<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant[X]
Filed by 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 Under Rule 14a-12
Specialty Equipment Companies, Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Specialty Equipment Companies, Inc.
1245 Corporate Boulevard, Suite 401
Aurora, Illinois 60504
NOTICE OF SOLICITATION OF ACTION BY WRITTEN CONSENT
To the Stockholders of Specialty Equipment Companies, Inc.:
Attached is a Proxy Statement describing the proposed election of members to
the Board of Directors of Specialty Equipment Companies, Inc. (the "Company")
by written consent of the holders of a majority in interest of shares
("Shares") of the Company's common stock, par value $.01. The attached Proxy
Statement is being provided in connection with the offer to purchase all of the
Company's outstanding shares of common stock (the "Offer") pursuant to the
offer to purchase ("Offer to Purchase") by Solar Acquisition Corp.
("Purchaser"), a wholly owned subsidiary of United Technologies Corporation
("UTC"). The attached Proxy Statement is also being distributed to satisfy the
requirements set forth in Rule 14f-1 of the Securities Exchange Act of 1934 in
connection with the Offer. Stockholders of record at the close of business on
October 18, 2000 are entitled to submit written consents in lieu of a special
meeting.
The Offer is made pursuant to, and in accordance with, that certain
Agreement and Plan of Merger, dated October 13, 2000, by and among the Company,
Purchaser and UTC ("Merger Agreement"). Subject to certain conditions, upon
closing of the Offer, Purchaser will be merged with and into the Company, with
the Company becoming a wholly owned subsidiary of UTC (the "Merger").
Each stockholder, by executing and delivering a Letter of Transmittal
accompanying the Offer to Purchase in connection with the Offer (or, in the
case of a book-entry transfer, by delivery of an Agent's Message (as defined in
the Offer to Purchase), in lieu of a Letter of Transmittal), will consent
thereby to the election of directors of the Company, to be designated by
Purchaser, to fill the vacancies on the Board of Directors of the Company that
are expected to result, after completion of the Offer, from the resignation of
certain directors of the Company. The number of directors that are expected to
resign, and that will be designated for election by Purchaser, will equal the
number, rounded up to the nearest whole number, which is the product of the
total number of directors on the Board of Directors of the Company and the
percentage that the aggregate number of Shares beneficially owned by Purchaser
after completion of the Offer bears to the total number of Shares then
outstanding, provided that there will remain after the Offer but prior to the
time the Merger described below becomes effective two directors who were
directors of the Company on the date of the Merger Agreement and who are not
representatives of UTC. Such consent is effective when, and only to the extent
that, Purchaser deposits the payment for the Shares tendered thereby with the
Depositary (as defined in the Offer to Purchase).
As further described in the attached Proxy Statement, the consent being
solicited is only revocable upon withdrawal of the tender of the related
Shares; otherwise, the consent is irrevocable. See the Offer to Purchase and
the Schedule 14D-9 which are included with this Proxy Statement for additional
information regarding the Merger, the Offer and the Merger Agreement.
EXECUTION AND DELIVERY OF THE LETTER OF TRANSMITTAL ACCOMPANYING THE OFFER
TO PURCHASE SHALL CONSTITUTE A WRITTEN CONSENT TO THE ELECTION OF THE
NOMINATED PERSONS AS DIRECTORS
By:__________________________________
Donald K. McKay
Executive Vice President and
Secretary
Aurora, Illinois
October 23, 2000
[LOGO]
<PAGE>
Specialty Equipment Companies, Inc.
1245 Corporate Boulevard, Suite 401
Aurora, Illinois 60504
PROXY STATEMENT
SOLICITATION OF WRITTEN CONSENTS
This proxy statement ("Proxy Statement") is being furnished by Specialty
Equipment Companies, Inc. (the "Company") in connection with a solicitation by
the Board of Directors of the Company (the "Board of Directors") of written
consents to be used for the election of members to the Board of Directors of
the Company (the "Election") by the written consent of the holders of a
majority in interest of the Company's common stock, par value $.01 per share
(the "Common Stock"), in lieu of holding a special meeting. The Election is to
take place in connection with the consummation of the offer (the "Offer") by
Solar Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of United
Technologies Corporation ("UTC"), to purchase, pursuant to the offer to
purchase ("Offer to Purchase"), all of the shares of the Company's outstanding
Common Stock (the "Shares"). It is anticipated that the Election by written
consent will be effective on or shortly after consummation of the Offer. This
Proxy Statement is being mailed on or about October 23, 2000 to stockholders of
the Company.
Each stockholder, by executing and delivering the Letter of Transmittal
accompanying the Offer to Purchase in connection with the Offer (or, in the
case of a book-entry transfer, by delivery of an Agent's Message (as defined in
the Offer to Purchase) in lieu of a Letter of Transmittal), will consent
thereby to the election of directors of the Company, to be designated by
Purchaser, to fill the vacancies on the Board of Directors of the Company that
are expected to result, after completion of the Offer, from the resignation of
certain directors of the Company. The number of directors that are expected to
resign, and that will be designated for election by Purchaser, will equal the
number, rounded up to the nearest whole number, which is the product of the
total number of directors on the Board of Directors of the Company and the
percentage that the aggregate number of Shares beneficially owned by Purchaser
after completion of the Offer bears to the total number of Shares then
outstanding, provided that there will remain after the Offer but prior to the
time the Merger described below becomes effective two directors who were
directors of the Company on the date of the Merger Agreement and who are not
representatives of UTC. Such consent is effective when, and only to the extent
that, Purchaser deposits the payment for the Shares tendered thereby with the
Depositary.
The consent being solicited is only revocable upon withdrawal of the tender
of Shares; otherwise the consent is irrevocable. Tenders of Shares made
pursuant to the Offer are irrevocable, except that Shares tendered pursuant to
the Offer may be withdrawn at any time prior to the expiration date of the
Offer and, unless theretofore accepted for payment by Purchaser pursuant to the
Offer, may also be withdrawn at any time after December 22, 2000.
For a withdrawal of Shares to be effective, a written facsimile transmission
notice of withdrawal must be timely received by the Depositary at its address
set forth on the back cover of the Offer to Purchase. Any notice of withdrawal
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the recordholder of the
Shares to be withdrawn, if different from that of the person who tendered such
Shares. The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (as defined in the Offer to Purchase), unless such Shares
have been tendered for the account of any Eligible Institution. If Shares have
been tendered pursuant to the procedures for book-entry transfer as set forth
in Section 3 of the Offer to Purchase, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility (as
defined in the Offer to Purchase) to be credited with the withdrawn Shares. If
certificates have been delivered or otherwise identified to the Depositary, the
name of the registered holder and the serial numbers shown on such certificates
must also be furnished to the Depositary as aforesaid prior to the physical
release of such certificates.
<PAGE>
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
which determination shall be final and binding. No withdrawal of Shares shall
be deemed to have been properly made until all defects and irregularities have
been cured or waived. None of Purchaser, UTC, the Depositary, the Information
Agent (as defined in the Offer to Purchase) or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give such notification.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 3 of the Offer to Purchase at any time prior to
the Expiration Date (as defined in the Offer to Purchase).
If Purchaser extends the Offer and is delayed in its acceptance for payment
Shares or is unable to accept for payment Shares pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under this Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in Section 4 of the
Offer to Purchase.
Each stockholder of record at the close of business on October 18, 2000 (the
"Record Date") is entitled to submit written consents in lieu of a special
meeting. On the Record Date, there were outstanding 19,515,887 shares of the
Company's Common Stock, each entitled to one non-cumulative vote. No other
shares of the Company entitled to submit written consents in lieu of a special
meeting were outstanding.
GENERAL
On October 13, 2000, the Board of Directors approved, and the Company
entered into, an Agreement and Plan of Merger ("Merger Agreement") with UTC and
Purchaser. The Merger Agreement gives Purchaser the right to designate a
certain number of directors upon the consummation of the Offer. The number of
designees is to be based upon the number of Shares purchased by Purchaser
pursuant to the Offer. The Merger Agreement requires the Company to use its
best efforts to secure the resignations of a corresponding number of directors
so that a sufficient number of vacancies will exist to allow Purchaser's
designees to be elected to fill such vacancies. Pursuant to the Amended and
Restated Certificate of Incorporation of the Company, as amended, vacancies on
the Board of Directors resulting from resignation may be filled only by a vote
of the Company's stockholders.
In order to effectuate the provisions of the Merger Agreement regarding
Purchaser's designation of directors and their election to the Board of
Directors, and to comply with the requirements of the Company's Amended and
Restated Certificate of Incorporation, as amended, the Company is soliciting
the written consent of the Company's stockholders to approve the election of
those nominees designated by Purchaser to fill such vacancies on the Board of
Directors arising from the consummation of the Offer.
The elimination of the need for a special meeting of stockholders to approve
the Election is made possible by Section 228 of the Delaware General
Corporation Law (the "DGCL"), which provides that the written consent of the
holders of outstanding shares of voting capital stock, having not less than the
minimum number of votes which would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, may be substituted for such a special meeting.
Stockholders owning at least a majority in interest of the Shares will be
required to consent to cause the contemplated election of directors. However,
under the terms of the Merger Agreement, the Offer will not close and,
accordingly, no new directors will be elected to the Board of Directors, unless
a majority of the outstanding Shares are tendered pursuant to the Offer.
Accordingly, unless the Company, UTC, and Purchaser agree to an amendment or
waiver of that condition of the Merger Agreement, if the Offer closes, there
will be sufficient consents to cause the election of the appropriate number of
directors.
2
<PAGE>
Pursuant to Section 228 of the DGCL, the Company will provide prompt notice
of the taking of the corporate action without a meeting after the Election is
effective to those stockholders specified in Section 228(d) of the DGCL who
have not consented in writing to such action. No additional action will be
undertaken pursuant to such written consent, and no appraisal rights under the
DGCL are afforded to the Company's stockholders as a result of the Election.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table (the "Security Holdings Table") sets forth information
as of October 13, 2000, 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 Regulation 13D-G 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 who own such Common Stock, and each of the executive officers named
in the 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 of
Common Stock shown as beneficially owned by them. To the Company's knowledge,
the nominees to the Board of Directors do not own any Shares. However, they may
be deemed to be beneficial owners due to their position with UTC. UTC may be
deemed to have beneficial ownership of Shares owned by Malcolm I. Glazer, Kevin
E. Glazer and Avram A. Glazer as a result of the Stockholder Agreement
described in footnote 8 below.
<TABLE>
<CAPTION>
Amount of
Beneficial Percent
Name of Beneficial Owner Ownership of Class (1)
------------------------ ---------- ------------
<S> <C> <C>
Malcolm I. Glazer(2)(7)(8)............................. 7,736,569 39.6%
Ariel Capital Management, Inc. (2)(3).................. 5,417,990 27.8%
Daniel B. Greenwood.................................... 100,193 (6)
William E. Dotterweich (4)............................. 100,000 (6)
Donald K. McKay (4).................................... 193,261 1.0%
Jeffrey P. Rhodenbaugh (4)(5).......................... 281,856 1.4%
Richard A. Kent........................................ 175,241 (6)
Barry L. MacLean....................................... 20,241 (6)
Kevin E. Glazer (7)(8)................................. 16,606 (6)
Charles E. Hutchinson.................................. 15,241 (6)
Avram A. Glazer (7)(8)................................. 15,000 (6)
All directors and executive officers as a group (11
people)(4)............................................ 8,655,208 43.9%
</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, 19,515,887, adjusted in the cases of Messrs. Rhodenbaugh and
Dotterweich as set forth in footnote 4 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) 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. Ariel has sole dispositive power and sole voting power with
respect to all such 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.
3
<PAGE>
(4) The amounts and percentages include those Shares reflected in column (b)
but not those reflected in column (c).
<TABLE>
<CAPTION>
(a) (b) (c)
Shares Issuable
on Exercise of
Options Under the
2000 Director
Shares Issuable on Plan and Unvested
Exercise of Vested Options Options Under the
Name Under Employee Plan Employee Plan
---- -------------------------- -----------------
<S> <C> <C>
Jeffrey P. Rhodenbaugh...... 100,000 --
William E. Dotterweich...... 100,000 --
Donald K. McKay............. -- --
Malcolm I. Glazer........... -- 2,800
Avram A. Glazer............. -- 2,800
Kevin E. Glazer............. -- 2,800
Richard A. Kent............. -- 2,800
Charles E. Hutchinson,
Ph.D....................... -- 2,800
Barry L. MacLean............ -- 2,800
All directors and executive
officers as a group (11
people).................... 200,000 51,800
</TABLE>
William W. Robertson retired at the end of fiscal year 2000 and,
accordingly, is no longer subject to reporting requirements under Section
16(a) of the Exchange Act. However, to the Company's knowledge, Mr.
Robertson does not beneficially own any Common Stock. Robert R. Friedl
became Chief Financial Officer on May 1, 2000; accordingly, he is not named
in the Compensation Table below. However, his ownership is included in the
directors and executive officers group. Additionally, Mr. Friedl owns
options for 35,000 shares of Common Stock, none of which are exercisable
within 60 days of the date of this Proxy Statement. All options owned by
any of the foregoing, whether vested or unvested, shall be cancelled upon
consummation of the Merger and converted into the right to receive a cash
payment equal to the excess of $30.50 (or such other amount as may be
payable pursuant to the Offer) over the exercise price of the option, times
the number of shares issuable upon exercise of the option.
(5) Includes an aggregate of 1,600 shares and 8,209 options held in trust for
the benefit of Mr. Rhodenbaugh's children as to which he may be deemed to
have shared voting and investment power.
(6) Less than one percent.
(7) The Shares owned by Malcolm Glazer are beneficially owned by the Malcolm I.
Glazer Family Limited Partnership (the "Family LP"). Malcolm Glazer is the
President and sole shareholder of the corporate general partner of the
Family LP. Avram A. Glazer and Kevin E. Glazer are sons of Malcolm I.
Glazer.
(8) As a condition to the commencement of the Offer, Malcolm I. Glazer, Kevin
E. Glazer and Avram A. Glazer (collectively, the "Glazers") entered into
that certain Stockholder Agreement with UTC and Purchaser, dated October
13, 2000 (the "Stockholder Agreement"). Under the Stockholder Agreement,
the Glazers each agreed to validly tender (or cause the record owner of
such Shares to validly tender), and not to withdraw, pursuant to the Offer,
not later than the fifth business day after its commencement, all of the
Shares beneficially owned by such stockholder on the date of the
Stockholder Agreement, or subsequently acquired by such stockholder, to
Purchaser as well as granted Purchaser an irrevocable option to purchase
all such Shares. Additionally, the Glazers each agreed to vote their
Shares, either at a meeting or by written consent, in favor of the Merger
Agreement and irrevocably granted to and appointed Purchaser as their proxy
and attorney-in-fact to vote their respective Shares in favor of the Merger
Agreement.
4
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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, 2000 were met. In the
current fiscal year of the Company, Robert R. Friedl was late in filing a Form
3.
ELECTION OF DIRECTORS
The Merger Agreement provides that, promptly upon payment for the Shares
tendered in response to the Offer, Purchaser shall be entitled to designate up
to such number of directors, rounded up to the nearest whole number, as will
give Purchaser representation on the Board of Directors equal to the product of
the total number of directors on the Board of Directors multiplied by the
percentage that the aggregate number of Shares as are accepted for payment
pursuant to the Offer bears to the number of Shares then outstanding.
Additionally, in furtherance thereof, the Company is required to use its best
efforts, after consummation of the Offer, to secure the resignations of that
number of directors as is necessary to enable Purchaser's designees to be
elected to the Board of Directors. However, two "independent" directors,
Messrs. MacLean and Kent, are to remain on the Board.
Accordingly, depending on the number of Shares purchased by Purchaser
pursuant to the Offer, as well as the number of directors that tender their
resignation, the following persons constitute the nominees to the Board of
Directors to be elected to fill the anticipated vacancies:
(a) If, after completion of the Offer, Parent beneficially owns greater
than 50% but not greater than 55 5/9% of the issued and outstanding
Shares, the following persons shall be the nominees designated by
Purchaser:
Azuwuike H. Ndukwu
Brian Lindroth
Robert E. Galli
George Minnich
Nicholas T. Pinchuk
(b) If, after completion of the Offer, Parent beneficially owns greater
than 55 5/9% but not greater than 66 2/3% of the issued and outstanding
Shares, the following persons shall be the nominees designated by
Purchaser:
Azuwuike H. Ndukwu
Brian Lindroth
Robert E. Galli
George Minnich
Nicholas T. Pinchuk
Christopher J. Brogan
(c) If, after completion of the Offer, Parent beneficially owns greater
than 66 2/3% of the issued and outstanding Shares, the following
persons shall be the nominees designated by Purchaser:
Azuwuike H. Ndukwu
Brian Lindroth
Robert E. Galli
George Minnich
Nicholas T. Pinchuk
Christopher J. Brogan
Kevin T. Williams
5
<PAGE>
Mr. Azuwuike H. Ndukwu, age 41, has served as Vice President, Business
Development of Carrier Corporation since July 2000. Prior to July 2000, Mr.
Ndukwu served as Director, Legal Affairs & Strategic Planning of Carrier Latin
American Operations, a Division of Carrier Corporation, which is a wholly owned
subsidiary of UTC. Prior to June 1999, Mr. Ndukwu served as Legal Counsel of
Carrier Latin American Operations. From July 1993 to January 1994, Mr. Ndukwu
served as Senior Attorney of Carrier Corporation World Headquarters. Mr. Ndukwu
will fill the vacancy caused by the anticipated resignation of Mr. Kevin E.
Glazer, with a term expiring in fiscal 2002.
Mr. Brian Lindroth, age 48, has served as the Vice President, Finance of
Carrier Refrigeration Operations since September 2000. Prior to September 2000,
Mr. Lindroth served as Director, Financial Planning and Analysis of Carrier
World Headquarters. From January 1993 to January 1997, Mr. Lindroth served as
Director, Finance of Carrier Latin American Operations. Mr. Lindroth will fill
the vacancy caused by the anticipated resignation of Mr. Avram A. Glazer, with
a term expiring in fiscal 2003.
Mr. Robert E. Galli, age 55, has served as the Vice President and General
Counsel of Carrier Corporation World Headquarters since June 1993. Mr. Galli
will fill the vacancy caused by the anticipated resignation of Mr. Malcolm I.
Glazer, with a term expiring in fiscal 2004.
Mr. George Minnich, age 50, has served as the Vice President and Chief
Financial Officer of Carrier Corporation World Headquarters since July 1996.
From July 1993 to July 1996, Mr. Minnich served as Vice President, Controller
of United Technologies Corporation. Mr. Minnich will fill the vacancy caused by
the anticipated resignation of Mr. William E. Dotterweich, with a term expiring
in fiscal 2002.
Mr. Nicholas T. Pinchuk, age 55, has served as President of Carrier
Commercial Refrigeration Operations since 1997. Prior to that Mr. Pinchuk was
President of Carrier Asia Pacific Operations for 10 1/2 years. Mr. Pinchuk will
fill the vacancy caused by the anticipated resignation of Mr. Daniel B.
Greenwood, with a term expiring in fiscal 2002.
Mr. Christopher J. Brogan, age 45, has served as the Deputy General Counsel
of Carrier World Headquarters since January 1999. From January 1994 to December
1998, Mr. Brogan served as Deputy Counsel of Sikorsky. Mr. Brogan will fill the
vacancy caused by the anticipated resignation of Mr. Jeffrey P. Rhodenbaugh,
with a term expiring in fiscal 2004.
Mr. Kevin T. Williams, age 49, has been Counsel to Carrier Commercial
Refrigeration Operations since May 1990. Mr. Williams will fill the vacancy
caused by the anticipated resignation of Mr. Charles E. Hutchinson, with a term
expiring in fiscal 2003.
Following is information regarding the current directors:
<TABLE>
<CAPTION>
Current Board Members Age
--------------------- ---
<S> <C>
Daniel B. Greenwood 81
William E. Dotterweich 64
Kevin E. Glazer 38
Jeffrey P. Rhodenbaugh 46
Malcolm I. Glazer 72
Avram A. Glazer 39
Charles E. Hutchinson, Ph.D. 64
Richard A. Kent 55
Barry L. MacLean 62
</TABLE>
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. Mr. Rhodenbaugh 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
6
<PAGE>
Marketing from 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 is active in industry trade associations and, in 1997,
served as president of the North American Association of Food Equipment
Manufacturers (NAFEM). Mr. Rhodenbaugh has served as a director since May 1997.
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, stocks, 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 of Omega
Protein Corporation ("Omega"), which is engaged in the production of marine
protein products. Malcolm Glazer is the father of Kevin Glazer, who is a
current director, and Avram Glazer, who is a current director. Mr. Glazer has
served as a director since May 1994.
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.
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 is
Chairman of the Board of Omega. Avram Glazer is the son of Malcolm Glazer and
the brother of Kevin Glazer, both of whom are current directors. Mr. Glazer has
served as a director since May 1994.
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, and is
currently the John H. Krehbiel, Sr. Professor for Emerging Technologies. 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.,
Medical Systems Inc., Microchips, Inc. and Dilon Technologies. Dr. Hutchinson
has served as a director of the Company since March 1992.
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.
Mr. Greenwood, a member of 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 of the Board of Directors, 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
7
<PAGE>
September 1996. From 1989 to 1992, and since May 1997, Mr. Dotterweich has
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.
Mr. Kevin E. Glazer, a member of 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 Savannah Bank
N.A. Kevin Glazer is the son of Malcolm Glazer, who is a current director, and
the brother of Avram Glazer, who is current director. Mr. Glazer has served as
a director since May 1994.
DIRECTORS COMMITTEES, MEETINGS AND COMPENSATION
The Board of Directors met four times in the Company's fiscal year ending
January 31, 2000. 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.
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, 2000 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. 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 Director Long-Term Incentive Plan (the "1993 Director Plan"). However,
Mr. Greenwood, Mr. Rhodenbaugh and Mr. Dotterweich received options pursuant to
the Specialty Equipment Companies, Inc. Executive Long-Term Incentive Plan
("Employee Plan"). Mr. Greenwood, Mr. Dotterweich and Mr. Rhodenbaugh do not
receive fees for their services as directors. Mr. Malcolm Glazer, Mr. Kevin
Glazer, Mr. Avram Glazer, Mr. Hutchinson, Mr. Kent, and Mr. MacLean received
options pursuant to the Specialty Equipment Companies, Inc. 2000 Non-Employee
Director Long-Term Incentive Plan (the "2000 Director Plan").
The Audit Committee consists of Mr. MacLean, Mr. Kent 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
members of the Audit Committee are "independent" as defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing standards. The
Board of Directors has not adopted a written charter for the Audit Committee.
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.
8
<PAGE>
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 Specialty Equipment Companies, Inc. 2000 Non-Employee Director Long-Term
Incentive Plan
On April 19, 2000 the Board of Directors approved the 2000 Director Plan
which the shareholders of the Company approved at the annual meeting on May 25,
2000.
On May 26, 2000, options to purchase 2,800 shares of the Common Stock at a
price of $20.625 per share were granted to each non-employee director then
serving or elected to serve on the Board of Directors (all current directors
other than Messrs. Rhodenbaugh, Greenwood and Dotterweich) pursuant to a
formula. Such number is determined by a formula applied at each annual meeting.
The formula is $32,000 divided by the per share present value of an option
determined under the Black-Scholes option pricing model. The formula result is
then rounded up to the next 100 whole shares. The option exercise price is the
fair market value (generally, the latest reported closing price) as of the date
of grant.
Depending on the values of the parameters for the Black-Scholes model, the
number of shares could be greater or less than 2,800 in other years, but the
present value of each annual grant under the Black-Scholes model would always
be $32,000 per non-employee director (or slightly more due to rounding).
Options granted under the 2000 Director Plan vest and become exercisable as
to 80% of the option upon the earlier of the date of the annual meeting in the
fourth year after grant, or the fourth annual anniversary of the grant. The
remaining 20% vests and becomes exercisable on the earlier of the date of the
annual meeting in the fifth year after grant, or the fifth annual anniversary
of the grant. Vesting may be accelerated if the service of a non-employee
director terminates by reason of retirement (defined to be any termination at
or after age 65), death or disability. In addition, all options will become
vested and exercisable upon a change of control of the Company. A "change of
control" will occur upon the consummation of the Offer. Director options under
the 2000 Director Plan expire upon the fifth anniversary of the vesting of such
option or portion of such option.
Options that are vested and exercisable upon termination of service may be
exercised for three months after termination of service (but not later than the
term of the option), unless service is terminated by retirement, death, or
disability, in which case options that are vested and exercisable upon
termination of service (including options that become vested on such
termination of service under the alternate vesting schedule) may be exercised
for three years after termination of service (but not later than the term of
the option), or unless service is terminated for cause, in which case all
options are forfeited.
Exercise of Director Options
The exercise price for options under the 2000 Director Plan may be paid in
cash or by the delivery of shares of Common Stock (valued at their fair market
value on the date of exercise) which the optionholder had held for at least six
months before the option exercise.
As a condition for delivery of shares under a director option, the director
must retain 20% of the shares of stock acquired by exercise of the option so
long as he or she is a director, with an exception for gifts of stock to
immediate family members, trusts or partnerships to whom the option could have
been transferred. An option granted under the 2000 Director Plan is generally
not assignable or transferable other than to such persons or by will or the
laws of descent and distribution.
The 2000 Director Plan will terminate on April 19, 2010 or at such earlier
time as the Board of Directors may determine. Termination of the 2000 Director
Plan will not affect outstanding options.
Treatment Under the Merger Agreement
The Merger Agreement provides that, as of the effective time of the Merger,
each outstanding option under the Company's stock option plans (including
options outstanding under the 2000 Director Plan) will be
9
<PAGE>
cancelled and the holder thereof will, whether such option is vested or not,
receive a cash payment equal to the excess of $30.50 (or such other amount as
may be payable pursuant to the Offer) over the exercise price of the option,
times the number of shares issuable upon the exercise of the option.
The 1993 Non-Employee Director Option Plan
In March 1993, the Board of Directors adopted for non-employee directors the
1993 Director Plan which was approved by stockholders of the Company on May 6,
1993, and has since been amended from time to time. Under the 1993 Director
Plan, options to purchase 175,241 shares of stock at a price of $1.00 per share
were granted on the date of the 1993 annual meeting to each non-employee
director then serving or elected to serve on the Board. No further grants of
options or other awards could be made under the 1993 Director Plan. Options
outstanding under the 1993 Director Plan neither affect nor are affected by any
grants of options under the 2000 Director Plan. As of April 15, 2000, options
for 876,205 shares under the 1993 Director Plan had already been exercised and
no further options under the 1993 Director Plan remain outstanding. Each of
Messrs. Hutchinson, Kent and MacLean, as well as two former directors, received
such options.
AGGREGATED 1993 NON-EMPLOYEE DIRECTOR PLAN
EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying in- the-
Shares Unexercised Money
Acquired Value Options Options at
On Exercise Realized at FY-End FY-End
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Richard A. Kent.................... -- -- 175,241 $2,957,192
Barry L. MacLean................... -- -- 20,241 341,567
</TABLE>
Messrs. Kent and MacLean exercised the options in the above chart prior to
their scheduled expiration in fiscal 2001 and continue to hold the shares so
acquired.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the executive
officers of the Company. Biographical information with respect to Messrs.
Greenwood and Rhodenbaugh is set forth under the caption "Election of
Directors" of this Proxy Statement.
<TABLE>
<CAPTION>
Year First Joined
the Company
or a Predecessor
Name Age Position Business
---- --- -------- -----------------
<S> <C> <C> <C>
Daniel B.
Greenwood 81 Chairman of the Board 1955
Jeffrey P. 46 President, Chief Executive and Chief Operating
Rhodenbaugh Officer 1986
Donald K. 68 Executive Vice President, Treasurer and Secretary
McKay 1977
Robert R.
Friedl 46 Chief Financial Officer 2000
</TABLE>
Mr. McKay has served as Executive Vice-President, Treasurer and Secretary
since April 1989. He also served as Chief Financial Officer of the Company from
April 1989 to May 1, 2000. From January 1985 until April 1989, Mr. McKay served
as Vice President of Finance, Treasurer and Secretary. From September 1988 to
March 1992, Mr. McKay served as a director of the Company. From 1977 to January
1985, Mr. McKay was employed by Beatrice, most recently as Vice-President of
its Commercial Equipment Division. Mr. McKay announced his retirement from the
Company on March 16, 2000 to be effective fiscal year end 2001.
10
<PAGE>
Robert R. Friedl has served as Chief Financial Officer since May 1, 2000.
Previously, Mr. Friedl served as Senior Vice President and Chief Financial
Officer from 1996 to September, 1999, as Vice President and Chief Financial
Officer from 1992 to 1996, as Vice President of Finance (1990 to 1992), and as
Assistant Treasurer (1988 to 1990) of The Manitowoc Company, Inc.
EXECUTIVE COMPENSATION
The following summary compensation table (the "Compensation Table")
summarizes compensation information with respect to the four most highly
compensated executive officers of the Company (collectively, the "Named
Executives") in fiscal 2000 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
Name and Principal Fiscal Salary Bonus Award(s) SARS Payout Compensation
Positions Year ($)(2) ($)(2) ($) (#) ($) ($)(1)
------------------ ------ ------- ------- ---------- -------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel B. Greenwood 1998 200,000 128,300 N/A N/A N/A 36,413
(Chairman of the Board) 1999 200,000 175,400 N/A N/A N/A 38,364
2000 200,000 140,888 N/A N/A N/A 35,094
Jeffrey P. Rhodenbaugh
(3) 1998 337,500 314,525 N/A 50,000 N/A 3,140
(Chief Executive
Officer, 1999 350,000 748,700 N/A N/A N/A 4,181
Chief Operating Officer 2000 364,000 256,416 N/A N/A N/A 4,416
and
President, and Chief
Executive
Officer, Taylor)
Donald K. McKay 1998 203,000 184,224 N/A N/A N/A 18,333
(Executive Vice 1999 213,000 451,866 N/A N/A N/A 17,422
President,
Chief Financial 2000 223,650 157,548 N/A N/A N/A 16,870
Officer, Treasurer and
Secretary) (4)
William W. Robertson 1998 250,000 300,000 N/A N/A N/A 4,413
(Chairman and Chief 1999 260,000 277,333 N/A N/A N/A 3,497
Executive Officer, 2000 260,000 183,659 N/A N/A N/A 4,042
Beverage-Air) (5)
</TABLE>
--------
(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.
(4) On May 1, 2000, Mr. Robert R. Friedl joined the Company as Chief Financial
Officer and Mr. McKay announced his retirement from the Company, to become
effective at fiscal year end 2001.
(5) Mr. Robertson retired effective the end of fiscal 2000.
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
11
<PAGE>
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 U.S. Internal Revenue Code ("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 2000, 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 9,960 19,921 29,881 39,841 49,802 59,762 81,402
200,000 13,710 27,421 41,131 54,841 68,552 82,262 111,402
250,000 17,460 34,921 52,381 69,841 87,302 104,762 141,402
300,000 21,210 42,421 63,631 84,841 106,052 127,262 171,402
350,000 24,960 49,921 74,881 99,841 124,802 149,762 201,402
400,000 28,710 57,421 86,131 114,841 143,552 172,262 231,402
450,000 32,246 64,921 97,381 129,841 162,302 194,762 261,402
500,000 36,210 72,421 108,631 144,841 181,052 217,262 291,402
550,000 39,960 79,921 119,881 159,841 199,802 239,762 321,402
600,000 43,710 87,421 131,131 174,841 218,552 262,262 351,402
650,000 47,460 94,921 142,381 189,841 237,302 284,762 381,402
700,000 51,210 102,421 153,631 204,841 256,052 307,262 411,402
750,000 54,960 109,921 164,881 219,841 274,802 329,762 441,402
800,000 58,710 117,421 176,131 234,841 293,552 352,262 471,402
850,000 62,460 124,921 187,381 249,841 312,302 374,762 501,402
</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, 2000) for the Named Executives are as follows: Mr. McKay,
22 years and $482,349; Mr. Robertson, 24 years and $460,082; and Mr.
Rhodenbaugh, 14 years and $592,022. Mr. Greenwood is not eligible to
participate in either the Retirement Plan or the Supplemental Plan.
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 5,004,814 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.
12
<PAGE>
The following table sets forth the number of shares covered by exercisable
and unexercisable options held by the Named Executives on January 31, 2000 and
the aggregate gains that would have been realized had those options been
exercised on January 31, 2000, whether these options were exercisable or not,
on January 31, 2000. These calculations assume a market value for a share of
Common Stock of $17.875, which was the closing price of the Common Stock on
January 31, 2000, as quoted on the New York Stock Exchange.
<TABLE>
<CAPTION>
Number of Shares
Shares Covered by Value of Options
Acquired Options on as of
Upon January 31, January 31,
Exercise Value 2000 2000 (1)
-------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Daniel B. Greenwood (3).. 150,000 $4,128,625 -- $ --
Jeffrey P. Rhodenbaugh
(2)(4).................. 125,000 2,718,751 200,000 2,050,000
William E. Dotterweich
(5)..................... 128,000 2,654,500 100,000 962,500
Donald K. McKay.......... -- -- 200,000 3,375,000
William W. Robertson (6). 117,600 3,251,736 -- --
</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 New York
Stock Exchange on January 31, 1999 ($17.875) 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 175,000 shares exercised by Mr. Greenwood, 50,000 shares were
withheld for payment of withholding taxes and a total of 125,000 were
issued.
(4) Of the 125,000 shares exercised by Mr. Rhodenbaugh, 50,062 were withheld
for payment of withholding taxes and exercise price and a total of 66,938
were issued.
(5) Mr. Dotterweich is no longer an executive officer of the Company since May
1, 1997. However, he continues to serve as a director.
(6) Of the 117,600 shares exercised by Mr. Robertson, 40,900 shares were
withheld for payment of withholding taxes and a total of 76,700 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, by
a qualified domestic relations order, or by gift to certain family members or
their trusts or family partnerships. 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.
There were no option awards granted to any of the named executives during
fiscal 2000. A stock option award covering 35,000 shares of Common Stock was
granted to Mr. Friedl upon his employment in fiscal 2001. Stock options
exercisable into 56,800 shares of Common Stock were granted to all employees
and non-employee directors as a group during fiscal 2001. Stock options
exercisable into 449,000 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, 2000. The exercise price is the closing market price on the
date of grant. Options vest and become exercisable commencing beginning on the
fourth anniversary of the grant date, and expire in five years from the vesting
date.
The Merger Agreement provides that, as of the effective time of the Merger,
each outstanding option under the Company's stock option plans (including
options outstanding under the Employee Plan) will be cancelled and the holder
thereof will, whether such option is vested or not, receive a cash payment
equal to the excess of $30.50 (or such other amount as may be payable pursuant
to the Offer) over the exercise price of the option, times the number of shares
issuable upon the exercise of the option.
13
<PAGE>
Employment Agreements
The Company has entered into employment agreements with each of its
executive officers, among others. Mr. Dotterweich retired as Chief Executive
Officer of the Company on May 1, 1997, and since then 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.
On June 12, 2000, the Company entered into amended employment retention
agreements with each of Messrs. Rhodenbaugh, Greenwood, Friedl and McKay, among
others, whereby the Company agrees to retain each of them and each of them
agreed to remain in the employ of the Company for a three year term. The term
automatically extends on a daily basis from the first anniversary of its
original effective date unless either party delivers notice of non-renewal, in
which event the agreement expires two years from the date of such notice.
Under the terms of the employment retention agreement for the executive
officers, each executive officer is to receive: a salary equal to his salary as
of the date of his agreement, subject to discretionary increases; a bonus
determined by the Compensation Committee with the approval of the Board of
Directors with a target bonus percentage of 60% of salary (100% for Mr.
Rhodenbaugh); 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 by the executive for good
reason, will be entitled to: (a) a lump sum cash payment within 30 days of
termination equal to two times his annual base salary as of the date of
termination (subject to a minimum of $450,000 for Mr. Friedl), plus an amount
equal to the incentive payments for the most recent two fiscal years (four
times the average incentive payments for the most recent four fiscal years for
Mr. Rhodenbaugh, and subject to a minimum of $167,500 for Mr. Friedl if
termination occurs before May 1, 2002), plus any deferred compensation; (b)
continuation of incentive, savings, retirement, and welfare plan benefits and
fringe benefits for a period of six months from the termination date (two years
from the termination date if termination occurs after a change of control), or
cash in lieu thereof; and (c) the vesting of any unvested options as of the
termination date. (For Mr. Rhodenbaugh, the aggregate cash payment described in
(a) above is subject to a minimum of $2.8 million.)
For purposes of the agreements, "good reason" is a material adverse change
in the executive officer's function, duties, or responsibilities (not promptly
cured); a failure by the Company to provide required compensation and plan,
welfare and fringe benefits (or cash in lieu thereof); a failure to secure
assumption of the agreement by any applicable successor company; or the
occurrence of a change of control if the executive provides the Company with a
notice of termination within 90 days thereafter (at any time for a period of
five years thereafter, unless and until the board of the successor corporation
approves comparable reporting responsibilities, for Mr. Rhodenbaugh).
For this last purpose only, a "change of control" is a 66 2/3% acquisition
by a person or group, a failure of incumbent directors to constitute 66 2/3% of
the Board of Directors, a merger or similar transaction (absent 66 2/3%
continuity of shareholder interest), or a liquidation or dissolution of the
Company. For other purposes (i.e., vesting of options and continuation of plan,
welfare and fringe benefits for two years rather than six months), a "change of
control" is a 50% acquisition by a person or group, a failure of incumbent
directors to constitute a majority of the Board of Directors, a merger or
similar transaction (absent 50% continuity of shareholder interest), or a
liquidation or dissolution of the Company. A change of control will occur under
one or both of these definitions (depending on the number of shares of Common
Stock that are tendered) upon consummation of the Offer. If a change of control
has not already occurred as a result of the Offer it will occur
14
<PAGE>
upon consummation of the Merger. 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.
On October 13, 2000, the employment retention agreements for Messrs.
Rhodenbaugh and Friedl (among others but not Messrs. Greenwood and McKay) were
further amended, effective (and conditional) upon the closing ("Closing") of
the transaction contemplated by the Merger Agreement. Under the amended
agreements, the employment term ends on the second anniversary of the Closing
with no provision for renewal. In the case of Mr. Rhodenbaugh, the amendment
provides that his position (including status, perquisites, offices, titles,
reporting requirements and responsibilities), authority and duties will be that
of a Level One Executive of UTC. The amended agreements provide base salary for
Mr. Rhodenbaugh of $400,000 annually before the Closing and $275,000 annually
after the Closing; and for Mr. Friedl at $225,000 before the Closing and
$175,000 after the Closing.
The amended agreements provide bonuses for Mr. Rhodenbaugh in accordance
with the Company's current incentive plan benefit for the fiscal year ending
January 31, 2001, and for Mr. Friedl a cash incentive payment in the amount of
$67,500 in respect of the fiscal year ending January 31, 2001 and $100,000 for
the year ending December 31, 2001. Beginning January 1, 2001, the amended
agreements provide for both Messrs. Rhodenbaugh and Friedl to participate in
Parent's annual incentive compensation program, and UTC's Continuous
Improvement Incentive Plan for long-term incentives, at target ranges
appropriate for their compensation levels. The amended agreements also provide
for a "transition payment" so that cash payments to those executives after the
Closing are in no event less than base compensation and target bonus as in
effect before the Closing.
For both Messrs. Rhodenbaugh and Friedl, the amended agreements provide that
"good reason" for termination does not include the changes in compensation and
benefits described above, nor (prior to the second anniversary of the Closing)
the changes in position, authority and duties (other than geographic relocation
of more than 50 miles without the executive's consent) contemplated by the
amended agreements, nor the occurrence of a change of control. The lump sum
benefit payable upon termination without cause, death, disability or for good
reason (as redefined in the amended agreements) will be based on post-Closing
base salary and reduced by the transition payment. However, the lump sum
benefit will be paid as, in substance, a retention bonus, on the second
anniversary of the Closing if the executive is still employed on such date. The
amended agreements also provide a post-employment covenant against competition
for one year regardless of the circumstances of such termination.
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 1, 2000, there
was no indebtedness owed to the Company by any of the named executives. During
fiscal year 2000, the total income imputed from the forgiveness of interest
indebtedness for Mr. Greenwood, Mr. Rhodenbaugh and Mr. McKay, $2,028, $838 and
$3,266, 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. A total of 210,914 shares of Common
Stock repurchased from the Malcolm Glazer Interests at an average price per
share of $17.53 during fiscal 1998 and fiscal 1999.
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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 2000 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 $364,000 for fiscal
2000. Mr. Rhodenbaugh's 2000 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 criteria 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 chairman 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 retention agreements,
described above.
Stock Options. At the Annual Meeting of Stockholders in 1993, the Company's
stockholders approved the Employee Plan. The Employee Plan was subsequently
amended in 1995 and 1999. The 1999 amendment increased the number of option
awards under the plan from 4,004,814 shares to 5,004,814 shares. 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. 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. Effective in fiscal 2000 bonuses for
executive officers are based on a percentage of their
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salaries and were derived from a formula based upon the Company's actual EVA
(Economic Value Added), as compared to the Company's targeted EVA. In the case
of executive officers who perform functions primarily at only one of the
Company's divisions, a portion of their bonuses are based upon the EVA of the
division compared to targeted EVA and a portion is based upon the Company's EVA
as compared to the Company's targeted EVA.
Each of the named executives (except for Mr. Rhodenbaugh who has a target of
100%) has a target bonus level of 60% of base salary. Under the EVA Plan,
bonuses are awarded to each named executive based on the improvement in EVA.
The target EVA is set annually for each business unit and for the Company as a
whole based on the average of the prior fiscal year's target and actual EVA
plus an expected improvement in EVA for the current fiscal year. If the annual
improvement in EVA is in excess of the targeted improvement, the bonus
calculation will result in an amount in excess of the participant's target
bonus. If the annual improvement in EVA is less than the targeted improvement,
the bonus calculation will produce an amount less than the individual's target
bonus. Bonuses payable under the EVA Plan are not subject to any minimum or
maximum. In fiscal year 2000, the performance of the Company and its business
units resulted in Plan compensation ranging from 105% to 143% of their targets.
In order to encourage a long-term commitment by executive officers and other
key employees to the Company and its stockholders, the EVA Plan requires that
two thirds of any bonus earned in a given year in excess of the target bonus be
deferred in a "bonus bank" for possible future payment by the Company. One-
third of the bonus bank balance is paid out each year. Consequently, the total
bonus payable in any given period consists of the individual's target bonus,
plus or minus a portion of the bonus bank balance. The bonus bank is considered
at risk in the sense that in any year EVA performance results in a bonus amount
which is negative, the negative bonus amount is subtracted from the bank
balance. In the event that the outstanding bonus bank balance at the beginning
of the year is negative, the bonus paid for that year is limited to the
aggregate of thirty-three percent of the positive bonus bank balance after
applying the remaining portion of the bonus earned for the year against the
negative balance in the bonus bank. The executive is not expected to repay
negative balances in the bonus. In the event that an executive voluntarily
terminates employment with the Company, the bonus bank balance is subject to
forfeiture.
Employment Retention Agreements
Since 1993, the Company has entered into renewable employment retention
agreements with its executive officers, among others, on terms and conditions
that were generally similar but vary in detail. On June 6, 2000, the
Compensation Committee and Board of Directors approved the amendment and
restatement of the employment retention agreements with all executive officers,
among others, to make them substantially identical in all features (except for
certain individual items and levels of compensation) and to provide for vesting
of options in the event of a change of control or a termination of employment
for good reason. Most of these agreements were further amended on October 13,
2000 as described above.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the IRC 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.
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Members of the Compensation Committee:
Daniel B. Greenwood
Barry L. MacLean
Richard A. Kent
Malcolm I. Glazer
Performance Information
The following graph compares on a cumulative basis changes since January 31,
1995 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 January 31, 1995 in the Company's Common Stock, the
Russell 2000 Index and the Value Line Machinery Index.
[LINE CHART]
SPECIALTY EQUIPMENT RUSSELL VALUE LINE
COMPANIES, INC. 2000 INDEX MACHINERY INDEX
------------------- ---------- ---------------
1/31/95 $100.00 $100.00 $100.00
1/31/96 $108.54 $129.94 $131.90
1/31/97 $131.71 $154.49 $173.34
1/31/98 $165.85 $182.16 $244.53
1/31/99 $273.78 $183.60 $211.43
1/31/00 $174.39 $213.48 $272.11
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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 124 companies, some of which
are direct competitors of the Company, with primary businesses that involve the
manufacture of a variety of machinery and equipment.
By order of the Board of Directors,
By:__________________________________
Donald K. McKay
Executive Vice President and
Secretary
Aurora, Illinois
October 23, 2000
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