<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:
[X] Preliminary Proxy Statement
[ ] 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)(4) 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 13, 1999
To the Stockholders of
Bacou USA, Inc.
You are hereby notified that the Annual Meeting of the Stockholders of
Bacou USA, Inc. (the "Corporation") will be held at the Westin Hotel, One West
Exchange Street, Providence, Rhode Island, on Thursday, May 13, 1999 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 duly elected and qualified.
(2) To amend Article Four of the Corporation's Amended and Restated
Certificate of Incorporation to increase the aggregate number of shares of
the Corporation's capital stock from 30,000,000 to 55,000,000 and to
increase the number of authorized shares of the Corporation's $.001 par
value Common Stock from 25,000,000 to 50,000,000.
(3) To ratify the selection of KPMG LLP as independent auditors to
audit the Corporation's books and accounts for the fiscal year ending
December 31, 1999.
(4) 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
Secretary
March 30, 1999
Smithfield, Rhode Island
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 13, 1999
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting")
of Bacou USA, Inc. (the "Corporation") to be held on May 13, 1999 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 17, 1999 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 Annual
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 17, 1999, there were 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 each matter 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
whether 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. An abstention on an increase in the number of authorized
shares or 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, an increase in
the number of authorized shares, 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 at the Annual Meeting. In
the absence of a quorum, the Annual Meeting may be postponed from time to time
until stockholders holding the requisite number of shares of Common Stock 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 March 30,
1999.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 12, 1999, unless otherwise
noted, certain information concerning the ownership of shares of Common Stock by
(i) each person or group that is known by the Corporation to own beneficially
more than five percent of the issued and outstanding shares of 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) 71.59%
168 Avenue des Aureats
BP 1205
26012 Valence Cedex, France
Philippe Bacou.................................... 12,651,400(1)(3) 71.65%
J. & W. Seligman & Co. Incorporated............... 1,096,697(2) 6.22%
100 Park Avenue
New York, NY 10017
Walter Stepan..................................... 522,900(4)(5) 2.95%
Christophe Bacou.................................. 20,400(3) *
Philip B. Barr.................................... 96,100(5) *
Karl F. Ericson................................... 25,400(3) *
Howard S. Leight.................................. 50,000(6) *
Gilbert Vandeputte................................ --(7) *
Alfred J. Verrecchia.............................. --(8) *
Herbert A. Wertheim............................... 63,900(3)(9)(10) *
John F. Burt, Jr.................................. 318,098(12) 1.81%
Harry Neff........................................ 30,000(5) *
John J. Bell...................................... 6,000(5) *
John Dean......................................... 3,000(11) *
All directors and executive officers as a group
(including Messrs. Burt, Neff, Bell and Dean, 18
persons)........................................ 13,820,198(3)(4)(5)(6)(9)(12) 76.66%
</TABLE>
- ---------------
(1) Philippe Bacou is Chairman, President and Chief Executive Officer of Bacou
S.A. and has sole voting and dispositive power with respect to all shares
owned by Bacou S.A. According to information provided to the Corporation by
Bacou S.A, it is controlled by Engineering Bacou S.A. and Alesia, S.A.
(2) According to its Schedule 13G/A filed with the Securities and Exchange
Commission, J. & W. Seligman & Co. Incorporated had, as of December 31,
1998, shared voting power with respect to 847,300 shares and shared
dispositive power with respect to 1,096,697 shares; it had no sole voting
or dispositive power.
(3) Includes, as applicable, the following shares of Common Stock reserved for
issuance upon exercise of stock options outstanding pursuant to the
Corporation's 1996 Non-Employee Director 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 as a group, 100,000 shares.
(4) Includes 55,440 shares of Common Stock owned of record by Mr. Stepan's
wife.
(5) Includes, as applicable, the following shares of Common Stock reserved for
issuance upon exercise of stock options vested as of April 13, 1999
pursuant to the Corporation's 1996 Stock Incentive Plan: Mr. Stepan,
100,000 shares; Mr. Barr, 91,000 shares; Mr. Neff, 30,000 shares; Mr. Bell,
6,000 shares and all executive officers as a group (including Messrs.
Stepan, Barr, Neff and Bell), 260,000 shares.
(6) Includes 50,000 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, constituting all options reserved for issuance
under this plan.
2
<PAGE> 5
(7) Mr. Vandeputte has been nominated to serve as a director commencing upon
his election at the Annual Meeting of Stockholders on May 13, 1999.
(8) Mr. Verrecchia was elected by the Board on February 24, 1999 to serve as a
director until the Annual Meeting of Stockholders on May 13, 1999. He has
been nominated to serve for another term as a director commencing upon his
election at the Annual Meeting of Stockholders.
(9) Includes 22,500 shares owned by Dr. Wertheim's spouse.
(10) Dr. Wertheim is not a nominee for election to another term on the Board of
Directors.
(11) Mr. Dean was an executive officer of the Corporation from February 27, 1998
through May 19, 1998. His employment with the Corporation terminated on
December 31, 1998.
(12) Represents unregistered shares received on September 30, 1997, as
consideration for exchange of Mr. Burt's shares in Biosystems, Inc., as
part of the Corporation's acquisition of Biosystems. Mr. Burt has
"piggyback" registration rights with respect to these shares. Includes
45,038 shares held by Mr. Burt's wife, Roberta Burt, as Trustee under that
certain Common Stock Voting Trust Agreement dated December 22, 1994 for the
benefit of their children and certain nieces and nephews. Does not include
up to 79,130 shares currently held in escrow that are allocable to Mr. Burt
and 12,817 such shares allocable to Roberta Burt as Trustee pursuant to an
escrow as part of the Biosystems acquisition.
* Less than 1%.
ELECTION OF DIRECTORS
The Board of Directors has nominated the persons named below 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 except Mr. Vandeputte 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. The persons named in the proxy intend to vote for the following
nominees:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Philippe Bacou*, 41.................... 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.
Walter Stepan, 60...................... Vice Chairman of the Board, President and Chief 7/94
Executive Officer; Chairman of the Board, President
and Chief Executive Officer of Bacou USA Safety,
Inc. ("Bacou Safety"); Chairman of the Board of
Uvex Safety Manufacturing, Inc. ("Uvex
Manufacturing"); Chairman of the Board of Titmus
Optical, Inc. ("Titmus"). 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
("Uvex Germany").
Christophe Bacou*, 35.................. Vice President of Bacou S.A.; previously Marketing 1/96
Manager of two subsidiaries of Bacou, S.A.;
employed by affiliates of Bacou, S.A. since 1990.
Also, Director of Bacou S.A.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Philip B. Barr, 47............. Executive Vice President since October 1996; 8/95
previously Vice President from August 1995 to
October 1996; Chief Financial Officer and Secretary
since August 1995; Chief Operating Officer since
February, 1999; Vice Chairman, Secretary and
Treasurer of Bacou Safety since December 1997; Vice
Chairman, Secretary and Treasurer of Uvex
Manufacturing since December 1997; Secretary and
Treasurer of Titmus since June 1996; Partner of
Edwards & Angell, the Corporation's primary outside
counsel, from 1985 to 1995.
Karl F. Ericson, 65............ Independent business consultant since 1990. Partner 7/96
with Peat Marwick Mitchell & Co., predecessor to
KPMG LLP, from 1970 to 1990. Also, Director of Bank
Rhode Island.
Howard S. Leight, 58........... 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. Consultant to Bacou
Safety since February 1998. Also, Director of
Howard Leight Enterprises, Inc. and Director of
Bacou, S.A.
Gilbert Vandeputte, 68......... Since 1992, President of the European Safety --
Federation and since 1975, President of Febelsafe,
the Belgian Safety Federation. Also, Director of
Bacou S.A.
Alfred J. Verrecchia, 56....... Director, President Global Operations and Executive 2/99
Vice President, Hasbro, Inc. from 1996 to present;
previously Chief Operating Officer, Domestic Toy
Operations from 1990 to 1996. Also, Director, Old
Stone Corporation.
</TABLE>
- ---------------
* Philippe Bacou and Christophe Bacou are brothers.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, currently comprised of
Mr. P. Bacou , Mr. Stepan (Chair)and Mr. Barr (since February 10, 1999), which
is authorized to handle routine matters that arise between meetings of the Board
of Directors. The Executive Committee held five meetings during the
Corporation's last fiscal year.
The Board of Directors has a Compensation Committee, currently comprised of
Mr. P. Bacou, Mr. Stepan (Chair), Mr. Ericson, Mr. Verrecchia (since February
24, 1999) 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 "Incentive Plan"). The
Compensation Committee held four meetings during the Corporation's last fiscal
year. The Compensation Committee has a sub-committee called the Covered Employee
Compensation Sub-Committee. This sub-committee is comprised of two outside
directors, Mr. Ericson and Mr. Verrecchia, 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 (the "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 Mr.
Ericson(Chair) and Dr. Wertheim, 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
4
<PAGE> 7
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, Mr. Verrecchia (since February 24, 1999) and Dr. Wertheim, which is
charged with the responsibility of reviewing the terms of transactions between
the Corporation and entities or persons with which directors are affiliated,
including 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 two meetings during the Corporation's last fiscal
year.
The Board of Directors does not have a nominating committee since 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 six meetings during 1998. Each
member of the Board of Directors attended at least 75% of the aggregate number
of meetings of the Board and each committee on which he served, except for Mr.
Christophe Bacou who attended four meetings of the Board. 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.
COMPENSATION OF DIRECTORS AND OFFICERS
DIRECTOR 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. The Chairman of the Board receives $60,000
annually. In addition, each non-employee director receives $1,000 per day for
attendance at any meeting of the Board of Directors or any Committee thereof or
$500 per day for attendance by conference call.
Since August 1, 1996, non-employee directors, with the exception of Mr.
Leight and Mr. Verrecchia, 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 Director 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 (the "Leight Plan"). See "Certain Transactions".
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table summarizes certain information with respect to
compensation for services rendered to the Corporation during the years ended
December 31, 1998, 1997 and 1996 by the Corporation's chief executive officer
and the four other most highly compensated executive officers in 1998 whose
salary and bonus exceeded $100,000. The table also includes information
concerning Mr. John Dean, who served as an executive officer of the Corporation
from February 27, 1998 through May 19, 1998.
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............................ 1998 $500,000 $2,100,000 $62,000(1) 70,000 $56,794(2)
Vice Chairman, President and Chief 1997 500,000 1,200,000 62,000(1) 30,000 50,936(2)
Executive Officer; Chairman, President 1996 500,000 1,206,672 40,000(1) -- 50,936(2)
and Chief Executive Officer of Bacou
Safety
Philip B. Barr........................... 1998 250,000 300,000 (3) 35,000 2,906(4)
Executive Vice President, Chief
Operating 1997 210,000 235,000 (3) 20,000 1,289(4)
Officer, Chief Financial Officer and 1996 190,000 160,000 (3) 45,000 --
Secretary; Vice Chairman, Secretary and
Treasurer of Bacou Safety
John F. Burt, Jr......................... 1998 230,000 62,100 (3) -- 4,899(4)
President of Biosystems division of
Bacou 1997 35,000 -- (3) -- 975(4)
Safety from March 31, 1998; President
of 1996 -- -- -- --
Biosystems, Inc., a subsidiary of the
Corporation from September 30, 1997
through March 31, 1998
Harry Neff............................... 1998 150,000 70,500 (3) 15,000 5,000(4)
Senior Vice President - Sales of Uvex 1997 125,000 60,000 (3) -- 3,183(4)
Safety and Howard Leight Industries 1996 120,000 75,000 (3) 30,000 2,398(4)
divisions of Bacou Safety
John J. Bell............................. 1998 160,000 56,000 (3) -- 4,656(4)
President of Survivair division of 1997 99,734 21,500 (3) 15,000 10,629(4)
Bacou Safety 1996 -- -- -- --
John Dean................................ 1998(5) 339,863 616,667(5) (3) 15,000 7,170(4)
President and Chief Operating Officer 1997 -- -- -- --
of Bacou Safety from February 27, 1998 1996 -- -- -- --
to May 19, 1998; on leave of absence
from May 26, 1998; terminated
employment December 31, 1998
</TABLE>
- ---------------
(1) Represents reimbursement payable to Mr. Stepan by the Corporation for United
States social security taxes and the applicable personal income tax effects
of such reimbursement. Certain other perquisites payable to Mr. Stepan did
not exceed the threshold referenced in footnote (3), below.
(2) Represents (i) split dollar life insurance premiums paid by the Corporation
on behalf of Mr. Stepan ($36,450 in 1998 and in 1997), (ii) term life
insurance premiums paid by the Corporation on behalf of Mr. Stepan ($9,736
in 1998 and in 1997), and (iii) contributions by the Corporation on behalf
of Mr. Stepan under the Bacou USA, Inc. 401(k) Plan Trust ($5,000 in 1998
and $4,750 in 1997).
(3) Perquisites and other personal benefits paid to such officer were less than
$50,000, or 10% of aggregate salary and bonus, and accordingly are omitted
from the table as permitted by the rules of the Commission.
(4) Represents amounts paid by the Corporation under the Bacou USA, Inc. 401(k)
Plan Trust and predecessor plans.
(5) Mr. Dean was an executive officer of the Corporation from February 27, 1998
through May 19, 1998. The bonus amount was awarded pursuant to an agreement
with the Corporation. Does not include amounts payable to Mr. Dean in 1999
and 2000 pursuant to such agreement. See "Employment Contracts - Mr. Dean".
6
<PAGE> 9
The following table sets forth certain information relating to option
grants pursuant to the Incentive Plan during the year ended December 31, 1998 to
certain of the individuals named in the Summary Compensation Table above. No
options were granted during such year to Mr. Burt or Mr. Bell.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
--------------------------------------------------------------------- REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR GRANT- APPRECIATION FOR
OPTIONS/ EMPLOYEES BASE DATE MARKET EXPIRA- OPTION TERM(3)(4)
SARS IN FISCAL PRICE PRICE TION ----------------------
NAME GRANTED(1)(2) YEAR ($/SH) PER SHARE DATE 5% 10%
- ---- ------------- ------------ -------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter Stepan............ 70,000 14.99% $17.50 $ 17.50 2/23/08 $770,396 $1,952,335
Philip B. Barr........... 35,000 7.49% $17.50 $ 17.50 2/23/08 $385,198 $ 976,167
Harry Neff............... 15,000 3.21% $17.50 $ 17.50 2/23/08 $165,085 $ 418,357
John Dean................ 15,000 3.21% $17.00 $17.125 2/27/08(5) (5) (5)
</TABLE>
- ---------------
(1) No options granted were options with tandem SARs and no free-standing SARs
were granted.
(2) 50% of the options issued to Mr. Stepan and Mr. Barr 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
$28.50 and 10% results in a stock price per share of $45.39.
(4) The actual value, if any, an executive may realize will depend on (i) the
excess of the stock price over the exercise price on the date the option is
exercised and (ii) the percent vested, so that there is no assurance the
value realized by an executive will be at or near the amounts reflected in
this table.
(5) Mr. Dean exercised 3,000 options on January 13, 1999, at a market value per
share of $22.875. Pursuant to the terms of the Incentive Plan, his remaining
options are unvested, not exercisable and expire on March 31, 1999, i.e., 90
days after his termination of employment.
The following table sets forth certain information with respect to
unexercised options to purchase the Corporation's Common Stock granted under the
Incentive Plan to the individuals named in the Summary Compensation Table above
(other than Mr. Burt, who has no options). No options were exercised in 1998.
Mr. Dean exercised 3,000 options at $22.875 per share on January 13, 1999.
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FISCAL YEAR-END SARS AT FISCAL YEAR-END(1)
-------------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Walter Stepan.......................... 65,000 35,000 $342,500 $140,000
Philip B. Barr......................... 64,500 35,500 380,500 187,500
Harry Neff............................. 21,000 24,000 129,000 126,000
John J. Bell........................... 6,000 9,000 40,000 60,750
John Dean.............................. 3,000 (2) (2) (2)
</TABLE>
- ---------------
(1) Based on a per share price of $21.50, which was the closing price of the
Corporation's Common Stock on The New York Stock Exchange on December 31,
1998.
(2) Mr. Dean exercised 3,000 options on January 13, 1999, at a market value per
share of $22.875. Pursuant to the terms of the Incentive Plan, his remaining
options are unvested, not exercisable and expire on March 31, 1999.
7
<PAGE> 10
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.
COMPENSATION COMMITTEE REPORT
During 1998, the membership of the Compensation Committee of the Board of
Directors of the Corporation consisted of Mr. P. Bacou, Mr. Stepan, Mr. Ericson,
and Dr. Wertheim. Since February 24, 1999, Mr. Verrecchia has been a member of
the Compensation Committee. Mr. P. Bacou, Mr. Ericson, Mr. Verrecchia and Dr.
Wertheim are not employees of the Corporation. Mr. Stepan is Vice Chairman,
President and Chief Executive Officer of the Corporation, as well as Chairman,
President and Chief Executive Officer of Bacou Safety, Chairman of Uvex
Manufacturing, and Chairman of Titmus. The role of the Compensation 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 Incentive Plan and the Corporation's Bonus Plan for Executives for
1998, 1997, and 1996 (the "Bonus Plan"). The Compensation Committee has a
sub-committee which is currently comprised of Mr. Ericson and Mr. Verrecchia,
which 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 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 stockholders 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 1998, 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 $268,000, were determined in direct
relation to the level of operating profit of the Corporation on a consolidated
basis.
With respect to the executive officers of the Corporation's operating
subsidiaries and divisions, executive compensation was related to corporate
performance through the Bonus Plan, which provides increased bonus levels as
subsidiary and division operating margins, net sales and operating profits
increase. On this basis, the portion of bonuses that were determined in direct
relation to corporate financial performance ranged from approximately 5% to 55%
of base salary for executive officers at operating subsidiaries and divisions.
CEO COMPENSATION
Mr. Stepan's salary and benefits for 1998 were fixed by the terms of his
employment agreement (see "Employment Contracts -- Mr. Stepan") which, except
for a first amendment to such contract dated October 24, 1997 and a second
amendment dated August 25, 1998, was in place prior to both the establishment of
the Compensation Committee and the Corporation's initial public offering in
March 1996. Approximately 80% of his 1998 compensation was represented by a cash
bonus. Mr. Stepan was entitled to a
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<PAGE> 11
cash bonus pursuant to an incentive formula directly related to the
Corporation's financial performance, as measured by consolidated operating
income. Based on the Corporation's financial performance for 1998, the
Compensation Committee awarded Mr. Stepan a cash bonus of $2,100,000. Mr. Stepan
received a grant of 70,000 options during 1998, pursuant to the Incentive Plan.
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 exercisable 50%
immediately and 50% after one year.
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. Although the compensation paid by the Corporation to
Mr. Stepan for 1998 was in excess of $1 million, the amounts paid pursuant to
his Employment Agreement are deductible within the meaning of the Code since (i)
the agreement was in effect prior to the Corporation's initial public offering,
(ii) the agreement was disclosed in the Corporation's Registration Statement on
Form S-1 filed with the Commission on March 27, 1996, and (iii) a subsequent
material amendment to the agreement has been approved by the Corporation's
stockholders.
COMPENSATION COMMITTEE
Walter Stepan (Chair)
Philippe Bacou
Karl F. Ericson
Alfred J. Verrecchia
Dr. Herbert A. Wertheim
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<PAGE> 12
CORPORATE PERFORMANCE
Set forth below is a line graph comparing the cumulative total stockholder
return for the years ended December 31, 1996, 1997 and 1998 of the Corporation's
Common Stock against the cumulative total return of a NASDAQ Index and the S&P
500 Index. Both the NASDAQ Index and the S&P 500 Index are included because the
Corporation's stock was quoted on the NASDAQ from March 27, 1996 through July
22, 1998 and was traded on the New York Stock Exchange from July 23, 1998
through the end of 1998. The graph also compares such return for the years 1996,
1997 and 1998 against the cumulative total return of a peer group of companies
in the safety and security products market consisting of Borg-Warner Security
Corp.; Checkpoint Systems; Cintas Corporation; Indentix, Inc.; Mine Safety
Appliances Company; Pittston Brinks Group; Pittway Corporation; Safeskin
Corporation; Scott Technologies (formerly known as Figgie International);
Sensormatic Electronics; Symbol Technologies; Thermedics, Inc.; and Vivid
Technologies (the "Peer Group"). The graph and table assume 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,
the S&P 500 Index and the Peer Group, and that all dividends were reinvested.
<TABLE>
<CAPTION>
BACOU USA NASDAQ INDEX(1) S&P 500 INDEX(1) PEER GROUP
--------- --------------- ---------------- ----------
<S> <C> <C> <C> <C>
3/27/96 $100.00 $100.00 $100.00 $100.00
12/31/96 $110.83 $117.52 $117.82 $110.07
12/31/97 $116.66 $144.20 $157.13 $140.82
12/31/98 $143.33 $202.63 $202.03 $178.75
</TABLE>
(1) For the period from March 27, 1996 through and including July 22, 1998, the
Corporation's stock was quoted on the NASDAQ. On July 23, 1998, the
Corporation's stock began trading on the New York Stock Exchange.
EMPLOYMENT CONTRACTS
MR. STEPAN
In January 1996, the Corporation entered into an employment agreement with
Mr. Stepan, replacing an earlier agreement he had with Uvex Safety, Inc. which
originated in 1992. The employment agreement provides for an annual base salary
of $500,000. Mr. Stepan is restricted from competing with the Corporation and is
prohibited from disclosing confidential information regarding the Corporation
during the term of such agreement and thereafter for periods of one year and
three years, respectively.
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<PAGE> 13
The original employment agreement 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 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.
On August 25, 1998, the Corporation entered into a Second Amendment to
Employment Agreement with Mr. Stepan, containing the following provisions: (a)
the term of the agreement was extended to December 31, 1999; (b) the term of the
agreement will be automatically extended for a single twelve-month period ending
December 31, 2000 unless either party gives notice of termination by June 30,
1999; (c) prior to June 30, 1999, the parties will negotiate another amendment
to the agreement under which Mr. Stepan will serve the Corporation in a
different capacity, at a different salary level and subject to a different
bonus, effective January 1, 2000; and (d) Mr. Stepan will be nominated to serve
as a Director of the Corporation through 2005.
MR. BARR
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,
$250,000 for 1998, and was increased to $300,000 effective January 1, 1999. 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) defining 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's bonus
payment for 1998 was $300,000, $268,000 of which was determined pursuant to the
incentive formula defined by his employment agreement and the balance of which
was awarded by the Board of Directors in its discretion at the recommendation of
the Compensation Committee. Mr. Barr is restricted from competing with the
Corporation and is 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 at any time
during its term, 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 such
non-renewal or termination.
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<PAGE> 14
MR. BURT
Effective on October 1, 1997, Biosystems, Inc., a predecessor by merger to
Bacou Safety, entered into an employment agreement with Mr. Burt. According to
this agreement, Mr. Burt will serve as the President of Biosystems (now the
Biosystems division of Bacou Safety) for an initial term through December 31,
2001. This term is subject to successive renewal terms of one year each, unless
written notice of termination is provided by either party at least six months
prior to the end of a term. The agreement provides for Mr. Burt to be paid base
salary of $230,000 for 1998 with salary increases consistent with the policies
of the Corporation. His base salary was increased to $240,000 for 1999.
Incentive compensation for years beginning in 1998 is to be paid in accordance
with the Bonus Plan, provided that his bonus in the year 2000 shall not exceed
35% of his base salary. In February, 1999, Mr. Burt received a bonus of $62,100
for his services in 1998. Mr. Burt is eligible to participate in the
Corporation's stock option plans and employee benefit plans. He is subject to
certain non-competition and confidentiality covenants regarding the
Corporation's business during the term of the agreement and thereafter. Also,
see "Certain Transactions - Put Option", "Contingent Payments and Other
Provisions of the Biosystems Agreement" and "Registration Rights."
MR. NEFF
Uvex Safety, Inc., a predecessor by merger to Bacou Safety, entered into an
employment agreement with Mr. Neff as of January 1, 1996. According to this
agreement, Mr. Neff serves as the principal sales executive of the Uvex Safety
division of Bacou Safety for a term that expires on December 31, 2000. His
responsibilities were expanded during 1998 to include the Howard Leight
Industries division of Bacou Safety. The five-year term of the agreement shall
be extended year by year unless at least six months prior to the end of a term,
either party shall provide written notice to the other that the agreement shall
expire at the end of such term. As compensation for his services, Mr. Neff
received $120,000 during the first year of the term and has received salary
increases consistent with the Corporation's policies and his expanded
responsibilities since that time. His base salary was increased to $165,000 for
1999. Mr. Neff participates in the Bonus Plan and under that plan he received a
bonus payment of $70,500 in February, 1999 for his services in 1998. Mr. Neff is
eligible to participate in the Corporation's stock option plan and employee
benefit plans. He is subject to certain non-competition and confidentiality
covenants regarding the Corporation's business during the term of the agreement
and thereafter.
MR. BELL
Survivair, Inc., a predecessor by merger to Bacou Safety, entered into an
employment agreement with Mr. Bell as of May 30, 1997. According to this
agreement, Mr. Bell was to serve as the President of Survivair (now the
Survivair division of Bacou Safety) for an initial term which expired on
December 31, 1998. This period of employment renewed for a one-year term
expiring December 31, 1999 and shall renew for successive one-year terms unless
prior written notice is provided by either party at least six months prior to
the end of any such year. Mr. Bell received a base salary of $155,000 for the
initial term and a salary increase for 1999 (in accordance with the
Corporation's compensation policies) to $167,000. He participates in the Bonus
Plan and received a payment of $56,000 in February, 1999 for his services during
1998. Mr. Bell is eligible to participate in the Incentive Plan and employee
benefit plans. He is subject to certain non-competition and confidentiality
covenants during the term of his agreement and thereafter. Mr. Bell and Bacou
Safety entered into a First Amendment to Employment Agreement as of June 29,
1998 which made non-material changes to the agreement.
MR. DEAN
Effective February 27, 1998, Bacou Safety entered into an employment
agreement with Mr. Dean for an initial term expiring December 31, 1999 unless
notice of termination was provided by either party not less than one year prior
to the end of the term. The agreement would then extend for additional one-year
terms subject to the same notice procedure. Mr. Dean would be paid salary of
$400,000 per year for the initial term with annual increases thereafter in line
with those generally applicable to salaried employees of the Corporation. His
bonus would be established according to the Bonus Plan and would be capped at
125% of base salary each
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<PAGE> 15
year. The agreement further provided a $200,000 signing bonus which was paid at
the time of execution of the agreement and an award of 15,000 options to
purchase shares of the Corporation's Common Stock at $17.00 per share.
On May 19, 1998, Bacou Safety entered into an amendment to the employment
agreement with Mr. Dean under which he resigned his position as President and
Chief Operating Officer of Bacou Safety and remained as President of the Howard
Leight Industries division of Bacou Safety through December 31, 1998. Bacou
Safety retained the right to place him on a leave of absence at any time after
May 19, 1998. Under this amendment, Bacou Safety agreed to continue to pay Mr.
Dean his annual salary for the years 1998 and 1999 and bonuses of $416,667 in
February 1999 and $500,000 in February 2000. Mr. Dean was subsequently placed on
a paid leave of absence on May 25, 1998 and served as a consultant to Bacou
Safety for the remainder of the year. Mr. Dean's employment with the Corporation
terminated on December 31, 1998, subject to the Corporation's obligation to
continue to make the aforementioned payments. He is subject to certain non-
competition and confidentiality covenants during the term of his agreement and
thereafter.
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 beneficial 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 1998
all Section 16(a) filing requirements applicable to its Insiders were complied
with except for the inadvertent late filing of a Form 3 by Mr. Leight and a Form
4 by Mr. Bradford Brooks, the President of Titmus.
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. The Corporation issued 826,514 shares of Common Stock as
payment of the initial purchase price for Biosystems (the "Payment Shares").
Pursuant to the Biosystems Agreement, Mr. Burt, who was formerly the President
and a principal stockholder of Biosystems 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 $16.38 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 earn-out payments if the operating results
of the Biosystems division of Bacou Safety exceed certain defined thresholds in
the year 2000. Any such payments would be payable to the five former
stockholders of Biosystems, Inc. (including Mr. Burt, and his brother, Mr.
Joseph Burt, who is an officer of the Biosystems division of Bacou Safety). Such
payments are payable in unregistered shares of Common Stock of the Corporation
except that the former stockholders of Biosystems, Inc. have the option to
receive up to an aggregate amount of $12.0 million of any such 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 thereunder.
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<PAGE> 16
REGISTRATION RIGHTS
Pursuant to agreements with the Corporation, Bacou S.A. (the "Principal
Stockholder") and John F. Burt, Jr. have certain rights (each 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 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 such 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 such 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 by 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
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<PAGE> 17
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 Bacou Safety as successor-in-interest to Uvex Safety,
Inc. pursuant to 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.
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.) (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. The allocation of rights and
obligations under such Settlement Agreement between the Corporation and the
Principal Stockholder were determined during 1998.
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
$24,000 in 1998, $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 $967,000 in 1998, $270,000 in 1997
and less than $60,000 in 1996. The Principal Stockholder has been the exclusive
distributor of Leight products in France since 1993.
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<PAGE> 18
PDS INTERNATIONAL PTE LTD. AGREEMENTS
Effective August 31, 1998, the Corporation and an affiliate of the
Principal Stockholder entered into certain agreements in which they became
stockholders of PDS International Pte Ltd., a company incorporated in the
Republic of Singapore ("PDS Singapore"). The Corporation acquired its interest
in PDS Singapore to provide channels of distribution for products of the
Corporation. Each of the Corporation and the affiliate of the Principal
Stockholder holds a 15% interest in PDS Singapore. The remaining 70% ownership
of PDS Singapore is held by Uvex Germany and certain unrelated interests.
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 Safety,
consummated the following transactions on February 27, 1998 (collectively, the
"Leight 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. (except for one share of capital
stock which was purchased by the Corporation in order to comply with Mexican
statutory requirements) from Leight and Howard S. Leight ("Mr. Leight") and
(iii) acquired all of the capital stock of Howard Leight (Europe) Limited from
Mr. Leight and Mr. 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 Leight 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 Leight 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 any breach by the
Corporation of its representations and warranties under the agreements.
CONSULTING AGREEMENT WITH HOWARD S. LEIGHT
In connection with the Leight 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 subsequent to February 27, 1998. Royalty payments will
be paid at the rate of four percent (4%) of the net sales of any qualifying
product, provided sales of such product exceed thresholds defined in the
Consulting Agreement. No royalty payments were made during 1998. 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 during each year of the five-year term of the
Consulting Agreement, and for the grant of stock options to Mr. Leight. Upon
consummation of the Leight Transactions, Mr. Leight joined the Boards of
Directors of both the Corporation and the Principal Stockholder and pursuant to
the Leight Plan, he received an option to purchase an aggregate of 50,000 shares
of the Common Stock at an exercise price of $17.00 per share. Under the terms of
the Consulting Agreement, Mr. Leight is subject to non-disclosure and
non-competition provisions.
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 Leight 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.
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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. Also, 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, Bacou Safety 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 Leight 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 increases in the regional 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. The
Corporation made lease payments totaling $100,000 during 1998 to Mr. Leight.
SUPPLY AGREEMENT WITH HOWARD LEIGHT ENTERPRISES, INC.
Mr. Leight is the principal stockholder of Howard Leight Enterprises, Inc.
("HLE"). In connection with the Leight 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. Mr. Dean is
also a stockholder of HLE as are one current and one former employee of the
Howard Leight Industries division of Bacou Safety. HLE has recently begun to
produce polyurethane pre-polymer; however, a supply agreement has not yet been
executed.
INCREASE IN THE NUMBER OF AUTHORIZED SHARES
On February 10, 1999, the Board of Directors adopted a resolution, subject
to ratification by the stockholders of the Corporation, to increase the number
of authorized shares of capital stock of the Corporation from 30,000,000 to
55,000,000, which includes an increase in the number of authorized shares of the
Corporation's Common Stock from 25,000,000 to 50,000,000. Such ratification
requires the affirmative vote of a majority of the issued and outstanding shares
of Common Stock. The availability of additional shares of Common Stock is
desirable to provide the Corporation with future growth opportunities, including
sufficient Common Stock in the future for potential acquisitions, stock splits
or stock dividends.
Accordingly, the Board of Directors has recommended that the
above-described resolution be ratified by the stockholders at the Annual
Meeting.
The Corporation currently has no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of Common Stock,
except for shares presently reserved for issuance. If any plans, understandings,
agreements or arrangements are made concerning the issuance of any shares,
holders of then outstanding shares of Common Stock may or may not be given the
opportunity to vote thereon, depending on the nature of any such transactions,
the law applicable thereto and the judgment of the Board of Directors regarding
the submission thereof to the Corporation's stockholders.
The Board of Directors recommends a vote FOR adoption of the amendment to
Article Four of the Corporation's Amended and Restated Certificate of
Incorporation.
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 LLP ("KPMG") as independent
auditors to audit the books and accounts of the Corporation for the fiscal year
ending December 31, 1999 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
17
<PAGE> 20
present in person or represented by proxy at the Annual Meeting when a quorum is
present. Representatives of KPMG 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 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 during the year ended December
31, 1998 were furnished at customary rates.
The Board recommends a vote FOR ratification of KPMG as independent
auditors for the fiscal year ending December 31, 1999.
OTHER MATTERS
Management does not know of any matters which will be brought before the
Annual Meeting other than those specified in the Notice of Annual Meeting.
However, if any other matters properly come before the Annual Meeting, the
persons named in the form of proxy, or their substitutes, will vote on such
matters in accordance with their best judgment.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1998
Annual Report to Stockholders, which is provided to stockholders along with this
form of Proxy. The Annual Report and the financial statements contained in such
report are not to be considered as a part of this soliciting material.
STOCKHOLDER PROPOSALS FOR YEAR 2000 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 Year 2000 Annual Meeting of Stockholders of the Corporation.
All such proposals must be mailed to the Secretary of the Corporation at 10
Thurber Boulevard, Smithfield, Rhode Island 02917 and must be received at that
address on or before December 2, 1999, in order to be included in the
Corporation's proxy relating to the Year 2000 Annual Meeting. If a stockholder
desires to bring business before the Corporation's Year 2000 Annual Meeting that
is not a proposal submitted to the Corporation for inclusion in the
Corporation's proxy statement, notice must be received by the Corporation at the
same address on or before January 3, 2000.
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
Secretary
Smithfield, Rhode Island
March 30, 1999
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4961-PS-99
<PAGE> 22
DETACH HERE
- --------------------------------------------------------------------------------
PROXY
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 13, 1999
The undersigned hereby appoints Walter Stepan and Philip B. Barr 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. of the undersigned, at
the Annual Meeting of Stockholders to be held at the Westin Hotel, Providence,
Rhode Island, on Thursday, May 13, 1999 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 AND 3.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 23
DETACH HERE
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<TABLE>
<S> <C>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR PROPOSAL 1, 2 AND 3.
1. To elect directors of the Corporation for the ensuing year, FOR AGAINST ABSTAIN
and until their successors are elected and qualified. 2. To amend Article Four of the [ ] [ ] [ ]
NOMINEES: Philippe Bacou, Walter Stepan, Christophe Bacou, Corporation's Amended and Restated
Philip B. Barr, Karl F. Ericson, Howard S. Leight, Certificate of Incorporation to increase
Gilbert Vandeputte, Alfred J. Verrechia the number of authorized shares of capital
stock from 30,000,000 to 55,000,000 including an increase in
the common stock from 25,000,000 to 50,000,000.
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES FOR AGAINST ABSTAIN
3. To ratify the selection of KPMG LLP as [ ] [ ] [ ]
[ ] ________________________________________ independent auditors to audit the
For all nominees except as noted above Corporation's books and accounts for the
fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
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 Board cannot vote your choice 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.
NOTE: Please sign as name appears hereon. Joint owners should
sign. When signing as a fiduciary or for an estate, trust,
corporation or partnership, your title or capacity should be
stated.
Signature: ____________________________ Date: ______________ Signature: ____________________________ Date: ______________
</TABLE>
