<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Safeskin Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1997
---------------------
The annual meeting of shareholders of Safeskin Corporation, a Florida
corporation (the "Company"), will be held at the Company's corporate
headquarters at 12671 High Bluff Drive, San Diego, California 92130 on Thursday,
June 12, 1997, beginning at 9:00 a.m., local time, and thereafter as it may from
time to time be adjourned, for the following purposes:
1. to elect six directors, each to serve until the next shareholders'
meeting at which directors are elected and until the director's successor
is duly elected and qualifies;
2. to consider and act upon a proposed amendment to the Company's
Equity Compensation Plan (the "Plan") to provide that in addition to those
shares currently authorized under the Plan the aggregate number of shares
of Common Stock that may be subject to grants of stock options, restricted
stock awards and stock appreciation rights under the Plan during each
calendar year shall be 2 1/2% of the number of shares of Common Stock
outstanding; and
3. to transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 21, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting or any postponements or adjournments thereof. A list of
shareholders entitled to notice of the meeting shall be available for inspection
by any shareholder, during regular business hours, for a period of ten days
prior to the annual meeting at the principal office of the Company, 12671 High
Bluff Drive, San Diego, California 92130 and at the annual meeting.
The Board of Directors of the Company urges you to sign, date and mail the
accompanying proxy in the enclosed postage prepaid envelope, regardless of
whether or not you intend to be present at the meeting. You are urged, however,
to attend the meeting. Proxies may be revoked at any time prior to the meeting
by giving written notice of revocation to the Secretary of the Company, by
giving a later dated proxy or by attending the meeting and voting in person.
By Order of the Board of Directors,
Richard Jaffe
Chairman of the Board, President and
Chief
Executive Officer
San Diego, California
April 30, 1997
<PAGE> 3
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Safeskin Corporation, a Florida corporation
(the "Company"), for use at the annual meeting of shareholders of the Company to
be held at the Company's corporate headquarters at 12671 High Bluff Drive, San
Diego, California, on Thursday, June 12, 1997, beginning at 9:00 a.m., local
time, and thereafter as it may from time to time be adjourned. This Proxy
Statement and the accompanying proxy were first sent to the Company's
shareholders on or about April 30, 1997.
You are requested to complete, date and sign the accompanying proxy, and
return it to the Company in the enclosed postage prepaid envelope. Proxies may
be revoked at any time prior to the meeting by giving written notice of
revocation to the Secretary of the Company, by giving a later dated proxy or by
attending the meeting and voting in person. Proxies duly executed and received
in time for the meeting will be voted in accordance with the shareholder's
instructions. If no instructions are given, proxies will be voted as follows:
1. FOR the election as directors of the six nominees named herein,
each to serve until the next shareholders' meeting at which directors are
elected and until the director's successor is duly elected and qualifies;
2. FOR the amendment to the Company's Equity Compensation Plan to
provide that in addition to those shares currently authorized under the
Plan the aggregate number of shares of Common Stock that may be subject to
grants of stock options, restricted stock awards and stock appreciation
rights under the Plan during each calendar year shall be 2 1/2% of the
number of shares of Common Stock outstanding; and
3. In the discretion of the proxyholders, FOR or AGAINST such other
business as may properly come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on April 21, 1997 as
the record date for determining the shareholders entitled to notice of and to
vote at the annual meeting. On the record date, there were 25,987,248
outstanding shares of the Company's common stock, par value $.01 per share (the
"Common Stock"). Holders of the Common Stock are entitled to one vote per share
held as of the record date. The presence in person or by proxy of shareholders
entitled to cast a majority of all votes entitled to be cast at the annual
meeting constitutes a quorum. All holders of issued and outstanding shares of
Common Stock are entitled to vote on Proposal 1 and 2. The affirmative vote of a
plurality of the votes cast by holders of outstanding shares of the Common Stock
is required for the approval of the election of the directors. The affirmative
vote of a majority of the votes cast by holders of outstanding shares of Common
Stock is required for approval of Proposal 2 and any other matters to be voted
upon at the meeting or any adjournment thereof. With regard to Proposal 1, votes
may be cast in favor of or withheld from any or all nominees. Votes that are
withheld with respect to this matter will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum.
Brokers who hold shares in street name for customers have the authority
under the rules of the various stock exchanges to vote on certain items when
they have not received instructions from beneficial owners. Brokers that do not
receive instructions are entitled to vote those shares with respect to the
election of directors, Proposal 1, but may not vote on Proposal 2. A failure by
brokers to vote those shares will have no effect on Proposal 2 as approval of
Proposal 2 only requires a majority of the votes cast. Any abstentions will have
the same effect as votes against the proposal.
Unless otherwise indicated, all share data included in this Proxy Statement
have been adjusted to reflect the 100% stock dividend paid by the Company on
January 2, 1997.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
Six persons are nominated for election by the holders of the Common Stock
as directors to serve until the next annual meeting of shareholders and until
his respective successor is duly elected and qualified. Although the Board of
Directors anticipates that all of the nominees will be able to serve, if any
nominee is unable or unwilling to serve at the time of the annual meeting, the
proxy will be voted for a substitute nominee chosen by the Board of Directors,
or the number of directors to be elected may be reduced in accordance with the
Company's Bylaws.
All of the nominees for director named below are currently serving as
directors of the Company for terms expiring at the annual meeting. The following
table sets forth certain information as to the persons nominated for election as
directors of the Company at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
IDENTIFIED BELOW.
NOMINEES TO BE VOTED ON BY THE SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Irving Jaffe.................................. 78 Chairman Emeritus and Director 1988
Richard Jaffe(1).............................. 44 Chairman of the Board, 1988
President, Chief Executive
Officer and Director
Neil K. Braverman(1).......................... 58 Director 1985
Cam L. Garner(2)(3)........................... 48 Director 1996
Howard L. Shecter(1)(2)....................... 53 Director 1993
Joseph Stemler(2)(3).......................... 66 Director 1995
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Mr. Irving Jaffe became Chairman Emeritus of the Company in May 1996 and
has served as a director of the Company since April 1988. He served as the
Chairman of the Board between August 1988 and May 1996 and as Chief Executive
Officer of the Company from August 1988 through March 1993. Since 1986, he has
been the Senior Managing Partner of the Jaffe Family Partnership, a family
investments partnership. From 1977 through 1985, Mr. Jaffe was the Chairman of
the Board and Chief Executive Officer of Nutri Foods International, Inc., a
manufacturer of frozen desserts ("Nutri Foods"). In 1985, Nutri Foods was sold
to The Coca-Cola Company. Mr. Jaffe attended New York University. Mr. Jaffe is
the father of Richard Jaffe.
Mr. Richard Jaffe became the Chairman of the Board, President and Chief
Executive Officer of the Company in May 1996 and has served as a director of the
Company since April 1988. Between March 1993 and May 1996, he was the Vice
Chairman of the Board and Co-Chief Executive Officer of the Company. Mr. Jaffe
served as the President of Safeskin Corporation (Malaysia) Sdn. Bhd. and Chief
Operating Officer of the Company between April 1988 and March 1993. In 1977, Mr.
Jaffe founded Nutri Foods. He served as President of Nutri Foods until December
1987. Mr. Jaffe served on the executive operating committee of the Foods
Division of The Coca-Cola Company from 1985 through 1987. Mr. Jaffe has been a
Managing General Partner of the Jaffe Family Partnership since 1985. Mr. Jaffe
holds a B.S. degree in industrial and labor relations from Cornell University.
Mr. Jaffe is the son of Irving Jaffe.
Mr. Braverman has served as a director since he founded the Company in
1985. In January 1997, Mr. Braverman entered into a consulting agreement with
the Company. Between May 1996 and December 1996, he served as the Co-Chairman of
the Company and between May 1993 and May 1996 as Co-Chief Executive Officer of
the Company. From 1985 through May 1996 Mr. Braverman served as President of the
Company. At various times during the period from 1972 through 1985, Mr.
Braverman was President of Reserve Energy Corporation, an oil drilling company,
and was President of Paramount Oil Co., a manufacturer of lubricating oils. From
1964 to 1972, he was President and Chief Executive Officer of Flair, Inc., a
consumer products
2
<PAGE> 5
manufacturer in Hong Kong. In 1968, Flair, Inc. was sold to U.S. Industries. Mr.
Braverman holds a B.S. degree in industrial management and engineering from the
Georgia Institute of Technology.
Mr. Garner became a director of the Company in June 1996. He has served as
the Chairman of Dura Pharmaceuticals, Inc., a publicly held pharmaceutical
company, since December 1995 and as the President and Chief Executive Officer
since May 1990. Between October 1989 and May 1990, he served as the Executive
Vice President of Dura Pharmaceuticals, Inc. From November 1987 to June 1989, he
served as the President of Syntro Corp., a biotechnology company. From October
1983 to October 1987, Mr. Garner was the Senior Vice President of Sales and
Marketing at Hybritech, Inc., a pharmaceutical company. Mr. Garner is currently
a director of Dura Pharmaceuticals, Inc., Houghton Pharmaceuticals, Inc. and
Spiros Development Corporation. He holds a B.A. degree in biology from Virginia
Wesleyan College and an M.B.A. from Baldwin-Wallace College.
Mr. Shecter became a director of the Company in June 1993. He has been a
partner since 1973 in the law firm of Morgan, Lewis & Bockius LLP. Mr. Shecter
served as the managing partner of Morgan, Lewis & Bockius LLP from 1979 to 1983
and was the Chairman of the Executive Committee of that firm in 1985. Mr.
Shecter holds an A.B. degree in government from Harvard College and a J.D.
degree from the University of Pennsylvania Law School.
Mr. Stemler became a director of the Company in June 1995. From January
1996 through February 1997, Mr. Stemler served as President, Chairman and Chief
Executive Officer of Scholle Corporation, an aseptic packaging company. Since
July 1995 Mr. Stemler has served as Chairman of the Board of La Jolla
Pharmaceutical Company. Previously, Mr. Stemler served as President, Chief
Executive Officer and Chairman of the Board of Directors of La Jolla
Pharmaceutical Company from its formation in 1989 to 1995. From 1985 to 1989,
Mr. Stemler served as President and Chairman of Quidel Corporation (the
predecessor of La Jolla Pharmaceutical Company). From 1978 and 1985, he served
as President of Bentley Laboratories and then as President of American Hospital
Supply Corporation's Bentley subsidiary. Mr. Stemler also serves as a director
of Sunrise Medical Inc., a publicly held manufacturer and provider of medical
products used in the rehabilitation and recovery phases of patient care. He
holds a B.S. degree in engineering from Illinois Institute of Technology and
holds advanced degrees in engineering and business administration.
COMPENSATION OF DIRECTORS
Outside directors will receive directors' fees in 1997 at an annual rate of
$17,000, which includes payment for services on Board committees, plus $2,000
per Board meeting attended. Prior to the stock dividend declared on January 2,
1997, each outside director upon election to the Board was entitled to receive
options to purchase 20,000 shares of the Common Stock at an exercise price equal
to the fair market value on the date of grant. Subsequent to the date the stock
dividend was declared, each outside director upon election to the Board will be
entitled to receive options to purchase 40,000 shares of the Common Stock at an
exercise price equal to the fair market value on the date of grant. Such options
were granted to each of the following directors upon their election: in 1993, to
Howard L. Shecter, in 1995, to Joseph Stemler and in 1996, to Cam L. Garner. The
options granted outside directors upon their election become exercisable at the
rate of 20% on each anniversary of the date of grant and expire on the tenth
anniversary of the date of grant or upon the director ceasing to serve as a
director of the Company. In addition, on February 27, 1997 all non-employee
directors, including Neil K. Braverman and Irving Jaffe, received options to
purchase 15,000 shares of the Common Stock at an exercise price of $18.00, which
is equal to the fair market value on the date of the grant. Of these options,
10,000 options become exercisable in the event the market price of the Company's
Common Stock reaches $27.50 for 30 consecutive days prior to December 31, 1998
and 5,000 options become exercisable in the event the market price of the
Company's Common Stock reaches $30.00 for 30 consecutive days prior to December
31, 1999. The directors do not receive additional compensation for their
services as director.
Beginning in 1993, the Company began paying Irving Jaffe for his services
as Chairman of the Board and as a consultant to the Company, primarily in the
areas of marketing and public relations. During 1996, Irving Jaffe was paid at
the annual rate of $160,000 but did not receive any fees for his services as
director. During 1997, Irving Jaffe will be paid at the annual rate of $100,000
and will receive standard director fees. As of January 1, 1997, Mr. Braverman
resigned as an executive officer of the Company and entered into a one year
consulting
3
<PAGE> 6
agreement pursuant to which he will be paid at the annual rate of $300,000 but
does not receive any fees for his services as director. See "Executive
Compensation -- Employment and Severance Agreements."
COMMITTEES AND MEETINGS
During the year ended December 31, 1996, the Board of Directors held four
meetings. All of the directors attended 100 percent of the number of meetings of
the Board of Directors and of the committees thereof held during their
respective terms.
The Executive Committee consists of Neil K. Braverman, Richard Jaffe and
Howard L. Shecter. The Executive Committee held five meetings during the year
ended December 31, 1996. The Executive Committee has all the authority held by
the full Board of Directors, except with respect to certain matters reserved to
the Board of Directors by law. All matters approved by the Board of Directors,
except such reserved matters, must first be approved by the Executive Committee.
The Compensation Committee consisted of Howard L. Shecter and Joseph
Stemler prior to June 1996 and consists of Cam L. Garner and Joseph Stemler from
June 1996. The Compensation Committee held twelve meetings during the year ended
December 31, 1996. The primary function of the Compensation Committee is to
review and approve the Company's compensation policies and practices, to propose
compensation levels for executive officers and other key employees and to
administer the Company's Equity Compensation Plan.
The Audit Committee consisted of Howard L. Shecter and Joseph Stemler prior
to June 1996 and consists of Cam L. Garner, Joseph Stemler and Howard L. Shecter
from June 1996. The Audit Committee held one meeting during the year ended
December 31, 1996. The primary function of the Audit Committee is to assist the
Board of Directors in fulfilling its responsibilities with respect to the
accounting and financial reporting practices of the Company and to address the
scope and results of the audit and other services performed by the Company's
independent accountants.
The Board of Directors does not have a separate nominating committee but
rather performs the functions of a nominating committee.
4
<PAGE> 7
EXECUTIVE COMPENSATION
TOTAL ANNUAL COMPENSATION
The following table sets forth certain information relating to the total
annual compensation paid or accrued by the Company and its subsidiaries, during
the fiscal years ending December 31, 1996, December 31, 1995 and December 31,
1994, to its Chief Executive Officer, its other four most highly compensated
executive officers who served in such capacities on December 31, 1996 and one
individual who would have been one of the four most highly compensated executive
officers but did not serve as an executive officer after July 31, 1996 (the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------- -----------------------------
SECURITIES
OTHER ANNUAL RESTRICTED STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS(4) ($) COMPENSATION AWARD(S) ($) OPTIONS(5) COMPENSATION
- --------------------------- ---- ---------- ------------ ------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Jaffe, 1996 $450,000 $360,000 * -- 350,000 --
Chairman of the Board, 1995 400,000 -- * -- -- --
President and Chief 1994 350,000 -- * -- 290,000 --
Executive Officer
Neil K. Braverman,(1) 1996 $450,000 $400,000 * -- -- --
Co-Chairman 1995 400,000 -- * -- -- --
1994 350,000 -- * -- 290,000 --
David L. Morash, 1996 $206,000 $120,000 * -- 60,000 --
Executive Vice President 1995 200,500 68,000 * -- -- --
and Chief Financial 1994 70,163 21,000 * -- 100,000 --
Officer
Lee Chee Ming, 1996 $157,673 $ 59,583 * -- 60,000 --
Managing Director, 1995 136,814 42,987 * -- -- --
Safeskin Corporation 1994 131,318 60,205 * 120,000 --
(Malaysia) Sdn. Bhd.(2)
Jeffrey A. Martin, 1996 $157,500 $102,375 * -- 30,000 --
Vice President, 1995 150,500 50,000 * -- -- --
Marketing and Business 1994 137,966 30,000 * -- 120,000 --
Development
Judy W. Grimes(3) 1996 $152,500 $220,500 * -- 80,000 300,125(7)
Executive Vice President 1995 227,167 170,000 * $1,475,000(6) -- --
1994 140,500 100,000 * -- 190,000 --
</TABLE>
- ---------------
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for the
executive officer and, therefore is not required to be disclosed pursuant to
Securities and Exchange Commission (the "Commission") rules.
(1) Mr. Braverman served as Co-Chief Executive Officer until May 1996.
(2) All amounts paid to Mr. Lee are paid in Malaysian ringgits and converted to
dollars at the exchange rate for 1996 (US $1.00 = M $2.5175), 1995 (US $1.00
= M $2.5108) and 1994 (US $1.00 = M $2.6232).
(3) Ms. Grimes served as Executive Vice President until July 31, 1996.
(4) Includes amounts accrued during year presented but paid in the subsequent
year.
(5) All share data have been adjusted to reflect the 100% stock dividend paid by
the Company on January 2, 1997.
(6) Represents a restricted stock grant of 200,000 shares that was valued at the
grant date at $7.375 per share. Pursuant to an agreement entered into
between the Company and Judy W. Grimes upon her separation from the Company,
Ms. Grimes forfeited 116,668 shares of such grant. All other shares
immediately vested. At December 31, 1996, the closing price as reported by
the Nasdaq National Market of the Company's Common
5
<PAGE> 8
Stock was $24.375 per share, giving the vested portion of the restricted
stock award a total value of $2,031,217.50.
(7) Includes additional amounts paid to Ms. Grimes in connection with her
severance agreement. See "Executive Compensation -- Employment and Severance
Agreements."
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth the stock options granted to and exercised
by the executive officers named in the Summary Compensation Table during the
year ended December 31, 1996.
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES
SECURITIES OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER FOR OPTION TERM
OPTIONS EMPLOYEES IN SHARE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------- ------------ --------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe 100,000(2) 6.82% $ 8.875 Feb. 26, 2006 $ 558,140 $1,414,444
50,000(3) 3.41 8.875 Feb. 26, 2006 279,070 707,222
200,000(4) 13.64 10.865 Mar. 12, 2006 1,044,059 2,949,636
200,000(5) 13.64 18.500 Sept.11, 2006 1,471,728 4,535,124
Neil K. Braverman -- -- -- -- -- --
David L. Morash 60,000(2) 4.09 8.875 Feb. 26, 2006 334,884 848,666
Lee Chee Ming 60,000(2) 4.09 8.875 Feb. 26, 2006 334,884 848,666
Judy W. Grimes 80,000(2) 5.46 8.875 Feb. 26, 2006 446,512 1,131,555
Jeffrey A. Martin 30,000(2) 2.05 8.875 Feb. 26, 2006 167,442 424,333
10,000(6) 0.68 15.000 Aug. 21, 2006 94,333 239,061
</TABLE>
- ---------------
(1) All share data have been adjusted to reflect the 100% stock dividend paid by
the Company on January 2, 1997.
(2) These options were earned as of December 31, 1996 based on the Company and
the individual achieving specified performance goals for 1996 and became
exercisable over a five year period at the rate of 20% each year beginning
on December 31, 1997.
(3) These options vest over a five year period at a rate of 20% each year,
beginning on December 31, 1996.
(4) These options became exercisable once the market price of the Company's
Common Stock reached $15.00 for 30 consecutive days prior to December 31,
1997.
(5) Of these options, 100,000 become exercisable in the event the market price
of the Company's Common Stock reaches $22.50 for 30 consecutive days prior
to December 31, 1997 and 100,000 of the options become exercisable in the
event the market price of the Company's Common Stock reaches $25.00 for 30
consecutive days prior to December 31, 1998.
(6) These options vest over a five year period at a rate of 20% each year,
beginning on the first anniversary of the date of the grant.
6
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END(2)
ACQUIRED ON VALUE (#) ($)
EXERCISE(1) REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe............. 200,000 $2,558,750 630,000 410,000 $9,302,000 $5,561,250
Neil K. Braverman......... 100,000 1,400,000 408,000 170,000 7,568,499 2,803,750
David L. Morash........... -- -- 30,000 130,000 487,500 2,067,500
Lee Chee Ming(3).......... 100,354 1,729,763 24,000 232,354 396,000 4,459,468
Jeffrey A. Martin......... 40,000 484,313 28,000 132,000 477,000 2,113,500
Judy W. Grimes(4)......... 64,000 744,500 44,000 222,000 748,500 3,634,750
</TABLE>
- ---------------
(1) All share data have been adjusted to reflect the Company's 100% stock
dividend paid on January 2, 1997.
(2) Calculated based upon the difference between the fair market value of the
Common Stock of $24.375 per share on December 31, 1996 and the exercise
price of in-the-money options.
(3) This amount includes options covering 441,770 shares that were granted to
Mr. Lee in 1990 outside the Equity Compensation Plan. These options were and
are exercisable at the rate of 88,354 shares on each April 15 of 1993
through 1997.
(4) Ms. Grimes served as Executive Vice President until July 31, 1996.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Neil K. Braverman and Richard Jaffe both served as executive officers of
the Company during 1996. Each of these officers had previously entered into
employment agreements with the Company which expired on June 30, 1996. Neither
of these agreements were renewed. Each agreement provided for an annualized base
salary of $450,000 for the period ending June 30, 1996. Pursuant to the
agreements, on June 15, 1993, each executive was granted options to purchase
300,000 shares of Common Stock at $5.00 per share, the fair market value of the
Common Stock on such date as determined by the Board of Directors, and 100,000
shares at $5.50 per share, 110% of the fair market value per share on such date.
One-third of each category of options were exercisable each year. Each executive
also covenanted not to compete with the Company for a period of three years
after the term of his employment.
Effective January 1, 1997, Mr. Braverman resigned as an executive officer
of the Company and entered into a consulting agreement with the Company.
Pursuant to the consulting agreement, Mr. Braverman will receive an annual
salary of $300,000 and be eligible to receive a bonus of up to $150,000 based
upon the satisfaction of certain specified target objectives in the area of
manufacturing.
Judy W. Grimes served as Executive Vice President of the Company until July
31, 1996 pursuant to an employment agreement entered into with the Company on
June 29, 1995. The agreement originally provided for an expiration date of
December 31, 1998 and provided for an annualized base salary of not less than
$250,000 for the term of the agreement. Pursuant to the agreement, on June 29,
1995, Ms. Grimes was awarded a restricted stock grant of 200,000 shares that
vested over a five year period in accordance with the following vesting
schedule: 16,666 shares vested on January 4 of 1996 and 1997, 16,667 shares
vested on January 4, 1998 and 25,000 shares vested on January 4 of 1999 and
2000. Ms. Grimes was also entitled to receive a cash bonus with target
opportunities equal to 70% of her base salary for the calendar year 1996. Upon
her separation from the Company, Ms. Grimes entered into an agreement with the
Company which provided that (i) she would continue to receive her salary and
cash bonus through the end of 1997, (ii) $20,000 of a loan granted in connection
with her relocation was forgiven immediately, (iii) 116,668 shares of the
restricted stock grant were to be forfeited, (iv) 83,332 shares of the
restricted stock grant were immediately vested and (v) her previously issued
stock options continue to vest until December 31, 1998 at which time all
remaining options vest. Once vested all Ms. Grimes' options must be exercised
prior to January 4, 2000.
7
<PAGE> 10
David L. Morash, Executive Vice President and Chief Financial Officer,
entered into an employment agreement with the Company on July 20, 1995 which
expired December 31, 1996. The agreement provided for an annualized base salary
of not less than $200,000 for the term of the agreement. Mr. Morash was also
entitled to receive a cash bonus with target opportunities equal to 37% of his
base salary. The agreement also provided for certain payments and benefits in
the event employment was terminated due to Mr. Morash's disability (payments
equal to base salary and bonus for the disability period plus a cash bonus at
least equal to the cash bonus earned by Mr. Morash in his last full year of
employment, reduced by the amount of any payments made to Mr. Morash under
Company disability plans).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Howard L. Shecter and Joseph
Stemler prior to June 1996 and of Cam L. Garner and Joseph Stemler from June
1996. None of the committee members has ever been an officer or employee of the
Company or its subsidiaries.
Howard L. Shecter, a director of the Company and a member of the
Compensation Committee prior to June 1996, is a partner in the law firm of
Morgan, Lewis & Bockius LLP, which serves as the Company's outside counsel.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
consisted of Howard L. Shecter and Joseph Stemler prior to June 1996 and of Cam
L. Garner and Joseph Stemler from June 1996. The Committee has the authority to
determine the compensation of the Company's executive officers and to administer
the Company's Equity Compensation Plan. The Committee currently consists of two
outside directors who are not officers or employees of the Company. The Company
is currently in compliance with Section 162(m) of the Internal Revenue Code of
1986, as amended.
Since the Company's initial public offering of Common Stock in November
1993, the Committee has focused on the formulation of compensation policies to
reflect the Company's status as a public company. Compensation for the Company's
Chief Executive Officer, Richard Jaffe, and former Co-Chief Executive Officer,
Neil K. Braverman, were, prior to June 1996, subject to the terms of employment
agreements approved by the Board of Directors in June 1993, prior to both the
Company's initial public offering and the establishment of the Compensation
Committee. Subsequent to June 1996, the Company sought to compensate its Chief
Executive Officer in a competitive manner that utilizes salary, cash bonuses and
non-cash compensation to closely align the interests of the Chief Executive
Officer with those of the shareholders. The cash bonus awarded the Chief
Executive Officer in 1997 for 1996 performance was based on the individual's
performance and the Company's performance. The Committee, in 1996, made two
grants to the Chief Executive Officer, Richard Jaffe, the values of which were
tied to future increases in the price of the Company's Common Stock. These
options may be earned if the market price of the Company's Common Stock
maintains a minimum target price for 30 consecutive days within specified time
periods. Once earned these options are immediately exercisable.
The Committee believes that the Company's compensation programs should be
administered in a manner that will enable the Company to:
(1) recruit, develop and retain the highest quality executives, by
paying executives base compensations competitive with those of its peers;
(2) maximize financial performance, balancing appropriately the short
and long term goals of the Company; and
(3) align the interests of Company executives with those of its
shareholders through the use of stock options to link a significant portion
of compensation to increases in shareholder value.
To achieve its policy goals, the Committee has utilized salary, cash
bonuses and non-cash compensation, including grants of stock and stock options.
The Committee has focused on the establishment of competitive
8
<PAGE> 11
salary levels for each of its executive officers. The Committee has utilized
publicly available information in determining competitive salary levels, both
for new and existing executives.
The Company has retained a leading independent compensation consulting firm
to assist the Committee in defining appropriate policies with respect to base
and incentive compensation for the Company's executive officers and other key
employees. In developing such policies, the Committee considered information and
data concerning compensation paid by corporations that compete with the Company
for executive talent, including corporations engaged in high growth (including
technology-based) industries and manufacturing concerns, and not necessarily the
Company's peers that are used to compare shareholder returns.
Cash bonuses have been used to encourage and reward short term performance.
All executives, other than Richard Jaffe and Neil K. Braverman, were awarded
cash bonuses in 1996 based on 1995 performance. During 1996, the two Executive
Vice Presidents were awarded cash bonuses pursuant to their employment
agreements. For all other executives, the Committee established a maximum bonus
target for each manager and determined the actual bonus amount to be paid to
each manager based upon the individual's performance as measured against the
individual's goals and responsibilities and upon the Company's performance.
Factors such as achievement of sales targets in the case of sales and marketing
personnel, product availability and quality in the case of manufacturing
personnel and other, largely subjective, criteria in the case of financial and
administrative personnel were taken into consideration in this process.
Stock options have been utilized by the Committee to encourage and reward
both long term and short term compensation goals. The Committee believes that
stock options provide a particularly effective incentive for the enhancement of
shareholder value since the full benefit of stock option grants will not be
realized unless there has been appreciation in per share values over an extended
period of time. With the exception of the grant of stock options as special
awards to selected sales persons who had achieved the best sales performance in
a particular area and certain options granted to the Chief Executive Officer,
all of the Company's option grants to employees vest in installments over a
period of years, generally five years, thus creating an additional incentive for
the individual to remain in the employ of the Company.
In addition, certain stock options have been structured to be utilized as
an incentive for short- and medium-term performance. The Committee authorized
the grant of performance stock options ("Performance Options") to selected key
employees, based upon the Company's performance in 1996. The options were
granted in early 1996 and could be "earned", depending upon the degree to which
the individual and the Company attained specified performance objectives for
1996. Once earned, the options would vest in installments of 20% per year over
the ensuing five years. These Performance Options are scheduled to vest in any
event in 2006, if the recipient is then employed by the Company. For 1996, the
individual's performance objectives and achievements for that year were given
primary weight in determining whether such Performance Options had been earned
by all of the recipients, although the Company's achievement of its performance
objectives was also considered. The Committee has decided not to continue the
use of Performance Options.
Compensation Committee
Cam L. Garner
Joseph Stemler
9
<PAGE> 12
PERFORMANCE GRAPH
The Company's Common Stock began trading on the Nasdaq National Market on
November 17, 1993 when its initial public offering commenced. The following
graph shows the total return to shareholders of an investment in the Company's
Common Stock as compared to (a) an investment in a peer group (see "Peer Index")
made up of (i) Ballard Medical Products, Inc., (ii) ICU Medical, Inc., (iii)
Maxxim Medical, Inc. and (iv) Tecnol Medical Products Inc., and (b) an
investment in the Nasdaq Composite Index (the "Nasdaq Index"). The time frame
for the Peer Index corresponds directly to the period during which the Company's
Common Stock has been traded, (i.e., for the period November 17, 1993 through
December 31, 1996). The four companies in the Peer Index have been selected
because they represent comparable companies in the medical products
manufacturing business. The time frame for the Nasdaq Index, which is compiled
on a monthly basis, begins with the period immediately preceding the Company's
initial public offering (i.e., October 31, 1993) and continues through December
31, 1996.
Total shareholder return is determined by dividing (i) the sum of the
cumulative amount of dividends for a given period (assuming dividend
reinvestment) and the difference between the share price at the end and the
beginning of the period, by (ii) the share price at the end of the period.
COMPARE CUMULATIVE TOTAL RETURN
AMONG SAFESKIN CORPORATION,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
11/17/93 12/31/93 12/31/94 12/31/95 12/31/96
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAFESKIN CORPORATION 100.00 123.08 109.62 130.77 375.00
- ------------------------------------------------------------------------------------------------
PEER GROUP INDEX 100.00 92.73 78.06 106.26 93.62
- ------------------------------------------------------------------------------------------------
NASDAQ MARKET INDEX 100.00 103.36 108.52 140.76 174.92
- ------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Reflects performance related to $100 invested on November 17, 1993 in each of
the Company's Common Stock and the Peer Index and $100 invested on October 31,
1993 in the Nasdaq Index, in each case including reinvestment of dividends,
through fiscal year ending December 31, 1996.
10
<PAGE> 13
SECURITY OWNERSHIP
The following table sets forth information, as of March 31, 1997, with
respect to the beneficial ownership of shares of the Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the aggregate
shares of Common Stock outstanding, (ii) each director and nominee for election
as a director, (iii) each Named Officer and (iv) all directors and executive
officers of the Company as a group. On March 31, 1997, there were 25,987,248
shares of Common Stock outstanding. Unless indicated, each of the persons in the
table below has sole voting power and sole dispositive power as to all of the
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
- ---- --------------------- --------
<S> <C> <C>
Irving Jaffe................................................ 1,349,066(2)(3) 5.19%
Richard Jaffe............................................... 1,873,544(3)(4)(9) 7.03%
Neil K. Braverman........................................... 2,246,120(5)(9) 8.50%
Eleanor Jaffe............................................... 1,349,066(3)(6) 5.19%
Ann Jaffe................................................... 1,873,544(7) 7.03%
Jeanne D. Braverman......................................... 2,246,120(8) 8.50%
Lee Chee Ming............................................... 177,416(9) *
Jeffrey A. Martin........................................... 17,500(9) *
David L. Morash............................................. 30,000(9) *
Howard L. Shecter........................................... 14,000(9) *
Joseph Stemler.............................................. 8,000(9) *
Cam L. Garner............................................... 2,000 *
All directors and executive................................. 5,784,546(9) 21.17%
officers as a group
(17 persons)
Nicholas-Applegate Capital Management....................... 2,303,744(10) 8.96%
600 West Broadway, 29th Floor
San Diego, CA 92101
Travelers Group Inc......................................... 1,942,358(11) 7.6%
388 Greenwich Street
New York, NY 10013
Smith Barney Holdings, Inc.................................. 1,862,358(11) 7.2%
388 Greenwich Street
New York, NY 10013
Navellier & Associates...................................... 1,344,002(12) 5.22%
1 East Liberty Street, 3rd Floor
Reno, Nevada 89501
The TCW Group, Inc.......................................... 1,328,000(13) 5.2%
865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
- ---------------
* Does not exceed one percent.
The address of each 5% shareholder, other than those otherwise specified,
is c/o Safeskin Corporation, 12671 High Bluff Drive, San Diego, California
92130.
(1) All share data have been adjusted to reflect the 100% stock dividend paid
by the Company on January 2, 1997.
(2) Includes 370,930 shares held by Eleanor Jaffe, Irving Jaffe's spouse.
(3) Includes the following number of shares for the following shareholders
which are held of record by Stanley Priskie or Stanley and Vilma Priskie:
Irving Jaffe -- 185,544; Richard Jaffe -- 185,544; and Eleanor Jaffe --
50,488. The Jaffes have advised the Company that an aggregate of 528,862
shares (including the 421,576
11
<PAGE> 14
shares referred to above) are beneficially owned by the Jaffes and are held
of record by the Priskies in nominee capacity. The Priskies have advised
the Company that they claim record and beneficial ownership of the shares
and dispute the Jaffes' claim. On October 7, 1993, the Jaffes commenced a
lawsuit against Stanley and Vilma Priskie in the Circuit Court of Dade
County, Florida, seeking, inter alia, the return of the disputed shares.
(4) Includes 1,028,000 shares held by R and A Family Partnership, L.P., whose
general partner is a revocable family trust of which Richard Jaffe is a
trustee and beneficiary.
(5) Includes 558,268 shares held by the Braverman Family Partnership, Ltd., a
family limited partnership of which Neil K. Braverman is the sole
shareholder of the general partner and a limited partner, 466,332 held by
the Braverman Family Trust, a family trust whose sole beneficiary is the
Braverman Family Partnership, Ltd, 174,612 shares held by Jeanne D.
Braverman, Mr. Braverman's spouse, 577,176 shares held by trusts for which
Ms. Braverman serves as trustee and shares subject to exercisable options
(see note (9) below).
(6) Includes 742,104 shares held by Irving Jaffe, Eleanor Jaffe's spouse, and
185,544 shares to which Irving Jaffe claims beneficial ownership, as
further described in note (3) above.
(7) Includes 1,028,000 shares held by R and A Family Partnership, L.P., whose
general partner is a revocable family trust of which Ann Jaffe is a trustee
and beneficiary, 185,544 shares to which Richard Jaffe claims beneficial
ownership, as further described in note (3) above, and shares subject to
exercisable options (see note (9) below).
(8) Includes 558,268 shares held by the Braverman Family Partnership, Ltd., a
family limited partnership of which Neil K. Braverman is the sole
shareholder of the general partner and a limited partner, 466,332 held by
the Braverman Family Trust, a family trust whose sole beneficiary is the
Braverman Family Partnership, Ltd, 31,732 shares held by Neil K. Braverman,
577,176 shares held by trusts for which Ms. Braverman serves as trustee and
shares owned by Neil K. Braverman subject to exercisable options (see note
(9) below).
(9) Includes shares beneficially owned under currently exercisable options as
follows: Neil K. Braverman -- 438,000; Richard Jaffe -- 660,000; Lee Chee
Ming -- 112,354; David L. Morash -- 30,000; Jeffrey A. Martin -- 17,500;
Joseph Stemler -- 8,000; Howard L. Shecter -- 14,000; and all directors and
executive officers as a group -- 1,342,354.
(10) Information as of December 31, 1996 as filed with the Commission on
Schedule 13G.
(11) Information as of December 31, 1996 as filed with the Commission on
Schedule 13G. Travelers Group Inc. is the sole shareholder of Smith Barney
Holdings, Inc.
(12) Information as of December 31, 1996 as filed with the Commission on
Schedule 13G.
(13) Information as of December 31, 1996 as filed with the Commission on
Schedule 13G. Pursuant to the Schedule 13G, Robert Day, identified as an
individual who may be deemed to control The TCW Group, Inc. and other
holders of the Common Stock of the issuer, beneficially owns 1,328,000
shares, or 5.2% of the class.
PROPOSAL 2
AMENDMENT TO EQUITY COMPENSATION PLAN
TO INCREASE THE AUTHORIZED SHARES
Amendment. The Company's Equity Compensation Plan (the "Plan") authorizes
the Compensation Committee of the Board of Directors to grant stock options,
restricted stock awards and stock appreciation rights to Company officers,
directors, key employees and eligible independent contractors. On February 27,
1997, the Board of Directors amended the Plan to (i) to provide that the
aggregate number of shares of Stock that may be subject to grants of stock
options, restricted stock awards and stock appreciation rights under the Plan
during each calendar year is 2 1/2% of the outstanding shares (plus any shares
authorized in prior years for grants under the Plan which have not been subject
to grants) and that the aggregate number of shares of Stock that may be subject
to Incentive Stock Options during the term of the Plan is 500,000, (ii) permit
the transfer of nonqualified stock options, (iii) make changes to comply with
the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 (the
"Exchange Act") and (iv) make certain other administrative changes. The
amendment to increase the number of authorized shares under the Plan is subject
to shareholder approval at the annual meeting. The directors approved the
amendment because they determined that the Plan lacked a sufficient number of
shares
12
<PAGE> 15
available for future grants. A description of the material features of the Plan
and a table disclosing the options granted through March 31, 1997 follow.
Administration of the Plan. The Plan is currently administered by the
Compensation Committee consisting of not less than two persons appointed by the
Board from among its members who are not employees of the Company and who are
outside directors within the meaning of section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code") and Non-Employee Directors within the
meaning of Rule 16b-3. The Compensation Committee is authorized to determine,
from time to time, the persons to whom awards or grants will be made, and the
term, exercise price, settlement terms, forfeiture provisions and other terms
and conditions of each award or grant. The Compensation Committee has the power
to establish and waive, in its discretion, vesting provisions for awards or
grants.
Grants. Incentives under the Plan may consist of any of incentive stock
options, non-qualified stock options, restricted stock awards and stock
appreciation rights. Shares subject to options, awards or rights which expire or
are forfeited become available to be granted again under the Plan.
Eligibility for Participation. Officers, directors, key employees and
eligible independent contractors of the Company who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company are eligible to receive grants under the Plan ("Participants"). As of
March 31, 1997 there were 12 officers, 5 outside directors and approximately 192
employees eligible to participate in the Plan. To date, options have been
granted to only one eligible independent contractor. The maximum aggregate
number of shares of Stock that may be subject to awards granted under the Plan
to any single Participant during a calendar year is 500,000 shares.
The Plan as amended provides that unless the Committee determines
otherwise, and in addition to any other grants that the Committee deems
appropriate, all non-employee directors will automatically receive grants of
non-qualified stock options to purchase 40,000 shares of Common Stock as of the
date they are first elected to the Board. Such options have a per share exercise
price equal to the fair market value of one share of Common Stock as of the date
of grant, a term of ten years, and vesting at the rate of 20% per year. There
are currently three outside non-employee, directors.
Options, Term and Purchase Price. The exercise price of Common Stock
subject to an option is the fair market value of the stock on the date the
option is granted. However, incentive stock options ("ISOs") granted to a person
who owns more than 10% of the voting power of the Company are required to have
an exercise price of not less than 110% of the fair market value of the Common
Stock on the date of grant. On March 31, 1997, the fair market value of a share
of Common Stock was $18.125 per share.
The Compensation Committee determines the option exercise period for each
option, not to exceed ten years from the date of grant, except that ISOs granted
to a person who owns more than 10% of the voting power of the Company are
required to have an exercise period of not greater than five years.
Transferability of Options. In general options are not transferable,
except by will or the laws of decent or distribution, pursuant to a qualified
domestic relations order or as permitted by the rules under Section 16 of the
Exchange Act. In addition, the Plan as amended provides that the Committee may
permit a grantee to transfer nonqualified stock options to family members, a
trust established for the benefit of such family members or other persons or
entities according to such terms as the Committee may determine; provided that
the grantee may not receive consideration for the transfer of such option and
the transferred option must continue to be subject to the same terms and
conditions as were applicable to the option immediately before the transfer.
Restricted Stock Grants. The Compensation Committee may award shares of
Common Stock pursuant to the Plan to officers and other key employees of the
Company. Shares of Common Stock issued pursuant to a restricted stock grant may
be issued for consideration or for no consideration. If a grantee's employment
terminates during the restriction period, the restricted stock grant terminates
with respect to all shares covered by the grant as to which the restrictions on
transfer have not lapsed. Restrictions imposed under the restricted stock grant
lapse upon the expiration of the applicable restriction period. In addition, the
Compensation Committee may determine as to any or all restricted grants that all
restrictions will lapse based on service, performance and/or such other factors
as the Compensation Committee may determine.
13
<PAGE> 16
Stock Appreciation Rights. The Compensation Committee may grant stock
appreciation rights ("SARs") to any grantee in tandem with stock options, for
all or a portion of the applicable stock options, either at the time the stock
options are granted or at any time thereafter while the stock options remain
outstanding. In the case of an ISO, however, SARs may be granted only at the
time of the grant of the ISO. The number of SARs granted to a grantee which are
exercisable during any given period of time may not exceed the number of shares
of Common Stock which the grantee may purchase upon the exercise of the related
stock options during such period of time. Upon the exercise of stock options,
the SARs relating to the Common Stock covered by the stock option terminate.
Upon the exercise of SARs, the related stock options terminate as to the extent
of an equal number of shares of Common Stock.
Upon a grantee's exercise of SARs, the grantee receives in settlement of
such SARs an amount equal to the value of the stock appreciation for the number
of SARs exercised, payable in cash, Common Stock or a combination thereof, as
determined by the Committee. The stock appreciation for a SAR is the difference
between the option price specified for the related stock option and the fair
market value of the underlying Common Stock on the date of exercise of the SAR.
The Plan provides that the exercise price of a SAR is the (i) exercise price or
option price of the related stock option or (ii) if the SAR is granted after the
stock option and the option price would result in the disallowance of the
Company's expense deduction upon exercise of the SAR under section 162(m) of the
Code, the fair market value of a share of Common Stock as of the date of the
grant of the SAR.
A SAR is exercisable only during the period when the Stock Option to which
it relates is also exercisable; provided, however, that in no event may a SAR be
exercisable during the first six months after being granted, except in the event
of the death or disability of the grantee. No SARs have been awarded under the
plan.
Amendment and Termination of the Plan. The Board may amend or terminate
the Plan at any time, provided that shareholder approval is required for any
amendment that requires shareholder approval in accordance with the regulations
issued under Section 16 of the Securities Exchange Act of 1934 and any amendment
that would impair the rights of a grantee requires the grantee's consent. The
Plan will terminate on June 15, 2003 unless terminated earlier by the Board.
Awards granted prior to June 15, 2003 may extend beyond that date.
Adjustment Provisions. If there is any change in the Common Stock as a
result of a stock dividend, recapitalization, stock split, or combination or
exchange of the Common Stock, or a merger, reorganization or consolidation of
the Company or any other change in the capital structure made without the
receipt of consideration, then unless such event results in the termination of
all outstanding grants under the Plan, the number of and class of shares
available for grants and the number and class of such shares covered by
outstanding grants, and the price per share or the applicable market value of
such grants, will be proportionately adjusted by the Compensation Committee to
reflect any increase or decrease in the number or kind of issued shares of
Common Stock.
Change in Control of the Company. In the event of a change in control,
unless otherwise determined by the Compensation Committee or the Board, any SARs
outstanding for at least six months and all outstanding stock options would
become fully vested and immediately exercisable, and the restrictions on any
restricted stock grants would lapse with such grants becoming fully vested. The
value of all outstanding grants may be cashed out by the Company on the basis of
the highest price paid for Common Stock during the 60 days preceding the change
in control.
Federal Income Tax Consequences. Set forth below is a general description
of the federal income tax consequences relating to grants under the Plan.
Non-Qualified Stock Options. There are no federal income tax consequences
to grantees or to the Company upon the grant of an non-qualified stock option
("NQSO") under the Plan. Upon the exercise of NQSOs, grantees will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the exercise price of the NQSO,
and the Company generally will be entitled to a corresponding federal income tax
deduction. Upon the sale of shares acquired by exercise of an NQSO, a grantee
will have a capital gain or loss in an amount equal to the difference between
the amount realized upon the
14
<PAGE> 17
sale and the grantee's adjusted tax basis in the shares (the exercise price plus
the amount of ordinary income recognized by the grantee at the time of exercise
of the NQSO).
Incentive Stock Options. Grantees will not be subject to federal income
taxation upon the grant or exercise of ISOs granted under the Plan, and the
Company will not be entitled to a federal income tax deduction by reason of such
grant or exercise. However, the amount by which the fair market value of the
shares at the time of exercise exceeds the stock option price (or the grantee's
other tax basis in the shares) is an item of tax preference subject to the
alternative minimum tax applicable to the person exercising the ISO. A sale of
shares acquired by exercise of an ISO that does not occur within one year after
the exercise or within two years after the grant of the ISO generally will
result in the recognition of long-term capital gain or loss in the amount of the
difference between the amount realized on the sale and the stock option price
(or the grantee's other tax basis in the shares), and the Company will not be
entitled to any tax deduction in connection with the sale.
If the sale occurs within one year from the date of exercise of the ISO or
within two years from the date of grant (a "disqualifying disposition") and is a
transaction in which a loss, if sustained, would be recognized, the grantee
generally will recognize ordinary compensation income equal to the lesser of (i)
the excess of the fair market value of the shares on the date of exercise over
the exercise price (or the grantee's other tax basis in the shares), or (ii) the
excess of the amount realized on the sale of the shares over the exercise price
(or the grantee's other tax basis in the shares). In the case of a disqualifying
disposition where a loss, if sustained, would not be recognized, the grantee
will recognize ordinary income equal to the excess of the fair market value of
the shares on the date of exercise over the stock option price (or the grantee's
other tax basis in the shares). Any amount realized on a disqualifying
disposition in excess of the amount treated as ordinary compensation income (or
any loss realized) will be a long-term or a short-term capital gain (or loss),
depending upon the length of time the shares were held. The Company generally
will be entitled to a tax deduction on a disqualifying disposition corresponding
to the ordinary compensation income recognized by the grantee.
Restricted Stock. A grantee normally will not recognize taxable income
upon the award of a restricted stock grant, and the Company will not be entitled
to a deduction, until such stock is transferable by the grantee or no longer
subject to a substantial risk of forfeiture for federal tax purposes, whichever
occurs earlier. When the Common Stock is either transferable or is no longer
subject to a substantial risk of forfeiture, the grantee will recognize ordinary
compensation income in an amount equal to the fair market value of the Common
Stock at that time and the Company will be entitled to a deduction in the same
amount. A grantee may, however, elect to recognize ordinary compensation income
in the year the restricted stock grant is awarded in an amount equal to the fair
market value of the Common Stock at that time, determined without regard to the
restrictions. In this event, the Company will be entitled to a deduction in the
same year. Any gain or loss recognized by the grantee upon subsequent
disposition of the Common Stock will be capital gain or loss. If, after making
the election, any Common Stock subject to a restricted stock grant is forfeited,
or if the market value declines during the restriction period, the grantee will
not be entitled to any tax deduction or tax refund.
Stock Appreciation Rights. The grantee will not recognize any income upon
the grant of an SAR. Upon the exercise of an SAR, the grantee will recognize
ordinary compensation income in the amount of both the cash and the fair market
value of the shares of Common Stock received upon such exercise, and the Company
is entitled to a corresponding deduction, provided the Company complies with the
applicable withholding requirements for federal tax purposes. In the event that
the grantee receives shares of Common Stock upon the exercise of an SAR, the
shares so acquired will have a tax basis equal to their fair market value on the
date of transfer, and the holding period of the shares will commence on that
date for purposes of determining whether a subsequent disposition of the shares
will result in long-term or short-term capital gain or loss.
Option Grant Information. As of March 31, 1997, options to purchase
6,412,200 shares of Common Stock had been granted, of which 607,000 options have
been forfeited. In addition, 218,000 shares had been granted to two executive
officers as restricted stock grants of which 116,668 have been forfeited.
Additional options to purchase 441,770 shares of Common Stock, 353,416 of which
have been exercised, were also granted outside of the Plan to one executive
officer. The stock options granted under the Plan are held by 192 employees, two
former employees, five non-employee directors and one consultant. Grants of
stock options to purchase 260,000 shares of Common Stock have been granted, in
the aggregate, to persons who were non-employee directors at the
15
<PAGE> 18
time they received the grants. The stock options that have been granted are
either immediately exercisable or are subject to periodic vesting over a period
of up to ten years. As of March 31, 1997, the weighted average exercise price of
all the stock options outstanding is $9.56 per share. No other grants have been
made under the Plan.
Set forth below is the number of shares underlying options granted, or to
be granted, in 1997 under the Plan to the persons indicated in the table below.
Future awards to officers under the Plan, other than those indicated, are not
determinable because specific awards are made at the discretion of the
Compensation Committee, depending on a variety of factors. Future awards to
outside directors under the Plan are not determinable because although the
number of options are determined by the Plan, it is not clear when and how many
new outside directors may be added to the Board.
NEW PLAN BENEFITS
EQUITY COMPENSATION PLAN
<TABLE>
<CAPTION>
Number of
Name and Position Options(1)
- ----------------- ----------
<S> <C>
Richard Jaffe............................................... 200,000
Chairman of the Board, President
and Chief Executive Officer
Neil K. Braverman........................................... 15,000(2)
Co-Chairman
David Morash................................................ 0
Executive Vice President
and Chief Financial Officer
Lee Chee Ming............................................... 0
Managing Director, Safeskin
Corporation (Malaysia) Sdn. Bhd.
Jeffrey A. Martin........................................... 0
Vice President, Marketing
and Business Development
Judy W. Grimes(3)........................................... 0
Executive Vice President
All current executive officers as a group (12 persons)...... 210,000
All current directors who are not executive officers as a
group (4 persons)......................................... 60,000
All eligible employees (including officers who are not
executive officers as a group (180 persons)............... 0
</TABLE>
- ---------------
(1) All share data have been adjusted to reflect the 100% stock dividend paid by
the Company on
January 2, 1997.
(2) Mr. Braverman resigned as an executive officer of the Company as of January
1, 1997. The 15,000 options, subject to shareholder approval, were granted
to him as part of the grant to non-employee directors on February 27, 1997.
(3) Ms. Grimes was employed as Executive Vice President until July 31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
AMEND THE COMPANY'S EQUITY COMPENSATION PLAN.
16
<PAGE> 19
OTHER EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 31, 1997,
with respect to the executive officers of the Company who are not also directors
of the Company or nominees for election as directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David L. Morash............................ 51 Executive Vice President and Chief
Financial Officer
Lee Chee Ming.............................. 48 Managing Director, Southeast Asian
Operations
John G. Brewer............................. 45 Vice President, Logistics and Information
Technology
Craig C. Cook.............................. 48 Vice President, Sales
Seth S. Goldman............................ 39 Vice President, Finance, Controller and
Secretary
Harold G. Hambrice......................... 51 Vice President, Technology Development
William R. LaRue........................... 45 Treasurer
Jeffrey A. Martin.......................... 45 Vice President, Marketing and Business
Development
William C. Miller.......................... 59 Vice President and General Counsel
Egon Thiele................................ 60 Managing Director, Europe
Wava Truscott, Ph.D........................ 46 Vice President, Scientific Affairs
Richard J. Witmeyer, Ph.D.................. 48 Vice President, Technical Affairs
</TABLE>
Mr. Morash has been the Executive Vice President and Chief Financial
Officer of the Company since August 1994. Formerly, as Managing Director, he
helped found Bedford Management Group, Inc. in 1992, a twenty member consulting
firm specializing in advising clients on financial, marketing and human resource
issues. From 1990 to 1992, Mr. Morash was Executive Vice President, Chief
Financial Officer of H.B.S.A. Industries, a department store fixture and
construction firm. His prior experience includes the positions of Vice
President, Treasurer of Merrill Lynch Realty, a publicly traded residential real
estate and relocation management firm, and Vice President, Business Investment
of Primerica Corporation (now Travelers Group, Inc.), a diversified financial
services company. Mr. Morash holds a B.A. in economics from Columbia College and
an M.B.A. in finance from the Columbia Graduate School of Business.
Mr. Lee has been the Managing Director, Southeast Asian Operations since
November 1996. From 1988 to November 1996, Mr. Lee served as the Managing
Director of Safeskin Corporation (Malaysia) Sdn. Bhd., the Company's
manufacturing subsidiary. From 1985 through 1988, Mr. Lee was the Managing
Director of Dynacraft (Malaysia) Sdn. Bhd., a subsidiary of National
Semiconductor Corporation. Mr. Lee holds an M.S. degree in management from the
Asian Institute of Management, The Philippines.
Mr. Brewer was named Vice President, Logistics and Information Technology
in October 1996 and served as Vice President, Logistics between April 1996 and
October 1996. Between February 1994 and April 1996, Mr. Brewer served as the
Chief Financial Officer of The Masters Alliance, Inc., a remodeling and property
management company. He served as a Supply Chain Manager for Nestle USA, Inc., a
conglomerate, between August 1991 and February 1994. Mr. Brewer holds a B.S. in
accounting from the University of Tennessee.
Mr. Cook became Vice President, Sales in October 1996. Between April 1995
and October 1996, Mr. Cook served as the Company's Vice President, Scientific
Division. He served as the Vice President, Sales, Scientific Division from
November 1994 to April 1995 and as the Regional Vice President, Medical Sales,
Western Region between November 1993 and November 1994. Mr. Cook joined the
Company in July 1992 as the Western Regional Medical Sales Manager and served in
such capacity until November 1993. Between April 1991 and July 1992, Mr. Cook
served as the President of Secure Products Corp., a medical disposables
business. Mr. Cook holds a B.S. degree in biology and chemistry from the
University of Southern California.
Mr. Goldman has served as Vice President of Finance since April 1996, as
Secretary since May 1996, and as Controller of the Company since August 1991.
Mr. Goldman was previously employed by Coopers & Lybrand L.L.P. and became a
certified public accountant in 1980. He holds a B.B.A. degree in accounting from
Florida Atlantic University.
17
<PAGE> 20
Mr. Hambrice joined the Company in January 1997 as Vice President,
Technology Development. Mr. Hambrice was previously employed by Baxter
Healthcare Corporation ("Baxter") from 1976 through December 1996 during which
time he held a variety of positions. Most recently Mr. Hambrice served as Vice
President and General Manager of Baxter's manufacturing plant in Penang,
Malaysia where he was responsible for the medical and scientific glove
manufacturing operations. He holds a B.S. in accounting and business
administration from Ouachita University.
Mr. LaRue became Treasurer of the Company in January 1997. Between January
1993 and January 1997, he was Treasurer of GDE Systems, Inc., a defense
electronics company. From March 1992 to January 1993, Mr. LaRue was a principal
of Fredericks, Shield & Co., an investment banking firm specializing in debt and
equity recapitalizations and acquisition financing. Prior to March 1992, Mr.
LaRue served as Vice President -- Finance and Chief Financial Officer of AMCON
Corporation, a wholesale distribution company, and has served as a Vice
President of Bank of America NT&SA, a financial services company. He holds a
B.S. degree in business administration and an M.B.A. in finance from the
University of Southern California.
Mr. Martin has served as Vice President, Marketing and Business Development
since October 1996 and served as Vice President, Marketing between March 1994
and October 1996. He was Southeast Regional Sales Manager for the Company from
April 1993 through August 1993 when he became Regional Vice President, Sales,
Southeast Region. From 1986 through 1993, Mr. Martin served in a variety of
management and sales positions with James River Corporation and its successor,
Regent Hospital Products Ltd. Mr. Martin holds a B.S. degree in engineering from
the Georgia Institute of Technology.
Mr. Miller became Vice President and General Counsel of the Company in
September 1996. From September 1995 to September 1996 he served as Vice
President and General Counsel of Gen-Probe Incorporated, a manufacturer of
medical diagnostic tests. He served in the same positions for Collagen
Corporation, a publicly traded biomedical device company, between October 1992
and September 1995. Mr. Miller was the Vice President, General Counsel and
Secretary of Boehringer Mannheim Corporation, a manufacturer of medical supplies
and instruments, between 1985 and October 1992. He holds a B.A. degree in
journalism from Washington and Lee University, an LL.B. from Washington and Lee
Law School, an LL.M. in comparative law from New York University and has
completed the Advanced Management Program at Harvard Business School.
Mr. Thiele became the Company's Managing Director, Europe in June 1994.
Between August 1991 and June 1994, he served as the Regional Director, Europe
for Ansell Medical, a medical device manufacturer.
Dr. Truscott became Vice President, Scientific Affairs in September 1993.
Between July 1993 and September 1993, she served as the Company's Director of
Scientific Affairs. She served as the Director of Regulatory Affairs, Pharmaseal
Division, for Baxter Corporation, a manufacturer of medical devices, between
January 1991 and July 1993. Dr. Truscott holds a B.S. in botany from Brigham
Young University, an M.B.A. from the University of La Verne and a Ph.D. in
comparative pathology from the University of California at Davis.
Dr. Witmeyer became Vice President, Technical Affairs in June 1995. In May
1995, he served as the Executive Vice President and Chief Operating Officer of
BioBarrier, Inc., a manufacturer of examination gloves. Between September 1992
and April 1995, he was the Vice President of Technical Affairs for Standard
Textile Company, Inc., a healthcare textile company. Dr. Witmeyer served as the
Vice President, Scientific Affairs, for Regent Hospital Products, Ltd./London
International U.S. Holdings between April 1990 and September 1992. He holds a
B.S. and an M.S. degree in chemical engineering from Lehigh University, an
M.B.A. from Georgia State University and a Ph.D. in materials engineering from
North Carolina State University.
CERTAIN TRANSACTIONS
In 1995, the Company advanced Ms. Grimes, an executive officer of the
Company, two loans totaling $65,000 for the payment of various expenses
associated with her relocation to San Diego, California. The loans had an
interest at a rate of seven percent per annum. The largest aggregate amount of
indebtedness outstanding during 1996 was $65,000, and the principal amount
outstanding as of March 31, 1997 was $45,000.
18
<PAGE> 21
COMPLIANCE WITH 16(A) OF EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons owning more than 10% of
the Company's equity securities to file with the Securities and Exchange
Commission reports of ownership of the Company's equity securities. During the
year ended December 31, 1996, Mr. Braverman filed one statement of beneficial
ownership after the due date for one transaction, Mr. Myerson, a former director
of the Company, filed one statement of beneficial ownership after the due date
for five transactions and Mr. Garner filed the initial statement of beneficial
ownership after the due date.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. was approved by the Board of Directors
as the Company's independent public accountants for the year ended December 31,
1996 and will continue as the Company's independent public accountants for the
current year. Coopers & Lybrand L.L.P. has audited the accounts of the Company
since 1989.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the annual meeting, with the opportunity to make a statement if he or she
desires to do so, and is expected to be available to respond to appropriate
questions.
FINANCIAL STATEMENTS
The annual report of the Company for the year ended December 31, 1996 is
enclosed with this Proxy Statement.
GENERAL INFORMATION
Other Matters. The Board of Directors does not intend to present any
matter for action at this meeting other than the matters described in this Proxy
Statement. If any other matters properly come before the annual meeting, it is
intended that the holders of the proxies hereby solicited will act in respect to
such matters in accordance with their best judgment.
Deadline for Shareholder Proposals. Proposals by holders of the Common
Stock which are intended to be presented at the next annual meeting of
shareholders must be received by the Company for inclusion in the Company's next
proxy statement and form of proxy relating to that meeting no later than
December 30, 1997. Such proposals must also comply in full with the requirements
of Rule 14a-8 promulgated under the Securities Exchange Act of 1934.
Expenses of Solicitation. Proxies will be solicited by mail, telephone, or
other means of communication. Solicitation also may be made by Directors,
officers and regular employees of the Company. The Company has retained
MacKenzie Partners, Inc. to assist in the solicitation of proxies from
shareholders. MacKenzie Partners, Inc. will receive a fee of $6,000 plus
reimbursement of certain out-of-pocket expenses. The Company will reimburse
brokerage firms, custodians, nominees and fiduciaries in accordance with the
rules of the Nasdaq Stock Market, for reasonable expenses incurred by them in
forwarding materials to the beneficial owners of shares. The entire cost of
solicitation will be borne by the Company.
By Order of the Board of Directors,
Richard Jaffe,
Chairman of the Board, President and
Chief Executive Officer
April 30, 1997
19
<PAGE> 22
APPENDIX A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
The undersigned hereby appoints Richard Jaffe with the power to appoint
his substitute, proxy to represent the undersigned and vote as designated below
all of the shares of Common Stock of Safeskin Corporation held of record by the
undersigned on April 21, 1997, at the Annual Meeting of Shareholders to be held
on June 12, 1997 and at any adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
IRVING JAFFE NEIL K. BRAVERMAN RICHARD JAFFE
CAM L. GARNER HOWARD L. SHECTER JOSEPH STEMLER
2. AMENDMENT TO THE EQUITY COMPENSATION PLAN TO PROVIDE THAT IN ADDITION TO
THOSE SHARES CURRENTLY AUTHORIZED UNDER THE PLAN THE AGGREGATE NUMBER OF
SHARES OF COMMON STOCK THAT MAY BE SUBJECT TO GRANTS OF STOCK OPTIONS,
RESTRICTED STOCK AWARDS AND STOCK APPRECIATION RIGHTS UNDER THE PLAN DURING
EACH CALENDAR YEAR SHALL BE 2 1/2% OF THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING;
/ / FOR the Amendment / / AGAINST the Amendment
3. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE> 23
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1 AND "FOR" PROPOSAL 2.
Dated:
---------------------------------
---------------------------------
Signature
---------------------------------
Signature if held jointly
Please sign exactly as name
appears to the left. When shares
are held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
