Securities Law & Instruments


Mutual Reliance Review System for Exemptive Relief Applications - Employmentagreement to be entered into between offeror and selling securityholder who is alsoofficer of offeree - Decision granted that the employment agreement is being enteredinto for reasons other than to increase the value of the consideration paid to the sellingsecurityholder for his shares and that the employment agreement may be entered intonotwithstanding the prohibition on collateral benefit agreements.

Applicable Ontario Statutes

Securities Act, R.S.O. 1990 c. S.5, as am.







1. WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of Alberta, British Columbia, Saskatchewan, Manitoba, Ontario,Quebec, Nova Scotia and Newfoundland (the "Jurisdictions") has received anapplication from Haworth, Inc. ("Haworth") and Haworth Acquisition Corp. (the"Offeror") for a decision under the securities legislation of the Jurisdictions (the"Legislation") that:

1.1 in connection with the cash offer (the "Offer") by the Offeror to purchaseall of the issued and outstanding common shares (the "SMED Shares") ofSMED International Inc. ("SMED");

1.2 despite the provisions in the Legislation that prohibit an offeror whomakes or intends to make a take-over bid or issuer bid and any person orcompany acting jointly or in concert with the offeror from entering into anycollateral agreement, commitment or understanding with any holder orbeneficial owner of securities of the offeree issuer that has the effect ofproviding to the holder or owner a consideration of greater value for thosesecurities than that offered to other

holders of the same class of securities (the "Prohibition on CollateralAgreements");

1.3 two employment agreements conditionally entered into, respectively,between SMED and each of Mogen F. Smed, Chairman and ChiefExecutive Officer of SMED, and Andrew R.G. Moor, President and ChiefFinancial Officer of SMED (collectively, the "Key Executives") are madefor reasons other than to increase the value of the consideration to bepaid to the Key Executives for their SMED Shares, and so may be enteredinto;

2. AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Alberta Securities Commission is theprincipal regulator for this application;

3. AND WHEREAS Haworth and the Offeror has represented to the DecisionMakers that:

3.1 Haworth is a privately held corporation existing under the laws of theState of Michigan;


3.2 the Offeror is a wholly-owned subsidiary of Haworth incorporated underthe laws of the Province of Alberta for the purposes of making the Offer;

3.3 SMED is a corporation amalgamated under the Business Corporations Act(Alberta);

3.4 the authorized capital of SMED consists of an unlimited number ofCommon Shares (the "SMED Shares"). As at January 24, 2000,8,427,555 SMED Shares were outstanding and there were outstandingstock options ("Stock Options") granted under the stock option plan ofSMED providing for the issuance of 550,308 SMED Shares upon theexercise thereof;


3.5 the SMED Shares are listed and posted for trading on The Toronto StockExchange and Nasdaq;

3.6 Mogens F. Smed ("Smed") is the Chairman and Chief Executive Officer ofSMED;

3.7 Andrew R.G. Moor ("Moor") is the President and Chief Financial Officer ofSMED;

3.8 Smed holds, directly and indirectly, or exercises control or direction over,505,409 SMED Shares and Stock Options to acquire an additional 97,378SMED Shares;

3.9 Moor holds, directly and indirectly, or exercises control or direction over,129,643 SMED Shares and Stock Options to acquire an additional 64,919SMED Shares;

3.10 Haworth, through the Offeror, has made an all-cash offer to acquire all ofthe issued and outstanding SMED Shares, including SMED Sharesissuable on the exercise of Stock Options;

3.11 the Offer is conditional upon, among other things, there being validlydeposited under the Offer and not withdrawn at least 66% of theoutstanding SMED Shares (calculated on a fully-diluted basis) other thanSMED Shares owned by the Offeror or its affiliates or by persons whoseSMED Shares may not form part of any minority approval of a subsequentacquisition transaction;

3.12 Haworth has entered into a pre-acquisition agreement (the "Pre-acquisition Agreement") with SMED pursuant to which, among otherthings, Haworth agreed to cause the Offeror to make the Offer on theterms and conditions contemplated thereby and SMED represented andwarranted that its Board of Directors has determined that the price offeredunder the Offer is fair from a financial point of view to holders of SMEDShares ("Shareholders") and that the Offer is in the best interests ofShareholders and that SMED's Board of Directors recommends thatShareholders accept the Offer;

3.13 Haworth and the Offeror have also entered into separate lock-upagreements (the "Lock-Up Agreements") with each of the directors andofficers of SMED, including the Key Executives, pursuant to which each ofsuch directors and officers have agreed to deposit to the Offer and notwithdraw, subject to certain exceptions, all of the SMED Shares (includingthose issuable on the exercise of Stock Options) owned, or over whichcontrol and direction is exercised, by him. The Lock-Up Agreements areall on identical terms;

3.14 each of the Key Executives has conditionally entered into an employmentagreement (collectively, the "Employment Agreements") dated January31, 2000 with SMED providing for the continued full time employment ofthe Key Executives with SMED, to come into effect on the Offeror takingup and paying for SMED Shares pursuant to the Offer. Pursuant to thePre-acquisition Agreement, the entering into of the EmploymentAgreements was a condition to the obligation of the Offeror to make theOffer;

3.15 the principal terms of the Employment Agreements are as follows:


3.15.1 Smed is to continue as Chief Executive Officer of SMED, tobe compensated on a reasonable basis appropriate to theindustry and the services to be rendered by him;

3.15.2 Moor is to continue as President and Chief Financial Officerof SMED, to be compensated on a reasonable basisappropriate to the industry and the services to be renderedby him;

3.15.3 each of the Employment Agreements is for an initial termexpiring December 31, 2001;

3.15.4 each of the Key Executives will be entitled to certainbenefits which are commensurate with the benefits whichthey currently receive as senior officers of SMED; and

3.15.5 the Employment Agreements contain customary termination,severance and non-competition provisions;

3.15.6 the Employment Agreements provide for, and the making ofthe Offer by the Offeror was conditional upon, theirrevocable waiver by each of the Key Executives of anyentitlement to payments to which he may otherwise havebeen entitled pursuant to existing agreements with SMED ona "change of control" of SMED occurring;

3.15.7 Haworth and the Offeror believe that each of the KeyExecutives has been an integral part of the successfuldevelopment of the SMED business and has substantial andvaluable experience and expertise in the office furnitureindustry. The Employment Agreements have been enteredinto primarily for the purpose of ensuring each of the KeyExecutive's continued participation in the successfulmanagement and development of the SMED business withinHaworth's operations following the completion of the Offer;

3.15.8 each of the Employment Agreements were negotiated atarm's length and are on terms that are reasonable;

3.15.9 the compensation provided for in each of the EmploymentAgreements is reasonable in light of the services to berendered by the Key Executives to Haworth and SMEDfollowing the completion of the Offer; and

3.15.10the Employment Agreements have been entered into for validbusiness reasons unrelated to the Key Executives' holdings ofSMED Shares and not for the purpose of conferring an economicor collateral benefit on the Key Executives in their capacities asholders of SMED Shares that the other holders of SMED Shares donot enjoy;

4. AND WHEREAS under the System, this MRRS Decision Document evidencesthe decision of each Decision Maker ( collectively, the "Decision");

5. AND WHEREAS each of the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with the jurisdiction to makethe Decision has been met;

6. THE DECISION of the Decision Makers under the Legislation is that theEmployment Agreements are entered into for reasons other than to increase thevalue of the consideration to be paid to the Key Executives for their SMEDShares and may be entered into notwithstanding the Prohibition on CollateralAgreements.

DATED at Edmonton, Alberta this 25th day of February, 2000.

"Ian E.W. McConnan", F.C.A., Member
"Jerry A Bennis", F.C.A., Member