Exhibit B
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July 13, 2000
Bacou USA, Inc.
10 Thurber Boulevard
Smithfield, RI 02917
Attention: Philip B. Barr, President and CEO
Dear Phil:
Some months ago, the holder of a substantial minority interest in Bacou S.A.
("BA-FR) informed us that it wished to divest its interest in BA-FR. As a result
of that request, our family initiated a study of how best to raise the capital
necessary to purchase the minority interest in BA-FR and also continue our
current strategies toward the goal of building a multi-billion dollar global
safety and security company. Fulfilling both objectives would require us to
increase our financial leverage, and consequently our risk, or to dilute
substantially our equity interests. This placed us at a crossroads regarding our
future path, causing us to consider all strategic options, including a
divestiture strategy, rather than continuing to grow the business according to
the plan we have followed in Europe since 1974 and in the U.S. since we founded
Bacou USA, Inc. ("BA-US") in 1993.
We have engaged Deutsche Bank as our investment bankers for the purpose of
seeking bids from prospective buyers and considering other strategic
alternatives. We acknowledge that BA-US also has entered into an engagement
letter with Deutsche Bank for the same purposes. Both BA-US and the undersigned
have been separately represented in the negotiation of our respective engagement
letters and have received copies of both letters. The investment bankers expect
to complete the preparation of offering materials this month and should begin
the process of solidifying offers (the "Offering"). Together, the four of us own
directly and indirectly all of the ownership interests in Engineering H. Bacou
S.A. ("EHB") and a majority of the ownership interests in BA-FR. In order to
control the process, we have entered into a contract with the holders of
substantially all of the minority interests in BA-FR that will allow us to make
any divestiture decisions with respect to the entire ownership interest in
BA-FR.
As you know, BA-FR is the holder of 12,612,600 shares of common stock (the
"BA-US Majority Shares") of BA-US. The BA-US Majority Shares will not be offered
for sale directly in the offering process, but their ultimate beneficial
ownership would change if we sell all of our shares in EHB and BA-FR.
Our indirect ownership interests in BA-US represent a significant part of the
value of our interests in EHB and BA-FR. Therefore, in connection with the
Offering, we have asked BA-US and its management for assistance in the following
ways: to participate in the preparation of Offering materials; to provide the
information necessary for preparation of a data room; to make management
presentations to potential buyers; to assist our negotiations with potential
buyers; to help us evaluate strategic alternatives to a sale of our interests;
and otherwise to participate in the Offering process. Walter Stepan has agreed
to lead the internal taskforce for all these activities on our behalf.
We understand that you have consulted with the Oversight Committee of the Board
of Directors of BA-US concerning our request and that cooperation will be
provided upon the condition that the Offering process also include an
opportunity to explore the value of shares (together the BA-US Minority
Interests") held by the other stockholders in BA-US (the "BA-US Minority
Stockholders").
The purpose of this letter is to confirm your discussions with Philippe Bacou in
which he agreed on our behalf that in the negotiation process with prospective
bidders, we will request that any bids presented shall clearly indicate the
following:
i. The value per share being attributed to the BA-US Majority
Shares (the "Per Share BA-US Majority Price"), excluding
liabilities or potential liabilities of BA-FR associated with
its ownership of the BA-US Majority Shares and
ii. An undertaking by the bidder to purchase all of the BA-US
Minority Interests together with the price per share at which
they would effect such purchase (the "Per Share BA-US Minority
Price").
Further, this will confirm that we will not accept any offer, or vote as
directors or stockholders of BA-FR to cause BA-FR to accept any offer, unless
(i) the bidder has offered to purchase both our interests in EHB and BA-FR and
the BA-US Minority Interests and (ii) the offer states substantially similar
terms for the purchase of the BA-US Majority Shares and the BA-US Minority
Interests. In this regard, we understand that "substantially similar terms"
would require, inter alia, that the Per Share BA-US Minority Price will be least
equal to the Per Share BA-US Majority Price, and the offers for our interests in
EHB and BA-FR will be required to state a comparable form of consideration as
that which is offered for the BA-US Minority Interests.
We understand that the Oversight Committee of the Board of Directors of BA-US
will have an obligation to make a judgment concerning the fairness of the Per
Share BA-US Minority Price, and that they will retain an investment banking firm
of their choice ("Advisor") to advise them on such matter. We further understand
that all investment banking fees, legal fees and other expenses incurred by the
Overnight Committee will be paid by BA-US. In recognition of the obligations of
the Oversight Committee and in order to facilitate the Offering process, we
confirm that, if we decide to sell our interests in EHB and BA-FR, that we will
accept an offer that contains a Per Share BA-US Minority Price which will
support a written opinion by the Advisor to the Overnight Committee that such
offer is fair from a financial point of view without the application of any
discount for minority interest. If none of the offers contain a per share BA-US
Minority Price which will support such written opinion, then we will accept an
offer that contains a Per Share BA-US Minority Price which will support a
written opinion by the Advisor to the Overnight Committee that such offer is
fair from a financial point of view. If none of the offers contain a Per Share
BA-US Minority Price which will support either such written opinions, then we
expressly reserve the right to accept any of the offer that we may receive for
our interests in EHB and BA-FR, understanding that it is unlikely that the
Overnight Committee would recommend to the BA-US Minority Stockholders that they
participate in such a transaction. Within the framework created by this
paragraph, you understand that there may be several competing offers which none
different Per Share BA-US Minority Prices and we wish to confirm that we have
reserved the right within this framework to take into account each bidder's
plans for the various constituencies of BA-FR and BA-US, including their
employees. We understand that BA-US has agreed that the investment banking fees
and expenses due to Deutsche Bank from BA-US and the undersigned pursuant to our
respective engagement letters and any indemnity obligations therein shall be
apportioned between BA-US and the undersigned on the same basis as the
allocation of value between BA-US and BA-FR. For this purpose, the value of
BA-US shall be the product of the Per Share BA-US Minority Price and the sum of
the actual numbers of shares of BA-US issued and outstanding at the date of
closing of any transaction and the numbers of all shares issuable pursuant to
stock options which are vested and excercisable at such date; and the value of
BA-FR shall be determined as the total consideration payable for all ownership
interests in BA-FR less the value of its interest in BA-US (determined as the
product of the numbers BA-US held by BA-FR at the closing date and the Per Share
BA-US Minority Price). In the absence of a transaction, apportionment shall be
on the basis of the EBITDA of BA-US and BA-FR (determined without consolidating
the results of BA-US) for the year ended December 31, 1999.
We consider the matters set forth in this agreement to be our binding obligation
as well as the binding obligation of any successors in ownership to our stock in
EHB and BA-FR, and we confirm that in the event that any of us shall transfer
any of our stock of EHB or BA-FR, he or she shall obligate our transferee(s) to
enter into a similar agreement with BA-US. We agree that the undertakings
contained herein shall continue until June 30, 2001 or to such earlier date as
we may abandon our efforts to seek a buyer for our interests in EHB and BA-FR;
provided , however, that the undertakings set forth in the preceding paragraph
shall continue effect in respect of any indemnity obligations of BA-US and us
referenced in the preceding paragraph which result from any claim, litigation or
proceedings initiated on or prior to June 30, 2002.
We understand that you have made a public announcement of our intent to seek a
buyer or implement other strategic alternatives pursuant to a press release on
July 10, 2000 in the form attached to this letter. We consent to such public
disclosure as well as the filing of this agreement with appropriate regulatory
authorities.
Please acknowledge and confirm the agreement of BA-US to the matters set forth
herein by signing and returning a copy of this letter to Philippe Bacou as our
representative.
Sincerely yours,
/s/ Jacqueline Maggi Bacou
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Jacqueline Maggi Bacou
/s/ Philippe Bacou
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Philippe Bacou
/s/ Christophe Bacou
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Christophe Bacou
/s/ Veronique Mirabel
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Veronique Mirabel
cc: Walter Stepan, Co-Chairman of Bacou USA, Inc.
Board of Directors of Bacou USA, Inc.
The foregoing agreement is acknowledged and confirmed this ____ day of July,
2000 by and on behalf of Bacou USA, Inc. by its duly authorized President and
Chief Executive Officer.
/s/ Philip B. Barr
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Philip B. Barr
