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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /x/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SAFETY 1ST, INC.
(Name of Registrant as Specified In Its Charter)
Board of Directors of Safety 1st, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[SAFETY 1ST LOGO]
April 28, 1997
To Safety 1st Stockholders:
The Board of Directors of Safety 1st, Inc. joins me in extending a cordial
invitation to attend our 1997 Annual Meeting of Stockholders. The meeting will
be held at the Hotel Meridien, 250 Franklin Street, Boston, Massachusetts 02110,
at 9:00 a.m., local time, on Wednesday, May 28, 1997.
In addition to voting on the matters described in the accompanying Proxy
Statement, we will review Safety 1st's business and discuss our direction for
the coming years. There will also be an opportunity to meet Richard Wenz, Safety
1st's newly named President, and to discuss matters of interest to you as a
Stockholder.
It is important that your shares be represented at the meeting whether or
not you plan to attend in person. Therefore, please sign and return the enclosed
Proxy Card in the envelope provided. If you do attend the meeting and desire to
vote in person, you may do so even though you have previously sent in a proxy.
We hope that you will be able to attend the meeting, and we look forward to
seeing you.
Sincerely,
/s/ Michael Lerner
Michael Lerner
Chairman & Chief Executive Officer
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SAFETY 1ST, INC.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1997
---------------
Notice is hereby given that the Annual Meeting of Stockholders of Safety
1st, Inc. (the "Company") will be held on May 28, 1997, at 9:00 a.m., Eastern
Time, at the Hotel Meridien, 250 Franklin Street, Boston, Massachusetts 02110,
to consider and act upon each of the following matters:
1. To elect six members of the Board of Directors to serve until the next
annual meeting of the Company's stockholders and thereafter until their
successors are chosen and qualified;
2. To approve the Company's 1996 Employee and Director Stock Option Plan;
3. To approve the Company's 1996 Nonqualified Stock Option Plan;
4. To ratify the appointment of Grant Thornton LLP as independent
accountants for the Company for the fiscal year ending December 31,
1997; and
5. To consider and act upon any other matters that may properly come
before the meeting or any adjournment(s) thereof.
All holders of Common Stock whose names appear of record on the Company's
books at the close of business on April 11, 1997 will be entitled to receive
notice of and to vote at the meeting and any adjournments thereof.
WHETHER OR NOT YOU PLAN TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors,
/s/ Curt R. Feuer
Curt R. Feuer
Clerk
Boston, Massachusetts
April 28, 1997
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SAFETY 1ST, INC.
210 BOYLSTON STREET
CHESTNUT HILL, MASSACHUSETTS 02167
---------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
---------------
INTRODUCTION
The Board of Directors of Safety 1st, Inc., a Massachusetts corporation
(the "Company"), is furnishing this Proxy Statement to holders of shares of
common stock, $.01 par value, of the Company (the "Common Stock"), in connection
with the solicitation of the enclosed Proxy Card for use at the Annual Meeting
of Stockholders of the Company to be held on May 28, 1997 at 9:00 A.M. at the
Hotel Meridien, 250 Franklin Street, Boston, Massachusetts 02110 and any
adjournments thereof (the "Annual Meeting"), for the purposes set forth in the
Notice of Annual Meeting of Stockholders.
Shares of Common Stock represented by proxies in the form solicited will be
voted in the manner directed by a stockholder. If no direction is given, the
proxy will be voted FOR the election of the nominees for director named in this
Proxy Statement and the proposals set forth in Items 2, 3 and 4. Proxies may be
revoked at any time prior to their being voted by giving written notice of
revocation or by giving a duly executed Proxy Card bearing a later date to the
Clerk of the Company. In addition, a stockholder of record may revoke a
previously submitted Proxy Card by voting in person at the Annual Meeting and
requesting that the previously submitted Proxy Card not be used.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone, telecopy,
telegraph, or personal calls.
The Board of Directors is not aware of any matters other than those
described in this Proxy Statement that will be acted upon at the Annual Meeting.
In the event that any other matters properly come before the meeting for a vote
of stockholders, the persons named as proxies in the enclosed Proxy Card will
vote in accordance with their best judgment on such other matters.
It is anticipated that this Proxy Statement and accompanying Proxy Card
will be first mailed to stockholders on or about April 28, 1997. Certain
additional information regarding the Company contained in the Company's Annual
Report to Stockholders is being furnished to each stockholder with the mailing
of this Proxy Statement but is not part of the Proxy Statement.
VOTING RIGHTS, QUORUM AND METHOD OF TABULATION
Only stockholders of record at the close of business on April 11, 1997 will
be entitled to vote at the Annual Meeting. At the close of business on such
date, a total of 7,187,288 shares of Common Stock were outstanding. Each share
of Common Stock is entitled to one vote. Cumulative voting is not permitted.
Pursuant to the Company's By-laws, a majority of the shares of the Common
Stock outstanding and entitled to vote constitutes a quorum for the transaction
of business. Votes cast by proxy or in person at the Annual Meeting will be
counted by persons appointed by the Company to act as election inspectors for
the meeting.
The Company's By-laws require the affirmative vote of a plurality of the
votes cast at the Annual Meeting for the election of directors, and the
affirmative vote of a majority of the votes cast at the Annual Meeting for the
approval of the other proposals.
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Abstentions and broker non-votes are not treated as votes cast, and will
therefore have no effect on the outcome of the election of directors and the
approval of the other proposals, although abstentions and broker non-votes will
be counted in the determination of a quorum.
MATTERS TO BE VOTED UPON
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
It is intended that the number of directors to be elected to the Board of
Directors be set at six. Ronald J. Jackson, whose term expires at the Annual
Meeting, is not standing for re-election and will resign from the Board as of
the Annual Meeting. The Board of Directors has nominated Mr. Mark Owens to
replace Mr. Jackson. Each director elected at the Annual Meeting of Stockholders
shall be elected for a term of one year and thereafter until his successor is
chosen and qualified. The Board of Directors recommends that the stockholders
elect the six nominees named below as directors of the Company for the ensuing
year, and the persons named as proxies in the enclosed Proxy Card will vote the
proxies received by them for the election as directors of the nominees named
below unless otherwise indicated.
Michael Lerner
Michael S. Bernstein
Curt R. Feuer
Robert J. Drummond
Laurence S. Levy
Mark Owens
Each nominee has indicated a willingness to serve, but in case any nominee
is not a candidate at the Annual Meeting for reasons not now known to the
Company, the proxies named in the enclosed Proxy Card may vote for a substitute
nominee at their discretion. Certain information regarding the nominees is set
forth below in the MANAGEMENT Section under the heading "Business Experience of
Directors and Nominee for Director and Executive Officers."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" each of
the six nominees named above.
VOTE REQUIRED
The nominees for election as director at the Annual Meeting who receive the
six largest pluralities of votes properly cast for the election of directors
shall be elected the directors of the Company. Proxies cannot be voted for a
greater number of persons than the number of nominees named. Cumulative voting
is not permitted.
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PROPOSAL NO. 2 -- APPROVAL OF THE COMPANY'S 1996 EMPLOYEE AND DIRECTOR STOCK
OPTION PLAN
GENERAL
The 1996 Employee and Director Stock Option Plan, as amended (the "Employee
and Director Plan"), was adopted, subject to stockholder approval, by the
Company's Board of Directors on September 18, 1996. The purpose of the Employee
and Director Plan is to attract and retain the best available employees,
directors, advisors and consultants and thereby promote the success of the
Company's business. The Employee and Director Plan provides for grants of
options to acquire Common Stock to employees, directors, advisors and
consultants of the Company and its subsidiaries. The following is a summary of
the Employee and Director Plan, which is qualified in its entirety by reference
to the Employee and Director Plan, a copy of which is annexed hereto as Exhibit
A. Terms not otherwise defined in this summary shall have the meanings given to
them in the text of the Employee and Director Plan.
SHARES AVAILABLE
Under the Employee and Director Plan, a total of 1,000,000 shares of Common
Stock are available to be issued upon exercise of options granted under the
plan, subject to adjustment in the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's
capitalization or other increase or reduction of the number of shares of Common
Stock outstanding without the receipt of compensation in money, services or
property.
As of April 11, 1997, (i) options for the purchase of a total of 475,480
shares of Common Stock had been granted under the Employee and Director Plan
(subject to stockholder approval) to 98 participants and options for 525,970
shares were available for issuance (which number includes 1,450 shares that were
subject to options that have been cancelled); (ii) Michael Lerner, the Company's
Chief Executive Officer, had been granted options to purchase 20,000 shares;
(iii) John J. Whyte, the Company's Executive Vice President, Planning and
Control, had been granted options to purchase 50,000 shares; (iv) Stephen P.
Orleans, the President of Safety 1st Home Products Canada Inc., had been granted
options to purchase 35,000 shares; (v) Richard E. Wenz, the Company's President
and Chief Operating Officer, had been granted options to purchase 250,000
shares; (vi) all current executive officers as a group had been granted options
to purchase 355,000 shares; (vii) all current directors, who are not executive
officers, as a group had been granted options to purchase 20,000 shares; and
(viii) all employees, including all current officers who are not executive
officers, as a group had been granted options to purchase 120,480 shares. The
granting of options under the Employee and Director Plan is discretionary, and
the Company cannot now determine the number or types of options to be granted in
the future to any particular person or group. The closing price on April 11,
1997, of one share of Common Stock on the Nasdaq Stock Market was $6.25.
PLAN DESCRIPTION
Administration
The Employee and Director Plan is administered by the Company's Board of
Directors, which has delegated concurrent power with respect to the plan to the
Stock Option Committee of the Board of Directors (the "Stock Option Committee").
For the purposes of this Plan Description, the term "Administrator" shall refer
to the Board of Directors and the Stock Option Committee. Subject to the terms
of the Employee and Director Plan, the Administrator has full power to select,
from among those eligible, the participants who will be granted options and the
terms and conditions of each option; to waive compliance by participants with
the terms of option grants; to modify or amend option grants with the applicable
participant's consent; to grant replacement options for options that have been
canceled; to interpret the Employee and Director Plan and decide any questions
and settle all controversies and disputes that may arise in connection
therewith; and to amend and rescind rules and regulations for the administration
of the Employee and Director Plan. All options granted to executive officers,
directors and beneficial owners of more than ten percent (10%) of the Common
Stock ("Section 16 Insider") will be awarded by the full Board of Directors or a
committee composed of two or more Non-Employee Directors (as defined by the
Rules and Regulations promulgated under Section 16 of
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the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Options
granted to participants that are not Section 16 Insiders will be awarded by the
Stock Option Committee or the Board of Directors. All determinations and actions
of the Administrator with respect to the Employee and Director Plan will be
conclusive and will bind all parties.
Eligibility
Employees, directors, advisors and consultants of the Company and its
subsidiaries are eligible to receive options under the Employee and Director
Plan, provided that Incentive Stock Options (as defined below) may be granted
only to employees and to directors who are also employees. From among those who
are eligible, the Administrator selects, in its sole discretion, those who will
receive options under the plan. As of April 11, 1997, there were approximately
200 persons eligible to receive options under the plan, 180 of whom are
employees of the Company.
Options: Grants and Exercise
The Employee and Director Plan permits the granting of options that qualify
as incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and options that do not
qualify as Incentive Stock Options ("Nonqualified Stock Options"). The exercise
price of each option shall be determined by the Administrator, provided that the
exercise price of an Incentive Stock Option may not be less than 100% of the
fair market value of the shares on the date of grant (110% in the case of a
person who owns stock possessing more than 10% of the voting power of all
classes of stock of the Company or of any of its parents or subsidiaries (a "10%
stockholder")). The "fair market value" on any given date means the last sale
price at which the Common Stock is traded on such date as reported by the Nasdaq
Stock Market.
The term of each option shall be determined by the Administrator at the
time of grant, provided that the latest date on which an option may be exercised
will be the tenth anniversary (fifth anniversary, in the case of an Incentive
Stock Option granted to a 10% stockholder) of the day immediately preceding the
option grant. The Administrator determines at what time or times and under what
conditions (including performance criteria) each option may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Administrator. The Administrator also
determines, at the time of each option grant, the terms and conditions under
which each option may be exercised in the event of a participant's death or in
the event of a termination of a participant's relationship with the Company for
a reason other than death, as more particularly described in the Employee and
Director Plan (a "Status Change").
The Administrator's general practice to date with respect to vesting of
options granted to employees has been to provide for options to become
exercisable in three equal installments six, eighteen and thirty months after
the grant date. The options granted to date generally provide that in the event
of a participant's death, vested options may be exercised only within one year
following the date of death, and in the event of a Status Change, vested options
may be exercised only within three months following the Status Change, except
that an option will terminate immediately upon a Status Change that results from
a discharge for cause which in the opinion of the Administrator casts such
discredit on the participant as to justify immediate termination of the option.
In order to exercise an option, a participant must provide written notice
and full payment to the Company together with payment of any taxes. The option
exercise price may be paid for by cash or check, and if permitted by the
agreement evidencing the option, by promissory note, by shares of Common Stock
outstanding for at least six months having a fair market value on the date of
surrender equal to the aggregate exercise price of the shares, by an undertaking
by a broker to deliver funds to the Company, by the withholding of shares of
Common Stock deliverable upon exercise having a fair market value on the date of
exercise at least equal to the exercise price, or by any combination of the
permitted forms of payment. The Administrator may require that upon exercise of
an option, certificates representing shares thereby acquired
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bear an appropriate restrictive legend if the sale of the shares has not been
registered under the Securities Act of 1933, as amended.
Options may not be transferred by a participant other than by will or by
the laws of descent and distribution, and are exercisable, during a
participant's lifetime, only by such participant.
Certain Corporate Transactions
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
of the Company's outstanding Common Stock by a single person or entity or by a
group of persons and/or entities acting in concert or a consolidation or a
merger where the Company is the surviving corporation but the stockholders of
the Company immediately prior to such consolidation or merger do not own after
such consolidation or merger shares representing fifty percent (50%) of the
voting power of the Company, or in the event of the sale or transfer of
substantially all the Company's assets or a dissolution or liquidation of the
Company (a "covered transaction"), all outstanding options will terminate as of
the effective date of the covered transaction, provided that the Administrator
may make outstanding options exercisable in full prior to a covered transaction.
With respect to an outstanding option held by a participant who, following the
covered transaction, will be employed by or otherwise providing services to a
corporation which is a surviving or acquiring corporation in such transaction or
an affiliate of such a corporation, the Administrator may, in lieu of the action
described above (but subject to prior contractual obligations), arrange to have
such surviving or acquiring corporation or affiliate grant to the participant a
replacement option.
Amendment and Termination
The Administrator may at any time or times amend the Employee and Director
Plan or any outstanding option (except that the Administrator may not, without
the consent of an option holder, take any action that would adversely affect the
rights of such holder) for any purpose which may at the time be permitted by
law, or may at any time terminate the Employee and Director Plan as to any
further grants of options, provided that (except to the extent expressly
required or permitted by the Employee and Director Plan) no such action will,
without the approval of the Company's stockholders, effectuate a change for
which stockholder approval is required in order for the plan to continue to
qualify to grant Incentive Stock Options under Section 422 of the Code.
Term of Plan
Unless earlier terminated as a result of the failure of the Company's
stockholders to approve the Employee and Director Plan, the Employee and
Director Plan shall terminate (i) when the total amount of Common Stock with
respect to which options may be granted shall have been issued upon the exercise
of options, (ii) by action of the Administrator, or (iii) ten (10) years after
the date of approval by the Company's Board of Directors (which was given on
September 18, 1996), whichever shall occur first.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal federal (not state
or local) income tax consequences of options granted under the Employee and
Director Plan. It is general in nature and is not intended to cover all tax
consequences that may apply to an Employee and Director Plan participant or to
the Company. The provisions of the Code and the regulations thereunder relating
to these matters ("Treasury Regulations") are complex, and their impact in any
one case may depend upon the particular circumstances. Each holder of an option
under the Employee and Director Plan (referred to in this summary as a
participant or an option holder) should consult the holder's own accountant,
legal counsel or other financial advisor regarding the tax consequences of
participation in the Employee and Director Plan. This discussion is based on the
Code as currently in effect.
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If an option (whether an Incentive Stock Option or Nonqualified Stock
Option) is granted to a participant in accordance with the terms of the Employee
and Director Plan, no income will be recognized by such participant at the time
the option is granted.
Generally, on exercise of a Nonqualified Stock Option, the amount by which
the fair market value of the shares of the Common Stock on the date of exercise
exceeds the purchase price of such shares will be taxable to the participant as
ordinary income, and, in the case of an employee, the Company will be required
to withhold tax on the amount of income recognized by the employee upon exercise
of a Nonqualified Stock Option. Such amount will be deductible for tax purposes
by the Company in the year in which the participant recognizes the ordinary
income. The disposition of shares acquired upon exercise of a Nonqualified Stock
Option will result in capital gain or loss (long-term or short-term depending on
the applicable holding period) in an amount equal to the difference between the
amount realized on such disposition and the sum of the purchase price and the
amount of ordinary income recognized in connection with the exercise of the
Nonqualified Stock Option.
Generally, on exercise of an Incentive Stock Option, an employee will not
recognize any income and the employer will not be entitled to a deduction for
tax purposes. However, generally the difference between the purchase price and
the fair market value of the shares of Common Stock received ("Incentive Stock
Option Shares") on the date of exercise will be treated as a positive adjustment
in determining alternative minimum taxable income, which may subject the
employee to the alternative minimum tax ("AMT"). AMT is an alternative method of
calculating income tax liability. An individual's federal income tax liability
is equal to the greater of the AMT or the income tax liability computed under
the ordinary method. In order to determine AMT, taxable income before personal
exemptions is modified by certain additions and subtractions to arrive at
alternative minimum taxable income ("AMTI"). One of these additions is the
positive adjustment previously discussed resulting from the exercise of an
Incentive Stock Option. The size of this positive adjustment and of the other
required additions and subtractions relative to a participant's taxable income
will determine whether there is an AMT liability. The AMT tax rate of 26% (28%
for the portion of AMTI in excess of a certain base amount) is applied to AMTI
less certain exemptions and adjustments, where applicable. If a participant is
required to pay the AMT by reason of exercising an Incentive Stock Option, a
portion of AMT may be available to offset regular tax liability in subsequent
years.
If an option is exercised through the use of Common Stock previously owned
by the employee, such exercise generally will not be considered a taxable
disposition of the previously owned shares, however, proposed treasury
regulations would provide that if any previously owned Incentive Stock Option
Shares are used to exercise an Incentive Stock Option and the holding period
requirement for those shares is not satisfied at the time they are used to
exercise an Incentive Stock Option, such use would constitute a disqualifying
disposition of such previously owned Incentive Stock Option Shares, resulting in
the recognition of ordinary income (but not any additional capital gain) in the
amount described above. Otherwise, when previously owned Common Stock is used to
exercise an Incentive Stock Option, in general (i) no gain or loss will be
recognized with respect to such shares, (ii) the number of shares received that
is equal in number to the shares surrendered will have a basis equal to the
shares surrendered and, except for purposes of determining whether a disposition
will be a disqualifying disposition, will have a holding period that includes
the holding period of the shares exchanged, and (iii) any additional shares
received will have a zero basis and will have a holding period that begins on
the date of the exercise. If any of the shares received are disposed of before
the applicable holding period for such shares has been met, the shares with the
lowest basis will be deemed to be disposed of first and such disposition will be
a disqualifying disposition giving rise to ordinary income as described above.
If any otherwise qualifying Incentive Stock Option first becomes exercisable in
any one year for shares having a fair market value, determined as of the date of
the grant, in excess of $100,000, the portion of the option in respect of such
excess shares will be treated as a Nonqualified Stock Option.
Upon the disposition of the Incentive Stock Option Shares, the option
holder will recognize long-term or short-term capital gain or loss (depending on
the applicable holding period) in an amount equal to the difference between the
amount realized on such disposition and the purchase price of such shares.
Generally, however, if the option holder disposes of the Incentive Stock Option
Shares within two years after the date of grant or within one year after the
date of exercise (a "disqualifying disposition"), the employee will recognize
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ordinary income, and the Company will be entitled to a deduction for tax
purposes for the taxable year in which the disqualifying disposition occurs, in
the amount of the excess of the fair market value of the shares on the date of
exercise over the purchase price (or, if less, the amount of the gain on sale).
Any excess of the amount realized by the holder on the disqualifying disposition
over the fair market value of the shares on the date of exercise of the
Incentive Stock Option will ordinarily constitute capital gain.
ACCOUNTING TREATMENT
Option grants to employees at 100% of fair market value will be accounted
for under the intrinsic value method as prescribed in Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees" and related
Interpretations. This method of accounting generally does not result in any
charge to the Company's earnings, however, the Company must disclose in
pro-forma statements to the Company's financial statements the impact those
options would have upon the Company's reported earnings were the value of those
options at the time of grant treated as compensation expense. Option grants to
non-employees will be accounted for in accordance with Statement of Financial
Accounting Standard No. 123, "Accounting for Stock Based Compensation" which
establishes a fair value based method of accounting for stock-based
compensation. Whether or not granted at a discount, the number of outstanding
options is a factor in determining the Company's earnings per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" approval
of the 1996 Employee and Director Stock Option Plan.
VOTE REQUIRED
The affirmative vote of at least a majority of the votes cast on the matter
is required to approve the 1996 Employee and Director Stock Option Plan.
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PROPOSAL NO. 3 -- APPROVAL OF THE COMPANY'S 1996 NONQUALIFIED STOCK
OPTION PLAN
GENERAL
The 1996 Nonqualified Stock Option Plan, as amended (the "Nonqualified
Plan"), was adopted, subject to stockholder approval, by the Company's Board of
Directors on September 18, 1996. The purposes of the Nonqualified Plan are to
provide additional incentive to present and future directors, employees and
other parties who may contribute to the success of the Company or its
subsidiaries. The Nonqualified Plan provides, in general, for grants of options
to acquire Common Stock to directors, employees, advisors, consultants, vendors,
sales representatives, distributors, suppliers, business partners and service
providers of the Company and its subsidiaries, and others who may contribute to
the success of the Company or its subsidiaries. By encouraging stock ownership,
the Company seeks to attract and retain on a continuing basis relationships with
persons and entities of exceptional competence and seeks to furnish an added
incentive for them to increase their efforts on behalf of the Company. The
following is a summary of the Nonqualified Plan, which is qualified in its
entirety by reference to the Nonqualified Plan, a copy of which is annexed
hereto as Exhibit B. Terms not otherwise defined in this summary shall have the
meanings given to them in the text of the plan.
SHARES AVAILABLE
Under the Nonqualified Plan, a total of 500,000 shares of Common Stock are
available to be issued upon exercise of options granted under the plan, subject
to adjustment in the event of a subdivision or consolidation of the Common Stock
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of outstanding Common Stock,
without receiving compensation therefor in money, services or property. As of
April 11, 1997, options for the purchase of a total of 37,100 shares of Common
Stock had been granted under the Nonqualified Plan (subject to stockholder
approval of the plan) to 6 participants (none of whom was an employee or
director of the Company) and options for 462,900 shares were available for
issuance. The granting of options under the Nonqualified Plan is discretionary,
and the Company cannot now determine the number or types of options to be
granted in the future to any particular person or group. On April 11, 1997, the
closing price of one share of Common Stock on the Nasdaq Stock Market was $6.25.
PLAN DESCRIPTION
Administration
The Nonqualified Plan is administered by the Company's Board of Directors,
which has delegated concurrent power with respect to the plan to the Stock
Option Committee of the Board of Directors. For the purposes of this Plan
Description, the term "Administrator" shall refer to the Board of Directors and
the Stock Option Committee. The Administrator determines the parties to whom
options shall be granted and the number of shares of Common Stock covered by
each option. Options granted to Section 16 Insiders will be awarded by the full
Board of Directors or a committee composed of two or more Non-Employee Directors
(as defined by the Rules and Regulations promulgated under Section 16 of the
Exchange Act). Options granted to participants that are not Section 16 Insiders
will be awarded by the Stock Option Committee or the Board of Directors. In
addition, all questions of interpretation and application of the Nonqualified
Plan, of options granted under the plan and of the value of shares of Common
Stock subject to an option, are subject to the determination of the
Administrator, which determination is final and binding.
Eligibility
Options under the Nonqualified Plan may be granted to directors, employees,
advisors, consultants, vendors, sales representatives, distributors, suppliers,
business partners and service providers of the Company and its subsidiaries, and
others who may contribute to the success of the Company or its subsidiaries. The
Administrator selects those eligible parties to whom options shall be granted in
its sole discretion. As of
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<PAGE> 12
April 11, 1997, there were approximately 210 parties eligible to receive options
under the plan, 180 of which are employees of the Company.
Options: Grants and Exercise
Options granted under the Nonqualified Plan will not qualify as Incentive
Stock Options under Section 422 of the Code. The exercise price and the term (up
to ten years) for each option is specified by the Administrator, in its
discretion, at the time each option is granted. The Administrator also specifies
upon granting an option the number of shares for which an option may be
exercised at a particular time and such other conditions as the Administrator
may determine. The Administrator's general practice to date with respect to the
vesting of options has been to provide for options to become exercisable in
three equal installments six, eighteen and thirty months after the grant date.
Options granted to date under the Nonqualified Plan provide that (i) in the
event that a participant ceases to be eligible to participate in the plan
because of death or disability, vested options may be exercised only within one
year following the date of such cessation, (ii) in the event that a participant
ceases to be eligible to participate in the plan because of termination for
cause or voluntary termination by the participant, the option shall terminate
and not be exercisable after the date of such cessation; and (iii) in the event
that a participant ceases to be eligible to participate in the plan for reasons
other than items (i) or (ii) above, vested options may be exercised only within
ninety days following the date of cessation.
An option may be exercised by sending the Company written notice together
with full payment and any tax or excise due. The option exercise price may be
paid for by cash or check, and if permitted by the Administrator, by promissory
note, shares of Common Stock outstanding for at least six months having a fair
market value on the last business day preceding the date of exercise equal to
the exercise price, an undertaking by a broker to deliver funds to the Company,
the withholding of shares of Common Stock deliverable upon exercise having a
fair market value on the date of exercise at least equal to the exercise price,
or any combination of the permitted forms of payment. In the event that the
shares issuable upon exercise of an option are not registered under the
Securities Act of 1933, as amended, the Company may imprint an appropriate
legend on the certificates representing the shares.
Options may not be transferred by a participant other than by will or by
the laws of descent and distribution, and are exercisable, during a
participant's lifetime, only by such participant, unless otherwise permitted by
the Administrator.
Certain Corporate Transactions
In the event that the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the surviving
corporation, or if there is a merger or consolidation where the Company is the
surviving corporation but the stockholders of the Company immediately prior to
such merger or consolidation do not own after such merger or consolidation
shares representing fifty percent of the voting power of the Company, or if the
Company is liquidated, or sells or otherwise disposes of substantially all its
assets to another corporation while unexercised options remain outstanding under
the Nonqualified Plan, (i) subject to the provisions of clause (iii) below,
after the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, each holder of an outstanding option shall be
entitled, upon exercise of such option, to receive, in lieu of shares of Common
Stock, shares of such stock or other securities, cash or property as the holders
of shares of Common Stock received pursuant to the terms of the merger,
consolidation, liquidation, sale or disposition; (ii) the Administrator may
accelerate the time for exercise of all unexercised and unexpired options to and
after a date prior to the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, specified by the
Administrator; or (iii) all outstanding options may be canceled by the
Administrator as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each option holder and (y) each option holder shall have the
right to exercise such option to the extent exercisable or, if the Administrator
shall have accelerated the time for exercise of all unexercised and
9
<PAGE> 13
unexpired options, in full during the 30-day period preceding the effective date
of such merger, consolidation, liquidation, sale or disposition.
Amendment and Termination
The Administrator may modify, revise or terminate the Nonqualified Plan at
any time and from time to time.
Term of Plan
Unless earlier terminated as a result of the failure of the Company's
stockholders to approve the Nonqualified Plan, the Nonqualified Plan shall
terminate (i) when the total amount of the Common Stock with respect to which
options may be granted shall have been issued upon the exercise of options; (ii)
by action of the Administrator; or (iii) ten (10) years after the date of
approval by the Company's Board of Directors (which was given on September 18,
1996), whichever shall occur first.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of options granted under the
Nonqualified Plan are identical to the tax consequences pertaining to
Nonqualified Stock Options discussed under "Proposal No. 2 -- Approval of the
Company's 1996 Employee and Director Stock Option Plan -- Certain Federal Income
Tax Consequences".
ACCOUNTING TREATMENT
Option grants to employees at 100% of fair market value will be accounted
for under the intrinsic value method as prescribed in Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees" and related
Interpretations. This method of accounting generally does not result in any
charge to the Company's earnings, however, the Company must disclose in
pro-forma statements to the Company's financial statements the impact those
options would have upon the Company's reported earnings were the value of those
options at the time of grant treated as compensation expense. Option grants to
non-employees will be accounted for in accordance with Statement of Financial
Accounting Standard No. 123, "Accounting for Stock Based Compensation" which
establishes a fair value based method of accounting for stock-based
compensation. Whether or not granted at a discount, the number of outstanding
options is a factor in determining the Company's earnings per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR" approval
of the 1996 Nonqualified Stock Option Plan.
VOTE REQUIRED
The affirmative vote of at least a majority of the votes cast on the matter
is required to approve the 1996 Nonqualified Stock Option Plan.
10
<PAGE> 14
PROPOSAL NO. 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Grant Thornton LLP as independent
accountants for the Company to examine the Company's financial statements for
the current fiscal year ending December 31, 1997, and recommends that the
stockholders of the Company ratify that appointment. Grant Thornton LLP has
served as the Company's independent accountants for all fiscal years since the
fiscal year ended December 31, 1990 and has no relationship with the Company
other than that arising from its employment as independent accountants.
Representatives of Grant Thornton LLP are expected to be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from stockholders.
It is intended that the proxies will be voted for the ratification of the
appointment of such firm unless otherwise indicated. If the appointment is not
ratified by the stockholders, the Board of Directors is not obligated to appoint
other auditors, but the Board of Directors will give consideration to such
unfavorable vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote "FOR"
ratification of the appointment of Grant Thornton LLP as independent accountants
for the Company.
VOTE REQUIRED
The affirmative vote of at least a majority of the votes cast on the matter
is required to ratify the appointment of Grant Thornton LLP as independent
accountants for the Company.
11
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 11, 1997, certain information
with respect to the shares of Common Stock "beneficially owned", as that term is
defined by Rule 13d-3 under the Exchange Act, by (a) each person who is known by
the Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (b) each director and nominee for director of the Company, (c) each of
the "Named Executive Officers" of the Company who are listed in the Summary
Compensation Table below and (d) all directors and executive officers of the
Company as a group. Except as otherwise indicated in the footnotes to the table,
to the knowledge of the Company, the beneficial owners listed have sole voting
and dispositive power as to all of the shares beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF
COMMON
NAME AND ADDRESS STOCK PERCENT OF
BENEFICIAL OWNER OWNED(1) OUTSTANDING
- --------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Michael Lerner(2).................................................... 2,990,667 41.6%
c/o Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, MA 02167
Michael S. Bernstein(3).............................................. 744,901 10.4%
c/o Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, MA 02167
Richard J. Caturano(4)............................................... 123,000 1.7%
c/o Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, MA 02167
John J. Whyte........................................................ 50,000 *
c/o Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, MA 02167
Stephen P. Orleans................................................... 32,417 *
c/o Safety 1st Home Products Canada, Inc.
804 Deslauriers
Ville St. Laurent, Quebec
H4N 1X1, Canada
J.P. Morgan & Co. Incorporated(5).................................... 912,150 12.7%
60 Wall Street
New York, NY 10260
Curt R. Feuer........................................................ 72,500 *
Robert J. Drummond................................................... 28,500 *
Laurence S. Levy..................................................... 22,500 *
Ronald J. Jackson.................................................... 65,000 *
Mark Owens........................................................... 68,000 *
All directors and officers as a group (9 persons)(6)................. 4,179,485 55.2%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Includes or represents, as the case may be, shares of Common Stock which the
following named individuals have the right to acquire from the Company
within 60 days after April 11, 1997 pursuant to outstanding stock options,
as follows: Mr. Lerner -- 6,667; Mr. Caturano -- 123,000; Mr. Whyte --
50,000; Mr. Orleans -- 32,417; Mr. Feuer -- 72,500; Mr. Drummond -- 27,500;
Mr. Levy -- 22,500; Mr. Jackson -- 5,000.
(2) Mr. Lerner has shared dispositive powers with respect to 358,622 of such
shares, which are pledged to certain parties to secure obligations of Mr.
Lerner, as described under "Certain Relationships and Related Transactions".
12
<PAGE> 16
(3) Mr. Bernstein has shared dispositive powers with respect to 6,761 of such
shares, which are pledged to certain parties to secure obligations of Mr.
Bernstein, as described under "Certain Relationships and Related
Transactions".
(4) Includes 63,000 shares underlying options owned by Vitale, Caturano & Co.,
P.C., and Vitale, Caturano and Company (two business entities affiliated
with Mr. Caturano), as to which shares Mr. Caturano has shared voting and
dispositive powers.
(5) J. P. Morgan & Co. Incorporated has informed the Company that, as of April
2, 1997, it holds through its various subsidiaries beneficial interest in
all such shares in a fiduciary capacity (with sole power to dispose of all
such shares, and sole power to vote 572,700 of such shares).
(6) Includes shares of Common Stock which all executive officers and directors,
as a group, have a right to acquire from the Company within 60 days after
April 11, 1997 pursuant to outstanding stock options, namely: those shares
referred to in footnote (1), with the exception of those attributable to Mr.
Whyte (who is no longer an executive officer), as well as 100,000 shares
deemed beneficially owned by Mr. Richard E. Wenz, who became an executive
officer of the Company in February 1997 and who is not a "Named Executive
Officer".
13
<PAGE> 17
MANAGEMENT
<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------------------- ----------------------------------------- ---
<S> <C> <C>
Michael Lerner........................... Chairman of the Board of Directors and 43
Chief Executive Officer
Richard E. Wenz.......................... President and Chief Operating Officer 48
Michael S. Bernstein..................... Executive Vice President 54
Richard J. Caturano...................... Treasurer and Chief Financial Officer 44
Stephen P. Orleans....................... President of Safety 1st Home Products 39
Canada, Inc.
Curt R. Feuer............................ Clerk and Director 50
Robert J. Drummond....................... Director 53
Laurence S. Levy......................... Director 40
Mark Owens............................... Nominee for Director 47
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS AND NOMINEE FOR DIRECTOR AND EXECUTIVE OFFICERS
Michael Lerner, a co-founder of the Company, has served as President, Chief
Executive Officer and Chairman of the Board of Directors of the Company since
its organization in 1984. From 1976 to 1984, Mr. Lerner served as Executive Vice
President of Career Management Services, Inc., an executive placement service.
Richard E. Wenz became the Company's President and Chief Operating Officer
in February 1997. During 1995 and 1996, Mr. Wenz was a Partner with the Lucas
Group, a strategy consulting firm in Boston, Mass. From 1992 to 1994, Mr. Wenz
served as President and Chief Executive Officer of Professional Golf
Corporation.
Michael S. Bernstein has served as Executive Vice President of the Company
since November 1992 and as a Director since March 1996. Mr. Bernstein joined the
Company in 1986 as Vice President of Marketing. From 1984 to 1986, Mr. Bernstein
served as Executive Vice President of Monterey Labs, an infant feeding
manufacturer. From 1975 to 1984, he served in various capacities, including Vice
President, with Sanitoy, Inc., a baby products manufacturer.
Richard J. Caturano became the Company's Treasurer and Chief Financial
Officer in March 1996. Mr. Caturano has been President and Chief Financial
Officer of Vitale, Caturano & Co., P.C., a certified public accounting firm,
since 1977, when he co-founded the firm.
Stephen P. Orleans, President of Safety 1st Home Products Canada Inc. (the
Company's wholly owned subsidiary located in Montreal, Canada), founded Orleans
Juvenile Products Inc. in 1989 and as its President developed it into one of the
leading distributors of juvenile products in Canada. Orleans Juvenile Products
Inc. was acquired by the Company effective February 1996.
Curt R. Feuer, Clerk and a Director of the Company since March 1993, is a
member of the law firm of Kassler & Feuer, P.C. in Boston, Massachusetts, the
Company's corporate counsel. Mr. Feuer has been practicing law for over twenty
years specializing in the areas of taxation and business law.
Robert J. Drummond, a Director of the Company since March 1993, has been
the President and Chief Executive Officer of Epsilon Data Management, Inc., a
subsidiary of American Express Travel Related Services Company, since March
1992. From February 1987 to March 1992, Mr. Drummond served as Senior Vice
President of Epsilon Data Management, Inc.
Laurence S. Levy, a Director of the Company since November 1993, has been
Chairman of the Board of Directors of High Voltage Engineering Corporation, a
diversified industrial manufacturing company, since November 1988. He has been
Chief Executive Officer of High Voltage Engineering Corporation since May 1991.
Since November 1987, Mr. Levy has been Chairman of Hyde Park Holdings, Inc., an
investment firm with holdings in industrial manufacturing and warehousing
enterprises.
14
<PAGE> 18
Mark Owens, nominee for director, has been President of Medo Industries,
Inc., a manufacturer of consumer goods, since 1972. Mr. Owens has also been
serving as Vice President of Quaker State Oil Corporation since October 1996,
when it acquired Medo Industries, Inc.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of 21 meetings during 1996 (including
11 which were conducted by written consent). All incumbent directors attended at
least 75 percent of those meetings, and of the committees of which they were
members, that were held while they were serving on the board or such committee.
The Audit Committee of the Board of Directors, which consists of Messrs.
Jackson, Drummond and Levy, had 1 meeting during 1996. The Audit Committee
recommends engagement of the Company's independent accountants and is primarily
responsible for reviewing their performance and their fees and for reviewing and
evaluating with the independent auditors and management the Company's accounting
policies and its system of internal accounting controls.
The Compensation Committee of the Board of Directors, which consists of
Messrs. Feuer (who serves as Chair) and Drummond, met once during 1996. The
Compensation Committee recommends to the Board of Directors the compensation of
executive officers of the Company.
The Stock Option Committee met 52 times during 1996 (in each case by
written consent). The current members of the Stock Option Committee are Messrs.
Lerner and Bernstein. The Stock Option Committee has in the past administered
and made awards under the Company's 1993 Incentive and Non-Qualified Stock
Option Plan and the 1993-A Employee and Director Stock Option Plan. It is
expected that the Stock Option Committee will continue to administer and make
awards to persons (except those who are executive officers, directors or 10%
shareholders) under the Company's 1996 Employee and Director Stock Option Plan
and the Company's 1996 Nonqualified Stock Option Plan.
The Company has no nominating committee.
TERMS OF OFFICE OF DIRECTORS AND OFFICERS
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Officers of the Company hold
office until the first meeting of directors following the next annual meeting of
stockholders, and in the case of the President, Treasurer and Clerk, until their
successors are chosen and qualified.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Specific due dates
for these reports have been established, and the Company is required to report
in this Proxy Statement any failure to file by these dates during or with
respect to 1996.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during 1996, all of these filing requirements were satisfied by
its directors, executive officers and ten percent holders except as follows:
David de Rozarieux and Stephen Orleans inadvertently were late in filing their
respective Form 3 (Initial Statement of Beneficial Ownership) upon becoming an
executive officer of the Company; and John J. Whyte inadvertently failed to file
a Form 3 upon being named an executive officer of the Company (at which time he
owned no holdings to report) but timely filed a Form 5 in February 1997 to state
his holdings as of that date.
15
<PAGE> 19
EXECUTIVE COMPENSATION;
BOARD OF DIRECTORS COMPENSATION; CERTAIN ARRANGEMENTS
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned, by the Company's
Chief Executive Officer and the four other highest-paid executive officers whose
salary and bonus for the 1996 fiscal year were in excess of $100,000, for
services rendered in their executive capacities to the Company and its
subsidiaries for each of the last three fiscal years. No executive officer who
would have otherwise been includable in such table on the basis of salary and
bonus earned for the 1996 fiscal year has been excluded by reason of his or her
termination of employment or change in executive status during that fiscal year.
The individuals included in the table are collectively referred to as the "Named
Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
---------------------- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SAR(S)(#) SATION($)
- --------------------------------------- ----- --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Michael Lerner......................... 1996 300,000 0 20,000 --
Chief Executive Officer 1995 300,000 0 -- --
1994 275,000 0 -- --
Michael S. Bernstein................... 1996 175,000 0 -- --
Executive Vice 1995 161,538 0 -- --
President 1994 135,000 0 -- --
Richard J. Caturano(1)................. 1996 134,038 0 60,000 --
Chief Financial Officer 1995 N/A N/A N/A N/A
1994 N/A N/A N/A N/A
John J. Whyte(2)....................... 1996 68,654 58,000 50,000 186,536(3)
Executive Vice 1995 N/A N/A N/A N/A
President, Planning and 1994 N/A N/A N/A N/A
Control
Stephen P. Orleans(4).................. 1996 95,456 0(5) 20,000 --
President, Safety 1st 1995 N/A N/A N/A N/A
Home Products 1994 N/A N/A N/A N/A
Canada, Inc.
</TABLE>
- ---------------
(1) Mr. Caturano became an executive officer of the Company in 1996. Amounts
exclude payments made and options granted to entities affiliated with Mr.
Caturano. See "Certain Relationships and Related Transactions".
(2) Mr. Whyte became an executive officer of the Company in 1996. Amounts
exclude payments made directly to an entity affiliated with Mr. Whyte prior
to Mr. Whyte becoming an employee of the Company. See "Certain Relationships
and Related Transactions".
(3) Amount consists of $145,500 accrued during 1996 for severance payments
provided for in Mr. Whyte's Employment Agreement as a result of Mr. Whyte's
termination of employment with the Company, and $41,036 paid by the Company
for consulting services rendered by Mr. Whyte as a consultant with Vitale,
Caturano & Co., P.C. prior to Mr. Whyte becoming an employee of the Company.
(4) Mr. Orleans became an executive officer of the Company in 1996. Amounts
exclude consideration received in connection with the Company's acquisition
of Orleans Juvenile Products Inc. See "Certain Relationships and Related
Transactions".
16
<PAGE> 20
(5) In lieu of a guaranteed minimum bonus of approximately US$25,000 due Mr.
Orleans under his employment agreement in respect of 1996, Mr. Orleans
agreed to accept options to acquire 25,000 shares of Common Stock, which
were awarded to him on April 1, 1997 at an exercise price of $6.00 per
share.
The following table sets forth information with respect to the stock option
grants made during the last completed fiscal year to each of the Named Executive
Officers. No stock appreciation rights were granted to the Named Executive
Officers during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL
NUMBER OF RATES OF STOCK
SECURITIES PERCENT OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(8)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED(#) FISCAL YEAR(2) ($/SHARE) DATE 5% 10%
- ---------------------- ---------- ------------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner........ 20,000 5.3% 9.00 10/15/2006 $113,400 $286,200
Michael S.
Bernstein........... 0 -- -- -- -- --
Richard J.
Caturano(3)......... 30,000 7.9% 6.50(4) 02/22/2006 115,050 310,050
30,000 7.9% 6.50(5) 04/01/2006 115,050 310,050
John J. Whyte......... 50,000 13.2% 8.50 04/30/2002 267,750 675,750
Stephen P. Orleans.... 750 0.2% 6.50(6) 03/31/2003 3,071 7,751
10,000 2.6% 6.50(7) 03/15/2006 40,950 103,350
10,000 2.6% 9.00 10/15/2006 56,700 143,100
</TABLE>
- ---------------
(1) When granted, each option had a term of ten years and, except as noted in
the next following sentence, vests in three equal installments six, eighteen
and thirty months after the date of grant. The option to purchase 30,000
shares granted to Mr. Caturano that expires on February 22, 2006, vested in
two equal installments on August 22, 1996, and February 22, 1997; the option
to purchase 30,000 shares granted to Mr. Caturano that expires on April 1,
2006, vested in full on October 1, 1996; the option to purchase 750 shares
granted to Mr. Orleans that expires on March 31, 2003, vested in two equal
installments on September 30, 1993, and March 31, 1994; the option to
purchase 50,000 shares granted to Mr. Whyte vested on September 19, 1996,
with respect to 20,000 shares, and on October 1, 1996, with respect to 5,000
shares, and will be fully vested on April 30, 1997. The initial exercise
price for each option is the fair market value of the Common Stock on the
date of grant. Other footnotes to the above chart set forth information
regarding changes to the exercise prices. The option exercise period may be
reduced in the event of death, disability or other termination of service to
the Company, and such period may also be reduced, and the time at which
options become exercisable may be accelerated, upon changes in control or
other fundamental corporate changes.
(2) The number of options granted to all employees used in this calculation does
not consider options granted in prior years but repriced in 1996.
(3) Does not include options granted to entities affiliated with Mr. Caturano.
See "Certain Relationships and Related Transactions".
(4) Originally granted in February 1996 at $12.75 per share; repriced on July
30, 1996.
(5) Originally granted in April 1996 at $13.88 per share; repriced on July 30,
1996.
(6) Originally granted in March 1993 at $12.00 per share; repriced on July 30,
1996.
(7) Originally granted in March 1996 at $14.50 per share; repriced on July 30,
1996.
(8) The option term used to calculate potential realized value is the term
commencing with the original grant date, even if an option was subsequently
repriced; the option price used is the "Exercise Price" stated in the table.
There is no assurance provided to any executive officer or any other holder
of the Common Stock that the actual stock price appreciation over any term
will be the assumed 5% or 10% rates of
17
<PAGE> 21
compounded stock price appreciation or at any other defined level. Unless the
market price of the Common Stock appreciates over the option term, no value will
be realized from the option grants made to the executive officers.
The following table sets forth each exercise of stock options during the
last completed fiscal year by each of the Named Executive Officers and the
fiscal year-end value of unexercised options:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR-END ($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner.............. 0 -- 0 20,000 $ 0 $25,000
Michael S. Bernstein........ 0 -- 0 0 0 0
Richard J. Caturano(1)...... 0 -- 60,000 0 225,000 0
John J. Whyte............... 0 -- 25,000 25,000 43,750 43,750
Stephen P. Orleans.......... 0 -- 4,083 16,667 15,311 76,501
</TABLE>
- ---------------
(1) Does not include options owned by entities affiliated with Mr. Caturano. See
"Certain Relationships and Related Transactions".
(2) Based upon the market price of $10.25 per share, which was the closing
selling price per share of the Common Stock on the Nasdaq Stock Market on
the last day of the 1996 fiscal year, less the option exercise price payable
per share.
The Company's Stock Option Committee believes that the future growth and
success of the Company is dependent upon, and the best interests of the Company
and its Stockholders are served by, the Company's ability to attract, retain and
motivate its officers and employees consistent with the interests of its
Stockholders, and that the Company's stock option plans are an important factor
in achieving these goals. During June and July of 1996, the market price of the
Company's Common Stock declined significantly. One effect of the depressed
market price of the Common Stock was the substantial differential between the
equity based incentives being realized by longer term employees with those
expected to be provided to newly hired persons. The Stock Option Committee felt
it was important to restore incentives and motivation for the Company's
employees and other grantees who are in a position to assist the Company to meet
its growth and profitability objectives, and to achieve consistency between
awards granted to long term employees and newly hired persons, by lowering the
exercise price of the options. Consequently, on July 30, 1996, the Committee,
consisting of Messrs. Lerner and Bernstein, neither of whom held any stock
options at the time, concluded that it was consistent with these goals and in
the best interests of the Company to decrease the exercise price of
substantially all outstanding stock options grants. The following table sets
forth all repricings of options held by any executive officer of the Company
during the last four completed fiscal years (namely, all years that the Company
was a reporting company pursuant to Section 13(a) or 15(d) of the Exchange Act).
STOCK OPTION COMMITTEE
Michael Lerner
Michael S. Bernstein
18
<PAGE> 22
FOUR-YEAR OPTIONS REPRICINGS
<TABLE>
<CAPTION>
MARKET
PRICE OF EXERCISE LENGTH OF
NUMBER OF STOCK AT PRICE AT ORIGINAL
SECURITIES TIME OF TIME OF OPTION TERM
UNDERLYING REPRICING REPRICING REMAINING AT
OPTIONS/SARS OR OR DATE OF
REPRICED OR AMENDMENT AMENDMENT NEW EXERCISE REPRICING OR
NAME DATE AMENDED (#) ($) ($) PRICE ($) AMENDMENT
- ------------------------ -------------- ------------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner.......... 0 -- -- -- --
Chief Executive
Officer
Michael S. Bernstein.... 0 -- -- -- --
Executive Vice
President
Richard J. Caturano..... July 30, 1996 30,000 6.50 12.75 6.50 9.7 years
Chief Financial July 30, 1996 30,000 6.50 13.88 6.50 9.8 years
Officer
John J. Whyte........... 0 -- -- -- --
Executive Vice
President, Planning
and Control
Stephen P. Orleans...... July 30, 1996 750 6.50 12.00 6.50 6.8 years
President, Safety 1st July 30, 1996 10,000 6.50 14.50 6.50 9.8 years
Home Products
Canada, Inc.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Curt R. Feuer and Robert J. Drummond served as members of the
Company's Compensation Committee during 1996. Mr. Feuer, Clerk and a director of
the Company, is a member of the law firm of Kassler & Feuer, P.C. in Boston,
Massachusetts, corporate counsel to the Company. Kassler & Feuer, P.C. was paid
approximately $829,800 during 1996 in fees for services rendered to the Company.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
In April 1993, the Company entered into five-year employment agreements
with each of Michael Lerner and Michael S. Bernstein, pursuant to which Messrs.
Lerner and Bernstein are employed as Chief Executive Officer and Executive Vice
President, respectively, and have agreed to devote their full time and efforts
to the Company. Under the agreements, the Company has agreed to pay Messrs.
Lerner and Bernstein base salaries of $275,000 and $135,000, respectively,
subject to increase in future years at the discretion of the Board of Directors.
The employment agreements further provide for bonuses to Messrs. Lerner and
Bernstein in each year of such amounts as may be determined at the discretion of
the Board of Directors, but not to exceed the amount of the respective
employee's base salary for such year. Each agreement also prohibits the employee
from competing with the Company for a period of three years after termination of
employment.
On March 16, 1996, the Company entered into a two-year employment agreement
with Mr. Caturano, pursuant to which Mr. Caturano is employed as the Company's
Chief Financial Officer and Treasurer. The agreement provides for Mr. Caturano's
base salary to be $170,000, subject to increase in future years at the
discretion of the Board of Directors. Mr. Caturano's employment agreement
further provides for bonuses in each year in such amounts as may be determined
at the discretion of the Board of Directors, but not to exceed the amount of his
base salary for such year. The agreement further provides for Mr. Caturano to
receive a severance payment equal to eighteen months' base salary upon the
Company's termination of his employment without cause or Mr. Caturano's
voluntary termination of his employment due to a change in control of the
Company's ownership. The Company is further obligated to pay Mr. Caturano's
estate a payment of 18 months' base salary in the event that his employment
shall terminate as a result of his death. The agreement prohibits Mr. Caturano
from competing with the Company for a period of two years after the termination
of his employment. Under his arrangement with the Company, Mr. Caturano will
continue a limited employment relationship with Vitale, Caturano & Co., P.C.
("VCC"), a certified public accounting firm of which he is a principal owner,
and will provide VCC with continuing administrative leadership which will enable
19
<PAGE> 23
Mr. Caturano to retain certain employee benefits through that firm which are not
available through the Company. Management of the Company believes that such a
continued relationship will have no adverse effect on the Company.
Effective June 1996, the Company entered into a one-year employment
agreement with John J. Whyte, pursuant to which Mr. Whyte was employed as
Executive Vice President, Planning and Control. The agreement provides for a
base salary of $170,000 and for a guaranteed bonus of $100,000, plus such
additional amount as may be determined by the Board of Directors in its
discretion, and reimbursement for living expenses up to $2,000 per month. The
agreement further provides for Mr. Whyte to receive a severance payment equal to
nine months of base salary and living expenses and the pro rata portion of his
bonus, upon either: (i) the termination of his employment by the Company without
cause; or (ii) his resignation in the event that Mr. Lerner ceases to be Chief
Executive Officer or President or Mr. Whyte's duties or title substantially
change. The agreement also prohibits Mr. Whyte from competing with the Company
for a period of eighteen months after the termination of his employment. In
December 1996, the Company and Mr. Whyte agreed that with the anticipated hiring
of a new President and Chief Operating Officer, his duties would be
substantially different, and as a result, his employment would terminate upon
completion of certain projects. His termination date is expected to be April 30,
1997.
On February 1, 1996, the Company's subsidiary, Safety 1st Home Products
Canada Inc. ("Safety 1st Canada"), entered into a five-year employment agreement
with Stephen Orleans, pursuant to which Mr. Orleans is employed as the Chief
Executive Officer of Safety 1st Canada, and has agreed to devote his full time
and efforts to Safety 1st Canada. Under the agreement, Safety 1st Canada has
agreed to pay Mr. Orleans a base salary of Canadian $135,000, subject to
increase in future years at the discretion of Safety 1st Canada's Board of
Directors. The employment agreement further provides for bonuses to Mr. Orleans
in each year in such amounts as may be determined at the discretion of Safety
1st Canada's Board of Directors (with a guaranteed minimum bonus of Canadian
$35,000 in 1996), but not to exceed the amount of his base salary for such year.
The agreement further provides for Mr. Orleans to receive a severance payment
upon termination of his employment without cause, as follows: (i) if terminated
during the first year of the agreement, continued payment of 100% of his base
salary for the remainder of the first year, and 50% of his base salary for the
remaining term of the agreement; or (ii) if terminated on or after February 1,
1997, continued payment of 50% of his base salary for the remaining term of the
agreement.
BOARD OF DIRECTORS COMPENSATION
Directors who are not full-time employees of the Company receive a fee of
$500 for each Board meeting attended and $250 for each Committee meeting not
held on the same day as a Board meeting. Directors are entitled to receive
reimbursement for traveling costs and other out-of-pocket expenses incurred in
attending Board and Committee meetings. Additionally, non-employee directors are
eligible to participate in the stock option plans of the Company.
In August 1996, Mr. Ronald Jackson was granted options to purchase 10,000
shares of Common Stock exercisable at $7.25 per share. Mr. Feuer was granted
options to purchase shares of Common Stock as follows: February 1996 -- 7,500
shares at $12.75 per share; July 1996 -- 15,000 shares at $6.50 per share; and
September 1996 -- 20,000 shares at $8.80 per share.
In July 1996, in response to a decline in the price of the Company's Common
Stock, the Stock Option Committee elected to reprice outstanding option grants
held at the time by substantially all Company employees to $6.50 per share. At
the same time, options held by the four non-employee directors, as follows, were
also repriced to $6.50 per share:
<TABLE>
<CAPTION>
DIRECTOR NO. OF SHARES
---------------------------------------------------------------- -------------
<S> <C>
Robert J. Drummond.............................................. 27,500
Curt R. Feuer................................................... 55,000
Laurence S. Levy................................................ 22,500
Ronald J. Jackson............................................... 10,000
</TABLE>
20
<PAGE> 24
Options granted to non-employee directors typically are granted at the
market price on the date of grant and vest in two equal installments, six months
and twelve months after the grant date, if the director continues to serve on
the Board of Directors on each of such dates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's refinancing of its credit facility,
Michael Lerner, the Chief Executive Officer and a director of the Company,
entered into a Limited Guaranty in favor of the Company's lender, pursuant to
which Mr. Lerner is liable for up to $10,500,000 of the Company's obligations to
its lender. Mr. Lerner's obligations under the Limited Guaranty may be reduced
by (1) $4,500,000 in the event Mr. Lerner purchases at least $4,500,000 of the
Company's Common Stock and (2) 50% of the amount of the proceeds of any private
placement of the Common Stock with a person other than Mr. Lerner, provided that
the aggregate reduction of Mr. Lerner's liability under this second event shall
not exceed $2,500,000. In either of the foregoing events, the proceeds of the
stock sales must be applied to pay down the outstanding balance of the Company's
term loan with its lender. Mr. Lerner has fully secured his guaranty obligations
with a pledge of U.S. Treasury securities and 331,579 shares of his stock of the
Company.
Mr. Lerner and Michael Bernstein, Executive Vice President and a director
of the Company, have agreed to pay in the aggregate $300,000 to the former
lenders of the Company as part of the consideration for the former lenders'
agreement to sell at discount their loans with the Company to the Company's
current lender. The obligations of Messrs. Lerner and Bernstein to the Company's
former lenders are payable over five years and are secured by a pledge of 27,043
shares and 6,761 shares, respectively, of their stock in the Company.
Richard J. Caturano, Chief Financial Officer of the Company, is a principal
owner of Vitale, Caturano & Co., P.C. ("VCC"), a certified public accounting
firm. During 1996, VCC, through its employees and certain independent
contractors, provided services to the Company in connection with the Company's
acquisitions of subsidiaries and accounting, business, tax and other matters.
VCC was paid, in the aggregate, approximately $1,957,000 in 1996 in fees for
services rendered and expenses. Of this amount, approximately $253,000
represented reimbursement to VCC for fees and expenses paid by VCC to
independent contractors arranged by VCC on behalf of the Company. During 1996
the Company issued and repriced certain options to acquire shares of the
Company's Common Stock to VCC and to an affiliate of VCC (Vitale, Caturano &
Company, a partnership of which Mr. Caturano is a principal owner) as follows:
options to purchase 3,000 shares granted to VCC in December 1994, were repriced
to an exercise price of $6.50 per share; options to purchase 30,000 shares
granted to Vitale, Caturano & Company in October 1995 were repriced to $6.50 per
share on July 30, 1996; and options to purchase 30,000 shares granted to Vitale,
Caturano & Company in February, 1996 were repriced to an exercise price of $6.50
per share on July 30, 1996. The Company anticipates that VCC will continue to
provide accounting and consulting services to the Company during 1997.
Management believes that such transactions were and will be negotiated on an
arms-length basis and on terms no less favorable to the Company than terms
available from unrelated parties for comparable services.
John J. Whyte, the Company's Executive Vice President, Planning and Control
during 1996 is sole stockholder of WPCE Corporation ("WPCE"). Prior to becoming
an employee of the Company Mr. Whyte, as an employee of WPCE, provided
consulting services to the Company on an independent contract basis and was paid
$78,045 in fees for such services. These amounts are in addition to amounts paid
by the Company for consulting services rendered by Mr. Whyte which are described
in footnote number (3) to the Summary Compensation Table appearing on page 16.
All such services ceased when Mr. Whyte became an employee of the Company.
Stephen P. Orleans, President of the Company's wholly owned subsidiary
Safety 1st Home Products Canada, Inc., was sole stockholder of Orleans Juvenile
Products Inc. when it was acquired by the Company effective February 1, 1996.
Mr. Orleans received an aggregate consideration of US $2,750,000 for the sale of
his business, of which amount, $1,100,000 was paid in cash at the closing, and
the balance of $1,650,000 was paid by three promissory notes as follows:
$825,000 payable (and paid) on March 15, 1997; $375,000 payable March 15, 1998;
and $450,000 payable March 15, 1999, subject to right of set off by the Company,
based on
21
<PAGE> 25
any breach of any representation or warranty made by Mr. Orleans in the
Acquisition Agreement. Prior to the acquisition, Orleans Juvenile Products Inc.
was the Company's exclusive distributor in Canada.
Curt R. Feuer, Clerk and a director of the Company, is a member of the law
firm of Kassler & Feuer, P.C., corporate counsel to the Company. See
"Compensation Committee Interlocks and Insider Participation."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has the responsibility for recommending to the
Board of Directors the compensation of the executive officers of the Company.
The Compensation Committee believes that the compensation provided to executive
officers of the Company must be competitive for the Company to attract and
retain highly qualified and experienced employees. Generally, it believes that
its salaries and annual bonuses should be positioned within the range of
compensation levels for comparable positions and responsibilities in the market
taking into account the Company's performance, including the level of Company
revenues and earnings, rate of shareholder return and return on equity, and that
the individual salaries and bonuses may be higher or lower based on the
qualification and experience of the individual.
Each of the individuals who served as an executive officer of the Company
at the beginning of 1996 (namely, Messrs. Lerner and Bernstein) were subject to
a five year employment agreement with the Company entered into in April 1993, in
contemplation of the Company's initial public offering. The base salaries of
these two executive officers specified by the terms of their employment
agreements were $275,000 for Mr. Lerner and $135,000 for Mr. Bernstein. Each of
the employment agreements provide that such base salaries are subject to
increase in future years at the discretion of the Board of Directors and that
bonuses may be paid to each of the executive officers for each year in such
amounts as may be determined at the discretion of the Board of Directors but
limited to the amounts of the respective base salary for such year. In view of
the employment agreements to which these two executive employees are parties,
and based upon the Committee's review of the criteria described above, neither
Mr. Lerner nor Mr. Bernstein received an increase in base salary for 1996, and
no bonuses in respect of 1996 were awarded. In October 1996, the Company's Board
of Directors awarded Mr. Lerner 20,000 options to acquire the Company's Common
Stock at an exercise price of $9 per share. The award was made in recognition of
Mr. Lerner's undertaking to personally guaranty a portion of the Company's
obligations to its lenders under the then existing credit facility.
During 1996, the Company entered into employment agreements with certain
newly hired executive officers. The agreement with Mr. Stephen Orleans was
negotiated primarily by Michael Lerner, as the Company's Chief Executive
Officer, in connection with the acquisition of Orleans Juvenile Products Inc. In
April 1997, the Board of Directors awarded Mr. Orleans options to acquire 25,000
shares of Common Stock at an exercise price of $6.00 in lieu of a minimum cash
bonus of approximately US$25,000 due him in respect of 1996 under his employment
agreement. The employment agreements with Messrs. Caturano and Whyte were also
negotiated primarily on behalf of the Company by Michael Lerner, and were in
each case structured to attract the executive to accept the offer made by the
Company and to motivate him to take necessary actions to benefit the Company and
its Stockholders. The Committee believes that the terms of all such agreements
and the actions by the Board of Directors noted above were justified and that
they conform to the executive compensation criteria described above.
COMPENSATION COMMITTEE
Curt R. Feuer, Chair
Robert J. Drummond
22
<PAGE> 26
PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total stockholder returns
of the Company; the CRSP Total Return Index for The Nasdaq Stock Market (US),
comprising all domestic common shares traded on the Nasdaq National Market and
the Nasdaq Small Cap Market; and a self-determined peer group of 9 companies.
The graph assumes $100 invested in the Company on April 14, 1993 (the effective
date of the registration of the initial public offering of shares of the
Company's Common Stock under the Securities Act of 1933) and in each of the
indices and assumes that any dividends were reinvested.
<TABLE>
<CAPTION>
Nasdaq Stock
Measurement Period Market (US Self-Determined
(Fiscal Year Covered) Safety 1st, Inc. Companies) Peer Group
<S> <C> <C> <C>
4/14/93 100.00 100.00 100.00
12/31/93 262.60 115.60 108.30
12/30/94 236.40 113.00 103.80
12/29/95 119.20 159.70 121.40
12/31/96 82.80 196.50 138.20
</TABLE>
COMPANIES IN THE SELF-DETERMINED PEER GROUP
<TABLE>
<S> <C>
HASBRO INC. HUFFY CORP.
KIDDIE PRODUCTS INC. MATTEL INC.
NEWELL COMPANY RUBBERMAID INC.
RUSS BERRIE & CO. SWING N SLIDE CORP.
GYMBOREE CORP.
</TABLE>
NOTES:
A. The lines represent index levels derived from compounded daily returns that
include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the last day of the interval is not a trading day, the preceding trading
day is used.
D. The index level for all series was set to 100.0 on 4/14/93.
23
<PAGE> 27
FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended
December 31, 1996 and certain other related financial and business information
of the Company are contained in the Annual Report to Stockholders mailed with
this Proxy Statement.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices (210 Boylston Street, Chestnut Hill, Massachusetts 02167) not
later than December 29, 1997 in order to be considered for inclusion in the
Company's proxy statement and form of proxy.
Your cooperation in giving this matter your immediate attention and in
returning your Proxy Card promptly will be appreciated.
/s/ Curt R. Feuer
Curt R. Feuer
Clerk
April 28, 1997
24
<PAGE> 28
EXHIBIT A
SAFETY 1ST, INC.
1996 EMPLOYEE AND DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to advance the
interests of Safety 1st, Inc. (the "Company") by enhancing its ability to
attract and retain employees, directors, advisors and consultants of the Company
and its subsidiaries through ownership of shares of the Company's common stock,
$.01 par value per share ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant incentive stock options ("Incentive Stock Options"), as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and options
that do not qualify as Incentive Stock Options ("Nonstatutory Stock
Options")(Incentive Stock Options and Nonstatutory Stock Options are hereafter
individually referred to as an "Option" and collectively referred to as
"Options").
2. ADMINISTRATION
The Plan will be administered by the Company's Board of Directors (the
"Board"). The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members.
The Board will have authority, not inconsistent with the express provisions
of the Plan and in addition to other authority granted under the Plan, to (a)
grant Options at such time or times as it may choose; (b) determine the size of
each Option, including the number of shares of Stock subject to the Option; (c)
determine the terms and conditions of each Option; (d) waive compliance by a
Participant (as defined below) with any obligations to be performed by the
Participant under an Option and waive any term or condition of an Option; (e)
amend or cancel an existing Option in whole or in part (and if an Option is
canceled, grant another Option in its place on such terms as the Board shall
specify), except that the Board may not, without the consent of the holder of an
Option, take any action under this clause with respect to such Option if such
action would adversely affect the rights of such holder; (f) prescribe the form
or forms of instruments that are required or deemed appropriate under the Plan,
including any written notices and elections required of Participants, and change
such forms from time to time; (g) adopt, amend and rescind rules and regulations
for the administration of the Plan; and (h) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations and actions of the Board, and all other
determinations and actions of the Board made or taken under authority granted by
any provision of the Plan, will be conclusive and will bind all parties. Nothing
in this Section shall be construed as limiting the power of the Board to make
adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective upon its adoption by the Company's full
Board of Directors (the "Effective Date"), provided that the Company's
stockholders shall approve the Plan within twelve (12) months after the
Effective Date. Options may be granted prior to stockholder approval provided
that the Options will be subject to such approval and will not be exercisable
until such approval is granted. If the Company's stockholders do not approve the
Plan within the 12-month period, the Plan and all Options granted under the Plan
shall terminate and be of no further force or effect.
<PAGE> 29
Unless earlier terminated as a result of the failure of the Company's
stockholders to approve the Plan as provided above, the Plan shall terminate (i)
when the total amount of Stock with respect to which Options may be granted
shall have been issued upon the exercise of Options, (ii) by action of the Board
pursuant to Section 9 hereof, or (iii) ten (10) years after the Effective Date,
whichever shall occur first.
No Options may be granted under the Plan after its termination, but Options
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be one
million (1,000,000). If any Option terminates or expires without having been
exercised in full, the number of shares of Stock as to which such Option was not
exercised will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Employees ("Employees"), directors, advisors and consultants of the Company
and its subsidiaries shall be eligible to receive Options and participate under
the Plan ("Participants"), provided that Incentive Stock Options may only be
granted to employees and to directors who are also employees. A "subsidiary" for
purposes of the Plan means any corporation in which the Company owns, directly
or indirectly, stock possessing 50% or more of the total combined voting power
of all classes of stock, as more particularly defined in Section 424(f) of the
Code.
6. GRANT OF OPTIONS
6.1. NATURE OF OPTIONS
An Option is an agreement entitling the recipient on exercise thereof to
purchase Stock at a specified exercise price. Both Incentive Stock Options and
Nonstatutory Stock Options may be granted under the Plan.
6.2. EXERCISE PRICE
The exercise price of an Option will be determined by the Board subject to
the following:
(a) The exercise price of an Incentive Stock Option shall not be less
than 100% (110% in the case of an Incentive Stock Option granted to a
ten-percent shareholder) of the fair market value of the Stock subject to
the Option, determined as of the time the Option is granted. A "ten-percent
shareholder" is any person who at the time of grant owns, directly or
indirectly, or is deemed to own by reason of the attribution rules of
Section 424(d) of the Code, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any of
its parents or subsidiaries.
(b) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(c) The Board may reduce the exercise price of an Option at any time
after the time of grant, but in the case of an Option originally awarded as
an Incentive Stock Option, only with the consent of the Participant.
6.3. DURATION OF OPTIONS
The latest date on which an Option may be exercised will be the tenth
anniversary (fifth anniversary, in the case of an Incentive Stock Option granted
to a ten-percent shareholder) of the day immediately preceding the date the
Option was granted, or such earlier date as may have been specified by the Board
at the time the Option was granted.
2
<PAGE> 30
6.4. EXERCISE OF OPTIONS
An Option will become exercisable at such time or times, and on such
conditions, as the Board may specify. The Board may at any time accelerate the
time at which all or any part of the Option may be exercised. Any exercise of an
Option must be in writing, signed by the proper person and delivered or mailed
to the Company, accompanied by (a) any documents required by the Board and (b)
payment in full in accordance with Section 6.7 below for the number of shares
for which the Option is exercised.
6.5. OPTIONS TO PERSONS SUBJECT TO SECTION 16
The Board may take any action it deems necessary to comply with Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including any one or more of the following actions to provide that Options
granted to an executive officer, director or beneficial owner of more than ten
percent (10%) of the Company's Stock (a "Section 16 Insider") shall be exempt
under Section 16(b) of the Exchange Act:
(a) The Board may restrict the shares of Stock issuable upon exercise
of an Option by a Section 16 Insider by providing that such shares may not
be sold or transferred (except that such shares may be issued upon exercise
of the Option) for a period of six (6) months following the grant of such
Option; and/or
(b) The Board may require that the grant of an Option to a Section 16
Insider be approved by the Company's full Board of Directors or a committee
of the Board of Directors composed solely of two or more Non-Employee
Directors, as such term is defined in Section 16b-3 of the Rules
promulgated under Section 16 of the Exchange Act.
6.6. $100,000 LIMITATION
To the extent that the aggregate fair market value of stock with respect to
which Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under the Plan and all other plans of the
Company and all parents and subsidiaries of the Company) exceeds $100,000, such
Options shall be deemed Nonstatutory Stock Options.
6.7. PAYMENT FOR STOCK
Stock purchased on exercise of an Option must be paid for as follows:
(a) By cash or check (acceptable to the Company in accordance with
guidelines established for this purpose), bank draft or money order payable
to the order of the Company; or
(b) If so permitted by the instrument evidencing the Option (or in the
case of an Option which is not an Incentive Stock Option, by the Board at
or after grant of the Option) any one or more of the following:
(1) by delivery of shares of Stock which have been outstanding for
at least six (6) months (unless the Board expressly approves a shorter
period) and which have a fair market value on the last business day
preceding the date of exercise equal to the exercise price;
(2) by delivery of a promissory note of the Participant to the
Company, payable on such terms as are specified by the Board;
(3) by delivery of an unconditional and irrevocable undertaking by
a broker to deliver promptly to the Company sufficient funds to pay the
exercise price;
(4) by the withholding of shares of Stock otherwise deliverable
upon exercise which have a fair market value on the date of exercise at
least equal to the exercise price; or
(5) by any combination of the permissible forms of payment;
provided, that if the stock delivered upon exercise of the Option is an
original issue of authorized Stock, at least so much of the exercise
price as represents the par value of such Stock must be paid other than
by the Option holder's personal check or promissory note.
3
<PAGE> 31
6.8. DISCRETIONARY PAYMENTS
If the market price of shares of Stock subject to an Option exceeds the
exercise price of the Option at the time of its exercise, the Board may cancel
the Option and cause the Company to pay in cash or in shares of Stock (at a
price per share equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between the fair market
value of the Stock which would have been purchased pursuant to the exercise
(determined on the date the Option is cancelled) and the aggregate exercise
price which would have been paid. The Board may exercise its discretion to take
such action only if it has received a written request from the person exercising
the Option, but such a request will not be binding on the Board.
6.9. NOTICE TO EMPLOYEE AND OPTION AGREEMENT
Upon granting an Option, the Board shall notify the person to whom the
Option shall be granted and shall deliver to such person a written instrument in
accordance with Section 8.1. An award of an Option shall immediately expire if
the person to whom the Board has decided to grant an Option shall not have (and
no Option shall be exercisable unless and until such person has) signed the
written instrument and returned it to the Company within thirty days after it
has been delivered to such individual. The written instrument may contain such
provisions that are consistent with this Plan as the Board may, in its
discretion, determine.
7. EVENTS AFFECTING OPTIONS
7.1. DEATH
Upon the death of a Participant, all Options held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option is transferred by will or the applicable laws of descent and
distribution, at any time within the one (1) year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Board may determine), and shall thereupon terminate. In no event, however, shall
an Option remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section 7. Except as otherwise determined by
the Board, all Options held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH)
If a Participant who is an Employee and/or a director ceases to be an
Employee and/or a director for any reason other than death, or if there is a
termination (other than by reason of death) of the relationship in respect of
which a consultant or advisor was granted an Option hereunder (such termination
of the employment or other relationship being hereinafter referred to as a
"Status Change"), except as otherwise determined by the Board, all Options held
by the Participant that were not exercisable immediately prior to the Status
Change shall terminate at the time of the Status Change. Any Options that were
exercisable immediately prior to the Status Change will continue to be
exercisable for a period of three months (or such shorter or longer period as
the Board may determine), and shall thereupon terminate, unless the Option
provides by its terms for immediate termination in the event of a Status Change
or unless the Status Change results from a discharge for cause which in the
opinion of the Board casts such discredit on the Participant as to justify
immediate termination of the Option. In no event, however, shall an Option
remain exercisable beyond the latest date on which it could have been exercised
without regard to this Section 7. For purposes of this Section, in the case of a
Participant who is an Employee, a Status Change shall not be deemed to have
resulted by reason of (i) a sick leave or other bona fide leave of absence
approved for purposes of the Plan by the Board, so long as the Employee's right
to reemployment is guaranteed either by statute or by contract, or (ii) a
transfer of employment between the Company and a subsidiary or affiliate, or to
the employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which Section
424(a) of the Code applies.
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<PAGE> 32
7.3. CERTAIN CORPORATE TRANSACTIONS
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
of the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert or a consolidation or a merger where
the Company is the surviving corporation but the stockholders of the Company
immediately prior to such consolidation or merger do not own after such
consolidation or merger shares representing fifty percent (50%) of the voting
power of the Company, or in the event of the sale or transfer of substantially
all the Company's assets or a dissolution or liquidation of the Company (a
"covered transaction"), all outstanding Options will terminate as of the
effective date of the covered transaction, and the following rules shall apply:
(a) The Board may in its sole discretion, by providing therefor at the
time of the grant of the Option or, subject to Sections 7.3 (b) and (c)
below, by taking appropriate action at any other time prior to the
effective date of the covered transaction, make outstanding Options
exercisable in full.
(b) If an outstanding Option is subject to performance or other
conditions (other than conditions relating to the mere passage of time and
continued employment) which will not have been satisfied at the time of the
covered transaction, the Board may in its sole discretion remove such
conditions. If the Board does not do so, however, such Option will
terminate as of the date of the covered transaction notwithstanding Section
7.3(a) above.
(c) With respect to an outstanding Option held by a Participant who,
following the covered transaction, will be employed by or otherwise
providing services to a corporation which is a surviving or acquiring
corporation in such transaction or an affiliate of such a corporation, the
Board may, in lieu of the action described in Section 7.3(a) above (but
subject to prior contractual obligations), arrange to have such surviving
or acquiring corporation or affiliate grant to the Participant a
replacement option which, in the judgment of the Board, is substantially
equivalent to the Option.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF OPTIONS
Options will be evidenced by such written instruments, if any, as may be
prescribed by the Board from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS
Except as specifically provided by the Plan, the receipt of an Option will
not give a Participant rights as a stockholder. A Participant will obtain
stockholder rights, subject to any limitations imposed by the Plan or the
instrument evidencing the Option, only upon actual receipt of Stock. However,
the Board may, on such conditions as it deems appropriate, provide that a
Participant will receive a benefit in lieu of cash dividends that would have
been payable on any or all Stock subject to the Participant's Option had such
Stock been outstanding. Without limitation, the Board may provide for payment to
the Participant of amounts representing such dividends, either currently or in
the future, or for the investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove any restrictions from shares previously delivered under
the Plan (a) until all conditions of the Option have been satisfied or removed,
(b) until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, including, without
limitation, the Securities Act of 1933, as amended (the "Securities Act"), and
the Exchange Act, (c) if the outstanding Stock is at the time listed on any
stock exchange, until the shares to be delivered have been listed or authorized
to be listed on such exchange upon official notice of issuance, and (d) until
all other legal matters in connection with the issuance
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<PAGE> 33
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act, the Company may
require, as a condition to exercise of the Option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of the Securities Act and may require that the certificates evidencing
such Stock bear an appropriate legend restricting transfer.
If an Option is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING
The Board will have the right to require a Participant receiving an Option
or Stock underlying an Option (or other appropriate person) to remit to the
Company an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements") arising in connection
therewith, or to make other arrangements satisfactory to the Board. If and to
the extent that such withholding is required, the Board may permit a Participant
or such other person to elect at such time and in such manner as the Board
provides to have the Company hold back from the shares to be delivered, or to
deliver to the Company, Stock having a value calculated to satisfy the
withholding requirement.
If at the time an Incentive Stock Option is exercised the Board determines
that the Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Board may require as a
condition of exercise that the person exercising the Incentive Stock Option
agree (a) to inform the Company promptly of any disposition (within the meaning
of Section 424(c) of the Code) of Stock received upon exercise, and (b) to give
such security as the Board deems adequate to meet the potential liability of the
Company for the withholding requirements and to augment such security from time
to time in any amount reasonably deemed necessary by the Board to preserve the
adequacy of such security.
8.5. NONTRANSFERABILITY OF OPTIONS
Options may not be transferred by a Participant other than by will or by
the laws of descent and distribution, and are exercisable, during a
Participant's lifetime, only by such Participant.
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
increase or reduction of the number of shares of Stock outstanding without
receiving compensation therefore in money, services or property, after the
effective date of the Plan, the Board will make any appropriate adjustments to
the maximum number of shares that may be delivered under the Plan under Section
4 above.
(b) In any event referred to in Section 8.6(a), the Board will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, any
exercise prices relating to Options and any other provision of Options affected
by such change. The Board may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Board that adjustments are
appropriate to avoid distortion in the operation of the Plan.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Options will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or any
subsidiary to terminate an employment, service or other relationship at any
time. Except as specifically provided by the Board in any particular case, the
loss of existing or potential profit in Options granted under the Plan will not
constitute an element of damages in the event of termination of an
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<PAGE> 34
employment, service or other relationship even if the termination is in
violation of an obligation of the Company to the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Options to a Participant will
affect the Company's right to grant to such Participant options that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Board may at any time or times amend the Plan or any outstanding Option
for any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Options, provided that (except to
the extent expressly required or permitted by the Plan) no such action will,
without the approval of the stockholders of the Company, effectuate a change for
which stockholder approval is required in order for the Plan to continue to
qualify to grant Incentive Stock Options under Section 422 of the Code.
* * *
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<PAGE> 35
EXHIBIT B
SAFETY 1ST, INC.
1996 NONQUALIFIED STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 1996 Nonqualified Stock Option Plan (the "Plan") of Safety 1st, Inc.,
a Massachusetts corporation (the "Company"), is designed to provide additional
incentive to present and future directors, employees and other parties who may
contribute to the success of the Company or its subsidiaries. The Company
intends that this purpose will be effected by the granting of stock options
(individually an "Option" and collectively "Options") under the Plan, which will
afford each recipient an opportunity to acquire a proprietary interest or
increase his, her or its existing proprietary interest in the Company through
the acquisition of shares of the Company's Common Stock, $.01 par value per
share (the "Common Stock"). By encouraging stock ownership, the Company seeks to
attract and retain on a continuing basis relationships with persons and entities
of exceptional competence and seeks to furnish an added incentive for them to
increase their efforts on behalf of the Company.
2. ADMINISTRATION.
The Plan will be administered by the Company's Board of Directors (the
"Board"). The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. All questions of interpretation and application of the Plan,
of Options granted hereunder and of the value of shares of Common Stock subject
to an Option, shall be subject to the determination of the Board, which
determination shall be final and binding.
3. NATURE OF OPTIONS.
The Options granted under the Plan will not qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
4. OPTION SHARES.
The stock subject to the Options and other provisions of the Plan shall be
the Common Stock. The total amount of the Common Stock with respect to which
Options may be granted shall not exceed in the aggregate five hundred thousand
(500,000) shares; provided, however, that the class and aggregate number of
shares which may be subject to Options granted hereunder shall be subject to
adjustment in accordance with the provisions of Section 17 hereof. Such shares
may be treasury shares or authorized but unissued shares. In the event that an
outstanding Option shall expire or terminate prior to exercise, the shares of
Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option under the Plan.
5. AUTHORITY TO GRANT OPTIONS.
The Board may grant Options from time to time to such Participants (as
defined in Section 6 below) as it shall determine. Subject to any applicable
limitations set forth in the Plan or established from time to time by the Board,
the number of shares of Common Stock to be covered by an Option shall be as
determined by the Board.
<PAGE> 36
6. ELIGIBILITY.
Options may be granted to directors, employees, advisors, consultants,
vendors, sales representatives, distributors, suppliers, business partners and
service providers of the Company and its subsidiaries, and others who may
contribute to the success of the Company or its subsidiaries ("Participants").
7. OPTION PRICE.
The price at which shares may be purchased pursuant to Options shall be
specified by the Board at the time the Option is granted.
8. DURATION OF OPTIONS.
The Board in its discretion may provide that an Option shall be exercisable
during any specified period of time from the date such Option is granted, but in
no event shall such period of time be greater than ten years.
9. AMOUNT EXERCISABLE; VESTING OF SHARES PURCHASED; REPURCHASE OF UNVESTED
SHARES.
Each Option may be exercised, so long as it is valid and out-standing, from
time to time in part or as a whole, subject to any limitations with respect to
the number of shares for which the Option may be exercised at a particular time
and to such other conditions as the Board in its discretion may specify upon
granting the Option.
The Board may in its discretion provide upon the grant of an Option
hereunder that the Company shall have an option to repurchase, upon such terms
and conditions as determined by the Board, all or any number of shares purchased
upon exercise of such Option. The repurchase price per share payable by the
Company shall be such amount or be determined by such formula as is fixed by the
Board at the time the Option for the shares subject to repurchase is granted. In
the event the Board shall grant Options subject to the Company's repurchase
option, the certificates representing the shares purchased pursuant to such
Option shall carry a legend satisfactory to counsel for the Company referring to
the Company's repurchase option.
10. OPTIONS TO PERSONS SUBJECT TO SECTION 16.
The Board may take any action it deems necessary to comply with Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including any one or more of the following actions to provide that Options
granted to an executive officer, director or beneficial owner of more than ten
percent (10%) of the Company's Stock (a "Section 16 Insider") shall be exempt
under Section 16(b) of the Exchange Act:
(a) The Board may restrict the shares of Stock issuable upon exercise
of an Option by a Section 16 Insider by providing that such shares may not
be sold or transferred (except that such shares may be issued upon exercise
of the Option) for a period of six (6) months following the grant of such
Option; and/or
(b) The Board may require that the grant of an Option to a Section 16
Insider be approved by the Company's full Board of Directors or a committee
of the Board of Directors composed solely of two or more Non-Employee
Directors, as such term is defined in Section 16b-3 of the Rules
promulgated under Section 16 of the Exchange Act.
11. EXERCISE OF OPTIONS.
Subject to the provisions of Section 13 hereof, Options shall be exercised
by the delivery of written notice to the Company setting forth the number of
shares with respect to which the Option is to be exercised, together with
(a) Cash or check (acceptable to the Company in accordance with
guidelines established for this purpose), bank draft or money order payable
to the order of the Company; or
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(b) If so permitted by the instrument evidencing the Option or by the
Board at or after grant of the Option, any one or more of the following:
(1) shares of Common Stock which have been outstanding for at least
six (6) months (unless the Board expressly approves a shorter period)
and which have a fair market value on the last business day preceding
the date of exercise equal to the exercise price;
(2) a promissory note of the Participant to the Company, payable on
such terms as are specified by the Board;
(3) an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise
price;
(4) the withholding of shares of Common Stock otherwise deliverable
upon exercise which have a fair market value on the date of exercise at
least equal to the exercise price; or
(5) any combination of the permissible forms of payment.
As promptly as practicable after receipt of such written notification and
payment, the Company shall deliver to the Participant certificates for the
number of shares with respect to which such Option has been so exercised, issued
in the Participant's name; provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to the
Participant, at the address specified pursuant to this Section 11.
The Board will have the right to require a Participant receiving an Option
or Common Stock underlying an Option (or other appropriate person) to remit to
the Company an amount sufficient to satisfy all federal, state and local
withholding tax requirements (the "withholding requirements") arising in
connection therewith, or to make other arrangements satisfactory to the Board.
If and to the extent that such withholding is required, the Board may permit a
Participant or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
12. TRANSFERABILITY OF OPTIONS.
Options shall not be transferable by a Participant otherwise than by will
or under the laws of descent and distribution, and shall be exercisable, during
a Participant's lifetime, only by such Participant, unless otherwise permitted
by the Board.
13. EMPLOYMENT RELATIONSHIP; BUSINESS RELATIONSHIP.
An employment relationship between the Company and a Participant shall be
deemed to exist during any period in which such Participant is employed by the
Company. A business relationship between the Company and a Participant shall be
deemed to exist during any period in which such Participant renders services as
a consultant or on an independent contractor basis to the Company or is
otherwise in a business relationship with the Company.
14. REQUIREMENTS OF LAW.
The Company shall not be required to sell or issue any shares under an
Option if the issuance of such shares shall constitute a violation by the
Participant or by the Company of any provision of any law, regulation or order
of any governmental authority. Without limiting the generality of the foregoing,
upon exercise of an Option, the Company shall not be required to issue such
shares unless the Board has received evidence satisfactory to it to the effect
that the holder of such Option will not transfer such shares except pursuant to
a registration statement in effect under the Securities Act of 1933, as now in
effect or hereafter amended (the "Securities Act"), and under the applicable
securities laws of any State, unless the Company has received an opinion of
counsel satisfactory to the Company, in form and substance satisfactory to the
Company, to the effect that such registration is not required. Any determination
in this connection by the Board shall be final, binding and conclusive. In the
event the shares issuable on exercise of an Option are not registered under the
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<PAGE> 38
Securities Act, the Company may imprint the following legend or any other legend
which counsel for the Company considers necessary or advisable to comply with
the Securities Act or other applicable laws:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any State and may not be sold or transferred except upon such registration
or upon receipt by the Corporation of an opinion of counsel satisfactory to
the Corporation, in form and substance satisfactory to the Corporation,
that registration is not required for such sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act; and in the event any
shares are so registered, the Company may remove any legend on certificates
representing such shares. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any other law, regulation or order of
any governmental authority.
15. NO RIGHTS AS STOCKHOLDER.
No Participant shall have rights as a stockholder with respect to shares
covered by an Option until the date of issuance of a stock certificate for such
shares; and, except as otherwise provided in Section 17 hereof, no adjustment
for dividends, or otherwise, shall be made if the record date therefor is prior
to the date of issuance of such certificate.
16. NO OBLIGATION TO CREATE OR MAINTAIN RELATIONSHIP.
The granting of an Option shall not impose upon the Company any obligation
to employ or continue to employ, to retain the services of or to continue to
retain the services of, or to create a relationship with or maintain a
relationship with, any Participant; and the right of the Company to terminate
the employment or services of, or relationship with, a Participant shall not be
diminished or affected by reason of the fact that an Option has been granted to
such Participant.
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize, without
limitation, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and per share price of shares of stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a manner as to entitle
a Participant to receive upon exercise of an Option, for the same aggregate cash
consideration, the same total number and class of shares as such Participant
would have received as a result of the event requiring the adjustment had such
Participant exercised his, her or its Option in full immediately prior to such
event; and (ii) the number and class of shares with respect to which Options may
be granted under this Plan shall be adjusted by substituting for the total
number of shares of Common Stock then reserved that number and class of shares
of stock that would have been received by the owner of an equal number of
outstanding shares of Common Stock as the result of the event requiring the
adjustment.
After a merger of one or more corporations into the Company, or after a
consolidation of the Company and one or more corporations in which (i) the
Company shall be the surviving corporation, and (ii) the stockholders of the
Company immediately prior to such merger or consolidation own after such merger
or consolidation shares representing at least fifty percent (50%) of the voting
power of the Company, each holder
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<PAGE> 39
of an outstanding Option shall, at no additional cost, be entitled upon exercise
of such Option to receive (subject to any required action by stock-holders) in
lieu of the number of shares as to which such Option shall then be so
exercisable, the number and class of shares of stock or other securities to
which such holder would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of a number of shares
of Common Stock equal to the number of shares as to which such Option shall be
so exercised.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
there is a merger or consolidation where the Company is the surviving
corporation but the stockholders of the Company immediately prior to such merger
or consolidation do not own after such merger or consolidation shares
representing fifty percent (50%) of the voting power of the Company, or if the
Company is liquidated, or sells or otherwise disposes of substantially all its
assets to another corporation while unexercised Options remain outstanding under
the Plan, (i) subject to the provisions of clause (iii) below, after the
effective date of such merger, consolidation, liquidation, sale or disposition,
as the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of such Option, to receive, in lieu of shares of Common Stock, shares
of such stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the merger, consolidation,
liquidation, sale or disposition; (ii) the Board may accelerate the time for
exercise of all unexercised and unexpired Options to and after a date prior to
the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, specified by the Board; or (iii) all
outstanding Options may be canceled by the Board as of the effective date of any
such merger, consolidation, liquidation, sale or disposition provided that (x)
notice of such cancellation shall be given to each holder of an Option and (y)
each holder of an Option shall have the right to exercise such Option to the
extent that the same is then exercisable or, if the Board shall have accelerated
the time for exercise of all unexercised and unexpired Options, in full during
the 30-day period preceding the effective date of such merger, consolidation,
liquidation, sale or disposition.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.
18. AMENDMENT OR TERMINATION OF PLAN.
The Board may modify, revise or terminate the Plan at any time and from
time to time.
19. WRITTEN AGREEMENT.
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the President, any Vice President or the Treasurer of the
Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Board in its discretion
shall deem advisable.
20. EFFECTIVE DATE AND DURATION OF PLAN.
The Plan shall become effective upon its adoption by the Board of Directors
(the "Effective Date"), provided that the Company's stockholders shall approve
the Plan within twelve (12) months after the Effective Date. Options may be
granted prior to stockholder approval provided that the Options will be subject
to such approval and will not be exercisable until such approval is granted. If
the Company's stockholders do not approve the Plan within the 12-month period,
the Plan and all Options granted under the Plan shall terminate and be of no
further force or effect.
Unless earlier terminated as a result of the failure of the Company's
stockholders to approve the Plan as provided above, the Plan shall terminate (i)
when the total amount of the Common Stock with respect to
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<PAGE> 40
which Options may be granted shall have been issued upon the exercise of
Options; (ii) by action of the Board pursuant to Section 18 hereof; or (iii) ten
(10) years after the Effective Date, whichever shall first occur.
No Options may be granted under the Plan after the Plan's termination, but
Options previously granted may extend beyond that date.
* * *
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<PAGE> 41
<TABLE>
<S> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
-----------------------
SAFETY 1ST, INC. With- For All
----------------------- 1. Election of Directors. For hold Except
MICHAEL LERNER ROBERT J. DRUMMOND [ ] [ ] [ ]
Mark box at right if you will attend the Annual [ ] MICHAEL S. BERNSTEIN LAURENCE S. LEVY
Meeting. CURT R. FEUER MARK OWENS
Mark box at right if an address change or comment [ ] If you do not wish shares voted "For" a particular nominee, mark
has been noted on the reverse side of this card. the "For All Except" box and strike a line through the
nominee's(s'). Your shares will be voted for the remaining
nominee(s).
For Against Abstain
RECORD DATE SHARES: 2. To approve the adoption of the Company's [ ] [ ] [ ]
1996 Employee and Director Stock Option Plan.
3. To approve the adoption of the Company's [ ] [ ] [ ]
1996 Nonqualified Stock Option Plan.
4. To approve the appointment of Grant Thornton [ ] [ ] [ ]
LLP as independent accountants for the
current fiscal year.
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
-------------- adjournments thereof. Receipt is hereby acknowledged of the
Please be sure to sign and date this Proxy. Date Notice of Annual Meeting of Stockholders and the Proxy Statement
- ------------------------------------------------------------- and Annual Report furnished herewith.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL.
- -----Stockholder sign here-------------Co-owner sign here----
DETACH CARD DETACH CARD
SAFETY 1ST, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot. There are a number of issues related to the
management and operation of your Company that require your immediate attention and approval. These are discussed in detail
in the enclosed proxy materials.
Your vote counts and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be voted. Then sign the card, detach it and
return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, May 28, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Safety 1st, Inc.
</TABLE>
<PAGE> 42
<TABLE>
SAFETY 1ST, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Safety 1st, Inc., a Massachusetts corporation (the "Company") hereby constitutes and appoints
Michael Lerner and Curt R. Feuer, and each of them, his/her Attorneys and Proxies (with full power of substitution in each), and
hereby authorizes them to represent the undersigned and to vote, as designated on the reverse, all the shares of Common Stock of
the Company held of record by the undersigned on April 11, 1997 at the Annual Meeting of Stockholders of the Company to be held on
Wednesday, May 28, 1997 and at any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED HOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS AS SET FORTH IN THE PROXY STATEMENT AND FOR PROPOSALS 2, 3 AND 4.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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Please sign this Proxy exactly as your name(s) appear(s) on the books of the Company. Joint owners should each sign personally.
Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a
majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
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<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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