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R. P. SCHERER MANAGEMENT CHALLENGES ELECTION OF DISSIDENT DIRECTOR

Executive Summary

R. P. SCHERER MANAGEMENT CHALLENGES ELECTION OF DISSIDENT DIRECTOR Theodore Souris based on the results of a shareholder proxy battle announced Aug. 24. In a complaint filed the next day in Delaware state court, Scherer management argues that 75,000 shares beneficially owned by Bessemer Securities, which has announced its support for current Scherer management, was improperly voted by Shearson Lehman affiliate SLH Asset Management in favor of Souris. In addition, Scherer management contends that 235,200 shares held in trust by Manufacturers National Bank were not counted in the final tally. "Had the 75,000 shares beneficially owned by Bessemer been properly voted in favor of [board member Peter] Dow in accordance with Bessemer's express directions, and had the inspectors of election properly counted the trustee's proxy for 235,000 in favor of Dow, petitioner Dow would have been reelected," the complaint states. Bessemer Securities Corp., a New York investment firm owning almost 400,000 shares of R. P. Scherer, originally backed Karla Scherer Fink's proposal to sell the company but later made an about-face, shifting support in favor of management ("The Pink Sheet" Aug. 22, In Brief). The switch apparently complicated a June purchase of 75,000 shares by Bessemer from SLH, which felt an obligation to vote for Souris. "SLH either rejected or ignored Bessemer's request and, in any case, voted the shares for Souris contrary to the express directions of Bessemer," the suit explains. The R. P. Scherer annual meeting began Aug. 17 and was adjourned for one week to tally votes cast for the election of directors. "On Aug. 24, the inspectors of election, Vincent Love and James Galla, announced that 3.02 mil. votes had been cast in favor of the election of Souris and that 2.67 mil. votes had been cast in favor of the election of Dow," the complaint states. A reduction of Souris' total by 75,000 votes, as requested in the suit, and a corresponding increase of Dow's total by 310,200 votes -- 75,000 from SLH and 235,200 from Manufacturers National Bank -- would keep Dow on the board. "Because the voting for the seat currently held by Mr. Dow was so close, we plan to review the results you heard announced by the inspectors," Peter Fink noted in an August 24 statement to Scherer employees. "This meeting will be adjourned by the chairman until Sept. 1, 1988 at 10:00 a.m. in order to give us time to deal with those issues." However, R. P. Scherer management did acknowledge the unseating of board member Richard Manoogian by Frederick Frank, a nominee of Karla Fink, and the defeat of a new stock option plan for Scherer management at the Aug. 24 resumption of the company's annual meeting. If the election of Souris is upheld, five of the 11 R. P. Scherer board members will support a sale of the company: Karla Fink and brother John Scherer, who together control about 38% of the voting power; Ernst Schoepe; Frank; and Souris. President Peter Fink, estranged husband of Karla Fink, Chairman Wilber Mack, General Counsel W. Merritt Jones, Manufacturers National Bank Chairman Dean Richardson, William Stutt and Joerg Siebert make up the opposing group. The terms of Peter Fink, Richardson, Stutt, Siebert and Schoepe expire in 1989.

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