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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SCOTSMAN INDUSTRIES, INC.
(Name of Subject Company)
SCOTSMAN INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
_________809340 10 2_________
(CUSIP Number of Class of Securities)
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DONALD D. HOLMES
VICE PRESIDENT-FINANCE
820 FOREST EDGE DRIVE
VERNON HILLS, ILLINOIS 60061
(847) 215-4500
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
THOMAS A. COLE
STEVEN SUTHERLAND
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Scotsman Industries, Inc., a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 820 Forest Edge Drive, Vernon Hills, Illinois 60061. The title of the class
of equity securities to which this Statement relates is the Company's Common
Stock, par value $.10 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Berisford Acquisition
Corporation (the "Offeror"), a Delaware corporation and a wholly owned
subsidiary of Welbilt Corporation, a Delaware corporation ("Parent"), which is
indirectly wholly owned by Berisford plc, a public limited company organized
under the laws of England and Wales ("Berisford"), to purchase all outstanding
Shares at a purchase price of $33.00 per share (such purchase price, as it may
be increased pursuant to the terms of the Merger Agreement (as defined below) is
hereinafter referred to as the "Offer Price"), net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated July 9, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together with the Offer to Purchase and any
amendments or supplements thereto constitute the "Offer"). The Offer is
disclosed in the Tender Offer Statement on Schedule 14D-1 dated July 9, 1999
(the "Schedule 14D-1"), as filed by Offeror, Parent and Berisford with the
Securities and Exchange Commission (the "SEC"). The Schedule 14D-1 states that
the address of the principal executive offices of the Offeror and Parent is 225
High Ridge Road, Stamford, Connecticut 06905, and the address of the principal
executive office of Berisford is Washington House, 40-41 Conduit Street, London
W1R 9FB, United Kingdom.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement") dated as of July 1, 1999 among Parent, the
Offeror and the Company. Pursuant to the Merger Agreement, following the
consummation of the Offer, upon the satisfaction or waiver of certain
conditions, the Offeror will be merged (the "Merger") with and into the Company,
with the Company surviving the Merger (as such, the "Surviving Corporation") as
a wholly owned subsidiary of Parent. In the Merger, each Share outstanding
immediately prior to the effective time (the "Effective Time") of the Merger
(other than Shares owned by the Company, any subsidiary of the Company, Parent,
the Offeror or any other subsidiary of Parent (other than shares owned by an
employee benefit plan of the Company, Parent, the Offeror or any subsidiary of
the Company, Parent or the Offeror) or by stockholders, if any, who are entitled
to and who properly exercise appraisal rights under the General Corporation Law
of the State of Delaware (the "DGCL") with respect to their Shares) will, by
virtue of the Merger and without any action by the holder thereof, be converted
into the right to receive $33.00 per Share (or any higher price paid per Share
in the Offer), net to the record holder thereof, in cash, without interest
thereon (the "Merger Consideration"), upon surrender of the certificate formerly
representing such Shares.
The Merger Agreement is more fully described below in Item 3. A copy of the
Merger Agreement is filed as an Exhibit hereto and is incorporated herein by
reference in its entirety. A copy of the joint press release issued by the
Company and Berisford on July 2, 1999 is filed as an Exhibit hereto and is
incorporated herein by reference in its entirety.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
(b)(1) Certain Contracts, Agreements, Arrangements and Understandings
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers and between Parent
and the Company are described in the Company's Information Statement pursuant to
Section 14(f) of the Securities Exchange Act of 1934 and
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Rule 14f-1 thereunder (the "Information Statement") dated the date hereof under
"Information Concerning the Board of Directors," "Directors' Fees and
Compensation," "Security Ownership of Management," "Principal Stockholders,"
"Executive Compensation," "Options and Stock Appreciation Rights," "Pension
Plans," "Executive Compensation and Severance Agreements, Including Change of
Control Provisions," "Other Agreements," and "Option Plans." The Information
Statement is attached hereto as Schedule I, filed as an Exhibit hereto and
incorporated herein by reference. In addition, certain contracts, agreements,
arrangements and understandings relating to the Company and/or the Company's
directors and executive officers are contained in the Merger Agreement and are
described below under "Merger Agreement."
(b)(2) Certain Background Information.
In January 1998, Richard C. Osborne, the Chairman of the Board, President
and Chief Executive Officer of the Company, contacted Andrew Roake, the Chief
Executive Officer of Parent to express the Company's interest in pursuing an
acquisition of the ice machine business of Berisford. The Company and Parent
executed a confidentiality agreement and the Company received certain
confidential information regarding the business. The Company eventually made an
offer to purchase the business, which offer was not accepted by Berisford.
From time to time in 1998 Mr. Osborne had various telephone conversations
and other discussions at industry trade shows and similar events with Mr. Roake
regarding possible cooperative arrangements between the companies, such as
possible marketing alliances. On November 12, 1998 Mr. Osborne met in London
with Mr. Alan J. Bowkett, who was at that time the Chief Executive Officer of
Berisford, to discuss aspects of a possible marketing alliance and their
respective views of strategies and industry direction.
On March 11, 1999 Mr. Osborne met with Messrs. Bowkett and Roake in New York
to further discuss potential relationships between the companies. At this
meeting Messrs. Bowkett and Roake indicated that Berisford was interested in
pursuing a possible business combination with the Company and discussed on a
preliminary basis alternative transaction structures, including a possible
acquisition of the Company and a preliminary indication of the price which might
be offered in any possible transaction.
At a special meeting of the Company's Board of Directors on March 16, 1999,
Mr. Osborne advised the Board of Berisford's indication of interest. The Board
authorized management to evaluate the potential alternatives and report back to
the Board and to continue exploring preliminary discussions with Berisford.
At a special meeting of the Company's Board of Directors on April 12, 1999,
the Board reviewed strategic alternatives available to the Company. Counsel for
the Company advised the Board as to the fiduciary duties of directors. The Board
authorized the retention of Morgan Stanley & Co. Incorporated ("Morgan Stanley")
as the Company's financial advisor, and representatives of Morgan Stanley made a
financial presentation to the Board, including a preliminary financial analysis
and valuation of the Company. The Board authorized management to continue
exploring preliminary discussions with Berisford.
In mid to late April 1999, counsel for the Company and counsel for Berisford
negotiated the terms of a confidentiality and standstill agreement between the
Company and Berisford. On April 29, 1999 the Company and Berisford executed a
confidentiality and standstill agreement.
In the first quarter of 1999 Mr. Osborne also received an unsolicited
contact from a representative of an investment fund (the "First Company"). The
representative expressed an interest in arranging an acquisition of the Company
involving the First Company and one or more companies which operate businesses
in the Company's industry or related industries. Mr. Osborne responded that he
would advise the Board of the interest and that the Board would consider the
interest in due course.
On April 30, 1999 Mr. Osborne and Donald D. Holmes, the Vice
President-Finance and Secretary of the Company met outside Birmingham, England
with Mr. Bowkett and Mr. Jonathan Findler, the finance
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director of Berisford, to continue the earlier preliminary discussions. Mr.
Osborne provided limited financial information regarding the Company.
On May 11, 1999 Mr. Osborne met at the Company's offices with a
representative of the First Company to discuss the First Company's expression of
interest. The parties discussed in general terms a possible acquisition of the
Company but did not negotiate or discuss the structure or terms of any possible
acquisition.
At the regular meeting of the Company's Board of Directors on May 13, 1999,
management updated the Board on the discussions and representatives of Morgan
Stanley made a financial presentation to the Board, including an updated
preliminary financial analysis and valuation of the Company. Counsel for the
Company advised the Board as to its fiduciary duties. The Board discussed the
reasons for and basis on which it might proceed to negotiate with Berisford
without first actively seeking alternative proposals, including the effect of
certain contractual provisions which might be negotiated and which would permit
potential competing proposals for an acquisition of the Company (the
"Provisions"). The Board authorized management to continue discussions with
Berisford on such basis.
Subsequent to the Board meeting, Mr. Osborne and representatives of Morgan
Stanley had various conversations with Mr. David Williams, the current Chief
Executive Officer of Berisford and Mr. Roake and representatives of Schroder &
Co. Inc. ("Schroders"), the financial advisor to Berisford. In these
conversations they communicated the Board's authorization and the required basis
for continuing discussions, including the ability of Parent to reach a specified
price in excess of the Offer Price upon completion of due diligence and
definitive documentation. Counsel for the Company provided to counsel for
Berisford an outline of the Provisions which included (i) a "no shop" provision
that included "fiduciary outs" which would allow the Company to provide
information to and negotiate with a third party desiring to make a competing
proposal in certain circumstances but did not require notification to Berisford
of such a proposal or a contractual right of Berisford to match any such
proposal, (ii) a right of the Company to terminate the merger agreement in the
event of a superior competing proposal with payment to Berisford of a "break up"
fee not greater than 2.5% of the equity value of the transaction with Berisford,
(iii) no Company or shareholder "lock-up" option granted to Berisford, (iv) a
provision permitting the Company to include in the press release announcing the
transaction a reference to the Company's ability to provide information to and
negotiate with a third party desiring to make a competing proposal, (v) a
provision permitting the Company to file publicly the merger agreement and the
press release immediately following the execution of the merger agreement and
(vi) provisions that the Offer would commence five business days after public
announcement of the transaction (the latest date permitted under federal
securities laws) and would remain open for 25 business days (five more business
days than required under federal securities laws) in order to provide any
potential competing bidder extra time to do so. Berisford indicated that it
could substantially agree in concept to the Provisions.
Beginning the week of May 24, 1999, the Company and its counsel made
available to representatives of Berisford a data room of confidential
information and senior management of the Company met with and reviewed with
representatives of Berisford the Company's businesses and results of operations.
Those results indicated that the preliminary estimated operating results for the
Company's quarter ending July 4, 1999 (the "Second Quarter") would likely be
below prior forecasts previously provided to Berisford.
At a special telephonic meeting of the Company's Board of Directors on May
25, 1999, management updated the Board on the discussions.
On May 28, 1999 the First Company sent to Mr. Osborne a letter indicating
that it had begun discussions with potential debt and equity financing sources
on the basis of which the First Company indicated a broad range of prices (the
upper end of which was above the Offer Price) that might be achievable. The
First Company stated that it would need to work with the Company to determine
the current outlook and potential synergies. The indicated range of prices had
been determined based on publicly available financial information about the
Company and did not reflect the preliminary results for the Second Quarter or
any projections, including projected results of operations beyond the Second
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Quarter. Subsequent to his receipt of the letter from the First Company, Mr.
Osborne had additional contacts with the representative of the First Company but
such contacts did not include any negotiation of the terms of a possible
acquisition of the Company by the First Company.
During the week of May 31, 1999 representatives of Berisford and Schroders
continued their due diligence investigation of the Company. In addition, during
that week the Company gathered further information about the preliminary
estimated operating results for the Second Quarter and the projected results of
operations beyond the Second Quarter from the managers of the Company's
principal operating units. Representatives of Berisford confirmed that they
continued to be interested in an acquisition of the Company, but that in light
of those preliminary estimated operating results and Berisford's analysis of
certain contractual obligations of the Company, they might not be able to
achieve the previously indicated price, which was above the Offer Price.
On June 2, 1999 Mr. Osborne had a telephone conversation with a
representative of a large diversified company (the "Second Company"). The
representative of the Second Company expressed an unsolicited indication of
interest in acquiring the Company at a price substantially below the Offer Price
and the price then being discussed with Berisford. The indication from the
Second Company had been determined based on publicly available financial
information about the Company and did not reflect the preliminary results for
the Second Quarter or any projections, including projected results of operations
beyond the Second Quarter. Representatives of the Second Company reported that
they would follow up on their expression of interest and possibly send a letter
to the Company confirming their expression of interest. No such letter has been
received and no further contact was received from the Second Company until
representatives of Morgan Stanley received a contact (which is described below)
from a financial advisor to the Second Company on July 2, 1999 after the public
announcement of the transaction.
On June 3, 1999 counsel for Berisford delivered to counsel for the Company a
draft merger agreement which incorporated some but not all of the Provisions.
The Company's Board of Directors held a telephonic meeting on June 4, 1999.
Because of the contacts with the First Company and an affiliation of Donald C.
Clark, a director of the Company, with the First Company, Mr. Clark recused
himself from that meeting and all subsequent meetings on the proposed
transaction. At the June 4 meeting, management updated the Board on discussions
and contacts. Management reviewed with the Board the preliminary estimated
operating results in the Second Quarter and further projected results of
operations for the Company. Counsel for the Company reviewed the principal
provisions of the draft merger agreement and described certain material
differences with respect to the Provisions previously delivered to Berisford.
The Board authorized management to continue discussions with Berisford.
During the week of June 7, 1999 representatives of Berisford continued their
due diligence investigation of the Company and counsel for the Company provided
comments on the draft merger agreement.
On June 9, 1999 the Company provided to representatives of Berisford updated
preliminary estimated operating results for the Second Quarter and beyond. On
June 11, 1999, representatives of Schroders indicated to representatives of
Morgan Stanley that Berisford continued to be committed to an acquisition of the
Company but that, in light of the preliminary estimated operating results for
the Second Quarter and beyond, Berisford was not prepared to offer the price
previously indicated, but that they wished to meet with additional members of
management to further discuss the estimated and projected results of operations.
At a telephonic meeting of the Company's Board of Directors on June 11,
1999, members of management and Morgan Stanley reported on the discussions and
updated the Board on the preliminary estimated operating results for the Second
Quarter and beyond. At that meeting the Board reviewed alternative courses of
action and determined to continue discussions with Berisford and to seek a
specified price, which was an amount above the Offer Price.
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On June 11, 1999 and thereafter representatives of Morgan Stanley contacted
representatives of Schroders to advise them of the Board's determinations. On
June 14, 1999 representatives of Schroders indicated that Berisford was prepared
to recommend the price specified by the Board but that Berisford needed
additional information and reiterated Berisford's request for further due
diligence, including meetings with additional members of management and visits
to the Company's principal manufacturing facilities.
At telephonic meetings of the Company's Board of Directors on June 15 and
June 17, 1999, management and Morgan Stanley updated the Board on the
discussions. Counsel for the Company reviewed the principal remaining issues
reflected in the draft merger agreement. The Board reviewed alternative courses
of action and authorized management and its advisors to continue discussions
with Berisford.
On June 15, 1999 counsel for the Company provided to counsel for Berisford
further comments on the draft merger agreement and over the following few days
Mr. Osborne and representatives of Morgan Stanley communicated to
representatives of Berisford and Schroders that the Company would consider their
requests for further due diligence based on the responses to those comments.
On June 18, 1999 counsel for Berisford provided to counsel for the Company
revised sections of the draft merger agreement which fully incorporated the
Provisions. Thereafter Mr. Osborne and representatives of Morgan Stanley
contacted representatives of Berisford and Schroders to inform them that in
light of those revisions the Company would permit the meetings with additional
members of management of the Company.
On June 21 and June 22, 1999 a series of due diligence meetings were held
between members of the Company's management (including the managers of the
Company's principal business units) and Morgan Stanley and representatives of
Berisford, Schroders and Berisford's accountants.
On June 23 and June 24, 1999 various conversations occurred between
representatives of Morgan Stanley and Schroders. The representatives of
Schroders indicated that Berisford's financial analysis had been completed, that
its financing was in place and that Berisford was willing to offer a specified
price below the Offer Price, subject to satisfactory negotiation of the
remaining outstanding issues on the merger agreement and visits to the Company's
principal manufacturing facilities.
At a telephonic meeting of the Board of Directors on June 24, 1999 the Board
was updated on the status of discussions and management provided a further
update on the preliminary operating results for the Second Quarter and further
projected results for the Company. Counsel for the Company updated the Board on
the remaining open issues on the merger agreement. The Board authorized
management to attempt to elicit from Berisford their best and final offer and
report back to the Board.
On June 24 and June 25, 1999 Mr. Osborne and representatives of Morgan
Stanley had further conversations and negotiations with representatives of
Berisford and Schroders in an attempt to elicit a higher offer. On June 25,
1999, representatives of Schroders informed representatives of Morgan Stanley
that Berisford was prepared to offer $33 per Share in the transaction, subject
to negotiation of the remaining outstanding issues in the merger agreement and
Berisford's visits to the Company's principal manufacturing facilities.
At a telephonic meeting of the Board of Directors on June 25, 1999, the
Board was updated on the status of discussions, including Berisford's increased
indication of $33 per Share as the price it would be willing to offer.
Representatives of Morgan Stanley orally provided the Board with an updated
preliminary financial analysis. Counsel for the Company described the remaining
open issues in the draft merger agreement. The Board reviewed alternative
courses of action and authorized management and the advisors to continue to
negotiate the definitive terms of a transaction with Berisford. On June 25, 1999
counsel for Berisford delivered to counsel for the Company a revised draft
merger agreement and subsequently counsel for the Company provided further
comments on the draft.
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From June 28 to June 30, 1999 representatives of Berisford visited the
principal manufacturing facilities of the Company and representatives of
Berisford and counsel for Berisford completed their due diligence review of the
Company.
On June 28, 1999 the Board of Directors of the Company met at the offices of
Sidley & Austin. Messrs. Rettig and Kennedy participated by telephone. The Board
was updated on the status of discussions. After being briefed by counsel for the
Company as to its fiduciary duties in connection with the proposed transaction,
the Board reviewed the terms of the draft merger agreement, including the
Provisions. Morgan Stanley gave a financial presentation to the Board, including
a review of Berisford's offer and a valuation of the Company. Morgan Stanley
reviewed the general content of a fairness opinion which it would be prepared to
provide. The Board reviewed alternative courses of action and received
management's recommendation to conclude negotiations with Berisford. The Board
authorized management to conclude negotiations with Berisford and present to the
Board a final transaction.
From June 29 to July 1, 1999 the parties concluded their negotiation of the
draft merger agreement and reviewed and finalized a draft joint press release to
announce the transaction.
On July 1, 1999 the Board of Directors met by telephone conference. The
Board was updated on the status of the draft merger agreement and the changes
negotiated since the last Board meeting, as well as agreed upon language to be
included in the press release announcing the transaction. Morgan Stanley
reviewed and reaffirmed its June 28, 1999 presentation to the Board and reviewed
with the Board the draft commitment letters proposed to be entered into by
Berisford to finance the acquisition. Morgan Stanley provided the Board with its
oral opinion (which was later confirmed in writing) that the consideration to be
received by the holders of Shares pursuant to the draft merger agreement is fair
from a financial point of view to such holders. Upon management's recommendation
the Board approved the Merger Agreement in the form presented to the Board
subject to such final revisions as management might approve in connection with
further negotiations.
During the evening of July 1, 1999 counsel for the Company continued to
discuss the provisions of the merger agreement with counsel for Berisford. After
having satisfactorily resolved all issues, the Company, Parent, the Offeror and
Berisford executed the Merger Agreement.
The transaction was publicly announced on July 2, 1999 prior to the opening
of trading on the New York and London Stock Exchanges. On July 2, 1999 the
Company filed a Current Report on Form 8-K which included as exhibits the Merger
Agreement and the joint press release announcing the transaction.
On July 2, 1999, after the public announcement of the Merger Agreement, a
representative of the First Company contacted Mr. Osborne by telephone and Mr.
Osborne and, in a subsequent conversation, a representative of Morgan Stanley
referred the representative of the First Company to the press release and noted
that the Merger Agreement had been publicly filed. On July 2, 1999 a
representative of a financial advisor to the Second Company contacted
representatives of Morgan Stanley by telephone. The representatives of Morgan
Stanley referred the representative of the Second Company to the press release
and noted that the Merger Agreement had been publicly filed.
(b)(3) Merger Agreement.
THE FOLLOWING SUMMARY OF THE MERGER AGREEMENT DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT,
A COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT HERETO AND IS INCORPORATED HEREIN
BY REFERENCE.
THE OFFER. Pursuant to the Merger Agreement, the Offeror was required to
commence the Offer on July 9, 1999. The obligation of the Offeror to commence
the Offer and accept for payment, and pay for, any Shares validly tendered prior
to the expiration of the Offer and not withdrawn will be subject only to the
conditions (the "Offer Conditions") (any of which may be waived in whole or in
part by the Offeror in the sole discretion of the Offeror, except that the
Offeror may not waive the Minimum Condition (as
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defined below) without the consent of the Company) that (i) there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares which, when added to the Shares, if any, beneficially
owned by Parent or the Offeror, would constitute at least a majority of the
Shares outstanding on a fully diluted basis (the "Minimum Condition"); (ii) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), shall have expired or been terminated and
consents required from a foreign Governmental Entity (as defined below) shall
have been obtained where the failure to obtain such consent would reasonably be
expected to have a material adverse effect on the Company or Parent; (iii) the
acquisition of the Company shall have been approved by the shareholders of
Berisford; (iv) approval under any applicable European antitrust law applicable
to the purchase of Shares pursuant to the Offer shall have been obtained where
the failure to obtain such approval would reasonably be expected to have a
material adverse effect on the Company or Parent; and (v) none of the following
conditions exists (other than as a result of any action or inaction of Parent or
any of its subsidiaries that constitutes a breach of the Merger Agreement):
(a) there shall be threatened or pending by a Governmental Entity any
suit, action or proceeding (i) seeking to prohibit or impose any material
limitations on Parent's or the Offeror's ownership or operation (or that of
their respective subsidiaries or affiliates) of all or a material portion of
their or the Company's businesses or assets, taken as a whole, (ii) seeking
to compel Parent or the Offeror or their respective subsidiaries and
affiliates to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and their respective
subsidiaries, in each case taken as a whole, as a result of the Offer or the
transactions contemplated by the Merger Agreement, (iii) challenging the
acquisition by Parent or the Offeror of any Shares pursuant to the Offer,
(iv) seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, (v) seeking to obtain from the Company
any damages that would reasonably be expected to have a material adverse
effect on the Company, (vi) seeking to impose material limitations on the
ability of the Offeror, or rendering the Offeror unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer
and the Merger, (vii) seeking to impose material limitations on the ability
of the Offeror or Parent effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the Company's
stockholders, or (viii) which otherwise would reasonably be expected to have
a material adverse effect on the Company or, as a result of the transactions
contemplated by the Merger Agreement, Parent and its subsidiaries;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger by any Governmental Entity, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act, that is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clauses (i) through (viii) of
paragraph (a) above;
(c) there shall have occurred after the commencement of the Offer and
continued to exist for not less than three business days (1) any general
suspension of trading in, or limitation on prices for, securities on the New
York or London Stock Exchanges (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges
not related to market conditions and excluding any coordinated trading halt
triggered as a result of a specific decrease in a market index), (2) a
declaration of a banking moratorium or suspension of payments in respect of
banks in the United Kingdom or the United States, (3) the commencement of a
war, armed hostilities or other international or national calamity directly
or indirectly involving the United Kingdom or the United States, (4) any
limitation (whether or not mandatory) by any United States governmental
authority or agency that has a material adverse effect generally on the
extension of credit by banks or other financial institutions, which in any
case would reasonably be expected to have a material adverse
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effect on the Company or materially adversely affect Parent's or the
Offeror's ability to complete the Offer and the Merger;
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct in each case at the date of
the Merger Agreement and at the date of consummation of the Offer as though
made on or as of such date (except for those representations and warranties
that address matters only as of a particular date or only with respect to a
specific period of time which need only be true and correct as of such date
or with respect to such period) or the Company shall have breached or failed
to perform or comply with any obligation, agreement or covenant required by
the Merger Agreement to be performed or complied with by it except, in each
case, where the failure of such representations and warranties to be true
and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), or the failure to perform or
comply with such obligations, agreements or covenants, do not, individually
or in the aggregate, have a material adverse effect on the Company or a
material adverse effect on the ability of the Company, Parent or the Offeror
to consummate the Offer or the Merger;
(e) the Company's Board of Directors (the "Board") (i) shall have
withdrawn, or modified or changed in a manner adverse to Parent or the
Offeror (including by amendment of this Statement) its recommendation of the
Offer, the Merger Agreement, or the Merger, (ii) shall have recommended any
Takeover Proposal (as defined below), or (iii) shall have adopted any
resolution to effect any of the foregoing;
(f) any person or "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other
than Parent, the Offeror or their affiliates or any group of which any of
them is a member, shall have acquired or announced its intention to acquire
beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under
the Exchange Act) of 25% or more of the Shares; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
As used above with respect to the Company, the phrase "material adverse
effect" means any change or effect that is materially adverse to the business,
properties, assets, prospects, financial condition or results of operations of
the Company and its subsidiaries taken as a whole (other than certain changes or
effects specified in the Merger Agreement). For purposes of the Merger
Agreement, a "subsidiary" is defined as, with respect to any person, any
corporation, partnership, joint venture or other entity, whether incorporated or
unincorporated, of which such person or any other subsidiary of such person (i)
owns, directly or indirectly, 50% or more of the outstanding voting securities
or equity interests, (ii) is entitled to elect at least a majority of the board
of directors or similar governing body or (iii) is a general partner (excluding
such partnerships where such person or any subsidiary of such person do not have
a majority of the voting interests in such partnership). In addition, a
"Governmental Entity" is defined as a (i) nation, state, county, city, town,
village, district or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal); or (iv)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of any
nature.
The Merger Agreement provides that, without the Company's prior written
consent, the Offeror may not: (i) decrease the Offer Price, (ii) change the
initial scheduled expiration of the Offer to a date earlier than the date 25
business days after the Offer is commenced, (iii) change the form of
consideration to be paid in the Offer or decrease the number of Shares sought,
(iv) except as permitted in the next sentence, extend the Offer, or (v) amend
any other condition of the Offer in any manner adverse to the holders of the
Shares or impose additional conditions. Notwithstanding the foregoing, the
Offeror may: (i) from time to time until such time as all such conditions are
satisfied or waived, extend the expiration date if on the initial scheduled
expiration date of the Offer all conditions to the Offer shall not have been
satisfied or
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waived; (ii) increase the Offer Price and extend the Offer to the extent
required by applicable law in connection with such increase; or (iii) extend the
Offer for a period not to exceed five business days, notwithstanding that all of
the conditions to the Offer are satisfied, if, immediately prior to the initial
expiration date of the Offer, the Shares validly tendered and not withdrawn
pursuant to the Offer equal more than 75% but less than 90% of the outstanding
Shares. Parent and the Offeror have agreed that the Offeror will not terminate
the Offer between scheduled expiration dates (unless the Merger Agreement is
terminated) and that, in the event that the Offeror would otherwise be entitled
to terminate the Offer at any scheduled expiration date due to the failure of
one or more of the Offer Conditions, the Offeror shall extend the Offer until
such date as the Offer Conditions have been satisfied or such later date as
required by applicable law; PROVIDED, HOWEVER, nothing described in this
sentence shall require the Offeror to extend the Offer beyond 120 days after the
date of the Merger Agreement. If the Merger Agreement is terminated, the Offeror
shall promptly terminate the Offer.
RECOMMENDATION. In the Merger Agreement, the Company approves of and
consents to the Offer, and represents that the Board, at a meeting duly called
and held, has (i) by a vote of all those present determined that each of the
Merger Agreement, the Offer and the Merger are fair to and in the best interests
of the stockholders of the Company, (ii) by a vote of all those present approved
the Merger Agreement, the Offer, the acquisition of Shares pursuant to the Offer
and the Merger for purposes of Section 203 of the DGCL, (iii) received the
opinion of Morgan Stanley to the effect that, as of the date of the Merger
Agreement, the Offer Price to be received by holders of Shares pursuant to the
Offer and the Merger Consideration pursuant to the Merger is fair to the
stockholders of the Company from a financial point of view, (iv) approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and (v) resolved to recommend that the stockholders of the
Company accept the Offer, tender their Shares thereunder to the Offeror and
approve and adopt the Merger Agreement and the Merger. However, it does not
constitute a breach of the Merger Agreement if the Board modifies or withdraws
its recommendation as provided below under "Takeover Proposals."
Parent and the Company agreed to file with the SEC a Tender Offer Statement
on Schedule 14D-1 and a Solicitation/Recommendation Statement on Schedule 14D-9
(together with the information required to be distributed to the stockholders of
the Company pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in connection with the designation of directors to the
Board, as described below), respectively, on the date the Offer is commenced.
BOARD OF DIRECTORS. The Company has agreed that promptly after the purchase
of and payment for any Shares by the Offeror or any of its affiliates such that
the Offeror and its affiliates own beneficially at least a majority of the then
outstanding Shares, Parent shall be entitled, to the extent permitted by law, to
designate such number of directors, rounded up the next whole number, on the
Board, subject to compliance with Section 14(f) of the Exchange Act, as is equal
to the product of the total number of directors on the Board multiplied by the
percentage that the number of Shares beneficially owned by the Offeror bears to
the total number of Shares then outstanding. The Company has agreed, upon
request of Parent, to use its best efforts promptly either to increase the size
of the Board or to secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable such designees of Parent to be so
elected or appointed to the Board, and the Company has agreed to take all
reasonable actions available to the Company to cause such designees of Parent to
be so elected or appointed.
The Merger Agreement also requires the parties to use their reasonable best
efforts to ensure that at least three of the member of the Board shall, at all
times prior to the Effective Time, be "Continuing Directors." A "Continuing
Director" means a person who is not an employee of the Company and who is either
(i) a member of the Board as of the date of the Merger Agreement or (ii) a
successor of a Continuing Director who is (A) unaffiliated with, and not a
designee or nominee of, Parent or the Offeror, and (B) recommended to succeed a
Continuing Director by a majority of the Continuing Directors then on the Board.
After Parent's designees constitute a majority of the Board, any amendment,
modification or waiver of any term or condition of the Merger Agreement, any
amendment to the Company's Certificate of
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Incorporation or By-laws, any termination of the Merger Agreement by the
Company, any extension of time for the performance of any of the obligations of
Parent or the Offeror under the Merger Agreement, any waiver of any condition to
the Company's obligations under the Merger Agreement or any waiver or assertion
of the Company's rights under the Merger Agreement or other action by the
Company under the Merger Agreement may be effected only by the action of a
majority of the Continuing Directors, which action is deemed to constitute the
action of the full Board.
THE MERGER. The Merger Agreement provides that upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL, the
Company and the Offeror will consummate the Merger at the Effective Time.
Pursuant to the Merger, the Offeror will be merged with and into the Company and
the separate corporate existence of the Offeror will thereupon cease, and the
Company will be the surviving corporation in the Merger and will continue to be
governed by the laws of the State of Delaware. The certificate of incorporation
and the by-laws of the Offeror, as in effect immediately prior to the Effective
Time, will be the certificate of incorporation and by-laws of the surviving
corporation, except that the name of the surviving corporation shall be changed
to "Scotsman Industries, Inc." The directors of the Offeror at the Effective
Time will be the initial directors of the surviving corporation, and the
officers of the Company at the Effective Time will be the initial officers of
the surviving corporation.
As a result of the Merger: (i) each issued and outstanding share of common
stock of the Offeror will be converted into one fully paid and nonassessable
share of common stock of the surviving corporation; (ii) all Shares owned by the
Company, Parent or the Offeror (or any subsidiary of any of them, other than an
employee benefit plan of any of them) shall be cancelled and no consideration
will be delivered in exchange therefor; and (iii) each issued and outstanding
Share (other than Shares to be cancelled pursuant to clause (ii) and Dissenting
Shares (as defined below)) shall be converted into the right to receive the
Offer Price in cash, without interest.
VOTE REQUIRED TO APPROVE THE MERGER. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board and generally by the holders of the Company's outstanding
voting securities. The Board has approved the Offer and the Merger;
consequently, the only additional action of the Company that may be necessary to
effect the Merger is approval by the Company's stockholders if the "short-form"
merger procedure described below is not available. Under the DGCL, the
affirmative vote of holders of a majority of the Shares is generally required to
approve the Merger. If the Offeror acquires, through the Offer or otherwise, a
majority of the outstanding Shares on a fully diluted basis (which would be the
case if the Minimum Condition were satisfied and the Offeror were to accept for
payment Shares tendered pursuant to the Offer), it would have sufficient voting
power to effect the Merger without the vote of any other stockholder of the
Company.
Under the DGCL, if a corporation owns 90% or more of each outstanding class
of capital stock of another corporation, it can effect a "short-form" merger
with such corporation without prior notice to, or any other action by, any other
stockholder of such corporation. If the Offeror were to acquire 90% of more of
the Shares pursuant to the Offer, the Offeror would then be able to effect the
Merger pursuant to this "short-form" merger provision of the DGCL.
If required by applicable law in order to consummate the Merger, the Company
has agreed, acting through the Board, and in accordance with applicable law, its
Certificate of Incorporation and By-laws: (i) as promptly as practicable
following the acceptance for payment and purchase of Shares by the Offeror
pursuant to the Offer, to duly call, give notice of, convene and hold a special
meeting of its stockholders for the purposes of considering and taking action
upon the approval of the Merger and the approval and adoption of the Merger
Agreement and to use its reasonable best efforts to obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders; (ii) to
prepare and file with the SEC a preliminary proxy or information statement
relating to the Merger and the Merger Agreement, and to cause a definitive proxy
or information statement, including any amendment or supplement thereto, to be
mailed to its stockholders at the earliest practicable date; and (iii) unless
the Merger Agreement has been
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terminated, and subject to the rights described below under "Takeover
Proposals," to include in such definitive proxy or information statement the
recommendation of the Board that stockholders of the Company vote in favor of
the approval of the Merger and the approval and adoption of the Merger
Agreement.
DISSENTING SHARES. Notwithstanding anything to the contrary in the Merger
Agreement, Shares ("Dissenting Shares") that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
did not vote in favor of the Merger and who comply with all of the relevant
provisions of Section 262 of the DGCL (the "Dissenting Stockholders") shall not
be converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to appraisal under the
DGCL. The Company shall give Parent (i) prompt notice of any written demands for
appraisal of any Shares, attempted withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. Neither the Company nor the surviving corporation in the Merger shall,
except with the prior written consent of Parent, voluntarily make any payment
with respect to, or settle or offer to settle, any such demand for payment. If
any Dissenting Stockholder shall fail to perfect or shall have effectively
withdrawn or lost the right to dissent, the Shares held by such Dissenting
Stockholder shall thereupon be treated as though such Shares had been converted
into the right to receive the Merger Consideration pursuant to the Merger
Agreement without any interest thereon.
CONDITIONS TO THE MERGER. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction on or prior to the
Effective Time of each of the following conditions, any and all of which may be
waived in whole or in part by the Company, Parent or the Offeror, as the case
may be, to the extent permitted by applicable law:
- the Merger Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of Shares, if required by applicable
law and the Certificate of Incorporation of the Company, in order to
consummate the Merger;
- no statute, rule, regulation, order, decree or injunction shall have been
enacted, promulgated or issued by any Governmental Entity precluding,
restraining, enjoining or prohibiting consummation of the Merger; PROVIDED
that each of the parties shall have used commercially reasonable efforts
to prevent the entry of any such order, decree or injunction and to appeal
as promptly as possible any order, decree or injunction that may be
entered; and
- Parent, the Offeror or their affiliates shall have purchased Shares
pursuant to the Offer.
STOCK OPTIONS. Pursuant to the Merger Agreement and at or immediately prior
to the Effective Time, each then outstanding option to purchase any shares of
capital of the Company (an "Option"), whether or not then vested or exercisable,
will be cancelled by the Company. In consideration of such cancellation of
Options with an exercise price less than the Offer Price, the Company (or, at
Parent's option, the Offeror) shall pay to such holders of Options an amount in
respect thereof (net of withholding taxes and without interest) equal to the
product of the excess of the Offer Price over the exercise price of each Option
and the number of shares previously subject to the Option immediately prior to
cancellation.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the Company, Parent and the Offeror.
INTERIM OPERATIONS OF THE COMPANY. The Merger Agreement provides that after
the date of the Merger Agreement and prior to the time the designees of Parent
have been elected to, and constitute a majority of, the Board, or the date, if
any, on which the Merger Agreement is terminated, and except as expressly
contemplated in the Merger Agreement, as set forth in a disclosure schedule
delivered by the
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Company to Parent at or prior to the execution of the Merger Agreement (the
"Disclosure Schedule"), or as agreed in writing with Parent (which agreement
shall not be unreasonably withheld or delayed):
- the Company shall and shall cause its subsidiaries to in all material
respects carry on their respective businesses in the ordinary course;
- the Company shall and shall cause its subsidiaries to use all reasonable
efforts to preserve intact their current business organizations, keep
available the services of their current officers and key employees and
preserve their relationships consistent with past practice with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses
shall be unimpaired in all material respects at the Effective Time;
- neither the Company nor any of its subsidiaries shall, directly or
indirectly, amend its certificate of incorporation or by-laws or similar
organizational documents;
- neither the Company nor any of its subsidiaries shall: (i)(A) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to the Company's capital stock or that of its
subsidiaries, except for quarterly dividends on Shares of up to $0.025 per
share to be declared and paid at customary times and except that a
wholly-owned subsidiary of the Company may declare and pay a dividend or
make advances to its parent or the Company or (B) redeem, purchase or
otherwise acquire directly or indirectly any of the Company's capital
stock or that of its subsidiaries; (ii) issue, sell, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of capital stock of any class of the
Company or its subsidiaries, other than Shares issued upon the exercise of
Options in accordance with the Company's option plans as in effect on the
date of the Merger Agreement; or (iii) split, combine or reclassify the
outstanding capital stock of the Company or of any of the subsidiaries of
the Company;
- except as permitted by the Merger Agreement, neither the Company nor any
of its subsidiaries shall acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof (including entities which are subsidiaries of the Company or any
of the Company's subsidiaries) or (B) any assets, including real estate,
except acquisitions in the ordinary course of business consistent with
past practice;
- neither the Company nor any of its subsidiaries shall make any new capital
expenditure or expenditures, other than capital expenditures specifically
disclosed in the Disclosure Schedule and capital expenditures not to
exceed $1 million in the aggregate;
- neither the Company nor any of its subsidiaries shall, except in the
ordinary course of business and except as otherwise permitted by the
Merger Agreement, amend or terminate any of certain material contracts of
the Company where such amendment or termination would reasonably be
expected to have a material adverse affect on the Company, or waive,
release or assign any material rights or claims;
- neither the Company nor any of its subsidiaries shall transfer, lease,
license, sell, mortgage, pledge, dispose of or encumber any property or
assets other than in the ordinary course of business and consistent with
past practice;
- neither the Company nor any of its subsidiaries shall: (i) enter into any
employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or
any of its subsidiaries except as required by the terms of any plan,
agreement or arrangement in effect on the date of the Merger Agreement or
to comply with applicable law or, with respect to employment agreements,
except in the ordinary course of business and as approved by the Offeror
(which approval will not be unreasonably withheld); or (ii) hire or agree
to hire any
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new officer or, other than in the ordinary course of business, consistent
with past practice, hire or agree to hire any additional employees;
- neither the Company nor any of its subsidiaries shall, except as required
to comply with applicable law or existing agreements or benefit plans or
expressly provided in the Merger Agreement, (A) adopt, enter into,
terminate, amend or increase the amount or accelerate the payment or
vesting of any benefit or award or amount payable under any benefit plan
or other arrangement for the current or future benefit or welfare of any
director, officer or current or former employee, except to the extent
necessary to coordinate any such benefit plans with the terms of the
Merger Agreement or other than with respect to employees in the ordinary
course of business, (B) increase in any respect the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee or
other than with respect to employees in the ordinary course of business,
(C) pay any benefit not provided for under any benefit plan, (D) grant any
awards under any bonus, incentive, performance or other compensation plan
or arrangement or benefit plan (including the grant of stock options,
stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing
restrictions in any benefits plans or agreements or awards made
thereunder) or (E) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or benefit plan;
- neither the Company nor any of its subsidiaries shall: (i) except in the
ordinary course of business and in an aggregate amount, not to exceed $8
million, incur or assume any additional long-term debt or any additional
short-term indebtedness; (ii) incur or modify any material indebtedness or
other liability except as set forth in the Disclosure Schedule; (iii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the material obligations
of any other person, except in the ordinary course of business and
consistent with past practice; (iv) make any loans, advances or capital
contributions to, or investments in, any other person (other than to
wholly owned subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business and consistent with past
practice); (v) settle any material claims other than in the ordinary
course of business, in accordance with past practice and without admission
of liability; or (iv) enter into any material commitment or transactions
except in the ordinary course of business consistent with past practice;
- neither the Company nor any of its subsidiaries shall change any of the
accounting methods used by it unless required by generally accepted
accounting principles;
- neither the Company nor any of its subsidiaries shall make or change any
tax election, amend any tax return, change an annual tax accounting
period, adopt or change any method of tax accounting, enter into any
closing agreement, settle or compromise any tax claim or assessment,
surrender any right to claim a tax refund, consent to any extension or
waiver of the limitations period applicable to any tax claim or assessment
or take or omit to take any other action relating to taxes except in the
ordinary course of business consistent with past practice;
- neither the Company nor any of its subsidiaries shall pay, discharge or
satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations, in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the most relevant consolidated financial
statements (or the notes thereto) of the Company and its consolidated
subsidiaries included in the Company's filings with the SEC; or, except in
the ordinary course of business consistent with past practice, waive the
benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreement to which the Company or
any of its subsidiaries is a party unless the
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Board determines in good faith, after consultation with outside counsel,
that it would be required consistent with its fiduciary responsibilities
to the Company's stockholders under applicable law;
- neither the Company nor any of its subsidiaries shall (by action or
inaction) amend, renew, terminate or cause to be extended any material
lease, agreement or arrangement relating to any of the Company's leased
properties or enter into any material lease, agreement or arrangement with
respect to real property; and
- neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend or propose or announce an intention to do any
of the foregoing.
REASONABLE EFFORTS. Upon the terms and subject to the conditions set forth
in the Merger Agreement, each of the parties has agreed to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer and the Merger, and the other
transactions contemplated by the Merger Agreement, including:
- the preparation and filing with the SEC of the documents relating to the
Offer (including a Tender Offer Statement on Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 and the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder) and the proxy or information statement in connection with the
Merger;
- the obtaining of all necessary actions or nonactions, waivers, consents
and approvals from any Governmental Entity and the making of all necessary
registrations and filings (including furnishing all information required
under the HSR Act and all other filings with any Governmental Entity, if
any) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity and shall promptly cooperate with and furnish
information to each other in connection with any such requirements imposed
upon any of them or any of their subsidiaries in connection with the Offer
and the Merger;
- the obtaining of all necessary consents, approvals or waivers from third
parties;
- the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging the Merger Agreement or the consummation of
the transactions contemplated by the Merger Agreement, including seeking
to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed;
- the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by the Merger Agreement and to
fully carry out the purposes of the Merger Agreement.
However, nothing contained in these provisions will require the Company to take
any action (or forego the taking of any action) if, in the good faith judgment
of the Board, after consultation with outside counsel, taking such action (or
foregoing the taking of such action) would be inconsistent with its fiduciary
duties to the Company's stockholders under applicable law.
In addition, Berisford is obligated under the Merger Agreement to, as soon
as practicable following the date of the Merger Agreement, duly call, give
notice of, convene and hold a meeting of its shareholders for the purpose of
obtaining such shareholders' approval of the acquisition of the Company.
Berisford, through its Board of Directors, is obligated to recommend to its
shareholders approval of the transactions contemplated by the Merger Agreement,
to use all reasonable efforts to solicit and obtain such approval by its
shareholders, and to not withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to the Company, such recommendation.
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TAKEOVER PROPOSALS. The Merger Agreement provides that the Company will
not, nor will it permit any of its subsidiaries to, nor will it authorize or
permit any of its officers, directors, authorized representatives or authorized
agents to, directly or indirectly, (i) solicit, initiate or knowingly encourage
(including by way of furnishing non-public information) any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal (as defined below) or (ii) participate in any
discussions or negotiations regarding any Takeover Proposal; PROVIDED, HOWEVER,
that if, at any time prior to the acceptance for payment of Shares pursuant to
the Offer, the Board determines in good faith, after consultation with outside
counsel, that to do so would be required consistent with it fiduciary
responsibilities to the Company's stockholders under applicable law, the Company
may, in response to a Takeover Proposal, which was not solicited subsequent to
the date of the Merger Agreement, (x) furnish information with respect to the
Company to any person pursuant to a customary confidentiality agreement (as
determined by the Company) and (y) participate in negotiations regarding such
Takeover Proposal. The Merger Agreement defines "Takeover Proposal" as any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company and its
subsidiaries or 20% or more of the Shares then outstanding, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of the Shares then outstanding, and any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its subsidiaries, other
than the transactions contemplated by the Merger Agreement. Upon execution of
the Merger Agreement, the Company was obligated to immediately cease any
existing activities, discussions or negotiations with any parties conducted
theretofore with respect to any of the foregoing.
The Merger Agreement further provides that neither the Board nor any
committee thereof will (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Parent, the approval or recommendation by the
Board or such committee of the Offer, the Merger or the Merger Agreement;
PROVIDED, HOWEVER, that the Board may, at any time prior to the consummation of
the Offer, modify or withdraw such recommendation of the Board if the Board
determines in good faith, after consultation with outside counsel, that it would
be required consistent with its fiduciary responsibilities to the stockholders
of the Company to so modify or withdraw such recommendation (regardless of the
existence of a Superior Proposal (as defined below) at such time); PROVIDED,
HOWEVER, that unless the Merger Agreement has been terminated, any such
modification or withdrawal will not prevent Parent or the Offeror, in its or
their discretion, from consummating the Offer and shall not affect any of the
actions required to be taken by the Company pursuant to the Merger Agreement;
(ii) approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
an "Acquisition Agreement") related to any Takeover Proposal. Notwithstanding
the foregoing, if the Company has received a Superior Proposal, the Board may
(x) withdraw or modify its approval or recommendation of the Offer, the Merger
and the Merger Agreement or (y) approve or recommend a Superior Proposal or,
subject to the provisions described below under "Termination," terminate the
Merger Agreement (and concurrently with or after such termination, if it so
chooses, cause the Company to enter into an Acquisition Agreement with respect
to any Superior Proposal). The Merger Agreement defines "Superior Proposal" as
any bona fide proposal made by a third party to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, a majority or more of
the Shares then outstanding or all or substantially all the assets of the
Company and otherwise on terms which the Board determines in its good faith
judgement (after consultation with a financial advisor of nationally recognized
reputation, such as Morgan Stanley) to be more favorable to the Company's
stockholders than the Offer and the Merger.
In addition, the Merger Agreement provides that nothing contained therein
will prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act or from making any disclosure to the Company's stockholders if, in
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the good faith judgment of the Board, after consultation with outside counsel,
such disclosure is required consistent with its fiduciary duties to the
Company's stockholders under applicable law.
Furthermore, the Company, Parent and the Offeror have agreed that the
Company (i) will include in its press release announcing the Merger Agreement a
statement to the effect that, consistent with the terms of the Merger Agreement,
the Board has directed the Company's management and financial and legal advisors
to be available to receive inquiries from any other parties interested in a
possible acquisition of or merger with the Company and, as appropriate, to
provide information to and enter into negotiations with such parties, (ii) file
the Merger Agreement and such press release as exhibits to a Current Report on
Form 8-K and (iii) may repeat such statement in other public disclosures and in
private communications with financial analysts, its stockholders and others.
PUBLICITY. Except as required by law or any listing agreement with any
national exchange or as permitted as described above under "Takeover Proposals,"
so long as the Merger Agreement is in effect, the Merger Agreement prohibits the
Company, Parent and their respective affiliates from issuing or causing the
publication of any press release or other announcement with respect to the
Merger, the Merger Agreement or the other transactions contemplated by the
Merger Agreement without the prior consultation of the other party.
STATE TAKEOVER LAWS. The Merger Agreement provides that notwithstanding any
other provision of the Merger Agreement, in no event shall the approval of the
Board of the Merger Agreement, the Offer, the acquisition of Shares pursuant to
the Offer and the Merger for purposes of Section 203 of the DGCL be withdrawn,
revoked or modified by the Board. If any state takeover statute other than
Section 203 of the DGCL becomes or is deemed to become applicable to the Offer,
the acquisition of Shares pursuant to the Offer or the Merger, Parent and the
Company shall take all action necessary to render such statute inapplicable to
all of the foregoing so that the transactions contemplated by the Merger
Agreement may be consummated as promptly as practicable on the terms
contemplated by the Merger Agreement.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification or exculpation, existing in favor of a director,
officer, employee or agent (an "Indemnified Party") of the Company or any of its
subsidiaries (including, without limitation, rights relating to advancement of
expenses and indemnification rights to which such persons are entitled because
they are serving as a director, officer, agent or employee of another entity at
the request of the Company or any of its subsidiaries), as provided in the
Company's Certificate of Incorporation or By-laws or any indemnification
agreement, in each case, as in effect on the date of the Merger Agreement, and
relating to actions or events through the Effective Time, shall survive the
Merger and shall continue in full force and effect, without any amendment
thereto.
In addition, the Merger Agreement provides that, for a period of six years
after the Effective Time, Parent shall cause the surviving corporation in the
Merger to maintain in effect, directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policies on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less favorable than
the terms now applicable to them under the Company's current policies, except
that in no event shall Parent or the surviving company be required to expend in
excess of 200% of the annual premium currently paid by the Company for such
coverage and that if the premium for such coverage exceeds such amount, Parent
or the surviving corporation shall purchase a policy with the greatest coverage
available for such 200% of the annual premium.
EMPLOYEES. Parent has agreed in the Merger Agreement that, for not less
than one year following the Effective Time, Parent shall maintain, or shall
cause the surviving corporation in the Merger and its subsidiaries to maintain,
compensation and employee benefit plans and arrangements for employees of the
Company and its subsidiaries ("Affected Employees") that are, in the aggregate,
no less favorable than as provided under the compensation arrangements and
benefit plans as in effect on the date of the Merger
16
<PAGE>
Agreement. Without limiting the generality of the foregoing, for not less than
one year following the Effective Time (or such longer period as may be required
under the applicable benefit plan), Parent shall provide, or cause the surviving
corporation in the Merger and its subsidiaries to provide, severance pay and
benefits to each Affected Employee as of the Effective Time that are not less
favorable than under the benefit plans and current policies or practices of the
Company as in effect as of the date of the Merger Agreement. Notwithstanding the
foregoing, Parent shall have the right (i) following the Effective Time to
transfer to one or more employee benefit plans maintained by Parent any employee
of the surviving corporation in the Merger or any subsidiary who becomes an
employee of Parent or any of its respective subsidiaries and (ii) in the good
faith exercise of its managerial discretion, to terminate the employment of any
employee.
In addition, the Merger Agreement provides that Parent shall, or shall cause
the surviving corporation in the Merger to, honor all benefit plans and other
contractual commitments in effect immediately prior to the Effective Time
between the Company or its subsidiaries and Affected Employees or former
employees of the Company or its subsidiaries (including the Company's severance
policy). Without limiting the generality of the foregoing, Parent shall, or
shall cause the surviving corporation in the Merger to, honor all vacation,
holiday, sickness and personal days accrued by Affected Employees and, to the
extent applicable, former employees of the Company and its subsidiaries, as of
the Effective Time.
Parent has also agreed that employees and, to the extent applicable, former
employees of the Company and its subsidiaries shall be given credit for all
services with the Company and its subsidiaries (or service credited by the
Company or such subsidiaries) under all employee benefit plans and arrangements
currently maintained by Parent or any of its subsidiaries in which they are or
become participants for purposes of eligibility, vesting, level of participant
contributions and benefit accruals (but subject to an offset, if necessary, to
avoid duplication of benefits) to the same extent as if rendered to Parent or
any of its subsidiaries. Parent shall cause to be waived any pre-existing
condition limitation under its welfare plans that might otherwise apply to an
Affected Employee or, to the extent applicable, a former employee of the Company
and its subsidiaries. Parent agrees to recognize (or cause to be recognized) the
dollar amount of all expenses incurred by Affected Employees or, to the extent
applicable, former employees of the Company and its subsidiaries, during the
calendar year in which the Effective Time occurs for purposes of satisfying the
calendar year deductions and co-payment limitations for such year under the
relevant benefit plans of Parent and its subsidiaries.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by stockholders of
the Company:
(a) By the mutual written consent of Parent and the Company; PROVIDED,
HOWEVER, that if Parent shall have a majority of the directors on the Board
as described above under "Board of Directors," such consent of the Company
may only be given if approved by the Continuing Directors;
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting
the transactions contemplated by the Merger Agreement on the terms
contemplated by the Merger Agreement or (ii) any Governmental Entity shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties to the Merger Agreement
shall use their reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement and such order, decree, ruling or other
action shall have become final and non-appealable; PROVIDED, HOWEVER, that
the right to terminate the Merger Agreement pursuant to this paragraph shall
not be available to any party which has not used its commercially reasonable
efforts to cause such order, decree, ruling or other action to be lifted;
(c) By either Parent or the Company if (i) as a result of the failure of
any of the Offer Conditions (other than the Minimum Condition) the Offer
shall have terminated or expired in
17
<PAGE>
accordance with its terms without the Offeror having accepted for payment
any Shares pursuant to the Offer or (ii) the Offeror shall have, consistent
with its obligations hereunder, failed to pay for the Shares prior to the
date 120 days after the date of the Merger Agreement; PROVIDED, HOWEVER,
that the right to terminate the Merger Agreement pursuant to this paragraph
shall not be available to any party whose failure to perform any of its
obligations under the Merger Agreement results in the failure of any such
condition or if the failure of such condition results from facts or
circumstances that constitute a breach of any representation or warranty
under the Merger Agreement by such party; or
(d) By the Company:
(i) if the Board determines in good faith that a Takeover Proposal
constitutes a Superior Proposal or has approved or recommended a Superior
Proposal as described above under "Takeover Proposal"; PROVIDED, HOWEVER,
that the Company is not in material breach of the provisions described
above under "Takeover Proposal," and that the Company simultaneously
terminates the Merger Agreement and makes simultaneous payment to Parent
of the Termination Fee (as defined below);
(ii) if Parent, the Offeror or any of their affiliates shall have
failed to commence the Offer on the fifth business day following the date
of the initial public announcement of the Offer;
(iii) if there shall be a material breach by Parent or the Offeror of
any of their representations, warranties, covenants or agreements
contained in the Merger Agreement, which breach cannot or has not been
cured within 15 days after the giving of written notice to Parent, and
which has had or is reasonably likely to materially impair the ability of
the Offeror or Parent to consummate the transactions contemplated by the
Merger Agreement; or
(iv) if (A) the approval of the shareholders of Berisford of the
acquisition of the Company shall not be granted within 30 days after the
date of the Merger Agreement or (B) Berisford's Board of Directors shall
have withdrawn or modified or changed in a manner adverse to the Company
its approval or recommendation of the Offer, the Merger or the Merger
Agreement;
(e) By Parent or the Offeror:
(i) if prior to the purchase of the Shares pursuant to the Offer,
the Board shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Offeror, its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have recommended or
approved a Takeover Proposal;
(ii) prior to the purchase of Shares pursuant to the Offer, in the
event of a breach by the Company of any representation, warranty,
covenant or other agreement contained in the Merger Agreement which (A)
would give rise to the failure of a condition set forth in paragraph (d)
under "The Offer," above, and (B) cannot be or has not been cured within
15 days after the giving of written notice to the Company;
(iii) any person or "group" (within the meaning of Section 13(d)(3)
of the Exchange Act), other than Parent, the Offeror or their affiliates
or any group of which any of them is a member, shall have acquired or
announced its intention to acquire beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of the Shares; or
(iv) if the Company receives a Takeover Proposal from any person
(other than Parent or the Offeror), and the Board takes a neutral
position or makes no recommendation with respect to such Takeover
Proposal after a reasonable amount of time (and in no event more than ten
business days following such receipt) has elapsed for the Board to review
and make a recommendation with respect to such Takeover Proposal.
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<PAGE>
FEES AND EXPENSES. The Merger Agreement provides that, except as provided
below, all fees and expenses incurred in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated by the Merger Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
If Parent or the Offeror terminates the Merger Agreement pursuant to clauses
(e)(i) or (e)(iv) under "Termination" above or the Company terminates the Merger
Agreement pursuant to clause (d)(i) under "Termination" above, then, in each
case, the Company shall pay, or cause to be paid to Parent, at the time of such
termination, an amount equal to $15.6 million (the "Termination Fee").
In addition, if the Merger Agreement is terminated by either Parent or the
Company pursuant to clause (c) under "Termination" above (except by reason of
such a termination at a time when the conditions described in clauses (ii),
(iii) or (iv) under the first paragraph under "The Offer," or paragraphs (a),
(b), (c) or (f) under "The Offer" have not been satisfied) at any time when
there is pending a Takeover Proposal, and at the time of any such termination,
Parent is not in material breach of the Merger Agreement, and if, within nine
months after any termination referred to in this paragraph, the Company shall
enter into an Acquisition Agreement with respect to a Takeover Proposal or any
person (other than Parent or its affiliates) shall acquire a majority of the
outstanding Shares, then the Company shall pay the Termination Fee concurrently
with entering into any such agreement or, if sooner, within one day after such
acquisition.
AMENDMENT AND MODIFICATION. The Merger Agreement provides that, subject to
the restrictions described above under "Board of Directors" and to applicable
law, the Merger Agreement may be amended, modified and supplemented in any and
all respects, by action taken or authorized by their respective Boards of
Directors, whether before or after any vote of the stockholders of the Company
contemplated by the Merger Agreement, by written agreement of the parties
hereto, at any time prior to the closing date of the Merger with respect to any
of the terms contained herein; PROVIDED, HOWEVER, that after the approval of the
Merger Agreement by the stockholders of the Company, no such amendment,
modification or supplement shall reduce the amount or change the form of the
Merger Consideration or otherwise adversely affect the rights of stockholders.
ASSIGNMENT. Neither the Merger Agreement nor any of the rights, interests
or obligations thereunder shall be assigned by any of the parties thereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that the Offeror may assign, in its sole discretion,
any or all of its rights, interests and obligations thereunder to Parent or to
any direct or indirect wholly-owned subsidiary of Parent but no such assignment
shall relieve the Offeror of any of its obligations under the Merger Agreement.
Subject to the preceding sentence, the Merger Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(b)(4) Confidentiality Agreement.
THE FOLLOWING SUMMARY OF THE CONFIDENTIALITY AGREEMENT DATED APRIL 29, 1999
BETWEEN THE COMPANY AND BERISFORD (THE "CONFIDENTIALITY AGREEMENT") DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
CONFIDENTIALITY AGREEMENT, A COPY OF WHICH HAS BEEN FILED AS AN EXHIBIT HERETO
AND IS INCORPORATED HEREIN BY REFERENCE.
The Confidentiality Agreement provides that, to induce the Company to
provide information to Berisford, Berisford agrees, among other things: (i) to
keep all such information confidential, except that such information may be
disclosed or made available to the directors, officers and employees, and to
representatives of the advisors and potential financing sources, of Berisford;
(ii) not to use such information for any purpose other than the evaluation of a
possible acquisition of the Company; and (iii) for eighteen months after the
date of the Confidentiality Agreement, except with the prior written consent of
the Company, not to acquire any Shares or any rights or options to acquire
Shares, or take certain other actions in relation to the Company, its
stockholders or the Shares (provided that such restrictions
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<PAGE>
terminate in the event a third party has publicly announced its intention to
acquire or make an offer for an acquisition of all or substantially all the
Shares or the assets of the Company, or the Company makes a public announcement
that it has entered into a definitive written agreement with a third party for
any of the foregoing). The confidentiality provisions of the Confidentiality
Agreement remain in force for two years from the date thereof.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board, at a meeting held July 1, 1999, determined that the
Merger is advisable and that the terms of the Offer and the Merger are fair
to, and in the best interests of, the Company's stockholders. At such
meeting, the Board by a vote of all those present acted to approve the Offer
and the Merger and the execution and delivery of the Merger Agreement. The
Board also approved the Merger Agreement for purposes of Section 203 of the
DGCL and Article Eighth of the Company's Restated Certificate of
Incorporation. In addition, the Board recommended that the Company's
stockholders accept the Offer and (if required by applicable law or
otherwise) approve the Merger Agreement and the Merger. A copy of the
Company's letter to stockholders dated July 9, 1999 is filed as an Exhibit
hereto and incorporated herein by reference.
(b) In reaching the determinations described in paragraph (a) above, the
Board considered a number of factors, including the following:
(1) The current and historical financial condition and results of
operations of the Company.
(2) The projected financial condition, results of operations,
prospects and strategic objectives of the Company, as well as the risks
involved in achieving those prospects and objectives with the current
economic and market conditions.
(3) The presentation of Morgan Stanley to the Board at its meeting
on June 28, 1999 and confirmed by Morgan Stanley to the Board at its
meeting on July 1, 1999, as to various financial matters deemed relevant
to the Board's consideration, including, among other things, (i) an
analysis of certain historical business and financial information
relating to the Company, (ii) a review of public information with respect
to certain other companies in lines of business Morgan Stanley believed
to be generally comparable, in whole or in part, to the business of the
Company, (iii) a review of various financial forecasts and other data
provided to Morgan Stanley by the Company relating to its business, (iv)
a review of the historical stock prices and trading volumes of the Shares
and (v) valuations of the Company using various methodologies.
(4) The fact that the Offer Price was at the mid-to-upper end of the
range of valuations of the Company arrived at by Morgan Stanley using
discounted cash flow valuations and exceeded the ranges of valuations
arrived at by Morgan Stanley using other valuation methodologies; and the
fact that the Offer Price was within the range of prices reflected in the
unsolicited indication of interest received from the First Company and
substantially above the price reflected in the unsolicited indication of
interest received from the Second Company, both of which had been based
on publicly available financial information about the Company and did not
reflect the preliminary results for the Second Quarter or any
projections, including projected results of operations beyond the Second
Quarter.
(5) The relationship of the Offer Price to the historical market
prices of the Shares, including the fact that the Offer Price represents
a substantial premium over the closing market price of $21.8125 per share
on July 1, 1999 (the last trading day prior to the public announcement of
the Merger Agreement) and is higher than the highest price of the Shares
since they began trading on the New York Stock Exchange.
(6) The terms and conditions of the Merger Agreement (which are
structured so as to accommodate additional bona fide third party offers
to acquire the Company) and the course of
20
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negotiations resulting in the execution thereof. The terms of the Merger
Agreement, among other things, (a) permit the Board, in the exercise of
its fiduciary duties, to furnish information to or participate in
negotiations with any third party that requests such information or
initiates such discussions or negotiations, pursuant to appropriate
confidentiality agreements, in connection with any Takeover Proposal
without notifying Berisford of any such proposal (although the Company is
not permitted by the Merger Agreement to initiate, solicit or knowingly
encourage any such proposal), (b) permit the Board to terminate the
Merger Agreement in the event of a Superior Proposal (without any right
of Berisford to match any such proposal), (c) do not include any Company
or shareholder "lock up" option granted to Berisford and (d) include the
other Provisions. The Company's directors noted that the Merger Agreement
provides that, in certain circumstances, the Company would be obligated
to pay Parent a Termination Fee of $15.6 million. See "Certain Background
Information" under Item 3 of this Statement for a discussion of other
terms of the Merger Agreement which would permit potential competing
proposals for an acquisition of the Company.
(7) The written opinion, dated July 1, 1999, of Morgan Stanley to
the Board that, based upon and subject to various considerations and
assumptions set forth therein, the consideration to be received by the
holders of Shares pursuant to the Merger Agreement is fair from a
financial point of view to such holders. A copy of the opinion rendered
by Morgan Stanley to the Board, setting forth the procedures followed,
the matters considered, the scope of the review undertaken and the
assumptions made by Morgan Stanley in arriving at its opinion, is
attached hereto as Annex A and incorporated herein by reference. THE
COMPANY'S STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
(8) The availability of appraisal rights under Section 262 of the
DGCL for Dissenting Shares.
(9) The likelihood that the Merger would be consummated, including
the likelihood of satisfaction of the regulatory approvals required
pursuant to, and the other conditions to, the Offer and the Merger
contained in the Merger Agreement.
(10) The recommendation of the Company's management with respect to
the proposed transaction.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Offer and the
Merger, the Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated as of March 25, 1999 between the
Company and Morgan Stanley, the Company has agreed to pay Morgan Stanley (i)
approximately $200,000 as an advisory fee and (ii) upon consummation of the
Offer, approximately 0.542% of the aggregate value of the acquisition
transaction (with the payment of the amount in clause (i) above being credited
against the fee payable pursuant to clause (ii)). The Company has also agreed to
reimburse Morgan Stanley for certain out-of-pocket expenses. In addition, the
Company has agreed to indemnify and hold harmless Morgan Stanley and its
affiliates and their respective officers, directors, employees, agents and
controlling persons against losses, claims, damages or liabilities arising out
of or in connection with its engagement pursuant to such letter (other than
losses, claims, damages or liabilities resulting from the bad faith or gross
negligence of any such indemnified person).
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Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth below, no transactions in Shares have been effected
during the past 60 days by the Company or by any executive officer, director,
affiliate or subsidiary of the Company:
On May 13, 1999, the Company issued an aggregate of 7,010 Shares to members
of the Board, in payment of the annual retainer fee, as follows: 1,061
Shares to each of Donald C. Clark, Frank W. Considine, George D. Kennedy and
Robert G. Rettig; and 922 Shares to each of Peter B. Hamilton, James J.
O'Connor and Richard L. Thomas.
(b) To the knowledge of the Company, each of its executive officers,
directors, affiliates and subsidiaries presently intend to tender to the Offeror
pursuant to the Offer all Shares which are held of record or beneficially owned
by such persons. The foregoing does not include any Shares over which, or with
respect to which, any such executive officer, director, affiliate or subsidiary
acts in a fiduciary or representative capacity or is subject to the instructions
of a third party with respect to such tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3 and 4 above (the provisions of which are
hereby incorporated by reference), no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company, (iii) a tender offer for or other acquisition of securities by or of
the Company, or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in Items 3 and 4 above (the provisions of which are
hereby incorporated by reference), there are no transactions, board resolutions,
agreements in principle or signed contracts in response to the Offer that relate
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Delaware General Corporation Law.
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the DGCL. Section 203 would prevent an "Interested Stockholder"
(generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Stockholder unless: (i) before such
person became an Interested Stockholder, the board of directors of the
corporation approved the "Business Combination," (ii) upon consummation of the
transaction which resulted in the Interested Stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
for purposes of determining the number of shares, shares of outstanding stock
held by directors who are also officers and by employee stock ownership plans
that do not allow plan participants to determine confidentially whether to
tender shares), or (iii) following the transaction in which such person became
an Interested Stockholder, the "Business Combination" is (x) approved by the
board of directors of the corporation and (y) authorized at a meeting of
stockholders by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder. The transactions contemplated by the Merger Agreement would result
in a
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"Business Combination" for purposes of Section 203. In accordance with the
provisions of Section 203, the Board has approved the Merger Agreement, the
Offeror's acquisition of Shares pursuant to the Offer and the Merger and the
transactions contemplated thereby. Accordingly, the restrictions of Section 203
are inapplicable to the Offer, the Merger and the transactions contemplated
thereby.
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares at the Effective Time
of the Merger will have certain rights pursuant to the provisions of Section 262
of the DGCL ("Section 262") to dissent and demand appraisal of their Shares.
Under Section 262, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of Shares could be based upon factors other
than, or in addition to, the price per Share to be paid in the Merger or the
market value of the Shares. The value so determined could be more or less than
the price per Share to be paid in the Merger.
The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. Failure to follow the
steps required by Section 262 for perfecting appraisal rights may result in the
loss of such rights.
(b) Charter Provision.
Article Eighth of the Company's certificate of incorporation provides that
the affirmative vote of the holders of at least 80% of the outstanding voting
shares of the Company (voting together as a single class) shall be required for
the approval or authorization of any "Business Combination" (as defined in the
Company's certificate of incorporation) with any "Interested Stockholder"
(generally defined as the beneficial owner of 10% or more of the Company's
outstanding voting shares). This provision shall not be applicable if such
"Business Combination" shall have been approved by a majority of the continuing
directors of the Company. The transactions contemplated by the Merger Agreement
would result in a "Business Combination" for purposes of the Company's
certificate of incorporation. In accordance with the certificate of
incorporation, the Board has approved the Merger Agreement and the transactions
contemplated thereby and, therefore, the restrictions of Article Eighth of the
Company's certificate of incorporation are inapplicable to the Offer, the Merger
and the transactions contemplated thereby.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
Exhibit 1. Agreement and Plan of Merger dated as of July 1, 1999 among Parent, the Offeror and the Company
(incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated July 1,
1999 (the "Form 8-K")).
Exhibit 2. Joint Press Release of the Company and Berisford dated July 2, 1999 (incorporated by reference to
Exhibit 2 to the Form 8-K).
Exhibit 3. Confidentiality Agreement dated as of April 29, 1999 between Berisford and the Company.
Exhibit 4. Company Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1 thereunder (included as Schedule I hereto).*
Exhibit 5. Letter to Stockholders of the Company dated July 9, 1999.*
Exhibit 6. Opinion of Morgan Stanley (included as Annex A hereto).*
</TABLE>
- ------------------------
* Included in copies mailed to stockholders of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
SCOTSMAN INDUSTRIES, INC.
By: /s/ RICHARD C. OSBORNE
-----------------------------------------
Name: Richard C. Osborne
Title: Chairman of the Board,
President and Chief Executive Officer
Dated: July 9, 1999
</TABLE>
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ANNEX A
[MORGAN STANLEY DEAN WITTER LETTERHEAD]
ONE FINANCIAL PLACE
440 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60605
(312) 706-4000
July 1, 1999
Board of Directors
Scotsman Industries, Inc.
820 Forest Edge Drive
Vernon Hills, Illinois 60061
Members of the Board:
We understand that Scotsman Industries, Inc. (the "Company"), Welbilt
Corporation ("Welbilt"), a wholly-owned subsidiary of Berisford plc
("Berisford"), and Berisford Acquisition Corporation, a wholly-owned subsidiary
of Welbilt ("Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated July 1, 1999 (the "Merger
Agreement"), which provides, among other things, for (a) the commencement by
Acquisition Sub of a cash tender offer (the "Tender Offer") for all outstanding
shares of common stock, par value $0.10 per share, of the Company (the "Company
Common Stock") for $33.00 per share, net to the seller in cash, and (b) the
subsequent merger (the "Merger") of Acquisition Sub with and into the Company.
Pursuant to the Merger, the Company will become a wholly-owned subsidiary of
Welbilt and each issued and outstanding share of Company Common Stock, other
than shares held in treasury or held by Welbilt or the Company, or any affiliate
of Welbilt or the Company, or as to which dissenter rights have been perfected,
will be converted into the right to receive $33.00 per share in cash. The terms
and conditions of the Tender Offer and Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of the Company Common Stock pursuant to the
Merger Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for Company Common
Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of Company Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) reviewed the pro forma impact of the Merger on Berisford's financial
position;
A-1
<PAGE>
[MORGAN STANLEY DEAN WITTER LOGO]
(ix) participated in discussions and negotiations among representatives of
the Company and Berisford and their financial and legal advisors;
(x) reviewed the draft Merger Agreement and certain related documents; and
(xi) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. In addition, we have assumed that the Tender Offer and Merger will be
consummated in accordance with the terms set forth in the Merger Agreement. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition, business
combination or other extraordinary transaction involving the Company, nor did we
negotiate with any parties, other than Berisford, which may have expressed
interest in the possible acquisition of, or combination with, the Company or
certain of its constituent businesses. We note that, pursuant to the terms of
the Merger Agreement, the Company's Board of Directors has preserved its ability
as a fiduciary to provide information and enter into negotiations where
appropriate with a third party.
We have acted as financial advisor to the Company in connection with this
transaction and will receive a fee for our services. In the past, Morgan Stanley
& Co. Incorporated and its affiliates have provided financial advisory and
financing services for the Company and have received fees for the rendering of
these services.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the Merger with the
Securities and Exchange Commission. In addition, Morgan Stanley expresses no
opinion or recommendation as to whether the shareholders of the Company should
accept the Tender Offer.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of the
Company Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders.
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ FRANCIS J. OELERICH III
-----------------------------------------
Francis J. Oelerich III
MANAGING DIRECTOR
</TABLE>
A-2
<PAGE>
SCHEDULE I
SCOTSMAN INDUSTRIES, INC.
820 FOREST EDGE DRIVE
VERNON HILLS, ILLINOIS 60061
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about July 9, 1999, as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of the Common Stock, $.10 par value per share (the "Shares"),
of Scotsman Industries, Inc., a Delaware corporation (the "Company").
Capitalized terms used and not otherwise defined herein shall have the meaning
set forth in the Schedule 14D-9. You are receiving this Information Statement in
connection with the possible election of persons designated by the Offeror to a
majority of the seats on the Board of Directors of the Company (the "Board").
Pursuant to the Merger Agreement, the Offeror commenced the Offer on July 9,
1999. The Offer is scheduled to expire at 12:00 Midnight, New York City time, on
Friday, August 13, 1999, unless extended.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act and Rule 14f-1 thereunder. You are urged to read this Information
Statement carefully. You are not, however, required to take any action.
The information contained in this Information Statement (including any
information incorporated by reference) concerning Parent, the Offeror and the
Designees (as hereinafter defined) has been furnished to the Company by Parent
and the Offeror and the Company assumes no responsibility for the accuracy,
completeness or fairness of such information.
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each share has one vote. At the close of business on July 1, 1999,
there were 10,627,875 Shares outstanding (not including 203,365 Shares held in
treasury).
The Board currently consists of eight members and there are currently no
vacancies on the Board. Each director serves a term of three years or until his
or her successor is duly elected and qualified. The Board is staggered and
divided into three classes so that no more than one-third of the Board is up for
election at each annual meeting of the Company.
RIGHT TO DESIGNATE DIRECTORS
The Merger Agreement provides that promptly after the purchase of and
payment for any Shares by the Offeror or any of its affiliates such that the
Offeror and its affiliates own beneficially at least a majority of then
outstanding Shares, Parent shall be entitled, to the extent permitted by law, to
designate such number of directors (the "Designees"), rounded up to the next
whole number, on the Board, subject to compliance with Section 14(f) of the
Exchange Act, as is equal to the product of the total number of directors on the
Board multiplied by the percentage that the number of Shares beneficially owned
by the Offeror bears to the total number of Shares then outstanding. The Company
has agreed, upon request of Parent, to use its best efforts promptly either to
increase the size of the Board or to secure the resignations of such number of
incumbent directors, or both, as is necessary to enable the Designees to be so
elected or appointed and to take all reasonable actions available to the Company
to cause the Designees to be so
I-1
<PAGE>
elected or appointed. The Company is also obligated, at Parent's request, to
take all action necessary to cause the Designees to constitute at least the same
percentage (rounded up to the next whole number) as is on the Board, of each
committee of the Board, each board of directors or similar body of each
subsidiary of the Company, and each committee of each such board.
The Merger Agreement also requires Parent and the Company to use their
respective reasonable best efforts to ensure that at least three of the members
of the Board shall be, at all times prior to the Effective Time, Continuing
Directors; PROVIDED, THAT, if the number of Continuing Directors is reduced
below three for any reason whatsoever, the remaining Continuing Directors will,
to the fullest extent permitted by law, designate a person to fill such vacancy
who will be deemed to be a Continuing Director for purposes of the Merger
Agreement or, if no Continuing Directors then remain, the other directors will
designate three persons to fill such vacancies who are not officers or
affiliates of the Company or any of its subsidiaries, or officers or affiliates
of Parent or any of its subsidiaries, and such persons will be deemed to be
Continuing Directors for purposes of the Merger Agreement.
From and after the time, if any, that the Designees constitute a majority of
the Board, any amendment, modification or waiver of any term or condition of the
Merger Agreement, any amendment to the Company's Certificate of Incorporation or
By-laws, any termination of the Merger Agreement by the Company, any extension
of time for performance of any of the obligations of Parent or the Offeror under
the Merger Agreement, any waiver of any condition to the Company's obligations
under the Merger Agreement or any waiver or assertion of the Company's rights
under the Merger Agreement or other action by the Company under the Merger
Agreement may be effected only by the action of a majority of the Continuing
Directors, which action shall be deemed to constitute the action of the full
Board. If there are no Continuing Directors such actions may be effected by a
majority vote of the entire Board, but the Offeror shall not decrease the Merger
Consideration or change the form of such consideration.
I-2
<PAGE>
INFORMATION WITH RESPECT TO DESIGNEES
Set forth below is the name, age, business address, principal occupation or
employment and five year employment history of the persons whom Parent may
select as the Designees. Such information is being furnished by Parent. The
business address of all persons listed below and identified with a plus(+)
symbol is c/o Welbilt Corporation, 225 High Ridge Road, Stamford, Connecticut
06905, and the business address of all persons listed below and identified with
an asterisk(*) is c/o Berisford plc, Washington House, 40-41 Conduit Street,
London WIR 9FB, United Kingdom. Unless otherwise indicated, all persons listed
below are citizens of the United States of America.
<TABLE>
<CAPTION>
NAME OF DESIGNEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ------------------------------------ --------- -------------------------------------------------------------------
<S> <C> <C>
Patrick Clark+...................... 38 Mr. Clark has been the Vice President of Finance of Parent since
1997. From 1995 to 1997, he was the Director of Planning and
Analysis at John Crane, Inc. From 1993 to 1995, Mr. Clark was a
Regional Finance Officer (Asean) for Raychem Corporation.
Jonathan Findler*................... 46 Mr. Findler has been Director and Finance Director of Berisford
since 1996. From 1994 to 1996, he was Finance Director of the John
Crane Division of TI Group plc. Mr. Findler is a citizen of the
United Kingdom.
David Hooper*....................... 51 Mr. Hooper has been the Corporate Secretary of Berisford since 1995
and was the Assistant Secretary of Berisford from 1991 to 1995. Mr.
Hooper is a citizen of the United Kingdom.
Roger Kissam+....................... 58 Mr. Kissam has been the Vice President and General Counsel of
Parent since 1993.
Andrew Roake+....................... 48 Mr. Roake has been a Director and Chief Executive Officer of Parent
since 1997. From 1994 to 1997, he was a Vice President of Raychem
Corporation. Mr. Roake is a citizen of the United Kingdom.
David Williams*..................... 41 Mr. Williams joined Berisford in 1996, became a Director in 1997
and Chief Executive in 1999. From 1994 to 1996, he was managing
director of the Potterton Myson division of Blue Circle Industries
plc. From 1996 to 1999 he was managing director of Magnet Limited.
Mr. Williams is a citizen of the United Kingdom.
</TABLE>
It is expected that the Designees may assume office at any time following
the purchase by the Offeror of a majority of the outstanding Shares pursuant to
the Offer and that upon assuming office, the Designees will thereafter
constitute at least a majority of the Board. Parent has informed the Company
that, to the best of Parent's knowledge, none of the Designees beneficially owns
any equity securities, or rights to acquire any equity securities of the
Company, or has been involved in any transactions with the Company or any of its
directors, executive officers or affiliates that are required to be disclosed
pursuant to the rules of the SEC.
I-3
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
Listed below is the name, age, principal occupation, five year employment
history and public directorships, if any, of each current member of the Board.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
- ------------------------------------ --- ----------- ----------------------------------------------------------
<S> <C> <C> <C>
James J. O'Connor................... 62 1989 Mr. O'Connor was Chairman, Chief Executive Officer and a
director of Commonwealth Edison Company, an electric
utility company from 1980 to March, 1998. Mr. O'Connor
was also the Chairman, Chief Executive Officer and a
director of Unicom Corporation, a holding company for
Commonwealth Edison Company from September, 1994 to
March, 1998. Mr. O'Connor is a director of Corning,
Inc., Everen Capital Corporation, Smurfit-Stone
Container Corporation, The Tribune Company, and UAL,
Inc. He was a director of the Company from April, 1989
to February, 1997 and was reappointed as a director in
May, 1998.
Robert G. Rettig.................... 69 1989 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 Hinsdale Hospital of
Hinsdale, Illinois.
Richard L. Thomas................... 68 1997 Mr. Thomas was Chairman of the Board of First Chicago NBD
Corporation and The First National Bank of Chicago from
1995 until his retirement in May, 1996. He was Chairman
of the Board, President and Chief Executive Officer of
The First National Bank of Chicago from 1992 to 1995.
Mr. Thomas is also a director of IMC Global Inc., The
PMI Group, Inc., The Sabre Group Holdings, Inc., Sara
Lee Corporation, and Unicom Corporation. He serves as a
trustee of the Chicago Symphony Orchestra, Kenyon
College, Northwestern University and Rush-
Presbyterian-St. Luke's Medical Center. He is also
Chairman of the Civic Committee of The Commercial Club
of Chicago.
Frank W. Considine.................. 77 1989 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
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
- ------------------------------------ --- ----------- ----------------------------------------------------------
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 also a director of
SEI Information Technology and Chairman of the Board of
Trustees of Loyola University, Chicago, Vice President
of the Lyric Opera of Chicago, and a member of the
Executive Committee of the Museum of Science and
Industry, Chicago, and the Board of Trustees of the
Field Museum of Natural History, Chicago.
<S> <C> <C> <C>
George D. Kennedy................... 73 1989 Mr. Kennedy was Chairman and a director of 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 American National Can Company and
the Kemper National Insurance Companies.
Donald C. Clark..................... 67 1989 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 Chairman of the Board of trustees of Clarkson
University and as a life trustee of Northwestern
University. He served as Chairman of the Board of the
Company from April, 1989, to May, 1991.
Peter B. Hamilton................... 52 1998 Mr. Hamilton is Executive Vice President and Chief
Financial Officer of Brunswick Corporation, a branded
recreational products company, and has held those
positions since 1998. Mr. Hamilton is also Chairman of
Brunswick Indoor Recreation. He was Senior Vice
President and Chief Financial Officer of Brunswick
Corporation from 1995 to 1998. From 1988 to 1995, he was
Vice President and Chief Financial Officer of Cummins
Engine Company, Inc. Mr. Hamilton is also a director of
the Kemper National Insurance Companies.
</TABLE>
I-5
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
- ------------------------------------ --- ----------- ----------------------------------------------------------
<S> <C> <C> <C>
Richard C. Osborne.................. 55 1989 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.
</TABLE>
Each of the directors has been engaged in the principal occupation(s)
described above during the past five years.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board held five meetings during 1998. The standing committees of the
Board also held a total of five meetings. The average attendance at the
aggregate of the total number of meetings of the Board and the total number of
committee meetings was 98%. All persons who were directors of the Company in
1998 attended at least 75% of the aggregate total number of meetings of the
Board and meetings of any committee of the Board on which they served. The Board
has standing Audit, Compensation, Governance and Executive Committees. The
Governance Committee performs many of the functions of a standing nominating
committee.
The Audit Committee consists of Robert G. Rettig, Peter B. Hamilton, George
D. Kennedy, and James J. O'Connor. Mr. Rettig 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 any material
concerns that may arise in connection with its review. The Audit Committee also
recommends to the Board 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 1998.
The Compensation Committee consists of Frank W. Considine, Donald C. Clark
and Richard L. Thomas. Mr. Considine 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 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 twice during 1998.
The Governance Committee consists of George D. Kennedy and Frank W.
Considine. Mr. Kennedy is the Chairman of the Committee. The Governance
Committee is responsible for, among other things, recommending to the Board
possible candidates for election to the Board (with the final determination to
be made by action of the Board), considering any shareholder recommendations of
proposed candidates for election to the Board, periodically reviewing each
director's continuation on the Board in consultation with such director and the
Chief Executive Officer and the Chairman of the Board, assigning individual
members of the Board to one or more committees of the Board, and reviewing, from
time to time, the
I-6
<PAGE>
compensation of the Board and recommending to the Board such changes as the
Governance Committee deems appropriate. The Governance Committee met once in
1998.
DIRECTORS' FEES AND COMPENSATION
Non-employee directors of the Company receive for their services (1) an
annual retainer fee paid in Shares with a total market value of approximately
$20,000, determined as of the day immediately preceding the date of the annual
meeting of the shareholders of the Company, and (2) a fee of $1,000 for each
Board 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 receives, as compensation for those services, additional
Shares with a total market value of approximately $3,000, 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 following the annual meeting of the shareholders
of the Company.
Under the Non-Employee Directors' Stock Option Plan (the "Non-Employee
Directors' Plan"), as currently in effect, each director of the Company who is
not otherwise an employee of the Company or any of its subsidiaries also
received, as of the effective date of the plan, or received or will receive, on
the next business day following his or her appointment to the Board, an option
to purchase 2,000 Shares. An option to purchase an additional 1,000 Shares 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 on
the date of grant.
On May 15, 1998, the Board amended the Non-Employee Directors' Plan and
awarded each of the six persons who were non-employee directors of the Company
as of that date an option to acquire 2,000 shares of Common Stock at an exercise
price of $28.00 per share, the fair market value of the Common Stock as of that
date. The shareholders of the Company approved such amendment at the 1999 Annual
Meeting of Shareholders on May 13, 1999.
Upon his reappointment to the Board on May 15, 1998, Mr. James J. O'Connor
also received an option to acquire 2,000 shares of Common Stock at an exercise
price of $28.00 per share, and upon his appointment to the Board on October 20,
1998, Mr. Peter B. Hamilton received an option to acquire 2,000 shares of Common
Stock at an exercise price of $15.03125 per share, the fair market value of the
Common Stock as of that date.
Each option granted under the Non-Employee Directors' Plan vests 100% and
thus becomes exercisable on the earliest of (1) the date immediately preceding
the first annual meeting following the date of the grant of the option, (2) the
death or disability of the non-employee director during his service as a
director, or (3) a change of control of the Company. 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 terminates before
the expiration of such ten-year period.
I-7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and positions of all
executive officers of the Company, the period that each has held his position
with the Company and a brief account of each such officer's business experience
during the past five years. Executive officers are appointed annually at a
meeting of the Board held as soon as practicable after each annual meeting of
the Company's shareholders. Officers of the Company are appointed to serve until
the next annual election of officers and until their respective successors are
chosen.
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER AGE TITLE
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Richard C. Osborne.................. 55 Mr. Osborne is Chairman of the Board and has held that position since
May 1991. He is also President, Chief Executive Officer and a
Director of the Company and President and Director of Scotsman
Group Inc. ("SGI") and has held those positions since April 1989.
Robert C. Eimers.................... 51 Mr. Eimers is Vice President-Human Resources of the Company and
Assistant Secretary of SGI, and has held those positions since
November 1998. From November 1997 to November 1998, he was a
partner at the human resource consulting firm of Medina & Thompson.
From February 1995 to September 1997, Mr. Eimers served as Senior
Vice President-Human Resources at Service Merchandise. He served as
Vice President-Human Resources at Sonoco Products Company from June
1988 to February 1995.
David M. Frase...................... 51 Mr. Frase is a Vice President of the Company and has held that
position since May 1997. He is also President and General Manager
of Kysor Panel Systems, and has held those positions since 1987.
Donald D. Holmes.................... 61 Mr. Holmes is Vice President-Finance and Secretary of the Company and
Vice President-Finance, Secretary and Director of SGI and has held
those positions since April 1989.
Christopher D. Hughes............... 52 Mr. Hughes is a Vice President of the Company and has held that
position since June 1994. He is also President of Booth and has
held that position since May 1994. From 1993 to May 1994, he was
Vice President/General Manager of the Central and Western Transit
Operations of Morrison Knudsen Corporation, a division engaged in
the business of assembling new and overhauling used passenger rail
cars.
Emanuele Lanzani.................... 65 Mr. Lanzani is a Executive Vice President of the Company and has held
that position since April 1989. He is also Managing Director,
Frimont and Castel MAC. Mr. Lanzani has been Managing Director of
Castel MAC since its acquisition by Household in October 1985 and
he has been Managing Director of Frimont since 1968.
Randall C. Rossi.................... 47 Mr. Rossi is a Vice President of the Company and has held that
position since January 1995. He is also President of Scotsman Ice
Systems and has held that position since January 1995. From January
1994 to January 1995, he was
</TABLE>
I-8
<PAGE>
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER AGE TITLE
- ------------------------------------ --- ---------------------------------------------------------------------
Executive Vice President of Scotsman Ice Systems. From 1989 to
January 1994, he was Vice President-Sales and Marketing of Scotsman
Ice Systems.
<S> <C> <C>
Michael de St. Paer................. 54 Mr. de St. Paer is a Vice President of the Company and has held that
position since April 1994. He is also Managing Director of Scotsman
Beverage Systems and has held that position since September 1998.
From June 1997 to September 1998 he was Managing Director of
Scotsman Beverage Group--Europe. From April 1993 to June 1997, Mr.
de St. Paer was Managing Director of Whitlenge.
Graham E. Tillotson................. 47 Mr. Tillotson is a Vice President of the Company and President of
Delfield. He has held those positions since June 1997. From January
1997 to June 1997, he served as Interim President of Delfield. From
1984 to December 1996, he was Vice President, Sales & Marketing of
Delfield.
Logan F. Wernz...................... 55 Mr. Wernz is a Vice President of the Company and has held that
position since May 1997. He is also President and General Manager
of Kysor//Warren and has held those positions since 1988.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Shares for each
director and each executive officer named in the Summary Compensation Table
elsewhere in this Information Statement, and all directors and executive
officers of the Company as a group. Information is provided as of June 30, 1999,
unless otherwise indicated.
<TABLE>
<CAPTION>
NO. OF SHARES
OF COMMON STOCK
BENEFICIALLY PERCENT OF
OWNED(1) CLASS(2)
--------------------------- -------------
<S> <C> <C>
DIRECTORS
Donald C. Clark.......................................................... 52,335(3) *
Frank W. Considine....................................................... 21,654(3) *
Peter B. Hamilton........................................................ 4,339(3) *
George D. Kennedy........................................................ 21,944(3) *
James J. O'Connor........................................................ 15,425(3) *
Richard C. Osborne....................................................... 288,024(3) 2.66%
Robert G. Rettig......................................................... 21,315(3) *
Richard L. Thomas........................................................ 10,470(3) *
CERTAIN EXECUTIVE OFFICERS
David M. Frase........................................................... 5,960(3) *
Donald D. Holmes......................................................... 109,517(3) 1.02%
Christopher D. Hughes.................................................... 20,415(3) *
Emanuele Lanzani......................................................... 78,429(3) *
Directors and Executive Officers as a Group (17 individuals, including
all those listed above)................................................ 743,370(3)(4) 6.72%
</TABLE>
- ------------------------
* Less than one percent of the outstanding Common Stock.
I-9
<PAGE>
(1) Information relating to the number of shares of Common Stock beneficially
owned by directors and executive officers is based upon information
furnished by, or on behalf of, each person to the Company, or reflected in
the records of (i) the Tax Reduction Investment Plan ("TRIP") of SGI, the
Kysor Industrial Corporation Savings Plan, or The Delfield Company 401(k)
Savings & Profit Sharing Retirement Plan (collectively, the "401(k) Plans"),
or (ii) the Long-Term Executive Incentive Compensation Plan or the
Non-Employee Directors' Plan. Information relating to shares held in the
401(k) Plans has been furnished as of March 31, 1999, the latest date for
which such information is available. Except as 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 10,627,875 issued and outstanding shares of Common
Stock as of June 30, 1999.
(3) Includes shares that could be acquired within 60 days after June 30, 1999
pursuant to the exercise of stock options as follows: Mr. Clark, Mr.
Considine, Mr. Kennedy, and Mr. Rettig, each 7,000; Mr. Hamilton, 2,000; Mr.
O'Connor, 4,000; Mr. Thomas, 4,000; Mr. Osborne, 207,445; Mr. Frase, 1,000;
Mr. Holmes, 68,030; Mr. Hughes, 8,925 and Mr. Lanzani, 68,885; all directors
and officers as a group, 433,935. Also includes certain shares held for the
account of executive officers under the 401(k) Plans with respect to which
each such officer has sole voting but no investment power as follows: Mr.
Osborne, 7,475; Mr. Frase, 227; Mr. Holmes, 9,570; Mr. Hughes, 5,497; all
executive officers as a group, 26,375.
(4) Does not include 1,467 shares held by the wife of an executive officer as to
which he disclaims beneficial ownership.
I-10
<PAGE>
PRINCIPAL STOCKHOLDERS
The following persons are known to the Company to be the beneficial owners
of more than 5% of the outstanding Shares as of the most recent date prior to
the preparation of this Information Statement for which information is available
to the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK PERCENT OF CLASS OF
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED STOCK(1)
- --------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Brinson Partners, Inc.
UBS AG................................................................... 829,200(2) 7.80%
209 South LaSalle Street
Chicago, Illinois 60604-1295
Lazard Freres & Co. LLC.................................................... 597,000(3) 5.62%
30 Rockefeller Plaza
New York, New York 10020
Neuberger & Berman, LLC.................................................... 1,244,700(4) 11.71%
605 Third Avenue
New York, New York 10158-3698
Samuel R. Shapiro
Shapiro Capital Management Company, Inc.................................. 1,115,700(5) 10.50%
3060 Peachtree Road, N.W.
Atlanta, Georgia 30305
</TABLE>
- ------------------------
(1) Based upon a total of 10,627,875 Shares issued and outstanding on June 30,
1999.
(2) Based on information provided in a Schedule 13G, as amended, filed with the
SEC on February 16, 1999, by Brinson Partners, Inc. ("BPI") and UBS AG.
According to the filing, BPI is an investment adviser and an indirect,
wholly owned subsidiary of UBS AG, which is a bank. BPI and UBS AG, by
reason of its indirect ownership of BPI, have shared voting and shared
dispositive power with respect to all 829,200 Shares reported.
(3) Based on information provided in a Schedule 13G, filed with the SEC on
February 16, 1999, by Lazard Freres & Co. LLC. According to the filing,
Lazard Freres & Co. LLC has sole dispositive power with respect to all
597,000 Shares, sole voting power with respect to 536,400 Shares, and no
voting power with respect to the remaining Shares.
(4) Based on information provided in a Schedule 13G, as amended by Amendment No.
7, filed with the SEC on March 3, 1999 by Neuberger & Berman LLC. According
to the filing, Neuberger & Berman LLC has shared dispositive power with
respect to all 1,244,700 Shares, sole voting power with respect to 785,600
Shares and no voting power with respect to the remaining Shares. According
to the filing, the Shares do not include 170,500 Shares owned by principals
of Neuberger & Berman LLC in their personal securities accounts as to which
Neuberger & Berman LLC disclaims beneficial ownership.
(5) Based on information provided in a Schedule 13G, filed with the SEC on April
9, 1998 by Shapiro Capital Management Company, Inc. ("SCMC") and Samuel R.
Shapiro. According to the filing, SCMC has sole voting power and sole
dispositive power with respect to all 1,115,700 Shares, and Mr. Shapiro is
the president, a director and a majority shareholder of SCMC and may be
deemed to have beneficial ownership of the Shares reported by virtue of that
affiliation. According to information reported by an on-line service
provider in a Schedule 13F filed with the SEC for the fiscal quarter
I-11
<PAGE>
ended December 31, 1998, SCMC reported sole voting and dispositive power
with respect to 1,411,650 Shares or 13.31% of the outstanding Shares.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash 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>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
AWARDS
ANNUAL COMPENSATION(2) ------------------------------
----------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
PRINCIPAL ANNUAL STOCK STOCK
NAME POSITION(1) YEAR SALARY BONUS COMP. AWARDS OPTIONS(#)
- -------------------------- -------------- --------- --------- --------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Osborne................ Chairman of 1998 $ 474,167 $ 327,175 -- $ 0 45,000
the Board, CEO 1997 $ 432,500 $ 285,000 -- $ 0 40,000
& President 1996 $ 365,000 $ 325,000 -- $ 0 19,100
D. Holmes................. VP Finance & 1998 $ 225,000 $ 91,125 -- $ 0 13,000
Secretary 1997 $ 208,750 $ 80,000 -- $ 0 6,100
1996 $ 177,083 $ 95,000 -- $ 0 7,200
E. Lanzani................ Exec. VP; 1998 $ 195,534 $ 61,422 -- $ 0 5,000
Mgng. Dir., 1997 $ 192,079 $ 26,664 -- $ 0 3,500
Frimont S.p.A. 1996 $ 197,396 $ 82,460 -- $ 0 5,100
& Castel MAC
S.p.A.
C. Hughes................. VP; President, 1998 $ 153,962 $ 67,682 -- $ 0 3,500
Booth/Crystal 1997 $ 143,019 $ 25,314 -- $ 0 2,700
Tips 1996 $ 138,154 $ 28,183 -- $ 0 4,000
D. Frase.................. VP; President, 1998 $ 141,680 $ 77,315 -- $ 0 4,000
Kysor Panel 1997(4) $ 105,463 $ 67,296 -- $ 0 --
Systems
<CAPTION>
PAYOUTS
------------- ALL
LTIP OTHER
NAME PAYOUTS COMP.(3)
- -------------------------- ------------- -----------
<S> <C> <C>
R. Osborne................ $ 0 $ 25,910
$ 0 $ 25,575
$ 0 $ 18,167
D. Holmes................. $ 0 $ 11,702
$ 0 $ 10,523
$ 0 $ 8,362
E. Lanzani................ $ 0 $ 0
$ 0 $ 0
$ 0 $ 0
C. Hughes................. $ 0 $ 6,818
$ 0 $ 6,760
$ 0 $ 6,010
D. Frase.................. $ 0 $ 5,490
$ 0 $ 579
</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
401(k) Plans and to SGI's Supplemental Tax Reduction Investment Plan and
(ii) life insurance premiums.
(4) The compensation reported is for a partial year, beginning on March 12,
1997, the date on which the Company acquired Kysor Industrial Corporation
("Kysor") and Mr. Frase became an executive officer of the Company.
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 1998
fiscal year and the value of the options held by such persons at the end of the
1998 fiscal year. No stock appreciation rights have been granted to date by the
Company.
I-12
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS IN 1998 POTENTIAL REALIZABLE VALUE AT ASSUMED
-----------------------------------------------------------
NUMBER OF ANNUAL RATES OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR 10-YEAR OPTION TERM
UNDERLYING OPTIONS -------------------------------------------
OPTIONS GRANTED TO EXERCISE EXPIRATION 0%
NAME GRANTED EMPLOYEES(1) PRICE(2) DATE -- 5% 10%
- ------------------------- ----------- ----------------- -------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Osborne............... 45,000 29.84% $ 26.5625 02/11/08 $ 0 $ 751,726 $ 1,905,026
D. Holmes................ 13,000 8.62% $ 26.5625 02/11/08 $ 0 $ 217,165 $ 550,341
E. Lanzani............... 5,000 3.32% $ 26.5625 02/11/08 $ 0 $ 83,525 $ 211,670
C. Hughes................ 3,500 2.32% $ 26.5625 02/11/08 $ 0 $ 58,468 $ 148,169
D. Frase................. 4,000 2.65% $ 26.5625 02/11/08 $ 0 $ 66,820 $ 169,336
All Shareholders(3)...... $ 0 $ 177,021,092 $ 448,607,470
Named Executive Officers' Gains as a % of all Shareholder Gains....................... 0.665% 0.665%
</TABLE>
- ------------------------
(1) Based on 150,800 options granted to all employees.
(2) Fair market value (the average of the high and low prices for the Shares as
reported on the New York Stock Exchange) on February 10, 1998, the date of
grant.
(3) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 10,596,880 outstanding Shares--the number of Shares
outstanding on December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL VALUE
OF
TOTAL NUMBER OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS HELD
NUMBER OF OPTIONS HELD AT AT FISCAL
SHARES FISCAL YEAR END YEAR END(1)
ACQUIRED ON VALUE -------------------------- ------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------------ ----------------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
R. Osborne................................ 0 $ 0 194,295 89,025 $ 1,714,862
D. Holmes................................. 0 $ 0 68,555 22,875 $ 612,889
E. Lanzani................................ 0 $ 0 74,635 11,275 $ 673,019
C. Hughes................................. 0 $ 0 5,450 8,450 $ 11,671
D. Frase.................................. 0 $ 0 0 4,000 $ 0
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------------------ -------------
<S> <C>
R. Osborne................................ $ 36,807
D. Holmes................................. $ 13,903
E. Lanzani................................ $ 9,623
C. Hughes................................. $ 7,682
D. Frase.................................. $ 0
</TABLE>
- ------------------------
(1) Based on the fair market value of the Shares on December 31, 1998 of
$20.21875 (the average of the high and low prices for the Common Stock as
reported on the New York Stock Exchange).
PENSION PLANS
Mr. Osborne, Mr. Holmes and Mr. Hughes participate in the Salaried Pension
Plan of SGI (the "SGI Salaried Pension Plan") and Mr. Frase participates in The
Kysor Industrial Corporation Administrative Pension Plan (the "Kysor
Administrative Pension Plan"). The SGI Salaried Pension Plan and the Kysor
Administrative Pension Plan are non-contributory, defined benefit plans for
certain salaried employees of SGI and its subsidiaries and Kysor and its
subsidiaries, respectively. Under both plans, (1) 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, and further adjusted based on wages subject to Social
Security taxes, (2) participants become fully vested in their accrued pension
benefits after five years
I-13
<PAGE>
of service, and (3) 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") under which each participant receives the
benefits that he or she would have received under the SGI Salaried Pension Plan
except for certain limitations on compensation and benefits imposed under the
Internal Revenue Code of 1986, as amended (the "Code"). Kysor does not have a
comparable plan, and benefits received under the Kysor Administrative Pension
Plan are limited by certain aspects of the Code.
The following table illustrates the amount of annual pension benefits
payable under the SGI 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. The
benefits shown are computed on a straight-life annuity basis.
SGI SALARIED PENSION PLAN AND SUPPLEMENTAL PLAN
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$100,000............................................. $ 18,082 $ 24,110 $ 30,137 $ 36,165 $ 42,192
$175,000............................................. $ 33,708 $ 44,944 $ 56,180 $ 67,416 $ 78,652
$250,000............................................. $ 49,334 $ 65,779 $ 82,223 $ 98,668 $ 115,113
$325,000............................................. $ 64,960 $ 86,613 $ 108,267 $ 129,920 $ 151,573
$400,000............................................. $ 80,586 $ 107,448 $ 134,310 $ 161,172 $ 188,034
$475,000............................................. $ 96,212 $ 128,282 $ 160,353 $ 192,424 $ 224,494
$550,000............................................. $ 111,838 $ 149,117 $ 186,396 $ 223,675 $ 260,955
$625,000............................................. $ 127,464 $ 169,951 $ 212,439 $ 254,927 $ 297,415
$700,000............................................. $ 143,089 $ 190,786 $ 238,482 $ 286,179 $ 333,875
$775,000............................................. $ 158,715 $ 211,620 $ 264,526 $ 317,431 $ 370,336
$850,000............................................. $ 174,341 $ 232,455 $ 290,569 $ 348,682 $ 406,796
$925,000............................................. $ 189,967 $ 253,290 $ 316,612 $ 379,934 $ 443,257
</TABLE>
For purposes of determining benefits under the SGI Salaried Pension Plan for Mr.
Osborne, Mr. Holmes and Mr. Hughes, credited years of service and the amount of
covered compensation (salary plus bonuses paid in cash or stock) for 1998 were
as follows: Mr. Osborne, 20 years and $759,167; Mr. Holmes, 24 years and
$305,000; Mr. Hughes, 15 years and $179,276. Covered compensation, in each case,
is equal to the salary reported for such officer in the Summary Compensation
Table for 1998 plus the bonus reported for 1997 since bonuses earned in a given
fiscal year are paid the following fiscal year.
In calculating credited years of service under the SGI 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.
The following table illustrates the amount of annual pension benefit payable
under the Kysor Administrative Pension Plan for eligible employees retiring at
age 65 with the following remuneration and number of credited years of service.
The benefits shown are computed on a straight-life annuity basis.
I-14
<PAGE>
KYSOR ADMINISTRATIVE PENSION PLAN
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 15 20 25 30 35
- -------------------------------------------------------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$100,000................................................ $ 20,604 $ 27,472 $ 34,340 $ 41,208 $ 43,523
$150,000................................................ $ 32,642 $ 43,523 $ 54,403 $ 65,284 $ 68,756
$200,000................................................ $ 37,089 $ 49,452 $ 61,815 $ 74,177 $ 81,951
$250,000................................................ $ 41,372 $ 56,115 $ 70,858 $ 85,601 $ 100,344
$300,000................................................ $ 47,041 $ 64,934 $ 82,826 $ 100,718 $ 118,611
</TABLE>
For purposes of determining benefits under the Kysor Administrative Pension
Plan, in 1998 Mr. Frase was credited with 23 years of service and his amount of
covered compensation (salary plus bonuses paid in cash or stock) was $208,976.
Covered compensation is equal to the salary reported for Mr. Frase in the
Summary Compensation Table for 1998 plus the bonus reported for 1997 since
bonuses earned in a given fiscal year are paid the following fiscal year. In
calculating credited years of service under the Kysor Administrative Pension
Plan, Mr. Frase's years of service with Kysor prior to its acquisition by the
Company in 1997 have been taken into account.
Mr. Lanzani is not covered by SGI's Salaried Pension Plan or Kysor's
Administrative 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 equal .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 31 years of service, and he received a total of $222,198 in salary
and bonuses in 1998. 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 1998, to an annual base salary of $480,000, 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,
1999, Mr. Osborne's base salary was increased to $505,000. Under the agreement,
Mr. Osborne was also eligible to receive, in 1998, an annual target bonus under
the Company's Executive Incentive Compensation Program (the "Cash Incentive
Program") equal to 60% of his annual salary. The agreement provides for certain
continued compensation in the event of (1) 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 (2) 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 (1) continued salary at the rate at which last received, (2)
continued target bonuses (prorated for such 18-month period) and (3)
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 (3), the economic equivalent thereof.
Benefit plan accruals described in clause (3) 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
I-15
<PAGE>
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 (1) three times the amount
of his highest annual base salary in effect during the immediately preceding
12-month period and (2) three times the amount of the greater of his then
current target bonus under the Cash Incentive Program or the average target
bonus paid or payable to him under the Cash Incentive 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 TRIP or Supplemental Tax Reduction
Investment 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 SGI 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 following events occurs:
(1) 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 Shares 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");
(2) persons who were directors of the Company as of a specified date or persons
nominated by those directors to succeed to their positions or their
successors (the "Incumbent Board") cease to constitute a majority of the
Board;
(3) the shareholders approve a reorganization, merger or consolidation of the
Company, unless, following such reorganization, merger or consolidation, (A)
more than 60% of the Shares 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 Shares 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
(4) 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 Shares 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
I-16
<PAGE>
controlled by the Company or a person who beneficially owned 20% or more of
the Shares 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.
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 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.
Mr. Holmes, Mr. Lanzani, Mr. Hughes, and Mr. Frase also have employment
agreements with SGI. Under their employment agreements with SGI, Mr. Holmes, Mr.
Lanzani, Mr. Hughes, and Mr. Frase are currently entitled to annual base
salaries of $242,000, 365,200,000 Lire (approximately $210,000 as of December
31, 1998), $156,000, and $158,000, respectively, subject to annual review. Under
their employment agreements, each of these four executive officers was eligible
to receive, in 1998, an annual target bonus equal to 35% of their annual salary.
The remaining provisions of their employment agreements are identical to those
of Mr. Osborne's employment agreement except that (1) the provisions relating to
continuation of compensation apply for a period of 12, rather than 18 months,
(2) there is no provision in the agreements for reimbursement of excise taxes,
and (3) 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, 2000, in
the case of Mr. Holmes and Mr. Lanzani, October 15, 1999 in the case of Mr.
Hughes, and December 18, 1999 in the case of Mr. Frase. 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 before the end of such term or extended term.
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 (1) two (rather than three) times the amount of his highest annual base
salary in effect during the immediately preceding 12-month period and (2) 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 Cash
Incentive Program in the preceding five fiscal years, if at any time before he
reaches age 65, his 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 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.
I-17
<PAGE>
OPTION PLANS
The Company's Long-Term Executive Incentive Compensation Plan and
Non-Employee Directors' Plan (collectively, the "Plans") provide that, upon a
change of control, any options held by a participant shall become fully
exercisable and vested. For purposes of the Plans, a "change of control" will be
deemed to have occurred if any of the events constituting a "change of control"
for purposes of the Severance Agreement (described above under "Executive
Compensation and Severance Agreements, Including Change of Control Provisions")
shall have occurred.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board is responsible for developing
executive compensation philosophies, determining the components of the executive
compensation program, and assuring that the executive compensation program is
administered in a manner consistent with its 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 each executive officer is in a position to
make substantial contributions to the long-term success of the Company, the
Company's 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 components of the compensation program and
plan for each executive officer for the upcoming year and relies upon the advice
of independent compensation consultants regarding the competitiveness of the
Company's compensation programs. The Committee approves the compensation plan
for each executive officer 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 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 coverage, 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 $500
to $700 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 1998 was fixed at $480,000, an increase of
7.9% over his 1997 base salary of $445,000. Despite the increase, Mr. Osborne's
1998 base salary 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.
- ------------------------
(1) This report of the Compensation Committee of the Board appeared in the Proxy
Statement for the Company's Annual Meeting of Shareholders held on May 13,
1999.
I-18
<PAGE>
The targets for awards under this program 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 cash flow. A portion of earned awards
are based on discretionary factors to reflect individual contributions to the
Company's success each year.
In 1998, Mr. Osborne was eligible to receive incentive compensation ranging
from 0% to 120% of his annual base salary, with a target payout of 60% of his
annual base salary. For 1998, Mr. Osborne received a bonus of 69% of his annual
base salary. In reviewing Mr. Osborne's incentive amount, the Committee
considered the Company's operating performance in 1998 and other accomplishments
affecting the Company's long-term growth. During 1998, the Company consolidated
its international beverage systems operations and strengthened its position with
major soft-drink suppliers in both Europe and the United States. The Company
took numerous other steps intended to enhance its long-term performance,
including the expansion of Kysor's Tennessee plant, and the implementation of
demand-flow manufacturing and enhanced product delivery systems at The Delfield
Company, the Company's wholly-owned subsidiary. The Company acquired, through
Kysor, a controlling interest in Austral Refrigeration Pty. Limited, an
Australian company, thus strengthening its position in Australia and
facilitating future expansion into Southeast Asian markets. The Company also
acquired, through its subsidiary Scotsman Drink Ltd., a one-third stake in Total
Cellar Systems, an installer and servicer of beer dispensing equipment in the
United Kingdom. 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 Long-Term Executive Incentive Compensation Plan
(the "Long-Term 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
Long-Term Incentive Plan which provide for stock option grants with a value
equal to the value of the awards granted to persons holding commensurate
positions at similar-sized companies. 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 Long-Term
Incentive Plan is based on competitive market data with the value determined by
the widely accepted Black-Scholes methodology. In 1998, the Committee approved a
stock option grant with a value commensurate with the market average. The
Committee believes that an appropriate portion of Mr. Osborne's total
compensation is tied directly to shareholder value.
BENEFIT PROGRAMS
The Company provides its executive officers with insurance 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 each of the four other most highly compensated executive
officers employed by the company at year-end, other than compensation which
qualifies as "performance-
I-19
<PAGE>
based compensation" under the Code and related regulations or is otherwise
exempt from the provisions of Section 162(m). Stock options and stock
appreciation rights granted to such officers under the Long-Term Incentive Plan,
as amended in 1997, should qualify as performance-based compensation under
Section 162(m). All compensation paid to the Company's chief executive officer
and four other most highly compensated officers was deductible in 1997 and is
expected to be deductible in 1998. 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).
Frank W. Considine, Committee Chairman
Donald C. Clark, Committee Member
Richard L. Thomas, Committee Member
I-20
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, officers and beneficial owners of more than 10 percent of the
outstanding Shares are required to file with the SEC reports on Forms 3, 4 and 5
reflecting certain changes in their beneficial ownership of Shares. 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 1998 fiscal year, except for Mr. David Frase, who failed
to file a Form 4 on a timely basis reporting a transaction in Shares on October
22, 1998, and Mr. Graham Tillotson, who failed to file on a timely basis Form
4's reporting transactions in Shares on April 8, 1998 and August 18, 1998.
COMPARISON OF CUMULATIVE FIVE-YEAR RETURNS
The graph below compares the cumulative total shareholder return on the
Shares 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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCOTSMAN INDUSTRIES RUSSELL 2000 S&P DIVERSIFIED MANUFACTURING
<S> <C> <C> <C>
12/31/93 $100.00 $100.00 $100.00
12/31/94 $122.04 $98.18 $103.63
12/31/95 $126.32 $126.10 $145.87
12/31/96 $170.13 $146.90 $201.02
12/31/97 $176.64 $179.75 $239.34
12/31/98 $149.25 $175.18 $277.09
</TABLE>
Assumes $100 invested on December 31, 1993 in the Common Stock, Russell 2000,
and S&P Diversified Manufacturing Group.
* Total return assumes reinvestment of dividends on a quarterly basis.
I-21
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
Exhibit 1. Agreement and Plan of Merger dated as of July 1, 1999 among Parent, the Offeror and the Company
(incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated July 1,
1999 (the "Form 8-K")).
Exhibit 2. Joint Press Release of the Company and Berisford dated July 2, 1999 (incorporated by reference to
Exhibit 2 to the Form 8-K).
Exhibit 3. Confidentiality Agreement dated as of April 29, 1999 between Berisford and the Company.
Exhibit 4. Company Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1 thereunder (included as Schedule I hereto).*
Exhibit 5. Letter to Stockholders of the Company dated July 9, 1999.*
Exhibit 6. Opinion of Morgan Stanley (included as Annex A hereto).*
</TABLE>
- ------------------------
* Included in copies mailed to stockholders of the Company.
<PAGE>
[LETTERHEAD OF SCOTSMAN INDUSTRIES, INC.]
Richard C. Osborne
Chairman of the Board
President & CEO
April 29, 1999
Berisford plc
Washington House
40/41 Conduit Street
London
W1R 9FB
Attention: Mr. Alan J. Bowkett
Gentlemen:
You have requested information regarding Scotsman Industries
(the "Company") for the purposes of your consideration of a possible
acquisition by you of the Company (a "Transaction"). It is understood and
agreed that this agreement creates no obligation to enter into any
Transaction or any agreement relating to a Transaction. To induce the Company
to furnish information to you, you hereby agree as follows:
1. As used herein:
"ACT" means the Securities Exchange Act of 1934, as amended;
"AFFILIATE" means any Person that (i) directly or indirectly
controls you, (ii) directly or indirectly is controlled by you or (iii)
is under direct or indirect common control with you;
"INFORMATION" means information regarding the Company or any
of its subsidiaries or their respective assets or businesses which is
furnished to you, directly or indirectly, by the Company or its
representatives;
"PERSON" shall have the meaning contained Section 3(a)(9) of
the Act; and
"RESTRICTED PERIOD" means the eighteen month period commencing
on the date hereof.
2. All Information will be kept confidential by you, except
that you may disclose or make available Information to your directors,
officers and employees and to representatives of your advisors and of
potential financing sources for the exclusive purpose of
<PAGE>
assisting you in the evaluation of a possible Transaction, all of whom shall
be specifically informed by you or your representatives of the confidential
character of such Information and that by receiving such information they are
agreeing to be bound by the terms of this agreement relating to the
confidential treatment of such Information. You will not use, or permit any
of your representatives to use, any of the Information for any purpose other
than the evaluation of a possible Transaction, and you will not make any
Information available to any Person for any other purpose whatsoever.
3. You hereby acknowledge that you are aware (and that prior
to the disclosure of any Information to any Person pursuant to paragraph 2
such Person will be advised) that the United States securities laws prohibit
any Person who has material non-public information about a company from
purchasing or selling securities of such company or from communicating such
information to any other Person under circumstances in which it is reasonably
foreseeable that such Person is likely to purchase or sell such securities.
In the event that you disclose any Information to any Person, whether or not
such disclosure is permitted under paragraph 2, you shall be liable to the
Company for any failure by such Person to treat such Information in the same
manner as you are obligated to treat such Information under the terms of this
agreement.
4. Except in response to the request made by the Company that
during May 1999 you provide to its Board of Directors a confidential
indication of interest in a Transaction, without the prior written consent of
the Company, you will not at any time during the Restricted Period (and you
will not at any time during the Restricted Period assist or encourage others
to):
(a) acquire or agree, offer, seek or propose to
acquire, directly or indirectly, alone or in concert with any
other Person, by purchase or otherwise, beneficial ownership
as defined in Rule 13d-3 under the Act, of any of the shares
of common stock or preferred stock of the Company (the
"Securities"), or any rights or options to acquire Securities
(including from any third party);
(b) solicit proxies (as such terms are defined in
Rule 14a-1 under the Act), whether or not such solicitation is
exempt under Rule 14a-2 under the Act, with respect to any
matter from holders of any Securities, or make any
communication to such holders relating to the Company which is
exempted from the definition of solicitation by Rule
14a-1(l)(2)(iv) under the Act;
(c) initiate, or induce or attempt to induce any
other Person, entity or group (as defined in Section 13(d)(3)
of the Act) to initiate, any stockholder proposal or tender
offer for any Securities, any change of control of the Company
or the convening of a stockholders' meeting of the Company;
(d) otherwise seek or propose to influence or
control the management or policies of the Company;
(e) enter into any discussions, negotiations,
arrangements or understandings with any other Person with
respect to any matter described in the foregoing subparagraphs
(a) through (d);
<PAGE>
(f) directly or indirectly request, other than by
means of a confidential communication to the Board of
Directors, that the Company amend or waive any provision of
this paragraph 4;
(g) knowingly take any action inconsistent with any
of the foregoing subparagraphs (a) through (f); or
(h) take any action with respect to any of the
matters described in this paragraph 4 that requires public
disclosure.
The restrictions of this paragraph 4 shall terminate in the event (i) a third
party has publicly announced its intention to acquire or make an offer for an
acquisition of all or substantially all of the Securities or assets of the
Company (on a consolidated basis) or (ii) the Company makes a public
announcement that it has entered into a definitive written agreement with a
third party for any of the foregoing.
5. If at any time during the course of discussions relating to
the indication of interest to be provided in May 1999, any officer or
director of, or financial advisor to, Berisford plc or Welbilt Corporation is
approached by any Person concerning your or their participation in a
transaction involving any material portion of the assets, businesses or
securities of the Company or any subsidiary thereof, you will promptly inform
us of the nature of such contact and the parties thereto.
6. During the Restricted Period except with the Company's
prior written approval, you will not disclose, and you will not permit your
representatives to disclose, to any Person other than the Persons described
in paragraph 2, the fact that you are engaged in discussions with the Company
regarding a Transaction, the fact that the Information has been made
available to you or that you have inspected any portion of the Information or
the fact that you are subject to any of the restrictions described in
paragraph 4; PROVIDED, however, that you may make such disclosure to the
extent necessary if you have received the advice of your outside counsel that
such disclosure must be made by you in order (i) that you not commit a
violation of law or violate any rules or regulations of any stock exchange on
which your securities are listed or any order applicable to you of any court
or administrative body having jurisdiction or (ii) to permit the continued
trading of your securities on such stock exchange.
7. In the event that you are requested in any proceeding to
disclose any Information received by you or any matter subject to paragraph
6, you will give us prompt notice of such request so that we may seek an
appropriate protective order. If in the absence of a protective order you are
nonetheless compelled to disclose any such Information or matter, you may
disclose such Information or matter without liability hereunder; provided
that you give us written notice of the Information or matter to be disclosed
as far in advance of its disclosure as is practicable and use your best
efforts to obtain assurances that confidential treatment will be accorded to
such Information or matter.
8. Information shall not include any Information furnished to
you by the Company or its representatives which you demonstrate (i) is on the
date hereof or hereafter becomes generally available to the public other than as
a result of a disclosure, directly or
<PAGE>
indirectly, by you or your representatives or (ii) was known or was available
to you prior to its disclosure to you by the Company or its representatives
or becomes available to you on a nonconfidential basis, from a source other
than the Company or its representatives, which source was not known to you
(after inquiry) to be bound by a confidentiality agreement with the Company
or its representatives and had not received such information, directly or
indirectly, from a Person so bound.
9. The Company does not make any representation or warranty as
to the accuracy or completeness of the Information provided to you. Neither
the Company nor any of its representatives shall have any liability resulting
from the use of the Information by you or any of your representatives.
10. Upon our request at any time, you will promptly redeliver
to us all copies of documents containing Information and will promptly
destroy all memoranda, notes and other writings prepared by you or by any
Person referred to in paragraph 2 based on such Information.
11. During the Restricted Period commencing on the date hereof,
(i) you will not (and will not assist or encourage others to) solicit the
services, as employee, consultant or otherwise, of any employee of the
Company or any of its subsidiaries and (ii) the Company will not (and will
not assist or encourage others to) solicit the services as employee,
consultant or otherwise, any employee of yours or any of your Affiliates;
provided, however, that the foregoing restrictions shall not apply to any
general advertisement of employment opportunities.
12. You shall cause each of your Affiliates to comply with the
terms of paragraphs 2, 3, 4, 5, 6, 7, 8, 10 and 11 (construing such
paragraphs for such purposes to refer also to such Affiliates in each
instance where there is a reference to you).
13. You acknowledge that irreparable damage would occur to the
Company in the event any of the provisions of this agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States of America or any state thereof, in
addition to any other remedy to which the Company may be entitled at law or
in equity.
14. If any term or provision of this agreement or any
application hereof shall be invalid or unenforceable, the remainder of this
agreement and any other application of such term or provision shall not be
affected thereby.
15. This agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but such counterparts shall constitute one and the same instrument.
16. This agreement contains the entire understanding of the
parties hereto with respect to the matters covered hereby and may be amended
only by an agreement in writing executed by the Company and you.
<PAGE>
17. This agreement shall be binding upon, inure to the benefit
of and be enforceable by our respective successors and assigns.
18. This agreement shall be governed by and construed in
accordance with the internal laws (as opposed to conflict of law provisions)
of the State of Illinois.
19. The confidentiality provisions contained in paragraphs 2
and 3 shall cease to have affect upon expiry of a period of two years from
the date hereof.
* * * * * *
If the foregoing correctly sets forth our agreement as to the
matters set forth herein, please confirm our agreement by executing and
returning a copy of this agreement to the undersigned.
Very truly yours,
SCOTSMAN INDUSTRIES, INC.
By: /s/ Richard C. Osborne
-----------------------------------
Name: Richard C. Osborne
Title: Chairman, President & C.E.O.
The foregoing terms are agreed to:
BERISFORD PLC
By: /s/ Alan J. Bowkett
---------------------------------
Name: A. J. Bowkett
Title: C.E.O.
<PAGE>
[LOGO]
July 9, 1999
Dear Fellow Stockholder:
I am pleased to inform you that Scotsman Industries, Inc. has entered into
an Agreement and Plan of Merger with Welbilt Corporation, a subsidiary of
Berisford plc, pursuant to which a wholly owned subsidiary of Welbilt has
commenced a tender offer to purchase all of the outstanding shares of Scotsman
for $33.00 per share in cash. Under the agreement, consummation of the tender
offer will be followed by a merger in which non-tendering stockholders will
receive $33.00 per share in cash or the highest price paid per share pursuant to
the tender offer and Scotsman will become a wholly owned subsidiary of Welbilt.
The Board of Directors of Scotsman has determined that the Welbilt tender
offer and the merger are fair to and in the best interests of Scotsman and its
stockholders and recommends that stockholders accept the Welbilt offer and
tender their shares pursuant to it.
Enclosed are the Welbilt Offer to Purchase, dated July 9, 1999, Letter of
Transmittal and other related documents. These documents set forth the terms and
conditions of the tender offer. Attached is a copy of the Company's Schedule
14D-9, as filed with the Securities and Exchange Commission. The Schedule 14D-9
describes in more detail the reasons for the Board's conclusions and contains
other important information relating to the tender offer. We urge you to
consider this information carefully.
The Board of Directors and the management and employees of Scotsman thank
you for your support.
Sincerely,
[SIG]
Richard C. Osborne
Chairman of the Board, President and
Chief Executive Officer
