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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14 (D) (4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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SIGNATURE BRANDS USA, INC.
(NAME OF SUBJECT COMPANY)
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COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
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82667N 10 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MEETA VYAS
CHIEF EXECUTIVE OFFICER AND
VICE CHAIRMAN OF THE BOARD
7005 COCHRAN ROAD
GLENWILLOW, OHIO 44139-4312
(440) 542-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
With a copy to:
JAMES WESTRA, ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-6600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Signature Brands USA, Inc., a Delaware
corporation (the 'Company'), and the address of the principal executive offices
of the Company is 7005 Cochran Road, Glenwillow, Ohio 44139-4312. The title of
the class of equity securities to which this statement relates is the common
stock, $.01 par value per share, of the Company (the 'Common Stock').
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to a cash tender offer by Java Acquisition Corp., a
Delaware corporation ('Purchaser') and a wholly owned indirect subsidiary of
Sunbeam Corporation, a Delaware corporation ('Parent'), disclosed in a Tender
Offer Statement on Schedule 14D-1 (the 'Schedule 14D-1'), dated Friday, March 6,
1998, to purchase all of the outstanding shares of Common Stock (the 'Shares')
at a price of $8.25 per share (such amount, or any greater amount per share paid
pursuant to the Offer, being hereafter referred to as the 'Per Share Amount'),
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated March 6, 1998 (the 'Offer to Purchase'),
and the related Letter of Transmittal (which together constitute the 'Offer'),
which were mailed to the holders of Common Stock pursuant to an Agreement and
Plan of Merger, dated as of February 28, 1998, (the 'Merger Agreement' or the
'Agreement'), by and among Parent, Purchaser and the Company.
The Merger Agreement provides that, among other things, as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
all conditions to the Merger, subject to conditions set forth below in the
section entitled 'Vote Required to Approve Merger,' Purchaser or a wholly owned
subsidiary of Purchaser will be merged with and into the Company (the 'Merger'),
and the Company will continue as the surviving corporation (the 'Surviving
Corporation'). A copy of the Merger Agreement is filed herewith as Exhibit 1,
and is incorporated herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of Parent and Purchaser are located at 1615 South Congress Avenue, Suite
200, Delray Beach, Florida 33445.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth below or in the Proxy Statement for the Annual
Meeting of Stockholders, dated January 23, 1998, a copy of which has been
provided to the Company stockholders and which is attached hereto as Exhibit 2,
none of the officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including without limitation any material contract, agreement,
arrangement or understanding (i) providing for the furnishing of services to or
by, (ii) providing for rental of real or personal property to or from, or (iii)
otherwise requiring payments to or from, any officer or director, any member of
the family of any officer or director or any corporation, partnership, trust or
other entity in which any officer or director has a substantial interest or is
an officer, director, trustee or partner.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Indemnification of Officers and Directors. The Company's Amended Restated
Certificate of Incorporation, as amended (the 'Charter') contains a provision
which states that no director shall be personally liable for the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Another provision requires the Corporation to indemnify its current
and former directors and officers against any and all liabilities and expenses
incurred in connection with their service in such capacities. The provision
allows for the advancement of expenses to the persons mentioned above.
In addition, the Company's By-Laws provide that the Company must indemnify
directors and officers against liabilities incurred in their capacities. This
provision of the By-Laws (i) provides that the indemnification and other rights
provided by the Charter shall continue as to any person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such person; (ii) allows for
advancement of expenses incurred by the officers and/or directors in connection
with the matter as to which they are seeking indemnification without a
preliminary determination of ultimate entitlement to indemnification, as long as
such person undertakes to repay such amount if it shall ultimately be determined
that such person was not entitled thereto; and (iii) states that the Corporation
has the power to make further provisions consistent with applicable law for
indemnification and advancement of expenses to directors, officers, employees
and agents.
The Company has entered into an Indemnity Agreement with each of its
Directors and executive officers. Pursuant to these Indemnity Agreements, the
Company has agreed to indemnify any such Director or officer (each, an
'Indemnitee') if an Indemnitee is a party to or threatened to be made a party to
or otherwise involved in any action, suit or proceeding, whether of a civil,
criminal, administrative or investigative nature (other than a proceeding by or
in the right of the Company), by reason of the fact that the Indemnitee is or
was a Director and/or officer of the Company or is or was serving at the request
of the Company as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against all expenses, judgments, settlements, fines and penalties actually and
reasonably incurred by such Indemnitee in the course of such action, suit or
proceeding, but only if an Indemnitee acted in good faith and in a manner which
he or she reasonably believed to be in or not opposed to the best interest of
the Company and, in the case of a criminal proceeding, had no reasonable cause
to believe that his or her conduct was unlawful. Pursuant to the Indemnity
Agreements, the Company has additionally agreed to indemnify any Indemnitee if
the Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any proceeding by or in the right of the Company, by reason of the
fact that the Indemnitee is or was a Director and/or officer of the Company or
is or was serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against all expenses, judgments, settlements, fines
and penalties actually and reasonably incurred by such Indemnitee in the course
of such proceeding, but only if an Indemnitee acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interest of the Company, except that the Company will not indemnify any
Indemnitee for expenses in respect of any claim issue or matter as to which such
Indemnitee has been adjudged to be liable to the Company.
The Merger Agreement provides that for a period of six (6) years following
the Effective Time of the Merger, the Company and the Parent shall indemnify all
present and former directors or officers of the Company and its subsidiaries
('Indemnified Parties') against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, 'Costs') incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time of the Merger, whether asserted or claimed prior
to, at or after the Effective Time of the Merger, to the fullest extent as would
have been permitted in their respective articles of organization or by-laws
consistent with applicable law, to the extent such Costs have not been paid for
by insurance and shall, in connection with defending against any action for
which indemnification is available hereunder, reimburse such Indemnified Parties
from time to time upon receipt of sufficient supporting documentation, for any
reasonable costs and expenses reasonably incurred by such Indemnified Parties;
provided that such reimbursement shall be conditioned upon such Indemnified
Parties' agreement promptly to return such amounts to the Company if a court of
competent jurisdiction shall ultimately determine that indemnification of such
Indemnified Parties is prohibited by applicable law. The Company will maintain
for a period of not less than six years from the Effective Time of the Merger,
the Company's current directors' and officers, insurance and indemnification
policy (or a policy providing substantially similar coverage) to the extent that
it provides coverage for events occurring prior to the Effective Time of the
Merger (the 'D&O Insurance') for all persons who are directors and officers of
the Company on the date of this Agreement; provided that the Company shall not
be required to spend as an annual premium for such D&O Insurance an amount in
excess of 200% of the annual premium paid for directors' and officers' insurance
in effect prior to the date of this Agreement; and provided further that the
Company shall nevertheless be obligated to provide such coverage as may be
obtained for such amount. The provisions of this Section are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which is filed herewith as
Exhibit 1.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of Purchaser to accept for payment or pay for Shares is subject to:
(i) the condition that there shall be validly tendered in accordance with the
terms of the Offer prior to the expiration date of the Offer and not withdrawn a
number of Shares which, together with the Shares then owned by the Buyer and
MergerCo, represents at least 51% of the total number of outstanding Shares
assuming the exercise of all outstanding options, rights and convertible
securities (if any) and the issuance of all Shares that the Company is then
obligated to issue (such total number of outstanding or issuable Shares being
hereinafter referred to as the 'Fully Diluted Shares') (the 'Minimum
Condition'), (ii) the expiration or termination of all waiting periods imposed
by The Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the 'HSR Act') and
(iii) the other conditions set forth in Annex I of the Merger Agreement
(collectively, the 'Offer Conditions'). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The initial expiration date of
the Offer shall be twenty (20) business days after commencement. Buyer and
MergerCo agree that if all of the Offer Conditions are not satisfied on such
initial expiration date of the Offer then, provided that the MergerCo
determines, in its reasonable discretion, that all such Conditions are
reasonably capable of being satisfied and subject to SEC rules with respect to
extension of time periods, MergerCo shall extend the Offer, without consent of
the Company, from time to time until such Conditions are satisfied or waived;
provided, that Offeror shall not be required to extend the Offer beyond April
30, 1998, unless any necessary approvals under the HSR Act shall not have been
received by such date, in which case MergerCo shall not be required to extend
the Offer beyond the earlier of (i) ten (10) days following receipt of such
approvals and (ii) June 30, 1998.
Certain Conditions of the Offer. Notwithstanding any other provision of
the Offer or the Merger Agreement, and subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) relating to Purchaser's
obligation to pay for or return tendered shares after termination of the Offer,
Parent and Purchaser shall not be required to accept for payment or pay for any
Shares tendered pursuant to the Offer and may delay acceptance for payment or
may terminate the offer, if (i) the Minimum Condition has not been satisfied;
(ii) any applicable waiting period under the HSR Act has not expired or
terminated; or (iii) at any time after February 28, 1998 and before acceptance
for payment of any Shares, any of the following events shall occur and be
continuing: (a) there shall be instituted or pending by any governmental entity
any suit, action or proceeding (i) challenging the acquisition by Parent or
Purchaser of any Shares under the Offer, or seeking to restrain or prohibit the
making or consummation of the Offer or the Merger, (ii) seeking to prohibit or
materially limit the ownership or operation by the Company, Parent or any of
Parent's subsidiaries of a material portion of the business or assets of the
Company or Parent and its subsidiaries, taken as a whole, or to compel the
Company or Parent to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and its subsidiaries, taken as a
whole, in each case as a result of the Offer or the Merger or (iii) seeking to
impose material limitations on the ability of Parent or Purchaser to acquire or
hold, or exercise full rights of ownership of, any Shares to be accepted for
payment pursuant to the Offer including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the Company
or (iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company; (b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, by any Governmental Entity or court,
other than the application to the Offer or the Merger of applicable waiting
periods under the HSR Act, that would result in any of the consequences referred
to in clauses (i) through (iv) of paragraph (a) above; (c) any of the
representations and warranties of the Company contained in the Merger Agreement
shall not be true and correct at and as of the date of consummation of the Offer
(except to the extent such representations and warranties speak to an earlier
date), as if made at and as of the date of consummation of the Offer, in each
case except as contemplated or permitted by the Merger Agreement and except, in
the case of any such breach when such breach would not have, individually or in
the aggregate, a Material Adverse Effect (as defined in 'Fees and Expenses')
with respect to the Company or materially affect the ability of the Company to
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consummate the Merger or the Offeror to accept for payment or pay for shares of
Company Common Stock pursuant to the Offer; (d) the Company shall have failed to
perform the obligations required to be performed by it under the Agreement at or
prior to the date of expiration of the Offer, including but not limited to its
obligations pursuant to Section 7.6 thereof, except for such failures to perform
as have not had or would not individually or in the aggregate, have a Material
Adverse Effect with respect to the Company or materially adversely affect the
ability of the Company to consummate the Merger or the Offeror to accept for
payment or pay for Shares pursuant to the Offer; (e) the Board of Directors of
the Company or any committee thereof shall have (i) withdrawn, modified or
amended in any respect adverse to Parent or Purchaser its approval or
recommendation of the Offer or the Merger, (ii) recommended or approved any
Transaction Proposal (as defined in 'Transaction Proposals') from a person other
than Parent, Purchaser or any of their respective affiliates, (iii) failed to
publicly announce, within ten (10) business days after the occurrence of a
Transaction Proposal, its opposition to such Transaction Proposal, or amended,
modified or withdrawn its opposition to any Transaction Proposal in any manner
adverse to Parent or Purchaser or failed to promptly reaffirm its recommendation
of the Offer or the Merger at the Parent's request, or (iv) resolved to do any
of the foregoing; (f) the Merger Agreement shall have been terminated in
accordance with its terms; or (g)(i) it shall have been publicly disclosed that
any person, entity or 'group' (as defined in Section 13(d)(3) of the Securities
Act of 1934 (the 'Exchange Act)), shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of more
than 15% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, other than Parent or an affiliate or any person or group existing
which on the date of the Merger Agreement beneficially owned more than 15% of
any class or series of capital stock of the Company or (ii) the Company shall
have entered into a definitive agreement or agreement in principle with any
person with respect to a Transaction Proposal or similar business combination
with the Company or any subsidiary, which in the reasonable judgment of Parent
or Purchaser in any such case, and regardless of the circumstances giving rise
to such condition, makes it inadvisable to proceed with the Offer and/or with
such acceptance for payment.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Parent and Purchaser and may, subject to the terms of the Merger
Agreement, be waived by Parent and Purchaser in whole or in part at any time and
from time to time in the reasonable discretion of Parent and Purchaser.
Board of Directors. The Merger Agreement provides that effective upon the
acceptance for payment by Purchaser of Shares pursuant to the Offer such that
the Parent or Purchaser shall own at least a majority of the Shares on a fully
diluted basis, the Parent will be entitled to designate the number of Directors,
rounded up to the next whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors (giving effect to the election of any additional directors pursuant
to this provision of the Merger Agreement) and (ii) the percentage that the
number of Shares owned by Purchaser or the Parent (including Shares accepted for
payment) bears to the total number of Shares outstanding, and the Company will
take all necessary action to cause the Parent's designees to be elected or
appointed to the Company's Board of Directors. The Merger Agreement also
provides that the Company will use its best efforts to cause individuals
designated by the Parent to constitute the same percentage as such individuals
represent on the Company's Board of Directors of each committee of the Board
(other than committees established to take action under the Merger Agreement),
each board of directors of each subsidiary of the Company and each committee of
each such board. The foregoing provisions of the Merger Agreement shall not
limit any rights which Parent, Purchaser or their affiliates may have as holders
or beneficial owners of Shares with respect to the election of directors or
otherwise. The Company's obligations to appoint designees to the Board of
Directors are subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Subject to applicable law, the Company has agreed to
take all action requested by Parent and Purchaser to effect such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, which Information Statement is attached as Appendix A to
the Schedule 14D-9. The Merger Agreement further provides that in the event that
Purchaser's designees are elected to the Board of Directors of the Company,
until the effective time of the Merger the Board of Directors of the Company
will have at least two (2) directors who are directors on the date of the Merger
Agreement and who are not officers of the Company or any of its subsidiaries.
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Vote Required to Approve Merger. The Delaware General Corporate Law
('DGCL') requires, among other things, that the adoption of any plan of merger
or consolidation of the Company must be approved by the Board of Directors of
the Company and, if the 'short form' merger procedure described below is not
available, by the holders of a majority of the Company's outstanding Shares. The
Board of Directors of the Company has approved the Offer, the Merger and the
Merger Agreement; consequently, the only additional action of the Company that
may be necessary to effect the Merger is approval by such stockholders if the
'short-form' merger procedure described below is not available. Under the DGCL,
the affirmative vote of holders of a majority of the outstanding Shares
(including any Shares owned by Purchaser), is generally required to approve the
Merger. If Purchaser acquires, through the Offer or otherwise, voting power with
respect to at least a majority of the outstanding Shares (which would be the
case if the Minimum Condition were satisfied and Purchaser were to accept for
payment Shares tendered pursuant to the Offer), it would have sufficient voting
power to effect a merger of the Company with and into Purchaser without the vote
of any other stockholders of the Company. However, the DGCL also provides that
if a parent company owns at least 90% of each class of stock of a subsidiary,
the parent company can effect a short-form merger with that subsidiary without
the action of the other stockholders of the subsidiary. Accordingly, if, as a
result of the Offer or otherwise, Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, Purchaser could (and, under the
Merger Agreement, is required to) effect the Merger using the 'short-form'
merger procedures without prior notice to, or any action by, any other
stockholder of the Company.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction of certain conditions, including the following: (1)
if required by applicable law, the Merger Agreement having been approved and
adopted by the affirmative vote of holders of a majority of the outstanding
Shares, (2) the expiration or termination of the applicable waiting period under
the HSR Act; (3) no temporary restraining order, preliminary or permanent
injunction or other order issued by any Federal, state or local government or
any court, administrative agency or commission or other governmental authority
(a 'Governmental Entity') or other legal restraint or prohibition preventing the
consummation of the Merger being in effect; provided, however, that the parties
shall, subject to the last sentence of Section 7.3(a) of the Merger Agreement,
use their best efforts to have any such injunction, order, restraint or
prohibition or other order vacated; and (4) no statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Government Entity of
competent jurisdiction which prohibits consummation of the Merger.
Termination of the Merger Agreement The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the 'Effective Time'),
whether before or after approval by the stockholders of the Company (1) by
mutual written consent of Purchaser and the Company; (2) by either Purchaser or
the Company if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting or if there shall be in effect any other legal restraint or
prohibition preventing the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such order, decree or ruling or other
action has become final and nonappealable (other than due to the failure of the
party seeking to terminate the Merger Agreement to perform its obligations
thereunder required to be performed at or prior to the Effective Time); (3) by
the Company, if Purchaser has not (a) commenced the Offer within five business
days after the initial public announcement of Parent's intention to commence the
Offer or (b) accepted for payment any Shares pursuant to the Offer prior to
April 30, 1998 (other than due to the failure of the Company to perform its
obligations thereunder) or if any necessary approvals required under the HSR Act
shall not have been obtained by April 30, 1998, on or prior to the earlier of
(A) ten (10) days after receipt of all necessary approvals under the HSR Act or
(B) July 15, 1998; (4) by the Parent or Purchaser in the event of a material
breach or failure to perform in any material respect by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which cannot be or has not been cured within ten (10) days after the
giving of written notice to the Company; (5) by the Company, upon its execution,
prior to the Parent or Purchaser's purchase of Shares pursuant to the Offer, of
a binding agreement with a third party with respect to a Transaction Proposal
(as defined below in 'Transaction Proposals'), provided that it has complied
with all provisions of the Agreement, including the notice provisions described
in 'Transaction Proposals' below, and that it pays the Termination Fee (as
defined below) as provided in the terms of the Merger Agreement described below
in 'Fees and Expenses;' (6) by the Company in the event of a material breach or
failure to perform in any material respect by Purchaser or the Parent of any
representation, warranty, covenant or other
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agreement contained in the Merger Agreement which cannot be or has not been
cured within ten (10) days after the giving of written notice to the Parent and
Purchaser; or (7) by Purchaser if Purchaser terminates the Offer as a result of
the occurrence of any event set forth under 'Certain Conditions of the Offer.'
Transaction Proposals. The Merger Agreement provides that, until the
termination of the Merger Agreement, neither the Company nor any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of its
Subsidiaries) will directly or indirectly initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate knowingly, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to any
Transaction Proposal (as defined below) or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal or authorize or permit any of its officers, directors, or
employees of any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
subsidiaries to take any such action; provided, however, that nothing contained
in the Merger Agreement shall prohibit the Board of Directors of the Company,
including any special committee thereof prior to the acceptance for payment of
the Shares pursuant to the Offer from furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide Transaction Proposal (as defined below), in respect of which
such person or entity has all of the necessary funds or commitments therefor.
The Merger Agreement defines 'Transaction Proposal' as any of the following
(other than the transactions between the Company and Purchaser contemplated by
the Offer and the Merger Agreement) involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, recapitalization,
business combination, or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for, or the acquisition (or right to acquire) of beneficial ownership by any
person, group or entity, other than a person, group or entity (as defined under
Section 13(d) of the Exchange Act) of 20% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith; (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing; or (v) any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to Parent of the transactions contemplated
hereby. The Merger Agreement provides further that if a Transaction Proposal
exists and the Board of Directors of the Company, after consultation with its
financial advisors and after consultation with and receipt of advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel) determines in good faith that such action is
necessary for the Board of Directors to comply with its fiduciary duties to
stockholders under applicable law, the Board of Directors of the Company may, at
any time prior to the acceptance for payment of Shares pursuant to the Offer and
subject to the notification requirements described below: (i) withdraw or modify
its recommendation of the Offer, the Merger or the Merger Agreement and (ii)
make to the Company's stockholders any recommendation and related filing with
the Commission as required by Rule 14e-2 and 14d-9 under the Exchange Act with
respect to any tender offer, or take any other legally required action with
respect to such tender offer (including, without limitation, the making of
public disclosures as may be necessary or reasonably advisable under applicable
securities laws).
Prior to the Board of Directors withdrawing or modifying its approval or
recommendation of the Offer, this Agreement or the Merger, approving or
recommending a Transaction Proposal, or entering into an agreement with respect
to a Transaction Proposal, the Board of Directors shall provide Parent with a
written notice (a 'Notice of Transaction Proposal') advising Parent that the
Board of Directors has received a Transaction Proposal, specifying the material
terms and conditions of such Transaction Proposal (unless prohibited from doing
so by the terms thereof) and identifying the person making such transaction
Proposal (unless prohibited from doing so by the terms thereof), and neither the
Company nor any subsidiary shall enter into an agreement with respect to a
Transaction Proposal until midnight three business days after the day on which
the Notice of Transaction Proposal was given to Parent. In addition, if the
Company proposes to enter into an agreement with respect to any Transaction
Proposal, it shall concurrently with entering into such agreement pay, or cause
to be
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paid, to Parent its expenses and fees and the Termination Fee (as provided in
and defined in 'Fees and Expenses' below).
Fees and Expenses. The Merger Agreement provides that except as provided
below, all fees and expenses incurred in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated by the Merger Agreement
will be paid by the party incurring such fees or expenses. The Merger Agreement
further provides that, subject to the last sentence of this paragraph, the
Company will pay to Purchaser the amount equal to $5,000,000 in cash to be paid
pursuant to the Merger Agreement (the 'Termination Fee') under the following
circumstances: (1) if the Company terminates the Merger Agreement in accordance
with the provisions described above in clause 5 of 'Termination of the Merger
Agreement' or (2) if Parent or Purchaser terminates the Merger Agreement in
accordance with the provisions described above in clause 4 of 'Termination of
the Merger Agreement' or in accordance with the provisions described above in
clause 7 of 'Termination of the Merger Agreement' if Purchaser's failure to
accept Shares for payment results from the failure of the Minimum Condition to
be satisfied or the occurrence of any of the events set forth in subparagraphs
(c), (d) or (f) of 'Certain Conditions of the Merger.' Notwithstanding the
foregoing, the Merger Agreement provides that no Termination Fee will be payable
if such termination results from the Company's breach of certain representations
and warranties relating to the absence of a Material Adverse Change (as defined
below) with respect to the Company. The Merger Agreement defines the term
Material Adverse Change to mean, when used in connection with the Company, any
change or effect that either individually or in the aggregate with all such
other changes is materially adverse to the business, financial condition, or
results of operations of the Company and its subsidiaries taken as a whole;
provided, however, that no Material Adverse Change will be deemed to have
occurred as a result solely of general economic conditions affecting generally
the industry in which the Company competes and general market conditions in the
United States.
In addition, in connection with any termination of the Merger Agreement
under any circumstance in which the Termination Fee would be payable, the Merger
Agreement provides that the Company will also be obligated, simultaneously with
such termination, to reimburse Purchaser for all out-of-pocket expenses and fees
in an aggregate amount not to exceed $1.5 million.
Conduct of Business by the Company. The Merger Agreement provides that
until the earlier of the Effective Time of the Merger and consummation of the
Offer, the Company will, and will cause its Subsidiaries to, act and carry on
their respective businesses in the usual, regular and ordinary course of
business consistent with past practice and, to the extent consistent therewith,
use their respective reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them and to preserve goodwill. Without limiting the generality of
the foregoing, during the period from the date of the Merger Agreement until the
earlier of the Effective Time of the Merger and consummation of the Offer, the
Company will not, and will not permit any of its Subsidiaries to, without
Purchaser's prior written consent: (a) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock, (b)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock (c) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities, except for the acquisition of Shares from holders of
Company Stock Options in full or partial payment of the exercise price payable
by such holder upon exercise of Company Stock Options outstanding on the date of
the Merger Agreement; (d) authorize for issuance, issue, deliver, sell, pledge
or otherwise encumber any shares of its capital stock or the capital stock of
any of its Subsidiaries, any other voting securities or any securities
convertible into, any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) (other than
an increase in the number of shares subject to the Stock Option Plan pursuant to
existing contractual obligations and the issuance of Shares upon the exercise of
Company Stock Options outstanding on the date of the Merger Agreement and in
accordance with their present terms); (e) amend its Charter, By-laws or other
comparable charter or organizational documents; (f) acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof material to
7
the Company; (g) other than as specifically permitted by the Merger Agreement,
sell, lease, license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets other than any such
properties or assets the value of which do not exceed $2.0 million individually
and $10.0 million in the aggregate, except sales of inventory, in the ordinary
course of business consistent with past practice; (h) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any 'keep well' or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings and for lease obligations, in each case incurred in the
ordinary course of business consistent with past practice; (i) make any loans,
advances or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned Subsidiary of the
Company, other than loans to employees in the ordinary course of business not to
exceed $25,000 in any one case or $500,000 in the aggregate; (j) pay, discharge
or satisfy any claims (including claims of stockholders), liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction, (i) of
liabilities or obligations in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the date hereof
or (ii) claims settled or compromised to the extent permitted under clause (n)
below, or waive, release, grant, or transfer any rights of material value or
modify or change in any material respect any existing license, lease, permit,
contract or other document, other than in the ordinary course of business
consistent with past practice; (k) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization; (1) enter into any new collective bargaining agreement; (m)
change any material accounting principle used by it; (n) settle or compromise
any litigation (whether or not commenced prior to the date of the Merger
Agreement) other than settlements or compromises of litigation where the amount
paid (after giving effect to insurance proceeds actually received) in settlement
or compromise is not material to the Company; (o) make any new capital
expenditure or expenditures, other than capital expenditures not to exceed in
the aggregate, the amounts provided for in the capital budget of the Company
provided to Purchaser; (p) neither the Company nor any of its Subsidiaries
shall, except in the ordinary course of business and except as otherwise
permitted by this Agreement, modify, amend or terminate any contract or
agreement set forth in the SEC Documents filed and publicly available prior to
the date of this Agreement to which the company or any Subsidiary is a party or
waive, release or assign any material rights or claims; (q) neither the Company
nor any of its Subsidiaries shall: (i) enter into any employment agreement with
any officer, director or key employee of the Company or any of its subsidiaries;
or (ii) hire or agree to hire any new or additional key employees or officers;
(r) neither the Company nor any of its Subsidiaries shall make any Tax election
or settle or compromise any material Tax liability; (s) neither the Company nor
any of its Subsidiaries will voluntarily take, or voluntarily agree to commit to
take, any action that would make any representation or warranty of the Company
contained herein inaccurate in any respect at, or as of any time prior to, the
Effective Time; or (t) authorize any of, or commit or agree to take any of, the
foregoing actions;
Stock Options and Warrants. The Merger Agreement provides that as soon as
practicable following the date thereof, the Board of Directors of the Company
(or, if appropriate, any committee administering the Company Stock Option Plans,
as defined below) will adopt such resolutions or take such other actions if any,
as may be reasonably required to adjust the terms of all outstanding options to
purchase the Company Stock Options granted under the Stock Option Plan, whether
vested or unvested, as necessary to provide that, at the Effective Time, each
Stock Option outstanding immediately prior to the Effective Time will vest as a
consequence of the Merger and be canceled in exchange for a payment from the
Company after the Merger (subject to any applicable withholding taxes) equal to
the product of (a) the total number of shares of Company Common Stock subject to
such Company Stock Option and (b) the excess of $8.25 over the exercise price
per share of Company Common Stock subject to such Company Stock Option and
applicable withholding taxes, payable in cash immediately following the
Effective Time of the Merger, except that payment with respect to options
accellerated as a result of the Merger will be payable (i) on the first
anniversary of the Effective Time if the optionee is an employee of the Company
on such anniversary, (ii) on the date of termination of the optionee if
employment is terminated by the Company without Cause or by the optionee after
reaching age 62 or for Good Reason and (iii) shall not be paid and shall be
forfeited if employment is terminated for Cause or by optionee prior to reaching
age 62 for any reason other than Good Reason. The Stock Option Plan and any
other plan, program or arrangement providing
8
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary shall terminate as of the Effective Time of the
Merger, and the Company shall ensure that, following the Effective Time of the
Merger, no holder of a Company Stock Option nor any participant in any Stock
Option Plan shall have any right thereunder to acquire equity securities of the
Company following the Merger. Also, each outstanding warrant shall at the
Effective Time automatically without further action of the Company or the
holders thereof, be converted into the right to receive an amount equal to the
difference between the Merger Consideration and the exercise price of such
warrant.
Additional Undertakings. Upon the terms and subject to the conditions set
forth in the Merger Agreement, each of the parties has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by the Merger Agreement. The Parent,
Purchaser and the Company will use their reasonable best efforts and cooperate
with one another (i) in promptly determining whether any filings are required to
be made or consents, approvals, waivers, licenses, permits or authorizations are
required to be obtained (or, which if not obtained, would result in a breach or
violation, or an event of default, termination or acceleration of any agreement
or any put right under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by the Merger, including the Offer and the Merger and (ii) in
promptly making any such filings, in furnishing information required in
connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. Notwithstanding the foregoing, or any
other covenant contained in the Merger Agreement, in connection with the receipt
of any necessary approvals under the HSR Act, neither the Company nor any of its
Subsidiaries will be entitled to divest or hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to, or
its ability to retain, the Company or any of its Subsidiaries or any material
portions thereof or any of the businesses, product lines, properties or assets
of the Company or any of its subsidiaries, without Purchaser's prior written
consent. The Merger Agreement requires the Company and Parent to make, subject
to the condition that the transactions contemplated by the Merger Agreement
actually occur, any undertakings (including undertakings to make divestitures,
provided, in any case, that such divestitures need not themselves be effective
or made until after the transactions contemplated hereby actually occur)
required in order to comply with the antitrust requirements or laws of any
governmental entity, including the HSR Act, in connection with the transactions
contemplated by this Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties, including representations from the
Company to the Parent and Purchaser with respect to, among other things, its
organization, subsidiaries, capitalization, authorization and validity of the
Merger Agreement, consents and approvals, public filings and financial
statements, undisclosed liabilities, conduct of business and absence of certain
adverse changes or events, litigation, labor matters, compliance with laws,
employee benefit plans, tax matters, employee benefit plans, environmental
matters, material contracts, brokers and finders and opinion of financial
advisor, recommendation of the Board of Directors, required vote of Company
shareholders, state takeover statutes, intellectual property, title to
properties and products liability.
Procedure for Termination, Amendment, Extension or Waiver. A termination,
amendment, extension or waiver will, in order to be effective, require, in the
case of Purchaser and the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
Appraisal Rights. Under Section 262 of the DCGL, stockholders of the
Company will have certain dissenters' rights of appraisal. Stockholders must
follow the procedures set forth therein to be entitled to have their Shares
appraised by the Delaware Court of Chancery and to receive payment in cash of
the 'fair value' of such shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. Stockholders who consider seeking
appraisal, if available, should be aware that the fair value of their Shares as
determined under Section 262 could be more than, less than or equal to the
consideration to be received by stockholders in the Merger.
9
Where a proposed merger for which statutory appraisal rights are available
is submitted for approval at a meeting of stockholders, Section 262 requires
that the company, not less than 20 days prior to such meeting, notify each of
its stockholders who was such on the record date for such meeting with respect
to the shares for which statutory appraisal rights are available, that statutory
appraisal rights are so available, and must include in such notice a copy of
Section 262. If a merger for which statutory appraisal rights are available is
approved without a vote of stockholders pursuant to the short form merger
procedure set forth in Section 253 of the DGCL, Section 262 requires the
surviving corporation, either before the effective date or within 10 days
thereafter, to notify each of the stockholders entitled to appraisal rights of
the effective date of the merger and that appraisal rights are available for any
or all of the shares of the Company, and to include in such notice a copy of
Section 262. This Solicitation/Recommendation Statement constitutes such notice
to the holders of the Shares and the provisions of Section 262 are attached to
this Solicitation/Recommendation Statement as Exhibit 3. Any Company stockholder
who wishes to exercise statutory appraisal rights with respect to all or a
portion of the Shares held by such stockholder or who wishes to preserve the
right to do so should review the following discussion and Exhibit 2 carefully,
as the failure to timely and properly comply with the procedures specified will
result in the loss of statutory appraisal rights under Delaware law.
If the proposed Merger is submitted for approval of a meeting of
stockholders, a holder of Shares wishing to exercise statutory appraisal rights
must (i) deliver to the Company prior to the vote on the Merger Agreement at the
Special Meeting a written demand for appraisal of such holder's Shares and (ii)
not vote in favor of adoption of the Merger Agreement. A holder of Shares
wishing to exercise such rights must be the record holder of such Shares on the
date the written demand is made and must continue to hold such shares of record
through the Effective Time. Accordingly, a holder of the Shares who is a record
holder on the date that the demand is made but who subsequently transfers such
Shares prior to the Effective Time will lose such holder's right to appraisal
with respect to the Shares transferred.
A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on the stock
certificate. If the Shares in question are held in a fiduciary or representative
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares are owned of record by more
than one person as in a joint tenancy or a tenancy in common, the demand should
be executed by or on behalf of all joint owners. An authorized agent, including
one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
agent for such owner or owners. A record holder such as a broker who holds
Shares as nominee for several beneficial owners may exercise statutory appraisal
rights with respect to the Shares held by one or more beneficial owners without
exercising such rights with respect to other beneficial owners; in such case,
the written demand should set forth the number of Shares as to which appraisal
is sought and, where no number of Shares is expressly mentioned, the demand will
be presumed to cover all Shares held in the name of the record owner.
Stockholders who hold the Shares in brokerage accounts or other nominee form and
who wish to assert statutory appraisal rights are urged to consult with their
brokers to determine the appropriate procedures to be followed in making a
demand for appraisal by such a nominee. All written demands for appraisal should
be sent or delivered to the Company and addressed to the Secretary.
Any holder of the Shares who has duly demanded an appraisal in compliance
with Section 262 will not, from and after the Effective Time, be entitled to
vote the Shares subject to the demand for any purpose or be entitled to the
payment of dividends or other distributions on the Shares (except for dividends
or distributions payable to holders of record of the Shares of a record date
prior to the Effective Time). After the Effective Time, no Shares will be
outstanding.
Within 10 days after the Effective Time the Surviving Corporation will be
required to notify each stockholder who has complied with the provisions of
Section 262 and who has not voted in favor of adoption of the Merger Agreement
of the date that the Merger became effective, or the Effective Time. Within 120
days after the Effective Time, any stockholder who has complied with the
requirements for exercise of statutory appraisal rights will be entitled, upon
written request, to receive from the Surviving Corporation a statement setting
forth the aggregate number of Shares not voted in favor of the Merger Agreement
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such Shares. Such statements must be
10
mailed within 10 days after a written request therefor has been received by the
Surviving Corporation or within 10 days after the expiration of the period for
delivery of demands, whichever is later.
The foregoing is only a partial summary of sections 262, inclusive, of the
DCGL and is qualified in its entirety by reference to the provisions thereof,
the full text of which is filed herewith as Exhibit 3.
STOCK PURCHASE AGREEMENT
The following is a summary of certain provisions of the Stock Purchase
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Stock Purchase Agreement, a
copy of which is filed with the Commission as Exhibit 4 to the Schedule 14D-9
and is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Stock Purchase Agreement.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed to sell,
transfer and deliver all Shares owned by them of the Company at the Closing at a
price per share equal to $8.25 or such higher per share price as the Purchaser
may have paid pursuant to the Offer. The Major Sellers have also agreed in the
Stock Purchase Agreement that, at any meeting of the stockholders of the
Company, each Major Seller shall (a) vote in favor of the Merger or any other
transaction contemplated by the Merger Agreement, (b) vote against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement and (c) vote against any action or agreement that would impede,
interfere with or discourage the Offer or the Merger.
Each Major Seller in the Stock Purchase Agreement has granted the Purchaser
as irrevocable proxy and irrevocably appoints the Purchaser or its designees,
with full power of substitution, its attorney and proxy to vote all such
Seller's Shares in respect of any of the matters set forth in clauses (a)
through (c) above and in the manner specified in such clauses, provided,
however, that certain conditions are met.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed that in
the event that within 12 months following the date of the expiration of the
Offer, a Seller shall sell, transfer or otherwise commit to dispose any or all
of such Shares to any party other than the Parent or an affiliate of the Parent
(a 'Sale') and realize a Profit (as defined below) from such Sale, then such
Seller shall pay to the Parent an amount equal to the Profit. Such amount shall
be paid to the Parent promptly following the receipt of proceeds by the Seller
or its affiliates from such Sale. The term 'Profit' shall mean the excess, if
any, of (a) the aggregate consideration received by the Seller or its affiliates
in connection with the Sale over (b) the number of Shares sold, transferred or
disposed of in connection with the Sale multiplied by the Offer Price.
Pursuant to the Stock Purchase Agreement, the Sellers have agreed not to,
(i) sell, transfer, pledge, assign or otherwise dispose of their Shares; (ii)
grant any proxies, deposit their Shares into a voting trust or enter into a
voting agreement with respect to any of their Shares; or (iii) solicit,
encourage, participate in or initiate discussions or negotiations with, or
provide information to, any person, other than Parent or any affiliate of
Parent, concerning any merger, sale of assets, sale of shares of capital stock
or similar transactions involving the Company.
The Stock Purchase Agreement, and all rights and obligations of the parties
thereunder, terminates upon the earliest of (i) the purchase of Shares pursuant
to the Offer, (ii) the termination of the Merger Agreement in accordance with
its terms and (iii) 12 months from the date of the Stock Purchase Agreement.
11
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Confidentiality Agreement, a
copy of which is filed with the Commission as Exhibit 5 to the Schedule 14D-9
and is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Confidentiality Agreement.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent has agreed, subject to certain exceptions, to
keep confidential all nonpublic, confidential or proprietary information
concerning the Company which is furnished to Parent by or on behalf of the
Company (the 'Confidential Information'), and to use the Confidential
Information solely for the purpose of evaluating a possible transaction
involving the Company and Parent and will not be used in any way detrimental to
the Company.
Parent has further agreed that, for a period of two years from the date of
the Confidentiality Agreement, unless Parent receives the prior written consent
of the Company, Parent will not, directly or indirectly, solicit any management
employee of the Company for employment. Parent shall also not disclose to any
person without the prior consent of the Company (i) that the Confidentiality
Agreement has ben entered into; (ii) that any negotiations are taking place
concerning a possible Transaction involving the Company; or (iii) that Parent
has requested or received Confidential Information from the Company.
In the Event that the Parent or its Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents, subpoena, investigative demand or similar process) to disclose any
Confidential Information, Parent has agreed to give the Company prompt written
notice of such request or requirement so that the Company may seek an
appropriate protective order or other remedy and waive Parent's compliance with
the Confidentiality Agreement. If such protective order is not obtained or the
Company does not waive compliance with the Confidentiality Agreement, Parent
may, upon the advice of legal counsel, disclose Confidential Information to a
tribunal provided, however, that Parent gives the Company notice of the
information to be disclosed as far in advance as practicable and Parent uses
reasonable efforts (at the Company's expense) to obtain reliable assurance that
the information disclosed will be accorded confidential treatment by the
tribunal.
EMPLOYMENT AGREEMENTS
The Company entered into an Addendum to Employment Agreement, effective as
of February 25, 1997, with Meeta R. Vyas, the Vice Chairman and Chief Executive
Officer of the Company amending the Employment Agreement dated August 11, 1997.
Pursuant to the Addendum, Ms. Vyas may voluntarily terminate her employment with
the Company if, following a 'Change of Control' (as defined in the Employment
Agreement, dated as of August 11, 1997, between the Company and Ms. Vyas), Ms.
Vyas's duties, responsibilities, authority, functions or title with the Company
or any surviving entity, or with the parent entity of the Company or any
surviving entity, are not consistent with the title, duties and responsibility
of the Chief Executive Officer of a public company which is not a subsidiary of
any other company, and Ms. Vyas will be entitled to receive the same
compensation as if she had been terminated other than for cause.
The Company entered into an Amendment No. 1 to Employment Agreement with
Timothy J. McGinnity on January 20, 1998. As amended, the agreement provides
that, in the event of termination of employment other than for cause during the
one-year period following a 'Change of Control' in the Company (as defined in
such amendment), Mr. McGinnity will be entitled to receive payment of his salary
until the earlier of 18 months after the date of termination or the date Mr.
McGinnity obtains a position with another employer at a substantially equivalent
annual base salary as that paid pursuant to Mr. McGinnity's Employment
Agreement.
The Company entered into an Amendment No. 1 to Employment Agreement with
Steven M. Billick on January 20, 1998. As amended, the agreement provides that,
in the event of termination of employment other than for cause during the
one-year period following a 'Change of Control' in the Company (as defined in
such amendment), Mr. Billick will be entitled to receive payment of his salary
until the earlier of 18 months after the date of termination or the date Mr.
Billick obtains a position with another employer at a substantially equivalent
annual base salary as that paid pursuant to Mr. Billick's Employment Agreement.
12
All of the employment agreements and salary continuation agreements between
the Company and its executive officers contain customary noncompetition and
non-disclosure provisions.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors.
THE BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT EACH OF THE OFFER AND THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
(b) Background; Reasons for the Recommendation.
Background. During the Fall of 1997, Thomas H. Lee Company was approached
by a party interested in a possible acquisition of the Company. The Company
executed a confidentiality agreement with the third party and the third party
performed due diligence on the Company. On October 17, 1997, the Company engaged
Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ') to serve as its
financial advisor in connection with a potential sale of the Company to such
third party. Shortly thereafter, the third party informed the Company that it
was no longer interested in pursuing a transaction due to the third party's
inability to reconcile issues concerning its partner in the proposed
transaction.
Thomas H. Lee Company was next approached in December of 1997 by two other
parties interested in a possible acquisition of the Company, and by a third
interested party in January 1998. The Company executed confidentiality
agreements with two of these interested parties. During January 1998, these
parties met with members of the Board of Directors of the Company, met with
management and performed due diligence on the Company. On February 2, 1998, the
Company's engagement of DLJ was amended so as to allow it to serve as the
Company's financial advisor in connection with a potential sale of the Company
to any of the interested parties. DLJ reported that it had also received an
inquiry from an additional interested party regarding a possible acquisition of
the Company. The Board of Directors of the Company formed a Special Committee
consisting of Messrs. Carmichael, Jones and Schoen (who was designated as
Chairman of the Special Committee) to coordinate with DLJ on its discussions
with interested parties.
Subsequent to this meeting, an additional interested party contacted Thomas
H. Lee Company concerning a possible acquisition of the Company and on February
9, 1998, representatives of Morgan Stanley & Co. (Parent's financial advisor)
first contacted Thomas H. Lee Company to discuss a possible acquisition of the
Company and another company in which Thomas H. Lee Company had a significant
equity interest.
On February 11, 1998, representatives of Morgan Stanley and representatives
of Parent met with representatives of Thomas H. Lee Company during which they
discussed a possible acquisition of the Company.
On February 12, 1998, the Special Committee met telephonically to discuss
the status of discussions with interested third parties.
On February 17, 1998, representatives of Morgan Stanley discussed with
directors of the Company via telephone the scope of confidential information the
Company would afford Parent. The Company and Parent entered into a
confidentiality agreement on February 17, 1998.
During the week of February 16, 1998, five parties remained interested and
several parties who previously signed confidentiality agreements engaged in
extensive due diligence on the Company. Also, several of the interested parties,
and their potential financing sources, met with management of the Company.
On February 20, 1998, representatives of Morgan Stanley and Parent met with
the Company's Chief Executive Officer and Vice Chairman and representatives of
DLJ at DLJ's offices in New York to perform due diligence on the Company. Later
that day, Morgan Stanley expressed Parent's serious interest in a possible
acquisition of the Company. As a result of this interest and Parent's
discussions to acquire the other company in which Thomas H. Lee Company had a
significant interest, of which Mr. Schoen is also a director, Mr. Schoen
resigned from the Special Committee on February 20, 1998.
On February 22, 1998, the Special Committee (Messrs. Carmichael and Jones)
met telephonically with DLJ to discuss the status of discussions with various
interested parties. The Special Committee instructed DLJ to seek definitive
proposals for an acquisition of the Company from all interested parties by
February 26 or 27, 1998,
13
depending upon DLJ's discussions with the interested parties and the interested
parties' ability to meet this timing.
On February 23, 1998, in conversations with the three parties who were
actively engaged in or substantially completed with their due diligence on the
Company, DLJ advised such parties that they would be receiving a draft Merger
Agreement and requested definitive proposals by February 27, 1998. Between
February 23, 1998 and February 25, 1998, DLJ had numerous conversations with the
three interested parties who indicated a continued interest in acquiring the
Company and these interested parties had meetings with management and continued
their due diligence on the Company.
On February 24, 1998, the Board of Directors of the Company discussed the
potential sale of the Company. DLJ updated the Board on the status of the
interested parties' review of the Company.
On February 25 and 26, 1998, counsel for two of the interested parties,
including Parent, provided proposed comments on the draft Merger Agreement
previously provided to them. On February 26, 1998, Counsel to the Special
Committee met telephonically with DLJ and the Special Committee to summarize the
terms and conditions proposed by these two interested parties. Both proposals
contemplated that the shareholders of the Company affiliated with Thomas H. Lee
Company (the 'Lee Stockholders') would execute, at the time of the Company's
execution of the Merger Agreement, an irrevocable proxy as well as an option to
purchase the Lee Stockholders' shares at a price equal to the per share
consideration offered to be paid by such party in the acquisition of the
Company.
On February 26, 1998, DLJ instructed the parties to provide their final and
best offers by 5:00 p.m. on February 27, 1998, at which time the Special
Committee would meet.
On February 27, 1998, counsel for the third interested party provided
comments on the draft Merger Agreement to counsel for the Special Committee. The
terms and conditions reflected in this third party's proposal included an
irrevocable proxy and option to purchase the Lee Stockholders' Shares.
On February 26 and 27, 1998, DLJ and the Special Committee's counsel
negotiated the terms of the Merger Agreement with the interested parties and
their counsel, including but not limited to certain conditions to closing,
certain non-solicitation requirements, the amount of break-up fee, the
circumstances under which a break-up fee would be payable and the obligations of
the parties to undertake certain actions in order to consummate a transaction.
On February 27, 1998, DLJ received proposals from Parent and two other
parties ('Bidder 1' and 'Bidder 2,' respectively). Parent's proposal
contemplated a price of $8.00 per Share and continued to require an irrevocable
proxy and certain other terms and conditions viewed unfavorably by the Special
Committee. Bidder 1 also submitted a proposal of $8.00 per Share which contained
some terms and conditions that were viewed unfavorably by the Special Committee,
including the requirement of an irrevocable proxy. Representatives of Bidder 1
indicated orally to representatives of DLJ that it would be willing to pay $8.25
per Share if the Company were to engage in one-on-one negotiations with such
party with respect to an acquisition of the Company. Bidder 2 provided an offer
to purchase the Company's shares for $7.10 per Share, if structured as a tender
offer followed by a merger, as proposed by the Company, or $7.85 per Share if
structured as a one-step merger transaction with no tender offer. The Special
Committee reviewed these bids and instructed DLJ to continue discussions with
the interested parties so as to be in a position to recommend one of the bids at
the Board of Directors' meeting scheduled for February 28, 1998.
During the evening of February 27, 1998 and the morning of February 28,
1998, DLJ negotiated with Parent and Bidder 1 certain aspects of their proposals
and informed them that the Special Committee would be meeting at 10:00 a.m. on
February 28, 1998 in advance of an 11:00 a.m. Board of Directors Meeting. Parent
increased its proposal to $8.25 per Share, relinquished its request for an
irrevocable proxy and improved other terms and conditions of its proposal.
Bidder 1 indicated a final and definitive proposal at $8.25 per Share without
the requirement of an irrevocable proxy and improved other terms and conditions
of its offer. Bidder 2 increased its proposed offer to $7.85 per Share for a
tender offer followed by a merger and $8.25 per Share for a one-step merger
transaction without a tender offer.
During the February 28, 1998 Board of Directors meeting, DLJ reported to
the Special Committee and the Board of Directors the status of offers from the
three interested parties. The offers of Parent and Bidder 1 were at $8.25 per
Share and the offer of Bidder 2 was at $7.85 per Share for a tender offer
followed by a merger and
14
$8.25 per Share for a one-step merger transaction. DLJ also reported that both
Parent and Bidder 1 would be willing to give up their request for irrevocable
proxies and would instead agree that the Lee Stockholders could provide proxies
that would terminate if the Board of Directors of the Company terminated the
Merger Agreement in order to accept a better offer from a third party. DLJ
expressed its opinion that Bidder 2 would also ultimately drop its request for
an irrevocable proxy, if requested. The Special Committee reported that, of the
offers presented, the Special Committee recommended the offer of Parent due to
price, certainty of closure and terms and conditions. DLJ indicated that it was
prepared to recommend that the consideration offered by Parent was fair to the
Company's shareholders, other than shareholders who are affiliates of the
Company, from a financial point of view. Thereafter, after discussion of the
various proposals and DLJ's fairness analysis, the Board of Directors approved
the offer of Parent.
Thereafter, on February 28, 1998, the Merger Agreement was signed by
Parent, the Purchaser and the Company and the Stock Purchase Agreement was
signed by the Lee Stockholders and the Purchaser. The transaction was announced
on the morning of March 2, 1998.
Reasons for the Transaction; Factors Considered by the Board. The Board of
Directors and the Company's senior management have reviewed the Company's
strategic position in the counter-top appliance and consumer health product
industries, the near and longer term prospects for those industries, the
consolidation trends within those industries and the strategic alternatives
available to the Company, all with a view to maximizing shareholder value. In
conducting its review, the Board of Directors considered the Company's results
of operations for the fiscal year ended September 28, 1997 as well as earnings
per share of the Company for the fiscal quarter ended December 28, 1997. The
Board of Directors also considered the recent trading prices of the Company's
Common Stock. In light of the Board's review of the Company's competitive
position, recent operating results and stock price, anticipated trends in the
industries in which the Company competes, and the price per Share being offered
by Parent, the Board of Directors determined that it would be in the best
interest of the Company's shareholders to approve the Merger Agreement. In
approving the Merger Agreement and the transactions contemplated thereby and
recommending that all holders of Shares of the Company's Common Stock tender
their Shares pursuant to the Offer, the Board of Directors considered a number
of factors including:
(i) the terms of the Merger Agreement, and the Stock Purchase
Agreement executed by certain stockholders in connection therewith,
including provisions allowing the Lee Stockholders' Shares to be voted in
favor of a competing offer if the Merger Agreement were terminated by the
Company in accordance with its terms to allow the Company to enter into an
agreement with any such competing bidder;
(ii) the trading price of shares of the Company's Common Stock, and
the expected trading prices for the foreseeable future;
(iii) the Company's competitive position and current trends in the
counter-top appliance and consumer health product industries;
(iv) the results of the Company's discussions during 1997, and the
results of the process undertaken by the Company in 1998, with respect to a
potential sale of the Company, and the low likelihood that a third party
would propose a cash price higher than $8.25 per Share;
(v) the fact that Parent's offer was not subject to a financing
contingency whereas the other offers available to the Board were either (i)
subject to financing contingencies or (ii) to be consummated through
newly-formed corporations with no existing assets, which were also subject
to consummation of conditions to financing from such bidders' funding
sources;
(vi) DLJ's opinion that the consideration to be received by the
stockholders of the Company, other than stockholders who are affiliates of
the Company, pursuant to the Merger Agreement is fair to such stockholders
from a financial point of view, as well as a presentation by DLJ of various
financial analyses relating to the Merger, including among other things a
review of the Company's historical, financial and stock market performance;
a review of selected financial and stock trading data for selected
companies that produce consumer and professional appliances, a review of
financial ratios for selected merger and acquisition transactions in the
consumer and professional appliance industry; a number of discounted cash
flow analyses at various discount rates and terminal values based on
Management's projections for the Company's future performance; an analysis
of premiums paid in selected merger and acquisition transactions within a
certain transaction value range and an analysis of values that might be
achieved in a leveraged buyout transaction involving the Company.
15
The full text of the DLJ fairness opinion is attached hereto as
Exhibit 6. The DLJ opinion is addressed to the Board of Directors of the
Company and does not address the merits of the underlying decision of the
Company to engage in the transactions contemplated by the Merger Agreement
and does not constitute a recommendation to any holder of Shares as to how
such holder should respond to the Offer. The summary of the DLJ opinion set
forth in this statement on Schedule 14D-9 is qualified in its entirety by
reference to full text of the DLJ opinion attached hereto attached as
Exhibit 6. Holders of shares are urged to read the DLJ opinion in its
entirety.
(vii) the recommendation of the Special Committee of the Board of
Directors that the Parent's offer be approved;
(viii) the fact that holders of approximately 48% of the Shares were
prepared to endorse the Merger Agreement; and
(ix) the availability of the dissenters' rights of appraisal in the
Merger.
The Board of Directors did not assign relative weight to the above factors
or determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to a letter agreement (the 'Advisory Agreement') dated October 17,
1997 as amended by a letter agreement dated February 12, 1998, between the
Company and Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ'), DLJ
agreed to advise and assist the Company, as financial advisor, in connection
with a possible business combination (a 'Transaction'), including financial
advice and assistance, performing valuation analyses, structuring, analyzing and
negotiating various aspects of the Transaction and, if requested, rendering a
written opinion to the Board of Directors of the Company as to the fairness from
a financial point of view of the consideration to be received by stockholders of
the Company in any proposed Transaction.
Pursuant to the Advisory Agreement, the Company will pay DLJ for its
services in connection with the Merger (i) a fee of $350,000 upon delivery of a
written fairness opinion, (ii) an additional fee of $50,000 for each updated
fairness opinion, and (iii) an additional fee in an amount equal to 0.85% of the
aggregate consideration payable to stockholders pursuant to the Merger and the
amount of any debt assumed, acquired or remaining outstanding in connection with
the Merger (which additional fee is expected to equal approximately $2,100,000),
less any amounts paid by the Company pursuant to clauses (i) and (ii) above. In
addition, the Company agreed to reimburse DLJ for reasonable out-of-pocket
expenses (including the reasonable fees and expenses of its legal counsel)
incurred by DLJ in connection with the Advisory Agreement and to indemnify DLJ
and its affiliates and the respective directors, officers, agents and employees
of DLJ and its affiliates against certain liabilities and expenses, including
liabilities under the Federal Securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) No transactions in the Shares have been effected during the past sixty
(60) days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company; except for
a former executive officer who exercised 12,500 vested options to purchase
Shares.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Board of
Directors' resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7 (a) above.
16
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex I is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by Parent and Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO.
- -----------
Exhibit 1 -- Agreement and Plan of Merger, dated as of February 28, 1998, by and among Signature Brands USA, Inc.,
Sunbeam Corporation and Java Acquisition Corp.
Exhibit 2 -- Proxy Statement for the Annual Meeting of Stockholders filed pursuant to Regulation 14A, dated
January 23, 1998.
Exhibit 3 -- Title 8 Section 262, Delaware General Corporation Law.
Exhibit 4 -- Stock Purchase Agreement, dated as of February 28, 1998, by and among Java Acquisition Corp. and the
stockholders named therein.
Exhibit 5 -- Confidentiality Agreement, dated February 17, 1998, between Sunbeam Corporation and Signature Brands
USA, Inc.
Exhibit 6 -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation*
Exhibit 7 -- Press Release issued by the Company, dated March 2, 1998.
Exhibit 8 -- Letter to Stockholders of Signature Brands USA, Inc.*
- ------------------
* Included in copies mailed to shareholders.
17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SIGNATURE BRANDS USA, INC.
By: /s/ MEETA VYAS
------------------------------
Meeta Vyas
Chief Executive Officer
Dated: March 6, 1998
18
SIGNATURE BRANDS USA, INC.
7005 Cochran Road
Glenwillow, OH 44139-4312
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 6, 1998, as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
'Schedule 14D-9') to holders of the Common Stock of Signature Brands USA, Inc.
(the 'Corporation'). Capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of persons (the
'Parent Designees') designated by Sunbeam Corporation (the 'Parent') to a
majority of the seats on the Board of Directors of the Corporation.
Pursuant to the Merger Agreement, on March 6, 1998, Java Acquisition Corp.
commenced the Offer. The Offer is scheduled to expire at 12:00 Midnight on April
2, 1998, unless otherwise extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent and Java Acquisition
Corp. and the Parent Designees has been furnished to the Corporation by Parent
and Java Acquisition Corp., a wholly owned subsidiary of Parent, and the
Corporation assumes no responsibility for the accuracy or completeness of such
information.
GENERAL INFORMATION REGARDING THE CORPORATION
GENERAL
The common stock, no par value per share ('Common Stock'), is the only
class of voting securities of the Corporation outstanding. Each share of Common
Stock has one vote. As of March 4, 1998, there were 9,186,761 shares of Common
Stock outstanding. The Corporation does not have any treasury shares. The Board
of Directors of the Corporation currently consists of nine members and there are
currently no vacancies on the Board. The Board of Directors only has three
classes and each director serves a term of three years until his successor is
duly elected and qualified or until his earlier death, resignation or removal.
PARENT DESIGNEES
The Agreement and Plan of Merger (the 'Merger Agreement') among Parent,
Java Acquisition Corp., and the Corporation dated February 28, 1998, provides
that upon acceptance for payment of shares pursuant to the Offer (as defined in
the Agreement), Parent and Java Acquisition Corp. shall be entitled to designate
the number of directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the Product of (i) the total number of Directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to the Merger Agreement) and (ii) the percentage
that the number of shares of Company Common Stock owned by the Parent or Java
Acquisition Corp. (including shares of Company Common Stock accepted for
payment) bears to the total number of shares of Company Common Stock
outstanding. Prior to the Effective Time, the current directors will resign,
subject to the Merger Agreement's requirement that until the Effective Time, the
Company shall have at least two (2) directors who were directors on the date of
the Merger Agreement and who are not officers of the Company or any of its
subsidiaries.
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
DIRECTORS OF THE CORPORATION
The names of the current directors, their ages as of March 6, 1998 and
certain other information about them are set forth below. As indicated above,
some of the current directors may resign effective immediately following the
purchase of shares by Java Acquisition Corp. pursuant to the Offer.
YEAR FIRST
ELECTED A POSITION WITH THE CORPORATION OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEAR
- ------------------------------------------ --- ---------- ------------------------------------------
Serving for a term ending in 2001
David A. Jones............................ 48 1996 Chairman of the Board, President and Chief
Executive Officer of Rayovac Corporation,
since September 1996. From 1994 until
1996, Chairman of the Board, President and
Chief Executive Officer of Thermoscan,
Inc. From 1989 until 1994, President and
Chief Executive Officer of Regina Company,
Inc.
Thomas H. Lee............................. 53 1992 Since 1974, President of Thomas H. Lee
Company ('THL'). Serves as a Director of
Autotote Corporation, Finlay Enterprises,
Inc., General Nutrition Companies, Inc.,
Playtex Family Products Corp., Livent,
Inc., and Vail Resorts, Inc. Hills
Department Stores, Inc. filed for
protection under Chapter 11 of the Federal
Bankruptcy Code in February 1991 and
emerged from such protection in October
1993 as Hills Stores Company. Mr. Lee was
Chairman of the Board of Hills Stores
Company at that time.
Sandra E. Peterson........................ 38 1998 Executive Vice President, Research of
Nabisco, Inc. from April 1996 to present.
From 1993 to March 1996, various senior
executive positions with Whirlpool
Corporation including: Vice President,
Advanced Product Concepts; and Vice
President, Strategic Analysis and Support.
Prior to 1993, Senior Engagement Manager
of McKinsey & Co., Inc.
Serving for a term ending in 2000
Urbano Perez V............................ 42 1987 Various positions with Mabe since 1977,
including Director, Range Division since
1992.
2
Thomas R. Shepherd........................ 68 1998 Chairman of the Board of Directors of the
Company and of Signature Brands since
August 1997 and a Director of the Company
and of Signature Brands since April 1988.
Consultant to THL since 1986 and currently
a Managing Director. Executive Vice
President of Thomas H. Lee Advisors I,
L.P. and an officer of various other THL
affiliates.
Frank E. Vaughn........................... 68 1995 Special Assistant to the Dean and Visiting
Professor at the College of Business
Administration and Graduate School of
Management at Kent State University. From
1988 to 1991, Executive Vice President at
Maytag Corporation.
Serving for a term ending in 1999
William P. Carmichael..................... 54 1992 Retired since October 1993. From January
1993 until October 1993, Senior Vice
President and Chief Accounting Officer of
Sara Lee Corporation. From August 1991 to
January 1993, Vice President and
Controller of Sara Lee Corporation. Also
serves as a Director of Cobra Electronics
Corporation and the Hain Food Group, Inc.,
and as a trustee of the Time Horizon Funds
and Pacific Innovations Fund.
Scott A. Schoen........................... 39 1996 Managing Director of THL since 1992 and
employed since 1986. Also serves as
Trustee of THL Equity Trust III, the
General Partner of THL Equity Advisors
Limited Partnership III, which is the
General Partner of Thomas H. Lee Equity
Fund III, L.P. Also serves as Vice
President of Thomas H. Lee Advisors I and
Thomas H. Lee Advisors II. Also serves as
a Director of First Alert, Inc.,
TransWestern Communications Company, Inc.
Rayovac Corporation and Syratech
Corporation.
Meeta R. Vyas............................. 39 1997 Vice Chairman of the Board of Directors
and Chief Executive Officer of the Company
and of Signature Brands since September
1997. From 1991 to 1997, a senior
executive with General Electric Co. Prior
to 1991, a consultant with McKinsey & Co.,
Inc.
There are no family relationships among any of the directors or executive
officers of the Corporation.
3
INFORMATION CONCERNING THE BOARD OF DIRECTORS OF THE CORPORATION
The Board of Directors has an Audit Committee and a Compensation Committee.
Currently, Messrs. Carmichael, Miller and Schoen are members of the Audit
Committee and Messrs. Jones, Schoen and Shepherd are members of the Compensation
Committee.
The Audit Committee reviews the activities of the Company's independent
public accountants, various Company policies and practices as well as potential
conflict of interest situations. In addition, the Audit Committee recommends to
the Board of Directors an independent accounting firm to audit the Company's
financial statements. The Audit Committee did not meet during the fiscal year
ended September 28, 1997.
The Compensation Committee is responsible for making recommendations
concerning the salaries, bonuses and other compensation paid to the Company's
executive officers. It is also responsible for administering the Second Amended
and Restated 1992 Stock Incentive Plan, the 1995 Stock Option and Incentive
Plan, the 1997 Stock Option and Incentive Plan and the Chief Executive Officer
Stock Option Plan. The Compensation Committee met twice during the fiscal year
ended September 28, 1997.
The Company does not have a standing nominating committee or a committee
performing similar functions.
The Company's Board of Directors met five times during the last fiscal
year. No Director, with the exception of Mr. Lee, attended less than 75% of the
aggregate number of meetings of the Board of Directors and the committees on
which he served during the period for which he was a member of the Board.
EXECUTIVE OFFICERS OF THE CORPORATION
Information required by Item 7(b) of Schedule 14A with respect to executive
officers of the Corporation is set forth below. The executive officers of the
Corporation are elected annually by the Board of Directors and hold office until
their successors are elected and qualified, or until their earlier removal or
resignation.
Meeta Vyas has served as Vice Chairman of the Board and Chief Executive
Office of the Company and Signature Brands since August 1997. From 1991 to 1997,
Ms. Vyas was a senior executive with General Electric Co. Prior to 1991, Ms.
Vyas was a consultant with McKinsey & Co., an international consulting firm.
Steven M. Billick has served as Senior Vice President, Treasurer and Chief
Financial Officer of the Company and Signature Brands since June 1996. From July
1991 to June 1996, he was Vice President and Controller of NACCO industries,
Inc. Prior to July 1991, Mr. Billick was a partner with the international public
accounting firm of Deloitte & Touche LLP.
Timothy J. McGinnity has served as Senior Vice President, Sales--Consumer
Products of the Company and Signature Brands since September 1994. From August
1991 to August 1994, Mr. McGinnity served as Vice President Sales of Mr. Coffee,
inc. From October 1985 to June 1991, Mr. McGinnity served as Vice President--
Sales, Grocery Division of Mr. Coffee, inc.
C. Wayne Morris has served as Senior Vice President, Professional Products
of the Company and Signature Brands since October 1996. From 1989 to 1996, Mr.
Morris was Senior Vice President Marketing of Plasti-Line, Inc. From 1979 to
1989, he served in various positions with Black & Decker Corporation.
BOARD OF DIRECTORS
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors reviews the Company's
existing and proposed executive compensation plans and makes recommendations to
the Board of Directors regarding such plans and the awards to be made
thereunder. The current members of the Compensation Committee are Messrs. Jones,
Shepherd and Schoen, all of whom are non-employee Directors of the Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the compensation of the Company's Chief Executive Officer and the
other named executive officers.
4
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that compensation paid to
executive officers and other management personnel should consist of four
elements: (1) salary, (2) annual incentive bonus, (3) stock options and (4)
welfare, retirement and other benefits. The compensation package is designed to
attract and retain top quality management employees. In the opinion of the
Committee, it reflects competitive conditions. The Committee, however, does not
specifically focus on the compensation levels of executives in peer group
companies in making compensation decisions. To some extent, elements of
compensation are designed to vary as Company performance varies. In general, the
elements of compensation that most typically have a significant relationship to
Company performance are awards under its stock option and bonus plans. The
objective measurement used in determining performance for purposes of awards
under the bonus plans is the Company's actual earnings before interest, taxes,
depreciation and amortization ('EBITDA') in comparison to budgeted amounts. The
vesting of certain options granted during the year is tied to the achievement of
specified annual levels of EBITDA over the duration of the options. The
Committee's decisions concerning compensation are not the result of a highly
formalistic process and the Committee does not rely extensively on objective
criteria in measuring individual performance. Instead, decisions are primarily
based on subjective decisions concerning the appropriate levels of compensation.
Set forth below is a discussion of the various components of the
compensation arrangements provided to the executive officers, as well as a
discussion of the compensation arrangements provided to the Company's chief
executive officer.
1997 COMPENSATION DECISIONS
Base Salary and Benefits. Salary levels for executive officers reflect the
Committee's subjective judgments of appropriate salaries in light of the duties
and responsibilities inherent in the executives' respective positions. The
particular qualifications of an individual holding the position and his or her
level of experience are considered in establishing a salary level when the
individual is first appointed to a given position. The performance and
contribution of the individual to the Company, as well as Company performance,
are the primary criteria influencing salary administration. Salaries of
executive officers are generally reviewed each year. Since certain executives
are parties to employment agreements with the Company, their minimum base salary
levels are set by the terms of such agreements. The primary factor in setting
salary levels pursuant to these agreements was the Company's desire to provide
compensation in amounts sufficient to induce these individuals to either join or
continue with the Company. Certain of these employment agreements were executed
after cancellation of salary continuation agreements with the former Mr. Coffee,
inc. executives. These agreements were entered into prior to the time they
joined the Company. The terms of these salary continuation agreements were a
significant factor in establishing compensation arrangements for executives who
were parties to such agreements. In the case of certain executive officers who
joined the Company during the 1997 fiscal year, base salary was determined at
their hire date on the basis of the Company's assessment of their prior
experience, the responsibilities associated with their positions and the results
of negotiations between the Company and the executives concerning their
compensation arrangements. In making adjustments to the salaries of existing
executive officers for fiscal 1997, consideration was given to the performance
of each of the individuals in question, the Company's results of operations for
fiscal 1996 and the terms of existing contractual arrangements with certain
executive officers.
Stock Options. The Company uses stock options as a long-term incentive
program for executives. Stock options are used because they directly relate the
amounts earned by executives to the amount of appreciation realized by the
Company's stockholders over comparable periods. Stock options also provide
executives with the opportunity to acquire and build a meaningful ownership
interest in the Company. The Committee considers stock options throughout the
year. In determining the number of options awarded to an individual executive,
the Committee generally establishes a level of award based upon the position of
the individual and his or her level of responsibility. In the case of certain
executive officers who executed employment agreements during the current fiscal
year, the number of options awarded to such executives was the result of
negotiations between the Company and the executives.
During the 1997 fiscal year, the Company awarded options to purchase an
aggregate of 40,000 shares of Common Stock to the executive officers of the
Company excluding the Chief Executive Officer. Certain of these
5
options are subject to vesting over a four-year period commencing on the first
anniversary of the date of grant and certain of these options are subject to
vesting over a five-year period commencing on the first anniversary of the date
of grant, with vesting for this later group further conditioned upon the
achievement of specified annual target thresholds for EBITDA over the duration
of the options.
Bonuses. The Company maintains an annual incentive bonus program based on
Company and group performance. A target bonus level, stated as a percentage of
year end salary, is established for each executive officer based on his or her
level of responsibility. Target bonuses are measured by the Company's financial
performance against its annual performance plans. Target levels of performance
are established based upon EBITDA. At its December 1996 meeting, the
Compensation Committee established a bonus pool of $1,250,000 for all eligible
employees under the Company's annual incentive bonus program. Because the target
levels of performance were not achieved during fiscal 1997, no bonuses were paid
to executive officers out of this amount. All bonuses paid during the fiscal
year were paid pursuant to the terms of the Company's employment agreements with
the executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation arrangements for Mr. Howell with respect to the 1997
fiscal year were primarily based upon the terms of an Employment Agreement
between Mr. Howell and the Company, which was entered into in 1994. The
Compensation Committee increased Mr. Howell's base salary during 1997 by 4.2% to
$314,340. Mr. Howell was also entitled to receive a bonus of $68,028, which, in
accordance with the terms of an Employment Agreement, is an amount equal to his
prior year's bonus, pro rated for the number of days in fiscal 1997 during which
Mr. Howell was employed by the Company. The Committee did not award Mr. Howell
any stock options during 1997. In connection with his resignation from the
Company, Mr. Howell was entitled to receive as severance pay, under the terms of
an Employment Agreement, an amount equal to 1.5 times the sum of (i) his annual
salary at the date of termination ($314,340) plus (ii) the amount of his bonus
payable for fiscal 1997 ($68,028) plus (iii) his automobile allowance ($13,000).
The compensation arrangements for Ms. Vyas, who joined the Company as Vice
Chairman and Chief Executive Officer following Mr. Howell's resignation, were
established through negotiations between the Committee and Ms. Vyas and are
provided for in an Employment Agreement between the Company and Ms. Vyas.
Factors considered by the Committee in establishing such arrangements included
the need to provide sufficient inducement to attract and retain a top key
executive; the duties and responsibilities of the position; and Ms. Vyas's
qualifications and experience. The Employment Agreement provides for Ms. Vyas to
receive an initial base salary of $500,000 and an annual bonus of not less than
50% of her base salary based upon the Company achieving certain EBITDA
objectives. Ms. Vyas was further granted an option to purchase 500,000 shares of
Common Stock at an exercise price equal to the closing price of the Common Stock
on the date of grant, which option vests 50% as of September 30, 1998 and 50% as
of September 30, 1999. She also received an option in the form of stock
subscriptions to purchase 91,727 shares of Common Stock at an exercise price
equal to 50% of the closing price of the Common Stock on August 11, 1997, which
option was exercisable only from September 2, 1997 through November 1, 1997.
This option was exercised by Ms. Vyas on November 1, 1997 at an exercise price
of $1.75 per share.
Compensation Committee of the Board of Directors
David A. Jones
Thomas R. Shepherd
Scott A. Schoen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Schoen, a managing director of THL, and Mr. Shepherd, a consultant to
THL, served as members of the Company's Compensation Committee during fiscal
1997. Neither Mr. Schoen nor Mr. Shepherd was an employee of the Company during
fiscal 1997. Under a Management Agreement, the Company has engaged THL to
provide consulting and management advisory services. The fees payable to THL
under the Management Agreement are $240,000 per annum. The Company believes that
this Management Agreement is on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties.
6
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own 10% or more of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission (the 'Commission').
Officers, Directors and beneficial holders of more than 10% of the Company's
Common Stock are required by Commission regulations to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, Directors and
beneficial holders of more than 10% of the Company's Common Stock complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended September 28, 1997, except for the filing of a late Form 4
to report the inadvertent omission of one transaction involving the purchase of
3,000 shares of Common Stock by C. Wayne Morris.
7
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each of
the three most recent fiscal years, of: (i) those persons who served as the
chief executive officer during the fiscal year ended September 28, 1997 and (ii)
the other four most highly compensated executive officers of the Company for the
fiscal year ended September 28, 1997 (the 'Named Executive Officers'):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
OTHER ANNUAL OPTION/SAR COMPEN-
NAME YEAR SALARY BONUS COMPENSATION AWARDS SATION(1)
- ----------------------------------------- ---- ------- ------ ------------ ---------- ---------
Meeta R. Vyas............................ 1997 $38,462(2) $ -- $ 41,166(3) 591,727(4) $ 77
Vice Chairman and
Chief Executive Officer
Peter C. McC. Howell..................... 1997 302,918 68,028(5) -- -- 606,677(6)
Former Chairman and Chief 1996 295,600 73,900 -- -- 8,471
Executive Officer (7) 1995 286,000 28,600 -- -- 7,953
S. Donald McCullough..................... 1997 222,245 26,850(8) 100,485(9) -- 966,700(10)
Former President and Chief 1996 214,800 53,700 -- 90,500(11) 10,830
Operating Officer (12) 1995 201,196 21,500 75,303(13) 45,000(14) 10,830
C. Wayne Morris.......................... 1997 176,020(15) 21,250 63,502(16) 30,000(17) 5,915
Senior Vice President-
Professional Products
Timothy J. McGinnity..................... 1997 163,157 25,000 -- -- 3,194
Senior Vice President- 1996 147,600 61,900 -- -- 5,632
National Account Sales 1995 141,115 65,000 -- 50,000(14) 5,632
Steven M. Billick........................ 1997 185,802 -- -- 10,000(18) 3,382
Senior Vice President, 1996 63,746(19) 15,405 -- 40,000(20) --
Treasurer and Chief
Financial Officer
- ------------------
Except as indicated above, no named Executive Officer received personal
benefits or perquisites during fiscal 1997 in excess of the lesser of $50,000 or
10% of his or her aggregate salary and bonus.
(1) Amounts reported for each Named Executive Officer for fiscal 1997, 1996 and
1995 include premiums paid by the Company for term life insurance policies
on behalf of each Named Executive Officer and matching contributions under
the Company's 401(k) Plan.
(2) Ms. Vyas joined the Company on September 2, 1997. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(3) Represents reimbursement in the amount of $20,603 received from the Company
in connection with Ms. Vyas's relocation to the Cleveland, Ohio metropolitan
area and $20,563 in additional federal and state income taxes payable with
respect to such reimbursement.
(4) Represents options to purchase shares of Common Stock awarded to Ms. Vyas
under the terms of her Employment Agreement. Of the total amount of options,
500,000 options were awarded under the Company's Chief Executive Officer
Stock Option Plan. Such options vest 50% on September 30, 1998 and
(Footnotes continued on next page)
8
(Footnotes continued from previous page)
50% on September 30, 1999. The remaining 91,727 options in the form of stock
subscriptions were granted pursuant to a Stock Subscription Agreement and
were exercisable between September 2, 1997 and November 1, 1997.
(5) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Employment Agreement between Mr. Howell and the Company.
(6) Includes, in addition to the items referred to in note (1) above, a
severance payment of $593,053 payable over the twelve-month period beginning
September 5, 1997, which Mr. Howell became entitled to during fiscal 1997
pursuant to the termination provisions of an Employment Agreement between
Mr. Howell and the Company.
(7) Mr. Howell joined the Company in August 1994 and became its Chairman and
Chief Executive Officer on September 2, 1994. He resigned from his offices
with the Company, effective as of August 12, 1997, and terminated his
employment with the Company, effective as of September 5, 1997.
(8) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Amended and Restated Employment Agreement and the terms of a Separation
Agreement between Mr. McCullough and the Company.
(9) Includes reimbursement in the amount of $39,451 received from the Company
for the loss of home equity in Mr. McCullough's prior residence and the
closing costs associated with the sale of such residence in connection with
his relocation to the Cleveland, Ohio metropolitan area and $34,083 in
additional federal and state income taxes payable on such reimbursement.
(10) Includes, in addition to the items referred to in note (1) above, severance
payments of (i) $419,850 payable over the eighteen month period beginning
on January 16, 1998, (ii) $524,426 payable within sixty days of January 16,
1998 upon receipt of which all stock options held by Mr. McCullough will
terminate and (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999. Mr. McCullough became
entitled to the items described in this note during fiscal 1997 pursuant to
the termination provisions of an Amended and Restated Employment Agreement
and the terms of a Separation Agreement between Mr. McCullough and the
Company.
(11) Represents options to purchase shares of Common Stock awarded to Mr.
McCullough under the terms of an Amended and Restated Employment Agreement
between the Company and Mr. McCullough. Mr. McCullough's options became
exercisable with respect to 22,625 shares on July 1, 1996 and an additional
22,625 shares on December 31, 1996. Pursuant to the Amended and Restated
Employment Agreement, options to purchase an additional 45,250 shares of
Common Stock automatically vested upon Mr. McCullough's resignation. Mr.
McCullough's options shall terminate pursuant to a Separation Agreement
between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) above.
(12) Mr. McCullough resigned from his position as President and Chief Operating
Officer, and as a Director, effective as of January 16, 1998. For purposes
of determining the Company's severance obligations to Mr. McCullough, the
terms of the Separation Agreement between Mr. McCullough and the Company
set the date of termination for Mr. McCullough at September 26, 1997. Mr.
McCullough continued as President and Chief Operating Officer of the
Company until January 16, 1998 pursuant to continuation of employment
provisions of such Separation Agreement.
(13) Includes club fees in the amount of $32,100 reimbursed by the Company and
$27,732 in additional federal and state income taxes payable on such dues
with respect to such reimbursement.
(14) Represents options to purchase shares of Common Stock awarded to the Named
Executive Officers under the Company's Second Amended and Restated 1992
Stock Incentive Plan (the '1992 Plan') or the 1995 Stock Option and
Incentive Plan (the '1995 Plan'). Options awarded under the 1992 Plan vest
in 25%
(Footnotes continued on next page)
9
(Footnotes continued from previous page)
increments on an annual basis commencing on the first anniversary of the
date of grant. Vesting of certain options awarded under the 1995 Plan is
conditioned upon the Company reaching certain earnings before interest,
taxes, depreciation and amortization ('EBITDA') objectives during the
period of the option. Options issued pursuant to these plans expire ten
years from the date of grant. Pursuant to an Amended and Restated
Employment Agreement between the Company and Mr. McCullough, all options
held by Mr. McCullough automatically vested upon Mr. McCullough's
resignation. Mr. McCullough's options shall terminate pursuant to a
Separation Agreement between Mr. McCullough and the Company upon the
receipt of certain compensation as described in note (10) above.
(15) Mr. Morris joined the Company in October 1996. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(16) Represents reimbursement in the amount of $42,519 received from the Company
in connection with Mr. Morris's relocation to the Chicago, Illinois
metropolitan area and $20,983 in additional federal and state income taxes
payable on such reimbursement.
(17) Represents options to purchase shares of Common Stock awarded to Mr. Morris
under the terms of an Employment Agreement between the Company and Mr.
Morris. Such options were awarded under the 1992 Plan and the 1995 Plan. Of
the total amount of options shown, 15,000 options vest in 25% increments on
an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives. The options expire ten years from the date of grant.
(18) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the 1997 Stock Option and Incentive Plan. The options vest in
20% increments on an annual basis beginning fiscal 1997, conditioned upon
the Company achieving certain EBITDA objectives. The options expire ten
years from the date of grant.
(19) Mr. Billick joined the Company in June 1996. Amounts reported as salary for
fiscal year 1996 represent payments received from that date through the end
of the Company's fiscal year.
(20) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the terms of an Employment Agreement. Such options were
awarded under the 1992 Plan and the 1995 Plan. Of the total amount of
options shown, 25,000 options vest in 25% increments on an annual basis
commencing on the first anniversary of the date of grant and 15,000 options
vest in 20% increments on an annual basis beginning in fiscal 1996,
conditioned upon the Company achieving certain EBITDA objectives. The
options expire ten years from the date of grant.
10
OPTION GRANTS
No options were exercised by the named executive officers during fiscal
1997. Shown below is information on grants of stock options during the fiscal
year ended September 28, 1997 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
%
OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES /SARS STOCK PRICE
UNDERLYING GRANTED MARKET APPRECIATION FOR
OPTION/ IN EXERCISE PRICE ON OPTION TERM
SARS FISCAL OR BASE DATE OF EXPIRATION --------------------
NAME GRANTED YEAR PRICE GRANT DATE 5%
- ------------------------------ ---------- ------- -------- -------- ---------- --------------------
Meeta R. Vyas................. 500,000(1) 65.7% $ 3.50 $ 3.50 8/11/07 $ 1,100,566
91,727(2) 12.1% $ 1.75 $ 3.50 11/1/97 $ 362,425
Peter C. McC. Howell.......... --
S. Donald McCullough.......... --
C. Wayne Morris............... 30,000(3) 3.9% $5.875 $5.875 10/7/06 $ 110,843
Timothy J. McGinnity.......... --
Steven M. Billick............. 10,000(4) 1.3% $5.375 $4.125 3/6/07 $ 13,442
NAME 10%
- ------------------------------ --------------------
Meeta R. Vyas................. $ 2,789,049
$ 672,185
Peter C. McC. Howell..........
S. Donald McCullough..........
C. Wayne Morris............... $ 280,897
Timothy J. McGinnity..........
Steven M. Billick............. $ 53,242
- ------------------
(1) Under Ms. Vyas's Employment Agreement, one-half of these options become
exercisable on September 30, 1998, and one-half become exercisable on
September 30, 1999.
(2) This option in the form of stock subscriptions had a per share exercise
price equal to 50% of the closing price of the Common Stock on August 11,
1997, and were exercisable between September 2, 1997 and
November 1, 1997. Ms. Vyas exercised these stock subscriptions on November
1, 1997, pursuant to the terms of a Stock Subscription Agreement.
(3) Of the total amount of options shown, 15,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
(4) Options vest in 20% increments on an annual basis beginning in fiscal 1997,
conditioned upon the Company achieving certain EBITDA objectives.
11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock for the Named Executive Officers as of the
fiscal year end, September 28, 1997.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE (#)EXERCISABLE/ ($)EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- ----------------------------------------------- ----------- -------- -------------------- -----------------
Meeta R. Vyas.................................. 0 0 91,727/500,000 $229,318/$375,000
Peter C. McC. Howell........................... 0 0 362,353/0 592,628/0
S. Donald McCullough........................... 0 0 98,250/92,250(3) 0/0
C. Wayne Morris................................ 0 0 0/30,000 0/0
Timothy J. McGinnity........................... 0 0 20,500/29,500 10,531/406
Steven M. Billick.............................. 0 0 9,250/40,750 0/0
- ------------------
(1) Vesting of certain of these options is conditioned upon the Company reaching
certain EBITDA objectives during the duration of the option.
(2) Year end value of options is calculated based upon the closing price ($4.25)
of a share of Common Stock on the Nasdaq National Market on September 26,
1997, the last trading date of the fiscal year.
(3) These options became exercisable on January 16, 1998 pursuant to the
termination provisions of an Amended and Restated Employment Agreement and
the terms of a Separation Agreement between Mr. McCullough and the Company.
All of Mr. McCullough's options shall terminate pursuant to a Separation
Agreement between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) to the Summary Compensation Table
included elsewhere herein.
12
SIGNATURE BRANDS USA, INC.
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Index and an index comprised of the 15
companies included in the Home Furnishings Daily housewares component of the HFD
stock index (the 'Peer Group Index') for the period from September 30, 1992 to
September 30, 1997. The Company's most recent fiscal year ended on September 28,
1997. Total stockholder return data for each index are not readily available for
this date. Accordingly, to ensure the integrity of the comparison, all data
reflect the period ending September 30, 1997. The companies comprising the Peer
Group Index are: Catalina Lighting, Inc., General Housewares Corp., Signature
Brands USA, Inc., Lancaster Colony Corp., Newell Co., Rival Co., Rubbermaid,
Incorporated, Sunbeam Corp., Toastmaster Inc., Brown Forman Corp., Oneida Ltd.,
The Black & Decker Corporation, Helen of Troy, Inc., Nacco Industries, Inc. and
National Presto Industries, Inc. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at September
30, 1992 and that all dividends, if any, were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SIGNATURE BRANDS USA, INC., THE S&P 500 INDEX AND A PEER GROUP
Brands USA Peer Group S&P 500
---------- ---------- -------
Sep-92 100 100 100
Sep-93 135 110 113
Sep-94 101 114 117
Sep-95 81 128 152
Sep-96 110 143 183
Sep-97 75 184 257
- ------------------
* $100 invested on 9/30/92 in stock or Index--including reinvestment of
dividends. Fiscal year ending September 30.
13
SECURITY OWNERSHIP OF
PRINCIPAL HOLDERS OF VOTING SECURITIES,
DIRECTORS, AND OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 16, 1998 by (i)
each person or group who is known to the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each of the Company's Directors, (iii)
each of the named executive officers of the Company named in the Summary
Compensation Table included elsewhere herein, and (iv) all Directors and
executive officers of the Company as a group. All information with respect to
beneficial ownership has been furnished by the respective Director, executive
officer, or 5% beneficial owner, as the case may be. Unless otherwise indicated
below, the persons named below have sole voting and investment power with
respect to the number of shares set forth opposite their names.
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF SHARES OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- -------------------------------------------------------- --------------------- ---------------------
Thomas H. Lee Equity Partners, L.P.(2) ................. 1,818,203 19.8%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
ML-Lee Acquisition Fund, L.P.(3) ....................... 1,563,053 17.0%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Meeta R. Vyas .......................................... 91,727 1.0%
Thomas H. Lee(5)(6) .................................... 1,025,566 11.2%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
William P. Carmichael................................... 16,000(7) *
David A. Jones.......................................... 5,000(4) *
Robert W. Miller........................................ 191,052(8) 2.1%
Urbano Perez V.......................................... 0 *
Sandra E. Peterson...................................... 0 *
Scott A. Schoen......................................... 28,826(9) *
Thomas R. Shepherd(6)................................... 54,607 *
Frank E. Vaughn......................................... 12,500(10) *
C. Wayne Morris......................................... 6,750(11) *
Timothy J. McGinnity.................................... 29,250(12) *
Steven M. Billick....................................... 11,050(13) *
All Directors and executive officers as a group (12 1,472,328 16.0%
persons)(6)(14).........................................
- ------------------
* Indicates an amount less than 1%.
(1) The number of shares of Common Stock shown as owned by the persons and
groups named in the foregoing table assumes the exercise of all outstanding
options held by such persons and groups that are exercisable within 60 days
after January 16, 1998, and the percentage shown assumes the exercise of
such options and assumes that no options held by others are exercised. For
purposes of the foregoing table, each person's
(Footnotes continued on next page)
14
(Footnotes continued from previous page)
'beneficial ownership' of the Company's Common Stock has been determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934 (the
'Exchange Act') and Rule 13d-3 promulgated thereunder. The beneficial
ownership of shares of Common Stock by Purchaser and Parent as a result of
the Stock Purchase Agreement executed in connection with the Merger
Agreement is not reflected herein.
(2) Each of THL Equity Advisors Limited Partnership ('Equity Advisors'), the
general partner of Thomas H. Lee Equity Partners, L.P. ('Equity Partners');
THL Equity Trust, the general partner of Equity Advisors; and Thomas H. Lee,
a Trustee of THL Equity Trust, also may be deemed to be beneficial owners of
the shares of Common Stock held by Equity Partners. Each of Equity Advisors,
THL Equity Trust, and Mr. Lee disclaims beneficial ownership of such shares.
Each of Equity Advisors and THL Equity Trust maintains a principal business
address c/o Thomas H. Lee Company, 75 State Street, Boston, Massachusetts
02109.
(3) The ML-Lee Acquisition Fund, L.P. (the 'ML-Lee Fund') has shared voting and
investment power with respect to these shares. This number does not include
the shares of Common Stock held beneficially by Thomas H. Lee, which may be
deemed to be beneficially owned by the ML-Lee Fund and Thomas H. Lee
Advisors I, L.P. ('Advisors') as a result of their relationship with Mr.
Lee. The ML-Lee Fund and Advisors disclaim beneficial ownership of such
shares.
(4) Reflects shares which may be acquired upon the exercise of stock options
exercisable within 60 days after January 16, 1998.
(5) The shares are held of record by State Street Bank and Trust Company of
Connecticut, N.A., 750 Main Street, Hartford, Connecticut 06103, not
individually, but as successor Trustee for the 1989 Thomas H. Lee Nominee
Trust (the 'THL Trust'). The Trustee of the THL Trust disclaims beneficial
ownership of such shares.
(6) Does not include shares of Common Stock held by the ML-Lee Fund which may be
deemed to be beneficially owned by Mr. Lee, Mr. Shepherd and Advisors as a
result of their relationship with the ML-Lee Fund. Messrs. Lee and Shepherd
and Advisors disclaim beneficial ownership of such shares.
(7) Consists of 11,000 shares held of record by William P. Carmichael as Trustee
of the William P. Carmichael Trust dated April 1, 1985 and 5,000 shares
which may be acquired upon the exercise of stock options exercisable within
60 days after January 16, 1998.
(8) Includes 101,052 shares owned directly by Mr. Miller and 90,000 shares held
of record by Trust Company of Illinois, 45 South Park Boulevard, Suite 315,
Glen Ellyn, Illinois 60137, as Trustee of the RW & JS Miller Irrevocable
Charitable Trust (the 'Miller Trust'). The Trustee of the Miller Trust
disclaims beneficial ownership of such shares.
(9) Includes 9,690 shares which may be acquired from Thomas H. Lee upon the
exercise of stock options exercisable within 60 days after January 16, 1998.
(10) Consists of 10,000 shares held of record by Frank E. Vaughn as Trustee of
the Frank E. Vaughn Trust dated October 15, 1997 and an additional 2,500
shares which Mr. Vaughn has the right to acquire upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(11) Includes 3,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(12) Includes 26,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(13) Includes 1,800 shares held jointly by Mr. Billick and his wife and 9,250
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(14) Includes an aggregate of 52,250 shares of Common Stock, not including the
options held by Mr. Schoen to acquire 9,690 shares from Thomas H. Lee,
which may be acquired by the Directors and executive officers of the
Company upon the exercise of stock options exercisable within 60 days after
January 16, 1998.
15
TERMS OF FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Messrs. Lee, Miller and Shepherd and others have certain demand and
piggyback registration rights pursuant to the First Amended and Restated
Stockholders Agreement dated as of March 16, 1992 (the 'Stockholders'
Agreement'). Such rights provide that stockholders who are parties to the
agreement owning stated percentages of the unregistered Common Stock may require
the Company to file registration statements under the Securities Act of 1933, as
amended (the 'Securities Act'), on up to three occasions, for the registration
of not less than 15% of the outstanding shares of Common Stock originally
subject to the agreement. Subject to certain conditions and limitations, the
other parties to the agreement have the right to request that their shares of
Common Stock be included in any such registrations. Also, subject to certain
conditions and limitations, all such stockholders have the right to require the
Company to include their shares of Common Stock in any registered offerings by
the Company. Under such agreement, the Company is required to bear all costs and
expenses of each such registration (other than underwriters' discounts or
commissions which are to be borne by the sellers), and the stockholders and the
Company have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
INFORMATION WITH RESPECT TO PARENT DESIGNEES
As of the date of this Information Statement, the Parent has determined who
will be Parent Designees.
Set forth below is the name, business address, principal occupation or
employment and five (5) year employment history of the persons who will be
Parent Designees. Unless otherwise indicated, each such person has held the
occupation listed opposite his name for at least the past five (5) years and
each occupation refers to employment with the Parent. All persons listed below
are citizens of the United States. None of the persons listed below owns any
Shares.
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND MATERIAL OCCUPATIONS
POSITIONS, OFFICES OR EMPLOYMENT
NAME OF BUSINESS HELD DURING THE LAST FIVE YEARS.
- ------------------------------------------ ---------------------------------------------------------------------
Albert J. Dunlap.......................... Director of Parent. Chairman of the Board of Directors and Chief
Executive Officer since July 18, 1996. Chairman and Chief Executive
Officer of Scott Paper Company from April 1994 to December 1995.
Managing Director and Chief Executive Officer of Consolidated Press
Holdings Limited (an Australian media, chemicals and agricultural
operation) from 1991 to 1993.
Russell A. Kersh.......................... Director of Parent. Vice Chairman and Chief Financial Officer since
February 1, 1998. Prior to that date, he served as Executive Vice
President, Finance and Admistration since July 22, 1996. Executive
Vice President, Finance and Administration of Scott Paper Company
from June 1994 to December 1995. Served as the Chief Operating
Officer of Addidas America from January 1993 to May 1994.
David C. Fannin........................... Executive Vice President, General Counsel and Secretary since January
1994. Partner in the law firm of Wyatt, Tarrant and Combs from 1979
until 1993.
Peter A. Langerman........................ Director of Parent. Chairman of the Board from May 22, 1996 until
July 18, 1996. Senior Vice President of Franklin Mutual Advisers,
Inc., a registered investment advisor and a wholly owned subsidiary
of Franklin Resources, Inc., a diversified financial services
organization, since November 1996. Senior Vice President of Heine
Securities Corporation, and investment advisory service company, from
1986 to November 1996. Mr. Langerman has been a director of Franklin
Mutual Series Fund Inc. (previously Mutual Series Fund Inc.) since
1988 and a Director of Metallurg Inc. (a metal and related materials
manufacturer) since 1977.
16