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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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OEA, INC.
(Name of Subject Company)
OEA, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
670826106
(CUSIP Number of Class of Securities)
DR. CHARLES B. KAFADAR
OEA, INC.
34501 EAST QUINCY AVENUE
P.O. BOX 100488
DENVER, COLORADO 80250
(303) 693-1248
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person Filing Statement)
With a Copy to:
RONALD R. LEVINE, II, ESQ.
DAVIS, GRAHAM & STUBBS LLP
370 SEVENTEENTH STREET, SUITE 4700
DENVER, COLORADO 80202
(303) 892-9400
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
(a) Name and Address. The name of the subject company is OEA, Inc., a
Delaware corporation ("OEA" or the "Company"). The address of the principal
executive offices of OEA is P.O. Box 100488, Denver, Colorado 80250. The
telephone number of the principal executive offices is (303) 693-1248.
(b) Securities. The title of the class of securities to which this
statement relates is the common stock, par value $.10 per share, of OEA (the
"Common Stock") including the associated Common Share Purchase Rights (the
"Rights" and together with the Common Stock, "Shares") issued pursuant to the
Rights Agreement, dated March 25, 1998, by and between OEA and ChaseMellon
Shareholder Services, L.L.C. as Rights Agent (as amended, including an amendment
substituting LaSalle Bank National Association as Rights Agent, the "Rights
Agreement"). There were 20,621,691 shares outstanding as of March 12, 2000.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
(a) Name and Address. The name, address and telephone number of OEA, which
is the person filing this Schedule 14D-9, are set forth in Item 1(a) above.
(b) Tender Offer. This Statement relates to the tender offer by OEA Merger
Corporation, a Delaware corporation ("Merger Sub" or "Purchaser") and an
indirectly wholly owned subsidiary of Autoliv, Inc., a Delaware corporation
("Parent"), disclosed in a tender offer statement on Schedule TO (the "Schedule
TO"), dated March 24, 2000 to purchase all outstanding Shares at a purchase
price of $10 per Share (the "Offer Price"), upon the terms and subject to
conditions set forth in the Offer to Purchase dated March 24, 2000 (the
"Offer").
The Offer is being made pursuant to an Amended and Restated Agreement and
Plan of Merger, dated March 12, 2000 (as such agreement may be amended and
supplemented from time to time, the "Merger Agreement"), by and among OEA,
Parent and Merger Sub. The Merger Agreement provides, among other things, that
as soon as practicable after the satisfaction or waiver of the conditions set
forth in the Merger Agreement, in accordance with the provisions of the Delaware
General Corporation Law, as amended (the "DGCL"), Merger Sub will be merged with
and into OEA (the "Merger" and, together with the Offer, the "Transaction").
Following consummation of the Merger, OEA will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned subsidiary
of Parent. Capitalized terms used in this Schedule 14D-9 and not defined in this
Schedule 14D-9 have the meanings given such terms in the Merger Agreement. The
Merger Agreement is Exhibit 1 to this Schedule 14D-9 and is incorporated herein
by reference.
Parent's principal executive offices as set forth in Merger Sub's Schedule
TO are located at P.O. Box 70381, SE-107 24 Stockholm, Sweden. The telephone
number at the principal executive offices of Purchaser is 46 8 587 20 608.
Merger Sub's principal executive offices as set forth in Merger Sub's Schedule
TO are located at 1320 Pacific Drive, Auburn Hills, MI 48326. The telephone
number at the principal executive offices of Merger Sub is (248) 475-0442.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
CHANGE IN CONTROL ARRANGEMENTS
OEA has entered into a Change of Control Employment Agreement (the
"Agreement") with each of Dr. Charles B. Kafadar, J. Thompson McConathy, William
R. Barker, Jim T. Flanary and 18 additional employees (individually the
"Employee," and together the "Employees").
Pursuant to the Agreement, OEA and the Employee agree that the Employee
will remain in OEA's employ for a period of three years following a change of
control of OEA (the "Employment Period") and will receive an annual base salary
in an amount at least equal to twelve times the Employee's highest monthly base
salary during the twelve-month period immediately preceding the month in which
the change of control occurs. In addition to the annual base salary, the
Employee is eligible to receive an annual cash bonus in an
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amount at least equal to the Employee's highest annual bonus for the last three
full fiscal years prior to the change of control.
As of the date of this Schedule 14D-9, the annual base salaries for Dr.
Kafadar, Mr. McConathy, Mr. Barker, and Mr. Flanary are $400,000, $204,755,
$285,000 and $235,019, respectively. The annual base salaries for each of the 18
additional employees range from $75,628 to $190,008.
The Employee's employment with OEA may be terminated: (i) automatically
upon the Employee's death; (ii) under certain circumstances upon the disability
of the Employee; (iii) by OEA for cause; or (iv) by the Employee for good
reason.
If, during the Employment Period, OEA terminates the Employee's employment
other than for cause or disability or the Employee shall terminate employment
for good reason, then OEA shall pay the Employee a cash severance in a lump sum
within 30 days of the termination (the "Severance"). The amount of the Severance
shall be calculated in accordance with Section 6 of the Agreement, a form of
which is Exhibit 15 to this Schedule 14D-9, and is incorporated herein by
reference. The estimated Severance payment for each of Dr. Kafadar, Mr.
McConathy, Mr. Barker, and Mr. Flanary is $1,514,774.40, $709,125.60,
$1,032,364.80 and $549,616.00, respectively. The estimated Severance payment for
each of the 18 additional employees ranges from $87,672.00 to $417,856.00.
For purposes of the Agreement, "change of control" means: (a) the
acquisition by any person of beneficial ownership of 20% or more of either the
outstanding shares of common stock of OEA or the combined voting power of the
outstanding voting securities of OEA; (b) the individuals who constitute OEA's
Board at the time of the Agreement cease for any reason to constitute at least a
majority of the OEA Board; (c) the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of OEA; or (d) the approval by OEA's stockholders of OEA's complete
liquidation or dissolution.
Except as set forth in the response to this Item 3 or in Schedule 1
attached hereto, or as incorporated by reference herein, to the knowledge of
OEA, there are no material agreements, arrangements or understandings and no
actual or potential conflicts of interest between OEA or its affiliates and (i)
OEA's executive officers, directors or affiliates or (ii) Parent or Merger Sub,
or their respective executive officers, directors or affiliates.
Certain contracts, arrangements or understandings between OEA or its
affiliates and certain of OEA's directors, executive officers and affiliates are
described in the Information Statement of OEA attached to this Statement as
Schedule I (the "Information Statement"). The Information Statement is being
furnished to OEA's stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 issued
under the Exchange Act in connection with Merger Sub's right (after acquiring a
majority of the Shares pursuant to the Offer) to designate persons to the board
of directors of OEA (the "OEA Board") other than at a meeting of the
stockholders of OEA. The Information Statement is incorporated by reference.
INDEMNIFICATION
Pursuant to Section 6.11 of the Merger Agreement, the Company and the
Surviving Corporation will indemnify and hold harmless, to the fullest extent
permitted under applicable law, each present and former director, officer,
employee, fiduciary and agent of OEA or any of its subsidiaries (collectively
the "Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgements, fines, losses, claims, damages, liabilities, and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to the transactions contemplated by
the Merger Agreement for a period of four years from the date of the Merger
Agreement.
Additionally, Section 6.11 of the Merger Agreement requires that the bylaws
of the Surviving Corporation contain the provisions with respect to
indemnification set forth in Article IX of the bylaws of OEA on the date of the
Merger Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights
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thereunder of individuals who, at the date of the Merger Agreement were
directors, officers, employees or agents of OEA, unless such modification is
required by law.
The indemnification provisions of the Merger Agreement shall survive the
consummation of the Merger at the Effective Time and are intended to benefit
OEA, the Surviving Corporation and the Indemnified Parties, and are binding on
all successors and assigns of the Surviving Corporation.
The foregoing description of the indemnification provided to the directors
and officers of OEA pursuant to the Merger Agreement is qualified by reference
to the complete text of Section 6.11 of the Merger Agreement, which is
incorporated by reference herein.
Article IX of the OEA bylaws requires that OEA indemnify any director or
officer of OEA, or any person serving at the request of OEA as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans maintained or sponsored by OEA, to the fullest extent authorized by the
DGCL as the same exists or may be amended. The indemnification and advancement
of expenses permitted by law shall continue as to a person who has ceased to be
a director, officer, employee or agent of OEA and inure to the benefit of his or
her heirs, executors and administrators. Article IX of the OEA bylaws is Exhibit
6 to this Schedule 14D-9 and is incorporated herein by reference.
CONFIDENTIALITY AGREEMENT
On January 5, 2000, Parent and OEA entered into a customary confidentiality
agreement. The confidentiality agreement provides that each of Parent and OEA
will keep the Transaction Material confidential and use such materials solely to
evaluate any proposals made during discussions between the parties. "Transaction
Material" includes all information (whether transferred in writing, orally,
visually, electronically, or otherwise) that is revealed by one party to the
other, subject to certain customary exceptions.
The Confidentiality Agreement provides for (i) the prompt notification to
either party of any legal compulsion to disclose any of the Transaction Material
in order to allow the other party to seek an appropriate protective order or to
waive compliance with the terms of the Confidentiality Agreement and (ii) the
prompt return of any tangible Transaction Material upon request of the party
providing such material.
Both parties agreed that for a period of one year from the date of the
Confidentiality Agreement, neither party will contact any officer, director,
employee or agent of the other party without such other party's express prior or
written permission.
The Confidentiality Agreement is Exhibit 4 to this Schedule 14D-9 and is
incorporated herein by reference.
MERGER AGREEMENT
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of Merger Sub to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the satisfaction or waiver of the Minimum
Condition and certain other conditions. Pursuant to the Merger Agreement,
without the consent of the Company, Merger Sub may not extend the Offer beyond
April 25, 2000, except in the following circumstances: (i) if necessary to
satisfy any condition of the HSR Act, for a period not to exceed forty (40)
business days; (ii) if any of the Offer Conditions (other than the Minimum
Condition) shall not have been satisfied or waived, for a period not to exceed
twenty (20) business days; (iii) if all the Offer Conditions are satisfied or
waived, but the number of Shares validly tendered and not withdrawn is less than
90% of the number of then outstanding Shares on a fully diluted basis (excluding
shares held by OEA, Inc. or any of its subsidiaries), for four successive five
(5) business day periods for an aggregate period not to exceed twenty (20)
business days; or (iv) if any of the Offer Conditions shall not have been
satisfied or waived and a Takeover Proposal has been made or publicly disclosed
by a person other than Parent or Merger Sub (including OEA, Inc. and any of its
subsidiaries and affiliates), or if Parent or Merger Sub otherwise learn that a
Takeover Proposal has been made or publicly proposed, for a period of up to ten
(10) days after the withdrawal or termination of such Takeover Proposal, such
date in no event to exceed the earlier of
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(i) June 30, 2000, and (ii) the minimum time period necessary to satisfy all
such outstanding Offer Conditions.
Subject to the foregoing restrictions, Merger Sub has the right (but is not
obligated), in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notices of extension to the depositary in such
offer by making a public announcement of such extension.
Merger Sub will not, without the prior consent of the Company, decrease the
Offer Price or the number of Shares sought pursuant to the Offer, or change the
form of consideration in the offer, or otherwise amend or add any term or
condition of or to the Offer, except as otherwise expressly permitted in or
contemplated by the Merger Agreement. Merger Sub can waive any other condition
to the Offer in its discretion.
Directors. The Merger Agreement provides that effective upon the acceptance
for payment of Shares, Merger Sub shall be entitled to designate at least such
number of directors, rounded up to the next whole number, on the OEA Board that
equals the product of (i) the total number of directors on the OEA Board
(determined after giving effect to the directors elected pursuant to this
sentence) and (ii) the percentage that the aggregate number of Shares
beneficially owned by Parent or Merger Sub (including Shares accepted for
payment pursuant to the Offer) bears to the total number of Shares then
outstanding and the Company will, upon request of Merger Sub promptly take all
actions necessary to cause Merger Sub's designees to be so elected, including,
if necessary, seeking the resignations of one or more existing directors;
provided, however, that before the Effective Time, the OEA Board will always
have at least three members who have been in place since March 12, 2000 (the
"Continuing Directors"). Following the election or appointment of Merger Sub's
designees and before the Effective Time, any amendment or termination of the
Merger Agreement by the Company, or any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Merger Sub
or waiver of any of the Company's rights thereunder, will require the
concurrence of a majority of the directors of the Company then in office who are
Continuing Directors.
Options. Prior to the Expiration Date, the Company will use its reasonable
best efforts to cause each person who holds an option to acquire Shares
("Option") to exercise, terminate or consent to their cancellation. As of the
Effective Time, all remaining Options will be canceled, redeemed or repurchased
by the Company, and each holder of Options will receive the aggregate Merger
Consideration that such holder would have received pursuant to this Offer if the
holder had tendered the Shares underlying such Options, less the aggregate
exercise or purchase price of such underlying Shares (subject to any applicable
withholding tax).
The Merger. The Merger Agreement provides that as soon as practicable after
the satisfaction or waiver of each of the conditions to the Merger set forth
therein, Merger Sub will be merged with and into the Company. Following the
Merger, the separate existence of Merger Sub will cease, and the Company will
continue as the Surviving Corporation, wholly owned by Parent.
If required by the DGCL, the Company shall call and hold a meeting of its
shareholders (the "Company Shareholders' Meeting") promptly following
consummation of the Offer for the purpose of voting upon the approval of the
Merger Agreement. At any such meeting all outstanding Shares then owned by
Parent or Merger Sub or any subsidiary of Parent shall be voted in favor of
approval of the Merger.
Pursuant to the Merger Agreement, each Share outstanding immediately before
the Effective Time (other than Shares owned beneficially or of record by Parent
or any subsidiary of Parent or held in the treasury of the Company, all of which
will be canceled, and other than Shares which are held by shareholders, if any,
who properly exercise their appraisal rights under the DGCL) will be converted
into the right to receive the Offer Price except as described below.
Shareholders who perfect their right to appraisal of their Shares under the DGCL
shall be entitled to the amounts determined pursuant to such proceedings.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties thereto, including representations
by the Company as to its corporate existence and power, capitalization,
corporate authorizations, Commission filings, financial statements, absence of
certain changes (including: (i) any material adverse effect in the financial
condition, business, operations or assets that would be reasonably expected to
have, either individually or in the aggregate, a Company Material Adverse Effect
(as defined in the Merger Agreement) on the Company and its Subsidiaries, taken
as a whole;
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(ii) entry by the Company into an agreement which, under the rules and
regulations of the Exchange Act, would be required to be filed as an exhibit to
an Exchange Act filing; or (iii) changes by the Company in its accounting
principles), government authorizations, absence of litigation, compliance with
laws, employee matters, certain contracts, taxes, environmental, intellectual
property, brokers, the opinion of the Company's financial advisor,
noncontravention, product liability, recalls, required shareholder vote and
rights agreement.
Company Covenants. The Merger Agreement contains various customary
covenants of the parties thereto. A description of certain of these covenants
follows:
Conduct of Business. Prior to the Effective Time, except as otherwise set
forth in the Merger Agreement or approved by Parent, the Company will:
(1) conduct its business in the ordinary course of business and
consistent with past practices and such that, as of the Effective Time, the
closing conditions set forth in the Merger Agreement will be met;
(2) use reasonable efforts to (a) maintain the business organizations
of the Company and its subsidiaries, (b) maintain all significant customer,
supplier, contractor, distributor, licensor, licensee and other business
relationships, and (c) retain officers and employees;
(3) not engage in an extraordinary corporate transaction;
(4) not amend its certificate of incorporation or bylaws;
(5) not (a) authorize, issue or provide for the issuance of or sell,
pledge, dispose of or encumber its capital stock or Options (other than
with respect to disclosed Option plans), (b) enter into any contract with
respect to the purchase or voting of capital stock, (c) split, combine or
reclassify capitalization any material term of its capital stock or (d)
make any other change in its capitalization;
(6) not declare, set aside or pay dividends or distributions or
purchase or redeem any capital stock or Options;
(7) maintain its accounting policies in accordance with past practice
and generally accepted accounting principles and not adopt any material
changes in its reporting regarding taxation or accounting procedures except
in accordance with such generally accepted accounting principles;
(8) not: (a) modify the terms of any existing indebtedness or incur
any new indebtedness unless such indebtedness: (1) is in the ordinary
course of business and (2) does not exceed the sum of total indebtedness on
January 31, 2000 and $10,000,000; (b) make loans of more than $100,000
(except intercompany loans); (c) pay or discharge any claims, liens or
liabilities involving more than $100,000 individually and $500,000 in the
aggregate; or (d) write off any accounts or notes receivable other than in
the ordinary course of business;
(9) not take any action with respect to employees that would: (a)
grant or increase any severance or termination pay; (b) adopt or establish
a new employee benefit plan or make any material amendment with respect to
an existing benefit plan; or (c) enter into or materially amend any
employment or employment related agreement (including union or labor
agreements) with any employees, directors, officers or consultants;
(10) not settle or compromise any suit or claim for an amount which
would exceed $250,000 individually; and
(11) not take any action or fail to take action that would result in:
(a) any condition to the Offer not being satisfied; (b) a breach of any
representation or warranty in the Merger Agreement or (c) an impairment by
any party to the Merger Agreement to consummate the transactions
contemplated in the Merger Agreement.
No Solicitation. The Company will not directly or indirectly (1) solicit,
initiate or encourage any Takeover Proposal, (2) engage in negotiations or
discussions concerning, provide any information to any third party relating to,
or take any other actions to facilitate a Takeover Proposal or (3) enter into
any agreement
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relating to a Takeover Proposal. The term "Takeover Proposal" is defined in the
Merger Agreement to mean any proposal or offer for a merger or certain other
extraordinary transactions. The foregoing will not prohibit the Company from
complying with Rule 14e-2 under the Exchange Act.
Notwithstanding the foregoing, the Company may furnish, at any time before
the closing of the Offer, non-public information to, or enter discussions with
respect to any unsolicited bona fide written proposal for a Takeover Proposal,
but only to the extent (1) the Company Board determines after consultation with
outside counsel and financial advisors that doing so is required to comport with
the exercise of its fiduciary obligations, (2) the OEA Board reasonably
determines that the Takeover Proposal is likely to lead to a Superior Proposal
and (3) before taking action on such Takeover Proposal the Company receives an
executed customary (as determined by outside counsel) confidentiality agreement.
The term "Superior Proposal" is defined in the Merger Agreement to mean any
Takeover Proposal: (a) which is more favorable to the Company's stockholders
than the Offer and the Merger as determined by the OEA Board based upon the
written opinion of the Company's financial advisors; (b) in which the person
making such proposal has or is reasonably likely to obtain the necessary funds
to make the Superior Proposal; and (c) that will have a consideration greater
than the Offer.
The OEA Board may not withdraw or modify its approval of the Offer and the
Merger or approve any Takeover Proposal unless the OEA Board determines after
consultation with outside counsel and financial advisors that doing so is
required to comport with the exercise of its fiduciary obligations and such
Takeover Proposal is a Superior Proposal. However, the Company may not enter
into an agreement with respect to the Superior Proposal unless the Merger
Agreement is terminated and the Termination Fee (as defined below) is paid to
Parent and Purchaser simultaneously with the Board's approval of a Superior
Proposal.
The Company has agreed to notify Parent promptly after receiving a Takeover
Proposal.
Indemnification. The Merger Agreement provides that for four (4) years
after the Effective Time, the Surviving Corporation will indemnify and hold
harmless each present and former director, officer, employee, fiduciary and
agent from liabilities for acts or omissions occurring at or prior to the
Effective Time to the fullest extent required under applicable law and the
Company's certificate of incorporation and bylaws; and that the bylaws of the
Surviving Corporation after the Effective Time will provide the same
indemnification protection as the bylaws of the Company in effect on the date of
the Merger Agreement.
Employees, Employee Benefits. The Merger Agreement contains certain
covenants relating to the treatment of employees of the Company for one year
after the consummation of the Offer. Parent: (a) intends to cause the Surviving
Corporation to provide benefits to employees who were employed by the Company on
the date of the consummation of the Offer that are not materially less favorable
than those for employees in comparable positions in the Surviving Corporation;
(b) will honor all legally imposed obligations relating to employment matters;
and (c) will recognize time served with the Company for determination of
eligibility, vesting and level under benefit plans of the Surviving Corporation.
Conditions to the Merger. The obligations of Parent, Merger Sub and the
Company to consummate the Merger are subject to the satisfaction of the
following conditions at or prior to the Effective Time:
(1) if required by the DGCL, the approval of the Merger Agreement by
the shareholders of the Company, the Parent and Merger Sub in accordance
with such law;
(2) the termination of any waiting period with respect to the HSR Act;
(3) the absence of any injunction, order, statute, regulation, rule
order or judgment that shall prohibit consummation of the Offer or the
Merger.
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In addition, the obligations of Parent and Merger Sub to consummate the
Merger are further subject to the satisfaction of the following condition at or
prior to the Effective Time:
(1) the Company shall have obtained all material consents, waivers,
approvals or authorizations.
The obligations of the Company to consummate the Merger are further subject
to the satisfaction of the following condition at or prior to the Effective
Time:
(1) Merger Sub shall have purchased all shares validly tendered and
not withdrawn pursuant to the Offer.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time:
(1) by mutual written consent of Merger Sub, Parent and the Company;
(2) by Merger Sub, Parent or the Company, if the Merger shall not have
been consummated by June 30, 2000 (provided that the right to terminate
shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has caused or resulted in the failure of the
Merger to occur on or before such date, and such time periods shall be
tolled for any time during which any party is subject to a non-final order
or decree restraining, enjoining or otherwise prohibiting the consummation
of the Merger);
(3) by Merger Sub, Parent or the Company, if any court or governmental
entity prohibits the transaction by final, nonappealable order, decree or
ruling permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(4) by Parent if, as a result of the failure of the conditions to the
Offer; the Offer is terminated or expires without Purchaser purchasing
Shares;
(5) by the Company, if the Company executes an agreement relating to a
Superior Proposal;
(6) by Parent, if (a) the Company has entered into an agreement with a
third party to sell all or substantially all of the assets of, any
substantial equity in or enter into a business combination with, the
Company or any of its subsidiaries, or (b) if the OEA Board has withdrawn
or modified its recommendation of the Offer or the Merger in a manner
materially adverse to Parent or Merger Sub.
If the Merger Agreement is terminated, it will become void and there will
be no liability on the part of the Company, Parent or Merger Sub, except for
obligations regarding the confidentiality agreement and certain fees and
expenses payable pursuant to the Merger Agreement; provided, however, that no
such termination shall relieve any party from liability for any breach of the
Merger Agreement prior to such termination.
Fees and Expenses. Except as otherwise specified in the following sentence,
all costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party incurring such cost
or expense.
If this Merger Agreement is terminated as set forth below, the Company
shall promptly pay to Parent, by wire transfer in immediately available funds, a
fee of $6 million (the "Termination Fee"), plus interest from the date the
Termination Fee is payable until paid at an interest rate of 8% calculated per
annum. The Termination Fee applies where the Merger Agreement is terminated:
(1) as a result of the Company executing an agreement relating to a
Superior Proposal;
(2) as a result of the Company entering into an agreement with a third
party to sell all or substantially all of the assets or any substantial
equity in or enter into a business combination with, the Company or any of
its subsidiaries, or the OEA Board withdrawing or modifying its
recommendation of the Offer or the Merger in a manner materially adverse to
Parent or Merger Sub.
Amendments and Waivers. Any provision of the Merger Agreement may be
amended or waived at any time; provided, however, that after adoption of the
Merger Agreement by the shareholders of the Company, no
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amendment may be made which changes the form or decreases the Offer Price or in
any other way materially and adversely affects the rights of such shareholders
(other than termination in accordance with its terms) without the approval of
such shareholders.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation. At a meeting held on March 12, 2000, the OEA Board (i)
determined that the Offer and Merger were fair to and in the best interests of
OEA's stockholders; (ii) unanimously approved the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger; and (iii) recommended that OEA's stockholders accept the Offer and
tender their shares thereunder and approve and adopt the Merger Agreement and
the Merger.
A press release announcing the commencement of the Offer is Exhibit 2 to
this Schedule 14D-9 and is incorporated herein by reference.
(b) Reasons.
BACKGROUND OF THE TRANSACTION
Over the past few years, the OEA Board has considered various options to
maximize the future value of the Company. While OEA has been successful in
growing its business, the Company's success has been limited as an independent
Tier II supplier, especially in competing with captive (internal) Tier I
suppliers. Notwithstanding OEA's proprietary product technology and low-cost
production operations, the Company's lack of direct access to vehicle
manufacturers and competitor scale of global operations limits its future growth
opportunities.
In October 1999, the OEA Board retained Deutsche Banc Alex. Brown
("Deutsche Bank") to identify strategic alternatives for the Company. Deutsche
Bank reviewed the following strategic alternatives with the OEA Board: debt
restructuring, private placement, merger or joint venture with a strategic
partner and sale of the entire Company or selected operations. Given the current
global consolidation of automotive suppliers, conditions in the financials
markets and the financial position of the Company, the OEA Board directed
Deutsche Bank to commence a process directed towards a strategic merger or sale
of the Company, while continuing to consider other strategic alternatives.
On October 27, 1999, the OEA Board met in Denver, Colorado where Deutsche
Bank and the Company outlined a discrete sale process and identified a limited
number of parties based on strategic fit with OEA and/or previous indications of
interest in investing in, or acquiring OEA. After receiving approval from the
OEA Board, Deutsche Bank contacted potential strategic acquirors and solicited
their interest in OEA over the next several weeks.
Interested prospective buyers received a confidential information
memorandum and were invited to attend a presentation by Company senior
management. Parent executed a confidentiality agreement on January 5, 2000 and
received a confidential information memorandum on January 6, 2000. Parent
subsequently confirmed its preference for the management presentation to be
delivered on January 22, 2000.
On January 10, 2000, the OEA Board met in Denver, Colorado to discuss the
Company's business plan, as described by management, and to receive an update
from Deutsche Bank on the status of the sale process. This meeting was
pre-scheduled to coincide with the Company's annual stockholder meeting which
was held on January 11, 2000.
Parent attended the management presentation at the offices of Davis, Graham
& Stubbs LLP, the Company's outside counsel ("DG&S"), on January 22, 2000.
On February 7, 2000, Parent submitted its preliminary indication of
interest to acquire the common stock of the Company at a price between $9 and
$11 per share.
On February 9, 2000, the OEA Board held a telephonic meeting to discuss the
preliminary indications of interest received from Parent and other prospective
acquirors. The OEA Board also received an update of the
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Company's financial performance through the second quarter ended January 31,
2000 and on the status of its compliance with covenants in its credit facility.
The OEA Board selected Parent, as well as a limited number of other interested
parties, to proceed with facility visits and additional due diligence at the
Company.
Parent toured the Company's facilities with OEA management in Colorado,
California and Utah on February 21, 22 and 23, 2000 respectively, and conducted
business, financial and legal due diligence.
Parent submitted its final written proposal to acquire the Company's common
stock for $9 per share in cash, and a markup of the Merger Agreement on March 9,
2000.
On the evening of March 9, 2000, Deutsche Bank contacted Parent to review
its written proposal and to address some outstanding due diligence items
referenced in the proposal. Deutsche Bank indicated that the economics of the
existing proposal may not be sufficient in the view of the Board and that Parent
should reconsider its proposal. It was determined that, in order for Parent to
reconsider its proposal, the outstanding due diligence items required additional
information from Company management. A conference call was scheduled with OEA
management on the morning of March 10, 2000 to discuss these items.
After the conference call on the morning of March 10, 2000, during which
all of the remaining due diligence items were addressed, Parent verbally
reconfirmed its interest in acquiring all of the Company's common stock for $9
per share in cash.
Early in the afternoon of March 10, 2000, Deutsche Bank contacted Parent
again and urged it to reconsider the economics of its proposal in light of
transaction alternatives that would be discussed at a pre-scheduled telephonic
OEA Board meeting set for 4:00 p.m. EST that day.
Prior to the OEA Board meeting, the CEO of Parent contacted Deutsche Bank
to modify the final proposal to reflect an offer to purchase all of OEA's
outstanding common stock for $10 per share in cash. The verbal proposal was
subsequently confirmed in writing later that night.
On March 10, 2000, Deutsche Bank presented the submitted offers, reviewed
the Company's strategic alternatives with the OEA Board and received preliminary
OEA Board approval to work with the Company's senior management and legal
counsel to negotiate and structure a merger agreement with Parent. The Company's
counsel circulated a revised draft of the definitive Merger Agreement to Parent
and its legal counsel later in the day.
On March 11, 2000, representatives of Deutsche Bank and DG&S continued to
negotiate the terms of the definitive Merger Agreement with Parent and their
legal counsel.
On March 12, 2000, at an OEA Board meeting held in Denver, Colorado,
Deutsche Bank and DG&S reviewed the status of the negotiations with the OEA
Board. Deutsche Bank delivered its oral fairness opinion, which was subsequently
confirmed in writing, that the consideration offered by Parent was fair, from a
financial point of view, to the stockholders of OEA. Based on the review of the
Merger Agreement and a discussion of the alternatives available to the Company,
the OEA Board voted unanimously to authorize executive management to work with
Deutsche Bank and DG&S to finalize the terms of the Merger Agreement and to
execute such agreement.
Late in the evening of March 12, 2000, OEA and Parent finalized terms and
executed a definitive Merger Agreement. Subsequently, both companies issued
separate press announcements regarding the transaction.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE OEA BOARD
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the OEA Board
considered a number of factors including those presented below:
1. The presentations and views expressed by management of the Company
regarding, among other things: (a) the financial condition, results of
operations, cash flows, business and prospects of the Company; (b) the fact
that the structure of the transaction proposed by Parent should result in a
rapid consummation of the transaction; (c) the continued cash funding
requirements of OEA in view of the
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upcoming maturity of its existing credit facility, as well as OEA's
requirement for additional financing in order to support its capital
requirements under its proposed operating and capital budget; (d) the fact
that industry trends continue to put pressure on both Tier I and Tier II
suppliers, leading to a push for highly integrated system suppliers; (e)
based on the process conducted with Deutsche Bank's assistance, management
of the Company believed it was unlikely that in the near term any other
party would propose an acquisition or strategic business combination that
would be more favorable to the Company and its stockholders than the Offer
and the Merger; (f) the fact that the transaction proposed by Parent was
not conditioned on the ability of Parent to obtain financing; and (g) the
recommendation of the Offer and the Merger by the management of the
Company.
2. The presentation of Deutsche Bank at the meeting of the OEA Board
held on March 12, 2000, and the opinion of Deutsche Bank, dated March 12,
2000, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the proposed cash consideration to
be received by the holders of Shares pursuant to the Offer and the merger
was fair to such holders from a financial point of view. The full text of
the written opinion dated March 12, 2000, which sets forth the assumptions
made, matters considered and limitations on the review undertaken, is
Exhibit 3 to this Schedule 14D-9, and is incorporated herein by reference.
The opinion of Deutsche Bank is directed only to the fairness, from a
financial point of view, of the cash consideration to be received in the
Offer and the Merger by holders of Shares and is not intended to
constitute, and does not constitute, a recommendation as to whether any
stockholder should tender Shares pursuant to the Offer or as to whether to
vote to adopt the Merger Agreement. Holders of Shares are urged to read
such opinion carefully in its entirety.
3. The arm's-length negotiations between the Company and Deutsche Bank
on behalf of the Company and Parent leading to the belief of the OEA Board
that $10.00 per Share represented the highest price per Share that could be
negotiated with Parent.
4. That the Offer and the merger provide for a prompt cash tender
offer for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time.
5. That pursuant to the Merger Agreement, between the execution of the
Merger Agreement and the closing of the Offer, the Company is required to
obtain Parent's consent before it can take certain actions.
6. The limited ability of Parent and Merger Sub to terminate the Offer
or the Merger Agreement.
7. That, in the Merger Agreement, Parent may extend the Offer (i) to
the 20th business day following the initial Expiration Date if any of the
Tender Offer Conditions have not been satisfied, for the minimum period of
time necessary to satisfy such condition or (ii) if all of the Tender Offer
Conditions have been satisfied but fewer than 90% of the issued and
outstanding Shares have been tendered in the Offer, for the minimum period
of time necessary until 90% of the issued and outstanding Shares have been
so tendered, but in no event later than the fifth business day following
the initial Expiration Date, which five business day period may be extended
for three additional five business day periods.
8. That pursuant to the Merger Agreement, the OEA Board has the right
to terminate the Merger Agreement if the OEA Board accepts a Superior
Proposal and pays Parent the Termination Fee.
9. The circumstances under the Merger Agreement upon which the $6
million Termination Fee would be paid.
10. The provision under the Merger Agreement for vesting, cancellation
and payment of all outstanding Company options in connection with the
Merger.
11. The other provisions of the Offer and the Merger Agreement.
12. That, while the Offer gives the Company's stockholders the
opportunity to realize a premium over the price at which the Shares traded
immediately prior to the public announcement of the Offer and
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the Merger, the consummation of the Offer and the Merger would eliminate
the opportunity for stockholders to participate in the future growth and
profits of the Company.
The foregoing discussion of information and factors considered and given
weight by the OEA Board is not intended to be exhaustive, but is believed to
include all of the material factors considered by the OEA Board. In view of the
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the OEA Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determinations and recommendations. In addition, individual members
of the OEA Board may have given different weights to different factors.
(c) Intent to Tender. To OEA's knowledge after reasonable inquiry, all of
OEA's executive officers, directors and affiliates currently intend to tender
all Shares held of record or beneficially by them pursuant to the Offer or to
vote in favor of the Merger. The foregoing does not include any Shares over
which, or with respect to which, any such executive officer, director, affiliate
or subsidiary acts in a fiduciary or representative capacity or is subject to
the instructions of a third party with respect to such tender.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
Deutsche Bank was retained pursuant to the terms of a letter agreement
dated October 7, 1999 (the "Deutsche Bank Letter"). Deutsche Bank's engagement
was to serve as OEA's financial advisor with respect to a possible sale, merger,
consolidation or any other business arrangement.
Pursuant to the Deutsche Bank Letter, OEA has agreed to pay Deutsche Bank
cash compensation of $50,000 as a retainer fee (which amount has already been
paid), and cash compensation of $750,000 at the time Deutsche Bank notifies the
OEA Board that Deutsche Bank is prepared to deliver an opinion requested by OEA
regarding the fairness of any Transaction. Upon consummation of the Offer, OEA
has agreed to pay Deutsche Bank an additional fee of approximately $2.6 million.
On March 12, 2000, the OEA Board requested that Deutsche Bank issue an
opinion with respect to the Merger Agreement. On such date, Deutsche Bank
delivered to the OEA Board its opinion that the consideration to be received by
the stockholders of OEA pursuant to the Offer contemplated by the Merger
Agreement was fair from a financial point of view.
Under the Deutsche Bank Letter, OEA has also agreed to reimburse Deutsche
Bank for all reasonable out-of-pocket expenses and to indemnify Deutsche Bank
and certain related parties against certain liabilities, including liabilities
under the federal securities laws, relating to or arising out of Deutsche Bank's
engagement.
A copy of Deutsche Bank's opinion is Exhibit 3 to this Schedule 14D-9 and
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No transactions in the Shares, other than transactions effected under OEA's
1997 Employee Stock Purchase Plan and Directors Compensation Plan, have been
effected during the past 60 days by OEA or, to the best of OEA's knowledge, by
any executive, officer, director, affiliate or subsidiary of OEA.
ITEM 7. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) (i) Except as indicated in items 3 and 4 above, no negotiations are
being undertaken or are underway by OEA in response to the Offer that relate to
a tender offer or other acquisition of OEA's securities by OEA, any subsidiary
of OEA or any other person.
(ii) Except as indicated below or in Items 3 and 4 above, no negotiations
are being undertaken or are underway by OEA in response to the Offer that relate
to, or would result in, (A) any extraordinary transaction such as a merger,
reorganization or liquidation involving OEA or any subsidiary of OEA; (B) any
purchase, sale or transfer of a material amount of assets by OEA or any
subsidiary of OEA; or (C) any material change in the present dividend rate or
policy, or indebtedness or capitalization of OEA.
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(b) Except as indicated in Items 3 and 4 above, there are no transactions,
OEA Board resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the matters
referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION
DGCL 203
Section 203 of the DGCL purports to regulate certain business combinations
involving a corporation organized under Delaware law, such as OEA, with a
stockholder beneficially owning 15% or more of the outstanding voting stock of
such corporation (an "Interested Stockholder"). Section 203 provides, in
relevant part, that the corporation shall not engage in any business combination
with any Interested Stockholder for a period of three years following the date
such stockholder became an Interested Stockholder unless (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, or (iii) on or subsequent to
such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least two-thirds of the outstanding voting stock which is not owned
by the Interested Stockholder. The OEA Board approved the Merger Agreement and
the Offer prior to Parent becoming an Interested Stockholder; therefore, Section
203 of the DGCL is inapplicable to the Offer and the Merger.
DGCL 253
Under Section 253 of the DGCL, if Merger Sub acquires, pursuant to the
Offer or otherwise, at least 90% of the outstanding Shares, Merger Sub will be
able to effect the Merger after consummation of the Offer without a vote by
OEA's stockholders. However, if Merger Sub does not acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, a vote by OEA's
stockholders will be required under the DGCL in order to effect the Merger.
SECTION 14(f) INFORMATION STATEMENT
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the OEA Board other than at a
meeting of OEA's stockholders.
ANTITRUST
Under the HSR Act, and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Parent pursuant to the Offer is subject
to such requirements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a 15
calendar day waiting period following the filing by Parent of a Notification and
Report Form with respect to the Offer. Parent's filing was made on March 21,
2000. The Antitrust Division or the FTC may extend the waiting period of such
filing by requesting additional information and documentary material relevant to
the acquisition. If such a request is made, the waiting period will be extended
until 11:59 P.M., New York City time, on the tenth day after Parent has
substantially complied with such request. Thereafter, such waiting periods can
be extended only by court order or consent. Although OEA is required to file
certain information and documentary material with the Antitrust Division and the
FTC in connection with the Offer, which filing was made on March 22, 2000,
neither OEA's failure to make such filings nor a request to OEA from the
Antitrust Division or the FTC for additional information or documentary material
will extend the waiting period. However, if the Antitrust Division or the FTC
raises
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substantive issues in connection with the Transaction, Parent and OEA may engage
in negotiations with the relevant governmental agency concerning possible means
of addressing these issues and may agree to delay consummation of the
Transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of acquisition transactions. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including, in the case of the Transaction, seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of Shares so acquired or
divestiture of substantial assets of Parent or OEA or any of their respective
subsidiaries. State attorneys general may also bring legal actions under federal
and state antitrust laws, and private parties may bring such actions under
certain circumstances. While OEA does not believe that the acquisition of Shares
by Parent will violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
Non-U.S. Antitrust. The German Act Against Restraints of Competition
prohibits the Purchaser from purchasing and voting the Shares until the
transaction has been notified to the German Federal Cartel Office (the "Cartel
Office") and the Cartel Office has cleared the transaction. Upon receipt of the
notification, the Cartel Office conducts a preliminary review with a maximum
duration of one month. Upon conclusion of the preliminary review, the Cartel
Office may either approve the transaction or initiate an in-depth review which
may, at a maximum, take an additional three months if further examination is
necessary to determine whether the transaction is compatible with the German Act
Against Restraints of Competition. The Purchaser and the Company plan to jointly
file the notification with the Cartel Office. There can be no assurances that
the Cartel Office might open an in-depth review to further examine the
transaction under the German Act Against Restraints of Competition.
APPRAISAL RIGHTS
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders of the Company may have certain rights
under the DGCL to dissent, and demand appraisal of, and to obtain payment for,
the fair value of their Shares. Such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value of the
Shares (excluding any element of value arising from the accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
stockholders for their Shares. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, a Delaware court
would be required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset value and
earning capacity. The value of the Shares determined in any appraisal proceeding
could be higher or lower than the price of the Offer.
STOCKHOLDERS RIGHTS PLAN
On March 25, 1998, the OEA Board declared a dividend of one common share
purchase right (a "Right") for each outstanding share of common stock, par value
$.10 per share (the "Common Shares"), of the Company. The dividend was payable
on April 10, 1998 (the "Record Date") to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from the Company one
one-half of a Common Share of the Company at a price of $70.00 per one one-half
of a Common Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
Common Shares or (ii) 10 business days (or such later date as may be determined
by action of the OEA Board prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange
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offer the consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the outstanding Common Shares (the earlier of
such dates being called the "Distribution Date"), the Rights will be evidenced,
with respect to any of the Common Share certificates outstanding as of the
Record Date, by such Common Share certificate with a copy of a summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of a summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 30, 2008 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares; (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price, or securities
convertible into Common Shares with a conversion price, less than the then-
current market price of the Common Shares; or (iii) upon the distribution to
holders of the Common Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends paid out of earnings or retained earnings or
dividends payable in Common Shares) or of subscription rights or warrants (other
than those referred to above).
In the event that, prior to the redemption, exchange or termination of the
Rights, any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two times the exercise
price of the Right. In the event that, prior to the redemption, exchange or
termination of the Rights, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right (other than Rights
beneficially owned by the Acquiring Person) will thereafter have the right to
receive, upon the exercise thereof at the then-current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the OEA Board may exchange the Rights (other than Rights owned by
such person or group which will have become void), in whole or in part, at an
exchange ratio of one Common Share per Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Common Shares will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Shares on the last trading day prior to the date of exercise.
At any time prior to such time as any person becomes an Acquiring Person,
the OEA Board may redeem the Rights in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price"). The redemption of the Rights may be
made effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
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The terms of the Rights may be amended by the OEA Board without the consent
of the holders of the Rights, including an amendment to lower certain thresholds
described above to not less than the greater of (i) the sum of .001% and the
largest percentage of the outstanding Common Shares then known to the Company to
be beneficially owned by any person or group of affiliated or associated persons
and (ii) 10%, except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights Agreement specifying the terms of the Rights is Exhibit 10 to
this Schedule 14D-9 and is incorporated herein by reference.
On March 12, 2000, in connection with the execution and delivery of the
Merger Agreement, the OEA Board approved an amendment to the Rights Agreement to
prevent Parent or Merger Sub from becoming or being deemed an Acquiring person
as a result of the approval, execution or delivery of the Merger Agreement and
the transactions contemplated therein, including the Merger and the Offer.
ITEM 9. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
1 -- Amended and Restated Agreement and Plan of Merger, dated
March 12, 2000, by and among Autoliv, Inc., OEA, Inc.,
and OEA Merger Corporation.(1)*
2 -- Press Release issued by OEA, Inc. on March 13, 2000.(2)*
3 -- Opinion of Deutsche Bank Securities Inc., dated March 12,
2000.
4 -- Confidentiality Agreement, dated January 5, 2000, between
Autoliv, ASP and OEA, Inc.*
5 -- Retirement Agreement, dated March 15, 1990, between OEA,
Inc. and Dr. Charles B. Kafadar.(3)*
6 -- Article IX of the Bylaws of OEA, Inc.(3)*
7 -- OEA, Inc. Nonemployee Directors' Stock Option Plan.(4)*
8 -- OEA, Inc. Employees' Stock Option Plan.(4)*
9 -- OEA, Inc. Directors' Compensation Plan.(5)*
10 -- Rights Agreement, dated as of March 25, 1998, between
OEA, Inc. and ChaseMellon Shareholder Services,
L.L.C.(6)*
11 -- First Amendment to Rights Agreement, dated February 19,
1999, between OEA, Inc. and ChaseMellon Shareholder
Services, L.L.C.(7)*
12 -- Stockholders Agreement, dated February 19, 1999, between
OEA, Inc. and Reich & Tang Asset Management L.P.(7)*
13 -- Second Amendment to Rights Agreement, dated August 23,
1999, between OEA, Inc., ChaseMellon Shareholder
Services, L.L.C. and LaSalle Bank National
Association.(8)*
14 -- 1997 Employee Stock Purchase Plan.(9)*
15 -- Form of Change of Control Employment Agreement between
OEA, Inc. and each of Dr. Charles F. Kafadar, John T.
McConathy, William R. Barker, Jim T. Flanary and 18
additional employees.(10)*
16 -- Form of Letter to Stockholders of the Company dated March
24, 2000.
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(1) Incorporated by reference to Exhibit D to the Schedule TO filed by Autoliv,
Inc. with the Securities and Exchange Commission on March 24, 2000.
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(2) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on March 13, 2000.
(3) Incorporated by reference to OEA, Inc.'s Annual Report on Form 10-K/A as
filed with the Securities and Exchange Commission on October 21, 1999.
(4) Incorporated by reference to OEA, Inc.'s Registration Statement on Form S-8
as filed with the Securities and Exchange Commission on November 3, 1998.
(No. 333-66753).
(5) Incorporated by reference to OEA, Inc.'s Revised Definitive Proxy Statement
on Schedule 14A as filed with the Securities and Exchange Commission on
December 15, 1998.
(6) Incorporated by reference to OEA, Inc.'s Registration Statement on Form 8-A
as filed with the Securities and Exchange Commission on April 8, 1998.
(7) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on February 19, 1999.
(8) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on August 24, 1999.
(9) Incorporated by reference to OEA, Inc.'s Definitive Proxy Statement on
Schedule 14A as filed with the Securities and Exchange Commission on
November 28, 1997.
(10) Incorporated by reference to OEA, Inc.'s Annual Report on Form 10-K as
filed with the Securities and Exchange Commission of October 21, 1999.
* Not included in copies mailed to stockholders.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
/s/ CHARLES B KAFADAR
Name: Charles B. Kafadar
Title: President and Chief Executive
Officer
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SCHEDULE I
OEA, INC.
P.O. Box 100488
Denver, Colorado 80250
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This information statement (the "Information Statement") is being mailed on
or about March 24, 2000, as part of the Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") to holders of record of shares of common
stock, par value $.10 per share (the "Shares"), of OEA, Inc., a Delaware
corporation ("OEA" or the "Company"). You are receiving this Information
Statement in connection with the possible election of persons designated by
Merger Sub (as defined below) to a majority of the seats on the Board of
Directors of OEA (the "OEA Board").
On March 12, 2000, OEA, Autoliv, Inc., a Delaware corporation (the
"Parent"), and OEA Merger Corporation, a Delaware corporation and wholly owned
subsidiary of Parent ("Merger Sub"), entered into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which (i)
Parent shall cause Merger Sub to commence a cash tender offer (the "Offer") for
all the outstanding Shares at a price of $10.00 per Share, and (ii) Merger Sub
shall be merged with and into OEA (the "Merger"). As a result of the Offer and
the Merger, OEA will become a wholly owned subsidiary of Parent.
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, Merger Sub shall be
entitled to designate such number of directors (the "Merger Sub Designees") to
the OEA Board as will give Merger Sub representation proportionate to its
ownership interest. The Merger Agreement requires OEA to take such action as
Merger Sub may request to cause the Merger Sub Designees to be elected to the
OEA Board under the circumstances described therein. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined shall have the meaning set forth in the Schedule 14D-9. The information
contained in this Information Statement concerning Parent and Merger Sub has
been furnished to OEA by Parent. OEA assumes no responsibility for the accuracy
or completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; MERGER SUB DESIGNEES
Pursuant to Section 1.3 of the Merger Agreement, promptly upon the purchase
by Merger Sub of Shares pursuant to the Offer, and from time to time thereafter,
Merger Sub shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the OEA Board as shall give Merger Sub
representation on the OEA Board equal to the product of the total number of
directors on the OEA Board (giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub at such time
bears to the total number of Shares then outstanding, and the Company shall, at
such time, promptly take all actions necessary to cause Merger Sub's designees
to be elected as directors of the Company, including increasing the size of the
OEA Board or securing the resignations of incumbent directors. Notwithstanding
the foregoing, until the time Merger Sub acquires a majority of the then
outstanding Shares, Merger Sub's right to appoint the Merger Sub Designees to
the OEA Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. OEA shall promptly take all actions, as Section
14(f) and Rule 14f-1
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require, in order to fulfill its obligations under the Merger Agreement. Merger
Sub has supplied to OEA in writing information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f)and Rule
14f-1.
Following the election or appointment of the Merger Sub Designees and until
the Effective Time, the approval of the Continuing Directors is required to
authorize any amendment or termination of the Merger Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or Merger
Sub or waiver of OEA's rights thereunder, which amendment, termination,
extension, or waiver would adversely affect the stockholders or option holders
of OEA.
The following table sets forth certain information with respect to the
individuals Merger Sub may choose to designate as the Merger Sub Designees
serving as directors of OEA (including current principal occupation or
employment and five years employment history). Unless otherwise noted, each
individual is a citizen of the United States. Unless otherwise noted, the
business address of each is World Trade Center, Klarabergsviadukten 70, SE-107
24 Stockholm Sweden. The information is based solely on information supplied to
OEA by Merger Sub and Parent.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME POSITIONS HELD DURING THE PAST FIVE YEARS
- ---- -------------------------------------------
Hans Biorck............................... President since March 13, 2000. He has been Vice
President and Chief Financial Officer of Parent since
April 1, 1999 and Vice President, Treasurer since
September 1998. Prior to such time, he held CFO
positions in Esselte AB and EBS Inc. His business
address is the World Trade Center, Klarabergsviadukten
70, SE-107 24 Stockholm, Sweden.
Jorgen I. Svensson........................ Vice President and Treasurer of Merger Sub since March
13, 2000. He has been Vice President Legal Affairs,
General Counsel and Secretary of Parent since May 1,
1997. He has also been Legal Counsel of Autoliv AB
since 1989, General Counsel since 1991 and Vice
President Legal Affairs and General Counsel since 1994.
His business address is the World Trade Center,
Klarabergsviadukten 70, SE-107 24 Stockholm, Sweden.
Michael Anderson.......................... Vice President and Secretary since March 13, 2000. He
has also been Vice President and General Counsel of
Autoliv ASP since March 31, 1998. He was previously
Vice President and Special Counsel of Autoliv ASP from
May 1, 1997 to March 31, 1998 and Vice President and
General Counsel of Autoliv North America, Inc. from
August 1994 to May 1, 1997. His business address is
1320 Pacific Drive, Auburn Hills, Michigan 48326. He is
a U.S. citizen.
Based solely on the information set forth in the Offer, none of the Merger
Sub Designees (i) is currently a director of, or holds any position with OEA,
(ii) has a familial relationship with any directors or executive officers of
OEA, or (iii) to the best knowledge of Parent and Merger Sub, beneficially owns
any securities (or any rights to acquire such securities) of OEA. OEA has been
advised by Parent and Merger Sub that, to the best of Parent's and Merger Sub's
knowledge, none of the Merger Sub Designees has been involved in any
transactions with OEA or any of its directors, officers, or affiliates which are
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"), except as may be disclosed herein.
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CERTAIN INFORMATION CONCERNING OEA
The Shares constitute the only class of voting securities of OEA. The
holders of common stock are entitled to one vote per Share. As of March 12,
2000, there were 20,621,691 shares issued and outstanding.
OEA
The OEA Board currently consists of nine directors each of whom shall hold
office until the next annual meeting of stockholders or until his successor is
duly elected or qualified. In accordance with the Delaware General Corporation
Law, directors are removable by a majority vote of the Company's stockholders
only for cause. Each director attended seventy-five percent or more of the
meetings of the OEA Board held while each was a director during 1999 and of the
meetings of Committees of which he was a member during 1999. The following table
sets forth certain information with respect to the individuals who are currently
serving as Directors of OEA (including age as of the date hereof, current
principal occupation or employment and employment history). Unless otherwise
noted, each individual is a citizen of the United States.
In the event of death or unforeseen contingencies rendering one or more of
said persons unavailable for election, then such proxies will be voted to fill
any vacancies so arising with such person or persons nominated by the management
who has consented to serve if elected.
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
Robert J. Schultz...................... 69 Chairman of the Board
Dr. Charles B. Kafadar................. 54 President, Chief Executive Officer and
Director
Dr. George S. Ansell................... 65 Director
Erwin H. Billing....................... 72 Director
Dr. James R. Burnett................... 74 Director
Richard L. Corbin...................... 53 Director
Philip E. Johnson...................... 52 Director
Donald E. Miller....................... 69 Director
Lewis W. Watson........................ 58 Director
Robert J. Schultz has been a Director of the Company since 1993 and was
elected Chairman of the Board of Directors in January 1998. Mr. Schultz, 69, was
Vice Chairman of General Motors ("GM") from August 1990 until his retirement in
January 1993. Prior to this position, Mr. Schultz was Vice President and Group
Executive in charge of GM's former Chevrolet-Pontiac-GM of Canada group from
1984 through 1989. In 1989, he was elected an Executive Vice President of GM
with responsibility for GM Hughes Electronics (defense and automotive
electronics), Electronic Data Systems Corporation (information technology),
General Motors Technical Staffs, and GM's Corporate Information Services
activity. Mr. Schultz is also a Director of Delco Remy International and a
Trustee of the California Institute of Technology.
Dr. Charles B. Kafadar has been a Director of the Company since 1977. Dr.
Kafadar, 54, was elected President and Chief Operating Officer of the Company in
1985, and Chief Executive Officer in 1998.
Dr. George S. Ansell has been a Director of the Company since 1993. Dr.
Ansell, 65, is President Emeritus of Colorado School of Mines ("CSM"), where he
served as President from 1984 to 1998. He came to CSM after serving as Dean of
the School of Engineering at Rensselaer Polytechnic Institute ("RPI") in Troy,
New York where he was a 24-year member of the RPI faculty.
Erwin H. Billig became a Director of the Company in 1996. Mr. Billig, 72,
is the Chairman and Chief Executive Officer of MSX International (engineering
services company), and has been President and Chief Operating Officer and Vice
Chairman of MascoTech, Inc. (major supplier to Ford, Chrysler, GM and European
auto manufacturers) since 1993, Chairman of Titan International since 1993, and
Vice Chairman of Delco Remy International since 1994.
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Dr. James R. Burnett has been a Director of the Company since 1977. Dr.
Burnett, 74, was Executive Vice President and Deputy General Manager, Space and
Defense Sector, of TRW, Inc. (manufacturers of military electronics and space
hardware) from 1987 until his retirement in 1991, and is now a consultant.
Richard L. Corbin became a Director of the Company in October 1998. Mr.
Corbin, 53, was named Executive Vice President and Chief Financial Officer of
Cordant Technologies, Inc., formerly Thiokol Corporation, (aerospace and
industrial supplier) in 1998 after joining the company as Senior Vice President
and CFO in 1994. Prior to joining Cordant, he was CFO and Vice President of
Administration for the Space Systems division of General Dynamics Corporation
and also held financial positions with LTV and Honeywell. Mr. Corbin is also a
member of the Board of Directors of Howmet International, Inc.
Philip E. Johnson has been a Director of the Company since 1986. Mr.
Johnson, 52, is an Officer and Director of Bennington Johnson & Reeve, P.C., a
Denver law firm.
Donald E. Miller became a Director of the Company in October 1998. Mr.
Miller, 69, spent his 35 year career with The Gates Corporation (automotive and
industrial supplier). He retired as Vice Chairman of that company in 1996. From
1987 until 1994, he held the position of President and Chief Operating Officer
of The Gates Corporation. Mr. Miller is also a Director of Sentry Insurance
Corporation, Lennox Industries, Inc. and Chateau Communities, Inc.
Lewis W. Watson has been a Director of the Company since 1981. Mr. Watson,
58, has been President and Director of Intermountain Resources, Inc. (mining
exploration) since 1981 and formerly was an Audit Partner with Peat, Marwick,
Mitchell & Co., certified public accountants, through 1980.
OTHER INFORMATION CONCERNING CURRENT DIRECTORS
Committees
As of March 12, 2000, the OEA Board had four standing committees, Audit,
Compensation, Corporate Responsibility and Executive Committees.
Members of the Audit Committee are Mr. Watson, Chairman, Mr. Corbin and Mr.
Johnson. The Audit Committee's functions are to investigate and review
accounting and audit procedures of the Company and to report its findings and
recommendations to the OEA Board for action.
Members of the Compensation Committee are Dr. Burnett, Chairman, Mr. Billig
and Mr. Miller. Its functions are to review officers' and certain key employees'
compensation and to make recommendations to the OEA Board of Directors in
connection therewith.
Members of the Corporate Responsibility Committee are Dr. Ansell, Chairman,
and Mr. Johnson. The Corporate Responsibility Committee's functions are to
promulgate and reaffirm ethical standards for OEA and to ensure that OEA is
compliant with established safety and environmental policies.
Members of the Executive Committee are Mr. Schultz, Chairman, Dr. Ansell,
Dr. Burnett and Dr. Kafadar. The Executive Committee's functions are to advise
the OEA Board on various matters relating to, but not limited to, the search for
and employment of senior OEA personnel and directors and term limits for
directors.
During fiscal year 1999 the OEA Board held seven meetings, the Audit
Committee held three meetings, the Compensation Committee held four meetings,
the Corporate Responsibility Committee held four meetings, and the Executive
Committee held four meetings and all directors attended at least 75% of the
meetings of the OEA Board and the Board Committees of which they were a member.
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SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth a summary of the
compensation paid by the Company during the last three fiscal years ended July
31, 1999, 1998 and 1997 to its Chief Executive Officer and the four other most
highly compensated executive officers (the "named executive officers") during
the fiscal year ended July 31, 1999.
LONG-TERM COMPENSATION
------------------------------------------------
AWARDS
ANNUAL COMPENSATION ----------------------- PAYOUTS
-------------------------------- RESTRICTED SECURITIES -------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#) ($) ($)(4)
- ------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------
Dr. Charles B. Kafadar.... 1999 400,005 100,000 -- -- 50,000 -- 7,980
President and Chief 1998 376,926 -- -- -- -- -- 7,988
Executive Officer 1997 350,002 48,000 -- -- 2,500 -- 7,474
William R. Barker......... 1999 268,172 54,200 -- -- 40,000 -- 7,490
President, Automotive 1998 124,789 -- -- -- 75,000 -- --
Safety Products 1997 -- -- -- -- -- -- --
Ben E. Paul............... 1999 241,542 -- -- -- -- -- 7,630
Executive Vice President 1998 206,588 -- -- -- -- -- 7,632
of OEA Aerospace, Inc. 1997 200,013 25,000 -- -- 1,000 -- 7,124
J. Thompson McConathy..... 1999 198,094 26,700 -- -- 30,000 -- 7,513
Vice President and 1998 185,771 -- -- -- 5,000 -- 7,520
Chief Financial Officer 1997 123,853 30,000 -- -- -- -- 5,783
Jim M. Flanary............ 1999 90,392 40,000 -- -- 50,000 -- --
President of OEA 1998 -- -- -- -- -- -- --
Aerospace, Inc. 1997 -- -- -- -- -- -- --
- ---------------
(1) Amounts shown include compensation earned and received by executive officers
as well as amounts earned but deferred at the election of those officers.
(2) Represents amounts accrued for executive officers pursuant to the Company's
Incentive Compensation Plan.
(3) Other annual compensation provided during 1999, 1998, and 1997 did not
exceed disclosure thresholds established by the Securities and Exchange
Commission.
(4) Amounts include the Company's contribution to the Company's Profit Sharing
Plan and Pension Plan.
INCENTIVE COMPENSATION
The OEA Board, at its discretion, may authorize payments of incentive
compensation (bonus) to employees of OEA, in an aggregate amount to be allocated
and distributed at the discretion of the Chairman and President. Sums shown
above under "Bonus" include the incentive compensation accrued to the named
executive officers and expensed for financial reporting purposes in fiscal years
1999, 1998 and 1997.
DIRECTORS' COMPENSATION
The Directors of the Company who are employed by it or its subsidiaries
were not additionally compensated for their services as Directors during fiscal
year 1999. Directors not employed by the Company or its subsidiaries received a
base compensation of $10,000 per annum, committee chairmen received an
additional base compensation of $1,200 per annum, additional compensation of
$3,300 for each OEA Board meeting attended, $2,700 for each committee meeting
attended on days the OEA Board of Directors did not meet and $2,500 for each
committee meeting on days that the OEA Board met. Directors utilized for
consulting purposes received $2,700 compensation per day. Dr. Ansell received
$5,400 for consulting during fiscal year 1999. Robert J. Schultz was elected
Chairman of the Board of Directors in January, 1998. The Company compensates Mr.
Schultz for his services as Chairman on a consulting basis, paying him a
retainer of $200,000 per year. In addition, Mr. Schultz in 1998 received an
option grant of 60,000 shares at an exercise
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price of $19.063 per share and in 1999 received an option grant of 70,000 shares
at an exercise price of $9.563 per share under the Company's Employee Stock
Option Plan, and is reimbursed for his expenses.
DIRECTORS' COMPENSATION PLAN
All directors of the Company, other than those who are officers or
employees of the Company, are eligible to participate in the Directors'
Compensation Plan and can elect to participate in the "Compensation Choice
Program" and the "Deferred Compensation Program" under the Plan. Eligible
directors of the Company may annually elect to be paid their director fees and
other compensation ("Director's Compensation") either (i) in cash, common stock,
non-statutory stock options, or a combination thereof ("Compensation Choice
Program"), or (ii) by deferring some or all of their Director's Compensation for
payment at a later date ("Deferred Compensation Program"). Any election may not
thereafter be changed for that Plan Year.
PROFIT SHARING PLAN
The Company and its wholly owned subsidiary (OEA Aerospace, Inc.) maintain
a profit sharing plan with salary reduction provisions permitted by Section
401(k) of the Internal Revenue Code of 1986, as amended, covering all of their
employees. Each fiscal year, the OEA Board determines the amount of its
contribution to its plan up to 10% of the total compensation of all participants
for such fiscal year. This contribution is allocated to the accounts of the
participants based on a formula which takes into account the compensation and
length of service of each participant. Vesting occurs at the rate of 20% at the
end of two years of service, as defined in the plan, and 20% for each year of
service thereafter, with full vesting at the end of six years of service. Upon
normal retirement, death, disability or termination of employment, a
participant's account balance is payable, at the administrative committee's
option, either in a lump sum or in periodic payments over a period not to exceed
ten years. The compensation column headed "All Other Compensation" includes the
listed officers' benefits under the applicable profit sharing plan which were
accrued during fiscal years 1999, 1998 and 1997.
PENSION PLAN
The Company and its wholly owned subsidiary (OEA Aerospace, Inc.) maintain
a pension plan covering all of their employees. Each fiscal year the Company and
its subsidiary contribute an amount equal to 5% of the aggregate compensation of
all participants in the plan for such fiscal year. Vesting occurs at the rate of
20% at the end of two years of service, as defined in the plan, and 20%for each
year of service thereafter, with full vesting at the end of six years of
service. Upon normal retirement, death, disability or termination of employment,
a participant's account balance is payable in the form of a joint and survivor
amount if the participant is married, provided, however, if the participant is
not married, or if the participant and his or her spouse so elect, the account
balance may be paid in a lump sum or, with the administrative committee's
permission, in periodic payments over a period not to exceed ten years. The
Compensation column headed "All Other Compensation" includes the listed
officers' benefits under the applicable pension plan which were accrued during
fiscal years 1999, 1998 and 1997.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Dr. Charles B.
Kafadar dated March 15, 1990, providing for his full time, active service as
President and Chief Operating Officer for an indefinite term. Dr. Kafadar's
employment is terminable at his election after age 65 and 33 years of continuous
service, or by the Company at any time for any reason. Upon termination or
retirement, the agreement provides for payments, pursuant to a formula based on
his compensation for the three years prior to his termination, to Dr. Kafadar
during his lifetime and, in the event of his death, his surviving spouse for up
to 10 years. Dr. Kafadar will not be eligible to elect under the agreement to
terminate his employment until 2010. If Dr. Kafadar had terminated his
employment as of July 31, 1999, termination payments calculated in accordance
with the agreement would have approximated $197,608 per year for Dr. Kafadar, or
$98,804 per year for his surviving spouse.
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INCENTIVE STOCK OPTION PLANS
The stockholders approved an Employees' Stock Option Plan and an Amendment
to the Employees' Stock Option Plan (the "Employees' Plan") on January 13, 1995
and January 14, 1999, respectively, and a Nonemployee Directors' Stock Option
Plan (the "1995 Directors' Plan") on January 12, 1996. These plans provide for
stock options to be granted for a maximum of 1,350,000 shares of Common Stock
under the Employees' Plan and a maximum of 50,000 shares of Common Stock under
the 1995 Directors' Plan. Options may be granted to employees and nonemployee
directors at prices not less than fair market value of the Company's Common
Stock on the date of grant. Options granted under the Employees' Plan may be
exercised at such times after the grant date as specified by the OEA Board,
except for options granted to executive officers which may not be exercised for
at least six months, and options issued under the 1995 Directors' Plan may be
exercised after the first six months following the grant date. All options must
be exercised within 10 years of the grant date, except for those incentive stock
options granted to recipients who own more than 10% of the total combined voting
power of the stock of the Company which must be exercised within 5 years of the
grant date. Shares may be granted from either authorized but unissued Common
Stock or issued shares reacquired and held as treasury stock.
The Company maintains an incentive stock option plan (the "Prior Plan"),
for grants prior to July 28, 1994, which provided for the grant, by the Board of
Directors, of options to purchase shares of the Company's Common Stock to those
officers and key employees of the Company and its subsidiaries who have
performed services, which in the opinion of the Board of Directors at the time
of grant, were of special importance in the management, operation and
development of the Company. Options granted under the Prior Plan are exercisable
during the period commencing one year after the date of grant and ending ten
years after the date of grant, except that any option granted to a recipient who
owns more than 10% of the total combined voting power of the stock of the
Company is exercisable only until five years after the date of grant. The
exercise price of the options granted under the Prior Plan is to be equal to
100% of the fair market value of the Company's Common Stock on the date of the
grant, except that the exercise price of any option granted to a recipient who
owns more than 10% of the total voting power of the stock of the Company is to
be equal to 110% of the fair market value of the Company's Common Stock on the
date of the grant.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information on option grants made during
fiscal year 1999 to the named executive officers. (None of the named executive
officers has ever received stock appreciation rights).
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE OPTION TERM(2)(3)
GRANTED IN FISCAL ($/SHARE) EXPIRATION -----------------------
NAME (#)(1)(2) 1999(2)(4) (1)(2) DATE(2) 5%($) 10%($)
---- ---------- ---------- --------- ---------- ---------- ----------
Dr. Charles B. Kafadar......... 50,000 12.29 9.56 10/22/08 300,612 761,809
William R. Barker.............. 40,000 9.83 9.56 10/22/08 240,489 609,447
Ben E. Paul.................... -- -- -- -- -- --
J. Thompson McConathy.......... 30,000 7.37 9.56 10/22/08 180,367 457,085
Jim M. Flanary................. 50,000 12.29 10.75 3/1/09 338,031 856,637
- ---------------
(1) On October 22, 1998, the Board of Directors granted Dr. Kafadar, Mr. Barker
and Mr. McConathy options to purchase 50,000, 40,000 and 30,000 shares,
respectively, of the Company's Common Stock at an exercise price of $9.56
per share. These options have a 5 year vesting period ( 1/5 vesting each
year) and expire on October 22, 2008. On March 1, 1999, the Board of
Directors granted Mr. Flanary options to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $10.75 per share. These
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options have a five year vesting period ( 1/5 vesting each year) and expire
on March 1, 2009. No consideration was or is to be received by the Company
for the granting of any option.
(2) On October 22, 1998, the Board of Directors granted Mr. Schultz options to
purchase 70,000 shares of the Company's Common Stock at an exercise price of
$9.56 per share. These options have a 5 year vesting period (1/5 vesting
each year) and expire on October 22, 2008. This option grant represents
17.20% of the total options granted to employees in fiscal 1999. Potential
realizable value over the option term is $420,856 assuming a 6% annual rate
of return and is $1,066,532 assuming a 10% annual rate of return.
(3) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates shown
(5% or 10%), compounded annually, from the date of grant of the option until
the end of the option term. The 5% and 10% assumed rates of appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
in any way represent the Company's estimate or projection of future stock
prices. Actual gains, if any, upon future exercise of any of these options
will depend on the actual performance of the Company's Common Stock and the
continued employment of the executive officer holding the option through its
vesting period.
(4) Based on options to purchase an aggregate of 407,000 shares granted to
employees during fiscal year 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information on option exercises in fiscal
year 1999 by the named executive officers and the value of such officers'
unexercised options at July 31, 1999.
NUMBER OF VALUE OF
SECURITIES UNEXERCISED IN
UNDERLYING THE-MONEY
UNEXERCISED OPTIONS AT FISCAL
NUMBER OF OPTIONS AT FISCAL YEAR-END ($)
SHARES YEAR-END (1)
ACQUIRED ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (2) ($) (2) UNEXERCISABLE (2) UNEXERCISABLE
- ---- ------------ -------------- ----------------- -----------------
Dr. Charles B. Kafadar............... -- -- 17,500/50,000 --/--
William R. Barker.................... -- -- 15,000/100,000 --/--
Ben E. Paul.......................... -- -- 4,000/-- --/--
J. Thompson McConathy................ -- -- 5,000/30,000 --/--
Jim M. Flanary....................... -- -- -- /50,000 --/--
- ---------------
(1) Only the value of unexercised, in-the-money options are reported. Value is
calculated by (i) subtracting the total exercise price per share from the
year-end market value of $8.5625 per share and (ii) multiplying by the
number of shares subject to the option.
(2) Robert J. Schultz had 22,500 exercisable and 110,000 unexercisable
securities underlying unexercised options at fiscal year end. He exercised
no options in fiscal 1999 and had no in-the-money options at fiscal year
end.
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COMPENSATION COMMITTEE; INTERLOCKS AND INSIDER PARTICIPATION
Dr. James R. Burnett, Mr. Erwin H. Billig and Mr. Donald E. Miller, all
non-employee directors, constituted the Compensation Committee of the OEA Board
during fiscal 1999. None of these individuals was in 1999, or has been in prior
years, an officer or employee of the Company or any of its subsidiaries. During
1999, these directors had no interlocking relationships as defined by the
Securities and Exchange Commission.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
BACKGROUND
The Compensation Committee (the "Committee") is pleased to present its
report on executive compensation. The Committee consists of three outside
members of the Board of Directors, Dr. Burnett as Chairman, Mr. Billig and Mr.
Miller, each of whom were members of the Compensation Committee throughout
fiscal 1999. This Committee report documents the components of the Company's
executive officer compensation programs and describes the basis on which fiscal
year 1999 compensation determinations were made by the Committee with respect to
the Chief Executive Officer and other executive officers of the Company. The
report of the Compensation Committee describes the policies and rationale with
respect to compensation paid to executive officers and other employees for the
year ended July 31, 1999. The information contained in the report shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission nor shall the information be incorporated by reference into
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing.
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION
PROGRAMS
It is the philosophy of the Company and the Committee to ensure that
executive compensation is primarily linked to long-term corporate performance
and increases in stockholder value. The following objectives have been utilized
by the Committee as guidelines for compensation decisions:
- Provide a competitive total compensation package that enables the Company
to attract and retain key executives who are capable of leading the
Company in achieving our business objectives.
- Integrate all pay programs with the Company's annual and long-term
business objectives and strategy, and focus executive performance on the
fulfillment of those objectives.
- Provide variable and "at risk" compensation opportunities that are
directly linked with the performance of the Company and that align
executive remuneration with the interests of stockholders and provide a
performance-based vehicle for capital accumulation and retirement
planning.
- Inspire executive officers to work together as a team to pursue the
Company's goals.
- Establish a general corporate atmosphere that promotes an entrepreneurial
style of leadership.
- Recognize individual initiative and achievement.
- Ensure compensation levels that are externally competitive and internally
equitable.
COMPENSATION PROGRAM COMPONENTS
One of our highest priorities is to attract and retain the most skilled and
experienced employees in key positions. Compensation is important in this
regard, and the Company's incentive compensation plan is designed to allow us to
be competitive in the market for key personnel while at the same time aligning
the employee's interest with corporate value creation. The incentive
compensation plan has a number of very important features that are discussed
below. As in the past, we believe that the cash and other types of compensation
of executive officers and other key employees, while being competitive with
other companies, should also be fair and discriminating with the Company on the
basis of personal performance.
There are three major components of our executive compensation program:
base salary, annual incentive bonus, and long-term incentives through stock
options. Executives, like all qualified employees, are eligible to
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participate in our 401(k) and profit sharing plans, as well as in certain other
benefit plans, such as health and life insurance pans.
Base Salary -- We believe it is essential to pay a competitive salary in
order to attract qualified individuals and to support the continuity of
management, consistent with the long-term nature of our industry. A variety of
resources, including published compensation surveys, are used as general
guidance in determining base salary levels. Although the Committee performs
comparisons with companies of similar revenue size and industry groups, it does
not specifically target compensation of the executive officers to compensation
levels at other companies. Also, because compensation survey data generally is
imprecise as to responsibilities, and transparent as to talent and experience,
we may adjust the range after subjectively considering the impact of these
factors. We may also consider Company and industry performance and internal
parity. Of critical importance to the setting of salary are the particular
individual's skill level and performance, and the value of his or her skills to
the Company. These factors are subjective, and no predetermined weighting of
factors is applied. Base pay levels for the executive officers are competitive
within a range that the Committee considers reasonable and appropriate. Please
refer to the Summary Compensation Table for details regarding executive officer
base salaries.
Annual Incentive Compensation -- The Company's officers, senior management
personnel and all other personnel are eligible to participate in an annual
incentive compensation (bonus) plan with awards based primarily on short-term
business success and individual contributions to that success. The objective of
this plan is to pay competitive levels of total compensation for the attainment
of financial objectives that the Committee believes are primary determinants of
share price over time. Specifically, the plan intends to focus corporate and
individual performance on return on capital employed targets and tailored
individual objectives. Targeted awards and base compensation for executive
officers under this plan are consistent with targeted awards of companies of
similar size and complexity to the Company. Actual awards are subject to
increase or decrease on the basis of the Company's performance and at the
discretion of the Committee. Please refer to the Summary Compensation Table for
details regarding executive officer incentive compensation.
Stock Option Plan -- The Committee believes that the best interests of
stockholders will be served by providing executive officers and other key
personnel who have substantial responsibility for the continued success and
profitability of the Company with an opportunity to increase their ownership of
Company Stock. Therefore, from time to time as recommended by the Committee
based on corporate and personal performance, executive officers and key
personnel are granted stock options in accordance with the Company's Employees'
Stock Option Plans. These personnel have the right to purchase shares of Common
Stock of the Company in the future, at the market value price of the stock on
the date of the grant. Options may also include vesting conditions related to
time or other factors. The ultimate value of the options granted relates to
stock price performance. Please refer to the Summary Compensation Table for
details regarding executive officer stock options.
Management's Performance in Fiscal 1999 -- During fiscal year 1999, OEA
continued its growth in its automotive safety products segment. In 1999, the
Company increased automotive sales by 4% and operating profit by 60%, which were
derived from air bag inflators and initiators. Automotive product sales
increased to 82% of total consolidated sales compared to 80% in the prior year
and 80% in 1997. The Company produced 7.6 million "smokeless" hybrid inflators
in its third year of production for delivery to air bag module manufacturers.
Chief Executive Officer Compensation -- In determining both Dr. Charles B.
Kafadar's fiscal year 1999 pay and the structure of his total compensation
packages, the Committee considered OEA's technical and financial performance
during 1999, the magnitude and effectiveness of the Company's continued
expansion into the automotive products industry, comparisons with executives of
automotive safety products and aerospace companies of similar revenue size, and
a variety of published compensation surveys. Dr. Kafadar has also spearheaded
the Company's technology-driven development of new generation products for
traditional markets and emerging applications. In general, Dr. Kafadar's
compensation is determined in the same manner as the compensation for our other
executive officers as described above.
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Internal Revenue Code Section 162(m) Implications for Executive
Compensation -- The Committee is responsible for addressing the issues raised by
Internal Revenue Code Section 162(m) ("Section 162(m)"). This Section limits to
$1 million the Company's deduction for compensation paid to certain executive
officers of the Company that does not qualify as "performance-based". To qualify
as performance-based under Section 162(m), compensation payments must be made
pursuant to a plan that is administered by a committee of outside directors and
must be based on achieving objective performance goals. In addition, the
material terms of the plan must be disclosed to and approved by stockholders,
and the Committee must certify that the performance goals were achieved before
payments can be awarded. It is not expected that the compensation to be paid to
the Company's executive officers for fiscal 2000 will exceed the $1 million
limit per officer. Accordingly, the Compensation Committee has not at this time
instituted any changes to its compensation policies to take into account the $1
million limitation.
The Committee continues to carefully consider the impact of this tax code
provision and will monitor the level of compensation paid to the executive
officers in order to take any steps which may be appropriate in response to the
provisions of Section 162(m).
Dr. James R. Burnett, Chairman
Erwin H. Billig
Donald E. Miller
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN BENEFICIAL OWNERS
As of March 12, 2000, the following persons, exclusive of management, were
known to the Company to own beneficially more than 5% of the Company's Common
Stock (the only class of voting securities of the Company):
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP* OF CLASS*
- ------------------------------------ --------------------- ---------
Reich & Tang Asset Management L.P....................... 3,041,000(1) 14.75
600 Fifth Avenue
New York, NY 10020
Oscar L. Tang........................................... 1,578,600 7.65
c/o Seward & Kissel LLP
One Battery Park Plaza New York, NY 10004
T. Rowe Price Associates, Inc. ......................... 1,304,100(2) 6.32
100 East Pratt Street
Baltimore, MD 21202
Ahmed D. Kafadar Declaration of Trust................... 1,125,484 5.46
350 Bleecker Street
Number 6E
New York, NY 10014
- ---------------
* This information is taken from statements filed by beneficial owners with
the SEC and by reference to the transfer agent's records.
(1) Reich & Tang Asset Management is a Registered Investment Advisor and the
shares are owned on behalf of their clients. Reich & Tang has sole
investment and voting authority over all shares.
(2) T. Rowe Price Associates, Inc. is a Registered Investment Advisor and the
shares are owned on behalf of their clients. T. Rowe Price Associates, Inc.
has sole dispositive power for the entire holding of 1,304,100 shares and
has sole voting authority for 335,300 shares.
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MANAGEMENT
As of March 12, 2000, the following Directors and named executive officers,
individually, and all Directors and officers as a group, beneficially owned
shares of the only class of voting securities of the Company (i.e. Common Stock,
$0.10 par value) as follows:
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP* OF CLASS*
- ------------------------------------ ------------------------ ---------
Robert J. Schultz........................................... 72,225(1)(2) --
Dr. Charles B. Kafadar...................................... 570,258(1)(3) 2.8
Dr. George S. Ansell........................................ 3,925(1)(4) --
Erwin H. Billig............................................. 7,325(1) --
Dr. James R. Burnett........................................ 30,391(1)(5) --
Richard L. Corbin........................................... 2,250(1) --
Philip E. Johnson........................................... 21,451(1) --
Donald E. Miller............................................ 7,714(1) --
Lewis W. Watson............................................. 6,616(1)(6) --
William R. Barker........................................... 46,200(1) --
J. Thompson McConathy....................................... 13,600(1) --
Jim M. Flanary.............................................. 10,000(1) --
Ben E. Paul................................................. 52,850(1)
All Directors and Executive Officers as a group (the 13
persons named above)...................................... 844,805 4.1
- ---------------
** This information is taken from statements filed by beneficial owners with
the SEC, by reference to the transfer agent's records and the Company's
stock option plan record. A line indicates ownership of less than 1%.
(1) Includes unexercised stock options, which are either vested or will vest
within six months of this Proxy Statement, under the Company's stock option
plans: Mr. Schultz, 57,125 shares; Dr. Kafadar, 27,500 shares; Dr. Ansell,
3,125 shares; Mr. Billig, 3,125 shares; Dr. Burnett, 3,125 shares; Mr.
Corbin, 1,250 shares; Mr. Johnson, 3,125 shares; Mr. Miller, 1,250 shares;
Mr. Watson, 3,125 shares; Mr. Barker, 38,000 shares; Mr. McConathy, 11,000
shares; Mr. Flanary, 10,000; and Mr. Paul, 4,000 shares.
(2) Does not include 1,000 shares held by his wife in her own name.
(3) Includes 75,795 shares held by Dr. Kafadar of record and 466,963 shares held
in joint tenancy with his wife, in which voting power is shared. Does not
include 10,250 shares held by his wife in her own name or 36,299 shares held
by his wife as custodian for their children, of which he disclaims
beneficial ownership.
(4) Does not include 1,000 shares held by his wife in her own name.
(5) Includes 18,000 shares held by Dr. Burnett in a living trust with his wife,
in which voting power is shared, and 9,266 shares of deferred compensation
under the Company's Directors Compensation Plan, which have not been issued
and cannot be voted.
(6) Includes 1,491 unexercised stock options under the Company's Directors'
Compensation Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF 1934
The Company's directors and executive officers and persons who are
beneficial owners of more than 10% of the Company's Common Stock ("10%
Beneficial Owners") are required to file reports of their holdings and
transactions in the Common Stock with the Securities and Exchange Commission
(the "Commission") and to furnish the Company with such reports. Based solely
upon its review of the copies of such reports the Company has received or upon
written representations it has obtained from certain of these persons, the
Company believes that, with respect to fiscal 1999, all of the Company's
directors, executive officers and 10% Beneficial Owners have complied with all
applicable Section 16(a) filing requirements.
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INDEX TO EXHIBITS
Exhibit
No. Description
- -------- -----------
1. Amended and Restated Agreement and Plan of Merger, dated March 12,
2000, by and among Autoliv, Inc., OEA, Inc., and OEA Merger
Corporation.(1)*
2. Press Release issued by OEA, Inc. on March 13, 2000.(2)*
3. Opinion of Deutsche Bank Securities Inc., dated March 12, 2000.
4. Confidentiality Agreement, dated January 5, 2000, between Autoliv,
ASP and OEA, Inc.*
5. Retirement Agreement, dated March 15, 1990, between OEA, Inc. and
Dr. Charles B. Kafadar.(3)*
6. Article IX of the Bylaws of OEA, Inc.(3)*
7. OEA, Inc. Nonemployee Directors' Stock Option Plan.(4)*
8. OEA, Inc. Employees' Stock Option Plan.(4)*
9. OEA, Inc. Directors' Compensation Plan.(5)*
10. Rights Agreement, dated as of March 25, 1998, between OEA, Inc. and
ChaseMellon Shareholder Services, L.L.C.(6)*
11. First Amendment to Rights Agreement, dated February 19, 1999,
between OEA, Inc. and ChaseMellon Shareholder Services, L.L.C.(7)*
12. Stockholders Agreement, dated February 19, 1999, between OEA, Inc.
and Reich & Tang Asset Management L.P.(7)*
13. Second Amendment to Rights Agreement, dated August 23, 1999, between
OEA, Inc., ChaseMellon Shareholder Services, L.L.C. and LaSalle Bank
National Association.(8)*
14. 1997 Employee Stock Purchase Plan.(9)*
15. Form of Change of Control Employment Agreement between OEA, Inc. and
each of Dr. Charles F. Kafadar, John T. McConathy, William R.
Barker, Jim T. Flanary and 18 additional employees.(10)*
16. Form of Letter to Stockholders of the Company dated March 24, 2000.
- -------------------
(1) Incorporated by reference to Exhibit D to the Schedule TO filed by
Autoliv, Inc. with the Securities and Exchange Commission on March 24,
2000.
(2) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on March 13, 2000.
(3) Incorporated by reference to OEA, Inc.'s Annual Report on Form 10-K/A as
filed with the Securities and Exchange Commission on October 21, 1999.
(4) Incorporated by reference to OEA, Inc.'s Registration Statement on Form
S-8 as filed with the Securities and Exchange Commission on November 3,
1998. (No. 333-66753).
(5) Incorporated by reference to OEA, Inc.'s Revised Definitive Proxy
Statement on Schedule 14A as filed with the Securities and Exchange
Commission on December 15, 1998.
(6) Incorporated by reference to OEA, Inc.'s Registration Statement on Form
8-A as filed with the Securities and Exchange Commission on April 8,
1998.
(7) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on February 19, 1999.
(8) Incorporated by reference to OEA, Inc.'s Current Report on Form 8-K as
filed with the Securities and Exchange Commission on August 24, 1999.
(9) Incorporated by reference to OEA, Inc.'s Definitive Proxy Statement on
Schedule 14A as filed with the Securities and Exchange Commission on
November 28, 1997.
(10) Incorporated by reference to OEA, Inc.'s Annual Report on Form 10-K as
filed with the Securities and Exchange Commission of October 21, 1999.
* Not included in copies mailed to stockholders.