<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 27, 1998
-------------------------------------------------------------------
BACOU USA, INC.
---------------
(Exact name of registrant as specified in its charter)
DELAWARE
--------
(State or other jurisdiction of incorporation)
0-28040 05-0470688
- --------------------------------------------------------------------------------
Commission file number) (IRS Employer Identification Number)
10 Thurber Boulevard, Smithfield, RI 02917
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 401-233-0333
------------
<PAGE> 2
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Report of Independent Accountants
Consolidated Balance Sheets of Howard S. Leight & Associates, Inc.
and Subsidiaries (d/b/a Howard Leight Industries) ("Leight") at
December 31, 1997 and 1996
Consolidated Statements of Income of Leight for the years ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Shareholder's Equity of Leight for the
years ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows of Leight for the years ended
December 31, 1997, 1996, and 1995
Notes to Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Consolidated Statement of Income of Bacou USA,
Inc. ("Bacou USA") and Leight for the year ended December 31, 1997
Unaudited Pro Forma Consolidated Balance Sheet of Bacou USA and
Leight at December 31, 1997
(c) Exhibits
Item 601
Exhibit Exhibit Title
-------- -------------
Exhibit 23 (a) Consent of Coopers & Lybrand L.L.P.
Exhibit 23 (b) Consent of Coopers & Lybrand L.L.P.
Exhibit 99 (a) Report of Independent Accountants on
Consolidated Audited Financial Statements of
Howard S. Leight and Subsidiaries as of
December 31, 1997 and 1996, and for the years
ended December 31, 1997, 1996, and 1995; as
described in Item 7(a) above
Exhibit 99 (b) Unaudited Pro Forma Consolidated Financial
Statements of Bacou USA and Leight at
and for the year ended December 31, 1997
Exhibit 99 (c) Real Estate Option and Right of First Refusal
Agreement
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, as amended, the Registrant has duly caused this amended report to be
signed on its behalf by the undersigned hereunto duly authorized.
BACOU USA, INC.
Registrant
By: /s/ Phillip B. Barr
----------------------------
Phillip B. Barr
Executive Vice President and
Chief Financial Officer
Dated: April 15, 1998
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the inclusion in this current report on Form 8-K/A of Bacou
USA, Inc. dated April 15, 1998, of our report dated February 9, 1998, on our
audits of the consolidated financial statements of Howard S. Leight &
Associates, Inc. and Subsidiaries (d/b/a Howard Leight Industries).
COOPERS & LYBRAND L.L.P.
San Diego, California
April 15, 1998
<PAGE> 1
Exhibit 23(b)
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-09251) of Bacou USA, Inc. of our report dated
February 9, 1998, on our audits of the consolidated financial statements of
Howard S. Leight & Associates, Inc. and Subsidiaries (d/b/a Howard Leight
Industries) as of December 31, 1997 and 1996 and for the years ended December
31, 1997, 1996 and 1995 which report is included in this Current Report on Form
8-K/A of Bacou USA, Inc. dated April 15, 1998.
Coopers & Lybrand L.L.P.
San Diego, California
April 15, 1998
<PAGE> 1
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
----------
REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Howard S. Leight & Associates, Inc.
We have audited the accompanying consolidated balance sheets of Howard S. Leight
& Associates, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholder's equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Howard S. Leight &
Associates, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Diego, California
February 9, 1998
<PAGE> 3
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,659 $ 3,000
Accounts receivable trade, net of $50 allowance for bad debt
in both 1997 and 1996 4,299 3,914
Inventories 4,112 5,339
Prepaid expenses and other current assets 459 328
------- -------
Total current assets 12,529 12,581
Restricted cash and investments 68 837
Property, plant and equipment, net 9,748 10,207
Other noncurrent assets 289 373
------- -------
Total assets $22,634 $23,998
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 1,216 $ 2,783
Accrued expenses 2,371 1,446
Due to related parties, net 42 218
Current portion of long-term debt 760 1,266
------- -------
Total current liabilities 4,389 5,713
Long-term debt, net of current portion 5,052 7,400
Other liabilities 168 31
------- -------
Total liabilities 9,609 13,144
------- -------
Shareholder's equity:
Common stock, $500 stated value; 500 shares
authorized, 110 shares issued and outstanding 55 55
Retained earnings 12,970 10,799
------- -------
Total shareholder's equity 13,025 10,854
------- -------
Total liabilities and shareholder's equity $22,634 $23,998
======= =======
</TABLE>
<PAGE> 4
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales $46,493 $37,617 $32,015
Cost of goods sold 19,694 16,689 15,439
------- ------- -------
Gross profit 26,799 20,928 16,576
Selling and shipping expenses 7,051 4,969 4,315
General and administrative expenses 9,321 7,609 6,194
------- ------- -------
Income from operations 10,427 8,350 6,067
Other income (expense):
Interest expense, net of interest income (302) (328) (31)
Other income (expense) (43) 83 -
Loss on disposal of assets - - (92)
------- ------- -------
Income from continuing operations before
provision for income taxes 10,082 8,105 5,944
Provision for income taxes 70 151 56
------- ------- -------
Income from continuing operations 10,012 7,954 5,888
Discontinued operations (Note 12):
Lossfrom operations of discontinued segment, less applicable income taxes
of $7, $34 and $7 for 1997,
1996 and 1995, respectively 452 2,232 464
Loss on disposition, less applicable income taxes of $20 718 - -
------- ------- -------
Net income $ 8,842 $ 5,722 $ 5,424
======= ======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE> 5
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1994 110 $55 $ 8,270 $ 8,325
Net income - - 5,424 5,424
Distributions to shareholder (3,886) (3,886)
--- --- ------- -------
Balance, December 31, 1995 110 55 9,808 9,863
Net income - - 5,722 5,722
Distributions to shareholder - - (4,731) (4,731)
--- --- ------- -------
Balance, December 31, 1996 110 55 10,799 10,854
Net income - - 8,842 8,842
Distributions to shareholder - - (6,671) (6,671)
--- --- ------- -------
Balance, December 31, 1997 110 $55 $12,970 $13,025
=== === ======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE> 6
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 8,842 $ 5,722 $ 5,424
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 777 1,044 877
Loss on disposal of assets - - 92
Write-down of goodwill - 1,362 -
Loss on disposition of discontinued operations 718 - -
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable trade, net (556) (640) 840
Inventories 648 258 (1,846)
Prepaid expenses and other current assets 131 73 (191)
Other assets (460) (82) 16
Accounts payable (1,489) 1,150 (422)
Accrued expenses (1,963) 64 531
Due to related parties, net (176) 392 (484)
Other liabilities 3,262 (46) (216)
------- ------- -------
Net cash provided by operating activities 9,734 9,297 4,621
------- ------- -------
Cash flows from investing activities:
Restricted cash and investments 769 4,438 (5,275)
Purchases of property, plant and equipment (810) (5,839) (4,043)
Proceeds from sale of land 510 - -
Acquisition of business, net of cash acquired - - (427)
------- ------- -------
Net cash provided (used) by investing activities 469 (1,401) (9,745)
------- ------- -------
Cash flows from financing activities:
Proceeds from issue of long-term debt - - 9,278
Proceeds from line of credit - 594 -
Proceeds from shareholder - - 60
Payments from related party - - (491)
Payments on long-term debt (2,809) (2,065) -
Payments on line of credit (64) (530) -
Principal payments on capital lease - - (11)
Principal payments on notes payable to shareholder - (14) 12
Distributions to shareholder (6,671) (4,731) (3,886)
------- ------- -------
Net cash used in financing activities (9,544) (6,746) 4,962
------- ------- -------
Net increase in cash and cash equivalents 659 1,150 (162)
Cash and cash equivalents, beginning of year 3,000 1,850 2,012
------- ------- -------
Cash and cash equivalents, end of year $ 3,659 $ 3,000 $ 1,850
======= ======= =======
Cash payments during the year for:
Income taxes $ 73 $ 86 $ 151
Interest 334 461 257
Noncash transaction:
Refinance of line of credit $ 227 $ - $ -
</TABLE>
<PAGE> 7
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
Howard S. Leight & Associates, Inc. is a California corporation doing
business as Howard Leight Industries (the "Company"). The Company
specializes in the manufacturing of hearing protection devices which it
sells to distributors, primarily in the United States.
The accompanying consolidated financial statements include operations of
Howard Leight de Mexico, S.A. de C.V., Howard Leight GmbH and Howard Leight
GmbH and Company OHG, in each of which the Company owns a 75% interest.
Howard S. Leight, the sole shareholder of the Company, owns the minority
interest in Howard Leight de Mexico, S.A. de C.V. Howard S. Leight and
other officers of the corporation own the minority interest in Howard
Leight GmbH and Howard Leight GmbH and Company Optac OHG.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
The Company recognizes revenue when the product is shipped to customers.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Investments are stated at market value.
RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments represent the unexpended portion of the
proceeds of Industrial Development Revenue Bonds and consist of cash and
short-term investments held in trust. These amounts are restricted pursuant
to the terms of the bond indenture agreement for the costs of acquisition,
construction and installation of the Company's hearing protection devices
manufacturing facility and related machinery and equipment.
These funds are invested in highly liquid interest bearing deposits and
U.S. Treasury bills, having maturities of six months or less, and are
carried at cost, which approximates market.
<PAGE> 8
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost and is being depreciated
principally on a straight-line basis over the estimated useful lives of the
assets which generally range from 20 to 40 years for buildings and
improvements and from 3 to 7 years for machinery and equipment.
Depreciation expense was $777,000, $977,000 and $877,000 in 1997, 1996 and
1995, respectively. Repairs and maintenance costs are charged against
income, while renewals and betterments are capitalized as additions to the
related assets. Retirements, sales and disposals of assets are recorded by
removing the cost and accumulated depreciation from the asset and
accumulated depreciation accounts with any resulting gain or loss reflected
in income.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
the net assets of acquired companies.
Goodwill incurred with the purchase of OPTAC of $1,362,000 was written off
in fiscal 1996 based on an undiscounted cash flow analysis.
INCOME TAXES
Effective July 1, 1990, the Company elected, and the Internal Revenue
Service ("IRS") consented, to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under this election, the Company does not pay
federal income tax on its taxable income. Instead, the Company's taxable
income or loss will be reported by the shareholder for federal income tax
purposes.
<PAGE> 9
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Also under this election, the state corporate income tax rate is reduced to
1.5% for 1997, 1996 and 1995, and the Company's income or loss after this
tax will be reported by the shareholder for state income tax purposes.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities in the balance sheets of foreign subsidiaries
whose functional currency is other than the U.S. dollar are translated at
year-end exchange rates. Related revenues and expenses are translated at
average exchange rates in effect during the period. Foreign currency
translation gains and losses are not material and are included in
determining net income.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to concentration
of credit risk consist primarily of cash and cash equivalents and trade
receivables. The Company currently maintains substantially all of its
day-to-day operating cash balances with major financial institutions. At
times, cash balances may be in excess of Federal Depository Insurance
Corporation ("FDIC") insurance limits.
Concentration of credit risk with respect to trade receivables is limited
as a large number of geographically diverse customers make up the Company's
customer base, thus spreading the trade credit risk. The Company controls
credit risk through credit approvals, credit limits and monitoring
procedures. The Company performs in-depth credit evaluations for all new
customers. Bad debt expense has not been material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions for the reporting period and as of the financial
statement date. These estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent liabilities, and
the reported amounts of revenues and expenses. Actual results could differ
from those estimates.
RECLASSIFICATION
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
<PAGE> 10
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
2. INVENTORIES:
Inventories at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Finished goods $1,358 $2,688
Work-in-process 268 231
Raw materials 2,486 2,420
------ ------
$4,112 $5,339
====== ======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at December 31, 1997 and 1996 consists of:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land $ 960 $ 1,470
Building 5,241 5,241
Plant machinery and equipment 5,179 4,732
Office furniture and fixtures 1,370 1,290
Leasehold improvements 100 106
Construction in progress 269 -
------- -------
13,119 12,839
Less accumulated depreciation and amortization (3,371) (2,632)
------- -------
$ 9,748 $10,207
======= =======
</TABLE>
Financial Accounting Standards Board Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
("SFAS 121"), requires that long-lived assets to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management believes that the carrying amount of plant assets
is recoverable based on current cash flows projections. Such projections
are predicated on currently supportable estimates and assumptions. The cash
flows that the Company will ultimately realize could differ materially from
the projected amounts.
Continued 9
<PAGE> 11
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
4. NOTES PAYABLE:
Long-term debt consists of the following at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Industrial Development Revenue Bonds, interest is variable (4.5% and 4.2%
at December 31, 1997 and 1996, respectively), paid monthly, principal due
in full on June 30, 2020. Yearly payments subject to sinking fund
requirements commencing July 1, 1995. Bonds are collateralized by bank
letter of credit, face amount of approximately $6,645,000, interest rate
bank reference rate plus 0.75%, expiring July 19, 2002 and collateralized
by a first trust deed on the property. $5,585 $6,130
Note payable to bank denominated in German marks, due in full August 31,
2000, interest rate 5.625% at December 31, 1996, paid in 1997. -- 2,472
Line of credit 227 64
------ ------
5,812 8,666
Less portion due within one year (760) (1,266)
------ ------
$5,052 $7,400
====== ======
</TABLE>
<TABLE>
<CAPTION>
Annual maturities of bank and other long-term debt are as follows;
<S> <C>
1998 $ 760
1999 505
2000 505
2001 505
2002 520
Thereafter 3,017
------
$5,812
======
</TABLE>
Sinking fund requirements regarding the Industrial Development Revenue
Bonds for the next five years are $532,000 in 1998, $505,000 in 1999,
$505,000 in 2000, $505,000 in 2001 and $520,000 in 2002.
Continued 10
<PAGE> 12
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
4. NOTES PAYABLE, CONTINUED:
The terms of certain financing agreements contain, among other things,
provisions and affirmative covenants, requirements for maintaining a
defined level of debt service coverage and financial reporting.
Total interest expense for the years ended December 31, 1997, 1996 and 1995
was $415,000, $551,000 and $257,000, respectively.
In 1997, the Company refinanced its line of credit with a 400,000 Deutch
Mark line of credit which translates into $227,000. The full amount is
outstanding at December 31, 1997.
5. INCOME TAXES:
The Company has a research and development tax credit carryforward
available in future years in the amount of $47,000 that can only be
utilized if and when the Company converts to a Subchapter C corporation as
defined in the Internal Revenue Code. The possibility of the Company's
conversion to a Subchapter C corporation is uncertain and, therefore, the
tax benefit of the carryforward cannot be determined and has been fully
reserved against. Tax expense for the years ended December 31, 1997, 1996
and 1995 consists of $-0-, $88,000 and $50,000 of state taxes and $70,000,
$29,000 and $13,000 of Mexican income taxes, respectively.
Continued 11
<PAGE> 13
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
6. COMMITMENTS AND CONTINGENCIES:
The Company leases manufacturing space from third parties under
noncancelable operating leases. Future minimum lease payments for these
leases are as follows (in thousands):
<TABLE>
<S> <C>
1998 $132
1999 132
2000 132
2001 132
----
$528
====
</TABLE>
Rent expense was $656,000, $999,000 and $833,000 for 1997, 1996 and 1995,
respectively.
7. RELATED-PARTY TRANSACTIONS:
The Company rents equipment from Point Zero Corporation, which is wholly
owned by Howard S. Leight. The equipment is rented at a monthly rate of
$28,000. Rent expense related to this equipment for the years ended
December 31, 1997, 1996 and 1995 was $446,000, $240,000 and $180,000,
respectively. In addition, the Company pays maintenance costs related to
the equipment rental. Maintenance expenses paid by the Company for the
years ended December 31, 1997, 1996 and 1995 totaled $275,000, $204,000 and
$247,000, respectively.
The Company leases equipment from Howard S. Leight, the sole shareholder of
Howard S. Leight & Associates, Inc., under a noncancelable operating lease
which expires April 2001. Future minimum lease payments for this lease are
as follows (in thousands):
<TABLE>
<S> <C>
1998 $96
1999 96
2000 96
2001 32
----
$320
====
</TABLE>
Continued 12
<PAGE> 14
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
7. RELATED-PARTY TRANSACTIONS, CONTINUED:
The Company leased two manufacturing facilities during 1997 from Howard S.
Leight. One lease ended in May 1997. A second facility was leased for ten
years, beginning in November 1997. Rent expense under these leases for the
years ended December 31, 1997, 1996 and 1995 was $151,000, $336,000 and
$336,000, respectively. Future minimum lease payments for the continuing
lease are as follows (in thousands):
<TABLE>
<S> <C>
1998 $ 150
1999 150
2000 150
2001 150
2002 150
Thereafter 726
------
$1,476
======
</TABLE>
Howard Leight (Europe) Limited, a sister company principally owned by
Howard S. Leight and established in May 1993, serves as the Company's sales
and marketing agent for Europe. Commission expense was accrued by the
Company for Howard Leight (Europe) Limited of $175,000, $151,000 and
$131,000 for December 31, 1997, 1996 and 1995, respectively. The Company
has entered into an agreement with Howard Leight (Europe) Limited to pay
administrative expenses incurred in addition to commissions on sales.
The Company pays certain expenses for and is subsequently reimbursed by
Sound Protection, Inc., a company owned by the sole shareholder's brother.
In 1996, the Company purchased $130,000 of inventory from the shareholder's
brother.
Continued 13
<PAGE> 15
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
7. RELATED-PARTY TRANSACTIONS, CONTINUED:
DUE TO/FROM RELATED PARTIES
The Company has receivables from (payables to) corporations which are
partially or wholly-owned by Howard S. Leight, the sole shareholder, and
other related parties at December 31, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Howard Leight International, Inc. $ 4 $ 2
Point Zero Corporation - (169)
Howard Leight (Europe) Limited (381) 234
Howard Leight L.L.C 59 -
Sound Protection, Inc. - (83)
Note payable to related party - (202)
Officer loans 219 -
Employee advances 57 -
----- -----
$ (42) $(218)
===== =====
</TABLE>
8. RESEARCH AND DEVELOPMENT:
The Company expenses research and development costs as incurred. The
Company incurred $423,000, $309,000 and $191,000 in research and
development costs for the years ended December 31, 1997, 1996 and 1995,
respectively.
9. PENSION PLAN:
In April 1994, the Company established a defined contribution plan in which
employees may contribute up to 15% of their gross wages up to the IRS limit
on a before-tax basis. The plan document provides that the employer will
match 50% of the first 5% of such employee contributions. Effective January
1997, the Company matches 100% of the first 5% of employee contributions
for all participants with six months in the plan. Effective October 1997,
the Company started matching 100% of the first 5% of employee contributions
for all participants. For the years ended December 31, 1997, 1996 and 1995,
$124,000, $61,000 and $43,000, respectively, of expenses was recorded for
the employer's matching of employee contributions.
Continued 14
<PAGE> 16
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
9. PENSION PLAN, CONTINUED:
The Company also sponsors a nonqualified defined contribution plan for
senior management. The plan document provides that eligible members of
management can contribute up to 15% of their gross wages on a before-tax
basis.
10. ADVERTISING EXPENSES:
The Company expenses advertising costs as incurred. For the years ended
December 31, 1997, 1996 and 1995, the Company incurred $2,284,000,
$1,277,000 and $1,333,000 in advertising expenses, respectively.
11. FOREIGN OPERATIONS:
The Company has assets in foreign countries that are used in the daily
operations of the business. The assets consist mainly of inventory and
fixed assets as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mexico:
Inventory $1,289 $1,213
Fixed assets, net 2,675 1,196
United Kingdom:
Inventory 262 322
</TABLE>
12. DISCONTINUED OPERATIONS:
In July 1997, management decided to discontinue its operations in Germany
(Howard Leight GmbH and Company Optac OHG). In August 1997, the Company
disposed of the remaining assets of the company. Accordingly, the Company
is reporting the results of the segment as a discontinued operation for all
the periods presented in the consolidated financial statements.
Revenues generated by Howard Leight GmbH and Company Optac OHG for the
years ended December 31, 1997, 1996 and 1995 were $1,518,000, $3,769,000
and $818,000, respectively.
No assets or liabilities related to the discontinued operations remain on
the balance sheet at December 31, 1997.
Continued 15
<PAGE> 17
HOWARD S. LEIGHT & ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
----------
13. SUBSEQUENT EVENT:
In January 1998, the Company entered into an agreement with Bacou USA
Safety, Inc. to sell substantially all of its assets for $120,000,000 in
cash and certain assumed liabilities, subject to certain adjustments. The
transaction is expected to close in the first quarter of 1998.
16
<PAGE> 1
EXHIBIT 99 (b)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On February 27, 1998, Bacou USA Safety, Inc. ("Bacou Safety"), a
wholly-owned subsidiary of Bacou USA, Inc. ("Bacou") consummated the following
transactions (collectively, the "Transactions") (i) its acquisition of
substantially all of the operating assets of Howard S. Leight & Associates, Inc.
(d/b/a Howard Leight Industries) ("Leight"), (ii) its acquisition of 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 Bacou in order to satisfy
a statutory requirement that Leight Mexico have two stockholders) from Leight
and Howard S. Leight ("H. Leight"), and (iii) its acquisition of all of the
capital stock of Howard Leight (Europe) Limited ("Leight Europe") from H. Leight
and John Dean. The Transactions are more fully described in the Bacou Form 8-K
filed March 13, 1998 relating to this transaction.
Leight, together with Leight Mexico and Leight Europe design, manufacture
and sell a complete line of hearing protection products, including disposable
ear plugs, reusable ear plugs and ear muffs. Leight's principal business
location is in San Diego, California. Assets acquired include physical property,
intellectual property and working capital. Bacou intends to continue to use
acquired physical property for the manufacture of hearing protection products.
Bacou 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. Funding of the cash consideration was provided by the
following: (i) an advance of $110 million under Bacou's term loan facility with
Banque Nationale de Paris; (ii) an advance of $14.3 million under Bacou's
revolving credit line facility with Citizens Bank of Rhode Island; and (iii) the
balance from Bacou's cash balances.
The acquisition of Leight Europe has not been incorporated into the
Unaudited Pro Forma Financial Statements contained herein and the historical
audited financial statements have not been included herein. Leight Europe is the
distributor of Leight product within Europe and derives all of its income from
commissions paid to it by Leight. Leight Europe remits substantially all of its
income to Leight. If the financial statements of Leight Europe had been combined
with the Unaudited Pro Forma Financial Statements of Income and the Unaudited
Pro Forma Balance Sheet for the period ended and as of December 31, 1997, net
revenue would not have been affected and net income would have been increased by
approximately $132,000. Total assets would have increased by approximately
$635,000 and net equity would have been increased by approximately $437,000.
Management believes these amounts to be immaterial to the Transactions taken as
a whole.
<PAGE> 2
The unaudited pro forma information is based on the historical consolidated
financial statements of Bacou and its consolidated subsidiaries and Leight and
its consolidated subsidiaries under the assumptions and adjustments set forth in
the accompanying Notes to the Unaudited Pro Forma Consolidated Financial
Statements. The pro forma financial statements do not give effect to anticipated
cost savings, if any, in connection with the acquisition unless there are
specifically identifiable expense reductions that result from the purchase
agreements that set forth the Transactions.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Bacou and the consolidated
historical financial statements of Leight, including the respective notes
thereto. The unaudited pro forma data is presented for comparative purposes only
and is not necessarily indicative of the combined financial position or results
of operations which would have been realized had the Transactions been
consummated during the period or as of the date for which the unaudited pro
forma data is presented. The unaudited pro forma information is also not
indicative of future results of operations or financial position.
The following nonrecurring charges will be included in the consolidated
statement of income of Bacou during the two months subsequent to February 27,
1998. These costs were not considered in the accompanying pro forma consolidated
statement of income for the period ended December 31, 1997 (i) purchased in
process research and development costs totaling $8.4 million ($5.1 million net
of tax), (ii) charges to cost of sales relating to the step-up of acquired
inventories to fair value totaling $1.0 million ($.6 million net of tax), and,
(iii) payments to certain senior executives in the aggregate amount of $.6
million ($.4 million net of tax) that were made as an inducement to consummate
the Transactions.
<PAGE> 3
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1997
(in thousands except earnings per share)
<TABLE>
<CAPTION>
Howard S. Leight and
Associates, Inc
Bacou USA, Inc. and Subsidiaries
Year Ended Year Ended Pro Forma Pro Forma
December 31, 1997 December 31, 1997 Adjustments Ref. As Adjusted
----------------- ----------------- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
Net sales $130,869 $46,493 $ - $177,362
Cost of sales 64,467 19,694 (944) (1) 83,217
------- ------- ------- --------
Gross profit 66,402 26,799 944 94,145
Operating expenses:
Selling 21,658 7,051 - 28,709
General and administrative 11,184 9,321 (2,675) (2) 17,830
Purchased in-process research and
development 3,721 - - 3,721
Research and development 1,110 - 423 (3) 1,533
Amortization of intangible assets 4,095 - 3,577 (4) 7,672
------- ------- ------- --------
Total operating expenses 41,768 16,372 1,324 59,464
------- ------- ------- --------
Operating income 24,634 10,427 (380) 34,681
Other expense (income):
Net interest expense (income) (216) 302 7,747 (5) 7,833
Net other expense (income) (160) 43 - (117)
------- ------- ------- ------
Other expense (income), net (376) 345 7,747 7,716
------- ------- ------- --------
Income from continuing operations
before income taxes 25,010 10,082 (8,127) 26,965
Income taxes 10,588 70 692 (6) 11,350
------- ------- ------- --------
Net income from continuing operations before
non-recurring charges directly attributable
to the transaction (A) $ 14,422 $10,012 $(8,820) $ 15,614
======== ======= ======= ========
Basic earnings per share $ 0.83 $ 0.90
Diluted earnings per share $ 0.83 $ 0.90
Weighted average shares outstanding:
Basic 17,383 17,383
Diluted 17,410 17,410
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
(A) The company completed its acquisition on May 30, 1997, of Survivair, Inc.
and on September 30, 1997, of Biosystems, Inc. Acquisition-related non-recurring
charges included above totaled $5.9 million for the year ended December 31,
1997. On an after tax basis these charges were equal to $5.1 million. Excluding
non-recurring charges, net income would have been as follows:
<TABLE>
<S> <C> <C>
Net income $19,498 $20,690
------- -------
Basic and diluted earnings per share $ 1.12 $ 1.19
------- -------
Other information:
Depreciation and amortization $ 8,618 $12,751
------- -------
Earnings before interest, taxes, depreciation
amortization and non-recurring charges $39,176 53,356
------- -------
</TABLE>
<PAGE> 4
Notes to Unaudited Pro Forma Consolidated Statement of Income
Year ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Adjustments
-----------
COST OF SALES:
<S> <C> <C> <C> <C> <C>
(1) To remove the salary of an employee terminated as a result of the Transactions. $ (61)
To reclassify the cost of the research and development department from
cost of sales to a separate category of operating expense. $ (423)
The reverse historical depreciation and include revised depreciation
based upon the expected useful lives and fair value of Property and Equipment
acquired in connection with the Transactions as follows:
Transactions
Remove old depreciation amount $(788)
-----
Add new depreciation amount: Cost
------
Land $ 998 $ -
Land improvements (used 75% in manufacturing) Useful life 10 years $ 200 $ 15
Building (used 75% in manufacturing) Useful life 40 years $5,325 $ 100
Machinery and equipment Useful life 10 years $2,130 $ 213
-----
New depreciation $ 328
-----
Net depreciation adjustment $ (460)
-------
Decrease in cost of sales $ (944)
=======
GENERAL AND ADMINISTRATIVE EXPENSE:
(2) To remove the salaries of employees, including Howard S. Leight, terminated
as a result of the Transactions. $(1,699)
To remove the costs of certain equipment rentals and the related maintenance
and operating expenses on that equipment not acquired in the transactions. $(1,108)
To record estimated additional expenses to be incurred as a result of the
removal of the equipment rented above. $ 250
To record the reduction in executive salaries realized because of new
employment contracts with modified incentive programs. For purposes of this
adjustment the assumption has been made that the maximum amount of the incentive
will be earned. $ (415)
To record the annual obligation incurred under a consulting agreement with
Howard S. Leight. This amount includes a direct annual payment of $200 plus the
amortization over the term of the agreement of the Fair Value of $350 in stock
options granted to the consultant and immediately vested. $ 270
To reverse historical depreciation and include revised depreciation based
upon the expected useful lives and fair value of property and equipment acquired
in connection with the Transactions as follows:
Remove old depreciation amount $(202)
-----
Add new depreciation amount Cost
------
Land $ 998 $ -
Land improvements (used 25% in administration) Useful life 10 years $ 200 $ 5
Building (used 25% in administration) Useful life 40 years $5,325 $ 33
Furniture and fixtures Useful life 7 years $ 651 $ 93
Computer equipment Useful life 3 years $ 198 $ 66
Vehicles Useful life 3 years $ 94 $ 31
-----
New depreciation $ 229
-----
Net depreciation adjustment $ 27
-------
Decrease in general and administrative expenses $(2,675)
</TABLE>
<PAGE> 5
Notes to Unaudited Pro Forma Consolidated Statement of Income, Continued
Year ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Adjustments
-----------
<S> <C> <C> <C> <C> <C>
RESEARCH AND DEVELOPMENT EXPENSE:
(3) To reclassify the cost of the research and development department from cost
of sales to a separate category of operating expense: $ 423
=======
AMORTIZATION OF INTANGIBLES:
(4) To record amortization expense based upon the expected useful lives and fair
value of intangible assets acquired in connection with the Transactions as
follows:
Description Cost Amortization
----------- ---- ------------
Goodwill Useful life of 30 years $ 12,435 $ 414
Core technology Useful life of 20 years $ 9,086 $ 454
Current products and technology Useful life of 30 years $ 75,717 $2,524
Other intangible assets Useful life of 10 years $ 658 $ 66
Other intangible assets Useful life of 30 years $ 3,542 $ 118
-------- ------
Totals $101,438 $3,577
-------- ------
New amortization amount $ 3,577
-------
INTEREST EXPENSE:
(5) To record interest expense on the portion of the acquisition price financed
with bank borrowing through term loan and working capital loan facilities. The
interest rate will be set quarterly at LIBOR plus various fees that totaled
6.1532% at February 11, 1998.
Amount of indebtedness $125,900
Interest rate on indebtedness 6.1532%
--------
Increase in interest expense $ 7,747
=======
INCOME TAXES:
(6) To record the income tax effect on the income reported by Howard S. Leight
& Associates, Inc. if the income was taxed at a rate of 39%. This rate reflects the federal
statutory rate of 35% plus the effect of state and local income taxes, less the income tax
paid by Howard S. Leight & Associates, Inc. $ 3,862
To record the income tax effect of the pro forma adjustments at a rate
of 39% This rate is based upon a federal statutory rate equal to 35% plus the
effect of state and local income taxes. $ (3,170)
--------
Increase in income taxes $ 692
======
</TABLE>
<PAGE> 6
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Howard S. Leight &
Associates, Inc
Bacou USA, Inc. and Subsidiaries
At At Pro Forma Pro Forma
December 31, 1997 December 31, 1997 Adjustments Ref. As Adjusted
----------------- ----------------- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 1,277 $ 3,659 $ (2,659) (1) $ 2,277
Trade accounts receivable, net 16,099 4,299 -- 20,398
Inventories 23,449 4,112 1,013 (2) 28,574
Prepaid expenses 3,502 459 -- 3,961
Deferred income taxes 1,426 -- -- 1,426
-------- ------- -------- --------
Total current assets 45,753 12,529 (1,646) 56,636
Restricted cash and investments -- 68 (68) (3) --
Property and equipment, net 35,880 9,748 118 (4) 45,746
Intangible assets, net 70,718 289 104,275 (5) 175,282
-------- ------- -------- --------
Total assets $152,351 $22,634 $102,679 $277,664
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,523 $ 1,216 $ - $ 6,739
Accrued compensation and benefits 2,939 2,371 - 5,310
Due to related parties, net - 42 (42) (6) -
Other accrued expenses 1,752 - - 1,752
Current portion of long-term debt - 760 14,954 (7) 15,714
Income taxes payable 1,029 - - 1,029
-------- ------- -------- --------
Total current liabilities 11,243 4,389 14,912 30,544
-------- ------- -------- --------
Long-term debt, net of current portion - 5,052 105,134 (8) 110,186
Deferred income taxes 6,052 - - 6,052
Other liabilities 2,704 168 - 2,872
-------- ------- -------- --------
Total liabilities 19,999 9,609 120,046 149,654
-------- ------- -------- --------
Common stock subject to a put option,
578,560 shares 9,450 - - 9,450
Stockholders' equity:
Preferred stock - - - -
Common stock 17 55 (55) (9) 17
Additional paid-in capital 62,588 - - 62,588
Retained earnings 60,297 12,970 (17,312) (9) 55,955
-------- ------- -------- --------
Total stockholders' equity 122,902 13,025 (17,367) 118,560
-------- ------- -------- --------
Total liabilities and stockholders' equity $152,351 $22,634 $102,679 $277,664
======== ======= ======== ========
</TABLE>
<PAGE> 7
Notes to Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Adjustments
-----------
CASH:
- -----
<S> <C> <C>
(1) To record the decrease in cash of Howard Leight & Associates, Inc. to the level
to be purchased per the purchase agreement. $ (2,659)
========
INVENTORIES:
(2) To record the increase in inventories to fair value on the date of acquisition. This
amount will be charged to cost of sales over the two month period beginning
March 1, 1998. $ 1,013
========
RESTRICTED CASH AND INVESTMENTS:
(3) To record the decrease in restricted cash and investments to the level to be
purchased per the purchase agreement. $ (68)
========
PROPERTY AND EQUIPMENT, NET:
(4) To record the increase in value of property and equipment at the date of
acquisition based on fair market appraisals, as follows:
Description
-----------
Land $ 998
Land improvements $ 200
Building $ 5,325
Machinery and equipment $ 2,130
Furniture and fixtures $ 651
Computer equipment $ 198
Construction in progress $ 270
Vehicles $ 94
--------
Fair market value at acquisition $ 9,866
Net book value prior to acquisition $ 9,748
--------
Net increase in value $ 118
========
INTANGIBLE ASSETS, NET:
(5) To record the increase in value of intangible assets at the date of
acquisition based on fair market appraisals, as follows:
Description
-----------
Goodwill $ 12,435
Core technology $ 9,086
Current products and technology $ 75,717
Other intangible assets $ 658
Other intangible assets $ 3,542
Long term deferred income taxes $ 2,776
Prepaid consulting fees $ 350
--------
Fair market value at acquisition $104,564
Net book value prior to acquisition $ 289
--------
Net increase in value $104,275
========
DUE TO RELATED PARTIES, NET:
(6) To record the removal of due to (from), net of related parties not
acquired in the acquisition. $ (42)
========
</TABLE>
<PAGE> 8
Notes to Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1997
<TABLE>
<S> <C> <C>
CURRENT PORTION OF LONG-TERM DEBT:
(7) To record the decrease in current portion of long-term debt to be paid off
prior to the acquisition. $ (760)
To record the increase in the current portion of long-term debt on the debt
incurred to fund the acquisition. $ 15,714
--------
Net increase in current portion of long-term debt $ 14,954
========
LONG-TERM DEBT:
(8) To record the decrease in long-term debt to be paid off at the acquisition $ (5,052)
To record the increase in long-term debt incurred to fund the Transactions
as follows:
Description
-----------
Assumed debt incurred to fund the Transactions $125,900
Current portion of long-term debt $(15,714)
--------
Net long-term debt incurred $105,134
========
STOCKHOLDERS' EQUITY:
(9) To record the reduction in the equity accounts as a result of the
Transactions, and the non-recurring charge for purchased in-process research and
development as follows:
Description
-----------
Common stock $ (55)
Retained earnings $(12,970)
Retained earnings reduction attributable to purchased in-process research
and development $ (7,118)
Less tax benefit on write-off of purchased in-process research and
development 2,776
--------
Net change in stockholders' equity $(17,367)
========
</TABLE>
<PAGE> 1
EXHIBIT 99(c)
REAL ESTATE OPTION AND RIGHT OF FIRST REFUSAL AGREEMENT
-------------------------------------------------------
THIS REAL ESTATE OPTION AND RIGHT OF FIRST REFUSAL AGREEMENT (this
"Agreement") is made as of the 27th day of February, 1998 by and between HOWARD
S. LEIGHT, a married man as his sole and separate property ("Seller"), and BACOU
USA SAFETY, INC., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of certain real property situated on
Waterville Road, San Diego, California, as more particularly described on
EXHIBIT A attached hereto (the "Property"); and
WHEREAS, pursuant to Section 9.15 of that certain Asset Purchase Agreement
dated as of December 31, 1997 by and between Buyer and Howard S. Leight &
Associates, Inc., a California corporation doing business as Howard Leight
Industries, Inc., as amended, Seller has agreed to grant to Buyer the right and
option to purchase the Property on the terms and conditions as are hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. OPTION TO PURCHASE.
Seller hereby grants to Buyer the exclusive and irrevocable right and
option (the "Option") to purchase the Property for the Option Purchase Price (as
defined below). The term of the Option shall commence at 9:00 a.m. local time on
December 15, 1999 and shall expire at 5:00 p.m. local time on December 15, 2002.
The Option granted herein shall be exercised, if at all, by giving notice (the
"Option Notice") in accordance with Section 15 hereof at any time during the
term of the Option. Such notice shall specify a closing date not later than
ninety (90) days from the date of the Option Notice. If the Option is not
exercised in accordance with its terms during the term hereof, then the Option
and the rights of Buyer hereunder shall automatically and immediately terminate
without notice.
The purchase price for the Property (the "Option Purchase Price") shall be
an amount which is mutually acceptable to Seller and Buyer. If Seller and Buyer
cannot agree on the Option Purchase Price after negotiating in good faith within
thirty (30) days of the date of the Option Notice, then Buyer and Seller shall
each select an appraiser who shall select a third appraiser who shall be a real
estate appraiser with at least five (5) years' experience appraising real
property in San Diego County and the three appraisers shall determine the fair
market value of the Property as of the date of the Option Notice (the "Option
Date Fair Market Value"). The Option Purchase Price shall be equal to the
greater of (a) Seven Hundred Fifty Thousand Dollars ($750,000) or (b) the Option
Date Fair Market Value.
<PAGE> 2
2. RIGHT OF FIRST REFUSAL.
If at any time from the date hereof through December 15, 2002, Seller
receives an offer from a third party to purchase the Property and such offer is
acceptable to Seller, Seller shall so notify Buyer and provide Buyer with a
statement (the "Offer Statement") as to all of the terms of such offer,
including, without limitation, the purchase price which shall be payable in full
in cash at the closing (as hereinafter defined) (the "Purchase Offer"). Buyer
shall then have sixty (60) days from the date on which Buyer receives the Offer
Statement (the "Exercise Period") to exercise its right to purchase the Property
on the terms and conditions set forth in the Purchase Offer by delivering
written notice (the "Notice of Purchase") to Seller setting forth the date, time
and location of the Closing, said Closing to take place no later than ninety
(90) days after delivery of the Notice of Purchase. If Buyer fails to deliver
the Notice of Purchase to Seller within the Exercise Period, then Seller shall
thereafter be free to sell the Property without restriction for a period of
one-hundred eighty (180) days for a purchase price greater than or equal to the
purchase price specified in the Purchase Offer and paid in full in cash at the
Closing. If Seller sells the Property within such one-hundred eighty (180) day
period for a purchase price greater than or equal to the purchase price
specified in the Purchase Offer paid in full in cash at the closing, then the
provisions of Section 1 hereof and this Section shall be null and void. If
Seller does not sell the Property within such one-hundred eighty (180) day
period for a purchase price greater than or equal to the purchase price
specified in the Purchase Offer and paid in full in cash at the closing, then
the provisions of Section 1 hereof and this Section s shall remain applicable to
all future offers to purchase the Property.
3. AGREEMENT OF PURCHASE AND SALE.
If Buyer exercises the Option or its right to purchase the Property under
Section 2 hereof, then this Agreement shall constitute a purchase and sale
contract with respect to the Property and Seller hereby agrees to convey the
Property to Buyer, and Buyer hereby agrees to purchase the Property, upon the
terms and conditions herein set forth.
In connection with the exercise of the Option, Buyer agrees to cooperate
with Seller in obtaining in arranging a like kind exchange and agrees to
cooperate with Seller in attempting to mitigate any materially adverse tax
consequences to Seller (other than normal capital gain or income taxes).
4. CLOSING.
The closing (the "Closing") of any purchase and sale of the Property
pursuant to the terms of this Agreement shall take place at 10:00 a.m. local
time in the offices of Chicago Title Insurance Company or another reputable
title company located in San Diego, California on the date and at the time
specified by Buyer pursuant to Section 1 or Section 2 hereof, or at another
date, time and location mutually agreeable to Buyer and Seller. At the Closing,
both Seller and Buyer shall execute or deliver any and all documents or other
instruments reasonably requested by the other party in order to effectuate the
purchase and sale of the Property.
-2-
<PAGE> 3
5. TITLE.
At the Closing, Seller shall convey good, clear, record and marketable fee
simple title to the Property to Buyer, or Buyer's nominee, by a grant deed in
form and substance satisfactory to Buyer, free and clear of all liens,
encumbrances and other title matters except for covenants, easements and
restrictions of record as of the date hereof as set forth on EXHIBIT B attached
hereto and to the lien of any real estate taxes or assessments not then due and
payable excepting restrictions and assessments which may be placed against the
Property over the objection of Seller. Title shall be insurable at regular
rates, at Buyer's expense, by a title company authorized to do business in the
State of California selected by Buyer.
6. CONDITION OF PROPERTY.
Possession of the Property, free of all tenants and occupants (other than
Buyer), shall be delivered by Seller to Buyer at Closing and the Property shall
be then in the same condition in which it is now. Seller shall not construct or
alter any improvements on the Property without the prior written consent of
Buyer.
7. RIGHT TO ENTER PROPERTY.
Seller agrees to permit Buyer and Buyer's agents at Buyer's cost to enter
into and examine the Property and conduct investigations thereon, including
without limitation, surveys, environmental site assessments and soil tests, at
reasonable times during business hours upon at least five (5) business days
prior written notice to Seller. Buyer shall repair any damage to the Property
caused by such activities and Buyer agrees to indemnify Seller from any losses
or expenses arising out of such activities by Buyer or Buyer's agents.
8. EXTENSION OF TIME.
If Seller shall be unable to give title or to make conveyance, or to
deliver possession of the Property, all as herein stipulated, or if at the time
of Closing the Property does not conform with the provisions hereof, then Seller
shall use Seller's best efforts to (i) remove any defects in title, (ii) deliver
possession as provided herein, and (iii) make the Property conform to the
provisions hereof, as the case may be, in which event the time for performance
shall be extended for a period to be designated by Buyer in writing, but in no
event more than sixty (60) days.
9. FAILURE OF TITLE OR CONDITION.
If at the expiration of the extended time Seller shall have failed so to
remove any defects in title, deliver possession, or make the Property conform,
as the case may be, all as herein agreed, then at Buyer's election, exercisable
by written notice to Seller within five (5) days after the expiration of the
extended period, (i) this Agreement shall be canceled and void, or (ii) Buyer
shall have the right to purchase the Property, paying for the Property the full
stated Option Purchase Price, all subject, however, to the provisions of Section
11 hereof.
-3-
<PAGE> 4
10. BUYER'S RIGHT TO CLOSE NOTWITHSTANDING DEFECTS, ETC.
Buyer shall have the election, at either the original or any extended time
for performance, to accept such title as Seller can deliver to the Property in
its then condition and to pay therefore the Option Purchase Price without
deduction, in which case Seller shall convey such title, but without warranties
against such defects. Acceptance of a deed and possession by Buyer shall be a
full and complete discharge of all obligations of Seller hereunder except such
as are, by the terms hereof, to be performed after Closing.
11. USE OF PURCHASE PRICE TO CLEAR TITLE.
To enable Seller to make conveyance as herein provided, Seller may, and if
necessary shall, at the time of delivery of the deed, use the purchase money, or
any part thereof, to clear the title of any or all encumbrances or interests
which are to be discharged, removed or eliminated by the terms hereof, provided
that all instruments so procured are recorded simultaneously with the delivery
of the deed.
12. ADJUSTMENTS.
Real estate taxes and assessments shall be apportioned as of Closing as
though such taxes were assessed for the fiscal year in which Closing takes
place; provided that in the event the amount of such taxes is not known as of
Closing, adjustment at Closing shall be made on the basis of the taxes assessed
for the previous fiscal year and the parties shall make another adjustment, if
necessary, promptly when the amount of such taxes is known. All water and sewer
charges, owner's association fees, all fire district and any other governmental
assessments shall be apportioned as of Closing. Buyer shall pay all escrow fees,
closing fees and title insurance charges.
13. BROKER.
Seller and Buyer each represent that each has dealt with no broker and that
they will each indemnify and save the other harmless against any and all claims
for a broker's commission on account of any misrepresentation contained in this
Section.
14. NOTICES.
Any notice, demand, payment or other communication required or permitted to
be given by any provision of this Agreement, shall be deemed to be sufficiently
given or served when delivered or sent by registered or certified mail addressed
as follows:
To Seller:
Mr. Howard S. Leight
6000 Cavalleri Road
Malibu, California 90265
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<PAGE> 5
with a copy to:
Murray D. Fischer, Esq.
433 North Camden Drive, Suite 888
Beverly Hills, California 90210
To Buyer:
Bacou USA Safety, Inc.
c/o Bacou USA, Inc.
10 Thurber Boulevard
Smithfield, Rhode Island 02917
Attention: Philip B. Barr, Jr., Esq.
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: Richard M.C. Glenn, III, Esq.
15. TIME OF ESSENCE.
Time shall be of the essence of this Agreement.
16. WAIVER.
No waiver of any breach or default of this Agreement by either party hereto
shall be considered to be a waiver of any other breach or default of this
Agreement.
17. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties hereto,
and supersedes any prior written or oral agreement between said parties
concerning the subject matter contained herein. There are no representations,
agreements, arrangements or understandings, oral or written between and among
the parties hereto, relating to the subject matter contained in this Agreement,
which are not fully expressed herein. This Agreement can be modified or
rescinded only by a writing expressly referring to this Agreement and signed by
the parties hereto.
18. CAPTION HEADINGS.
Captions at the beginning of each numbered section of this Agreement are
solely for the convenience of the parties and shall not be deemed part of the
context of this Agreement.
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<PAGE> 6
19. RECORDING.
The parties hereto agree to execute and deliver a notice of this Agreement
for recording.
20. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be controlled by and construed under the laws of the State of
California.
21. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding on and shall inure to the benefit of Buyer
and Seller and their respective heirs, representatives, successors and assigns.
This Agreement may be assigned by Buyer without the prior written consent of
Seller.
22. CLEARING OF TITLE.
After the expiration of the term of the Option or the sale of the Property
to a third party in compliance with Section 2 above, upon receipt by Buyer of
ten (10) days written notice from Seller, Buyer shall provide to Seller within
said ten (10) day period a quitclaim deed to the Property and/or other
reasonable documentation requested by Seller or a title insurer to clear the
Property of this Agreement. Buyer's failure to provide such documentation shall
entitle Seller to recover from Buyer all damages suffered by Seller due to
Buyer's failure to provide such documentation, including, but not limited to
consequential and lost profits damages arising out of the loss of the sale of
the Property to a third party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first set forth above.
Seller:
/s/ Howard S. Leight
----------------------------------------------
Howard S. Leight
Buyer:
BACOU USA SAFETY, INC.
By /s/ W. Stepan
--------------------------------------------
Print Name W. STEPAN
-------------------------------
Title PRESIDENT
------------------------------------
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EXHIBIT A
LEGAL DESCRIPTION
LOT 5 OF BROWN FIELD BUSINESS PARK, UNIT NO. 1, IN THE CITY OF SAN DIEGO, COUNTY
OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 12279, FILED IN
THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, DECEMBER 14, 1988.
<PAGE> 8
EXHIBIT B
TITLE MATTERS
1. Instrument regarding Otay Mesa Road Assessment District No. 3987
recorded April 5, 1983 as File No. 83-108222 and April 12, 1985 as File No.
85-133627, both of Official Records of the Office of the County Recorder of San
Diego County.
2. Instrument regarding Otay Mesa Reorganization District No. RO83-18
recorded March 14, 1985 as File No. 85-086495 of Official Records of the Office
of the County Recorder of San Diego County.
3. Avigation Easement shown on Map of 12279.
4. Flood Storage Easement shown on Map of 12279.
5. Agreement dated December 12, 1988 by and between The City of San Diego
and Turnberry Associates recorded February 14, 1989 as File No. 89-076677 of
Official Records of the Office of the County Recorder of San Diego County.
6. Declaration of Covenants, Conditions and Restrictions for Brown Field
Business Park recorded August 14, 1989 as File No. 89-434301 of Official Records
of the Office of the County Recorder of San Diego County.
7. Encroachment Removal Agreement between The City of San Diego and Brown
Field Business Park Owner's Association recorded September 14, 1989 as File No.
89-496282 of Official Records of the Office of the County Recorder of San Diego
County.
