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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
SAFETY 1ST, INC.
(NAME OF SUBJECT COMPANY)
SAFETY 1ST, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
786475103
(CUSIP NUMBER OF CLASS OF SECURITIES)
MICHAEL LERNER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SAFETY 1ST, INC.
45 DAN ROAD
CANTON, MA 02021
(781) 364-3100
(NAME AND ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH COPIES TO:
STUART M. CABLE, P.C.
JOSEPH L. JOHNSON III, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
(a) NAME AND ADDRESS. The name of the subject company is Safety 1st, Inc.,
a Massachusetts corporation (the "Company"), and the address of the principal
executive offices of the Company is 45 Dan Road, Canton, Massachusetts 02021.
The telephone number of the principal executive offices of the Company is (781)
364-3100.
(b) SECURITIES. The title of the class of equity securities to which this
statement relates is the common stock, par value $0.01 per share, of the Company
(the "Shares"). As of May 1, 2000, there were 8,680,682 Shares outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) NAME AND ADDRESS. The name, address and telephone number of the
Company, which is the person filing this statement, are set forth in Item 1(a)
above.
(b) TENDER OFFER OF THE BIDDER. This Solicitation/Recommendation Statement
relates to the tender offer by Diamond Acquisition Subsidiary Inc., a
Massachusetts corporation ("Purchaser") and a wholly owned subsidiary of Dorel
Industries, Inc., a Quebec corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule TO, dated May 8, 2000 (the "Schedule TO"), to purchase all
of the outstanding Shares at a purchase price of $13.875 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), less applicable
withholding taxes, if any, and upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 8, 2000 (the "Offer to Purchase"), and
in the related Letter of Transmittal (which, together with the Offer to
Purchase, constitutes the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 22, 2000 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and the satisfaction or waiver
of certain conditions, Purchaser will be merged with and into the Company (the
"Merger"), with the Company as the surviving corporation (the "Surviving
Corporation"). Certain terms of the Merger Agreement are described below in Item
3(b)(2).
Parent has formed Purchaser in connection with the Offer and the Merger
Agreement. The principal executive offices of Parent are located at 1255 Greene
Avenue, Suite 300, Westmount, Quebec, Canada H3Z 2A4. The principal executive
offices of Purchaser are located at c/o CT Corporation Systems, 101 Federal
Street, Suite 300, Boston, MA 02110, and its telephone number is (617) 757-6401.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
The following describes material contracts, agreements, arrangements and
understandings and any actual or potential conflicts of interest between the
Company or its affiliates and the Company, its executive officers, directors or
affiliates:
THE MERGER AGREEMENT
In connection with the Offer, the Company has entered into the Merger
Agreement with Purchaser and Parent. A summary of the Merger Agreement is set
forth below. A copy of the Merger Agreement is attached hereto as Exhibit 1, and
the following summary is qualified in its entirety by reference to the text of
the Merger Agreement, which is incorporated herein by reference. Defined terms
used herein and not defined herein shall have the respective meanings assigned
to those terms in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable after the date of the Merger Agreement. The obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer is subject
to the satisfaction of the Minimum Condition and certain other conditions that
are described in the Merger Agreement. Purchaser and Parent have agreed that no
change in the Offer may be made which decreases the price per Share payable in
the Offer, which changes the consideration into a form other than cash, which
reduces the maximum number of Shares to be purchased in the Offer, which imposes
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additional conditions to the Offer in addition to those set forth in the Merger
Agreement or amends the conditions to the Offer set forth in the Merger
Agreement.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Massachusetts law, Purchaser
will be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation and will become a wholly owned subsidiary
of Parent. Upon consummation of the Merger, each issued and then outstanding
Share (other than any Shares held in the treasury of the Company, or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company and any Shares which are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Massachusetts law) shall be cancelled and converted automatically into the right
to receive the Merger Consideration.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time (as defined below) will be the initial directors of
the Surviving Corporation and that the officers of the Company immediately prior
to the Effective Time will be the initial officers of the Surviving Corporation.
Subject to the Merger Agreement, at the Effective Time the Articles of
Organization of Purchaser, as in effect immediately prior to the Effective Time,
will be the Articles of Organization of the Surviving Corporation; provided,
however, that, at the Effective Time, Article I of the Articles of Incorporation
of the Surviving Corporation will be amended to read as follows: "The name of
the corporation is Safety 1st, Inc." Subject to the Merger Agreement, at the
Effective Time, the Bylaws of Purchaser, as in effect immediately prior to the
Effective Time, will be the Bylaws of the Surviving Corporation.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company will
duly call, give notice of, convene and hold an annual or special meeting of its
stockholders as promptly as practicable following consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
Merger (the "Stockholders' Meeting"). If Purchaser acquires at least a majority
of the outstanding Shares, Purchaser will have sufficient voting power to
approve the Merger, even if no other stockholder votes in favor of the Merger.
Proxy Statement. The Merger Agreement provides that the Company will file
with the Commission under the Exchange Act a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Stockholders' Meeting and
shall cause the Proxy Statement and all required amendments and supplements
thereto to be mailed to the holders of Shares. The Company has agreed to include
in the Proxy Statement the recommendation of the Board that the stockholders of
the Company approve and adopt the Merger Agreement and the Merger and to obtain
such approval and adoption. Parent and Purchaser have agreed to cause all Shares
then owned by them and their subsidiaries to be voted in favor of approval and
adoption of the Merger Agreement and the Merger.
Conduct of Business by the Company Pending the Merger. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, between the date
of the Merger Agreement and the date the Articles of Merger have been examined
by and received approval of the Secretary of the Commonwealth of Massachusetts
pursuant to Massachusetts law (the "Effective Time"), the businesses of the
Company and its subsidiaries (the "Subsidiaries" and, individually, a
"Subsidiary") will be conducted only in, and the Company and the Subsidiaries
shall not take any action except in the usual, regular and ordinary course,
consistent with past practice, and use their best efforts to preserve intact
their present business organizations, keep available the services of their
present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date of
the Merger Agreement (for the term provided in such contracts). The Merger
Agreement provides that, without limitation, except as contemplated therein or
to the extent that Parent shall otherwise consent in writing, neither the
Company nor any Subsidiary will, between the date of the Merger Agreement and
the Effective Time, directly or indirectly, do any of the following: (a) split,
combine or reclassify any shares of capital stock of the Company or declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any Shares,
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except for dividends paid by any Subsidiary to the Company or any Subsidiary
that is, directly or indirectly, wholly owned by the Company; (b) authorize for
issuance, issue or sell or agree or commit to issue or sell (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, stock appreciation rights) (other
than the issuance of Shares upon the exercise of Options outstanding on the date
of the Merger Agreement in accordance with their present terms); (c) acquire,
sell, lease, encumber, transfer or dispose of any assets outside the ordinary
course of business which are material to the Company or any of the Subsidiaries
(whether by asset acquisition, stock acquisition or otherwise), except pursuant
to obligations in effect on the date of the Merger Agreement or as set forth in
the disclosure schedules of the Merger Agreement; (d) except up to $10,000,000
pursuant to credit facilities in existence on the date hereof, incur any amount
of indebtedness for borrowed money, guarantee any indebtedness, issue or sell
debt securities, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any material
lien thereupon other than in the ordinary course of business, except, in each
case, pursuant to credit facilities in existence on the date of the Merger
Agreement; (e) except pursuant to any mandatory payments under any credit
facilities in existence on April 22, 2000, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than any payment, discharge or satisfaction (i)
in the ordinary course of business consistent with past practice, or (ii) in
connection with the Offer and Merger; (f) change any of the accounting
principles or practices used by it (except as required by generally accepted
accounting principles, in which case written notice will be provided to Parent
and Purchaser prior to any such change); (g) except as required by law, (i)
enter into, adopt, amend or terminate any Company Benefit Plan (as defined in
the Merger Agreement), (ii) enter into, adopt, amend or terminate any agreement,
arrangement, plan or policy between the Company or any of the Subsidiaries and
one or more of their directors or officers, or (iii) except for normal increases
in the ordinary course of business consistent with past practice, increase in
any manner the compensation or fringe benefits of any non-executive officer or
employee or pay any benefit not required by any Company benefit plan or
arrangement as in effect as of April 22, 2000; (h) adopt any amendments to the
Articles of Organization or the Bylaws except as expressly provided by the terms
of the Merger Agreement; (i) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization (other
than plans of complete or partial liquidation or dissolution of inactive
Subsidiaries); (j) settle or compromise any litigation (whether or not commenced
prior to April 22, 2000) other than settlements or compromises for litigation
where the amount paid (after giving effect to insurance proceeds actually
received) in settlement or compromise does not exceed $100,000; (k) amend any
term of any outstanding security of the Company or any Subsidiary; (l) other
than in the ordinary course of business, neither the Company nor any Subsidiary
shall modify or amend any Material Contract (as defined in the Merger Agreement)
to which the Company or any Subsidiary is a party or waive, release or assign
any material rights or claims under any such Material Contract; (m) authorize,
commit to or make any equipment purchases or capital expenditures other than in
the ordinary course of business and consistent with past practice; or (n) enter
into an agreement to take any of the foregoing actions.
Board Representation. The Merger Agreement provides that, promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, Parent will be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company (the "Board") as will
give Parent representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence), multiplied by the percentage that the total votes represented by
such number of Shares purchased by Purchaser bears to the total votes
represented by the number of Shares then outstanding. The Company will, upon
request by Parent, promptly increase the size of the Board and/or exercise its
best efforts to secure the resignations of such number of its directors as is
necessary to enable Parent's designees to be elected to the Board and will take
all actions to cause Parent's designees to be so elected to the Board. The
Merger Agreement also provides that, at such time, the Company will take all
actions to cause persons designated by Parent to constitute the same percentage
(rounded up to the next whole number) as persons designated by Parent shall
constitute of the Board of (i) each committee of the Board, (ii) each board of
directors (or similar body) of each Subsidiary, and (iii) each committee (or
similar body)
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of each such board. Notwithstanding the foregoing, in the event that Parent's
designees are elected to the Board, until the Effective Time, the Company will
have at least two members of the Board who are directors as of the date of the
Merger Agreement to remain members of the Board ("Independent Directors").
The Merger Agreement provides that, following the election or appointment
of Parent's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company, the exercise or waiver of any of the Company's rights,
benefits or remedies under the Merger Agreement or any extension by the Company
of the time for the performance of any of the obligations of Parent or Purchaser
under the Merger Agreement, will require the affirmative vote of a majority of
the Independent Directors.
In the Merger Agreement, the Company has agreed to take all action required
pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill
its obligations under the Merger Agreement, including mailing to stockholders
the information required by such Section 14(f) and Rule 14f-1 as is necessary to
enable Purchaser's designees to be elected to the Board.
Access to Information. Pursuant to the Merger Agreement, until the
Effective Time, the Company will, and will cause the Subsidiaries and the
officers, directors, employees, auditors and agents of the Company and the
Subsidiaries to, afford to Parent and the officers, employees and agents of
Parent complete access at all reasonable times to the officers, employees,
agents, properties, books, records and contracts of the Company and each
Subsidiary, and will furnish Parent with such financial, operating and other
data and information as Parent may reasonably request. Parent and Purchaser have
agreed to keep such information confidential, except in certain circumstances as
set out in the Confidentiality Agreement (as defined herein).
No Solicitation of Transactions. The Company has agreed that neither it
nor any Subsidiary or their respective officers, directors, or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it, directly or indirectly, shall (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes an Acquisition Proposal (as defined herein), or (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal. Notwithstanding anything to the contrary in the Merger Agreement, if
the Company receives an Acquisition Proposal that was unsolicited or that did
not otherwise result from a breach of the Merger Agreement, and the Board
determines in good faith (after consulting with its outside legal counsel and
its financial advisor) that such Acquisition Proposal is reasonably likely to
lead to a Superior Proposal (as defined herein), the Company (x) may furnish
non-public information with respect to the Company and the Subsidiaries to the
person who made such Acquisition Proposal (a "Third Party") and (y) may
participate in negotiations regarding such Acquisition Proposal. Notwithstanding
anything to the contrary in the Merger Agreement, the Company will notify Parent
after receipt of any Acquisition Proposal, but shall not be required to disclose
to Parent or Purchaser the identity of the Third Party making any such
Acquisition Proposal and will have no duty to notify or update Parent or
Purchaser on the status of discussions or negotiations (including the status of
such Acquisition Proposal or any amendments or proposed amendments thereto)
between the Company and such Third Party.
The Company has represented to Parent and Purchaser that as of the
execution of the Merger Agreement it had terminated any discussions or
negotiations relating to, or that may have been reasonably expected to lead to
any Acquisition Proposal and agreed to promptly request the return of all
confidential information regarding the Company provided to any third party prior
to the date of the Merger Agreement pursuant to the terms of any confidentiality
agreements.
The Company has also agreed that the Board will not withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Purchaser, its
approval or recommendation of the Merger Agreement, the Offer or the Merger
unless the Board shall have received an Acquisition Proposal reasonably likely
to lead to a Superior Proposal and shall have determined in good faith, after
consulting with its outside legal counsel and its financial advisor, that the
Merger Agreement, the Offer or the Merger is no longer in the best interests of
the Company's stockholders and that such withdrawal or modification is required
to satisfy its fiduciary duties to the Company's stockholders under applicable
law.
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As used herein, the term "Acquisition Proposal" shall mean any proposed or
actual (i) merger, consolidation or similar transaction involving the Company,
(ii) sale, lease or other disposition, directly or indirectly, by merger,
consolidation, share exchange or otherwise, of any assets of the Company or the
Subsidiaries representing 15% or more of the consolidated assets of the Company
and the Subsidiaries, (iii) issue, sale or other disposition by the Company of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 15% or more of the
votes associated with the outstanding securities of the Company, (iv) tender
offer or exchange offer in which any person shall acquire beneficial ownership
(as such term is defined in Rule 13d-3 under the Exchange Act), or the right to
acquire beneficial ownership, or any "group" (as such term is defined under the
Exchange Act), or the right to acquire beneficial ownership, or any "group" (as
such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or (vi) transaction which is similar in form, substance or purpose
to any of the foregoing transactions; provided however, that the term
"Acquisition Proposal" will not include the Merger and the Offer.
As used herein, the term "Superior Proposal" will mean an Acquisition
Proposal that the Board determines in good faith, after consulting with its
outside legal counsel and its financial advisor, would, if consummated, result
in a transaction that is more favorable to the stockholders of the Company than
the Offer and the Merger.
Stock Options. The Merger Agreement also provides that each holder of an
option ("Option") granted under the Company Stock Option Plans (as defined in
the Merger Agreement) that is outstanding (whether or not currently exercisable)
as of immediately prior to the date on which Purchaser accepts for payment
Shares pursuant to the Offer (the "Acceptance Date") and which has not been
exercised or cancelled prior thereto shall, on the Acceptance Date, be cancelled
and in exchange for cash paid by Parent in an amount equal to the product of (i)
the number of Shares provided for in such Option and (ii) the excess, if any, of
the Offer Price over the exercise price per Share provided for in such Option,
which cash payment shall be treated as compensation and shall be net of any
applicable federal or state withholding tax. Notwithstanding the foregoing, if
the exercise price per Share provided for in any Option exceeds the Offer Price,
no cash shall be paid with regard to such Option to the holder of such Option.
In the Merger Agreement the Company agreed to take all actions necessary to
ensure that (i) all Options, to the extent not exercised prior to the Acceptance
Date, shall terminate and be cancelled as of the Acceptance Date and thereafter
be of no further force or effect, (ii) no Options are granted after the date of
the Merger Agreement, and (iii) as of the Acceptance Date, the Company Stock
Option Plans and all Options issued thereunder shall terminate.
Except as may be otherwise agreed to by Parent or Purchaser and the
Company, the Company Stock Option Plans shall terminate as of the Acceptance
Date and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any of the Subsidiaries shall be of no further force and effect
and shall be deemed to be deleted as of the Acceptance Date and no holder of an
Option or any participant in any Company Stock Option Plan or any other plans,
programs or arrangements shall have any right thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any Subsidiary thereof.
Directors' and Officers' Indemnification. The Merger Agreement provides
for the indemnification of directors and officers of the Company by the Company
prior to the Effective Date and by the Surviving Corporation after the Effective
Time, subject to certain conditions.
The Merger Agreement further provides that Parent and Purchaser agree that
all rights to indemnification existing in favor of, and all limitations on the
personal liability of, the directors, officers, employees and agents of the
Company and the Subsidiaries provided for in the Articles of Organization or
Bylaws of the Company as in effect as of the date of the Merger Agreement with
respect to matters occurring prior to the Effective Time, and including the
Offer and the Merger, shall continue in full force and effect for a period of
not less then six years from the Effective Time; provided, however, that all
rights to indemnification in respect
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of any claims (each a "Claim") asserted or made within such period shall
continue until the disposition of such Claim. Prior to the Effective Time, the
Company will purchase an extended reporting period endorsement under the
Company's existing directors' and officers' liability insurance coverage for the
Company's directors and officers in a form acceptable to the Company which shall
provide such directors and officers with coverage for six years following the
Effective Time of not less than the existing coverage under, and have other
terms not materially less favorable on the whole to, the insured persons than
the directors' and officers' liability insurance coverage presently maintained
by the Company.
Parent, Purchaser and the Company have also agreed that in the event Parent
or the Surviving Corporation or any of their respective successors or assigns
(a) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(b) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then and in each such case, proper provision will be
made so that the successors and assigns of Parent or the Surviving Corporation,
as the case may be, will assume the foregoing indemnity obligations.
Employee Benefit Arrangements. After the closing of the Merger, Parent
will cause Purchaser or the Company to honor all obligations under (i) the
existing terms of the employment and severance agreements to which the Company
or any Subsidiary is presently a party, except as may otherwise be agreed to by
the parties thereto, and (ii) the Company's and any Subsidiary's general
severance policy. Following the Effective Time, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect on
the date thereof on terms substantially similar to those provided to employees
of Parent. Until such time as Parent causes employees of the Company to
participate in the employee benefit plans of Parent, employees of the Company
will continue to participate in the currently existing benefit plans of the
Company (other than stock option or stock purchase plans) on substantially
similar terms to those currently in effect.
If any employee of the Company or any of the Subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent, any of
its affiliates or the Surviving Corporation, such employee shall be given credit
under such plan for all service prior to the Effective Time with the Company and
the Subsidiaries and prior to the time such employee becomes such a participant,
for purposes of eligibility (including, without limitation, waiting periods) and
vesting, and such employees will be given credit for such service for purposes
of any vacation policy. In addition, if any employees of the Company or any of
the Subsidiaries employed as of the closing of the Merger become covered by a
medical plan of Parent, any of its affiliates or the Surviving Corporation, such
medical plan shall not impose any exclusion on coverage for preexisting medical
conditions with respect to these employees.
Further Action. The Merger Agreement provides that each of the parties
thereto shall use its best efforts to take all such action as may be necessary
or appropriate in order to effectuate the Merger under Massachusetts Law as
promptly as practicable following the purchase of the Shares pursuant to the
Offer. If at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of the Merger Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of both of the Company and
Purchaser, the officers of such corporations are fully authorized in the name of
their corporation or otherwise to take, and shall take, all such lawful and
necessary action. In addition, to the extent Richard E. Wenz exercises stock
options prior to Monday, June 5, 2000, the Company agrees to use its best
efforts to have him enter into the Tender Agreement as soon as possible after
such exercise.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, absence of litigation,
employee benefit plans, labor matters, property and leases, intellectual
property, environmental matters, taxes, material contracts, opinion of financial
advisors and brokers.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction,
at or prior to the Effective Time, of the following conditions: (a) if and to
the extent required by Massachusetts law, the Merger Agreement and the Merger
will have been approved and adopted by the affirmative vote of the stockholders
of the Company; (b) any waiting period
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(and any extension thereof) applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated; (c) all necessary approvals,
authorizations and consents of any governmental or regulatory entity required to
consummate the Merger will have been obtained and remain in full force and
effect, and all waiting periods relating to such approvals, authorizations and
consents will have expired or been terminated, except where such failure would
not have a material adverse effect with respect to the Company or Parent, as the
case may be, or would not affect adversely the ability of the Company or
Purchaser, as the case may be, to consummate the Merger; (d) no statute, order,
decree, ruling or permanent injunction will have been enacted, entered,
promulgated or enforced by any governmental entity which prohibits the
consummation of the Merger on the terms contemplated by the Merger Agreement;
provided that the party seeking to rely upon this condition has fully complied
with and performed its obligations to make all necessary filings with applicable
governmental entities as required by the Merger Agreement; (e) all consents
relating to any Material Contracts set forth in the Merger Agreement that are
necessary as a result of the consummation of the transactions contemplated by
the Merger Agreement will have been received; and (f) Parent, Purchaser or their
affiliates will have purchased all Shares validly tendered and not withdrawn
pursuant to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval and adoption of the Merger Agreement and the Merger by
the stockholders of the Company (a) by mutual written consent of each of Parent,
Purchaser and the Company or (b) by either Parent, Purchaser or the Company (i)
if any Governmental Entity shall have enacted, entered, promulgated or enforced
a final and nonappealable injunction (which injunction the parties hereto shall
have used their best efforts to lift), which prohibits the consummation of the
Merger on the terms contemplated by the Merger Agreement (provided that the
party seeking to rely upon this condition has fully complied with and performed
its obligations pursuant to the Merger Agreement), or permanently enjoins the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger; (ii) if, without any material breach by the terminating party of its
obligations under this Agreement, Parent or Acquisition Sub shall not have
purchased Shares pursuant to the Offer on or prior to the Expiration Date;
provided, however, that neither Parent, Purchaser nor the Company will terminate
the Merger Agreement prior to August 31, 2000 if Shares shall not have been
purchased by Purchaser by reason of any applicable waiting period (and any
extension thereof) under the HSR Act in respect of the Offer not having expired
or been terminated or the pendency of a non-final injunction, and Parent,
Purchaser and the Company will use their best efforts to cause such condition to
be satisfied (including, without limitation, by complying with the requirements
of the FTC or other comparable Governmental Entity to divest of assets or
otherwise in connection with the consummation of the Offer and Merger or in
settlement of any action brought by it) or have any such injunction stayed or
reversed; or (iii) by either the Company or Parent if, at the special meeting of
stockholders (including any adjournment or postponement thereof) called pursuant
to the Merger Agreement the requisite vote of the stockholders of the Company
for the Merger shall not have been obtained; (c) by the Company: (i) if Parent
or Purchaser shall have failed to commence the Offer on or prior to the tenth
business day following the date of the initial public announcement of the Offer;
(ii) if the Board shall have (A) withdrawn, or modified or changed in a manner
adverse to Parent its approval or recommendation of the Merger Agreement or the
Offer, or resolved to do any of the foregoing, and (B) determined in good faith,
after consultation with its outside legal counsel and its financial advisor,
that an Acquisition Proposal is a Superior Proposal; (iii) if Parent or
Purchaser shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in the
Merger Agreement, which breach cannot be or has not been cured within 30 days
after the giving of written notice to Parent or Purchaser except, in any case,
for such breaches which would not affect adversely Parent's or Purchaser's
ability to consummate the Offer or the Merger provided, however, that no cure
period shall be applicable to the matters set forth in clause (i) of this
paragraph; or (iv) if the Minimum Condition shall not have been satisfied, in
which case neither Parent, Purchaser nor any of their affiliates shall be
permitted to accept for payment or pay for any Shares unless and until the
Company shall have provided Parent with written notice stating that the Company
is not exercising its right to terminate the Merger Agreement; (d) by Parent or
Purchaser if: (i) the Company will have breached any representation, warranty,
covenant or other agreement contained in the Merger Agreement which breach (A)
would give rise to the failure of a condition set forth in paragraph (b), (c) or
(e) of Annex A to the Merger Agreement, and
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<PAGE> 9
(B) cannot be or has not been cured within 30 days after the giving of written
notice to the Company; or (ii) if the Board shall have withdrawn, modified or
changed in a manner adverse to Parent its approval or recommendation of the
Merger Agreement or the Offer or shall have executed an agreement in principle
or definitive agreement relating to an Acquisition Proposal with a person or
entity other than Parent or its affiliates or resolved to do any of the
foregoing.
Effect of Termination. In the event of the termination of the Merger
Agreement, the Merger Agreement shall forthwith become null and void and have no
effect, and there shall be no liability on the part of any party or its
affiliates, trustees, directors, officers or stockholders and all rights and
obligations of any party shall cease thereto, except (i) as set forth below
under the section entitled "Fees and Expenses" and (ii) nothing in the Merger
Agreement shall relieve any party from liability for any breach thereof prior to
the date of such termination, provided, however, that the Confidentiality
Agreement shall survive any termination of the Merger Agreement.
Fees and Expenses. The Merger Agreement provides that subject to the
termination of the Merger Agreement, whether or not the Merger is consummated,
all fees, costs and expenses incurred in connection with this Agreement and the
Offer and Merger shall be paid by the party incurring such fees, costs or
expenses.
If the Company or Parent terminates the Merger Agreement because of the
Board's decision to withdraw, modify or change in a manner adverse to Parent its
approval or recommendation of the Merger Agreement or the Offer or because the
Company has executed an agreement in principle or definitive agreement relating
to an Acquisition Proposal with a person or entity other than Parent or its
affiliates or resolved to do any of the foregoing, then the Company will as soon
as possible thereafter pay to Parent an amount in cash equal to 4% of the sum of
(a) the product of (i) the Merger Consideration and (ii) the total number of
issued and outstanding Shares, and (b) the amount to be paid for Options
pursuant to the Merger Agreement.
Executive Severance Arrangements with Executive Officers of the Company
The Company has entered into executive severance agreements with the
following executives of the Company: Michael Lerner, Richard Wenz, Joseph
Driscoll, Denis Horton, Stephen Orleans, Ronald Cardone, Paul Ware, Jason
Macari, Jeffery Hale, Brian Sundberg and Michael Goldberg. Michael Lerner and
Richard Wenz's severance agreements provide that in the event of the qualifying
termination (as defined in the agreement) of the executive's employment within
twelve months following a change in control (as defined in the agreement) of the
Company, the executive is entitled to a payment equal to two times: 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. Joseph
Driscoll's severance agreement provides that in the event of the qualifying
termination (as defined in the agreement) of the executive's employment within
twelve months following a change in control (as defined in the agreement) of the
Company, the executive is entitled to a payment equal to 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. All other
severance agreements provide that in the event of the qualifying termination (as
defined in the agreement) of the executive's employment within twelve months
following a change in control (as defined in the agreement) of the Company, the
executive is entitled to a payment equal to half of: 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. Each severance agreement
also provides that in the event of the qualifying termination (as defined in the
agreement) of the executive's employment within twelve months following a change
in control (as defined in the agreement) of the Company, the executive is
entitled to the following severance benefits: (i) continuation of medical,
dental, long-term, disability, life and any other insurance coverages for up to
18 months following termination, (ii) continuation of COBRA benefits following
the end of the 18 month period referred to in (i) above, (iii) all reasonable
legal and arbitration fees and expenses incurred by the executive in
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<PAGE> 10
obtaining or enforcing any right or benefit provided by the severance agreement,
except in cases involving frivolous or bad faith litigation. The severance
agreements also provide that in the event the receipt of the severance payments
causes the executive to become subject to the 20% excise tax imposed by Section
4999 of the Internal Revenue Code, the severance payments will be increased such
that the net amount retained by the executive, after deduction of any excise tax
on the severance payments, any federal, state and local income tax, employment
tax and any interest and/or penalties assessed with respect to such excise tax,
shall be equal to the severance payments. The consummation of the transactions
contemplated by the Merger Agreement will constitute a change in control under
each executive's severance agreement.
The following events, among others, are deemed "Qualifying Terminations"
under each severance agreement that would entitle the executive to receive
severance benefits: (i) an adverse change, not consented to by the executive, in
the nature or scope of the executive's responsibilities, authorities, powers,
functions or duties from the responsibilities, authorities, powers, functions or
duties exercised by the executive immediately prior to change of control; (ii) a
reduction in the executive's annual base salary as in effect on the date of the
severance agreement or as the same may be increased from time to time; (iii) the
relocation of the Company's offices at which the executive is principally
employed immediately prior to the date of a change in control to any other
location, or the requirement by the Company for the executive to be based
anywhere other than the current offices, except for required travel on the
Company's business to an extent substantially consistent with the executive's
business travel obligations immediately prior to the change in control; (iv) the
failure by the Company to pay the executive any portion of his compensation or
to pay to the executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company within 15 days of the
date such compensation is due without prior written consent of the executive;
and (v) the failure by the Company to obtain an effective agreement from any
successor to assume and agree to perform the severance agreement.
A copy of the form of severance agreement entered into with each executive
is attached hereto as Exhibit 2. The form of severance agreement is incorporated
herein by reference.
STOCK OPTIONS
The Merger Agreement provides that each option to purchase Shares granted
under the Company Stock Option Plans (as defined below), which is outstanding
(whether or not currently exercisable) as of immediately prior to the date on
which Purchaser accepts for payment Shares pursuant to the Offer (the
"Acceptance Date") and which has not been exercised or canceled prior thereto
will, on the Acceptance Date, be canceled and in exchange therefor, Parent will
pay to the holder cash in an amount equal to the product of (i) the number of
Shares provided for in such Option and (ii) the excess, if any, of the Offer
Price over the exercise price per Share provided for in such Option, which cash
payment will be treated as compensation and will be net of any applicable
federal or state withholding tax. Notwithstanding the foregoing, if the exercise
price per Share provided for in any Option exceeds the Offer Price, no cash will
be paid with regard to such Option to the holder of such Option. The Company
will take all actions necessary to ensure that (i) all Options, to the extent
not exercised prior to the Acceptance Date, will terminate and be canceled as of
the Acceptance Date and thereafter be of no further force or effect, (ii) no
Options are granted after the date of the Merger Agreement, and (iii) as of the
Acceptance Date, the Company Stock Option Plans and all Options issued
thereunder shall terminate.
"Option" means any option to purchase Shares granted under any Company
Stock Option Plan. "Company Stock Option Plans" means the 1993 Incentive and
Nonqualified Stock Option Plan, 1993-A Employee and Director Stock Option Plan,
1996 Employee and Director Stock Option Plan, and 1996 Nonqualified Stock Option
Plan.
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<PAGE> 11
The following table sets forth the options held by the Company's executive
officers which will become fully vested.
<TABLE>
<CAPTION>
NAME NUMBER OF OPTION SHARES PER SHARE EXERCISE PRICE
- ---- ----------------------- ------------------------
<S> <C> <C>
Michael Lerner..................................... 20,000 $9.00
Michael Bernstein.................................. 250 $6.00
250 $6.50
Richard Wenz....................................... 250,000 $2.88
75,000 $7.25
250,000 $7.63
Joseph Driscoll.................................... 20,000 $2.88
50,000 $4.75
12,000 $6.00
Stephen Orleans.................................... 50,000 $2.88
5,000 $5.37
25,000 $6.00
10,750 $6.50
5,000 $8.63
10,000 $9.00
</TABLE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting of the
Company's Board of Directors held on April 22, 2000, the Company's Board of
Directors, by a unanimous vote, determined that the Offer and the Merger is fair
to and in the best interests of the Company and its stockholders, unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby and recommended that all holders of Shares tender their Shares pursuant
to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION.
BACKGROUND
During the summer of 1998, the Company initiated a process with its
investment banker, Goldman, Sachs & Co. ("Goldman Sachs"), to explore
opportunities to enhance shareholder value through the possible sale of the
Company in a limited auction process. At that time, a number of parties
expressed interest in acquiring the Company and discussions were held with,
among others, Bidder A, the corporate parent of a leading industry competitor,
and Bidder B, a buyout firm. During the first quarter of 1999, the Board of
Directors terminated these discussions after determining that the discussions
were not likely to yield a price that adequately reflected the long-term value
of the Company.
On October 23, 1999, the President of Bidder A's subsidiary contacted
Michael Lerner, Chairman and Chief Executive Officer of the Company and
expressed interest in renewing discussions regarding a strategic combination of
the two companies. As a result of that conversation, senior executives of Bidder
A met with Michael Lerner and Richard Wenz, President and Chief Operating
Officer of the Company on November 2, 1999. During this meeting, the
participants discussed the status of the Company's overall business as well as
recent business developments. Following the discussion, the parties agreed to
consider further the possibility of a business combination and to contact each
other again if they were interested in pursuing such a transaction. On November
18, 1999, during a regularly scheduled meeting of the Board of Directors, as
part of a general discussion about the Company's stock price and business
prospects, Michael Lerner briefed the Board concerning the meeting with Bidder A
and the potential for renewed interest in a strategic transaction.
In a telephone conversation with Michael Lerner on December 21, 1999, the
President of Bidder A's subsidiary reemphasized Bidder A's interest in
continuing discussions concerning a potential business combination between the
two companies. In the same conversation, he also indicated that Bidder A's
initial indication of a proposed value of the Company would be provided by
mid-January 2000. Following this
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conversation, the Company informed Goldman Sachs of Bidder A's renewed interest
and Goldman Sachs became actively involved in advising the Company concerning
this renewed interest in a strategic transaction. During the week of January 10,
2000, Bidder B indicated to Michael Lerner and Richard Wenz that it was
interested in renewing discussions concerning pursuing a strategic transaction
with the Company and developing a formal proposal to acquire the Company at a
price of approximately $10 per share in a leveraged recapitalization transaction
that would include a management rollover of equity.
On January 20, 2000, the Board of Directors met telephonically to receive
an update from Michael Lerner regarding the Company and its strategic
alternatives, including the potential sale of the Company to Bidder A or Bidder
B.
On January 21, 2000, Bidder A provided to the Company a request for
selected information for due diligence purposes. On February 3, 2000, senior
management of the Company and representatives of Goldman Sachs had a conference
call with the members of Bidder A's acquisition team and their investment banker
to discuss various matters relating to the due diligence information request and
the proposed due diligence process.
Also on February 3, 2000, Michael Lerner received an unsolicited telephone
call from Jeff Segel, Vice President of Sales and Marketing of Parent, another
industry competitor, expressing interest in exploring a strategic combination
between the Company and Parent. Michael Lerner agreed to meet with members of
Parent's senior management on February 5, 2000 to discuss a possible business
combination.
On February 4, 2000, Michael Lerner received a call from Bidder B
emphasizing its high level of interest in acquiring the Company and its desire
to visit the Company to conduct due diligence as soon as possible. Later that
same day, the Board of Directors met telephonically to discuss the status of
negotiations. During the meeting, the Board was updated on the status of
discussions with Bidder A, Bidder B and Parent.
On February 5, 2000, Michael Lerner met with Jeff Segel, Martin Schwartz,
President and Chief Executive Officer of Parent and Alan Schwartz, Vice
President of Operations of Parent. The parties discussed the Company's business
operations and prospects and possible synergies and strategic benefits from a
business combination between the two companies. Subsequent to the meeting,
Parent informed Michael Lerner that its preliminary indication of value for the
Company was approximately $11-12 cash per share. On February 17, 2000, Parent
executed a confidentiality agreement with the Company and, on February 22, 2000,
submitted a due diligence request for information to the Company.
On February 14, 2000, the Company received a due diligence request for
information from Bidder B. Upon receipt of a signed confidentiality agreement
from Bidder B, the Company made due diligence information available to Bidder B.
On February 24, 2000, Bidder A provided the Company and Goldman Sachs with a
letter of interest proposing an acquisition of the Company for a price of $11-13
cash per share.
At a telephonic Board meeting on February 29, 2000, Michael Lerner updated
the Board of Directors on the status of discussions involving the potential
acquisition of the Company. On March 1, 2000, the Company received a revised due
diligence information request from Bidder A and Bidder A executed a
confidentiality agreement. On March 2-3, 2000, the acquisition team from Bidder
A visited a "data room," which had been established, and conducted due diligence
procedures.
On March 6, 2000, the Company received a proposal from Bidder B offering
$11 per share and contemplating a management retaining a portion of its equity.
On March 7, 2000, the senior management of Parent visited the Company's
offices and attended a management presentation by Michael Lerner and Richard
Wenz. Subsequently, during the weeks of March 7 and March 14, representatives
from Parent and their acquisition team visited the Company's "data room" and
performed additional due diligence.
During a telephonic meeting on March 8, 2000, Michael Lerner updated the
Board with respect to the status of ongoing due diligence by the interested
parties. At this meeting, the Board agreed to meet via telephone once a week
while discussions of a possible acquisition were actively continuing. At this
stage, the Board believed that discussions should continue in the context of
negotiations over definitive documentation
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and, in connection with these negotiations, on March 8, 2000, the Company's
counsel, Goodwin, Procter & Hoar LLP distributed a draft Merger Agreement to
each of Bidder A and Parent.
Following consultation with Goldman Sachs, Michael Lerner met with the
senior management of Parent in Montreal on March 14, 2000 to discuss the
possible synergies and opportunities that could result from a combination of the
Company and Parent. On a March 15, 2000 conference call, the Board was updated
on the status of discussions with Parent.
On March 20, 2000, after consultation with Goldman Sachs, Michael Lerner
discussed with Bidder B the proposed terms of its offer to acquire the Company.
Given that $11 per share appeared to be the upper limit of the range that Bidder
B could offer and that the proposal would require that management retain their
equity in connection with the transaction, the parties agreed to terminate
discussions at that time.
During a telephonic meeting on March 22, 2000, Michael Lerner updated the
Board on the ongoing due diligence activities of both Bidder A and Parent and
the Company's response to Bidder B's offer. On March 28, 2000, senior management
of Bidder A and its subsidiary visited the Company's offices and listened to a
presentation by senior management concerning the Company.
At a telephonic meeting on March 29, 2000, Michael Lerner updated the Board
concerning the ongoing process of due diligence and contract negotiations
between the Company and each of Bidder A and Purchaser. On April 3, 2000, the
Board of Directors again met to discuss the status of ongoing discussions and
negotiations with the three interested parties. At this meeting, Goldman Sachs
presented an analysis of the financial terms of the three proposals that had
been received or were contemplated. Goodwin, Procter & Hoar LLP reviewed the
status of contract negotiations with each of Bidder A and Parent. Following
these presentations, the Board discussed the appropriate strategy for continued
discussions with the interested parties.
A senior executive of Bidder A telephoned Michael Lerner on April 4, 2000
to make a verbal cash offer of $11.75 per share for the acquisition of the
Company. Subsequently, the Company and its counsel engaged in contract
negotiations with Bidder A and its counsel that focused on, among other things,
the scope of the representations, warranties and covenants contained in the
merger agreement, the conditions under which the acquiring party would be
obligated to close the tender offer, the obligations of the parties with respect
to obtaining antitrust approval, the ability of the Company to terminate the
merger agreement and to enter into an agreement with a party who made a superior
proposal and the amount of the termination fee to be paid to Bidder A in such
circumstances.
On April 10, 2000, the President of Parent called Michael Lerner to make a
verbal cash offer of $13 per share for the acquisition of the Company. In the
subsequent week, the Company and its counsel negotiated with Parent and its
counsel a variety of points raised by Parent in its response. These discussions
focused on, among other things, the conditions under which Parent would be
obligated to close the tender offer, the amount of the termination fee to be
paid to Parent if the Company terminated the Merger Agreement in order to enter
into an agreement with a party who made a Superior Proposal, and issues relating
to Parent's financing arrangements for the transaction.
On April 11, 2000, the Company's counsel distributed a revised draft of the
Merger Agreement to Parent and, on April 12, 2000, the Company's counsel
distributed a revised draft of the Merger Agreement to Bidder A. Later on April
12, 2000, the Board held a telephonic meeting and the Company's legal and
financial advisors updated the Board on negotiations with both Bidder A and
Purchaser.
During the week of April 13, 2000, a senior executive of Bidder A called
Michael Lerner to inform him that they were contemplating increasing their offer
to the mid $12 range.
On April 13, 2000, Parent provided the Company with a draft of its
financing commitment letter. On April 14, 2000, the Company and Goldman Sachs
conveyed to Parent their comments on the draft of the commitment letter. On
April 18, 2000, Parent provided the Company with a final version of the
financing commitment letter, which responded to certain of the comments provided
to Parent. Later the same day, the Company's counsel distributed a revised draft
of the Merger Agreement to Parent.
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On April 19, 2000, after reviewing the status of both offers with
representatives of Goldman Sachs, Michael Lerner telephoned the Chief Financial
Officer of Bidder A and explained that their offer price was lower than another
interested party and that more substantial contract points remained unresolved
than remained with the other interested party. In response, the Chief Financial
Officer of Bidder A suggested that a face-to-face meeting might expedite
resolution of the outstanding contract issues. On the next day, April 20, 2000,
members of the Bidder A management team and their outside counsel met with
Michael Lerner and Richard Wenz, the Company's counsel and a representative of
Goldman, Sachs. While the parties made substantial progress in resolving
outstanding contract issues, significant points remained outstanding at the end
of the meeting, including the parties' obligations with respect to obtaining
antitrust approval, the ability of the Company to terminate the merger agreement
and to enter into an agreement with a party who made a superior proposal and the
amount of the termination fee. Bidder A indicated that they were contemplating
raising their offer price and would inform the Company the next day if they
decided to do so.
On April 21, 2000, the Board of Directors met telephonically to discuss the
status of negotiations with the interested parties. Michael Lerner informed the
Board that, at the Company's direction, Goldman Sachs instructed both Bidder A
and Parent to have their final bids and contracts submitted by 5:00 p.m. on
Friday, April 21, 2000. Bidder A responded by increasing its bid to $13.00 per
share and Parent increased its bid to $13.875 per share. Following the receipt
of the bids and contracts, additional discussions were held with both parties to
evaluate the specifics of their bids.
A Board meeting was held on Saturday April 22, 2000 to review the final
bids. During the meeting, Goldman Sachs presented to the Board an analysis of
the financial terms of the final offers of Parent and Bidder A and commented on
the price and structure of the two proposals. After extensive discussions among
the Board members and the Company's advisors, the Board concluded that Parent's
final bid of $13.875 per share represented a superior price to Bidder A's
proposed price of $13.00 per share and the Merger Agreement negotiated with
Parent contained more favorable terms than the one negotiated with Bidder A,
particularly with respect to the parties' obligations to obtain antitrust
approval. Goldman Sachs then delivered its oral opinion to the effect that the
consideration to be received from Parent by the Company's stockholders in the
Offer and the Merger was fair from a financial point of view to the Company's
stockholders. The Company's Board of Directors then determined that the Offer
and the Merger were fair to and in the best interest of the Company and its
stockholders, unanimously approved and adopted the Merger Agreement and the
transactions contemplated thereby, and recommended that all holders of shares
tender their Shares pursuant to the Offer. Subsequently, Parent, Purchaser and
the Company executed the Merger Agreement and publicly announced the
transaction.
REASONS FOR THE COMPANY'S BOARD'S RECOMMENDATIONS; FACTORS CONSIDERED
In reaching its determination described in paragraph (a) above, the
Company's Board of Directors considered a number of factors, including, without
limitation, the following:
(i) The fact that the $13.785 per Share price to be paid in the Offer
and the Merger represents (A) a premium of 9.9% over $12.63, the closing
price of the Shares on NASDAQ on April 20, 2000, (B) a premium of 19.3%
over $11.63, the ten day trading average of the Shares as of April 20,
2000, (C) a premium of 20.9% over $11.48, the 20 day trading average of the
Shares as of April 20, 2000, (D) a premium of 20.9% over $11.48, the one
month trading average of the Shares as of April 20, 2000, (E) a premium of
28.1% over $10.83, the two month trading average of the Shares as of April
20, 2000, (F) a premium of 41.6% over $9.80, the three month trading
average of the Shares as of April 20, 2000, (G) a premium of 63.4% over
$8.49, the six month trading average of the Shares as of April 20, 2000,
and, (H) a premium of 88.0% over $7.38, the one year trading average of the
Shares as of April 20, 2000.
(ii) The Company's business, financial condition, results of
operations, strategic objectives, competitive position and prospects.
(iii) The Company's historical financial information and projected
financial results, including management's most recent projections.
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(iv) A financial analysis of the valuation of the Company under
various methodologies, including a discounted cash flow analysis, a
leveraged buy out analysis, and pro forma merger analysis.
(v) The opinion of Goldman Sachs, delivered to the Company's Board of
Directors on April 22, 2000, that as of such date, and based upon and
subject to various considerations set forth therein, the consideration to
be received by the Company's stockholders in the Offer and the Merger was
fair from a financial point of view to such stockholders.
(vi) The results of the discussions with Bidder A and Bidder B
regarding a possible acquisition, leveraged recapitalization, leveraged
buyout, or similar transaction with the Company.
(vii) The limited ability of Purchaser to terminate the Offer or the
Merger
(viii) The terms and conditions of the Merger Agreement, including the
"all cash" nature of the transaction and the facts that (A) the Offer and
Merger are not subject to a financing condition, (B) Parent and Purchaser
have agreed that Shares not purchased in the Offer will receive pursuant to
the Merger the same form and amount of consideration as the Shares
purchased in the Offer, and (C) the Company, under certain circumstances
and subject to certain conditions (including the payment of a Liquidated
Amount) may terminate the Merger Agreement in order to execute an agreement
with a third party providing for the acquisition of the Company on terms
more favorable to the Company's stockholders than the Offer and the Merger.
The foregoing discussion of information and factors considered and given
weight by the Board of Directors is not intended to be exhaustive, but is
believed to include all of the material factors, both positive and negative,
considered by the Board of Directors in connection with its approval of the
Merger Agreement. In view of the variety of factors considered in connection
with its evaluation of the Offer and the Merger, the Board of Directors did not
find it practical to, and did not, quantify or otherwise assign relative weights
to the specific factors considered in reaching its determination and
recommendations. In addition, individual members of the Board of Directors may
have given different weights to different factors.
In analyzing the Offer and the Merger, the Company's management and Board
of Directors were assisted and advised by representatives of Goldman Sachs and
the Company's counsel, who reviewed various financial, legal and other
considerations in addition to the terms of the Merger Agreement. The full text
of the written opinion of Goldman Sachs, setting forth the procedures followed,
the matters considered, the scope of the review undertaken and the assumptions
made by Goldman Sachs in arriving at its opinion, is attached hereto as Exhibit
3 and is incorporated herein by reference. Stockholders are urged to, and
should, read such opinion carefully and in its entirety. The opinion was
provided for the information and assistance of the Company's Board of Directors
in connection with its consideration of the Offer and the Merger. Such opinion
addresses only the fairness from a financial point of view of the consideration
to be received by the stockholders of the Company in the Offer and the Merger
and does not constitute a recommendation to any stockholder as to whether to
tender shares in the Offer or to vote in favor of the Merger.
(c) INTENT TO TENDER. To the Company's knowledge after reasonable inquiry,
all of the Company's executive officers, directors and affiliates currently
intend to either (i) tender all Shares held of record or beneficially by them
pursuant to the Offer, or (ii) vote all Shares held of record or beneficially by
them for the approval and to tender their Shares. Concurrently with execution of
the Merger Agreement, Michael Lerner, Michael Bernstein and Mark Owens, three of
the Company's directors, and Bear Stearns & Co. and DB Capital Partners, Inc.
(formerly known as BT Capital Partners), two of the Company's stockholders,
collectively owning approximately 58% of the outstanding Shares, entered into a
tender agreement pursuant to which they are contractually bound to tender their
shares pursuant to the Offer. The foregoing does not include any Shares over
which, or with respect to which, any such executive officer, director or
affiliate acts in a fiduciary or representative capacity or is subject to the
instructions of a third party with respect to such tender or vote.
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ITEM 5. PERSON/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) SOLICITATIONS OR RECOMMENDATIONS. Goldman Sachs is acting as the
Company's financial advisor in connection with the Offer and the Merger. The
Company entered into an engagement letter with Goldman Sachs, dated August 23,
1996, as amended from time to time by the Company and Goldman Sachs
(collectively, the "Engagement Letter"), pursuant to which the Company engaged
Goldman Sachs as a financial advisor in connection with the possible sale of all
or a portion of the Company. Pursuant to the terms of the Engagement Letter, the
Company will pay Goldman Sachs a fee equal to 1.5% of the aggregate
consideration paid for the Shares, upon completion of the Offer. In addition,
the Company has agreed to reimburse Goldman Sachs for its reasonable expenses
incurred during its engagement and to indemnify Goldman Sachs against certain
liabilities incurred in connection with its engagement, including liabilities
under federal securities laws.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. In the ordinary course
of business, Goldman Sachs and its affiliates may actively trade or hold the
securities of the Company and Parent for their own account or for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf with respect
to the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transaction in the Shares has been effected during the past sixty (60)
days by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction such as a merger or reorganization involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth in this Statement, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the events referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION.
(a) State Takeover Laws. Massachusetts has enacted three takeover laws,
Chapters 110C, 110D and 110F of the MGL. Chapter 110D of the MGL (the "Control
Share Act") regulates "control share acquisitions," defined as the acquisition
of stock in certain "issuing public corporations" organized in Massachusetts
which increases the voting power of the acquiror above certain specified levels
(i.e., 20%, 33 1/3% and 50%). The Control Share Act disqualifies the voting
rights of Shares acquired in a "control share acquisition" unless, among other
things, such acquisition is pursuant to a merger agreement to which the issuing
public corporation is a party. In accordance with the provisions of Chapter
110D, on April 22, 2000, the Board of Directors of the Company consented to and
approved the Merger Agreement, the Offer, and the Merger and Purchaser's and
Parent's acquisition of Shares pursuant to the Offer and the Merger, and
accordingly, the Control Share Act is inapplicable to the offer and the Merger.
Chapter 110C of the MGL (the "Take-Over Bid Statute") imposes procedural
requirements in connection with certain take-over bids. A take-over bid
("Take-Over Bid") is the acquisition or offer to
15
<PAGE> 17
acquire stock which would result in the acquiror possessing more than 10% of the
voting power of any class of an issuer's stock. A Take-Over Bid does not
include, among other things, any offer which the board of directors of the
issuer has consented to and approved and has recommended its stockholders
accept, if the terms of such bid, including any inducements to officers or
directors which are not made available to all stockholders, have been furnished
to the stockholders. In accordance with the provisions of Chapter 110C, on April
22, 2000, the Board of Directors of the Company consented to and approved the
Merger Agreement, the Offer and the Merger and Purchaser's and Parent's
acquisition of Shares pursuant to the Offer and the Merger and complied with all
applicable disclosure requirements, therefore, the Take-Over Bid Statute is
inapplicable to the Offer and the Merger.
Chapter 110F of the MGL (the "Business Combination Statute") limits the
ability of a Massachusetts corporation to engage in business combinations with
"interested stockholders" (defined as any beneficial owner of 5% or more of the
outstanding voting stock of the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder". On April 22, 2000, the Board of Directors
of the Company consented to and approved the Merger Agreement, the Offer and the
Merger and Purchaser's and Parent's acquisition of Shares pursuant to the Offer
and the Merger and, therefore, the Business Combination Statute is inapplicable
to the Offer and the Merger.
(b) Antitrust. The Offer and Merger are subject to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), which provides that certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Federal Trade Commission ("FTC") and the Antitrust
Division of the Department of Justice ("Antitrust Division") and certain waiting
period requirements have been satisfied. Each of Parent and the Company intends
to file a Notification and Report Form under the HSR Act with respect to the
Offer as soon as practicable.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of Shares
pursuant to the Offer. At any time before or after Purchaser's acceptance for
payment of Shares, the FTC or the Antitrust Division could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise or seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of Purchaser or its subsidiaries. Private
parties and state attorney generals may also bring legal action under the
antitrust laws under certain circumstances. Based upon Purchaser's discussions
with the Company and its examination of publicly available information with
respect to the Company, Purchaser believes that the acquisition by Purchaser of
the Shares will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made,
or, if such a challenge is made, of the result.
(c) Section 14(f) Information Statement. The Information Statement
attached as Schedule I hereto is being furnished in connection with the possible
designation by Purchaser, pursuant to the Merger Agreement, of certain persons
to be appointed to the Company Board of Directors other than at a meeting of the
Company's stockholders.
ITEM 9. EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger dated April 22, 2000 among
Safety 1st, Inc., Dorel Industries, Inc. and Diamond
Acquisition Subsidiary, Inc.
Exhibit 2 Form of Severance Agreement. Safety 1st has entered into
such agreements with the following officers: Michael Lerner,
Richard Wenz, Joseph Driscoll, Denis Horton, Stephen
Orleans, Ronald Cardone, Paul Ware, Jason Macari, Jeffery
Hale, Brian Sundberg and Michael Goldberg.
</TABLE>
16
<PAGE> 18
<TABLE>
<S> <C>
Exhibit 3* Opinion dated April 22, 2000 of Goldman, Sachs & Co.*
Exhibit 4* Letter to Stockholders of Safety 1st, Inc., dated May 8,
2000 from Michael Lerner, Chairman and Chief Executive
Officer of Safety 1st, Inc.*
Exhibit 5 Joint Press Release issued by Safety 1st, Inc. and Dorel
Industries, Inc., dated April 24, 2000.
</TABLE>
- ---------------
* Included in copies mailed to stockholders by Safety 1st, Inc. and Dorel
Industries, Inc.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 8, 2000 SAFETY 1ST, INC.
By: /s/ MICHAEL LERNER
------------------------------------
Michael Lerner
Chairman and Chief Executive Officer
17
<PAGE> 19
SCHEDULE I
SAFETY 1ST, INC.
45 DAN ROAD
CANTON, MASSACHUSETTS 02021
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about May 8, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Safety 1st, Inc., a Massachusetts corporation (the "Company"), to the
holders of shares of common stock, par value $.01 per share, of the Company (the
"Shares"). You are receiving this Information Statement in connection with the
possible election of the Purchaser Designees (as hereinafter defined) to seats
on the Board of Directors of the Company (the "Company Board").
The Company, Dorel Industries, a Canadian corporation ("Parent"), and
Diamond Acquisition Subsidiary Inc., a Massachusetts corporation and a
wholly-owned subsidiary of Parent ("Purchaser"), entered into an Agreement and
Plan of Merger dated as of April 22, 2000 (the "Merger Agreement"), pursuant to
which (i) Parent has caused the Company to commence a tender offer (the "Offer")
for all outstanding Shares at a price of $13.875 per Share, net to the seller in
cash, without interest, and (ii) the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Offer and the Merger, the Company
will become a wholly owned subsidiary of Parent.
The Merger Agreement requires the Company to take action to cause the
Purchaser Designees to be elected to the Company Board under the circumstances
described therein. See "Right to Designate Directors; Purchaser Designees"
below.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
8, 2000. The Offer is scheduled to expire at 12:00 Midnight, New York City time,
on June 5, 2000. In certain circumstances, the Offer may be extended.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of (a) the total number of directors on the Company Board (after
giving effect to the directors designated by Parent pursuant to this sentence)
and (b) the percentage that the total votes represented by such number of Shares
so purchased by the Purchaser bears to the total votes represented by the number
of Shares outstanding. In order to effect the foregoing, the Company has agreed
that it shall, upon request by Parent, promptly increase the size of the Company
Board and/or exercise its best efforts to secure the resignations of such number
of its directors as is necessary to enable Parent's designees (the "Purchaser
Designees") to be elected to the Company Board and shall take all actions to
cause Purchaser Designees to be so elected to the Company Board. In the event
that Purchaser Designees are elected to the Company Board, until the effective
time of the Merger (the "Effective Time"), the Company Board shall have at least
two directors who are directors on the date of the Merger Agreement (the
<PAGE> 20
"Independent Directors"); provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall be entitled to designate the person to fill
such vacancy who shall be deemed to be an Independent Director for purposes of
the Merger Agreement or, if no Independent Director then remains, the other
directors shall designate two persons to fill such vacancies who shall not be
stockholders, affiliates or associates of Parent or Purchaser and such persons
shall be deemed to be Independent Directors for purposes of the Merger
Agreement. In addition, in the event that Purchaser Designees are elected to the
Company Board, after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required in addition to any other applicable
requirement to (a) amend or terminate the Merger Agreement by the Company, (b)
exercise or waive any of the Company's material rights, benefits or remedies
hereunder, or (c) extend the time for performance of Parent's or Purchaser's
respective obligations under the Merger Agreement.
As of the date of this Information Statement, Parent has not determined the
identity of the Purchaser Designees. However, the Purchaser Designees are
expected to be selected from among the directors and executive officers of
Parent. Certain information regarding the directors and executive officers of
Parent is contained in Annex I hereto. The Company also has not yet determined
the identity of the Independent Directors, although the Independent Directors
will be selected from among the current directors of the Company. Certain
information regarding the Company's directors is set forth below in "Information
Regarding Directors and Executive Officers of the Company."
None of the Purchaser Designees (i) is currently a director of, or holds
any position with, the Company, (ii) has a familial relationship with any
directors or executive officers of the Company or (iii) to the best knowledge of
Parent, beneficially owns any securities (or rights to acquire securities) of
the Company. The Company has been advised by Parent that, to the best of
Parent's knowledge, none of the Purchaser Designees has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission"), except
as may be disclosed herein or in the Schedule 14D-9.
It is expected that the Purchaser Designees may assume office promptly
following the purchase by the Purchaser of such number of shares which satisfies
the Minimum Condition (as defined in the Merger Agreement) and the satisfaction
or waiver of certain other conditions set forth in the Merger Agreement, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least two-thirds of the Company Board.
SHARE INFORMATION
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote on each matter properly brought
before an annual or special meeting of stockholders of the Company. As of May 1,
2000, there were 8,680,682 Shares outstanding.
INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
BOARD OF DIRECTORS OF THE COMPANY AND COMMITTEES THEREOF
The Company Board currently consists of six members. The Company Board is
composed of Michael Lerner, Michael Bernstein, John Howard, Joseph Wood, Mark
Owens and Frank Haydu. 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.
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.
S-2
<PAGE> 21
Audit Committee.
The Audit Committee of the Board of Directors, which consisted of Frank
Haydu, Mark Owens, and John 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.
Compensation Committee.
The Compensation Committee of the Board of Directors, which consisted of
Mark Owens, John Howard and Michael 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.
Stock Option Committee.
The Stock Option Committee met once during 1999. The members of the Stock
Option Committee are Michael Lerner and Michael 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 to those persons who are executive officers, directors or 10%
shareholders, whose awards are administered by the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mark Owens, Michael Batal, and John Howard served as members of the
Company's Compensation Committee during 1999, and Curt 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. Curt Feuer
was 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. Michael 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".
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS
The following biographical descriptions set forth certain information with
respect to the members of the Company Board, based on information furnished to
the Company by each director.
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, Michael
Lerner served as Executive Vice President of Career Management Services, Inc.,
an executive placement service.
Michael Bernstein has served as Executive Vice President of the Company
since November 1992 and as a Director since March 1996. Michael Bernstein joined
the Company in 1986 as Vice President of Sales and Marketing. From 1984 to 1986,
Michael 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.
Michael Bernstein became a consultant to the company effective January 1, 2000.
S-3
<PAGE> 22
Mark Owens, 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 Mark Owens was President of Medo Industries, Inc., a manufacturer
of consumer goods. Mark Owens also served as Vice President of Quaker State Oil
Corporation from October 1996, when it acquired Medo Industries, Inc., until
October 1997.
Frank Haydu, 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,
Frank Haydu was a Managing Director at Kidder Peabody & Company. Frank Haydu
also served as interim Chief Executive Officer of the Tufts New England Medical
Center.
John 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., John 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. John Howard is a director of Dyersburg Corp.
and Celestial Seasonings, Inc.
Joseph Wood, a Director of the Company since November 1999 replaced Michael
Batal as DB Capital Partners Inc. representative in November of 1999. Joseph
Wood has been a senior member of DB Capital and its predecessor BT Capital for
12 years. Since 1989, Joseph 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 and 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. Joseph Wood and John Howard
are the persons designated by DB Capital and Bear Stearns, respectively.
BIOGRAPHICAL INFORMATION REGARDING EXECUTIVE OFFICERS OF THE COMPANY
The following biographical descriptions set forth certain information with
respect to the executive officers of the Company, based on information furnished
to the Company by each executive officer.
Michael Lerner is the Company's Chief Executive Officer. For Biographical
information regarding Michael Lerner see "-- Biographical Information Regarding
Directors" above.
Richard Wenz became the Company's President and Chief Operating Officer in
February 1997. During 1995 and 1996, Richard Wenz was a Partner with the Lucas
Group, a strategy consulting firm in Boston, Mass. From 1992 to 1994, Richard
Wenz served as President and Chief Executive Officer of Professional Golf
Corporation.
Joseph 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, Joseph Driscoll served in various capacities, including Assistant
Corporate Controller, for Staples, Inc., a retailer of office supplies and
equipment.
Stephen 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.
S-4
<PAGE> 23
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS.
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: Frank Haydu received a grant of 25,000 options at an exercise price
of $5.37 per share on July 19, 1999.
EXECUTIVE OFFICERS.
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 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 Bernstein................................. 1999 200,081 0 0
Executive Vice President 1998 195,663 0 0
1997 134,616 0 0
Joseph 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 Orleans(3)................................ 1999 158,501 25,000 55,000
President, Safety 1st Home Products Canada, Inc. 1998 124,112 5,000 5,000
1997 109,711 (4)7,500 (4)25,000
</TABLE>
- ---------------
(1) Richard Wenz became employed by the Company in 1997.
(2) Joseph Driscoll became employed by the Company in 1997 and became an
executive officer of the Company in 1998.
(3) Stephen 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 Stephen
Orleans under his employment agreement in respect of 1996, Stephen 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 $6.00 per share
(the fair market value of the Common Stock on the date of grant).
S-5
<PAGE> 24
Option Exercises and Year-End Holdings
The following table sets forth information with respect to the stock option
grants made during the last completed fiscal year to each of the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZED
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Lerner............ 0 -- -- -- -- --
Richard Wenz.............. 250,000 26.6% 2.88 3/11/2009 $452,804 $1,147,495
Michael Bernstein......... 0 -- -- -- -- --
Joseph Driscoll........... 20,000 2.1% 2.88 3/11/2009 $ 36,224 $ 91,800
Stephen Orleans........... 50,000 5.3% 2.88 3/11/2009 $ 90,561 $ 229,499
5,000 0.6% 5.37 7/19/2009 $ 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. Richard 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. Stephen
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:
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
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT 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 Wenz................ 0 0 487,500 87,500 $878,750 $295,000
Michael Bernstein........... 0 0 500 0 $ 0 $ 0
Joseph Driscoll............. 0 0 52,001 29,999 $140,470 $107,430
Stephen 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.
S-6
<PAGE> 25
AGREEMENTS WITH MANAGEMENT
In April 1993, the Company entered into five-year employment agreements
with each of Michael Lerner and Michael Bernstein, pursuant to which Michael
Lerner and Michael 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
Michael Lerner and Michael 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 Michael
Lerner and Michael 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. (See also
"Severance Agreements" below.)
Effective January 1, 2000, Michael Bernstein entered into a one year
contract as a consultant to the Company. The contract pays Michael Bernstein
$200,000 over the one year period. Prior to January 1, 2000, Michael Bernstein
had been the Company's Executive Vice President.
On February 19, 1997, the Company entered into a three year employment
agreement with Richard Wenz, pursuant to which Richard 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, Richard 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. Richard Wenz is also entitled to receive incentive compensation,
based on performance of Richard 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 Richard Wenz from competing with the Company for a
period of two years after termination of employment for any reason. (See also
"Severance Agreements" below.)
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 Stephen Orleans is employed as the
President 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 Stephen 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 Stephen 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. (See
also "Severance Agreements" below.)
SEVERANCE AGREEMENTS
The Company has entered into executive severance agreements with the
following executives of the Company: Michael Lerner, Richard Wenz, Joseph
Driscoll, Denis Horton, Stephen Orleans, Ronald Cardone, Paul Ware, Jason
Macari, Jeffery Hale, Brian Sundberg and Michael Goldberg. Michael Lerner and
Richard Wenz's severance agreements provide that in the event of the qualifying
termination (as defined in the agreement) of the executive's employment within
twelve months following a change in control (as defined in the agreement) of the
Company, the executive is entitled to a payment equal to two times: 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. Joseph
Driscoll's severance agreement provides that in the event of the qualifying
termination (as defined in the agreement) of the executive's employment within
twelve months following a change in control (as defined in the agreement) of the
Company, the executive is entitled to a payment equal to one time: the sum of
(A) the executive's base salary
S-7
<PAGE> 26
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. All other severance agreements provide that
in the event of the qualifying termination (as defined in the agreement) of the
executive's employment within twelve months following a change in control (as
defined in the agreement) of the Company, the executive is entitled to a payment
equal to half of: 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. Each severance agreement also provides that in the event of the
qualifying termination (as defined in the agreement) of the executive's
employment within twelve months following a change in control (as defined in the
agreement) of the Company, the executive is entitled to the following severance
benefits: (i) continuation of medical, dental, long-term, disability, life and
any other insurance coverages for up to 18 months following termination, (ii)
continuation of COBRA benefits following the end of the 18 month period referred
to in (i) above, (iii) all reasonable legal and arbitration fees and expenses
incurred by the executive in obtaining or enforcing any right or benefit
provided by the severance agreement, except in cases involving frivolous or bad
faith litigation. The severance agreements also provide that in the event the
receipt of the severance payments causes the executive to become subject to the
20% excise tax imposed by Section 4999 of the Internal Revenue Code, the
severance payments will be increased such that the net amount retained by the
executive, after deduction of any excise tax on the severance payments, any
federal, state and local income tax, employment tax and any interest and/or
penalties assessed with respect to such excise tax, shall be equal to the
severance payments. The consummation of the transactions contemplated by the
Merger Agreement will constitute a change in control under each executive's
severance agreement.
The following events, among others, are deemed "Qualifying Terminations"
under each severance agreement that would entitle the executive to receive
severance benefits: (i) an adverse change, not consented to by the executive, in
the nature or scope of the executive's responsibilities, authorities, powers,
functions or duties from the responsibilities, authorities, powers, functions or
duties exercised by the executive immediately prior to change of control; (ii) a
reduction in the executive's annual base salary as in effect on the date of the
severance agreement or as the same may be increased from time to time; (iii) the
relocation of the Company's offices at which the executive is principally
employed immediately prior to the date of a change in control to any other
location, or the requirement by the Company for the executive to be based
anywhere other than the current offices, except for required travel on the
Company's business to an extent substantially consistent with the executive's
business travel obligations immediately prior to the change in control; (iv) the
failure by the Company to pay the executive any portion of his compensation or
to pay to the executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company within 15 days of the
date such compensation is due without prior written consent of the executive;
and (v) the failure by the Company to obtain an effective agreement from any
successor to assume and agree to perform the severance agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Joseph Wood, a director of the Company, is a Managing Director with DB
Capital and John 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
S-8
<PAGE> 27
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,
Michael Lerner, Chief Executive Officer and a director of the Company, and
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 Michael Batal was
elected as director of the Company. Michael Batal resigned as director on
September 1, 1999 and was replaced by 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 BTCC 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.
Michael Lerner and Michael 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 Michael Lerner and Michael 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.
S-9
<PAGE> 28
Stephen 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.
Stephen 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.
S-10
<PAGE> 29
TOTAL STOCKHOLDER RETURN
Set forth below is a graph comparing cumulative total stockholder returns
of the Company; the CRSP Total Return Index for The Nasdaq National Market and
the Nasdaq SmallCap Market; and a self-determined peer group of 9 companies. The
graph assumes $100 invested in the Company on December 30, 1994 and in each of
the indices and assumes that any dividends were reinvested.
[Line Graph]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET (US SELF-DETERMINED PEER
SAFETY 1ST, INC. COMPANIES) GROUP
---------------- ----------------------- --------------------
<S> <C> <C> <C>
12/1994 $100.00 $100.00 $100.00
12/1995 50.43 141.34 119.74
12/1996 35.04 173.90 135.37
12/1997 21.37 214.53 177.98
12/1998 11.97 300.43 163.30
12/1999 25.64 555.99 113.06
</TABLE>
COMPANIES IN THE SELF-DETERMINED PEER GROUP:
<TABLE>
<S> <C>
Dorel Industries, Inc. First Years Inc.
Hasbro Inc. Mattel Inc.
Newell Rubbermaid Inc. Playtex Products Inc.
</TABLE>
NOTES:
<TABLE>
<S> <C>
A. The lines represent monthly index levels derived from
compounded daily returns that include all dividends.
B. The indices are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is
not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on
12/30/94.
</TABLE>
S-11
<PAGE> 30
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. Compensation of the Company's
executive officers has historically consisted of three components: base salary,
annual bonuses and stock option grants. Generally, the Committee believes that
the Company's salaries and annual bonuses for executive officers 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 qualifications and experience of the individual. Base
salary levels have been developed in order to attract and retain executives
based on their level of responsibility within the Company. Annual bonuses link
executive pay with performance in areas that are directly related to the
Company's short-term operating success.
Stock option grants are intended to create incentives for retaining
qualified and competent employees and maximizing long-term stockholder values.
The Company's stock option plans are long-term incentive plans for executive
officers, pursuant to which options are awarded to the executive officers by the
entire Board of Directors. Stock option grants are intended to provide long-term
incentives for the achievement of the Company's strategic business plan and to
align the executive officers' interests with those of the Company's
stockholders. Under the stock option plans, the stock options may be awarded to
executives for terms not to exceed ten years at an exercise price which is no
less than the fair market value of the Company Common Stock on the date of
grant. The size of any stock option grant is related principally to the
Company's performance and to the individual's performance and level of
responsibility within the organization.
The compensation of the Company's Chairman of the Board of Directors and
Chief Executive Officer, Michael Lerner, was established pursuant to a five year
employment agreement which expired in April 1998. See "Agreements with
Management." Michael Lerner's employment agreement provided that his base
salary, specified at $275,000, is subject to increase each year at the
discretion of the Board of Directors and that annual bonuses may be paid at the
discretion of the Board of Directors, but limited to the amounts of Michael
Lerner's base salary for such year. Based upon the Committee's review of the
criteria described above, the Committee recommended an increase in Michael
Lerner's salary to $338,000 in 1999 from $325,000 in 1998. Michael Lerner
received no bonus in 1999. In addition, the Compensation Committee recommended
an increase in the salary of Richard Wenz to $327,600 in 1999 from $315,000 in
1998 and an increase in the salary of Michael Bernstein to $200,200 in 1999 from
$192,500 in 1998. Michael Bernstein became a consultant to the company effective
January 1, 2000. His consulting agreement provides for a term of one year and
will pay Michael Bernstein $200,000 for his services.
The Compensation Committee will continue to examine and evaluate the
performance of the Company's executive officers, through discussions with senior
management and otherwise, and will make recommendations to the Board of
Directors with respect to base salary, annual bonuses and any other elements of
compensation in light of an overriding Company philosophy linking pay and
performance.
COMPENSATION COMMITTEE
Mark Owens
John Howard
S-12
<PAGE> 31
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
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
- ---------------- --------- -----------
<S> <C> <C>
Michael Lerner(2)........................................... 2,764,000 25.4%
c/o Safety 1st, Inc
Canton Commerce Center
45 Dan Road
Canton, MA 02021
Michael 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.................................... 633,009 5.8%
245 Park Avenue
New York, NY 10167
Richard Wenz................................................ 487,500 4.5%
Joseph Driscoll............................................. 52,001 *
Stephen Orleans............................................. 64,917 *
Frank Haydu................................................. 9,034 *
Mark Owens.................................................. 422,000 3.9%
Joseph Wood(5).............................................. 634,173 5.8%
John 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: Michael Lerner -- 20,000; Richard
Wenz -- 487,500; Joseph Driscoll -- 52,001; Stephen Orleans -- 64,917; Mark
Owens -- 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) Michael Lerner has shared investment powers with respect to 27,043 of such
shares, which are pledged to certain parties to secure obligations of
Michael Lerner, as described under "Certain Relationships and Related
Transactions".
S-13
<PAGE> 32
(3) Michael Bernstein has shared investment powers with respect to 6,761 of such
shares, which are pledged to certain parties to secure obligations of
Michael 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) Joseph 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. Joseph Wood disclaims
beneficial ownership of such shares.
(6) John 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. John 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 Joseph Wood and John Howard as set
forth in footnotes (5) and (6).
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.
S-14
<PAGE> 33
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND PARENT
1. Directors and Executive Officers of Dorel. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Dorel. Unless otherwise indicated, the current
business address of each person is 1255 Greene Avenue, Suite 300, Westmount,
Quebec, Canada H3Z 2A4. Unless otherwise indicated, each such person is a
citizen of Canada and has held his or her present position as set forth below
for the past five years. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Dorel.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR
NAME EMPLOYMENT HISTORY
- ---- ------------------------------------------
<S> <C>
Martin Schwartz President and Chief Executive Officer
Jeff Segel Vice-President, Sales and Marketing
Alan Schwartz Vice-President, Operations
Jeffrey Schwartz Vice-President, Finance
Pierre Dupuis Chief Operating Officer. Prior to joining Dorel in October
1999, Mr. Dupuis held senior positions in building materials
and printing industries in Canada and the United States.
Frank Rana Treasurer, Corporate Controller
Nick Costides President of Cosco Inc., a subsidiary of Dorel (United
States citizen)
Richard Jackson President of Ameriwood Industries Inc., a subsidiary of
Dorel since 1998 and prior to that President of Charleswood
Corporation, a subsidiary of Dorel (United States Citizen)
Robert Klassen Executive Vice-President, Chief Operating Officer of
Ameriwood Industries Inc. since 1998 and prior to that the
Chief Operating Officer of Ridgewood Corporation, a
subsidiary of Dorel
Douglas Crozier Chief Operating Officer of Dorel Home Products division
Kees Spreeuwenberg Managing Director of Maxi-Miliaan B.V., a subsidiary of
Dorel (citizen of the Netherlands)
Michael Silberstein President of Infantino, Inc. a subsidiary of Dorel (United
States citizen)
Michael Caplan Managing Director (U.K.) Limited (since 1996). Prior to
1996, Mr. Caplan was Managing Director of Write On Demand
and Stylus Music Limited (citizen of the United Kingdom)
Dr. Laurent Picard Director, Retired Professor of McGill University and a
director of The Jean Coutu Group (PJC) Inc.
Bruce Kaufman Director, President, Kaufel Group Ltd.
Maurice Tousson Director, President, Medi-Trust Pharmacy Inc.
</TABLE>
2. Directors and Executive Officers of Purchaser. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Purchaser. Unless otherwise indicated, the
current business address of each person is 1255 Greene Avenue, Suite 300,
Westmount, Quebec, Canada H3Z 2A4. Unless otherwise indicated, each such person
is a citizen of Canada, and each occupation set forth opposite an individual's
name, refers to employment with Purchaser.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR
NAME EMPLOYMENT HISTORY
- ---- ------------------------------------------
<S> <C>
Jeffrey Schwartz Treasurer since 2000, Vice-President, Finance of Dorel
Frank Rana President and Vice-President and Secretary since 2000,
Treasurer of Dorel
</TABLE>
S-15
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
DOREL INDUSTRIES, INC.,
DIAMOND ACQUISITION SUBSIDIARY, INC.
AND
SAFETY 1ST, INC.
Dated as of April 22, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE OFFER..................................................................................... 1
1.1 The Offer..................................................................................... 1
1.2 Company Actions............................................................................... 3
1.3 Board Representation.......................................................................... 4
1.4 Company Stock Options and Related Matters..................................................... 5
ARTICLE II THE MERGER.................................................................................... 6
2.1 The Merger.................................................................................... 6
2.2 Effective Time................................................................................ 7
2.3 Closing....................................................................................... 7
2.4 Directors and Officers........................................................................ 7
2.5 Stockholders' Meeting......................................................................... 7
2.6 Conversion of Securities...................................................................... 8
2.7 Taking of Necessary Action; Further Action.................................................... 9
ARTICLE III PAYMENT FOR SHARES; DISSENTING SHARES......................................................... 9
3.1 Payment for Shares of Company Common Stock.................................................... 9
3.2 Appraisal Rights............................................................................. 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB 12
4.1 Existence, Good Standing, Authority, Compliance with Law..................................... 12
4.2 Authorization; Validity of Agreement; Necessary Action....................................... 12
4.3 Consents and Approvals; No Violations........................................................ 13
4.4 Required Financing........................................................................... 13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................ 14
5.1 Existence; Good Standing; Authority; Compliance With Law..................................... 14
5.2 Authorization, Validity and Effect of Agreements............................................. 15
5.3 Capitalization............................................................................... 15
5.4 Subsidiaries................................................................................. 16
5.5 Other Interests.............................................................................. 16
5.6 No Violation; Consents....................................................................... 17
5.7 Commission Documents......................................................................... 17
5.8 Litigation................................................................................... 18
5.9 Absence of Certain Changes................................................................... 18
5.10 Taxes........................................................................................ 18
5.11 Properties................................................................................... 19
5.12 Intellectual Property........................................................................ 20
5.13 Environmental Matters........................................................................ 21
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
5.14 Employee Benefit Plans....................................................................... 21
5.15 Labor Matters................................................................................ 23
5.16 No Brokers................................................................................... 23
5.17 Opinion of Financial Advisor................................................................. 24
5.18 Material Contracts........................................................................... 24
5.19 Definition of the Company's Knowledge 24
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER....................................................... 24
6.1 Conduct of Business by the Company........................................................... 24
ARTICLE VII ADDITIONAL AGREEMENTS........................................................................ 26
7.1 HSR and Other Filings........................................................................ 26
7.2 Fees and Expenses............................................................................ 28
7.3 No Solicitations............................................................................. 28
7.4 Officers' and Directors' Indemnification..................................................... 30
7.5 Access to Information; Confidentiality....................................................... 32
7.6 Financial and Other Statements............................................................... 32
7.7 Public Announcements......................................................................... 32
7.8 Employee Benefit Arrangements................................................................ 33
7.9 Required Financing........................................................................... 33
7.10 Further Assurances........................................................................... 34
ARTICLE VIII CONDITIONS TO THE MERGER..................................................................... 34
8.1 Conditions to the Obligations of Each Party to Effect the Merger............................. 34
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................................................ 35
9.1 Termination.................................................................................. 35
9.2 Effect of Termination........................................................................ 37
9.3 Amendment.................................................................................... 38
9.4 Extension; Waiver............................................................................ 38
ARTICLE X GENERAL PROVISIONS........................................................................... 38
10.1 Notices...................................................................................... 38
10.2 Interpretation............................................................................... 39
10.3 Non-Survival of Representations, Warranties, Covenants and Agreements........................ 40
10.4 Miscellaneous ............................................................................... 40
10.5 Assignment................................................................................... 40
10.6 Severability................................................................................. 40
10.7 Choice of Law/Consent to Jurisdiction........................................................ 40
10.8 No Agreement Until Executed.................................................................. 41
ANNEX A......................................................................................................... A-1
</TABLE>
(ii)
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF Dorel Industries, Inc., a Quebec corporation
("Parent"), Diamond Acquisition Subsidiary, Inc., a Massachusetts corporation
and a wholly-owned subsidiary of Parent ("Acquisition Sub"), and Safety 1st,
Inc., a Massachusetts corporation (the "Company").
RECITALS
WHEREAS, the Board of Directors of each of Parent, Acquisition Sub and
the Company has approved, and deems it advisable and in the best interests of
its respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent, the Acquisition Sub and each of Michael Lerner and
Michael Bernstein have entered into a Tender Agreement, dated as of the date
hereof obligating each of them to tender his Shares (as defined below) pursuant
to the Offer (as defined below), substantially in the form of Exhibit A hereto
and the Company agrees to use its best efforts to have BT Capital Partners, Inc.
and Bear, Stearns & Co., Inc. enter into the Tender Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, Parent, Acquisition Sub and the Company hereby agree as
follows:
ARTICLE I
THE OFFER
1.1 The Offer.
(1)
<PAGE> 5
(a) Provided that this Agreement shall not have been
terminated in accordance with its terms, Acquisition Sub shall, as soon as
practicable after the date hereof, commence (within the meaning of Rule 14d-2(a)
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act")), an offer to purchase (as such
offer to purchase may be amended in accordance with the terms of this Agreement,
the "Offer") all of the issued and outstanding shares ("Shares") of common
stock, par value $0.01 per share, of the Company (the "Company Common Stock") at
a price of not less than $13.875 per Share, net to the seller in cash (less
applicable withholding taxes, if any) (such price, or such other price per Share
as may be paid in the Offer, being referred to herein as the "Offer Price").
After the commencement of the Offer, the Offer and the obligation of Acquisition
Sub to accept for payment and pay for Shares tendered pursuant to the Offer
shall be subject only to the conditions set forth in Annex A hereto and the
condition (the "Minimum Condition") that there be validly tendered and not
withdrawn prior to the expiration of the Offer at least two-thirds of the Shares
on a fully diluted basis (the "Minimum Percentage"). Parent and Acquisition Sub
expressly reserve the right to waive any condition set forth in Annex A, to
change the form or amount payable per Share in the Offer (including the Offer
Price) and to make any other changes in the terms and conditions of the Offer;
provided, however, that without the prior written consent of the Company, Parent
shall not amend, or permit to be amended, the Offer to (i) decrease the Offer
Price, (ii) change the consideration into a form other than cash, (iii) add any
conditions to the obligation of Acquisition Sub to accept for payment and pay
for Shares tendered pursuant to the Offer, (iv) amend (other than to waive) the
Minimum Condition or the other conditions set forth in Annex A, or (v) reduce
the maximum number of Shares to be purchased in the Offer. If on the initial
scheduled expiration date of the Offer (the "Initial Expiration Date"), which
shall be 20 business days after the date the Offer is commenced, all conditions
to the Offer shall not have been satisfied or waived, Acquisition Sub may, from
time to time, in its sole discretion, extend the expiration date of the Offer
(the "Expiration Date"); provided, however, that, except as set forth below, the
Expiration Date, as extended, shall be no later than the date that is 40
business days immediately following the Initial Expiration Date. Notwithstanding
the foregoing, if on the Initial Expiration Date, the applicable waiting period
(and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") in respect of the Offer shall not have expired or
been terminated and all other conditions to the Offer shall have been satisfied
or waived other than the Minimum Condition, Acquisition Sub shall be required to
extend the Expiration Date until such waiting period shall have expired or been
terminated, subject to the provisions of Section 9.1(b)(ii). Acquisition Sub
shall, on the terms and subject to the prior satisfaction or waiver of the
conditions of the Offer, accept for payment and pay for Shares tendered as soon
as practicable as it is legally permitted to do so under this Agreement and
applicable law. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement, the
Minimum Percentage and the conditions set forth in Annex A hereto.
(b) On the date the Offer is commenced, Parent and Acquisition
Sub shall file or cause to be filed with the Securities and Exchange Commission
(the "Commission") a
(2)
<PAGE> 6
Tender Offer Statement on Schedule TO (together with all amendments or
supplements thereto, the "Schedule TO"), which shall include as an exhibit or
incorporate by reference, the Offer to Purchase (or portions thereof) and forms
of the related letter of transmittal and summary advertisement (such Schedule
TO, the Offer to Purchase and related documents, together with all amendments or
supplements thereto, are collectively referred to herein as the "Offer
Documents"). Parent and Acquisition Sub shall take all necessary steps to cause
the Offer Documents (other than the Schedule TO), together with the Schedule
14D-9 (as hereinafter defined), to be disseminated to the holders of Common
Stock as soon as practicable following commencement of the Offer. The Offer
Documents shall comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the Commission
and on the date first published, sent or given to the Company"s stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or Acquisition
Sub with respect to information furnished by the Company for inclusion in the
Offer Documents. The information supplied in writing by the Company for
inclusion in the Offer Documents and by Parent or Acquisition Sub for inclusion
in the Schedule TO (as hereinafter defined) shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Parent,
Acquisition Sub and the Company each agrees promptly to amend or supplement any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect or as otherwise required by applicable federal securities laws, and
Parent and Acquisition Sub each further agrees to take all steps necessary to
cause the Offer Documents, as so amended or supplemented, to be filed with the
Commission and disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents and all amendments and supplements thereto prior to the filing
thereof with the Commission or the dissemination thereof to the holders of
Shares.
(3)
<PAGE> 7
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that the Board of Directors of the Company (the
"Company Board"), at a meeting duly called and held, has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as hereinafter defined) taken together, are
fair to and in the best interests of the Company and its stockholders, (ii)
approved this Agreement and the transactions contemplated hereby, including,
without limitation, the Merger and the Offer (collectively, the "Transactions"),
and such approval constitutes approval of the Transactions for purposes of
Chapter 110F of the Massachusetts General Laws, as amended (the "MGL"), and
(iii) voted to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to Acquisition Sub and approve and adopt this
Agreement and the Merger, subject to the Company"s rights under Section 7.3
hereof.
(b) Concurrently with the commencement of the Offer and the
filing by or on behalf of Parent and Acquisition Sub of the Schedule TO, the
Company shall file with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with all amendments or supplements thereto, the
"Schedule 14D-9"), containing (among other things) the recommendation referred
to in clause (iii) of Section 1.2(a) hereof, subject to the Company"s rights
under Section 7.3 hereof. The Schedule 14D-9 shall comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the Commission and on the date first published, sent or given to
the Company"s stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information furnished by Parent or
Acquisition Sub for inclusion in the Schedule 14D-9. The Company, Parent and
Acquisition Sub each agrees promptly to correct, amend or supplement any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect or as otherwise required by applicable federal securities laws, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9,
as so amended or supplemented, to be filed with the Commission and disseminated
to the holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Parent, Acquisition Sub and their counsel
shall be given a reasonable opportunity to review and comment upon the Schedule
14D-9 and all amendments and supplements thereto prior to the filing thereof
with the Commission or the dissemination thereof to the holders of Shares.
(c) In connection with the Offer, the Company shall promptly
furnish Parent and Acquisition Sub with a list of the names and addresses of all
record holders of Shares and security position listings of Shares, each as of a
recent date, and shall promptly furnish Parent and Acquisition Sub with such
additional information, including updated lists of the
(4)
<PAGE> 8
stockholders of the Company, lists of the holders of the Company"s outstanding
stock options, mailing labels, security position listings and such other
assistance and information as Parent or Acquisition Sub or their agents may
reasonably request. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer, each of Parent and Acquisition Sub
shall use the information described in the preceding sentence only in connection
with the Offer, and if this Agreement is terminated in accordance with its
terms, each of them shall, upon the Company"s request, deliver to the Company
all such information and any copies or extracts thereof then in its possession
or under its control.
1.3 Board Representation. Promptly upon the purchase of Shares by
Acquisition Sub pursuant to the Offer, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Company
Board as is equal to the product of (a) the total number of directors on the
Company Board (after giving effect to the directors designated by Parent
pursuant to this sentence) and (b) the percentage that the total votes
represented by such number of Shares in the election of directors of the Company
so purchased by Acquisition Sub bears to the total votes represented by the
number of Shares outstanding. In furtherance thereof, the Company shall, upon
request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent"s designees to be elected to the
Company Board and shall take all actions to cause Parent"s designees to be so
elected to the Company Board. At such time, the Company shall also cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company Board of (i) each committee of the
Company Board, (ii) each board of directors (or similar body) of each Subsidiary
(as defined in Section 10.2 hereof) of the Company (each, a "Company
Subsidiary") and (iii) each committee (or similar body) of each such board. The
Company shall take, at its expense, all action required pursuant to Section
14(f) and Rule 14f-1 of the Exchange Act in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 1.3. Parent will supply to the
Company in writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1. Notwithstanding the foregoing, in the event that
Parent"s
(5)
<PAGE> 9
designees are elected to the Company Board, until the Effective Time
(as hereinafter defined), the Company Board shall have at least two directors
who are directors on the date hereof (the "Independent Directors"); provided
that, in such event, if the number of Independent Directors shall be reduced
below two for any reason whatsoever, the remaining Independent Director shall be
entitled to designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of this Agreement, or if no Independent
Director then remains, the other directors shall designate two persons to fill
such vacancies who shall not be stockholders, affiliates or associates of Parent
or Acquisition Sub and such persons shall be deemed to be Independent Directors
for purposes of this Agreement. Notwithstanding anything in this Agreement to
the contrary, in the event that Parent"s designees are elected to the Company
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (a) amend or terminate this Agreement
by the Company, (b) exercise or waive any of the Company"s rights, benefits or
remedies hereunder, or (c) extend the time for performance of Parent"s and
Acquisition Sub"s respective obligations hereunder.
1.4 Company Stock Options and Related Matters.
(a) Each option (collectively, the "Options") granted under
the Company Stock Option Plans (as hereinafter defined), which is outstanding
(whether or not currently exercisable) as of immediately prior to the date on
which Acquisition Sub accepts for payment Shares pursuant to the Offer (the
"Acceptance Date") and which has not been exercised or canceled prior thereto
shall, on the Acceptance Date, be canceled and in exchange therefor, Parent
shall pay to the holder thereof cash in an amount equal to the product of (i)
the number of Shares provided for in such Option and (ii) the excess, if any, of
the Offer Price over the exercise price per Share provided for in such Option,
which cash payment shall be treated as compensation and shall be net of any
applicable federal or state withholding tax. Notwithstanding the foregoing, if
the exercise price per Share provided for in any Option exceeds the Offer Price,
no cash shall be paid with regard to such Option to the holder of such Option.
The Company shall take all actions necessary to ensure that (i) all Options, to
the extent not exercised prior to the Acceptance Date, shall terminate and be
canceled as of the Acceptance Date and thereafter be of no further force or
effect, (ii) no Options are granted after the date of this Agreement, and (iii)
as of the Acceptance Date, the Company Stock Option Plans and all Options issued
thereunder shall terminate.
(b) Except as may be otherwise agreed to by Parent or
Acquisition Sub and the Company, the Company Stock Option Plans shall terminate
as of the Acceptance Date and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any of the Company Subsidiaries shall be
of no further force and effect and shall be deemed to be deleted as of the
Acceptance Date and no holder of an Option or any participant in any Company
Stock Option Plan or any other plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the Surviving
Corporation (as hereinafter defined) or any Subsidiary thereof.
(6)
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ARTICLE II
THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Company and Acquisition Sub shall consummate a merger
(the "Merger") pursuant to which (a) Acquisition Sub shall be merged with and
into the Company and the separate corporate existence of Acquisition Sub shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger (sometimes referred to herein as the "Surviving Corporation") and
shall continue to be governed by the laws of the Commonwealth of Massachusetts,
and (c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The Company shall take such steps as are permitted under the
Massachusetts Business Corporation Law ("MBCL") to (i) amend the Articles of
Organization of the Company (the "Articles of Organization") so that the
Articles of Organization of Acquisition Sub, as in effect immediately prior to
the Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Organization, and (ii) amend the Bylaws of the Company (the "Bylaws") so that
the Bylaws of Acquisition Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by law, by the Articles of Organization of the Surviving Corporation
and by such Bylaws. The Merger shall have the effects specified in the MBCL. The
purpose, powers, rights and privileges permitted in the Articles of Organization
are not to be deemed to be in limitation of similar, other or additional powers,
rights and privileges granted or permitted to the Company by the MBCL, it being
intended that the Company shall be authorized to have and shall have all the
powers, rights, and privileges granted or permitted to a corporation by such
statutes.
2.2 Effective Time. As promptly as practicable after all of the
conditions set forth in Article VIII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same,
Acquisition Sub and the Company shall duly execute and file articles of merger
(the "Articles of Merger") with the Secretary of the Commonwealth of
Massachusetts in accordance with the MBCL. The Merger shall become effective at
such time as the Articles of Merger, accompanied by payment of the filing fee
(as provided in Section 114 of the MBCL), have been examined by and received the
endorsed approval of the Secretary of State of the Commonwealth of Massachusetts
(the "Effective Time").
2.3 Closing. The closing of the Merger (the "Closing") shall take place
at such time and on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of all of the
conditions set forth in Article VIII hereof (the "Closing Date"), at the offices
of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109,
unless another date or place is agreed to by the parties hereto.
2.4 Directors and Officers. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, and the officers
(7)
<PAGE> 11
of the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Organization and Bylaws of the Surviving Corporation.
2.5 Stockholders" Meeting. If required by applicable law in order to
consummate the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable law:
(a) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as promptly as
practicable following the Acceptance Date for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(b) prepare and file in consultation with Parent with
the Commission a preliminary proxy or information statement relating to the
Merger and this Agreement containing the information required by the Commission
to be included in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment or
supplement thereto (the "Proxy Statement"), to be mailed to its stockholders,
provided that no amendment or supplement to the Proxy Statement will be made by
the Company without the consultation and approval of Parent and its counsel
(which shall not be unreasonably withheld), and to obtain the necessary
approvals of the Merger and this Agreement by its stockholders; and
(c) include in the Proxy Statement the recommendation
of the Company Board that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement.
In the event that a Special Meeting is called with respect to
the Merger or related matters, Parent and Acquisition Sub hereby agree to vote
all shares of capital stock of the Company that they or any affiliate acquire in
the Offer or otherwise are entitled to vote at any such Special Meeting or any
adjournment or postponement thereof in favor of the approval of the Merger and
the adoption of the Agreement and other related agreements (or any amended
version thereof) and any actions related thereto.
2.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition Sub, the Company or the
holders of any Shares:
(a) Each issued and outstanding Share held by the Company as a
treasury Share or held by any direct or indirect Company Subsidiary and each
issued and outstanding Share owned by Parent, Acquisition Sub or any other
direct or indirect Subsidiary of Parent (a "Parent Subsidiary") immediately
prior to the Effective Time, shall be canceled and retired and
(8)
<PAGE> 12
cease to exist without any conversion thereof and no payment or distribution
shall be made with respect thereto;
(b) Each Share issued and outstanding immediately prior to the
Effective Time, other than (i) those Shares referred to in Section 2.6(a) and
(ii) Dissenting Shares (as hereinafter defined), shall be canceled and shall be
converted automatically into and represent the right to receive the kind and
amount of consideration (without interest) equal to the kind and amount of
consideration paid per Share pursuant to the Offer (the "Merger Consideration"),
payable (without interest) to the holder of such Share upon surrender, in the
manner provided in Section 3.1 hereof, of the Certificate (as hereinafter
defined) that formerly evidenced such Share. All of the Certificates evidencing
Shares, by virtue of the Merger and without any action on the part of the
stockholders of the Company or the Company, shall be deemed to be no longer
outstanding, shall not be transferable on the books of the Surviving
Corporation, and shall represent solely the right to receive the amount set
forth in this Section 2.6(b); and
(c) Each share of common stock, no par value per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation, a
certificate for which shall be issued to the stockholder of Acquisition Sub upon
surrender to the Surviving Corporation of such stockholder"s certificate
formerly representing such shares of Acquisition Sub.
2.7 Taking of Necessary Action; Further Action. Each of Parent,
Acquisition Sub and the Company shall use its best efforts to take all such
action as may be necessary or appropriate in order to effectuate the Merger
under the MBCL as promptly as practicable following the purchase of shares
pursuant to the Offer. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of both of the
Company and Acquisition Sub, the officers of such corporations are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such lawful and necessary action. Acquisition Sub agrees, and Parent
agrees to cause Acquisition Sub, to vote all of the Shares owned beneficially or
of record by it or any of its affiliates or associates as of the record date for
the Special Meeting in favor of the Merger at the Special Meeting.
(9)
<PAGE> 13
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
3.1 Payment for Shares of Company Common Stock.
(a) Prior to the Effective Time, Parent shall designate a bank
or trust company to act as agent for the holders of the Shares in connection
with the Merger (the "Paying Agent") for purposes of effecting the exchange of
certificates for the Merger Consideration which, prior to the Effective Time,
represented Shares entitled to receive the Merger Consideration pursuant to
Section 2.6(b) hereof.
(b) Immediately prior to the Effective Time, Parent or
Acquisition Sub shall deposit in trust with the Paying Agent cash in an
aggregate amount equal to the product of (i) the number of Shares issued and
outstanding immediately prior to the Effective Time (other than Shares owned by,
or issuable upon conversion of other securities to, the Company, Parent,
Acquisition Sub or any direct or indirect Parent Subsidiary or Company
Subsidiary and Shares known immediately prior to the Effective Time to be
Dissenting Shares) (as hereinafter defined) and (ii) the Merger Consideration
(such aggregate amount being hereinafter referred to as the "Payment Fund"). The
Paying Agent shall, pursuant to irrevocable instructions, make the payments
referred to in Section 2.6(b) hereof out of the Payment Fund.
(c) Promptly after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each person who was a record
holder of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), whose Shares were
converted pursuant to Section 2.6(b) into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected and risk of loss and title to Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and instructions for its use in surrendering Certificates in exchange
for payment of the Merger Consideration. Upon the surrender to the Paying Agent
of such a Certificate, together with such duly executed letter of transmittal
and any other required documents, the holder thereof shall be paid, without
interest thereon, the Merger Consideration to which such holder is entitled
hereunder, and such Certificate shall forthwith be canceled. Until so
surrendered, each such Certificate shall, after the Effective Time, represent
solely the right to receive the Merger Consideration into which the Shares such
Certificate theretofore represented shall have been converted pursuant to
Section 2.6(b), and the holder thereof shall not be entitled to be paid any cash
to which such holder otherwise would be entitled. In case any payment pursuant
to this Section 3.1 is to be made to a holder other than the registered holder
of a surrendered Certificate, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
such cash to a person other
(10)
<PAGE> 14
than the registered holder of the Certificate surrendered, or that such person
shall establish to the satisfaction of the Paying Agent that such tax has been
paid or is not applicable.
(d) Promptly following the date which is six months after the
Effective Time, the Paying Agent shall return to the Surviving Corporation all
cash, certificates and other instruments in its possession that constitute any
portion of the Payment Fund (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and the Paying Agent"s duties shall terminate. Thereafter, each holder
of a Certificate shall be entitled to look to the Surviving Corporation (subject
to applicable abandoned property, escheat and similar laws) only as a general
creditor thereof with respect to any Merger Consideration, without interest,
that may be payable upon due surrender of the Certificate or Certificates held
by them. Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of Certificates that prior to the Effective
Time evidenced Shares for any Merger Consideration delivered pursuant hereto to
a public official pursuant to applicable abandoned property, escheat or other
similar laws.
(e) At the Effective Time, the Company Common Stock transfer
books shall be closed and no transfer of Shares shall be made thereafter. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent, they shall be canceled and exchanged for the
Merger Consideration as provided in Section 2.6(b), subject to applicable law in
the case of Dissenting Shares.
(f) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, upon the posting by such person of a bond
in such amount as Parent or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate, the cash representing the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
(11)
<PAGE> 15
3.2 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the
contrary, any Shares ("Dissenting Shares") which are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders of
the Company who have timely filed with the Company, before the taking of the
vote of the stockholders of the Company to approve this Agreement, written
objections to such approval stating their intention to demand payment for such
Shares, and who have not voted such Shares in favor of the adoption of this
Agreement will not be converted as described in Section 2.6 hereof, but will
thereafter constitute only the right to receive payment of the fair value of
such Shares in accordance with the applicable provisions of the MBCL (the
"Appraisal Rights Provisions"); provided, however, that all Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Shares under the Appraisal
Rights Provisions shall thereupon be deemed to have been canceled and retired
and to have been converted, as of the Effective Time, into the right to receive
the Merger Consideration, without interest, in the manner provided in Section
2.6 hereof. Persons who have perfected statutory rights with respect to
Dissenting Shares as aforesaid will not be paid by the Surviving Corporation as
provided in this Agreement and will have only such rights as are provided by the
Appraisal Rights Provisions with respect to such Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, if Parent or
Acquisition Sub abandons or is finally enjoined or prevented from carrying out,
or the stockholders rescind their adoption of, this Agreement, the right of each
holder of Dissenting Shares to receive the fair value of such Dissenting Shares
in accordance with the Appraisal Rights Provisions will terminate, effective as
of the time of such abandonment, injunction, prevention or rescission.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the MBCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the MBCL. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal or offer to settle any such demands.
(c) Each dissenting stockholder who becomes entitled under the
MBCL to payment for Dissenting Shares shall receive payment therefor after the
Effective Time from the Surviving Corporation (but only after the amount thereof
shall have been agreed upon or finally determined pursuant to the MBCL) and such
Dissenting Shares shall be canceled.
(12)
<PAGE> 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Except as set forth in the disclosure schedules delivered at or prior
to the execution hereof to the Company which shall refer to the relevant
sections of this Agreement (the "Parent Disclosure Schedule"), Parent and
Acquisition Sub jointly and severally hereby represent and warrant to the
Company as follows:
4.1 Existence; Good Standing; Authority; Compliance With Law.
(a) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Quebec. Acquisition Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Massachusetts. Except as set forth in Section 4.1 of the
Parent Disclosure Schedule, each of Parent and Acquisition Sub is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
licensed or qualified would not have a Parent Material Adverse Effect (as
defined below). For purposes of this Agreement, a "Parent Material Adverse
Effect" shall mean a material adverse effect on the current business, results of
operations or financial condition of Parent and its Subsidiaries taken as a
whole. Each of Parent and Acquisition Sub has all requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted.
(b) Neither Parent nor Acquisition Sub is in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which Parent or
Acquisition Sub or any of their respective properties or assets is subject,
where such violation would have a Parent Material Adverse Effect. Parent and
Acquisition Sub have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations in
connection with their businesses as now conducted, where the failure to obtain
any such license, permit or authorization or to take any such action would have
a Parent Material Adverse Effect.
(c) Copies of the Articles or Certificate of Incorporation and
bylaws (and in each such case, all amendments thereto) of each of the Parent and
Acquisition Sub are in Section 4.1 of the Parent Disclosure Schedule.
4.2 Authorization; Validity of Agreement; Necessary Action. Each of
Parent and Acquisition Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and
(13)
<PAGE> 17
Acquisition Sub of this Agreement and the consummation of the Transactions have
been duly authorized by the Board of Directors of Parent (the "Parent Board")
and the Board of Directors of Acquisition Sub (the "Acquisition Sub Board") and
by Parent as the sole stockholder of Acquisition Sub, and except as set forth in
Section 4.2 of the Parent Disclosure Schedule, no other corporate action on the
part of Parent and Acquisition Sub is necessary to authorize the execution and
delivery by Parent and Acquisition Sub of this Agreement and the consummation of
the Transactions. This Agreement has been duly executed and delivered by Parent
and Acquisition Sub and, assuming due and valid authorization, execution and
delivery hereof by the Company, is a valid and binding obligation of each of
Parent and Acquisition Sub, as the case may be, enforceable against each of them
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors" rights and general
principles of equity.
4.3 Consents and Approvals; No Violations. Except as set forth in
Section 4.3 of the Parent Disclosure Schedule and except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the HSR Act, state securities or
state "Blue Sky" laws and the MGL, none of the execution, delivery or
performance of this Agreement by Parent or Acquisition Sub, the consummation by
Parent or Acquisition Sub of the Transactions or compliance by Parent or
Acquisition Sub with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the respective articles of organization
or bylaws of Parent or Acquisition Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any state or federal government or
governmental authority or by any United States or state court of competent
jurisdiction (a "Governmental Entity"), (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the material terms, conditions or provisions of any material note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or Acquisition Sub is a party or by
which either of them or any of their respective properties or assets may be
bound, or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, Acquisition Sub or any of their properties or
assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
4.4 Required Financing. Parent and Acquisition Sub have financing
commitments in place which, if funded in accordance with their terms, will
provide sufficient funds to purchase and pay for the Shares pursuant to the
Offer and the Merger in accordance with the terms of this Agreement, to
consummate the Transactions and to repay all amounts of the Company"s
outstanding indebtedness for borrowed money. Neither Parent nor Acquisition Sub
has any reason to believe that any condition to such financing commitments
cannot or will not be waived or satisfied prior to the Initial Expiration Date.
Parent has provided to the Company a true, complete and correct copy of the
financing commitment letter (the "Financing Letter"), and all amendments
thereto, executed by the lender (the "Lender"). Parent will provide to the
(14)
<PAGE> 18
Company any amendments to the Financing Letter as promptly as possible (but in
any event within twenty-four (24) hours).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered at or prior
to the execution hereof to Parent and Acquisition Sub, which shall refer to the
relevant sections of this Agreement (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent and Acquisition Sub as follows:
5.1 Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts. Except as set forth in Section 5.1 of the Company Disclosure
Schedule, the Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other jurisdiction in
which the character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary, except where
the failure to be so licensed or qualified would not have a Company Material
Adverse Effect (as defined below). For purposes of this Agreement, a "Company
Material Adverse Effect" shall mean a material adverse effect on the business,
assets, results of operations or financial condition of the Company and the
Company Subsidiaries taken as a whole. The Company has all requisite corporate
power and authority to own, operate, lease and encumber its properties and carry
on its business as now conducted.
(b) Each of the Company Subsidiaries listed in Section 5.1 of
the Company Disclosure Schedule (the "Company Subsidiaries") is a corporation,
partnership or limited liability company (or similar entity or association in
the case of those Company Subsidiaries organized and existing other than under
the laws of a state of the United States) duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or other power and authority to
own its properties and to carry on its business as it is now being conducted,
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not have a Company
Material Adverse Effect. The Company has no other subsidiaries other than the
Company Subsidiaries.
(c) Neither the Company nor any of the Company Subsidiaries is
in violation of any order of any court, governmental authority or arbitration
board or tribunal, or
(15)
<PAGE> 19
any law, ordinance, governmental rule or regulation to which the Company or any
Company Subsidiary or any of their respective properties or assets is subject,
where such violation, alone or together with all other violations would have a
Company Material Adverse Effect. The Company and the Company Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or governmental regulations in connection
with their businesses as now conducted, where the failure to obtain any such
license, permit or authorization or to take any such action, alone or together
with all other failures, would have a Company Material Adverse Effect.
(d) Copies of the Articles of Organization and Bylaws and the
other charter documents, bylaws, organizational documents and partnership,
limited liability company and joint venture agreements (and in each such case,
all amendments thereto) of the Company and each of the Company Subsidiaries are
in Section 5.1 of the Company Disclosure Schedule.
5.2 Authorization, Validity and Effect of Agreements. The Company has
the requisite power and authority to enter into the Transactions and to execute
and deliver this Agreement. The Company Board has approved this Agreement and
the Transactions. In connection with the foregoing, the Company Board has taken
such actions and votes as are necessary on its part to render the provisions of
Chapter 110F of the MGL and all other applicable takeover statutes inapplicable
to this Agreement and the Transactions. Subject only to the approval of this
Agreement by the holders of the Company Common Stock, if required, the execution
by the Company of this Agreement and consummation of the Transactions have been
duly authorized by all requisite corporate action on the part of the Company.
This Agreement, assuming due and valid authorization, execution and delivery
thereof by Parent and Acquisition Sub, constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors" rights and general principles of equity.
(16)
<PAGE> 20
5.3 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Company Common Stock and 100,000 shares of
preferred stock, $1.00 par value per share, of the Company (the "Company
Preferred Stock"). As of the date of this Agreement, (i) 8,572,215 shares of
Company Common Stock were issued and outstanding, (ii) 2,900,000 shares of
Company Common Stock have been authorized and reserved for issuance pursuant to
the Company"s stock option plans listed in Section 5.3 of the Company Disclosure
Schedule (the "Company Stock Option Plans"), subject to adjustment on the terms
set forth in the Company Stock Option Plans, (iii) 2,640,232 Options were
outstanding under the Company Stock Option Plans, and (iv) no shares of Company
Common Stock and no shares of Company Preferred Stock were held in the treasury
of the Company. As of the date of this Agreement, the Company had no shares of
Company Common Stock reserved for issuance other than as described above. All
such issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. The Company has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. Except for the Options (all of
which have been issued under the Company Stock Option Plans), as of the date of
this Agreement there are not any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock of the Company. Section 5.3 of the Company Disclosure Schedule
sets forth a full list of the Options, including the name of the person to whom
such Options have been granted, the number of shares subject to each Option, the
per share exercise price for each Option, and the vesting schedule for each
Option. As of the Acceptance Date, pursuant to the Company Stock Option Plans,
the Options will be fully vested and immediately exercisable. Except as set
forth in Section 5.3 of the Company Disclosure Schedule, there are no agreements
or understandings to which the Company or any Company Subsidiary is a party with
respect to the voting of any shares of capital stock of the Company or which
restrict the transfer of any such shares, nor does the Company have knowledge of
any third party agreements or understandings with respect to the voting of any
such shares or which restrict the transfer of any such shares. Except as set
forth in Section 5.3 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock, partnership
interests or any other securities of the Company or any Company Subsidiary.
Except as set forth in Section 5.3 of the Company Disclosure Schedule, neither
the Company nor any Company Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement to register the offer and sale or resale
of any of their securities under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Securities Act").
5.4 Subsidiaries. Except as set forth in Section 5.4 of the Company
Disclosure Schedule, the Company owns directly or indirectly each of the
outstanding shares of capital stock or other equity interest of each of the
Company Subsidiaries. Each of the outstanding shares of capital stock of each of
the Company Subsidiaries having corporate form is duly
(17)
<PAGE> 21
authorized, validly issued, fully paid and nonassessable. Except as set forth in
Section 5.4 of the Company Disclosure Schedule, each of the outstanding shares
of capital stock or other equity interest of each of the Company Subsidiaries is
owned, directly or indirectly, by the Company free and clear of all liens,
pledges, security interests, claims or other encumbrances. The following
information for each Company Subsidiary as of the date of this Agreement is set
forth in Section 5.4 of the Company Disclosure Schedule: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock, share capital or other equity interest, to the extent applicable; and
(iii) the name of each stockholder or equity interest holder and the number of
issued and outstanding shares of capital stock, share capital or other equity
interest held by it.
5.5 Other Interests. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other entity (other than investments in short-term investment
securities).
5.6 No Violation; Consents. Except as set forth in Section 5.6 of the
Company Disclosure Schedule, neither the execution and delivery by the Company
of this Agreement nor consummation by the Company of the Transactions in
accordance with the terms hereof, will conflict with or result in a breach of
any provisions of the Articles of Organization or the Bylaws. Except as set
forth in Section 5.6 of the Company Disclosure Schedule, the execution and
delivery by the Company of this Agreement and consummation by the Company of the
Transactions in accordance with the terms hereof will not violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties of the
Company or the Company Subsidiaries under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of (i) any note, bond, mortgage, indenture or deed of trust or (ii)
any license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which the Company or any of the Company Subsidiaries
is a party, or by which the Company or any of the Company Subsidiaries or any of
their properties is bound, except as otherwise would not, individually or in the
aggregate, have a Company Material Adverse Effect. Other than the filings
provided for in Article II of this Agreement, the HSR Act, the Exchange Act or
applicable state securities and "Blue Sky" laws (collectively, the "Regulatory
Filings"), the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company and consummation of the
Transactions does not, require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, except where the failure to obtain any such consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(18)
<PAGE> 22
5.7 Commission Documents. The Company has filed all required forms,
reports and documents with the Commission since December 31, 1997 (collectively,
the "Company SEC Reports"), all of which were prepared in accordance with the
applicable requirements of the Exchange Act, the Securities Act and the rules
and regulations promulgated thereunder (the "Securities Laws"). All required
Company SEC Reports have been filed with the Commission and constitute all
forms, reports and documents required to be filed by the Company under the
Securities Laws since December 31, 1997. As of their respective dates, the
Company SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or incorporated by
reference into the Company SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of the Company
and the Company Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by reference into the Company SEC Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and the Company
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act. No Company Subsidiary is required to file any form, report or
document with the Commission.
5.8 Litigation. Except as set forth in Section 5.8 of the Company
Disclosure Schedule, there is no litigation, suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries, as to which there is a reasonable likelihood of an
adverse determination and which, if adversely determined, individually or in the
aggregate with all such other litigation, suits, actions or proceedings, would
(i) have a Company Material Adverse Effect, (ii) materially and adversely affect
the Company"s ability to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the Transactions.
5.9 Absence of Certain Changes. Except as disclosed in the Company SEC
Reports filed with the Commission between December 31, 1999 and the date of this
Agreement, and except as set forth in Section 5.9 of the Company Disclosure
Schedule, the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course of business and there has not been: (i)
as of the date hereof, any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company; (ii) any material commitment, contractual obligation (including,
without limitation, any management or franchise agreement, any lease (capital or
otherwise) or any letter of intent),
(19)
<PAGE> 23
borrowing, liability, guaranty, capital expenditure or transaction (each, a
"Commitment") entered into by the Company or any of the Company Subsidiaries
outside the ordinary course of business except for Commitments for expenses of
attorneys, accountants and investment bankers incurred in connection with the
Transactions; or (iii) any material change in the Company"s accounting
principles, practices or methods.
5.10 Taxes.
(a) Except as set forth in Section 5.10 of the Company
Disclosure Schedule, each of the Company and the Company Subsidiaries (i) has
timely filed all Tax Returns (as defined below) which the Company was required
to file (after giving effect to any filing extension granted by a Governmental
Entity) and (ii) has paid all Taxes (as defined below) shown on such Tax Returns
as required to be paid by it, except, in each case, where the failure to file
such Tax Returns or pay such Taxes would not, individually or in the aggregate,
have a Company Material Adverse Effect. Except as set forth in Section 5.10 of
the Company Disclosure Schedule, the most recent audited financial statements
contained in the Company"s Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 reflect, to the knowledge of the Company, an adequate reserve
for all Taxes payable by the Company and the Company Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements in accordance with GAAP, whether or not shown as being due on any
returns. To the knowledge of the Company, and except as set forth in Section
5.10 of the Company Disclosure Schedule, no deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of the Company
Subsidiaries as of the date of this Agreement, and no requests for waivers of
the time to assess any such Taxes are pending.
(b) For purposes of this Agreement, "Taxes" means any and all
taxes, fees, levies, duties tariffs, imposts and other charges of any kind
(together with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any government or taxing
authority, including, without limitation: taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
worker"s compensation, unemployment compensation or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added or gains taxes; license, registration and documentation fees; and
customers; duties, tariffs and similar charges.
(c) For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements or other information required to be
supplied to a taxing authority in connection with Taxes.
(20)
<PAGE> 24
5.11 Properties.
(a) Section 5.11 of the Company Disclosure Schedule lists all
real property leased or subleased to or by the Company or any of the Company
Subsidiaries and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to Parent or
Acquisition Sub complete and accurate copies of the leases and subleases (as
amended to date) listed in Section 5.11 of the Company Disclosure Schedule. With
respect to each lease and sublease listed in Section 5.11 of the Company
Disclosure Schedule except as would not, individually or in the aggregate, have
a Company Material Adverse Effect:
(i) the lease or sublease is legal, valid, binding,
enforceable obligation of the Company or Company Subsidiary, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors" rights and general principles of equity;
(ii) neither the Company nor any Company Subsidiary,
or to the knowledge of the Company any other party, is in material
breach or violation of, or default under, any such lease or sublease,
and, to the knowledge of the Company, no event has occurred, is pending
or, is threatened, which, after the giving of notice, with lapse of
time, would constitute a material breach or default by the Company or a
Company Subsidiary, or to the knowledge of the Company, any other party
under such lease or sublease;
(iii) neither the Company nor any Company Subsidiary
has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold; and
(iv) the Company is not aware of any Encumbrances (as
defined below), easement, covenant or other restriction applicable to
the real property subject to such lease, except for recorded easements,
covenants and other restrictions which do not, individually or in the
aggregate, materially impair the current uses or the occupancy by the
Company of the property subject thereto.
(b) Except as set forth in Section 5.11 of the Company
Disclosure Schedule, the Company and the Company Subsidiaries own good title,
free and clear of all liens which secure the payment of money mortgages or deeds
of trust, monetary, charges which are liens, security interests or other
encumbrances on title which secure the payment of money (collectively,
"Encumbrances"), to all property and assets necessary to conduct the business of
the Company as presently conducted, except for (A) Encumbrances reflected in the
Company"s balance sheet at January 1, 2000 as reflected in the Company SEC
Reports, (B) Encumbrances or imperfections of title which are not, individually
or in the aggregate, material in character, amount or extent and which do not
materially detract from the value or materially interfere
(21)
<PAGE> 25
with the present or presently contemplated use of the assets subject thereto or
affected thereby, and (C) Encumbrances for current Taxes not yet due and
payable. All of the machinery, equipment and other tangible personal property
and assets owned or used by the Company and the Company Subsidiaries are, to the
Company"s knowledge, in good condition and repair, except for ordinary wear and
tear, to the extent necessary to permit the Company and the Company Subsidiaries
to conduct their business as they are presently being conducted.
5.12 Intellectual Property. To the knowledge of the Company, the
Company or the Company Subsidiaries are the owner of, or a licensee under a
valid license for, all items of intangible property which are material to the
business of the Company and the Company Subsidiaries as currently conducted,
taken as a whole, including, without limitation, trade names, unregistered
trademarks and service marks, brand names, software, patents and copyrights. As
of the date of this Agreement, except as disclosed in the Company SEC Reports or
Section 5.12 of the Company Disclosure Schedule, there are no claims pending or,
to the Company"s knowledge, threatened, that the Company or any Company
Subsidiary is in violation of any such intellectual property right of any third
party which, individually or in the aggregate, would have a Company Material
Adverse Effect, and, to the Company"s knowledge, no third party is in violation
of any intellectual property rights of the Company or any Company Subsidiary
which, individually or in the aggregate, would have a Company Material Adverse
Effect.
5.13 Environmental Matters. The Company and the Company Subsidiaries
are in compliance with all Environmental Laws (as defined below), except for any
noncompliance that, either singly or in the aggregate, would not have a Company
Material Adverse Effect. As used in this Agreement, "Environmental Laws" shall
mean all federal, state and local laws, rules, regulations, ordinances and
orders that purport to regulate the release of hazardous substances into the
environment, or impose requirements relating to environmental protection. As
used in this Agreement, "Hazardous Materials" means any "hazardous waste" as
defined in either the United States Resource Conservation and Recovery Act or
regulations adopted pursuant to said act, any "hazardous substances" or
"pollutant" or "contaminant" as defined in the United States Comprehensive
Environmental Response, Compensation and Liability Act and, to the extent not
included in the foregoing, any medical waste, oil or fractions thereof. Except
as set forth in Section 5.13 of the Company Disclosure Schedule, there is no
administrative or judicial enforcement proceeding pending, or to the knowledge
of the Company threatened, against the Company or any Company Subsidiary under
any Environmental Law. Except as set forth in Section 5.13 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary or, to the
knowledge of the Company, any legal predecessor of the Company or any Company
Subsidiary, has received any written notice that it is potentially responsible
under any Environmental Law for costs of response or for damages to natural
resources, as those terms are defined under the Environmental Laws, at any
location and neither the Company nor any Company Subsidiary has transported or
disposed of, or allowed or arranged for any third party to transport or dispose
of, any waste containing Hazardous Materials at any location included on the
National Priorities List, as defined under
(22)
<PAGE> 26
the Comprehensive Environmental Response, Compensation, and Liability Act, or
any location proposed for inclusion on that list or at any location on any
analogous state list. Except as set forth in Section 5.13 of the Company
Disclosure Schedule, (i) the Company has no knowledge of any release on the real
property owned or leased by the Company or any Company Subsidiary or predecessor
entity of Hazardous Materials in a manner that could result in an order to
perform a response action or in material liability under the Environmental Laws,
and (ii) to the Company"s knowledge, there is no hazardous waste treatment,
storage or disposal facility, underground storage tank, landfill, surface
impoundment, underground injection well, friable asbestos or PCB"s, as those
terms are defined under the Environmental Laws, located at any of the real
property owned or leased by the Company or any Company Subsidiary or predecessor
entity or facilities utilized by the Company or the Company Subsidiaries.
5.14 Employee Benefit Plans.
(a) Section 5.14 of the Company Disclosure Schedule sets forth
a list of every Company Benefit Plan (as hereinafter defined) that is maintained
by the Company or an Affiliate (as hereinafter defined) on the date hereof.
(b) Each Company Benefit Plan which has been intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification under such section
and neither the Company nor any Affiliate knows that any such Company Benefit
Plan has been maintained in a manner that would preclude qualified status.
(c) With respect to any Company Benefit Plan, there has been
no (i) "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Code Section
4975, for which an exemption is not available or (ii) material failure to comply
with any provision of ERISA, other applicable law, or any agreement, which, in
either case, would subject the Company or any Affiliate to liability (including,
without limitation, through any obligation of indemnification or contribution)
for any damages, penalties, or taxes, or any other material loss or expense that
would have a Company Material Adverse Effect. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the Company"s
knowledge, threatened with respect to any such Company Benefit Plan.
(d) Neither the Company nor any Affiliate has incurred any
liability under Title IV of ERISA which has not been paid in full as of the date
of this Agreement. There has been no "accumulated funding deficiency" (whether
or not waived) with respect to any employee pension benefit plan ever maintained
by the Company or any Affiliate and subject to Code Section 412 or ERISA Section
302. With respect to any Company Benefit Plan maintained by the Company or any
Affiliate and subject to Title IV of ERISA, there has been
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no (other than as a result of the transactions contemplated by this Agreement)
(i) "reportable event," within the meaning of ERISA Section 4043 or the
regulations thereunder, for which the notice requirement is not waived by the
regulations thereunder, and (ii) event or condition which presents a material
risk of a plan termination or any other event that may cause the Company or any
Affiliate to incur liability or have a lien imposed on its assets under Title IV
of ERISA. Except as set forth in Section 5.14 of the Company Disclosure
Schedule, neither the Company nor any Affiliate has ever maintained a
Multiemployer Plan (as hereinafter defined).
(e) With respect to each Company Benefit Plan, complete and
correct copies of the following documents (if applicable to such Company Benefit
Plan) have previously been made available to Parent: (i) all documents embodying
or governing such Company Benefit Plan, and any funding medium for such Company
Benefit Plan (including, without limitation, trust agreements) as they may have
been amended to the date hereof; (ii) the most recent IRS determination or
approval letter with respect to such Company Benefit Plan under Code Section
401(a), and any applications for determination or approval subsequently filed
with the IRS; (iii) the most recently filed IRS Form 5500, with all applicable
schedules and accountants" opinions attached thereto; and (iv) the current
summary plan description for such Company Benefit Plan (or other descriptions of
such Company Benefit Plan provided to employees) and all modifications thereto.
(f) For purposes of this Section:
(i) "Company Benefit Plan" means (A) all employee
benefit plans within the meaning of ERISA Section 3(3)
maintained by the Company or any Affiliate, and (B) all stock
option plans and stock purchase plans.
(ii) An entity "maintains" a Company Benefit Plan if
such entity sponsors, contributes to, or provides benefits
under or through such Company Benefit Plan, or has any
obligation (by agreement or under applicable law) to
contribute to or provide benefits under or through such
Company Benefit Plan, or if such Company Benefit Plan provides
benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) An entity is an "Affiliate" of the Company for
purposes of this Section 5.14 if it would have ever been
considered a single employer with the Company under ERISA
Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C); and
(iv) "Multiemployer Plan" means an employee pension
or welfare benefit plan to which more than one unaffiliated
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
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5.15 Labor Matters. Except as set forth in Section 5.15 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries relating to their business, except for any such proceeding which
would not have a Company Material Adverse Effect. To the Company"s knowledge
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of the Company Subsidiaries.
5.16 No Brokers. Neither the Company nor any of the Company
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of such entity or Parent
or Acquisition Sub to pay any finder"s fees, brokerage or agent"s commissions or
other like payments in connection with the negotiations leading to this
Agreement or consummation of the Transactions, except that the Company has
retained Goldman, Sachs & Co. ("Goldman Sachs") as its financial advisor in
connection with the Transactions. Other than the foregoing arrangements, the
Company is not aware of any claim for payment of any finder"s fees, brokerage or
agent"s commissions or other like payments in connection with the negotiations
leading to this Agreement or consummation of the Transactions.
5.17 Opinion of Financial Advisor. The Company has received the opinion
of Goldman Sachs to the effect that, as of the date hereof, the Offer Price and
the Merger Consideration are fair to the holders of the Company Common Stock
from a financial point of view.
5.18 Material Contracts. Except as set forth on Schedule 5.18 of the
Company Disclosure Schedule, the Company SEC Documents list all Material
Contracts (as defined below) of the Company, and except as set forth on Schedule
5.18 of the Company Disclosure Schedule or in the Company SEC Documents, to the
knowledge of the Company, each Material Contract is valid, binding and
enforceable and in full force and effect; except where such failure to be valid,
binding and enforceable and in full force and effect would not, individually or
in the aggregate, have a Company Material Adverse Effect, and there are no
defaults thereunder, except those defaults that would not, individually or in
the aggregate, have a Company Material Adverse Effect. For purposes of this
Agreement, "Material Contracts" shall mean (i) all contracts, agreements or
understandings with customers of the Company and Company Subsidiaries in the
last fiscal year where each customers" contracts, agreements or understandings
in the aggregate account for more than 10% of the Company"s annual revenues;
(ii) all acquisition, merger, asset purchase or sale agreements entered into by
the Company in the last two fiscal years with a transaction value in excess of
10% of the Company"s annual revenues; and (iii) any other agreements within the
meaning set forth in Item 601(b)(10) of Regulation S-K of Title 17, Part 229 of
the Code of Federal Regulations.
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5.19 Definition of the Company"s Knowledge. As used in this Agreement,
the phrase "to the knowledge of the Company" or any similar phrase means the
actual (and not the constructive or imputed) knowledge, after due inquiry, of
those individuals identified in Section 5.19 of the Company Disclosure Schedule.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by the Company. During the period from the date
of this Agreement to the Effective Time, except as otherwise contemplated by
this Agreement, the Company shall and shall cause each of the Company
Subsidiaries to carry on their respective businesses in the usual, regular and
ordinary course, consistent with past practice, and use their best efforts to
preserve intact their present business organizations, keep available the
services of their present advisors, managers, officers and employees and
preserve their relationships with customers, suppliers, licensors and others
having business dealings with them and continue existing contracts as in effect
on the date hereof (for the term provided in such contracts). Without limiting
the generality of the foregoing, neither the Company nor any of the Company
Subsidiaries will (except as expressly permitted by this Agreement or to the
extent that Parent shall otherwise consent in writing):
(a) split, combine or reclassify any shares of capital stock
of the Company or declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
any shares of capital stock of the Company, except for dividends paid by any
Company Subsidiary to the Company or any Company Subsidiary that is, directly or
indirectly, wholly owned by the Company;
(b) authorize for issuance, issue or sell or agree or commit
to issue or sell (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, stock appreciation rights) (other than the issuance of Shares upon
the exercise of Options and Warrants outstanding on the date of this Agreement
in accordance with their present terms);
(c) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business which are material to the Company
or any of the Company Subsidiaries (whether by asset acquisition, stock
acquisition or otherwise), except pursuant to obligations in effect on the date
hereof or as set forth in Section 6.1 of the Company Disclosure Schedule;
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(d) except up to $10,000,000 pursuant to credit facilities in
existence on the date hereof, incur any amount of indebtedness for borrowed
money, guarantee any indebtedness, issue or sell debt securities, make any
loans, advances or capital contributions, mortgage, pledge or otherwise encumber
any material assets, create or suffer any material lien thereupon other than in
the ordinary course of business, except, in each case, pursuant to credit
facilities in existence on the date hereof;
(e) except pursuant to any mandatory payments under any credit
facilities in existence on the date hereof, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than any payment, discharge or satisfaction (i)
in the ordinary course of business consistent with past practice, or (ii) in
connection with the Transactions;
(f) change any of the accounting principles or practices used
by it (except as required by generally accepted accounting principles, in which
case written notice shall be provided to Parent and Acquisition Sub prior to any
such change);
(g) except as required by law, (i) enter into, adopt, amend or
terminate any Company Benefit Plan, (ii) enter into, adopt, amend or terminate
any agreement, arrangement, plan or policy between the Company or any of the
Company Subsidiaries and one or more of their directors or officers, or (iii)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of any
non-executive officer or employee or pay any benefit not required by any Company
Benefit Plan or arrangement as in effect as of the date hereof;
(h) adopt any amendments to the Articles of Organization or
the Bylaws except as expressly provided by the terms of this Agreement;
(i) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization (other
than plans of complete or partial liquidation or dissolution of inactive Company
Subsidiaries);
(j) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises for litigation where the amount paid (after giving effect to
insurance proceeds actually received) in settlement or compromise does not
exceed $100,000;
(k) amend any term of any outstanding security of the Company
or any Company Subsidiary;
(l) other than in the ordinary course of business, neither the
Company nor any Company Subsidiary shall modify or amend any Material Contract
to which the Company
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or any Company Subsidiary is a party or waive, release or assign any material
rights or claims under any such Material Contract;
(m) authorize, commit to or make any equipment purchases or
capital expenditures other than in the ordinary course of business and
consistent with past practice; or
(n) enter into an agreement to take any of the foregoing
actions.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 HSR and Other Filings.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, including the taking of such actions as are
necessary to obtain any necessary consents, approvals, orders, exemptions and
authorizations by or from any public or private third party, including, without
limitation, any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which the
Company or any Company Subsidiary is a party or by which any of their respective
properties or assets are bound, to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the Transactions,
to cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
Transactions, and to effect all necessary registrations and submissions of
information requested by governmental authorities. For purposes of the foregoing
sentence, the obligations of Parent and the Company to use their "best efforts"
to obtain waivers, consents and approvals to loan agreements, leases and other
contracts shall not include any obligation to agree to an adverse modification
of the terms of such documents or to prepay or incur additional obligations to
such other parties. If, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors of Parent and the Company shall take all such necessary
action.
(b) Without limiting the generality of the foregoing, as
promptly as practicable, Parent and the Company each shall properly prepare and
file any other filings required under federal or state law relating to the
Merger and the other Transactions (including filings, if any, required under the
HSR Act) (collectively, "Other Filings"). Each of Parent and the Company shall
promptly notify the other of the receipt of any comments on, or any request for
amendments or supplements to, any Other Filings by any Governmental Entity or
official,
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and each of Parent and the Company shall supply the other with copies of all
correspondence between it and each of its Subsidiaries and representatives, on
the one hand, and any other appropriate governmental official, on the other
hand, with respect to any Other Filings. Parent and Acquisition Sub hereby
covenant and agree to use their respective best efforts to secure termination of
any waiting periods under the HSR Act and obtain the approval of the Federal
Trade Commission (the "FTC") or any other Governmental Entity for the
transactions contemplated hereby, including, without limitation, (i) defending
through litigation on the merits any antitrust, trade regulation or competition
claim asserted in any court by any Governmental Entity, including, but not
limited to, defending against any request for, or seeking to have vacated or
terminated, any decree, order or judgment that would restrain, prevent or delay
consummation of the Merger, and (ii) divesting such plants, assets or businesses
of Parent or the Company or any of their respective Subsidiaries (including
entering into ancillary agreements relating to any such divestiture of such
assets or businesses) as may be required in order to avoid the filing of a
lawsuit by any Governmental Entity seeking to enjoin the Merger, or the entry
of, or to effect the dissolution of, any injunction, temporary restraining
order, or other order in any suit or proceeding, which would otherwise have the
effect of preventing or delaying the consummation of the Merger. At the request
of Parent, the Company shall agree to divest, hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to, or
its ability to retain, any of the businesses, product lines or assets of the
Company or any of the Company Subsidiaries, provided that any such action shall
be conditioned upon the consummation of the Merger. The Company and Parent shall
keep the other apprised of the status of matters relating to the completion of
the transactions contemplated hereby and work cooperatively in connection with
obtaining any consents from Governmental Entity, including, without limitation:
(i) promptly notifying the other of, and if in writing, furnishing the other
with copies of (or, in the case of material oral communications, advise the
other orally of) any communications from or with any Governmental Entity with
respect to the Merger or any of the other transactions contemplated by this
Agreement, (ii) permitting the other party to review and discuss in advance, and
considering in good faith the views of one another in connection with, any
proposed written (or any material proposed oral) communication with any
Governmental Entity, (iii) not participating in any meeting with any
Governmental Entity unless it consults with the other party in advance and to
the extent permitted by such Governmental Entity gives the other party the
opportunity to attend and participate thereat, (iv) furnishing the other party
with copies of all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and any Governmental Entity with
respect to this Agreement and the Merger, and (v) furnishing the other party
with such necessary information and reasonable assistance as such other party
may reasonably request in connection with its preparation of necessary filings
or submissions of information to any Governmental Entity. The Company and Parent
may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other under this Section as
"outside counsel only." Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not
be disclosed by such outside counsel to employees,
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officers, or directors of the recipient unless express permission is obtained in
advance from the source of the materials (the Company or Parent, as the case may
be) or its legal counsel.
7.2 Fees and Expenses. Subject to Section 9.2(b) hereof, whether or not
the Merger is consummated, all fees, costs and expenses incurred in connection
with this Agreement and the Transactions shall be paid by the party incurring
such fees, costs or expenses.
7.3 No Solicitations.
(a) The Company represents and warrants that it has terminated
any discussions or negotiations relating to, or that may be reasonably expected
to lead to, any Acquisition Proposal (as hereinafter defined) and will promptly
request the return of all confidential information regarding the Company
provided to any third party prior to the date of this Agreement pursuant to the
terms of any confidentiality agreements. Except as permitted by this Agreement,
the Company shall not, and shall not authorize or permit any Company Subsidiary
or any of their respective officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other representative retained
by it to, directly or indirectly, (i) solicit, initiate or encourage (including
by way of furnishing non-public information), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes an
Acquisition Proposal, or (ii) participate in any discussions or negotiations
regarding an Acquisition Proposal. Notwithstanding anything to the contrary in
this Agreement, if the Company receives an Acquisition Proposal that was
unsolicited or that did not otherwise result from a breach of this Section
7.3(a), and the Company Board determines in good faith (after consulting with
its outside legal counsel and its financial advisor) that such Acquisition
Proposal is reasonably likely to lead to a Superior Proposal (as defined below),
the Company (x) may furnish non-public information with respect to the Company
and the Company Subsidiaries to the person who made such Acquisition Proposal (a
"Third Party") and (y) may participate in negotiations regarding such
Acquisition Proposal. Notwithstanding anything to the contrary in this
Agreement, the Company will notify Parent after receipt of any Acquisition
Proposal, but shall not be required to disclose to Parent or Acquisition Sub the
identity of the Third Party making any such Acquisition Proposal and shall have
no duty to notify or update Parent or Acquisition Sub on the status of
discussions or negotiations (including the status of such Acquisition Proposal
or any amendments or proposed amendments thereto) between the Company and such
Third Party.
(b) The Board of Directors of the Company shall not withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Acquisition Sub, its approval or recommendation of this Agreement or the Offer
or the Merger unless the Board of Directors of the Company shall have received
an Acquisition Proposal reasonably likely to lead to a Superior Proposal and
shall have determined in good faith, after consulting with its outside legal
counsel and its financial advisor, that this Agreement or the Offer or the
Merger is no longer in the best interests of the Company"s stockholders and that
such withdrawal or
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modification is required to satisfy its fiduciary duties to the Company"s
stockholders under applicable law.
(c) Nothing contained in this Section 7.3 shall prohibit the
Company from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or
making any disclosure required by Rule 14a-9 promulgated under the Exchange Act.
(d) As used in this Agreement, the term "Acquisition Proposal"
shall mean any proposed or actual (i) merger, consolidation or similar
transaction involving the Company, (ii) sale, lease or other disposition,
directly or indirectly, by merger, consolidation, share exchange or otherwise,
of any assets of the Company or the Company Subsidiaries representing 15% or
more of the consolidated assets of the Company and the Company Subsidiaries,
(iii) issue, sale or other disposition by the Company of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 15% or more of the votes associated with the
outstanding securities of the Company, (iv) tender offer or exchange offer in
which any person shall acquire beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act), or the right to acquire beneficial
ownership, or any "group" (as such term is defined under the Exchange Act) shall
have been formed which beneficially owns or has the right to acquire beneficial
ownership of, 15% or more of the outstanding shares of Company Common Stock, (v)
recapitalization, restructuring, liquidation, dissolution, or other similar type
of transaction with respect to the Company or (vi) transaction which is similar
in form, substance or purpose to any of the foregoing transactions; provided,
however, that the term "Acquisition Proposal" shall not include the Merger and
the other Transactions.
(e) As used in this Agreement, the term "Superior Proposal"
shall mean an Acquisition Proposal that the Board of Directors determines in
good faith, after consulting with its outside legal counsel and its financial
advisor, would, if consummated, result in a transaction that is more favorable
to the stockholders of the Company than the Transactions.
7.4 Officers" and Directors" Indemnification.
(a) In the event of any threatened or actual claim, action,
suit, demand, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
demand, proceeding or investigation in which any person who is now, or has been
at any time prior to the date hereof, or who becomes prior to the Effective
Time, a director, officer, employee, fiduciary or agent of the Company or any of
the Company Subsidiaries (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer,
employee, fiduciary or agent of the Company or any of the Company Subsidiaries,
or is or was serving at the request of the Company or any of the
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Company Subsidiaries as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(ii) the negotiation, execution or performance of this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that the Company shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation and Parent shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including attorneys" fees and expenses), judgments, fines and amounts
paid in settlement in connection with any such threatened or actual claim,
action, suit, demand, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, demand, proceeding or investigation
(whether asserted or arising before or after the Effective Time), (A) the
Company, and the Surviving Corporation and Parent after the Effective Time,
shall promptly pay expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the full extent
permitted by law, subject to the provision by such Indemnified Party of an
undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled to such amounts, (B) the Indemnified Parties
may retain one counsel satisfactory to them, and the Company, and the Surviving
Corporation and Parent after the Effective Time, shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties within 30 days after
statements therefor are received, and (C) the Company, the Surviving Corporation
and Parent will use their respective reasonable best efforts to assist in the
vigorous defense of any such matter; provided that none of the Company, the
Surviving Corporation or Parent shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld); and provided further that the Surviving Corporation and Parent shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim indemnification under this Section 7.4, upon
learning of any such claim, action, suit, demand, proceeding or investigation,
shall notify the Company and, after the Effective Time, the Surviving
Corporation and Parent, thereof; provided that the failure to so notify shall
not affect the obligations of the Company, the Surviving Corporation and Parent
except to the extent such failure to notify materially prejudices such party.
(b) Parent and Acquisition Sub agree that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of, the directors, officers, employees and agents of the Company and
the Company Subsidiaries provided for in the Articles of Organization or Bylaws
as in effect as of the date hereof with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger, shall continue in
full force and effect for a period of not less then six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
claims (each a "Claim")
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asserted or made within such period shall continue until the disposition of such
Claim. Prior to the Effective Time, the Company shall purchase an extended
reporting period endorsement under the Company"s existing directors" and
officers" liability insurance coverage for the Company"s directors and officers
in a form acceptable to the Company which shall provide such directors and
officers with coverage for six years following the Effective Time of not less
than the existing coverage under, and have other terms not materially less
favorable on the whole to, the insured persons than the directors" and officers"
liability insurance coverage presently maintained by the Company.
(c) This Section 7.4 is intended for the irrevocable benefit
of, and to grant third party rights to, the Indemnified Parties and shall be
binding on all successors and assigns of Parent, the Company and the Surviving
Corporation. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 7.4.
(d) In the event that Parent or the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person or entity, then,
and in each such case, proper provision shall be made so that the successors and
assigns of Parent and the Surviving Corporation, as the case may be, assume the
obligations set forth in this Section 7.4.
7.5 Access to Information; Confidentiality. From the date hereof until
the Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company"s and Company Subsidiaries" officers,
employees and agents to, afford to Parent and to the officers, employees and
agents of Parent complete access at all reasonable times to such officers,
employees, agents, properties, books, records and contracts, and shall furnish
to Parent such financial, operating and other data and information as Parent may
reasonably request. Prior to the Effective Time, Parent and Acquisition Sub
shall hold in confidence all such information on the terms and subject to the
conditions contained in that certain confidentiality agreement between Parent
and the Company dated February 17, 2000 (the "Confidentiality Agreement"). The
Company hereby waives the provisions of the Confidentiality Agreement as and to
the extent necessary to permit the making and consummation of the Transactions.
At the Effective Time, such Confidentiality Agreement shall terminate.
7.6 Financial and Other Statements. Notwithstanding anything contained
in Section 7.5, during the term of this Agreement, the Company shall also
provide to Parent the following documents and information:
(a) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter ending after the date of this
Agreement, the Company will deliver to Parent its Quarterly Report on Form 10-Q
as filed under the Exchange Act. As soon
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as reasonably available, but in no event more than 90 days after the end of each
fiscal year ending after the date of this Agreement, the Company will deliver to
Parent its Annual Report on Form 10-K, as filed under the Exchange Act. The
Company will also deliver to Parent, contemporaneously with its being filed with
the Commission, a copy of each Current Report on Form 8-K.
(b) As soon as practicable, the Company will furnish to Parent
copies of all such financial statements and reports as it or any Company
Subsidiary shall send to its stockholders, the Commission or any other
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential and except as legally prohibited
thereby.
7.7 Public Announcements. The Company and Parent shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any of the Transactions (including
any "pre-commencement communications" permitted by Rule 14d-2(b) of the Exchange
Act) and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by law or the applicable rules of any stock
exchange if it has used its best efforts to consult with the other party and to
obtain such party"s consent but has been unable to do so in a timely manner. In
this regard, the parties shall make a joint public announcement of the Offer and
the Transactions contemplated thereby no later than (i) the close of trading on
the Nasdaq National Market on the day this Agreement is signed, if such signing
occurs during a business day or (ii) the opening of trading on the Nasdaq
National Market on the business day following the date on which this Agreement
is signed, if such signing does not occur during a business day. The parties
agree that such joint public announcement shall be filed with the Commission by
Parent and Acquisition Sub on Schedule TO in accordance with Rule 14d-2(b) of
the Exchange Act.
7.8 Employee Benefit Arrangements.
(a) After the Closing, Parent shall cause Acquisition Sub or
the Company to honor all obligations under (i) the existing terms of the
employment and severance agreements to which the Company or any Company
Subsidiary is presently a party, except as may otherwise be agreed to by the
parties thereto, and (ii) the Company"s and any Company Subsidiary"s general
severance policy. Following the Effective Time, the Company"s employees will be
permitted to participate in the employee benefit plans of Parent as in effect on
the date thereof on terms substantially similar to those provided to employees
of Parent. Until such time as the Parent causes employees of the Company to
participate in the employee benefit plans of the Parent, employees of the
Company will continue to participate in the Company Benefit Plans (other than
stock option or stock purchase plans) on substantially similar terms to those
currently in effect.
(34)
<PAGE> 38
(b) If any employee of the Company or any of the Company
Subsidiaries becomes a participant in any employee benefit plan, practice or
policy of Parent, any of its affiliates or the Surviving Corporation, such
employee shall be given credit under such plan for all service prior to the
Effective Time with the Company and the Company Subsidiaries and prior to the
time such employee becomes such a participant, for purposes of eligibility
(including, without limitation, waiting periods) and vesting, and such employees
will be given credit for such service for purposes of any vacation policy. In
addition, if any employees of the Company or any of the Company Subsidiaries
employed as of the Closing Date become covered by a medical plan of Parent, any
of its affiliates or the Surviving Corporation, such medical plan shall not
impose any exclusion on coverage for preexisting medical conditions with respect
to these employees.
7.9 Required Financing. Each of Parent and Acquisition Sub hereby
agrees to use its best efforts to arrange the financing in respect of the
Transactions and to satisfy the conditions set forth in the Financing Letter.
Parent and Acquisition Sub shall keep the Company informed of the status of
their financing arrangements for the Transactions, including providing
notification to the Company as promptly as possible (but in any event within
twenty-four (24) hours) (i) that the Lender may be unable to provide the
financing as contemplated by the Financing Letter, or (ii) concerning the
inability of Parent or Acquisition Sub to satisfy any of the conditions set
forth in the Financing Letters. Parent shall provide written notice to the
Company within twenty-four (24) hours if the Lender has given notice to Parent
or Acquisition Sub that such Lender will be unable to provide the financing
contemplated by the Financing Letter.
7.10 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Acquisition Sub, any deed,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Acquisition Sub, any other actions and things to vest,
perfect or confirm on record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger. The Company agrees to use its
best efforts to have Mark Owens, BT Capital Partners, Inc., Bear Stearns & Co.,
Inc. and, to the extent he exercises stock options prior to the Initial
Expiration Date, Richard E. Wenz enter into the Tender Agreement as soon as
possible after the date hereof.
(35)
<PAGE> 39
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, where permissible, at or prior to the Closing
Date, of each of the following conditions:
(a) Stockholder Approval. If required by applicable law, this
Agreement and the Transactions, including the Merger, shall have been approved
and adopted by the affirmative vote of the stockholders of the Company to the
extent required by the MBCL and the Articles of Organization.
(b) Hart-Scott-Rodino Act. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
(c) Other Regulatory Approvals. All necessary approvals,
authorizations and consents of any governmental or regulatory entity required to
consummate the Merger shall have been obtained and remain in full force and
effect, and all waiting periods relating to such approvals, authorizations and
consents shall have expired or been terminated, except where such failure would
not have a Company Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be, or would not affect adversely the ability of the Company or
Acquisition Sub, as the case may be, to consummate the Merger.
(d) No Injunctions, Orders or Restraints; Illegality. No
statute, order, decree, ruling or permanent injunction (an "Injunction") shall
have been enacted, entered, promulgated or enforced by any Governmental Entity
which prohibits the consummation of the Merger on the terms contemplated by this
Agreement; provided that the party seeking to rely upon this condition has fully
complied with and performed its obligations pursuant to Section 7.1 hereof.
(e) Required Consents. All consents relating to any Material
Contracts set forth on Schedule 8.1(e) that are necessary as a result of the
consummation of the transactions contemplated by this Agreement shall have been
received.
(f) Purchase of Shares in Offer. Parent, Acquisition Sub or
their affiliates shall have purchased Shares pursuant to the Offer.
(36)
<PAGE> 40
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after stockholder approval thereof:
(a) by the mutual written consent of Parent or Acquisition Sub
and the Company.
(b) by either of the Company or Parent or Acquisition Sub:
(i) if any Governmental Entity shall have enacted,
entered, promulgated or enforced a final and nonappealable Injunction
(which Injunction the parties hereto shall have used their best efforts
to lift), which prohibits the consummation of the Merger on the terms
contemplated by this Agreement (provided that the party seeking to rely
upon this condition has fully complied with and performed its
obligations pursuant to Section 7.1 hereof), or permanently enjoins the
acceptance for payment of, or payment for, Shares pursuant to the Offer
or the Merger;
(ii) if, without any material breach by the
terminating party of its obligations under this Agreement, Parent or
Acquisition Sub shall not have purchased Shares pursuant to the Offer
on or prior to the Expiration Date; provided, however, that neither
Parent, Acquisition Sub nor the Company shall terminate this Agreement
prior to August 31, 2000 if Shares shall not have been purchased by
Acquisition Sub by reason of any applicable waiting period (and any
extension thereof) under the HSR Act in respect of the Offer not having
expired or been terminated or the pendency of a non-final Injunction,
and Parent, Acquisition Sub and the Company shall use their best
efforts to cause such condition to be satisfied (including, without
limitation, by complying with the requirements of the FTC or other
comparable Governmental Entity to divest of assets or otherwise in
connection with the consummation of the Transactions or in settlement
of any action brought by it) or have any such Injunction stayed or
reversed; or
(iii) by either the Company or Parent if, at the
Special Meeting (including any adjournment or postponement thereof)
called pursuant to Section 2.5 hereto the requisite vote of the
shareholders of the Company for the Merger shall not have been
obtained.
(37)
<PAGE> 41
(c) by the Company:
(i) if Parent or Acquisition Sub shall have failed to
commence the Offer on or prior to the tenth business day following the
date of the initial public announcement of the Offer;
(ii) if the Company Board of Directors shall have (A)
withdrawn, or modified or changed in a manner adverse to Parent its
approval or recommendation of this Agreement or the Offer, or resolved
to do any of the foregoing, and (B) determined in good faith, after
consultation with its outside legal counsel and its financial advisor,
that an Acquisition Proposal is a Superior Proposal;
(iii) if Parent or Acquisition Sub shall have
breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in
this Agreement, which breach cannot be or has not been cured within 30
days after the giving of written notice to Parent or Acquisition Sub
except, in any case, for such breaches which would not affect adversely
Parent"s or Acquisition Sub"s ability to consummate the Offer or the
Merger; provided, however, that no cure period shall be applicable
under any circumstances to the matters set forth in Section 9.1(c)(i);
or
(iv) if the Minimum Condition shall not have been
satisfied, in which case neither Parent, Acquisition Sub nor any of
their affiliates shall be permitted to accept for payment or pay for
any Shares unless and until the Company shall have provided Parent with
written notice stating that the Company is not exercising its right to
terminate this Agreement pursuant to this Section 9.1(c)(iv).
(d) by Parent or Acquisition Sub if:
(i) the Company shall have breached any
representation, warranty, covenant or other agreement contained in this
Agreement which breach (A) would give rise to the failure of a
condition set forth in paragraph (b), (c) or (e) of Annex A hereto, and
(B) cannot be or has not been cured within 30 days after the giving of
written notice to the Company; or
(ii) if the Company Board of Directors shall have
withdrawn, modified or changed in a manner adverse to Parent its
approval or recommendation of this Agreement or the Offer or shall have
executed an agreement in principle or definitive agreement relating to
an Acquisition Proposal with a person or entity other than Parent or
its affiliates or resolved to do any of the foregoing.
(38)
<PAGE> 42
9.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant
to Section 9.1 hereof, this Agreement shall forthwith become null and void and
have no effect, without any liability on the part of any party hereto or its
affiliates, trustees, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease except for the agreements contained
in Sections 7.2 and 7.5, this Section 9.2 and Article X; provided, however, that
nothing contained in this Section 9.2 shall relieve any party from liability for
any fraud or willful breach of this Agreement.
(b) If the Company terminates this Agreement pursuant to
Section 9.1(c)(ii) or Parent or Acquisition Sub terminates this Agreement
pursuant to Section 9.1(d)(ii) hereof, then the Company shall as soon as
possible thereafter pay to Parent an amount in cash equal to 4% of the sum of
(i) the product of (x) the Offer Price and (y) the total number of issued and
outstanding Shares, and (ii) the amount to be paid for Options pursuant to
Section 1.4 hereof (the "Liquidated Amount").
(c) Any payment required by this Section 9.2 shall be payable
by the Company to Parent by wire transfer of immediately available funds to an
account designated by Parent.
(d) Notwithstanding anything to the contrary in this
Agreement, Parent and Acquisition Sub hereto expressly acknowledge and agree
that, with respect to any termination of this Agreement pursuant to Section
9.1(c)(ii) hereof, the payment of the Liquidated Amount shall constitute
liquidated damages with respect to any claim for damages or any other claim
which Parent or Acquisition Sub would otherwise be entitled to assert against
the Company or any of the Company Subsidiaries or any of their respective
assets, or against any of their respective directors, officers, employees,
partners, managers, members or shareholders, with respect to this Agreement and
the Transactions and shall constitute the sole and exclusive remedy available to
Parent and Acquisition Sub. The parties hereto expressly acknowledge and agree
that, in light of the difficulty of accurately determining actual damages with
respect to the foregoing upon any termination of this Agreement pursuant to
Section 9.1(c)(ii) hereof, the rights to payment under Section 9.2(b): (i)
constitute a reasonable estimate of the damages that will be suffered by reason
of any such proposed or actual termination of this Agreement pursuant to Section
9.1(c)(ii) hereof and (ii) shall be in full and complete satisfaction of any and
all damages arising as a result of the foregoing. Except for nonpayment of the
amounts set forth in Section 9.2(b), Parent and Acquisition Sub hereby agree
that, upon any termination of this Agreement pursuant to Section 9.1(c)(ii)
hereof, in no event shall Parent or Acquisition Sub be entitled to seek or to
obtain any recovery or judgment against the Company or any of the Company
Subsidiaries or any of their respective assets, or against any of their
respective directors, officers, employees, partners, managers, members or
shareholders, and in no event shall Parent or Acquisition Sub be entitled to
seek or obtain any other damages of any kind, including, without limitation,
consequential, indirect or punitive damages.
(39)
<PAGE> 43
9.3 Amendment. This Agreement may be amended by the parties hereto by
an instrument in writing signed on behalf of each of the parties hereto at any
time before or after any approval hereof by the stockholders of the Company and
Acquisition Sub, but in any event following authorization by the Acquisition Sub
Board and the Company Board; provided, however, that after any such stockholder
approval, no amendment shall be made which by law requires further approval by
stockholders without obtaining such approval.
9.4 Extension; Waiver. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or sent if delivered personally or sent by
cable, telegram, telecopier or telex or sent by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
(a) if to Parent or Acquisition Sub:
Dorel Industries, Inc.
1255 Green Avenue
Suite 300
Westmont, Quebec
Canada H37 2A4
Telecopy No.: (514) 934-9932
(40)
<PAGE> 44
with a copy to:
Shearman & Sterling
Commerce Court West
199 Bay Street, Suite 4405
Toronto, Ontario
MSL 1E8
Attn: Bruce Czachor
Telecopy No.: 416-360-2958
(b) if to the Company:
Safety 1st, Inc.
45 Dan Road
Canton, MA 02021
Telecopy No.: (781) 364-3205
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Stuart M. Cable, P.C.
Joseph L. Johnson III, P.C.
Telecopy No.: (617) 523-1231
10.2 Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, Acquisition Sub or the Company, the word "Subsidiary"
means any corporation more than 50% of whose outstanding voting securities, or
any partnership, joint venture or other entity more than 50% of whose total
equity interest, is directly or indirectly owned by Parent, Acquisition Sub or
the Company, as the case may be. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Non-Survival of Representations, Warranties, Covenants and
Agreements. Except for Sections 7.2, 7.4 and 7.8, and Article X, none of the
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, and thereafter there shall be no liability on the
part of either Parent, Acquisition Sub or the Company or any of their respective
officers, directors or stockholders in respect thereof. Except as expressly set
forth in this Agreement, there are no representations or warranties of any party
hereto, express or implied.
(41)
<PAGE> 45
10.4 Miscellaneous. This Agreement (i) constitutes, together with the
Confidentiality Agreement, Annex A hereto, the Company Disclosure Schedule, the
Parent Disclosure Schedule and the Tender Agreements referred to in the recitals
to this Agreement, the entire agreement and supersedes all of the prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof, (ii) shall be binding upon
and inure to the benefits of the parties hereto and their respective successors
and assigns and is not intended to confer upon any other person (except as set
forth below) any rights or remedies hereunder and (iii) may be executed in two
or more counterparts which together shall constitute a single agreement. Section
7.4 and Section 7.8 are intended to be for the benefit of those persons
described therein and the covenants contained therein may be enforced by such
persons. The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in the Massachusetts Courts (as hereinafter
defined), this being in addition to any other remedy to which they are entitled
at law or in equity.
10.5 Assignment. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties.
10.6 Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
10.7 Choice of Law/Consent to Jurisdiction. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement, or the Transactions shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to its rules of conflict of laws. Each of the Company, Parent and
Acquisition Sub hereby irrevocably and unconditionally consents to submit to the
sole and exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts and of the United States District Court for the District of
Massachusetts (the "Massachusetts Courts") for any litigation arising out of or
relating to this Agreement, or the negotiation, validity or performance of this
Agreement, or the Transactions (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the Massachusetts Courts and agrees not to plead
or claim in any Massachusetts Court that such litigation brought therein has
been brought in any inconvenient forum. Each of the parties hereto agrees, (a)
to the extent such party is not otherwise subject to service of process in the
Commonwealth of Massachusetts, to appoint and maintain an agent in the
Commonwealth of Massachusetts as such party"s agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid
(42)
<PAGE> 46
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service. Service made pursuant to
(a) or (b) above shall have the same legal force and effect as if served upon
such party personally within the Commonwealth of Massachusetts. For purposes of
implementing the parties" agreement to appoint and maintain an agent for service
of process in the Commonwealth of Massachusetts, each such party does hereby
appoint CT Corporation, 101 Federal Street, Suite 300, Boston, Massachusetts
02110, as such agent.
10.8 No Agreement Until Executed. Irrespective of negotiations among
the parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the MGL
and any applicable provision of the Articles of Organization, the terms of this
Agreement, and (ii) this Agreement is executed by the parties hereto.
[Remainder of page intentionally left blank]
(43)
<PAGE> 47
IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DOREL INDUSTRIES, INC.
By: /s/ Martin Schwartz
------------------------------------
Name:Martin Schwartz
Title: President
By: /s/ Frank Rana
------------------------------------
Name: Frank Rana
Title: Treasurer
DIAMOND ACQUISITION SUBSIDIARY, INC.
By: /s/ Jeffrey Schwartz
------------------------------------
Name: Jeffrey Schwartz
Title: President
By: /s/ Jeffrey Schwartz
------------------------------------
Name: Jeffrey Schwartz
Title: Treasurer
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
------------------------------------
Name: Richard E. Wenz
Title: President
By: /s/ Joseph Driscoll
------------------------------------
Name: Joseph Driscoll
Title: Treasurer
<PAGE> 48
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings set forth
in the attached Agreement, except that the term "Agreement" shall be deemed to
refer to the attached Agreement together with this Annex A.
Notwithstanding any other provision of the Offer or the Agreement and
subject to Rule 14c-1(c) under the Exchange Act and Section 1.1 of the
Agreement, Acquisition Sub may delay the acceptance for payment of and payment
for any Shares, (A) until any applicable waiting period (and any extension
thereof) under the HSR Act in respect of the Offer shall have expired or been
terminated, or (B) if there shall not have been validly tendered to Acquisition
Sub pursuant to the Offer and not withdrawn immediately prior to the Expiration
Date, at least that number of Shares that, when taken as a whole with all other
Shares owned or acquired by Acquisition Sub (whether pursuant to the Offer or
otherwise), constitutes at least the Minimum Condition, and (C) terminate or
amend the Offer or delay the acceptance for payment of and payment for Shares
tendered if at any time on or after the date of the Agreement, and prior to the
Expiration Date, any of the following conditions exist or shall occur or remain
in effect:
(a) Any Governmental Entity shall have enacted, entered,
promulgated or enforced a final and nonappealable Injunction (which Injunction
the parties hereto shall have used their best efforts to lift), which (i)
prohibits Parent or Acquisition Sub from owning or operating all of the material
portions of the business and assets of the Company and the Company Subsidiaries
taken as a whole or (ii) prohibits the consummation of the Merger on the terms
contemplated by this Agreement (provided that the party seeking to rely upon
this condition has fully complied with and performed its obligations pursuant to
Section 7.1 hereof), or permanently enjoins the acceptance for payment of, or
payment for, Shares pursuant to the Offer or the Merger;
(b) (i) Any of the representations and warranties of the
Company set forth in the Agreement which are qualified by a Company Material
Adverse Effect or words of similar effect shall not have been, or cease to be,
true and correct (except to the extent such representations and warranties
expressly relate to a specific date or as of the date hereof, in which case such
representations and warranties shall not have been true and correct as of such
date); or (ii) any of the representations and warranties of the Company set
forth in the Agreement which are not so qualified shall not have been, or cease
to be, true and correct (except to the extent such representations and
warranties expressly relate to a specific date or as of the date hereof, in
which case such representations and warranties shall not have been true and
correct in all material respects as of such date), except for such inaccuracies
as, individually or in the aggregate, would not have a Company Material Adverse
Effect;
A-1
<PAGE> 49
(c) The Company shall not have performed all obligations
required to be performed by it under the Agreement, including, without
limitation, the covenants contained in Article VI or VII thereof, except where
any failure to perform would, individually or in the aggregate, not materially
impair or significantly delay the ability of Acquisition Sub to consummate the
Offer;
(d) The Agreement shall have been terminated in accordance
with its terms;
(e) Any consent, authorization, order or approval of (or
filing or registration with) any governmental commission, board, other
regulatory body or other third party required to be made or obtained by the
Company or any of the Company Subsidiaries or affiliates in connection with the
execution, delivery and performance of the Agreement shall not have been
obtained or made, except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration, would not have
a Company Material Adverse Effect;
(f) The Company shall have executed a definitive agreement or
agreement in principal with any person relating to an Acquisition Proposal with
a person or entity other than Parent or its affiliates;
(g) The Company Board of Directors shall have (A) withdrawn,
or modified or changed in a manner adverse to Parent its approval or
recommendation of this Agreement or the Offer, or resolved to do any of the
foregoing, and (B) determined in good faith, after consultation with its outside
legal counsel and its financial advisor, that an Acquisition Proposal is a
Superior Proposal; or
(h) There shall have occurred, after the date of this
Agreement, any change concerning the Company or the Company Subsidiaries which
has had a material adverse effect on the business, assets, results of operations
or financial condition of the Company and the Company Subsidiaries taken as a
whole ("Material Adverse Change"), provided, however, that any change (i) that
primarily results from this Agreement, the Merger, the Offer and the
transactions contemplated thereby or the announcement thereof, (ii) generally
affecting the industries in which the Company operates, including changes due to
actual or proposed changes in law or regulations, or (iii) related to a general
drop in stock prices in the United States shall be excluded in determining
whether a Material Adverse Change has occurred.
The foregoing conditions (i) may be asserted by Parent or Acquisition
Sub regardless of the circumstances (including any action or inaction by Parent
or any of its affiliates other than a material breach of the Agreement), and
(ii) are for the sole benefit of Parent, Acquisition Sub and their respective
affiliates. The foregoing conditions may be waived by Parent, in whole or in
part, at any time and from time to time, in the sole discretion of Parent. The
foregoing conditions may be considered to be material to the Offer. The failure
by Parent or Acquisition Sub at any time to exercise any of the foregoing rights
will not be deemed a waiver of any
A-2
<PAGE> 50
right and each right will be deemed an ongoing right which may be asserted at
any time and from time to time.
Should the Offer be terminated due to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall promptly be returned
to the tendering stockholders.
A-3
<PAGE> 1
EXHIBIT 2
FORM OF
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this ___ day of _________, ____ by and between
Safety 1st, Inc., a Massachusetts corporation with its principal place of
business in Canton, Massachusetts (the "Company"),
and_________________________________ (the "Executive").
1. Purpose. The Company considers it essential to the best interests of
its stockholders to promote and preserve the continuous employment of key
management personnel. The Board of Directors of the Company (the "Board")
recognizes, however, that, as is the case with many publicly held corporations,
the possibility of a Change in Control (as defined in Section 2 hereof) exists
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. Therefore, the
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control. Nothing in this Agreement shall be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have
occurred in any one of the following events:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than the
Company, any of its Subsidiaries, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of the
Company or any of its Subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing 50% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an election of
the Company's Board of Directors ("Voting Securities") or (B) the then
outstanding shares of Stock of the Company (in either such case other than as a
result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to the
date hereof whose election or nomination for election was approved by a vote of
at least a majority of the Incumbent Directors shall, for purposes of this
Agreement, be
<PAGE> 2
considered as Incumbent Director provided, however, that there shall be excluded
for consideration as Incumbent Director any individual whose initial assumption
of office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board of Directors; or
(c) Upon (A) any consolidation or merger of the Company or any
Subsidiary where the shareholders of the Company, immediately prior to the
consolidation or merger, did not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act), directly
or indirectly, shares representing in the aggregate more than 50% of the voting
shares of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any), (B) any sale, lease,
exchange or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or substantially
all of the assets of the Company or (C) the approval by the stockholders of the
Company of any plan or proposal for the liquidation or dissolution of the
Company.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred for purposes of the foregoing clause (a) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Stock or other Voting Securities outstanding, increases (x)
the proportionate number of shares of Stock beneficially owned by any person to
50% or more of the shares of Stock then outstanding or (y) the proportionate
voting power represented by the Voting Securities beneficially owned by any
person to 50% or more of the combined voting power of all then outstanding
Voting Securities; provided, however, that if any person referred to in clause
(x) or (y) of this sentence shall thereafter become the beneficial owner of any
additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change in Control"
shall be deemed to have occurred for purposes of the foregoing clause (a).
3. Terminating Event. A "Terminating Event" shall mean any of the
events provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the
Executive with the Company for any reason other than (A) a willful act of
dishonesty by the Executive with respect to any matter involving the Company or
any subsidiary or affiliate, or (B) conviction of the Executive of a crime
involving moral turpitude, or (C) the gross or willful failure by the Executive
to substantially perform the Executive's duties with the Company (other than any
such failure after Executive gives notice of termination for good reason), which
failure is not cured within 30 days after a written demand for substantial
performance is received by the Executive from the Board of Directors of the
Company which specifically identifies the manner in which the Board of Directors
believes the Executive has not substantially performed the Executive's duties,
or (D) the failure by the Executive to perform his full-time duties with the
Company by reason of his death, disability or retirement; provided, however,
that a
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<PAGE> 3
Terminating Event shall not be deemed to have occurred pursuant to this Section
3(a) solely as a result of the Executive being an employee of any direct or
indirect successor to the business or assets of the Company, rather than
continuing as an employee of the Company following a Change in Control. For
purposes of clauses (A) and (C) of this Section 3(a), no act, or failure to act,
on the Executive's part shall be deemed "willful" unless done, or omitted to be
done, by the Executive without reasonable belief that the Executive's act, or
failure to act, was in the best interests of the Company and its subsidiaries
and affiliates. For purposes of clause (D) of this Section 3(a), Section 6 and
Section 8(b) hereof, "disability" shall mean the Executive's incapacity due to
physical or mental illness which has caused the Executive to be absent from the
full-time performance of his duties with the Company for a period of six (6)
consecutive months if the Company shall have given the Executive a Notice of
Termination and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of his
duties. For purposes of clause (D) of this Section 3(a) and Section 6,
"retirement" shall mean termination of the Executive's employment in accordance
with the Company's normal retirement policy, not including early retirement,
generally applicable to its salaried employees, as in effect immediately prior
to the Change in Control, or in accordance with any retirement arrangement
established with respect to the Executive with the Executive's express written
consent;
(b) termination by the Executive of the Executive's employment
with the Company for "Good Reason." "Good Reason" shall mean the occurrence of
any of the following events:
(i) an adverse change, not consented to by the
Executive, in the nature or scope of the Executive's responsibilities,
authorities, powers, functions or duties from the responsibilities, authorities,
powers, functions or duties exercised by the Executive immediately prior to the
Change in Control; or
(ii) a reduction in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from time
to time hereafter; or
(iii) the relocation of the Company's offices at
which the Executive is principally employed immediately prior to the date of a
Change in Control (the "Current Offices") to any other location, or the
requirement by the Company for the Executive to be based anywhere other than the
Current Offices, except for required travel on the Company's business to an
extent substantially consistent with the Executive's business travel obligations
immediately prior to the Change in Control; or
(iv) the failure by the Company to pay to the
Executive any portion of his compensation or to pay to the Executive any portion
of an installment of deferred compensation under any deferred compensation
program of the Company within 15 days of the date such compensation is due
without prior written consent of the Executive; or
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<PAGE> 4
(v) the failure by the Company to obtain an effective
agreement from any successor to assume and agree to perform this Agreement, as
required by Section 16.
4. Severance Payment. In the event a Terminating Event occurs within
twelve (12) months after a Change in Control,
(a) the Company shall pay to the Executive an amount equal to
[two times], [one times], [one-half of] the sum of (i) the Executive's base
salary immediately prior to the Terminating Event (or immediately prior to the
Change in Control, if higher) and (ii) the Executive's most recent bonus paid
prior to the Change in Control, payable in one lump-sum payment on the Date of
Termination. Said amount shall be paid in one lump sum payment no later than 31
days following the Date of Termination;
(b) the Company shall, regardless of whether the Company is
unable to utilize Company-related benefit plans, continue to provide to the
Executive certain benefits, including, without limitation, health, dental,
long-term disability, life insurance and other fringe benefits, on the same
terms and conditions as though the Executive had remained an active employee,
for eighteen (18) months;
(c) the Company shall provide COBRA benefits to the Executive
following the end of the period referred to in Section 4(b) above, such benefits
to be determined as though the Executive's employment had terminated at the end
of such period; and
(d) the Company shall pay to the Executive all reasonable
legal and arbitration fees and expenses incurred by the Executive in obtaining
or enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Severance Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Severance Payments, any Federal, state and
local income tax, employment tax and Excise Tax upon the payment provided by
this subsection, and any interest and/or penalties assessed with respect to such
Excise Tax, shall be equal to the Severance Payments.
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<PAGE> 5
(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by a nationally-recognized accounting firm other than Grant Thornton LLP
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested
by the Company or the Executive. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation applicable to individuals
for the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of individual taxation in the
state and locality of the Executive's residence on the Date of Termination, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. The initial Gross-Up Payment, if any,
as determined pursuant to this Section 5(b), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, the
Company shall furnish the Executive with an opinion of the Accounting Firm that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an "Underpayment"). In the
event that the Company exhausts its remedies pursuant to Section 5(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred, consistent with the calculations required to be made hereunder, and
any such Underpayment, and any interest and penalties imposed on the
Underpayment and required to be paid by the Executive in connection with the
proceedings described in Section 5(c), shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after the
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
5
<PAGE> 6
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 5(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issues raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 5(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 5(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
6
<PAGE> 7
6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) the termination by the Company
of the employment of the Executive because of (A) a willful act of dishonesty by
the Executive with respect to any matter involving the Company or any subsidiary
or affiliate, or (B) conviction of the Executive of a crime involving moral
turpitude, or (C) the gross or willful failure by the Executive to substantially
perform the Executive's duties with the Company, or (D) the failure by the
Executive to perform his full-time duties with the Company by reason of his
death, disability (as defined in Section 3(a)) or retirement (as defined in
Section 3(a)), (b) the resignation or termination of the Executive for any
reason prior to a Change in Control, (c) the resignation of the Executive after
a Change in Control for any reason other than the occurrence of any of the
events enumerated in Section 3(b)(i)-(v) of this Agreement, or (d) the date
which is twelve (12) months after a Change in Control if the Executive is still
employed by the Company.
7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control and
during the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with this Section 8. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and the Date of Termination. Further, a
Notice of Termination pursuant to one or more of clauses (A) through (C) of
Section 3(a) hereof is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than two-thirds (2/3) of the entire
membership of the Board at a meeting of the Board (after reasonable notice to
the Executive and an opportunity for the Executive, accompanied by the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the termination met the criteria set forth in one or
more of clauses (A) through (C) of Section 3(a) hereof.
(b) Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Change in
Control and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for disability, 30 days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30-day period) and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination. In the case of a termination by the Company other
than a termination pursuant to one or more of clauses (A) through (C) of Section
3(a) (which may be effective immediately), the Date of Termination shall not be
less than 30 days after the Notice of Termination is given. In the case of a
termination by the Executive, the Date of Termination shall not be less than 15
days from the date such Notice of Termination is given.
7
<PAGE> 8
Notwithstanding Section 3(a) of this Agreement, in the event that the Executive
gives a Notice of Termination to the Company, the Company may unilaterally
accelerate the Date of Termination and such acceleration shall not result in a
Terminating Event for purposes of Section 3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) Settlement and Arbitration of Disputes. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
be settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 8(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
9. Successor to Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the event of the
Executive's death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4(a) and (b) of this Agreement,
the Company shall continue such payments to the Executive's beneficiary
designated in writing to the Company prior to his death (or to his estate, if
the Executive fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this
8
<PAGE> 9
Agreement, shall not prevent any subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board of
Directors.
13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan.
14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of the Commonwealth
of Massachusetts.
16. Obligations of Successors. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs, customer lists, customer requirements or other information used in the
manufacture, sale or marketing of any of the respective products or services of
the Company or any subsidiary or other affiliate of the Company; provided,
however, that no breach or alleged breach of this Section 17 shall entitle the
Company to fail to comply fully and in a timely manner with any other provision
hereof. Nothing in this Agreement shall preclude the Company from seeking money
damages, or equitable relief by injunction or otherwise without the necessity of
proving actual damage to the Company, for any breach by the Executive hereunder.
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SAFETY 1ST, INC.
By:
--------------------------------------
Name:
Title:
-----------------------------------------
10
<PAGE> 1
EXHIBIT 3
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
April 22, 2000
Board of Directors
Safety 1st, Inc.
Canton Commerce Center
45 Dan Road
Canton, MA 02021
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Shares"), of Safety 1st, Inc. (the "Company") of the $13.875 per
Share in cash proposed to be paid by Dorel Industries, Inc. ("Buyer") in the
Tender Offer and the Merger (as defined below) pursuant to the Agreement and
Plan of Merger, dated as of April 22, 2000, among Buyer, Diamond Acquisition
Subsidiary, Inc. ("Diamond"), a wholly-owned subsidiary of Buyer, and the
Company (the "Agreement"). The Agreement provides for a tender offer for all of
the Shares (the "Tender Offer") pursuant to which Diamond will pay $13.875 per
Share in cash for each Share accepted. The Agreement further provides that
following completion of the Tender Offer, Diamond will be merged with and into
the Company (the "Merger") and each outstanding Share will be converted into the
right to receive $13.875 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as its agent in connection
with securing a credit facility for the Company in January 1997, and having
acted as its financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Agreement. We also have provided
certain investment banking services to Buyer from time to time, including having
acted as the lead underwriter of a public offering of the Class B Subordinated
Voting Shares of Buyer in April 1998, and may provide investment banking
services to Buyer and its subsidiaries in the future. Goldman, Sachs & Co.
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company or Buyer for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended January 1, 2000; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and
Ex-3-1
<PAGE> 2
Safety 1st, Inc.
April 22, 2000
Page Two
forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, we have reviewed the reported price and trading activity for the
Shares, compared certain financial and stock market information for the Company
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the juvenile products industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. Our opinion does not address
the relative merits of the transaction contemplated pursuant to the Agreement as
compared to any alternative business transaction that might be available to the
Company. Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to whether or
not any holder of Shares should tender such Shares in connection with such
transaction or, if applicable, how any holder of Shares should vote with respect
to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
$13.875 in cash to be received by the holders of Shares in the Tender Offer and
the Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
--------------------------------------
(GOLDMAN, SACHS & CO.)
Ex-3-2
<PAGE> 1
EXHIBIT 4
SAFETY 1ST, INC.
45 DAN ROAD
CANTON, MA 02021
(781) 364-3100
May 8, 2000
Dear Stockholder:
I am pleased to inform you that, on April 22, 2000, Safety 1st, Inc. (the
"Company") and Dorel Industries, Inc. ("Dorel") entered into a Merger Agreement.
Pursuant to the terms of the Merger Agreement, Diamond Acquisition Subsidiary
Inc., a wholly owned subsidiary of Dorel, is commencing a cash tender offer for
all of the outstanding shares of common stock of the Company at a price of
$13.875 per share. Promptly following the completion of the tender offer,
Diamond Acquisition Subsidiary Inc. will be merged into the Company, and all
outstanding shares of the Company's common stock (other than those owned by the
Company or Dorel or any of their respective affiliates, and other than those
owned by dissenting stockholders) will be converted into the right to receive
$13.875 in cash.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND THE
MERGER AND DECLARED EACH OF THEM ADVISABLE AND UNANIMOUSLY RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS TENDER THEIR SHARES OF COMMON STOCK IN THE TENDER OFFER.
In arriving at this decision, the Board gave careful consideration to a
number of factors described in the attached Schedule 14D-9 that is being filed
today with the Securities and Exchange Commission. Among other factors, the
Board considered the opinion, dated April 22, 2000, of Goldman, Sachs & Co., the
Company's financial advisor, which provides that as of such date, and based upon
and subject to the matters set forth therein, the cash consideration to be
received by the stockholders of the Company pursuant to the tender offer and the
merger was fair from a financial point of view to the Company's stockholders.
Accompanying this letter, in addition to the attached 14D-9 relating to the
tender offer, is Dorel's Offer to Purchase, dated May 8, 2000, together with
related materials, including a Letter of Transmittal to be used for tendering
your shares. These documents set forth the terms and conditions of the tender
offer and the merger and provide instructions regarding how to tender your
shares. I urge you to read the enclosed materials carefully.
Your Board of Directors believes that the proposed acquisition of the
Company by Dorel is fair to and in the best interests of the Company's
stockholders.
Sincerely,
/s/ MICHAEL LERNER
MICHAEL LERNER
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 5
FOR IMMEDIATE RELEASE
- ---------------------
Dorel Signs Agreement To Acquire Safety 1st
Strong Brand Awareness Will Boost Dorel's Juvenile Segment
Montreal, April 24, 2000 -- Dorel Industries Inc. (TSE: DII.A, DII.B; NASDAQ:
DIIBF) today announced it has signed an agreement to purchase Safety 1st, Inc.
(NASDAQ: SAFT), of Canton, Massachusetts, a leading marketer and developer of
juvenile products. The acquisition of Safety 1st will be Dorel's largest-ever.
Dorel will commence a tender offer to purchase all of the outstanding shares of
Safety 1st at US$13.875 per share. Upon completion of the tender offer, Dorel
will consummate a second-step merger in which all remaining Safety 1st
stockholders also will receive US$13.875 per share.
The Board of Directors of Safety 1st has approved the transaction. In connection
with the Board's approval of the transaction, Goldman, Sachs & Co. delivered its
opinion that the transaction was fair from a financial point of view to Safety
1st stockholders. In addition, certain stockholders of Safety 1st which control
shares representing approximately 60% of the issued and outstanding shares of
Safety 1st, have agreed to tender their shares in Dorel's offer. Completion of
the tender offer and the merger are subject to customary conditions. The tender
offer will be made pursuant to definitive documents to be filed with the
Securities and Exchange Commission.
Dorel President and Chief Executive Officer, Martin Schwartz, said Dorel has
been actively pursuing acquisition opportunities for some time, but did not want
to compromise the organization's tradition of selective and disciplined
purchases. "Safety 1st fits our criteria perfectly. It is a leader in a sector
we know intimately, complements our existing juvenile product lines and has
built one of the best known and respected brands. When combined with Cosco, our
existing juvenile operation, it will place Dorel in a significant position of
strength in the fast growing $5 billion retail juvenile products industry." The
Company has entered into a commitment to finance the acquisition through a new
lending facility led by the Royal Bank of Canada.
About Safety 1st
Safety 1st has established a reputation for unique, feature-rich, quality
products providing real value for the consumer. The Company is a leading source
of child safety products, nursery monitors, booster seats, bathtubs, infant
health and convenience products. Safety 1st currently distributes over 200
products to more than 1,000 retailers worldwide. Safety 1st was the first
company to identify "child safety" as a category within the industry, has more
than a 50% market share in the industry and it is recognized as the juvenile
safety expert. It was Safety 1st that first conceived the "Baby on Board"
vehicle signs.
For the year ended January 1, 2000, Safety 1st's net sales increased 30% to
US$158 million, compared to US$121 million the previous year. Net income before
an extraordinary charge was US$5.1 million or US$0.57 per diluted common share,
compared to a net loss of US$1.0 million or a net loss of $0.14 per diluted
common share, for fiscal 1998. In recently announced results for the first
quarter of 2000, sales increased 25% over the prior year to US$49.9
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million, while net income, available to common shareholders, increased a
corresponding 75%.
Safety 1st Chairman and Chief Executive Officer, Michael Lerner, said he is
very pleased with the transaction. "We have had several discussions with
Dorel's top management and we are entirely comfortable with their business
philosophy and their plans to grow both companies."
Strong Brand Recognition
In a recent Parents Magazine survey, Safety 1st ranked 11th in quality out of
107 of the most recognized brands in the United States, ranging from consumer
products to automobiles to retail chains. It ranked 4th in the juvenile category
itself. "Safety 1st has the leading market share in major product categories as
a result of its proven ability to identify new trends and innovate unique
products. Historically Safety 1st's new product introductions gain meaningful
market share within the first year," stated Mr. Schwartz.
Dorel has a history of growth through successfully integrating various
acquisitions. The first was Cosco in 1988, followed by Charleswood in 1990,
Maxi-Miliaan in 1994 and Ameriwood Industries in 1998. "There are immediate
synergies that can be realized with Safety 1st and the company is profitable. It
presents many of the same benefits we experienced when we purchased
Maxi-Miliaan," concluded Mr. Schwartz.
Dorel Profile
Dorel is a rapidly growing, consumer products manufacturer specializing in three
product areas: ready-to-assemble (RTA) furniture, juvenile products and home
furnishings. Dorel's product offerings include a wide variety of RTA furniture
for home and office use; juvenile products such as infant car seats, strollers,
high chairs, toddler beds and cribs; and home furnishings such as metal folding
chairs, tables, bunk beds, futons and step stools.
Dorel employs more than 3,500 people in nine countries. Major North American
facilities are located in Montreal, Quebec; Cornwall, Ontario; Columbus,
Indiana; Wright City, Missouri; Tiffin, Ohio; Dowagiac, Michigan; Cartersville,
Georgia; Forth Smith, Arkansas and San Diego, California. The Company's major
divisions in the United States include Cosco, Ameriwood and Infantino. In
Canada, Dorel operates Ridgewood and Dorel Home Products. European operations
are carried out through Maxi-Miliaan B.V. in the Netherlands and Dorel (U.K.)
Ltd. in the United Kingdom.
Other important information:
The tender offer described in this announcement for the outstanding shares of
Safety 1st has not yet commenced. As soon as the tender offer commences, we
will file a tender offer statement with the Securities and Exchange Commission
(SEC). You should read the tender offer statement when it becomes available
because it will contain important information about the tender offer. You can
obtain the tender offer statement and other documents that are filed with the
SEC free on the SEC's web site at: www.sec.gov. If you write us or call us, we
will send you these documents free when they are made available:
- - Tender offer statement (except for exhibits)
- - Offers to purchase
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- - Letters of transmittal
- - Notices of guaranteed delivery
Except for the historical information contained herein, this press release
contains statements that constitute forward-looking statements, as defined in
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that may cause or
contribute to such differences include, among other things, the Company's
ability to close the proposed transaction. Other risks and uncertainties include
changes in business conditions and the economy in general, changes in
governmental regulations, unforeseen litigation and other risk factors
identified in the Company's public filings under "Risk Factors." The Company
undertakes no obligation to update these forward-looking statements for
revisions or changes after the date of this press release.
For further information:
Dorel contact: Jeffrey Schwartz
Tel: (514) 934-3034
Rick Leckner
Tel: (514) 731-0000
Safety 1st Contact: Kara DiCamillo
Investor Relations
Media: Stacy Roth
Morgen-Walke Associates
Tel: (212) 850-5600
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