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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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SIGNATURE BRANDS USA, INC.
(NAME OF SUBJECT COMPANY)
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COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
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82667N 10 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MEETA VYAS
CHIEF EXECUTIVE OFFICER AND
VICE CHAIRMAN OF THE BOARD
7005 COCHRAN ROAD
GLENWILLOW, OHIO 44139-4312
(440) 542-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
With a copy to:
JAMES WESTRA, ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-6600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Signature Brands USA, Inc., a Delaware
corporation (the 'Company'), and the address of the principal executive offices
of the Company is 7005 Cochran Road, Glenwillow, Ohio 44139-4312. The title of
the class of equity securities to which this statement relates is the common
stock, $.01 par value per share, of the Company (the 'Common Stock').
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to a cash tender offer by Java Acquisition Corp., a
Delaware corporation ('Purchaser') and a wholly owned indirect subsidiary of
Sunbeam Corporation, a Delaware corporation ('Parent'), disclosed in a Tender
Offer Statement on Schedule 14D-1 (the 'Schedule 14D-1'), dated Friday, March 6,
1998, to purchase all of the outstanding shares of Common Stock (the 'Shares')
at a price of $8.25 per share (such amount, or any greater amount per share paid
pursuant to the Offer, being hereafter referred to as the 'Per Share Amount'),
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated March 6, 1998 (the 'Offer to Purchase'),
and the related Letter of Transmittal (which together constitute the 'Offer'),
which were mailed to the holders of Common Stock pursuant to an Agreement and
Plan of Merger, dated as of February 28, 1998, (the 'Merger Agreement' or the
'Agreement'), by and among Parent, Purchaser and the Company.
The Merger Agreement provides that, among other things, as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
all conditions to the Merger, subject to conditions set forth below in the
section entitled 'Vote Required to Approve Merger,' Purchaser or a wholly owned
subsidiary of Purchaser will be merged with and into the Company (the 'Merger'),
and the Company will continue as the surviving corporation (the 'Surviving
Corporation'). A copy of the Merger Agreement is filed herewith as Exhibit 1,
and is incorporated herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of Parent and Purchaser are located at 1615 South Congress Avenue, Suite
200, Delray Beach, Florida 33445.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth below or in the Proxy Statement for the Annual
Meeting of Stockholders, dated January 23, 1998, a copy of which has been
provided to the Company stockholders and which is attached hereto as Exhibit 2,
none of the officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including without limitation any material contract, agreement,
arrangement or understanding (i) providing for the furnishing of services to or
by, (ii) providing for rental of real or personal property to or from, or (iii)
otherwise requiring payments to or from, any officer or director, any member of
the family of any officer or director or any corporation, partnership, trust or
other entity in which any officer or director has a substantial interest or is
an officer, director, trustee or partner.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Indemnification of Officers and Directors. The Company's Amended Restated
Certificate of Incorporation, as amended (the 'Charter') contains a provision
which states that no director shall be personally liable for the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Another provision requires the Corporation to indemnify its current
and former directors and officers against any and all liabilities and expenses
incurred in connection with their service in such capacities. The provision
allows for the advancement of expenses to the persons mentioned above.
In addition, the Company's By-Laws provide that the Company must indemnify
directors and officers against liabilities incurred in their capacities. This
provision of the By-Laws (i) provides that the indemnification and other rights
provided by the Charter shall continue as to any person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such person; (ii) allows for
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advancement of expenses incurred by the officers and/or directors in connection
with the matter as to which they are seeking indemnification without a
preliminary determination of ultimate entitlement to indemnification, as long as
such person undertakes to repay such amount if it shall ultimately be determined
that such person was not entitled thereto; and (iii) states that the Corporation
has the power to make further provisions consistent with applicable law for
indemnification and advancement of expenses to directors, officers, employees
and agents.
The Company has entered into an Indemnity Agreement with each of its
Directors and executive officers. Pursuant to these Indemnity Agreements, the
Company has agreed to indemnify any such Director or officer (each, an
'Indemnitee') if an Indemnitee is a party to or threatened to be made a party to
or otherwise involved in any action, suit or proceeding, whether of a civil,
criminal, administrative or investigative nature (other than a proceeding by or
in the right of the Company), by reason of the fact that the Indemnitee is or
was a Director and/or officer of the Company or is or was serving at the request
of the Company as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against all expenses, judgments, settlements, fines and penalties actually and
reasonably incurred by such Indemnitee in the course of such action, suit or
proceeding, but only if an Indemnitee acted in good faith and in a manner which
he or she reasonably believed to be in or not opposed to the best interest of
the Company and, in the case of a criminal proceeding, had no reasonable cause
to believe that his or her conduct was unlawful. Pursuant to the Indemnity
Agreements, the Company has additionally agreed to indemnify any Indemnitee if
the Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any proceeding by or in the right of the Company, by reason of the
fact that the Indemnitee is or was a Director and/or officer of the Company or
is or was serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against all expenses, judgments, settlements, fines
and penalties actually and reasonably incurred by such Indemnitee in the course
of such proceeding, but only if an Indemnitee acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interest of the Company, except that the Company will not indemnify any
Indemnitee for expenses in respect of any claim issue or matter as to which such
Indemnitee has been adjudged to be liable to the Company.
The Merger Agreement provides that for a period of six (6) years following
the Effective Time of the Merger, the Company and the Parent shall indemnify all
present and former directors or officers of the Company and its subsidiaries
('Indemnified Parties') against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, 'Costs') incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time of the Merger, whether asserted or claimed prior
to, at or after the Effective Time of the Merger, to the fullest extent as would
have been permitted in their respective articles of organization or by-laws
consistent with applicable law, to the extent such Costs have not been paid for
by insurance and shall, in connection with defending against any action for
which indemnification is available hereunder, reimburse such Indemnified Parties
from time to time upon receipt of sufficient supporting documentation, for any
reasonable costs and expenses reasonably incurred by such Indemnified Parties;
provided that such reimbursement shall be conditioned upon such Indemnified
Parties' agreement promptly to return such amounts to the Company if a court of
competent jurisdiction shall ultimately determine that indemnification of such
Indemnified Parties is prohibited by applicable law. The Company will maintain
for a period of not less than six years from the Effective Time of the Merger,
the Company's current directors' and officers, insurance and indemnification
policy (or a policy providing substantially similar coverage) to the extent that
it provides coverage for events occurring prior to the Effective Time of the
Merger (the 'D&O Insurance') for all persons who are directors and officers of
the Company on the date of this Agreement; provided that the Company shall not
be required to spend as an annual premium for such D&O Insurance an amount in
excess of 200% of the annual premium paid for directors' and officers' insurance
in effect prior to the date of this Agreement; and provided further that the
Company shall nevertheless be obligated to provide such coverage as may be
obtained for such amount. The provisions of this Section are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which is filed herewith as
Exhibit 1.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of Purchaser to accept for payment or pay for Shares is subject to:
(i) the condition that there shall be validly tendered in accordance with the
terms of the Offer prior to the expiration date of the Offer and not withdrawn a
number of Shares which, together with the Shares then owned by the Buyer and
MergerCo, represents at least 51% of the total number of outstanding Shares
assuming the exercise of all outstanding options, rights and convertible
securities (if any) and the issuance of all Shares that the Company is then
obligated to issue (such total number of outstanding or issuable Shares being
hereinafter referred to as the 'Fully Diluted Shares') (the 'Minimum
Condition'), (ii) the expiration or termination of all waiting periods imposed
by The Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the 'HSR Act') and
(iii) the other conditions set forth in Annex I of the Merger Agreement
(collectively, the 'Offer Conditions'). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The initial expiration date of
the Offer shall be twenty (20) business days after commencement. Buyer and
MergerCo agree that if all of the Offer Conditions are not satisfied on such
initial expiration date of the Offer then, provided that the MergerCo
determines, in its reasonable discretion, that all such Conditions are
reasonably capable of being satisfied and subject to SEC rules with respect to
extension of time periods, MergerCo shall extend the Offer, without consent of
the Company, from time to time until such Conditions are satisfied or waived;
provided, that Offeror shall not be required to extend the Offer beyond April
30, 1998, unless any necessary approvals under the HSR Act shall not have been
received by such date, in which case MergerCo shall not be required to extend
the Offer beyond the earlier of (i) ten (10) days following receipt of such
approvals and (ii) June 30, 1998.
Certain Conditions of the Offer. Notwithstanding any other provision of
the Offer or the Merger Agreement, and subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) relating to Purchaser's
obligation to pay for or return tendered shares after termination of the Offer,
Parent and Purchaser shall not be required to accept for payment or pay for any
Shares tendered pursuant to the Offer and may delay acceptance for payment or
may terminate the offer, if (i) the Minimum Condition has not been satisfied;
(ii) any applicable waiting period under the HSR Act has not expired or
terminated; or (iii) at any time after February 28, 1998 and before acceptance
for payment of any Shares, any of the following events shall occur and be
continuing: (a) there shall be instituted or pending by any governmental entity
any suit, action or proceeding (i) challenging the acquisition by Parent or
Purchaser of any Shares under the Offer, or seeking to restrain or prohibit the
making or consummation of the Offer or the Merger, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company, Parent or any of
Parent's subsidiaries of a material portion of the business or assets of the
Company or Parent and its subsidiaries, taken as a whole, or to compel the
Company or Parent to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and its subsidiaries, taken as a
whole, in each case as a result of the Offer or the Merger or (iii) seeking to
impose material limitations on the ability of Parent or Purchaser to acquire or
hold, or exercise full rights of ownership of, any Shares to be accepted for
payment pursuant to the Offer including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the Company
or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company; (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 or court,
other than the application to the Offer or the Merger of applicable waiting
periods under the HSR Act, that would result in any of the consequences referred
to in clauses (i) through (iv) of paragraph (a) above; (c) any of the
representations and warranties of the Company contained in the Merger Agreement
shall not be true and correct at and as of the date of consummation of the Offer
(except to the extent such representations and warranties speak to an earlier
date), as if made at and as of the date of consummation of the Offer, in each
case except as contemplated or permitted by the Merger Agreement and except, in
the case of any such breach when such breach would not have, individually or in
the aggregate, a Material Adverse Effect (as defined in 'Fees and Expenses')
with respect to the Company or materially affect the ability of the Company to
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consummate the Merger or the Offeror to accept for payment or pay for shares of
Company Common Stock pursuant to the Offer; (d) the Company shall have failed to
perform the obligations required to be performed by it under the Agreement at or
prior to the date of expiration of the Offer, including but not limited to its
obligations pursuant to Section 7.6 thereof, except for such failures to perform
as have not had or would not individually or in the aggregate, have a Material
Adverse Effect with respect to the Company or materially adversely affect the
ability of the Company to consummate the Merger or the Offeror to accept for
payment or pay for Shares pursuant to the Offer; (e) the Board of Directors of
the Company or any committee thereof shall have (i) withdrawn, modified or
amended in any respect adverse to Parent or Purchaser its approval or
recommendation of the Offer or the Merger, (ii) recommended or approved any
Transaction Proposal (as defined in 'Transaction Proposals') from a person other
than Parent, Purchaser or any of their respective affiliates, (iii) failed to
publicly announce, within ten (10) business days after the occurrence of a
Transaction Proposal, its opposition to such Transaction Proposal, or amended,
modified or withdrawn its opposition to any Transaction Proposal in any manner
adverse to Parent or Purchaser or failed to promptly reaffirm its recommendation
of the Offer or the Merger at the Parent's request, or (iv) resolved to do any
of the foregoing; (f) the Merger Agreement shall have been terminated in
accordance with its terms; or (g)(i) it shall have been publicly disclosed that
any person, entity or 'group' (as defined in Section 13(d)(3) of the Securities
Act of 1934 (the 'Exchange Act)), shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of more
than 15% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, other than Parent or an affiliate or any person or group existing
which on the date of the Merger Agreement beneficially owned more than 15% of
any class or series of capital stock of the Company or (ii) the Company shall
have entered into a definitive agreement or agreement in principle with any
person with respect to a Transaction Proposal or similar business combination
with the Company or any subsidiary, which in the reasonable judgment of Parent
or Purchaser in any such case, and regardless of the circumstances giving rise
to such condition, makes it inadvisable to proceed with the Offer and/or with
such acceptance for payment.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Parent and Purchaser and may, subject to the terms of the Merger
Agreement, be waived by Parent and Purchaser in whole or in part at any time and
from time to time in the reasonable discretion of Parent and Purchaser.
Board of Directors. The Merger Agreement provides that effective upon the
acceptance for payment by Purchaser of Shares pursuant to the Offer such that
the Parent or Purchaser shall own at least a majority of the Shares on a fully
diluted basis, the Parent will be entitled to designate the number of Directors,
rounded up to the next whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors (giving effect to the election of any additional directors pursuant
to this provision of the Merger Agreement) and (ii) the percentage that the
number of Shares owned by Purchaser or the Parent (including Shares accepted for
payment) bears to the total number of Shares outstanding, and the Company will
take all necessary action to cause the Parent's designees to be elected or
appointed to the Company's Board of Directors. The Merger Agreement also
provides that the Company will use its best efforts to cause individuals
designated by the Parent to constitute the same percentage as such individuals
represent on the Company's Board of Directors of each committee of the Board
(other than committees established to take action under the Merger Agreement),
each board of directors of each subsidiary of the Company and each committee of
each such board. The foregoing provisions of the Merger Agreement shall not
limit any rights which Parent, Purchaser or their affiliates may have as holders
or beneficial owners of Shares with respect to the election of directors or
otherwise. The Company's obligations to appoint designees to the Board of
Directors are subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Subject to applicable law, the Company has agreed to
take all action requested by Parent and Purchaser to effect such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, which Information Statement is attached as Appendix A to
the Schedule 14D-9. The Merger Agreement further provides that in the event that
Purchaser's designees are elected to the Board of Directors of the Company,
until the effective time of the Merger the Board of Directors of the Company
will have at least two (2) directors who are directors on the date of the Merger
Agreement and who are not officers of the Company or any of its subsidiaries.
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Vote Required to Approve Merger. The Delaware General Corporate Law
('DGCL') requires, among other things, that the adoption of any plan of merger
or consolidation of the Company must be approved by the Board of Directors of
the Company and, if the 'short form' merger procedure described below is not
available, by the holders of a majority of the Company's outstanding Shares. The
Board of Directors of the Company has approved the Offer, the Merger and the
Merger Agreement; consequently, the only additional action of the Company that
may be necessary to effect the Merger is approval by such 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 outstanding Shares
(including any Shares owned by Purchaser), is generally required to approve the
Merger. If Purchaser acquires, through the Offer or otherwise, voting power with
respect to at least a majority of the outstanding Shares (which would be the
case if the Minimum Condition were satisfied and Purchaser were to accept for
payment Shares tendered pursuant to the Offer), it would have sufficient voting
power to effect a merger of the Company with and into Purchaser without the vote
of any other stockholders of the Company. However, the DGCL also provides that
if a parent company owns at least 90% of each class of stock of a subsidiary,
the parent company can effect a short-form merger with that subsidiary without
the action of the other stockholders of the subsidiary. Accordingly, if, as a
result of the Offer or otherwise, Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, Purchaser could (and, under the
Merger Agreement, is required to) effect the Merger using the 'short-form'
merger procedures without prior notice to, or any action by, any other
stockholder of the Company.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction of certain conditions, including the following: (1)
if required by applicable law, the Merger Agreement having been approved and
adopted by the affirmative vote of holders of a majority of the outstanding
Shares, (2) the expiration or termination of the applicable waiting period under
the HSR Act; (3) no temporary restraining order, preliminary or permanent
injunction or other order issued by any Federal, state or local government or
any court, administrative agency or commission or other governmental authority
(a 'Governmental Entity') or other legal restraint or prohibition preventing the
consummation of the Merger being in effect; provided, however, that the parties
shall, subject to the last sentence of Section 7.3(a) of the Merger Agreement,
use their best efforts to have any such injunction, order, restraint or
prohibition or other order vacated; and (4) no statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Government Entity of
competent jurisdiction which prohibits consummation of the Merger.
Termination of the Merger Agreement The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the 'Effective Time'),
whether before or after approval by the stockholders of the Company (1) by
mutual written consent of Purchaser and the Company; (2) by either Purchaser or
the Company if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting or if there shall be in effect any other legal restraint or
prohibition preventing the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such order, decree or ruling or other
action has become final and nonappealable (other than due to the failure of the
party seeking to terminate the Merger Agreement to perform its obligations
thereunder required to be performed at or prior to the Effective Time); (3) by
the Company, if Purchaser has not (a) commenced the Offer within five business
days after the initial public announcement of Parent's intention to commence the
Offer or (b) accepted for payment any Shares pursuant to the Offer prior to
April 30, 1998 (other than due to the failure of the Company to perform its
obligations thereunder) or if any necessary approvals required under the HSR Act
shall not have been obtained by April 30, 1998, on or prior to the earlier of
(A) ten (10) days after receipt of all necessary approvals under the HSR Act or
(B) July 15, 1998; (4) by the Parent or Purchaser in the event of a material
breach or failure to perform in any material respect by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which cannot be or has not been cured within ten (10) days after the
giving of written notice to the Company; (5) by the Company, upon its execution,
prior to the Parent or Purchaser's purchase of Shares pursuant to the Offer, of
a binding agreement with a third party with respect to a Transaction Proposal
(as defined below in 'Transaction Proposals'), provided that it has complied
with all provisions of the Agreement, including the notice provisions described
in 'Transaction Proposals' below, and that it pays the Termination Fee (as
defined below) as provided in the terms of the Merger Agreement described below
in 'Fees and Expenses;' (6) by the Company in the event of a material breach or
failure to perform in any material respect by Purchaser or the Parent of any
representation, warranty, covenant or other
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agreement contained in the Merger Agreement which cannot be or has not been
cured within ten (10) days after the giving of written notice to the Parent and
Purchaser; or (7) by Purchaser if Purchaser terminates the Offer as a result of
the occurrence of any event set forth under 'Certain Conditions of the Offer.'
Transaction Proposals. The Merger Agreement provides that, until the
termination of the Merger Agreement, neither the Company nor any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of its
Subsidiaries) will directly or indirectly initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate knowingly, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to any
Transaction Proposal (as defined below) or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal or authorize or permit any of its officers, directors, or
employees of any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
subsidiaries to take any such action; provided, however, that nothing contained
in the Merger Agreement shall prohibit the Board of Directors of the Company,
including any special committee thereof prior to the acceptance for payment of
the Shares pursuant to the Offer from furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide Transaction Proposal (as defined below), in respect of which
such person or entity has all of the necessary funds or commitments therefor.
The Merger Agreement defines 'Transaction Proposal' as any of the following
(other than the transactions between the Company and Purchaser contemplated by
the Offer and the Merger Agreement) involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, recapitalization,
business combination, or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for, or the acquisition (or right to acquire) of beneficial ownership by any
person, group or entity, other than a person, group or entity (as defined under
Section 13(d) of the Exchange Act) of 20% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith; (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing; or (v) any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to Parent of the transactions contemplated
hereby. The Merger Agreement provides further that if a Transaction Proposal
exists and the Board of Directors of the Company, after consultation with its
financial advisors and after consultation with and receipt of advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel) determines in good faith that such action is
necessary for the Board of Directors to comply with its fiduciary duties to
stockholders under applicable law, the Board of Directors of the Company may, at
any time prior to the acceptance for payment of Shares pursuant to the Offer and
subject to the notification requirements described below: (i) withdraw or modify
its recommendation of the Offer, the Merger or the Merger Agreement and (ii)
make to the Company's stockholders any recommendation and related filing with
the Commission as required by Rule 14e-2 and 14d-9 under the Exchange Act with
respect to any tender offer, or take any other legally required action with
respect to such tender offer (including, without limitation, the making of
public disclosures as may be necessary or reasonably advisable under applicable
securities laws).
Prior to the Board of Directors withdrawing or modifying its approval or
recommendation of the Offer, this Agreement or the Merger, approving or
recommending a Transaction Proposal, or entering into an agreement with respect
to a Transaction Proposal, the Board of Directors shall provide Parent with a
written notice (a 'Notice of Transaction Proposal') advising Parent that the
Board of Directors has received a Transaction Proposal, specifying the material
terms and conditions of such Transaction Proposal (unless prohibited from doing
so by the terms thereof) and identifying the person making such transaction
Proposal (unless prohibited from doing so by the terms thereof), and neither the
Company nor any subsidiary shall enter into an agreement with respect to a
Transaction Proposal until midnight three business days after the day on which
the Notice of Transaction Proposal was given to Parent. In addition, if the
Company proposes to enter into an agreement with respect to any Transaction
Proposal, it shall concurrently with entering into such agreement pay, or cause
to be
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paid, to Parent its expenses and fees and the Termination Fee (as provided in
and defined in 'Fees and Expenses' below).
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
will be paid by the party incurring such fees or expenses. The Merger Agreement
further provides that, subject to the last sentence of this paragraph, the
Company will pay to Purchaser the amount equal to $5,000,000 in cash to be paid
pursuant to the Merger Agreement (the 'Termination Fee') under the following
circumstances: (1) if the Company terminates the Merger Agreement in accordance
with the provisions described above in clause 5 of 'Termination of the Merger
Agreement' or (2) if Parent or Purchaser terminates the Merger Agreement in
accordance with the provisions described above in clause 4 of 'Termination of
the Merger Agreement' or in accordance with the provisions described above in
clause 7 of 'Termination of the Merger Agreement' if Purchaser's failure to
accept Shares for payment results from the failure of the Minimum Condition to
be satisfied or the occurrence of any of the events set forth in subparagraphs
(c), (d) or (f) of 'Certain Conditions of the Merger.' Notwithstanding the
foregoing, the Merger Agreement provides that no Termination Fee will be payable
if such termination results from the Company's breach of certain representations
and warranties relating to the absence of a Material Adverse Change (as defined
below) with respect to the Company. The Merger Agreement defines the term
Material Adverse Change to mean, when used in connection with the Company, any
change or effect that either individually or in the aggregate with all such
other changes is materially adverse to the business, financial condition, or
results of operations of the Company and its subsidiaries taken as a whole;
provided, however, that no Material Adverse Change will be deemed to have
occurred as a result solely of general economic conditions affecting generally
the industry in which the Company competes and general market conditions in the
United States.
In addition, in connection with any termination of the Merger Agreement
under any circumstance in which the Termination Fee would be payable, the Merger
Agreement provides that the Company will also be obligated, simultaneously with
such termination, to reimburse Purchaser for all out-of-pocket expenses and fees
in an aggregate amount not to exceed $1.5 million.
Conduct of Business by the Company. The Merger Agreement provides that
until the earlier of the Effective Time of the Merger and consummation of the
Offer, the Company will, and will cause its Subsidiaries to, act and carry on
their respective businesses in the usual, regular and ordinary course of
business consistent with past practice and, to the extent consistent therewith,
use their respective reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them and to preserve goodwill. Without limiting the generality of
the foregoing, during the period from the date of the Merger Agreement until the
earlier of the Effective Time of the Merger and consummation of the Offer, the
Company will not, and will not permit any of its Subsidiaries to, without
Purchaser's prior written consent: (a) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock, (b)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock (c) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities, except for the acquisition of Shares from holders of
Company Stock Options in full or partial payment of the exercise price payable
by such holder upon exercise of Company Stock Options outstanding on the date of
the Merger Agreement; (d) authorize for issuance, issue, deliver, sell, pledge
or otherwise encumber any shares of its capital stock or the capital stock of
any of its Subsidiaries, any other voting securities or any securities
convertible into, any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) (other than
an increase in the number of shares subject to the Stock Option Plan pursuant to
existing contractual obligations and the issuance of Shares upon the exercise of
Company Stock Options outstanding on the date of the Merger Agreement and in
accordance with their present terms); (e) amend its Charter, By-laws or other
comparable charter or organizational documents; (f) acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof material to
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the Company; (g) other than as specifically permitted by the Merger Agreement,
sell, lease, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets other than any such
properties or assets the value of which do not exceed $2.0 million individually
and $10.0 million in the aggregate, except sales of inventory, in the ordinary
course of business consistent with past practice; (h) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any 'keep well' or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings and for lease obligations, in each case incurred in the
ordinary course of business consistent with past practice; (i) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned Subsidiary of the
Company, other than loans to employees in the ordinary course of business not to
exceed $25,000 in any one case or $500,000 in the aggregate; (j) pay, discharge
or satisfy any claims (including claims of stockholders), liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction, (i) of
liabilities or obligations in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the date hereof
or (ii) claims settled or compromised to the extent permitted under clause (n)
below, or waive, release, grant, or transfer any rights of material value or
modify or change in any material respect any existing license, lease, permit,
contract or other document, other than in the ordinary course of business
consistent with past practice; (k) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization; (1) enter into any new collective bargaining agreement; (m)
change any material accounting principle used by it; (n) settle or compromise
any litigation (whether or not commenced prior to the date of the Merger
Agreement) other than settlements or compromises of litigation where the amount
paid (after giving effect to insurance proceeds actually received) in settlement
or compromise is not material to the Company; (o) make any new capital
expenditure or expenditures, other than capital expenditures not to exceed in
the aggregate, the amounts provided for in the capital budget of the Company
provided to Purchaser; (p) neither the Company nor any of its Subsidiaries
shall, except in the ordinary course of business and except as otherwise
permitted by this Agreement, modify, amend or terminate any contract or
agreement set forth in the SEC Documents filed and publicly available prior to
the date of this Agreement to which the company or any Subsidiary is a party or
waive, release or assign any material rights or claims; (q) neither the Company
nor any of its Subsidiaries shall: (i) enter into any employment agreement with
any officer, director or key employee of the Company or any of its subsidiaries;
or (ii) hire or agree to hire any new or additional key employees or officers;
(r) neither the Company nor any of its Subsidiaries shall make any Tax election
or settle or compromise any material Tax liability; (s) neither the Company nor
any of its Subsidiaries will voluntarily take, or voluntarily agree to commit to
take, any action that would make any representation or warranty of the Company
contained herein inaccurate in any respect at, or as of any time prior to, the
Effective Time; or (t) authorize any of, or commit or agree to take any of, the
foregoing actions;
Stock Options and Warrants. The Merger Agreement provides that as soon as
practicable following the date thereof, the Board of Directors of the Company
(or, if appropriate, any committee administering the Company Stock Option Plans,
as defined below) will adopt such resolutions or take such other actions if any,
as may be reasonably required to adjust the terms of all outstanding options to
purchase the Company Stock Options granted under the Stock Option Plan, whether
vested or unvested, as necessary to provide that, at the Effective Time, each
Stock Option outstanding immediately prior to the Effective Time will vest as a
consequence of the Merger and be canceled in exchange for a payment from the
Company after the Merger (subject to any applicable withholding taxes) equal to
the product of (a) the total number of shares of Company Common Stock subject to
such Company Stock Option and (b) the excess of $8.25 over the exercise price
per share of Company Common Stock subject to such Company Stock Option and
applicable withholding taxes, payable in cash immediately following the
Effective Time of the Merger, except that payment with respect to options
accellerated as a result of the Merger will be payable (i) on the first
anniversary of the Effective Time if the optionee is an employee of the Company
on such anniversary, (ii) on the date of termination of the optionee if
employment is terminated by the Company without Cause or by the optionee after
reaching age 62 or for Good Reason and (iii) shall not be paid and shall be
forfeited if employment is terminated for Cause or by optionee prior to reaching
age 62 for any reason other than Good Reason. The Stock Option Plan and any
other plan, program or arrangement providing
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for the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary shall terminate as of the Effective Time of the
Merger, and the Company shall ensure that, following the Effective Time of the
Merger, no holder of a Company Stock Option nor any participant in any Stock
Option Plan shall have any right thereunder to acquire equity securities of the
Company following the Merger. Also, each outstanding warrant shall at the
Effective Time automatically without further action of the Company or the
holders thereof, be converted into the right to receive an amount equal to the
difference between the Merger Consideration and the exercise price of such
warrant.
Additional Undertakings. Upon the terms and subject to the conditions set
forth in the Merger Agreement, each of the parties has agreed to use its
reasonable best 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, the Merger and
the other transactions contemplated by the Merger Agreement. The Parent,
Purchaser and the Company will use their reasonable best efforts and cooperate
with one another (i) in promptly determining whether any filings are required to
be made or consents, approvals, waivers, licenses, permits or authorizations are
required to be obtained (or, which if not obtained, would result in a breach or
violation, or an event of default, termination or acceleration of any agreement
or any put right under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by the Merger, including the Offer and the Merger and (ii) in
promptly making any such filings, in furnishing information required in
connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. Notwithstanding the foregoing, or any
other covenant contained in the Merger Agreement, in connection with the receipt
of any necessary approvals under the HSR Act, neither the Company nor any of its
Subsidiaries will be entitled to divest or hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to, or
its ability to retain, the Company or any of its Subsidiaries or any material
portions thereof or any of the businesses, product lines, properties or assets
of the Company or any of its subsidiaries, without Purchaser's prior written
consent. The Merger Agreement requires the Company and Parent to make, subject
to the condition that the transactions contemplated by the Merger Agreement
actually occur, any undertakings (including undertakings to make divestitures,
provided, in any case, that such divestitures need not themselves be effective
or made until after the transactions contemplated hereby actually occur)
required in order to comply with the antitrust requirements or laws of any
governmental entity, including the HSR Act, in connection with the transactions
contemplated by this Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties, including representations from the
Company to the Parent and Purchaser with respect to, among other things, its
organization, subsidiaries, capitalization, authorization and validity of the
Merger Agreement, consents and approvals, public filings and financial
statements, undisclosed liabilities, conduct of business and absence of certain
adverse changes or events, litigation, labor matters, compliance with laws,
employee benefit plans, tax matters, employee benefit plans, environmental
matters, material contracts, brokers and finders and opinion of financial
advisor, recommendation of the Board of Directors, required vote of Company
shareholders, state takeover statutes, intellectual property, title to
properties and products liability.
Procedure for Termination, Amendment, Extension or Waiver. A termination,
amendment, extension or waiver will, in order to be effective, require, in the
case of Purchaser and the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
Appraisal Rights. Under Section 262 of the DCGL, stockholders of the
Company will have certain dissenters' rights of appraisal. Stockholders must
follow the procedures set forth therein to be entitled to have their Shares
appraised by the Delaware Court of Chancery and to receive payment in cash of
the 'fair value' of such shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. Stockholders who consider seeking
appraisal, if available, should be aware that the fair value of their Shares as
determined under Section 262 could be more than, less than or equal to the
consideration to be received by stockholders in the Merger.
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Where a proposed merger for which statutory appraisal rights are available
is submitted for approval at a meeting of stockholders, Section 262 requires
that the company, not less than 20 days prior to such meeting, notify each of
its stockholders who was such on the record date for such meeting with respect
to the shares for which statutory appraisal rights are available, that statutory
appraisal rights are so available, and must include in such notice a copy of
Section 262. If a merger for which statutory appraisal rights are available is
approved without a vote of stockholders pursuant to the short form merger
procedure set forth in Section 253 of the DGCL, Section 262 requires the
surviving corporation, either before the effective date or within 10 days
thereafter, to notify each of the stockholders entitled to appraisal rights of
the effective date of the merger and that appraisal rights are available for any
or all of the shares of the Company, and to include in such notice a copy of
Section 262. This Solicitation/Recommendation Statement constitutes such notice
to the holders of the Shares and the provisions of Section 262 are attached to
this Solicitation/Recommendation Statement as Exhibit 3. Any Company stockholder
who wishes to exercise statutory appraisal rights with respect to all or a
portion of the Shares held by such stockholder or who wishes to preserve the
right to do so should review the following discussion and Exhibit 2 carefully,
as the failure to timely and properly comply with the procedures specified will
result in the loss of statutory appraisal rights under Delaware law.
If the proposed Merger is submitted for approval of a meeting of
stockholders, a holder of Shares wishing to exercise statutory appraisal rights
must (i) deliver to the Company prior to the vote on the Merger Agreement at the
Special Meeting a written demand for appraisal of such holder's Shares and (ii)
not vote in favor of adoption of the Merger Agreement. A holder of Shares
wishing to exercise such rights must be the record holder of such Shares on the
date the written demand is made and must continue to hold such shares of record
through the Effective Time. Accordingly, a holder of the Shares who is a record
holder on the date that the demand is made but who subsequently transfers such
Shares prior to the Effective Time will lose such holder's right to appraisal
with respect to the Shares transferred.
A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on the stock
certificate. If the Shares in question are held in a fiduciary or representative
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of record by more
than one person as in a joint tenancy or a tenancy in common, the demand should
be executed by or on behalf of all joint owners. An authorized agent, including
one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
agent for such owner or owners. A record holder such as a broker who holds
Shares as nominee for several beneficial owners may exercise statutory appraisal
rights with respect to the Shares held by one or more beneficial owners without
exercising such rights with respect to other beneficial owners; in such case,
the written demand should set forth the number of Shares as to which appraisal
is sought and, where no number of Shares is expressly mentioned, the demand will
be presumed to cover all Shares held in the name of the record owner.
Stockholders who hold the Shares in brokerage accounts or other nominee form and
who wish to assert statutory appraisal rights are urged to consult with their
brokers to determine the appropriate procedures to be followed in making a
demand for appraisal by such a nominee. All written demands for appraisal should
be sent or delivered to the Company and addressed to the Secretary.
Any holder of the Shares who has duly demanded an appraisal in compliance
with Section 262 will not, from and after the Effective Time, be entitled to
vote the Shares subject to the demand for any purpose or be entitled to the
payment of dividends or other distributions on the Shares (except for dividends
or distributions payable to holders of record of the Shares of a record date
prior to the Effective Time). After the Effective Time, no Shares will be
outstanding.
Within 10 days after the Effective Time the Surviving Corporation will be
required to notify each stockholder who has complied with the provisions of
Section 262 and who has not voted in favor of adoption of the Merger Agreement
of the date that the Merger became effective, or the Effective Time. Within 120
days after the Effective Time, any stockholder who has complied with the
requirements for exercise of statutory appraisal rights will be entitled, upon
written request, to receive from the Surviving Corporation a statement setting
forth the aggregate number of Shares not voted in favor of the Merger Agreement
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such Shares. Such statements must be
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mailed within 10 days after a written request therefor has been received by the
Surviving Corporation or within 10 days after the expiration of the period for
delivery of demands, whichever is later.
The foregoing is only a partial summary of sections 262, inclusive, of the
DCGL and is qualified in its entirety by reference to the provisions thereof,
the full text of which is filed herewith as Exhibit 3.
STOCK PURCHASE AGREEMENT
The following is a summary of certain provisions of the Stock Purchase
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Stock Purchase Agreement, a
copy of which is filed with the Commission as Exhibit 4 to the Schedule 14D-9
and is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Stock Purchase Agreement.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed to sell,
transfer and deliver all Shares owned by them of the Company at the Closing at a
price per share equal to $8.25 or such higher per share price as the Purchaser
may have paid pursuant to the Offer. The Major Sellers have also agreed in the
Stock Purchase Agreement that, at any meeting of the stockholders of the
Company, each Major Seller shall (a) vote in favor of the Merger or any other
transaction contemplated by the Merger Agreement, (b) vote against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement and (c) vote against any action or agreement that would impede,
interfere with or discourage the Offer or the Merger.
Each Major Seller in the Stock Purchase Agreement has granted the Purchaser
as irrevocable proxy and irrevocably appoints the Purchaser or its designees,
with full power of substitution, its attorney and proxy to vote all such
Seller's Shares in respect of any of the matters set forth in clauses (a)
through (c) above and in the manner specified in such clauses, provided,
however, that certain conditions are met.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed that in
the event that within 12 months following the date of the expiration of the
Offer, a Seller shall sell, transfer or otherwise commit to dispose any or all
of such Shares to any party other than the Parent or an affiliate of the Parent
(a 'Sale') and realize a Profit (as defined below) from such Sale, then such
Seller shall pay to the Parent an amount equal to the Profit. Such amount shall
be paid to the Parent promptly following the receipt of proceeds by the Seller
or its affiliates from such Sale. The term 'Profit' shall mean the excess, if
any, of (a) the aggregate consideration received by the Seller or its affiliates
in connection with the Sale over (b) the number of Shares sold, transferred or
disposed of in connection with the Sale multiplied by the Offer Price.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed not to,
(i) sell, transfer, pledge, assign or otherwise dispose of their Shares; (ii)
grant any proxies, deposit their Shares into a voting trust or enter into a
voting agreement with respect to any of their Shares; or (iii) solicit,
encourage, participate in or initiate discussions or negotiations with, or
provide information to, any person, other than Parent or any affiliate of
Parent, concerning any merger, sale of assets, sale of shares of capital stock
or similar transactions involving the Company.
The Stock Purchase Agreement, and all rights and obligations of the parties
thereunder, terminates upon the earliest of (i) the purchase of Shares pursuant
to the Offer, (ii) the termination of the Merger Agreement in accordance with
its terms and (iii) 12 months from the date of the Stock Purchase Agreement.
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CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Confidentiality Agreement, a
copy of which is filed with the Commission as Exhibit 5 to the Schedule 14D-9
and is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Confidentiality Agreement.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent has agreed, subject to certain exceptions, to
keep confidential all nonpublic, confidential or proprietary information
concerning the Company which is furnished to Parent by or on behalf of the
Company (the 'Confidential Information'), and to use the Confidential
Information solely for the purpose of evaluating a possible transaction
involving the Company and Parent and will not be used in any way detrimental to
the Company.
Parent has further agreed that, for a period of two years from the date of
the Confidentiality Agreement, unless Parent receives the prior written consent
of the Company, Parent will not, directly or indirectly, solicit any management
employee of the Company for employment. Parent shall also not disclose to any
person without the prior consent of the Company (i) that the Confidentiality
Agreement has ben entered into; (ii) that any negotiations are taking place
concerning a possible Transaction involving the Company; or (iii) that Parent
has requested or received Confidential Information from the Company.
In the Event that the Parent or its Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, investigative demand or similar process) to disclose any
Confidential Information, Parent has agreed to give the Company prompt written
notice of such request or requirement so that the Company may seek an
appropriate protective order or other remedy and waive Parent's compliance with
the Confidentiality Agreement. If such protective order is not obtained or the
Company does not waive compliance with the Confidentiality Agreement, Parent
may, upon the advice of legal counsel, disclose Confidential Information to a
tribunal provided, however, that Parent gives the Company notice of the
information to be disclosed as far in advance as practicable and Parent uses
reasonable efforts (at the Company's expense) to obtain reliable assurance that
the information disclosed will be accorded confidential treatment by the
tribunal.
EMPLOYMENT AGREEMENTS
The Company entered into an Addendum to Employment Agreement, effective as
of February 25, 1997, with Meeta R. Vyas, the Vice Chairman and Chief Executive
Officer of the Company amending the Employment Agreement dated August 11, 1997.
Pursuant to the Addendum, Ms. Vyas may voluntarily terminate her employment with
the Company if, following a 'Change of Control' (as defined in the Employment
Agreement, dated as of August 11, 1997, between the Company and Ms. Vyas), Ms.
Vyas's duties, responsibilities, authority, functions or title with the Company
or any surviving entity, or with the parent entity of the Company or any
surviving entity, are not consistent with the title, duties and responsibility
of the Chief Executive Officer of a public company which is not a subsidiary of
any other company, and Ms. Vyas will be entitled to receive the same
compensation as if she had been terminated other than for cause.
The Company entered into an Amendment No. 1 to Employment Agreement with
Timothy J. McGinnity on January 20, 1998. As amended, the agreement provides
that, in the event of termination of employment other than for cause during the
one-year period following a 'Change of Control' in the Company (as defined in
such amendment), Mr. McGinnity will be entitled to receive payment of his salary
until the earlier of 18 months after the date of termination or the date Mr.
McGinnity obtains a position with another employer at a substantially equivalent
annual base salary as that paid pursuant to Mr. McGinnity's Employment
Agreement.
The Company entered into an Amendment No. 1 to Employment Agreement with
Steven M. Billick on January 20, 1998. As amended, the agreement provides that,
in the event of termination of employment other than for cause during the
one-year period following a 'Change of Control' in the Company (as defined in
such amendment), Mr. Billick will be entitled to receive payment of his salary
until the earlier of 18 months after the date of termination or the date Mr.
Billick obtains a position with another employer at a substantially equivalent
annual base salary as that paid pursuant to Mr. Billick's Employment Agreement.
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All of the employment agreements and salary continuation agreements between
the Company and its executive officers contain customary noncompetition and
non-disclosure provisions.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors.
THE BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT EACH OF THE OFFER AND THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
(b) Background; Reasons for the Recommendation.
Background. During the Fall of 1997, Thomas H. Lee Company was approached
by a party interested in a possible acquisition of the Company. The Company
executed a confidentiality agreement with the third party and the third party
performed due diligence on the Company. On October 17, 1997, the Company engaged
Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ') to serve as its
financial advisor in connection with a potential sale of the Company to such
third party. Shortly thereafter, the third party informed the Company that it
was no longer interested in pursuing a transaction due to the third party's
inability to reconcile issues concerning its partner in the proposed
transaction.
Thomas H. Lee Company was next approached in December of 1997 by two other
parties interested in a possible acquisition of the Company, and by a third
interested party in January 1998. The Company executed confidentiality
agreements with two of these interested parties. During January 1998, these
parties met with members of the Board of Directors of the Company, met with
management and performed due diligence on the Company. On February 2, 1998, the
Company's engagement of DLJ was amended so as to allow it to serve as the
Company's financial advisor in connection with a potential sale of the Company
to any of the interested parties. DLJ reported that it had also received an
inquiry from an additional interested party regarding a possible acquisition of
the Company. The Board of Directors of the Company formed a Special Committee
consisting of Messrs. Carmichael, Jones and Schoen (who was designated as
Chairman of the Special Committee) to coordinate with DLJ on its discussions
with interested parties.
Subsequent to this meeting, an additional interested party contacted Thomas
H. Lee Company concerning a possible acquisition of the Company and on February
9, 1998, representatives of Morgan Stanley & Co. (Parent's financial advisor)
first contacted Thomas H. Lee Company to discuss a possible acquisition of the
Company and another company in which Thomas H. Lee Company had a significant
equity interest.
On February 11, 1998, representatives of Morgan Stanley and representatives
of Parent met with representatives of Thomas H. Lee Company during which they
discussed a possible acquisition of the Company.
On February 12, 1998, the Special Committee met telephonically to discuss
the status of discussions with interested third parties.
On February 17, 1998, representatives of Morgan Stanley discussed with
directors of the Company via telephone the scope of confidential information the
Company would afford Parent. The Company and Parent entered into a
confidentiality agreement on February 17, 1998.
During the week of February 16, 1998, five parties remained interested and
several parties who previously signed confidentiality agreements engaged in
extensive due diligence on the Company. Also, several of the interested parties,
and their potential financing sources, met with management of the Company.
On February 20, 1998, representatives of Morgan Stanley and Parent met with
the Company's Chief Executive Officer and Vice Chairman and representatives of
DLJ at DLJ's offices in New York to perform due diligence on the Company. Later
that day, Morgan Stanley expressed Parent's serious interest in a possible
acquisition of the Company. As a result of this interest and Parent's
discussions to acquire the other company in which Thomas H. Lee Company had a
significant interest, of which Mr. Schoen is also a director, Mr. Schoen
resigned from the Special Committee on February 20, 1998.
On February 22, 1998, the Special Committee (Messrs. Carmichael and Jones)
met telephonically with DLJ to discuss the status of discussions with various
interested parties. The Special Committee instructed DLJ to seek definitive
proposals for an acquisition of the Company from all interested parties by
February 26 or 27, 1998,
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depending upon DLJ's discussions with the interested parties and the interested
parties' ability to meet this timing.
On February 23, 1998, in conversations with the three parties who were
actively engaged in or substantially completed with their due diligence on the
Company, DLJ advised such parties that they would be receiving a draft Merger
Agreement and requested definitive proposals by February 27, 1998. Between
February 23, 1998 and February 25, 1998, DLJ had numerous conversations with the
three interested parties who indicated a continued interest in acquiring the
Company and these interested parties had meetings with management and continued
their due diligence on the Company.
On February 24, 1998, the Board of Directors of the Company discussed the
potential sale of the Company. DLJ updated the Board on the status of the
interested parties' review of the Company.
On February 25 and 26, 1998, counsel for two of the interested parties,
including Parent, provided proposed comments on the draft Merger Agreement
previously provided to them. On February 26, 1998, Counsel to the Special
Committee met telephonically with DLJ and the Special Committee to summarize the
terms and conditions proposed by these two interested parties. Both proposals
contemplated that the shareholders of the Company affiliated with Thomas H. Lee
Company (the 'Lee Stockholders') would execute, at the time of the Company's
execution of the Merger Agreement, an irrevocable proxy as well as an option to
purchase the Lee Stockholders' shares at a price equal to the per share
consideration offered to be paid by such party in the acquisition of the
Company.
On February 26, 1998, DLJ instructed the parties to provide their final and
best offers by 5:00 p.m. on February 27, 1998, at which time the Special
Committee would meet.
On February 27, 1998, counsel for the third interested party provided
comments on the draft Merger Agreement to counsel for the Special Committee. The
terms and conditions reflected in this third party's proposal included an
irrevocable proxy and option to purchase the Lee Stockholders' Shares.
On February 26 and 27, 1998, DLJ and the Special Committee's counsel
negotiated the terms of the Merger Agreement with the interested parties and
their counsel, including but not limited to certain conditions to closing,
certain non-solicitation requirements, the amount of break-up fee, the
circumstances under which a break-up fee would be payable and the obligations of
the parties to undertake certain actions in order to consummate a transaction.
On February 27, 1998, DLJ received proposals from Parent and two other
parties ('Bidder 1' and 'Bidder 2,' respectively). Parent's proposal
contemplated a price of $8.00 per Share and continued to require an irrevocable
proxy and certain other terms and conditions viewed unfavorably by the Special
Committee. Bidder 1 also submitted a proposal of $8.00 per Share which contained
some terms and conditions that were viewed unfavorably by the Special Committee,
including the requirement of an irrevocable proxy. Representatives of Bidder 1
indicated orally to representatives of DLJ that it would be willing to pay $8.25
per Share if the Company were to engage in one-on-one negotiations with such
party with respect to an acquisition of the Company. Bidder 2 provided an offer
to purchase the Company's shares for $7.10 per Share, if structured as a tender
offer followed by a merger, as proposed by the Company, or $7.85 per Share if
structured as a one-step merger transaction with no tender offer. The Special
Committee reviewed these bids and instructed DLJ to continue discussions with
the interested parties so as to be in a position to recommend one of the bids at
the Board of Directors' meeting scheduled for February 28, 1998.
During the evening of February 27, 1998 and the morning of February 28,
1998, DLJ negotiated with Parent and Bidder 1 certain aspects of their proposals
and informed them that the Special Committee would be meeting at 10:00 a.m. on
February 28, 1998 in advance of an 11:00 a.m. Board of Directors Meeting. Parent
increased its proposal to $8.25 per Share, relinquished its request for an
irrevocable proxy and improved other terms and conditions of its proposal.
Bidder 1 indicated a final and definitive proposal at $8.25 per Share without
the requirement of an irrevocable proxy and improved other terms and conditions
of its offer. Bidder 2 increased its proposed offer to $7.85 per Share for a
tender offer followed by a merger and $8.25 per Share for a one-step merger
transaction without a tender offer.
During the February 28, 1998 Board of Directors meeting, DLJ reported to
the Special Committee and the Board of Directors the status of offers from the
three interested parties. The offers of Parent and Bidder 1 were at $8.25 per
Share and the offer of Bidder 2 was at $7.85 per Share for a tender offer
followed by a merger and
14
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$8.25 per Share for a one-step merger transaction. DLJ also reported that both
Parent and Bidder 1 would be willing to give up their request for irrevocable
proxies and would instead agree that the Lee Stockholders could provide proxies
that would terminate if the Board of Directors of the Company terminated the
Merger Agreement in order to accept a better offer from a third party. DLJ
expressed its opinion that Bidder 2 would also ultimately drop its request for
an irrevocable proxy, if requested. The Special Committee reported that, of the
offers presented, the Special Committee recommended the offer of Parent due to
price, certainty of closure and terms and conditions. DLJ indicated that it was
prepared to recommend that the consideration offered by Parent was fair to the
Company's shareholders, other than shareholders who are affiliates of the
Company, from a financial point of view. Thereafter, after discussion of the
various proposals and DLJ's fairness analysis, the Board of Directors approved
the offer of Parent.
Thereafter, on February 28, 1998, the Merger Agreement was signed by
Parent, the Purchaser and the Company and the Stock Purchase Agreement was
signed by the Lee Stockholders and the Purchaser. The transaction was announced
on the morning of March 2, 1998.
Reasons for the Transaction; Factors Considered by the Board. The Board of
Directors and the Company's senior management have reviewed the Company's
strategic position in the counter-top appliance and consumer health product
industries, the near and longer term prospects for those industries, the
consolidation trends within those industries and the strategic alternatives
available to the Company, all with a view to maximizing shareholder value. In
conducting its review, the Board of Directors considered the Company's results
of operations for the fiscal year ended September 28, 1997 as well as earnings
per share of the Company for the fiscal quarter ended December 28, 1997. The
Board of Directors also considered the recent trading prices of the Company's
Common Stock. In light of the Board's review of the Company's competitive
position, recent operating results and stock price, anticipated trends in the
industries in which the Company competes, and the price per Share being offered
by Parent, the Board of Directors determined that it would be in the best
interest of the Company's shareholders to approve the Merger Agreement. In
approving the Merger Agreement and the transactions contemplated thereby and
recommending that all holders of Shares of the Company's Common Stock tender
their Shares pursuant to the Offer, the Board of Directors considered a number
of factors including:
(i) the terms of the Merger Agreement, and the Stock Purchase
Agreement executed by certain stockholders in connection therewith,
including provisions allowing the Lee Stockholders' Shares to be voted in
favor of a competing offer if the Merger Agreement were terminated by the
Company in accordance with its terms to allow the Company to enter into an
agreement with any such competing bidder;
(ii) the trading price of shares of the Company's Common Stock, and
the expected trading prices for the foreseeable future;
(iii) the Company's competitive position and current trends in the
counter-top appliance and consumer health product industries;
(iv) the results of the Company's discussions during 1997, and the
results of the process undertaken by the Company in 1998, with respect to a
potential sale of the Company, and the low likelihood that a third party
would propose a cash price higher than $8.25 per Share;
(v) the fact that Parent's offer was not subject to a financing
contingency whereas the other offers available to the Board were either (i)
subject to financing contingencies or (ii) to be consummated through
newly-formed corporations with no existing assets, which were also subject
to consummation of conditions to financing from such bidders' funding
sources;
(vi) DLJ's opinion that the consideration to be received by the
stockholders of the Company, other than stockholders who are affiliates of
the Company, pursuant to the Merger Agreement is fair to such stockholders
from a financial point of view, as well as a presentation by DLJ of various
financial analyses relating to the Merger, including among other things a
review of the Company's historical, financial and stock market performance;
a review of selected financial and stock trading data for selected
companies that produce consumer and professional appliances, a review of
financial ratios for selected merger and acquisition transactions in the
consumer and professional appliance industry; a number of discounted cash
flow analyses at various discount rates and terminal values based on
Management's projections for the Company's future performance; an analysis
of premiums paid in selected merger and acquisition transactions within a
certain transaction value range and an analysis of values that might be
achieved in a leveraged buyout transaction involving the Company.
15
<PAGE>
The full text of the DLJ fairness opinion is attached hereto as
Exhibit 6. The DLJ opinion is addressed to the Board of Directors of the
Company and does not address the merits of the underlying decision of the
Company to engage in the transactions contemplated by the Merger Agreement
and does not constitute a recommendation to any holder of Shares as to how
such holder should respond to the Offer. The summary of the DLJ opinion set
forth in this statement on Schedule 14D-9 is qualified in its entirety by
reference to full text of the DLJ opinion attached hereto attached as
Exhibit 6. Holders of shares are urged to read the DLJ opinion in its
entirety.
(vii) the recommendation of the Special Committee of the Board of
Directors that the Parent's offer be approved;
(viii) the fact that holders of approximately 48% of the Shares were
prepared to endorse the Merger Agreement; and
(ix) the availability of the dissenters' rights of appraisal in the
Merger.
The Board of Directors did not assign relative weight to the above factors
or determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement (the 'Advisory Agreement') dated October 17,
1997 as amended by a letter agreement dated February 12, 1998, between the
Company and Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ'), DLJ
agreed to advise and assist the Company, as financial advisor, in connection
with a possible business combination (a 'Transaction'), including financial
advice and assistance, performing valuation analyses, structuring, analyzing and
negotiating various aspects of the Transaction and, if requested, rendering a
written opinion to the Board of Directors of the Company as to the fairness from
a financial point of view of the consideration to be received by stockholders of
the Company in any proposed Transaction.
Pursuant to the Advisory Agreement, the Company will pay DLJ for its
services in connection with the Merger (i) a fee of $350,000 upon delivery of a
written fairness opinion, (ii) an additional fee of $50,000 for each updated
fairness opinion, and (iii) an additional fee in an amount equal to 0.85% of the
aggregate consideration payable to stockholders pursuant to the Merger and the
amount of any debt assumed, acquired or remaining outstanding in connection with
the Merger (which additional fee is expected to equal approximately $2,100,000),
less any amounts paid by the Company pursuant to clauses (i) and (ii) above. In
addition, the Company agreed to reimburse DLJ for reasonable out-of-pocket
expenses (including the reasonable fees and expenses of its legal counsel)
incurred by DLJ in connection with the Advisory Agreement and to indemnify DLJ
and its affiliates and the respective directors, officers, agents and employees
of DLJ and its affiliates against certain liabilities and expenses, including
liabilities under the Federal Securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) No transactions in the Shares have been effected during the past sixty
(60) days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company; except for
a former executive officer who exercised 12,500 vested options to purchase
Shares.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth herein, the Company is not engaged in any
negotiation 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 herein, there are no transactions, Board of
Directors' 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.
16
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex I is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by Parent and Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated as of February 28, 1998, by and among Signature Brands USA, Inc.,
Sunbeam Corporation and Java Acquisition Corp.
Exhibit 2 -- Proxy Statement for the Annual Meeting of Stockholders filed pursuant to Regulation 14A, dated
January 23, 1998.
Exhibit 3 -- Title 8 Section 262, Delaware General Corporation Law.
Exhibit 4 -- Stock Purchase Agreement, dated as of February 28, 1998, by and among Java Acquisition Corp. and the
stockholders named therein.
Exhibit 5 -- Confidentiality Agreement, dated February 17, 1998, between Sunbeam Corporation and Signature Brands
USA, Inc.
Exhibit 6 -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation*
Exhibit 7 -- Press Release issued by the Company, dated March 2, 1998.
Exhibit 8 -- Letter to Stockholders of Signature Brands USA, Inc.*
</TABLE>
- ------------------
* Included in copies mailed to shareholders.
17
<PAGE>
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.
SIGNATURE BRANDS USA, INC.
By: /s/ MEETA VYAS
------------------------------
Meeta Vyas
Chief Executive Officer
Dated: March 6, 1998
18
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SIGNATURE BRANDS USA, INC.
7005 Cochran Road
Glenwillow, OH 44139-4312
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 March 6, 1998, as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
'Schedule 14D-9') to holders of the Common Stock of Signature Brands USA, Inc.
(the 'Corporation'). 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 (the
'Parent Designees') designated by Sunbeam Corporation (the 'Parent') to a
majority of the seats on the Board of Directors of the Corporation.
Pursuant to the Merger Agreement, on March 6, 1998, Java Acquisition Corp.
commenced the Offer. The Offer is scheduled to expire at 12:00 Midnight on April
2, 1998, unless otherwise extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent and Java Acquisition
Corp. and the Parent Designees has been furnished to the Corporation by Parent
and Java Acquisition Corp., a wholly owned subsidiary of Parent, and the
Corporation assumes no responsibility for the accuracy or completeness of such
information.
GENERAL INFORMATION REGARDING THE CORPORATION
GENERAL
The common stock, no par value per share ('Common Stock'), is the only
class of voting securities of the Corporation outstanding. Each share of Common
Stock has one vote. As of March 4, 1998, there were 9,186,761 shares of Common
Stock outstanding. The Corporation does not have any treasury shares. The Board
of Directors of the Corporation currently consists of nine members and there are
currently no vacancies on the Board. The Board of Directors only has three
classes and each director serves a term of three years until his successor is
duly elected and qualified or until his earlier death, resignation or removal.
PARENT DESIGNEES
The Agreement and Plan of Merger (the 'Merger Agreement') among Parent,
Java Acquisition Corp., and the Corporation dated February 28, 1998, provides
that upon acceptance for payment of shares pursuant to the Offer (as defined in
the Agreement), Parent and Java Acquisition Corp. shall be entitled to designate
the number of directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the Product of (i) the total number of Directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to the Merger Agreement) and (ii) the percentage
that the number of shares of Company Common Stock owned by the Parent or Java
Acquisition Corp. (including shares of Company Common Stock accepted for
payment) bears to the total number of shares of Company Common Stock
outstanding. Prior to the Effective Time, the current directors will resign,
subject to the Merger Agreement's requirement that until the Effective Time, the
Company shall have at least two (2) directors who were directors on the date of
the Merger Agreement and who are not officers of the Company or any of its
subsidiaries.
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
DIRECTORS OF THE CORPORATION
The names of the current directors, their ages as of March 6, 1998 and
certain other information about them are set forth below. As indicated above,
some of the current directors may resign effective immediately following the
purchase of shares by Java Acquisition Corp. pursuant to the Offer.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE CORPORATION OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEAR
- ------------------------------------------ --- ---------- ------------------------------------------
<S> <C> <C> <C>
Serving for a term ending in 2001
David A. Jones............................ 48 1996 Chairman of the Board, President and Chief
Executive Officer of Rayovac Corporation,
since September 1996. From 1994 until
1996, Chairman of the Board, President and
Chief Executive Officer of Thermoscan,
Inc. From 1989 until 1994, President and
Chief Executive Officer of Regina Company,
Inc.
Thomas H. Lee............................. 53 1992 Since 1974, President of Thomas H. Lee
Company ('THL'). Serves as a Director of
Autotote Corporation, Finlay Enterprises,
Inc., General Nutrition Companies, Inc.,
Playtex Family Products Corp., Livent,
Inc., and Vail Resorts, Inc. Hills
Department Stores, Inc. filed for
protection under Chapter 11 of the Federal
Bankruptcy Code in February 1991 and
emerged from such protection in October
1993 as Hills Stores Company. Mr. Lee was
Chairman of the Board of Hills Stores
Company at that time.
Sandra E. Peterson........................ 38 1998 Executive Vice President, Research of
Nabisco, Inc. from April 1996 to present.
From 1993 to March 1996, various senior
executive positions with Whirlpool
Corporation including: Vice President,
Advanced Product Concepts; and Vice
President, Strategic Analysis and Support.
Prior to 1993, Senior Engagement Manager
of McKinsey & Co., Inc.
Serving for a term ending in 2000
Urbano Perez V............................ 42 1987 Various positions with Mabe since 1977,
including Director, Range Division since
1992.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Thomas R. Shepherd........................ 68 1998 Chairman of the Board of Directors of the
Company and of Signature Brands since
August 1997 and a Director of the Company
and of Signature Brands since April 1988.
Consultant to THL since 1986 and currently
a Managing Director. Executive Vice
President of Thomas H. Lee Advisors I,
L.P. and an officer of various other THL
affiliates.
Frank E. Vaughn........................... 68 1995 Special Assistant to the Dean and Visiting
Professor at the College of Business
Administration and Graduate School of
Management at Kent State University. From
1988 to 1991, Executive Vice President at
Maytag Corporation.
Serving for a term ending in 1999
William P. Carmichael..................... 54 1992 Retired since October 1993. From January
1993 until October 1993, Senior Vice
President and Chief Accounting Officer of
Sara Lee Corporation. From August 1991 to
January 1993, Vice President and
Controller of Sara Lee Corporation. Also
serves as a Director of Cobra Electronics
Corporation and the Hain Food Group, Inc.,
and as a trustee of the Time Horizon Funds
and Pacific Innovations Fund.
Scott A. Schoen........................... 39 1996 Managing Director of THL since 1992 and
employed since 1986. Also serves as
Trustee of THL Equity Trust III, the
General Partner of THL Equity Advisors
Limited Partnership III, which is the
General Partner of Thomas H. Lee Equity
Fund III, L.P. Also serves as Vice
President of Thomas H. Lee Advisors I and
Thomas H. Lee Advisors II. Also serves as
a Director of First Alert, Inc.,
TransWestern Communications Company, Inc.
Rayovac Corporation and Syratech
Corporation.
Meeta R. Vyas............................. 39 1997 Vice Chairman of the Board of Directors
and Chief Executive Officer of the Company
and of Signature Brands since September
1997. From 1991 to 1997, a senior
executive with General Electric Co. Prior
to 1991, a consultant with McKinsey & Co.,
Inc.
</TABLE>
There are no family relationships among any of the directors or executive
officers of the Corporation.
3
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS OF THE CORPORATION
The Board of Directors has an Audit Committee and a Compensation Committee.
Currently, Messrs. Carmichael, Miller and Schoen are members of the Audit
Committee and Messrs. Jones, Schoen and Shepherd are members of the Compensation
Committee.
The Audit Committee reviews the activities of the Company's independent
public accountants, various Company policies and practices as well as potential
conflict of interest situations. In addition, the Audit Committee recommends to
the Board of Directors an independent accounting firm to audit the Company's
financial statements. The Audit Committee did not meet during the fiscal year
ended September 28, 1997.
The Compensation Committee is responsible for making recommendations
concerning the salaries, bonuses and other compensation paid to the Company's
executive officers. It is also responsible for administering the Second Amended
and Restated 1992 Stock Incentive Plan, the 1995 Stock Option and Incentive
Plan, the 1997 Stock Option and Incentive Plan and the Chief Executive Officer
Stock Option Plan. The Compensation Committee met twice during the fiscal year
ended September 28, 1997.
The Company does not have a standing nominating committee or a committee
performing similar functions.
The Company's Board of Directors met five times during the last fiscal
year. No Director, with the exception of Mr. Lee, attended less than 75% of the
aggregate number of meetings of the Board of Directors and the committees on
which he served during the period for which he was a member of the Board.
EXECUTIVE OFFICERS OF THE CORPORATION
Information required by Item 7(b) of Schedule 14A with respect to executive
officers of the Corporation is set forth below. The executive officers of the
Corporation are elected annually by the Board of Directors and hold office until
their successors are elected and qualified, or until their earlier removal or
resignation.
Meeta Vyas has served as Vice Chairman of the Board and Chief Executive
Office of the Company and Signature Brands since August 1997. From 1991 to 1997,
Ms. Vyas was a senior executive with General Electric Co. Prior to 1991, Ms.
Vyas was a consultant with McKinsey & Co., an international consulting firm.
Steven M. Billick has served as Senior Vice President, Treasurer and Chief
Financial Officer of the Company and Signature Brands since June 1996. From July
1991 to June 1996, he was Vice President and Controller of NACCO industries,
Inc. Prior to July 1991, Mr. Billick was a partner with the international public
accounting firm of Deloitte & Touche LLP.
Timothy J. McGinnity has served as Senior Vice President, Sales--Consumer
Products of the Company and Signature Brands since September 1994. From August
1991 to August 1994, Mr. McGinnity served as Vice President Sales of Mr. Coffee,
inc. From October 1985 to June 1991, Mr. McGinnity served as Vice President--
Sales, Grocery Division of Mr. Coffee, inc.
C. Wayne Morris has served as Senior Vice President, Professional Products
of the Company and Signature Brands since October 1996. From 1989 to 1996, Mr.
Morris was Senior Vice President Marketing of Plasti-Line, Inc. From 1979 to
1989, he served in various positions with Black & Decker Corporation.
BOARD OF DIRECTORS
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors reviews the Company's
existing and proposed executive compensation plans and makes recommendations to
the Board of Directors regarding such plans and the awards to be made
thereunder. The current members of the Compensation Committee are Messrs. Jones,
Shepherd and Schoen, all of whom are non-employee Directors of the Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the compensation of the Company's Chief Executive Officer and the
other named executive officers.
4
<PAGE>
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that compensation paid to
executive officers and other management personnel should consist of four
elements: (1) salary, (2) annual incentive bonus, (3) stock options and (4)
welfare, retirement and other benefits. The compensation package is designed to
attract and retain top quality management employees. In the opinion of the
Committee, it reflects competitive conditions. The Committee, however, does not
specifically focus on the compensation levels of executives in peer group
companies in making compensation decisions. To some extent, elements of
compensation are designed to vary as Company performance varies. In general, the
elements of compensation that most typically have a significant relationship to
Company performance are awards under its stock option and bonus plans. The
objective measurement used in determining performance for purposes of awards
under the bonus plans is the Company's actual earnings before interest, taxes,
depreciation and amortization ('EBITDA') in comparison to budgeted amounts. The
vesting of certain options granted during the year is tied to the achievement of
specified annual levels of EBITDA over the duration of the options. The
Committee's decisions concerning compensation are not the result of a highly
formalistic process and the Committee does not rely extensively on objective
criteria in measuring individual performance. Instead, decisions are primarily
based on subjective decisions concerning the appropriate levels of compensation.
Set forth below is a discussion of the various components of the
compensation arrangements provided to the executive officers, as well as a
discussion of the compensation arrangements provided to the Company's chief
executive officer.
1997 COMPENSATION DECISIONS
Base Salary and Benefits. Salary levels for executive officers reflect the
Committee's subjective judgments of appropriate salaries in light of the duties
and responsibilities inherent in the executives' respective positions. The
particular qualifications of an individual holding the position and his or her
level of experience are considered in establishing a salary level when the
individual is first appointed to a given position. The performance and
contribution of the individual to the Company, as well as Company performance,
are the primary criteria influencing salary administration. Salaries of
executive officers are generally reviewed each year. Since certain executives
are parties to employment agreements with the Company, their minimum base salary
levels are set by the terms of such agreements. The primary factor in setting
salary levels pursuant to these agreements was the Company's desire to provide
compensation in amounts sufficient to induce these individuals to either join or
continue with the Company. Certain of these employment agreements were executed
after cancellation of salary continuation agreements with the former Mr. Coffee,
inc. executives. These agreements were entered into prior to the time they
joined the Company. The terms of these salary continuation agreements were a
significant factor in establishing compensation arrangements for executives who
were parties to such agreements. In the case of certain executive officers who
joined the Company during the 1997 fiscal year, base salary was determined at
their hire date on the basis of the Company's assessment of their prior
experience, the responsibilities associated with their positions and the results
of negotiations between the Company and the executives concerning their
compensation arrangements. In making adjustments to the salaries of existing
executive officers for fiscal 1997, consideration was given to the performance
of each of the individuals in question, the Company's results of operations for
fiscal 1996 and the terms of existing contractual arrangements with certain
executive officers.
Stock Options. The Company uses stock options as a long-term incentive
program for executives. Stock options are used because they directly relate the
amounts earned by executives to the amount of appreciation realized by the
Company's stockholders over comparable periods. Stock options also provide
executives with the opportunity to acquire and build a meaningful ownership
interest in the Company. The Committee considers stock options throughout the
year. In determining the number of options awarded to an individual executive,
the Committee generally establishes a level of award based upon the position of
the individual and his or her level of responsibility. In the case of certain
executive officers who executed employment agreements during the current fiscal
year, the number of options awarded to such executives was the result of
negotiations between the Company and the executives.
During the 1997 fiscal year, the Company awarded options to purchase an
aggregate of 40,000 shares of Common Stock to the executive officers of the
Company excluding the Chief Executive Officer. Certain of these
5
<PAGE>
options are subject to vesting over a four-year period commencing on the first
anniversary of the date of grant and certain of these options are subject to
vesting over a five-year period commencing on the first anniversary of the date
of grant, with vesting for this later group further conditioned upon the
achievement of specified annual target thresholds for EBITDA over the duration
of the options.
Bonuses. The Company maintains an annual incentive bonus program based on
Company and group performance. A target bonus level, stated as a percentage of
year end salary, is established for each executive officer based on his or her
level of responsibility. Target bonuses are measured by the Company's financial
performance against its annual performance plans. Target levels of performance
are established based upon EBITDA. At its December 1996 meeting, the
Compensation Committee established a bonus pool of $1,250,000 for all eligible
employees under the Company's annual incentive bonus program. Because the target
levels of performance were not achieved during fiscal 1997, no bonuses were paid
to executive officers out of this amount. All bonuses paid during the fiscal
year were paid pursuant to the terms of the Company's employment agreements with
the executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation arrangements for Mr. Howell with respect to the 1997
fiscal year were primarily based upon the terms of an Employment Agreement
between Mr. Howell and the Company, which was entered into in 1994. The
Compensation Committee increased Mr. Howell's base salary during 1997 by 4.2% to
$314,340. Mr. Howell was also entitled to receive a bonus of $68,028, which, in
accordance with the terms of an Employment Agreement, is an amount equal to his
prior year's bonus, pro rated for the number of days in fiscal 1997 during which
Mr. Howell was employed by the Company. The Committee did not award Mr. Howell
any stock options during 1997. In connection with his resignation from the
Company, Mr. Howell was entitled to receive as severance pay, under the terms of
an Employment Agreement, an amount equal to 1.5 times the sum of (i) his annual
salary at the date of termination ($314,340) plus (ii) the amount of his bonus
payable for fiscal 1997 ($68,028) plus (iii) his automobile allowance ($13,000).
The compensation arrangements for Ms. Vyas, who joined the Company as Vice
Chairman and Chief Executive Officer following Mr. Howell's resignation, were
established through negotiations between the Committee and Ms. Vyas and are
provided for in an Employment Agreement between the Company and Ms. Vyas.
Factors considered by the Committee in establishing such arrangements included
the need to provide sufficient inducement to attract and retain a top key
executive; the duties and responsibilities of the position; and Ms. Vyas's
qualifications and experience. The Employment Agreement provides for Ms. Vyas to
receive an initial base salary of $500,000 and an annual bonus of not less than
50% of her base salary based upon the Company achieving certain EBITDA
objectives. Ms. Vyas was further granted an option to purchase 500,000 shares of
Common Stock at an exercise price equal to the closing price of the Common Stock
on the date of grant, which option vests 50% as of September 30, 1998 and 50% as
of September 30, 1999. She also received an option in the form of stock
subscriptions to purchase 91,727 shares of Common Stock at an exercise price
equal to 50% of the closing price of the Common Stock on August 11, 1997, which
option was exercisable only from September 2, 1997 through November 1, 1997.
This option was exercised by Ms. Vyas on November 1, 1997 at an exercise price
of $1.75 per share.
Compensation Committee of the Board of Directors
David A. Jones
Thomas R. Shepherd
Scott A. Schoen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Schoen, a managing director of THL, and Mr. Shepherd, a consultant to
THL, served as members of the Company's Compensation Committee during fiscal
1997. Neither Mr. Schoen nor Mr. Shepherd was an employee of the Company during
fiscal 1997. Under a Management Agreement, the Company has engaged THL to
provide consulting and management advisory services. The fees payable to THL
under the Management Agreement are $240,000 per annum. The Company believes that
this Management Agreement is on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties.
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own 10% or more of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission (the 'Commission').
Officers, Directors and beneficial holders of more than 10% of the Company's
Common Stock are required by Commission regulations to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, Directors and
beneficial holders of more than 10% of the Company's Common Stock complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended September 28, 1997, except for the filing of a late Form 4
to report the inadvertent omission of one transaction involving the purchase of
3,000 shares of Common Stock by C. Wayne Morris.
7
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each of
the three most recent fiscal years, of: (i) those persons who served as the
chief executive officer during the fiscal year ended September 28, 1997 and (ii)
the other four most highly compensated executive officers of the Company for the
fiscal year ended September 28, 1997 (the 'Named Executive Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
OTHER ANNUAL OPTION/SAR COMPEN-
NAME YEAR SALARY BONUS COMPENSATION AWARDS SATION(1)
- ----------------------------------------- ---- ------- ------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas............................ 1997 $38,462(2) $ -- $ 41,166(3) 591,727(4) $ 77
Vice Chairman and
Chief Executive Officer
Peter C. McC. Howell..................... 1997 302,918 68,028(5) -- -- 606,677(6)
Former Chairman and Chief 1996 295,600 73,900 -- -- 8,471
Executive Officer (7) 1995 286,000 28,600 -- -- 7,953
S. Donald McCullough..................... 1997 222,245 26,850(8) 100,485(9) -- 966,700(10)
Former President and Chief 1996 214,800 53,700 -- 90,500(11) 10,830
Operating Officer (12) 1995 201,196 21,500 75,303(13) 45,000(14) 10,830
C. Wayne Morris.......................... 1997 176,020(15) 21,250 63,502(16) 30,000(17) 5,915
Senior Vice President-
Professional Products
Timothy J. McGinnity..................... 1997 163,157 25,000 -- -- 3,194
Senior Vice President- 1996 147,600 61,900 -- -- 5,632
National Account Sales 1995 141,115 65,000 -- 50,000(14) 5,632
Steven M. Billick........................ 1997 185,802 -- -- 10,000(18) 3,382
Senior Vice President, 1996 63,746(19) 15,405 -- 40,000(20) --
Treasurer and Chief
Financial Officer
</TABLE>
- ------------------
Except as indicated above, no named Executive Officer received personal
benefits or perquisites during fiscal 1997 in excess of the lesser of $50,000 or
10% of his or her aggregate salary and bonus.
(1) Amounts reported for each Named Executive Officer for fiscal 1997, 1996 and
1995 include premiums paid by the Company for term life insurance policies
on behalf of each Named Executive Officer and matching contributions under
the Company's 401(k) Plan.
(2) Ms. Vyas joined the Company on September 2, 1997. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(3) Represents reimbursement in the amount of $20,603 received from the Company
in connection with Ms. Vyas's relocation to the Cleveland, Ohio metropolitan
area and $20,563 in additional federal and state income taxes payable with
respect to such reimbursement.
(4) Represents options to purchase shares of Common Stock awarded to Ms. Vyas
under the terms of her Employment Agreement. Of the total amount of options,
500,000 options were awarded under the Company's Chief Executive Officer
Stock Option Plan. Such options vest 50% on September 30, 1998 and
(Footnotes continued on next page)
8
<PAGE>
(Footnotes continued from previous page)
50% on September 30, 1999. The remaining 91,727 options in the form of stock
subscriptions were granted pursuant to a Stock Subscription Agreement and
were exercisable between September 2, 1997 and November 1, 1997.
(5) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Employment Agreement between Mr. Howell and the Company.
(6) Includes, in addition to the items referred to in note (1) above, a
severance payment of $593,053 payable over the twelve-month period beginning
September 5, 1997, which Mr. Howell became entitled to during fiscal 1997
pursuant to the termination provisions of an Employment Agreement between
Mr. Howell and the Company.
(7) Mr. Howell joined the Company in August 1994 and became its Chairman and
Chief Executive Officer on September 2, 1994. He resigned from his offices
with the Company, effective as of August 12, 1997, and terminated his
employment with the Company, effective as of September 5, 1997.
(8) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Amended and Restated Employment Agreement and the terms of a Separation
Agreement between Mr. McCullough and the Company.
(9) Includes reimbursement in the amount of $39,451 received from the Company
for the loss of home equity in Mr. McCullough's prior residence and the
closing costs associated with the sale of such residence in connection with
his relocation to the Cleveland, Ohio metropolitan area and $34,083 in
additional federal and state income taxes payable on such reimbursement.
(10) Includes, in addition to the items referred to in note (1) above, severance
payments of (i) $419,850 payable over the eighteen month period beginning
on January 16, 1998, (ii) $524,426 payable within sixty days of January 16,
1998 upon receipt of which all stock options held by Mr. McCullough will
terminate and (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999. Mr. McCullough became
entitled to the items described in this note during fiscal 1997 pursuant to
the termination provisions of an Amended and Restated Employment Agreement
and the terms of a Separation Agreement between Mr. McCullough and the
Company.
(11) Represents options to purchase shares of Common Stock awarded to Mr.
McCullough under the terms of an Amended and Restated Employment Agreement
between the Company and Mr. McCullough. Mr. McCullough's options became
exercisable with respect to 22,625 shares on July 1, 1996 and an additional
22,625 shares on December 31, 1996. Pursuant to the Amended and Restated
Employment Agreement, options to purchase an additional 45,250 shares of
Common Stock automatically vested upon Mr. McCullough's resignation. Mr.
McCullough's options shall terminate pursuant to a Separation Agreement
between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) above.
(12) Mr. McCullough resigned from his position as President and Chief Operating
Officer, and as a Director, effective as of January 16, 1998. For purposes
of determining the Company's severance obligations to Mr. McCullough, the
terms of the Separation Agreement between Mr. McCullough and the Company
set the date of termination for Mr. McCullough at September 26, 1997. Mr.
McCullough continued as President and Chief Operating Officer of the
Company until January 16, 1998 pursuant to continuation of employment
provisions of such Separation Agreement.
(13) Includes club fees in the amount of $32,100 reimbursed by the Company and
$27,732 in additional federal and state income taxes payable on such dues
with respect to such reimbursement.
(14) Represents options to purchase shares of Common Stock awarded to the Named
Executive Officers under the Company's Second Amended and Restated 1992
Stock Incentive Plan (the '1992 Plan') or the 1995 Stock Option and
Incentive Plan (the '1995 Plan'). Options awarded under the 1992 Plan vest
in 25%
(Footnotes continued on next page)
9
<PAGE>
(Footnotes continued from previous page)
increments on an annual basis commencing on the first anniversary of the
date of grant. Vesting of certain options awarded under the 1995 Plan is
conditioned upon the Company reaching certain earnings before interest,
taxes, depreciation and amortization ('EBITDA') objectives during the
period of the option. Options issued pursuant to these plans expire ten
years from the date of grant. Pursuant to an Amended and Restated
Employment Agreement between the Company and Mr. McCullough, all options
held by Mr. McCullough automatically vested upon Mr. McCullough's
resignation. Mr. McCullough's options shall terminate pursuant to a
Separation Agreement between Mr. McCullough and the Company upon the
receipt of certain compensation as described in note (10) above.
(15) Mr. Morris joined the Company in October 1996. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(16) Represents reimbursement in the amount of $42,519 received from the Company
in connection with Mr. Morris's relocation to the Chicago, Illinois
metropolitan area and $20,983 in additional federal and state income taxes
payable on such reimbursement.
(17) Represents options to purchase shares of Common Stock awarded to Mr. Morris
under the terms of an Employment Agreement between the Company and Mr.
Morris. Such options were awarded under the 1992 Plan and the 1995 Plan. Of
the total amount of options shown, 15,000 options vest in 25% increments on
an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives. The options expire ten years from the date of grant.
(18) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the 1997 Stock Option and Incentive Plan. The options vest in
20% increments on an annual basis beginning fiscal 1997, conditioned upon
the Company achieving certain EBITDA objectives. The options expire ten
years from the date of grant.
(19) Mr. Billick joined the Company in June 1996. Amounts reported as salary for
fiscal year 1996 represent payments received from that date through the end
of the Company's fiscal year.
(20) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the terms of an Employment Agreement. Such options were
awarded under the 1992 Plan and the 1995 Plan. Of the total amount of
options shown, 25,000 options vest in 25% increments on an annual basis
commencing on the first anniversary of the date of grant and 15,000 options
vest in 20% increments on an annual basis beginning in fiscal 1996,
conditioned upon the Company achieving certain EBITDA objectives. The
options expire ten years from the date of grant.
10
<PAGE>
OPTION GRANTS
No options were exercised by the named executive officers during fiscal
1997. Shown below is information on grants of stock options during the fiscal
year ended September 28, 1997 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
%
OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES /SARS STOCK PRICE
UNDERLYING GRANTED MARKET APPRECIATION FOR
OPTION/ IN EXERCISE PRICE ON OPTION TERM
SARS FISCAL OR BASE DATE OF EXPIRATION --------------------
NAME GRANTED YEAR PRICE GRANT DATE 5%
- ------------------------------ ---------- ------- -------- -------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas................. 500,000(1) 65.7% $ 3.50 $ 3.50 8/11/07 $ 1,100,566
91,727(2) 12.1% $ 1.75 $ 3.50 11/1/97 $ 362,425
Peter C. McC. Howell.......... --
S. Donald McCullough.......... --
C. Wayne Morris............... 30,000(3) 3.9% $5.875 $5.875 10/7/06 $ 110,843
Timothy J. McGinnity.......... --
Steven M. Billick............. 10,000(4) 1.3% $5.375 $4.125 3/6/07 $ 13,442
<CAPTION>
NAME 10%
- ------------------------------ --------------------
<S> <C>
Meeta R. Vyas................. $ 2,789,049
$ 672,185
Peter C. McC. Howell..........
S. Donald McCullough..........
C. Wayne Morris............... $ 280,897
Timothy J. McGinnity..........
Steven M. Billick............. $ 53,242
</TABLE>
- ------------------
(1) Under Ms. Vyas's Employment Agreement, one-half of these options become
exercisable on September 30, 1998, and one-half become exercisable on
September 30, 1999.
(2) This option in the form of stock subscriptions had a per share exercise
price equal to 50% of the closing price of the Common Stock on August 11,
1997, and were exercisable between September 2, 1997 and
November 1, 1997. Ms. Vyas exercised these stock subscriptions on November
1, 1997, pursuant to the terms of a Stock Subscription Agreement.
(3) Of the total amount of options shown, 15,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
(4) Options vest in 20% increments on an annual basis beginning in fiscal 1997,
conditioned upon the Company achieving certain EBITDA objectives.
11
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock for the Named Executive Officers as of the
fiscal year end, September 28, 1997.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE (#)EXERCISABLE/ ($)EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- ----------------------------------------------- ----------- -------- -------------------- -----------------
<S> <C> <C> <C> <C>
Meeta R. Vyas.................................. 0 0 91,727/500,000 $229,318/$375,000
Peter C. McC. Howell........................... 0 0 362,353/0 592,628/0
S. Donald McCullough........................... 0 0 98,250/92,250(3) 0/0
C. Wayne Morris................................ 0 0 0/30,000 0/0
Timothy J. McGinnity........................... 0 0 20,500/29,500 10,531/406
Steven M. Billick.............................. 0 0 9,250/40,750 0/0
</TABLE>
- ------------------
(1) Vesting of certain of these options is conditioned upon the Company reaching
certain EBITDA objectives during the duration of the option.
(2) Year end value of options is calculated based upon the closing price ($4.25)
of a share of Common Stock on the Nasdaq National Market on September 26,
1997, the last trading date of the fiscal year.
(3) These options became exercisable on January 16, 1998 pursuant to the
termination provisions of an Amended and Restated Employment Agreement and
the terms of a Separation Agreement between Mr. McCullough and the Company.
All of Mr. McCullough's options shall terminate pursuant to a Separation
Agreement between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) to the Summary Compensation Table
included elsewhere herein.
12
<PAGE>
SIGNATURE BRANDS USA, INC.
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Index and an index comprised of the 15
companies included in the Home Furnishings Daily housewares component of the HFD
stock index (the 'Peer Group Index') for the period from September 30, 1992 to
September 30, 1997. The Company's most recent fiscal year ended on September 28,
1997. Total stockholder return data for each index are not readily available for
this date. Accordingly, to ensure the integrity of the comparison, all data
reflect the period ending September 30, 1997. The companies comprising the Peer
Group Index are: Catalina Lighting, Inc., General Housewares Corp., Signature
Brands USA, Inc., Lancaster Colony Corp., Newell Co., Rival Co., Rubbermaid,
Incorporated, Sunbeam Corp., Toastmaster Inc., Brown Forman Corp., Oneida Ltd.,
The Black & Decker Corporation, Helen of Troy, Inc., Nacco Industries, Inc. and
National Presto Industries, Inc. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at September
30, 1992 and that all dividends, if any, were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SIGNATURE BRANDS USA, INC., THE S&P 500 INDEX AND A PEER GROUP
Brands USA Peer Group S&P 500
---------- ---------- -------
Sep-92 100 100 100
Sep-93 135 110 113
Sep-94 101 114 117
Sep-95 81 128 152
Sep-96 110 143 183
Sep-97 75 184 257
- ------------------
* $100 invested on 9/30/92 in stock or Index--including reinvestment of
dividends. Fiscal year ending September 30.
13
<PAGE>
SECURITY OWNERSHIP OF
PRINCIPAL HOLDERS OF VOTING SECURITIES,
DIRECTORS, AND OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 16, 1998 by (i)
each person or group who is known to the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each of the Company's Directors, (iii)
each of the named executive officers of the Company named in the Summary
Compensation Table included elsewhere herein, and (iv) all Directors and
executive officers of the Company as a group. All information with respect to
beneficial ownership has been furnished by the respective Director, executive
officer, or 5% beneficial owner, as the case may be. Unless otherwise indicated
below, the persons named below have sole voting and investment power with
respect to the number of shares set forth opposite their names.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF SHARES OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- -------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P.(2) ................. 1,818,203 19.8%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
ML-Lee Acquisition Fund, L.P.(3) ....................... 1,563,053 17.0%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Meeta R. Vyas .......................................... 91,727 1.0%
Thomas H. Lee(5)(6) .................................... 1,025,566 11.2%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
William P. Carmichael................................... 16,000(7) *
David A. Jones.......................................... 5,000(4) *
Robert W. Miller........................................ 191,052(8) 2.1%
Urbano Perez V.......................................... 0 *
Sandra E. Peterson...................................... 0 *
Scott A. Schoen......................................... 28,826(9) *
Thomas R. Shepherd(6)................................... 54,607 *
Frank E. Vaughn......................................... 12,500(10) *
C. Wayne Morris......................................... 6,750(11) *
Timothy J. McGinnity.................................... 29,250(12) *
Steven M. Billick....................................... 11,050(13) *
All Directors and executive officers as a group (12 1,472,328 16.0%
persons)(6)(14).........................................
</TABLE>
- ------------------
* Indicates an amount less than 1%.
(1) The number of shares of Common Stock shown as owned by the persons and
groups named in the foregoing table assumes the exercise of all outstanding
options held by such persons and groups that are exercisable within 60 days
after January 16, 1998, and the percentage shown assumes the exercise of
such options and assumes that no options held by others are exercised. For
purposes of the foregoing table, each person's
(Footnotes continued on next page)
14
<PAGE>
(Footnotes continued from previous page)
'beneficial ownership' of the Company's Common Stock has been determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934 (the
'Exchange Act') and Rule 13d-3 promulgated thereunder. The beneficial
ownership of shares of Common Stock by Purchaser and Parent as a result of
the Stock Purchase Agreement executed in connection with the Merger
Agreement is not reflected herein.
(2) Each of THL Equity Advisors Limited Partnership ('Equity Advisors'), the
general partner of Thomas H. Lee Equity Partners, L.P. ('Equity Partners');
THL Equity Trust, the general partner of Equity Advisors; and Thomas H. Lee,
a Trustee of THL Equity Trust, also may be deemed to be beneficial owners of
the shares of Common Stock held by Equity Partners. Each of Equity Advisors,
THL Equity Trust, and Mr. Lee disclaims beneficial ownership of such shares.
Each of Equity Advisors and THL Equity Trust maintains a principal business
address c/o Thomas H. Lee Company, 75 State Street, Boston, Massachusetts
02109.
(3) The ML-Lee Acquisition Fund, L.P. (the 'ML-Lee Fund') has shared voting and
investment power with respect to these shares. This number does not include
the shares of Common Stock held beneficially by Thomas H. Lee, which may be
deemed to be beneficially owned by the ML-Lee Fund and Thomas H. Lee
Advisors I, L.P. ('Advisors') as a result of their relationship with Mr.
Lee. The ML-Lee Fund and Advisors disclaim beneficial ownership of such
shares.
(4) Reflects shares which may be acquired upon the exercise of stock options
exercisable within 60 days after January 16, 1998.
(5) The shares are held of record by State Street Bank and Trust Company of
Connecticut, N.A., 750 Main Street, Hartford, Connecticut 06103, not
individually, but as successor Trustee for the 1989 Thomas H. Lee Nominee
Trust (the 'THL Trust'). The Trustee of the THL Trust disclaims beneficial
ownership of such shares.
(6) Does not include shares of Common Stock held by the ML-Lee Fund which may be
deemed to be beneficially owned by Mr. Lee, Mr. Shepherd and Advisors as a
result of their relationship with the ML-Lee Fund. Messrs. Lee and Shepherd
and Advisors disclaim beneficial ownership of such shares.
(7) Consists of 11,000 shares held of record by William P. Carmichael as Trustee
of the William P. Carmichael Trust dated April 1, 1985 and 5,000 shares
which may be acquired upon the exercise of stock options exercisable within
60 days after January 16, 1998.
(8) Includes 101,052 shares owned directly by Mr. Miller and 90,000 shares held
of record by Trust Company of Illinois, 45 South Park Boulevard, Suite 315,
Glen Ellyn, Illinois 60137, as Trustee of the RW & JS Miller Irrevocable
Charitable Trust (the 'Miller Trust'). The Trustee of the Miller Trust
disclaims beneficial ownership of such shares.
(9) Includes 9,690 shares which may be acquired from Thomas H. Lee upon the
exercise of stock options exercisable within 60 days after January 16, 1998.
(10) Consists of 10,000 shares held of record by Frank E. Vaughn as Trustee of
the Frank E. Vaughn Trust dated October 15, 1997 and an additional 2,500
shares which Mr. Vaughn has the right to acquire upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(11) Includes 3,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(12) Includes 26,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(13) Includes 1,800 shares held jointly by Mr. Billick and his wife and 9,250
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(14) Includes an aggregate of 52,250 shares of Common Stock, not including the
options held by Mr. Schoen to acquire 9,690 shares from Thomas H. Lee,
which may be acquired by the Directors and executive officers of the
Company upon the exercise of stock options exercisable within 60 days after
January 16, 1998.
15
<PAGE>
TERMS OF FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Messrs. Lee, Miller and Shepherd and others have certain demand and
piggyback registration rights pursuant to the First Amended and Restated
Stockholders Agreement dated as of March 16, 1992 (the 'Stockholders'
Agreement'). Such rights provide that stockholders who are parties to the
agreement owning stated percentages of the unregistered Common Stock may require
the Company to file registration statements under the Securities Act of 1933, as
amended (the 'Securities Act'), on up to three occasions, for the registration
of not less than 15% of the outstanding shares of Common Stock originally
subject to the agreement. Subject to certain conditions and limitations, the
other parties to the agreement have the right to request that their shares of
Common Stock be included in any such registrations. Also, subject to certain
conditions and limitations, all such stockholders have the right to require the
Company to include their shares of Common Stock in any registered offerings by
the Company. Under such agreement, the Company is required to bear all costs and
expenses of each such registration (other than underwriters' discounts or
commissions which are to be borne by the sellers), and the stockholders and the
Company have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
INFORMATION WITH RESPECT TO PARENT DESIGNEES
As of the date of this Information Statement, the Parent has determined who
will be Parent Designees.
Set forth below is the name, business address, principal occupation or
employment and five (5) year employment history of the persons who will be
Parent Designees. Unless otherwise indicated, each such person has held the
occupation listed opposite his name for at least the past five (5) years and
each occupation refers to employment with the Parent. All persons listed below
are citizens of the United States. None of the persons listed below owns any
Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND MATERIAL OCCUPATIONS
POSITIONS, OFFICES OR EMPLOYMENT
NAME OF BUSINESS HELD DURING THE LAST FIVE YEARS.
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Albert J. Dunlap.......................... Director of Parent. Chairman of the Board of Directors and Chief
Executive Officer since July 18, 1996. Chairman and Chief Executive
Officer of Scott Paper Company from April 1994 to December 1995.
Managing Director and Chief Executive Officer of Consolidated Press
Holdings Limited (an Australian media, chemicals and agricultural
operation) from 1991 to 1993.
Russell A. Kersh.......................... Director of Parent. Vice Chairman and Chief Financial Officer since
February 1, 1998. Prior to that date, he served as Executive Vice
President, Finance and Admistration since July 22, 1996. Executive
Vice President, Finance and Administration of Scott Paper Company
from June 1994 to December 1995. Served as the Chief Operating
Officer of Addidas America from January 1993 to May 1994.
David C. Fannin........................... Executive Vice President, General Counsel and Secretary since January
1994. Partner in the law firm of Wyatt, Tarrant and Combs from 1979
until 1993.
Peter A. Langerman........................ Director of Parent. Chairman of the Board from May 22, 1996 until
July 18, 1996. Senior Vice President of Franklin Mutual Advisers,
Inc., a registered investment advisor and a wholly owned subsidiary
of Franklin Resources, Inc., a diversified financial services
organization, since November 1996. Senior Vice President of Heine
Securities Corporation, and investment advisory service company, from
1986 to November 1996. Mr. Langerman has been a director of Franklin
Mutual Series Fund Inc. (previously Mutual Series Fund Inc.) since
1988 and a Director of Metallurg Inc. (a metal and related materials
manufacturer) since 1977.
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
SUNBEAM CORPORATION
JAVA ACQUISITION CORP.
AND
SIGNATURE BRANDS USA, INC.
DATED AS OF FEBRUARY 28, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I--THE OFFER
1.1 The Offer........................................................................................ 1
1.1.1 General.................................................................................. 1
1.1.2 Securities Law Compliance................................................................ 2
1.1.3 Termination of the Offer................................................................. 2
1.2 Action by The Company............................................................................ 2
1.2.1 Approval and Recommendation of the Board................................................. 2
1.2.2 Securities Law Compliance................................................................ 3
1.2.3 Stockholder Lists........................................................................ 3
1.2.4 Directors................................................................................ 3
ARTICLE II--THE MERGER....................................................................................... 4
2.1 The Merger....................................................................................... 4
2.2 Closing.......................................................................................... 4
2.3 Effective Time of the Merger..................................................................... 5
2.4 Effects of the Merger............................................................................ 5
2.5 Certificate of Incorporation; By--Laws........................................................... 5
2.6 Directors........................................................................................ 5
2.7 Officers......................................................................................... 5
ARTICLE III--EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS................................................................................... 5
3.1 Effect on Capital Stock.......................................................................... 5
3.2 Stock Plans...................................................................................... 6
3.3 Exchange of Certificates......................................................................... 7
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................... 8
4.1 Organization, Standing and Corporate Power....................................................... 8
4.2 Subsidiaries..................................................................................... 8
4.3 Capital Structure................................................................................ 8
4.4 Authority; Noncontravention...................................................................... 9
4.5 SEC Documents; Undisclosed Liabilities........................................................... 10
4.6 Information Supplied............................................................................. 10
4.7 Absence of Certain Changes or Events............................................................. 11
4.8 Litigation; Labor Matters; Compliance with Laws.................................................. 11
4.9 Employee Benefit Plans........................................................................... 12
4.10 Taxes............................................................................................ 13
4.11 Environmental Matters............................................................................ 14
4.12 Material Contracts............................................................................... 15
4.13 Brokers.......................................................................................... 15
4.14 Opinion of Financial Advisor..................................................................... 15
4.15 Board Recommendation............................................................................. 15
4.16 Required Company Vote............................................................................ 15
4.17 State Takeover Statutes.......................................................................... 15
4.18 Intellectual Property............................................................................ 16
4.19 Title to Properties.............................................................................. 16
4.20 Products Liability............................................................................... 16
4.21 Sole Representations............................................................................. 16
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V--REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER CO............................................. 17
5.1 Organization, Standing and Corporate Power....................................................... 17
5.2 Authority; Noncontravention...................................................................... 17
5.3 Brokers.......................................................................................... 17
5.4 Offer Documents and Schedule 14D--9.............................................................. 17
5.5 Information Supplied............................................................................. 17
5.6 Sole Representations............................................................................. 18
ARTICLE VI--COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER..................................................................................................... 18
6.1 Conduct of Business of the Company............................................................... 18
6.2 Changes in Employment Arrangements............................................................... 19
6.3 Severance........................................................................................ 20
6.4 WARN............................................................................................. 20
ARTICLE VII--ADDITIONAL AGREEMENTS........................................................................... 20
7.1 Preparation of Proxy Statement: Stockholder Meeting.............................................. 20
7.2 Access to Information, Confidentiality........................................................... 21
7.3 Additional Undertakings.......................................................................... 21
7.4 Indemnification.................................................................................. 21
7.5 Public Announcements............................................................................. 22
7.6 No Solicitation.................................................................................. 22
7.7 Resignation of Directors......................................................................... 23
7.8 Employee Benefits................................................................................ 23
7.9 Notification of Certain Matters.................................................................. 24
7.10 State Takeover Laws.............................................................................. 24
ARTICLE VIII--CONDITIONS PRECEDENT........................................................................... 24
8.1 Conditions to Each Party's Obligation............................................................ 24
8.2 Condition to Buyer's and Merger Co.'s Obligation................................................. 24
ARTICLE IX--TERMINATION, AMENDMENT AND WAIVER................................................................ 25
9.1 Termination...................................................................................... 25
9.2 Effect of Termination............................................................................ 25
9.3 Amendment........................................................................................ 25
9.4 Extension; Waiver................................................................................ 25
9.5 Procedure for Termination, Amendment, Extension or Waiver........................................ 26
ARTICLE X--PROVISIONS........................................................................................ 26
10.1 Nonsurvival of Representations and Warranties.................................................... 26
10.2 Fees and Expenses................................................................................ 26
10.3 Notices.......................................................................................... 27
10.4 Definitions...................................................................................... 27
10.5 Interpretation................................................................................... 28
10.6 Counterparts..................................................................................... 28
10.7 Entire Agreement; No Third--Party Beneficiaries.................................................. 28
10.8 GOVERNING LAW.................................................................................... 28
10.9 Assignment....................................................................................... 28
10.10 Enforcement...................................................................................... 28
Annex I................................................................................................. I-1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 28th day of
February, 1998 by and between Sunbeam Corporation, a Delaware corporation (the
'Buyer'), Java Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Buyer or other wholly owned subsidiary of Buyer as contemplated
hereby ('MergerCo'), and Signature Brands USA, Inc., a Delaware corporation (the
'Company').
WHEREAS, the respective Boards of Directors of the Company, the Buyer and
MergerCo have determined that the merger of MergerCo with and into the Company
(the 'Merger'), upon the terms and subject to the conditions set forth in this
Agreement, would be advisable and in the best interests of their respective
companies and stockholders, and such Boards of Directors have approved such
Merger, pursuant to which each share of common stock, par value $.01 per share,
of the Company ('Company Common Stock') issued and outstanding immediately prior
to the Effective Time of the Merger (as defined in Section 1.3) will be
converted into the right to receive cash, other than (a) shares of Company
Common Stock owned, directly or indirectly, by the Company or any subsidiary (as
defined in Section 10.4) of the Company, the Buyer or MergerCo and (b)
Dissenting Shares (as defined in Section 3.l(d));
WHEREAS, subject to the terms and conditions of this Agreement and in
furtherance of the Merger, the Buyer will make, or will cause MergerCo to make,
a tender offer (the 'Offer') to acquire any and all shares of Company Common
Stock;
WHEREAS, concurrently with the execution and delivery of this Agreement,
certain stockholders of the Company have entered into a Stock Purchase Agreement
(the 'Stock Purchase Agreement') with Buyer pursuant to which, subject to the
terms and conditions specified therein, Buyer is willing to purchase and such
stockholders are willing to sell certain Shares owned by such stockholders;
WHEREAS, approval of this Agreement requires the vote of a majority in
number of the issued and outstanding shares of Company Common Stock for the
approval thereof (the 'Company Stockholder Approval'); and
WHEREAS, Buyer, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of and conditions to
the Offer and the Merger;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
1.1 The Offer.
1.1.1 General. Provided that this Agreement shall not have been terminated
in accordance with Article IX, the Buyer shall commence, or shall cause MergerCo
to commence, the Offer to acquire any and all shares of Company Common Stock for
a cash price per share equal to the Merger Consideration (as defined in Section
3.1(c), (the 'Offer Price')), as promptly as reasonably practicable after the
date hereof, but in no event later than five (5) business days after the initial
public announcement of Offeror's intention to commence the Offer. For purposes
of this Article I, the party which makes the Offer, whether the Buyer or
MergerCo, shall be referred to as the 'Offeror.' Offeror may not accept any
shares of Company Common Stock tendered for purchase in response to the Offer
unless it accepts all such shares that are properly tendered in accordance with
the terms thereof. Acceptance by Offeror of shares of Company Common Stock for
payment pursuant to the Offer shall be irrevocable. The Offer shall be subject:
(i) to the condition that there shall be validly tendered in accordance with the
terms of the Offer prior to the expiration date of the Offer and not withdrawn a
number of shares of Company Common Stock which, together with the shares of
Company Common Stock then owned by the Buyer and MergerCo, represents at least
51% of the total number of outstanding shares of the Company Common Stock,
assuming the exercise of all outstanding options, rights and convertible
securities (if any) and the issuance of all shares of Company Common Stock that
the Company is then obligated to issue (such total
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number of outstanding or issuable shares of Company Common Stock being
hereinafter referred to as the 'Fully Diluted Shares') (the 'Minimum Condition')
and (ii) to the other conditions set forth in Annex I attached hereto
(collectively, the 'Offer Conditions'). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The initial expiration date of
the Offer shall be twenty (20) business days after commencement. Buyer and
MergerCo agree that if all of the Offer Conditions are not satisfied on such
initial expiration date of the Offer then, provided that the Offeror determines,
in its reasonable discretion that all such Conditions are reasonably capable of
being satisfied and subject to SEC rules with respect to extension of time
periods, Offeror shall extend the Offer, without consent of the Company, from
time to time until such Conditions are satisfied or waived; provided, that
Offeror shall not be required to extend the Offer beyond April 30, 1998, unless
any necessary approvals under the HSR Act (as defined herein) shall not have
been received by such date, in which case Offeror shall not be required to
extend the Offer beyond the earlier of (i) ten (10) days following receipt of
such approvals and (ii) June 30, 1998. Buyer and MergerCo agree that upon the
expiration date of the Offer, as the same may be extended in accordance with the
immediately preceding sentence, if the Offer Conditions have been satisfied,
Offeror shall accept the shares of Company Common Stock properly tendered for
purchase. Without the prior written consent of the Company, no change may be
made by Offeror which reduces the maximum number of shares of Company Common
Stock to be purchased in the Offer or which reduces the Offer Price or changes
the form of consideration or changes the Offer Conditions. The Offer Price
shall, subject to reduction for applicable withholding of taxes, be net to the
seller in cash, payable upon the terms and subject to the conditions of the
Offer. Subject to the terms and conditions of the Offer, Offeror shall pay, as
promptly as practicable after expiration of the Offer, for all shares of Company
Common Stock validly tendered and not withdrawn. At or prior to the expiration
of the Offer, Offeror will take all steps necessary to provide its paying agent
any funds necessary to make the payments contemplated by the Offer. Upon the
execution of this Agreement, the Merger Consideration shall be the amount set
forth in Section 3.1(c) payable without interest thereon, and such initial
Merger Consideration shall be adjusted only in accordance with the following
provisions. The Merger Consideration payable in connection with the Offer shall
automatically be adjusted appropriately for any stock dividend, split or any
conversion or reclassification in respect of the Company Common Stock occurring
after the date hereof and prior to the date of consummation of the Offer, which
shall occur only in accordance with the terms of this Agreement. Buyer and
MergerCo shall have the right to increase the Merger Consideration in effect
hereunder at any time, in which case the consideration payable with respect to
the Offer shall also be so increased.
1.1.2 Securities Law Compliance. On the date of commencement of the Offer,
Offeror shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the 'Schedule 14D-1')
with respect to the Offer. The Schedule 14D-1 shall contain or shall incorporate
by reference an offer to purchase (the 'Offer to Purchase') and forms of the
related letter of transmittal and any related summary advertisement (the
Schedule 14D-1, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the 'Offer Documents'). Offeror and the Company agree to promptly correct any
information provided by either of them for use in the Offer Documents which
shall have become false or misleading, and Offeror further agrees to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to holders
of shares of the Company Common Stock, in each case as and to the extent
required by applicable federal securities laws. Offeror agrees to provide the
Company with a written copy of any comments it or its counsel may receive from
time to time from the SEC or its staff with respect to the Schedule 14D-1
promptly after receipt of such comments.
1.1.3 Termination of the Offer. Offeror shall not, without the prior
written consent of the Company, (i) terminate the Offer, except in accordance
with the terms of Annex I attached hereto, or (ii) extend the Expiration Date,
except as specifically provided herein, and in no event to a date later than
April 30, 1998 or, if any necessary approvals under the HSR Act shall not have
been received by such date, in no event to a date later than the earlier of (i)
ten (10) days following receipt of such approvals and (ii) June 30, 1998.
1.2 Action by The Company.
1.2.1 Approval and Recommendation of the Board. The Company hereby
approves of and consents to the making of the Offer and represents that (a) the
Board of Directors of the Company, at a meeting duly called and
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held on February 28, 1998 has (i) determined that the Merger and the Offer,
taken together, are fair to, and in the best interests of, the Company and the
holders of the Company Common Stock, (ii) advised, authorized and approved this
Agreement and approved the Merger and the other transactions contemplated hereby
(including but not limited to the Offer), (iii) recommended that the
stockholders of the Company accept the Offer and authorize and approve this
Agreement and the transactions contemplated hereby, and (iv) agreed to recommend
that holders of Company Common Stock tender their shares of Company Common Stock
pursuant to the Offer, and (b) Donaldson, Lufkin & Jenrette Securities
Corporation has delivered to the Board an oral opinion on February 28, 1998
which will be confirmed promptly in writing, to the effect that, as of such
date, the consideration to be received by the holders of shares of Company
Common Stock pursuant to the Offer and the Merger, taken together, is fair to
the holders of shares of Company Common Stock from a financial point of view.
Subject to the provisions of Section 7.6 hereof and the other provisions of this
Agreement, the Company hereby consents to the inclusion in the Offer Documents
prepared in connection with the Offer of the recommendation of the Board of
Directors of the Company described in the immediately preceding sentence.
1.2.2 Securities Law Compliance. On the date of commencement of the Offer,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto, the
'Schedule 14D-9') containing, subject to the provisions of Section 6.6 hereof
and the other provisions of this Agreement, the recommendation of the Board of
Directors of the Company described in Section 1.2.1 and shall mail the Schedule
14D-9 to the stockholders of the Company. The Schedule 14D-9 will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company and Offeror agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of shares of the Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. Buyer and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company agrees
to provide Offeror with a written copy of any comments it or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-9, promptly after receipt of such comments.
1.2.3 Stockholder Lists. In connection with the Offer and the Merger, the
Company shall furnish Offeror with mailing labels containing the names and
addresses of all record holders of shares of Company Common Stock and with
security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, and of those persons becoming record
holders subsequent to such date. The Company shall furnish Offeror with all such
additional information (including, but not limited to, updated lists of holders
of shares of Company Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Offeror or its agents may
reasonably request in communicating the Offer to the record and beneficial
owners of shares of the Company Common Stock. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Offeror shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated in
accordance with Section 9.1, shall deliver to the Company all copies of such
information then in its or any of its affiliate's possession.
1.2.4 Directors.
(a) Effective upon the acceptance for payment by Offeror of shares pursuant
to the Offer such that Buyer or MergerCo shall own at least a majority of the
Fully Diluted Shares, the Offeror shall be entitled to designate the number of
Directors, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage that the number of
shares of Company Common Stock owned by Offeror (including shares of Company
Common Stock accepted for payment) bears to the total number of Shares of
Company Common Stock outstanding, and the Company shall take all action
necessary to cause Offeror's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of
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<PAGE>
incumbent directors. At such times, the Company will use its best efforts to
cause individuals designated by Offeror to constitute the same percentage as
such individuals represent on the Company's Board of Directors of (x) each
committee of the Board (other than any committee of the Board established to
take action under this Agreement), (y) each board of directors of each
Subsidiary of the Company and (z) each committee of each such board. provided;
however, that in the event that Offeror's designees are elected to the Board of
Directors of the Company, until the Effective Time, such Board of Directors
shall have at least two directors who are directors of the Company on the date
of this Agreement and who are not officers of the Company or any of its
subsidiaries (the 'Independent Directors') and; provided further that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors of the Company on the date hereof shall designate two persons to
fill such vacancies who shall not be officers or affiliates of the Company or
any of its Subsidiaries, or officers or affiliates of Buyer or any of its
subsidiaries, and such persons shall be deemed to be Independent Directors for
purposes of this Agreement. Notwithstanding anything in this Agreement to the
contrary, the affirmative vote of the majority of the Independent Directors
shall be required to (i) amend or otherwise modify the Certificate of
Incorporation of the Company, (ii) approve any amendment, modification or waiver
by the Company of any provisions of this Agreement or (iii) approve any other
action by the Company that materially adversely affects the interests of the
stockholders of the Company (other than Buyer or MergerCo) with respect to the
transactions contemplated hereby, including without limitation, any actions
which would constitute a breach by the Company of its representations,
warranties or covenants contained herein. The provisions of this Section
1.2.4(a) are in addition to and shall not limit any rights which the Buyer,
MergerCo or any of their affiliates may have as a holder or beneficial owner of
shares as a matter of law with respect to the election of directors or
otherwise.
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Subject to applicable law, the Company shall promptly
take all action requested by Offeror necessary to effect any such election,
including mailing to its stockholders the information statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Offeror shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Offeror's designees). In connection with
the foregoing, the Company will promptly, at the option of Offeror, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Offeror's designees to be elected or appointed to, and to constitute a majority
of the Company's Board of Directors as provided above. Offeror will supply to
the Company in writing and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
2.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the relevant state statute, MergerCo or
such wholly owned subsidiary of MergerCo shall be merged with and into the
Company at the Effective Time of the Merger (as hereafter defined). Upon the
Effective Time of the Merger, the separate existence of MergerCo or such wholly
owned subsidiary of MergerCo shall cease, and the Company shall continue as the
surviving corporation (the 'Surviving Corporation') and shall continue under the
name Signature Brands USA, Inc. In the event that a wholly owned Subsidiary of
MergerCo rather than MergerCo is merged with and into the Company, references
herein to MergerCo with respect to the Merger shall be deemed to be references
to such wholly owned Subsidiary of MergerCo.
2.2. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
9.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VIII, the closing of the Merger (the 'Closing') will take place at 10:00
a.m. on the second business day after satisfaction or waiver of the conditions
set forth in Article VIII (the 'Closing Date'), at the
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offices of Hutchins, Wheeler & Dittmar, A Professional Corporation, unless
another date, time or place is agreed to in writing by the parties hereto.
2.3. Effective Time of the Merger. On the Closing Date, the Surviving
Corporation shall file a certificate of merger or, if applicable, MergerCo shall
file a certificate of ownership and merger (the 'Certificate of Merger')
executed in accordance with the Delaware General Corporation Law ('DGCL') with
the Delaware Secretary of State and the Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or at such other time as is specified in the Certificate
of Merger as MergerCo and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being the
'Effective Time of the Merger').
2.4. Effects of the Merger. The Merger shall have the effects set forth in
the DGCL.
2.5. Certificate of Incorporation; By-Laws. (a) The Certificate of
Incorporation of MergerCo, as in effect immediately prior to the Effective Time
of the Merger, shall become the Certificate of Incorporation of the Surviving
Corporation except that it shall be amended to change the name of the Surviving
Corporation to Signature Brands USA, Inc. and, as so amended, until thereafter
further amended as provided therein and under the DGCL, it shall be the
Certificate of Incorporation of the Surviving Corporation following the Merger.
(b) The By-laws of MergerCo as in effect at the Effective Time of the
Merger shall be the By-laws of the Company following the Merger until thereafter
changed or amended as provided therein or by applicable law.
2.6. Directors. The directors of MergerCo at the Effective Time of the
Merger shall be the directors of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.7. Officers. The officers of the Company at the Effective Time of the
Merger shall be the officers of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
3.1. Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of MergerCo:
(a) Common Stock of MergerCo. Each share of common stock of MergerCo
issued and outstanding immediately prior to the Effective Time of the Merger
shall be converted into one share of the common stock, par value $.01 per share,
of the Company.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
that is owned by the Company or by any wholly owned subsidiary of the Company
shall automatically be canceled and retired and shall cease to exist, and no
cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
herein and subject to Section 3.3, each issued and outstanding share of Company
Common Stock, other than shares owned by Buyer, MergerCo or any other direct or
indirect subsidiary of Buyer, the Company or any wholly owned Subsidiary of the
Company (collectively, the 'Excluded Shares'), and other than Dissenting Shares
and treasury stock, shall be converted into the right to receive in cash from
the Company following the Merger an amount equal to $8.25 (the 'Merger
Consideration'), without interest, upon surrender of the certificates formerly
representing such shares pursuant to Section 3.3. The term 'Merger
Consideration' shall mean the per share amount in reference to the consideration
designated on a per share basis, and otherwise shall refer to the aggregate
consideration represented by the per share amount multiplied by the total number
of shares of Company Common Stock then outstanding.
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(d) Dissenting Shares. Shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger held by a
holder who has the right to demand payment for and an appraisal of such shares
in accordance with the DGCL (or any successor provision) ('Dissenting Shares')
shall not be converted into the right to receive Merger Consideration unless
such holder fails to perfect or otherwise withdraws, forfeits or loses such
holder's right to such payment or appraisal, if any. If, after the Effective
Time of the Merger, such holder fails to perfect or withdraws, forfeits or loses
any such right to appraisal, each share of such holder shall be treated as a
share that had been converted as of the Effective Time of the Merger into the
right to receive Merger Consideration in accordance with this Section 3.1. The
Company shall give prompt notice to MergerCo of any demands received by the
Company for appraisal of shares of Company Common Stock, and MergerCo shall have
the right to participate in and, at MergerCo's reasonable discretion, to direct
all communications, negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of MergerCo, make
any payment with respect to, or settle or offer to settle, any such demands.
(e) Cancellation and Retirement of Excluded Shares. Each Excluded Share
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(f) Cancellation and Retirement of Company Common Stock. As of the
Effective Time of the Merger, all shares of Company Common Stock (other than
shares referred to in Section 3.1(b)) issued and outstanding immediately prior
to the Effective Time of the Merger, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
applicable thereto, without interest, upon surrender of such certificate in
accordance with Section 3.3 or the right, if any, to receive payment from the
Surviving Corporation for the 'fair value' of such shares as determined in
accordance with the provisions of Section 262 of the DGCL.
3.2. Stock Plans and Warrants.
(a) As soon as practicable following the date of this Agreement, the Board
of Directors of the Company (or, if appropriate, any committee administering the
Stock Plans (as defined below)) shall adopt such resolutions or take such other
actions as may be required to effect the following:
(i) adjust the terms of all outstanding employee stock options to
purchase shares of Company Common Stock ('Company Stock Options') granted
under the Company's Chief Executive Officer Stock Option Plan, 1997 Stock
Option and Incentive Plans, 1995 Stock Option and Incentive Plan and Second
Amended and Restated 1992 Stock Option Plan (the 'Stock Option Plans') to
provide that, at the Effective Time of the Merger each Company Stock Option
outstanding immediately prior to the Effective Time of the Merger shall
vest as a consequence of the Merger and shall be canceled in exchange for a
payment from the Company after the Merger (subject to any applicable
withholding taxes) equal to the product of (1) the total number of shares
of Company Common Stock subject to such Company Stock Option and (2) the
excess of the Merger Consideration over the exercise price per share of
Company Common Stock subject to such Company Stock Option and applicable
withholding taxes, payable in cash immediately following the Effective Time
of the Merger, except as otherwise set forth on Exhibit 3.2(a)(i); and
(ii) except as provided herein or as otherwise agreed to by the
parties, the Stock Option Plan and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time of the Merger, and the Company shall ensure that, following
the Effective Time of the Merger, no holder of a Company Stock Option nor
any participant in any Stock Option Plan shall have any right thereunder to
acquire equity securities of the Company following the Merger.
(b) Each outstanding Warrant (each a 'Warrant') governed by that
certain Warrant Agreement, dated as of August 17, 1994, by and between the
Company and American Bank National Association, as Warrant Agent (the
'Warrant Agreement'), shall at the Effective Time automatically without any
further action of
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the Company or the holders thereof be converted into the right to receive
an amount equal to the difference between the Merger Consideration and the
Exercise Price (as defined in the Warrant Agreement) in accordance with the
terms of the Warrant Agreement.
(c) The Company hereby represents and warrants that upon taking of the
actions specified above, immediately following the Effective Time of the
Merger, and after giving effect to the payments described in this Section
3.2, no holder of a Company Stock Option nor any participant in any Stock
Option Plan nor the holder of any warrant to purchase Company Common Stock
shall have the right thereunder to acquire equity securities of the
Company, or any other benefit, after the Merger.
3.3. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time of the Merger, Buyer shall
designate a bank or trust company to act as agent for the holders of Company
Common Stock in connection with the Merger (the 'Exchange Agent') (who shall be
reasonably acceptable to the Company) to receive the funds to which holders of
the shares of Company Common Stock are entitled to pursuant to this Article III.
Buyer shall, from time to time, make available to the Exchange Agent funds in
amounts and at times necessary for the payment of the Merger Consideration as
provided herein. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder, as of the Effective Time, of an outstanding
certificate or certificates which immediately prior to the Effective Time
represented shares of Company Common Stock (the 'Certificates'), a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor (or such other documents as may reasonably be
required in connection with such surrender) in customary form to be agreed by
MergerCo and the Company prior thereto.
(b) Exchange Procedures. (i) After the Effective Time of the Merger, each
holder of an outstanding Certificate or Certificates shall, upon surrender to
the Exchange Agent of such Certificate or Certificates and acceptance thereof by
the Exchange Agent, be entitled to receive the amount of cash into which such
Certificate or Certificates surrendered shall have been converted pursuant to
this Agreement.
(i) After the Effective Time of the Merger, there shall be no further
transfer on the records of the Company or its transfer agent of Certificates,
and if Certificates are presented to the Company for transfer, they shall be
canceled against delivery of cash. If Merger Consideration is to be remitted to
a name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Company or its transfer agent any transfer or other taxes required or
establish to the satisfaction of the Company or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the Merger Consideration applicable thereto as contemplated by Section 3.1. From
and after the Effective Time, the holders of Certificates evidencing ownership
of the shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares, except as otherwise provided for
herein or by applicable law. No interest will be paid or will accrue on any cash
payable as Merger Consideration or in lieu of any fractional shares of Company
Common Stock. The right of any stockholder to receive the Merger Consideration
shall be subject to reduction to reflect any applicable withholding obligation
for Taxes.
(ii) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Buyer, the
posting by such person of a bond in such amount as Buyer may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
or the provision of other reasonable assurances requested by Buyer, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
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(c) No Further Ownership Rights in Company Common Stock Exchanged For
Cash. The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to such
shares.
(d) Termination of Exchange Fund. Any portion of the Merger Consideration
deposited with the Exchange Agent pursuant to this Section 3.3 (the 'Exchange
Fund') which remains undistributed to the holders of the Certificates for six
months after the Effective Time of the Merger shall be delivered to the Company,
upon demand, and any holders of shares of Company Common Stock prior to the
Merger who have not theretofore complied with this Article II shall thereafter
look only to the Company and only as general creditors thereof for payment of
their claim for cash, if any, to which such holders may be entitled.
(e) No Liability. None of Buyer, MergerCo, the Company or the Exchange
Agent shall be liable to any person in respect of any Merger Consideration from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by the Buyer, on a daily basis. Any
interest and other income resulting from such investments shall be paid to the
Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and MergerCo as
follows:
4.1 Organization, Standing and Corporate Power. Each of the Company and
each of its Subsidiaries (as defined in Section 4.2) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a Material Adverse
Effect (as defined in Section 10.4) with respect to the Company. Attached as
Section 4.1 of the schedule (the 'Disclosure Schedule') delivered to MergerCo by
the Company at the time of execution of this Agreement are complete and correct
copies of the Amended and Restated Certificate of Incorporation, as amended, and
bylaws, as amended, of the Company. The Company has delivered to MergerCo
complete and correct copies of the articles or certificates of incorporation and
by-laws (or other comparable organizational documents) of each of its
Subsidiaries, in each case as amended to the date of this Agreement.
4.2 Subsidiaries. The only direct or indirect subsidiaries of the Company
are those listed in Section 4.2 of the Disclosure Schedule (the 'Subsidiaries').
All the outstanding shares of capital stock of each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned (of record and
beneficially) by the Company, by another wholly owned Subsidiary of the Company
or by the Company and another such wholly owned Subsidiary, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, 'Liens'). Except for the ownership
interests set forth in Section 4.2 of the Disclosure Schedule, the Company does
not own, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, business association, joint venture or other
entity.
4.3 Capital Structure. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock, par value $.01 per share.
Subject to any Permitted Changes (as defined in Section 6.1(d)) there were, as
of the close of business on January 16, 1998: (i) 9,174,261 shares of Company
Common Stock issued and outstanding; (ii) no shares of Company Common Stock are
held in the treasury of the Company; (iii) 1,634,853 shares of Company Common
Stock are reserved for issuance upon exercise of outstanding Company Stock
Options (of which options 190,500 shares will be cancelled prior to the
consummation of the Offer); and (iv) 767,200 shares of Company Common Stock
issuable upon exercise of outstanding Warrants (the 'Warrants'). Section 4.3 of
the Disclosure Schedule sets forth the exercise price for the outstanding
Company Stock Options and the Warrants. Except as set forth above or in Section
3.3 of the Disclosure Schedule, no shares of capital stock or other equity
securities of the Company are issued, reserved for
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issuance or outstanding. All outstanding shares of capital stock of the Company
are, and all shares which may be issued pursuant to the Stock Option Plan
including any increases pursuant to existing contractual obligations will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except as set forth on Section 4.3 of the
Disclosure Schedule, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote. Except as set forth
above, there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other equity or voting securities of the Company or of any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Other than as disclosed in the most
recent balance sheet of the Company included in the SEC Documents (as defined
below) or as set forth in Section 4.3 of the Disclosure Schedule, no
indebtedness for borrowed money of the Company or its Subsidiaries contains any
restriction upon the incurrence of indebtedness for borrowed money by the
Company or any of its Subsidiaries or restricts the ability of the Company or
any of its Subsidiaries to grant any Liens on its properties or assets. Other
than the Company Stock Options and other than as disclosed in Section 4.3 of the
Disclosure Schedule, (i) there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company or any of its Subsidiaries
and (ii) to the knowledge of the Company, there are no irrevocable proxies with
respect to shares of capital stock of the Company or any subsidiary of the
Company. Section 4.3 of the Disclosure Schedule sets forth the record and, to
the knowledge of the Company, beneficial ownership of, and voting power in
respect of, the capital stock of the Company held by the Company's directors,
officers and stockholders owning five percent (5%) or more of the Company's
outstanding common stock. Except as set forth on Section 4.3 of the Disclosure
Schedule, there are no agreements or arrangements pursuant to which the Company
is or could be required to register shares of Company Common Stock or other
securities under the Securities Act of 1933, as amended (the 'Securities Act')
or other agreements or arrangements with or among any security holders of the
Company with respect to securities of the Company.
4.4 Authority; Noncontravention. The Company has the requisite corporate
and other power and authority to enter into this Agreement and, subject to the
Company Stockholder Approval with respect to the consummation of the Merger, to
consummate the transactions contemplated hereby. The Offer, the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly authorized by
the Company's Board of Directors, which constitutes all necessary corporate
action on the part of the Company, subject, in the case of the Merger, to the
Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. Except
for the Company's credit facility and except as disclosed in Section 4.4 of the
Disclosure Schedule, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by the Offer and this
Agreement and compliance with the provisions hereof will not, conflict with, or
result in (a) any breach or violation of, or default (with or without notice or
lapse of time, or both) under, or right of termination, cancellation,
acceleration or 'put', with respect to any obligation or (b) the loss of a
benefit or other right or (c) the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, (i) the
Certificate of Incorporation, as amended, or By-laws, as amended, of the Company
or the comparable organizational documents of any of its Subsidiaries, (ii) any
loan or credit agreement, note, note purchase agreement, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a Material Adverse Effect with
respect to the Company or would not prevent, hinder or materially delay the
ability of the Company and/or MergerCo to consummate the transactions
contemplated by this Agreement if not
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cured or waived by the Closing Date. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Federal, state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign (a
'Governmental Entity'), or any other person under any material agreement,
indenture or other instrument to which the Company or any Subsidiary is a party
or to which any of its properties is subject, is required by or with respect to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for (i) the filing of a pre-merger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the 'HSR Act'), (ii) the filing
with the SEC of (x) a proxy statement relating to the Company Stockholder
Approval (such proxy statement as amended or supplemented from time to time, the
'Proxy Statement'), and (y) such reports under the Exchange Act as may be
required in connection with the Offer and this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the Certificate of Merger
with the Secretary of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices as are set forth in Section 4.4
of the Disclosure Schedule.
4.5 SEC Documents; Undisclosed Liabilities. Except as disclosed on
Schedule 4.5 of the Disclosure Schedule, the Company has timely filed all
required reports, schedules, forms, statements and other documents with the
Securities and Exchange Commission ('SEC') since January 1, 1996 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, as amended, the 'SEC Documents'). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents, and none of the SEC Documents (including any and all financial
statements included therein) as of such dates contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in all SEC Documents (the 'SEC
Financial Statements') comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations, stockholders' equity, and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments, none of which, individually or
in the aggregate is material). Except as set forth in Schedule 4.5 of the
Disclosure Schedule and except as set forth in the SEC Documents filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the SEC Documents filed and publicly available prior
to the date of this Agreement (the 'Balance Sheet'), neither the Company nor any
of its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of the
Company and its consolidated subsidiaries or in the notes thereto.
4.6 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to the
information supplied by MergerCo or any affiliate of MergerCo in writing
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. Neither the Schedule
14D-9 nor any information supplied by the Company for inclusion in the Offer
Documents will, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company,
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contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading (except to the extent information contained therein is based upon
information supplied solely by the Buyer or MergerCo). The Schedule 14D-9 shall
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
4.7 Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents or on Section 4.7 of the Disclosure Schedule, since the date of the
Balance Sheet, the Company has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not been: (i) any
Material Adverse Change with respect to the Company; (ii) any event which, if it
had taken place following the execution of this Agreement, would not have been
permitted by Section 6.1 without the prior consent of MergerCo; or (iii) any
condition, event or occurrence which would reasonably be expected to prevent,
hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
4.8 Litigation; Labor Matters; Compliance with Laws. (a) Except as
disclosed in the SEC Documents filed and publicly available prior to the date of
this Agreement, there is (i) no suit, action or proceeding or investigation
pending and, (ii) to the knowledge of the Company, no suit, action or proceeding
or investigation threatened against or affecting the Company or any of its
Subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect with respect to the Company or (iii)
prevent, hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries having, or which in the future
could have, any such effect.
(b) Except as disclosed in Section 4.8 of the Disclosure Schedule, (i)
neither the Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization; (ii) neither the Company nor any of
its Subsidiaries is the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment;
(iii) there is no strike, work stoppage or other labor dispute involving it or
any of its Subsidiaries pending or, to its knowledge, threatened, nor has there
been in the three year period prior to the date of this Agreement and, to the
knowledge of the Company, there are no current union organizing activities among
the Employees of the Company or any of its Subsidiaries which are reasonably
likely to result in a Material Adverse Effect; (iv) there is no grievance
arising out of any collective bargaining agreement or other grievance procedure
against the Company or any of its subsidiaries, except such grievances that have
not and will not prevent the Company from carrying on its business substantially
as now conducted or might reasonably be expected to result in a Material Adverse
Effect; (v) no charges with respect to or relating to the Company or any of its
subsidiaries are pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices, except such charges that have not and will not prevent the Company
from carrying on its business substantially as now conducted or might reasonably
be expected to result in a Material Adverse Effect; (vi) neither of the Company
or any of its subsidiaries has received notice of the intent of any Federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation which is reasonably likely to result
in a Material Adverse Effect; and (vii) the Company is not liable for any
severance pay or other payments to any employee or former employee, or any other
person, arising from the termination of employment, or other change in the legal
relationship with such person, under any benefit or severance policy, practice,
agreement, plan, or program of the Company, nor will the Company have any
liability which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the termination by the
Company of any persons employed by the Company or any of its Subsidiaries on or
prior to the Effective Time of the Merger.
(c) The ownership of the assets of and the conduct of the business of the
Company and each of its Subsidiaries have not been in violation of, and comply
with all statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees or arbitration awards applicable thereto, except for violations or
failures so to comply, if any, that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect with respect to the
Company.
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(d) Each of the Company and its Subsidiaries has in effect all material
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchise, licenses, notices, permits and rights,
including all authorizations under Environmental Laws ('Permits'), necessary for
it to own, lease or operate its properties and assets and to carry on its
business substantially as now conducted, and there is no actions pending to
revoke any such Permit and there has occurred no default or violation under any
such Permit which is reasonably likely to have a Material Adverse Effect.
4.9 Employee Benefit Plans. With respect to the employee benefit plans (as
that phrase is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ('ERISA')) and any other benefit or
compensation plan, program, or arrangement (including, but not limited to, each
deferred compensation and each bonus or other incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, and each employment, termination
or severance agreement) maintained for the benefit of any current or former
employee, officer, or director of the Company or any ERISA Affiliate (as defined
below) ('Benefit Plans'), except as set forth in Section 4.9 of the Disclosure
Schedule:
(i) none of the Benefit Plans is a 'multiemployer plan' within the
meaning of ERISA nor has the Company ever maintained or contributed to such
a Plan;
(ii) No Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any other Subsidiary for periods extending
beyond their retirement or other termination of service, other than (i)
coverage mandated by applicable law, (ii) death benefits under any 'pension
plan,' or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(iii) none of the Benefit Plans or any other agreement with any
employee of the Company or its Subsidiaries provides for payment of a
benefit, the increase of a benefit amount, the payment of a contingent
benefit, or the acceleration of the payment or vesting of a benefit by
reason of the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement;
(iv) each Benefit Plan intended to be qualified under section 401 (a)
of the Internal Revenue Code of 1986, as amended ('Code' has received a
favorable determination letter from the Internal Revenue Service that it is
so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to result in the revocation of such
determination letter;
(v) each Benefit Plan has been operated in all material respects in
accordance with its terms and the requirements of all applicable law.
(vi) No liability under Title IV or section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation
('PBGC') (which premiums have been paid when due). Insofar as the
representation made in this section 4.9(v) applies to Sections 4064, 4069
or 4204 of Title IV of ERISA, it is made with respect to any employee
benefit plan, program, agreement or arrangement subject to Title IV of
ERISA to which the Company or any ERISA Affiliate made, or was required to
make, contributions during the five (5)-year period ending on the last day
of the most recent plan year ended prior to the Effective Plan.
(vii) the Company has provided to Buyer or MergerCo (x) true and
complete copies of all Benefit Plans, (y) the most recent annual actuarial
valuation, if any, prepared for each Benefit Plan, and (z) the most recent
annual report (Form 5500), if any, required under ERISA with respect to
each Benefit Plan;
(viii) no payment that is owed or may become due to any director,
officer, employee, or agent of the Company will be non-deductible to the
Company or subject to tax under I.R.C. Section280G or Section4999,
respectively, nor will the Company be required to 'gross up'or otherwise
compensate any such person because of the imposition of any excise tax on a
payment to such person;
(ix) as of the date hereof, subject to the requirements of Section 412
of the Code or Section 302 of ERISA, no Pension Plan has incurred an
accumulated funding deficiency (as defined in Section 302 of
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ERISA and Section 412 of the Code) nor has any sponsor of such a Pension
Plan obtained a funding waiver (as such terms are defined in such
applicable sections and any regulations thereunder) with respect thereto;
(x) neither the Company nor any ERISA Affiliates has engaged in, and
neither the Company nor any Affiliate knows of any other person who or
which has engaged in, any 'prohibited transaction' (within the meaning of
Section 406 of ERISA or Section 4975 of the Code, excluding any
transactions which are exempt under Section 408 of ERISA or Section 4975 of
the Code) with respect to any Benefit Plan, which could reasonably be
expected to subject the Company or any Subsidiary or Buyer or MergerCo to
any material liability;
(xi) no reportable event (as defined in ERISA and the regulations
thereunder, but excluding any such event for which the thirty (30) day
notice requirement has been waived) has occurred or is continuing with
respect to any Benefit Plan;
(xii) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, any
actions, suits or claims (other than routine claims for benefits) which can
reasonably be expected to be asserted, against the Company with respect to
any Benefit Plan or other plan or arrangement, or against any such Benefit
Plan or other plan or the assets thereof;
(xiii) the Company and each ERISA Affiliate is, and at all relevant
times, has been in material compliance with the provisions of COBRA (as
defined below); and
(xiv) except as specifically set forth herein, the Company has not
taken any action or made any statement, promise or representation to, or
agreement with, any of its employees, officers or directors that after the
Closing, Buyer will continue or establish any Benefit Plan or other plan or
arrangement or provide any particular benefits or compensation to
employees. To the knowledge of the Company, the PBGC has not instituted
proceedings to terminate any Benefit Plan subject to Section 302 or Title
IV of ERISA or Section 412 of the Code (each, a 'Title IV Plan') and no
condition exists that presents a material risk that such proceedings will
be instituted.
For purposes of this Agreement, 'ERISA Affiliate' shall mean any
corporation, trade or business which controls, is controlled by, or is under
common control with, the Company within the meaning of Sections 414(b), 414(c),
414(m) or 414(o) of the Code or Section 4001(a)(14) of ERISA and 'COBRA' shall
mean Part 6 of Subtitle B of Title I of ERISA and Section 4980B(f) of the Code.
Schedule 4.9 of the Disclosure Schedule sets forth a complete and accurate
list of all Benefit Plans currently in effect.
4.10 Taxes. Except as disclosed in Section 4.10 of the Disclosure
Schedule, the Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member (a 'Consolidated Group') has
timely filed (or has had timely filed on its behalf) all Tax Returns required to
be filed by it (except for certain Tax Returns, each of which is immaterial in
amount and scope, involving aggregate liability for Taxes of no more than
$100,000, which may not have been timely filed) and all such Tax Returns are
true, correct and complete in all material respects, has paid (or has had paid
on its behalf) all Taxes shown thereon to be due and has provided adequate
reserves in its financial statements, in accordance with generally accepted
accounting principles, for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. Except as disclosed in Section 4.10 of
the Disclosure Schedule, (i) no claim for unpaid Taxes has become a lien against
the assets of the Company or any of its Subsidiaries or is being asserted
against the Company or any of its Subsidiaries; (ii) no audit of any Tax Return
that includes the Company or any of its Subsidiaries is being conducted by a Tax
authority; (iii) no extension or waiver of the statute of limitations on the
assessment of any Taxes or with respect to any Tax Return has been granted by
the Company or any of its Subsidiaries and is currently in effect and (iv) there
is no arrangement with respect to sharing or allocating Taxes that will require
any payment by the Company or any of its Subsidiaries after the date of this
Agreement. As used in this Agreement, 'Taxes' shall mean (a) all taxes of any
kind, including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, back-up withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any
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penalties, additions to tax or additional amounts imposed by any Governmental
Entity, domestic or foreign (b) any liability for the payment of any amount of
the type described in (a) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (c) any liability for the payment
of any amounts as a result of being a party to any tax sharing agreement or as a
result of an express or implied obligation to indemnify another person with
respect to the payment of any amounts of the type described in clause (a) or
(b). As used in this Agreement, 'Tax Return' shall mean any return, report or
statement required to be filed with any Governmental Entity with respect to
Taxes. Except as set forth on Schedule 4.10, there are no written or, to its
knowledge, oral proposed assessments of Taxes against the Company or any of its
Subsidiaries or written or, to its knowledge, oral proposed adjustments to any
Tax Return filed, pending against the Company or any of its Subsidiaries, or
written or, to its knowledge, oral proposed adjustments to the manner in which
any Tax of the Company or any of its Subsidiaries is determined.
4.11 Environmental Matters. Except as disclosed in Section 4.11 of the
Disclosure Schedule, and except for items of non-compliance which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company:
(a) The Company and its Subsidiaries hold and formerly held, and are,
and have been, in material compliance with, all Environmental Permits, and
the Company and its Subsidiaries are, and have been, in material compliance
with all applicable Environmental Laws;
(b) None of the Company or its Subsidiaries has received any
Environmental Claim, and none of the Company or its Subsidiaries is aware,
after diligent inquiry, of any threatened Environmental Claim or of any
circumstances, conditions or events that could reasonably be expected to
give rise to a material Environmental Claim, against the Company or any of
its Subsidiaries and, to the knowledge of the Company, as of the date of
this Agreement, there are no circumstances or conditions that may prevent
or interfere with compliance by the Company or its subsidiaries in the
future with Environmental Laws (or Environmental Permits issued thereunder)
in effect as of the date of this Agreement, except such circumstances or
conditions that have not and are not reasonably likely to result in a
Material Adverse Effect;
(c) There are no Hazardous Materials present at any facility currently
owned, leased or operated by the Company or any of its Subsidiaries that
could reasonably be expected to give rise to liability of the Company or
any of its Subsidiaries under any Environmental Laws which liability could
reasonably be expected to have a Material Adverse Effect on the Company;
(d) No modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or approval of,
any third party of the Environmental Permits is required in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby or the continuation of the business of the
Company or its Subsidiaries following such consummation;
(e) Hazardous Materials have not been generated, transported, treated,
stored, disposed of, released or threatened to be released at, on, from or
under any of the properties or facilities currently or previously owned or
leased by the Company or any of its Subsidiaries, in violation of or in a
manner or to a location that could give rise to liability under any
Environmental Laws which liability could reasonably be expected to have
Material Adverse Effect on the Company;
(f) The Company and its Subsidiaries have not assumed, contractually
or by operation of law, any liabilities or obligations under any
Environmental Laws except, in the case of those assumed by operation of
law, those assumed which in and of themselves (and irrespective of any
contribution or indemnification rights) could not reasonably be expected to
have a Material Adverse Effect on the Company.
(g) For purposes of this Agreement, the following terms shall have the
following meanings:
'Environmental Claim' means any written or oral notice, claim, demand,
action, complaint, proceeding, request for information or other communication by
any person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous
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Materials at any location, whether or not owned, leased or operated by the
Company or any of its Subsidiaries or (ii) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or Environmental
Permit or (iii) otherwise relating to obligations or liabilities under any
Environmental Laws.
'Environmental Permits' means all permits, licenses, registrations and
other governmental authorizations required for the Company and its Subsidiaries
and the operations of the Company's and its Subsidiaries', facilities and
otherwise to conduct its business under Environmental Laws.
'Environmental Laws' means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection of
human health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and local laws.
'Hazardous Materials' means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
4.12 Material Contracts. The Company has provided or made available to
MergerCo true and complete copies of all written contracts, agreements
(including, but not limited to, distribution agreements and licensing
agreements), commitments, arrangements, leases (including with respect to
personal property), policies and other instruments to which it or any of its
Subsidiaries is a party or by which it or any such Subsidiary is bound which is
or was required to be filed as an exhibit to the SEC Documents ('Material
Contracts'). Except as set forth in Section 4.12 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries is, or has received any notice
or has any knowledge that any other party is, in breach or default in any
material respect under any such Material Contract; and there has not occurred
any event that with the lapse of time or the giving of notice or both would
constitute a material breach or default. Except as set forth on Section 4.12 of
the Disclosure Schedule, all Material Contracts are valid and subsisting and in
full force and effect in accordance with their terms, and the Company has duly
performed its obligations thereunder in all material respects to the extent such
obligations have occurred.
4.13 Brokers. No broker, investment banker, financial advisor or other
person, other than Donaldson, Lufkin & Jenrette Securities Corporation, the fees
and expenses of which will be paid by the Company (pursuant to a fee agreement,
a copy of which has been provided to MergerCo), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
4.14 Opinion of Financial Advisor. The Company has received the opinion of
Donaldson, Lufkin & Jenrette Securities Corporation dated the date hereof, to
the effect that the consideration to be received in the Offer and the Merger by
the Company's stockholders (other than any consideration paid with respect to
Dissenting Shares is fair to the holders of Company Common Stock from a
financial point of view, a signed copy of which opinion has been delivered to
MergerCo.
4.15 Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has (a) determined that the Offer, this Agreement
and the transactions contemplated hereby, taken together, are advisable and in
the best interests of the Company and the stockholders of the Company, and (b)
resolved to recommend that the holders of the shares of Company Common Stock
tender their shares of Company Common Stock in the Offer, approve the Offer,
this Agreement and the transactions contemplated herein, including the Merger.
4.16 Required Company Vote. The Company Stockholder Approval, being the
affirmative vote of a majority in number of the shares of the Company Common
Stock, is the only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
4.17 State Takeover Statutes. No state takeover statute or similar statute
or regulation of the State of Delaware (and, to the knowledge of the Company
after due inquiry, of any other state or jurisdiction) applies or
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purports to apply to the Company or any of its Subsidiaries, or to this
Agreement, the Offer, the Merger, or any of the other transactions contemplated
hereby, except any such statutes or regulations which are no longer applicable
in any respect upon the execution of this Agreement. Neither the Company nor any
of its Subsidiaries has any rights plan, preferred stock or similar arrangement
which have any of the aforementioned consequences in respect of the transactions
contemplated hereby.
4.18. Intellectual Property. Section 4.18 of the Disclosure Schedule sets
forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to the Company and its Subsidiaries
and which are material to the Company and its Subsidiaries taken as a whole
(collectively, 'Intellectual Property Rights'). The Intellectual Property Rights
are sufficient to allow each of the Company and each of its Subsidiaries to
conduct, and continue to conduct, its business as currently conducted in all
material respects. To the knowledge of the Company, each of the Company and each
of its Subsidiaries owns or has sufficient unrestricted right to use the
Intellectual Property Rights in order to allow it to conduct its business as
currently conducted in all material respects, and the consummation of the
transactions contemplated hereby will not alter or impair such ability in any
respect. Each copyright registration, patent and registered trademark and
application therefor listed on Section 4.18 of the Disclosure Schedule is in
proper form, not disclaimed in whole and has been duly maintained including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions except with respect
to use requirements as to trademarks and except for any such failure to be in
proper form, any such disclaimer or such failure to be duly maintained which is
not reasonably likely to result in a Material Adverse Effect. To the knowledge
of the Company, there are no pending oppositions, cancellations, invalidity
proceedings, interferences or re-examination proceedings with respect to the
Intellectual Property Rights which are reasonably likely to result in a Material
Adverse Effect. To the knowledge of the Company, neither the Company nor any of
its Subsidiaries has received any written notice from any other Person
pertaining to or challenging the right of the company or any of its Subsidiaries
to use any of the Intellectual Property Rights which is reasonably likely to
result in a Material Adverse Effect. Except as identified in Section 4.18 of the
Disclosure Schedules, no claims are pending by any Person with respect to the
ownership, validity, enforceability or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which are reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has made any claim of a
violation or infringement by others of its rights to or in connection with the
Intellectual Property Rights.
4.19. Title to Properties. Each of the Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its material tangible properties and assets (including real
property) in order to allow it to conduct, and continue to conduct, its business
as currently conducted in all material respects. Except as set forth in Section
4.19 of the Disclosure Schedule, such material tangible properties and assets
(including real property) are free of Liens which would impair such ability in
any material respect and, to the knowledge of the Company, the consummation of
the transactions contemplated by this Agreement will not alter or impair such
ability in any material respect.
4.20. Products Liability. Except as set forth in Section 4.20 of the
Disclosure Schedule, there is no pending or, to the knowledge of the Company,
threatened claim, action, suit, inquiry, proceeding or investigation by any
individual or Governmental Entity in which a Product is alleged to have a Defect
and which is reasonably likely to result in a Material Adverse Effect; nor, to
the knowledge of the Company, is there any valid basis for any such claim,
cation, suit, inquiry, proceeding, or investigation. As used in this Section
4.20, the term 'Product' shall mean any product designed, manufactured, shipped,
sold, marketed, distributed and/or otherwise introduced into the stream of
commerce by or on behalf of the Company or any of its Subsidiaries, including,
without limitation, any product sold in the United States by the Company or any
of its Subsidiaries as the distributor, agent, or pursuant to any other
contractual relationship with a non-U.S. manufacturer; and the term 'Defect'
shall mean a defect or impurity of any kind, whether in design, manufacture,
processing, or otherwise, including, without limitation, any dangerous
propensity associated with any reasonably foreseeable use of a Product, or the
failure to warn of the existence of any defect, impurity, or dangerous
propensity.
4.21 Sole Representations. The representations and warranties contained in
this Agreement are the sole representations and warranties which the Company is
making in connection with the transactions contemplated herein.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
Each of Buyer and MergerCo hereby, jointly and severally, represents and
warrants to the Company as follows:
5.1 Organization, Standing and Corporate Power. Each of Buyer and MergerCo
are corporations duly organized, validly incorporated and in good standing in
the State of Delaware, and each has the requisite corporate power and authority
to carry on its business as now being conducted. Each of Buyer and MergerCo has
delivered to the Company complete and correct copies of its certificate of
incorporation (or other organizational documents) and by-laws.
5.2 Authority; Noncontravention. Each of Buyer and MergerCo has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each of Buyer and MergerCo and the consummation by
each of Buyer and MergerCo of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of each
of Buyer and MergerCo. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Buyer and MergerCo.
Except as disclosed on Section 5.2 of the Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in (a) any breach or violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration or 'put' with
respect to any obligation or (b) the loss of a benefit, or other right or the
creation of any Lien upon any of the properties or assets of either Buyer or
MergerCo under, (i) the certificate of incorporation or by-laws of either Buyer
or MergerCo, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to either Buyer or MergerCo or its properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to either Buyer or MergerCo or its
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a Material Adverse Effect with
respect to either Buyer or either Buyer or MergerCo or could not prevent, hinder
or materially delay the ability of MergerCo to consummate the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, or notice to, any Governmental
Entity or any other person under any agreement, indenture or other instrument to
which Buyer or MergerCo is a party or to which any of its properties is subject,
is required by or with respect to either Buyer or MergerCo in connection with
the execution and delivery of this Agreement by either Buyer or MergerCo or the
consummation by Buyer and MergerCo of any of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification and
report form under the HSR Act, and (ii) the filing with the SEC of (y) the Offer
Documents and (z) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby.
5.3 Brokers. No broker, investment banker, financial advisor or other
person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of
which will be paid by Buyer or MergerCo, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
an behalf of MergerCo to its affiliates.
5.4 Offer Documents and Schedule 14D-9. The Offer Documents will not, at
the time the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders of the
Company, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (except to the extent information contained therein is based upon
information supplied solely by the Company). The Offer Documents shall comply in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
5.5 Information Supplied. None of the information supplied or to be
supplied by Buyer or MergerCo or its affiliates in writing specifically for
inclusion or incorporation by reference in the Proxy Statement will, at the
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time the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
5.6 Sole Representations. The representations and warranties contained in
this Agreement are the sole representations and warranties which Buyer or
MergerCo are making in connection with the transactions contemplated herein.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 Conduct of Business of the Company. During the period from the date of
this Agreement to the Effective Time of the Merger (except as otherwise
specifically required by the terms of this Agreement), the Company shall, and
shall cause its Subsidiaries to, act and carry on their respective businesses in
the usual, regular and ordinary course of business consistent with past practice
and use its and their respective reasonable best efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them and to preserve goodwill. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time of the Merger, the Company shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of MergerCo:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent in accordance with applicable law;
(b) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
(c) purchase, redeem or otherwise acquire any shares of capital stock
of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities, except for the cash-out of Company Stock Options (as provided
in Section 3.2.3); in full or partial payment of the exercise price payable
by such holder upon exercise of Company Stock Options outstanding on the
date of this Agreement;
(d) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any of its
Subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
(other than the issuance of Company Common Stock upon the exercise of
Company Stock Options outstanding on the date of this Agreement and in
accordance with their present terms (such issuances, together with the
acquisitions of shares of Company Common Stock permitted under clause (c)
above, being referred to herein as 'Permitted Changes'));
(e) in the case of the Company or any subsidiary, amend its
certificates or articles of incorporation, by-laws or other comparable
charter or organizational documents;
(f) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization;
(g) other than as specifically permitted by Section 6.1 of the
Disclosure Schedule, sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets other than any such properties or assets the value of which do not
exceed two million individually and ten million in the aggregate, except
sales of inventory in the ordinary course of business consistent with past
practice;
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(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another person,
enter into any 'keep well' or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings and for lease obligations, in each case incurred in the ordinary
course of business consistent with past practice;
(i) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or indirect wholly owned subsidiary of the Company and other than loans to
employees in the ordinary course of business not to exceed $25,000 in any
one case or $500,000 in the aggregate;
(j) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, (a) of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as
in effect on the date hereof or (b) claims settled or compromised to the
extent permitted by Section 6.1(n), or waive, release, grant, or transfer
any rights of material value or modify or change in any material respect
any existing license, lease, Permit, contract or other document, other than
in the ordinary course of business consistent with past practice;
(k) adopt a plan of merger, consolidation, restructuring,
recapitalization or reorganization or complete a partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution,
(1) enter into any new collective bargaining agreement;
(m) change any material accounting principle used by it;
(n) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or compromises
of litigation where the amount paid (after giving effect to insurance
proceeds actually received) in settlement or compromise is not material to
the Company;
(o) neither the Company nor any of its subsidiaries shall make any new
capital expenditure or expenditures, other than capital expenditures not to
exceed, in the aggregate, the amounts provided for capital expenditures in
the capital budget of the company provided to Buyer;
(p) neither the Company nor any of its subsidiaries shall, except in
the ordinary course of business and except as otherwise permitted by this
Agreement, modify, amend or terminate any contract or agreement set forth
in the SEC Documents filed and publicly available prior to the date of this
Agreement to which the company or any Subsidiary is a party or waive,
release or assign any material rights or claims;
(q) neither the Company nor any of its subsidiaries shall: (i) enter
into any employment agreement with any officer, director or key employee of
the Company or any of its subsidiaries; or (ii) hire or agree to hire any
new or additional key employees or officers.
(r) neither the Company nor any of its subsidiaries shall make any Tax
election or settle or compromise any material Tax liability;
(s) neither the Company nor any of its subsidiaries will voluntarily
take, or voluntarily agree to commit to take, any action that would make
any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time; or
(t) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Changes in Employment Arrangements. Except as set forth in Section 6.2
of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
shall adopt or amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement (including any Company Plan) for the benefit or welfare of any
employee, director or former director or employee, or increase the compensation
or fringe benefits of any director, employee or former director or employee or
pay any benefit not required by any
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existing plan, arrangement or agreement (other than increases for employees
other than officers and directors) in the ordinary course of business consistent
with past practice .
6.3 Severance. Neither the Company nor any of its Subsidiaries shall grant
any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
6.4 WARN. Neither the Company nor any of its Subsidiaries shall effectuate
a 'plant closing' or 'mass layoff', as those terms are defined in the Worker
Adjustment and Retraining Notification Act of 1988 or similar state law ('WARN')
affecting in whole or in part any site of employment, facility, operating unit
or employee of the Company or any subsidiary, without the prior written consent
of MergerCo or its affiliates in advance and without complying with the notice
requirements and other provisions of WARN.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Preparation of Proxy Statement: Stockholder Meeting.
(a) As promptly as practicable after Buyer or MergerCo first purchases
Shares pursuant to the Offer, and if required by applicable law, the Company
shall prepare and file with the SEC a preliminary proxy or information statement
in accordance with the Exchange Act relating to the Merger and this Agreement
and use its best efforts (x) to obtain and furnish the information required to
be included by the Exchange Act and the SEC in the Proxy Statement and, after
consultation with Buyer, to respond promptly to any comments made by the SEC
with respect to the preliminary proxy or information statement and cause a
definitive proxy or information statement, including any amendment or supplement
thereto to be mailed to its stockholders, provided that no amendment or
supplement to the Proxy Statement or information statement will be made by the
Company without consultation with Buyer and its counsel. If, at any time prior
to the Stockholders Meeting, any event, with respect to the Company, its
Subsidiaries, directors, officers, and/or the Merger or the other transactions
contemplated hereby, shall occur, which is required to be described in the Proxy
Statement, the Company shall so describe such event and, to the extent required
by applicable law, shall cause it to be disseminated to the Company's
stockholders.
(b) The Company will immediately notify MergerCo and its affiliates of (i)
the receipt of any comments from the SEC regarding the Proxy Statement and (ii)
the approval of the Proxy Statement by the SEC. MergerCo shall be given a
reasonable opportunity to review and comment on all filings with the SEC and all
mailings to the Company's stockholders in connection with the Merger prior to
the filing or mailing thereof, and the Company shall use its best efforts to
reflect all such reasonable comments.
(c) The Company will, as promptly as practicable following the expiration
of the Offer and in consultation with MergerCo, duly call, give notice of,
convene and hold a meeting of its stockholders (the 'Stockholders Meeting') for
the purpose of approving this Agreement and the transactions contemplated by
this Agreement. The Company will, through its Board of Directors, recommend to
its stockholders approval of the foregoing matters and seek to obtain all votes
and approvals thereof by the stockholders, as set forth in Section 4.15;
provided, however; that the obligations contained herein shall be subject to the
provisions of Section 7.6 of this Agreement. Subject to the foregoing, such
recommendation, together with a copy of the opinion referred to in Section 4.14
shall be included in the Proxy Statement. The Company will use its best efforts
to hold such meetings as soon as practicable after the date hereof.
Notwithstanding the foregoing, if MergerCo shall acquire at least 90% of the
outstanding Company Common Stock pursuant to the Offer, MergerCo may, in its
sole discretion, and in lieu of completing the Merger in accordance with this
Agreement, cause the Company to be merged into Merger Co, or MergerCo into the
Company, in either case without a Stockholders Meeting and in accordance with
the Delaware law; provided, however, that in such event, the rights of
stockholders of the Company under this Agreement (including, without limitation,
the right to receive the Merger Consideration) shall not be adversely affected
thereby (other than the right to receive the Proxy Statement, attend the
Stockholders Meeting and vote on the Merger, which shall no longer be
applicable).
(d) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
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7.2. Access to Information, Confidentiality.
(a) The Company shall, and shall cause its Subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
MergerCo and its representatives reasonable access during normal business hours,
in a manner initially coordinated with the chief executive officer or chief
financial officer of the Company, and thereafter coordinated with those persons
designated by the chief executive officer, during the period prior to the
Effective Time of the Merger to its properties, books, contracts, commitments,
personnel and records (including, without limitation, to the extent available,
the work papers of the Company's independent public accountants) and, during
such period, the Company shall, and shall cause its Subsidiaries, officers,
employees and representatives to, furnish promptly to MergerCo (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (ii) all other information concerning its business, properties,
financial condition, operations and personnel as MergerCo may from time to time
reasonably request. Except as required by law, each of the Company and MergerCo
will hold, and will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence to the extent
required by and in accordance with that certain Confidentiality Agreement, dated
February 17, 1998 by or on behalf of the Company and Buyer, the other terms of
which Confidentiality Agreement are hereby terminated.
7.3. Additional Undertakings.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable best 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, the Merger and the other transactions
contemplated by this Agreement. The Buyer, MergerCo and the Company will use
their reasonable best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, Permits or authorizations are required to be obtained (or,
which if not obtained, would result in a breach or violation, or an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Offer, the Merger and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, neither the Company nor
any of its Subsidiaries shall be entitled to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of its
Subsidiaries or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company or any of its Subsidiaries, without
Buyer's prior written consent.
(b) The Company and Buyer shall make, subject to the condition that the
transactions contemplated herein actually occur, any undertakings (including
undertakings to make divestitures, provided, in any case, that such divestitures
need not themselves be effective or made until after the transactions
contemplated hereby actually occur) required in order to comply with the
antitrust requirements or laws of any governmental entity, including the HSR
Act, in connection with the transactions contemplated by this Agreement.
7.4 Indemnification. For six years after the Effective Time of the Merger,
the Company and the Buyer shall indemnify all present and former directors or
officers of the Company and its Subsidiaries ('Indemnified Parties') against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, 'Costs') incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time of the
Merger, whether asserted or claimed prior to, at or after the Effective Time of
the Merger, to the fullest extent as would have been permitted in their
respective articles of organization or by-laws consistent with applicable law,
to the extent such Costs have not been paid for by insurance and shall, in
connection with defending against any action for which indemnification is
available hereunder, reimburse such Indemnified Parties from time to time upon
receipt of sufficient supporting documentation, for any reasonable costs and
expenses reasonably incurred by such Indemnified Parties; provided
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that such reimbursement shall be conditioned upon such Indemnified Parties'
agreement promptly to return such amounts to the Company if a court of competent
jurisdiction shall ultimately determine that indemnification of such Indemnified
Parties is prohibited by applicable law. The Company will maintain for a period
of not less than six years from the Effective Time of the Merger, the Company's
current directors' and officers, insurance and indemnification policy (or a
policy providing substantially similar coverage) to the extent that it provides
coverage for events occurring prior to the Effective Time of the Merger (the
'D&O Insurance') for all persons who are directors and officers of the Company
on the date of this Agreement; provided that the Company shall not be required
to spend as an annual premium for such D&O Insurance an amount in excess of 200%
of the annual premium paid for directors' and officers' insurance in effect
prior to the date of this Agreement; and provided further that the Company shall
nevertheless be obligated to provide such coverage as may be obtained for such
amount. The provisions of this Section are intended for the benefit of, and
shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.5 Public Announcements. Neither MergerCo or the Buyer, on the one hand,
nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, without the other party's prior consent,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with NASDAQ, and in any event MergerCo and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or other public
statements with respect to such transactions. The parties agree that the initial
press release or releases to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed upon prior to the
issuance thereof.
7.6 No Solicitation.
(a) From and after the date hereof until the termination of this Agreement,
neither the Company or any of its Subsidiaries, nor any of their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its Subsidiaries) will directly or indirectly
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to any Transaction Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Transaction Proposal
or agree to or endorse any Transaction Proposal or authorize or permit any of
its officers, directors or employees or any of its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to take any such
action, provided, however, that nothing contained in this Agreement shall
prohibit the Board of Directors of the Company which, for purposes of this
Section 7.6, shall include any Special Committee thereof from, prior to the
acceptance for payment of Company Common Stock pursuant to the Offer (i)
furnishing information to or entering into discussions or negotiations with, any
person or entity that makes an unsolicited written, bona fide Transaction
Proposal and in respect of which such person or entity has all of the necessary
funds or commitments therefor if, and only to the extent that: (A) the Board of
Directors of the Company, after consultation with their financial advisors and
after receipt of advice from independent outside legal counsel (who may be the
Company's regularly engaged independent outside legal counsel) determines in
good faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary duties to stockholders under applicable
law, (B) prior to taking such action the Company receives from such person or
entity an executed confidentiality agreement containing terms and provisions
substantially similar to those contained in the Confidentiality Agreement
described in Section 7.2, (ii) failing to make or withdrawing or modifying its
recommendation referred to in Section 4.15 if there exists a Transaction
Proposal and the Board of Directors of the Company, after consultation with its
financial advisors and after receipt of advice from independent outside legal
counsel (who may be the Company's regularly engaged outside independent
counsel), determines in good faith that such action is necessary for the Board
of Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law in connection with such Transaction Proposal or (iii)
making to the Company's stockholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer, or taking any other legally required action with respect to
such tender offer (including, without limitation, the making of public
disclosures as may be necessary or reasonably advisable under applicable
securities laws) if the Board of Directors of the Company, after
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consultation with their financial advisors and receipt of advice from
independent outside legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary for
the Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law; and Section 7.6(b) and 7.6(c) are fully
complied with by the Board of Directors of the Company. In the event of an
exercise of the Company's or it's Board of Director's rights under clauses (i),
(ii) or (iii) above and subject to compliance with this Section 7.6,
notwithstanding anything contained in this Agreement to the contrary, such
exercise of rights shall not constitute a breach of this Agreement by the
Company. For purposes of this Agreement, 'Transaction Proposal' shall mean any
of the following (other than the transactions between the Company and MergerCo
contemplated by the Offer and this Agreement) involving the Company or any of
its Subsidiaries: (i) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for, or the acquisition (or right to acquire) of 'beneficial ownership' by
any person, 'group' or entity (as such terms are defined under Section 13 (d) of
the Exchange Act), of 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing or recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries or (vi) any other transaction
the consummation of which would reasonably be expected to impede, interfere
with, prevent or materially delay the Offer or the Merger or which would
reasonably be expected to dilute materially the benefits to Buyer of the
transactions contemplated hereby.
(b) Prior to the Board of Directors withdrawing or modifying its approval
or recommendation of the Offer, this Agreement or the Merger, approving or
recommending a Transaction Proposal, or entering into an agreement with respect
to a Transaction Proposal, the Board of Directors shall provide Buyer with a
written notice (a 'Notice of Takeover Proposal') advising Buyer that the Board
of Directors has received a Takeover Proposal, specifying the material terms and
conditions of such Transaction Proposal (unless prohibited from doing so by the
terms thereof) and identifying the person making such transaction Proposal
(unless prohibited from doing so by the terms thereof), and neither the Company
nor any subsidiary shall enter into an agreement with respect to a Transaction
Proposal until midnight three business days after the day on which the Notice of
Takeover Proposal was given to Buyer. In addition, if the Company proposes to
enter into an agreement with respect to any Transaction Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid, to
Buyer the expenses and fees and the Termination Fee (as provided in and defined
in Section 10.2)
7.7 Resignation of Directors. Prior to the Effective Time of the Merger,
the Company shall deliver to MergerCo evidence satisfactory to MergerCo of the
resignation of all directors of the Company, effective at the Effective Time of
the Merger.
7.8 Employee Benefits. Buyer agrees that, for a period of twelve (12)
months following the Effective Time, the Surviving Corporation shall maintain
employee benefits plans and arrangements (directly or in conjunction with Buyer)
which, in the aggregate, will provide a level of benefits to continuing
employees of the Company and its Subsidiaries substantially comparable in the
aggregate to those provided under the Buyer's benefit plans as in effect
immediately prior to the Effective Time (other than discretionary benefits);
provided, however, that Buyer may cause modifications to be made to such benefit
plans and arrangements to the extent necessary to comply with applicable Law or
to reflect widespread adjustments in benefits (or costs thereof) provided to
employees under compensation and benefit plans of Buyer and its subsidiaries,
and no specific compensation and benefit plans need be provided. For purposes of
determining eligibility and vesting with respect to all Benefit Plans set forth
on Schedule 4.9 of the Disclosure Schedule (except with respect to any defined
benefit plans), Buyer shall use the employee's hire date with the Company or
such other date as has been previously determined by the Company for credit for
prior employment with any ERISA Affiliate of the Company. Benefit plans which
provide medical, dental, or life insurance benefits after the Effective Time to
any individual who is an active or former employee of the Company or any of its
Subsidiaries as of the Effective Time or a dependent of such an employee shall,
with respect to such individuals, waive any waiting periods, any pre-existing
conditions, and any actively-at-work exclusions to the extent so waived under
present policy and shall provide that any expenses incurred on or before the
Effective Time by such individuals shall be taken into
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account under such plans for purposes of satisfying applicable deductible,
coinsurance, and maximum out-of-pocket provisions to the extent taken into
account under present policy. Nothing in this Section 7.8 shall prohibit the
Company or the Surviving Corporation from terminating the employment of any
employee at any time with or without cause (subject to, and in accordance with
the terms of any existing employment agreements), or shall be construed or
applied to restrict the ability of the Buyer or Surviving Corporation and its
Subsidiaries to establish such types and levels of compensation and benefits as
they determine to be appropriate. Buyer agrees to cause the Surviving
Corporation (or the applicable Subsidiary employer) to honor the existing
employment agreements that are set forth on Schedule 7.8 of the Disclosure
Schedule.
7.9 Notification of Certain Matters. The Company shall give prompt notice
to Buyer and MergerCo and Buyer and MergerCo shall give prompt notice to the
Company of: (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which does or would be likely to cause (A) any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect, or (B) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied; and (ii) any failure of the
Company on the one hand, or Buyer or MergerCo on the other hand, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.10 State Takeover Laws. If any 'fair price' or 'control share
acquisition' statute or other similar statute or regulation shall become
applicable to the transactions contemplated by the Stock Purchase Agreement or
this Agreement, including the Offer or the Merger, the Company and Buyer, and
their respective Boards of Directors shall use their reasonable best efforts to
grant such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise use their reasonable best
efforts to eliminate the effects of any such statute or regulation on the
transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation. The respective obligation of
each party to effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval shall
have been obtained if required by applicable law.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition shall be in effect preventing or
prohibiting the acceptance for payment of, or payment for, shares of Common
Stock pursuant to the Offer, or the consummation of the Merger; provided,
however, that the parties hereto shall, subject to the last sentence of Section
7.3 (a) hereof, use their best efforts to have any such injunction, order,
restraint or prohibition vacated.
(d) Statutes; Consents. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any Governmental Entity of competent
jurisdiction which prohibits the consummation of the Merger.
8.2 Condition to Buyer's and Merger Co.'s Obligation. The obligation of
Buyer and Merger Co. to effect the Merger is subject to Buyer or Merger Co.
having purchased shares of Company Common Stock in the Offer.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Buyer and the Company; or
(b) by either Buyer or the Company, if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting or if there shall be in effect
any other legal restraint or prohibition preventing or prohibiting the
acceptance for payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger and such order, decree,
ruling or other action shall have become final and nonappealable (other than due
to the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to the
Effective Time of the Merger); or
(c) by the Company, if Offeror shall not have (i) commenced the Offer
within five (5) business days after the initial public announcement of Buyer's
intention to commence the Offer, or (ii) accepted for payment any shares of
Company Common Stock pursuant to the Offer (other than due to the failure of the
Company to perform its obligations under this Agreement) on or prior to April
30, 1998, or, if any necessary approvals required under the HSR Act shall not
have been obtained by April 30, 1998, on or prior to the earlier of (A) ten (10)
days after receipt of all necessary approvals under the HSR Act or (B) July 15,
1998; or
(d) by the Company, upon its execution, prior to Buyer's or MergerCo's
purchase of shares of Company Common Stock pursuant to the Offer, of a binding
agreement with a third party with respect to a Transaction Proposal, provided
that it has complied with all provisions of this Agreement, including the notice
provisions herein, and that it pays the Termination Fee as provided by and
defined in Section 10.2;
(e) by Buyer in the event of a material breach or failure to perform in any
material respect by the Company of any representation, warranty, covenant or
other agreement contained in this Agreement which cannot be or has not been
cured within 10 days after the giving of written notice to the Company; or
(f) by the Company, in the event of a material breach or failure to perform
in any material respect by MergerCo or Buyer of any representation, warranty,
covenant or other agreement contained in this Agreement which cannot be or has
not been cured within 10 days after the giving of written notice to MergerCo or
Buyer.
(g) by Buyer, if Offeror terminates the Offer in accordance with the terms
of Annex I.
9.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or MergerCo as provided in Section 9.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of MergerCo or the Company, other than the provisions of
Section 4.13, Section 5.5, the last sentence of Section 7.2, this Section 9.2,
Section 10.2 and Section 10.7. Nothing contained in this Section shall relieve
any party for any breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
9.3 Amendment. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the Merger by the stockholders of the Company; provided, however, that after any
such approval, there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
9.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 9.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The
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failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
9.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section
9.4 shall, in order to be effective, require in the case of MergerCo or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished on consummation of
the Merger and none of the Company, Buyer and MergerCo, nor any officer,
director or employee or shareholder thereof shall be under any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
10.2 Fees and Expenses.
(a) In addition to any other amounts which may be payable or become payable
pursuant to any other paragraph of this Section 10.2, the Company shall,
simultaneously with the termination of this Agreement in any of the
circumstances described in Section 10.2(b), reimburse MergerCo for all
out-of-pocket expenses and fees, in an aggregate amount not to exceed $1,500,000
(including, without limitation, fees payable to all banks, investment banking
firms and other financial institutions, and their respective agents and counsel,
and all fees of counsel, accountants, financial printers, experts and
consultants to MergerCo and its affiliates), whether incurred prior to, on or
after the date hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement, and the financing thereof.
(b) If any person (other than MergerCo or any of its affiliates) shall have
made, proposed, communicated or disclosed a Transaction Proposal in a manner
which is or otherwise becomes public and this Agreement is terminated pursuant
to any of the following provisions:
(i) by the Company pursuant to Section 9.1 (d);
(ii) by Buyer pursuant to Section 9.1 (e), other than as a result of a
breach of the representation in clause (i) of Section 4.7 and other than as
a result of facts or circumstances occurring after the date of this
Agreement and not as a result of any action or inaction by the Company or
any of its Subsidiaries in violation of this Agreement;
(iii) by Buyer pursuant to Section 9.1(g), if Offeror has terminated
the Offer as a result of the occurrence of any of the events set forth in
subparagraph (c) of Annex I, other than a breach of the representation in
clause (i) of Section 4.7 and other than as a result of facts or
circumstances occurring after the date of this Agreement and not as a
result of any action or inaction by the Company or any of its Subsidiaries
in violation of this Agreement or subparagraphs (d) or (e) of Annex I;
then the Company shall, simultaneously with such termination of this
Agreement, pay MergerCo a fee of $5,000,000 in cash, which amount shall be
payable in same day funds (the 'Termination Fee').
In addition, (i) if any Person (other than Merger Co. or any of its
affiliates) shall have made, proposed, communicated or disclosed a Transaction
Proposal and the Minimum Condition is not met in the Offer; or (ii) if prior to
any termination of this Agreement, any person or 'group' (as defined in Section
13(d)(3) of the Exchange Act) (other than Buyer or any of its affiliates)
purchases or otherwise acquires, directly or indirectly, beneficial ownership of
10% or more of the outstanding voting securities of the Company, and, if at any
time prior to 12 months following the termination of this Agreement any such
person or 'group' consummates a transaction that would otherwise constitute a
Transaction Proposal, there shall be paid to Buyer immediately prior
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to the consummation of such transaction the Termination Fee. In no event shall
the Company be required to pay more than one Termination Fee pursuant to this
Section 10.2(b).
(c) Except as provided otherwise in paragraph (a) above, all costs and
expenses incurred in connection with this Agreement, and the transactions
contemplated hereby shall be paid by the party incurring such expenses,, except
that the Company shall pay all costs and expenses (i) in connection with
printing and mailing the Proxy Statement, as well as all SEC filing fees
relating to the transactions contemplated herein and (ii) of obtaining any
consents of any third party.
10.3 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to MergerCo or Buyer, to
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, FL 33445
Telecopier: (561) 243-2218
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022-3897
Telecopier: (212) 735-2000
Attn: Blaine V. Fogg, Esq.
(b) if to the Company, to
Signature Brands, Inc.
7005 Cochran Road
Glenwillow, OH 44139-4312
Telecopier: (440) 542-4059
Attn: Chief Executive Officer
with copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier: (617) 951-1295
Attn: James Westra, Esq.
10.4 Definitions. For purposes of this Agreement:
(a) an 'affiliate' of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) a 'business day' means any day, other than Saturday, Sunday or a
federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern time. In computing any time period under Section 14(d)(5)
or Section 14(d)(6) of the Exchange Act or under Regulation 14D or Regulation
14E, the date of the event which begins the running of such time period shall be
included except that if such event occurs on other than a business day such
period shall begin to run on and shall include the first business day
thereafter;
(c) 'knowledge', with respect to the Company means the actual knowledge of
any one or more of the following officers and employees of the Company and its
Subsidiaries: Meeta Vyas and Steven M. Billick.
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(d) 'Material Adverse Change' or 'Material Adverse Effect' means, when
used in connection with the Company, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, financial condition, or results of
operations of the Company and its Subsidiaries taken as a whole and the terms
'material' and 'materially' shall have correlative meanings; provided, however,
that no Material Adverse Change or Material Adverse Effect shall be deemed to
have occurred as a result solely of general economic conditions affecting
generally the industry in which the Company competes and general market
conditions in the United States.
(e) 'person' means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(f) a 'subsidiary' of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors (or
other governing body) or, if there are no such voting interests, 50% or more of
the equity interests of which is owned directly or indirectly by such first
person or any entity, in which the Company or any of its Subsidiaries is a
general partner.
10.5 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words 'include', 'includes' or 'including' are used in
this Agreement, they shall be deemed to be followed by the words -without
limitation'.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.7 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than Section 7.4, is not intended to confer upon any Person
other than the parties any rights or remedies.
10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
10.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties; provided, however, that Buyer or MergerCo may,
without the Company's prior written consent, assign its rights under this
Agreement to any financial institution that requires such assignment in
connection with such financial institution's agreement to provide financing to
either Buyer or MergerCo Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
10.10 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
28
<PAGE>
IN WITNESS WHEREOF, Buyer, MergerCo and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SUNBEAM CORPORATION
By: /s/ DAVID C. FANNIN
-------------------
Name: David C. Fannin
Title: Executive Vice President and
General Counsel
SIGNATURE BRANDS USA, INC.
By: /s/ MEETA VYAS
-------------------
Name: Meeta Vyas
Title: Vice Chairman and
Chief Executive Officer
JAVA ACQUISITION CORP.
By: /s/ DAVID C. FANNIN
-------------------
Name: David C. Fannin
Title: Executive Vice President and
General Counsel
29
<PAGE>
ANNEX I
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to MergerCo's obligation to pay for or return tendered shares
after termination of the Offer, Buyer and MergerCo shall not be required to
accept for payment or pay for any shares of Company Common Stock tendered
pursuant to the Offer and may delay acceptance for payment or payment or may
terminate the Offer, if (i) less than 51% of the Fully Diluted Shares of Company
Common Stock has been tendered pursuant to the Offer by the expiration of the
Offer and not withdrawn (the 'Minimum Condition'); (ii) any applicable waiting
period under the HSR Act has not expired or terminated; or (iii) at any time
after the date of this Agreement, and before acceptance for payment of any
shares of Company Common Stock, any of the following events shall occur and be
continuing:
(a) there shall be instituted or pending by any Governmental Entity
any suit, action or proceeding (i) challenging the acquisition by Buyer or
MergerCo of any shares of Company Common Stock under the Offer, or seeking
to restrain or prohibit the making or consummation of the Offer or the
Merger, (ii) seeking to prohibit or materially limit the ownership or
operation by the Company, Buyer or any of Buyer's subsidiaries of a
material portion of the business or assets of the Company or Buyer and its
subsidiaries, taken as a whole, or to compel the Company or Buyer to
dispose of or hold separate any material portion of the business or assets
of the Company or Buyer and its subsidiaries, taken as a whole, in each
case as a result of the Offer or the Merger or (iii) seeking to impose
material limitations on the ability of Buyer or MergerCo to acquire or
hold, or exercise full rights of ownership of, any shares of Company Common
Stock to be accepted for payment pursuant to the Offer including, without
limitation, the right to vote such shares of Company Common Stock on all
matters properly presented to the stockholders of the Company or (iv)
seeking to prohibit Buyer or any of its subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company;
(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 or court, other than
the application to the Offer or the Merger of applicable waiting periods
under the HSR Act, that would result in any of the consequences referred to
in clauses (i) through (iv) of paragraph (a) above;
(c) any of the representations and warranties of the Company contained
in the Agreement shall not be true and correct at and as of the date of
consummation of the Offer (except to the extent such representations and
warranties speak to an earlier date), as if made at and as of the date of
consummation of the Offer, in each case except as contemplated or permitted
by this Agreement and except, in the case of any such breach when such
breach would not have, individually or in the aggregate, a Material Adverse
Effect with respect to the Company or materially affect the ability of the
Company to consummate the Merger or the Offeror to accept for payment or
pay for shares of Company Common Stock pursuant to the Offer;
(d) the Company shall have failed to perform the obligations required
to be performed by it under the Agreement at or prior to the date of
expiration of the Offer, including but not limited to its obligations
pursuant to Section 7.6 hereof, except for such failures to perform as have
not had or would not individually or in the aggregate, have a Material
Adverse Effect with respect to the Company or materially adversely affect
the ability of the Company to consummate the Merger or the Offeror to
accept for payment or pay for shares of Company Common Stock pursuant to
the Offer;
(e) the Board of Directors of the Company or any committee thereof
shall have (i) withdrawn, modified or amended in any respect adverse to
Buyer or MergerCo its approval or recommendation of the Offer or the
Merger, (ii) recommended or approved any Transaction Proposal from a person
other than Buyer, MergerCo or any of their respective affiliates, (iii)
failed to publicly announce, within ten (10) business days after the
occurrence of a Transaction Proposal, its opposition to such Transaction
Proposal, or amended, modified or withdrawn its opposition to any
Transaction Proposal in any manner adverse to Buyer or MergerCo or failed
to promptly reaffirm its recommendation of the Offer or the Merger at the
Buyer's request, or (iv) resolved to do any of the foregoing;
(f) the Agreement shall have been terminated in accordance with its
terms; or
I-1
<PAGE>
(g) (i) it shall have been publicly disclosed that any person, entity
or 'group' (as defined in Section 13(d)(3) of the Exchange Act), shall have
acquired beneficial ownership (determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than 15% of any class or series
of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, other than
Buyer or an affiliate or any person or group existing which on the date of
the Agreement beneficially owned more than 15% of any class or series of
capital stock of the Company or (ii) the Company shall have entered into a
definitive agreement or agreement in principle with any person with respect
to a Transaction Proposal or similar business combination with the Company
or any subsidiary, which in the reasonable judgment of Buyer or MergerCo in
any such case, and regardless of the circumstances giving rise to such
condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment.
The foregoing conditions are for the sole benefit of the Buyer and MergerCo
and may be waived by Buyer or MergerCo, in whole or in part at any time and from
time to time in the reasonable discretion of Buyer or MergerCo.
I-2
<PAGE>
SIGNATURE BRANDS USA, INC.
January 23, 1998
To the Stockholders of Signature Brands USA, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Signature Brands USA, Inc. (the "Company") to be held at 10:00 a.m. (EST), on
Thursday, March 5, 1998, at the Company's headquarters located at 7005 Cochran
Road, Glenwillow, Ohio.
In addition to the election of Directors, at this year's Annual Meeting
stockholders will be asked to ratify the appointment of the Company's
independent auditors.
Regardless of the number of shares you own, it is important that you vote.
Whether or not you plan to attend the Annual Meeting, please sign, date and mail
your proxy in the enclosed postage-paid envelope. We hope that you plan to
attend the Annual Meeting and we look forward to seeing you. If you do attend
the Annual Meeting you may, of course, withdraw your proxy should you wish to
vote in person.
Very truly yours,
/s/ Thomas R. Shepherd
THOMAS R. SHEPHERD
Chairman
/s/ Meeta R. Vyas
MEETA R. VYAS
Vice Chairman and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 5, 1998
Notice Is Hereby Given that the Annual Meeting of Stockholders of Signature
Brands USA, Inc. (the "Company") will be held at the Company's headquarters
located at 7005 Cochran Road, Glenwillow, Ohio on Thursday, March 5, 1998 at
10:00 a.m. (EST) for the following purposes:
1. To elect three Directors in the class whose terms will expire at
the Annual Meeting of Stockholders to be held in 2001;
2. To act upon a proposal to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP to serve as the Company's independent
auditors for the 1998 fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on January 16,
1998 are entitled to receive notice of and to vote at the Annual Meeting. In
order to assure that your shares are represented at the Annual Meeting, we ask
that you promptly sign, date and mail the enclosed proxy card in the return
envelope provided. Stockholders who attend the Annual Meeting may revoke their
proxies and vote in person.
By Order of the Board of Directors,
THOMAS F. MCKEE
Secretary
Glenwillow, Ohio
January 23, 1998
<PAGE>
SIGNATURE BRANDS USA, INC.
------------------------
PROXY STATEMENT
------------------------
MAILED ON OR ABOUT JANUARY 23, 1998
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 5, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Signature Brands USA, Inc., formerly Health
o meter Products, Inc. (the "Company"), for the Annual Meeting of Stockholders
to be held on Thursday, March 5, 1998 at 10:00 a.m. at the Company's
headquarters located at 7005 Cochran Road, Glenwillow, Ohio or any adjournment
thereof for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders.
The accompanying proxy is solicited by the Board of Directors of the
Company and will be voted in accordance with the instructions contained therein,
if it is returned duly executed and is not revoked. If no choice is specified in
the proxy, it will be voted "FOR" the election of each of the nominees for
Director named herein, and "FOR" the proposal to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP to serve as the Company's independent
auditors. Any stockholder may revoke a proxy at any time before its exercise by
delivery of written notice to the Secretary of the Company or by a duly executed
proxy bearing a later date.
The record date for determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting was the close of business on January
16, 1998. On that date, there were outstanding and entitled to vote an aggregate
of 9,174,261 shares of Common Stock, $.01 par value (the "Common Stock"). Each
share of Common Stock is entitled to one vote. Stockholders do not have the
right to vote cumulatively in the election of Directors. At the Annual Meeting,
the inspectors of election appointed for the Annual Meeting by the Board of
Directors will determine the presence of a quorum and will tabulate the results
of the vote of the stockholders.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for beneficial owners have the authority to vote on certain matters
when they have not received instructions from the beneficial owners. Under
applicable Delaware law, if a broker returns a proxy and has not voted on a
certain proposal, such broker non-votes will count for purposes of determining
whether a quorum is present. Pursuant to the Company's By-Laws, all matters
brought before a meeting of stockholders (other than the election of Directors)
will be decided by the holders of a majority of the outstanding shares entitled
to vote thereon present in person or by proxy at the meeting, unless otherwise
provided by law or by the Certificate of Incorporation. In voting on matters
other than the election of Directors, votes may be cast in favor, against or
abstained. Abstentions will count as present for purposes of the proposal on
which the abstention is noted and will have the effect of a vote against the
proposal. Broker non-votes, however, are not counted as present and entitled to
vote for purposes of determining whether a proposal has been approved and will
have no effect on the outcome of any proposal requiring the affirmative vote of
the holders of a majority of the outstanding shares present and entitled to
vote.
The cost of soliciting proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
materials to the owners of stock held in their name and the Company will
reimburse them for their out-of-pocket expenses in connection therewith.
Directors, officers and management employees of the Company may, without
additional compensation, solicit proxies by telephone, mail and personal
interview. In addition, the Company has retained Regan & Associates, Inc. to
assist in the solicitation of proxies for a fee estimated to be $3,000 plus
reasonable out-of-pocket expenses.
As used in this Proxy Statement, the "Company" refers, unless the context
otherwise requires, to Signature Brands USA, Inc. and its subsidiaries.
<PAGE>
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 16, 1998 by (i)
each person or group who is known to the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each of the Company's Directors and the
nominee for election as a Director, (iii) each of the named executive officers
of the Company named in the Summary Compensation Table included elsewhere
herein, and (iv) all Directors and executive officers of the Company as a group.
All information with respect to beneficial ownership has been furnished by the
respective Director, nominee for election as a Director, executive officer, or
5% beneficial owner, as the case may be. Unless otherwise indicated below, the
persons named below have sole voting and investment power with respect to the
number of shares set forth opposite their names.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF SHARES OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- - --------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P.(2)............. 1,818,203 19.8%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
ML-Lee Acquisition Fund, L.P.(3)................... 1,563,053 17.0%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Meeta R. Vyas...................................... 91,727 1.0%
Peter C. McC. Howell............................... 362,353(4) 3.8%
S. Donald McCullough............................... 200,500(5) 2.1%
Thomas H. Lee(6)(7)................................ 1,025,566 11.2%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
William P. Carmichael.............................. 16,000(8) *
David A. Jones..................................... 5,000(4) *
Robert W. Miller................................... 191,052(9) 2.1%
Urbano Perez V. ................................... 0 *
Sandra E. Peterson................................. 0 *
Scott A. Schoen.................................... 28,826(10) *
Thomas R. Shepherd(7).............................. 54,607 *
Frank E. Vaughn.................................... 12,500(11) *
C. Wayne Morris.................................... 6,750(12) *
Timothy J. McGinnity............................... 29,250(13) *
Steven M. Billick.................................. 11,050(14) *
All Directors and executive officers as a group (12
persons)(7)(15).................................. 1,472,328 16.0%
</TABLE>
- - ---------------
* Indicates an amount less than 1%.
(1) The number of shares of Common Stock shown as owned by the persons and
groups named in the foregoing table assumes the exercise of all outstanding
options held by such persons and groups that are exercisable within 60 days
after January 16, 1998, and the percentage shown assumes the exercise of
such options and assumes that no options held by others are exercised. For
purposes of the foregoing table, each person's "beneficial ownership" of
the Company's Common Stock has been determined in accordance with Section
13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule
13d-3 promulgated thereunder.
2
<PAGE>
(2) Each of THL Equity Advisors Limited Partnership ("Equity Advisors"), the
general partner of Thomas H. Lee Equity Partners, L.P. ("Equity Partners");
THL Equity Trust, the general partner of Equity Advisors; and Thomas H.
Lee, a Trustee of THL Equity Trust, also may be deemed to be beneficial
owners of the shares of Common Stock held by Equity Partners. Each of
Equity Advisors, THL Equity Trust, and Mr. Lee disclaims beneficial
ownership of such shares. Each of Equity Advisors and THL Equity Trust
maintains a principal business address c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109.
(3) The ML-Lee Acquisition Fund, L.P. (the "ML-Lee Fund") has shared voting and
investment power with respect to these shares. This number does not include
the shares of Common Stock held beneficially by Thomas H. Lee, which may be
deemed to be beneficially owned by the ML-Lee Fund and Thomas H. Lee
Advisors I, L.P. ("Advisors") as a result of their relationship with Mr.
Lee. The ML-Lee Fund and Advisors disclaim beneficial ownership of such
shares.
(4) Reflects shares which may be acquired upon the exercise of stock options
exercisable within 60 days after January 16, 1998.
(5) Includes 10,000 shares owned directly by Mr. McCullough and 190,500 shares
which may be acquired upon the exercise of stock options exercisable within
60 days after January 16, 1998. Mr. McCullough's options shall terminate
pursuant to a Separation Agreement between Mr. McCullough and the Company
upon the receipt of certain compensation as described in note (10) to the
Summary Compensation Table included elsewhere herein.
(6) The shares are held of record by State Street Bank and Trust Company of
Connecticut, N.A., 750 Main Street, Hartford, Connecticut 06103, not
individually, but as successor Trustee for the 1989 Thomas H. Lee Nominee
Trust (the "THL Trust"). The Trustee of the THL Trust disclaims beneficial
ownership of such shares.
(7) Does not include shares of Common Stock held by the ML-Lee Fund which may
be deemed to be beneficially owned by Mr. Lee, Mr. Shepherd and Advisors as
a result of their relationship with the ML-Lee Fund. Messrs. Lee and
Shepherd and Advisors disclaim beneficial ownership of such shares.
(8) Consists of 11,000 shares held of record by William P. Carmichael as
Trustee of the William P. Carmichael Trust dated April 1, 1985 and 5,000
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(9) Includes 101,052 shares owned directly by Mr. Miller and 90,000 shares held
of record by Trust Company of Illinois, 45 South Park Boulevard, Suite 315,
Glen Ellyn, Illinois 60137, as Trustee of the RW & JS Miller Irrevocable
Charitable Trust (the "Miller Trust"). The Trustee of the Miller Trust
disclaims beneficial ownership of such shares.
(10) Includes 9,690 shares which may be acquired from Thomas H. Lee upon the
exercise of stock options exercisable within 60 days after January 16,
1998.
(11) Consists of 10,000 shares held of record by Frank E. Vaughn as Trustee of
the Frank E. Vaughn Trust dated October 15, 1997 and an additional 2,500
shares which Mr. Vaughn has the right to acquire upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(12) Includes 3,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(13) Includes 26,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(14) Includes 1,800 shares held jointly by Mr. Billick and his wife and 9,250
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(15) Includes an aggregate of 52,250 shares of Common Stock, not including the
options held by Mr. Schoen to acquire 9,690 shares from Thomas H. Lee,
which may be acquired by the Directors and
3
<PAGE>
executive officers of the Company upon the exercise of stock options
exercisable within 60 days after January 16, 1998. Does not include options
exercisable by Messrs. Howell and McCullough who, as of January 16, 1998,
were no longer executive officers or Directors of the Company.
TERMS OF FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Messrs. Lee, Miller and Shepherd and others have certain demand and
piggyback registration rights pursuant to the First Amended and Restated
Stockholders Agreement dated as of March 16, 1992 (the "Stockholders'
Agreement"). Such rights provide that stockholders who are parties to the
agreement owning stated percentages of the unregistered Common Stock may require
the Company to file registration statements under the Securities Act of 1933, as
amended (the "Securities Act"), on up to three occasions, for the registration
of not less than 15% of the outstanding shares of Common Stock originally
subject to the agreement. Subject to certain conditions and limitations, the
other parties to the agreement have the right to request that their shares of
Common Stock be included in any such registrations. Also, subject to certain
conditions and limitations, all such stockholders have the right to require the
Company to include their shares of Common Stock in any registered offerings by
the Company. Under such agreement, the Company is required to bear all costs and
expenses of each such registration (other than underwriters' discounts or
commissions which are to be borne by the sellers), and the stockholders and the
Company have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
4
<PAGE>
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of Directors as the Board determines from time to time.
The size of the Board is currently set at nine members. The Board is divided
into three classes, with one class being elected each year for a three-year
term. On January 20, 1998, in accordance with the Company's By-Laws and
Certificate of Incorporation, the Company's Board of Directors elected Urbano
Perez V. to fill the vacancy created by Mr. McCullough's resignation in the
class of Directors whose term of office will expire at the 2000 Annual Meeting.
At the Annual Meeting, three Directors are to be elected to serve until the
Annual Meeting of Stockholders to be held in 2001. All Directors elected will
serve until their successors are duly elected and qualified. The Board of
Directors' nominees for election as Directors are David A. Jones, Thomas H. Lee
and Sandra E. Peterson. Messrs. Jones and Lee currently serve as Directors of
the Company. Robert W. Miller, who currently serves as a Director in the class
to be elected at the Annual Meeting, is retiring from the Board of Directors as
of the date of the Annual Meeting. Ms. Peterson is nominated for the
directorship currently held by Mr. Miller.
Unless otherwise directed, the persons named in the accompanying proxy will
vote for the election of the three nominees set forth in the table below as
Directors of the Company for a three-year term. In the event of the death or
inability to act of any of the nominees, the proxies will be voted for the
election as a Director of such other person as the Board of Directors may
recommend. The Board of Directors has no reason to anticipate that this will
occur. In no event will the accompanying proxy be voted for more than three
nominees or for persons other than those named below and any such substitute
nominee for any of them.
Set forth below is certain information concerning the nominees for election
at the Annual Meeting and Directors who will continue in office subsequent to
the Annual Meeting.
NOMINEES FOR ELECTION AT 1998 ANNUAL MEETING
David A. Jones. Mr. Jones has been a Director of the Company and of
Signature Brands, Inc. ("Signature Brands") since July 1996. Mr. Jones has been
Chairman of the Board, President and Chief Executive Officer of Rayovac
Corporation, a manufacturer of batteries and battery-operated devices, since
September 1996. From 1994 until 1996, Mr. Jones was Chairman of the Board,
President and Chief Executive Officer of Thermoscan, Inc., a consumer healthcare
products manufacturer. From 1989 until 1994, he was President and Chief
Executive Officer of Regina Company, Inc., a manufacturer of household
appliances. Mr. Jones is 48 years of age.
Thomas H. Lee. Mr. Lee has been a Director of the Company and of Signature
Brands since February 1992. Since 1974, Mr. Lee has served as President of
Thomas H. Lee Company ("THL"). THL and the funds which it advises invest in
friendly leveraged acquisitions and recapitalizations. Mr. Lee is also Chairman
and a Trustee of Thomas H. Lee Advisors I and II, L.P., the investment advisor
to two public mezzanine investment funds, and is Individual General Partner of
Equity Advisors, L.P., the investment advisor to Thomas H. Lee Equity Partners,
L.P. which participates in equity or equity related investments of the companies
acquired. Mr. Lee serves as a Director of Autotote Corporation, Finlay
Enterprises, Inc., General Nutrition Companies, Inc., Playtex Family Products
Corp., Livent, Inc., and Vail Resorts, Inc. Hills Department Stores, Inc. filed
for protection under Chapter 11 of the Federal Bankruptcy Code in February 1991
and emerged from such protection in October 1993 as Hills Stores Company. Mr.
Lee was Chairman of the Board of Hills Stores Company at that time. Mr. Lee is
53 years of age.
Sandra E. Peterson. Ms. Peterson is a Director nominee of the Company. Ms.
Peterson has been the Executive Vice President, Research of Nabisco, Inc., a
consumer food manufacturer, from April 1996 to present. From 1993 to March 1996,
Ms. Peterson held various senior executive positions with Whirlpool Corporation,
a manufacturer and marketer of major home appliances, including: Vice President,
Advanced Product Concepts; and Vice President, Strategic Analysis and Support.
Prior to 1993, Ms.
5
<PAGE>
Peterson was a Senior Engagement Manager of McKinsey & Co., Inc., an
international consulting firm. Ms. Peterson is 38 years of age.
DIRECTORS CONTINUING IN OFFICE UNTIL 1999 ANNUAL MEETING
William P. Carmichael. Mr. Carmichael has been a Director of the Company
and of Signature Brands since April 1992. From January 1993 until October 1993
when he retired, Mr. Carmichael was the Senior Vice President and Chief
Accounting Officer of Sara Lee Corporation, an international manufacturer of
food and consumer packaged goods. From August 1991 to January 1993, he was the
Vice President and Controller of Sara Lee Corporation. Prior to his employment
with Sara Lee Corporation, he was the Senior Vice President and Chief Financial
Officer of Beatrice Companies, Inc., a diversified food and food products
company, from May 1987 until November 1990. Mr. Carmichael also serves as a
Director of Cobra Electronics Corporation and The Hain Food Group, Inc., and as
a trustee of the Time Horizon Funds and Pacific Innovations Fund. Mr. Carmichael
is 54 years of age.
Scott A. Schoen. Mr. Schoen has been a Director of the Company and of
Signature Brands since September 1994. He is a Managing Director of THL, which
he joined in 1986. Prior to that time, Mr. Schoen served as an Associate in the
Private Finance Department of Goldman, Sachs & Co., an investment banking firm.
Mr. Schoen also serves as a Director of First Alert, Inc., LaSalle Reinsurance
Ltd., and Rayovac Corporation, and as a trustee of the Insight Premier Funds.
Mr. Schoen is 39 years of age.
Meeta R. Vyas. Ms. Vyas has served as Vice Chairman of the Board of
Directors and Chief Executive Officer of the Company and of Signature Brands
since September 1997. Prior to her employment with the Company, Ms. Vyas was a
senior executive with General Electric Co. ("GE"), a diversified technology,
manufacturing and services company. Beginning in 1991, Ms. Vyas held several
senior positions with GE including General Manager, GE Corporate Business
Development; General Manager, GE Appliances; and Manager, GE Corporate Business
Development. Prior to 1991, Ms. Vyas was a consultant with McKinsey & Co., Inc.,
an international consulting firm. Ms. Vyas is 39 years of age.
DIRECTORS CONTINUING IN OFFICE UNTIL 2000 ANNUAL MEETING
Urbano Perez V. Mr. Perez has been a Director of the Company and of
Signature Brands since January 1998. Mr. Perez has held various positions with
Mabe, a Mexico-based manufacturer and distributor of major home appliances,
since 1977, including Director, Range Division since 1992. Mr. Perez is 42 years
of age.
Thomas R. Shepherd. Mr. Shepherd has been Chairman of the Board of
Directors of the Company and of Signature Brands since August 1997 and a
Director of the Company and of Signature Brands since April 1988. He has been
engaged as a consultant to THL since 1986 and is currently a Managing Director.
In addition, Mr. Shepherd is Executive Vice President of Thomas H. Lee Advisors
I, L.P. and an officer of various other THL affiliates. Previously, Mr. Shepherd
was President of GTE (Sylvania) Lighting Products from 1983 to 1986; President
of North American Phillips Commercial Electronics Corporation from 1981 to 1983;
and Senior Vice President and General Manager of GTE (Sylvania) Entertainment
Products Group from 1979 to 1981. He is also a Director of General Nutrition
Companies, Inc. and Rayovac Corporation. Mr. Shepherd is 68 years of age.
Frank E. Vaughn. Mr. Vaughn has been a Director of the Company and of
Signature Brands since August 1995. Mr. Vaughn is currently Special Assistant to
the Dean and Visiting Professor at the College of Business Administration and
Graduate School of Management at Kent State University. From 1988 to 1991, Mr.
Vaughn was an Executive Vice President at Maytag Corporation, a manufacturer of
household appliances, and President of its wholly-owned subsidiary, The Hoover
Company, from 1985 to 1991. Mr. Vaughn serves as a Director of ABC Dispensing
Technologies, Inc. Mr. Vaughn is 68 years of age.
6
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Committee.
Currently, Messrs. Carmichael, Miller and Schoen are members of the Audit
Committee and Messrs. Jones, Schoen and Shepherd are members of the Compensation
Committee.
The Audit Committee reviews the activities of the Company's independent
public accountants, various Company policies and practices as well as potential
conflict of interest situations. In addition, the Audit Committee recommends to
the Board of Directors an independent accounting firm to audit the Company's
financial statements. The Audit Committee did not meet during the fiscal year
ended September 28, 1997.
The Compensation Committee is responsible for making recommendations
concerning the salaries, bonuses and other compensation paid to the Company's
executive officers. It is also responsible for administering the Second Amended
and Restated 1992 Stock Incentive Plan, the 1995 Stock Option and Incentive
Plan, the 1997 Stock Option and Incentive Plan and the Chief Executive Officer
Stock Option Plan. The Compensation Committee met twice during the fiscal year
ended September 28, 1997.
The Company does not have a standing nominating committee or a committee
performing similar functions.
The Company's Board of Directors met five times during the last fiscal
year. No Director, with the exception of Mr. Lee, attended less than 75% of the
aggregate number of meetings of the Board of Directors and the committees on
which he served during the period for which he was a member of the Board.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each of
the three most recent fiscal years, of: (i) those persons who served as the
chief executive officer during the fiscal year ended September 28, 1997 and (ii)
the other four most highly compensated executive officers of the Company for the
fiscal year ended September 28, 1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING ALL OTHER
OTHER ANNUAL OPTION/SAR COMPEN-
NAME YEAR SALARY BONUS COMPENSATION AWARDS SATION(1)
- - ---------------------------------------- ---- -------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas........................... 1997 $ 38,462(2) $ -- $ 41,166(3) 591,727(4) $ 77
Vice Chairman and
Chief Executive Officer
Peter C. McC. Howell.................... 1997 302,918 68,028(5) -- -- 606,677(6)
Former Chairman and Chief 1996 295,600 73,900 -- -- 8,471
Executive Officer (7) 1995 286,000 28,600 -- -- 7,953
S. Donald McCullough.................... 1997 222,245 26,850(8) 100,485(9) -- 966,700(10)
Former President and Chief 1996 214,800 53,700 -- 90,500(11) 10,830
Operating Officer (12) 1995 201,196 21,500 75,303(13) 45,000(14) 10,830
C. Wayne Morris......................... 1997 176,020(15) 21,250 63,502(16) 30,000(17) 5,915
Senior Vice President-
Professional Products
Timothy J. McGinnity.................... 1997 163,157 25,000 -- -- 3,194
Senior Vice President- 1996 147,600 61,900 -- -- 5,632
National Account Sales 1995 141,115 65,000 -- 50,000(14) 5,632
Steven M. Billick....................... 1997 185,802 -- -- 10,000(18) 3,382
Senior Vice President, 1996 63,746(19) 15,405 -- 40,000(20) --
Treasurer and Chief
Financial Officer
</TABLE>
- - ---------------
Except as indicated above, no Named Executive Officer received personal
benefits or perquisites during fiscal 1997 in excess of the lesser of $50,000 or
10% of his or her aggregate salary and bonus.
(1) Amounts reported for each Named Executive Officer for fiscal 1997, 1996 and
1995 include premiums paid by the Company for term life insurance policies
on behalf of each Named Executive Officer and matching contributions under
the Company's 401(k) Plan.
(2) Ms. Vyas joined the Company on September 2, 1997. Amounts reported as
salary for fiscal year 1997 represent payments received from that date
through the end of the Company's fiscal year.
(3) Represents reimbursement in the amount of $20,603 received from the Company
in connection with Ms. Vyas's relocation to the Cleveland, Ohio
metropolitan area and $20,563 in additional federal and state income taxes
payable with respect to such reimbursement.
(4) Represents options to purchase shares of Common Stock awarded to Ms. Vyas
under the terms of her Employment Agreement. Of the total amount of
options, 500,000 options were awarded under the Company's Chief Executive
Officer Stock Option Plan. Such options vest 50% on September 30, 1998 and
50% on September 30, 1999. The remaining 91,727 options in the form of
stock subscriptions were granted pursuant to a Stock Subscription Agreement
and were exercisable between September 2, 1997 and November 1, 1997.
(5) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Employment Agreement between Mr. Howell and the Company.
(6) Includes, in addition to the items referred to in note (1) above, a
severance payment of $593,053 payable over the twelve month period
beginning September 5, 1997, which Mr. Howell became entitled to during
fiscal 1997 pursuant to the termination provisions of an Employment
Agreement between Mr. Howell and the Company.
8
<PAGE>
(7) Mr. Howell joined the Company in August 1994 and became its Chairman and
Chief Executive Officer on September 2, 1994. He resigned from his offices
with the Company, effective as of August 12, 1997, and terminated his
employment with the Company, effective as of September 5, 1997.
(8) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Amended and Restated Employment Agreement and the terms of a Separation
Agreement between Mr. McCullough and the Company.
(9) Includes reimbursement in the amount of $39,451 received from the Company
for the loss of home equity in Mr. McCullough's prior residence and the
closing costs associated with the sale of such residence in connection with
his relocation to the Cleveland, Ohio metropolitan area and $34,083 in
additional federal and state income taxes payable on such reimbursement.
(10) Includes, in addition to the items referred to in note (1) above, severance
payments of (i) $419,850 payable over the eighteen month period beginning
on January 16, 1998, (ii) $524,426 payable within sixty days of January 16,
1998 upon receipt of which all stock options held by Mr. McCullough will
terminate and (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999. Mr. McCullough became
entitled to the items described in this note during fiscal 1997 pursuant to
the termination provisions of an Amended and Restated Employment Agreement
and the terms of a Separation Agreement between Mr. McCullough and the
Company.
(11) Represents options to purchase shares of Common Stock awarded to Mr.
McCullough under the terms of an Amended and Restated Employment Agreement
between the Company and Mr. McCullough. Mr. McCullough's options became
exercisable with respect to 22,625 shares on July 1, 1996 and an additional
22,625 shares on December 31, 1996. Pursuant to the Amended and Restated
Employment Agreement, options to purchase an additional 45,250 shares of
Common Stock automatically vested upon Mr. McCullough's resignation. Mr.
McCullough's options shall terminate pursuant to a Separation Agreement
between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) above.
(12) Mr. McCullough resigned from his position as President and Chief Operating
Officer, and as a Director, effective as of January 16, 1998. For purposes
of determining the Company's severance obligations to Mr. McCullough, the
terms of the Separation Agreement between Mr. McCullough and the Company
set the date of termination for Mr. McCullough at September 26, 1997. Mr.
McCullough continued as President and Chief Operating Officer of the
Company until January 16, 1998 pursuant to continuation of employment
provisions of such Separation Agreement.
(13) Includes club fees in the amount of $32,100 reimbursed by the Company and
$27,732 in additional federal and state income taxes payable on such dues
with respect to such reimbursement.
(14) Represents options to purchase shares of Common Stock awarded to the Named
Executive Officers under the Company's Second Amended and Restated 1992
Stock Incentive Plan (the "1992 Plan") or the 1995 Stock Option and
Incentive Plan (the "1995 Plan"). Options awarded under the 1992 Plan vest
in 25% increments on an annual basis commencing on the first anniversary of
the date of grant. Vesting of certain options awarded under the 1995 Plan
is conditioned upon the Company reaching certain earnings before interest,
taxes, depreciation and amortization ("EBITDA") objectives during the
period of the option. Options issued pursuant to these plans expire ten
years from the date of grant. Pursuant to an Amended and Restated
Employment Agreement between the Company and Mr. McCullough, all options
held by Mr. McCullough automatically vested upon Mr. McCullough's
resignation. Mr. McCullough's options shall terminate pursuant to a
Separation Agreement between Mr. McCullough and the Company upon the
receipt of certain compensation as described in note (10) above.
(15) Mr. Morris joined the Company in October 1996. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(16) Represents reimbursement in the amount of $42,519 received from the Company
in connection with Mr. Morris's relocation to the Chicago, Illinois
metropolitan area and $20,983 in additional federal and state income taxes
payable on such reimbursement.
9
<PAGE>
(17) Represents options to purchase shares of Common Stock awarded to Mr. Morris
under the terms of an Employment Agreement between the Company and Mr.
Morris. Such options were awarded under the 1992 Plan and the 1995 Plan. Of
the total amount of options shown, 15,000 options vest in 25% increments on
an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives. The options expire ten years from the date of grant.
(18) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the 1997 Stock Option and Incentive Plan. The options vest in
20% increments on an annual basis beginning fiscal 1997, conditioned upon
the Company achieving certain EBITDA objectives. The options expire ten
years from the date of grant.
(19) Mr. Billick joined the Company in June 1996. Amounts reported as salary for
fiscal year 1996 represent payments received from that date through the end
of the Company's fiscal year.
(20) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the terms of an Employment Agreement. Such options were
awarded under the 1992 Plan and the 1995 Plan. Of the total amount of
options shown, 25,000 options vest in 25% increments on an annual basis
commencing on the first anniversary of the date of grant and 15,000 options
vest in 20% increments on an annual basis beginning in fiscal 1997,
conditioned upon the Company achieving certain EBITDA objectives. The
options expire ten years from the date of grant.
OPTION GRANTS
No options were exercised by the Named Executive Officers during fiscal
1997. Shown below is information on grants of stock options during the fiscal
year ended September 28, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES /SARS STOCK PRICE
UNDERLYING GRANTED MARKET APPRECIATION FOR
OPTION/ IN EXERCISE PRICE ON OPTION TERM
SARS FISCAL OR BASE DATE OF EXPIRATION -----------------------
NAME GRANTED YEAR PRICE GRANT DATE 5% 10%
- - ------------------------------ ---------- ------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas................. 500,000(1) 65.7% $3.50 $3.50 8/11/07 $1,100,566 $2,789,049
91,727(2) 12.1% $1.75 $3.50 11/1/97 $ 362,425 $ 672,185
Peter C. McC. Howell.......... --
S. Donald McCullough.......... --
C. Wayne Morris............... 30,000(3) 3.9% $5.875 $5.875 10/7/06 $ 110,843 $ 280,897
Timothy J. McGinnity.......... --
Steven M. Billick............. 10,000(4) 1.3% $5.375 $4.125 3/6/07 $ 13,442 $ 53,242
</TABLE>
- - ---------------
(1) Under Ms. Vyas's Employment Agreement, one-half of these options become
exercisable on September 30, 1998, and one-half become exercisable on
September 30, 1999.
(2) This option in the form of stock subscriptions had a per share exercise
price equal to 50% of the closing price of the Common Stock on August 11,
1997, and were exercisable between September 2, 1997 and November 1, 1997.
Ms. Vyas exercised these stock subscriptions on November 1, 1997, pursuant
to the terms of a Stock Subscription Agreement.
(3) Of the total amount of options shown, 15,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
10
<PAGE>
(4) Of the total amount of options shown, 25,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock for the Named Executive Officers as of the
fiscal year end, September 28, 1997.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE (#)EXERCISABLE/ ($)EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- - -------------------------------- ----------- -------- -------------------- ------------------
<S> <C> <C> <C> <C>
Meeta R. Vyas................... 0 0 91,727/500,000 $229,318/ $375,000
Peter C. McC. Howell............ 0 0 362,353/ 0 592,628/ 0
S. Donald McCullough............ 0 0 98,250/ 92,250(3) 0/ 0
C. Wayne Morris................. 0 0 0/ 30,000 0/ 0
Timothy J. McGinnity............ 0 0 20,500/ 29,500 10,531/ 406
Steven M. Billick............... 0 0 9,250/ 40,750 0/ 0
</TABLE>
- - ---------------
(1) Vesting of certain of these options is conditioned upon the Company reaching
certain EBITDA objectives during the duration of the option.
(2) Year end value of options is calculated based upon the closing price ($4.25)
of a share of Common Stock on the Nasdaq National Market on September 26,
1997, the last trading date of the fiscal year.
(3) These options became exercisable on January 16, 1998 pursuant to the
termination provisions of an Amended and Restated Employment Agreement and
the terms of a Separation Agreement between Mr. McCullough and the Company.
All of Mr. McCullough's options shall terminate pursuant to a Separation
Agreement between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) to the Summary Compensation Table
included elsewhere herein.
EMPLOYMENT AGREEMENTS
The Company and Meeta R. Vyas entered into an Employment Agreement,
effective as of August 11, 1997, pursuant to which the Company employs Ms. Vyas
as its Vice Chairman and Chief Executive Officer at a minimum annual base salary
of $500,000, subject to increase (but not decrease), through September 30, 1999.
The term of Ms. Vyas's employment may be extended for an additional year if
agreed to by the Company and Ms. Vyas. Ms. Vyas's Employment Agreement provides
for payment to Ms. Vyas of an annual bonus of not less than 50% of her base
salary based upon the Company achieving certain EBITDA objectives and entitles
Ms. Vyas to certain benefits, automobile allowances and other fringe benefits.
Ms. Vyas also received an option to purchase 500,000 shares of Common Stock at a
per share exercise price equal to the closing price of the Common Stock on
August 11, 1997, which option vests 50% as of September 30, 1998 and 50% as of
September 30, 1999. Notwithstanding such vesting schedule, the option will
accelerate and become fully vested upon any Change in Control (as defined in
such agreement) that occurs before September 30, 1999. In addition, she received
an option in the form of stock subscriptions to purchase 91,727 shares of Common
Stock at a per share exercise price equal to 50% of the closing price of the
Common Stock on August 11, 1997 (the "1997 Option"), which option was
exercisable between September 2, 1997 and November 1, 1997. Ms. Vyas exercised
the 1997 Option on November 1, 1997, pursuant to the terms of a Stock
Subscription Agreement. In the event of termination
11
<PAGE>
of her employment other than for cause, Ms. Vyas will be entitled to continue to
receive payment of her salary and to participate in the Company's benefit plans
for a period ending on the later of (i) 12 months following the date of such
termination or (ii) September 30, 1999. Ms. Vyas will also be entitled to
receive a bonus equal to 50% of the aggregate salary amounts payable to Ms. Vyas
for that period. If Ms. Vyas elects to terminate her employment with the Company
upon a Change of Control, she will be entitled to receive the same compensation
as if she had been terminated other than for cause.
Under the terms of an Employment Agreement entered into in August 1994 with
Peter C. McC. Howell, the Company agreed to pay Mr. Howell a base salary of at
least $286,000 per annum, subject to increase (but not decrease), through
December 31, 1998. Mr. Howell resigned, effective as of August 12, 1997, from
each office of the Company that he held and terminated his employment with the
Company, effective as of September 5, 1997. Mr. Howell's resignation was deemed
to be a termination other than for cause under the Employment Agreement.
Pursuant to the termination provisions of an Employment Agreement between Mr.
Howell and the Company, Mr. Howell is entitled to the payment of (i) a cash
bonus for fiscal 1997 of $68,028 and (ii) a severance payment of $593,053
payable over the twelve month period beginning September 5, 1997, and is
entitled to continued benefits from the Company through August 31, 2000. In
addition, all stock options held by Mr. Howell were deemed fully vested as of
his date of termination.
The Company and S. Donald McCullough entered into an Amended and Restated
Employment Agreement, effective as of July 1, 1996, pursuant to which the
Company agreed to employ Mr. McCullough as its President and Chief Operating
Officer at a minimum annual base salary of $217,000, subject to increase by the
Company from time to time, through January 2, 1999. Mr. McCullough resigned from
his positions with the Company, effective as of January 16, 1998. Mr.
McCullough's resignation from the Company was deemed to be a termination without
cause under the Amended and Restated Employment Agreement. Pursuant to the
termination provisions of the Amended and Restated Employment Agreement and the
terms of a Separation Agreement between Mr. McCullough and the Company, Mr.
McCullough is entitled to the payment of (i) a cash bonus of $26,850, (ii) a
severance payment of $419,850 payable over the eighteen month period beginning
on January 16, 1998, (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999 and (iv) $524,426 payable within
sixty days of January 16, 1998 upon receipt of which all stock options held by
Mr. McCullough will terminate. In addition, Mr. McCullough is entitled to
continued benefits and certain perquisites from the Company for an eighteen
month period beginning on January 16, 1998.
The Company entered into an Employment Agreement with Timothy J. McGinnity
on March 31, 1995. Mr. McGinnity was formerly an executive of Mr. Coffee, inc.
("Mr. Coffee") and was party to a Salary Continuation Agreement with Mr. Coffee.
Under the terms of the Salary Continuation Agreement, Mr. McGinnity was entitled
to terminate his employment with the Company and receive continuation of salary
for a period of 18 months subsequent to the date of the Company's acquisition of
Mr. Coffee. The Salary Continuation Agreement also provided for continuation of
certain health and life insurance and other benefits for a specified period
subsequent to such termination. Effective March 31, 1995, the Salary
Continuation Agreement was terminated and Mr. McGinnity entered into an
Employment Agreement with the Company. This agreement provides Mr. McGinnity
with an initial base salary of $142,500, subject to increase or decrease at the
discretion of the Board of Directors. In addition, Mr. McGinnity is entitled to
receive certain health and life insurance benefits, automobile allowances and
other fringe benefits. The agreement provides that the employment of Mr.
McGinnity is at will, and may be terminated at any time. In the event of
termination of employment other than for cause, Mr. McGinnity will be entitled
to continue to receive payment of his salary for a period of 12 months after the
date of termination. Mr. McGinnity will also be entitled to receive a pro rata
share of any annual bonus that management employees would be eligible to receive
under the Company's incentive bonus plans, and continuation of health, life and
certain other benefits for a specified period. Upon execution of an Employment
Agreement, Mr. McGinnity received a bonus in the amount of $25,000 and options
to purchase 10,000 shares of Common Stock.
12
<PAGE>
The Company entered into an Employment Agreement with Steven M. Billick to
serve as Senior Vice President, Treasurer and Chief Financial Officer of the
Company on June 10, 1996. The agreement provides Mr. Billick with an initial
base salary of $175,000, subject to increase or decrease at the discretion of
the Compensation Committee, and entitles Mr. Billick to participate in any bonus
plan established by the Board of Directors. Upon entering into the Employment
Agreement, Mr. Billick received (1) a bonus of $7,500, (2) an option to purchase
25,000 shares of Common Stock, which vests in 25% increments on an annual basis
and has a per share exercise price equal to $5.8125 and (3) an option to
purchase 15,000 shares of Common Stock, which vests in 20% increments on an
annual basis, conditioned upon the Company reaching certain EBITDA objectives,
and has a per share exercise price equal to $5.8125. All options expire ten
years from the date of grant. The Employment Agreement provides further that Mr.
Billick's employment with the Company is at will, and may be terminated at any
time. In the event of termination of employment other than for cause, Mr.
Billick will be entitled to continue to receive payment of his salary and the
continuation of any benefits he received at the time of termination until the
earlier of (1) the date Mr. Billick obtains other employment that provides a
salary substantially equivalent to that provided by the Employment Agreement or
(2) the first anniversary of his date of termination.
The Company entered into an Employment Agreement with C. Wayne Morris to
serve as Senior Vice President, Professional Products of the Company on October
7, 1996. The agreement provides Mr. Morris with an initial base salary of
$170,000, subject to increase or decrease at the discretion of the Compensation
Committee, and entitles Mr. Morris to participate in any bonus plan established
by the Board of Directors. Upon entering into the Employment Agreement, Mr.
Morris received (1) a bonus of $21,250, (2) an option to purchase 15,000 shares
of Common Stock, which vests in 25% increments on an annual basis and has a per
share exercise price equal to $5.875 and (3) an option to purchase 15,000 shares
of Common Stock, which vests in 20% increments on an annual basis, conditioned
upon the Company reaching certain EBITDA objectives, and has a per share
exercise price equal to $5.875. All options expire ten years from the date of
grant. The agreement provides further that Mr. Morris's employment with the
Company is at will, and may be terminated at any time. In the event of
termination of employment other than for cause, Mr. Morris will be entitled to
continue to receive payment of his salary and the continuation of any benefits
he received at the time of termination until the earlier of (1) the date Mr.
Morris obtains other employment that provides a salary substantially equivalent
to that provided by the Employment Agreement or (2) the first anniversary of his
date of termination.
All of the employment agreements between the Company and its executive
officers contain customary noncompetition and non-disclosure provisions.
INDEBTEDNESS OF MANAGEMENT
The Company extended a non-interest bearing loan of $200,000 on November
22, 1994 to S. Donald McCullough, the former President and Chief Operating
Officer of the Company, for the purchase of suitable housing in the metropolitan
area of Cleveland, Ohio. Mr. McCullough paid this loan in full in November 1997.
Meeta R. Vyas, Vice Chairman and Chief Executive Officer of the Company,
was extended a loan by the Company in the amount of $160,522 to facilitate her
exercise of the previously described option, in the form of stock subscriptions,
to purchase 91,727 shares of Common Stock. Such loan was extended at a rate of
interest equal to the actual rate of interest paid by Signature Brands under its
revolving credit facility. Ms. Vyas paid the loan in full in January 1998.
COMPENSATION OF DIRECTORS
Non-employee Directors of the Company, other than Messrs. Lee, Shepherd and
Schoen, are paid an annual retainer at the rate of $20,000. In addition,
Directors of the Company are entitled to participate in the Company's 1992 Stock
Incentive Plan, the 1995 Stock Option and Incentive Plan and the 1997 Stock
Option and Incentive Plan.
13
<PAGE>
Mr. Jones was appointed to the Board of Directors effective May 8, 1996 and
was granted at that time, in addition to the $20,000 annual retainer, options to
purchase 20,000 shares of Common Stock. These option grants were at fair market
value and vest 25% per annum. The Company also entered into a consulting
agreement with Mr. Jones, pursuant to which Mr. Jones receives $2,500 per day
for consulting services provided on an "as-needed" basis. The maximum amount per
year that can be paid by the Company under this agreement is $30,000. Mr. Jones
was paid $7,500 under this agreement during the fiscal year ended September 28,
1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors reviews the Company's
existing and proposed executive compensation plans and makes recommendations to
the Board of Directors regarding such plans and the awards to be made
thereunder. The current members of the Compensation Committee are Messrs. Jones,
Shepherd and Schoen, all of whom are non-employee Directors of the Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the compensation of the Company's Chief Executive Officer and the
other Named Executive Officers.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that compensation paid to
executive officers and other management personnel should consist of four
elements: (1) salary, (2) annual incentive bonus, (3) stock options and (4)
welfare, retirement and other benefits. The compensation package is designed to
attract and retain top quality management employees. In the opinion of the
Committee, it reflects competitive conditions. The Committee, however, does not
specifically focus on the compensation levels of executives in peer group
companies in making compensation decisions. To some extent, elements of
compensation are designed to vary as Company performance varies. In general, the
elements of compensation that most typically have a significant relationship to
Company performance are awards under its stock option and bonus plans. The
objective measurement used in determining performance for purposes of awards
under the bonus plans is the Company's actual earnings before interest, taxes,
depreciation and amortization ("EBITDA") in comparison to budgeted amounts. The
vesting of certain options granted during the year is tied to the achievement of
specified annual levels of EBITDA over the duration of the options. The
Committee's decisions concerning compensation are not the result of a highly
formalistic process and the Committee does not rely extensively on objective
criteria in measuring individual performance. Instead, decisions are primarily
based on subjective decisions concerning the appropriate levels of compensation.
Set forth below is a discussion of the various components of the
compensation arrangements provided to the executive officers, as well as a
discussion of the compensation arrangements provided to the Company's chief
executive officer.
1997 COMPENSATION DECISIONS
Base Salary and Benefits. Salary levels for executive officers reflect the
Committee's subjective judgments of appropriate salaries in light of the duties
and responsibilities inherent in the executives' respective positions. The
particular qualifications of an individual holding the position and his or her
level of experience are considered in establishing a salary level when the
individual is first appointed to a given position. The performance and
contribution of the individual to the Company, as well as Company performance,
are the primary criteria influencing salary administration. Salaries of
executive officers are generally reviewed each year. Since certain executives
are parties to employment agreements with the Company, their minimum base salary
levels are set by the terms of such agreements. The primary factor in setting
salary levels pursuant to these agreements was the Company's desire to
14
<PAGE>
provide compensation in amounts sufficient to induce these individuals to either
join or continue with the Company. Certain of these employment agreements were
executed after cancellation of salary continuation agreements with the former
Mr. Coffee, inc. executives. These agreements were entered into prior to the
time they joined the Company. The terms of these salary continuation agreements
were a significant factor in establishing compensation arrangements for
executives who were parties to such agreements. In the case of certain executive
officers who joined the Company during the 1997 fiscal year, base salary was
determined at their hire date on the basis of the Company's assessment of their
prior experience, the responsibilities associated with their positions and the
results of negotiations between the Company and the executives concerning their
compensation arrangements. In making adjustments to the salaries of existing
executive officers for fiscal 1997, consideration was given to the performance
of each of the individuals in question, the Company's results of operations for
fiscal 1996 and the terms of existing contractual arrangements with certain
executive officers.
Stock Options. The Company uses stock options as a long-term incentive
program for executives. Stock options are used because they directly relate the
amounts earned by executives to the amount of appreciation realized by the
Company's stockholders over comparable periods. Stock options also provide
executives with the opportunity to acquire and build a meaningful ownership
interest in the Company. The Committee considers stock options throughout the
year. In determining the number of options awarded to an individual executive,
the Committee generally establishes a level of award based upon the position of
the individual and his or her level of responsibility. In the case of certain
executive officers who executed employment agreements during the current fiscal
year, the number of options awarded to such executives was the result of
negotiations between the Company and the executives.
During the 1997 fiscal year, the Company awarded options to purchase an
aggregate of 40,000 shares of Common Stock to the executive officers of the
Company excluding the Chief Executive Officer. Certain of these options are
subject to vesting over a four-year period commencing on the first anniversary
of the date of grant and certain of these options are subject to vesting over a
five-year period commencing on the first anniversary of the date of grant, with
vesting for this later group further conditioned upon the achievement of
specified annual target thresholds for EBITDA over the duration of the options.
Bonuses. The Company maintains an annual incentive bonus program based on
Company and group performance. A target bonus level, stated as a percentage of
year end salary, is established for each executive officer based on his or her
level of responsibility. Target bonuses are measured by the Company's financial
performance against its annual performance plans. Target levels of performance
are established based upon EBITDA. At its December 1996 meeting, the
Compensation Committee established a bonus pool of $1,250,000 for all eligible
employees under the Company's annual incentive bonus program. Because the target
levels of performance were not achieved during fiscal 1997, no bonuses were paid
to executive officers out of this amount. All bonuses paid during the fiscal
year were paid pursuant to the terms of the Company's employment agreements with
the executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation arrangements for Mr. Howell with respect to the 1997
fiscal year were primarily based upon the terms of an Employment Agreement
between Mr. Howell and the Company, which was entered into in 1994. The
Compensation Committee increased Mr. Howell's base salary during 1997 by 4.2% to
$314,340. Mr. Howell was also entitled to receive a bonus of $68,028, which, in
accordance with the terms of an Employment Agreement, is an amount equal to his
prior year's bonus, pro rated for the number of days in fiscal 1997 during which
Mr. Howell was employed by the Company. The Committee did not award Mr. Howell
any stock options during 1997. In connection with his resignation from the
Company, Mr. Howell was entitled to receive as severance pay, under the terms of
an Employment Agreement, an amount equal to 1.5 times the sum of (i) his annual
salary at the date of termination ($314,340) plus (ii) the amount of his bonus
payable for fiscal 1997 ($68,028) plus (iii) his automobile allowance ($13,000).
15
<PAGE>
The compensation arrangements for Ms. Vyas, who joined the Company as Vice
Chairman and Chief Executive Officer following Mr. Howell's resignation, were
established through negotiations between the Committee and Ms. Vyas and are
provided for in an Employment Agreement between the Company and Ms. Vyas.
Factors considered by the Committee in establishing such arrangements included
the need to provide sufficient inducement to attract and retain a top key
executive; the duties and responsibilities of the position; and Ms. Vyas's
qualifications and experience. The Employment Agreement provides for Ms. Vyas to
receive an initial base salary of $500,000 and an annual bonus of not less than
50% of her base salary based upon the Company achieving certain EBITDA
objectives. Ms. Vyas was further granted an option to purchase 500,000 shares of
Common Stock at an exercise price equal to the closing price of the Common Stock
on the date of grant, which option vests 50% as of September 30, 1998 and 50% as
of September 30, 1999. She also received an option in the form of stock
subscriptions to purchase 91,727 shares of Common Stock at an exercise price
equal to 50% of the closing price of the Common Stock on August 11, 1997, which
option was exercisable only from September 2, 1997 through November 1, 1997.
This option was exercised by Ms. Vyas on November 1, 1997 at an exercise price
of $1.75 per share.
Compensation Committee of the Board of Directors
David A. Jones
Thomas R. Shepherd
Scott A. Schoen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Schoen, a managing director of THL, and Mr. Shepherd, a consultant to
THL, served as members of the Company's Compensation Committee during fiscal
1997. Neither Mr. Schoen nor Mr. Shepherd was an employee of the Company during
fiscal 1997. Under a Management Agreement, the Company has engaged THL to
provide consulting and management advisory services. The fees payable to THL
under the Management Agreement are $240,000 per annum. The Company believes that
this Management Agreement is on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own 10% or more of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission (the "Commission").
Officers, Directors and beneficial holders of more than 10% of the Company's
Common Stock are required by Commission regulations to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, Directors and
beneficial holders of more than 10% of the Company's Common Stock complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended September 28, 1997, except for the filing of a late Form 4
to report the inadvertent omission of one transaction involving the purchase of
3,000 shares of Common Stock by C. Wayne Morris.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Index and an index comprised of the 15
companies included in the Home Furnishings Daily housewares component of the HFD
stock index (the "Peer Group Index") for the period from September 30, 1992 to
September 30, 1997. The Company's most recent fiscal year ended on September 28,
1997. Total stockholder return data for each index are not readily available for
this date. Accordingly, to ensure the integrity of the comparison, all data
reflect the period ending September 30, 1997. The companies comprising the Peer
Group Index are: Catalina Lighting, Inc., General Housewares Corp., Signature
Brands USA, Inc., Lancaster Colony Corp., Newell Co., Rival Co., Rubbermaid,
Incorporated, Sunbeam Corp., Toastmaster Inc., Brown Forman Corp., Oneida Ltd.,
The Black & Decker Corporation, Helen of Troy, Inc., Nacco Industries, Inc. and
National Presto Industries, Inc. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at September
30, 1992 and that all dividends, if any, were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SIGNATURE BRANDS USA, INC., THE S&P 500 INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SIGNATURE BRANDS USA,
(FISCAL YEAR COVERED) INC. PEER GROUP S & P 500
<S> <C> <C> <C>
9/92 100 100 100
9/93 135 110 113
9/94 101 114 117
9/95 81 128 152
9/96 110 143 183
9/97 75 184 257
</TABLE>
* $100 INVESTED ON 9/30/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
RATIFICATION OF AUDITORS
Stockholders will be asked to ratify the Board of Directors' appointment of
KPMG Peat Marwick LLP to serve as the Company's independent auditors for the
current fiscal year. KPMG Peat Marwick LLP has served as the Company's auditors
since September 1994. A representative of that firm will be present at the
Annual Meeting and will have an opportunity to make a statement, if he or she
should so desire. The representative will also be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF ITS
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE 1998 FISCAL YEAR. If the stockholders fail to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP, the Board will consider that decision in
selecting an independent accounting firm for subsequent fiscal years.
17
<PAGE>
DATE TO SUBMIT STOCKHOLDER
PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder who wishes to submit a proposal for inclusion in the
Company's proxy materials to be distributed by the Company in connection with
its 1999 Annual Meeting of Stockholders must do so no later than September 25,
1998. To be eligible for inclusion in the 1999 proxy materials, such proposal
must conform to the requirements set forth in Regulation 14A promulgated under
the Exchange Act. Any such proposals should be directed to the Company at 7005
Cochran Road, Glenwillow, Ohio 44139, Attention: Corporate Secretary.
OTHER MATTERS
As of the date of the Proxy Statement, management is unaware of any matters
to come before the Annual Meeting other than as set forth in the Notice. If any
other matters are properly presented at the Annual Meeting, it is the intention
of the persons named in the accompanying proxy to vote in accordance with their
best judgment on such matters insofar as the proxies are not limited to the
contrary.
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including financial statements and schedules required to be
filed with the Commission pursuant to Rule 13a-1 under the Exchange Act, for the
Company's most recent year. Written requests for such report should be directed
to Signature Brands USA, Inc., 7005 Cochran Road, Glenwillow, Ohio 44139,
Attention: Chief Financial Officer.
You are urged to sign and return your proxy promptly in order to make
certain that your shares are voted at the Annual Meeting. For your convenience,
a postage paid return envelope to the Company's transfer agent is enclosed
herewith.
By Order of the Board of Directors,
THOMAS F. MCKEE
Secretary
Glenwillow, Ohio
January 23, 1998
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DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
SECTION 262--APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
'stockholder' means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words 'stock' and 'share' mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
'depository receipt' mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this Chapter:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except: (i) shares of stock of the corporation
surviving or resulting from such merger or consolidation, or depository
receipts in respect thereof; (ii) shares of stock of any other corporation,
or depository receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof ) or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
(iii) the foregoing subparagraphs (i) and (ii) of this paragraph; or any
combination of the shares of stock, depository receipts and cash in lieu of
fractional shares or fractional depository receipts described in the
foregoing subparagraphs (i), (ii) and (iii) of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation
2
<PAGE>
surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Such
written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of
the proceeding. Upon application by the surviving or resulting corporation
or by any stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and
the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
3
<PAGE>
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
4
<PAGE>
Exhibit 99.4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 28, 1998 (the
"Agreement"), among JAVA ACQUISITION CORP., a Delaware corporation (the
"Purchaser"), and each person or entity named in Schedule A to this Agreement
(the "Sellers").
WHEREAS, the Purchaser, Sunbeam Corporation, a Delaware
corporation of which the Purchaser is a wholly owned subsidiary ("Parent"), and
Signature Brands USA, Inc., a Delaware corporation (the "Company"), are entering
into an Agreement and Plan of Merger (the "Merger Agreement") simultaneously
with the entry into this Agreement, which provides, among other things, that the
Purchaser, upon the terms and subject to the conditions thereof, make a cash
tender offer (the "Offer") for all issued and outstanding shares of common
stock, par value $.01 per share, of the Company (the "Shares") at a price of
$8.25 per share, and following consummation of the Offer the Purchaser will
merge with and into the Company with the Company as the surviving corporation
(the "Merger") and each then outstanding Share (other than Shares held by (i)
the Parent or any of its wholly owned subsidiaries, (ii) the Company or any of
its wholly owned subsidiaries or (iii) any holder who perfects dissenters'
rights under Delaware law) would be converted
1
<PAGE>
into the right to receive $8.25 in cash, or any higher price paid per Share in
the Offer; and
WHEREAS, each of the Sellers wishes to sell to the Purchaser,
and the Purchaser wishes to purchase from each of the Sellers, upon the terms
and subject to the conditions hereinafter set forth, the number of Shares (the
"Seller's Shares") set forth in Schedule A hereto opposite the name of each of
the Sellers.
NOW, THEREFORE, the parties hereto agree as follows:
1. Sellers' Representations. Each of the Sellers severally
represents and warrants to the Purchaser (a) that such Seller has the power and
authority (or the capacity if an individual) to execute and deliver this
Agreement, (b) that, if a corporation, partnership or other entity, this
Agreement has been duly authorized by all requisite action on the part of the
Seller, (c) that the Seller has duly executed and delivered this Agreement and
this Agreement is a valid and binding agreement, enforceable against such Seller
in accordance with its terms, (d) that neither the execution of this Agreement
nor the consummation by such Seller of the transactions contemplated hereby will
constitute a violation of, or conflict with, or default under, any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which such Seller is a party or by which such Seller is bound and, if the Seller
is a corporation, partnership or other entity, the organizational documents
thereof, (e) that on the date hereof such Seller has, and at any
2
<PAGE>
Closing (as defined below) hereunder such Seller will have (without exception),
good and valid title to such Seller's Shares, free and clear of all claims,
liens, charges, encumbrances and security interests, restricting such Seller's
ability to enter into this Agreement or perform its obligations hereunder, (f)
that there are no options or rights to purchase or acquire, or agreements
relating to any such rights with respect to, any of such Seller's Shares except
pursuant to this Agreement, (g) that the transfer of such Seller's Shares to the
Purchaser hereunder will vest in the Purchaser good and valid title to such
Shares, free and clear of all claims, liens, charges, encumbrances, security
interests or restrictions on voting and (h) that the number of Shares set forth
in Schedule A hereto opposite the name of such Seller constitutes all of the
Shares owned beneficially or of record by such Seller (other than, in the case
of the Sellers listed on Schedule A other than ML-Lee Acquisition Fund, L.P.,
Thomas H. Lee Equity Partners, L.P. and State Street Bank and Trust Company, not
individually but as trustee of the 1989 Thomas H. Lee Nominee Trust
(collectively, the "Major Sellers"), for differences therefrom which are not
material).
2. Purchaser's Representations. The Purchaser represents and
warrants to each of the Sellers that (a) the Purchaser has duly authorized,
executed and delivered this Agreement and this Agreement is a valid and binding
agreement, enforceable against the Purchaser in accordance with its terms and
(b) the Purchaser will acquire the Shares for its own account and not with a
view to or for sale in
3
<PAGE>
connection with any distribution thereof, and the Purchaser will not sell or
otherwise dispose of the Shares except in compliance with, or pursuant to an
exemption from registration under, the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
3. Agreement to Sell. At the Closing provided for in Section 4
of this Agreement and subject to the conditions in Section 5 of this Agreement,
each of the Sellers will sell, transfer and deliver such Seller's Shares to the
Purchaser (duly endorsed for transfer in blank or accompanied by stock transfer
powers duly executed in blank, with all necessary stock transfer tax stamps
affixed and cancelled) and the Purchaser will purchase such Seller's Shares and
deliver to such Seller a certified or official bank check or checks payable to
or upon the order of such Seller in immediately available funds, at a price per
Share equal to $8.25 such higher per Share price as the Purchaser may have paid
pursuant to the Offer. Each Seller will, upon request of the Purchaser, promptly
execute and deliver all additional documents reasonably deemed by the Purchaser
to be necessary, appropriate or desirable to effect, complete and evidence the
sale, assignment and transfer of such Seller's Shares pursuant to this
Agreement.
4. Closing. The closing (the "Closing") of the purchase and
sale hereunder shall take place at the office of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022, or such other place as the
4
<PAGE>
parties may mutually agree, on the earlier to occur of (i) the first business
day after the purchase of Shares by the Purchaser pursuant to the Offer or (ii)
if the Offer has otherwise terminated or expired, such date (which shall be at
least one business day following the date of notice) as the Purchaser may
specify in writing to the Sellers. Payment for the Shares shall be in
immediately available funds. Any Seller may tender such Seller's Shares pursuant
to the Offer, provided, however, that until such time as such Shares are
accepted for payment pursuant to the Offer, such Shares shall continue to be
governed by this Agreement. If a Seller's Shares are tendered and accepted for
payment pursuant to the Offer, the payment for such Seller's Shares pursuant to
the Offer shall constitute the Closing of the purchase and sale of such Shares
hereunder.
5. Conditions to Closing. (a) The obligations of the
Purchaser and each of the Sellers under this Agreement shall be subject to the
satisfaction at the Closing of each of the following conditions:
(i) Neither the Purchaser nor such Seller
shall be subject to any order, decree or injunction of a court of
competent jurisdiction which prevents or delays the consummation of the
transactions contemplated by this Agreement and such Closing shall not
be prohibited by any rule, regulation, ruling or law.
5
<PAGE>
(ii) The applicable waiting period with
respect to such Closing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired or been terminated.
(iii) The representations and warranties of
such Seller (in the case of the Purchaser) or the Purchaser (in the
case of each Seller) shall be true and correct in all material respects
and such Seller (in the case of the Purchaser) or the Purchaser (in the
case of each Seller) shall have complied in all material respects with
its covenants hereunder.
6. Changes in Shares. In the event of any change in the number
of Shares outstanding by recapitalization, declaration of a stock split or
combination or payment of a stock dividend or the like, the number of Shares to
be transferred to the Purchaser and the per Share payments to be made to the
Sellers shall be appropriately adjusted. Each Seller's Shares shall include all
Shares acquired after the date hereof by such Seller and all dividends or
distributions in respect of the Seller's Shares.
7. Seller's Covenants. Except as provided for herein, each
Seller agrees not to:
6
<PAGE>
(a) sell, transfer, pledge, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, assignment or other
disposition of such Seller's Shares;
(b) grant any proxies, deposit of such Seller's
Shares into a voting trust or enter into a voting agreement with respect to any
of such Shares;
(c) solicit, encourage, participate in or initiate
discussions or negotiations with, or provide information to, any person, other
than Parent or any affiliate of Parent, concerning any merger, sale of assets,
sale of shares of capital stock or similar transactions involving the Company
or any subsidiary or division of the Company; provided nothing herein shall be
deemed to limit or restrict in any respect the ability of Directors of the
Company who are Sellers or may be affiliated with Sellers from exercising the
fiduciary duties in accordance with Section 7.6 of the Merger Agreement; or
(d) take any action which would make any
representation or warranty of such Seller herein untrue or incorrect.
8. Seller's Actions. Each Major Seller hereby agrees that at
any meeting of the stockholders of the Company however called, it shall (a) vote
such Seller's Shares in favor of the Merger or any other transaction
contemplated by the Merger Agreement, (b) vote such Seller's Shares against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or
7
<PAGE>
warranty or any other obligation of the Company under the Merger Agreement and
(c) vote such Seller's Shares against any action or agreement that would impede,
interfere with or discourage the Offer or the Merger, including, but not limited
to: (i) any extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries,
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries, (iii) any change in the management or Board of Directors of
the Company (other than as contemplated by the Merger Agreement), (iv) any
change in the present capitalization or dividend policy of the Company or (v)
any other material change in the Company's corporate structure or business. Each
Major Seller hereby grants the Purchaser as irrevocable proxy and irrevocably
appoints the Purchaser or its designees, with full power of substitution, its
attorney and proxy to vote all such Seller's Shares in respect of any of the
matters set forth in clauses (a) through (c) of this Section and in the manner
specified in such clauses, provided, however, that such proxy shall not apply to
the matters set forth in clause (c)(iii) of this Section until any waiting
period applicable thereto under the HSR Act shall have expired or been
terminated. Such Seller acknowledges and agrees that this proxy is coupled with
an interest, constitutes, among other things, an inducement for Parent and the
Purchaser to enter into the Merger Agreement, is irrevocable and shall not be
terminated by operation of law or otherwise upon the occurrence of any event
(other than the termination of this
8
<PAGE>
Agreement) and that no subsequent proxies will be given (and if given will not
be effective). Any such proxy shall terminate upon the termination of this
Agreement.
9. Legend. As soon as practicable after the execution of this
Agreement, each Seller shall surrender the certificates representing such
Seller's Shares to the Purchaser so that the following legend may be placed on
such certificates:
"The shares of capital stock represented by this certificate
are subject to a Stock Purchase Agreement, dated as of February 28,
1998, between [the Purchaser] and [the Seller]."
10. Specific Enforcement. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable, in
addition to any other remedy which may be available at law or in equity.
11. Brokerage Fees. Each Seller and the Purchaser, in
connection with the transaction contemplated herein, severally and not jointly
agrees to indem nify and hold the other harmless from and against any and all
claims, liabilities or obligations with respect to any brokerage fees,
commissions or finders' fees asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate (other than,
in the case of the Sellers, an affiliate which is also a Seller).
9
<PAGE>
12. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement.
13. Survival. Notwithstanding anything contained in Section
14(g) hereof to the contrary, none of the representations, warranties and
agreements made by each of the Sellers and by the Purchaser in this Agreement
shall survive the Closing hereunder and any investigation at any time made by or
on behalf of any party hereto.
14. Miscellaneous.
(a) Amendment, Etc. This Agreement may not be
modified, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(b) Assignment. No party to this Agreement may assign
any of its rights or obligations under this Agreement without the prior consent
of the other parties except that the rights and obligations of the Purchaser may
be assigned by the Purchaser to Parent or any of its other wholly owned
subsidiaries but no such transfer shall relieve the Purchaser of its obligations
hereunder if such transferee does not perform such obligations.
(c) Binding Effect. This Agreement will be binding
upon, inure to the benefit of and be enforceable by each Seller and such
Seller's respective heirs, beneficiaries, executors, representatives and
permitted assigns.
10
<PAGE>
(d) Notices. All notices, claims, requests, demands
and other communications hereunder will be in writing and will be deemed to have
been duly given upon receipt as follows:
(a) If to the Purchaser, to:
c/o Sunbeam Corporation
1615 South Congress Avenue
Delray Beach, Florida 33445
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
(b) If to the Seller, to such Seller at the address set
forth under his name in Schedule A;
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above.
11
<PAGE>
(e) Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed to be an original but
all of which together will constitute one and the same instrument.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law.
(g) Termination. Except for Sections 9, 11, 13 and 15
hereof, this Agreement shall terminate on the earliest of (i) the purchase of
Shares pursuant to the Offer, (ii) the termination of the Merger Agreement in
accordance with its terms and (iii) 12 months from the date hereof.
15. Sale of Shares. In the event that within 12 months
following the expiration of the Offer, a Seller shall sell, transfer or
otherwise commit to dispose any or all of such Shares to any party other than
the Parent or an affiliate of the Parent (a "Sale") and realize a Profit (as
defined below) from such Sale, then such Seller shall pay to the Parent an
amount equal to the Profit. Such amount shall be paid to the Parent promptly
following the receipt of proceeds by such Seller from such Sale. The term
"Profit" shall mean the excess, if any, of (a) the aggregate consideration
received by such Seller in connection with the Sale over (b) the
12
<PAGE>
number of Shares sold, transferred or disposed of by such Seller in connection
with the Sale multiplied by the Offer Price.
13
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each Seller and a duly authorized officer of the Purchaser on the
day and year first written above.
JAVA ACQUISITION CORP.
By /s/ David C. Fannin
------------------------
Executive Vice President
and General Counsel
THOMAS H. LEE EQUITY PARTNERS, L.P.
By: THL Equity Advisors
Limited Partnership
By: THL Equity Trust
Its General Partner
By /s/ Scott Schoen
---------------------
Name: Scott Schoen
Title: Vice President
ML-LEE ACQUISITION FUND, L.P.
By: Mezzanine Investments, L.P.
Its Managing General Partner
By: ML Mezzanine Inc.
Its General Partner
By /s/ James V. Caruso
-------------------------------
Name: James V. Caruso
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY,
not individually but as Trustee of the
1989 THOMAS H. LEE NOMINEE TRUST
By /s/ Gerald R. Webber
------------------------
Vice President
<PAGE>
/s/ John W. Childs
--------------------------
JOHN W. CHILDS
/s/ David V. Harkins
--------------------------
DAVID V. HARKINS
/s/ Thomas R. Shepherd
--------------------------
THOMAS R. SHEPHERD
/s/ Thomas R. Shepherd
---------------------
THOMAS R. SHEPHERD MONEY PURCH.
/s/ Glenn H. Hutchins
--------------------------
GLENN H. HUTCHINS
/s/ Scott A. Schoen
--------------------------
SCOTT A. SCHOEN
/s/ C. Hunter Boll
--------------------------
C. HUNTER BOLL
/s/ Steven G. Segal
--------------------------
STEVEN G. SEGAL
/s/ Anthony J. Dinovi
--------------------------
ANTHONY J. DINOVI
/s/ Thomas M. Hagerty
--------------------------
THOMAS M. HAGERTY
/s/ Joseph I. Incandela
--------------------------
JOSEPH I. INCANDELA
/s/ Warren C. Smith, Jr.
--------------------------
WARREN C. SMITH, JR.
/s/ Tina B. Smith
--------------------------
TINA B. SMITH
<PAGE>
/s/ Glenn A. Hopkins
--------------------------
GLENN A. HOPKINS
/s/ Adam L. Suttin
--------------------------
ADAM L. SUTTIN
/s/ Seth W. Lawry
--------------------------
SETH W. LAWRY
/s/ Wendy L. Masler
--------------------------
WENDY L. MASLER
/s/ Todd M. Abbrecht
--------------------------
TODD M. ABBRECHT
/s/ Charles A. Brizlus
--------------------------
CHARLES A. BRIZLUS
<PAGE>
SCHEDULE A
Number of Shares
Name and Address of Common Stock
of Seller(1) of the Company
---------------- ----------------
Thomas H. Lee Equity Partners, L.P. 1,818,203
ML-Lee Acquisition Fund, L.P. 1,563,053
State Street Bank and Trust Company
Not Individually but as Trustee of the
1989 Thomas H. Lee Nominee Trust 1,025,566
John W. Childs 191,577
David V. Harkins 44,481
Thomas R. Shepherd 44,607
Thomas R. Shepherd Money Purch. 19,611
Glenn H. Hutchins 31,750
Scott A. Schoen 19,136
C. Hunter Boll 19,136
Steven G. Segal 5,783
Anthony J. Dinovi 6,298
Thomas M. Hagerty 6,798
- --------
1 Address for all Sellers, until notice of change is given, is:
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
A-1
<PAGE>
Joseph I. Incandela 1,398
Warren C. Smith, Jr. 5,814
Tina B. Smith 3,876
Glenn A. Hopkins 3,876
Adam L. Suttin 2,438
Seth W. Lawry 4,476
Wendy L. Masler 500
Todd M. Abbrecht 231
Charles A. Brizius 311
A-2
<PAGE>
Exhibit 99.5
SIGNATURE BRANDS USA, INC.
February 17, 1998
David Fannin, Esq.
Sunbeam Corporation
1615 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
Dear Sir:
In connection with your meetings and discussions with employees of
Signature Brands USA, Inc. (the 'Company') regarding a possible business
transaction (a 'Transaction'), you have requested certain oral and written
information concerning the Company. As a condition of such meetings and
discussions and being furnished with such information (referred to herein and
defined below as the 'Evaluation Material'), you agree to the following:
1. The Evaluation Material will be used solely for the purpose of
evaluating a possible Transaction involving the Company. Such
information will be kept confidential by you and your representatives,
advisors, directors, officers, employees, affiliates agents and clients
(collectively your 'Representatives'), except that you may disclose the
Evaluation Material or portions thereof to those of your
Representatives who need to know such information for the purpose of
evaluating the merits of a possible Transaction with the Company. You
agree that you will inform your Representatives in advance of the
confidential nature of the Evaluation Material, and that you will be
responsible for any breach of this agreement by your Representatives.
You agree to undertake all reasonable efforts to safeguard the
Evaluation Material you receive from the Company from disclosure or use
other than as permitted hereby.
2. The term 'Evaluation Material' shall mean all oral, written or
electronic information, whether or not labeled, furnished or otherwise
acquired by you from the Company in any manner, whether before, on or
after the date of this agreement, relating to the Company or the
possible Transaction, including but not limited to information
regarding finances, markets, properties, methods of doing business,
personnel, legal affairs, plans, sales, products, processes and
customers. The term 'Evaluation Material' does not include information
which (i) is or becomes generally available to the public other than as
a result of a disclosure by your or any of your Representatives in
violation of this agreement, (ii) was available to you on a
non-confidential basis from a third party prior to its disclosure
pursuant to this agreement, provided that to your knowledge after
inquiry the third party was not bound by a contractual, legal or
fiduciary obligation of confidentiality to the Company and did not
receive the information from another third party source which was so
bound or (iii) becomes available to you on a non-confidential basis
from a third party, provided that to your knowledge after inquiry the
third party is not bound by a contractual, legal or fiduciary
obligation of confidentiality to the Company and did not receive the
information from another third party source who is so bound.
3. Without the prior written consent of the Company, for a period of two
years, you will not, and will direct your Representatives not to,
directly or indirectly, solicit for employment any management employee,
as of the date of this agreement, of the Company. Nothing herein will
preclude you from entering into independent arrangements with persons
who are not currently management employees with the Company.
4. Without the prior written consent of the Company, you will not, and
will direct your Representatives not to, and without your prior written
consent the Company will not, disclose to any person (i) that this
agreement has been entered into; (ii) that any investigators,
discussions or negotiations are taking place concerning a possible
Transaction involving the Company; or (iii) that you have requested or
received Evaluation Material from the Company, or any of the terms,
conditions or other facts with respect to any such possible
Transaction, including the status thereof.
1
<PAGE>
5. As quickly as practicable following a request by the Company, you will
(i) return to the Company all written material containing any of the
Evaluation Material (whether prepared by the Company or otherwise) and
all copies, extracts or other reproductions in whole or in part of such
written material, in your possession or in the possession of your
Representatives, (ii) destroy all copies of any analyses, compilations,
studies or other documents prepared by you or your Representatives for
your use containing, utilizing or reflecting any Evaluation Material
and (iii) provide the Company with a written certification of such
return and destruction. You acknowledge and agree that such return or
destruction shall not relieve you of your obligations of
confidentiality and your other obligations hereunder.
6. In the event that you or your Representatives are requested or required
(by oral questions, interrogatories, requests for information or
documents, subpoena, investigative demand or similar process) to
disclose any Evaluation Material or any of the information referred to
in paragraph 4 of this letter, you will give the Company prompt written
notice of such request or requirement as promptly as reasonably
practicable under the circumstances and the information which is the
subject thereof so that the Company may seek an appropriate protective
order or other remedy and waive your compliance with the provisions of
this agreement. You will use your best efforts to cooperate with the
Company (at the Company's expense) to obtain such protective order or
other remedy. In the event that such protective order or other remedy
is not obtained or the Company does not waive compliance with the
relevant provisions of this agreement, if you are nonetheless upon
advice of your legal counsel, required to disclose information to a
tribunal (or stand liable for contempt or suffer other censure or
penalty) you may disclose such information to such tribunal; provided,
however, that you shall give the Company notice of the information to
be disclosed as far in advance as reasonably practicable under the
circumstances and shall use your reasonable efforts (at the Company's
expense) to obtain an order or other reliable assurance that
confidential treatment will be accorded to any portion of such
information as the Company designates.
7. You understand and acknowledge that the Company is not making any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material and neither the Company nor any
of its stockholders, owners, or Representatives, will have any
liability to you or any other person resulting from your use of or
reliance upon the Evaluation Material.
8. You also understand and agree that unless and until a definitive
Transaction agreement has been executed and delivered, no contract or
agreement providing for a Transaction with the Company shall be deemed
to exist between you and the Company, and neither the Company nor you
will be under any legal obligation of any kind whatsoever with respect
to such Transaction by virtue of this or any written or oral expression
thereof, except, in the case of this agreement, for the matters
specifically agreed to herein. For purposes of this paragraph, the term
'definitive Transaction agreement' does not include an executed letter
of intent or any other preliminary written agreement, nor does it
include any written or oral acceptance of an offer, bid proposal or
expression of interest on your part.
9. Nothing contained in this agreement shall (a) limit the right of the
Company to terminate your access to the Evaluation Material at any
time, to reject any or all proposals and terminate discussions and
negotiations with you or your Representatives at any time, or to enter
into negotiations relating to, or consummate a transaction with, any
other party or parties or (b) limit your right to terminate discussions
with the Company at any time.
10. You agree and acknowledge that irreparable injury may result to the
Company in the event of a breach by you or your Representatives of your
obligations hereunder as to the Company, and in the event of such
breach or threat thereof, the Company shall be entitled to, in addition
to all other remedies and damages available at law or in equity, seek
specific performance, temporary and permanent injunctive relief or
other equitable relief to restrain such breach by you without the
necessity of proving actual damage or the likelihood of irreparable
harm. No failure or delay by the Company in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or future
exercise of any right, power or privilege.
2
<PAGE>
11. This agreement is for the benefit of you and the Company, and shall be
governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts. This agreement is not assignable by you
without the prior written consent of the Company.
12. This agreement and the obligations of the parties hereto shall cease
and be of no further force and effect from and after the third
anniversary of the date hereof except for paragraph 3 of this
agreement.
Please sign both copies of this letter and return one executed copy to me,
which will then constitute our mutual agreement with respect to the subject
matter of this letter.
Very truly yours
SIGNATURE BRANDS USA, INC.
By: /s/ Meeta Vyas
-----------------------------------
Meeta Vyas, CEO
ACCEPTED AND AGREED:
as of February 17, 1998.
SUNBEAM CORPORATION
By: /s/ David C. Fannin
------------------------------------
Name: David C. Fannin
Title: Executive Vice President
and General Counsel
3
<PAGE>
[DONALDSON, LUFKIN & JENRETTE LOGO]
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 o (212) 892-3000
February 28, 1998
Board of Directors
Signature Brands USA, Inc.
7005 Cochran Road
Glenwillow, OH 44139-4312
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Signature Brands USA, Inc. (the 'Company'), other
than stockholders who are affiliates of the Company, of the consideration to be
received by such stockholders pursuant to the terms of the Agreement and Plan of
Merger, dated as of February 28, 1998 (the 'Agreement'), by and between the
Company, Sunbeam Corporation ('Sunbeam') and Java Acquisition Corp.
('Acquisition Sub'), a wholly-owned subsidiary of Sunbeam, pursuant to which
Acquisition Sub will be merged (the 'Merger') with and into the Company.
Pursuant to the Agreement, Sunbeam or Acquisition Sub will commence a
tender offer for any and all outstanding shares of the Company's common stock,
par value $.01 per share ('Company Common Stock'), at a price of $8.25 per share
in cash. The tender offer is to be followed by the Merger in which each share of
Company Common Stock not tendered in the tender offer will be converted into the
right to receive $8.25 per share in cash.
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company including information provided during discussions with management
and the Board of Directors. Included in the information provided during
discussions with management and the Board of Directors were certain financial
projections of the Company for the period beginning October 1, 1997 and ending
September 30, 2002 prepared by the management of the Company and the Board of
Directors' assessment of such projections. In addition, we have compared certain
financial and securities data of the Company with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the common stock of the Company, reviewed prices and
premiums paid in certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion. We were not requested to, nor did we, solicit the
interest of any other party in acquiring the Company; however, at the Board's
direction, we did hold discussions with certain other parties who communicated
unsolicited indications of interest to the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have been informed by management of the
Company that they were reasonably prepared on the basis reflecting management's
best currently available estimates and judgments as to the future operating and
financial performance of the Company, and we have also considered the Board of
Directors' assessment of the uncertainties of achieving such projections. We
have not assumed any responsibility for making an independent
evaluation of any assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied as to
certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Merger and the other business strategies being considered by the
Company's Board of Directors, nor does it address the Board's decision to
proceed with the Merger. Our opinion does not constitute a recommendation to any
stockholder as to whether to tender shares pursuant to the tender offer or
whether and how to vote on the Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ'), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company and Thomas H. Lee Company, an
affiliate of the Company, and its affiliates in the past and has been
compensated for such services.
<PAGE>
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the stockholders of the
Company, other than stockholders who are affiliates of the Company, pursuant to
the Agreement is fair to such stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Louis P. Friedman
----------------------------------
Louis P. Friedman
Managing Director
2
<PAGE>
FOR IMMEDIATE RELEASE
SIGNATURE BRANDS AND SUNBEAM ANNOUNCE MERGER AGREEMENT
Cleveland, Ohio (March 2, 1998)--Signature Brands USA, Inc., (Nasdaq:SIGB), a
leading manufacturer of a comprehensive line of consumer and professional
products and Sunbeam Corporation (NYSE: SOC), a leading consumer products
company, today announced the execution of a definitive merger agreement whereby
Sunbeam would acquire for cash all outstanding shares of Signature Brands common
stock for $8.25 per share. This represents a 57 percent premium to the closing
price for Signature Brands common stock on Friday, February 27, 1998, of $5.25
per share.
Under the terms of the merger agreement, approved by both company Boards,
Sunbeam will initiate a tender offer for all of the outstanding shares of
Signature Brands to commence within five business days. Once initiated, the
offer will be open for 20 business days unless further extended. Sunbeam's offer
is contingent upon, among other things, a valid tender of at least a majority of
the outstanding shares of Signature Brands. After consummation of the tender
offer, Sunbeam will acquire, pursuant to the merger agreement, any remaining
Signature Brands shares for the same per share price. The transaction is subject
to a number of customary conditions including the receipt of required regulatory
approvals. In connection with the merger agreement, certain stockholders owning
in the aggregate, approximately 48 percent of Signature Brands outstanding
shares have agreed to tender all of their shares.
Meeta Vyas, Vice Chairman of the Board and Chief Executive Officer of Signature
Brands stated: 'We are pleased to announce the combination of these two leading
consumer products companies. It is our belief that the maximum potential of
Signature Brands' portfolio of leading brand name products can best be realized
by capitalizing on the strengths of a larger and more diversified organization.'
Sunbeam Corporation is a leading consumer products company that designs,
manufactures and markets nationally and internationally a diverse portfolio of
brand name products. The company's Sunbeam(Registered) and Oster(Registered)
brands have been household names for generations, both domestically and abroad,
and the company is a market leader in many of its product categories.
Signature Brands USA, Inc. is a leading manufacturer of a comprehensive line of
consumer and professional products. The Company's consumer products, marketed
under the Mr. Coffee(Registered), Health o meter(Registered),
Counselor(Registered) and Borg(Registered) brand names include automatic drip
coffeemakers, teamakers, coffee filters, water filtration products, accessories
and other kitchen countertop appliances as well as bath, kitchen, and gourmet
scales and therapeutic devices. Professional products include the
Pelouze(Registered) and Health o meter(Registered) brands of office, foodservice
and medical scales.
This press release contains forward-looking statements based on current
expectations which are covered under the 'Safe Harbor' provision within the
Private Securities Litigation Reform Act of 1995. Actual results and events
related to the acquisition may differ from those anticipated as a result of
risks and uncertainties which include, but are not limited to, the successful
completion of this transaction, the effective integration of Signature Brands
into Sunbeam and the overall economic, market and industry conditions, as well
as the risks described from time to time in Sunbeam's and Signature Brand's
reports as filed with the Securities and Exchange Commission, including their
most recently filed Form 10-K reports.
Contact: Steven M. Billick
Senior Vice President and
Chief Financial Officer
(440) 542-4000
<PAGE>
SIGNATURE BRANDS USA, INC.
7005 COCHRAN ROAD
GLENWILLOW, OHIO 44139-4312
March 6, 1998
To Our Stockholders:
On behalf of the Board of Directors of Signature Brands USA, Inc. (the
'Company'), we are pleased to inform you that, on February 28, 1998, the Company
entered into an Agreement and Plan of Merger (the 'Merger Agreement') with
Sunbeam Corporation and its wholly-owned subsidiary, Java Acquisition Corp.,
pursuant to which Java Acquisition Corp. has today commenced a cash tender offer
(the 'Offer') to purchase all of the outstanding shares (the 'Shares') of the
Company's Common Stock at $8.25 per share. Under the Merger Agreement, the Offer
will be followed by a merger (the 'Merger') in which any remaining shares of the
Company's Common Stock will be converted into the right to receive $8.25 per
share in cash, without interest.
Your Board of Directors has determined that the Offer and the Merger are
fair to and in the best interests of the Company and its stockholders, approved
the Offer and the Merger, and recommends that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission, including
among other things, the terms and conditions of the Merger Agreement and the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ'), the
Company's financial advisor, to the effect that, as of the date of such opinion
and based upon the assumptions and other matters set forth therein, the
consideration to be received by holders of Shares in the Offer and the Merger,
other than affiliates of the Company, is fair to such holders from a financial
point of view. Holders of Shares are urged to read the DLJ opinion in its
entirety.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated March 6, 1998, of Java Acquisition
Corp., together with related materials, including a Letter of Transmittal, to be
used for tendering your Shares. These documents set forth the terms and
conditions of the Offer and the Merger and provide instructions as to how to
tender your Shares. We urge you to read the enclosed material carefully in
making your decision with respect to tendering your Shares pursuant to the
Offer.
On behalf of the Board of Directors,
Meeta Vyas
Vice Chairman and
Chief Executive Officer
