robert R. Henry, a director of the Company and a
trustee of certain family trusts established by Mr. Whitman, will beneficially
own approximately 17.6% and 15.4%, respectively, of the outstanding shares of
Common Stock after this offering (approximately 17.0% and 14.8%, respectively,
if the Underwriters' over-allotment is exercised in full). See "Principal and
Selling Stockholders." As a result, these stockholders could exercise
significant influence over most matters requiring approval by the Company's
stockholders, including the election of the Company's directors. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of the Company.
FACTORS INHIBITING TAKEOVERS
Certain provisions of the Company's Certificate of Incorporation and
Delaware law, together or separately, could discourage potential acquisition
proposals, delay or prevent a change in control of the Company or limit the
price that certain investors might be willing to pay in the future for the
Company's Common Stock. These provisions include the issuance, without further
stockholder approval, of up to 2,000,000 shares of preferred stock with rights
and preferences that could be senior to the Common Stock. The Company is also
subject to Section 203 of the Delaware General Corporation Law, which may
inhibit a change in control of the Company. See "Description of Capital Stock."
EXPOSURE IN CONNECTION WITH SALE OF VICTORY
The Company has guaranteed to unrelated third parties approximately $800,000
of rent payable by Victory over the next twelve months. In addition, the Company
holds a $400,000 note from Victory due to be paid to the Company over the next
two years. Victory is a start-up company formed when the Company sold its former
Victory subsidiary on January 23, 1997 to an investor group led by Victory
management. A default by Victory on its rent or note obligations could have an
adverse effect on the Company's earnings in the interim period such an event
were to be reported.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the market price of the Common Stock. The
Company, its executive officers and directors and the Selling Stockholders, who
in the aggregate will own 4,241,407 shares upon completion of the offering, have
agreed that they will not directly or indirectly offer, sell or otherwise
dispose of any shares of Common Stock, or other securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock of the Company
without the prior written consent of the Underwriters for a period of 120 days
from the date of this Prospectus. These shares will be eligible for sale,
subject to the limitations of SEC Rule 144, at the conclusion of the 120-day
period. See "Underwriting."
VOLATILITY OF STOCK PRICE
The price of the Company's Common Stock historically has experienced
significant volatility due to fluctuations in the Company's revenue and
earnings, the market's changing expectations for the Company's growth, overall
equity market conditions and other factors related and unrelated to the
Company's operations. These fluctuations are expected to continue. In addition,
the overall equity markets have experienced extreme price volatility in recent
years, which has had a substantial effect on the market price for securities
issued by many companies in similar industries, often for reasons unrelated to
the operating performance of the specific companies. These broad market
fluctuations may adversely affect the price of the Company's Common Stock. See
"Price Range of Common Stock."
11
<PAGE>
USE OF PROCEEDS
Net proceeds from the sale of the Common Stock offered by the Company will
be approximately $17.1 million ($20.5 million if the Underwriters exercise their
over-allotment option in full), assuming a public offering price of $9.25 per
share (the last reported closing sale price of the Common Stock on the Nasdaq
National Market System on September 10, 1997). The Company expects to use the
net proceeds from this offering to pay down its revolving line of credit under
the Company's senior secured credit facility. The remaining proceeds, if any,
will be used for general corporate purposes. As of June 28, 1997, the
outstanding balance under this facility totaled $23.0 million, consisting of
term loans of $5.8 million and a revolving line of credit of $17.2 million.
Amounts outstanding under this credit facility accrue interest at floating rates
of 2.0% above the London Interbank Offered Rate (approximately 7.9% per annum at
June 28, 1997) or 0.5% above the bank's reference rate (approximately 9.0% at
June 28, 1997), at the Company's option. This credit facility matures no later
than January 2000. The Company will not receive any of the proceeds from the
sale of shares of Common Stock by the Selling Stockholders. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
PRICE RANGE OF COMMON STOCK
On November 28, 1995, the Company's Common Stock was admitted for trading on
the Nasdaq National Market System under the symbol "MIDD". Prior to that date,
the Company's Common Stock had been listed on the American Stock Exchange under
the symbol "MBY". The following table sets forth, for the periods indicated, the
high and low closing sale prices per share of Common Stock, as reported by the
American Stock Exchange prior to November 28, 1995, and as reported by the
Nasdaq National Market System on and after November 28, 1995.
<TABLE>
<CAPTION>
CLOSING SHARE PRICE
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL 1995
First quarter...................................................... $ 6.750 $ 3.875
Second quarter..................................................... 8.750 5.250
Third quarter...................................................... 8.125 5.375
Fourth quarter..................................................... 9.750 5.375
FISCAL 1996
First quarter...................................................... 8.625 7.000
Second quarter..................................................... 13.938 7.375
Third quarter...................................................... 8.000 5.750
Fourth quarter..................................................... 6.750 4.750
FISCAL 1997
First quarter...................................................... 8.625 6.125
Second quarter..................................................... 10.125 7.125
Third quarter (through September 10, 1997)......................... 10.000 8.625
</TABLE>
The last reported closing sale price for the Common Stock on the Nasdaq
National Market System on September 10, 1997 was $9.25 per share. As of June 28,
1997, the Company estimates there were approximately 2,500 beneficial owners of
the Company's Common Stock.
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its capital stock
since 1991. In addition, the Company's current financing agreements restrict the
Company's ability to pay dividends. See Note 4 to the Consolidated Financial
Statements.
12
<PAGE>
CAPITALIZATION
The following table sets forth as of June 28, 1997 (i) the unaudited
consolidated capitalization of the Company and (ii) the unaudited consolidated
capitalization of the Company as adjusted for the sale by the Company of
2,000,000 shares of Common Stock offered hereby and the application of the net
proceeds therefrom as described in "Use of Proceeds," as if these transactions
had occurred on June 28, 1997. This table should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 28, 1997
------------------------------
ACTUAL AS ADJUSTED
-------------- --------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Current maturities of long-term debt.......................................... $ 2,786 $ 2,786
-------------- --------------
-------------- --------------
Long-term debt:
Senior secured credit facility:
Revolving credit line..................................................... $ 17,237 $ 147
Term loans................................................................ 3,141 3,141
Senior secured note......................................................... 15,000 15,000
Philippines subsidiary credit facility:
Revolving credit line..................................................... 2,548 2,548
Term loan................................................................. 1,700 1,700
Other....................................................................... 40 40
-------------- --------------
Total long-term debt...................................................... 39,666 22,576
-------------- --------------
Minority interest and other non-current liabilities........................... 2,554 2,554
-------------- --------------
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized, no shares
issued and outstanding, no shares issued and outstanding as adjusted...... -- --
Common stock, $.01 par value; 20,000,000 shares authorized, 8,501,453 shares
issued and outstanding, 10,501,453 shares issued and outstanding as
adjusted(1)............................................................... 85 105
Paid-in capital............................................................. 28,350 45,420
Cumulative translation adjustment........................................... (176) (176)
Accumulated deficit......................................................... (3,150) (3,150)
-------------- --------------
Total stockholders' equity................................................ 25,109 42,199
-------------- --------------
Total capitalization.................................................... $ 67,329 $ 67,329
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(1) Based on the number of shares of Common Stock outstanding as of June 28,
1997. Excludes 250,000 shares subject to the exercise of outstanding
warrants and 197,600 shares subject to the exercise of outstanding stock
options. Also excludes shares of Common Stock issuable in two installments
on March 1, 1998 and March 1, 1999 in connection with the establishment of
Middleby Japan. Each such installment will consist of shares having a market
value of $170,000, but in no event will either such installment be more than
34,451 shares.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following consolidated statement of income and balance sheet data for
each of the 1992, 1993, 1994, 1995 and 1996 fiscal years have been derived from
the Company's audited Consolidated Financial Statements. The consolidated
statement of income and balance sheet data for the six months ended June 29,
1996 and June 28, 1997 have been derived from the Company's unaudited financial
statements which have been prepared on the same basis as the audited
Consolidated Financial Statements and in the opinion of management include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth herein. This data should be read in
conjunction with the Consolidated Financial Statements, including the Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) ----------------------
---------------------------------------------------------- JUNE 29, JUNE 28,
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2)(3)(4):
Net sales...................... $ 90,415 $ 85,789 $ 94,158 $ 106,348 $ 124,765 $ 58,171 $ 74,780
Cost of sales.................. 61,547 62,501 65,594 73,841 87,330 41,075 51,492
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit................... 28,868 23,288 28,564 32,507 37,435 17,096 23,288
Selling and distribution
expenses..................... 14,868 13,004 13,398 15,385 18,319 8,482 10,716
General and administrative
expenses..................... 10,186 10,530 8,573 9,326 10,439 4,655 5,719
Provision for product line
discontinuance............... -- -- -- 900 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
operations................. 3,814 (246) 6,593 6,896 8,677 3,959 6,853
Interest expense and deferred
financing amortization,
net.......................... 4,876 3,947 3,262 4,327 4,351 2,136 2,338
Other (income) expense, net.... (112) (473) 482 (36) (146) (5) (20)
Unusual (income) item(5)....... -- (18,402) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) before income
taxes...................... (950) 14,682 2,849 2,605 4,472 1,828 4,535
Provision (benefit) for income
taxes........................ 331 271 614 (140) 1,389 661 1,562
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) from
continuing operations.... (1,281) 14,411 2,235 2,745 3,083 1,167 2,973
Discontinued operations, net of
income tax:
(Loss) earnings from
discontinued operations.... (613) (147) 505 419 (744) (512) --
Loss on disposal including
operating losses during the
phase out period........... -- -- -- -- (1,866) -- (564)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss)........ $ (1,894) $ 14,264 $ 2,740 $ 3,164 $ 473 $ 655 $ 2,409
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) per common
share:
Continuing operations...... $ (0.15) $ 1.72 $ 0.26 $ 0.31 $ 0.35 $ 0.13 $ 0.34
Discontinued operations.... (0.07) (0.02) 0.06 0.05 (0.30) (0.05) (0.06)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss) per
common share............. $ (0.22) $ 1.70 $ 0.32 $ 0.36 $ 0.05 $ 0.08 $ 0.28
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of
shares outstanding........... 8,320,000 8,369,000 8,434,000 8,678,000 8,666,000 8,707,000 8,758,000
BALANCE SHEET DATA(2)(4):
Working capital................ $ 21,835 $ 22,307 $ 23,254 $ 28,746 $ 25,046 $ 35,338 $ 30,367
Total assets................... 76,148 73,394 76,700 85,231 85,968 94,305 93,892
Total debt..................... 59,545 47,401 44,472 43,028 41,268 50,023 42,452
Stockholders' equity........... (3,823) 10,100 14,657 21,758 22,450 22,804 25,109
</TABLE>
- ------------------------------
(1) The Company's fiscal year ends on the Saturday nearest to December 31.
(2) The above selected consolidated financial data excludes the Company's former
Victory subsidiary which has been accounted for as a discontinued operation.
Additionally, the Company has given retroactive effect to the change in
accounting principle for the 1993 litigation settlement with Hussmann
Corporation. See Notes 2(n) and 3 to the Consolidated Financial Statements.
(3) Results relating to the Company's former Seco Division are included for
fiscal 1992 until its sale on August 21, 1992.
(4) Certain amounts in the prior years' financial data have been reclassified to
be consistent with the fiscal 1996 presentation.
(5) In 1993, the Company settled a dispute with Hussmann Corporation related to
the 1989 acquisition of the Foodservice Equipment Group which resulted in a
gain of $18.4 million. See Note 2 to the Consolidated Financial Statements.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The foodservice equipment industry has experienced moderate growth over the
past few years, with the domestic market expected to grow by 6.5% in 1997. The
industry has also been highly competitive. During the past several years, the
Company has grown faster than the industry average due to its alignment with
fast growing restaurant chains, emphasis on new product development and
expansion of its international distribution and service capabilities. The
Company has derived approximately 88%, 81% and 79% of total net sales from the
sale of Company manufactured products for fiscal years 1994, 1995 and 1996,
respectively. The remaining net sales were derived from the distribution of
non-manufactured products primarily into international markets by Asbury, the
Company's international distribution subsidiary. International sales as a
percentage of total sales were 35%, 36% and 37% in fiscal years 1994, 1995 and
1996, respectively.
Since 1994, Middleby has increased net sales by an average of over 15% per
year. This trend accelerated during the six-month period ended June 28, 1997, as
the Company increased net sales by 29% over the same period in 1996. Continued
growth in net sales and earnings will be dependent upon several factors,
including the pace of international expansion by major quick-service chains,
timely development and market acceptance of new products and general economic
conditions. See "Risk Factors--International Exposure."
The Company's business can be affected by short-term cycles related to the
timing of orders from major restaurant chains or the timing of large
international projects, such as hotels and resorts. See "Risk Factors--Quarterly
Variations in Operating Results." The Company's cooking and warming equipment
divisions ship directly from stock or assemble to order, with a typical lead
time of one to four weeks, with the majority of orders received and shipped in
the same quarter. Large international projects requiring consolidation of
multiple factory orders and other project management services result in many
orders shipping in quarters subsequent to the quarter in which the order was
received. Revenue is recognized upon shipment.
During the past few years, the Company has established several additional
international sales and distribution offices to significantly improve its
ability to support the growth of foodservice chains in international markets and
improve its total store package ("TSP") capabilities. These offices typically
require nine to twelve months before they achieve breakeven results and
generally experience significant growth rates during their first few years
thereafter. As the Asbury business matures, management expects operating results
to become more consistent. In early 1996, the Company opened a new manufacturing
facility in the Philippines to meet expanding demand for its kitchen fabrication
products and specialty equipment in the Asian, Pacific Rim and Middle Eastern
regions. Revenues of this business grew 46% in 1996 and 36% in the first six
months of 1997, and the Company expects significant growth opportunities for
this division during the foreseeable future.
Middleby has invested in state-of-the-art computer-aided design ("CAD")
systems and engineering resources to enhance its ability to bring innovative
products to market with shorter development cycle times. In addition, Middleby
has invested, and will continue to invest, in equipment and facilities to reduce
product costs and improve manufacturing flexibility. During late 1996, the
Company began implementing an enterprise-wide resource planning (ERP) system to
replace its manufacturing, planning, financial and information systems. This
program should enable the Company to reduce product costs and leverage operating
expenses.
The Company operates through the following principal business divisions:
conveyor oven equipment (Middleby Marshall and CTX), counterline cooking
equipment and specialty products (Toastmaster and various distribution
products), core cooking equipment (Southbend and SteamMaster), international
specialty equipment (Middleby Philippines) and international distribution
(Asbury). The following table provides a summary of net sales of the Company's
principal business divisions for the periods presented:
15
<PAGE>
NET SALES SUMMARY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) SIX MONTHS ENDED
---------------------------------------------------------------- ------------------------------------------
1994 1995 1996 JUNE 29, 1996 JUNE 28, 1997
-------------------- -------------------- -------------------- -------------------- --------------------
SALES PERCENT SALES PERCENT SALES PERCENT SALES PERCENT SALES PERCENT
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BUSINESS DIVISIONS
Conveyor oven
equipment.......... $ 34,285 36.4 % $ 39,443 37.1 % $ 41,216 33.0 % $ 18,491 31.8 % $ 29,437 39.4 %
Counterline cooking
equipment and
specialty
products........... 14,061 15.0 17,186 16.1 19,635 15.8 9,881 17.0 10,428 13.9
Core cooking
equipment.......... 26,012 27.6 24,023 22.6 29,617 23.7 13,867 23.8 16,005 21.4
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL COOKING AND
WARMING
EQUIPMENT
DIVISIONS....... 74,358 79.0 80,652 75.8 90,468 72.5 42,239 72.6 55,870 74.7
International
specialty
equipment.......... 3,846 4.1 4,487 4.2 6,552 5.3 2,740 4.7 3,739 5.0
International
distribution(2).... 28,648 30.4 33,592 31.6 39,722 31.8 19,280 33.1 23,672 31.7
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL
INTERNATIONAL
DIVISIONS....... 32,494 34.5 38,079 35.8 46,274 37.1 22,020 37.8 27,411 36.7
Intercompany
sales(3)........... (13,539) (14.4) (13,095) (12.3) (13,394) (10.7) (6,991) (12.0) (8,501) (11.4)
Other............... 845 0.9 712 0.7 1,417 1.1 903 1.6 -- --
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL............. $ 94,158 100.0 % $ 106,348 100.0 % $ 124,765 100.0 % $ 58,171 100.0 % $ 74,780 100.0 %
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------------
(1) The Company's fiscal year ends on the Saturday nearest to December 31.
(2) Consists of sales of products manufactured by Middleby and products
manufactured by third parties.
(3) Consists of sales to the Company's international distribution division from
the Company's other business divisions.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of income
items as a percentage of net sales for the periods presented:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) --------------------
------------------------------- JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 69.7 69.4 70.0 70.6 68.8
--------- --------- --------- --------- ---------
Gross profit............................................ 30.3 30.6 30.0 29.4 31.2
Selling, general and administrative expenses.............. 23.3 23.2 23.0 22.6 22.0
Provision for product line discontinuance................. -- 0.9 -- -- --
--------- --------- --------- --------- ---------
Income from operations.................................. 7.0 6.5 7.0 6.8 9.2
Interest expense and deferred financing
amortization, net....................................... 3.5 4.1 3.5 3.7 3.1
Other (income) expense, net............................... 0.5 (0.1) (0.1) -- --
--------- --------- --------- --------- ---------
Earnings before income taxes............................ 3.0 2.5 3.6 3.1 6.1
Provision (benefit) for income taxes...................... 0.6 (0.1) 1.1 1.1 2.1
--------- --------- --------- --------- ---------
Net earnings from continuing operations................. 2.4 2.6 2.5 2.0 4.0
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------------
(1) The Company's fiscal year ends on the Saturday nearest to December 31.
16
<PAGE>
SIX MONTHS ENDED JUNE 28, 1997 COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
NET SALES. Net sales in the six-month period ended June 28, 1997 increased
$16.6 million or 29% to $74.8 million as compared to $58.2 million in the
six-month period ended June 29, 1996, reflecting higher unit volume in the
Company's cooking and warming equipment divisions and international divisions.
Sales of the Company's cooking and warming equipment divisions increased 32%
for the six-month period ended June 28, 1997, led by a 59% increase in sales of
the conveyor oven equipment division. This period included increased sales to a
major restaurant chain, primarily during the second quarter, to support the
introduction of a new product, including $4.5 million of equipment upgrade parts
and field service work to improve existing equipment within their system. Orders
from this restaurant chain are expected to lessen in the third quarter. Sales of
the core cooking equipment division increased 15% in this six-month period due
primarily to continued market share penetration and new products. Sales of the
counterline cooking equipment and specialty products division increased 6% in
this six-month period, even though sales in the prior year period included a
large equipment roll-out to an international chain.
Sales of the international divisions represented 37% of total sales in the
six-month period and increased 24% as compared to the prior year period. Sales
of the Company's international specialty equipment division increased 36% in the
six-month period, reflecting the increase in production capacity since the
opening of the new Philippines factory in mid-1996. Sales of the Company's
international distribution division increased 23% in this six-month period,
primarily due to the Company's sales and distribution offices established over
the past three years.
GROSS PROFIT. Gross profit increased $6.2 million or 36% in the six-month
period to $23.3 million as compared to $17.1 million in the prior year period.
As a percentage of net sales, gross profit margin increased 1.8% to 31.2% from
29.4%, which was attributable to higher sales levels, increased capacity
utilization, improved manufacturing efficiencies and favorable product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $3.3 million or 25% in the six-month period to
$16.4 million as compared to $13.1 million in the prior year period. The
increase was primarily due to variable costs associated with the higher sales
volume and the expansion of the Company's international sales and service
capabilities, including the establishment of sales and distribution offices in
Taiwan, Korea, Japan and Mexico during the past twelve months. As a percentage
of net sales, selling, general and administrative expenses decreased to 22.0%
from 22.6% as expenses were leveraged over higher volume.
INCOME FROM OPERATIONS. Income from operations increased $2.9 million or
73% to $6.9 million for the six-month period ended June 28, 1997 from $4.0
million in the prior year period. The improvement in income from operations was
primarily attributable to higher sales volumes.
INTEREST EXPENSE AND DEFERRED FINANCING AMORTIZATION. Interest expense and
deferred financing amortization for the six-month period ended June 28, 1997
increased 9% to $2.3 million as compared to $2.1 million in the prior year
period. The increase was due to a higher average outstanding debt balance to
support working capital needs related to the higher sales level.
INCOME TAXES. The Company recorded a net tax provision of $1.6 million for
the six-month period ended June 28, 1997 as compared to a net tax provision of
$0.7 million in the prior year period. There were no tax benefits due to net
operating loss ("NOL") utilization or valuation allowance reductions recorded in
either six-month period, as it has been the Company's policy to evaluate and
adjust the valuation allowances in conjunction with the annual budgeting
process.
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NET EARNINGS. For the six-month period ended June 28, 1997, the Company
recorded net earnings from continuing operations of $3.0 million as compared to
$1.2 million in the prior year period. The Company recorded an additional
estimated loss on disposal of discontinued operations of $0.6 million, net of
tax, during the second fiscal quarter of 1997. During the prior year six-month
period, the Company recorded net losses from discontinued operations of $0.5
million. For the six-month period ended June 28, 1997, the Company recorded net
earnings of $2.4 million compared to $0.7 million in the prior year period.
FISCAL YEAR ENDED DECEMBER 28, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1995
NET SALES. Net sales in fiscal 1996 increased $18.5 million or 17% to
$124.8 million as compared to $106.3 million in fiscal 1995, reflecting unit
volume increases.
Sales of the cooking and warming equipment divisions increased 12%, led by a
23% sales increase of the core cooking equipment division due to market share
penetration and the introduction of new products. Sales of the conveyor oven
equipment division increased 4% over the prior year. During the first half of
1996, certain international pizza chains slowed new store development, primarily
in Europe. Sales of the counterline cooking equipment and specialty products
division increased 14% primarily due to a large international chain equipment
roll-out and increased sales of conveyor toasters to McDonald's.
Sales of the international divisions represented 37% of total sales in 1996
and increased 22% over the prior year. Sales of the Company's international
specialty equipment division increased 46% over the prior year. During 1996, the
division completed construction of a new 54,000 square foot facility in the
Philippines. The sales gain reflects increased production capacity as the year
progressed. Sales of the Company's international distribution division increased
18% over the prior year, reflecting increased sales activity at the Company's
new sales and distribution offices.
GROSS PROFIT. Gross profit increased $4.9 million or 15% to $37.4 million
in fiscal 1996 as compared to $32.5 million in fiscal 1995. As a percentage of
net sales, gross profit declined to 30.0% in 1996 as compared to 30.6% in 1995.
The decline in gross profit margin was attributable to expenses of a trial
direct service program that was initiated in late 1995 and terminated during the
fourth quarter of 1996 and start-up costs associated with the Company's new
Philippines manufacturing facility.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.1 million or 16% to $28.8 million in fiscal
1996 from $24.7 million in fiscal 1995, largely due to the increased sales,
additional support for the Company's expanding international operations and
costs associated with dealer promotional programs. As a percentage of net sales,
expenses decreased to 23.0% from 23.2% in fiscal 1995.
INCOME FROM OPERATIONS. Income from operations increased $1.8 million or
26% to $8.7 million in fiscal 1996 from $6.9 million in fiscal 1995, primarily
due to higher sales volumes.
INTEREST EXPENSE AND DEFERRED FINANCING AMORTIZATION. Interest expense and
deferred financing amortization increased 0.6% to $4.4 million in fiscal 1996
from $4.3 million in fiscal 1995. Stable interest rates and average outstanding
debt balances contributed to the consistent expense amount.
INCOME TAXES. The Company recorded a net tax provision of $1.4 million in
fiscal 1996 as compared to a net tax benefit of $0.1 million in fiscal 1995. The
tax provision included a benefit of $0.9 million related to NOL utilization and
valuation allowance reductions as compared to a benefit of $1.7 million recorded
in fiscal 1995.
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NET EARNINGS. Net earnings from continuing operations increased to $3.1
million in fiscal 1996 from $2.7 million in fiscal 1995. During fiscal 1996, the
Company recorded losses from discontinued operations of $0.7 million and an
estimated loss on disposal of these operations of $1.9 million, net of tax. Net
earnings were $0.5 million in fiscal 1996 as compared to $3.2 million in fiscal
1995.
FISCAL YEAR ENDED DECEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
NET SALES. Net sales in fiscal 1995 increased $12.1 million or 13% to
$106.3 million as compared to $94.2 million in fiscal 1994.
Sales of the Company's cooking and warming equipment divisions increased 9%
in fiscal 1995, led by a 15% sales increase in the conveyor oven equipment
division, largely due to the successful introduction of an extra-wide belt
conveyor oven and the continued acceptance of conveyor oven cooking technology
by non-pizza chain customers. Sales of the counterline cooking equipment and
specialty products division increased 22% over the prior year, as the division
began distributing Rational-Registered Trademark- combi-steamers during fiscal
1995, which accounted for net sales of $2.7 million. Sales of the core cooking
equipment division decreased 8%.
Sales of the international divisions represented 36% of total sales in
fiscal 1995 and increased 17% over the prior year. Sales of the Company's
international specialty equipment division increased 17% over the prior year
resulting from a higher number of kitchen equipment packages sold to McDonald's
in Asia and the Pacific Rim.
GROSS PROFIT. Gross profit increased $3.9 million or 14% to $32.5 million
in fiscal 1995 as compared to $28.6 million in fiscal 1994. As a percentage of
net sales, gross profit increased 0.3% to 30.6% from 30.3%. The increase in
gross profit margin resulted from higher sales volume, product mix, reduced
operating costs and improved margins on products distributed internationally.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $2.7 million or 12% to $24.7 million in fiscal
1995 from $22.0 million in fiscal 1994 due to marketing expenses associated with
the Rational combi-steamers, expenses for a trial direct service program which
began in late 1995, increased promotional expenses and higher commissions due to
increased sales. As a percentage of net sales, expenses decreased to 23.2% from
23.3% in fiscal 1994.
INCOME FROM OPERATIONS. Income from operations, including a $0.9 million
provision for the discontinuance of a product line, increased $0.3 million or 5%
to $6.9 million in fiscal 1995 as compared to $6.6 million in fiscal 1994. See
Note 6 to the Consolidated Financial Statements. Excluding the provision for the
discontinued product line, income from operations increased $1.2 million or 18%,
primarily due to increased sales and gross profit improvement.
INTEREST EXPENSE AND DEFERRED FINANCING AMORTIZATION. Interest expense and
deferred financing amortization increased $1.0 million or 33% to $4.3 million in
fiscal 1995 as compared to $3.3 million in fiscal 1994, primarily as a result of
higher interest rates and deferred financing costs associated with the Company's
January 1995 refinancing.
INCOME TAXES. The Company recorded a net tax benefit of $0.1 million as
compared to a tax provision of $0.6 million in the prior year. The net tax
benefit included a credit of $1.7 million related to NOL utilization and
valuation allowance reductions, reflecting management's increased confidence in
the utilization of NOL carry-forwards.
NET EARNINGS. Net earnings from continuing operations increased to $2.7
million in fiscal 1995 from $2.2 million in fiscal 1994. During fiscal 1995, the
Company recorded income from discontinued operations of $0.4 million compared to
$0.5 million in fiscal 1994. Net earnings increased to $3.2 million in fiscal
1995 from $2.7 million in fiscal 1994.
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FINANCIAL CONDITION AND LIQUIDITY
For the six months ended June 28, 1997, net cash provided by operating
activities before changes in assets and liabilities was $5.9 million, as
compared to $3.0 million for the six months ended June 29, 1996. Net cash used
by continuing operating activities after changes in assets and liabilities was
$1.9 million as compared to net cash used of $4.9 million in the prior
year-to-date period. Accounts receivable increased $6.5 million and inventories
increased $3.7 million. The increase in accounts receivable was largely due to
the sales increase, particularly in the second quarter. Inventories increased to
support the expanding sales level and the increased number of international
distribution locations. These increases were partially offset by increased
accounts payable and other liabilities of $3.4 million.
During the first six months of 1997, the Company increased overall
outstanding debt by $1.2 million under various facilities. During this period,
the Company increased borrowings under the senior secured revolving credit line
by $2.7 million, repaid $2.6 million on the senior secured term loans and
increased borrowings under the Philippines subsidiary's credit facility by $1.1
million.
In January 1995, the Company's subsidiaries consummated a $57.5 million
financing package to replace existing bank debt of $44 million and provide
working capital for future growth. The financing includes a $42.5 million senior
secured credit facility from a group of lenders led by an affiliate of a major
international bank and a $15 million senior secured note placement with a major
insurance company. The credit facility includes a $15 million five-year term
loan, a $25 million revolving credit line and a $2.5 million capital expenditure
term loan facility renewable annually. The senior secured notes have an
eight-year term with payments beginning in the sixth year and bear interest at
10.99%. As of June 28, 1997, there was $17.2 million outstanding under the
Company's revolving credit line which had $23.4 million of total borrowing
availability. The Company has executed letters of credit of $1.0 million against
this facility, leaving an available line of credit of $5.2 million as of June
28, 1997.
Management believes that with the net proceeds from this offering, the
Company will have sufficient financial resources available to meet its
anticipated requirements for working capital needs, capital expenditures and
debt amortization for the foreseeable future.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, Financial Accounting Standard No. 128 "Earnings Per Share"
("FAS 128") was issued. FAS 128 specifies modifications to the calculation of
earnings per share from that currently used by the Company. Under FAS 128,
"basic earnings per share" will be calculated based upon the weighted average
number of shares actually outstanding, and "diluted earnings per share" will be
calculated based upon the weighted average number of common shares outstanding
and other potential common shares if they are dilutive. FAS 128 will be adopted
for the Company's fiscal 1997 year and all prior periods will be restated. The
adoption of FAS 128 will not change reported earnings per share for the 1996,
1995, or 1994 fiscal years.
In June 1997, Financial Accounting Standard No. 131 "Disclosures About
Segments of an Enterprise and Related Information" ("FAS 131") was issued. This
statement establishes standards for reporting financial and descriptive
information about operating segments. Under FAS 131, information pertaining to
the Company's operating segments will be reported on the basis that is used
internally for evaluating segment performance and making resource allocation
determinations. FAS 131 will be adopted during the Company's 1998 fiscal year
and required disclosures will be presented for each year included in the related
consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This Prospectus, particularly the Sections entitled "Prospectus Summary,"
"Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations"
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and "Business," contains certain forward-looking statements and other statements
that are not historical facts concerning, among other things, market conditions
of the foodservice and foodservice equipment industries and the Company's
strategies for growth and expansion. These statements are highly dependent upon
a variety of important factors that could cause such results or events to differ
materially from any forward-looking statements deemed to have been made in the
Prospectus. These factors include, but are not limited to, changing market
conditions, the availability and cost of raw materials, the impact of
competitive products and pricing, the timely development and market acceptance
of the Company's products, foreign exchange and political risks affecting
international sales and other risks detailed herein and from time-to-time in the
Company's Securities and Exchange Commission filings. There can be no assurance
that the Company has accurately identified and properly weighed all of the
factors that affect market conditions and demand for the Company's products and
services, that the public information on which the Company has relied is
accurate or complete or that the Company's analysis of the market and demand for
its products and services is correct and, as a result, that the strategy based
on such analysis will be successful.
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BUSINESS
GENERAL
The Company, through its operating subsidiary Middleby Marshall and its
subsidiaries, is a leader in the design, manufacture, marketing and service of a
broad line of cooking and warming equipment used in all types of foodservice
operations, including quick-service restaurants, full-service restaurants,
retail outlets, and hotels and other institutions. The Company's products
include Middleby Marshall conveyor oven equipment, Toastmaster toasters and
counterline cooking and warming equipment, Southbend ranges, convection ovens
and heavy-duty cooking equipment, SteamMaster steam cooking equipment, CTX
infra-red conveyor cooking equipment and Titan mixers. The Company is also a
provider of integrated distribution and service capabilities in international
markets. Major customers include leading quick-service chains such as Domino's,
KFC, McDonald's, Papa John's, Pizza Hut, Schlotzsky's Deli and Wendy's, and
full-service chains such as Brinker, Denny's, Landry's, Perkins Family
Restaurants, Rainforest Cafe and Red Lobster.
Founded in 1888 as a manufacturer of baking ovens, Middleby Marshall Oven
Company was acquired in 1983 by TMC Industries Ltd., a publicly traded company
that changed its name in 1985 to The Middleby Corporation. Throughout its
history, the Company had been a leading innovator in the baking equipment
industry and in the early 1980s positioned itself as a leading foodservice
equipment manufacturer by introducing the conveyor oven that revolutionized the
pizza market. In 1989, the Company became a broad line equipment manufacturer
through the acquisition of the Foodservice Equipment Group of Hussmann
Corporation, which included CTX, Southbend, SteamMaster and Toastmaster. The
Company initiated its international distribution and service strategy in 1990 by
acquiring a controlling interest in Asbury. In 1991, the Company established
Middleby Philippines to provide custom kitchen fabrication and specialty cooking
equipment to restaurant and hotel chains in the Asian, Pacific Rim and Middle
Eastern markets.
The Company has identified, as a major area of growth, the rapidly growing
international markets targeted by restaurant and hotel chains. To capture this
market, Middleby established its own export management company, set up master
distribution in international markets and began to distribute complementary
products of other American and European equipment manufacturers. As the first
company in its industry to take these initiatives, Middleby has positioned
itself as a preferred foodservice equipment supplier to major chains expanding
globally. Middleby's international network enables it to offer a total store
package ("TSP") of kitchen equipment to be delivered virtually anywhere in the
world, installed and serviced by Middleby. The Company believes that its TSP
program provides it with a competitive marketing advantage and will enable it to
develop significant new international business. The Company has delivered and
installed equipment in over 100 countries throughout the world.
INDUSTRY OVERVIEW
The foodservice equipment industry provides equipment and services to
operators in the commercial and institutional foodservice industry. The
foodservice industry consists of four principal categories: (i) fast food or
quick-service restaurants, including restaurants that primarily offer pizza,
(ii) full-service restaurants, including casual-theme restaurants, (iii) retail
outlets, such as convenience stores, supermarkets and department stores and (iv)
public and private institutions such as hotels, resorts, schools, hospitals,
long-term care facilities, correctional facilities, stadiums, airports,
corporate cafeterias, military facilities and government agencies. In 1996, the
foodservice industry in the U.S. had sales of approximately $314 billion through
over 740,000 outlets, making it the largest retail industry in the U.S. The
international foodservice industry is estimated to have over $700 billion in
annual sales.
During the past several decades, growth in the U.S. foodservice industry has
been driven primarily by population growth, economic growth and demographic
changes, including the emergence of families with multiple wage-earners and
growth in the number of higher-income households. These factors
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have led to a demand for convenience and speed in food preparation and
consumption. Eating-out and carry-out continue to be on an upward trend in the
U.S., although at a slower rate than during the 1970s and 1980s. The percentage
of the U.S. consumer's total food dollar spent on meals prepared outside the
home was approximately 52% in 1996, compared with approximately 45% in 1986, and
is expected to increase during future periods.
The quick-service restaurant segment is the fastest growing and largest
category within the foodservice industry. In 1996, U.S. sales within the
quick-service restaurant segment increased 3.6% to $105 billion, accounting for
33.2% of overall industry sales, while the full-service restaurant segment
increased 2.9% to $96 billion, accounting for 30.6% of industry sales. These
figures compare to 1987, when the quick-service restaurant segment sales were
$57.6 billion, or 28.7% of overall industry sales, and full-service restaurant
segment sales were $68 billion, or 33.9% of the overall industry.
The foodservice equipment industry has grown in response to the primary
growth factors of the foodservice industry. After high growth in the early- and
mid-1980s, growth in the foodservice equipment industry entered a slow period
from 1988 through 1991, due to a general decline in the worldwide economy and
the maturation of the domestic foodservice industry. In 1992, the industry began
to recover due to the development of new quick-service and casual-theme
restaurant chain concepts, the expansion into nontraditional locations by
quick-service restaurants and store equipment modernization. The international
foodservice equipment industry is experiencing stronger growth than the U.S.
market due to rapidly expanding international economies and increased
opportunity for expansion by U.S. chains into developing regions.
In 1996, the foodservice equipment industry in the U.S. had total sales of
approximately $4.5 billion. The Company's manufactured products compete
primarily in the cooking and warming equipment category, which had sales in the
U.S. of approximately $1.1 billion in 1996 and is expected to grow 6.5% in 1997.
Management believes that the broader international equipment market the Company
serves had 1996 sales of approximately $10 billion, with expected annual growth
of nearly twice the growth rate of the U.S. market.
The Company believes that continuing growth in demand for foodservice
equipment will result from (i) the development of new restaurant units, (ii) the
expansion of U.S. chains into international markets and (iii) the replacement
and upgrade of existing equipment.
RESTAURANT UNIT DEVELOPMENT
While new construction of U.S. restaurant units has slowed since the late
1980s, the Company believes that the domestic foodservice industry will
experience substantial growth in restaurant unit development primarily as a
result of the emergence of new quick-service, casual-theme and home-meal
replacement restaurant concepts and the expansion of quick-service chains into
non-traditional sites.
New chains such as Papa John's and Schlotzsky's Deli have experienced
significant growth during the past several years and are expected to continue
such growth for the foreseeable future. Papa John's, for example, has expanded
from 110 units in 1991 to 1,160 units in 1996 and has announced plans to open
over 300 units in 1997. Furthermore, new casual-theme and "eatertainment"
restaurant concepts such as Rainforest Cafe and Planet Hollywood, along with
home-meal replacement concepts such as Boston Market and Eatzi's, are in the
early stages of their unit development program.
As a result of high costs of construction and real estate, in addition to
difficulties in finding attractive sites, major quick-service chains have been
expanding into non-traditional locations. In an effort to bring food closer to
the consumer, chain-branded kiosks are experiencing rapid growth in retail
stores, sports stadiums, airports and college campuses. For example, retailers
such as Wal-Mart and Home Depot have developed programs with branded foodservice
chains, such as McDonald's and Wendy's.
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INTERNATIONAL EXPANSION
International expansion is a major driver of growth for U.S. restaurants,
particularly quick-service chains. Aggressive expansion in international markets
by these chains is driven by economic development in non-industrialized and
industrializing nations, along with favorable operating economics for
foodservice operators. The limited penetration of quick-service restaurants
outside the U.S. provides these chains with opportunities for international
expansion. The largest worldwide restaurant system, PepsiCo's Tricon Global
Restaurants, Inc., which includes Pizza Hut, KFC and Taco Bell, had 11% annual
growth in international units during the five-year period through 1996, compared
to 6% annual growth in U.S. units, and today only 29% of its units are in
international markets. McDonald's has announced that it plans to open over 2,000
new units per year, approximately two-thirds of which will be in international
markets.
REPLACEMENT AND UPGRADE OF EXISTING EQUIPMENT
Management believes that demand for foodservice equipment will accelerate
during the next several years as restaurant chains begin to replace and upgrade
equipment installed during the rapid expansion period of the 1970s and 1980s.
Furthermore, the trend toward value pricing and discounting, coupled with
increasing labor costs and a shortage of labor, have focused the foodservice
industry's attention on productivity improvements to maintain profit margins. As
a result, foodservice outlets are replacing existing equipment with new
equipment that offers innovative technology, product flexibility, reduced food
waste, and labor saving and space saving features. Management believes that
restaurant chains have one paramount consideration in purchasing equipment: it
must be able to produce consistent quality with high productivity using
unskilled labor. Red Lobster, for example, has lowered its costs, improved its
kitchen productivity and further improved food quality by converting to Middleby
Marshall conveyor ovens. Additionally, Middleby's product offerings typically
incorporate the latest energy and operating efficiencies. The
Accumiser-Registered Trademark- griddle, for example, was recently named the
most energy efficient commercial griddle ever tested by Pacific Gas and
Electric, the largest utility company in the U.S. In addition, heightened
concerns about E-coli bacteria contamination and other related food safety
issues have caused foodservice operators, particularly chains, to review the
condition of their cooking equipment more frequently. Management believes that
these health and safety concerns provide increased sales opportunities for the
Company's equipment.
New menu items are constantly being introduced by foodservice chains to
stimulate demand. These menu changes often require customized equipment or
upgraded equipment to meet their requirements. For example, Middleby supplies a
customized Toastmaster food warmer for Wendy's new pita sandwich.
BUSINESS STRATEGY
FOCUS ON MAJOR CHAIN RELATIONSHIPS
The Company has been strengthening its existing relationships and developing
new relationships with the major quick-service and casual-theme restaurant
chains. These relationships are handled through an integrated effort by
top-level executives and sales managers at the corporate and business division
levels to best serve each customer's needs. A sales manager is dedicated to
selected major chains to market the full range of the Company's products and
services.
Middleby's product development and engineering departments work closely with
major customers to develop equipment to meet specialized needs and to satisfy
global regulations and utility requirements. The Company has improved its
manufacturing flexibility in order to meet the high unit demands of chains over
an extended period of time. The Company's technology center at its Elgin,
Illinois facility provides a state-of-the-art kitchen that enables customers to
work with newly developed or prototype equipment. In addition, the Company
supports over 40 demonstration centers, of which fifteen are
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located overseas. Many of the Company's customers utilize the technology center
or the demonstration centers to hold training and demonstration meetings for
their personnel or franchisees. The Company also provides executive chef
assistance to its customers along with the hands-on support of over 200 sales
representatives in the domestic market and fifteen sales managers in the
international market. As an example of the success of its strategy, the Company
designed a specific conveyor oven for Papa John's and was recently appointed
exclusive provider of its cooking equipment.
DEVELOP INNOVATIVE EQUIPMENT SOLUTIONS
The Company continuously seeks to improve the functionality and quality of
its product offerings through its own development efforts and by licensing
products and technologies that the Company believes have significant potential.
Global expansion has accelerated the pace of change in the industry, causing the
Company's customers, particularly restaurant chains, to demand greater equipment
variations, value, service and responsiveness. The Company believes its
technical expertise and resources satisfy the demanding requirements of an
increasingly competitive global environment. Over 30 professionals support the
Company's product development and engineering activities, including project
engineers, CAD operators, laboratory technicians, model makers, and engineering
documentation and systems support personnel. Cross-functional teams are utilized
for all key development activities to speed the design concept to production and
minimize corrections upon pilot production and market introduction. The Company
has invested in state-of-the-art computer-aided design and manufacturing
("CAD/CAM") systems to streamline engineering operations and provide advanced
capabilities for creative design and analysis.
The Company has demonstrated product innovation and market responsiveness
throughout its history. For example, within the last two years, the Company
designed a specialized conveyor toaster for McDonald's McMuffin-Registered
Trademark- breakfast sandwich and is now the sole supplier for this equipment.
Additionally, the Accumiser griddle received the California Restaurant
Association's 1997 award for innovation.
SUPPORT THE INTERNATIONAL EXPANSION OF MAJOR CHAINS
The Company believes that its ability to support the international growth of
restaurant chains and hotels through its worldwide sales and service networks is
central to expanding its market position. The turnkey project management
capabilities offered by Asbury provide a number of services to customers for
which they would otherwise need to maintain internal expertise or source from
multiple outside vendors. These services include export documentation, freight
forwarding, equipment warehousing and consolidation, installation, warranty
service and parts support. Management believes that the Company is uniquely
positioned to provide integrated, comprehensive services to large restaurant and
hotel chains seeking to expand globally.
The Company has established distribution subsidiaries or sales offices in
Canada, Mexico, Spain, France, Saudi Arabia, the Philippines, Taiwan, China,
Indonesia, Japan and Korea, and intends to continue to expand in international
markets. Sales managers and customer service representatives are based in the
local foreign markets to provide customer service and technical support in the
local language and time zone. Internationally, over 3,000 independent service
technicians are trained in the installation and service of the Company's
products and are supported by fifteen internationally-based service managers and
thirteen factory-based technical service engineers. This infrastructure enables
the Company to offer standardized total store equipment packages with local
training and service support to customers seeking to expand internationally.
During the past three years, over 35% of the Company's net sales have been in
the international markets.
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BUSINESS DIVISIONS AND PRODUCTS
The Company operates through the following domestic business divisions:
conveyor oven equipment (Middleby Marshall and CTX), counterline cooking
equipment and specialty products (Toastmaster and various distribution products)
and core cooking equipment (Southbend and SteamMaster). Additionally, the
Company provides its products and services to the international marketplace
through two operating subsidiaries: Asbury, a leading exporter and distributor
of foodservice equipment in the global marketplace, and Middleby Philippines,
one of the principal suppliers of commercial kitchen fabrication and specialty
cooking equipment in the Asian, Pacific Rim and Middle Eastern markets.
CONVEYOR OVEN EQUIPMENT
Principal product lines include conveyor ovens sold under the Middleby
Marshall and CTX brand names. The Middleby Marshall product line is the world's
conveyor cooking equipment leader. A brand of baking and cooking equipment since
1888, the Middleby Marshall name is renowned for quality and durability.
Middleby Marshall ovens are used by a majority of the leading high-volume pizza
chains and seafood chains, as well as by other restaurants and institutions.
Middleby Marshall conveyor ovens utilize a patented process, Jet-Sweep air
impingement, that forces heated air at high velocities through a system of
nozzles above and below the food product which is placed on a moving conveyor
belt. This process achieves faster baking times and greater consistency of bake
than conventional ovens. The CTX line of conveyor ovens utilizes patented
infra-red cooking and precision control technology for more specialized, lower
volume applications than Middleby Marshall ovens. CTX conveyor ovens are sold to
restaurants and pizza outlets and offer such additional features as a
programmable time and temperature control as well as a self-cleaning function.
Conveyor oven products range in price from approximately $5,000 to $30,000 per
unit (or as much as $90,000 for a multiple unit system) and are predominately
assembled to order and purchased directly by end-users (who order units
customized for their operations) rather than through dealers.
COUNTERLINE COOKING EQUIPMENT AND SPECIALTY PRODUCTS
Principal counterline cooking equipment product lines (predominately
light-duty electric equipment) consist of Toastmaster counterline cooking and
warming equipment, including toasters, hot food servers, foodwarmers, griddles,
fryers, convection ovens, ranges and mixers. Toastmaster products feature energy
saving and food safety technologies, such as those offered in the Accumiser
griddle. Long in use by major restaurant chains, Toastmaster products have
continuously evolved to fit each chain's particular needs. Toastmaster's hot
food servers, for example, are found in nearly every KFC in the world. The
Company also recently developed a conveyor toaster for McDonald's that has
resulted in improved operating efficiencies and less food waste. Counterline
cooking equipment products range in price from $300 to $10,000 per unit and are
predominately purchased from stock by dealers.
The Company does not produce consumer products under the Toastmaster name,
as the rights to the Toastmaster brand name for consumer markets are owned by an
unaffiliated company, Toastmaster, Inc.
Additionally, the Company distributes certain specialty products under
exclusive licenses. The Company has a distribution agreement with Rational GmbH,
the inventor and world's leading manufacturer of combi-ovens, to distribute its
products in North America. The combi-oven combines steam and hot air in one
appliance providing the versatility to use steam, hot air, or both in
combination to prepare food items. Also, the Company has a distribution
agreement with a European manufacturer of rotisserie cooking and merchandising
display equipment. In 1996, the Company entered into another arrangement with
the same manufacturer to distribute the RoFry oil-less fryer on an exclusive
basis in North and South America and on a non-exclusive basis in certain other
parts of the world. RoFry's unique multi-stage cooking process allows the
complete cooking of normally deep fried foods without any frying oil,
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resulting in significant cost savings to the operator and a healthier food
product. Management believes RoFry could significantly impact the fryer
equipment market and represents a substantial growth opportunity. Distribution
products range in price from $1,000 to $15,000 per unit and are predominately
purchased by dealers from stock.
CORE COOKING EQUIPMENT
Principal product lines (mainly heavy-duty gas-fired equipment) include the
Southbend product line of ranges, convection ovens, broilers, fryers and
griddles. Many of the products in this division are made to specification for
use by the professional chef or are offered as standardized equipment for
general use in restaurants and institutions. Southbend is known for its
innovative product features and premier cooking line. Its 40,000 BTU
Pyromax-Registered Trademark- range doubled the industry standard for BTU's when
it was introduced in 1996. Southbend's Marathoner Gold-Registered Trademark-
convection oven is considered by many in the industry to be the best baking
convection oven on the market today. This business division also offers a broad
line of steam cooking equipment under the SteamMaster name. Core cooking
equipment products range in price from $1,000 to $10,000 (or as much as $60,000
for a complete line-up of modular equipment) and are predominantly purchased by
dealers on an order-by-order basis.
INTERNATIONAL SPECIALTY EQUIPMENT
Middleby Philippines designs, engineers, manufactures and installs custom
kitchen fabrication and speciality cooking equipment used primarily in
conjunction with standard equipment manufactured in the U.S. to provide a
complete kitchen installation. Principal products include serving stations, work
tables, undercounter refrigeration systems, ventilation systems, cabinets and
shelving. In 1992, Middleby Philippines was qualified as a supplier of kitchen
fabrication to McDonald's. Customers are primarily Asian, Pacific Rim and Middle
Eastern operations of major U.S. and international foodservice chains and
hotels. Sales are primarily made on an order-by-order project basis. Middleby
Philippines' operations were moved in April 1996 into a newly constructed 54,000
square foot facility outside of Manila. The Company owns 80% of Middleby
Philippines, with the remaining 20% owned by O. Neal Asbury, Jr. See
"Management."
INTERNATIONAL DISTRIBUTION
The Company, through its Asbury subsidiary, provides integrated export
management and distribution services. Asbury sells the Company's product lines
and certain non-competing complementary product lines of other American and
European manufacturers throughout the world (except for Canada, where the
Company has a distribution operation, Escan). Asbury offers customers a complete
package of kitchen equipment, delivered and installed in over 100 countries. For
a local country distributor or dealer, Asbury provides centralized sourcing of a
broad line of equipment with complete export management services, including
export documentation, freight forwarding, equipment warehousing and
consolidation, installation, warranty service and parts support. Asbury is
headquartered in Miramar, Florida with Asian sales and administrative operations
based in the Philippines. Asbury has sales offices or distribution centers in
Mexico, Spain, France, Saudi Arabia, the Philippines, Taiwan, China, Indonesia,
Japan and Korea. The Company owns 80% of Asbury, with the remaining 20% owned by
O. Neal Asbury, Jr. See "Management."
27
<PAGE>
SERVICES AND PRODUCT WARRANTY
The Company is an industry leader in equipment installation programs and
after-sales support and service. The emphasis on global service increases the
likelihood of repeat business and enhances Middleby's image as a partner and
provider of quality products and services. It is critical to major foodservice
chains that equipment providers be capable of supporting equipment on a
worldwide basis.
Middleby is unique in providing a one-year parts and labor warranty
throughout the world. Domestic sales include a "no quibble" guarantee, which
eliminates the premium charges customers normally pay on warranty work done on
overtime or weekends. Since many restaurants are busiest during evenings and
weekends, the Company provides customers in most major metropolitan areas a
guaranteed two-hour response time in emergency situations and a 24-hour
toll-free help-line staffed by factory technicians. Other unique services
include on-site repair of portable equipment, which competitors typically
require to be delivered to a service center. Many of Middleby's products include
complimentary start-up and demonstration service. The Company also provides
complete turnkey services whereby new equipment is shipped to an authorized
service company, delivered to a job site and installed, with the old equipment
removed.
The Company's domestic service network consists of over 80 authorized
service parts distributors and 2,500 independent certified technicians that have
been formally trained and certified by the Company through its factory training
school and on-site installation training programs. The service network is
separate from the sales network to ensure that technicians remain focused on
service issues rather than new business. Technicians work through service parts
distributors, which are required to provide around-the-clock service via a
toll-free paging number. The Company provides substantial technical support at
each factory to the technicians in the field through thirteen factory-based
technical service engineers. The Company has among the most stringent parts
stocking requirements in the industry for these agencies, leading to an
exceptionally high first call completion rate for service and warranty repairs.
Middleby's international service network consists of distributors in over
100 countries with approximately 3,000 independent service technicians trained
in the installation and service of the Company's products and supported by
fifteen internationally-based service managers along with the factory-based
technical service engineers. As with its domestic service network, the Company
maintains stringent parts stocking requirements for its international
distributors.
The Company continuously strives to lower warranty costs through its quality
control programs. Management believes its warranty cost of less than 2% of net
sales is among the lowest in the industry for similar equipment. See
"Business--Manufacturing and Quality Control."
MARKETING AND SALES
Middleby's products and services are marketed in the U.S. and in over 100
countries through a combination of the Company's sales personnel and
international marketing subsidiaries, together with an extensive network of
independent dealers, distributors, consultants, sales representatives and
agents. The Company's relationships with major restaurant chains are primarily
handled through an integrated effort of top-level executive and sales management
at the corporate and business division levels to best serve each customer's
needs.
Each of the Company's business divisions is responsible for the marketing of
its products and services, under the direction of the division's President or
General Manager, Sales Manager and supporting personnel. Each business division
manages its own sales, promotion and marketing programs with coordination and
support provided by corporate sales and marketing functions.
28
<PAGE>
Each business division distributes its products to independent end-users
through a network of approximately 400 to 1,000 non-exclusive dealers
nationwide, who are supported by over 200 manufacturers' marketing
representatives. Between 1990 and 1995, the Company reduced its authorized
dealers by approximately 50% to increase the importance of each dealer
relationship.
International sales are primarily made through Asbury's distribution network
to independent local country stocking and servicing distributors and dealers and
directly to major chains, hotels and other large end-users.
CUSTOMERS
The Company's products are sold primarily through independent dealers and
distributors to end-user customers, including quick-service restaurants,
full-service restaurants, retail outlets such as supermarkets and convenience
stores, and private and public institutions, such as hotels, resorts, schools,
hospitals, long-term care facilities, correctional facilities, stadiums,
airports, corporate cafeterias, military facilities and government agencies.
Many of the dealers in the U.S. belong to buying groups that negotiate sales
terms with the Company. Certain large restaurant and hotel chain customers have
purchasing organizations that manage product procurement for their systems.
Some of the Company's major customers include the following:
<TABLE>
<S> <C>
Quick-service Chick-fil-A, Domino's, KFC, Kenny Rogers Roasters, McDonald's,
restaurants: Papa John's, Pizza Hut, Schlotzsky's Deli, Wendy's
Full-service Applebee's, Brinker International (Chili's, Eatzi's, Macaroni
restaurants: Grill, On the Border), Denny's, Hard Rock Cafe, Landry's,
Morton's of Chicago, Perkins Family Restaurants, Planet
Hollywood, Rainforest Cafe, Red Lobster, TGI Friday's
Hotels: Hilton, Holiday Inn, Hyatt, Intercontinental, Marriott, MGM
Grand, New World, Shangri-La, Sheraton
Other: Carnival Cruise Lines, Hillhaven (health care facilities), New
York City Schools, Price Costco, Publix, Safeway, U.S. Government
Agencies and Departments, Wegman's
</TABLE>
The Company's ten largest customers accounted for approximately 25% of net
sales in 1996, with no single customer accounting for more than 6% of 1996 net
sales.
COMPETITION
The cooking and warming segment of the foodservice equipment industry is
highly competitive and fragmented. Within a given product line, the industry
remains fairly concentrated, with typically a small number of competitors
accounting for the bulk of the line's industry-wide sales. Industry competition
includes companies that manufacture a broad line of products and those that
specialize in a particular product line. Competition in the industry is based
upon many factors, including brand recognition, product features and design,
quality, price, delivery lead times, serviceability and after-sale service. The
Company believes that its ability to compete depends on strong brand equity,
exceptional product performance, short lead-time and timely delivery,
competitive pricing, superior customer service support and its unique TSP
capability. Management believes that the demand for its labor saving,
multi-functional and energy efficient equipment will increase, driven by
quick-service chains that face labor supply issues, space limitations and
increasing operating costs. The Company also focuses on the user interface and
serviceability factors of its equipment across global markets.
29
<PAGE>
In the international markets, the Company competes with U.S. manufacturers
and numerous global and local competitors. Management believes that the
Company's integrated international export management and distribution
capabilities uniquely position it to provide value-added services to U.S. and
internationally-based chains, as well as to local country distributors offering
a complete line of kitchen equipment.
The Company believes that it is among the largest multiple-line
manufacturers of cooking and warming equipment in the U.S. and worldwide,
although some of its competitors are units of operations that are larger than
the Company and possess greater financial and personnel resources. Among the
Company's major U.S. competitors are certain subsidiaries and divisions of
Welbilt Corporation, a subsidiary of Berisford International plc; G.S. Blodgett
Corp. (which Maytag Corporation has announced its intent to purchase); Hobart
Corporation and Vulcan-Hart Corporation, both subsidiaries of Premark
International, Inc.; and Wells Manufacturing Company, a subsidiary of Specialty
Equipment Companies, Inc. International-based competitors include Zanussi, a
subsidiary of Electrolux AB, and Ali Group.
MANUFACTURING AND QUALITY CONTROL
The Company operates two domestic and one international manufacturing
facilities. The Company's conveyor oven and counterline cooking equipment
products are manufactured in Elgin, Illinois and its core cooking equipment
products are manufactured in Fuquay-Varina, North Carolina. Middleby's
international fabrication and specialty cooking equipment operation is located
in Laguna, the Philippines. Metal fabrication, finishing, sub-assembly and
assembly operations are conducted at each manufacturing facility. Equipment
installed at individual locations includes numerically controlled turret presses
and machine centers, shears, press brakes, welding equipment, polishing
equipment, CAD/CAM systems and product testing and quality assurance measurement
devices. The Company's state-of-the-art CAD/CAM systems enable virtual
electronic prototypes to be created, reviewed and refined before the first
physical prototype is built. Detailed manufacturing drawings are quickly and
accurately derived from the model and passed electronically to manufacturing for
programming and optimal parts nesting on various numerically controlled punching
cells. The Company believes that this integrated product development and
manufacturing process is critical to assuring product performance, customer
service and competitive pricing.
Middleby uses sophisticated equipment and procedures to ensure the quality
of its products. The Company also utilizes extensive internal programs for
analyzing potential product failures and certifying vendors for continuous
improvement. Every product manufactured or licensed by the Company is
individually tested prior to shipment to ensure compliance with Company quality
standards.
The Company has implemented programs to reduce costs and improve operating
efficiencies. In some cases, new capital equipment has been acquired to increase
automation and productivity. Recently, Middleby began implementing a new,
company-wide management information system (including an enterprise-wide
resource planning system) that management believes should further improve
operating results.
SOURCES OF SUPPLY
The Company purchases raw materials and component parts from a number of
suppliers. The majority of Middleby's material purchases are standard
commodity-type materials, such as stainless steel, electrical controls and
components, hardware and various components. These materials and parts generally
are available in adequate quantities from numerous suppliers. Some component
parts are obtained from sole sources of supply. In such instances, management
believes it can substitute other suppliers as required. The majority of
fabrication is done internally through the use of automated equipment. Certain
equipment and accessories are manufactured by other suppliers for sale by the
30
<PAGE>
Company. The Company believes it enjoys good relationships with its suppliers
and considers its sources of supply to be adequate for present and anticipated
future requirements.
EMPLOYEES AND LABOR RELATIONS
As of June 28, 1997, the Company employed 1,065 persons. Of this amount, 375
were management, administrative, sales, engineering and supervisory personnel;
377 were hourly production non-union workers; and 313 were hourly production
union members. Included in these totals were 343 individuals employed outside of
the U.S., of which 125 were management, sales, administrative and engineering
personnel and 218 were hourly production workers who participate in an employee
cooperative. At its Elgin, Illinois facility, the Company has a union contract
with the International Brotherhood of Teamsters covering approximately 300
workers that expires in 2002. Management believes that relationships between
employees, union and management are good.
LICENSES, PATENTS, AND TRADEMARKS
Middleby Marshall has an exclusive license from Patentsmith to manufacture,
use and sell Jetsweep air impingement ovens in the U.S. for commercial food
applications in which the interior length or width of a rectangular cooking
area, or in which the diameter of a circular cooking area, equals or exceeds 36
inches. The Patentsmith license covers numerous patents, some of which extend
beyond the year 2000. Middleby Marshall also holds an exclusive sublicense from
Lincoln to manufacture, use and sell throughout the world, other than in the
U.S. and Japan, air impingement ovens of the above-described dimensions for
commercial food applications. This sublicense covers the foreign analogues of
the patents covered by the Patentsmith license and grants Middleby Marshall
rights of first refusal for a similar sublicense in Japan. The Patentsmith
license and the Lincoln sublicense expire upon the expiration of the last
patented improvement covered by the license. While the loss of the Patentsmith
license or the Lincoln sublicense could have an adverse effect on the Company,
management believes it is capable of designing, manufacturing and selling
similar equipment, although not as technologically advanced. Lincoln and Fuji
Chubo Setsubi Company, Ltd. are the only other foodservice equipment
manufacturers licensed under the Patentsmith patents.
The Company holds numerous patents covering technology and applications
related to various products, equipment and systems. Management believes the
expiration of any one of these patents would not have a material adverse effect
on the overall operations or profitability of the Company.
The Company owns numerous trademarks and trade names; among them, CTX,
Middleby Marshall, SteamMaster, Southbend, Toastmaster and Titan are registered
with the U.S. Patent and Trademark Office and in various foreign countries.
FACILITIES
The Company's principal executive offices are located in Rolling Meadows,
Illinois. The Company operates two manufacturing facilities in the U.S. and one
manufacturing facility in the Philippines. The Company also operates a
warehousing and office facility located in Florida. The Company's property,
plant and equipment are encumbered pursuant to its current credit agreements.
See Note 4 to the Consolidated Financial Statements.
31
<PAGE>
The principal properties of the Company are listed below:
<TABLE>
<CAPTION>
PRINCIPAL SQUARE OWNED/
LOCATION BUSINESS DIVISIONS FUNCTION FOOTAGE LEASED
- --------------------------- -------------------------------------- ----------------- --------- ------------
<S> <C> <C> <C> <C>
Elgin, IL Conveyor Oven Equipment Manufacturing, 207,000 Owned
Counterline Cooking Equipment Warehousing and
and Specialty Products Offices
Warehousing 42,000 Leased(1)
Fuquay-Varina, NC Core Cooking Equipment Manufacturing, 131,000 Owned
Warehousing and
Offices
Miramar, FL International Distribution Warehousing and 18,000 Leased(2)
Offices
Laguna, the Philippines International Specialty Equipment Manufacturing, 54,000 Owned
Warehousing and
Offices
Rolling Meadows, IL The Middleby Corporation Corporate 4,000 Leased(3)
Headquarters
</TABLE>
- ------------------------
(1) Lease expires in August 1999, with payments of approximately $17,000 per
month.
(2) Lease expires in October 2002, with payments of approximately $12,000 per
month.
(3) Lease expires in July 2002, with payments of approximately $5,000 per month.
At various other locations the Company leases small amounts of office space
for administrative and sales functions, and in certain instances limited
short-term inventory storage. These locations are in Manila, the Philippines;
Bilbao, Spain; Paris, France; Taipei, Taiwan; Shanghai, China; Tokyo, Japan;
Seoul, Korea; Jakarta, Indonesia; Mexico City, Mexico; and Toronto, Canada.
Management believes that all of these facilities are adequate for the
operation of the Company's business as presently conducted.
ENVIRONMENTAL COMPLIANCE
The Company is subject to a variety of environmental regulations relating to
the use, storage, discharge and disposal of hazardous chemicals used during
manufacturing. Any failure by the Company to comply with present or future
environmental regulations could subject it to future liabilities or the
suspension of production, which could have a material adverse effect on the
Company's results of operations. These regulations could also restrict the
Company's ability to expand its facilities or could require the Company to
acquire costly equipment or to incur other expenses to comply with environmental
regulations. The Company's operations are subject to a variety of foreign,
federal, state and local regulatory requirements, including environmental, waste
management, health and safety matters. The Company's customers are also subject
to extensive regulations, including those related to workplace safety and food
preparation for consumers.
LEGAL PROCEEDINGS
The Company is routinely involved in litigation incidental to its business,
including product liability actions which are generally covered by insurance.
Such routine claims are vigorously contested, and management does not believe
that the outcome of any such pending litigation will have a material adverse
effect upon the financial condition of the Company.
32
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning Middleby's
executive officers, certain key management employees and non-employee directors
as of June 28, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
William F. Whitman, Jr. 57 Chairman of the Board
David P. Riley 50 President, Chief Executive Officer and Director
John J. Hastings 41 Executive Vice President, Chief Financial Officer, Secretary
and Treasurer
CERTAIN KEY MANAGEMENT EMPLOYEES
O. Neal Asbury, Jr. 40 President, Asbury
Selim A. Bassoul 40 President, Southbend
Adrian A. Bruno 58 Vice President, Technology & Planning
Mark A. Sieron 49 Vice President, General Manager, Sales Divisions
Bernard G. Stever 57 Senior Vice President, Global Market Development
Frank J. Thomas 57 Vice President and General Manager, Middleby Philippines
NON-EMPLOYEE DIRECTORS
Robert R. Henry 56 Director
A. Don Lummus 61 Director
John R. Miller, III 56 Director
Philip G. Putnam 56 Director
Sabin C. Streeter 55 Director
Joseph G. Tompkins 56 Director
Laura B. Whitman 30 Director
Robert L. Yohe 61 Director
</TABLE>
The Company has written employment agreements with Messrs. Whitman, Riley,
Asbury and Thomas, and maintains key person life insurance on Mr. Asbury. The
Company has no other written employment agreements.
BIOGRAPHIES
EXECUTIVE OFFICERS:
WILLIAM F. WHITMAN, JR. has been Chairman of the Board of the Company and
Middleby Marshall since 1983.
DAVID P. RILEY has been President and Chief Executive Officer of the Company
and Middleby Marshall since 1983. From 1982 to 1983, he was General Manager of
Middleby Marshall Oven Company and Vice President of Stewart Systems, Inc. From
1972 to 1982, Mr. Riley was Director of the Food Machine, Commercial Dishwasher,
Weighing, Wrapping and Cooking divisions of the Hobart Corporation. He is also a
director of Zebra Technologies Corporation, an industrial equipment
manufacturer.
JOHN J. HASTINGS has been the Company's Executive Vice President, Chief
Financial Officer, Secretary and Treasurer since 1993. Mr. Hastings has held
various financial and executive positions with the Company since 1987.
33
<PAGE>
CERTAIN KEY MANAGEMENT EMPLOYEES:
O. NEAL ASBURY, JR. has been President of Asbury since 1986. He founded
Asbury Associates in 1986, and currently owns 20% of Asbury and 20% of Middleby
Philippines. From 1981 to 1986, Mr. Asbury was Asia Pacific sales director of
Amimpex/J.D. Marshall, an export management company.
SELIM A. BASSOUL has been Southbend's President since 1996. He served as
Vice President, Sales and Marketing of Vulcan-Hart (a division of Premark
International, an international food equipment manufacturer) from 1992 to 1996.
Prior thereto, Mr. Bassoul held various marketing and sales positions for
Premark International, Kinetic Concepts, Inc. and Baxter International, Inc.
ADRIAN A. BRUNO has been the Company's Vice President, Technology & Planning
since 1989. He has also been Vice President of Engineering since 1983. From 1976
to 1983, Mr. Bruno held engineering and marketing management positions in
Raytheon's Amana Range and Microwave Cooking Divisions.
MARK A. SIERON has been Vice President, General Manager, Sales Divisions
since 1992. He was also Vice President and General Manager of the Toastmaster
division from 1988 to 1992 and Vice President of Sales for the Hussmann
Foodservice Group from 1986 to 1988. Additionally, Mr. Sieron was Vice President
of Sales and Marketing for Toastmaster from 1983 to 1986.
BERNARD G. STEVER has been the Company's Senior Vice President, Global
Market Development since 1996. Prior to that he served as Vice President of
Sales and Market Development. Prior to the acquisition of the Foodservice
Equipment Group from Hussmann Corporation in 1989, Mr. Stever was Vice President
of Market Development and Vice President of Marketing for the Foodservice Group
of Hussmann Corporation. He is a former President of the North American
Association of Food Equipment Manufacturers.
FRANK J. THOMAS has been Middleby Philippines' Vice President and General
Manager since 1996. From 1989 to 1996, he was the President of Ice-O-Matic (a
division of Welbilt Corporation, an international food equipment manufacturer).
Prior thereto, Mr. Thomas held various executive and operational positions in
manufacturing concerns.
NON-EMPLOYEE DIRECTORS:
ROBERT R. HENRY has been President of Robert R. Henry Co., Inc., a venture
capital firm, since 1989. From 1977 to 1989, he was a Managing Director of
Morgan Stanley & Co., Inc. ("Morgan Stanley"). Mr. Henry is an advisory director
of Morgan Stanley and a director of Alfacell Corporation, a biotechnology
company.
A. DON LUMMUS has been Chairman and Chief Executive Officer of Crudgington
Machine Tools since 1995. From 1984 to 1994, he was Vice Chairman and Chief
Executive Officer of SASIB Bakery, N.A. (formerly Stewart Systems, Inc.), a
manufacturer of automated bakery equipment. Prior thereto, he was President and
Chief Executive Officer of Stewart Systems, Inc.
JOHN R. MILLER, III is President of Equal Opportunity Publications, Inc.,
publishers of special market career and health care magazines. He is also a
director of First National Bank of Long Island and its holding company, First of
Long Island Corporation.
PHILIP G. PUTNAM has been Executive Vice President of Brean Murray & Co.,
Inc., investment bankers, since 1996. From 1983 to 1996, he was Executive Vice
President of American Asset Management Company, investment advisers, which was
acquired by an affiliate of Brean Murray & Co., Inc. in 1993. Brean Murray &
Co., Inc. is acting as one of the Representatives of the Underwriters in this
offering. See "Underwriting."
SABIN C. STREETER is an Adjunct Professor and Executive-in-Residence at
Columbia Business School and a member of Columbia Naples Capital L.L.C. He
served as a Managing Director of
34
<PAGE>
Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ"), investment bankers, from
1989 to 1990 and again from 1993 until his retirement in April 1997. From 1991
to 1993, he was Managing Director of Sprout Group, DLJ's venture capital
affiliate. He is also a director of Oakwood Homes Corporation, Parker/Hunter
Incorporated and Fotoball U.S.A., Inc.
JOSEPH G. TOMPKINS has been President of Saga Investment Co. Inc., an
investment advisor, since 1992, and is a member of Columbia Naples Capital
L.L.C. From 1992 to 1995, he was an advisory director of Morgan Stanley and from
1976 to 1992 was a Managing Director of Morgan Stanley.
LAURA B. WHITMAN has been Assistant Vice President of Christie's, New York,
since March 1997. She served as a Specialist in Chinese Paintings at Christie's
from 1995 to February 1997, and held a similar position at Sotheby's, New York,
from 1990 to 1995.
ROBERT L. YOHE is an independent director and corporate advisor. He serves
as director of Airgas, Inc., Betz Dearborn, Inc., Calgon Carbon Corporation,
LaRoche Industries, Inc. and Marsulex Inc. From 1993 to 1994, he was Vice
Chairman and Director of Olin Corporation, a chemicals manufacturer, and from
1985 to 1992, he was President of Olin Chemicals, a division of Olin
Corporation.
35
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of September 10, 1997 and as adjusted to
reflect the sale of the shares offered hereby, (i) by each Selling Stockholder,
(ii) by each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock, (iii) by each director and
executive officer of the Company, and (iv) by all executive officers and
directors as a group. This information is based upon information received from
or on behalf of the named stockholders.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(2)
------------------------ ------------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
- -------------------------------------------------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
William F. Whitman, Jr. (3)....................... 2,153,271 25.3% 300,000 1,853,271 17.6%
Robert R. Henry (4)(7)............................ 1,620,269 19.1 -- 1,620,269 15.4
David P. Riley (5)................................ 501,545 5.9 210,000(10) 291,545 10) 2.8
A. Don Lummus (6)................................. 208,300 2.4 -- 208,300 2.0
John R. Miller, III............................... 26,000 * -- 26,000 *
Philip G. Putnam (7).............................. 6,750 * -- 6,750 *
Sabin C. Streeter................................. 26,000 * -- 26,000 *
Joseph G. Tompkins (7)............................ 7,750 * -- 7,750 *
Laura B. Whitman (7)(8)........................... 242,375 2.8 100,000 142,375 1.4
Robert L. Yohe (7)................................ 24,750 * -- 24,750 *
John J. Hastings (9).............................. 34,397 * -- 34,397 *
All executive officers and directors as a group
(11 persons) (4)(5)(6)(7)(9).................... 4,851,407 56.8 610,000 4,241,407 40.3
</TABLE>
- ------------------------
* Represents less than 1% of all outstanding shares of Common Stock.
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes that the individuals named in this table have sole voting and
investment power with respect to all shares of Common Stock reflected in
this table.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Does not include 1,537,125 shares owned by the trusts described in Note (4)
below, as to which Mr. Whitman disclaims beneficial ownership. Includes
255,300 shares owned by Mr. Whitman's spouse.
(4) Includes 1,537,125 shares of Common Stock held by Mr. Henry as trustee under
trusts as follows: (a) 1,255,875 shares for the benefit of Mr. Whitman's two
adult children, W. Fifield Whitman III and Laura B. Whitman (218,625 shares
owned by a trust for the benefit of Laura B. Whitman and 437,250 shares
owned by a trust for the benefit on W. Fifield Whitman III, and 300,000
shares owned by each of two other trusts), and (b) 281,250 shares for the
benefit of Mr. Whitman's spouse. Mr. Henry disclaims beneficial ownership of
these shares.
(5) Includes 78,650 shares of Common Stock owned by trusts for the benefit of
Mr. Riley's two adult children, Christopher Riley and Kevin Riley, and for
which Mr. Riley and his spouse Linda serve as trustees. Mr. Riley disclaims
beneficial ownership of all of these shares. Also includes 173,670 shares of
Common Stock held by Mr. Riley's spouse in trust.
(6) Includes 1,000 shares of Common Stock deemed issued upon exercise of stock
options granted in May 1992.
36
<PAGE>
(7) Includes 3,750 shares of Common Stock deemed issued upon exercise of stock
options granted in February 1996.
(8) Does not include shares owned by trusts for the benefit of Ms. Whitman
described in Note (4) above.
(9) Includes 16,000 shares of Common Stock deemed issued upon exercise of stock
options.
(10) Of the shares being offered, 180,000 are directly owned by Mr. Riley and
30,000 shares are owned by Mr. Riley and his spouse as trustees for the
benefit of their children. After the offering, the shares shown as owned by
Mr. Riley will include 48,650 shares owned by trusts for the benefit of his
children and 173,670 shares held by his spouse in trust. See Note (5) above.
William F. Whitman, Jr. and David P. Riley, two of the Selling Stockholders,
are executive officers and directors of the Company. Laura B. Whitman, the other
Selling Stockholder, is a director of the Company. See "Management."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company is 20,000,000 shares of Common
Stock, $0.01 par value per share (the "Common Stock"), and 2,000,000 shares of
Preferred Stock, $0.01 par value (the "Preferred Stock"). Immediately prior to
the commencement of this offering, there were 8,501,453 shares of Common Stock
issued and outstanding and held by approximately 2,500 beneficial owners. No
shares of Preferred Stock were outstanding.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters on which stockholders are entitled or
permitted to vote. Such holders may not cumulate votes in the election of
directors. The holders of Common Stock are entitled to receive such dividends as
may lawfully be declared by the Board of Directors out of funds legally
available therefor and to share pro rata in any other distribution to the
holders of Common Stock. The holders of Common Stock are entitled to share
ratably in the assets of the Company remaining after payment of liabilities and
any preferences of any Preferred Stock in the event of any liquidation,
dissolution or winding up of the affairs of the Company. The holders of Common
Stock have no preemptive rights. There are no conversion rights, redemption or
sinking fund provisions or fixed dividend rights with respect to the Common
Stock. All outstanding shares of Common Stock are fully paid and non-assessable,
and the shares of Common Stock to be issued in this offering, upon payment
therefor, will be fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company or the removal of existing management and may adversely
affect the voting and other rights of the holders of Common Stock.
PROVISIONS IN COMPANY'S CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation (the "Certificate") provides that
no agreement or plan providing for the dissolution, liquidation, merger or
consolidation of the Company or the sale, lease or transfer of substantially all
of its assets, shall be effective, unless approved by the affirmative vote of
not
37
<PAGE>
less than two-thirds of the votes of all the shares of stock outstanding and
entitled to vote thereon. This supermajority requirement may have the effect of
delaying, deferring or preventing a change in control of the Company or the
removal of existing management.
The Company has adopted provisions in the Certificate that, to the fullest
extent provided under Delaware law, limit the liability of its directors and
officers for monetary damages arising from a breach of their fiduciary duties as
directors or officers. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission, nor
does it limit liability for acts of fraud, knowing violations of law, or
unlawful payment of distributions. Furthermore, equitable remedies may not, as a
practical matter, be effective for various reasons. The Certificate also
provides that the Company shall indemnify its directors and officers and other
agents to the fullest extent permitted by the Delaware law, including in
circumstances in which indemnification is otherwise discretionary to the Company
under Delaware law.
DELAWARE LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an interested
stockholder is previously approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior thereto, did own) 15% or more of
the corporation's voting stock.
WARRANTS AND REGISTRATION RIGHTS
In conjunction with the issuance of its senior secured notes in January
1995, the Company issued a transferrable warrant to the noteholders for the
purchase of 250,000 shares (the "Underlying Shares") of Common Stock at an
exercise price of $3.00 per share. Alternatively, under certain conditions, the
terms of the warrant provide for the purchase of 200,000 shares at $0.01 per
share. The warrant provides for adjustment of the exercise price if the Company
issues additional shares at a purchase price below the then current market
price, as defined, and for adjustment of the number of shares if the Company
declares a stock dividend. The warrant is currently exercisable for 250,000
shares at $3.00 per share and expires July 10, 2003.
The warrant also provides to its holders certain rights to demand
registration of the Underlying Shares under the Securities Act of 1933 (the
"Securities Act") or other applicable law upon written notice to the Company and
to all holders of the warrant or Underlying Shares. If such a demand is made,
the Company may, at its option and instead of registering the Underlying Shares,
repurchase such shares from the holders at a price based on the current market
price of the Common Stock. In addition, in the event that the Company proposes
to register any class of its Common Stock under the Securities Act in an
underwritten public offering, the holders of the warrants have certain rights to
request that the Underlying Shares be included in the registration. The
registration rights provided in the warrant expire with the expiration of the
warrant on July 10, 2003.
Under the Company's written employment agreement with William F. Whitman,
Jr., the Company's Chairman, Mr. Whitman possesses certain rights to request
registration of shares of Common Stock owned by him, consisting of one demand
registration and two incidental registration rights during the term of such
agreement, all at the expense of the Company. The agreement is for a term ending
December 31, 2000.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, each of
the Underwriters named below, and each of the Underwriters for whom Schroder &
Co. Inc. and Brean Murray & Co., Inc. are acting as Representatives (the
"Representatives") has severally agreed to purchase from the Company and the
Selling Stockholders an aggregate of 2,610,000 shares of Common Stock at the
price to the public less the underwriting discounts set forth on the cover page
of this Prospectus, in the amounts set forth below opposite their respective
names.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- -------------------------------------------------------------------------- ------------------
<S> <C>
Schroder & Co. Inc........................................................
Brean Murray & Co., Inc...................................................
------------------
Total................................................................. 2,610,000
------------------
------------------
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligation to pay
for and accept delivery of the shares of Common Stock offered hereby is subject
to certain conditions precedent and that the Underwriters will be obligated to
purchase all such shares, excluding shares covered by the over-allotment option,
if any are purchased. The Underwriters have informed the Company that no sales
of Common Stock will be confirmed to discretionary accounts.
The Company has been advised by the Underwriters that they propose initially
to offer the Common Stock to the public at the public offering price set forth
on the cover page of this Prospectus and to certain dealers at such price, less
a concession not in excess of $ per share. The Underwriters may allow and
such dealers may reallow a concession not in excess of $ per share to certain
other brokers and dealers. After the offering, the public offering price, the
concession and reallowances to dealers and other selling terms may be changed by
the Underwriters.
The Company has granted to the Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 391,500
additional shares of Common Stock to cover over-allotments, if any, at the same
price per share to be paid by the Underwriters for the other shares of Common
Stock offered hereby. If the Underwriters purchase any such additional shares
pursuant to the over-allotment option, each Underwriter will be committed,
subject to certain conditions, to purchase a number of the additional shares of
Common Stock proportionate to such Underwriter's initial commitment.
The Company, its directors and executive officers and the Selling
Stockholders, who will beneficially own an aggregate of 4,241,407 shares of the
Common Stock outstanding after the offering, have agreed with the
Representatives, for a period of 120 days after the date of this Prospectus, not
to issue, sell, offer to sell, grant any options for the sale of, or otherwise
dispose of any shares of Common Stock or any rights to purchase shares of Common
Stock (other than stock issued or options granted pursuant to the Company's
stock incentive plans), without the prior written consent of the
Representatives.
The Company and the Selling Stockholders have severally agreed to indemnify
the Underwriters against certain liabilities that may be incurred in connection
with the sale of the Common Stock, including liabilities arising under the
Securities Act, and to contribute to payments that the Underwriters may be
required to make with respect thereto.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters
39
<PAGE>
may over-allot in connection with the offering, creating a short position in the
Common Stock for their own account. In addition, to cover over-allotments or to
stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Common Stock in the offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities and may
end any of these activities at any time.
Philip G. Putnam, a director of the Company, is Executive Vice President of
Brean Murray & Co., Inc., which is participating in the offering as one of the
Representatives.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and the Selling Stockholders by D'Ancona &
Pflaum, Chicago, Illinois and for the Underwriters by Thompson Hine & Flory LLP,
Cleveland, Ohio. Nathaniel Sack, a partner of D'Ancona & Pflaum, owns 5,000
shares of Common Stock, and other attorneys of D'Ancona & Pflaum own additional
shares of such Common Stock, which ownership is not material in the aggregate.
EXPERTS
The Consolidated Financial Statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and is included herein in reliance upon the
authority of such firm as experts in giving such reports.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a Registration Statement on Form S-2 under
the Securities Act, relating to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in exhibits and schedules to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or any other document referred to herein are not necessarily complete.
Where such contract, agreement or other document is an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, each such statement being qualified in all
respects by such reference. For further information regarding the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed as a part thereof, which may be inspected at the
office of the Commission without charge or copies of which may be obtained from
and upon request the Commission and payment of the prescribed fee.
The Company is subject to the informational requirements of the Securities
Exchange Act, as amended, and in accordance therewith, files reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission's Headquarters at 450 Fifth Street, Room 1024, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, 13th Floor, New York, New York 10048. The Common Stock is
listed on the Nasdaq National Market System. The Commission maintains a Web site
that contains reports, proxy statements and other information of the Company at
http://www.sec.gov.
40
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
28, 1996, as amended, the Company's Quarterly Reports on Form 10-Q for the
quarterly periods ending March 29, 1997 and June 28, 1997, and the Current
Report of the Company on Form 8-K dated January 23, 1997, and filed on February
7, 1997, in each case as filed by the Company with the Commission are
incorporated herein by reference. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
subsequent to the date of this Prospectus and prior to the termination of the
offering made hereby shall be deemed incorporated by reference in this
Prospectus and to be a part hereof from the date of the filing of such
documents. See "Available Information." Any statements contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon a written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference into this
Prospectus (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference to such documents). Requests for such
copies should be directed to the Chief Financial Officer of the Company, 2850
West Golf Road, Suite 405, Rolling Meadows, Illinois 60008, Telephone: (847)
758-3880; Facsimile: (847) 758-3883.
41
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Consolidated Balance Sheets as of June 28, 1997 (unaudited) and December 28, 1996.......................... F-2
Consolidated Statements of Earnings for the three and six months ended June 28, 1997 and June 29, 1996
(unaudited).............................................................................................. F-3
Consolidated Statements of Cash Flows for the six months ended June 28, 1997 and June 29, 1996
(unaudited).............................................................................................. F-4
Notes to Condensed Consolidated Financial Statements (unaudited)........................................... F-5
Report of Independent Public Accountants................................................................... F-8
Consolidated Balance Sheets as of December 28, 1996 and December 30, 1995.................................. F-9
Consolidated Statements of Earnings for the fiscal years ended December 28, 1996, December 30, 1995 and
December 31, 1994........................................................................................ F-10
Consolidated Statements of Changes in Shareholders' Equity for the fiscal years ended December 28, 1996,
December 30, 1995 and December 31, 1994.................................................................. F-11
Consolidated Statements of Cash Flows for fiscal years ended December 28, 1996, December 30, 1995 and
December 31, 1994........................................................................................ F-12
Notes to Consolidated Financial Statements................................................................. F-13
</TABLE>
F-1
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 28, DEC. 28,
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 1,330 $ 1,410
Accounts receivable, net......................................... 26,384 19,859
Inventories, net................................................. 24,681 20,956
Prepaid expenses and other....................................... 1,036 939
Net assets of discontinued operations............................ 1,400 4,082
Current deferred taxes........................................... 2,099 2,086
----------- -----------
Total current assets......................................... 56,930 49,332
Property, plant and equipment, net of accumulated depreciation of
$12,546 and $11,741............................................ 19,625 18,843
Excess purchase price over net assets acquired, net of
accumulated amortization of $4,444 and $4,216.................. 13,111 13,339
Deferred taxes................................................... 1,897 2,950
Other assets..................................................... 2,329 1,504
----------- -----------
Total assets................................................. $ 93,892 $ 85,968
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt............................. $ 2,786 $ 3,916
Accounts payable................................................. 13,472 10,369
Accrued expenses................................................. 10,305 10,001
----------- -----------
Total current liabilities.................................... 26,563 24,286
Long-term debt................................................... 39,666 37,352
Minority interest and other non-current liabilities.............. 2,554 1,880
Shareholders' equity:
Preferred stock, $.01 par value; nonvoting; 2,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
8,476,000 and 8,468,000 issued and outstanding in 1997 and
1996, respectively........................................... 85 85
Paid-in capital................................................ 28,350 28,108
Cumulative translation adjustment.............................. (176) (184)
Accumulated deficit............................................ (3,150) (5,559)
----------- -----------
Total shareholders' equity................................... 25,109 22,450
----------- -----------
Total liabilities and shareholders' equity................. $ 93,892 $ 85,968
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
F-2
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ------------------------------
RESTATED RESTATED
JUNE 28, 1997 JUNE 29, 1996 JUNE 28, 1997 JUNE 29, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales........................................ $ 42,082 $ 28,661 $ 74,780 $ 58,171
Cost of sales.................................... 29,268 20,132 51,492 41,075
-------------- -------------- -------------- --------------
Gross margin................................. 12,814 8,529 23,288 17,096
Selling and distribution expenses................ 6,035 4,472 10,716 8,482
General and administrative expenses.............. 3,044 2,386 5,719 4,655
-------------- -------------- -------------- --------------
Income from operations....................... 3,735 1,671 6,853 3,959
Interest expense and deferred financing
amortization................................... 1,257 1,079 2,338 2,136
Other (income) expense, net...................... 18 (23) (20) (5)
-------------- -------------- -------------- --------------
Earnings before income taxes................. 2,460 615 4,535 1,828
Provision for income taxes....................... 873 214 1,562 661
-------------- -------------- -------------- --------------
Earnings from continuing
operations................................. 1,587 401 2,973 1,167
-------------- -------------- -------------- --------------
Loss from discontinued operations, net of tax.... -- (432) -- (512)
Estimated loss on sale of discontinued
operations..................................... (564) -- (564) --
-------------- -------------- -------------- --------------
Net earnings................................. $ 1,023 $ (31) $ 2,409 $ 655
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Earnings per share from continuing operations.... $ 0.18 $ 0.04 $ 0.34 $ 0.13
Loss per share from discontinued operations...... (0.06) (0.04) (0.06) (0.05)
-------------- -------------- -------------- --------------
Net earnings per share........................... $ 0.12 $ 0.00 $ 0.28 $ 0.08
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes
F-3
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
RESTATED
JUNE 28,1997 JUNE 29, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities--net earnings................................ $ 2,409 $ 655
Adjustments to reconcile net earnings to cash provided by continuing operating
activities--
Depreciation and amortization................................................. 1,500 1,522
Utilization of NOLs........................................................... 1,416 325
Discontinued operations....................................................... 564 512
Changes in assets and liabilities--
Accounts receivable......................................................... (6,525) (3,775)
Inventories................................................................. (3,725) (3,743)
Prepaid expenses and other assets........................................... (914) (999)
Accounts payable and other liabilities...................................... 3,407 628
-------------- --------------
Net cash used in continuing operating activities................................ (1,868) (4,875)
Net cash (used in) provided by discontinued operations.......................... (2,963) 119
-------------- --------------
Net cash used in operating activities........................................... (4,831) (4,756)
-------------- --------------
Cash flows from investing activities--
Proceeds from sale of discontinued operations................................... $ 5,081 $ --
Additions to property and equipment............................................. (1,702) (2,099)
-------------- --------------
Net cash provided by (used in) investing activities............................. 3,379 (2,099)
-------------- --------------
Cash flows from financing activities--
Increase in revolving credit line, net.......................................... $ 2,687 $ 4,735
Reduction in term loans......................................................... (2,595) (799)
Proceeds (reduction) from capital expenditure loan.............................. (50) 475
Increase in foreign bank debt................................................... 1,142 2,557
Other financing activities, net................................................. 188 --
-------------- --------------
Net cash provided by financing activities....................................... 1,372 6,968
-------------- --------------
Changes in cash and cash equivalents--
Net (decrease) increase in cash and cash equivalents............................ $ (80) $ 113
Cash and cash equivalents at beginning of year.................................. 1,410 972
-------------- --------------
Cash and cash equivalents at end of quarter..................................... $ 1,330 $ 1,085
-------------- --------------
-------------- --------------
Interest paid..................................................................... $ 2,011 $ 2,264
-------------- --------------
-------------- --------------
Income taxes paid................................................................. $ 120 $ 61
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes
F-4
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(UNAUDITED)
1) BASIS OF PRESENTATION
The financial statements have been prepared by The Middleby Corporation (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information not misleading. These financial statements
should be read in conjunction with the financial statements and related notes
contained in the Company's 1996 Annual Report.
In the opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position of the Company as
of June 28, 1997 and December 28, 1996, and the results of operations for the
three and six months ended June 28, 1997 and June 29, 1996 and cash flows for
the six months ended June 28, 1997 and June 29, 1996.
2) DISCONTINUED OPERATION
On January 23, 1997, the Company completed the sale of substantially all of
the assets of its Victory Refrigeration Company ("Victory") subsidiary to an
investor group led by local management at Victory. Gross proceeds from the sale
are expected to amount to approximately $6,700,000, less amounts for retained
liabilities and transaction costs aggregating approximately $2,600,000. The
gross proceeds are subject to post-closing adjustments and have been adjusted
from $7,300,000 at December 28, 1996 to reflect negotiations with the investor
group. The terms of the sale were the results of arms-length negotiations. This
sale was announced on November 1, 1996, concluding the sale of all of the assets
of Victory. The sale and leaseback of the Victory facility to an unrelated third
party had previously been completed on December 27, 1996 for net proceeds of
approximately $4,556,000. Proceeds from these transactions were used to pay down
debt.
The results of the Victory Refrigeration Company subsidiary have been
reported separately as a discontinued operation in the Consolidated Financial
Statements for all periods presented. The results of the discontinued operations
are not necessarily indicative of the results which may have been obtained had
the continuing and discontinuing operations been operating independently.
Summarized results of the Victory Refrigeration Company for the quarter ended
June 29, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 29, 1996
------------------------------
THREE MONTHS SIX MONTHS
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales..................................................... $ 8,778 $ 17,814
Operating income (424) (303)
(Loss) earnings before taxes.................................. (646) (766)
Provision for taxes........................................... (214) (254)
-------------- --------------
(Loss) earnings from discontinued operations.................. $ (432) $ (512)
-------------- --------------
-------------- --------------
</TABLE>
Interest expense of $222,000 and $463,000 for the second quarter of 1996 and
year to date 1996, has been allocated based upon the ratio of the net assets of
the discontinued operations to the consolidated capitalization of the Company.
Continuing operations and discontinued operations reflect
F-5
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 28, 1997
(UNAUDITED)
2) DISCONTINUED OPERATION (CONTINUED)
the net tax expense or tax benefit generated by the respective operations,
limited, however, by the income tax benefit recognized in the Company's
historical financial statements. No general corporate expenses have been
allocated to the discontinued operations.
The net assets of discontinued operations included in the Consolidated
Balance Sheets at June 28, 1997 and December 28, 1996 amounted to $1,600,000 and
$4,082,000, respectively. The June 28, 1997 amount represents the remaining
amount due from the buyers. The Company expects that $1,200,000 will be received
during the third quarter of 1997, with the remaining $400,000 payable in two
annual installments on June, 1998 and June, 1999 with accrued interest. The
December 30, 1996 amount consists primarily of receivables, inventory and
equipment related to the discontinued operations, net of accounts payable,
accrued liabilities and closing costs associated with the sale.
3) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes.
The Company has recorded an income tax provision of $1,562,000 for the
fiscal six months ended June 28, 1997. The Company has significant tax loss
carry-forwards, and although a tax provision is recorded, the Company makes no
payment of federal tax other than AMT amounts.
The utilization of the NOL and credit carry-forwards depend on future
taxable income during the applicable carry-forward periods. Management evaluates
and adjusts the valuation allowance, based on the Company's expected taxable
income as part of the annual budgeting process. These adjustments reflect
management's judgment as to the Company's ability to generate taxable income
which will, more likely than not, be sufficient to recognize these tax assets.
4) EARNINGS PER SHARE
Earnings per share of common stock are based upon the weighted average
number of outstanding shares of common stock and common stock equivalents. The
treasury stock method is used in computing common stock equivalents, which
included stock options and a warrant issued in conjunction with the senior
secured note. The terms of the warrant provide for the purchase of 250,000
shares at $3.00 per share. Alternatively, under certain conditions, the warrant
terms provide for the purchase of 200,000 shares at $0.01 per share. Earnings
per share were computed based upon the weighted average number of common shares
outstanding of 8,795,000 and 8,715,000 for the fiscal quarters ended June 28,
1997 and June 29, 1996, respectively and 8,758,000 and 8,707,000 for the fiscal
year-to-date periods ended June 28, 1997 and June 29, 1996, respectively.
The Company is required to adopt "FAS 128: Earnings Per Share" during the
fourth quarter of 1997. Under this method, average shares outstanding for the
basic earnings per share calculation would have been 8,481,000 and 8,405,000 for
the fiscal quarters ended June 28, 1997 and June 29, 1996, respectively and
8,476,000 and 8,401,000 for the year-to-date periods ended June 28, 1997 and
June 29, 1996, respectively. Diluted earnings per share would not be presented
since dilution would be less than three percent. The adoption of this accounting
method would not affect earnings per share for the quarter or year-to-date
periods ended June 28, 1997 and June 29, 1996.
F-6
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 28, 1997
(UNAUDITED)
5) INVENTORIES
Inventories are valued using the first-in, first-out method.
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 28, 1997 DEC. 28, 1996
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials and parts....................................... $ 7,528 $ 6,492
Work-in-process............................................... 4,535 4,621
Finished goods................................................ 12,618 9,843
-------------- --------------
$ 24,681 $ 20,956
-------------- --------------
-------------- --------------
</TABLE>
6) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JUNE 28, 1997 DEC. 28, 1996
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued payroll and related expenses.......................... $ 3,345 $ 3,567
Accrued commissions........................................... 1,549 1,392
Accrued warranty.............................................. 1,363 1,252
Other accrued expenses........................................ 4,048 3,790
-------------- --------------
$ 10,305 $ 10,001
-------------- --------------
-------------- --------------
</TABLE>
7) RECLASSIFICATIONS AND RESTATEMENT
SALE OF DISCONTINUED OPERATIONS:
The financial statements exclude Victory Refrigeration Company which has
been accounted for as a discontinued operation. See Note 2 to the Consolidated
Financial Statements.
LITIGATION SETTLEMENT ACCOUNTING:
During 1996, the Company restated its accounting for the proceeds from the
September 1993 litigation settlement with the Hussmann Corporation in accordance
with generally accepted accounting principles (GAAP). The effect of this
accounting change was to record a greater gain from the litigation settlement.
Certain assets related to the 1989 acquisition that were written-off as a result
of the Company's original accounting for the settlement in 1993, were restored
in the historical financial statements or written-off in periods prior to 1993.
The effect on the financial statements for the periods ended June 28, 1997 and
June 29, 1996 was to increase non-cash amortization charges by $49,000, or $0.01
per share, and $69,000, or $0.01 per share, respectively.
F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of The Middleby Corporation
We have audited the accompanying consolidated balance sheets of THE MIDDLEBY
CORPORATION (a Delaware corporation) and Subsidiaries as of December 28, 1996,
and December 30, 1995, and the related consolidated statements of earnings,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Middleby Corporation and Subsidiaries as of December 28, 1996, and December
30, 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 28, 1996, in conformity with
generally accepted accounting principles.
As explained in Note 2(n) to the consolidated financial statements, the
Company has given retroactive effect to the change in accounting for the 1993
litigation settlement with the Hussmann Corporation.
Arthur Andersen LLP
Chicago, Illinois
February 17, 1997
F-8
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RESTATED
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 1,410 $ 972
Accounts receivable, net............................................................ 19,859 14,058
Inventories, net.................................................................... 20,956 18,320
Prepaid expenses and other.......................................................... 939 879
Net assets of discontinued operations............................................... 4,082 12,803
Current deferred taxes.............................................................. 2,086 2,086
---------- ----------
Total current assets.............................................................. 49,332 49,118
Property, plant and equipment, net.................................................... 18,843 17,305
Excess purchase price over net assets acquired, net................................... 13,339 13,796
Deferred taxes........................................................................ 2,950 2,930
Other assets.......................................................................... 1,504 2,082
---------- ----------
Total assets...................................................................... $ 85,968 $ 85,231
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................................................ $ 3,916 $ 1,710
Accounts payable.................................................................... 10,369 10,587
Accrued expenses.................................................................... 10,001 8,075
---------- ----------
Total current liabilities......................................................... 24,286 20,372
Long-term debt........................................................................ 37,352 41,318
Minority interest and other non-current liabilities................................... 1,880 1,783
Shareholders' equity:
Preferred stock, $.01 par value; none issued........................................ -- --
Common stock, $.01 par value; 8,468,000 and 8,388,000 shares issued and outstanding
in 1996 and 1995, respectively.................................................... 85 84
Paid-in capital..................................................................... 28,108 27,934
Cumulative translation adjustment................................................... (184) (228)
Accumulated deficit................................................................. (5,559) (6,032)
---------- ----------
Total shareholders' equity........................................................ 22,450 21,758
---------- ----------
Total liabilities and shareholders' equity........................................ $ 85,968 $ 85,231
---------- ----------
---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-9
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE FISCAL YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995
AND DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 RESTATED 1995 RESTATED 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales....................................................... $ 124,765 $ 106,348 $ 94,158
Cost of sales................................................... 87,330 73,841 65,594
------------- ------------- -------------
Gross margin................................................ 37,435 32,507 28,564
Selling and distribution expenses............................... 18,319 15,385 13,398
General and administrative expenses............................. 10,439 9,326 8,573
Provision for product line discontinuance....................... -- 900 --
------------- ------------- -------------
Income from operations...................................... 8,677 6,896 6,593
Interest expense and deferred financing amortization............ 4,351 4,327 3,262
Other (income) expense, net..................................... (146) (36) 482
------------- ------------- -------------
Earnings before income taxes................................ 4,472 2,605 2,849
Provision (benefit) for income taxes............................ 1,389 (140) 614
------------- ------------- -------------
Earnings from continuing operations......................... 3,083 2,745 2,235
Discontinued operations, net of income tax:
(Loss) earnings from discontinued operations................ (744) 419 505
Loss on disposal including operating losses
during the phase out period............................... (1,866) -- --
------------- ------------- -------------
Net earnings................................................ $ 473 $ 3,164 $ 2,740
------------- ------------- -------------
------------- ------------- -------------
Net earnings (loss) per share:
Continuing operations....................................... $ 0.35 $ 0.31 $ 0.26
Discontinued operations..................................... (0.30) 0.05 0.06
------------- ------------- -------------
Net earnings per share...................................... $ 0.05 $ 0.36 $ 0.32
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-10
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995
AND DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PAID-IN ACCUMULATED
COMMON STOCK CAPITAL DEFICIT CTA TOTAL
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1994 (restated)............... $ 83 $ 22,207 $ (11,936) $ (254) $ 10,100
Net earnings (restated).................. -- -- 2,740 -- 2,740
NOL utilization and change in tax asset
valuation allowance.................... -- 1,924 -- -- 1,924
Exercise of employee stock options....... -- 23 -- -- 23
Change in cumulative translation
adjustment............................. -- -- -- (130) (130)
------------ ------------ ------------- ------------ ------------
BALANCE,
December 31, 1994 (restated)............. $ 83 $ 24,154 $ (9,196) $ (384) $ 14,657
Net earnings (restated).................. -- -- 3,164 -- 3,164
NOL utilization and change in tax asset
valuation allowance.................... -- 3,409 -- -- 3,409
Exercise of employee stock options....... 1 121 -- -- 122
Issuance of deferred warrant............. -- 250 -- -- 250
Change in cumulative translation
adjustment............................. -- -- -- 156 156
------------ ------------ ------------- ------------ ------------
BALANCE,
December 30, 1995 (restated)............. $ 84 $ 27,934 $ (6,032) $ (228) $ 21,758
Net earnings............................. -- -- 473 -- 473
Exercise of employee stock options....... 1 174 -- -- 175
Change in cumulative translation
adjustment............................. -- -- -- 44 44
------------ ------------ ------------- ------------ ------------
BALANCE,
December 28, 1996........................ $ 85 $ 28,108 $ (5,559) $ (184) $ 22,450
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-11
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED DECEMBER 28, 1996, DECEMBER 30, 1995
AND DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RESTATED RESTATED
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities--
Net earnings.............................................................. $ 473 $ 3,164 $ 2,740
Adjustments to reconcile net earnings to net cash provided by continuing
operating activities--
Depreciation and amortization........................................... 2,752 3,024 2,107
Utilization of NOL...................................................... 98 (137) 601
Discontinued operations................................................. 2,610 (419) (505)
Cash effects of changes in--
Accounts receivable................................................. (5,801) 862 (2,782)
Inventories......................................................... (2,636) (3,147) 812
Prepaid expenses and other assets................................... (99) 911 28
Accounts payable.................................................... (218) 3,071 (785)
Accrued expenses and other liabilities.............................. 1,925 (198) 2,463
---------- ---------- ----------
Net cash (used in) provided by continuing operating activities............ (896) 7,131 4,679
Net cash provided by (used in) discontinued operating activities.......... 1,311 (2,268) 408
---------- ---------- ----------
Net cash provided by operating activities................................. 415 4,863 5,087
---------- ---------- ----------
Cash flows from investing activities--
Additions to property and equipment....................................... $ (2,966) $ (2,728) $ (1,922)
Proceeds from sale and leaseback of discontinued operations............... 4,800 -- --
Net cash received from sale of investment................................. -- 1,337 --
---------- ---------- ----------
Net cash provided by (used in) investing activities....................... 1,834 (1,391) (1,922)
---------- ---------- ----------
Cash flows from financing activities--
Proceeds from senior secured note......................................... $ -- $ 15,000 $ --
Proceeds from credit facility............................................. -- 31,000 --
Extinguishment of bank debt............................................... -- (44,055) --
Reduction in revolving credit line, net................................... (425) (1,000) (3,366)
Reduction in term loans................................................... (3,597) (2,932) (20)
Proceeds from foreign bank debt........................................... 2,233 1,200 --
Cost of financing activities.............................................. -- (1,726) --
Other financing activities, net........................................... (22) (640) 457
---------- ---------- ----------
Net cash used in financing activities..................................... (1,811) (3,153) (2,929)
---------- ---------- ----------
Changes in cash and cash equivalents--
Net increase in cash and cash equivalents............................... $ 438 $ 319 $ 236
Cash and cash equivalents at beginning of year.......................... 972 653 417
---------- ---------- ----------
Cash and cash equivalents at end of year................................ $ 1,410 $ 972 $ 653
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-12
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF OPERATIONS
The Middleby Corporation (the "Company") is engaged in the design,
manufacture and sale of commercial and institutional foodservice equipment. Its
major lines of products consist of conveyor ovens, toasters, counter-top cooking
and warming equipment, heavy duty gas ovens, convection ovens, broilers,
steamers and semi-custom fabrication units. The Company manufactures and
assembles most of this equipment at two factories in the United States and one
operation in the Philippines. The Company conducts its business principally
through three domestic and two international divisions. Each division operates
primarily on a decentralized basis.
The Company's products are sold primarily to independent dealers and
distributors and are marketed primarily through the Company's sales personnel
and network of independent manufacturers' representatives. The Company's
customers include: (i) fast food or quick-service restaurants, including those
restaurants that primarily offer pizza, (ii) full-service restaurants, including
casual-theme restaurants, (iii) retail outlets, such as convenience stores,
supermarkets and department stores and (iv) public and private institutions,
such as hotels, resorts, schools, hospitals, long-term care facilities,
correctional facilities, stadiums, airports, corporate cafeterias, military
facilities and government agencies. Included in these customers are several
large multi-national restaurant chains which account for a significant portion
of the Company's business, although no single customer accounts for more than
10% of net sales.
The Company purchases raw materials and component parts, the majority of
which are standard commodity type materials, from a number of suppliers.
Although certain component parts are procured from a sole source, the Company
can purchase such parts from alternate vendors.
The Company has numerous licenses and patents to manufacture, use and sell
its products and equipment. Certain of these licenses begin to expire in the
year 2000. Management believes the loss of any one of these licenses or patents
would not have a material adverse effect on the financial and operating results
of the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
years 1996, 1995 and 1994 ended on December 28, 1996, December 30, 1995 and
December 31, 1994, respectively, and each included 52 weeks.
(B) ACCOUNTS RECEIVABLE
Accounts receivable, as shown in the consolidated balance sheets, is net of
allowances for doubtful accounts of $495,000 and $413,000 at December 28, 1996
and December 30, 1995, respectively.
F-13
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
utilizing the first-in, first-out (FIFO) inventory method. Inventories, as of
December 28, 1996 and December 30, 1995, are as follows:
<TABLE>
<CAPTION>
RESTATED
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials and parts............................................. $ 6,492 $ 6,338
Work in process..................................................... 4,621 4,652
Finished goods...................................................... 9,843 7,330
----------- -----------
$ 20,956 $ 18,320
----------- -----------
----------- -----------
</TABLE>
The amounts shown above are net of inventory reserves of $946,000 and
$1,016,000 as of December 28, 1996 and December 30, 1995, respectively.
(D) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost as follows:
<TABLE>
<CAPTION>
RESTATED
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land and improvements............................................... $ 3,322 $ 3,293
Building and improvements........................................... 11,012 10,206
Machinery and equipment............................................. 16,250 14,516
----------- -----------
30,584 28,015
Less accumulated depreciation....................................... (11,741) (10,710)
----------- -----------
Property, plant and equipment, net.................................. $ 18,843 $ 17,305
----------- -----------
----------- -----------
</TABLE>
Depreciation is provided for financial statement purposes using the
straight-line method and amounted to $1,594,000, $1,543,000 and $1,547,000 in
fiscal 1996, 1995 and 1994, respectively. Following is a summary of the
estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION LIFE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Land improvements.......................................................... 7 years
Building and improvements.................................................. 20 to 40 years
Machinery and equipment.................................................... 3 to 10 years
</TABLE>
Expenditures which significantly extend useful lives are capitalized.
Maintenance and repairs are charged to expense as incurred.
F-14
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) EXCESS PURCHASE PRICE OVER NET ASSETS ACQUIRED
The excess purchase price over net assets acquired is being amortized using
a straight-line method over 40 years. Amounts presented are net of accumulated
amortization of $4,216,000 in fiscal 1996 and $3,759,000 in fiscal 1995. The
Company periodically evaluates the useful life and realizability of the excess
purchase price over net assets acquired based on current events and
circumstances. Impairments are measured utilizing an undiscounted forecasted
income method pertaining to business units and are recorded at the time
management deems an impairment has occurred.
(F) INTANGIBLE ASSETS
Trademarks, patents, license agreements and other intangibles, included in
other assets in the consolidated balance sheets, are being amortized on a
straight-line basis over estimated useful lives ranging from 5 to 14 years. Net
recorded intangible assets of $243,000 and $364,000 are presented net of
accumulated amortization of $2,314,000 and $2,193,000 in fiscal 1996 and 1995,
respectively.
(G) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
RESTATED
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued payroll and related expenses................................ $ 3,567 $ 3,200
Accrued commissions................................................. 1,392 1,190
Accrued warranty.................................................... 1,252 879
Other accrued expenses.............................................. 3,790 2,806
----------- -----------
$ 10,001 $ 8,075
----------- -----------
----------- -----------
</TABLE>
(H) RESEARCH AND DEVELOPMENT COSTS
Research and development costs, included in cost of sales in the
consolidated statements of earnings, are charged to expense when incurred. These
costs were $1,515,000, $1,438,000 and $1,295,000 in fiscal 1996, 1995 and 1994,
respectively.
(I) EARNINGS PER SHARE
Primary earnings per share is based upon the weighted average number of
outstanding shares of common stock and common stock equivalents. The weighted
average number of shares outstanding was 8,666,000, 8,678,000 and 8,434,000
shares for the fiscal years 1996, 1995 and 1994, respectively. Fully diluted
earnings per common and common equivalent shares are not presented, since
dilution is less than 3%.
(J) CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid instruments with a maturity of three months or less
to be cash equivalents. Cash paid for interest was $4,397,000, $4,076,000 and
$4,060,000 in fiscal 1996, 1995 and 1994, respectively. Cash payments
F-15
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
totaling $256,000, $371,000 and $192,000 were made for income taxes during
fiscal 1996, 1995 and 1994, respectively.
(K) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(L) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of all assets and liabilities approximates the fair value
of those financial instruments.
(M) ADOPTION OF ACCOUNTING STANDARDS
In fiscal 1996, the Company adopted "SFAS 121: Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets To Be Disposed Of" and "SFAS 123:
Accounting for Stock-Based Compensation." The adoption of these accounting
standards did not have a material impact on the financial statements.
(N) RESTATEMENTS
SALE OF DISCONTINUED OPERATIONS:
The financial statements presented have been restated for all periods
presented to exclude the Victory Refrigeration Company which has been accounted
for as a discontinued operation. See Note 3 to the Consolidated Financial
Statements.
LITIGATION SETTLEMENT ACCOUNTING:
During 1996, the Company restated its accounting for proceeds received from
the September 1993 litigation settlement with the Hussmann Corporation in
accordance with generally accepted accounting principles (GAAP). This settlement
related to a dispute arising from the Company's acquisition of the Hussmann
Corporation's Foodservice Equipment Group in July 1989. The effect of this
accounting change was to record a greater gain from the 1993 litigation
settlement. Certain assets related to the 1989 acquisition, that were
written-off in conjunction with the Company's original accounting for the
settlement in 1993, have been restored in the historical balance sheets or
written-off prior to 1993. This accounting has been reflected in the respective
periods in the Consolidated Financial Statements.
The effect on the 1991 financial statements was to write-off amounts related
to the 1991 arbitration settlement, and other amounts due from Hussmann, deemed
to be unrealizable under the revised accounting treatment. This resulted in a
decrease to net earnings, excess purchase price over net assets acquired, and
shareholders equity of $3,902,000. The effect on the 1993 financial statements
was to record a greater gain on the settlement, resulting in an increase to net
earnings and shareholders equity of $10,936,000. Excess purchase price over net
assets acquired and property, plant and equipment
F-16
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
were also increased by $10,936,000 to restore amounts written-off under the
original accounting treatment. The resulting impact on non-cash amortization and
depreciation charges was to increase such amounts by $104,000, $310,000 and
$310,000 in 1993, 1994 and 1995, respectively. The net effect of these
restatements on earnings per share resulted in a decrease of $0.47 in 1991, an
increase of $1.29 in 1993, a decrease of $0.04 in 1994 and a decrease of $0.03
in 1995.
(3) DISCONTINUED OPERATION
On January 23, 1997, the Company completed the sale of substantially all of
the assets of its Victory Refrigeration Company ("Victory") subsidiary to an
investor group led by local management at Victory. Gross proceeds from the sale
are expected to amount to approximately $7,300,000, less amounts for retained
liabilities and transaction costs aggregating approximately $2,600,000. The
proceeds are subject to post-closing adjustments. The terms of the sale were the
results of arms-length negotiations. This sale was announced on November 1,
1996, concluding the sale of all of the assets of Victory. The sale and
leaseback of the Victory facility to an unrelated third party had previously
been completed on December 27, 1996 for net proceeds of approximately
$4,556,000. Proceeds from these transactions were used to pay down debt.
The results of Victory have been reported separately as a discontinued
operation in the Consolidated Financial Statements for all periods presented.
The results of the discontinued operations are not necessarily indicative of the
results which may have been obtained had the continuing and discontinuing
operations been operating independently. Summarized results of Victory are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................. $ 27,261 $ 32,841 $ 35,809
Operating (loss) income................................... (458) 1,642 1,572
(Loss) earnings before taxes.............................. (1,111) 603 754
Provision for taxes....................................... (367) 184 249
------------ ------------ ------------
(Loss) earnings from discontinued operations.............. (744) 419 505
Estimated loss on disposal including operating results
during the phase-out period............................. (1,866) -- --
------------ ------------ ------------
Total (loss) earnings related to discontinued
operations.............................................. $ (2,610) $ 419 $ 505
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
During the fourth quarter of 1996, the Company provided for additional
losses on the disposal of Victory of $495,000, net of taxes. The additional
provision was required due to higher than anticipated operating losses prior to
the sale of Victory. The loss on disposal of Victory consists primarily of
operating losses of $1,409,000 during the fourth quarter of 1996 and $457,000
during 1997 until the sale was completed. The effective tax rate included in
these amounts differs from the U.S. statutory rate due to permanent book versus
tax differences.
Interest expense of $809,000, $771,000 and $818,000 for 1996, 1995 and 1994,
respectively, has been allocated based upon the ratio of the net assets of the
discontinued operations to the consolidated capitalization of the Company.
Continuing operations and discontinued operations reflect the net tax expense or
tax benefit generated by the respective operations, limited, however, by the
income tax
F-17
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) DISCONTINUED OPERATION (CONTINUED)
benefit recognized in the Company's historical financial statements. No general
corporate expenses have been allocated to the discontinued operations.
The net assets of discontinued operations included in the consolidated
balance sheets at December 28, 1996 and December 30, 1995 amounted to $4,082,000
and $12,803,000, respectively, and consist primarily of receivables, inventory,
and property, plant and equipment related to the discontinued operations, net of
accounts payable, accrued liabilities and closing costs associated with the
sale. Property and plant are not included in the December 28, 1996 amount, as
the sale and leaseback transaction was completed on December 27, 1996.
(4) FINANCING ARRANGEMENTS
The following is a summary of long-term debt as of December 28, 1996 and
December 30, 1995.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Senior secured credit facility:
Revolving credit line.................................................. $ 14,575 $ 15,000
Term loans............................................................. 8,362 11,959
Senior secured note...................................................... 15,000 15,000
Other.................................................................... 3,331 1,069
------------ ------------
41,268 43,028
Less current maturities of long-term debt................................ 3,916 1,710
------------ ------------
Total long-term debt................................................. $ 37,352 $ 41,318
------------ ------------
------------ ------------
</TABLE>
On January 10, 1995, the Company's subsidiaries consummated a $57,500,000
financing package to replace the existing bank debt and provide working capital
for future growth. The financing included a $42,500,000 senior secured credit
facility from a group of lenders led by an affiliate of a major international
bank and a $15,000,000 senior secured note placement with a major insurance
company.
The senior secured credit facility included a $15,000,000 five-year term
loan, a $2,500,000 capital expenditure facility renewable annually, and a
$25,000,000 revolving credit line expiring in January, 2000. Borrowings under
the revolving credit line are limited to specified percentages of defined
accounts receivable and inventories. The credit agreement initially permitted
borrowings for the term loan and revolving credit line at floating rates of 2.5%
above LIBOR rate or 1.0% above base rate. The interest rate can be adjusted
quarterly based on the Company's achievement of defined coverage ratios on a
rolling four quarter basis. As of December 28, 1996, borrowings under LIBOR
contracts were at 2.5% above the LIBOR rate and borrowings under prime rate
contracts were at 1.0% above the base rate. A facility fee of 0.0625% is payable
annually and a commitment fee of 0.375% is charged on the unused portion of the
revolving credit facility and capital expenditure facility. The term loan is
repayable in quarterly installments that total $2,325,000 in 1997, plus a
one-time payment of $1,470,000 related to the sale of Victory due also in 1997.
Additional scheduled repayments towards the term loan will total $2,625,000 in
1998 and $1,517,000 in 1999. The outstanding capital expenditure loans of
$425,000 are repayable in quarterly installments that total $100,000 in each of
1997, 1998, and 1999 with a lump sum payment of $125,000 or the remaining
balance on January 2, 2000. Mandatory prepayments are required in the case of
any excess cash flow, as defined, or in the event of any sale or disposition of
assets. The credit facility
F-18
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) FINANCING ARRANGEMENTS (CONTINUED)
is secured by a senior security interest of substantially all property, plant
and equipment and all accounts receivable and inventory of the Company's
domestic subsidiaries.
As of December 28, 1996, the Company's revolving credit facility provided
$23,650,000 of total borrowing availability. There was $14,575,000 outstanding
under that facility at December 28, 1996. The Company had executed letters of
credit of $632,000 against this facility, leaving an available line of credit of
$8,443,000 at December 28, 1996. As of December 28, 1996, the assets of Victory
provided $5,412,000 of the $23,650,000 total borrowing availability of the
revolving credit facility.
The senior secured note bears interest at 10.99% and has an eight-year term
maturing January 2003 with semi-annual payments of $2,500,000 beginning in July
2000. A warrant for the purchase of 250,000 shares of Common Stock of the
Company at an exercise price of $3.00 per share was issued in conjunction with
the note. Alternatively, the terms of the warrant provide for the purchase of
200,000 shares at $0.01 per share. The note agreement is secured by a senior
security interest in substantially all the intellectual property collateral of
the Company's subsidiaries.
The terms of the credit and note agreements prohibit the paying of
dividends, limit capital expenditures and leases, and require, among other
terms, a minimum amount, as defined, of shareholders' equity, and minimum ratios
of current assets to current liabilities, cash flow coverage indebtedness and
fixed charged coverage. The credit and note agreements also provide that if a
material adverse change in the Company's business operations or conditions
occurs, the lender and noteholder could declare an event of default. The Company
was in compliance with all covenants as amended for the period ending December
28, 1996.
A foreign subsidiary of the Company had borrowings of $3,433,000 at December
28, 1996, including a $1,700,000 term loan and a $1,733,000 omnibus revolving
credit line. The term loan is secured by the real property of the foreign
subsidiary. The revolving credit line is guaranteed by the Company. Interest on
both the term loan and the revolving credit line are at the prevailing bank
rate. The term loan is repayable in twenty equal quarterly installments starting
on March 31, 1998 and the revolving credit line is payable in full on January 1,
1998 if not renewed for an additional one-year period.
The weighted average interest rates under credit agreements during fiscal
1996, 1995 and 1994 were 9.3%, 9.5% and 8.7%, respectively.
The aggregate amount of long-term debt payable during each of the next five
years is as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1997.................................................................. $ 3,916
1998.................................................................. 4,819
1999.................................................................. 1,963
2000.................................................................. 17,390
2001.................................................................. 5,340
Thereafter............................................................ 7,840
----------
Total............................................................. $ 41,268
----------
----------
</TABLE>
F-19
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) COMMON AND PREFERRED STOCK
(A) SHARES AUTHORIZED
At December 28, 1996 and December 30, 1995, the Company had 20,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock authorized.
(B) WARRANT
In conjunction with the issuance of the senior secured notes in January 1995
(see Note 4), the Company issued a transferrable warrant to the noteholders for
the purchase of 250,000 shares of Common Stock at an exercise price of $3.00 per
share. Alternatively under certain conditions, the terms of the warrant provide
for the purchase of 200,000 shares at $0.01 per share. The warrant provides for
adjustment of the exercise price if the Company issues additional shares at a
purchase price below the then current market price, as defined, and for
adjustment of the number of shares if the Company declares a stock dividend. The
warrant became exercisable on February 10, 1995 and expires July 10, 2003.
(C) STOCK OPTIONS
The Company maintains an Amended and Restated 1989 Stock Incentive Plan (the
"Plan"), effective as of February 16, 1989, which provides key employees of the
Company rights to purchase shares of Common Stock at the fair market value of
the stock on the date of grant. The Plan was amended in 1996, by shareholder
approval, to increase the maximum amount that can be issued under the Plan to
400,000 shares from 200,000 shares. Options may be exercised upon certain
vesting requirements being met but expire, to the extent unexercised, within a
maximum of ten years from the date of grant. 147,075 shares remain available for
issue at December 28, 1996 under the Plan. The weighted average exercise price
of options outstanding under the Plan was $4.43 at December 28, 1996 and $3.10
at December 30, 1995.
In addition to the above Plan, the directors of the Company have options for
7,000 shares exercisable at $1.875 per share and 75,000 shares exercisable at
$7.50 per share.
A summary of stock option activity is presented below:
<TABLE>
<CAPTION>
KEY OPTION PRICE PER
STOCK OPTION ACTIVITY EMPLOYEES DIRECTORS SHARE
- ------------------------------------------------------------- ----------- --------- -----------------
<S> <C> <C> <C>
Outstanding at,
December 31, 1994.......................................... 140,000 9,000 $1.25 to $4.38
Granted.................................................... 39,000 -- $5.63
Exercised.................................................. (22,000) -- $1.25 to $4.38
Forfeited.................................................. (2,000) -- $3.00
----------- ---------
Outstanding at,
December 30, 1995.......................................... 155,000 9,000 $1.25 to $5.63
Granted.................................................... 60,000 75,000 $5.25 to $7.50
Exercised.................................................. (72,500) (2,000) $1.25 to $4.38
Forfeited.................................................. (5,900) -- $3.00 to $5.63
----------- ---------
Outstanding at,
December 28, 1996.......................................... 136,600 82,000 $1.25 to $7.50
----------- ---------
----------- ---------
</TABLE>
F-20
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) COMMON AND PREFERRED STOCK (CONTINUED)
The weighted average fair value of options granted was $5.78 and $3.82 in
1996 and 1995, respectively. The Company accounts for options under APB Opinion
No. 25, under which no compensation cost has been recognized. Had compensation
cost for these options been recorded, the Company's net income and earnings per
share would have been reduced as follows:
<TABLE>
<CAPTION>
RESTATED
1996 1995
---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Earnings from continuing operations.............. As reported $ 3,083 $ 2,745
Pro forma $ 2,893 $ 2,671
Net earnings..................................... As reported $ 473 $ 3,164
Pro forma $ 283 $ 3,090
Continuing operations EPS........................ As reported $ 0.35 $ 0.31
Pro forma $ 0.33 $ 0.31
EPS.............................................. As reported $ 0.05 $ 0.36
Pro forma $ 0.03 $ 0.36
</TABLE>
Under SFAS 123, the fair value of each option grant is estimated on the date
of grant using the following general assumptions for 1995 and 1996: risk-free
interest rate of 6.5%, no expected dividend yield, expected lives of four to
five years, and an expected annual increase in stock value of ten percent.
(6) PROVISION FOR PRODUCT LINE DISCONTINUANCE AND RESTRUCTURING CHARGE
Company management made the decision to discontinue the production of a
unique line of mixers during the fourth quarter of 1995. A provision of $900,000
was recorded for this product line discontinuance. The charge related to the
disposal and rationalization of assets associated with the product line and its
operations. No changes in operating personnel were made as a result of this
decision.
(7) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes."
The provision for income taxes for continuing operations is summarized as
follows:
<TABLE>
<CAPTION>
RESTATED RESTATED
1996 1995 1994
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal............................................ $ 1,153 $ (385) $ 460
State and local.................................... 188 183 144
Foreign............................................ 48 62 10
--------- ----------- -----------
Total.......................................... $ 1,389 $ (140) $ 614
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
F-21
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
Although the Company is not a federal taxpayer due to its NOL
carry-forwards, a tax provision is still required to be recorded. The majority
of the NOL carry-forwards expiring prior to 1998 relate to a 1983
quasi-reorganization and were not recorded as a credit to the tax provision, but
were directly credited to paid-in-capital. NOLs expiring in 1998 and thereafter
will be recorded entirely as a credit to the tax provision as they are
recognized. Reconciliation of the differences between income taxes computed at
the federal statutory rate and effective rate are as follows:
<TABLE>
<CAPTION>
RESTATED RESTATED
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
U.S. federal statutory tax rate......................................... 34.0% 34.0% 34.0%
Utilizations of NOL and reductions in valuation allowance............... (19.3) (65.6) (18.1)
Permanent book vs. tax differences...................................... 1.2 15.5 7.6
Foreign tax losses and rate differentials............................... 11.0 3.7 (7.0)
State taxes, net of federal benefit..................................... 4.2 7.0 5.1
--------- --------- ----------
Consolidated effective tax rate for continuing operations............... 31.1% (5.4%) 21.6%
--------- --------- ----------
--------- --------- ----------
</TABLE>
As of December 28, 1996 and December 30, 1995, the Company had recorded the
following deferred tax assets and liabilities which were comprised of the
following:
<TABLE>
<CAPTION>
RESTATED
1996 1995
---------- ----------
<S> <C> <C>
(DOLLARS IN
Deferred tax assets: THOUSANDS)
Net operating loss carry-forwards................................................ $ 12,073 $ 13,736
Tax credit carry-forwards........................................................ 1,503 1,426
Accrued pension benefits......................................................... 703 606
Accrued warranty................................................................. 641 469
Other............................................................................ 1,141 960
Valuation allowance.............................................................. (9,437) (10,515)
---------- ----------
Deferred tax assets............................................................ 6,624 6,682
Deferred tax liabilities:
Depreciation..................................................................... (1,588) (1,666)
---------- ----------
Net deferred tax assets............................................................ $ 5,036 $ 5,016
---------- ----------
---------- ----------
</TABLE>
As of December 28, 1996, the consolidated tax loss carry-forwards for
federal income tax purposes were approximately $12,073,000 on a tax effected
basis. These carry-forwards expire as follows: $6,849,000 in 1997; $3,000 in
1998; $264,000 in 2001; $508,000 in 2004; $1,619,000 in 2005; $1,913,000 in
2006; and $917,000 in 2007. Consolidated business tax credit carry-forwards
available at December 28, 1996 to reduce future tax liabilities were
approximately $898,000 and expire from 1996 through 2000. The Company also has
tax credits of approximately $605,000 resulting from federal AMT payments which
do not expire.
The decrease in the gross tax asset and the related valuation allowance was
primarily due to the utilization of NOL carry-forwards during the year. The
utilization of the NOL and credit carry-forwards depends on future taxable
income during the applicable carry-forward periods. Management evaluates
F-22
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
and adjusts the valuation allowance based on the Company's expected taxable
income as part of the annual budgeting process. These adjustments reflect
management's judgment as to the Company's ability to generate taxable income
which will, more likely than not, be sufficient to recognize these tax assets.
(8) COMMITMENTS AND CONTINGENCIES
The Company leases office and plant facilities and equipment under operating
leases which expire in fiscal 1997 through 2001. Rental expense was $692,000,
$816,000 and $897,000 in fiscal 1996, 1995 and 1994, respectively. Future
minimum rental payments under these leases are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1997.................................................................. $ 782
1998.................................................................. 709
1999.................................................................. 550
2000.................................................................. 552
2001.................................................................. 405
Thereafter............................................................ --
----------
Total............................................................. $ 2,998
----------
----------
</TABLE>
In addition to the above, the Company entered into an agreement with the
landlord of the Victory facility (before that subsidiary was sold--see Note 3)
to guarantee Victory's lease payments. The duration of this lease guarantee is
19 months. The contingent liability related to this guarantee totals
approximately $996,000 at December 28, 1996. This contingent liability is
scheduled to decrease by approximately $52,400 per month during fiscal 1997.
(9) SEGMENT INFORMATION
The Company is engaged in the manufacture and sale of commercial and
institutional food cooking and preparation equipment for the foodservice
industry. The Company's principal operations are in the United States, with a
majority of sales made to domestic dealers and distributors. No customer
accounted for 10% or more of sales during fiscal 1996, 1995 and 1994.
Sales outside the United States, based on dealer locations, are given below.
These export sales represented 37%, 36% and 35% of the Company's net sales in
fiscal 1996, 1995 and 1994, respectively. Additionally, a small amount of sales
to U.S. customers are transshipped by those customers for installation at their
international locations.
F-23
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SEGMENT INFORMATION (CONTINUED)
The following represents net sales as reported by each major geographic
region:
<TABLE>
<CAPTION>
RESTATED RESTATED
1996 1995 1994
----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
United States............................. $ 78,594 $ 67,878 $ 60,971
----------- ----------- ---------
Asia/Pacific.............................. 25,606 20,161 13,641
Europe/other.............................. 11,248 10,430 8,986
Latin America............................. 5,281 4,036 6,790
Canada.................................... 4,036 3,843 3,770
----------- ----------- ---------
Total international..................... 46,171 38,470 33,187
----------- ----------- ---------
Total net sales................... $ 124,765 $ 106,348 $ 94,158
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
(10) EMPLOYEE BENEFIT PLANS
The Company has a discretionary profit sharing plan and a 401(k) savings
plan for salaried and non-union hourly employees. The company had profit sharing
expense of $350,000, $325,000 and $300,000 in fiscal 1996, 1995 and 1994,
respectively.
The Company has a defined benefit pension plan for union hourly plant
employees at the Elgin, Illinois facility. The company's funding policy is to
contribute the minimum required by the Employee Retirement Income Security Act
of 1974. The plan had projected benefit obligations of $1,911,000 and $1,653,000
at December 28, 1996 and December 30, 1995, respectively. The market values of
plan assets were $1,549,000 and $1,371,000 at December 28, 1996 and December 30,
1995, respectively. The discount rates used to determine the projected benefit
obligations were 7.5% and 7.5% for 1996 and 1995, respectively. The net pension
expense for this plan was $155,000, $140,000 and $185,000 for fiscal 1996, 1995
and 1994, respectively.
In fiscal 1993, the Company adopted a non-qualified defined benefit pension
plan for certain officers of the Company and entered into a retirement benefit
agreement with its President. The Company also has a retirement benefit
agreement with its Chairman. The retirement benefit is based on a percentage of
the officer's final base salary and the number of years of employment. The
projected benefit obligations under these agreements were $2,067,000 and
$1,812,000 at December 28, 1996 and December 30, 1995, respectively, and are
currently unfunded. The discount rates used to determine the projected benefit
obligations were 7.5% and 7.5% for 1996 and 1995, respectively. Retirement
benefit expense was $255,000, $255,000 and $259,000 in fiscal 1996, 1995 and
1994, respectively.
F-24
<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
RESTATED
------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996
Net sales................................................. $ 29,510 $ 28,661 $ 31,400 $ 35,194
Gross margin.............................................. 8,567 8,529 9,373 10,966
Operating income.......................................... 2,288 1,671 2,062 2,656
Earnings from continuing operations....................... 766 401 624 1,292
(Loss) earnings from discontinued operations.............. (80) (432) (1,603) (495)
------------ ------------ ------------ ------------
Net earnings (loss)....................................... $ 686 $ (31) $ (979) $ 797
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net earnings (loss) per share:
Continuing operations................................... $ 0.09 $ 0.04 $ 0.07 $ 0.15
Discontinued operations................................. (0.01) (0.04) (0.19) (0.06)
------------ ------------ ------------ ------------
Net earnings (loss) per common share...................... $ 0.08 $ 0.00 $ (0.12) $ 0.09
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
1995
Net sales................................................. $ 25,743 $ 25,646 $ 27,558 $ 27,401
Gross margin.............................................. 7,667 7,492 8,389 8,959
Operating income.......................................... 1,836 1,484 2,117 1,459
Earnings from continuing operations....................... 497 437 739 1,072
(Loss) earnings from discontinued operations.............. 168 180 144 (73)
------------ ------------ ------------ ------------
Net earnings.............................................. $ 665 $ 617 $ 883 $ 999
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net earnings (loss) per share:
Continuing operations................................... $ 0.06 $ 0.05 $ 0.08 $ 0.12
Discontinued operations................................. 0.02 0.02 0.02 (0.01)
------------ ------------ ------------ ------------
Net earnings per common share............................. $ 0.08 $ 0.07 $ 0.10 $ 0.11
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
F-25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS.IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................................................ 3
The Company............................................................... 3
The Offering.............................................................. 5
Summary Consolidated Financial and Operating Data......................... 6
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 12
Price Range of Common Stock............................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Selected Consolidated Financial Data...................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 15
Business.................................................................. 22
Management................................................................ 33
Principal and Selling Stockholders........................................ 36
Description of Capital Stock.............................................. 37
Underwriting.............................................................. 39
Legal Matters............................................................. 40
Experts................................................................... 40
Available Information..................................................... 40
Incorporation of Certain Documents by Reference........................... 41
Index to Consolidated Financial Statements................................ F-1
</TABLE>
2,610,000 SHARES
[THE MIDDLEBY CORPORATION]
COMMON STOCK
($0.01 PAR VALUE)
SCHRODER & CO. INC.
BREAN MURRAY & CO., INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered, other than underwriting discounts. All of the amounts shown are
estimated except the Securities and Exchange Commission registration fee, the
Nasdaq National Market System filing fee and the NASD filing fee. All of such
expenses will be paid by the Registrant.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 8,243
Nasdaq National Market System filing fee........................ 17,500
NASD filing fee................................................. 3,220
Printing and engraving expenses................................. 100,000
Legal fees and expenses......................................... 75,000
Accounting fees and expenses.................................... 50,000
Transfer agent and registrar fees............................... 2,500
Miscellaneous................................................... 43,537
----------
Total....................................................... $ 300,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("Delaware GCL")
empowers a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorneys' fees, judgments,
fines and certain settlements) actually and reasonably incurred by them in
connection with any suit or proceeding to which they are a party, so long as
they acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to a
criminal action or proceeding, so long as they had no reasonable cause to
believe their conduct to have been unlawful. Such indemnification may extend to
certain liabilities under the Securities Act of 1933. The Registrant's
Certificate of Incorporation provides that the Registrant shall indemnify its
directors and such of its officers, employees and agents as the Board of
Directors may determine from time to time, to the fullest extent permitted by
Section 145 of the Delaware GCL.
Section 102 of the Delaware GCL permits a Delaware corporation to include in
its certificate of incorporation a provision eliminating or limiting a
director's liability to a corporation or its stockholders for monetary damages
for breaches of fiduciary duty. The enabling statute provides, however, that
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct, or knowing violation of the law, and
the unlawful purchase or redemption of stock or payment of unlawful dividends or
the receipt of improper personal benefits cannot be eliminated or limited in
this manner. The Registrant's Certificate of Incorporation includes a provision
which eliminates, to the fullest extent permitted, director liability for
monetary damages for breaches of fiduciary duty.
The Registrant has purchased liability coverage for its officers and
directors insuring such officers and directors against losses arising from any
wrongful act in his or her capacity as an officer or director.
The form of Underwriting Agreement filed as Exhibit 1 hereto provides for
the indemnification of the Registrant, its directors and officers and each
person who controls the Registrant within the meaning of the Securities Act of
1933 or the Securities Exchange Act of 1934, by the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Indemnification provisions are also contained in the warrant incorporated by
reference as Exhibit 4.2 hereto and the employment agreement incorporated by
reference as Exhibit 10.13 hereto.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement
3.1 Unofficial Restated Certificate of Incorporation of The Middleby
Corporation (as amended to August 23, 1996), incorporated by reference
to the Company's Form 10-Q/A, Amendment No. 1, Exhibit 3(i), for the
fiscal quarter ended June 29, 1996, filed on August 23, 1996
3.2 Unofficial Amended and Restated Bylaws of The Middleby Corporation (as
amended to August 23, 1996), incorporated by reference to the Company's
Form 10-Q/A, Amendment No. 1, Exhibit 3(ii), for the fiscal quarter
ended June 29, 1996, filed on August 23, 1996
4.1 Certificate of Designations dated October 30, 1987, and specimen stock
certificate relating to the Company's Preferred Stock, incorporated by
reference from the Company's Form 10-K, Exhibit (4), for the fiscal year
ended December 31, 1988, filed on March 15, 1989
4.2 Warrant to purchase common stock of The Middleby Corporation dated January
10, 1995, incorporated by reference to the Company's Form 10-K, Exhibit
(4) (d), for the fiscal year ended December 31, 1994, filed on March 31,
1995
5 Opinion of D'Ancona & Pflaum
10.1 Loan and Security Agreement dated January 9, 1995, by and among Middleby
Marshall Inc. and Asbury Associates, Inc., as Borrowers, certain lenders
named therein, as Lenders, and Sanwa Business Credit Corporation, as
Agent and Lender, incorporated by reference to the Company's Form 10-K,
Exhibit (4) (b), for the fiscal year ended December 31, 1994, filed on
March 31, 1995
10.2 First Amendment to Loan and Security Agreement, incorporated by reference
to the Company's Form 10-Q, Exhibit (4)(b)(i), for the fiscal quarter
ended June 29, 1996, filed on August 13, 1996
10.3 Second Amendment to Loan and Security Agreement, dated as of December 26,
1996, incorporated by reference to the Company's Form 10-K, Exhibit
4(b)(ii), for the fiscal year ended December 28, 1996
10.4 Third Amendment to Loan and Security Agreement, dated as of January 22,
1997, incorporated by reference to Company's Form 10-K, Exhibit
4(b)(iii), for the fiscal year ended December 28, 1996
10.5 Note Agreement dated as of January 1, 1995, among Middleby Marshall Inc.
and Asbury Associates, Inc. as Obligors, incorporated by reference to
the Company's Form 10-K, Exhibit (4) (c), for the fiscal year ended
December 31, 1994, filed on March 31, 1995
10.6 Amendment No. 1 to Note Agreement, incorporated by reference to the
Company's Form 10-Q, Exhibit (4)(c)(i), for the fiscal quarter ended
June 29, 1996, filed August 13, 1996
10.7 Amendment No. 2 to Note Agreement, incorporated by reference to the
Company's Form 10-Q, Exhibit (4)(c)(ii), for the fiscal quarter ended
June 29, 1996, filed on August 13, 1996
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
10.8 Amendment No. 3 to Note Agreement, dated as of August 15, 1996,
incorporated by reference to the Company's Form 10-K, Exhibit 4(c)(iii),
for the fiscal year ended December 28, 1996
10.9 "Second Amendment" (Amendment No. 4) to Note Agreement, dated as of
January 15, 1997, incorporated by reference to the Company's Form 10-K,
Exhibit 4(c)(iv), for the fiscal year ended December 28, 1996
10.10 Intercreditor Agreement dated as of January 10, 1995, by and among Sanwa
Business Credit Corporation, as Agent, the Northwestern Mutual Life
Insurance Company, as the Senior Noteholder, and First Security Bank of
Utah, National Association, as Security Trustee and collateral Agent,
incorporated by reference to the Company's Form 10-K, Exhibit (4) (e),
for the fiscal year ended December 31, 1994, filed on March 31, 1995
10.11 Amendment No. 1 to Intercreditor Agreement, incorporated by reference to
the Company's Form 10-Q, Exhibit (4)(e)(i), for the fiscal quarter ended
June 29, 1996, filed on August 13, 1996
10.12 Amendment No. 2 to Intercreditor Agreement, incorporated by reference to
the Company's Form 10-Q, Exhibit (4)(e)(ii), for the fiscal quarter
ended June 29, 1996, filed on August 13, 1996
10.13 Amended and Restated Employment Agreement of William F. Whitman, Jr.,
dated January 1, 1995, incorporated by reference to the Company's Form
10-Q, Exhibit (10) (iii) (a), for the fiscal quarter ended April 1, 1995
10.14 Amended and Restated Employment Agreement of David P. Riley, dated January
1, 1995, incorporated by reference to the Company's 10-Q, Exhibit (10)
(iii) (b) for the fiscal quarter ended April 1, 1995
10.15 Amended and Restated Employment Agreement of independent directors adopted
as of January 1, 1995, incorporated by reference to the Company's Form
10-Q, Exhibit (10) (iii) (c), for the fiscal quarter ended April 1, 1995
10.16 The Middleby Corporation Amended and Restated 1989 Stock Incentive Plan,
as amended, incorporated by reference to the Company's Form 10-Q,
Exhibit (10)(iii)(d), for the fiscal quarter ended June 29, 1996, filed
on August 13, 1996
10.17 1993 Performance Bonus Plan (Corporate Vice Presidents) incorporated by
reference to the Company's Form 10-K, Exhibit 10 (iii) (g), for the
fiscal year ended January 1, 1994, filed on March 31, 1994
10.18 1996 Management Incentive Plan (Corporate Vice Presidents), incorporated
by reference to Company's Form 10-Q, Exhibit 10 (iii) (f), for the
fiscal quarter ended June 29, 1996, filed on August 13, 1996
10.19 Description of Supplemental Retirement Program, incorporated by reference
to Amendment No. 1 to the Company's Form 10-Q, Exhibit 10 (c), for the
fiscal quarter ended July 3, 1993, filed on August 25, 1993
10.20 The Middleby Corporation Stock Ownership Plan, incorporated by reference
to the Company's Form 10-K, Exhibit (10) (iii) (m), for the fiscal year
ended January 1, 1994, filed on March 31, 1994
10.21 Amendment to The Middleby Corporation Stock Ownership Plan dated as of
January 1, 1994; incorporated by reference to the Company's Form 10-K,
Exhibit (10) (iii) (n), for the fiscal year ended December 31,1994,
filed on March 31, 1995
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
10.22 Agreement of Purchase and Sale of the Company's Cherry Hill, New Jersey
facility, with attached lease, incorporated by reference to the
Company's Form 10-Q, Exhibit (10)(iii)(j), for the fiscal quarter ended
September 28, 1996, filed on November 12, 1996
10.23 Asset Purchase Agreement among Middleby Marshall Inc., Victory
Refrigeration Company and Victory Acquisition Group dated December 27,
1996, incorporated by reference to the Company's Form 8-K dated January
23, 1997, Exhibit (10)(iii)(k), filed on February 7, 1997
23.1 Consent of Arthur Andersen LLP
23.2 Consent of D'Ancona & Pflaum (included in Exhibit 5)
24 Powers of Attorney (included on Page II-5)
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions (see response to Item 15 above),
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in said Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rolling Meadows, State of Illinois on September 11,
1997.
<TABLE>
<S> <C> <C>
THE MIDDLEBY CORPORATION,
A DELAWARE CORPORATION (REGISTRANT)
By: /s/ DAVID P. RILEY
-----------------------------------------
David P. Riley
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
By: /s/ JOHN J. HASTINGS
-----------------------------------------
John J. Hastings
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, TREASURER AND SECRETARY
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned directors and
officers of The Middleby Corporation, a Delaware corporation, which is filing a
registration statement on Form S-2 with the Securities and Exchange Commission,
under the provisions of the Securities Act of 1933, as amended, hereby
constitute and appoint David P. Riley, John J. Hastings and William F. Whitman,
Jr., and each of them, each as their true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign such
Registration Statement and any or all pre-effective and post-effective
amendments to the registration statement, including a Prospectus or an amended
Prospectus therein and any subsequent registration statement for the same
offering that may be filed under Rule 462(b) under the Securities Act of 1933,
as amended, and all other documents in connection therewith to be filed with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all interests and purposes as each of them might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ DAVID P. RILEY Officer and Director
- ------------------------------ (Principal Executive September 11, 1997
David P. Riley Officer)
Executive Vice President,
/s/ JOHN J. HASTINGS Chief Financial Officer,
- ------------------------------ Treasurer and Secretary September 11, 1997
John J. Hastings (Principal Financial and
Accounting Officer)
/s/ WILLIAM F. WHITMAN, JR.
- ------------------------------ Chairman of the Board and September 11, 1997
William F. Whitman, Jr. Director
/s/ ROBERT R. HENRY
- ------------------------------ Director September 11, 1997
Robert R. Henry
/s/ A. DON LUMMUS
- ------------------------------ Director September 11, 1997
A. Don Lummus
/s/ JOHN R. MILLER, III
- ------------------------------ Director September 11, 1997
John R. Miller, III
/s/ PHILIP G. PUTNAM
- ------------------------------ Director September 11, 1997
Philip G. Putnam
/s/ SABIN C. STREETER
- ------------------------------ Director September 11, 1997
Sabin C. Streeter
/s/ JOSEPH G. TOMPKINS
- ------------------------------ Director September 11, 1997
Joseph G. Tompkins
/s/ LAURA B. WHITMAN
- ------------------------------ Director September 11, 1997
Laura B. Whitman
/s/ ROBERT L. YOHE
- ------------------------------ Director September 11, 1997
Robert L. Yohe
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement
3.1 Unofficial Restated Certificate of Incorporation of The Middleby
Corporation (as amended to August 23, 1996), incorporated by reference
to the Company's Form 10-Q/A, Amendment No. 1, Exhibit 3(i), for the
fiscal quarter ended June 29, 1996, filed on August 23, 1996
3.2 Unofficial Amended and Restated Bylaws of The Middleby Corporation (as
amended to August 23, 1996), incorporated by reference to the Company's
Form 10-Q/A, Amendment No. 1, Exhibit 3(ii), for the fiscal quarter
ended June 29, 1996, filed on August 23, 1996
4.1 Certificate of Designations dated October 30, 1987, and specimen stock
certificate relating to the Company's Preferred Stock, incorporated by
reference from the Company's Form 10-K, Exhibit (4), for the fiscal year
ended December 31, 1988, filed on March 15, 1989
4.2 Warrant to purchase common stock of The Middleby Corporation dated January
10, 1995, incorporated by reference to the Company's Form 10-K, Exhibit
(4) (d), for the fiscal year ended December 31, 1994, filed on March 31,
1995
5 Opinion of D'Ancona & Pflaum
10.1 Loan and Security Agreement dated January 9, 1995, by and among Middleby
Marshall Inc. and Asbury Associates, Inc., as Borrowers, certain lenders
named therein, as Lenders, and Sanwa Business Credit Corporation, as
Agent and Lender, incorporated by reference to the Company's Form 10-K,
Exhibit (4) (b), for the fiscal year ended December 31, 1994, filed on
March 31, 1995
10.2 First Amendment to Loan and Security Agreement, incorporated by reference
to the Company's Form 10-Q, Exhibit (4)(b)(i), for the fiscal quarter
ended June 29, 1996, filed on August 13, 1996
10.3 Second Amendment to Loan and Security Agreement, dated as of December 26,
1996, incorporated by reference to the Company's Form 10-K, Exhibit
4(b)(ii), for the fiscal year ended December 28, 1996
10.4 Third Amendment to Loan and Security Agreement, dated as of January 22,
1997, incorporated by reference to Company's Form 10-K, Exhibit
4(b)(iii), for the fiscal year ended December 28, 1996
10.5 Note Agreement dated as of January 1, 1995, among Middleby Marshall Inc.
and Asbury Associates, Inc. as Obligors, incorporated by reference to
the Company's Form 10-K, Exhibit (4) (c), for the fiscal year ended
December 31, 1994, filed on March 31, 1995
10.6 Amendment No. 1 to Note Agreement, incorporated by reference to the
Company's Form 10-Q, Exhibit (4)(c)(i), for the fiscal quarter ended
June 29, 1996, filed August 13, 1996
10.7 Amendment No. 2 to Note Agreement, incorporated by reference to the
Company's Form 10-Q, Exhibit (4)(c)(ii), for the fiscal quarter ended
June 29, 1996, filed on August 13, 1996
10.8 Amendment No. 3 to Note Agreement, dated as of August 15, 1996,
incorporated by reference to the Company's Form 10-K, Exhibit 4(c)(iii),
for the fiscal year ended December 28, 1996
10.9 "Second Amendment" (Amendment No. 4) to Note Agreement, dated as of
January 15, 1997, incorporated by reference to the Company's Form 10-K,
Exhibit 4(c)(iv), for the fiscal year ended December 28, 1996
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
10.10 Intercreditor Agreement dated as of January 10, 1995, by and among Sanwa
Business Credit Corporation, as Agent, the Northwestern Mutual Life
Insurance Company, as the Senior Noteholder, and First Security Bank of
Utah, National Association, as Security Trustee and collateral Agent,
incorporated by reference to the Company's Form 10-K, Exhibit (4) (e),
for the fiscal year ended December 31, 1994, filed on March 31, 1995
10.11 Amendment No. 1 to Intercreditor Agreement, incorporated by reference to
the Company's Form 10-Q, Exhibit (4)(e)(i), for the fiscal quarter ended
June 29, 1996, filed on August 13, 1996
10.12 Amendment No. 2 to Intercreditor Agreement, incorporated by reference to
the Company's Form 10-Q, Exhibit (4)(e)(ii), for the fiscal quarter
ended June 29, 1996, filed on August 13, 1996
10.13 Amended and Restated Employment Agreement of William F. Whitman, Jr.,
dated January 1, 1995, incorporated by reference to the Company's Form
10-Q, Exhibit (10) (iii) (a), for the fiscal quarter ended April 1, 1995
10.14 Amended and Restated Employment Agreement of David P. Riley, dated January
1, 1995, incorporated by reference to the Company's 10-Q, Exhibit
(10)(iii)(b) for the fiscal quarter ended April 1, 1995
10.15 Amended and Restated Employment Agreement of independent directors adopted
as of January 1, 1995, incorporated by reference to the Company's Form
10-Q, Exhibit (10)(iii)(c), for the fiscal quarter ended April 1, 1995
10.16 The Middleby Corporation Amended and Restated 1989 Stock Incentive Plan,
as amended, incorporated by reference to the Company's Form 10-Q,
Exhibit (10)(iii)(d), for the fiscal quarter ended June 29, 1996, filed
on August 13, 1996
10.17 1993 Performance Bonus Plan (Corporate Vice Presidents) incorporated by
reference to the Company's Form 10-K, Exhibit 10 (iii) (g), for the
fiscal year ended January 1, 1994, filed on March 31, 1994
10.18 1996 Management Incentive Plan (Corporate Vice Presidents), incorporated
by reference to Company's Form 10-Q, Exhibit 10 (iii) (f), for the
fiscal quarter ended June 29, 1996, filed on August 13, 1996
10.19 Description of Supplemental Retirement Program, incorporated by reference
to Amendment No. 1 to the Company's Form 10-Q, Exhibit 10 (c), for the
fiscal quarter ended July 3, 1993, filed on August 25, 1993
10.20 The Middleby Corporation Stock Ownership Plan, incorporated by reference
to the Company's Form 10-K, Exhibit (10) (iii) (m), for the fiscal year
ended January 1, 1994, filed on March 31, 1994
10.21 Amendment to The Middleby Corporation Stock Ownership Plan dated as of
January 1, 1994 incorporated by reference to the Company's Form 10-K,
Exhibit (10) (iii) (n), for the fiscal year ended December 31,1994,
filed on March 31, 1995
10.22 Agreement of Purchase and Sale of the Company's Cherry Hill, New Jersey
facility, with attached lease, incorporated by reference to the
Company's Form 10-Q, Exhibit (10)(iii)(j), for the fiscal quarter ended
September 28, 1996, filed on November 12, 1996
10.23 Asset Purchase Agreement among Middleby Marshall Inc., Victory
Refrigeration Company and Victory Acquisition Group dated December 27,
1996, incorporated by reference to the Company's Form 8-K dated January
23, 1997, Exhibit (10)(iii)(k), filed on February 7, 1997
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of D'Ancona & Pflaum (included in Exhibit 5)
24 Powers of Attorney (included on Page II-5)
</TABLE>
II-9
<PAGE>
THE MIDDLEBY CORPORATION
2,610,000 Shares
Common Stock
(Par Value $0.01 Per Share)
_________________
UNDERWRITING AGREEMENT
New York, New York
September ___,1997
SCHRODER & CO. INC.
BREAN MURRAY & CO., INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder & Co. Inc.
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Ladies & Gentlemen:
THE MIDDLEBY CORPORATION, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters"), an aggregate of
2,000,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), and the persons named in Schedule II hereto (the "Selling
Stockholders"), propose, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 610,000 shares of Common Stock. The
2,610,000 shares of Common Stock to be sold by the Company and the Selling
Stockholders are herein referred to as the "Firm Securities." In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 391,500 shares of Common Stock (the "Option Securities"), on the
terms and for the purposes set forth in Section 2 hereof. The Firm Securities
and the Option Securities are herein collectively referred to as the
"Securities." Except as may be expressly set forth below, any reference to you
in this Agreement shall be solely in your capacity as the Representatives.
-1-
<PAGE>
1A. The Company and each of Messrs. William F. Whitman, Jr. and David P.
Riley (the "Principal Selling Stockholders"), jointly and severally, represent
and warrant to, and agree with, each of the Underwriters that:
(a) A registration statement on Form S-2 (File No. 333- ),
and as a part thereof a preliminary prospectus, in respect of the
Securities, has been filed with the Securities and Exchange Commission
(the "Commission") in the form heretofore delivered to you and, with
the exception of exhibits to the registration statement, also
delivered to you for each of the other Underwriters; if such
registration statement has not become effective, an amendment (the
"Final Amendment") to such registration statement, including a form of
final prospectus, necessary to permit such registration statement to
become effective, will promptly be filed by the Company with the
Commission; if such registration statement has become effective and
any post-effective amendment to such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, which amendment or amendments shall be in form acceptable
to you, the most recent such amendment has been declared effective by
the Commission; if such registration statement has become effective, a
final prospectus (the "Rule 430A Prospectus") relating to the
Securities containing information permitted to be omitted at the time
of effectiveness by Rule 430A of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"),
will promptly be filed by the Company pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act (any preliminary
prospectus filed as part of such registration statement being herein
called a "Preliminary Prospectus," and the final prospectus relating
to the Securities in the form first filed pursuant to Rule 424(b)(1)
or (4) of the rules and regulations of the Commission under the Act
or, if no such filing is required, the form of final prospectus
included in the registration statement, being herein called the
"Prospectus"); "Registration Statement" means such registration
statement as amended at the time that it becomes or became effective,
or, if applicable, as amended at the time the most recent post-effective
amendment to such
-2-
<PAGE>
registration statement filed with the Commission prior to the execution
and delivery of this Agreement became effective (the "Effective Date"),
including all exhibits thereto and all information deemed to be a part
thereof at such time pursuant to Rule 430A of the rules and regulations
of the Commission under the Act; any reference herein to any Preliminary
Prospectus or the Prospectus or the Registration Statement shall be deemed
to include any information incorporated by reference therein, as of the
date of such Preliminary Prospectus, the Prospectus or the
Registration Statement, as the case may be, and any reference to any
amendment or supplement to any Preliminary Prospectus, the Prospectus
or the Registration Statement shall be deemed to include any documents
filed after such date under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder and so incorporated by reference;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
(c) On the Effective Date and the date the Prospectus is filed
with the Commission, and when any further amendment or supplements
thereto become effective or are filed with the Commission, as the case
may be, the Registration Statement, the Prospectus and such amendment
or supplements did and will conform in all material respects to the
requirements of the Act and the rules and regulations of the
-3-
<PAGE>
Commission thereunder, and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through you expressly for use therein;
(d) The documents incorporated by reference in the Prospectus,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction where the nature of the property owned or leased by
it, or the nature of the business conducted by it, makes such
qualification necessary (except where the failure to so qualify would
not have a material adverse effect on the condition, financial or
otherwise, or the business affairs or prospects of the Company and its
subsidiaries, taken as a whole); and each of the Company's
subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own
its properties and to conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under
-4-
<PAGE>
the laws of each other jurisdiction where the nature of the property
owned or leased by it, or the nature of the business conducted by it,
makes such qualification necessary (except where the failure to so
qualify would not have a material adverse effect on the condition,
financial or otherwise, or the business affairs or prospects of the
Company and its subsidiaries, taken as a whole);
(f) All the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and, except as otherwise set forth in
the Prospectus, are owned by the Company free and clear of all liens,
encumbrances, equities, security interests, or claims; and, except as
otherwise set forth in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and
there are no commitments, plans or arrangements to issue, any shares
of capital stock of any subsidiary or any security convertible or
exchangeable or exercisable for capital stock of any subsidiary;
except for the shares of stock of each subsidiary owned by the Company
and as otherwise set forth in the Prospectus, neither the Company nor
any subsidiary owns, directly or indirectly, any shares of capital
stock of any corporation or has any equity interest in any firm,
partnership, joint venture, association or other entity;
(g) The Company has all requisite power and authority (corporate
and other) to execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance by the Company of
its obligations under this Agreement have been duly and validly
authorized by all requisite corporate action of the Company; and this
Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms;
(h) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus, any loss of or material dispute with any
of its ten largest customers or its ten largest suppliers of
-5-
<PAGE>
products or services (measured by dollar volume during the Company's most
recent fiscal year) or any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute, work stoppage or work slowdown
or court or governmental action, order or decree, which loss or
interference is material to the Company and its subsidiaries, taken as
a whole; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been, and prior to the Time of Delivery (as defined in Section 4
hereof) there will not be, any change in the capital stock, other than
shares issued pursuant to exercise of employee or director stock
options that the Prospectus indicates are outstanding (the "Option
Shares"), pursuant to exercise of warrants that the Prospectus
indicates are outstanding, or pursuant to the terms of convertible or
exchangeable securities of the Company or its subsidiaries outstanding
on the date hereof and described in the Prospectus or short-term debt
or long-term debt of the Company or any of its subsidiaries that is
described in the Prospectus, or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(i) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property purported to be owned by them, in each case
free and clear of all liens, encumbrances and defects except those
that are described or contemplated by the Prospectus, or those that do
not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company and its subsidiaries; any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such real property and
-6-
<PAGE>
buildings by the Company and its subsidiaries; and the properties of the
Company and its subsidiaries, and their respective operations, are
insured to the extent insurance is customarily obtained by similar
businesses;
(j) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the
issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable, are
free of any preemptive rights, rights of first refusal or similar
rights, were issued and sold in compliance with the applicable federal
and state securities laws, are quoted on the Nasdaq National Market
System and conform in all material respects to the description thereof
in the Prospectus; except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible or
exchangeable or exercisable for capital stock of the Company; except
for William F. Whitman, Jr., there are no holders of securities of the
Company who, by reason of the filing of the Registration Statement
have the right (and have not waived such right) to request the Company
to include in the Registration Statement securities owned by them;
(k) The Securities to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and non-assessable, and will
conform in all material respects to the description thereof in the
Prospectus and will be quoted on the Nasdaq National Market System as
of the Effective Date;
(l) The performance of this Agreement, the consummation of the
transactions herein contemplated, the issue and sale of the Securities
and the compliance by the Company with all the provisions of this
Agreement will not conflict with or result in a breach or violation of
any of the terms or
-7-
<PAGE>
provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge, claim or encumbrance upon, any of the
property or assets of the Company or any of its subsidiaries pursuant to,
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions
of the Certificate of Incorporation or the By-laws (or similar corporate
constituent documents), in each case as amended to the date hereof, of
the Company or any of its subsidiaries or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their respective properties; and no consent, approval, authorization,
order, registration or qualification of or with any court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation of the other transactions contemplated
by this Agreement, except the registration under the Act of the
Securities, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state or
foreign securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
(m) Except as set forth in the Prospectus, there is no legal or
governmental action, suit, proceeding or investigation pending to
which the Company or any of its subsidiaries or any of their
respective officers or directors is a party or of which the Company or
any of its subsidiaries or their respective properties is the subject,
other than actions, suits, proceedings or investigations incident to
the business conducted by the Company and its subsidiaries that will
not individually or in the aggregate have a material adverse effect on
the current or future financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole; to the best of the Company's knowledge, no such actions, suits,
proceedings or investigations are threatened or
-8-
<PAGE>
contemplated by governmental authorities or threatened or contemplated by
others; neither the Company nor any of its subsidiaries is involved in any
labor dispute, work stoppage, or work slowdown, nor, to the Company's
knowledge, is any labor dispute, work stoppage, or work slowdown
threatened; and neither the Company nor any of its subsidiaries is
subject to any outstanding order, ruling, judgment, award or decree
that may have a material adverse effect upon the Company and its
subsidiaries, taken as a whole;
(n) The Company and its subsidiaries have such licenses, permits
and other approvals or authorizations of and from governmental or
regulatory authorities ("Permits") as are necessary under applicable
law to own their respective properties and to conduct their respective
businesses in the manner now being conducted and as described in the
Prospectus; and the Company and its subsidiaries have fulfilled and
performed all of their respective obligations with respect to such
Permits, and no event has occurred that allows, or after notice or
lapse of time or both would allow, revocation or termination thereof
or result in any other material impairment of the rights of the holder
of any such permits;
(o) Arthur Andersen LLP have certified certain financial
statements of the Company and its consolidated subsidiaries, have
delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, and are independent public accountants
as required by the Act and the rules and regulations of the Commission
thereunder;
(p) The consolidated financial statements and schedules of the
Company and its subsidiaries included or incorporated by reference in
the Registration Statement and the Prospectus present fairly the
financial condition, the results of operations and the cash flows of
the Company and its subsidiaries as of the dates and for the periods
therein specified in conformity with generally accepted accounting
principles consistently applied throughout the periods
-9-
<PAGE>
involved, except as otherwise stated therein; and the other financial and
statistical information and data set forth in the Registration
Statement and the Prospectus is accurately presented and, to the
extent such information and data is derived from the financial
statements and books and records of the Company and its subsidiaries,
is prepared on a basis consistent with such financial statements and
the books and records of the Company and its subsidiaries; and no
other financial statements or schedules are required to be included in
the Registration Statement and the Prospectus;
(q) There are no statutes or governmental regulations, or any
contracts or other documents that are required to be described in or
filed as exhibits to the Registration Statement that are not described
therein or filed or incorporated by reference as exhibits thereto; and
all such contracts to which the Company or any subsidiary is a party
have been duly authorized, executed and delivered by the Company or
such subsidiary, constitute valid and binding agreements of the
Company or such subsidiary, have been performed or are being performed
in all material respects and are enforceable against the Company or
such subsidiary in accordance with the terms thereof;
(r) The Company and its subsidiaries own or possess adequate
patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names, copyrights,
technology and know-how necessary to conduct the general business now
or proposed to be operated by them as described in the Prospectus;
neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trademarks,
service marks, trade names, copyrights, technology or know-how that,
individually or in the aggregate, could materially adversely affect
the business, operations, financial condition, income or business
prospects of the Company and its subsidiaries, taken as a whole; and,
the discoveries, inventions, products or processes of the Company and
its subsidiaries referred to in the Prospectus do not, to the
Company's knowledge,
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<PAGE>
infringe or conflict with any patent or other right of any third party,
or any discovery, invention, product or process that is the subject of a
patent application filed by any third party, known to the Company;
(s) Neither the Company nor any of its subsidiaries are in
violation of any term or provision of its Certificate of Incorporation
or By-Laws (or similar corporate constituent documents), in each case
as amended to the date hereof, or any law, ordinance, administrative
or governmental rule or regulation applicable to the Company or any of
its subsidiaries, or of any decree of any court or governmental agency
or body having jurisdiction over the Company or any of its
subsidiaries;
(t) No default exists, and no event has occurred that with
notice or lapse of time, or both, would constitute a default in the
due performance and observance of any term, covenant or condition of
any indenture, mortgage, deed of trust, bank loan or credit agreement,
lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which any of them or their
respective properties is bound or may be affected in any material
adverse respect with regard to the property, business or operations of
the Company and its subsidiaries;
(u) The Company and its subsidiaries have timely filed all
necessary tax returns and notices and have paid all federal, state,
county, local and foreign taxes of any nature whatsoever for all tax
years through December 28, 1996, to the extent such taxes have become
due. The Company has no knowledge, or any reasonable grounds to know,
of any tax deficiencies that would have a material adverse effect on
the Company or any of its subsidiaries; the Company and its
subsidiaries have paid all taxes that have become due, whether
pursuant to any assessments or otherwise, and there is no further
liability (whether or not disclosed on such returns) or assessments
for any such taxes, and no interest or penalties accrued or accruing
with respect thereto, except as may be set forth or adequately
reserved for in the financial statements included or incorporated by
reference in the Registration
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<PAGE>
Statement; the amounts currently set up as provisions for taxes or
otherwise by the Company and its subsidiaries on their books and records
are sufficient for the payment of all their unpaid federal, state, county,
local and foreign taxes accrued through the dates as of which they speak,
and for which the Company and its subsidiaries may be liable in their own
right, or as a transferee of the assets of, or as successor to, any other
corporation, association, partnership, joint venture or other entity;
(v) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit the preparation of financial
statements in conformity with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(w) Neither the Company nor any of its subsidiaries is in
violation of, nor has any of them received any outstanding notice of a
violation of, any foreign, federal, state, county or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants, antitrust or trade regulation matters, any federal or
state law relating to equal employment or discrimination in the
hiring, promotion or paying of employees or civil rights generally,
any applicable federal or state wages and hours laws, or any
provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated thereunder, where
such violation would have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(x) None of the Company or its subsidiaries, or any of their
respective officers,
-12-
<PAGE>
directors, employees or agents have used any corporate funds for any
unlawful contribution, payment, gift or entertainment or other unlawful
expense relating to political activity, or made any unlawful payment of
funds of the Company or any subsidiary or received or retained any
contribution, payment, gift or expenditure in violation of any law, rule
or regulation;
(y) None of the Company or its subsidiaries, or any of their
respective officers, directors, employees or agents have taken or will
take, directly or indirectly, any action designed to or that has
constituted or that might be reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities; and
(z) The conditions for use of Form S-2 as set forth in the
General Instructions thereto, have been satisfied.
1B. Each Selling Stockholder, severally and not jointly, represents and
warrants to, and agrees with, each of the Underwriters that:
(a) Such Selling Stockholder has, and at the Time of Delivery
(as defined in Section 4 hereof) will have, good and valid title to
the Securities to be sold by such Selling Stockholder hereunder, free
and clear of any liens, encumbrances, equities, security interests,
claims and other restrictions of any nature whatsoever, and such
Selling Stockholder has the full legal, right, power and authority,
and any approval required by law, to enter into this Agreement and to
sell, assign, transfer and deliver the Securities being sold by such
Selling Stockholder hereunder and to make the representations,
warranties, covenants and agreements made by it in this Agreement; and
upon the delivery of and payment for such Securities as herein
provided, the Underwriters will acquire good and valid title thereto,
free and clear of all liens, encumbrances, equities, security
interests, claims and other restrictions of any nature whatsoever;
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<PAGE>
(b) Such Selling Stockholder has duly executed and delivered an
agreement and power of attorney (with respect to such Selling
Stockholder, the "Power-of-Attorney", in the form heretofore delivered
to the Representatives, appointing John J. Hastings as such
Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact") with
authority to execute, deliver and perform this Agreement on behalf of
the Selling Stockholder and appointing the Company as custodian thereunder
(the "Custodian"). Certificates in negotiable form, endorsed in blank
or accompanied by blank stock powers duly executed, with signatures
appropriately guaranteed, representing the Securities to be sold by such
Selling Stockholder hereunder have been deposited with the Custodian
pursuant to the Power-of-Attorney for the purpose of delivery pursuant
to this Agreement. Such Selling Stockholder has all requisite power and
authority to execute, deliver and perform its obligations under the Power-
of-Attorney. The execution and delivery of the Power-of-Attorney have
been duly authorized by all necessary action of such Selling Stockholder;
the Power-of-Attorney has been duly executed and delivered by such Selling
Stockholder and, assuming due authorization, execution and delivery by
the Custodian, is the legal, valid, binding and enforceable instrument
of such Selling Stockholder. Such Selling Stockholder agrees that
each of the Securities represented by the certificates on deposit with
the Custodian is subject to the interests of the Underwriters, the
Company and the other Selling Stockholders hereunder, that the
arrangements made for such custody, the appointment of the Attorney-in-Fact
and the right, power and authority of the Attorney-in-Fact to
execute and deliver this Agreement and to carry out the terms of this
Agreement, are to that extent irrevocable and that the obligations of
such Selling Stockholder hereunder shall not be terminated, except as
provided in this Agreement or the Power-of-Attorney, by any act of
such Selling Stockholder, by operation of law or otherwise, whether by
the death or incapacity of such Selling Stockholder or by the
occurrence of any other event. If any Selling Stockholder should die
or become incapacitated or if any other event should
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<PAGE>
occur, before the delivery of the Securities hereunder, the certificates
for the Securities deposited with the Custodian shall be delivered by the
Custodian in accordance with the respective terms and conditions of
this Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Custodian or the Attorney-in-Fact
shall have received notice thereof. Neither the execution,
delivery or performance of the Power-of-Attorney, the consummation of
the transactions therein contemplated nor the compliance with the
terms thereof by such Selling Stockholder will conflict with, or
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge, claim or encumbrance on any property of the
Company or any of its subsidiaries under, any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder's
property is bound, or any statute, ruling, judgment, decree, order to
regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Stockholder.
(c) Neither the execution and delivery or performance of this
Agreement or the Power of Attorney or the consummation of the
transactions herein or therein contemplated nor the compliance with
the terms hereof or thereof by such Selling Stockholder will conflict
with, or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim or encumbrance on
any property of the Company or any of its subsidiaries under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder's property is bound, or the constituent
documents of such Selling Stockholder or any statute, ruling,
judgment, decree, order or regulation of any court or other
governmental authority or any arbitrator applicable to such Selling
Stockholder; and no consent, approval, authorization, order,
registration or qualification of or with any governmental authority,
except those as have been
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<PAGE>
obtained, those as may be required under state or foreign securities or
Blue Sky laws or by the by-laws and rules of the National Association of
Securities Dealers, Inc. and, if the Registration Statement filed with
respect to the Securities is not effective under the Act as of the time of
execution hereof, those as may be required (and shall be obtained as
provided in this Agreement) under the Act and the Exchange Act;
(d) Such Selling Stockholder will not, during the period of 120
days after the date hereof, except pursuant to this Agreement, offer,
sell, contract to sell or otherwise dispose of any capital stock of
the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, without the
prior written consent of Schroder & Co. Inc.;
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to cause or result in, or
that has constituted or that might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or otherwise;
(f) The sale by such Selling Stockholder of Securities pursuant
hereto is not prompted by any adverse information concerning the
Company or its subsidiaries that is not set forth in the Registration
Statement or the Prospectus;
(g) Such Selling Stockholder is disposing of Securities for its
own account and is not selling such Securities, directly or
indirectly, for the benefit of the Company or the Underwriters. No
part of the proceeds of such sale to be received by such Selling
Stockholder will inure, either directly or indirectly, to the benefit
of the Company;
(h) All information furnished in writing to the Company or the
Underwriters by such Selling Stockholder for use in the preparation of
the Registration Statement and the Prospectus and other documents to
be filed with the National Association of Securities Dealers, Inc. or
state securities or Blue Sky
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<PAGE>
authorities is true and correct and does not contain an untrue statement
of material fact nor does it omit to state any material fact required to
be stated therein or necessary to make such information, in the light of
the circumstances under which it was made, not misleading;
(i) Such Selling Stockholder has reviewed the Prospectus and the
Registration Statement, and the information regarding such Selling
Stockholder set forth therein under the caption "Principal and Selling
Stockholders" is complete and accurate;
(j) At the Time of Delivery, all stock transfer or other taxes
(other than income taxes) that are required to be paid in connection
with the sale and transfer of the Securities to be sold by such
Selling Stockholder to the Underwriters hereunder will have been fully
paid or provided for by such Selling Stockholder and all laws imposing
such taxes will have been fully complied with;
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to the Underwriters an aggregate of 2,000,000 Firm
Securities, each Selling Stockholder agrees to sell to the Underwriters the
number of Firm Securities set forth on Schedule II opposite the name of such
Selling Stockholder and each of the Underwriters agrees to purchase from the
Company and the Selling Stockholders, at a purchase price of $____________ per
share, the respective aggregate number of Firm Securities determined in the
manner set forth below. The obligation of each Underwriter to the Company and
each of the Selling Stockholders, respectively, shall be to purchase that
portion of the number of shares of Common Stock to be sold by the Company or
such Selling Stockholder pursuant to this Agreement as the number of Firm
Securities set forth opposite the name of such Underwriter on Schedule I bears
to the total number of Firm Securities to be purchased by the Underwriters
pursuant to this Agreement, in each case adjusted by you in order that no
Underwriter shall be obligated to purchase Firm Securities other than in 100
share amounts. In making this Agreement, each Underwriter is contracting
severally and not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriters, as required (for the sole
purpose of covering over-allotments in the sale of the Firm Securities), up to
391,500 Option Securities at the purchase price per share of the Firm Securities
being sold by the Company as stated in the preceding paragraph. The right to
purchase the Option Securities may be exercised by you giving 48 hours prior
written or telephonic notice
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<PAGE>
(subsequently confirmed in writing) to the Company of your determination to
purchase all or a portion of the Option Securities. Such notice may be given
at any time within a period of 30 days following the date of this Agreement.
Option Securities shall be purchased severally for the account of each
Underwriter in proportion to the number of Firm Securities set forth opposite
the name of such Underwriter in Schedule I hereto. No Option Securities
shall be delivered to or for the accounts of the Underwriters unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided. The respective purchase obligations of each
Underwriter shall be adjusted by you in order that no Underwriter shall be
obligated to purchase Option Securities other than in 100 share amounts. The
Underwriters may cancel any purchase of Option Securities at any time prior
to the Option Securities Delivery Date (as defined in Section 4 hereof) by
giving written notice of such cancellation to the Company.
3. The Underwriters propose to offer the Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
and the Selling Stockholders to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase price therefor at
the election of the Company and the Selling Stockholders by (i) wire transfer or
(ii) certified or official bank check or checks, payable in New York Clearing
House funds, to the order of the Company, for the purchase price of the Firm
Securities being sold by the Company, and to the order of the Attorney-in-Fact
for the purchase price of the Firm Securities being sold by the Selling
Stockholders, at the office of Schroder & Co. Inc., Equitable Center,
787 Seventh Avenue, New York, New York, at 9:30 A.M., New York City time, on
________ __, 1997, or at such other time, date and place as you and the Company
may agree upon in writing, such time and date being herein called the "Time of
Delivery."
Certificates in definitive form for the Option Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
to you for the account of such Underwriter, against payment by such Underwriter
or on its behalf of the purchase price thereof at the election of the Company
and the Selling Stockholders by (i) wire transfer or (ii) certified or official
bank check or checks, payable in New York Clearing House funds, to the order of
the Company, for the purchase price of the Option Securities, in New York, New
York, at such time and on such date (not earlier than the Time of Delivery nor
later than ten business days after giving of the notice delivered by you to the
Company with reference thereto) and in such denominations and registered in such
names as shall be specified in the notice delivered by you to the Company with
respect to the purchase of such Option Securities. The date and time of such
delivery and payment are herein sometimes referred to as the "Option Securities
Delivery Date." The obligations of the Underwriters shall be subject, in their
discretion, to the condition that there shall be delivered to the Underwriters
on the Option Securities Delivery Date opinions and
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<PAGE>
certificates, dated such Option Securities Delivery Date, referring to the
Option Securities, instead of the Firm Securities, but otherwise to the same
effect as those required to be delivered at the Time of Delivery pursuant to
Section 7(d), 7(e), 7(f), 7(g) and 7(j).
Certificates for the Firm Securities and the Option Securities to be
delivered as aforesaid will be in good delivery form, and in such denominations
and registered in such names as you may request not less than 48 hours prior to
the Time of Delivery and the Option Securities Delivery Date, respectively.
Such certificates will be made available for checking and packaging in New York,
New York, at least 24 hours prior to the Time of Delivery and Option Securities
Delivery Date.
5. (a) The Company covenants and agrees with each of the Underwriters:
(i) If the Registration Statement has not become effective, to
file promptly the Final Amendment with the Commission and use its best
efforts to cause the Registration Statement to become effective; if
the Registration Statement has become effective, to file promptly the
Rule 430A Prospectus with the Commission; to make no further amendment
or any supplement to the Registration Statement or Prospectus that
shall be disapproved by you after reasonable notice thereof; to advise
you, promptly after it receives notice thereof of the time when the
Registration Statement, or any amendment thereto, or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and in the event of the
issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain
withdrawal of such order;
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<PAGE>
(ii) Promptly from time to time, to take such action as you may
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(iii) To furnish each of the Representatives and counsel for the
Underwriters, without charge, signed copies of the registration
statement originally filed with respect to the Securities and each
amendment thereto (in each case including all exhibits thereto) and to
each other Underwriter, without charge, a conformed copy of such
registration statement and each amendment thereto (in each case
without exhibits thereto) and, so long as a prospectus relating to the
Securities is required to be delivered under the Act, as many copies
of each Preliminary Prospectus, the Prospectus and all amendments or
supplements thereto as you may from time to time reasonably request.
If at any time when the delivery of a prospectus is required to be
delivered under the Act an event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply
with the Act, the Company will forthwith prepare and, subject to the
provisions of Section 5(a)(i) hereof, file with the Commission an
appropriate supplement or amendment thereto, and will furnish to each
Underwriter and to any dealer in securities, without charge, as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus or make an appropriate
filing under Section 13, 14 or 15(d) of the Exchange Act that will
correct such statement or omission or effect such
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<PAGE>
compliance in accordance with the requirements of Section 10 of the Act;
(iv) To make generally available to its stockholders as soon as
practicable, but in any event not later than 45 days after the close
of the period covered thereby, an earnings statement in form complying
with the provisions of Section 11(a) of the Act (including, at the
option of the Company, Rule 158) covering a period of 12 consecutive
months beginning not later than the first day of the Company's fiscal
quarter next following the Effective Date;
(v) To file promptly all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act
subsequent to the Effective Date and during any period when the
Prospectus is required to be delivered;
(vi) For a period of five years from and after the Effective
Date, to furnish to its stockholders after the end of each fiscal year
an annual report (including a consolidated balance sheet and
statements of income, cash flow and stockholders' equity of the
Company and its subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the Effective Date), consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(vii) During a period of five years from and after the Effective
Date, to furnish to you copies of all reports or other communications
(financial or other) furnished to its stockholders, and deliver to you
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is
listed; and (ii) such additional information concerning the business
and financial condition of the Company as you may from time to time
reasonably request;
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<PAGE>
(viii) To apply the net proceeds from the sale of the Securities
in the manner set forth in the Prospectus under the caption "Use of
Proceeds";
(ix) That it will not, and will cause its subsidiaries,
officers, directors, employees, agents and affiliates not to, take,
directly or indirectly, any action designed to cause or result in, or
that might reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities;
(x) That prior to the Time of Delivery there will not be any
change in the capital stock or material change in the short-term debt
or long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company or any of its subsidiaries, otherwise than
as set forth or contemplated in the Prospectus;
(xi) That it will not, during the period of 120 days after the
date hereof (other than pursuant to this Agreement), offer, sell,
contract to sell or otherwise dispose of any capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company), directly or indirectly, without the prior
written consent of Schroder & Co. Inc., except for the issuance of
Option Shares, grants of stock options under the Company's Amended and
Restated 1989 Stock Incentive Plan, issuance of shares of common stock
in connection with the establishment of Middleby Japan Corporation,
pursuant to exercise of warrants that the Prospectus indicates are
outstanding, or pursuant to the terms of convertible or exchangeable
securities of the Company or its subsidiaries outstanding on the date
hereof and described in the Prospectus;
(xii) That it has caused the Securities to be included for
quotation on the Nasdaq National Market System as of the Effective
Date; and
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<PAGE>
(xiii) To file with the Commission such reports on Form SR as
may be required pursuant to Rule 463 under the Act.
(b) Each Selling Stockholder, severally and not jointly, covenants and
agrees with each of the Underwriters that:
(i) Such Selling Stockholder will not, during the period of 120
days after the date hereof, except pursuant to this Agreement, offer,
sell, contract to sell or otherwise dispose of any capital stock of
the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, without the
prior written consent of Schroder & Co. Inc.;
(ii) Such Selling Stockholder will not, directly or indirectly,
take any action designed to cause or result in, or that has
constituted or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities;
(iii) As soon as any Selling Stockholder is advised thereof,
such Selling Stockholder will advise the Representatives and confirm
such advice in writing, (i) of receipt by such Selling Stockholder or
by any representative or agent of such Selling Stockholder, of any
communication from the Commission relating to the Registration
Statement, the Prospectus or any Preliminary Prospectus, or any notice
or order of the Commission relating to the Company or any of the
Selling Stockholders in connection with the transactions contemplated
by this Agreement and (ii) of the happening of any event that makes or
may make any statement made in the Registration Statement, the
Prospectus or any Preliminary Prospectus untrue or that requires the
making of any change in the Registration Statement, Prospectus or
Preliminary Prospectus, as the case may be, in order to make such
statement, in light of the circumstances in which it was made, not
misleading; and
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(iv) Such Selling Stockholder will deliver to the
Representatives prior to the Time of Delivery a properly completed and
executed United States Treasury Department Form W-9.
6. The Company covenants and agrees with the Underwriters that the Company
will pay or cause to be paid: (i) the fees, disbursements and expenses of
counsel and accountants for the Company and the Selling Stockholders, and all
other expenses, in connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and supplements thereto
and the furnishing of copies thereof, including charges for mailing, air freight
and delivery and counting and packaging thereof and of any Preliminary
Prospectus and related offering documents to the Underwriters and dealers;
(ii) the cost of printing this Agreement, the Agreement Among Underwriters, the
Selling Agreement, communications with the Underwriters and selling group and
the Preliminary and Supplemental Blue Sky Memoranda and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities for
offering and sale under securities laws as provided in Section 5(a) hereof,
including filing and registration fees and the fees, disbursements and expenses
of counsel for the Underwriters in connection with such qualification and in
connection with Blue Sky surveys or similar advice with respect to sales;
(iv) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (v) all fees and expenses in connection with quotation of the
Securities on the Nasdaq National Market System; and (vi) all other costs and
expenses incident to the performance of their obligations hereunder that are not
otherwise specifically provided for in this Section 6, including the fees of the
Company's Transfer Agent and Registrar, the cost of any stock issue or transfer
taxes on sale of the Securities to the Underwriters, the cost of the Company's
personnel and other internal costs, the cost of printing and engraving the
certificates representing the Securities and all expenses and taxes incident to
the sale and delivery of the Securities to be sold by the Company and the
Selling Stockholders to the Underwriters hereunder.
Each Selling Stockholder will pay any transfer taxes incident to the
transfer to the Underwriters of the Securities being sold by such Selling
Stockholder.
It is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
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other statements of the Company and the Selling Stockholders herein are, at and
as of the Time of Delivery, true and correct, the condition that the Company and
the Selling Stockholders shall have performed all its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Registration Statement shall have become effective, and you shall
have received notice thereof not later than 10:00 P.M., New York City time, on
the date of execution of this Agreement, or at such other time as you and the
Company may agree; if required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b); no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction.
(b) All corporate proceedings and related legal and other matters in
connection with the organization of the Company and the registration,
authorization, issue, sale and delivery of the Securities shall have been
reasonably satisfactory to Thompson Hine & Flory LLP, counsel to the
Underwriters, and Thompson Hine & Flory LLP shall have been timely furnished
with such papers and information as they may reasonably have requested to enable
them to pass upon the matters referred to in this subsection.
(c) You shall not have advised the Company or any Selling Stockholder that
the Registration Statement or Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact or omits to state a fact that in
your judgment is in either case material and in the case of an omission is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) D'Ancona & Pflaum, counsel to the Company, shall have furnished to you
its written opinion, dated the Time of Delivery, in form and substance
satisfactory to you and to Thompson Hine & Flory LLP, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction identified in such opinion, which, to such
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counsel's knowledge, are the only jurisdictions where the nature of
the property owned or leased by it, or the nature of the business
conducted by it, makes such qualification necessary (except where the
failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a whole);
(ii) Based solely upon certificates of public officials, each of
the Company's subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and to conduct its business as described
in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction identified in such opinion,
which, to such counsel's knowledge, are the only jurisdictions where
the nature of the property owned or leased by it, or the nature of the
business conducted by it, makes such qualification necessary (except
where the failure to so qualify would not have a material adverse
effect on the condition, financial or otherwise, or the business
affairs or prospects of the Company and its subsidiaries, taken as a
whole);
(iii) All the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and are validly
issued and outstanding, are fully paid and non-assessable and, except
as otherwise set forth in the Prospectus, are owned by the Company of
record and, to the best knowledge of such counsel, (A) beneficially
and (B) free and clear of all liens, encumbrances, equities, security
interests or claims of any nature whatsoever; and neither the Company
nor any of its subsidiaries has granted any outstanding options,
warrants or commitments with respect to any shares of its capital
stock, whether issued or unissued, except as otherwise described in
the Prospectus;
(iv) The Company has an authorized capitalization as set forth
in the Registration Statement, and all the issued shares of capital
stock of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable, are free of any preemptive
rights, and were issued and sold in compliance with all applicable
federal and state securities laws; except as described in the
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Prospectus, to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of, and
there are no commitments, plans or arrangements to issue, any shares
of capital stock of the Company; the Securities being sold by the
Company have been duly and validly authorized and, when duly
countersigned by the Company's Transfer Agent and Registrar and
issued, delivered and paid for in accordance with the provisions of
the Registration Statement and this Agreement, will be duly and
validly issued, fully paid and non-assessable; the Securities conform
to the description thereof in the Prospectus; the Securities to be
sold by the Company have been duly authorized for quotation on the
Nasdaq National Market System, as of the Effective Date, and the
Securities to be sold by the Selling Stockholders are quoted on the
Nasdaq National Market System; and the certificates for the Securities
are in valid and legal form;
(v) To the best of such counsel's knowledge, except as set forth
in the Prospectus, there are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries
or any of their respective officers or directors is a party or of
which any property of the Company or any of its subsidiaries is the
subject that, if resolved against the Company or any of its
subsidiaries or any of their respective officers or directors,
individually or in the aggregate, is of a character required to be
disclosed in the Prospectus that has not been properly disclosed
therein;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding agreement
of the Company enforceable in accordance with its terms, except as
enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors
rights generally and except as enforceability of those provisions
relating to indemnity may be limited by the federal securities laws
and principles of public policy;
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(vii) The Company has full corporate power and authority to
execute, deliver and perform this Agreement, and the execution,
delivery and performance of this Agreement, the consummation of the
transactions herein contemplated and the issue and sale of the
Securities and the compliance by the Company with all the provisions
of this Agreement will not conflict with, or result in a breach of any
of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge, claim or
encumbrance upon, any of the property or assets of the Company or any
of its subsidiaries pursuant to, the terms of any indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws (or similar corporate constituent
documents), in each case as amended, of the Company or any of its
subsidiaries, or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any court or any regulatory authority or
other governmental body is required for the issue and sale of the
Securities or the consummation of the other transactions contemplated
by this Agreement, except those as have been obtained under the Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(ix) Neither the Company nor any of its subsidiaries is currently
in violation of its Certificate of Incorporation or By-Laws (or
similar corporate constituent documents) or, to the best of such
counsel's knowledge, in default under, any indenture, mortgage, deed
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of trust, lease, bank loan or credit agreement or any other agreement
or instrument of which such counsel has knowledge to which the Company
or any of its subsidiaries is a party or by which any of them or any
of their property may be bound or affected (in any respect that is
material in light of the financial condition of the Company and its
subsidiaries, taken as a whole);
(x) There are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of, any
Securities pursuant to the Company's Certificate of Incorporation or
By-Laws, in each case as amended to the date hereof, or, to the best
of such counsel's knowledge, any agreement or other instrument, except
as described in the Prospectus; and, except for William F. Whitman,
Jr., no holders of securities of the Company have rights to the
registration thereof under the Registration Statement or, if any such
holders have such rights, such holders have waived such rights;
(xi) To the extent summarized therein, all contracts and
agreements summarized in the Registration Statement and the Prospectus
are fairly summarized therein, conform in all material respects to the
descriptions thereof contained therein, and, to the extent such
contracts or agreements or any other material agreements are required
under the Act or the rules and regulations thereunder to be filed or
incorporated by reference therein, as exhibits to the Registration
Statement, they are so filed or incorporated by reference; and such
counsel does not know of any contracts or other documents required to
be summarized or disclosed in the Prospectus or to be so filed or
incorporated by reference as an exhibit to the Registration statement,
which have not been so summarized or disclosed, or so filed or
incorporated by reference;
(xii) All descriptions in the Prospectus of statutes,
regulations or legal or governmental proceedings are fair summaries
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thereof and fairly present the information required to be shown with
respect to such matters;
(xiii) Nothing has come to such counsel's attention to give such
counsel reason to believe that any of the representations and
warranties of the Company contained in this Agreement or in any
certificate or document contemplated under this Agreement to be
delivered are not true or correct or that any of the covenants and
agreements herein contained to be performed on the part of the Company
or any of the conditions herein contained, or set forth in the
Registration Statement and the Prospectus, to be fulfilled or complied
with by the Company have not been or will not be duly and timely
performed, fulfilled or complied with;
(xiv) The Registration Statement has become effective under the
Act, the Prospectus has been filed in accordance with Rule 424(b) of
the rules and regulations of the Commission under the Act, including
the applicable time periods set forth therein, or such filing is not
required and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act, and the Registration Statement,
the Prospectus and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder; and the documents incorporated by reference in
the Prospectus comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder; it being understood with respect to all of the
foregoing that such counsel need express no opinion as to the
financial statements and schedules or other financial data contained
or incorporated by reference in the Registration Statement or the
Prospectus; and
(xv) The conditions for use of Form S-2 set forth in the General
Instructions thereto have been satisfied.
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Such counsel shall also state that nothing has come to such counsel's
attention that would lead such counsel to believe that either the Registration
Statement or any amendment or supplement thereto, at the time such Registration
Statement or amendment or supplement became effective and as of the Time of
Delivery, or the Prospectus or any amendment or supplement thereto, as of its
date and as of the Time of Delivery, contains or contained any untrue statement
of material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering its opinion set forth in Section 7(d) above, such counsel may
rely, to the extent deemed advisable by such counsel, (a) as to factual matters,
upon certificates of public officials and officers of the Company, and (b) as to
the laws of any jurisdiction other than the United States and jurisdictions in
which they are admitted, on opinions of counsel (PROVIDED, HOWEVER, that you
shall have received a copy of each of such opinions which shall be dated the
Time of Delivery, addressed to you or otherwise authorizing you to rely thereon,
and D'Ancona & Pflaum in its opinion to you delivered pursuant to this
subsection, shall state that such counsel are satisfactory to them and that
D'Ancona & Pflaum has no reason to believe that the Underwriters and they are
not justified to so rely);
(e) With respect to each of the Selling Stockholders, D'Ancona & Pflaum,
counsel for the Selling Stockholders shall have furnished to you its written
opinion, dated the Time of Delivery, in form and substance satisfactory to you
and to Thompson Hine & Flory LLP to the effect that:
(i) each Selling Stockholder has full legal right, power and
authority to enter into this Agreement and the Power-of-Attorney and
to sell, transfer and deliver the Securities being sold by such
Selling Stockholder hereunder in the manner provided in this Agreement
and to perform its obligations under the Power-of-Attorney; the
execution and delivery of this Agreement and the Power-of-Attorney
have been duly authorized by all necessary action of each Selling
Stockholder; this Agreement and the Power-of-Attorney have been duly
executed and delivered by each Selling Stockholder; assuming due
authorization, execution and delivery by the Custodian, the
Power-of-Attorney is the legal, valid and binding agreement of each
Selling Stockholder, enforceable in accordance with its terms, except as
enforcement of the same may be limited by bankruptcy, insolvency,
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reorganization, moratorium or other similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(ii) upon delivery of and payment for the Securities being sold
by each Selling Stockholder, the Underwriters will receive good and
valid title to such Securities, free and clear of all liens,
encumbrances, equities, security interests, claims or other defects;
(iii) the sale of the Securities to the Underwriters by the
Selling Stockholders pursuant to this Agreement, the compliance by the
Selling Stockholders with the other provisions of this Agreement and
the Power-of-Attorney and the consummation of the other transactions
herein contemplated do not (i) conflict with, or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, claim or encumbrance on any property of any Selling
Stockholder under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which any Selling Stockholder is a
party or by which any Selling Stockholder or any of the Selling
Stockholders' property is bound or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to any Selling Stockholder, or
(ii) require the consent, approval, authorization, order, registration
or qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state or foreign
securities or Blue Sky laws; and
(iv) there are no transfer or other taxes (other than income
taxes) known to such counsel payable in connection with the sale and
delivery of the Securities by the Selling Stockholders to the
Underwriters or all such taxes have been fully paid in connection with
such sale and delivery.
Such counsel shall also state that nothing has come to such counsel's
attention that would lead such counsel to believe that either the Registration
Statement or any amendment or supplement thereto, at the time such Registration
Statement or amendment or supplement became effective and as of the Time of
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Delivery, or the Prospectus or any amendment or supplement thereto, as of its
date and as of the Time of Delivery, contains or contained any untrue statement
of material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering its opinion set forth in Section 7(e) above, such counsel may
rely, to the extent deemed advisable by such counsel, as to factual matters,
upon certificates of public officials and the Selling Stockholders.
(f) Thompson Hine & Flory LLP, counsel to the Underwriters, shall have
furnished to you its written opinion or opinions, dated the Time of Delivery, in
form and substance satisfactory to you, with respect to the incorporation of the
Company, the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters.
(g) With respect to the letter of Arthur Andersen LLP delivered to you
concurrently with the execution of this Agreement (the "initial letter"), the
Company shall have furnished to you a letter (as used in this paragraph, the
"bring-down letter") of Arthur Andersen LLP, addressed to you and dated the Time
of Delivery (i) confirming that they are independent public accountants with
respect to the Company and its subsidiaries within the meaning of the Act and
the applicable rules and regulations thereunder, (ii) stating, as of the date of
the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of the bring-down letter), the conclusions and findings of
Arthur Andersen LLP with respect to the financial information and other matters
covered by the initial letter, and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(h) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, any loss of or material dispute
with any of its ten largest customers or its ten largest suppliers of products
or services (measured by dollar volume during the Company's most recent fiscal
year) or any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute, work stoppage or work slowdown or court or governmental action, order
or decree; and since the respective dates as of which information is given in
the Prospectus, there shall not have been any change in the capital stock (other
than shares issued pursuant to the exercise of Option Shares, pursuant to the
exercise of warrants that the Prospectus indicates are outstanding, or pursuant
to the terms of convertible or exchangeable securities of the Company or its
subsidiaries outstanding on the date hereof and described in the Prospectus) or
short-term debt or long-term debt of the Company or any of its subsidiaries that
is described in the Prospectus nor any change or any development involving a
prospective change, in or affecting the general affairs, management, financial
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position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case is in your judgment so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities on the terms and in the manner contemplated in
the Prospectus.
(i) Between the date hereof and the Time of Delivery, there shall have
been no declaration of war by the Government of the United States; at the Time
of Delivery, there shall not have occurred any material adverse change in the
financial or securities markets in the United States or in political, financial
or economic conditions in the United States or any outbreak or material
escalation of hostilities or other calamity or crisis, the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the resale of Securities and
no event shall have occurred resulting in (i) trading in securities generally on
the New York Stock Exchange or in the Common Stock on the principal securities
exchange or market in which the Common Stock is listed or quoted being suspended
or limited or minimum or maximum prices being generally established on such
exchange or market, or (ii) additional material governmental restrictions, not
in force on the date of this Agreement, being imposed upon trading in securities
generally by the New York Stock Exchange or in the Common Stock on the principal
securities exchange or market in which the Common Stock is listed or quoted or
by order of the Commission or any court or other governmental authority, or
(iii) a general banking moratorium being declared by either federal or New York
authorities.
(j) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of the
Company, and by each Selling Stockholder or the Attorney-in-Fact on behalf of
each Selling Stockholder, satisfactory to you as to such matters as you may
reasonably request and as to (i) the accuracy of its and their respective
representations and warranties herein at and as of the Time of Delivery and (ii)
the performance by the Company and each Selling Stockholder of all their
respective obligations hereunder to be performed at or prior to the Time of
Delivery; the Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of the
Company, and by each Selling Stockholder as to (i) the fact that they have
carefully examined the Registration Statement and Prospectus and, (a) as of the
Effective Date, the statements contained or incorporated by reference in the
Registration Statement and the Prospectus were true and correct and neither the
Registration Statement nor the Prospectus omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
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(b) since the Effective Date, no event has occurred that is required by the Act
or the rules and regulations of the Commission thereunder to be set forth in an
amendment of, or a supplement to, the Prospectus that has not been set forth in
such an amendment or supplement; and (ii) the matters set forth in subsection
(a) of this Section 7.
(k) Each director, executive officer, Selling Stockholder and five percent
stockholder of the Company shall have delivered to you an agreement not to
offer, sell, contract to sell or otherwise dispose of any shares of capital
stock of the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, for a period of 120 days
after the date of this Agreement, without the prior written consent of Schroder
& Co. Inc.
(l) The Company shall have delivered to you evidence that the Securities
to be sold by the Company have been authorized for quotation on the Nasdaq
National Market System as of the Effective Date.
8. (a) The Company and each Principal Selling Stockholder, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained or incorporated by reference in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky application or other document executed by the
Company specifically for that purpose or based upon information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Securities under the securities laws thereof or filed with the Commission
or any securities association or securities exchange (each, an "Application"),
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements made or incorporated by
reference therein, in the light of the circumstances under which they were made,
not misleading, or (ii) any untrue statement or alleged untrue statement made by
the Company and the Principal Selling Stockholders in Section 1A of this
Agreement, or (iii) the employment by the Company of any device, scheme or
artifice to defraud, or the engaging by the Company in any act, practice or
course of business that operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which the Company shall participate, in
connection with the issuance and sale of any of the Securities, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, preparing to defend,
defending or appearing as a third-party witness in connection with any such
action or claim; PROVIDED, HOWEVER, that the Company and the Principal Selling
Stockholders shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
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statement or alleged untrue statement or omission or alleged omission relating
to an Underwriter made in any Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement or any Application in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through you expressly for use therein.
(b) Each Selling Stockholder, severally and not jointly, will indemnify
and hold harmless each Underwriter, the Company and the other Selling
Stockholders against any losses, claims, damages or liabilities to which such
Underwriter, the Company or such Selling Stockholder may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained or
incorporated by reference in the Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made or incorporated by
reference therein, in the light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Preliminary Prospectus, the Registration Statement, the Prospectus
or such amendment or supplement in reliance upon and in conformity with
information furnished to such Underwriter or the Company by such Selling
Stockholder expressly for use therein, or (ii) any untrue statement or alleged
untrue statement made by such Selling Stockholder in Section 1B of this
Agreement, and will reimburse such Underwriter, the Company or such Selling
Stockholder for any legal or other expenses reasonably incurred by such
Underwriter, the Company or such Selling Stockholder in connection with
investigating, preparing to defend, defending or appearing as a third-party
witness in connection with any such action or claim.
(c) In addition to any obligations of the Company and each of the Selling
Stockholders under Section 8(a) and 8(b), the Company and each of the Selling
Stockholders agree that they shall perform their indemnification obligations
under Section 8(a) and Section 8(b) (as modified by the last paragraph of this
Section 8(c)) with respect to counsel fees and expenses and other expenses
reasonably incurred by making payments within 45 days to the Underwriter in the
amount of the statements of the Underwriter's counsel or other statements that
shall be forwarded by the Underwriter, and that it shall make such payments
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court until such time as a court orders the return of such payments.
The indemnity agreement in Section 8(a) and Section 8(b) shall be in
addition to any liability that the Company or any of the Selling Stockholders
may otherwise have and shall extend upon the same terms and conditions to each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act.
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(d) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholders against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or any Application, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement, the Prospectus or such amendment or supplement or any
Application in reliance upon and in conformity with written information
furnished to the Company or such Selling Stockholder by such Underwriter
relating to such Underwriter through you expressly for use therein, and will
reimburse the Company or such Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim.
The indemnity agreement in this Section 8(d) shall be in addition to any
liability that the respective Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
or of any Selling Stockholder and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the Exchange
Act.
(e) Promptly after receipt by an indemnified party under Section 8(a),
8(b) or 8(d) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability that it may have to any indemnified party under Section 8(a), 8(b) or
8(d) except to the extent it was unaware of such action and has been prejudiced
in any material respect by such failure or from any liability that it may have
to any indemnified party otherwise than under such Section 8(a), 8(b) or 8(d).
In case any such action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. If, however, (i) the indemnifying party has authorized
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the employment of counsel for the indemnified party at the expense of the
indemnifying party or (ii) an indemnified party shall have reasonably concluded
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them and the
indemnified party so notifies the indemnifying party, then the indemnified party
shall be entitled to employ counsel different than counsel for the indemnifying
party at the expense of the indemnifying party, and the indemnifying party shall
not have the right to assume the defense of such indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to local counsel) for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same set of allegations or circumstances. The
counsel with respect to which fees and expenses shall be so reimbursed shall be
designated in writing by Schroder & Co. Inc. in the case of parties indemnified
pursuant to Section 8(a) and Section 8(b) and by the Company in the case of
parties indemnified pursuant to Section 8(d).
If at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 8(c), the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party, without the prior
written consent of the indemnified party, shall effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(f) In order to provide for just and equitable contribution under the Act
in any case in which (i) any Underwriter (or any person who controls any
Underwriter within the meaning of the Act or the Exchange Act) makes claim for
indemnification pursuant to Section 8(a) or Section 8(b) hereof, but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8(a) or Section 8(b) provides for
indemnification in such case or (ii) contribution under the Act may be required
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<PAGE>
on the part of any Underwriter or any such controlling person in circumstances
for which indemnification is provided under Section 8(d), then, and in each such
case, each indemnifying party shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject as an indemnifying party
hereunder (after contribution from others) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 8(e) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Securities purchased under this Agreement, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 8(f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 8(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
Section 8(f) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 8(f),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this Section 8(f) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(g) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the commencement
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thereof; but the omission so to notify the contributing party will not relieve
it from any liability that it may have to any other party for contribution under
the Act except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any liability that it
may have to any other party other than for contribution under the Act. In case
any such action, suit or proceeding is brought against any party, and such party
notifies a contributing party of the commencement thereof, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified.
9. (a) If any Underwriter shall default in its obligation to purchase the
Firm Securities that it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Firm Securities on the terms contained herein. If the aggregate number of Firm
Securities as to which Underwriters default is more than one-eleventh of the
aggregate number of all the Firm Securities and within 36 hours after such
default by any Underwriter you do not arrange for the purchase of such Firm
Securities, then the Company and the Selling Stockholders shall be entitled to a
further period of 36 hours within which to procure another party or other
parties satisfactory to you to purchase such Firm Securities on such terms. In
the event that, within the respective prescribed periods, you notify the Company
and the Selling Stockholders that you have so arranged for the purchase of such
Firm Securities, or the Company and the Selling Stockholders notify you that
they have so arranged for the purchase of such Firm Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus that in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Firm Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Firm Securities of such defaulting Underwriter or Underwriters by you or the
Company and the Selling Stockholders or both as provided in subsection (a)
above, the aggregate number of such Firm Securities that remain unpurchased does
not exceed one-eleventh of the aggregate number of all the Firm Securities, then
the Company and the Selling Stockholders shall have the right to require each
non-defaulting Underwriter to purchase the number of the Firm Securities that
such Underwriter agreed to purchase hereunder and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Firm Securities that such Underwriter agreed to purchase hereunder) of the
Firm Securities of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing shall relieve a defaulting
Underwriter from liability for its default.
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<PAGE>
(c) If, after giving effect to any arrangements for the purchase of the
Firm Securities of a defaulting Underwriter or Underwriters by you or the
Company and the Selling Stockholders as provided in subsection (a) above, the
aggregate number of such Firm Securities which remain unpurchased exceeds
one-eleventh of the aggregate number of all the Firm Securities, or if the
Company and the Selling Stockholders shall not exercise the right described
in subsection (b) above to require non-defaulting Underwriters to purchase
Firm Securities of a defaulting Underwriter or Underwriters, then this
Agreement shall thereupon terminate without liability on the part of any
non-defaulting Underwriter, the Company or any Selling Stockholder, except
for the expenses to be borne by the Company and the Selling Stockholders and
the Underwriters as provided in Section 6 hereof and the indemnity agreement
in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, each of the Selling Stockholders and the
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or an officer or director or controlling person of
the Company, or any of the Selling Stockholders, or any controlling person of
any of the Selling Stockholders, and shall survive delivery of and payment for
the Securities.
11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon, New
York City time, on the first full business day after the Registration Statement
becomes effective, or at such time after the Registration Statement becomes
effective as you may authorize the sale of the Securities to the public by
Underwriters or other securities dealers, or (b) if the Registration Statement
has heretofore become effective, at the earlier of 24 hours after the filing of
the Prospectus with the Commission or at such time as you may authorize the sale
of the Securities to the public by Underwriters or securities dealers, unless,
prior to any such time you shall have received notice from the Company that it
elects that this Agreement shall not become effective, or you, or through you
such of the Underwriters as have agreed to purchase in the aggregate fifty
percent or more of the Firm Securities hereunder, shall have given notice to the
Company that you or such Underwriters elect that this Agreement shall not become
effective; PROVIDED, HOWEVER, that the provisions of this Section and Section 6
and Section 8 hereof shall at all times be effective.
If this Agreement shall be terminated pursuant to Section 9 hereof, or if
this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company and the
Selling Stockholders shall not then be under any liability to any Underwriter
except as provided in Section 6 and Section 8 hereof, but if this Agreement
becomes effective and is not so terminated but the Securities are not delivered
by or on behalf of the Company or any of the Selling Stockholders as provided
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herein because the Company or any of the Selling Stockholders has been unable
for any reason beyond its control and not due to any default by it to comply
with the terms and conditions hereof, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Securities, but the Company and the Selling Stockholders shall then be under no
further liability to any Underwriter except as provided in Section 6 and
Section 8 hereof.
12. The statements set forth in the last paragraph on the front cover page
of the Preliminary Prospectus or Prospectus, the paragraph on the inside front
cover of the Preliminary Prospectus or Prospectus containing language relating
to stabilization and the second and last paragraphs under the caption
"Underwriting" in the Preliminary Prospectus or Prospectus constitute the only
information furnished by any Underwriter through the Representatives to the
Company for purposes of Sections 1A(b), 1A(c) and 8 hereof.
13. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Schroder & Co. Inc. on behalf of you as the
Representatives, and in all dealings with the Selling Stockholders hereunder,
you and the Company shall be entitled to act and rely upon any statement,
request, notice or agreement furnished in writing by or on behalf of such
Selling Stockholder or made or given by the Attorney-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
you as the Representatives in care of Schroder & Co. Inc., Equitable Center, 787
Seventh Avenue, New York, New York 10019, Attention: Syndicate Department; and
if to the Company or the Selling Stockholders, shall be delivered or sent by
letter sent by mail, telex or facsimile transmission (subsequently confirmed by
delivery or by letter sent by mail) to the address of the Company set forth in
the Registration Statement, Attention: _______________; PROVIDED, HOWEVER, that
any notice to any Underwriter pursuant to Section 8(d) hereof shall be delivered
or sent by mail, telex or facsimile transmission (subsequently confirmed by
delivery or by letter sent by mail) to such Underwriter at its address set forth
in its Underwriters' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and each of the Selling Stockholders and, to
the extent provided in Section 8 and Section 10 hereof, the officers and
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directors of the Company and each person who controls the Company, any Selling
Stockholder or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
15. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
17. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument. If the foregoing is in accordance with your understanding, please
sign and return to us two counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement Among Underwriters, manually or
facsimile executed counterparts of which, to the extent practicable and upon
request, shall be submitted to the Company for examination, but without warranty
on your part as to the authority of the signers thereof.
Very truly yours,
THE MIDDLEBY CORPORATION
By: ___________________________
Name:
Title:
SELLING STOCKHOLDERS
By: ____________________________
As Attorney-in-Fact for each of
the Selling Stockholders listed in
Schedule II
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Accepted as of the date hereof:
SCHRODER & CO. INC.
BREAN MURRAY & CO., INC.
as Representatives of the several Underwriters
By: SCHRODER & CO. INC.
By: ____________________________________
Managing Director
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SCHEDULE I
UNDERWRITER NUMBER OF FIRM SECURITIES
----------- --------------------------
Schroder & Co. Inc.
Brean Murray & Co., Inc.
Total
-----------
2,610,000
-----------
-----------
<PAGE>
SCHEDULE II
NUMBER OF FIRM
SELLING STOCKHOLDER SECURITIES TO BE SOLD
------------------- ---------------------
William F. Whitman, Jr. 300,000
David P. Riley 210,000
Laura B.Whitman 100,000
Total
-------
610,000
-------
-------
<PAGE>
EXHIBIT 5
D'ANCONA & PFLAUM
Suite 2900
30 North LaSalle Street
Chicago, Illinois 60602
Telephone (312)580-2000
Telecopier (312)580-0923
September 11, 1997
The Middleby Corporation
2850 W. Golf Road, Suite 405
Rolling Meadows, IL 60008
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act
of 1933, as amended, by The Middleby Corporation, a Delaware corporation
(the "Company"), of up to 3,001,500 shares of the Company's Common Stock,
$0.01 par value per share (the "Shares"), as described in the Company's
registration statement on Form S-2 to be filed with the Securities and
Exchange Commission (such registration statement, including all amendments
and exhibits thereto, being herein called the "Registration Statement"), we
hereby advise you that as counsel for the Company we have examined the
original or certified copies of the Certificate of Incorporation of the
Company and all amendments thereto, the by-laws of the Company, the minute
books of the Company, and such other documents and records as we have
deemed necessary for the purposes of this opinion.
Based upon such examination, it is our opinion that:
(1) the 2,391,500 Shares to be sold by the Company (including up to
391,500 Shares which the Underwriters have the option to purchase from the
Company to cover over-allotments, if any) are duly authorized and, when
issued and sold pursuant to the terms of the Underwriting Agreement
included as an exhibit to the Registration Statement, will be legally
issued, fully paid and nonassessable; and
(2) the 610,000 Shares to be sold by the Selling Stockholders
referred to in the Registration Statement are duly authorized, legally
issued, fully paid and nonassessable.
We hereby consent to the references to our firm under the heading
"Legal Matters" in the Prospectus of the Company included in the
Registration Statement, and to the filing of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
D'ANCONA & PFLAUM
By: /s/ Nathaniel Sack
---------------------------------------
Nathaniel Sack, a Partner
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 11, 1997
