<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year ended January 1, 2000
Commission File No. 0-21404
SAFETY 1ST, INC.
(Exact Name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2836423
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
45 DAN ROAD 02021
CANTON, MASSACHUSETTS (Zip code)
(Address of principal executive offices)
</TABLE>
(781) 364-3100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
<S> <C>
None None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.01 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A. [ ]
The aggregate market value of the common stock held by non-affiliates of the
registrant (assuming, for purposes of this calculation, without conceding, that
all executive officers and directors are "affiliates") was $38,966,245 at April
14, 2000, based on the closing sales price of $10.81 per share for the common
stock on such date on the Nasdaq Market.
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The number of shares of the registrant's common stock outstanding at April 14,
2000 was 8,612,681.
This Amendment amends and supplements the Form 10-K filed by the Company on
March 31, 2000 by adding the following Part III, Items 10 through 13:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
MANAGEMENT
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
Michael Lerner................................................ Chairman of the Board of Directors and Chief Executive 46
Officer
Richard E. Wenz............................................... President and Chief Operating Officer 50
Michael S. Bernstein.......................................... Executive Vice President and Director 57
Stephen R. Orleans............................................ President of Safety 1st Home Products Canada, Inc. 41
Joseph S. Driscoll............................................ Chief Financial Officer and Treasurer 35
Mark Reichenbaum.............................................. Director 50
Joseph T. Wood................................................ Director 54
John D. Howard................................................ Director 48
Frank W. Haydu................................................ Director 52
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Michael Lerner, a co-founder of the Company, has served as Chief Executive
Officer and Chairman of the Board of Directors of the Company since its
organization in 1984 and as its President until 1997. 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. Mr. Bernstein
became a consultant to the company effective January 1, 2000.
Stephen R. 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.
Joseph S. Driscoll joined the Company in April 1997 as Controller, and was
named the Company's Chief Financial Officer in September 1998. From 1993 to
1997, Mr. Driscoll served in various capacities, including Assistant Corporate
Controller, for Staples, Inc., a retailer of office supplies and equipment.
Mark Reichenbaum, a Director of the Company since May 1997, is President of
Haja Capital Corporation, a private investment firm which he founded in 1997.
From 1972 to 1997 Mr. Reichenbaum was President of Medo Industries, Inc., a
manufacturer of consumer goods. Mr. Reichenbaum had also been serving as Vice
President of Quaker State Oil Corporation from October 1996, when it acquired
Medo Industries, Inc., until October 1997.
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<PAGE> 3
Frank W. Haydu III, a Director of the Company since June 1999, is Vice
Chairman of Haydu & Lind, a senior living development and management company,
and is a member of Albany Molecular Research, Inc.'s Board of Directors. For
five years, Mr. Haydu was a Managing Director at Kidder Peabody & Company. Mr
Haydu also served as interim Chief Executive Officer of the Tufts New England
Medical Center.
John D. Howard, a Director of the Company since July 1997, has been a Senior
Managing Director in the Merchant Banking Division of Bear, Stearns & Co., Inc.,
an investment banking firm, since March 1997. Prior to joining Bear, Stearns &
Co., Inc., Mr. Howard served as the Chief Executive Officer of Gryphon Capital
Partners, a private investment firm, from June 1996 to March 1997 and as
Co-Chief Executive Officer of Vestar Capital Partners, Inc., a private
investment firm, from 1990 to 1996. Mr. Howard is a director of Dyersburg Corp.
and Celestial Seasonings, Inc.
Joseph T. Wood, a Director of the Company since November 1999 replaced
Michael J. Batal III as DB Capital Partners Inc. representative in November of
1999. Mr. Wood has been a senior member of DB Capital and its predecessor BT
Capital for 12 years. Since 1989, Mr. Wood has played a critical role in a
majority of DB Capital's investments. He serves as a board member for several of
DB Capital's portfolio companies. He has worked for Deutsche Bank and its
predecessor Bankers Trust since 1970 in the corporate lending, credit and money
market areas.
On July 30, 1997 in connection with the purchase by DB Capital Partners,
Inc. ("DB Capital"), formerly BT Capital Partners, Inc., and Bear, Stearns &
Co., Inc. ("Bear Stearns") of shares of the Company's preferred stock and of
warrants to purchase the Company's Common Stock, Bear Stearns and DB Capital
entered into a Voting Agreement with the Company, Michael Lerner and Michael
Bernstein pursuant to which each party to the Agreement (with the exception of
the Company) agreed to vote all of their respective holdings of Common Stock to
elect one person designated by Bear Stearns (subject to the satisfaction of a
minimum percentage holding of Common Stock equivalents by Bear Stearns) and one
person designated by DB Capital (subject to the satisfaction of a minimum
percentage holding of Common Stock equivalents by DB Capital) to the Company's
Board of Directors. In addition, under the terms of the Voting Agreement, the
Company agreed to use its best efforts to cause the persons designated by DB
Capital and Bear Stearns to be nominated to the Company's Board of Directors.
Messrs. Joseph Wood and John Howard are the persons designated by DB Capital and
Bear Stearns, respectively.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of five meetings during 1999 (and acted
by written consent four times). 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 consisted of Messrs.
Haydu, Reichenbaum, and Howard held one meeting during 1999. 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 consisted of
Messrs. Reichenbaum, Howard and Batal (who resigned from the Board on September
1, 1999) met once during 1999. The Compensation Committee recommends to the
Board of Directors the compensation of executive officers of the Company.
The Stock Option Committee met once during 1999. The 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 under the Company's 1996 Employee and Director Stock
Option Plan and the Company's 1996 Nonqualified Stock Option Plan, except those
persons who are executive officers, directors or 10% shareholders, whose awards
are administered by the Board of Directors.
The Company has no nominating committee.
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<PAGE> 4
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 duly 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 1999.
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 all of these filing requirements were satisfied by its directors, executive
officers and ten percent holders with respect to transactions during its 1999
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION;
BOARD OF DIRECTORS COMPENSATION; CERTAIN ARRANGEMENTS
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for services rendered
to the Company and its subsidiaries for each of the last three fiscal years by:
the Company's Chief Executive Officer and the four other highest paid executive
officers whose salary and bonus earned during the 1999 fiscal year were in
excess of $100,000 and who were serving as executive officers at the end of the
1999 fiscal year. The individuals included in the table are collectively
referred to as the "Named Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------- OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SAR(S)(#)
- --------------------------- ---- --------- -------- ---------
<S> <C> <C> <C> <C>
Michael Lerner.................................................... 1999 337,800 0 0
Chairman and Chief Executive Officer 1998 330,288 0 0
1997 230,769 0 0
Richard E. Wenz(1)................................................ 1999 327,406 0 250,000
President and Chief Operating Officer 1998 320,481 45,000 75,000
1997 252,692 60,000 250,000
Michael S. Bernstein.............................................. 1999 200,081 0 0
Executive Vice President 1998 195,663 0 0
1997 134,616 0 0
Joseph S. Driscoll (2)............................................ 1999 175,000 40,000 20,000
Chief Financial Officer and Treasurer 1998 139,489 12,500 50,000
1997 90,465 20,000 12,000
Stephen R. Orleans(3)............................................. 1999 158,501 25,000 55,000
President, 1998 124,112 5,000 5,000
Safety 1st Home Products Canada, Inc. 1997 109,711 (4)7,500 (4)25,000
</TABLE>
4
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(1) Mr. Wenz became employed by the Company in 1997.
(2) Mr. Driscoll became employed by the Company in 1997 and became an executive
officer of the Company in 1998.
(3) 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".
(4) In lieu of a guaranteed minimum bonus of approximately $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 $6.00 per
share (the fair market value of the Common Stock on the date of grant).
The following table sets forth information with respect to the stock option
grants made during the last completed fiscal year to each of the named executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZED
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL STOCK APPRECIATION
UNDERLYING OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner .................. 0 -- -- -- -- --
Richard E. Wenz ................. 250,000 26.6% 2.88 03/11/2009 $ 452,804 $1,147,495
Michael S. Bernstein ............ 0 -- -- -- -- --
Joseph S. Driscoll .............. 20,000 2.1% 2.88 03/11/2009 $ 36,224 $ 91,800
Stephen R. Orleans .............. 50,000 5.3% 2.88 03/11/2009 $ 90,561 $ 229,499
5,000 0.6% 5.37 07/19/2009 $ 16,886 $ 42,792
</TABLE>
(1) When granted, each option had a term of ten years and vests as follows:
33.3% of the options vest 6 months after the grant date, an additional 33.3%
vest 18 months after the grant date, and the final 33.3% vest 30 months
after the grant date. The exercise price for each option is the fair market
value of the Common Stock on the date of grant. 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. Mr Wenz's grant of 250,000 options
vest as follows: 125,000, 6 months after grant date, 62,500, 12 months after
grant date and 62,500, 18 months after grant date. Mr. Orleans's grant of
5,000 options vest as follows: 2,500 vest at grant date and the remaining
2,500 options vest 12 months after grant date.
(2) 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 compounded stock price appreciation
or at any other defined level. Unless the market price of the Common Stock
appreciates over the exercise price during 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, the
number of unexercised options at year-end and the fiscal year-end value of
unexercised options:
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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($)(1)
EXERCISE REALIZED ----------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner............................. 0 0 20,000 0 $ 0 $ 0
Richard E. Wenz............................ 0 0 487,500 87,500 $878,750 $295,000
Michael S. Bernstein....................... 0 0 0 0 $ 0 $ 0
Joseph S. Driscoll........................ 0 0 52,001 29,999 $140,470 $107,430
Stephen R. Orleans......................... 0 0 64,917 35,833 $130,577 $159,323
</TABLE>
(1) Based upon the market price of $7.50 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 1999 fiscal year, less the option exercise price payable
per share.
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.
Options were granted to non-employee directors during the 1999 fiscal year
as follows: Mr. Haydu received a grant of 25,000 options at an exercise price of
$5.37 per share on July 19, 1999.
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 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. The agreements expired in April 1998.
Effective January 1, 2000, Mr. Bernstein entered into a one year contract as
a consultant to the Company. The contract pays Mr. Bernstein $200,000 over the
one year period. Prior to January 1, 2000, Mr. Bernstein had been the Company's
Executive Vice President.
On February 19, 1997, the Company entered into a three year employment
agreement with Mr. Richard E. Wenz, pursuant to which Mr. Wenz became employed
as the Company's President and Chief Operating Officer and has agreed to devote
his full time and efforts to the Company. Under the agreement, Mr. Wenz is
entitled to receive an annual base salary of $300,000, subject to annual
increases at the discretion of the Company's Board of Directors or Compensation
Committee. Mr. Wenz is also entitled to receive incentive compensation, based on
performance of Mr. Wenz and the Company, not to exceed 35% of base salary and,
in the case of the first year of employment, not to be less than 20% of base
salary. The employment agreement also provided for the grant of the 250,000
options in 1997. The agreement further provides that the Company may terminate
the agreement without cause upon either one year's prior written notice or a
payment of base salary for one year from the date of termination. The agreement
prohibits Mr. Wenz from competing with the Company for a period of two years
after termination of employment for any reason.
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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 Mr. Stephen R. 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.
In February 2000, the company entered into executive severance agreements with
Messrs. Driscoll, Lerner and Wenz. Each severance agreement provides that in the
event of a qualifying termination without cause (as defined in the agreement) of
the executive's employment within twelve months following a change in control of
the Company, the executive is entitled to the following severance benefits: (i)
a payment equal to two times, or in the case of Mr. Driscoll one time, the sum
of (A) the executive's base salary immediately prior to the termination (or
immediately prior to the change in control, if higher) and (B) the executive's
most recent bonus paid prior to the change in control, payable in one lump-sum
payment no later than 31 days following the date of termination, (ii)
continuation of certain benefits for up to 18 months following termination and
(iii) reasonable fees and expenses incurred by the executive in obtaining or
enforcing any right or benefit under the severance agreement. The executive
severance agreements also provide that, where applicable, the agreements
supersede all prior agreements with respect to any severance benefits provisions
contained therein. The Company expects to enter into a similar agreement with
Mr. Orleans for six months of base salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Mark Reichenbaum, Michael Batal, and John D. Howard served as
members of the Company's Compensation Committee during 1999, and Mr. Curt R.
Feuer served as a member of the Company's Compensation Committee in 1999 until
his resignation from the positions of Clerk and Director of the Company on
January 25, 1999. Mr Feuer is a member of the law firm of Kassler & Feuer, P.C.
in Boston, Massachusetts, which was corporate counsel to the Company until
January 25, 1999. Kassler & Feuer, P.C. was paid approximately $211,000 during
1999 in fees for services rendered to the Company. Mr. Batal was a Managing
Director with DB Capital, with which the Company has entered into certain
transactions described under the heading "Certain Relationships and Related
Transactions" for which DB Capital received a closing fee of $150,000 in 1997
and an additional fee in the amount of $225,000 payable (under certain
conditions) over four years. In addition, BT Commercial Corporation, an
affiliate of DB Capital, has and will be receiving fees, as the Company's
lender, and as agent for a group of lenders providing the Company's credit
facility, as discussed under the heading "Certain Relationships and Related
Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 14, 2000, 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 of the Company, (c) each of the "Named Executive
Officers" of the Company who are listed in the Summary Compensation Table above
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 investment 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(1)
- ---------------- -------- --------------
<S> <C> <C>
Michael Lerner(2)............................................................... 2,764,000 25.4%
c/o Safety 1st, Inc.
Canton Commerce Center
</TABLE>
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<TABLE>
<S> <C> <C>
45 Dan Road
Canton, MA 02021
Michael S. Bernstein(3)......................................................... 566,151 5.2%
c/o Safety 1st, Inc.
Canton Commerce Center
45 Dan Road
Canton, MA 02021
Wynnfield Capital.(4) .......................................................... 711,050 6.5%
One Penn Plaza, Suite 4720
New York, NY 10119
DB Capital Partners, Inc........................................................ 634,173 5.8%
130 Liberty Street
New York, NY 10006
Bear, Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167.............................................................. 633,009 5.8%
Richard E. Wenz................................................................. 487,500 4.5%
Joseph S. Driscoll.............................................................. 52,001 *
Stephen R. Orleans.............................................................. 64,917 *
Frank W. Haydu III.............................................................. 9,034 *
Mark Reichenbaum................................................................ 422,000 3.9%
Joseph T. Wood(5)............................................................... 634,173 5.8%
John D. Howard(6)............................................................... 633,009 5.8%
All directors and officers as a group (9 persons)(7)............................ 5,632,785 51.8%
</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
currently or within 60 days after April 14, 2000 pursuant to outstanding
stock options, as follows: Mr. Lerner -- 20,000; Mr. Wenz -- 487,500; Mr.
Driscoll -- 52,001; Mr. Orleans -- 64,917; Mr. Reichenbaum -- 12,000. The
total outstanding shares for purposes of computing the percentage owned is
10,870,481, which consists of 8,612,681 common shares outstanding plus
2,257,800 outstanding stock options which are exercisable within 60 days
after April 14, 2000.
(2) Mr. Lerner has shared investment powers with respect to 27,043 of such
shares, which are pledged to certain parties to secure obligations of Mr.
Lerner, as described under "Certain Relationships and Related Transactions".
(3) Mr. Bernstein has shared investment 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) Information is based on a Schedule 13G filing dated April 6, 2000, filed by
Wynnfield Capital Management, LLC.
(5) Mr. Wood is a Managing Director of DB Capital Partners, Inc. and, as a
result, may be deemed to be the beneficial owner of the shares of Common
Stock beneficially owned by DB Capital Partners, Inc.. Mr. Wood disclaims
beneficial ownership of such shares.
(6) Mr. Howard is a Senior Managing Director of Bear, Stearns & Co., Inc. and,
as a result, may be deemed to be beneficial owner the shares of Common Stock
beneficially owned by Bear, Stearns & Co., Inc.. Mr. Howard disclaims
beneficial ownership of such shares.
(7) 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 14, 2000 pursuant to outstanding stock options, namely: (i) those
shares referred to in footnote (1). Also includes shares of Common Stock
which may be deemed beneficially owned by Messrs. Wood and Howard as set
forth in footnotes (5) and (6).
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Joseph T. Wood, a director of the Company, is a Managing Director with DB
Capital (formerly BT Capital), and John D. Howard, a director of the Company, is
a Senior Managing Director of Bear Stearns. DB Capital and Bear Stearns are each
beneficial owners of more than 5% of the Company's Common Stock and have engaged
in the following transactions with the Company. On July 30, 1997, the Company
entered into a $55 million refinancing of its then existing credit facility. The
refinancing consisted of a $15 million equity investment by DB Capital and Bear
Stearns and a $40 million credit facility (which was subsequently increased to a
$47.5 million credit facility) provided in part by an affiliate of DB Capital.
The equity investment consisted of a $15 million private placement of 15,000
shares of the Company's redeemable preferred stock, $1.00 par value per share
(the "Preferred Shares") and warrants to purchase 1,268,346 shares of the
Company's Common Stock (the "Warrants"). The investment was made 50% by DB
Capital and 50% by Bear Stearns. At the closing, the Company paid DB Capital and
Bear Stearns each a closing fee of $150,000 and agreed to pay additional fees in
the amount of $225,000 to each (under certain conditions) over four years.
Dividends on the Preferred Shares are payable, at the option of the Company,
either in cash at an annual rate of 10%, compounded quarterly, or in the form of
an increase in the liquidation value of the Preferred Shares at an annual rate
of 13.25%, compounded quarterly. On October 21, 1999 the company paid $9,685,000
to both DB Capital and Bear Stearns to redeem the Company's outstanding
preferred stock and accrued dividends in connection with the refinancing of
their primary credit facility.
Pursuant to the above, Bear Stearns and DB Capital exercised their warrants
to purchase the Company's Common Stock on June 24, 1999 and August 1, 1999,
respectively, at an exercise price of $.01 per share of Common Stock. Bear
Stearns received 633,009 shares (cashless exercise) and DB Capital received
634,173 shares. DB Capital and Bear Stearns have each been granted one demand
registration right for the Common Stock underlying the Warrants (subject to
customary timing limitations) as well as piggyback registration rights. Pursuant
to the equity investment, DB Capital and Bear Stearns is each entitled to
designate one person to be nominated to the Company's Board of Directors so long
as each such investor owns Common Stock (or Warrants to purchase Common Stock)
which, in the aggregate, represents 5% or more of the Common Stock Equivalents
(as defined) outstanding at July 30, 1997; and as long as either DB Capital or
Bear Stearns has a right to designate one person to the Board of Directors, the
Board of Directors shall not exceed 10 members. Pursuant to a Voting Agreement,
Mr. Michael Lerner, Chief Executive Officer and a director of the Company, and
Mr. Michael Bernstein, Executive Vice President and a director of the Company,
have agreed to vote in favor of the persons designated by DB Capital or Bear
Stearns to the extent such investor is entitled to designate a person to the
Board of Directors. Effective with the closing of the equity investment, the
Company's Board of Directors decreased its size from 8 to 6 members, and Messrs.
Michael Batal was elected as director of the Company. Mr. Batal resigned as
director on September 1, 1999 and was replaced by Mr. Joseph Wood as
representative of DB Capital.
An affiliate of DB Capital, BT Commercial Corporation ("BTCC"), acted as
lender and as agent for a group of lenders which provided the Company's primary
credit facility. BTCC's participation in the credit facility was approximately
20%. The annual rate of interest for the revolving credit portion of the
facility ($35 million maximum) was, at the Company's option, either prime plus
1.75% or LIBOR plus 2.75%. The annual rate of interest for the term loan portion
of the facility ($12.5 million maximum) was, at the Company's option, either
prime plus 2.00% or LIBOR plus 3.00%. The credit facility was secured primarily
by all corporate assets of the Company and contained certain financial
covenants. The credit agreement required the Company to pay certain fees to
BTCC, as agent, including a monthly unused line fee equal to 0.50% per annum of
the average unused commitment during the preceding month and letter of credit
fees in an amount equal to 2.50% per annum of the daily average amount of
standby letter of credit obligations outstanding during the previous month and
1.375% per annum of the daily average amount of documentary letter of credit
obligations outstanding during the previous month. The Company and BTCC also
entered into a separate letter agreement pursuant to which the Company paid to
BTCC a fee of $1,000,000 and was required to pay BTCC an annual agent's fee of
$75,000 and letter of credit facing fees equal to 0.25% per annum on the undrawn
amount of each letter of credit. Bankers Trust Company, an affiliate of DB
Capital and BTCC, provided services under the credit facility as issuer of
letters of credit for the Company, and received customary fees for such
services. On October 21, 1999 the Company refinanced its existing bank debt and
preferred stock with a new $70,000,000 credit facility. In connection with the
refinancing the Company paid $35,232,000 to DB Commercial Corporation to
extinguish it previous bank facility.
The transactions with DB Capital (and its affiliates) and Bear Stearns
described above were entered into in arms-length negotiations at a time when
neither party had a representative on the Company's Board of Directors.
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Mr. Lerner and Mr. Bernstein have agreed to pay in the aggregate $300,000 to
former lenders of the Company as part of the consideration for such former
lenders' agreement to sell at discount their loans with the Company to a
successor 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.
Stephen R. 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 $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 promissory notes as follows: $825,000 was
paid on March 15, 1997; and the balance was paid in March and April 1998. Prior
to the acquisition, Orleans Juvenile Products Inc. was the Company's exclusive
distributor in Canada.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Safety 1st, Inc. (Registrant)
By: /s/ Joseph S. Driscoll
Joseph S. Driscoll
Chief Financial Officer and
Corporate Clerk
Date: April 28, 2000
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