<PAGE> 1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6
(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SPECIALTY EQUIPMENT COMPANIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No:
3) Filing Party:
4) Date Filed:
<PAGE> 2
SPECIALTY EQUIPMENT COMPANIES, INC.
1245 CORPORATE BOULEVARD, SUITE 401
AURORA, ILLINOIS 60504
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
TO THE STOCKHOLDERS OF
SPECIALTY EQUIPMENT COMPANIES, INC.
Notice is hereby given that the Annual Meeting of Stockholders of
Specialty Equipment Companies, Inc., a Delaware corporation (the "Company"),
will be held at The Chicago Club located at 81 E. Van Buren Street, Chicago,
Illinois on Tuesday, May 19, 1998 at 10:00 a.m., Chicago time, for the following
purposes:
1. To consider and vote on the election of three members of the
Company's Board of Directors.
2. To consider and act upon such other matters as may properly come
before the meeting.
Stockholders of record at the close of business on April 8, 1997 are
entitled to notice of and to vote at the Annual Meeting and at any adjournment
thereof. For the ten days prior to the annual meeting, a complete list of the
stockholders entitled to vote at the Annual Meeting shall be open to any
stockholder, for any purpose germane to the meeting, during normal business
hours at the offices of LaSalle National Bank, 135 South LaSalle Street,
Chicago, Illinois 60674-9910.
A copy of the Annual Report and Form 10-K of the Company for the
fiscal year ended January 31, 1998 is enclosed herewith.
You are requested to sign, date and return the accompanying proxy in
the enclosed envelope, whether or not you expect to attend the meeting in
person.
By order of the Board of Directors,
/s/ DONALD K. MC KAY
---------------------------
Donald K. McKay, Secretary
Aurora, Illinois
April 13, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
IN PERSON, WE REQUEST THAT YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY.
<PAGE> 3
SPECIALTY EQUIPMENT COMPANIES, INC.
1245 CORPORATE BOULEVARD, SUITE 401
AURORA, ILLINOIS 60504
PROXY STATEMENT
SOLICITATION OF PROXIES
This proxy statement (the "Proxy Statement") is furnished to
stockholders of Specialty Equipment Companies, Inc. (the "Company") in
connection with a solicitation by the Board of Directors of the Company (the
"Board of Directors") of proxies to be used at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held May 19, 1998 and any adjournments
or postponements thereof for the purposes set forth in the accompanying notice.
Any stockholder giving a proxy has the power to revoke it at any time prior to
the exercise thereof by executing and delivering to the Secretary of the Company
at the above address a subsequent proxy or a written notice of revocation of the
proxy, or by attending the Annual Meeting and voting in person. In the absence
of any contrary written direction in the proxy, each proxy will be voted for the
election of the nominees for directors named in this proxy statement and in the
proxy, and, in the best judgment of the persons named in the proxy as
representatives upon any other matters which may properly come before the Annual
Meeting. The Company's Annual Report for its fiscal year ended January 31, 1998,
including financial statements, and this Proxy Statement and the attached form
of proxy are first being mailed to stockholders on or about April 13, 1998.
Each stockholder of record at the close of business on April 8, 1998,
the record date stated in the notice of the meeting ("Record Date"), is entitled
to vote at the meeting and at any adjournments or postponements thereof. On the
Record Date, there were outstanding 18,278,221 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), each entitled to one
non-cumulative vote. No other shares of the Company entitled to vote at the
Annual Meeting were outstanding.
With regard to the election of directors, votes may be cast in favor of
or withheld from one or more of the nominees; votes that are withheld will be
excluded entirely from the vote and will have no effect.
Proxies will be solicited by mail and may also be solicited by personal
interview, telephone, telecopy and telegram. Solicitation will be made on a
part-time basis by directors and officers of the Company and by other regular
employees, who will receive no compensation therefor other than their regular
salary. The Company will arrange for brokerage houses, nominees and other
custodians holding Common Stock of the Company of record to forward proxy
soliciting material to the beneficial owners of such shares, and will reimburse
such record owners for the reasonable out-of-pocket expenses incurred by them.
The cost of the solicitation of proxies will be borne by the Company.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
Annual Meeting of Stockholders in 1999 must be received by the Secretary of the
Company at the above address by December 14, 1998, for inclusion in the
Company's proxy, notice of meeting and proxy statement relating to that meeting.
1
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table (the "Security Holdings Table") sets forth
information as of April 8, 1998 to the Company's knowledge based upon (a)
reports filed with the Securities and Exchange Commission (the "Commission") on
or before such date pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and/or Rule 13D promulgated by the
Commission pursuant to the Exchange Act and (b) certain other information known
to the Company, (i) with respect to persons or groups who are believed by the
Company to be beneficial owners of more than five percent of the outstanding
Common Stock and (ii) with respect to beneficial ownership of the Company's
directors and the nominees to the Board of Directors who own such Stock, and
each of the executive officers named in the Cash Compensation Table below.
Beneficial ownership is defined, for this purpose, as the sole or shared power
to vote, or to direct the disposition of, the Common Stock. Unless otherwise
noted, the persons named in the following table have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS (1)
------------------------ --------------- ------------
<S> <C> <C>
Malcolm I. Glazer (2)(3) 7,764,052.95 40.0%
Ariel Capital Management, Inc. (2)(4) 4,588,170 25.1%
Daniel B. Greenwood (5) 319,418 1.7%
William E. Dotterweich (5)(6) 295,000 1.6%
Donald K. McKay (5) 264,661 1.4%
Jeffrey P. Rhodenbaugh (5) 239,718 1.3%
Richard A. Kent (5) 175,241 (7)
William W. Robertson (5) 117,600 (7)
Barry L. MacLean (5) 40,241 (7)
Kevin E. Glazer (8) 16,606 (7)
Charles E. Hutchinson (5) 15,241 (7)
Avram A. Glazer (8) 15,000 (7)
All directors and executive officers as a group (11 people)(6) 9,262,779.95 45.0%
</TABLE>
(1) For purposes of calculating the percent of class, the Company has used
the number of shares of its Common Stock outstanding as of the date
specified above, 18,278,221, adjusted in the case of Malcolm I. Glazer
as set forth in the footnote 3 to this table and, in the cases of
Messrs. Greenwood, Robertson, McKay, Rhodenbaugh, Dotterweich, Kent and
MacLean, as set forth in footnote 5 of this table.
(2) The addresses of the persons shown on the foregoing table who are
believed by the Company to be beneficial owners of more than 5% of the
Company's Common Stock are as follows: Malcolm I. Glazer, 1482 South
Ocean Boulevard, Palm Beach, Florida 33480; and Ariel Capital
Management, Inc. ("Ariel"), 307 North Michigan Avenue, Suite 500,
Chicago, Illinois 60601.
(3) The amount shown includes shares that can be acquired within 60 days
through the exercise of warrants to purchase 1,136,746.95 shares of
Common Stock, and the percentage of the class owned assumes the
exercise of such warrants. The warrants and shares are held in the name
of the Malcolm I. Glazer Family Limited Partnership, in which Malcolm
I. Glazer is the sole general partner.
(4) Ariel holds its respective shares solely as a result of its position as
investment adviser for its clients. Ariel disclaims beneficial
ownership of such shares of Common Stock. Ariel has sole dispositive
power with respect to all such shares but sole voting power with
respect to only 4,324,420 shares. Mr. John W. Rogers, president and
principal shareholder of Ariel, may be deemed to have beneficial
ownership of the shares beneficially owned by Ariel, but disclaims such
ownership.
2
<PAGE> 5
(5) The amounts and percentages include those reflected in column (b) and
(c), except for options to purchase 100,000 shares issued to Jeffrey P.
Rhodenbaugh, 50,000 of which are not scheduled to vest until August 21,
1998 and 50,000 of which are not scheduled to vest until May 1, 1999.
<TABLE>
<CAPTION>
(a) (b) (c)
Shares Issuable on
Exercise of Options Shares Issuable on
Under Exercise of Options Under
Name Employee Plan Director Plan
---- ------------- -------------
<S> <C> <C>
Daniel B. Greenwood 150,000 ---
Jeffrey P. Rhodenbaugh 225,000 ---
William E. Dotterweich 275,000 ---
Richard A. Kent --- 175,241
Barry L. MacLean --- 40,241
Donald K. McKay 200,000 ---
William W. Robertson 117,600 ---
All directors and
executive officers as a 967,600 215,482
group (7 people)
</TABLE>
(6) Includes an aggregate of 20,000 shares held in the name of Mr.
Dotterweich's wife as to which he may be deemed to have shared voting
and investment power.
(7) Less than one percent.
(8) Avram A. Glazer and Kevin E. Glazer are sons of Malcolm I. Glazer.
Section 16(a) of the Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's outstanding Common Stock, to file reports of ownership and changes in
ownership of such securities with the Commission. Officers, directors and
greater than ten-percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to the
Company, and written representations from certain reporting persons that no
other reports were required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and ten-percent holders
during or with respect to the Company's fiscal year ended January 31, 1998 were
met.
1. ELECTION OF DIRECTORS
Three members of the Board of Directors will be elected to the class of
the Board of Directors which term expires at the annual meeting of stockholders
in the Company's fiscal year ending January 31, 2002.
The shares represented by proxies received by the Board of Directors
will be voted, in the absence of any contrary direction therein, for the
election of the nominees hereinafter listed and described. The Board of
Directors believes that the persons named will be available, but if any nominee
becomes unwilling or unable to serve as a director, the proxies will be voted
for another individual to be selected by the Board of Directors. The affirmative
vote of a plurality of the shares of the Company's Common Stock represented at
the Annual Meeting is required for the election of directors.
Daniel B. Greenwood, William E. Dotterweich and Kevin E. Glazer are
nominated, and upon election will hold office for three year terms, expiring at
the annual meeting of stockholders in the Company's fiscal year ending January
31, 2002, and until their successors are chosen and have qualified.
3
<PAGE> 6
Certain other information (as of the date of this proxy statement)
concerning the above-mentioned nominees and the current directors who will
continue to serve on the Board of Directors after the Annual Meeting is set
forth below.
<TABLE>
<CAPTION>
Board Members and Nominees Age
- --------------------------------------------------------
<S> <C>
Daniel B. Greenwood (member and nominee) 78
William E. Dotterweich (member and nominee) 62
Kevin E. Glazer (member and nominee) 36
Jeffrey P. Rhodenbaugh (member) 43
Malcolm I. Glazer (member) 69
Avram A. Glazer (member) 37
Charles E. Hutchinson, Ph.D. (member) 62
Richard A. Kent (member) 52
Barry L. MacLean (member) 59
</TABLE>
Mr. Greenwood, a member and nominee to the Board of Directors, has
served as Chairman of the Board since January 1985, and as Chief Executive
Officer of the Company from that date until September 1988 and from November 16,
1993 to January 31, 1995. Before becoming Chairman he was employed by Taylor
(one of the Company's divisions) for thirty years, most recently as President.
Mr. Greenwood has served as a director since 1985.
Mr. Dotterweich, a member and nominee, has served as a member
of the Board of Directors since May 1995. Mr. Dotterweich was Chief
Executive Officer of the Company from December 1993 until May 1997 and served as
President and Chief Operating Officer of the Company from December 1993 until
September 1996. From 1989 to 1992 Mr. Dotterweich worked for the Company in a
consulting capacity. Prior to that time, from 1985 until 1989, Mr. Dotterweich
served as President and Chief Operating Officer of the Company. Mr. Dotterweich
was a director of the Company from January 1985 to September 1988. From 1981 to
1985 Mr. Dotterweich was employed by Beatrice as President of its Commercial
Equipment Division which included the food service equipment group. Since May 1,
1997, Mr. Dotterweich has served as a consultant to the Company.
Mr. Kevin E. Glazer, a member and nominee to the Board of Directors,
has been employed by, and works on behalf of, Malcolm Glazer and a number of
entities owned and controlled by Malcolm Glazer, for more than the past ten
years, with his principal responsibilities including overseeing the operations
of Malcolm Glazer's investment interests, including serving as a Vice President
of First Allied Corporation since 1986. He also serves as a director of
Houlihan's Restaurant Group Inc. ("HRGI") and Savannah Bank N.A. See the
discussion below, in the information regarding Malcolm Glazer, regarding HRGI's
purchase of equipment manufactured by the Company. Kevin Glazer is the son of
Malcolm Glazer and the brother of Avram Glazer, both of whom are members of the
Board of Directors. Mr. Glazer has served as a director since May 1994.
Mr. Rhodenbaugh, a member of the Board of Directors, has been President
and Chief Operating Officer of the Company since September 1996. Mr. Rhodenbaugh
became Chief Executive officer of the Company after Mr. Dotterweich's retirement
on May 1, 1997. He was President of Beverage-Air from March 1996 to September
1996. From April 1993 to March 1996 he served as Executive Vice President of
Beverage-Air. He also served as Vice President of Marketing of the Company from
January 1991 to September 1996. He served as President of Wells from January
1990 to January 1991 and as Wells' Vice President of Sales and Marketing form
1986 to January 1990. Mr. Rhodenbaugh joined Wells after nine years at Hobart
Corporation as a field sales employee and national account manager. Mr.
Rhodenbaugh serves on the Board of Directors and Executive Committee and, in
1997, as president of the North American Association of Food Equipment
Manufacturers (NAFEM). His current term as a director expires in fiscal 2001.
4
<PAGE> 7
Mr. Malcolm I. Glazer is a member of the Board of Directors. He has
been a self-employed, private investor whose diversified portfolio consists of
investments in television broadcasting, restaurants, health care, banking, real
estate, sports franchises, stock, and corporate bonds for more than the past
nine years. He has been President and Chief Executive Officer of the First
Allied Corporation since 1984. He is Chairman of the Board of Directors of
Zapata Corporation ("Zapata"), a manufacturer of marine protein products and
food packaging services, and until 1997 a director of Envirodyne Industries,
Inc. ("Envirodyne"), a packaging materials company. He is a director and
Chairman of the Board of HRGI a restaurant holding company, which is the holding
company for restaurant subsidiaries (including Houlihan's Restaurants) that
regularly purchase restaurant equipment manufactured by the Company. All such
transactions are on regular trade terms. He is a director of Omega Protein
Corporation ("Omega"), engaged in the production of marine protein products.
Malcolm Glazer is the father of Kevin Glazer, who is a nominee and a current
director, and Avram Glazer, who is a current director. Mr. Glazer has served as
a director since May 1994. His current term as a director expires in fiscal
2001.
Mr. Avram A. Glazer, a member of the Board of Directors, has been
employed by, and works on behalf of, Malcolm I. Glazer and a number of entities
owned and controlled by Malcolm Glazer, for more than the past ten years, with
his principal responsibilities including identifying, implementing, monitoring
and disposing of Malcolm Glazer's investment interests, including serving as
President and Chief Executive Officer of Zapata since March 1995. He is also a
director of Zapata and until 1997 he was a director of Envirodyne. He also
serves as a director of HRGI. See the discussion above, in the information
regarding Malcolm Glazer, regarding HRGI's purchase of equipment manufactured by
the Company. He is Chairman of the Board of Omega. Avram Glazer is the son of
Malcolm Glazer, who is a current director, and the brother of Kevin Glazer, who
is a nominee and current director. Mr. Glazer has served as a director since May
1994. His current term as a director expires in fiscal 2000.
Dr. Hutchinson, a member of the Board of Directors, is Dean
(Emeritus) of the Thayer School of Engineering at Dartmouth College. He was
Dean of the Thayer School of Engineering at Dartmouth College from 1984 to 1994.
Dr. Hutchinson holds a Ph.D. from Stanford University. Dr. Hutchinson has also
been a Professor at the University of Massachusetts, has published extensively
and has extensive consulting experience with both public and private entities.
He is a member of the Board of Directors of Markem Corporation, Hypertherm, Inc.
and Interact Medical Technology Inc. Dr. Hutchinson has served as a director of
the Company since March 1992. His current term as a director expires in fiscal
2000.
Mr. Kent, a member of the Board of Directors, is currently
Chairman and Chief Executive Officer of Kentco Capital Corporation. He is
also President of Parco Foods L.L.C. Mr. Kent was formerly Chairman/Chief
Executive Officer and President of Orval Kent Food Company, Inc. Mr. Kent is a
past Vice President and a member of the Board of Directors of the Salad
Manufacturers Association. Mr. Kent has served as a director of the Company
since March 1992. His current term as a director expires in fiscal 2000.
Mr. MacLean is a member of the Board of Directors. He is currently
the President and Chief Executive Officer of MacLean-Fogg Company, a
manufacturer of automotive parts and products for the power and telephone
utilities businesses, and has served in those positions since 1972. Mr. MacLean
also serves as a Director of Oce-U.S.A., Inc and L.R. Nelson Corp., a
manufacturer of lawn and garden sprinklers. Mr. MacLean is a Director and a
former Chairman of the Illinois Manufacturers Association, and is a trustee of
Dartmouth College. Mr. MacLean has served as a director of the Company since
March 1992. His current term as a director expires in fiscal 2001.
DIRECTORS COMMITTEES, MEETINGS AND COMPENSATION
The Board of Directors met five times in the Company's fiscal year
ending January 31, 1998. Board Committees include an Audit Committee, which met
one time during the last fiscal year, a Compensation Committee, which met one
time during that year, a Restricted Stock Committee, which met one time during
that year and a Stock Incentive Committee which met one time during that year.
The Board does not have a standing Nominations Committee.
5
<PAGE> 8
All members of the Board of Directors attended at least 75% of the
meetings of the Board and each of the meetings of the committees on which he
served in the Company's fiscal year ending January 31, 1998 held during the
period in which he was a director.
Except as noted below, each director who is not an employee or
consultant to the Company receives $28,000 annually, paid in quarterly
installments in advance, plus expenses paid for each regular quarterly meeting
attended. In fiscal 1996 Mr. Kevin Glazer received $35,000 for director fees.
Each of the current directors, other than Mr. Greenwood, Mr. Rhodenbaugh, Mr.
Dotterweich, Mr. Avram Glazer, Mr. Kevin Glazer, and Mr. Malcolm Glazer,
received options pursuant to the Specialty Equipment Companies, Inc.
Non-Employee Directors Long-Term Incentive Plan (the "Director Plan"), described
below. However, Mr. Greenwood, Mr. Rhodenbaugh and Mr. Dotterweich received
options pursuant to the Executive Long-Term Incentive Plan ("Employee Plan").
Mr. Greenwood, Mr. Dotterweich and Mr. Rhodenbaugh do not receive fees for their
services as directors.
The Audit Committee consists of Mr. MacLean, Mr. Avram Glazer
and Mr. Hutchinson. This Committee considers matters relating to internal
controls and compliance with accounting policies. It also recommends independent
auditors to the Board of Directors and reviews the independence of such
auditors, approves the scope of the annual audit activities of the independent
auditors and reviews the audit fee payable to the independent auditors and the
audit results.
The Restricted Stock Committee consists of Mr. MacLean, Mr. Kent
and Mr. Hutchinson. The Committee administers the Company's Restricted
Stock Plan.
The Compensation Committee consists of Mr. MacLean, Mr. Kent, Mr.
Greenwood and Mr. Malcolm Glazer. The Compensation Committee reviews and
makes recommendations to the Board of Directors on compensation of corporate
officers and presidents of the Company's divisions.
The Stock Incentive Committee consists of Mr. Hutchinson, Mr. Kent,
Mr. MacLean and Mr. Avram Glazer. The Stock Incentive Committee administers the
Company's Employee Plan.
THE NON-EMPLOYEE DIRECTOR OPTION PLAN
Effective May 6, 1993, the Company adopted the Director Plan. Pursuant
to the Director Plan, on May 6, 1993 each of the five non-employee directors
then serving or elected to serve on the Board of Directors was granted an option
to purchase 175,241 shares of Common Stock at a price of $1.00 per share; the
aggregate grants under the Director Plan totaled 876,205 shares. Each of Messrs.
Hutchinson, Kent and MacLean, as well as two former directors, received such
options.
The options granted under the Director Plan all vested and became
exercisable on May 6, 1995, as on such date all of the conditions to vesting
were satisfied. The exercise price for options granted under the Director Plan
must be paid in cash. All options granted pursuant to the Director Plan expire
on May 6, 2000. Options awarded pursuant to the Director Plan may not be
transferred except in certain circumstances by will or by the laws of descent
and distribution. Options under the Director Plan that are vested and
exercisable at the date of a grantee's termination of service generally may be
exercised for three months thereafter, except that such awards may be exercised
for three years after death, disability and/or retirement.
The following table sets forth the number of shares covered by options,
all of which are exercisable, held by each non-employee director holding options
pursuant to the Director Plan on January 31, 1998 and the aggregate gains that
were realized upon their exercise during the fiscal year ended January 31, 1998
or would have been realized had those options been exercised on January 31,
1998. These calculations assume a market value for a share of Common Stock of
$17.00, which was the closing price of the Common Stock on January 31, 1998, as
quoted on the Nasdaq Stock Market.
6
<PAGE> 9
AGGREGATED NON-EMPLOYEE DIRECTOR PLAN
EXERCISES IN LAST FISCAL YEAR END AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-
Acquired Options the-Money
on Exercise Value Realized at FY-End Options at FY-End
<S> <C> <C> <C> <C>
Richard A. Kent - - 175,241 $2,803,856
Barry L. MacLean 50,000 $787,500 40,241 643,856
</TABLE>
EXECUTIVE COMPENSATION
The following summary compensation table (the "Compensation Table")
summarizes compensation information with respect to Mr. Dotterweich, who served
as Chief Executive Officer until May 1, 1997, and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executives") in fiscal 1998 for services rendered during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payout
Restricted
Stock Options/ LTIP All Other
Fiscal Salary Bonus Award(s) SARS Payout Compensation
Name and Principal Positions Year ($)(2) ($)(2) ($) (#) ($) ($)(1)
---------------------------- ---- ------ ----- -------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel B. Greenwood (Chairman 1996 200,000 200,000 N/A N/A N/A 30,897
of the Board) 1997 200,000 172,200 N/A N/A N/A 35,648
1998 200,000 128,300 N/A N/A N/A 36,413
Jeffrey P. Rhodenbaugh(3) 1996 155,000 155,000 N/A N/A N/A 3,451
(Chief Executive Officer, 1997 235,417 196,453 N/A 50,000 N/A 2,959
Chief Operating Officer and 1998 337,500 314,525 N/A 50,000 N/A 3,140
President, and Chief
Executive Officer, Taylor)
William E. Dotterweich 1996 450,000 450,000 N/A N/A N/A 1,579
(Chief Executive Officer) 1997 450,000 450,000 N/A N/A N/A 1,995
1998 112,500 - N/A N/A N/A 1,749
Donald K. McKay 1996 180,000 180,000 N/A N/A N/A 15,213
(Executive Vice President, 1997 193,000 166,173 N/A N/A N/A 17,929
Chief Financial Officer, 1998 203,000 184,224 N/A N/A N/A 18,433
Treasurer and Secretary)
William W. Robertson 1996 200,000 200,000 N/A N/A N/A 11,683
(Chairman, President and 1997 220,000 171,798 N/A N/A N/A 9,475
Chief Executive Officer, 1998 230,000 320,000 N/A N/A N/A 4,413
Beverage-Air)
</TABLE>
7
<PAGE> 10
(1) Benefits include premiums paid by the Company with respect to term life
insurance for the benefit of the beneficiaries of the Named Executives
and the value of leased cars for the use of certain named Executives,
and in the case of Mr. McKay, Mr. Greenwood and Mr. Rhodenbaugh,
includes interest imputed on non-interest bearing loans from the
Company for payment of taxes on Restricted Stock holdings. See
"--Certain Transactions."
(2) Includes elected deferrals under the Specialty Equipment Companies
Retirement Savings Plan.
(3) Effective May 1, 1997, Mr. Rhodenbaugh's annual salary was increased
to $350,000 upon his appointment as Chief Executive Officer.
Defined Benefit Plans
The Company maintains the Specialty Equipment Companies Retirement
Income Plan ("Retirement Plan") for certain of its salaried employees, including
executive officers. The Company also maintains the Specialty Equipment Companies
Supplemental Retirement Plan ("Supplemental Plan") for certain of its salaried
employees, including executive officers, in order to provide benefits in an
amount equal to the excess of the benefits that would be paid under the
Retirement Plan were it not for the limitations on benefits imposed by the IRC.
The benefits under the Supplemental Plan are provided by means of unfunded
payments made by the Company to the individuals eligible for such payments, as
described in the Supplemental Plan. Based on estimated Social Security benefit
levels and on IRC and Retirement Plan applicable limitations in fiscal 1998, the
table below reflects annual benefit payments in the form of a single life
annuity at age 65 to participants in the Retirement Plan, as supplemented by the
Supplemental Plan, at specified compensation levels (based on final average
annual earnings -- that is, cash compensation in the five calendar years in
which compensation was highest, during the last fifteen calendar years) and with
specified lengths of service.
YEARS OF CREDITED SERVICE AT RETIREMENT
<TABLE>
<CAPTION>
Final
Average
Annual
Earnings 5 10 15 20 25 30 40
-------- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
150,000 10,042 20,084 30,127 40,169 50,211 60,253 81,948
200,000 13,792 27,584 41,377 55,169 68,961 82,753 111,948
250,000 17,542 35,084 52,627 70,169 87,711 105,253 141,948
300,000 21,292 42,584 63,877 85,169 106,461 127,753 171,948
350,000 25,042 50,084 75,127 100,169 125,211 150,253 201,948
400,000 28,792 57,584 86,377 115,169 143,961 172,753 231,948
450,000 32,542 65,084 97,627 130,169 162,711 195,253 261,948
500,000 36,292 72,584 108,877 145,169 181,461 217,753 291,948
550,000 40,042 80,084 120,127 160,169 200,211 240,253 321,948
600,000 43,792 87,584 131,377 175,169 218,961 262,753 351,948
650,000 47,542 95,084 142,627 190,169 237,711 285,253 381,948
700,000 51,292 102,584 153,877 205,169 256,461 307,753 411,948
750,000 55,042 110,084 165,127 220,169 275,211 330,253 441,948
800,000 58,792 117,584 176,377 235,169 293,961 352,753 471,948
850,000 62,542 125,084 187,627 250,169 312,711 375,253 501,948
</TABLE>
For purposes of determining the collective pension benefits under the
Retirement Plan and the Supplemental Plan, the years of credited service and
final average annual earnings (as though the executive officer had retired at
age 65 on January 31, 1998) for the Named Executives are as follows: Mr. McKay,
20 years and $391,704; Mr. Robertson, 22 years and $384,363; and Mr.
Rhodenbaugh, 12 years and $330,761. Mr. Dotterweich retired on May 1, 1997. Mr.
Greenwood is not eligible to participate in either the Retirement Plan or the
Supplemental Plan.
8
<PAGE> 11
Employee Option Plan
Each of the Company's executive officers are eligible to be granted
awards under the Employee Plan. The Employee Plan, as amended, permits the
delivery of a maximum of 4,004,814 shares of the Company's Common Stock on
account of the exercise of awards. Of this amount of shares of the Company's
Common Stock, a maximum of 1,500,000 shares of the Company's Common Stock may be
made subject to awards granted to any particular individual.
The following table sets forth the number of shares covered by
exercisable and unexercisable options held by the Named Executives on January
31, 1998 and the aggregate gains that would have been realized had those options
been exercised on January 31, 1998, whether these options were exercisable or
not, on January 31, 1998. These calculations assume a market value for a share
of Common Stock of $17.00, which was the closing price of the Common Stock on
January 31, 1998, as quoted on the Nasdaq Stock Market.
<TABLE>
<CAPTION>
Number of Shares Covered by
Options on Value of Options as of
January 31, 1998 January 31, 1998 (1)
---------------- --------------------
Shares
Acquired
upon Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel B. Greenwood --- --- 325,000 --- $ 5,200,000 ---
Jeffrey P. Rhodenbaugh (2) --- --- 225,000 100,000 3,600,000 $475,000
William E. Dotterweich 100,000 $ 843,750 275,000 --- 2,443,750 ---
Donald K. McKay --- --- 200,000 --- 3,200,000 ---
William W. Robertson(3) 132,400 1,787,400 117,600 --- 1,881,600 ---
</TABLE>
(1) Option values are calculated based upon the difference between the
closing market price of the Company's common stock as reported on the NASDAQ
National Market on January 31, 1998 ($17.00) and the applicable exercise prices
of the options.
(2) All of the options granted to Mr. Rhodenbaugh vest two years after
the date of grant. 225,000 options were granted on June 8, 1993 at an exercise
price of $1.00, 50,000 options were granted on August 21, 1996 at an exercise
price of $12.00 and 50,000 options were granted on May 1, 1997 at an exercise
price of $12.50.
(3) Of the 132,400 shares exercised by Mr. Robertson, 44,900 shares
were withheld for payment of withholding taxes and a total of 87,500 were
issued.
Options awarded pursuant to the Employee Plan may not be transferred
except in certain circumstances by will or by the laws of descent and
distribution. Options under the Employee Plan that are vested and exercisable at
the date of a grantee's termination of service generally may be exercised for
three months thereafter, except that such awards may be exercised for three
years after death, disability and/or retirement.
OPTION GRANTS IN THE FISCAL YEAR ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
Percent of Potential Realized Value at
Total Options Assumed Annual Rates
Granted to all Exercise or of Stock Price Appreciation
Options Employees in Base Price Expiration for Option Term (4)
Granted # Fiscal Year (1) ($/Share) (2) Date (3) 5% ($) 10%($)
--------- --------------- ------------ ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey P. Rhodenbaugh 50,000 100% $12.50 5/1/04 $ 254,438 $ 592,948
</TABLE>
9
<PAGE> 12
(1) Stock options exercisable into 50,000 shares of Common Stock were granted
to all employees and non-employee directors of the Corporation as a group
during the fiscal year ended January 31, 1998.
(2) The exercise price is the closing market price on the date of grant.
(3) Options vest and become exercisable commencing on the second anniversary of
the grant date, and expire in five years from the vesting date.
(4) The dollar amounts under the potential realizable values columns use the 5%
and 10% rates of appreciation permitted by the SEC, and are not intended to
forecast actual future appreciation in the stock price. Actual gains, if
any, on stock option exercises are dependent on the future performance of
the Company's Common Stock. There can be no assurance the amounts reflected
in this table will be achieved. The assumed rates are compounded annually
to the full seven year term of the options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its
executive officers (other than Mr. Dotterweich), among others, whereby the
Company agreed to retain each of them and each of them has agreed to remain in
the employ of the Company for two years from December 19, 1993. Each of these
Agreements were renewed for an additional two year term, effective December 19,
1995, and were amended so that they will automatically renew for additional two
year terms unless either party delivers notice within 90 days prior to the end
of the then applicable term. Since May 1, 1997 Mr. Dotterweich has served as a
consultant to the Company. The Company and Mr. Dotterweich have agreed that he
will continue to serve in such capacity for four years, until May 1, 2001. In
connection with his consulting services the Company has agreed to pay Mr.
Dotterweich $225,000, $175,000, $125,000 and $75,000 for each of the years ended
April 30, 1998, 1999, 2000 and 2001, respectively. The parties are negotiating
the terms of a formal consulting agreement and to date have not entered into any
written agreement with respect to these consulting services.
Under the terms of the employment agreement for the executive officers,
each executive officer is to receive: a salary equal to his salary as of the
date of his employment agreement, with any increases subject to the discretion
of the Compensation Committee and the approval of the Board of Directors; a
bonus determined by the Compensation Committee with the approval of the Board of
Directors; participation in any employee stock option program, such as the
Employee Plan, that may be adopted; participation in other incentive, savings
and retirement plans, welfare benefit plans and fringe benefits, expense
reimbursement and vacation policies applicable to Company executives; and
indemnification for liabilities arising from his service whether arising before
or during the term of his employment agreement.
Also, each executive officer, upon (i) termination without cause, (ii)
death, (iii) permanent disability or (iv) termination for good reason, will be
entitled to: (a) continuation of monthly salary, health and life insurance in
effect on the termination date for the "Continuation Term" (although the
agreements do not provide for continuation payments if the employment of the
executive is terminated at any time after the expiration date of such person's
employment agreement); (b) such terminated executive officer's share of cash
incentive bonus earned in the year of termination prorated based on the time
employed during the year; and (c) the continuation of any unexercised options as
specified in the Plan. The Continuation Term is six months, unless the
termination which gives rise to the severance benefits occurs following a Change
of Control (as defined therein), in which case the Continuation Term is 24
months. If a change of the ownership or effective control of a substantial
portion of the assets of the Company results in any executive officer becoming
subject to the 20% excise tax on excess parachute payments, the Company will
reimburse such person for the amount of the excise tax due and all taxes on the
reimbursement up to a maximum reimbursement limit of five times the excise tax.
10
<PAGE> 13
CERTAIN TRANSACTIONS
In connection with the taxes payable on Company issued shares of
restricted stock, the Company has offered certain of its executives non-interest
bearing loans. All shares of restricted stock were granted on April 1, 1992 and
have become fully vested and are no longer restricted. As of April 8, 1998, the
aggregate indebtedness owed to the Company by Donald McKay, Daniel Greenwood and
Jeffrey Rhodenbaugh is an amount equal to $68,963, $123,115 and $18,080
respectively, which was the largest aggregate amount of indebtedness to the
Company outstanding for each such person during fiscal 1998. During fiscal year
1998, the total income imputed from the forgiveness of interest indebtedness for
these individuals was $4,659, $8,352, and $1,216, respectively.
In connection with the Company's Stock Repurchase Plan, the Company
entered into a stock purchase agreement with Malcolm I. Glazer and the Malcolm
I. Glazer Family Limited Partnership (collectively, the "Malcolm Glazer
Interests"). Pursuant to this agreement, the Malcolm Glazer Interests have
participated in the Stock Repurchase Plan through an agreement to sell a pro
rata portion of their shares at the average per share price paid to other
selling stockholders. A special committee of the Board, consisting entirely of
outside directors, approved this agreement. As of April 8, 1998, 176,181 shares
of Common Stock had been repurchased from the Malcolm Glazer Interests at an
average price per share of $16.451.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Greenwood, who is an executive officer, is a member of the
Compensation Committee of the Board of Directors. The other members of the
Compensation Committee during fiscal 1998 were Messrs. MacLean, Kent, and
Malcolm Glazer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Executive Officer Compensation
The Company's compensation program for executive officers consists of
three elements: a base salary, a bonus and stock options. The Committee believes
that this approach best serves the interests of stockholders by ensuring that
executive officers are compensated in a manner which provides incentives based
upon both the short-term and long-term performance of the Company. Thus,
compensation for the Company's executive officers involves a high proportion of
pay which is at risk: the variable annual bonus and stock options (which
directly relate a significant portion of the executive officer's long-term
remuneration to stock price appreciation realized by the Company's
stockholders). The Compensation Committee generally believes that stock options
should be emphasized more than a bonus as a means to attract, retain and
motivate executives.
Base Salary. The Compensation Committee recommended, and the Board of
Directors approved a base salary for Mr. Rhodenbaugh of $350,000 effective May
1, 1997. Mr. Rhodenbaugh's 1998 Compensation was established taking into his
account his overall qualifications and experience and market conditions for
executives of his caliber for comparable companies. In addition, it takes into
consideration, effective May 1, 1997 his added responsibilities as the Company's
Chief Executive Officer upon his election to such position at that time. The
salaries of the other executive officers of the Company, were set based upon
subjective factors such as the level of experience and competency and complexity
of the duties performed by such executive officer, as well as objective
criterion such as the performance of the Company, as compared to its business
plan, including compliance by the Company with the financial covenants provided
in the Company's loan agreements. In the case of Mr. Robertson, the division
president of Beverage-Air, base salary is also affected by the performance of
that division compared with its business plan. The Compensation Committee's
discretion in setting the executive officers' base salaries, however, is limited
by the terms of the employment agreements, described above.
11
<PAGE> 14
Stock Options. At the Annual Meeting of Stockholders in 1993, the
Company's stockholders approved the Employee Plan. The Employee Plan is designed
to advance the interests of the Company by providing a means by which key
employees of the Company and its subsidiaries can acquire and maintain stock
ownership, thereby strengthening their commitment to the Company's success and
their desire to remain employed by the Company and its subsidiaries. The Board
of Directors believes that the share authorizations and allocations under the
Employee Plan have been consistent with competitive practice and properly
reflected the Company's transitional circumstances following its 1992 bankruptcy
reorganization and the challenges confronting management. Allocations of options
were based principally upon subjective factors, including, most significantly,
an assessment of how significant the individual executive officer's performance
was and would be to the future growth and performance of the Company. A total of
50,000 stock options were granted to Mr. Rhodenbaugh pursuant to the Employee
Plan in the Company's fiscal year ended January 31, 1998. These grants were made
to reflect his increased responsibilities as Chief Executive Officer and his
increased importance to the Company's overall performance and achievement of its
objectives. Stock option awards are not made by the compensation committee but
rather are made by the stock incentive committee, which is comprised of three
non-employee directors.
Annual Bonus. The Compensation Committee also reviews and approves
bonus compensation for the executive officers. Bonuses for executive officers
other than Mr. Dotterweich were based on a percentage of their salaries and were
derived from a formula based upon the Company's actual EBITA (Earnings Before
Interest, Taxes and Amortization), as compared to the Company's projected EBITA
in its annual plan. In the case of Mr. Rhodenbaugh and Mr. McKay, a portion of
their bonus is based upon the appreciation in the price of the Company's Common
Stock. In the case of executive officers who perform functions primarily at only
one of the Company's divisions, bonuses are based upon various factors including
the meeting of a divisional (as opposed to Company-wide plan) EBITA, sales
growth, earnings growth and use of working capital.
Compliance With Internal Revenue Code Section 162(m)
Section 162(m) of the IRC, enacted in 1993, generally disallows a tax
deduction to public companies for compensation exceeding $1 million paid to the
corporation's Chief Executive Officer or four other most highly compensated
executive officers. The Compensation Committee has reviewed the possible effect
on the Company of Section 162(m), and it does not believe that such section
currently effects the Company given its current compensation structure. To the
extent that it is possible that the compensation to any of the Company's
executive officers could exceed $1 million the Compensation Committee intends to
further review and consider the effect on the Company of Section 162 (m).
Furthermore, the Employee Plan was amended so as to make it possible to satisfy
the conditions for an exemption from Section 162(m)'s deduction limit. However,
other characteristics of a grant affect whether or not a deduction is actually
available in a given case.
Members of the Compensation Committee:
Daniel B. Greenwood
Barry L. MacLean
Richard A. Kent
Malcolm I. Glazer
12
<PAGE> 15
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis changes since
December 1, 1993 (the date on which the Common Stock of the Company was first
publicly traded) in (a) the total stockholder return on the Company's Common
Stock, (b) the total return of companies in the Russell 2000 Index, and (c) the
total return of companies in the Value Line Machinery Index. The total return
information presented in the graph assumes the reinvestment of dividends. The
graph assumes $100 was invested on December 1, 1993 in the Company's Common
Stock, the Russell 2000 Index and the Value Line Machinery Index.
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
12/1/93 1/31/94 1/31/95 1/31/96 1/31/97 1/31/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Specialty Equipment Companies, Inc. 100.00 133.33 227.78 247.22 299.99 377.78
Russell 2000 Index 100.00 106.66 100.09 130.05 154.70 172.00
Value Line Machinery Index 100.00 106.66 100.85 125.49 144.94 165.00
</TABLE>
The Company is included in the Russell 2000 Index (an index of small
capitalization companies) but is not part of the Value Line Machinery Index. The
Value Line Machinery Index includes a group of 43 companies, some of which are
direct competitors of the Company, with primary businesses that involve the
manufacture of a variety of machinery and equipment.
13
<PAGE> 16
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP served as the Company's independent
certified public accountants for the fiscal year ended January 31, 1998. A
representative of that firm is expected to be present at the Company's 1998
Annual Meeting of Stockholders with the opportunity to make a statement, if so
desired, and to be available to respond to appropriate questions.
2. OTHER MATTERS
It is not presently expected that any matters other than the election
of Directors will be brought before the meeting. If, however, other matters do
come before the meeting, it is the intention of the persons named as
representatives in the accompanying proxy to vote in accordance with their best
judgment on such matters.
By order of the Board of Directors,
/s/ DONALD K. MC KAY
--------------------------
Donald K. McKay, Secretary
Aurora, Illinois
April 13, 1998
14
<PAGE> 17
PROXY PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SPECIALTY EQUIPMENT COMPANIES, INC.
1245 Corporate Boulevard, Suite 401
Aurora, Illinois 60504
FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY 19, 1998
The undersigned stockholder hereby appoints JEFFREY P. RHODENBAUGH, DONALD K.
MCKAY and DOUGLAS C. JOHNSON, or any of them, with full power of substitution
(the action of one, if only one be present and acting to be in any event
controlling), the proxies of the undersigned at the Annual Meeting of
Stockholders of Specialty Equipment Companies, Inc. (the "Company") to be held
at The Chicago Club located at 81 E. Van Buren Street, Chicago, Illinois 60605,
on Tuesday May 19, 1998 at 10:00 a.m., Chicago time and at any and all
adjournments or postponements thereof, and to vote all shares which the
undersigned would be entitled to vote thereat as designated below, with all
powers which the undersigned would possess if personally present.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1.
<TABLE>
<S> <C>
(Comments/Change of Address)
------------------------------------
------------------------------------
(If you have written in the above
space, please mark the corresponding
box on the reverse side)
....................................................................................................................................
</TABLE>
FOLD AND DETACH HERE
<PAGE> 18
SPECIALTY EQUIPMENT COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
<S><C>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT:
/ / / / / /
1. Election of Directors -- 2. In their discretion, the Proxies are
Director Nominees: authorized to vote upon such other
William E. Dotterweich business as may properly come before
Daniel B. Greenwood the meeting.
Kevin E. Glazer
------------------------------------------------ Comments/
Nominee exception (INSTRUCTION: To withhold Change
authority to vote for any individual nominee of [ ]
or nominees, write the name(s) of the nominee(s) Address
on the line provided above.)
Dated: , 1998
-----------------------------------------------
-------------------------------------------------------------
Signature
-------------------------------------------------------------
Signature if held jointly
NOTE: Please sign exactly as name appears at left.
When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
....................................................................................................................................
FOLD AND DETACH HERE
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
