<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as 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
SCOTSMAN INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- -------------------------------------------------------------------------------
(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:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(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):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
N/A
- --------------------------------------------------------------------------------
[ ] 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:
N/A
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE> 2
Scotsman Industries Logo
March 28, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Scotsman Industries, Inc. which will be held on Thursday, May 15, 1997, at 9:00
a.m., local time, at our headquarters in Vernon Hills, Illinois. Please refer to
the attached map for directions to the premises.
At the Annual Meeting, shareholders are being asked to elect two directors
to serve terms which expire in 2000 and to approve an amendment to the Scotsman
Industries Long-Term Executive Incentive Compensation Plan to establish a
maximum number of shares with respect to which options or stock appreciation
rights may be granted to any employee under the Plan. The Board of Directors
recommends a vote "FOR" each nominee and "FOR" the proposed amendment to the
Long-Term Executive Incentive Compensation Plan.
Your vote is important. Whether or not you plan to attend the Annual
Meeting and regardless of the size of your holdings, you are encouraged to sign,
date, and mail the enclosed Proxy in the envelope provided. Your right to vote
in person at the meeting is not affected by returning the Proxy.
A copy of Scotsman Industries' Annual Report for the fiscal year ended
December 29, 1996 accompanies this Notice of Meeting and Proxy Statement. On
behalf of the Board of Directors, officers and employees of Scotsman, I would
like to thank you for your continued interest and support.
Sincerely,
RICHARD C. OSBORNE
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
[MAP]
Place of Annual Meeting
Scotsman's headquarters is located at 775 Corporate Woods Parkway in Vernon
Hills, Illinois, approximately 40 miles northwest of downtown Chicago.
Shareholders attending the meeting who will be using the Tri-State Tollway
(Interstate Route 94-284) should exit at Half Day Road (Route 22) and travel
west to reach Milwaukee Avenue (Route 21). Turn right onto Milwaukee Avenue
and travel north approximately 1 mile to reach Corporate Woods Parkway (the
second or northern Corporate Woods entrance).
Parking facilities will be available and refreshments will be served beginning
at 8:30 a.m.
<PAGE> 4
775 Corporate Woods Parkway
Vernon Hills, Illinois 60061
Scotsman Industries Logo 847-215-4500
March 28, 1997
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1997
------------------------
To the Shareholders of SCOTSMAN INDUSTRIES, INC.
Notice is hereby given that the annual meeting of shareholders of Scotsman
Industries, Inc. (the "Company") will be held at the Company's headquarters at
775 Corporate Woods Parkway, Vernon Hills, Illinois 60061 on Thursday, May 15,
1997, at 9:00 a.m., local time, for the following purposes:
1. To elect two directors to serve for a term of three years; and
2. To consider and vote upon a proposal to amend the Company's Long-Term
Executive Incentive Compensation Plan (the "Incentive Plan") to
establish a maximum number of shares with respect to which options or
stock appreciation rights may be granted to any single employee under
the Incentive Plan; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 21, 1997, are
entitled to notice of and to vote at the meeting and any adjournment thereof.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO
THE COMPANY IN THE ENVELOPE PROVIDED. THE GIVING OF SUCH PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
DONALD D. HOLMES
Vice President -- Finance and
Secretary
<PAGE> 5
775 Corporate Woods Parkway
Scotsman Industries Logo Vernon Hills, Illinois 60061
March 28, 1997
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Scotsman Industries, Inc., a Delaware
corporation (the "Company"), for use at the annual meeting of shareholders of
the Company to be held at the Company's principal executive offices at 775
Corporate Woods Parkway, Vernon Hills, Illinois 60061 on Thursday, May 15, 1997,
at 9:00 a.m., local time (the "1997 Annual Meeting"), and at any adjournments
thereof. The 1997 Annual Meeting is being held to consider and vote upon (1) the
election of two directors to serve until the 2000 annual meeting of shareholders
of the Company or until the successors of such directors have been duly elected
and qualified, and (2) a proposal to amend the Company's Long-Term Executive
Incentive Compensation Plan (the "Incentive Plan") to establish a maximum number
of shares with respect to which options or stock appreciation rights may be
granted to any single employee under the Incentive Plan. The Company's Board of
Directors knows of no other business that will be presented for consideration at
the 1997 Annual Meeting other than the matters described in this Proxy
Statement.
The close of business on March 21, 1997 has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
shareholders entitled to vote at the 1997 Annual Meeting. Accordingly, only
holders of record of shares of the Company's common stock, par value $.10 per
share (the "Common Stock"), at the close of business on such date will be
entitled to vote at the 1997 Annual Meeting. As of the close of business on that
date, there were 10,548,214 shares of Common Stock outstanding (not including
187,049 shares of Common Stock held in treasury). Each share of Common Stock
outstanding as of the Record Date, excluding the treasury shares, is entitled to
one vote.
This Proxy Statement is first being mailed to the Company's shareholders on
or about March 28, 1997. The Company's 1996 Annual Report to Shareholders,
including financial statements for the fiscal year ended December 29, 1996,
accompanies this Proxy Statement.
Any shareholder who has given a proxy may revoke it at any time prior to
its exercise at the 1997 Annual Meeting by (1) giving written notice of such
revocation to the Secretary of the Company, (2) properly submitting to the
Company a duly executed proxy bearing a later date, or (3) appearing in person
at the 1997 Annual Meeting and voting in person. All written notices of
revocation or other communications with respect to the revocation of proxies
should be addressed as follows: Scotsman Industries, Inc., 775 Corporate Woods
Parkway, Vernon Hills, Illinois 60061, Attention: Donald D. Holmes, Secretary.
Duly executed proxies received prior to the meeting will be voted in accordance
with the instructions indicated in the proxy. IF NO INSTRUCTIONS ARE INDICATED,
SUCH PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED
IN THE PROXY AND "FOR" THE APPROVAL OF THE AMENDMENT TO THE INCENTIVE PLAN.
1
<PAGE> 6
The presence, in person or by proxy, of the holders of record of shares of
Common Stock entitling the holders thereof to cast a majority of the votes
entitled to be cast at the 1997 Annual Meeting will constitute a quorum. The
inspectors of election will count abstentions and broker non-votes (i.e., shares
held by a broker in street name and represented by a proxy indicating that the
broker does not have discretionary authority to vote on a particular proposal)
as present for purposes of determining the presence of a quorum at the 1997
Annual Meeting.
The New York Stock Exchange has advised the Company that, under the rules
of the exchange, brokers who are members of the New York Stock Exchange will
have discretionary authority to vote such shares on all of the proposals being
submitted at the 1997 Annual Meeting, provided that none of the proposed actions
is subsequently contested. Under the Company's by-laws, directors are elected by
a plurality of the votes cast. As a result, abstentions or broker non-votes, if
any, will reduce the number of votes received by a director, but should have no
effect on the outcome of the election.
Under the Company's by-laws and applicable Internal Revenue Service
regulations, the proposal to amend the Incentive Plan must be approved by a
majority of the votes cast at the 1997 Annual Meeting. Abstentions and broker
non-votes will not be treated as votes cast and will therefore have no effect on
the outcome of the vote.
The Company will bear the cost of soliciting proxies. In addition to
solicitations by mail, officers, directors, or employees of the Company or its
subsidiaries may make solicitations in person or by telephone without
compensation, other than the compensation such persons otherwise receive for
their services as officers, directors or employees. Arrangements will also be
made with brokerage firms and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of shares of Common
Stock held of record by such persons, and the Company will reimburse such
brokerage firms, custodians, nominees, and fiduciaries for reasonable
out-of-pocket expenses in connection with forwarding such materials. In
addition, the Company has retained Morrow & Co., Inc. to aid in the solicitation
of proxies. The fees to be paid to such firm for such services are not expected
to exceed $4,000, plus reimbursement for out-of-pocket costs and expenses.
YOUR VOTE IS IMPORTANT TO THE COMPANY. IF YOU DO NOT EXPECT TO VOTE IN
PERSON AT THE 1997 ANNUAL MEETING, WE URGE YOU TO COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's by-laws provide for a Board of Directors, the number of which
shall be fixed from time to time by a resolution adopted by a majority of the
whole Board of Directors. The number of members of the Board of Directors has
been fixed at eight. Mr. James J. O'Connor resigned from the Board of Directors,
effective February 13, 1997, due to the press of other responsibilities. The
Board of Directors has not yet filled the resulting vacancy on the Board.
The Company's by-laws provide that the directors are to be divided into
three classes with respect to the time for which they hold office. At each
annual meeting of shareholders of the Company, successors of the class whose
terms of office expire in that year are to be elected for three-year terms or
until their successors
2
<PAGE> 7
have been duly elected and qualified. The terms of two directors, Frank W.
Considine and George D. Kennedy, will expire at the 1997 Annual Meeting, and the
Company's Board of Directors has renominated both for re-election to the Board
of Directors. If re-elected, both will serve until the 2000 annual meeting of
shareholders of the Company or until their successors have been duly elected and
qualified. The Company's by-laws establish certain procedures for shareholder
nominations of candidates for directors. Those procedures are set forth below in
the section entitled "Notice Provisions for Shareholder Proposals and
Shareholder Nominations of Directors."
Under the Company's by-laws, directors are elected by a plurality of the
votes cast. Since two positions are to be filled on the Board of Directors, the
two nominees receiving the highest number of votes cast will be elected as
directors.
It is the intention of the parties named in the enclosed proxy to vote the
shares represented thereby for the election of the nominees listed below unless
the proxy is marked otherwise. Each of the nominees has agreed to serve as a
director if elected, and the Company has no reason to believe that either
nominee will be unable to serve. In the event that one or more nominees should
become unwilling or unable to accept nomination for election, however, the
persons named in the enclosed proxy will vote such proxy for such other person
or persons as may be nominated for director by the Board of Directors of the
Company.
INFORMATION REGARDING NOMINEES AND DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY OR OTHER PRINCIPAL
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
------------ --------------------------------------------
<S> <C>
NOMINEES FOR ELECTION AT THE 1997
ANNUAL MEETING TO SERVE UNTIL 2000
- --------------------------------------------------------------------------------------------------
Frank W. Considine (75) Mr. Considine is Honorary Chairman of the Board, Chairman of
the Executive Committee and a director of American
National Can Company, a packaging manufacturer, and has
held those positions since 1990. He was Chairman of the
Board of American National Can Company from 1983 to 1990,
President from 1969 to 1988, and Chief Executive Officer
from 1973 to 1988. Mr. Considine is Chairman of the Board
of Trustees of Loyola University, Chicago, and serves on
the Board of Trustees of the Field Museum of Natural
History, Chicago. Mr. Considine has been a director of the
Company since April, 1989.
George D. Kennedy (70) Mr. Kennedy was Chairman and a director of the Mallinckrodt
Group Inc., a producer of medical products and chemicals,
from 1991 until his retirement in October, 1994. He was
Chairman and Chief Executive Officer of Mallinckrodt Group
Inc. from 1986 to 1991. Mr. Kennedy is also a director of
Brunswick Corporation, Illinois Tool Works, Inc., American
National Can Company, Kemper National Insurance Company
and Stone Container Corporation. He has been a director of
the Company since April, 1989.
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY OR OTHER PRINCIPAL
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
------------ --------------------------------------------
<S> <C>
DIRECTORS CONTINUING TO SERVE UNTIL 1998
------------------------------------------------------------
Richard C. Osborne(53) Mr. Osborne is Chairman of the Board, President and Chief
Executive Officer of the Company. Mr. Osborne has been
Chairman of the Board since May, 1991 and President and
Chief Executive Officer since April, 1989. He was an
Executive Vice President of Household Manufacturing, Inc.
from 1982 to April, 1989. He has been a director of the
Company since April, 1989.
Donald C. Clark (65) Mr. Clark was Chairman of the Board and a director of
Household International, Inc. ("Household"), a financial
services business, until his retirement in 1996. Mr. Clark
was Chairman of the Board of Household from 1984 to 1996
and Chief Executive Officer of Household from 1982 to
September, 1994. He is also a director of Armstrong World
Industries, Inc., PMI Group, Inc., Ameritech Corporation
and Warner-Lambert Co. and serves as trustee of Clarkson
University and Northwestern University. He has been a
director of the Company since April, 1989 and served as
Chairman of the Board of the Company from April, 1989, to
May, 1991.
Timothy C. Collins(40) Mr. Collins is Chief Executive Officer and Senior Managing
Director of Ripplewood Holdings L.L.C., an industrial and
investment management holding company, and has held that
position since 1995. Mr. Collins was Senior Managing
Director of Onex Investment Corp. (New York), a management
company for the U.S. investments of Onex Corporation, an
Ontario corporation ("Onex"), from 1990 to 1995. He also
serves on the board of directors of Dayton Superior
Corporation and Danielson Holding Corporation. He has been
a director of the Company since April, 1994.
DIRECTORS CONTINUING TO SERVE UNTIL 1999
------------------------------------------------------------
Matthew O. Diggs(64) Mr. Diggs is the Chief Executive Officer of The Diggs Group,
a New York general partnership that provides investment
banking services, and has held that position since 1990.
From 1987 to 1990, Mr. Diggs was Vice Chairman of Copeland
Corporation, a refrigerator compressor manufacturer,
having served as President and Chief Executive Officer of
Copeland Corporation from 1975 to 1987. Mr. Diggs is a
director of Bank One Dayton NA, Cavert Wire Company and
Tower Automotive Inc. and serves as a trustee of Wright
State University and the Miami Valley School. He has been
a director of the Company since April, 1994.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY OR OTHER PRINCIPAL
NAME AND AGE OCCUPATION AND OTHER DIRECTORSHIPS
------------ --------------------------------------------
<S> <C>
Robert G. Rettig (67) Mr. Rettig is a consultant to Illinois Tool Works, Inc., a
manufacturer of industrial products and components, and a
consultant to, and a director of, The Tech Group, a custom
molding company, and has held those positions since 1990.
He was an Executive Vice President of Illinois Tool Works,
Inc. from 1983 to December, 1989. Mr. Rettig is also a
director of Lawson Products, Inc. and serves as a trustee
of the Illinois Institute of Technology. He has been a
director of the Company since April, 1989.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held eight meetings during 1996. The
standing committees of the Board of Directors held a total of six meetings. The
average attendance at the aggregate of the total number of meetings of the Board
of Directors and the total number of committee meetings was 84%. All persons who
were directors of the Company in 1996 attended at least 75% of the aggregate
total number of meetings of the Board of Directors and meetings of any committee
of the Board of Directors on which they served, except for Mr. Diggs. The Board
of Directors has standing Audit, Compensation, Governance and Executive
Committees. The Governance Committee performs many of the functions of a
standing nominating committee.
The Audit Committee is composed of Frank W. Considine, Timothy C. Collins
and Robert G. Rettig. Mr. Considine is the Chairman of the Committee. The Audit
Committee's duties and functions include reviewing the internal accounting
controls and audit functions of the Company and its subsidiaries, the Company's
accounting principles, policies and practices, and financial reporting, the
scope of the audits conducted by the Company's independent public accountants
and internal auditors, and the annual financial statements of the Company and
its subsidiaries. The Audit Committee is responsible for informing the Chief
Executive Officer of the Company and the Board of Directors of any material
concerns that may arise in connection with its review. The Audit Committee also
recommends to the Board of Directors the selection of the Company's principal
independent public accountants and reviews their professional services to
determine if their independence may have been impaired by the performance of any
non-audit services. The Audit Committee met twice during 1996.
The Compensation Committee is composed of George D. Kennedy, Donald C.
Clark, and Matthew O. Diggs, Jr. Mr. Kennedy is the Chairman of the Committee.
The Compensation Committee is responsible for determining the salaries, salary
ranges and bonuses of the five highest paid executive officers of the Company
and its subsidiaries. It also recommends to the Board of Directors the adoption
of, or any substantive amendments to, any pension, profit-sharing, employee
benefit or long-term executive compensation plan or program in which senior
management participates. The Compensation Committee is also responsible for the
granting of stock options, stock appreciation rights and other awards under any
long-term executive incentive compensation plan or program of the Company. The
Compensation Committee met four times during 1996.
The Governance Committee is composed of George D. Kennedy, Frank W.
Considine, and Matthew O. Diggs, Jr. Mr. O'Connor was Chairman of the Committee
prior to his resignation, and the Board of Directors expects to appoint a new
Chairman at a meeting of the Board of Directors to be held immediately following
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<PAGE> 10
the 1997 Annual Meeting. The Governance Committee is responsible for, among
other things, recommending to the Board of Directors possible candidates for
election to the Board of Directors (with the final determination to be made by
action of the Board of Directors), considering any recommendations made by
shareholders of the Company of proposed candidates for election to the Board of
Directors, periodically reviewing each director's continuation on the Board of
Directors, in consultation with such director and the Chief Executive Officer
and the Chairman of the Board, assigning individual members of the Board of
Directors to one or more committees of the Board of Directors, and reviewing,
from time to time, the compensation of the Board of Directors and recommending
to the Board of Directors such changes as the Governance Committee deems
appropriate. For a description of the procedures by which shareholders may
nominate candidates for election as directors, see "Notice Provisions for
Shareholder Proposals and Shareholder Nominations of Directors." The Governance
Committee did not meet in 1996.
DIRECTORS' FEES AND COMPENSATION
Non-employee directors of the Company receive for their services (i) an
annual retainer fee paid in shares of Common Stock with a total market value of
approximately $16,000, determined as of the day immediately preceding the date
of the annual meeting of the shareholders of the Company, and (ii) a fee of $900
for each Board of Directors and committee meeting attended. In addition, any
non-employee director who serves as chairman of the Audit, Compensation,
Executive or Governance Committees of the Board of Directors receives, as
compensation for those services, additional shares of Common Stock with a total
market value of approximately $2,000, determined as of the same valuation date
used in determining the number of shares to be granted to the directors as
annual retainer fees. The Company transfers shares of treasury stock to the
directors in payment of such fees at the time of, or shortly after, the first
meeting of the Board of Directors following the annual meeting of the
shareholders of the Company.
Under the Non-Employee Directors' Stock Option Plan (the "Non-Employee
Directors' Plan"), effective August 11, 1994, each director of the Company who
is not otherwise an employee of the Company or any of its subsidiaries (a
"Non-Employee Director") also received, as of the effective date of the Non-
Employee Directors' Plan, or will receive, on the next business day following
his or her appointment to the Board of Directors, an option to purchase 2,000
shares of Common Stock. An option to purchase an additional 1,000 shares of
Common Stock is automatically granted to each Non-Employee Director on the next
business day following the date of each annual meeting of shareholders. The
exercise price per share of each option granted is equal to the fair market
value of a share of Common Stock on the date of grant. In 1996, under the
Non-Employee Directors' Plan, each of the seven persons who were Non-Employee
Directors of the Company received an option to acquire 1,000 shares of Common
Stock at an exercise price of $20.1875 per share.
Each option granted under the Non-Employee Directors' Plan vests 100% and
thus becomes exercisable on the earliest of (i) the date immediately preceding
the first annual meeting following the date of the grant of the option, (ii) the
death or disability of such Non-Employee Director during his service as a
director, or (iii) a "change of control." The term "change of control" has the
same meaning given such term in the Incentive Plan, described below. See
"PROPOSAL 2, PROPOSED AMENDMENT TO LONG-TERM EXECUTIVE INCENTIVE COMPENSATION
PLAN -- Provisions Relating to Change of Control." Options generally expire 10
years and one day from the date of grant, subject to earlier termination under
certain circumstances if the director's service on the Board of Directors
terminates prior to the expiration of such ten-year period.
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<PAGE> 11
AGREEMENTS GOVERNING THE APPOINTMENT AND FUTURE NOMINATION
OF CERTAIN DIRECTORS; VOTING AGREEMENTS
Timothy C. Collins and Matthew O. Diggs, Jr. were appointed directors of
the Company, effective April 29, 1994, pursuant to the terms and conditions of
an Agreement and Plan of Merger, dated January 11, 1994, as amended (the "DFC
Merger Agreement"), and a Share Acquisition Agreement, dated January 11, 1994,
as amended (the "WAL Acquisition Agreement"), governing the acquisition by the
Company of DFC Holding Corporation ("DFC") and its wholly-owned subsidiary, The
Delfield Company ("Delfield"), and Whitlenge Acquisition Limited ("WAL") and its
wholly-owned subsidiary, Whitlenge Drink Equipment Limited ("Whitlenge").
Pursuant to the DFC Merger Agreement and WAL Acquisition Agreement, the Company
also agreed that, (i) so long as the former shareholders of DFC and WAL,
together in each case, with certain permitted transferees (collectively, the
"New Scotsman Shareholders") own at least 1,688,578 shares of Common Stock
(appropriately adjusted for any subsequent recapitalization, stock dividend,
split or other change in the capital stock), they will be entitled to designate
the persons nominated by the Board of Directors to fill the directorships
currently held by Mr. Collins and Mr. Diggs, and (ii) so long as the New
Scotsman Shareholders own at least 1,114,462 shares of Common Stock
(appropriately adjusted for any subsequent recapitalization, stock dividend,
split or other change in the capital stock), they will be entitled to designate
one such nominee. For information concerning the current holdings of the New
Scotsman Shareholders, see Note 5 under "Security Ownership of Certain
Beneficial Owners."
So long as the New Scotsman Shareholders are entitled to designate at least
one nominee to the Board of Directors, (i) the Company has agreed that, subject
to the right of the holders of preferred stock, if any, to elect directors under
certain circumstances, it will not increase the number of directors to more than
eight directors, and (ii) the New Scotsman Shareholders have agreed to vote, to
cause any affiliates or associates controlled by them to vote, and to use
reasonable efforts to cause any other affiliates or associates to vote, all
shares of capital stock of the Company owned by them in favor of all of the
nominees to the Board of Directors recommended by the Board of Directors.
The right of the New Scotsman Shareholders to designate one or more
nominees to the Company's Board of Directors will terminate on January 11, 2004
unless such obligation is extended by written agreement among the Company and
the New Scotsman Shareholders after January 11, 2002 but before the termination
date. Upon termination of the right of the New Scotsman Shareholders to
designate one or more nominees to the Board of Directors at a time when any
designee of the New Scotsman Shareholders is currently on the Board and upon the
request of the Company, (i) any such designee who is a New Scotsman Shareholder
shall promptly resign as a director, and (ii) the New Scotsman Shareholders will
use their best efforts to cause any such designee or designees who are not New
Scotsman Shareholders to promptly resign.
Certain former shareholders of DFC and WAL have entered into a
Stockholders' Agreement, dated as of January 11, 1994 (the "Stockholders'
Agreement"), under which they have, among other things, allocated among
themselves the power to designate the person or persons to be nominated as
directors. The Stockholders' Agreement provides that, so long as Onex and its
affiliates, Onex DHC LLC and Onex U.S. Investments (the "Onex Affiliates"), hold
Common Stock, Onex and the Onex affiliates will have the right to designate (and
remove) one such director, and EJJM, an Ohio general partnership of which Mr.
Diggs is the sole managing general partner ("EJJM"), will have the right to
designate (and remove) the other such director. If the New Scotsman Shareholders
are entitled to designate only one nominee to the Board of Directors, whichever
of Onex and the Onex Affiliates or EJJM owns the higher percentage of Common
Stock
7
<PAGE> 12
at the time of such designation will be entitled to designate the nominee. In
all other cases, the holders of a majority of the Common Stock held by the New
Scotsman Shareholders at the time that they are entitled to designate one or
more nominees to the Board of Directors shall make such designation. Scotsman is
not a party to the Stockholders' Agreement.
Under the Stockholders' Agreement, Onex and the Onex Affiliates have also
been granted an irrevocable proxy (the "Onex Proxy") to vote all of the shares
of Common Stock held by the New Scotsman Shareholders. The Onex Proxy includes
the right to vote for the transaction of any and all business that may come
before an annual, general or special meeting of the Company's shareholders,
including the right to vote for the sale of all or any part of the assets, the
liquidation, or the dissolution of the Company. The Onex Proxy will
automatically terminate on January 10, 1999 or at such time that Onex, together
with the Onex Affiliates, holds less than 30% of the number of shares of Common
Stock initially acquired by it pursuant to the merger provided for in the DFC
Merger Agreement. The Onex Proxy will also terminate with respect to specific
shares of Common Stock upon the transfer of such shares to any person other than
certain specified types of affiliates or associates of the former DFC
shareholders and WAL shareholders that have granted Onex and the Onex Affiliates
the Onex Proxy. For additional information regarding the parties to, and terms
of, the Stockholders' Agreement, see Note 5 under "Security Ownership of Certain
Beneficial Owners."
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<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock for each
director and nominee for director, each executive officer named in the Summary
Compensation Table elsewhere in this Proxy Statement, and all directors and
executive officers of the Company as a group. Information is provided as of
February 15, 1997, unless otherwise indicated.
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
<CAPTION>
NO. OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT OF
OWNED(1) CLASS(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIRECTORS AND
DIRECTOR NOMINEES
- -----------------------------------------------------------------------------------------------------
Donald C. Clark.................................... 45,599(3) *
- -----------------------------------------------------------------------------------------------------
Timothy C. Collins................................. 105,497(3)(4) 1.00%
- -----------------------------------------------------------------------------------------------------
Frank W. Considine................................. 14,918(3) *
- -----------------------------------------------------------------------------------------------------
Matthew O. Diggs, Jr............................... 709,623(3)(5) 6.73%
- -----------------------------------------------------------------------------------------------------
George D. Kennedy.................................. 15,208(3) *
- -----------------------------------------------------------------------------------------------------
Richard C. Osborne................................. 243,566(3) 2.27%
- -----------------------------------------------------------------------------------------------------
Robert G. Rettig................................... 14,579(3) *
- -----------------------------------------------------------------------------------------------------
CERTAIN EXECUTIVE OFFICERS
- -----------------------------------------------------------------------------------------------------
Ludwig Klein....................................... 875(3) *
- -----------------------------------------------------------------------------------------------------
Emanuele Lanzani................................... 76,634(3) *
- -----------------------------------------------------------------------------------------------------
Donald D. Holmes................................... 95,307(3) *
- -----------------------------------------------------------------------------------------------------
Michael de St. Paer................................ 4,992(3)(6) *
- -----------------------------------------------------------------------------------------------------
Directors and Officers as a Group
(17 individuals, including all those listed
above).......................................... 1,432,665(3)(7) 13.08%
- -----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock.
(1) Information relating to the number of shares of Common Stock beneficially
owned by directors, nominees for directors and executive officers is based
upon information (i) furnished by, or on behalf of, each person to the
Company, (ii) reflected in the records of the Tax Reduction Investment Plan
("TRIP") of the Company's wholly-owned subsidiary, Scotsman Group Inc.
("SGI"), the Incentive Plan, or the Company's Non-Employee Directors' Plan,
or (iii) reflected in a Schedule 13D, as amended by Amendment No. 2, dated
October 24, 1995 (the "New Scotsman Shareholders 13D"), filed by certain New
Scotsman Shareholders (including Mr. Diggs and Mr. de St. Paer), as more
fully described in Note 5 under "Security Ownership of Certain Beneficial
Owners," who, according to such filing, may be deemed to constitute a
"group" for purposes of Section 13(d)(3) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Information relating to shares
held in the TRIP has been furnished as of December 31, 1996, the latest date
for which such information is available. Except as
9
<PAGE> 14
indicated otherwise in the notes to this table, each person named in the
table has sole voting and investment power over the number of shares of
Common Stock listed opposite his name.
(2) Based upon a total of 10,542,464 issued and outstanding shares of Common
Stock as of February 15, 1997.
(3) Includes shares that could be acquired within 60 days after February 15,
1997 pursuant to the exercise of stock options as follows: Mr. Clark, Mr.
Collins, Mr. Considine, Mr. Diggs, Mr. Kennedy, and Mr. Rettig, each 3,000;
Mr. Osborne, 177,994; Mr. Holmes, 67,959; Mr. Klein, 875; Mr. Lanzani,
76,634; and Mr. de St. Paer, 2,425; all directors and officers as a group,
410,324. Also includes certain shares held for the account of executive
officers under the TRIP with respect to which each such officer has sole
voting but no investment power as follows: Mr. Osborne, 6,423; Mr. Holmes,
8,908; all executive officers as a group, 24,227.
(4) Includes 101,702 shares of Common Stock held of record by Ripplewood
Holdings L.L.C., as to which Mr. Collins has shared voting power and shared
investment power. Mr. Collins is the Chief Executive Officer and Senior
Managing Director of Ripplewood Holdings L.L.C. and has, through his
ownership interest, the right to elect a majority of the Board of Directors
of Ripplewood Holdings L.L.C.
(5) Includes 645,374 shares of Common Stock held of record by EJJM, and 58,465
shares of Common Stock held of record by The Diggs Family Foundation, a
charitable foundation for which Mr. Diggs serves as one of six trustees. Mr.
Diggs has shared investment power and shared voting power with respect to
all of these shares under the Stockholders' Agreement and the Onex Proxy and
also shares investment power and voting power with his co-trustees with
respect to the shares held by The Diggs Family Foundation. The shares
reported for Mr. Diggs do not include (i) 30 shares held by Mr. Diggs' son
as to which Mr. Diggs disclaims beneficial ownership, or (ii) any shares of
Common Stock held of record by New Scotsman Shareholders (other than Mr.
Diggs, EJJM or The Diggs Family Foundation) who, according to the New
Scotsman Shareholders 13D, may be deemed to constitute a "group" for
purposes of Section 13(d)(3) under the Exchange Act and with respect to
which Mr. Diggs, EJJM and The Diggs Family Foundation and its trustees share
investment power and voting power as part of such group. See Note 5 under
"Security Ownership of Certain Beneficial Owners."
(6) Does not include 1,467 shares held by Mr. de St. Paer's wife as to which he
disclaims beneficial ownership.
(7) Does not include shares of Common Stock held of record by New Scotsman
Shareholders (other than Mr. Diggs, EJJM, The Diggs Family Foundation, and
Mr. de St. Paer) who, according to the New Scotsman Shareholders 13D, may be
deemed to constitute a "group" for purposes of Section 13(d)(3) of the
Exchange Act and with respect to which Mr. Diggs, EJJM, The Diggs Family
Foundation, and Mr. de St. Paer share investment power and voting power as
part of such group. See Note 5 under "Security Ownership of Certain
Beneficial Owners." Also does not include 1,497 shares of Common Stock held
of record by adult family members of officers and directors of the Company
as to which such officers and directors disclaim beneficial ownership.
10
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION(2) LONG-TERM COMPENSATION
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
OTHER ALL
PRINCIPAL ANNUAL OTHER
NAME POSITION(1) YEAR SALARY BONUS COMP. AWARDS PAYOUTS COMP.(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
SECURITIES
RESTRICTED UNDERLYING
STOCK STOCK LTIP
AWARDS OPTIONS(#) PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
R. Osborne Chairman of the 1996 $365,000 $325,000 -- $0 19,100 $0 $18,167
Board, CEO & 1995 $343,750 $200,000 -- $0 17,900 $0 $18,196
President 1994 $320,000 $200,000 -- $0 18,100 $0 $16,804
- ------------------------------------------------------------------------------------------------------------------
E. Lanzani Exec. VP; Mgng. 1996 $197,396 $82,460 -- $0 5,100 $0 $ 0
Dir., Frimont 1995 $167,458 $85,995 -- $0 4,400 $0 $ 0
S.p.A. & Castel 1994 $158,763 $63,431 -- $0 8,900 $0 $ 0
MAC S.p.A.
- ------------------------------------------------------------------------------------------------------------------
D. Holmes VP Finance & 1996 $177,083 $95,000 -- $0 7,200 $0 $ 8,362
Secretary 1995 $167,083 $64,000 -- $0 6,800 $0 $ 8,034
1994 $154,708 $66,060 -- $0 6,200 $0 $ 6,870
- ------------------------------------------------------------------------------------------------------------------
L. Klein VP; Mgng. Dir., 1996 $198,268 $75,163 -- $0 3,500 $0 $ 0
Hartek Beverage
Handling GmbH
- ------------------------------------------------------------------------------------------------------------------
M. de St. Paer VP; Mgng. Dir., 1996 $127,551 $72,035 -- $0 3,500 $0 $21,466
Whitlenge Drink 1995 $121,122 $43,657 -- $0 3,100 $0 $21,259
Equipment Ltd. 1994(4) $78,239 $0 -- $0 0 $0 $13,636
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Each executive officer held the same position with the Company in each of
the years indicated.
(2) Includes amounts earned in the fiscal year, whether or not deferred.
(3) Amounts in this column consist of (i) Company-matching contributions to the
TRIP and the Supplemental Tax Reduction Plan and, in the case of Mr. de St.
Paer, Company contributions to an individual retirement plan made in lieu of
contributions to Whitlenge's pension plan (in which Mr. de St. Paer does not
participate), and (ii) life insurance premiums.
(4) The compensation reported is for a partial year, beginning on April 29,
1994, the date on which the Company acquired Whitlenge and Mr. de St. Paer
became an executive officer of the Company.
11
<PAGE> 16
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants to and exercises by the
executive officers named in the Summary Compensation Table above during the 1996
fiscal year and the value of the options held by such persons at the end of the
1996 fiscal year. No stock appreciation rights have been granted to date by the
Company.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
INDIVIDUAL GRANTS IN 1996 POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR 10-YEAR OPTION TERM
------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE EXPIRATION
NAME GRANTED EMPLOYEES(1) PRICE(2) DATE 0% 5% 10%
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Osborne 19,100 22.44% $ 17.375 02/16/06 $0 $ 208,707 $ 528,904
- ------------------------------------------------------------------------------------------------------------------
E. Lanzani 5,100 5.99% $ 17.375 02/16/06 $0 $ 55,728 $ 141,226
- ------------------------------------------------------------------------------------------------------------------
D. Holmes 7,200 8.46% $ 17.375 02/16/06 $0 $ 78,675 $ 199,377
- ------------------------------------------------------------------------------------------------------------------
M. de St. Paer 3,500 4.11% $ 17.375 02/16/06 $0 $ 38,245 $ 96,920
- ------------------------------------------------------------------------------------------------------------------
L. Klein 3,500 4.11% $ 17,375 02/16/06 $0 $ 38,245 $ 96,920
- ------------------------------------------------------------------------------------------------------------------
All Shareholders(3) $0 $115,198,137 $291,934,428
- ------------------------------------------------------------------------------------------------------------------
Named Executive Officers' Gains as a % of all Shareholder Gains 0.364% 0.364%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Based on 85,100 options granted to all employees.
(2) Fair market value (the average of the high and low prices for the Common
Stock as reported on the New York Stock Exchange) on February 15, 1996, the
date of grant.
(3) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 10,542,464 outstanding shares of Common Stock -- the
number of shares outstanding on December 27, 1996.
12
<PAGE> 17
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER OF SECURITIES TOTAL VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS HELD
OPTIONS HELD AT FISCAL YEAR END AT FISCAL YEAR END(1)
------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Osborne 4,982 $59,281 157,769 48,025 $2,180,974 $332,752
- ---------------------
E. Lanzani 3,488 $35,136 68,859 16,025 $ 928,540 $119,423
- ---------------------
D. Holmes 3,986 $47,429 60,684 17,625 $ 832,251 $120,927
- ---------------------
M. de St. Paer 0 $ 0 775 5,825 $ 4,214 $ 34,080
- ---------------------
L. Klein 0 $ 0 0 3,500 $ 0 $ 21,438
- ---------------------
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock on December 27, 1996 of
$23.50 (the average of the high and low prices for the Common Stock as
reported on the New York Stock Exchange).
PENSION PLAN
The Salaried Pension Plan of Scotsman Group Inc. ("SGI") is a
non-contributory, defined benefit plan for certain salaried employees of SGI and
its subsidiaries. The amount of a participant's pension benefits depends
primarily on years of employment, age at retirement, and average annual
compensation (salary plus bonus, whether paid in cash or stock) for the five
successive highest-paid years out of the employee's last ten years of
employment, adjusted for wages subject to Social Security taxes. Participants
become fully vested in their accrued pension benefits after five years of
service. Payment of vested pension benefits normally begins at age 65, but an
early retirement benefit at reduced levels may be paid if a participant is at
least 55 years of age with 10 years of service. Effective January 1, 1994, SGI
adopted the Supplemental Executive Retirement Plan (the "Supplemental Plan")
which provides each participant in the Supplemental Plan with the benefits such
participant would have received under the Salaried Pension Plan except for
certain limitations on compensation and benefits imposed under the Internal
Revenue Code of 1986, as amended (the "Code").
The following table illustrates the amount of annual pension benefits
payable under the Salaried Pension Plan (including amounts payable under the
Supplemental Plan, where applicable) for eligible employees retiring at age 65
with the following remuneration and numbers of credited years of service.
13
<PAGE> 18
PENSION PLAN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
YEARS OF SERVICE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMUNERATION 15 20 25 30 35
- -------------------------------------------------------------------
$100,000 $ 18,358 $ 24,478 $ 30,597 $ 36,717 $ 42,836
- ----------
$175,000 $ 33,957 $ 45,276 $ 56,595 $ 67,914 $ 79,232
- ----------
$250,000 $ 49,555 $ 66,074 $ 82,592 $ 99,110 $115,629
- ----------
$325,000 $ 65,154 $ 86,871 $108,589 $130,307 $152,025
- ----------
$400,000 $ 80,752 $107,669 $134,587 $161,504 $188,421
- ----------
$475,000 $ 96,350 $128,467 $160,584 $192,701 $224,818
- ----------
$550,000 $111,949 $149,265 $186,581 $223,898 $261,214
- ----------
$625,000 $127,547 $170,063 $212,579 $255,095 $297,610
- ----------
$700,000 $143,146 $190,861 $238,576 $286,291 $334,007
- ----------
</TABLE>
The benefits set forth in the above table are computed on a straight-line
annuity basis. Offsets for Social Security payments and other offsets provided
for in the plan are not reflected in the table. For purposes of determining the
benefit under the Salaried Pension Plan for Mr. Osborne and Mr. Holmes, credited
years of service and the amount of covered compensation (salary plus bonuses
paid in cash or stock) for 1996 are as follows: Mr. Osborne, 18 years and
$565,000; Mr. Holmes, 22 years and $241,083. Covered compensation, in each case,
is equal to the salary reported for such officer in the Summary Compensation
Table for 1996 plus the bonus reported for 1995 since bonuses earned in a given
fiscal year are paid the following fiscal year. In calculating credited years of
service under the Salaried Pension Plan, years of service with Household or its
former subsidiaries prior to the spin-off of the Company by Household in 1989
have been taken into account.
Mr. Lanzani, Mr. de St. Paer and Mr. Klein are not covered by SGI's
Salaried Pension Plan. Mr. Lanzani does, however, have an agreement with the
Company's Italian subsidiary, Frimont S.p.A. ("Frimont"), which provides that he
will receive monthly payments beginning at the later of July 1, 1999 or
termination of his employment and ending at his death. These monthly payments
will be equal to .0133 times his average monthly compensation times his credited
service. For purposes of the agreement, "average monthly compensation" means his
regular salary plus short-term bonuses received during the five-year period
prior to termination of employment divided by 60 and "credited service" means
the number of years of continuous service from November 7, 1967 to the date of
termination of employment. For purposes of this plan, Mr. Lanzani is currently
credited with 29 years of service, and he received a total of $283,391 in salary
and bonuses in 1996. If Mr. Lanzani's employment is terminated before he reaches
age 65, then at age 65 he will begin receiving such monthly payments.
EXECUTIVE COMPENSATION AND SEVERANCE AGREEMENTS, INCLUDING CHANGE OF CONTROL
PROVISIONS
Mr. Osborne has entered into an employment agreement with SGI under which
he was entitled, in 1996, to an annual base salary of $370,000, subject to
annual review, and to benefits under SGI's benefit plans. See "Board
Compensation Committee Report on Executive Compensation -- Base Salary."
Effective March 1, 1997, in connection with the Company's March 1997 acquisition
of Kysor Industrial Corporation, Mr. Osborne's annual base salary was increased
to $445,000. Under the agreement, Mr. Osborne was also eligible to receive, in
1996, an annual target bonus under the Company's Executive Incentive
Compensation
14
<PAGE> 19
Program (the "Program") equal to 50% of his annual salary. His annual target
bonus has been increased to 60% for 1997. The agreement provides for certain
continued compensation in the event of (i) termination of employment by SGI or
its subsidiaries prior to age 65 for any reason other than willful and
deliberate misconduct or disability for a specified period that prevents him
from reasonably performing his duties, or (ii) Mr. Osborne's resignation from
his position prior to age 65 because of a reassignment to a position of lesser
rank or status, reduction of salary, benefits or target bonus, or reassignment
to a geographic area more than 50 miles from his residence as of the date the
agreement was executed.
In the event Mr. Osborne's employment is terminated or he resigns for any
of the reasons described in the preceding paragraph, he will be entitled for the
next 18 months to (i) continued salary at the rate at which last received, (ii)
continued target bonuses (prorated for such 18-month period) and (iii)
continuation of pension accrual, savings plan contributions, deferred
compensation (if any) and medical and life insurance benefits or, with respect
to the benefits described in clause (iii), the economic equivalent thereof.
Benefit plan accruals described in clause (iii) that would be payable to Mr.
Osborne on a deferred basis, were he to continue his employment, may be deferred
or paid in an actuarially equivalent lump sum at the end of the 18-month period.
Mr. Osborne's employment agreement further provides that SGI will reimburse Mr.
Osborne for any excise tax due upon any of the benefits described in this
paragraph and for any additional federal income and excise taxes due as the
result of such reimbursement.
Mr. Osborne and SGI have also entered into a separate, executive severance
agreement (the "Severance Agreement") under which Mr. Osborne will be entitled
to receive a single cash payment equal to the sum of (i) three times the amount
of his highest annual base salary in effect during the immediately preceding 12-
month period and (ii) three times the amount of the greater of his then current
target bonus under the Program or the average target bonus paid or payable to
him under the Program in the last five fiscal years, if at any time before he
reaches age 65, Mr. Osborne's employment with SGI is terminated or he resigns
for "good reason" following a "change of control" of the Company. Under such
circumstances, Mr. Osborne will also become fully vested in any accrued benefits
in which he is not then fully vested under SGI's Salaried Pension Plan and in
any employer matching contributions in which he is not then fully vested under
SGI's Tax Reduction Investment Plan ("TRIP") or Supplemental Tax Reduction Plan.
SGI will be obligated to pay Mr. Osborne, within 30 days of his termination or
resignation, a lump sum equal to the actuarial equivalent of such accrued
benefits under the Salaried Pension Plan and the amount of such employer
matching contributions. SGI will also be obligated to keep in full force and
effect, for a period of three years, all medical and insurance policies provided
to Mr. Osborne by SGI at the same level of coverage and upon the same terms and
conditions in effect as of the date of termination of his employment. Any
payments made and benefits provided to Mr. Osborne under the Severance Agreement
will be in lieu of those payments and benefits to which Mr. Osborne would
otherwise be entitled under his employment agreement. The Severance Agreement
further provides that SGI will reimburse Mr. Osborne for any excise tax due upon
any payment made as a result of a change of control and for any additional
federal income and excise taxes due as the result of such reimbursement.
For purposes of the Severance Agreement, a "change of control" will be
deemed to have occurred if any of the events constituting a "change of control"
for purposes of the Incentive Plan shall have occurred. See "PROPOSAL 2,
PROPOSED AMENDMENT TO LONG-TERM EXECUTIVE INCENTIVE PLAN -- Provisions Relating
to Change of Control." Mr. Osborne will be deemed to have had "good reason" to
terminate his employment with SGI following a change of control if, among other
things, without his written
15
<PAGE> 20
consent, he is assigned to duties inconsistent with his duties or
responsibilities with SGI immediately prior to the change of control, his salary
or benefits are reduced, he is reassigned to any location other than the
facility where he is located at the time of the change of control or, following
a merger or consolidation in which the Company is not the surviving corporation
or the transfer of all or substantially all of the assets of the Company to
another corporation, SGI fails to obtain from such corporation an agreement to
assume all of SGI's obligations under the Severance Agreement.
In addition to Mr. Osborne, Mr. Holmes, Mr. Lanzani, and Mr. de St. Paer
each have employment agreements with SGI, and Mr. Klein has an employment
agreement with SGI's wholly-owned German subsidiary, Hartek Beverage Handling
GmbH ("Hartek"). Under their employment agreements with SGI, Mr. Holmes, Mr.
Lanzani, and Mr. de St. Paer are currently entitled to annual base salaries of
$215,000, 326,000,000 Lire (approximately $211,000 as of December 31, 1996), and
82,000 British pounds sterling (approximately $127,500 as of December 31, 1996),
respectively, subject to annual review. Under their employment agreements, Mr.
Holmes, Mr. Lanzani and Mr. de St. Paer were each eligible to receive, in 1996,
an annual target bonus equal to 30% of their annual salary. The annual target
bonus for each has been increased to 35% for 1997. The remaining provisions of
Mr. Holmes', Mr. Lanzani's and Mr. de St. Paer's employment agreements are
identical to those of Mr. Osborne's employment agreement except that (i) the
provisions relating to continuation of compensation apply for a period of 12,
rather than 18 months, (ii) there is no provision in the agreements for
reimbursement of excise taxes, and (iii) each agreement will remain in effect,
not until the executive officer who is a party to the agreement reaches age 65,
but only until June 20, 1997 (in the case of Mr. Holmes and Mr. Lanzani) or
October 15, 1997 (in the case of Mr. de St. Paer). Thereafter, the term of each
agreement will be automatically extended each year for one additional year,
unless the Compensation Committee delivers written notice of termination three
months prior to the end of such term or extended term.
Under his employment agreement with Hartek, Mr. Klein is entitled to an
annual salary of 275,000 Deutsche marks (approximately $183,000 as of December
31, 1996) and to a bonus equal to 30% of his annual salary. He is eligible to
receive, in addition, a discretionary bonus of up to 20% of his annual salary,
with the actual amount to be determined by the President of the Company. In the
event that Mr. Klein is unable to work due to illness or any other reason beyond
his control, Hartek is obligated to continue to pay Mr. Klein's annual salary
and to provide health and other insurance benefits under the agreement for up to
six months. If Mr. Klein were to die during the term of his employment
agreement, Hartek is required to make such payments to Mr. Klein's spouse during
the month of his death and for the following three months. Mr. Klein's
employment agreement was effective January 1, 1997 and expires on January 31,
1998.
Mr. Holmes and Mr. Lanzani have also entered into executive severance
agreements with SGI. The provisions of those agreements are identical to the
provisions of Mr. Osborne's Severance Agreement with SGI except that each of
these officers will be entitled to receive a single cash payment equal to the
sum of (i) two (rather than three) times the amount of his highest annual base
salary in effect during the immediately preceding 12-month period and (ii) two
(rather than three) times the amount of the greater of his then current target
bonus or the average target bonus paid or payable to him under the Program in
the preceding five fiscal years, if at any time before he reaches age 65, such
officer's employment is terminated or he resigns for "good reason" following a
"change of control" of the Company. Unlike Mr. Osborne's Severance Agreement,
such agreements may be terminated prior to the occurrence of a change of control
by SGI upon six months' prior notice to the executive who is a party to the
agreement, provided that, to the
16
<PAGE> 21
knowledge of the board of directors of SGI, no person has taken, at the time of
such notice, steps reasonably calculated to effect a change of control.
OTHER AGREEMENTS
Mr. Lanzani has an agreement with Frimont which provides that, so long as
he is employed in his present position at Frimont, he will receive 2.4% of the
annual net operating income of Frimont. This agreement replaced his prior
ownership of 10% of the shares of Frimont. Since the payments made to Mr.
Lanzani pursuant to this agreement replaced his prior ownership of shares of
Frimont stock, the Company does not consider these payments to be cash
compensation for services rendered and, accordingly, such payments have not been
included in the summary compensation table set forth above.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing executive compensation philosophies, determining the executive
compensation program components and assuring that the program is administered in
a manner consistent with the program's philosophies and objectives. All persons
who were members of the Compensation Committee during the Company's last fiscal
year were outside directors of the Company.
The Committee believes that since executive officers are in positions to
make substantial contributions to the long-term success of the Company, the
executive compensation program should be structured to provide meaningful
incentives to increase shareholder value. On an annual basis, the Committee
reviews the actual results of each executive officer's performance against the
objectives established by, and for, such executive for the preceding year. The
Committee also reviews the compensation program components and plan for each
executive officer for the upcoming year and relies upon the advice of
independent compensation consultants regarding the competitiveness of the
compensation programs. The Committee approves each compensation plan with such
modifications as it deems appropriate. During the year, the Committee reviews
individual salaries in conjunction with the criteria for base salaries set forth
below, taking into account any significant event that could affect program
objectives and design.
The Company's executive officer compensation program is comprised of a base
salary, an annual cash incentive compensation program, and a long-term incentive
compensation plan in the form of stock options, stock appreciation rights,
restricted stock and restricted stock rights. In addition, executives are
eligible for other benefits that are generally available to employees of the
Company, including insurance protection, retirement plans and vacations and
holidays.
Base Salary
Base salary ranges for executives are set at the 50th percentile of the
national marketplace for manufacturing companies with sales in the range of $300
to $500 million. In determining salaries, the Committee takes into account
salary rates compared with the marketplace, the performance of individuals and
other factors deemed relevant by the Committee.
Mr. Osborne's base salary for 1996 was fixed at $370,000, an increase of
5.7% over his 1995 base salary of $350,000. The increase was in the range of
increases reflected in marketplace surveys. The resultant base
17
<PAGE> 22
salary for Mr. Osborne was nevertheless somewhat below the median of chief
executive officers of comparably sized manufacturing companies.
Executive Incentive Compensation Program
The Executive Incentive Compensation Program is a cash bonus program
designed to provide increased incentives to key executives to meet or exceed
aggressive financial targets and to accomplish significant projects contributing
to the Company's success.
The targets for awards under this plan are set at the 50th percentile of
the national marketplace. Incentives earned are based primarily on performance
compared with financial targets established for the Company and/or a subsidiary
or division of the Company at levels approved by the Committee. The financial
targets include targets for earnings and return on investment or return on
equity. A portion of earned awards are based on discretionary factors to reflect
individual contributions to the Company's success each year.
In 1996, Mr. Osborne was eligible to receive incentive compensation ranging
from 0% to 100% of his annual base salary, with a target payout of 50% of his
annual base salary. For 1996, Mr. Osborne received a bonus of 89% of his annual
base salary. In reviewing Mr. Osborne's incentive amount, the Committee
considered the Company's operating performance in 1996 and other accomplishments
affecting the Company's long-term growth. During 1996, the Company increased its
sales in key markets, and earnings per share were higher than the prior year.
Also, in July, 1996, the Company acquired 50% of the outstanding shares of SAW
Technologies Limited, a U.K.-based joint venture with Aztec Developments
Limited. The joint venture will produce and market technologically advanced
beverage dispensing valves in the global market for beverage dispensing
equipment. In addition, during 1996, the Company began negotiations for the
acquisition of Kysor Industrial Corporation, which was acquired by the Company
in March, 1997. In the light of such accomplishments, the Committee believes
that the incentive award granted to Mr. Osborne was appropriate.
Long-Term Executive Incentive Compensation Plan
The Committee believes that long-term incentives should provide significant
portions of total compensation for executives while encouraging long-term stock
ownership. The objectives of the Incentive Plan are to align executive and
shareholder long-term interests by creating a strong and direct link between
executive pay and shareholder return. The Committee endorses the value of stock
ownership as an incentive for Company executives to increase shareholder value
through improved executive performance.
The Committee has established programs for each executive officer under the
Incentive Plan which provide for stock option grants as a portion of each
participant's salary grade midpoint. The option exercise price is equal to the
fair market value of the Common Stock on the date of the grant. Value to the
executive is dependent upon an increase in the share price above the option
exercise price. The program established for Mr. Osborne under the Incentive Plan
has a target equal to 100% of his salary grade midpoint. In 1996, the Committee
approved a stock option grant equal to 100% of his salary grade midpoint. The
Committee believes that an appropriate portion of Mr. Osborne's total
compensation is tied directly to shareholder value.
18
<PAGE> 23
Benefit Programs
The Company provides its executive officers with insurance protection
plans, including medical, dental, life, accidental death and dismemberment,
travel and accident, and disability insurance plans, retirement programs and
vacation and holiday plans. These plans are generally available to the Company's
employees.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the "Code") and related
regulations provide that a public company may not deduct, for federal income tax
purposes, compensation in excess of $1 million per year paid to the chief
executive officer and the four other most highly compensated executive officers
employed by the company at year-end, other than compensation which qualifies as
"performance-based compensation" under the Code and related regulations or is
otherwise exempt from the provisions of Section 162(m). The Board of Directors
has approved, and recommended to the shareholders for their approval, an
amendment to the Incentive Plan designed to permit stock options and stock
appreciation rights granted under the Incentive Plan to such officers, in the
future, to continue to qualify as performance-based compensation not subject to
the $1 million cap on deductibility established in Section 162(m). See "PROPOSAL
2 -- PROPOSED AMENDMENT TO LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN." All
compensation paid to the Company's chief executive officer and four other most
highly compensated officers was deductible in 1996 and is expected to be
deductible in 1997. In designing future compensation programs for the chief
executive officer and other highly compensated executive officers, the Committee
will take into account the deductibility of such compensation under Section
162(m). The Committee may recommend, in the future, steps to assure the
deductibility of other forms of compensation paid by the Company, in the event
that the Committee determines that the benefits of such deductibility to the
Company outweigh any loss of flexibility or other disadvantages involved in
qualifying such compensation as performance-based compensation under Section
162(m).
George D. Kennedy, Committee
Chairman
Donald C. Clark, Committee Member
Matthew O. Diggs, Jr., Committee
Member
19
<PAGE> 24
COMMON STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock for the last five fiscal years with the cumulative total return of
the Russell 2000 Index and the S&P Diversified Manufacturing Index over the same
period. Most of the Company's direct competitors are private companies or small
segments of larger companies and do not permit construction of a realistic peer
group. Therefore, the S&P Diversified Manufacturing Index has been used in lieu
of a peer group for this comparison.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
SCOTSMAN INDUSTRIES, RUSSELL 2000,
AND S&P DIVERSIFIED MANUFACTURING
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SCOTSMAN RUSSELL 2000 S&P
(FISCAL YEAR COVERED) INDUSTRIES DIVERSIFIED
MANUFACTURING
<S> <C> <C> <C>
12/31/91 100 100 100
12/31/92 116.69 118.42 108.38
12/31/93 177.22 140.79 131.55
12/31/94 216.28 138.23 136.19
12/31/95 223.85 177.54 191.72
12/31/96 301.50 206.83 264.15
</TABLE>
Assumes $100 invested on December 31, 1991 in the Common Stock, Russell 2000,
and S&P Diversified Manufacturing Group.
* Total return assumes reinvestment of dividends on a quarterly basis.
20
<PAGE> 25
PROPOSAL 2
PROPOSED AMENDMENT TO LONG-TERM EXECUTIVE
INCENTIVE COMPENSATION PLAN
The Long-Term Executive Incentive Compensation Plan (the "Incentive Plan")
is a stock-based benefit plan administered by the Compensation Committee of the
Board of Directors. Under the Incentive Plan, the Compensation Committee, in its
discretion, may grant employees of the Company or its subsidiaries (i) options
to purchase shares of Common Stock, (ii) stock appreciation rights relating to
the Common Stock, either in tandem with the grant of an option or on a
stand-alone basis, (iii) restricted Common Stock, or (iv) restricted stock
rights relating to the Common Stock. The purpose of the Incentive Plan is to
further the long-term growth of the Company by strengthening its ability to
attract and retain key employees and by providing additional incentives for such
employees to seek to enhance the Company's performance by enabling them to
participate in its ownership and growth. The Incentive Plan was established in
1989, and an amendment to the Incentive Plan was approved by the shareholders at
the 1992 Annual Meeting.
At its February 13, 1997 meeting, the Board of Directors, adopted, subject
to the approval of the shareholders, an amendment to the Incentive Plan that
would impose a per-employee limit on the maximum number of shares of Common
Stock for which options or stock appreciation rights may be granted under the
Incentive Plan in any calendar year. The purpose of the proposed amendment is to
permit compensation paid to the chief executive officer and any of the other
four most highly compensated executive officers of the Company, upon the
exercise of options or stock appreciation rights granted after the date of the
1997 Annual Meeting, to qualify as "performance-based compensation" under
Section 162(m) of the Code.
As described under "Board Compensation Committee Report on Executive
Compensation," above, under Section 162(m) and applicable Internal Revenue
Service regulations, a publicly traded company is generally precluded from
taking a tax deduction for compensation in excess of $1 million paid to the
company's chief executive officer or any of the company's four other most highly
paid executive officers, subject to certain exceptions, including an exception
for "performance-based" compensation. To qualify as "performance-based"
compensation for purposes of Section 162(m), compensation must meet the
following requirements: (i) the compensation must be payable solely on account
of the attainment of one or more pre-established performance goals, (ii) the
performance goals must be established by a compensation committee comprised of
two or more outside directors, (iii) the "material terms of the performance
goals" must be disclosed to and approved by the shareholders before any
compensation is paid, and (iv) the compensation committee must certify in
writing that the performance goals have been satisfied before any compensation
is paid. Compensation attributable to a stock option or stock appreciation right
is deemed to be payable on account of the attainment of one or more
pre-established performance goals if, among other things, the underlying plan
includes a limit on the number of shares for which stock options or stock
appreciation rights may be granted to any employee during a specified period.
Under transition rules adopted by the Internal Revenue Service, compensation
attributable to options previously granted under the Incentive Plan will qualify
as performance-based compensation, notwithstanding the fact that the Incentive
Plan did not contain a per-employee limit at the time the options were granted.
The Company, however, will not be permitted to rely on those transition rules
for options or stock appreciation rights granted after the 1997 Annual Meeting.
The Board of Directors believes that it is in the best interests of the
Company to ensure, to the extent possible, the full deductibility of
compensation attributable to stock options and stock appreciation rights granted
under the Incentive Plan. It has accordingly approved, subject to shareholder
approval, an amendment
21
<PAGE> 26
to the Incentive Plan which provides that the maximum number of shares of Common
Stock with respect to which options or stock appreciation rights, or any
combination thereof, may be granted under the Incentive Plan within a calendar
year may not exceed 100,000, subject to equitable adjustment under the
anti-dilution provisions of the Incentive Plan. Grants of options or stock
appreciation rights to the chief executive officer and four other most highly
compensated officers of the Company in any year following the 1997 Annual
Meeting will be contingent upon the receipt of shareholder approval of this
amendment to the extent required under Section 162(m) of the Code and applicable
regulations.
A copy of the Incentive Plan, restated to reflect the proposed amendment,
is attached as Exhibit A to the Proxy Statement. The following discussion of the
material features and provisions of the Incentive Plan is qualified in its
entirety by reference to Exhibit A.
ADMINISTRATION
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors. Under the terms of the Incentive Plan, the Committee must
consist of a least two directors, designated from time to time by the Board of
Directors. Membership on the Committee is limited to those directors who meet
the definitions of (i) a "non-employee director" under Rule 16b-3 under Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(ii) an "outside director" under Section 162(m) of the Code. The Committee, in
its discretion, may grant any type of award permitted under the Incentive Plan
to any person eligible to receive such an award under the Incentive Plan.
SHARES SUBJECT TO THE INCENTIVE PLAN
Up to 1,000,000 shares of Common Stock may be issued under the Incentive
Plan. Common Stock issued pursuant to the Plan may consist of authorized and
unissued shares of Common Stock or of Common Stock held in the Company's
treasury. If any award granted under the Incentive Plan terminates or lapses for
any reason, including by agreement between the Company and the grantee, any
shares of Common Stock subject to such award will again be available for
issuance under the Incentive Plan. Under the terms of the Incentive Plan, the
Board of Directors or the Compensation Committee has the authority to change
equitably the number of shares of Common Stock available for issuance under the
Incentive Plan in the event of a stock dividend, stock split, recapitalization,
reorganization, merger, consolidation or other change in the Company's
capitalization. Under such circumstances, the Board of Directors or the
Compensation Committee may also make appropriate adjustments in the price or
number of shares of Common Stock subject to awards or to the terms of the awards
to prevent dilution or enlargement of previously granted awards.
ELIGIBILITY
Only employees of the Company and its divisions and subsidiaries may be
selected by the Compensation Committee for awards under the Incentive Plan.
Directors who are not also employees of the Company are not eligible to
participate in the Incentive Plan. As of December 31, 1996, a total of 2,250
persons were employed by the Company and its divisions and subsidiaries. As a
result of the recent acquisition of Kysor Industrial Corporation, the Company
has, as of the date hereof, approximately 3,855 employees. The Compensation
Committee, in its sole discretion, selects those employees who are to be granted
awards under the Incentive Plan. In 1996, a total of 49 employees received
awards under the Incentive Plan.
22
<PAGE> 27
OPTIONS
The Compensation Committee may grant any type of option to purchase shares
of Common Stock that is permitted by law at the time of grant. Under current
law, such options may therefore be either "incentive stock options" ("Incentive
Stock Options") subject to the requirements of Section 422 of the Code, or non-
qualified stock options ("Non-Qualified Stock Options"). An option may not be
exercisable more than ten years and one day from the date of grant, but
otherwise may be exercised at the rate set by the Compensation Committee. The
option price per share is set by the Compensation Committee and may not be less
than the fair market value of one share of Common Stock on the date of grant.
Payment for options may be made in cash or, in the discretion of the
Compensation Committee, in Common Stock or by a combination of cash and Common
Stock.
STOCK APPRECIATION RIGHTS
Under the Incentive Plan, the Compensation Committee may grant stock
appreciation rights in tandem with the grant of an option under the Incentive
Plan or with respect to a previously granted option under the Incentive Plan, or
on a stand-alone basis. In exchange for the surrender in whole or in part of the
right to exercise the related option, a stock appreciation right granted in
tandem with an option entitles the holder to payment of an amount equal to the
appreciation in value of the Common Stock subject to the surrendered option.
Stock appreciation rights which are issued on a stand-alone basis entitle the
holder, upon exercise, to payment of an amount equal to the difference between
the base price of the stand-alone stock appreciation right and the fair market
value on the date of exercise of a share of Common Stock. The "base price" is
determined by the Compensation Committee and must be at least 100% of the fair
market value of one share of Common Stock on the date such stock appreciation
right is granted. A stand-alone stock appreciation right may be exercised at the
rate set by the Compensation Committee, but may not be exercised less than one
year nor more than ten years from the date of grant. In the discretion of the
Compensation Committee, payment upon exercise of a stock appreciation right may
be made in cash, in Common Stock or by a combination of cash and Common Stock.
RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
The Incentive Plan also authorizes the Compensation Committee to grant
restricted stock and restricted stock rights. The Compensation Committee may
grant restricted shares of Common Stock to any employee selected by the
Compensation Committee, subject to the forfeiture of such shares to the Company
if the employee fails to remain an employee of the Company or any of its
subsidiaries for the period of time established by the Compensation Committee
(the "restricted period"). Restricted stock rights entitle an employee to
receive a stated number of shares of Common Stock after the employee remains
continuously employed by the Company for the restricted period. The Compensation
Committee in its sole discretion may waive a forfeiture in whole or in part or
may accelerate the termination of the restricted period with respect to any
restricted stock or restricted stock rights. A holder of restricted stock rights
is not entitled to any of the rights of a holder of the Company's Common Stock
prior to the issuance of shares subject to the restricted stock rights; however,
at the discretion of the Compensation Committee, the Company may pay the holder
an amount in cash equal to the cash dividends declared on the Common Stock for
each such share of stock.
23
<PAGE> 28
PROVISIONS RELATING TO CHANGE OF CONTROL
The Incentive Plan provides that, in the event of a "change of control,"
(i) any stock appreciation rights outstanding for at least six months and any
options not previously exercisable and vested shall become exercisable and
vested, (ii) the restrictions previously applicable to any restricted stock
shall not apply and such stock shall be deemed fully vested, and (iii) each
holder of restricted stock rights shall be entitled to receive the number of
shares of Common Stock subject to such restricted stock rights. A "change of
control" will be deemed to have occurred if any of the following events occurs:
(i) subject to certain specified exceptions, any individual, entity,
or group, including any "person" (as defined in Section 13(d)(3) or
14(d)(2) of the Exchange Act) acquires beneficial ownership of 20% or more
of the Common Stock or of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Voting Securities");
(ii) persons who were directors of the Company as of October 25, 1991
(the date of adoption of the change of control provision) or persons
nominated by those directors to succeed to their positions or their
successors (the "Incumbent Board") shall cease to constitute a majority of
the board of directors of the Company;
(iii) the shareholders shall approve a reorganization, merger or
consolidation of the Company, unless, following such reorganization, merger
or consolidation, (A) more than 60% of the Common Stock and 60% of the
Voting Securities are owned by all or substantially all of the same persons
who were beneficial owners of such securities immediately prior to such
reorganization, consolidation or merger, in substantially the same
proportions relative to one another, (B) no person beneficially owns 20% or
more of the common stock or voting securities of the surviving corporation,
other than specified entities controlled by the Company or a person who
beneficially owned 20% or more of the Common Stock or the Voting Securities
immediately prior to the reorganization, consolidation or merger, and (C)
at least a majority of the members of the board of directors of the
surviving corporation were members of the Incumbent Board; or
(iv) the shareholders approve a plan of liquidation or dissolution of
the Company or the sale or disposition of all or substantially all of the
assets of the Company to another corporation other than a corporation which
meets the following requirements: (A) more than 60% of the common stock and
60% of the voting securities of the corporation are owned by all or
substantially all of the same persons who were beneficial owners of the
Common Stock and the Voting Securities immediately prior to such sale or
disposition, in substantially the same proportions relative to one another,
(B) no person beneficially owns 20% or more of the common stock or voting
securities of the corporation, other than specified entities controlled by
the Company or a person who beneficially owned 20% or more of the Common
Stock or the Voting Securities immediately prior to such sale or
disposition, and (C) at least a majority of the members of the board of
directors of the corporation were members of the Incumbent Board.
AMENDMENT AND TERMINATION OF THE INCENTIVE PLAN
The Board of Directors or the Compensation Committee may amend the
Incentive Plan at any time or may modify any award granted under the Incentive
Plan, subject to the following limitations: (i) without the approval of the
Company's shareholders (and except as permitted under the circumstances
described under "Shares Subject to the Incentive Plan," above), the Board of
Directors or the Compensation Committee may
24
<PAGE> 29
not increase the number of shares of Common Stock which may be issued pursuant
to the Incentive Plan or change the exercise price of an option or the base
price of a "stand-alone" stock appreciation right, or make any other amendment
to the Incentive Plan which is required by law to be approved by the
shareholders, and (ii) without the consent of the holder, the Board of Directors
or the Compensation Committee may not amend a previously granted award in a
manner which materially and adversely affects the rights of the holder of that
award. The Board of Directors may terminate the Incentive Plan at any time. Such
termination shall not affect any awards previously granted under the Incentive
Plan.
PROPOSED AMENDMENT
If approved by the shareholders, Section 3(b) of the Incentive Plan will be
amended to provide that the maximum number of shares of Common Stock with
respect to which options or stock appreciation rights or any combination thereof
may be granted under the Incentive Plan to any employee within a calendar year
may not exceed 100,000. Such number will be subject to equitable adjustment in
the event of the types of corporate changes described under the caption "Shares
Subject to the Incentive Plan."
PLAN BENEFITS
Information relating to option grants and exercises under the Incentive
Plan in 1996 with respect to the chief executive officer and other four most
highly compensated officers of the Company is included under the caption
"Options and Stock Appreciation Rights," above. In addition, in 1996, 57,800
options at an exercise price of $17.375 per share were granted to all executive
officers as a group, and 27,300 options at an exercise price of $17.375 per
share were granted to all non-executive officer employees as a group. No stock
appreciation rights, restricted stock, or restricted stock rights have been
granted to date under the Incentive Plan.
At its February 13, 1997 meeting, the Compensation Committee granted 40,000
options to Mr. Osborne, 3,500 options to Mr. Lanzani, 6,100 options to Mr.
Holmes, 2,500 options to Mr. de St. Paer, 2,000 options to Mr. Klein, 69,300
options to all executive officers as a group, and 21,200 options to all
non-executive officer employees as a group. All such options were granted at an
exercise price of $26.6875, the average of the high and low prices for the
Common Stock as reported on the New York Stock Exchange on the date of grant. On
March 21, 1997, the last reported sales price for the Common Stock on the New
York Stock Exchange was $28.50. None of these grants were made subject to, or
will be affected by, shareholder approval or disapproval of the proposed
amendment to the Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES
Options
Under present U.S. federal income tax laws, awards under the Incentive Plan
will have the following tax consequences:
The grant of any option under the Incentive Plan will not give rise to
taxable income to the optionee or to a deduction for the Company. The tax
consequences upon exercise of the option or upon sale of the shares of Common
Stock acquired upon exercise of the option will depend upon whether it is an
Incentive Stock Option or a Non-Qualified Stock Option.
25
<PAGE> 30
In the case of an Incentive Stock Option, the optionee does not ordinarily
recognize income, and the Company is not entitled to a deduction, at the time of
exercise of the option. The excess of the fair market value of the Common Stock
at the date of exercise over the exercise price is, however, a tax preference
item and may lead to alternative minimum tax liability for the optionee at the
time of exercise of the option. The optionee will be subject to taxation at the
time the shares of Common Stock acquired upon exercise of the option are sold.
If (i) at the time of sale, the optionee has held the Common Stock acquired upon
exercise of the option for at least two years from the date the option was
granted and one year from the date the option was exercised and (ii) the
optionee was an employee of the Company or a subsidiary of the Company
continuously from the date of grant until at least three months before the date
of exercise (or one year before the date of exercise if the optionee's
employment terminated because of disability), any amount realized upon sale of
the Common Stock in excess of the exercise price will be taxable to the optionee
as long-term capital gain and any loss will constitute long-term capital loss.
In such event, the Company will not be entitled to a deduction at the time of
sale. If, however, the sale occurs within two years of the date of grant of the
option or one year of the date the option was exercised, the lesser of (i) the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price, or (ii) the excess of the sale price over the exercise price
will be taxable to the optionee as ordinary income. Under such circumstances,
subject to Section 162(m), the Company will be entitled to a deduction in the
year that the sale occurs in an amount equal to the income realized by the
optionee.
In the case of a Nonqualified Stock Option, or in the case of an Incentive
Stock Option with respect to which the optionee does not satisfy the continuous
employment requirement referred to in the preceding paragraph, the optionee will
recognize as ordinary income upon exercise of the option an amount equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. Subject to Section 162(m), the Company will be entitled to a
deduction in an amount equal to, and at the same time that, income is recognized
by the optionee, provided that the Company complies with applicable withholding
tax requirements.
If the optionee pays the exercise price of an option in cash, his or her
original tax basis in the Common Stock acquired upon exercise of the option will
be equal to the sum of the exercise price paid plus the amount that the optionee
is required to recognize as income as a result of the exercise of the option. If
the optionee pays the exercise price of an option by tendering other Common
Stock then owned by the optionee, the optionee will not recognize any gain or
loss on the tendered stock, and the optionee's original tax basis for an equal
number of shares of Common Stock acquired upon exercise of the option will be
the same as the optionee's adjusted tax basis in the tendered stock. The
remaining acquired Common Stock will have an original tax basis equal to the sum
of the amount paid in cash, if any, plus any amount which the optionee is
required to recognize as income as a result of the exercise of the option.
At the discretion of the Compensation Committee, in lieu of providing cash
to the Company to pay withholding tax liability upon exercise of an option, the
optionee may authorize the Company to withhold shares to be issued pursuant to
the exercised option in payment for such tax liability. Alternatively, if
permitted by the Compensation Committee, the optionee may tender Common Stock
owned by the optionee prior to the exercise of the option in payment of the tax
withholding amount due; however, use of such shares may result in the
recognition, for tax purposes, of gain or loss by the optionee on the shares
tendered to the Company to satisfy the optionee's tax liability. Shares withheld
or otherwise delivered to the Company in
26
<PAGE> 31
payment for withholding tax liabilities will be valued at their fair market
value as of the date on which the amount of tax to be withheld is determined.
Stock Appreciation Rights, Restricted Stock Rights, and Restricted Stock
Except as otherwise described in the next paragraph, the grant of a stock
appreciation right, restricted stock right or shares of restricted stock is not
taxable to the grantee for federal income tax purposes at the time of grant.
However, at the time the grantee exercises a stock appreciation right or the
restricted period on restricted stock rights or restricted stock terminates, the
grantee will realize income, taxable as ordinary income, to the extent of the
cash or then fair market value of the property received. Subject to Section
162(m), the Company will be entitled to a corresponding deduction for federal
income tax purposes in the year in which the grantee recognizes ordinary income,
provided that the Company withholds income tax from such amount, as required
under the Code. Except as to distributions made in cash (such as dividend
equivalents, if any, on restricted stock rights or stock appreciation rights
that the Compensation Committee elects to settle in cash), and in connection
with which the Company will withhold necessary amounts, the grantee will be
required to provide funds to the Company to cover necessary withholding taxes.
Under Code Section 83(b), a grantee may elect within thirty (30) days after
the date of an award of restricted stock to recognize taxable compensation as of
the date of such award (instead of when the restricted period terminates), and
the Company will be entitled to a corresponding deduction at such time. The
amount of such taxable income and corresponding deduction will be equal to the
fair market value of such restricted stock at the time of the award. The grantee
will have a tax basis in such shares of restricted stock equal to such fair
market value and will recognize no further taxable income until the grantee
subsequently sells the shares, at which time he or she will recognize capital
gain equal to the difference between the sale price and his or her adjusted
basis in the shares. However, if the restricted stock is subsequently forfeited,
the forfeiture will be treated as a sale or exchange upon which the employee
realizes a loss equal to the excess (if any) of (i) the employee's tax basis in
the shares, over (ii) the amount realized (if any) upon the forfeiture, and the
loss will be treated as capital loss.
Amounts representing dividends paid on shares of restricted stock or shares
subject to restricted stock rights before the termination of the restricted
period thereon will be taxed as ordinary income to the grantee when received,
and the Company will be entitled to a corresponding deduction at such time. Such
amounts will be paid to the grantee net of the withholding tax due. Dividends
paid on restricted stock with respect to which a grantee has made a Section
83(b) election or paid after the restricted period on such restricted stock has
terminated will continue to be taxed as ordinary income to the grantee but will
not be deductible by the Company.
VOTE REQUIRED FOR APPROVAL
The proposed amendment to the Incentive Plan must be approved by a majority
of the votes cast on the proposal at the 1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE INCENTIVE PLAN. UNLESS OTHERWISE DIRECTED IN THE PROXY, THE
PERSONS NAMED IN THE ACCOMPANYING PROXY INTEND TO VOTE SUCH PROXY "FOR" PROPOSAL
2.
27
<PAGE> 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons are known to the Company to be the beneficial owners
of more than 5% of the outstanding Common Stock as of the most recent date prior
to the preparation of this Proxy Statement for which information is available to
the Company.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF CLASS
BENEFICIALLY OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED STOCK(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Brinson Partners, Inc.
Brinson Trust Company
Brinson Holdings, Inc.
SBC Holding (USA), Inc.
Swiss Bank Corporation.................................... 626,700(2) 5.94%
209 South LaSalle Street
Chicago, Illinois 60604-1295
- ------------------------------------------------------------------------------------------------------
First Chicago NBD Corporation............................. 567,999(3) 5.39%
One First National Plaza
Chicago, Illinois 60670
- ------------------------------------------------------------------------------------------------------
Neuberger & Berman, LLC................................... 594,590(4) 5.64%
605 Third Avenue
New York, New York 10158-3698
- ------------------------------------------------------------------------------------------------------
Onex Corporation
EJJM...................................................... 2,622,402(5) 24.87%
c/o Robert F. Quaintance, Jr., Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Based upon a total of 10,542,464 shares of Common Stock issued and
outstanding on February 15, 1997.
(2) Based on information provided in a Schedule 13G, as amended, dated February
12, 1997, filed with the Securities and Exchange Commission (the "SEC") by
Brinson Partners, Inc. ("BPI"), on behalf of itself, Brinson Trust Company
("BTC"), Brinson Holdings, Inc. ("BHI"), SBC Holding (USA), Inc. ("SBC USA")
and Swiss Bank Corporation ("SBC"). According to the filing, BTC is a
wholly-owned subsidiary of BPI, BPI is a wholly-owned subsidiary of BHI, BHI
is a wholly-owned subsidiary of SBC USA, and SBC USA is a wholly-owned
subsidiary of SBC. The filing states that BTC has shared voting power and
shared investment power with respect to 181,063 shares of Common Stock, and,
by virtue of their corporate relationships, BPI, BHI, SBC USA and SBC have
shared voting and shared investment power with respect to 626,700 shares of
Common Stock held by BTC and BPI.
(3) Based on information provided in a Schedule 13G, as amended by Amendment No.
1, dated February 4, 1997, filed with the SEC by First Chicago NBD
Corporation. According to the filing, First Chicago NBD Corporation has sole
voting power with respect to 557,944 shares, sole dispositive power with
respect to 466,879 shares and shared dispositive power with respect to 278
shares.
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(4) Based on information provided in a Schedule 13G, as amended by Amendment No.
3, dated February 10, 1997, filed with the SEC by Neuberger & Berman LLC.
According to the filing, Neuberger & Berman LLC has shared investment power
with respect to all 594,590 shares, sole voting power with respect to 73,700
shares and no voting power with respect to the remaining shares. According
to the filing, the shares do not include 115,900 shares of Common Stock
owned by partners of Neuberger & Berman LLC in their personal securities
accounts as to which Neuberger & Berman LLC disclaims beneficial ownership
and 119,600 shares held in the name of the Neuberger & Berman Profit Sharing
Retirement Plan as to which Neuberger & Berman LLC disclaims beneficial
ownership.
(5) Based on (i) information provided in a Schedule 13D, as amended by Amendment
No. 2, dated October 24, 1995 (the "New Scotsman Shareholders 13D"), filed
with the SEC by Onex Corporation, Onex DHC LLC, OMI Quebec Inc., Onex
Capital Corporation, Oncap Holding Corporation, Gerald W. Schwartz, EJJM,
Matthew O. Diggs, Jr., Nancy B. Diggs, The Diggs Family Foundation, Pacific
Mutual Life Insurance Company ("Pacific Mutual"), PM Group Life Insurance
Company ("PM"), Pacific Mutual Charitable Foundation ("Pacific Mutual
Foundation"), W. Joseph Manifold, Charles R. McCollom, Anita J. Moffatt
Trust dated July 23, 1993, Anita J. Moffatt, Remo Panella, Teddy F. Reed,
Robert L. Schafer, Graham E. Tillotson, John A. Tilmann Trust dated July 23,
1993, John A. Tilmann, Ronald A. Anderson, Kevin E. McCrone, Michael P.
McCrone, Michael J. de St. Paer, Paul L. de St. Paer, Wendy M. de St. Paer,
M. Anne de St. Paer, Graham F. Cook, Jane E. Cook, Catherine J. Cook, G.F.
Cook and J.E. Cook (A/c AJC) Trust, G.F. and J.E. Cook (A/c SEC) Trust,
Christopher R.L. Wheeler, Maureen J. Wheeler, Jonathan R. Wheeler, Josephine
V. Wheeler, John Rushton, and Margaret L. Rushton (the "Reporting Persons"),
and (ii) more current information included in Form 4's filed with the SEC by
certain Reporting Persons and other information available to the Company.
According to the New Scotsman Shareholders 13D, the Reporting Persons may be
deemed to constitute a "group" for purposes of Section 13(d)(3) of the
Exchange Act. The New Scotsman Shareholders 13D further states that,
pursuant to the Stockholders' Agreement, (i) the Reporting Persons may not
transfer any shares of Common Stock, except for transfers pursuant to an
underwritten public offering or sale in the public market through a broker,
unless the transferee agrees to become a party to, and to be bound by, the
Stockholders' Agreement, and (ii) the Reporting Persons have granted Onex
the Onex Proxy to vote all shares of Common Stock held by such Reporting
Persons. For additional information relating to the Stockholders' Agreement
and the Onex Proxy, see "Agreements Governing the Appointment and Future
Nomination of Certain Directors."
Based on the New Scotsman Shareholders 13D, the most recent reports on Form
4 filed with the SEC by Onex and its affiliates, Pacific Mutual (including
PM), and Pacific Mutual Foundation and information furnished to the Company
by Mr. Diggs, the Company believes that (i) Onex and its affiliates
currently hold 1,611,699 shares of Common Stock, (ii) EJJM, Matthew O.
Diggs, Jr., Nancy B. Diggs, and The Diggs Family Foundation currently hold
709,623 shares of Common Stock (including 3,000 shares that may be acquired
within 60 days of February 15, 1997 pursuant to the exercise of options),
and (iii) Pacific Mutual, PM, and Pacific Mutual Foundation hold no shares
of Common Stock acquired under the DFC Merger Agreement and have ceased to
be members of the reporting group. Based on information included in the New
Scotsman Shareholders 13D, Form 4's filed with the SEC, the records of the
Incentive Plan, and other information available to the Company, the Company
believes that the remaining Reporting Persons, as a group, beneficially own
approximately 301,080 shares of Common
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Stock (including 7,650 shares which may be acquired within 60 days of
February 15, 1997 pursuant to the exercise of options under the Incentive
Plan).
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, officers and beneficial owners of more than 10 percent of the
outstanding shares of the Common Stock are required to file with the SEC reports
on Forms 3, 4 and 5 reflecting certain changes in their beneficial ownership of
the Common Stock. Pursuant to regulations adopted by the SEC, the Company is
required to disclose each such person who failed to file any such report on a
timely basis during the Company's most recent fiscal year. Based solely on a
review of the Forms 3, 4 and 5 furnished to the Company and any amendments
thereto, the Company believes that all of its officers, directors and greater
than 10 percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during the 1996 fiscal year.
AUDITORS
The independent public accounting firm of Arthur Andersen LLP has audited
the Company's consolidated 1996 financial statements. Arthur Andersen LLP will
serve as the Company's independent auditors in 1997. A representative from
Arthur Andersen LLP will be present at the 1997 Annual Meeting and will have the
opportunity to make a statement and to respond to appropriate questions.
NOTICE PROVISIONS FOR SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF
DIRECTORS
The Company's by-laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors of
the Company, of candidates for election as directors (the "Nomination
Procedure") and with regard to certain matters to be brought before an annual
meeting of shareholders of the Company (the "Business Procedure").
The Nomination Procedure provides that only persons who are nominated by,
or at the direction of, the Board of Directors or by a shareholder who has given
timely written notice to the Secretary of the Company prior to the meeting at
which directors are to be elected will be eligible for election as directors of
the Company. The Business Procedure provides that at an annual meeting, and
subject to any other applicable requirements, only such business may be
conducted as has been brought before the meeting by, or at the direction of, the
Board of Directors or by a shareholder who has given timely prior written notice
to the Secretary of the Company of such shareholder's intention to bring such
business before the meeting. In order for business to be properly brought before
an annual meeting, such business must also be a proper matter for shareholder
action. To be timely, notice of a nomination or proposed business must be
received by the Company not later than the close of business on the 60th day nor
earlier than the close of business on the 90th day before the first anniversary
of the preceding year's annual meeting.
Special provisions apply if the date of an annual meeting is more than 30
days before or 60 days after such anniversary date. Under those circumstances,
in order to be timely, notice must be received by the Company not earlier than
the close of business on the 90th day before the date of the annual meeting nor
later than the later of (i) the close of business on the 60th day before the
annual meeting or (ii) the close of business on the 10th day after the date on
which the Company first publicly announces the meeting (either by a press
release reported by the Dow Jones News Service, Associated Press or a comparable
national news service or by a
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filing with the Securities and Exchange Commission). Special provisions also
apply in the event that the number of directors to be elected at an annual
meeting is increased and there is no such public announcement naming all of the
nominees for directors or specifying the size of the increased board at least 70
days before the first anniversary of the preceding year's annual meeting. Under
those circumstances, a notice shall be timely, but only with respect to nominees
for any new positions created by the increase, if the notice is received by the
Company not later than the close of business on the 10th day after the date that
the Company first makes such a public announcement. Any shareholder who gives
notice of the nomination of any person for election as a director or notice of
business to be brought before an annual meeting must be a shareholder of record
at the time of the giving of notice and entitled to vote on the matter with
respect to which such notice is given.
Under the Nomination Procedure, notice to the Company from a shareholder
who proposes to nominate a person at an annual meeting for election as a
director must contain certain information about that person, including age,
business and residence addresses, principal occupation, the class and number of
shares of Common Stock beneficially owned and such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the proposed nominee (including such person's written consent to being named
as a nominee and to serving as a director if elected). Under the Business
Procedure, notice relating to the conduct of business other than the nomination
of directors at an annual meeting must contain certain information about the
business to be brought, including a brief description of the business, the
reasons for conducting such business at the annual meeting, and any material
interest of such shareholder in the business so proposed. Any notice given under
either the Nomination Procedure or the Business Procedure must also contain
certain information about the shareholder giving such notice and the beneficial
owner, if any, on whose behalf the nomination or proposal has been made,
including the name and address of the shareholder as they appear on the
Company's books, the name and address of such beneficial owner, if any, and the
number of shares of Common Stock owned beneficially and of record by such
shareholder and beneficial owner, if any.
If the Chairman or other officer presiding at a meeting determines that a
person was not nominated in accordance with the Nomination Procedure, such
person will not be eligible for election as a director, or if such Chairman or
other officer determines that other business was not properly brought before
such meeting in accordance with the Business Procedure, such business will not
be conducted at such meeting. Nothing in the Nomination Procedure or the
Business Procedure will preclude discussion by any shareholder of any nomination
or business properly made or brought before the annual meeting in accordance
with the above-mentioned procedures.
1998 ANNUAL MEETING OF THE COMPANY'S SHAREHOLDERS
Proposals from shareholders to be presented at the 1998 annual meeting of
the shareholders of the Company must be received by the Company on or before
November 28, 1997 in order to be eligible for inclusion in the Company's proxy
statement and form of proxy for that meeting.
OTHER BUSINESS
The management of the Company knows of no business other than that stated
in this Proxy Statement which will be presented for action at the 1997 Annual
Meeting. If however, other business should properly
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come before the meeting, the persons designated in the enclosed proxy will vote
or refrain from voting in respect thereof in accordance with their best
judgment.
THE COMPANY WILL PROVIDE WITHOUT COST TO ANY SHAREHOLDER A COPY OF THE
COMPANY'S REPORT ON FORM 10-K FOR ITS MOST RECENT FISCAL YEAR, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, WHICH THE COMPANY IS REQUIRED TO FILE WITH
THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN REQUESTS FOR THE REPORT SHOULD
BE DIRECTED TO SCOTSMAN INDUSTRIES, INC., 775 CORPORATE WOODS PARKWAY, VERNON
HILLS, ILLINOIS 60061, ATTENTION: DONALD D. HOLMES, SECRETARY.
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EXHIBIT A
SCOTSMAN INDUSTRIES, INC.
LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
[ALL CHANGES TO BE EFFECTED BY THE PROPOSED AMENDMENT ARE SHOWN IN BOLDFACE
TYPE.]
1. PURPOSE
The purpose of the Long-Term Executive Incentive Compensation Plan (the
"Plan") is to further the long-term growth of Scotsman Industries, Inc. (the
"Company") and its divisions and subsidiaries by strengthening the ability of
the Company to attract and retain key employees and to provide additional
motivation and incentives for the performance of key employees.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee shall consist of
at least two such Directors as the Board may from time to time designate.
Membership on the Committee shall be limited to members of the Board of
Directors who meet the definitions of a "non-employee director" under Rule 16b-3
under Section 16 of the Securities Exchange Act of 1934, as amended, and an
"outside director" under Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The Committee shall have such powers to
administer the Plan as are delegated to it by the Plan or the Board of
Directors, including the power to interpret the Plan and any agreements executed
thereunder, to prescribe rules and regulations relating to the Plan, and to make
all other determinations necessary or advisable for administering the Plan.
3. GRANT OF AWARDS; SHARES SUBJECT TO PLAN
(a) The Committee may grant any type of award permitted under the terms of
the Plan (all such awards in the aggregate being hereinafter referred to as
"Awards"). Only employees of the Company and its divisions and subsidiaries may
be selected by the Committee for Awards under the Plan.
(b) The maximum number of shares of Common Stock of the Company that may be
issued under the Plan is 1,000,000, all of which shares may be made subject to
Options. THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK WITH RESPECT TO WHICH
OPTIONS OR STOCK APPRECIATION RIGHTS ("SARS"), OR ANY COMBINATION THEREOF, MAY
BE GRANTED UNDER THE PLAN TO ANY EMPLOYEE WITHIN A CALENDAR-YEAR PERIOD MAY NOT
EXCEED 100,000, SUBJECT TO PARAGRAPH (C) OF THIS SECTION 3. The Common Stock
issued pursuant to the Plan may consist of authorized and unissued shares of the
Company's Common Stock or Common Stock held in the Company's treasury. If any
Award granted under the Plan shall terminate or lapse for any reason, any shares
of Common Stock subject to such Award shall again be available for the grant of
an Award.
(c) In the event of corporate changes affecting the Company's Common Stock
or this Plan or Awards granted thereunder (including without limiting the
generality of the foregoing, stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, or other relevant changes in
capitalization), the Board of Directors or the Committee shall make appropriate
adjustments in price, number and kind of shares of Common Stock or other
consideration subject to such Awards or in the terms of such Awards, which it
deems equitable to prevent dilution or enlargement of rights under the Awards.
In addition, the Board of
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Directors or the Committee may from time to time equitably change the aggregate
number or remaining number or kind of shares which may be issued under the Plan
OR TO ANY EMPLOYEE UNDER THE PLAN to reflect any such corporate changes.
4. OPTIONS
(a) The Committee may grant any type of statutory or non-statutory Option
to purchase shares of the Company's Common Stock as is permitted by law at the
time the Option is granted. The term of each Option shall not be more than ten
years and one day from the date of grant and may be exercised at the rate set by
the Committee.
(b) The per share purchase price of the Company's Common Stock which may be
acquired pursuant to an Option shall be at least 100% of the fair market value
of one share of Common Stock of the Company on the date on which the Option is
granted. Within this limitation such price shall be determined by the Committee.
(c) Notwithstanding sub-section (b) above, the Compensation Committee in
its discretion and for Options granted on or prior to April 20, 1989 may grant
Options with a per share purchase price less than 100% of the fair market value
of one share of the Company's Common stock on the date on which the Option is
granted; however, the Compensation Committee may only grant Options pursuant to
this sub-section (c) to former employees of Household Manufacturing, Inc. or its
subsidiaries who have forfeited or will be forfeiting employee stock options
previously granted by Household International, Inc. as a result of termination
of employment. The exercise price for Options granted pursuant to this
sub-section (c) at less than fair market value on the date of grant will be
determined by the Compensation Committee based on the appreciation in value of
Household International, Inc. employee stock options being forfeited. No Option
shall be granted to an employee pursuant to this sub-section (c) unless such
employee has agreed to forfeit any remaining rights such employee may have in
options granted by Household International, Inc.
(d) Payment for shares purchased upon the exercise of an Option shall be
made in cash or, in the discretion of the Committee and subject to such rules as
it may adopt, in shares of Common Stock of the Company valued at the then fair
market of such shares or by a combination of cash and shares of Common Stock.
(e) The Committee may, in its discretion and subject to such rules as it
may adopt, permit an optionee to satisfy, in whole or in part, withholding tax
obligations incurred in connection with the exercise of an Option: (1) by
electing to have the Company withhold shares of the Company's Common Stock
(otherwise deliverable to the optionee) in payment for such withholding tax
obligation or (2) by delivering shares of the Company's Common stock owned by
such holder in payment for such withholding tax obligation.
5. STOCK APPRECIATION RIGHTS
(a) The Committee may grant SARs in tandem with the grant of an Option
under the Plan or with respect to a previously granted Option under the Plan. In
either case the number of shares in respect of which SARs are granted by the
Committee shall not be greater than the number of shares subject to the related
Option. In exchange for the surrender in whole or in part of the right to
exercise the related Option, such SAR shall entitle the employee to payment of
an amount equal to the appreciation in value of the surrendered Options (the
excess of the fair market value of such Stock subject to Options at the time of
surrender over
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their aggregate option price). An SAR granted pursuant to this subsection (a)
shall be exercisable to the extent and only to the extent that the related
Option is exercisable, but if an SAR is granted with respect to a
previously-granted Option, the SAR will not be exercisable for a period of
twelve months from the date of grant of such SAR. No such SAR shall be
exercisable except upon surrender of the related Option, and to the extent such
Option is surrendered, the shares covered by such Option shall again be
available for purposes of the Plan to the extent that payment of such SAR is not
made in shares of Common Stock of the Company. The exercise of any Option shall
result in the cancellation of any related SAR.
(b) The Committee may also grant units of SARs on a stand-alone basis which
are not issued in tandem with Options. The term of each such SAR shall not be
more than ten years from the date of grant and may be exercised at the rate set
by the Committee; provided, however, that no such SAR shall be exercised less
than one year from the date of grant. The "base price" of each unit of a
"stand-alone" SAR shall be at least 100% of the fair market value of one share
of Common Stock of the Company on the date on which such SAR is granted. Within
this limitation the base price shall be determined by the Committee. Each unit
of a "stand-alone" SAR entitles the holder, upon exercise, to payment of an
amount equal to the difference between the base price of such SAR unit and the
fair market value on the date of exercise of a share of Common Stock of the
Company.
(c) At the discretion of the Committee, payment upon exercise of SARs may
be made in cash, in shares of Common Stock of the Company valued at their fair
market value as of the date of exercise of the SAR, or partly in cash and partly
in shares of Common Stock of the Company.
(d) The Committee may establish a maximum appreciation value payable under
an SAR.
6. TRANSFER OF OPTIONS AND STOCK APPRECIATION RIGHTS; EXERCISE OF OPTIONS AND
STOCK APPRECIATION RIGHTS FOLLOWING TERMINATION OF EMPLOYMENT
(a) Options and SARs may not be transferred except by will or the laws of
descent and distribution, and during the lifetime of the holder may be exercised
only by him. If the holder of an Option or SAR shall cease to be an employee of
the Company, a division, or a subsidiary, and unless otherwise provided by the
Committee or as provided for in Section 8, all rights under such Option or SAR
shall, subject to sub-section (b), terminate, as set forth below:
(i) in the event of termination of a holder who is retirement-eligible
under the terms of a pension plan of the Company or a subsidiary, the
Option or SAR may be exercised within three years of the date of
termination of employment
(ii) in the event of termination of employment due to permanent and
total disability of a holder who is not retirement-eligible under the terms
of a pension plan of the Company or a subsidiary, the Option or SAR may be
exercised within twelve months following the date of such termination of
employment.
(iii) in the event of death during employment, the Option or SAR may
be exercised by the executor, administrator, or other personal
representative of the holder within three years succeeding death if such
holder was retirement-eligible under the terms of a pension plan of the
Company or a subsidiary, or twelve months if such holder was not
retirement-eligible under the terms of a pension plan of the Company or a
subsidiary.
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(iv) in the event of termination of employment other than as set forth
in subsections (i), (ii) or (iii) above, the Option or SAR may be exercised
within three months following the date of termination.
(v) in the event of death of a holder of an Option or SAR following
termination of employment, the Option or SAR may be exercised by the
executor, administrator, or other personal representative of the holder,
notwithstanding the time period specified in (i), (ii), (iii) or (iv)
above, within (a) twelve months following death or (b) the remainder of the
period in which the holder was entitled to exercise the Option or SAR,
whichever period is longer.
If the Committee determines that the termination is for cause, the
Option or SAR will not under any circumstances be exercisable following
termination of employment.
(b) Notwithstanding the provisions of sub-section (a), an Option or SAR may
not be exercised pursuant to this Section after the expiration of the term of
such Option or SAR and may be exercised only to the extent that the holder is
entitled to exercise such Option or SAR on the date of termination of
employment.
7. RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
(a) The Committee from time to time may grant shares of Common Stock of the
Company to any employee selected by the Committee, subject to the forfeiture of
such stock to the Company if such employee fails to remain an employee of the
Company or a division, or any subsidiary for the period of time established by
the Committee ("Restricted Stock"). The Committee may also grant Restricted
Stock Rights ("RSRs") to any employee selected by the Committee, which would
entitle such employee to receive a stated number of shares of Common Stock of
the Company, subject to forfeiture of such RSRs if such employee fails to remain
continuously an employee of the Company, a division, or any subsidiary for the
period of time established by the Committee.
(b) Restricted Stock and RSRs shall be subject to the following
restrictions and limitations:
(i) Restricted Stock and RSRs may not be transferred except by will or
the laws of descent and distribution;
(ii) Except as otherwise provided in Paragraphs (d) and (e) of this
Section 7, or as provided in Section 8, Restricted Stock and RSRs and the
shares subject to such RSRs shall be forfeited and all rights of a grantee
of such Restricted Stock and RSRs and shares subject to RSRs shall
terminate without any payment of consideration by the Company if the
employee fails to remain continuously as an employee of the Company, a
division, or any subsidiary for the period of time established by the
Committee (the "Restricted Period"). A grantee shall not be deemed to have
terminated his period of continuous employment with the Company, a
division, or any subsidiary if he leaves the employ of the Company or any
subsidiary for immediate reemployment with the Company, a division, or any
subsidiary.
(c) A holder of RSRs shall not be entitled to any of the rights of a holder
of the Common Stock with respect to the shares subject to such RSRs prior to the
issuance of such shares pursuant to the Plan. At the Committee's discretion,
during the Restricted Period, for each share subject to RSRs, the Company may
pay the holder an amount in cash equal to the cash dividend declared on a share
of Common Stock of the Company during the Restricted Period on or about the date
the Company pays such dividend to its stockholders of record.
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(d) The Committee in its sole discretion may accelerate the termination of
the Restricted Period with respect to any Restricted Stock and RSRs.
(e) In the event that the employment of a holder terminates by reason of
death or permanent and total disability, (i) a holder of Restricted Stock shall
be entitled to have the risk of forfeiture removed from the number of shares of
Restricted Stock multiplied by a fraction (x) the numerator of which shall be
the number of full months between the date of grant of such Restricted Stock and
the date of such termination of employment, and (y) the denominator of which
shall be the number of full months in the Restricted Period; and (ii) a holder
of RSRs shall be entitled to receive the number of shares subject to such RSRs
multiplied by a fraction (x) the numerator of which shall be the number of full
months between the date of such RSRs and the date of such termination of
employment, and (y) the denominator of which shall be the number of full months
in the Restricted Period; provided, however, that any fractional share shall not
be awarded. A holder of Restricted Stock or RSRs whose employment terminates for
reasons other than those listed in this paragraph will forfeit his rights under
any outstanding shares of Restricted Stock or RSRs. This automatic forfeiture
may be waived in whole or in part by the Committee in its sole discretion.
(f) When a grantee shall be entitled to receive shares pursuant to RSRs,
the Company shall issue the appropriate number of shares registered in the name
of the grantee.
8. CHANGE IN CONTROL
The following provisions shall apply in the event of a "Change in Control":
(a) In the event of a Change in Control, as defined in this Section 8:
(i) any SARs outstanding for at least 6 months and any options not
previously exercisable and vested shall become fully exercisable and
vested;
(ii) the restrictions applicable to any Restricted Stock shall lapse
and such Restricted Stock shall be deemed fully vested; and
(iii) each holder of RSRs shall be entitled to receive the number of
shares subject to such RSRs.
(b) For purpose of this Section 8, "Change in Control" means:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Sections 13(d) (3) or 14(d)
(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of 20% or more of either (i) the then outstanding
shares of Common Stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change in Control:
(A) any acquisition directly from the Company (excluding any acquisition
resulting from the exercise of a conversion or exchange privilege in
respect of outstanding convertible or exchangeable securities), (B) any
acquisition by the Company, (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation involving
the Company, if immediately after such reorganization, merger or
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consolidation, each of the conditions described in clauses (i), (ii) and
(iii) of subsection (3) of this Section 8(b) shall be satisfied; and
provided further that, for purposes of clause (B), if any Person (other
than the Company or any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company
shall become the beneficial owner of 20% or more of the Outstanding Company
Common Stock or 20% or more of the Outstanding Company Voting Securities by
reason of an acquisition by the Company and such person shall, after such
acquisition by the Company, become the beneficial owner of any additional
shares of the Outstanding Company Common Stock or any additional
Outstanding Company Voting Securities and such beneficial ownership is
publicly announced, such additional beneficial ownership shall constitute a
Change in Control;
(2) individuals who, as of October 25, 1991, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of such Board; provided, however, that any individual who becomes a
director of the Company subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent
Board shall be deemed to have been a member of the Incumbent Board; and
provided further, that no individual who was initially elected as a
director of the Company as a result of an actual or threatened election
contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other
than the Board shall be deemed to have been a member of the Incumbent
Board;
(3) approval by the stockholders of the Company of a reorganization,
merger or consolidation unless, in any such case, immediately after such
reorganization, merger or consolidation, (i) more than 60% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and more than 60% of the combined
voting power of the then outstanding securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals or entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation and in substantially the same proportions relative to each
other as their ownership, immediately prior to such reorganization, merger
or consolidation, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation resulting from
such reorganization, merger or consolidation (or any corporation controlled
by the Company) and any Person which beneficially owned, immediately prior
to such reorganization, merger or consolidation, directly or indirectly,
20% or more of the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly
or indirectly, 20% or more of the then outstanding shares of common stock
of such corporation or 20% or more of the combined voting power of the then
outstanding securities of such corporation entitled to vote generally in
the election of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such reorganization, merger or consolidation; or
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<PAGE> 43
(4) approval by the stockholders of the Company of (i) a plan of
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the Company
other than to a corporation with respect to which, immediately after such
sale or other disposition, (A) more than 60% of the then outstanding shares
of common stock thereof and more than 60% of the combined voting power of
the then outstanding securities thereof entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities immediately prior to such
sale or other disposition and in substantially the same proportions
relative to each other as their ownership, immediately prior to such sale
or other disposition, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person
(other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or such corporation (or any
corporation controlled by the Company) and any Person which beneficially
owned) immediately prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be, beneficially
owns, directly or indirectly, 20% or more of the then outstanding shares of
common stock thereof or 20% or more of the combined voting power of the
then outstanding securities thereof entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors thereof were members of the Incumbent Board at the time
of the execution of the initial agreement or action of the Board providing
for such sale or other disposition.
9. AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors or the Committee may amend the Plan or any Award
granted thereunder at any time, except that the Board of Directors or the
Committee may not, except as permitted by Section 3(c), (i) without stockholder
approval, increase the number of shares of Common Stock of the Company which may
be issued pursuant to the Plan, change the purchase price of an Option or base
price of a "stand-alone" SAR, or make any other amendment to the Plan which is
required by law to be approved by the stockholders of the Company; (ii) amend an
Award granted thereunder in a manner materially and adversely affecting the
rights of the holder thereof without such holder's consent. The Board of
Directors may terminate the Plan at any time, but such termination shall not
affect Awards previously granted under the Plan.
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APPENDIX
The following graphics material cannot be transmitted pursuant to EDGAR:
1. A map of the area of Vernon Hills, Illinois, indicating directions to
the site of the annual meeting, including directions from O'Hare
airport, which appears on the page following the cover letter.
2. The graph captioned "Comparison of Five Year Cumulative Total Return.
Scotsman Industries, Russell 2000, and S&P Diversified Manufacturing"
which appears on page 20 of the Proxy Statement, which has been
supplementally submitted to the Securities and Exchange Commission.
<PAGE> 45
REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF SCOTSMAN INDUSTRIES, INC.
The undersigned hereby appoint(s) Richard C. Osborne and Donald D.
Holmes, or either of them, as proxies for the undersigned, with full power of
substitution, to act and to vote all the shares of common stock of Scotsman
Industries, Inc. that the undersigned would be entitled to vote if personally
present at the annual meeting of shareholders to be held on Thursday, May 15,
1997, or at any adjournment thereof. Said proxies are directed to vote as
instructed on the matters set forth below and otherwise at their discretion.
Receipt of a copy of the notice of said meeting and proxy statement is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDERS(S). IF NO DIRECTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED UNDER PROPOSAL 1 AND
FOR PROPOSAL 2 ON THE REVERSE SIDE OF THIS CARD.
(PLEASE SIGN AND DATE THE REVERSE SIDE AND
MAIL IN THE ENCLOSED RETURN ENVELOPE.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ""FOR''
ALL THE NOMINEES AND ""FOR'' PROPOSAL 2.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
WITHHOLD FOR ALL EXCEPT THE
FOR AUTHORITY NOMINEE(S) WRITTEN BELOW
1. Election of Directors
Nominees:
Frank W. Considine,
George D. Kennedy / / / / / / ___________________
FOR AGAINST ABSTAIN
2. Proposal to Amend the
Long-Term Executive
Incentive Compensation
Plan, as described in the
accompanying proxy
statement. / / / / / /
---------------------------------------
Signature
---------------------------------------
Signature (if held jointly)
Dated: ___________________________, 1997
IMPORTANT: Please sign exactly as your
name or names appear on the left. If
stock is held jointly, all joint owners
must sign. Executors, administrators,
trustees, guardians, custodians,
corporate officers and others signing in
a representative capacity should give
their full titles.
