<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Bacou USA, Inc.
(Name of Registrant as Specified In Its Charter)
Bacou USA, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
BACOU USA, INC.
10 THURBER BOULEVARD
SMITHFIELD, RHODE ISLAND 02917
NOTICE OF ANNUAL MEETING
MAY 19, 1998
To the Stockholders of
Bacou USA, Inc.
Notice is hereby given that the Annual Meeting of the Stockholders of Bacou
USA, Inc. (the "Corporation"), will be held at the Westin Hotel, Providence,
Rhode Island, on Tuesday, May 19, 1998 at 10:00 A.M., Eastern Daylight Time, for
the following purposes:
(1) To elect directors of the Corporation for the ensuing year, and
until their successors are elected and qualified.
(2) To ratify the adoption of the 1998 Howard S. Leight Stock Option
Plan.
(3) To ratify the adoption of a first amendment to the Bacou USA, Inc.
1996 Stock Incentive Plan.
(4) To ratify the adoption of a first amendment to the Bacou USA, Inc.
1996 Non-Employee Directors Stock Option Plan.
(5) To ratify the adoption of a first amendment to Employment
Agreement with Walter Stepan, the Chief Executive Officer of the
Corporation.
(6) To ratify the selection of KPMG Peat Marwick LLP as independent
auditors to audit the Corporation's books and accounts for the fiscal year
ending December 31, 1998.
(7) To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Directors,
PHILIP B. BARR, JR.
Secretary
April 13, 1998
Mailed at Boston, Massachusetts
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS PROMPTLY
AS POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE
USED.
<PAGE> 3
BACOU USA, INC.
10 THURBER BOULEVARD
SMITHFIELD, RHODE ISLAND 02917
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders of Bacou USA, Inc. (the
"Corporation") to be held on May 19, 1998 and at any adjournment thereof, for
the purposes set forth in the accompanying notice of such meeting. All
stockholders of record of the Corporation's Common Stock at the close of
business on March 24, 1998 will be entitled to vote. The stock transfer books
have not been closed.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any such proxy, if received in time for the voting and not revoked,
will be voted at the Annual Meeting in accordance with the directions of the
stockholder. Any proxy which fails to specify a choice with respect to any
matter to be acted upon will be voted for the election of each nominee for
director and in favor of each proposal to be acted upon. Any stockholder giving
a proxy in the form enclosed has the power to revoke it at any time before it is
exercised by filing a later proxy with the Corporation, by attending the meeting
and voting in person, or by notifying the Corporation of the revocation in
writing to its President at 10 Thurber Boulevard, Smithfield, Rhode Island
02917.
As of March 24, 1998, there were 17,593,914 shares of common stock of the
Corporation, $0.001 par value, ("Common Stock") issued and outstanding. Each
share of Common Stock entitles the holder thereof to one vote on the matters to
be voted upon at the Annual Meeting. All holders of Common Stock vote together
as one class. Abstentions and broker non-votes will be counted in determining if
a quorum is present. With regard to the election of directors, votes that are
withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on all proposals other than the election of
directors and will be counted as present for purposes of the item on which the
abstention is noted. Abstentions on the ratification of the adoption of the 1998
Howard S. Leight Stock Option Plan, the ratification of a first amendment to the
Bacou USA, Inc. 1996 Stock Incentive Plan, the ratification of a first amendment
to the Bacou USA, Inc. 1996 Non-Employee Directors Stock Option Plan, the
ratification of a first amendment to Employment Agreement with the Chief
Executive Officer of the Corporation and the ratification of accountants, will
have the same legal effect as a vote against such matter. Brokers holding shares
in street name have the authority to vote on certain matters when they have not
received instructions from the beneficial owners. Brokers that do not receive
instructions are permitted to vote on the outcome of the election of directors,
the ratification of the adoption of the 1998 Howard S. Leight Stock Option Plan,
the ratification of a first amendment to the Bacou USA, Inc. 1996 Stock
Incentive Plan, the ratification of a first amendment to the Bacou USA, Inc.
1996 Non-Employee Directors Stock Option Plan, the ratification of a first
amendment to Employment Agreement with the Chief Executive Officer of the
Corporation and the ratification of accountants and, as a result, broker non-
votes will have no effect on the outcome of these matters.
The holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. In the absence of a quorum,
the Annual Meeting may be postponed from time to time until stockholders holding
the requisite amount are present or represented by proxy.
The approximate date on which the Proxy Statement and accompanying proxy
card will first be mailed to the stockholders of the Corporation is April 13,
1998.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 23, 1998, unless otherwise
noted, certain information concerning the ownership of shares of Common Stock by
(i) each person or group who is known by the Corporation to own beneficially
more than five percent of the issued and outstanding Common Stock, (ii) each
director and nominee for director of the Corporation, (iii) each named executive
officer described in "Executive Compensation" below, and (iv) all directors and
executive officers as a group. Except as otherwise indicated, each person named
has sole investment and voting power with respect to the securities shown.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENT OF CLASS
---- ---------------- ----------------
<S> <C> <C>
Bacou S.A.............................................. 12,612,600(1) 71.69%
168 Avenue des Aureats
BP 1205
26012 Valence Cedex, France
Philippe Bacou......................................... 12,651,400(1)(3) 71.75%
J. & W. Seligman & Co. Incorporated.................... 974,569(2) 5.54%
100 Park Avenue
New York, NY 10017
Walter Stepan.......................................... 522,800(4)(5) 2.76%
Christophe Bacou....................................... 20,400(3) *
Philip B. Barr, Jr..................................... 105,000(5) *
Karl F. Ericson........................................ 23,400(3) *
Howard S. Leight....................................... 50,000(6) *
Herbert A. Wertheim.................................... 63,900(3)(7) *
Raymond R. Baker....................................... 45,000(5) *
Harry D. Neff, II...................................... 45,000(5) *
Michael Mancuso........................................ 20,000(5) *
All directors and executive officers as a group (30
persons)............................................. 14,241,038(3)(4)(5)(6)(7) 77.36%
</TABLE>
- ---------------
(1) Philippe Bacou is Chairman, President and Chief Executive Officer of Bacou
S.A. and has sole voting power with respect to shares owned by Bacou S.A.
According to Form 13Gs filed with the Securities and Exchange Commission
(the "Commission"), Bacou S.A. is controlled by Engineering Bacou S.A.,
Allesia S.A., Philippe Bacou, Christophe Bacou, Jacqueline Maggi Bacou,
Veronique Mirabel and Gilbert Vandeputte.
(2) According to its Form 13G filed with the Commission J. & W. Seligman & Co.
Incorporated had, as of December 31, 1997, shared voting power with respect
to 787,500 shares and shared dispositive power with respect to 974,569
shares; it had no sole voting or dispositive power.
(3) Includes the following shares of Common Stock reserved for issuance upon
exercise of stock options outstanding pursuant to the Corporation's 1996
Non-Employee Directors Stock Option Plan: Mr. P. Bacou, 38,800 shares; Mr.
C. Bacou, 20,400 shares; Mr. Ericson, 20,400 shares; Dr. Wertheim, 20,400
shares; and all directors and executive officers as a group, 100,000 shares.
(4) Includes 55,440 shares of Common Stock owned of record by Mr. Stepan's wife.
(5) Includes the following shares of Common Stock reserved for issuance upon
exercise of stock options outstanding pursuant to the Corporation's 1996
Stock Incentive Plan: Mr. Stepan, 100,000 shares; Mr. Barr, 100,000 shares;
Mr. Baker, 45,000 shares; Mr. Neff, 45,000 shares; Mr. Mancuso, 20,000
shares; and all directors and executive officers as a group, 568,000 shares.
(6) Includes the following shares of Common Stock reserved for issuance upon
exercise of stock options outstanding pursuant to the Corporation's 1998
Howard S. Leight Stock Option Plan: Mr. Leight, 50,000 shares; and all
directors and executive officers as a group, 50,000 shares.
(7) Includes 22,500 shares owned by Dr. Wertheim's spouse.
* Less than 1%.
2
<PAGE> 5
ELECTION OF DIRECTORS
The persons named below have been nominated for election at the Annual
Meeting as directors of the Corporation. The directors who are elected shall
hold office until their respective successors shall have been duly elected and
qualified. In accordance with Delaware General Corporation Law, directors are
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting.
All nominees are members of the present Board. Each of the nominees for
director has consented to being named a nominee in this Proxy Statement and has
agreed to serve as a director, if elected at the Annual Meeting. It is the
intention of the persons named in the proxy to vote for the following nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Walter Stepan, 59...................... Vice Chairman of the Board, President and Chief 7/94
Executive Officer; Chairman of the Board and Chief
Executive Officer of Bacou USA Safety, Inc.;
Chairman of the Board, President and Chief
Executive Officer of Uvex Safety Manufacturing,
Inc.; Chairman of the Board of Titmus Optical,
Inc. Also a director of Bacou S.A., Bacou Far East
Ltd. (an affiliate of Bacou S.A.), Uvex Winter
Optical, Inc. and Uvex Sports, Inc. Uvex Winter
Optical, Inc. and Uvex Sports, Inc. are affiliates
of Uvex Arbeitsschutz GmbH (together "Uvex
Germany").
Philippe Bacou*, 40.................... Chairman of the Board since June 1996; Chairman, 7/94
President and Chief Executive Officer of Bacou,
S.A. since July 1996; previously Executive Vice
President of Bacou, S.A. since 1993; Chief
Financial Officer and Vice President -- Finance of
Bacou, S.A. since 1985; Director of Bacou, S.A.
since July 1996.
Christophe Bacou*, 33.................. Marketing Manager of two subsidiaries of Bacou, 1/96
S.A. since 1990. Employed by affiliates of Bacou,
S.A. since 1990.
Philip B. Barr, Jr., 46................ Executive Vice President since October 1996; 8/95
previously Vice President since 1995; Chief
Financial Officer, Treasurer and Secretary since
August 1995. Partner of Edwards & Angell, the
Corporation's primary outside counsel, from 1985
to 1995.
Karl F. Ericson, 64.................... Independent business consultant since 1990. 7/96
Partner with KPMG Peat Marwick LLP from 1970 to
1990. Also Director of Bank Rhode Island.
Howard S. Leight, 57................... Founder of Howard S. Leight & Associates, Inc. 2/98
(d/b/a Howard Leight Industries); President and
sole Stockholder of Howard Leight Industries from
1984 until February 1998. Director of Bacou, S.A.
since February 1998.
Herbert A. Wertheim, 58................ Founder, Chairman and Chief Executive Officer of 7/96
Brain Power Incorporated, a manufacturer of
optical instruments and chemicals, since 1971.
Director and member of the Compensation Committee
of FPA Medical Management.
</TABLE>
- ---------------
* Philippe and Christophe Bacou are brothers.
3
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, currently comprised of
Mr. P. Bacou, Mr. Ericson (effective February 23, 1998), Mr. Stepan (Chair) and
Dr. Wertheim, which is charged with the responsibility of reviewing, approving
and recommending to the Board of Directors all compensation arrangements for
executive officers. The Compensation Committee also administers the
Corporation's 1996 Stock Incentive Plan. The Compensation Committee held three
meetings during the Corporation's last fiscal year. Effective February 23, 1998,
the Compensation Committee established a sub-committee called the Covered
Employee Compensation Sub-Committee (the "Sub-Committee"). The Sub-Committee is
comprised of two outside directors, Dr. Wertheim and Mr. Ericson, and is charged
with the responsibility of reviewing, approving and recommending to the
Compensation Committee all compensation arrangements for covered employees, as
defined by Section 162(m) of the Internal Revenue Code, who are likely to have
compensation in excess of $1 million in any fiscal year.
The Board of Directors has an Audit Committee, currently comprised of
Messrs. P. Bacou, Dr. Wertheim (effective February 23, 1998) and Mr. Ericson
(Chair), which is charged with the responsibility of recommending to the Board
of Directors the annual engagement of the Corporation's independent auditors and
reviewing with the independent auditors the scope and results of the audits, the
internal accounting controls of the Corporation, audit practices and
professional services furnished by the independent auditors. The Audit Committee
held three meetings during the Corporation's last fiscal year.
The Board of Directors has an Oversight Committee, currently comprised of
Mr. Ericson and Dr. Wertheim, which is charged with the responsibility of
reviewing the terms of transactions between the Corporation and Bacou S.A. and
any of its subsidiaries and affiliates (the "Bacou Group") and any possible
conflicts of interest arising in connection with corporate opportunities which
become available to each of the Company and the Bacou Group. See "Certain
Transactions -- Corporate Opportunities Agreement." The Oversight Committee held
three meetings during the Corporation's last fiscal year.
The Board of Directors has an Executive Committee, currently comprised of
Messrs. Stepan and P. Bacou, which is authorized to handle routine matters which
arise between meetings of the Board of Directors. Although Messrs. Stepan and P.
Bacou routinely consult on various matters relating to the business of the
Corporation, they took no action in their capacity as members of the Executive
Committee during 1997.
The Board of Directors does not have a nominating committee as the Board as
a whole considers the qualifications of candidates and recommends to the
stockholders the election of directors of the Corporation. Stockholders may
recommend nominees for election as directors by writing to the President of the
Corporation.
The Board of Directors held a total of four meetings during 1997. Each
member of the Board of Directors attended at least 75% of the aggregate number
of meetings of the Board, except for Mr. C. Bacou who attended two meetings.
Each member of the Board of Directors attended 100% of the aggregate number of
meetings of all committees of the Board on which he served, except for Dr.
Wertheim who attended two of three meetings of the Compensation Committee.
COMPENSATION OF DIRECTORS AND OFFICERS
DIRECTORS COMPENSATION
Directors who are also employees of the Corporation receive no compensation
for service on the Board of Directors. The Company's non-employee directors
receive cash compensation for service on the Board of Directors in an annual
amount of $15,000, payable quarterly; effective May 19, 1997, the Chairman of
the Board receives $60,000 annually (previously $25,000 annually). In addition,
each non-employee director receives $1,000 per day for attendance at any meeting
of the Board of Directors or any Committees thereof or $500 per day for
attendance by conference call.
4
<PAGE> 7
Since August 1, 1996, non-employee directors, with the exception of Mr.
Leight, have been granted 100,000 options in the aggregate at exercise prices
equal to the fair market value of the Common Stock on the date of grant,
pursuant to the 1996 Non-Employee Directors Stock Option Plan. Effective
February 27, 1998 the Corporation granted 50,000 options to Mr. Leight at an
exercise price equal to $17.00 per share, pursuant to the 1998 Howard S. Leight
Stock Option Plan. See "Certain Transactions" and "Approval of the 1998 Howard
S. Leight Stock Option Plan". The Corporation entered into various agreements
with Mr. Leight effective February 27, 1998. See "Certain Transactions".
EXECUTIVE COMPENSATION
The following table summarizes certain information with respect to
compensation for services rendered to the Corporation during the years ended
December 31, 1997, 1996 and 1995 by the Corporation's chief executive officer
and the four other most highly compensated executive officers whose salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------------------------ OPTIONS/
CALENDAR OTHER ANNUAL SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (SHARES) COMPENSATION
--------------------------- -------- ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Walter Stepan..................... 1997 $500,000 $1,200,000 $62,000(1)(3) 30,000 $50,936(2)
President and Chief Executive 1996 500,000 1,206,672 40,000(1)(3) -- 50,936(2)
Officer; Chairman, and Chief 1995 300,000 1,214,734 53,000(1)(3) -- 50,806(2)
Executive Officer of Bacou USA
Safety, Inc.
Philip B. Barr, Jr................ 1997 210,000 235,000 (3) 20,000 1,289(4)
Executive Vice President and 1996 190,000 160,000 (3) 45,000 --
Chief Financial Officer 1995 71,521 55,000 (3) -- --
Harry D. Neff, II................. 1997 125,000 60,000 (3) -- 3,183(4)
Senior Vice President-Sales 1996 120,000 75,000 (3) 30,000 2,398(4)
of Uvex Safety 1995 109,167 57,917 (3) -- 3,480(4)
Raymond R. Baker.................. 1997 125,000 45,000 (3) -- 3,697(4)
Senor Vice President- 1996 120,000 60,000 (3) 30,000 2,595(4)
Manufacturing and General 1995 99,167 30,417 (3) -- 1,980(4)
Manager of Uvex Safety
Manufacturing, Inc.
Michael Mancuso(6)................ 1997 180,000 45,000 (3) -- 1,951(5)
President of Titmus Optical, 1996 -- -- (3) 20,000(6) 31,150(6)
Inc.
</TABLE>
- ---------------
(1) Represents reimbursement by the Corporation for United States social
security taxes payable to Mr. Stepan and the applicable personal income tax
effects of such reimbursement.
(2) Represents (i) split dollar life insurance premiums paid by the Corporation
on behalf of Mr. Stepan ($36,450 in 1997), (ii) term life insurance premiums
paid by the Corporation on behalf of Mr. Stepan ($9,736 in 1997), and (iii)
contributions by the Corporation on behalf of Mr. Stepan under the Bacou
USA, Inc. 401(k) Plan Trust ($4,750 in 1997).
(3) Perquisites and other personal benefits paid to the Named Executive Officer
were less than $50,000 or 10% of aggregate salary and bonus and accordingly
are omitted from the table as permitted by the rules of the Commission.
(4) Represents amounts paid by the Corporation under the Bacou USA, Inc. 401(k)
Plan Trust in 1997 and under the Uvex Safety, Inc. 401(k) Plan Trust in 1996
and 1995.
(5) Represents amounts paid by the Corporation under the Titmus Optical, Inc.
Retirement Savings Plan.
(6) Mr. Mancuso began employment with the Corporation, as President of Titmus
Optical, Inc., effective January 1, 1997. Mr. Mancuso was paid fees totaling
$31,150 and granted 20,000 options during 1996 pursuant to a consulting
agreement. Mr. Mancuso's employment as President of Titmus Optical, Inc.,
terminated on March 5, 1998.
5
<PAGE> 8
The following table sets forth certain information relating to option
grants pursuant to the Corporation's 1996 Stock Incentive Plan during the year
ended December 31, 1997 to the individuals named in the Summary Compensation
Table above. No options were granted to Mr. Neff, Mr. Baker or Mr. Mancuso
during the year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
---------------------------------------------------------------- REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR GRANT- APPRECIATION FOR
OPTIONS/ EMPLOYEES BASE DATE MARKET EXPIRA- OPTION TERM(3)(4)
SARS IN FISCAL PRICE PRICE TION ---------------------
NAME GRANTED(1)(2) YEAR ($/SH) PER SHARE DATE 5% 10%
---- ------------- ------------ -------- ----------- ------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Walter Stepan........................ 30,000 21.0% $14.75 $14.75 5/30/07 $278,286 $705,231
Philip B. Barr, Jr................... 20,000 14.0% $14.75 $14.75 5/30/07 $185,524 $470,154
</TABLE>
- ---------------
(1) None of the options granted were options with tandem SARs and no
free-standing SARs were granted.
(2) Granted to the named executive officers on May 30, 1997 pursuant to the 1996
Stock Incentive Plan. The options became exercisable on the date of grant.
(3) Potential Realizable Value is based on the assumed growth rates for the
ten-year option term. 5% annual growth results in a stock price per share
of $24.03 and 10% results in a stock price per share of $38.26.
(4) The actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized by an executive
will be at or near the amounts reflected in this table.
The following table sets forth certain information with respect to
unexercised options to purchase the Corporation's Common Stock granted under the
Plan to the individuals named in the Summary Compensation Table above. No
options were exercised in 1997 by such individuals.
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FY-END SARS AT FY-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Walter Stepan.............................. 30,000 -- $ 82,500 $ --
Philip B. Barr, Jr......................... 38,000 27,000 100,000 67,500
Harry D. Neff, II.......................... 12,000 18,000 30,000 45,000
Raymond R. Baker........................... 12,000 18,000 30,000 45,000
Michael Mancuso............................ 8,000 12,000 8,960 13,440
</TABLE>
- ---------------
(1) Based on the closing price on the Nasdaq National Market of the
Corporation's Common Stock on December 31, 1997 ($17 1/2).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stepan, Chairman of the Corporation's Compensation Committee, and Vice
Chairman, President and Chief Executive Officer of the Corporation, serves on
the Board of Directors of Bacou S.A.; and Mr. P. Bacou is the Chairman,
President and Chief Executive Officer of Bacou S.A. and is a member of the
Corporation's Compensation Committee.
6
<PAGE> 9
COMPENSATION COMMITTEE REPORT
The membership of the Compensation Committee of the Board of Directors of
the Corporation consists of Philippe Bacou, Karl F. Ericson (effective February
23, 1998), Walter Stepan (Chair) and Dr. Herbert A. Wertheim. Accordingly, Mr.
Ericson did not participate in the decisions of the Compensation Committee
during 1997, although he is currently a member of the Committee and a signatory
of this report. Mr. Bacou, Dr. Wertheim and Mr. Ericson are not employees of the
Corporation. Mr. Stepan is Vice Chairman, President and Chief Executive Officer
of the Corporation, as well as Chairman and Chief Executive Officer of Bacou USA
Safety, Inc., Chairman, President and Chief Executive Officer of Uvex Safety
Manufacturing, Inc., and Chairman of the Corporation's other operating
subsidiaries. The role of the Committee is advisory and administrative in
nature, with responsibility for matters such as making recommendations to the
Board of Directors concerning certain compensation matters and administering
compensation plans adopted by the Board of Directors, including the
Corporation's 1996 Stock Incentive Plan and the Corporation's Bonus Plan for
Executives for 1996 and 1997 (the "Bonus Plan"). Effective February 23, 1998,
the compensation committee established the Sub-Committee, which is comprised of
Dr. Wertheim and Mr. Ericson and is charged with the responsibility of
reviewing, approving and recommending to the Compensation Committee all
compensation arrangements for covered employees, as defined by Section 162(m) of
the Internal Revenue Code, who are likely to have compensation in excess of $1
million during any fiscal year.
COMPENSATION POLICIES
The Corporation's executive compensation program consists of three main
components: (1) base salary; (2) cash bonuses; and (3) stock options. Base
salaries are designed to attract and retain well-qualified executives who are
likely to manage the Corporation and its operating subsidiaries in a manner that
will produce successful operating strategies and results. Cash bonuses are
designed to provide short-term incentives which are determined in direct
relation to corporate financial performance and also take into account
individualized objectives and achievements. Stock options are designed to align
the interests of shareholders and executives by providing long-term incentives
based on growth in market value of the Corporation's Common Stock.
DIRECT RELATIONSHIP OF COMPENSATION TO CORPORATE FINANCIAL PERFORMANCE
For 1997, Mr. Stepan and Mr. Barr received bonuses which were determined in
direct relation to corporate financial performance, as measured by operating
income, pursuant to their employment agreements. All of Mr. Stepan's bonus, and
a portion of Mr. Barr's bonus equal to $160,000 or 76% of base salary, was
determined in direct relation to the achievement of a certain operating margin
by the Corporation on a consolidated basis.
With respect to the executive officers of the Corporation's operating
subsidiaries, executive compensation was related to corporate performance
through the Bonus Plan, which provides increased bonus levels as subsidiary
operating margins, net sales and operating profit increase. On this basis, the
portion of bonuses that were determined in direct relation to corporate
financial performance ranged from 10% to 25% of base salary for executive
officers at operating subsidiaries. In addition, executive officers at operating
subsidiaries were paid discretionary bonuses that ranged from 4% to 23% of base
salary.
7
<PAGE> 10
CEO COMPENSATION
Mr. Stepan's salary and benefits for 1997 were fixed by the terms of his
employment contract which, except for a first amendment to such contract dated
October 24, 1997 (the "First Amendment"), was in place prior to both the
establishment of the Compensation Committee and the Corporation's initial public
offering in March 1996. Approximately two-thirds of his 1997 compensation was
represented by a cash bonus. Mr. Stepan was entitled to a cash bonus pursuant to
an incentive formula which directly related the Corporation's financial
performance, as measured by consolidated operating income, to the amount of his
bonus.There was no material difference between the cash bonus determined
pursuant to the incentive formulas defined within the January 1996 contract and
the First Amendment, and the Compensation Committee awarded Mr. Stepan a cash
bonus of $1,200,000, which was near the midpoint of the two amounts. Mr. Stepan
received a grant of 30,000 options during 1997, pursuant to the Corporation's
1996 Stock Incentive Plan, and awarded for his successful negotiation of the
acquisition of Survivair, Inc. The options were granted at an exercise price
equal to the fair market value of the Corporation's Common Stock on the date of
grant and were fully exercisable upon grant.
IRS MATTERS
Section 162(m) of the Internal Revenue Code disallows deductions by
publicly-held companies for employee remuneration in excess of $1 million which
is not performance-based (the "Regulations"). Although the compensation paid by
the Corporation to Mr. Stepan during 1997 was in excess of $1 million, the
amounts paid pursuant to his employment contract are deductible within the
meaning of the Regulations since (i) the contract was in effect prior to the
Corporation's initial public offering, (ii) the contract was disclosed in the
Corporation's Registration Statement on Form S-1 filed with the Commission on
March 27, 1996, and (iii) for 1997 there have been no subsequent material
modifications to the contract.
COMPENSATION COMMITTEE
Walter Stepan(Chair)
Philippe Bacou
Karl F. Ericson
Dr. Herbert A. Wertheim
'
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<PAGE> 11
CORPORATE PERFORMANCE
Set forth below is a line graph comparing the cumulative total stockholder
return for the years ended December 31, 1996 and 1997 of the Corporation's
Common Stock against the cumulative total return of the Nasdaq Index and a peer
group of companies in the safety and security products market consisting of
Borg-Warner Security Corp.; Checkpoint Systems; Cintas Corporation; Figgie
International; Indentix, Inc.; Mine Safety Appliances Company; Pittston Brinks
Group; Pittway Corporation; Safeskin Corporation; Sensormatic Electronics;
Symbol Technologies; Thermedics, Inc.; and Vivid Technologies (the "Peer
Group"). The graph and table assumes that $100 was invested on March 27, 1996
(the effective date of the Corporation's initial public offering) in each of the
Corporation's Common Stock, the Nasdaq Index and the Peer Group, and that all
dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Peer
(Fiscal Year Covered) Bacou USA Nasdaq Index Group(1)
<S> <C> <C> <C>
3/27/96 100.00 100.00 100.00
12/31/96 110.83 117.52 110.07
12/31/97 116.66 144.20 140.82
</TABLE>
(1) The Peer Group included ADT, Ltd. in 1996. During 1997 ADT Ltd. was acquired
and is no longer included in the Peer Group Index. The value of an
investment in the Peer Group, as of December 31, 1996, was $118.50 including
ADT Ltd. and $110.07 excluding ADT Ltd.
EMPLOYMENT CONTRACTS
In January 1996, the Corporation entered into an employment agreement with
Mr. Stepan, replacing an existing agreement with Uvex Safety, Inc. which
originated in 1992. The initial term of the agreement expires in July 1999 and,
unless either party elects not to renew, the agreement will be automatically
extended for an additional one year term. The agreement provides for an annual
base salary of $500,000, which will be reviewed annually by the Board of
Directors. At this date Mr. Stepan's annual base salary remains at $500,000. The
initial agreement also provided for an annual incentive cash bonus based on a
declining percentage ranging from four to one percent of the earnings before
interest and taxes of the Corporation ("Adjusted EBIT"), as well as
reimbursement of United States social security taxes and the applicable personal
income tax effect of such reimbursement, and certain other benefits.
Effective October 24, 1997, the Corporation and Mr. Stepan entered into a
First Amendment to Employment Agreement which (i) replaced the decreasing
percentage formula with an increasing percentage formula ranging from 2.75% to
4.25% of Adjusted EBIT and, (ii) reduced to writing the applicable definition of
Adjusted EBIT as meaning the Corporation's earnings before interest and taxes,
as reported in its
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<PAGE> 12
consolidated financial statements for the calendar year for which the
computation is made, increased to eliminate the effects of (a) any accrual for
Mr. Stepan's incentive compensation; (b) amortization expense; and (c) any
non-recurring charges including but not limited to the non-recurring effects of
purchase accounting treatment of acquisitions such as inventory step-ups and
purchased research and development. Mr. Stepan is restricted from competing with
the Corporation and prohibited from disclosing confidential information
regarding the Corporation during the term of the agreement and thereafter for
periods of one year and three years, respectively. The agreement further
provides that if either the Corporation fails to renew the agreement for its
final one-year term at July 31, 1999 or if Mr. Stepan terminates his employment
during any term period to pursue other interests, the terminating party is
required to pay to the other an amount equal to one year of the annual base
salary in effect at the time of the non-renewal or termination.
In May 1995, the Corporation entered into a five year employment agreement
with Mr. Barr, having an initial term expiring in 2000 which, unless either
party elects not to renew, will be automatically extended for successive three
year terms. Mr. Barr's initial annual base salary was $180,000 and was subject
to annual review, with minimum guaranteed increases based on the Consumer Price
Index. Mr. Barr's annual base salary was $210,000 for 1997 and was increased to
$250,000 effective January 1, 1998. The agreement initially provided for an
annual bonus having the following components: an amount based on the
profitability of the Corporation as measured by the Corporation's earnings
before interest and taxes at a rate ranging from 5% to 25% of the annual base
salary; a bonus up to 25% of the annual base salary based upon the achievement
of individual performance goals; and additional bonus compensation to be awarded
in connection with special projects, as identified by the Corporation. Effective
October 24, 1997, the Corporation and Mr. Barr entered into a Third Amendment to
Employment Agreement which amended the initial agreement by (i) replacing the
aforementioned annual bonus components with an annual incentive cash bonus based
on increasing percentages ranging from 0.40% to 0.55% of Adjusted EBIT as
defined and, (ii) defined Adjusted EBIT to mean the Corporation's earnings
before interest and taxes, as reported in its consolidated financial statements
for the calendar year for which the computation is made, increased to eliminate
the effects of (a) amortization expense; and (b) any non-recurring charges
including but not limited to the non-recurring effects of purchase accounting
treatment of acquisitions such as inventory step-ups and purchased research and
development. Mr. Barr is restricted from competing with the Corporation and
prohibited from disclosing any confidential information regarding the
Corporation's business during the term of the agreement and thereafter for
periods of one year and three years, respectively. The agreement further
provides that if the Corporation fails to renew the contract prior to Mr. Barr
reaching the age of 65 or Mr. Barr terminates the agreement during any term
period, the terminating party is required to pay to the other an amount equal to
six months of the annual base salary in effect at the time of the non-renewal or
termination.
The Corporation, through its respective operating subsidiaries, entered
into employment agreements (the "Subsidiary Employee Agreements") with Messrs.
Baker, Neff and Mancuso. The Subsidiary Employee Agreements contain the
following terms and conditions: (i) initial terms of five years commencing
January 1, 1996 in the case of Messrs. Baker and Neff and 24 months commencing
January 1, 1997 in the case of Mr. Mancuso, subject to automatic extensions for
successive additional five-year terms in the case of Messrs. Baker and Neff and
additional one-year terms in the case of Mr. Mancuso; (ii) annual salary which
will be subject to discretionary increases on an annual basis; (iii) annual
incentive compensation determined pursuant to the Bonus Plan; (iv) eligibility
for participation in the Stock Incentive Plan and any other stock option plan
which the Corporation may adopt; (v) participation in all compensation and
employee benefit arrangements available to other senior executives of the
Corporation; and (vi) noncompetition and confidentiality covenants. The initial
base salaries of Messrs. Baker, Neff and Mancuso were $120,000, $120,000 and
$180,000, respectively. The base salaries for each of Messrs. Baker, Neff and
Mancuso have been increased annually and effective January 1, 1998, are
currently $140,000, $150,000, and $185,000, respectively.
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<PAGE> 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities ("insiders"), to file
reports of ownership and changes in ownership with the SEC. Insiders are
required by SEC regulation to furnish the Corporation with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Corporation, the Corporation believes that during 1997 all
Section 16(a) filing requirements applicable to its insiders were complied with
except for the inadvertent late filing of Form 3 by Mr. Mancuso.
CERTAIN TRANSACTIONS
PUT OPTION
Pursuant to an Agreement and Plan of Merger dated as of September 30, 1997
(the "Biosystems Agreement"), the Corporation acquired all of the capital stock
of Biosystems, Inc. ("Biosystems"). The Corporation has issued 826,514 shares of
its common stock as payment of the initial purchase price for Biosystems (the
"Payment Shares"). Pursuant to the Biosystems Agreement, John F. Burt, Jr., who
is the President of Biosystems and was a principal stockholder prior to its
purchase by the Corporation, received the right to require the Corporation to
repurchase up to approximately 218,083 of the Payment Shares received by him as
consideration for his shares in Biosystems (the "Put Option"). The Put Option is
exercisable at any time during a twenty-four (24) month period commencing
September 30, 1997. The Corporation is obligated to purchase shares pursuant to
an exercise of the Put Option at a price equal to approximately $16 3/8 per
share.
CONTINGENT PAYMENTS AND OTHER PROVISIONS OF THE BIOSYSTEMS AGREEMENT
Pursuant to provisions of the Biosystems Agreement, the Corporation is
obligated to make certain contingent earnout payments if the operating results
of Biosystems exceed certain defined thresholds in the year 2000 (the
"Contingent Payments"). Contingent Payments, if any, would be due to the five
former stockholders of Biosystems (including Mr. John F. Burt, Jr. and Mr.
Joseph Burt, who are brothers and officers of Biosystems), and are payable in
unregistered shares of common stock of the Corporation except that the former
stockholders of Biosystems have the option to receive up to an aggregate amount
of $12.0 million of any Contingent Payments in cash.
In addition, the Biosystems Agreement includes terms and conditions
customary for transactions of this nature, including representations, warranties
and indemnities between the parties. Both Mr. John F. Burt, Jr. and Mr. Joseph
Burt are parties to the Biosystems Agreement and would be entitled to
indemnification in the event of breaches by the Corporation of its
representations and warranties under the Biosystems Agreement.
REGISTRATION RIGHTS
Pursuant to agreements with the Corporation, Bacou S.A. (the "Principal
Stockholder") and John F. Burt, Jr. each have certain rights (a "Demand
Registration Right") to cause the Corporation to register its shares of Common
Stock under the Securities Act of 1933, as amended (the "Securities Act"). In
addition, subject to certain limitations, if the Corporation proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders, each of the Principal
Stockholder, all selling shareholders of Biosystems, and Mr. Stepan, his wife
and two adult children (together, the Stepan Family), are entitled to written
notice of the registration and are entitled to, at the Corporation's expense,
include therein shares of Common Stock held by such holder (a "Piggyback
Right"), provided, among other conditions, that the underwriters of any offering
have the right to limit the number of such shares included in the registration.
If an underwriter does so limit the number of shares included in a registration,
shares will be eliminated from the offering in the following order: (i) shares
proposed to be sold by selling shareholders of Biosystems pursuant to a
Piggyback Right, (ii) shares proposed to be sold by the Principal Stockholder or
the Stepan Family pursuant to a Piggyback Right, (iii) shares proposed to be
sold by any person pursuant to the exercise of a Demand Registration Right, and
finally (iv) shares proposed to be sold by the Corporation for its own account.
The Corporation generally is required to bear all the fees, costs and expenses
of such registrations other than underwriting discounts and commissions. The
Corporation also is obligated to indemnify each of the Principal Stockholder,
the selling shareholders of Biosystems, the Stepan Family and
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<PAGE> 14
any other party which exercises its registration rights against certain
liabilities, including liabilities under the Securities Act.
CORPORATE OPPORTUNITIES AGREEMENT
The Corporation and the Principal Stockholder have entered into an
agreement which addresses potential conflicts of interest with respect to future
business opportunities. In general, the agreement covers the following: the
extent to which the Bacou Group may export its products to the United States;
the extent to which the Corporation may export its products to France; the
manner in which acquisition opportunities will be allocated between the
Corporation and the Bacou Group; the basis for cooperation between the
Corporation and the Bacou Group with respect to product development,
intellectual property rights, research and development and manufacturing
processes; and the terms and conditions for sale of products by one party to the
other. The agreement expires on December 31, 2016, subject to a ten year renewal
option exercisable by either party.
Except for products supplied by the Corporation as an original equipment
manufacturer, the Corporation may not offer for sale in France personal
protective equipment of a type offered by the Bacou Group to its customers in
France unless it shall have first offered to supply the products to the Bacou
Group and such offer shall have been declined. At any time after the Bacou Group
declines such an offer, it may change its decision, prevent the Corporation from
making future sales of such products in France and undertake sales of such
products on its own behalf. The rights of the Bacou Group to reconsider an offer
would be subject to any agreement entered into by the Corporation with third
parties subsequent to the Bacou Group's having declined the initial offer.
Except for products supplied by the Bacou Group as an original equipment
manufacturer, the Bacou Group may not offer for sale in the United States
personal protective equipment of a type offered by the Corporation to its
customers in the United States unless it shall have first offered to supply the
products to the Corporation and such offer shall have been declined. At any time
after the Corporation declines such an offer, it may change its decision,
prevent the Bacou Group from making further sales of such products in the United
States and undertake sales of such products on its own behalf. The rights of the
Corporation to reconsider an offer would be subject to any agreement entered
into by the Bacou Group with third parties subsequent to the Corporation's
having declined the initial offer.
The geographic restrictions applicable generally to sales by the
Corporation in France and the Bacou Group in the United States do not apply to
products sold by either party as an original equipment manufacturer, except that
either party may determine in its reasonable discretion that such sales by the
other party would materially and adversely affect the marketability of its
competing products, in which case the other party would be required to curtail
such export sales of products supplied as an original equipment manufacturer.
Opportunities for future acquisitions generally will be allocated by
geographic location, with the Corporation making acquisitions of businesses in
North, Central and South America and the Bacou Group making acquisitions
elsewhere in the world. Recognizing the Corporation's expertise in eyewear
products, the Corporation has the right of first refusal for any acquisitions of
eyewear businesses wherever located.
The agreement requires both parties and their affiliates to regularly
exchange information about activities relating to product development,
intellectual property rights, research and development and manufacturing
processes. In the event the Corporation selects a new product of the Bacou Group
for sale within the United States, the Corporation may utilize the intellectual
property, products, processes and know-how associated with the selected products
without payment of any royalty or consulting fee. The Corporation is subject to
the same requirement for new products of the Corporation which are selected by
the Bacou Group for sale in France. The Corporation's obligations are subject to
the restrictions placed on Uvex Safety, Inc. pursuant to its agreements with
Uvex Germany. The obligations of both parties are subject to any restrictions
applicable under other third party agreements, such as secrecy agreements, in
force at January 1, 1996.
The supply of products by either party to the other generally is required
to occur upon the most favorable terms and conditions applicable to transactions
with unrelated customers involving similar quantities and purchase order
conditions.
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<PAGE> 15
ACQUISITION OF COMASEC HOLDINGS, INC. AND SURVIVAIR, INC.
On May 30, 1997, the Principal Stockholder consummated the acquisition of
all of the capital stock of Comasec International S.A. ("Comasec"), a French
holding company, which was the sole shareholder of a French operating company,
Fenzy S.A. and a United States holding company, Comasec Holdings, Inc. ("Comasec
Holdings"). Simultaneously, the Corporation and the Principal Stockholder
consummated a series of merger and redemption transactions that resulted in the
acquisition by the Corporation of Comasec's interest in Comasec Holdings
(including its wholly-owned subsidiary Survivair, Inc. ("Survivair")) (the
"Survivair Acquisition") for a redemption price of approximately $27.4 million
(the "Redemption Price"). In March 1997 a wholly-owned subsidiary of the
Corporation advanced $28.0 million to the Principal Stockholder, evidenced by
promissory notes, for its use in closing the transaction with the former
shareholders of Comasec. The Redemption Price was paid by the assignment of the
aforementioned promissory notes to Comasec, then a wholly-owned subsidiary of
the Principal Stockholder. All terms of the Survivair Acquisition were reviewed
and approved by the Oversight Committee pursuant to the Corporate Opportunities
Agreement.
The Corporation and the Principal Stockholder entered into a Settlement
Agreement dated March 30, 1998 with the former shareholders of Comasec which
provides for settlement of certain post-closing purchase price adjustments,
indemnification claims and related matters. Allocation of rights and obligations
under such Settlement Agreement between the Corporation and the Principal
Stockholder will be determined during 1998 and any such allocation will be
subject to review by the Oversight Committee pursuant to the Corporate
Opportunities Agreement.
INVENTORY PURCHASES FROM AND SALES TO PRINCIPAL STOCKHOLDER
The Corporation purchases certain inventory items from wholly-owned
subsidiaries of the Principal Stockholder. Total purchases were approximately
$207,000 in 1997 and $625,000 in 1996. The Corporation also sells certain
inventory items to wholly-owned subsidiaries of the Principal Stockholder with
sales totaling approximately $270,000 in 1997 and less than $60,000 in 1996.
ASSET PURCHASE AGREEMENT WITH HOWARD S. LEIGHT & ASSOCIATES, INC.
Pursuant to an Asset Purchase Agreement (as amended) with Howard S. Leight
& Associates, Inc. (d/b/a Howard Leight Industries) ("Leight"), Bacou USA
Safety, Inc., a wholly-owned subsidiary of the Corporation, consummated the
following transactions on February 27, 1998 (collectively, the "Transactions"):
(i) acquired substantially all of the assets and assumed substantially all of
the liabilities of Leight (ii) acquired all of the capital stock of Howard
Leight de Mexico S.A. de C.V. ("Leight Mexico") (except for one share of capital
stock which was purchased by the Corporation in order to satisfy a statutory
requirement that Leight Mexico have two stockholders) from Leight and Howard S.
Leight ("Mr. Leight") and (iii) acquired all of the capital stock of Howard
Leight (Europe) Limited ("Leight Europe") from Mr. Leight and John Dean. Mr.
Leight was the founder and sole stockholder of Leight. The Corporation paid cash
consideration of $125.9 million in connection with the closing of the
Transactions, $5.9 million of which represented the refinancing of Leight
indebtedness. In addition to cash consideration paid at the closing the
Corporation is obligated to pay additional amounts, not to exceed $2.0 million,
if the sales of Leight exceed certain defined thresholds by the year 2000. The
agreements governing the Transactions include terms and conditions customary for
transactions of this nature, including representations, warranties and
indemnities between the parties. Mr. Leight would be entitled to indemnification
in the event of breaches by the Corporation of its representations and
warranties under the agreements. The Principal Stockholder has been the
exclusive distributor of Leight products in France since 1993, and total sales
by Leight to Bacou S.A. in 1997 were approximately $650,000.
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<PAGE> 16
CONSULTING AGREEMENT WITH HOWARD S. LEIGHT
In connection with the Transactions, Mr. Leight entered into a consulting
agreement dated February 27, 1998 (the "Consulting Agreement") with the
Corporation. The Consulting Agreement requires Mr. Leight to provide advice to
the Corporation and to assist the Corporation with certain marketing efforts. As
compensation for these services the Corporation is required to pay Mr. Leight
$200,000 annually. In addition, the Corporation is required to make royalty
payments to Mr. Leight for every new hearing protection product which is
patented by the Corporation or for which a patent could be obtained but which
the Corporation determined not to file in order to protect its trade secret, and
which is either principally derived from ideas of Mr. Leight or principally
developed by Mr. Leight. Royalty payments will be paid at the rate of four
percent (4%) of the net sales of any qualifying product. The Consulting
Agreement continues for a period of five years from the date of commencement,
except, however, that the Corporation's obligation to make royalty payments
pursuant to the Consulting Agreement does not terminate upon expiration of this
term. The Consulting Agreement also provides for Mr. Leight's nomination as a
Director of the Corporation and for the grant of stock options to Mr. Leight.
Upon consummation of the Transactions, Mr. Leight joined the Boards of Directors
of both the Corporation and the Principal Stockholder and received an option to
purchase an aggregate of 50,000 shares of the Corporation's common stock,
subject to shareholder approval, at an exercise price of $17.00 per share.
REAL ESTATE OPTION AND RIGHT OF FIRST REFUSAL AGREEMENT WITH HOWARD S. LEIGHT
Mr. Leight is the owner of a parcel of land adjacent to the Corporation's
manufacturing facility in San Diego, California (the "Option Land"). In
connection with the Transactions, the Corporation and Mr. Leight entered into a
Real Estate Option and Right of First Refusal Agreement pursuant to which the
Corporation obtained the right to purchase the Option Land under certain terms
and conditions in the future. In general, a subsidiary of the Corporation may
elect to purchase the Option Land for a price equal to the greater of $750,000
or fair market value determined by independent appraisal, at any time within a
three year period beginning December 15, 1999 and Mr. Leight is required to
offer the Option Land to the Corporation's subsidiary on terms and conditions as
favorable as those applicable to any which Mr. Leight proposes to accept from a
third party at any time in the future.
LEASE AGREEMENT WITH HOWARD S. LEIGHT
Effective February 27, 1998, a subsidiary of the Corporation entered into a
lease agreement with Mr. Leight for a 20,000 square foot warehouse located in
Florence, Kentucky (the "Lease Agreement") in connection with the Transactions.
The Lease Agreement has an initial lease term of five (5) years and is subject
to two (2) successive options to extend the term for a period of five (5) years
each. The Lease Agreement provides for annual rent equal to $100,000 and is
subject to annual increases based upon the Consumer Price Index. Pursuant to the
terms of the Lease Agreement the Corporation is responsible for payment of
taxes, utilities, insurance and certain repairs and maintenance.
SUPPLY AGREEMENT WITH HOWARD LEIGHT ENTERPRISES, INC.
Mr. Leight is the principal stockholder of Howard Leight Enterprises, Inc.
("HLE"). In connection with the Transactions, the Corporation has agreed to
enter into a supply agreement with HLE pursuant to which it will purchase its
requirements for polyurethane pre-polymer (the principal raw material used in
the production of foam hearing protection products) for a period of five years
provided that the quality and price of such raw material offered by HLE are
equivalent to that which is available from third party suppliers. John Dean,
Robert Hanover and Ken David Meyers, each employees of a wholly-owned subsidiary
of the Corporation, are also stockholders of HLE. HLE is not currently producing
polyurethane pre-polymer and, therefore, a supply agreement has not been
executed.
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<PAGE> 17
RATIFICATION OF THE APPROVAL OF THE 1998 HOWARD S. LEIGHT
STOCK OPTION PLAN
BACKGROUND
The 1998 Howard S. Leight Stock Option Plan (the "Leight Plan") is intended
to promote the Corporation's interests by providing an inducement to obtain and
retain the services of Mr. Leight to serve as a consultant to the Corporation.
The Leight Plan was adopted by the Board of Directors effective February
27, 1998. Pursuant to the terms of the Leight Plan, 50,000 shares of the
Corporation's Common Stock are reserved for grant to Mr. Leight. As of February
27, 1998, options to purchase 50,000 shares of the Corporation's Common Stock
were granted to Mr. Leight, subject to shareholder approval.
Approval of the Leight Plan requires the affirmative vote of a majority of
the shares entitled to vote thereon present in person or represented by proxy at
the Annual Meeting when a quorum is present. The Board of Directors recommends
that you vote FOR the approval of the Leight Plan.
THE LEIGHT PLAN
The principal features of the Leight Plan are summarized below, but such
summary is qualified in its entirety by reference to the terms of the Leight
Plan, copies of which are available without charge upon written request from the
Corporation.
Participation. Participation in the Leight Plan is limited solely to Mr.
Leight.
Administration. The Leight Plan is administered by the Chairman, President
or Executive Vice President of the Corporation (an "Authorized Officer"), which
have the power to interpret and construe the terms of the Leight Plan. After
being granted an option, Mr. Leight is required to enter into an option
agreement with the Corporation setting forth the terms of the option. Upon
exercise of options, Mr. Leight is required to pay the option price in full
prior to receipt of certificates representing shares of Common Stock.
Terms of Options. Effective February 27, 1998, the Board of Directors
granted options to Mr. Leight to purchase 50,000 shares under the Leight Plan.
See "Security Ownership of Certain Beneficial Owners and Management." The option
exercise price is $17.00 per share, or $850,000 in the aggregate.
The market value of 50,000 shares of the Corporation's Common Stock at
March 2, 1998 was $875,000 (based on a closing price of $17 1/2 per share on
such date).
The options granted pursuant to the Leight Plan are non-qualified stock
options. See "Federal Income Tax Consequences" below.
Options granted under the Leight Plan are immediately vested and
exercisable on the date of grant. The options may be exercised for a period of
10 years from the date of grant of the option, provided, however, that (i) if
Mr. Leight ceases to serve as a consultant for any reason other than death,
permanent disability or serious breach of conduct, the option shall terminate 90
days after the date Mr. Leight ceased to serve as a consultant; (ii) if Mr.
Leight ceased to serve as a consultant by reason of death or permanent
disability, the option shall terminate 12 months after the date of death or
permanent disability; or (iii) if an Authorized Officer determines that Mr.
Leight has engaged in a serious breach of the Consulting Agreement, the option
will be cancelled. In the event of a change of control (as defined in the Leight
Plan), the options shall be nonforfeitable and exercisable in full.
Stock Dividends or Splits. Appropriate adjustments will be made in the
number of shares covered by each option and to the option exercise price in the
event of any change in the Common Stock of the Corporation by reason of any
reorganization, recapitalization, reclassification, split or reverse stock
split, or of any similar change affecting the Corporation's voting stock.
Duration and Amendment of Leight Plan. The Leight Plan shall remain in
effect until all shares subject to or which may become subject to the Leight
Plan have been issued pursuant to the Leight Plan; provided that no grants may
be made under the Leight Plan after February 27, 2008 and the Corporation may
terminate
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<PAGE> 18
the Leight Plan prior to that date. Amendments may be made by the Corporation,
provided, however, that the Corporation may not, without the approval of the
holders of a majority of the shares of Common Stock present and voting at a
meeting, increase the maximum number of shares for which options may be granted
under the Leight Plan, materially modify the eligibility requirements,
materially increase the benefits accruing to option holders or amend the Leight
Plan in any manner which would cause Rule 16b-3 under the Securities Exchange
Act of 1934 to become inapplicable. In addition, any provisions of the Leight
Plan specified in such Rule 16b-3 may not be amended more than once every six
months other than to comport with changes in the Internal Revenue Code, ERISA or
any rules thereunder.
Federal Income Tax Consequences. Options issued under the Leight Plan are
intended to be treated as non-qualified stock options under the Internal Revenue
Code of 1986, as amended. The grant of a non-qualified option does not result in
recognition of income to the optionee. Upon the exercise of a non-qualified
option, the amount by which the fair market value of the Corporation's Common
Stock on the date of exercise exceeds the option exercise price is taxed to the
optionee as ordinary income. The Corporation is entitled to a deduction in the
amount of the ordinary income realized by the optionee. At such time as the
optionee sells shares issued to him upon exercise of his non-qualified option,
he will realize gain or loss in an amount equal to the difference between the
selling price and the fair market value of the shares on the date the option was
exercised.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this proxy statement, which are subject to change, and
does not purport to be a complete description of the federal income tax aspects
of the Leight Plan. There may also be state and local taxes assessed in
connection with the grant or exercise of options granted under the Leight Plan
and the sale or other disposition of shares acquired upon exercise of options.
RATIFICATION OF A FIRST AMENDMENT TO THE BACOU USA, INC. 1996 STOCK INCENTIVE
PLAN
Effective February 23, 1998, the Board of Directors of the Corporation
approved, subject to shareholder approval, a First Amendment to the Bacou USA,
Inc. 1996 Stock Incentive Plan (the "Employee Plan") which reduced the number of
shares of the Corporation's common stock initially reserved under the Employee
Plan from 900,000 shares to 850,000 shares. The amendment also, effective on
that date, reserved an additional 500,000 shares for issuance under the Employee
Plan. As amended, a total of 1,350,000 shares of the Corporation's common stock
are reserved for issuance under the Employee Plan.
Approval of a First Amendment to the Employee Plan requires the affirmative
vote of a majority of the shares entitled to vote thereon present in person or
represented by proxy at the Annual Meeting when a quorum is present. The Board
of Directors recommends that you vote FOR the approval of a First Amendment to
the Employee Plan.
RATIFICATION OF A FIRST AMENDMENT TO THE BACOU USA, INC. 1996 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
Effective February 23, 1998, the Board of Directors of the Corporation
approved, subject to shareholder approval, a First Amendment to the Bacou USA,
Inc. 1996 Non-Employee Directors Stock Option Plan (the "Director Plan") which,
effective on that date, reserved an additional 200,000 shares for issuance under
the Director Plan. As amended, a total of 300,000 shares of the Corporation's
common stock are reserved for issuance under the Director Plan.
Approval of a First Amendment to the Director Plan requires the affirmative
vote of a majority of the shares entitled to vote thereon present in person or
represented by proxy at the Annual Meeting when a quorum is present. The Board
of Directors recommends that you vote FOR the approval of a First Amendment to
the Director Plan.
16
<PAGE> 19
RATIFICATION OF FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
WITH WALTER STEPAN
Effective October 24, 1997, the Board of Directors of the Corporation
approved, subject to shareholder approval, a First Amendment to the Employment
Agreement with Walter Stepan, the Corporation's Vice-Chairman, President and
Chief Executive Officer. The Sub-Commitee has also approved the First Amendment.
The First Amendment provides an annual incentive cash bonus based on increasing
percentages ranging from 2.75% to 4.25% of Adjusted EBIT, replacing the
decreasing percentage formula provided by the initial agreement.
The following table presents Mr. Stepan's approximate incentive cash bonus
determined by the incentive formula provided by the initial Employment Agreement
and the incentive formula provided by the First Amendment, in both cases for
three hypothetical amounts of Adjusted EBIT.
<TABLE>
<CAPTION>
INCENTIVE CASH BONUS
DETERMINED BY
----------------------------
ADJUSTED EBIT OLD FORMULA NEW FORMULA
------------- ----------- -----------
<S> <C> <C> <C>
$27,000,000 $ 960,000 $ 862,500
$36,000,000 $1,170,000 $1,230,000
$45,000,000 $1,350,000 $1,612,500
</TABLE>
Approval of the First Amendment to Employment Agreement of Walter Stepan
requires the affirmative vote of a majority of the shares entitled to vote
thereon present in person or represented by proxy at the Annual Meeting when a
quorum is present. The Board of Directors recommends that you vote FOR the
approval of the First Amendment to Employment Agreement of Walter Stepan.
RATIFICATION OF SELECTION OF AUDITORS
The selection, by a majority of the members of the Board who are not
officers or employees of the Corporation, of KPMG Peat Marwick LLP as
independent auditors to audit the books and accounts of the Corporation for the
fiscal year ending December 31, 1998 shall be submitted at the Annual Meeting
for ratification. Such ratification requires the affirmative vote of a majority
of the shares entitled to vote thereon present in person or represented by proxy
at the Annual Meeting when a quorum is present. Representatives of KPMG Peat
Marwick LLP will be present at the Annual Meeting and will be given an
opportunity to make a statement if they desire to do so and will respond to
appropriate questions of stockholders.
The firm of KPMG Peat Marwick LLP has advised the Corporation that neither
it nor any of its members has any direct financial interest in the Corporation
as a promoter, underwriter, voting trustee, director, officer or employee.
All professional services rendered by KPMG Peat Marwick LLP during the year
ended December 31, 1997 were furnished at customary rates.
The Board recommends a vote FOR ratification of KPMG Peat Marwick LLP as
independent auditors for the fiscal year ending December 31, 1998.
OTHER MATTERS
Management does not know of any matters which will be brought before the
Annual Meeting other than those specified in the notice thereof. However, if any
other matters properly come before the Annual Meeting, it is intended that the
persons named in the form of proxy, or their substitutes acting thereunder, will
vote thereon in accordance with their best judgment.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1997
Annual Report to Stockholders, which has been provided to the stockholders
concurrently herewith. Such report and the financial statements contained
therein are not to be considered as a part of this soliciting material.
17
<PAGE> 20
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Under the regulations of the Commission, a record or beneficial owner of
shares of the Corporation's Common Stock may submit proposals on proper subjects
for action at the 1999 Annual Meeting of Stockholders of the Corporation. All
such proposals must be mailed to the Corporation at 10 Thurber Boulevard,
Smithfield, Rhode Island 02917 and must be received at that address on or before
December 9, 1998, in order to be included in the Corporation's proxy relating to
the 1999 Annual Meeting.
EXPENSE OF SOLICITATION OF PROXIES
All the expenses of preparing, assembling, printing and mailing the
material used in the solicitation of proxies by the Board will be paid by the
Corporation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Corporation may solicit proxies on behalf
of the Board by telephone, telegram or personal interview, the expenses of which
will be borne by the Corporation. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of stock held of record by such persons at
the expense of the Corporation.
By order of the Board of Directors,
PHILIP B. BARR, JR.
Secretary
Smithfield, Rhode Island
April 13, 1998
18
<PAGE> 21
BACOU USA, INC.
10 Thurber Boulevard
Smithfield, Rhode Island 02917
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY 19, 1998
The undersigned hereby appoints Walter Stepan and Philip B. Barr, Jr., or
either one of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and vote, as designated on the
reverse, all shares of Common Stock of Bacou USA, Inc. (the "Corporation") of
the undersigned, at the Annual Meeting to be held at the Westin Hotel,
Providence, Rhode Island, on Tuesday May 19, 1998 at 10:00 A.M., Eastern
Daylight Time, or at any adjournment thereof, for the following purposes:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3, 4, 5 AND 6.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
A[X] Please mark your
votes as in this
example.
(1) To elect directors The Board of Directors recommends that you
of the Corporation instruct the Proxies to vote FOR proposals
for the ensuing 1, 2, 3, 4, 5 and 6.
year, and until their
successors are elected
and qualified.
WITHHOLD Nominees: Philippe Bacou
FOR AUTHORITY Walter Stepan
all nominees to vote for all Christophe Bacou
listed at nominees listed Philip B. Barr, Jr.
right at right Karl F. Ericson
Howard S. Leight
[ ] [ ] Dr. Herbert A. Wertheim
(2) To ratify the adoption of the 1998 Howard S. FOR AGAINST ABSTAIN
Leight Stock Option Plan. [ ] [ ] [ ]
(3) To ratify the adoption of a first amendment
to the Bacou USA, Inc. 1996 Stock Incentive
Plan. [ ] [ ] [ ]
(4) To ratify the adoption of a first amendment to
the Bacou USA, Inc. 1996 Non-Employee Directors
Stock Option Plan. [ ] [ ] [ ]
(5) To ratify the adoption of a first amendment
to the Employment Agreement with Walter Stepan,
the Chief Executive Officer of the Corporation. [ ] [ ] [ ]
(6) To ratify the selection of KPMG Peat Marwick
LLP as independent auditors to audit the
Corporation's books and accounts for the fiscal
year ending December 31, 1998. [ ] [ ] [ ]
(7) To transact such other business as may properly come before the meeting or
any adjournment thereof.
You are encouraged to specify your choices by marking the appropriate
boxes, but you need not mark any boxes if you wish to vote in accordance with
the Board of Directors' recommendations. The proxies cannot vote your shares
unless you sign and return this card. Please complete, sign and date this
proxy and mail it as promptly as possible. If you attend the meeting and vote
in person, the proxy will not be used.
Signature Dated
--------------------------------- ---------------------
NOTE: Please sign exactly as name appears hereon. Joint owners each should
sign. When signing as a fiduciary or for an estate, trust, corporation or
partnership, your title or capacity should be stated.
