<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1997
REGISTRATION NO. 333-17239
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SAFESKIN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 3096 59-2617525
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
12671 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
(619) 794-8111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM C. MILLER, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
(619) 794-8111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
with copies to:
<TABLE>
<S> <C>
HOWARD L. SHECTER, ESQ. FREDERICK W. KANNER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP DEWEY BALLANTINE
101 PARK AVENUE 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10178 NEW YORK, NEW YORK 10019
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JANUARY 23, 1997
PROSPECTUS
3,200,000 SHARES
[LOGO OF SAFESKIN CORPORATION]
SAFESKIN(Registered)
COMMON STOCK
------------------------
All of the shares of Common Stock, $.01 par value (the 'Common Stock'), of
Safeskin Corporation (the 'Company') offered hereby are being sold by the
Selling Shareholders. See 'Principal and Selling Shareholders.' The Company will
not receive any of the proceeds from the sale of shares by the Selling
Shareholders.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol 'SFSK.' On January 21, 1997, the closing price of the Common Stock,
as reported by the Nasdaq National Market was $25 1/4 per share.
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS
<S> <C> <C> <C>
Per Share..................................................... $ $ $
Total(2)...................................................... $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See 'Underwriting.'
(2) The Selling Shareholders have granted the Underwriters a 30-day option to
purchase up to 480,000 additional shares of Common Stock on the same terms
as set forth above to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Selling Shareholders will be
$ , $ and $ , respectively. See
'Underwriting.'
------------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1997 at the offices of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001.
------------------------
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
JANUARY , 1997
<PAGE>
[Color pictures.]
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE 'UNDERWRITING.'
---------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
---------------------------
Safeskin(Registered), HypoClean(Registered) and HypoClean 100(Registered)
are registered trademarks of the Company, and Oxyglazed System(Trademark) is a
mark of the Company for which an application for federal trademark registration
is pending.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere or incorporated by reference
in this Prospectus. See 'Risk Factors' for a discussion of certain factors to be
considered by prospective investors. Unless otherwise indicated, all financial
information, share and per share data in this Prospectus assume no exercise of
the Underwriters' over-allotment option and give effect to a two-for-one split
of the Common Stock effected on January 2, 1997.
THE COMPANY
The Company is the leading manufacturer of high quality disposable latex
medical examination gloves for the United States market and believes that it is
the world's leading manufacturer of high quality disposable powder-free
examination gloves. The Company sells its gloves primarily to the medical,
dental, high technology and scientific markets. The Company markets high quality
gloves designed to prevent the transmission of infectious disease while at the
same time minimizing the risk of any debilitating side effects which may result
from prolonged use by the wearer. In 1995, the Company became the market share
leader, in both sales dollars and total units, of medical examination gloves to
acute care facilities (hospitals) in the United States. Based upon information
provided by its distributors, the Company believes that, in 1995, approximately
64% of the Company's sales were to acute care facilities, approximately 28% were
to alternate care (primary care and extended care) and dental facilities and
approximately 8% were to the high technology and scientific market.
In 1995, the total market for medical gloves in the United States was
approximately $1 billion. The growth in the market for medical examination
gloves over the past nine years has largely resulted from the increased concerns
among health care professionals over protection from the transmission of
infectious diseases, particularly human immunodeficiency virus ('HIV'), which
can cause acquired immunodeficiency syndrome ('AIDS'), and hepatitis B virus
('HBV'). The demand for latex gloves has also grown among users in the
semiconductor, biotechnology, pharmaceutical, general industrial manufacturing
and research segments of the high technology and scientific market.
Increasingly, the manufacturing processes in these industries take place in
cleanrooms and require gloves that minimize the amount of particles on their
surfaces to prevent contamination.
Between 1991 to 1995, the Company's net sales grew from $17.0 million to
$117.0 million, a compound annual growth rate of 61.9%. During that same period,
net income grew from $1.2 million to $14.9 million, a compound annual growth
rate of 88.6%. During the nine months ended September 30, 1996, net sales and
net income grew 26.4% and 80.4%, respectively, over the comparable period in
1995. The Company's strategy for future growth is to (i) increase its domestic
market penetration by emphasizing sales of powder-free gloves, (ii) expand its
customer base to include new categories of customers and international markets,
(iii) introduce new products and (iv) continue to develop innovative
manufacturing techniques and facilities.
The Company currently manufactures and markets three basic types of gloves:
medical examination gloves, surgical gloves and high technology and scientific
gloves. The Company's gloves consist of six types of latex gloves and one type
of nitrile synthetic latex glove, substantially all of which are marketed under
the 'Safeskin' trade name to enhance market recognition and brand loyalty. Each
type of the Company's latex gloves comes in various sizes and, except for the
high technology and scientific nitrile glove, is made of natural rubber latex
with a beaded cuff for added strength and ease in donning. The Company
manufactures both ambidextrous and hand specific gloves.
In 1996, the Company introduced a powder-free, sterile surgical glove,
which was developed through the use of computer-aided design (CAD) and a new
rapid prototyping technique known as 'laminated object manufacturing.' The
Safeskin 2000 surgical glove offers superior ergonomic characteristics which
provide surgeons with greater freedom of motion and increased dexterity, thereby
resulting in less hand fatigue. The Company introduced its nitrile synthetic
latex gloves in its high technology and scientific product line in the first
half of 1996. These gloves are manufactured from a synthetic material, thus
eliminating natural rubber protein antigens and offering a broader range of
resistance to many of the chemicals used in high technology and laboratory
applications. The Company has also developed a medical examination glove made of
nitrile synthetic latex and has recently received clearance from the FDA to
begin selling the gloves in the United States.
3
<PAGE>
The Company manufactures its products at two factories in Ipoh, Malaysia
and one factory in Hat Yai, Thailand. Factory locations are selected to be close
to the rubber tree plantations, which are the Company's source of natural latex,
as well as for favorable cost and availability of labor supply. The Company's
gloves are manufactured on production machines which can run continuously and
which can be changed quickly to produce different types and sizes of gloves. A
new production line currently being constructed at the Thai facility, referred
to by the Company as the 'Grand Master' and scheduled to be completed by early
1997, is expected to have the capacity of approximately eight existing
production lines in this facility and lower production costs through higher
operating efficiencies and lower labor requirements. Quality control and testing
are emphasized throughout the Company's manufacturing process.
In addition, the Company is currently building a latex concentrate plant in
Thailand. The output of the plant will supply latex concentrate to the Company's
factories in Thailand and Malaysia to manufacture its disposable latex gloves.
The Company expects that the first construction phase of this new plant will be
completed in the first half of 1997 and that the final phase will be completed
within two years. This plant will allow the Company to integrate more fully its
manufacturing processes in order to gain better control over the quality, cost
and reliability of latex supplies.
The Company's sales and marketing efforts focus principally on the acute
care market, alternate care market and dental market with respect to medical
products and on the semiconductor, biotechnology, pharmaceutical, general
industrial manufacturing and research market segments with respect to high
technology and scientific products. The Company's sales and marketing efforts
are supported by the Company's logistics team that delivers services to medical
products distributors and end users designed to assist them in their businesses.
The Company believes that these logistics services are one of its key
competitive advantages and have helped the Company become the preferred supplier
for many of its customers. Specifically, the Company's logistics personnel work
with medical products distributors to reduce their order cycle time and
inventory levels and have succeeded in increasing product availability for the
Company's customers.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered...................... 3,200,000 shares(1)
Common Stock outstanding.................. 25,708,448 shares(2)
Use of proceeds........................... All of the proceeds from the sale of the shares will be received by
the Selling Shareholders.
Nasdaq National Market symbol............. SFSK
</TABLE>
- ------------------
(1) Does not include up to 480,000 shares of Common Stock that may be sold by
Selling Shareholders pursuant to the Underwriters' over-allotment option.
See 'Underwriting.'
(2) Does not include 4,788,654 shares of Common Stock issuable upon exercise of
options outstanding as of September 30, 1996 and 344,668 shares reserved for
issuance pursuant to the Company's equity compensation plan (the 'Equity
Compensation Plan').
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales......................... $17,013 $33,878 $57,264 $84,142 $117,014 $84,278 $106,534
Cost of goods sold................ 11,135 20,603 33,237 50,376 75,756 55,282 62,576
------- ------- ------- ------- -------- ------- --------
Gross profit.................... 5,878 13,275 24,027 33,766 41,258 28,996 43,958
Selling expenses.................. 1,594 3,981 7,999 11,685 16,120 11,617 12,747
Research and development(2)....... -- -- 398 977 1,493 978 1,404
General and administrative
expenses........................ 1,672 1,812 2,561 3,625 6,397 4,275 7,969
------- ------- ------- ------- -------- ------- --------
Income from operations............ 2,612 7,482 13,069 17,479 17,248 12,126 21,838
Interest expense, related
parties......................... 203 216 156 -- -- -- --
Interest expense, other........... 1,253 1,325 1,285 17 194 107 118
Other expense (income), net....... (21) (203) (237) (825) (163) (191) 201
------- ------- ------- ------- -------- ------- --------
Income before income tax........ 1,177 6,144 11,865 18,287 17,217 12,210 21,519
Income tax provision.............. -- 127 213 3,920 2,326 1,851 2,828
------- ------- ------- ------- -------- ------- --------
Net income...................... $ 1,177 $ 6,017 $11,652 $14,367 $ 14,891 $10,359 $ 18,691
------- ------- ------- ------- -------- ------- --------
------- ------- ------- ------- -------- ------- --------
Net income per share.............. $ .07 $ .34 $ .56 $ .57 $ .58 $ .41 $ .68
Weighted average common shares
outstanding(3).................. 17,403 17,491 20,817 25,392 25,605 25,411 27,479
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital (deficit)......... $(8,131) $(6,768) $22,310 $22,987 $ 28,055 $28,123 $ 39,893
Total assets...................... 12,134 21,393 43,224 61,230 84,675 83,858 108,698
Long-term debt.................... 3,337 852 -- -- 2,750 4,750 --
Shareholders' equity (deficit).... (6,307) 934 38,750 54,260 69,861 66,118 93,903
</TABLE>
- ------------------
(1) The summary consolidated financial data for the five years ended December
31, 1995 are derived from the audited consolidated financial statements of
the Company except for per share information which has been restated to give
effect to a two-for-one split of the Common Stock effected on January 2,
1997. The statement of operations data for the nine months ended September
30, 1995 and 1996 and the balance sheet data at September 30, 1995 and 1996
are derived from unaudited financial statements of the Company.
(2) Prior to the year ended December 31, 1993, the Company did not separately
classify the cost of research and development because it was not
significant.
(3) Net income per share is computed by dividing net income by the weighted
average of common shares outstanding and dilutive common stock equivalents.
Common stock options are common stock equivalents and are included in the
weighted average of common shares outstanding using the treasury stock
method. Primary and fully diluted net income per share amounts and the
number of primary and fully diluted weighted average common shares
outstanding are the same for all periods presented except for the nine
months ended September 30, 1996. Fully diluted net income per share and the
number of fully diluted weighted average common shares outstanding for the
nine months ended September 30, 1996 were $.67 and 27,969, respectively.
5
<PAGE>
THE COMPANY
The Company was incorporated in the State of Florida in 1985 and was
inactive until 1987, when it entered the latex glove business. The Company's
principal executive offices are located at 12671 High Bluff Drive, San Diego,
California 92130, and its telephone number is (619) 794-8111. Unless the context
indicates otherwise, Safeskin Corporation and its subsidiaries are referred to
herein collectively as the 'Company.'
RISK FACTORS
An investment in shares of Common Stock offered by this Prospectus involves
a high degree of risk. In addition, this Prospectus contains, and documents
incorporated by reference herein contain, forward-looking statements that
involve risks and uncertainties. Discussions containing such forward-looking
statements may be found in the material set forth under 'Prospectus Summary,'
'Risk Factors,' 'Recent Developments,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' 'Business,'
'Business--Strategy,' 'Business--Products,' 'Business--Products Under
Development,' 'Business--Sales and Marketing,' 'Business--Manufacturing and
Quality Control,' 'Business--Competition,' 'Business-- Government Regulation,'
'Business--Product Liability and Insurance,' and 'Business--Legal Proceedings,'
as well as elsewhere in the Prospectus and the documents incorporated by
reference herein generally. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth in the following risk factors and
elsewhere in the Prospectus and the documents incorporated by reference herein.
Accordingly, in evaluating the Company and its business, prospective investors
should carefully consider the following risk factors in addition to the other
information included and incorporated by reference herein.
DEPENDENCE ON GLOVES
The Company is exclusively engaged in the manufacture and sale of
disposable gloves. Accordingly, the Company's results of operations and
financial condition are highly dependent on the level of supply of and demand
for disposable gloves. There can be no assurance that the supply of or demand
for disposable gloves will continue at current levels or that changes in such
supply or such demand will not have a material adverse effect on the Company's
results of operations or financial condition.
DEPENDENCE ON RUBBER HARVEST AND LATEX CONCENTRATE
The ability of the Company to produce its products profitably is entirely
dependent upon the consistent availability, at competitive prices, of raw rubber
harvested by independent growers in Malaysia and Thailand and locally processed
by the Company and others into latex concentrate. Any disruption in the
consistent supply of rubber for latex concentrate due to weather or other
natural phenomena, labor or transportation stoppages, shortages or other
factors, could cause significant adverse effects to the Company's results of
operations and financial condition. In addition, rubber is a commodity traded on
world commodities exchanges and is subject to price fluctuations driven by
changing market conditions over which the Company has no control. Increases in
the price of latex concentrate have adversely affected the Company's raw
material costs in the past and could do so again. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and
'Business--Manufacturing and Quality Control.'
COMPETITION; RISK OF OBSOLESCENCE
The market for the Company's products is highly competitive. The Company
competes with many other firms, including several large firms having
substantially greater financial, management and marketing resources than the
Company. There can be no assurance that the Company's competitors or others will
not develop products, manufacturing processes or new technologies that would
render the Company's gloves obsolete or uncompetitive or that would be more cost
effective or more efficient than the processes and technologies of the Company.
Such competition could have a material adverse effect on the Company's results
of operations and financial condition. See 'Business--Competition.'
6
<PAGE>
RELIANCE UPON DISTRIBUTORS
Substantially all domestic sales of the Company's gloves are made through
distributors. Three of the nation's largest medical products distributors, Owens
& Minor, General Medical and Bergen Brunswig Medical, accounted for
approximately 30.3%, 29.8% and 8.2%, respectively, of the Company's 1995
consolidated net sales. If the efforts of the Company's distributors prove
unsuccessful, if such distributors abandon or limit their distribution of the
Company's products, or if such distributors encounter serious financial
difficulties, the Company's results of operations and financial condition could
be materially adversely affected.
MANUFACTURING IN MALAYSIA AND THAILAND
Two of the Company's latex glove factories and its latex concentrate
manufacturing and processing plant are located in Malaysia and its third latex
glove factory is located in Thailand. In addition, the Company is currently in
the process of building a latex concentrate plant in Thailand. As a result, the
Company is, and will continue to be, directly affected by the political and
economic conditions existing in both Malaysia and Thailand. Any political or
economic instability in either Malaysia or Thailand, a significant increase in
the rate of Malaysian or Thai corporate taxation, a discontinuance or reduction
in Thai export tax rebates, or any other change in either country's policies
regarding foreign ownership of manufacturing facilities could have significant
adverse effects on the Company's business, financial condition and results of
operations. The Company's non-United States expenses represented 79%, 75% and
84% of its total expenses in 1993, 1994 and 1995, respectively, almost all of
which were in foreign currencies (Malaysian ringgits and Thai baht). The Company
expects that non-United States expenses will continue to represent the major
portion of its expenses and that it will continue to be subject to the normal
risks of conducting business internationally, including foreign currency
exchange rate fluctuations, unexpected changes in regulatory requirements,
tariffs and other barriers. No assurance can be given that the Company's results
of operations or financial condition will not be materially adversely affected
by currency exchange rate fluctuations. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and
'Business--Manufacturing and Quality Control.'
LACK OF PATENTED PRODUCTS AND PROCESSES
The Company's products are not protected by patents. The Company considers
certain of its manufacturing processes to be proprietary and relies on trade
secret laws and confidentiality procedures to protect its rights. There can be
no assurance that these means of protecting the Company's proprietary
manufacturing processes will be effective. In addition, the laws of some foreign
countries may not protect the Company's proprietary rights to the same extent as
do the laws of the United States.
GOVERNMENT REGULATION AND LABELING
The Company's products and the manufacturing, marketing and labeling of its
products are subject to regulation by governmental authorities in the United
States, including the Food and Drug Administration (the 'FDA'), and other
countries. The regulatory process can result in a substantial delay in the
introduction of a new product developed by the Company, and there can be no
assurance that regulatory approval will be obtained for a new product. In
addition, delays or rejections may be encountered based upon changes in FDA
laws, regulations or policies. Periodic testing by the FDA of shipments to the
United States of medical gloves has in the past and may in the future result in
the detention of shipments and losses or delays in the recognition of income by
the Company. Similar delays may also be encountered in foreign countries.
Further, the Company's gloves and its manufacturing facilities are subject to
continual review and periodic inspections, and the discovery of previously
unknown problems with a product or facility may result in the FDA imposing
restrictions on the product or facility, including the withdrawal of the product
from the market. The FDA has proposed issuing regulations prohibiting the use of
a 'hypoallergenic' label on medical gloves and requiring a labeling statement
that latex may cause allergic reactions. The term 'hypoallergenic' is currently
used on the labels of all gloves manufactured and sold by the Company. As a
result, the Company may need to rely on alternate labeling. The Company has
received FDA clearance for its powder-free medical gloves with labeling
concerning total protein content, including a claim for '50 micrograms or less
of total water extractable protein per gram,' the lowest protein content claim
allowable by the FDA for latex medical gloves, which the Company began using in
1996. In addition, the Company may elect to seek approval of alternative
labeling with respect to the chemical qualities
7
<PAGE>
of its medical gloves, but there can be no assurance that such an alternative
claim will be permitted. See 'Business--Product Labeling' and
'Business--Government Regulation.'
EFFECTS OF REIMBURSEMENT POLICIES; CHANGES AFFECTING THE HEALTHCARE INDUSTRY
Although the Company's customers do not bill third-party reimbursement
sources separately for purchases of the Company's gloves, the Company's ability
to sell its latex medical gloves profitably may depend in part on the extent to
which reimbursement for the cost of medical gloves will be affected by
reimbursement policies and regulations of government health administration
authorities, private health insurers and other organizations. Such third-party
payors are increasingly challenging the price of medical products and services.
Additionally, legislative measures, if adopted, could adversely affect the
pricing of, or the amount or availability of reimbursement for, the Company's
medical gloves. See 'Business--Government Regulation.' In addition, the
healthcare industry is currently experiencing significant change, including a
consolidation trend among healthcare providers. The Company cannot predict how
these changes will ultimately affect the healthcare industry or its business. No
assurance can be given that any such change will not have a material adverse
effect on the Company's results of operations or financial condition.
PRODUCT LIABILITY
Participants in the medical supplies business are potentially subject to
lawsuits alleging product liability, many of which involve significant damage
claims and defense costs. A successful claim against the Company in excess of
the Company's insurance coverage could have a material adverse effect on the
Company's results of operations or financial condition. Claims made against the
Company, regardless of their merit, could also have a material adverse effect on
the Company's reputation. There is no assurance that the coverage limits of the
Company's insurance policy will be adequate. While the Company has been able to
obtain product liability insurance in the past, such insurance varies in cost,
is difficult to obtain and may not be available in the future on acceptable
terms or at all. See 'Business--Product Liability and Insurance.' The Company is
subject to a number of lawsuits filed against it and other manufacturers of
latex gloves alleging injuries relating to allergic reactions caused by the
residual chemicals or latex proteins in gloves. The litigation is still in the
early stages, and there can be no assurance that the Company's insurance will be
sufficient to meet any recovery for which the Company may be found liable or
that the outcome of such suits will not materially adversely affect the
Company's results of operations or financial condition. See 'Business--Legal
Proceedings.'
ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue shares of
preferred stock and to determine the designations, preferences and rights and
the qualifications or restrictions of those shares without any further vote or
action by the shareholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate actions, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company.
Pursuant to the foregoing authority, the Company recently adopted a
shareholder rights plan, which involves the issuance of preferred stock purchase
rights to holders of its Common Stock. The rights issued pursuant to such plan
will provide discount purchase rights to shareholders of the Company upon
certain acquisitions of beneficial ownership of 15% or more of the outstanding
Common Stock and certain tender offers which would result in beneficial
ownership of 15% or more of the outstanding Common Stock. The effect of the
foregoing may be to inhibit a change in control of the Company that may be
beneficial to the Company's shareholders.
8
<PAGE>
USE OF PROCEEDS
All of the shares of Common Stock being offered hereby are offered by the
Selling Shareholders. The Company will not receive any of the proceeds from the
sale of such shares.
RECENT DEVELOPMENTS
On December 13, 1996, the Company announced plans to move all of its
remaining latex examination glove production from its Malaysian facility to its
Thai facility in 1997. In connection with the move, the Company will take a $3
million after-tax charge against earnings in the fourth quarter of 1996. The
Company anticipates that the move will improve profit margins in 1997 and future
years due to the lower production costs at the Thai facility. To accomodate the
increased production requirements in Thailand, the Company plans to complete its
initial 'Grand Master' production machine in the first quarter of 1997 and build
two additional 'Grand Master' lines scheduled to be completed during the second
half of 1997. The combination of the three machines is expected to increase the
Thai facility's capacity by approximately 70% by the end of 1997 when the new
machines are scheduled to be fully operational. The Company will continue to
operate one of its Malaysian facilities for the production of higher value
products, such as the newly introduced Safeskin 2000 powder-free surgical glove,
the high technology and scientific division's HypoClean products and synthetic
nitrile products.
Effective January 1, 1997, the Company's founder, Co-Chairman and director
Neil K. Braverman resigned as Co-Chairman and entered into a one-year consulting
arrangement with the Company. Pursuant to the consulting arrangement, Mr.
Braverman is working on a part-time basis, assisting the Company in the areas of
manufacturing and new product development. Mr. Braverman is a director of the
Company.
9
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades on the Nasdaq National Market under the
symbol 'SFSK.' The following table sets forth the high and low closing prices of
a share of the Company's Common Stock for each quarter in 1994, 1995, 1996 and
the interim period indicated, as reported by the Nasdaq National Market and
restated to give effect to a two-for-one split of the Common Stock effected on
January 2, 1997.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1994
First Quarter....................................................... $ 8 5/8 $6 3/4
Second Quarter...................................................... 7 3/4 6 1/8
Third Quarter....................................................... 8 5/8 6 3/4
Fourth Quarter...................................................... 8 7/8 6 1/2
1995
First Quarter....................................................... 7 5/8 6 1/8
Second Quarter...................................................... 7 3/4 5 1/2
Third Quarter....................................................... 9 5/8 7 1/4
Fourth Quarter...................................................... 9 13/16 8
1996
First Quarter....................................................... 13 5/8 8
Second Quarter...................................................... 20 3/4 12 1/2
Third Quarter....................................................... 20 5/8 15
Fourth Quarter...................................................... 26 11/16 17 7/8
1997
First Quarter (through January 21, 1997)............................ 25 3/4 24
</TABLE>
The closing price of the Company's Common Stock on January 21, 1997, as
reported by the Nasdaq National Market was $25 1/4.
The approximate number of record holders of the Company's Common Stock as
of January 21, 1997 was 304. The Company believes that a larger number of
beneficial owners hold such shares of Common Stock in depositary or nominee
form.
10
<PAGE>
DIVIDEND POLICY
The Company has never paid any cash dividends on the Common Stock. The
Company does not anticipate payment of any cash dividends in the foreseeable
future and intends to continue its present policy of retaining earnings for
reinvestment in the operations of the Company and the expansion of its business.
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company at September 30, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Short-term debt............................................................................... $ --
----------
----------
Long-term debt................................................................................ $ --
----------
----------
Shareholders' equity:
Preferred stock; $.01 par value; 10,000,000 shares authorized and no shares outstanding at
September 30, 1996....................................................................... --
Common Stock; $.01 par value; 40,000,000 shares authorized(1); 25,708,448 shares
outstanding.............................................................................. 257
Additional paid-in capital.................................................................. 34,693
Foreign currency translation adjustment..................................................... 876
Retained earnings........................................................................... 58,077
----------
Total shareholders' equity............................................................... 93,903
----------
Total capitalization..................................................................... $ 93,903
----------
----------
</TABLE>
- ------------------
(1) Authorized shares include 4,700,300 shares issuable upon exercise of
outstanding options under the Equity Compensation Plan and 88,354 shares
issuable under other options. An additional 344,668 shares are reserved for
issuance for future awards under the Equity Compensation Plan.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data of the Company for the
five years ended December 31, 1995 are derived from the audited consolidated
financial statements of the Company except for per share information which has
been restated to give effect to a two-for-one split of the Common Stock effected
on January 2, 1997. The statement of operations data for the nine months ended
September 30, 1995 and 1996 and the balance sheet data at September 30, 1995 and
1996 are derived from unaudited financial statements of the Company. The
unaudited financial statements include all adjustments (consisting only of
normal recurring items) that the Company considers necessary for a fair
presentation of the financial information set forth therein. The results of
operations for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for any future period or for the entire
year. The following information should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
incorporated by reference herein and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' included herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $17,013 $33,878 $57,264 $84,142 $117,014 $84,278 $106,534
Cost of goods sold...................... 11,135 20,603 33,237 50,376 75,756 55,282 62,576
------- ------- ------- ------- -------- ------- --------
Gross profit.......................... 5,878 13,275 24,027 33,766 41,258 28,996 43,958
Selling expenses........................ 1,594 3,981 7,999 11,685 16,120 11,617 12,747
Research and development(1)............. -- -- 398 977 1,493 978 1,404
General and administrative expenses..... 1,672 1,812 2,561 3,625 6,397 4,275 7,969
------- ------- ------- ------- -------- ------- --------
Income from operations................ 2,612 7,482 13,069 17,479 17,248 12,126 21,838
Interest expense, related parties....... 203 216 156 -- -- -- --
Interest expense, other................. 1,253 1,325 1,285 17 194 107 118
Other expense (income), net............. (21) (203) (237) (825) (163) (191) 201
------- ------- ------- ------- -------- ------- --------
Income before income tax.............. 1,177 6,144 11,865 18,287 17,217 12,210 21,519
Income tax provision.................... -- 127 213 3,920 2,326 1,851 2,828
------- ------- ------- ------- -------- ------- --------
Net income............................ $ 1,177 $ 6,017 $11,652 $14,367 $ 14,891 $10,359 $ 18,691
------- ------- ------- ------- -------- ------- --------
------- ------- ------- ------- -------- ------- --------
Net income per share.................... $ .07 $ .34 $ .56 $ .57 $ .58 $ .41 $ .68
------- ------- ------- ------- -------- ------- --------
------- ------- ------- ------- -------- ------- --------
Weighted average common shares
outstanding(2)........................ 17,403 17,491 20,817 25,392 25,605 25,411 27,479
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............... $(8,131) $(6,768) $22,310 $22,987 $ 28,055 $28,123 $ 39,893
Total assets............................ 12,134 21,393 43,224 61,230 84,675 83,858 108,698
Long-term debt.......................... 3,337 852 -- -- 2,750 4,750 --
Shareholders' equity (deficit).......... (6,307) 934 38,750 54,260 69,861 66,118 93,903
</TABLE>
- ------------------
(1) Prior to the year ended December 31, 1993, the Company did not separately
classify the cost of research and development because it was not
significant.
(2) Net income per share is computed by dividing net income by the weighted
average of common shares outstanding and dilutive common stock equivalents.
Common stock options are common stock equivalents and are included in the
weighted average of common shares outstanding using the treasury stock
method. Primary and fully diluted net income per share amounts and the
number of primary and fully diluted weighted average common shares
outstanding are the same for all periods presented except for the nine
months ended September 30, 1996. Fully diluted net income per share and the
number of fully diluted weighted average common shares outstanding for the
nine months ended September 30, 1996 were $.67 and 27,969, respectively.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and related Notes thereto incorporated by
reference herein.
The Company's net sales have grown substantially over the past several
years. The Company attributes the growth in net sales during this period
principally to the introduction of new products, growth in markets for its
products, and increased market penetration due to the implementation of sales
and marketing programs. The Company introduced lightly powdered medical gloves,
powder-free medical gloves, HypoClean(Registered) powder-free gloves,
powder-free latex surgical gloves and high technology and scientific nitrile
gloves in 1989, 1990, 1992, 1994 and 1995, respectively. In the fourth quarter
of 1996, the Company formally launched its Safeskin 2000 powder-free latex
surgical glove, which was developed through the use of computer-aided design
(CAD) and a new rapid prototyping technique known as 'laminated object
manufacturing.' Although the Company has continued to develop new products and
expects to do so in the future, no assurance can be given that the new products
will be accepted in the marketplace or will have similar growth rates.
The Company's net sales are derived from the sale of finished products, net
of allowable rebates provided by contract to distributors covering the resale of
the Company's products in specific volumes to specified end user customers. Cost
of goods sold includes all costs to manufacture the finished product plus
related costs associated with ocean freight, customs duty and warehousing.
Selling expenses include all salaries for sales and marketing staffs together
with other related expenses such as sales commissions, travel costs, trade
shows, advertising and delivery expenses. Research and development expenses
include salaries for research and development staffs as well as expenses such as
consulting, product testing and travel costs. General and administrative
expenses include salaries for executives and administrative and information
technology staffs, together with related expenses such as travel costs,
insurance, facilities costs and consulting and professional fees. Income tax
expenses are substantially less than statutory rates as a result of the tax free
status of the Company's foreign manufacturing operations. During June 1994, the
Company's Malaysian manufacturing operations were granted five additional years
of tax free status retroactive to October 1, 1993, the date on which the
original five year grant of tax free status expired. The Company's Thai
manufacturing operations have been granted tax free status through 2003.
The Company's medical glove distributor customers do not bill third-party
reimbursement sources separately for purchases of the Company's gloves.
Consequently, the timing and effect of third-party payments to hospitals and
clinics do not have a material effect on the Company's operations or liquidity.
13
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain items in the Consolidated Statements
of Operations, expressed as a percentage of total sales, for the years ended
December 31, 1993, 1994, 1995, and for the nine months ended September 30, 1995
and 1996.
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
---------------------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales....................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.............................................. 58.0 59.9 64.7 65.6 58.7
----- ----- ----- ----- -----
Gross profit.................................................. 42.0 40.1 35.3 34.4 41.3
Selling expenses................................................ 14.0 13.9 13.8 13.8 12.0
Research and development........................................ .7 1.1 1.3 1.1 1.3
General and administrative expenses............................. 4.5 4.3 5.5 5.1 7.5
----- ----- ----- ----- -----
Income from operations........................................ 22.8 20.8 14.7 14.4 20.5
Interest expense, related parties............................... .3 -- -- -- --
Interest expense, other......................................... 2.2 -- .2 .1 .1
Other expense (income), net..................................... (.4) (.9) (.2) (.2) .2
----- ----- ----- ----- -----
Income before income tax...................................... 20.7 21.7 14.7 14.5 20.2
Income tax provision............................................ .4 4.6 2.0 2.2 2.7
----- ----- ----- ----- -----
Net income.................................................... 20.3% 17.1% 12.7% 12.3% 17.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Net sales for the nine months ended September 30, 1996 were $106,534,000
which represents a 26.4% increase over net sales of $84,278,000 for the same
period in 1995. The predominant causes for the sales growth were an increase in
unit volumes sold and the shift in product mix to higher priced powder-free
gloves in the 1996 period as compared to the 1995 period.
Cost of goods sold increased 13.2% from $55,282,000 for the nine months
ended September 30, 1995 to $62,576,000 for the nine months ended September 30,
1996. As a percentage of net sales, cost of goods sold decreased from 65.6% for
the nine months ended September 30, 1995 to 58.7% for the same period in 1996.
This decrease in cost of goods sold as a percentage of net sales was principally
attributable to improved operating efficiencies in the Thai facility as well as
decreased raw material costs during the 1996 period. Cost of goods sold for the
nine months ended September 30, 1996 also reflects the favorable impact of U.S.
import legislation ('Generalized System of Preferences' or 'GSP') reinstated by
President Clinton in the third quarter of 1996 retroactive to August 1, 1995. As
a result of this legislation, the Company has estimated a cumulative customs
duty refund of approximately $1,175,000 for gloves imported from its
manufacturing facilities between August 1, 1995 and September 30, 1996, which
amount is reflected as a reduction of cost of goods sold for the nine months
ended September 30, 1996. The new GSP term, under which imports from Thailand
and certain imports from Malaysia are currently eligible, runs through May 31,
1997. The favorable impact of this refund was partially offset by a $650,000
charge in the third quarter of 1996 relating to the write off of inventory as a
result of the introduction of the new Safeskin 2000 powder-free latex surgical
glove. Excluding the customs duty refund and the write off of inventory, cost of
goods sold as a percentage of net sales for the nine months ended September 30,
1996 would have been 59.4%. As a result of the above, gross profits increased
51.6% from $28,996,000 for the nine months ended September 30, 1995 to
$43,958,000 for the nine months ended September 30, 1996.
Selling expenses increased 9.7% from $11,617,000 for the nine months ended
September 30, 1995 to $12,747,000 for the nine months ended September 30, 1996.
As a percentage of net sales, selling expenses decreased from 13.8% for the nine
months ended September 30, 1995 to 12.0% for the same period in 1996. Selling
expenses for the nine months ended September 30, 1996 include approximately
$523,000 of non-
14
<PAGE>
recurring net severance charges relating to a former executive. Excluding such
charges, such selling expenses as a percentage of net sales would have been
11.4%. The decrease in selling expenses as a percentage of net sales is a result
of selling expenses such as salaries, travel costs and delivery expenses
remaining comparable to the prior year while sales have significantly increased
over the prior year.
Research and development expenses increased 43.6% from $978,000 for the
nine months ended September 30, 1995 to $1,404,000 for the nine months ended
September 30, 1996. As a percentage of net sales, research and development
expenses increased from 1.1% for the nine months ended September 30, 1995 to
1.3% for the nine months ended September 30, 1996.
General and administrative expenses increased 86.4% from $4,275,000 for the
nine months ended September 30, 1995 to $7,969,000 for the nine months ended
September 30, 1996. As a percentage of net sales, general and administrative
expenses increased from 5.1% for the 1995 period to 7.5% for the 1996 period.
The increase in general and administrative expenses as a percentage of net sales
pertains primarily to increased costs associated with the Information Technology
Department (which was established in the second quarter of 1995) to support the
continued growth of the Company. Additional factors include increased facilities
costs and increased consulting fees in 1996.
Income from operations increased 80.1% from $12,126,000 for the nine months
ended September 30, 1995 to $21,838,000 for the nine months ended September 30,
1996. Operating margins increased from 14.4% in the 1995 period to 20.5% in the
1996 period.
Interest expense increased slightly from $107,000 for the nine months ended
September 30, 1995 to $118,000 for the nine months ended September 30, 1996.
Other expense (income), net, increased from $191,000 of other income for
the nine months ended September 30, 1995 to $201,000 of other expense for the
nine months ended September 30, 1996. The increase in other expense was
substantially due to losses experienced from foreign currency transactions in
the Company's European subsidiaries in the nine months ended September 30, 1996
compared to gains from foreign currency transactions experienced in the prior
year.
Provision for income taxes increased from $1,851,000 for the nine months
ended September 30, 1995 to $2,828,000 for the nine months ended September 30,
1996. The income tax provisions recorded in both 1995 and 1996 remain less than
statutory rates due to the foreign tax free status.
Net income increased 80.4% from $10,359,000 for the nine months ended
September 30, 1995 to $18,691,000 for the nine months ended September 30, 1996
due to the foregoing factors.
1995 COMPARED TO 1994
Net sales for 1995 were $117,014,000 which represents a 39.1% increase over
net sales of $84,142,000 in 1994. The predominant cause for the sales growth was
higher unit volumes in the 1995 period as compared to the 1994 period. The
Company's gross margins were negatively impacted by competitive pricing
pressures beginning in the later part of 1994. In response to higher raw
materials costs, the Company increased prices on most of its products in the
United States beginning in the second quarter of 1995.
Cost of goods sold increased 50.4% from $50,376,000 for 1994 to $75,756,000
for 1995. As a percentage of net sales, cost of goods sold increased from 59.9%
in 1994 to 64.7% in 1995. The increase in cost of goods sold as a percentage of
net sales is principally attributable to increased raw material costs coupled
with competitive pricing pressures. Despite the significant increase in raw
material costs in 1995, manufacturing costs benefited from greater operating
efficiencies in the new Thai facility. The Company anticipates that these
operating efficiencies will continue in 1996 as the Thai facility's production
capacity increases. As a result of the above, gross profits increased 22.2% from
$33,766,000 in 1994 to $41,258,000 in 1995.
Selling expenses increased 38.0% from $11,685,000 in 1994 to $16,120,000 in
1995. As a percentage of net sales, selling expenses are comparable to the prior
year, decreasing slightly from 13.9% in 1994 to 13.8% in 1995.
15
<PAGE>
Research and development expenses increased 52.8% from $977,000 in 1994 to
$1,493,000 in 1995. As a percentage of net sales, research and development
expenses increased from 1.1% in 1994 to 1.3% in 1995.
General and administrative expenses increased 76.5% from $3,625,000 in 1994
to $6,397,000 in 1995. As a percentage of net sales, general and administrative
expenses increased from 4.3% in 1994 to 5.5% in 1995. This increase in general
and administrative expenses as a percentage of net sales pertains primarily to
the formation of an Information Technology Department in fiscal year 1995 to
support the growth of the Company. Additional factors include increased
consulting, investor relations efforts and legal expenses as well as the costs
associated with the relocation of the finance department to San Diego to
consolidate the sales, marketing and finance areas of the Company.
Income from operations decreased 1.3% from $17,479,000 in 1994 to
$17,248,000 in 1995 and operating margins decreased from 20.8% in 1994 to 14.7%
in 1995.
Interest expense increased from $17,000 in 1994 to $194,000 in 1995. This
increase resulted from the additional debt incurred in 1995 to facilitate the
growth of the Company.
The excess of other income over other expense decreased from $825,000 in
1994 to $163,000 in 1995. This reflected a decrease in other income, primarily
due to the reclassification in fiscal 1995 of scrap sale proceeds totaling
approximately $688,000 as a reduction of cost of goods sold.
Provision for income taxes decreased 40.7% from $3,920,000 in 1994 to
$2,326,000 in 1995. During June 1994, the Company's Malaysian manufacturing
operations were granted five additional years of tax free status retroactive to
October 1, 1993. The income tax provisions recorded in both 1994 and 1995 remain
less than statutory rates due to the foreign tax free status.
Net income increased 3.6% from $14,367,000 in 1994 to $14,891,000 in 1995
and the net income margin decreased from 17.1% in 1994 to 12.7% in 1995 due to
the foregoing factors.
1994 COMPARED TO 1993
Net sales for 1994 were $84,142,000 which represents a 46.9% increase over
net sales of $57,264,000 in 1993. The predominant causes for the sales growth
were higher unit volumes and the continuing shift in product mix to higher
priced powder-free gloves in 1994 as compared to 1993.
Cost of goods sold increased 51.6% from $33,237,000 for 1993 to $50,376,000
for 1994. As a percentage of net sales cost of goods sold increased from 58.0%
in 1993 to 59.9% in 1994. This increase in cost of goods sold as a percentage of
net sales was principally attributable to increased raw material costs during
the 1994 period. Despite the increase in raw material costs, cost of goods sold
as a percentage of net sales was favorably impacted by improved production
efficiencies caused by increased volume. As a result of the above, gross profit
increased 40.5% from $24,027,000 in 1993 to $33,766,000 in 1994.
Selling expenses increased 46.1% from $7,999,000 in 1993 to $11,685,000 in
1994. As a percentage of net sales, selling expenses were comparable to the
prior year, decreasing slightly from 14.0% in 1993 to 13.9% in 1994.
Research and development expenses increased 145.5% from $398,000 in 1993 to
$977,000 in 1994. As a percentage of net sales, research and development
expenses increased from 0.7% in 1993 to 1.1% in 1994.
General and administrative expenses increased 41.5% from $2,561,000 in 1993
to $3,625,000 in 1994. As a percentage of net sales, however, these expenses
declined from 4.5% in 1993 to 4.3% in 1994. The principal items causing the
increase in dollars were compensation increases for existing employees, the
addition of administrative employees and increases in accounting and legal fees.
Income from operations increased 33.7% from $13,069,000 in 1993 to
$17,479,000 in 1994 and operating margins decreased from 22.8% in 1993 to 20.8%
in 1994.
Interest expense decreased substantially from $1,441,000 in 1993 to $17,000
in 1994. This decrease resulted from the repayment of debt with the proceeds of
the Company's initial public offering.
16
<PAGE>
The excess of other income over other expense increased from $237,000 in
1993 to $825,000 in 1994. The principal reasons for the increase were increased
scrap sales and interest income from the remaining proceeds from the Company's
initial public offering.
As a result of the tax free status at the Company's foreign manufacturing
operations, which initially expired at the end of September 1993, and net
operating loss carryforwards available in the United States, the income tax
provision recorded in 1993 was substantially less than statutory rates. During
June 1994, the Company's Malaysian manufacturing operations were granted five
additional years of tax free status retroactive to October 1, 1993. Net
operating loss carryforwards available in the United States were substantially
utilized during 1993. The income tax provision recorded in 1994 remains less
than statutory rates due to the foreign tax free status.
Net income increased 23.3% from $11,652,000 in 1993 to $14,367,000 in 1994
and the net income margin decreased from 20.3% in 1993 to 17.1% in 1994 due to
the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations generated approximately $10,843,000, $11,868,000
and $6,494,000 of cash during 1995, 1994 and 1993, respectively, and
approximately $17,990,000 and $8,876,000 of cash during the nine months ended
September 30, 1996 and 1995, respectively. Further, during 1995, 1994, 1993, and
the nine months ended September 30, 1996 and 1995, the Company acquired capital
assets of approximately $16,461,000, $15,423,000, $10,241,000, $14,331,000 and
$12,536,000, respectively, substantially all of which were for the expansion of
the Company's foreign manufacturing operations. Included in the 1993 amount was
approximately $5,100,000 for the acquisition of an additional manufacturing
facility and equipment located adjacent to the Company's existing manufacturing
facilities in Ipoh, Malaysia. Included in the 1994 and 1995 amounts were
approximately $10,645,000 and $14,319,000, respectively, for the acquisition of
land and the construction of plant and equipment at the Company's manufacturing
facility in Hat Yai, Thailand.
The Company is currently constructing a new production line in its Thai
facility. The new production line, referred to by the Company as the 'Grand
Master,' is expected to have the highest capacity of any glove production line
in the world, equivalent in capacity to approximately eight of the existing
production lines in this facility. Production and capital costs are expected to
be reduced due to labor savings and higher unit production. Construction is
expected to be completed by early 1997 and is being funded with internally
generated cash. The Company plans to build two additional 'Grand Master' lines
by the end of 1997, construction of which is also being funded with internally
generated cash.
In addition, the Company is currently building a latex concentrate plant in
Thailand. The output of the plant will supply latex concentrate to the Company's
factories in Thailand and Malaysia to manufacture its disposable latex gloves.
The Company expects that the first construction phase of this new plant will be
completed in the first half of 1997 and that the final phase will be completed
within three years. This plant will allow the Company to integrate more fully
its manufacturing processes to gain better control over the quality, cost and
reliability of latex supplies.
The Company has a domestic two-year term credit facility for financing
general working capital needs, up to a maximum of $25,000,000 in borrowings. As
of September 30, 1996, there were no borrowings outstanding under this credit
facility.
The Company's foreign manufacturing subsidiaries have revolving lines of
credit for financing general working capital needs up to approximately
$13,700,000, of which there were no outstanding balances as of September 30,
1996. These borrowings are collateralized by all assets of the subsidiaries and
are further supported by a guarantee of the Company.
INFLATION
The Company does not believe that the relatively moderate levels of
inflation which have been experienced in the United States in recent years have
had a significant effect on its net sales or its profitability.
17
<PAGE>
BUSINESS
The Company is the leading manufacturer of high quality disposable latex
medical examination gloves for the United States market and believes that it is
the world's leading manufacturer of high quality disposable powder-free
examination gloves. The Company sells its gloves primarily to the medical,
dental, high technology and scientific markets. The Company markets high quality
gloves designed to prevent the transmission of infectious disease while at the
same time minimizing the risk of any debilitating side effects which may result
from prolonged use by the wearer. In 1995, the Company became the market share
leader, in both sales dollars and total units, of medical examination gloves to
acute care facilities (hospitals) in the United States. Based upon information
provided by its distributors, the Company believes that, in 1995, approximately
64% of the Company's sales were to acute care facilities, approximately 28% were
to alternate care (primary care and extended care) and dental facilities and
approximately 8% were to the high technology and scientific market.
The Company began operations in 1987 to take advantage of the opportunity
presented by the growing demand for high quality latex gloves which appeal to
the wearer by being safe, durable and comfortable to don and wear for extended
time periods. The Company built a manufacturing facility in Malaysia and began
producing latex gloves in 1988. In order to protect the wearer from the glove,
the Company developed manufacturing processes which produced gloves that were
lower in proteins and chemical allergens than those on the market at that time.
In August 1989, the Company was the first manufacturer to receive FDA clearance
to market non-sterile latex gloves labeled 'hypoallergenic' and 'lightly
powdered.' In November 1989, the Company received FDA clearance to market
non-sterile latex gloves labeled 'hypoallergenic' and 'powder-free;' these
gloves were introduced to the market early in 1990 and have become the Company's
largest selling and fastest growing product. (See '--Product Labeling' for a
discussion of the Company's use of the 'hypoallergenic' label.) In 1992, the
Company introduced its line of HypoClean gloves for high technology and
scientific uses; in 1994, the Company introduced a powder-free latex surgical
glove; and in 1995, the Company introduced a powder-free glove made of nitrile
synthetic latex designed for use in the high technology and scientific market.
During 1995, the Company received FDA clearance to label its powder-free gloves
as having the lowest protein level claim that the FDA allows for medical grade
gloves. The Company was the first glove manufacturer to receive clearance for
use of this claim for all of its powder-free glove products. In 1996, the
Company introduced its Safeskin 2000 powder-free latex surgical glove, which was
developed through the use of computer-aided design (CAD) and a new rapid
prototyping technique known as 'laminated object manufacturing.'
INDUSTRY
In 1995, the total market for medical gloves in the United States was
approximately $1 billion. The growth in the market for medical examination
gloves over the past nine years has largely resulted from the increased concerns
among health care professionals over protection from the transmission of
infectious diseases, particularly HIV, which can cause AIDS, and HBV. In 1987,
the Centers for Disease Control ('CDC') issued recommendations that anyone
coming into contact with bodily fluids should use 'universal precautions,'
including wearing gloves. Additionally, since 1991 Occupational Safety and
Health Administration ('OSHA') regulations have required that protective gloves
be worn when it can be reasonably anticipated that an employee will have contact
with blood, saliva or other potentially infectious substances.
The demand for latex gloves has also grown among users in the
semiconductor, biotechnology, pharmaceutical, general industrial manufacturing
and research segments of the high technology and scientific market.
Increasingly, the manufacturing processes in these industries take place in
cleanrooms and require gloves that minimize the amount of particles on their
surfaces to prevent contamination.
As people began wearing more latex gloves for longer periods, there was an
increase in allergic reactions to the water soluble proteins in latex and to the
chemical and other additives used in processing latex and manufacturing gloves.
In 1991, the FDA issued a medical alert warning health care professionals about
the increased incidences of allergic reactions to latex medical products by both
medical personnel and patients. In response to the increase in allergic
reactions to latex gloves, glove manufacturers attempted to reduce the amount of
powder, latex proteins and chemical allergens in their gloves, which may
contribute to the likelihood of
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allergic reaction. OSHA regulations in effect since 1991 require that all
employers provide gloves that are both hypoallergenic and powder-free for
employees who are allergic to the gloves otherwise provided. In 1995, the United
States acute care market for powder-free medical examination gloves was
approximately $100 million and had grown at a rate of approximately 35% from the
previous year.
STRATEGY
The Company's strategy for future growth includes the following principal
components:
Increase Domestic Market Penetration. The Company's strategy is to
increase its penetration of the overall domestic acute care medical examination
glove market, which had sales of $280 million in 1995, by emphasizing sales in
the powder-free segment of that market. In 1995, the powder-free segment grew
approximately 35% from 1994, compared to 3% growth in the overall domestic acute
care medical examination glove market. The Company estimates that in 1995 it had
a 47% share of the powder-free segment, compared to a 23% share of the overall
market.
Expand Customer Base. The Company intends to expand the customer base of
its products to include new categories of customers and international markets.
The Company's traditional marketing efforts have focused on the domestic acute
care market, which accounted for 64% of the Company's sales in 1995. The Company
plans to increase its marketing efforts in the expanding alternate care market,
such as the medical laboratory, primary care, and extended care segments, in the
dental market, and in the high technology and scientific market, which includes
the semiconductor, biotechnology, pharmaceutical, general industrial
manufacturing and research segments. The Company also plans to expand its sales
and marketing efforts in Europe.
Introduce New Products. The Company has a history of new product
development and innovation and has recently introduced the Safeskin 2000
powder-free surgical latex glove to the high value added $215 million annual
United States market for surgical gloves. The Company plans to continue to be an
innovator in glove manufacturing technology and intends to introduce new
products to the marketplace in the future. Specifically, the Company intends to
acquire or develop other medical and scientific gloves made of nitrile or other
synthetic latex and to continue to dedicate resources to research and
development of new healthcare and scientific product opportunities.
Emphasize Innovative Manufacturing. The Company intends to continue to
develop innovative manufacturing techniques and facilities to improve quality
and efficiency. The Company is currently constructing a new production line in
its Thai facility. The new production line, referred to by the Company as the
'Grand Master,' is expected to have the highest capacity of any glove production
line in the world, equivalent in capacity to approximately eight of the existing
production lines in the facility. The Company is also in the process of building
a latex concentrate plant in Thailand, which will supply latex concentrate to
the Company's factories in Thailand and Malaysia and will allow the Company to
integrate more fully its manufacturing processes. These two manufacturing
innovations will improve the reliability of the Company's raw material supplies
and the quality of the Company's gloves, decrease raw material costs, improve
operating efficiencies and profitability, expand capacity and reduce capital
costs.
PRODUCTS
The Company currently manufactures and markets three basic types of gloves:
medical examination gloves, surgical gloves and high technology and scientific
gloves. The Company's gloves consist of six types of latex gloves and one type
of nitrile synthetic latex glove, substantially all of which are marketed under
the 'Safeskin' trade name to enhance market recognition and brand loyalty. Each
type of the Company's latex gloves comes in various sizes and, except for the
high technology and scientific nitrile glove, is made of natural rubber latex
with a beaded cuff for added strength and ease in donning. The Company
manufactures both ambidextrous and hand specific gloves. The price data
appearing below are industry-wide averages.
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MEDICAL EXAMINATION GLOVES
o Medical Examination Gloves--Powder-Free. Safeskin powder-free medical
examination gloves were introduced to the market in 1990. Medical
examination gloves are designed to be used for medical uses where a
sterile glove is not required. These gloves are manufactured utilizing a
proprietary process in order to make them easy to don and remove without
the need for corn starch powder and are also processed to reduce further
both proteins in the latex and additives used in the manufacturing
process. The lack of powder makes the gloves more desirable to wearers
who may develop reactions to prolonged use of powdered gloves.
Additionally, powder-free gloves eliminate complications which could be
caused by powder entering open wounds, and they eliminate airborne powder
which may cause distress to respiratory and neo-natal patients. End users
typically pay between $.12 and $.24 per pair for powder-free medical
examination gloves.
o Medical Examination Gloves--Lightly Powdered. Safeskin lightly powdered
medical gloves were the Company's first product introduced to the market
in 1989. The lightly powdered glove is the Company's least expensive and
is designed to minimize the incidence of contact dermatitis. 'Lightly
Powdered' refers to the corn starch powder added to the inside of the
glove in order to make it easier to don and remove. Principal users are
hospital personnel. The glove is also used by other healthcare personnel
such as paramedics, nursing home workers and dental professionals. End
users typically pay between $.08 and $.16 per pair for lightly powdered
medical examination gloves.
SURGICAL GLOVES
o Safeskin 2000 Powder-Free Surgical Gloves. In 1996, the Company
introduced a powder-free, sterile surgical glove, which was developed
through the use of computer-aided design (CAD) and a new rapid
prototyping technique known as 'laminated object manufacturing.' Surgical
gloves are designed to meet the more rigorous demands of the operating
room environment. The Safeskin 2000 surgical glove offers superior
ergonomic characteristics which provide surgeons with greater freedom of
motion and increased dexterity, thereby resulting in less hand fatigue.
In addition to being sterile, the glove is non-pyrogenic, which
eliminates endotoxin (dead bacteria) contamination of surgical sites. The
CAD program revolutionized prototype and mold design processes, greatly
decreasing the time between product development and market launch, and
utilized data from a United States Army Anthropometric Survey on several
thousand hand measurements and spatial relationships for unique fit. End
users typically pay between $1.00 and $2.00 per pair for powder-free
surgical gloves.
o Surgical Gloves--Lightly Powdered. Safeskin lightly powdered sterile
surgical gloves were first introduced in 1994 to the European market.
These gloves offer many of the same benefits of the Company's powder-free
sterile surgical glove. End users in the European market typically pay
between $.45 and $.75 per pair for lightly powdered surgical gloves.
HIGH TECHNOLOGY AND SCIENTIFIC GLOVES
o HypoClean 100(Registered) Cleanroom Latex Gloves. Introduced in 1992,
HypoClean 100(Registered) cleanroom gloves are engineered and processed
to meet the stringent contamination control requirements of highly
critical cleanroom applications in the semiconductor and pharmaceutical
industries. These gloves are developed through an integrated
manufacturing process, the Oxyglazed System(Trademark). The Oxyglazed
System(Trademark) is a proprietary process that minimizes particulates,
reduces latex proteins, removes residual chemicals and enabled the
Company to offer the first non-cytotoxic (i.e., does not destroy cells)
glove to the high technology and scientific market. In addition,
HypoClean 100(Registered) gloves receive further ultra pure cleaning and
are packaged in a Class M3.5 (100) cleanroom for compatibility with all
critical environment applications. End users in the high technology and
scientific fields typically pay between $.32 and $.80 per pair for latex
gloves designed for a cleanroom environment.
o HypoClean(Registered) Powder-Free Latex Gloves. These hand specific and
ambidextrous gloves, which were introduced in 1992 and are developed
through the Oxyglazed System(Trademark), are sold to the high technology
and scientific market for applications where glove powders can interfere
with production yields and
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laboratory processes. End users in the high technology and scientific
fields typically pay between $.20 and $.60 per pair for powder-free latex
gloves.
o High Technology and Scientific Nitrile Gloves. The Company introduced
its nitrile synthetic latex gloves in its high technology and scientific
product line in the first half of 1996. These gloves are manufactured
from a synthetic material, thus eliminating natural rubber protein
antigens and offering a broader range of resistance to many of the
chemicals used in high technology and laboratory applications. End users
in the high technology and scientific fields typically pay between $.28
and $.70 per pair for powder-free synthetic latex gloves.
RESEARCH AND DEVELOPMENT
The Company's research and development strategy is to develop high quality
disposable gloves for the medical, dental, high technology and scientific
markets. In 1993, 1994, 1995 and the nine months ended September 30, 1996, the
Company's research and development expenses were approximately $398,000,
$977,000, $1,493,000 and $1,404,000, respectively. The Company expects these
costs to increase as the Company increases the number of new products it
introduces. The Company believes that the close interaction between its research
and development and manufacturing personnel allows for timely and effective
realization of the Company's new glove concepts.
PRODUCTS UNDER DEVELOPMENT
The Company has developed a medical examination glove made of nitrile
synthetic latex and has recently received clearance from the FDA to begin
selling the gloves in the United States. The Company is also currently
developing non-nitrile synthetic latex gloves for the medical, high technology
and scientific markets. In the future, the Company intends to introduce
specialty powder-free surgical gloves designed to offer additional benefits such
as increased barrier protection.
There can be no assurance that these new products will be successfully
developed, will be cleared by the FDA, will gain market acceptance or will
command pricing levels acceptable to the Company.
PRODUCT LABELING
All of the Company's latex medical gloves are labeled 'hypoallergenic' and
have passed the modified Draize test for hypoallergenicity. Gloves labeled
'hypoallergenic' are manufactured and processed with lower levels of chemicals.
These products are designed to minimize the likelihood of irritation or allergic
contact dermatitis. The Company's powder-free latex gloves have soluble and
antigenic protein levels which the Company believes are as low as the level in
any other latex gloves on the market. The Company has received 510(k) clearance
for its powder-free medical gloves with labeling concerning total protein
content. The product labeling which was cleared through the 510(k) process
included a claim for '50 micrograms or less of total water extractable protein
per gram,' the lowest protein content claim allowable by the FDA for latex
medical gloves.
There is a risk with all latex gloves that individuals sensitive to latex
proteins might have allergic reactions. The recent emergence of allergies to
latex protein have caused the FDA to question whether the use of the term
'hypoallergenic' is still appropriate. Therefore, in June 1996, the FDA proposed
issuing regulations prohibiting the use of a 'hypoallergenic' label on latex
gloves for use by healthcare personnel and requiring a labeling statement that
latex may cause allergic reactions. In the event such regulations are adopted by
the FDA, the Company will stop using the term 'hypoallergenic' on its packaging
and will comply fully with applicable labeling requirements. As a result, the
Company may need to rely on alternate labeling such as the low protein content
claim cleared through the 510(k) process. In addition, the Company may elect to
seek approval of alternative labeling with respect to the chemical qualities of
its medical gloves, but there can be no assurance such an alternative claim will
be permitted. The Company also currently uses the statement 'THIS PRODUCT
CONTAINS NATURAL RUBBER LATEX' on all of its packaging containing medical latex
gloves, as recommended by the FDA.
By establishing criteria for glove manufacturers to claim a low level of
chemical residue and a low protein content, the FDA will be raising industry
standards for glove manufacturing. The Company believes that its
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strength in manufacturing and research and development provide it with an
opportunity to further distinguish itself from its competitors by anticipating
and exceeding regulatory requirements.
SALES AND MARKETING
The Company's sales and marketing efforts focus principally on the acute
care market (hospital), alternate care market (primary care and extended care)
and dental market with respect to medical products and on the semiconductor,
biotechnology, pharmaceutical, general industrial manufacturing and research
market segments with respect to high technology and scientific products. In
1995, sales of latex medical gloves to acute care facilities represented
approximately 64% of the Company's total sales, while sales to alternate care
facilities represented approximately 28% of total sales. Sales by the Scientific
Division to the non-medical, high technology and scientific users represented
approximately 8% of total sales during 1995.
The Company's sales and marketing activities in the medical products area
are directed at the end users of medical glove products, such as hospitals,
group purchasing organizations, integrated healthcare networks and primary or
alternate care providers. The Company targets decision makers at these entities
and attempts to increase demand for the Company's medical glove products with
them and among their constituencies. Sales to end users are then made by a
medical products distributor who will purchase the Company's products, stock
inventory and resell and deliver the products to the healthcare provider or
other end user, typically pursuant to a contract between the Company and the
distributor specifying prices to be paid by the distributor for gloves sold to a
particular end user. The Company's gloves are currently used in over 3,400
hospitals, which constitute approximately 40% of all hospitals in the United
States.
Purchasing decisions by healthcare systems are customarily made by a
clinical staff committee which evaluates potential products based on quality
criteria, such as effectiveness, durability and likelihood to cause dermatitis,
as well as price and value. The Company's sales representatives work with
healthcare personnel to ensure that the Company's products are considered in the
process and that their comparative advantages are known by the committee. The
Company's sales staff also participates in healthcare trade shows to introduce
prospective customers to its products and to generate sales orders for the
distributors. The Company also participates in various workshops and educational
programs relating to healthcare worker protection and skin disorders in order to
promote the Company's products and educate the hospital and other personnel
utilizing the products. The Company continues to expand its healthcare marketing
efforts to other healthcare professionals, including physicians offices, nursing
homes, outpatient clinics, surgical centers, blood banks and other areas of the
alternate-care market. Recently, the Company hired a sales manager to focus on
the dental market and is in the process of recruiting sales representatives to
support the Company's efforts.
The Company's sales force for medical gloves currently comprises 44
persons, who are supervised by seven Regional Managers and the Director of
Sales, Medical Division. The sales representatives are paid salaries plus
performance-based commissions. Each sales representative possesses at least five
years of previous sales experience and is trained by the Company in the
dermatological and immunological aspects of latex. They are also specifically
trained to conduct continuing education programs for healthcare personnel to
educate them on the reactions possible from latex gloves. Under these education
programs, the Company has trained approximately 30,000 healthcare professionals.
The sales force maintains regular interaction with healthcare personnel, thereby
providing the Company with valuable feedback on market perception of the
Company's products as well as new developments within the industry.
The Company's recently formed national accounts department promotes sales
to and negotiates agreements with group purchasing organizations, integrated
delivery networks, large non-acute care customers and multi-facility high
technology and scientific customers. The national accounts department is also
responsible for assuring that all operating functions of the Company provide
high service levels to these national accounts and maintain relationships with
the purchasing agents and senior officers at each such account once a contract
is in place.
The Company's sales and marketing efforts are supported by the Company's
logistics team that delivers services to medical products distributors and end
users designed to assist them in their businesses. The Company believes that
these logistics services are one of its key competitive advantages and have
helped the Company become the preferred supplier for many of its customers.
Specifically, the Company's logistics personnel work
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with medical products distributors to reduce their order cycle time and
inventory levels and have succeeded in increasing product availability for the
Company's customers. In addition, the Company actively promotes the use of
electronic data interchange (EDI) technology, for applications such as order
entry and sales tracing, which produces savings for both the Company and its
distributors.
All domestic sales of the Company's medical products are made through
approximately 140 national, regional and local distributors, typically pursuant
to a contract between the Company and the distributor specifying prices to be
paid by the distributor for gloves sold to a particular end user. Three of the
largest distributors to the general hospital market, Owens & Minor, General
Medical, and Bergen Brunswig Medical currently carry the Company's product line
on a non-exclusive basis. Owens & Minor, General Medical and Bergen Brunswig
Medical distributed gloves accounting for approximately 30.3%, 29.8% and 8.2%,
respectively, of the Company's 1995 consolidated net sales. Medical products
distributors provide the Company with an extensive nationwide distribution
network. This enables the Company's products to reach hospitals, clinics,
physicians and dental offices located in metropolitan as well as rural areas.
The distributors do not, however, necessarily promote the sale of the Company's
products more aggressively than the other competing lines of latex gloves which
they carry.
During 1994, the Company entered into a three year contract with General
Medical governing sales of the Company's gloves through General Medical. The
contract also designated the Company as the exclusive manufacturer of General
Medical's private label gloves. Sales of gloves under the contract first occured
in 1995. In July 1996, the contract was amended to extend its term for an
additional two years and to name the Company as General Medical's preferred
glove manufacturer. In the amendment, General Medical also agreed to promote
sales of the Company's gloves and the private label gloves manufactured by the
Company. General Medical is a leading national medical/surgical products
distributor and is the nation's largest distributor to the alternate healthcare
market.
In December 1996, the Company entered into a five year contract, subject to
early termination, to supply its examination gloves to Premier Purchasing
Partners ('Premier'), a national group purchasing organization ('GPO') which is
the largest hospital alliance in the United States. The Company is one of two
examination glove suppliers selected by Premier. Premier comprises 1,800
healthcare facilities with 315,000 beds, approximately one-third of the U.S.
hospital marketplace. Beginning in the first quarter of 1997, the Company's
examination gloves will be made available to the Premier member hospitals and
their alternate care affiliates. Premier corporate guidelines direct members to
utilize contracted vendors for a minimum of 90 percent of their product
requirements.
In December 1996, the Company also entered into a three year contract,
subject to early termination, to supply its examination gloves to Catholic
Materials Management Alliance ('CMMA'), a GPO representing approximately 230
healthcare facilities with 40,000 beds in the United States. The contract
contemplates that the Company will be the sole contracted supplier of
examination gloves to CMMA members between March 1997 and February 2000.
The Scientific Division markets its products for a variety of cleanroom and
laboratory applications in the semiconductor, biotechnology, pharmaceutical,
general industrial manufacturing and research segments of the high technology
and scientific market. Like the medical segment, more workers in the high
technology and scientific market are beginning to use gloves. Gloves protect
both the worker and the products or processes in these industries. As of
November 25, 1996, the Company's high technology and scientific products were
sold by a network of over 80 distribution companies, including the two largest
U.S. laboratory/cleanroom distributors, Fisher Scientific and VWR Scientific
Products. The Company has a sales force of six Company sales representatives and
four independent manufacturing representatives actively supporting the
distribution network and end user customers. This sales force reports to the
Director of Sales, Scientific Division.
The Company established a sales and marketing office in The Netherlands in
1992. In 1994, the Company opened its international sales and marketing
headquarters in Germany, with a satellite office in the United Kingdom. The
Company also recruited and trained a sales organization in 1994 and continues to
expand its distribution network throughout the European Community (the 'EC').
The Company also sells its products in South America, Australia, and Japan.
During 1995, international sales represented approximately six percent of
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the Company's total sales. Foreign sales may be subject to certain additional
risks, including import and export license requirements, trade regulations,
tariffs and foreign medical regulations.
MANUFACTURING AND QUALITY CONTROL
The Company manufactures its products at two factories in Ipoh, Malaysia
and one factory in Hat Yai, Thailand. Factory locations are selected to be close
to the rubber tree plantations, which are the Company's source of natural latex,
as well as for favorable cost and availability of labor supply. Immediately
after daily harvest from rubber trees, raw natural rubber is sold by the
plantations to latex processing firms which concentrate the rubber to produce
latex concentrate and incorporate additives and preservatives to prevent
spoilage. Latex concentrate is then purchased by the Company as the raw material
for gloves.
The Company's facilities in Ipoh, Malaysia have received an ISO 9002
certification and the Company expects to receive ISO 9002 certification for the
new Thailand facility in 1997. ISO standards are internationally recognized
quality manufacturing standards established by the International Organization
for Standardization based in Geneva, Switzerland. To obtain its ISO
registration, the Company's factories were independently audited to ensure
compliance with the applicable standards, and to maintain registration, the
factories receive regular announced inspections by an independent certification
organization. The Company believes that the ISO 9002 registration makes it more
competitive in the marketplace as customers are increasingly recognizing the
standard as an indication of product quality.
The Company's Thai facility began producing gloves in the first quarter of
1995 and is capable of producing all types of the Company's latex examination
glove products. Processes have been added in order to allow the Company to
further reduce protein levels and chemical contact sensitizers to minimize
adverse reactions to natural rubber latex gloves and in anticipation of
potential FDA labeling regulations. See '--Product Labeling.' Current results
indicate that the new facility generates significant labor, raw materials, and
water processing savings and efficiencies as compared to its Malaysian
facilities. The Company has announced plans to move all of its remaining latex
examination glove production from its Malaysian facility to its Thai facility in
1997. See 'Recent Developments.' A new production line currently being
constructed at the Thai facility, referred to by the Company as the 'Grand
Master' and scheduled to be completed by early 1997, is expected to have the
capacity of approximately eight existing production lines in this facility and
lower production costs through higher operating efficiencies and lower labor
requirements. The Company plans to build two additional 'Grand Master' lines by
the end of 1997.
In addition, the Company is currently building a latex concentrate plant in
Thailand. The output of the plant will supply latex concentrate to the Company's
factories in Thailand and Malaysia to manufacture its disposable latex gloves.
The Company expects that the first construction phase of this new plant will be
completed in the first half of 1997 and that the final phase will be completed
within two years. This plant will allow the Company to integrate more fully its
manufacturing processes in order to gain better control over the quality, cost
and reliability of latex supplies.
The gloves are manufactured on production machines which can run
continuously and which can be changed quickly to produce different types and
sizes of gloves. Quality control and testing are emphasized throughout the
Company's manufacturing process. Each batch of latex concentrate arriving at the
factory is tested to ensure that it meets Company quality standards. Each glove
is formed by dipping a porcelain mold into the latex compound. Water soluble
proteins which occur naturally in latex, and certain additives which are added
to latex when it is processed, are removed by means of extensive heating and
leaching processes. In both the Thai and Malaysian facilities, the Company has
begun automating the glove stripping process. In the past, the lack of rigidity
of newly-manufactured gloves required that they be removed manually from their
molds; new glove-stripping equipment streamlines the procedure by reducing
manpower requirements. Proteins and chemicals are minimized as a result of the
Company's proprietary latex formulations. In addition, the majority of the
Company's gloves are treated under a proprietary process to make them
powder-free and lower in protein. Throughout the manufacturing process the
Company's quality assurance team performs in-process testing of gloves for
thickness, tensile strength, tear resistance and water tightness. A sample of
every batch is retained for future analysis.
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The Company's HypoClean 100(Registered) gloves for use in cleanrooms are
processed and packaged in a Class M3.5 (100) cleanroom built into one of the
Company's Ipoh, Malaysia factories in 1993. Cleanrooms are classified by the
level and size distribution of allowed airborne particles per given volume of
air and are increasingly required for the manufacture of sensitive
microelectronic components. In a Class M3.5 (100) cleanroom, no more than 100
airborne particles per cubic foot of air are allowed.
Although the Company has never experienced an interruption in the
availability of latex due to natural phenomena or transportation problems or by
a factory shutdown resulting from fire, power outage, employee strike or other
cause, there can be no assurance that the Company's production of gloves will
not be adversely affected by such events.
COMPETITION
The Company faces substantial competition from a number of manufacturers of
latex gloves. The leading competitors in the medical glove product line are
Allegiance (a spin-off of Baxter Healthcare), Maxxim Medical, Ansell-Perry, and
Johnson & Johnson. The Company believes that Allegiance is the leading
competitor in the high technology and scientific glove market. There are also a
number of other competitors which are engaged in manufacturing or distributing
high technology and scientific gloves. Many of the Company's competitors,
particularly those competitors which are large medical and pharmaceutical and
hospital supply companies, have substantially greater financial, manufacturing,
marketing and technical resources than the Company. Synthetic latex glove
manufacturers also sell products in the medical and non-medical glove market.
Synthetic latex gloves are generally more expensive than natural latex gloves
and do not, in the Company's opinion, present a significant threat to the
Company's natural rubber latex products at this time.
The Company believes the primary competitive factors within its markets are
product quality, durability, reliability and consistency, clinical value, ease
of product use, access to distribution channels, price and the availability of
prompt delivery. Failure of the Company to continue to distinguish its products
on the basis of quality, reliability and value could have a material adverse
effect on the Company's business and results of operations. Furthermore, there
can be no assurance that the Company's competitors or others will not develop
products, manufacturing processes or new technologies which would be more cost
effective or more efficient than those of the Company or that the Company's
gloves will not be rendered obsolete or uncompetitive. Such competition could
have a material adverse effect on the Company's business, financial condition
and results of operations.
GOVERNMENT REGULATION
The Company's products are subject to regulation by numerous governmental
authorities in the United States and other countries, particularly as to safety
and efficacy, and adherence to the Good Manufacturing Practices ('GMP')
regulations for medical devices. In the United States, examination and surgical
gloves are classified as Class I medical device products regulated by the FDA.
The Federal Food, Drug, and Cosmetic Act (the 'FFD&C Act') and other federal
statutes and regulations govern or influence the testing, manufacture, safety,
labeling, storage, record-keeping, approval, advertising and promotion of Class
I devices. Noncompliance with the FFD&C Act or regulations promulgated
thereunder can result in administrative enforcement, such as warning letters,
import alerts and administrative detention, or in civil penalties, product bans,
defect notifications, mandatory field corrections, seizures, recalls,
injunctions and criminal prosecution. Periodically the FDA inspects shipments of
medical gloves as they arrive in United States ports. The time period during
which the tests are conducted and the FDA reviews the results may cause delays
in delivery and thus can result in a loss or delay in recognition of income by
the Company.
Latex medical and surgical gloves must be submitted to the FDA for
clearance to market by a pre-market notification filing under Section 510(k) of
the FFD&C Act. An application is made for a particular use or performance claim
for each type of glove produced by a specific manufacturer. Applications under
the 510(k) procedure must demonstrate substantial equivalence to a legally
marketed device. Additional data requirements apply to gloves such as surgical
gloves, which are sterile. Applicants must defer marketing until a written order
is issued by the FDA finding the firm's device substantially equivalent to a
legally marketed device. This notice may be issued within 90 days of submission,
but may take substantially longer. The FDA, however, may
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determine that the proposed device is not substantially equivalent, or the
agency may require the Company to submit further information, such as additional
test data, before it is able to make a substantial equivalence determination.
Such an adverse determination or request for additional information could have
the effect of materially delaying the commencement of marketing. As part of the
substantial equivalence determination, the Company must demonstrate that the
glove complies with the American Society of Testing and Materials testing
standards relating to physical specifications for the product and must pass the
FDA 'leakage test.' In addition, the FDA may inspect the manufacturing
facilities before issuing a notice of substantial equivalence and may delay or
decline to issue such notice.
The Company has obtained 510(k) clearance for each type of currently
marketed glove which requires clearance. The Company has not experienced any
substantial difficulty in obtaining 510(k) clearances in the past. If the
Company makes any changes to a type of glove previously cleared by the FDA that
could significantly affect its safety or effectiveness (such as significant
changes in the manufacturing process), a new 510(k) submission will be required.
The Company is subject to periodic inspection by the FDA for compliance
with GMP regulations. Under GMP regulations, the Company is subject to
significant procedural and documentation requirements with respect to
manufacturing, packaging, storage and control activities. The Company also may
be subject to inspection by foreign regulatory authorities to determine
compliance with comparable standards. Beginning in June 1997, the Company will
have to comply with the FDA's recently promulgated Quality System Regulation,
which will replace the GMP regulations for medical devices and will incorporate
preproduction design and development controls and achieve consistency with
quality system requirements worldwide. Therefore, the Company must continue to
expend time, monies and efforts in the areas of production and quality control
to ensure full technical compliance with these standards.
The Company must also comply with various FDA labeling and post-market
reporting requirements. Failure to comply with applicable regulatory
requirements can result in administrative enforcement, such as warning letters,
import alerts and administrative detention, or in product bans, field
corrections, seizures, recalls, injunctions and criminal prosecutions. Changes
in existing requirements or adoption of new requirements could adversely affect
the ability of the Company to comply with regulatory requirements. Failure to
comply with regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations.
Whether or not FDA clearance is obtained for a new product, approval or
clearance of a product by regulatory authorities in foreign countries may be
required prior to the commencement of commercial sales of the product in such
countries. The requirements governing product approvals or clearances vary
widely from country to country, and the time required for approval may be longer
or shorter than that required for FDA approval.
The Company must meet various regulatory requirements for the sale and
distribution of its product throughout the EC. The Company currently meets all
such regulatory requirements, including registration with the appropriate
notified bodies, which register companies for the sale of products throughout
the EC. In order to continue selling its products within the EC following June
14, 1998, the Company will be required to comply with the EC's Medical Devices
Directive.
Although the Company's customers do not bill third-party reimbursement
sources separately for purchases of the Company's gloves, the Company's ability
to sell its latex medical gloves profitably may depend in part on the
reimbursement policies and regulations of government health administration
authorities, private health insurers and other organizations. Such third-party
payors are increasingly challenging the price of medical products and services.
Additionally, reform measures, if adopted, could adversely affect the pricing of
the Company's medical gloves.
In addition to the statutes and regulations described above, the Company is
also subject to Malaysian and Thai occupational, health and environmental laws
and regulations.
26
<PAGE>
LEGAL PROCEEDINGS
Since May 1995, 41 product liability lawsuits seeking monetary damages, in
most cases of an unspecified amount, have been filed in federal and state courts
against the Company, and other manufacturers of latex gloves, alleging injuries
ranging from dermatitis to severe allergic reactions caused by the residual
chemicals or latex proteins in gloves worn by medical workers while performing
their duties. The Company has referred the defense of these lawsuits to its
insurance carriers. While the Company maintains levels of insurance coverage
which it believes will be adequate to cover the costs of the legal defense of
these suits, there can be no assurance that the Company's insurance will be
sufficient to meet any damages for which the Company may be found liable in the
existing lawsuits, which are still in relatively early stages of discovery, or
any others that may be filed in the future, or that the outcome of such suits
will not adversely affect the Company's results of operations or financial
condition.
From time to time, the Company is involved in other litigation relating to
claims arising out of its operations in the normal course of business. As of the
date hereof, the Company is not a party to any other legal proceedings, the
adverse outcome of which, in management's opinion, individually or in the
aggregate, would have a material adverse effect on the Company's financial
condition.
PRODUCT LIABILITY AND INSURANCE
Participants in the medical supply industry are subject to lawsuits
alleging product liability, many of which involve significant damage claims and
defense costs. The Company currently has in force product liability insurance
policies. The Company's insurance policies are on a 'claims made' basis and are
subject to annual renewal. A successful claim against the Company in excess of
the Company's insurance coverage could have a material adverse effect on the
Company's results of operations or financial condition. Claims made against the
Company, regardless of their merit, also could have a material adverse effect on
the Company's reputation. There is no assurance that the coverage limits of the
Company's insurance policies will be adequate. While the Company has been able
to obtain product liability insurance in the past, such insurance varies in
cost, is difficult to obtain and may not be available in the future on
acceptable terms or at all.
EMPLOYEES
As of November 15, 1996, the Company had approximately 4,200 employees, of
whom approximately 4,050 were employed in Malaysia and Thailand. The Malaysian
factory workers are represented by a company union which has entered into a
collective bargaining agreement with the Company's Malaysian subsidiary. The
agreement expires on September 30, 1997. The Company considers its relations
with its employees to be good.
FACILITIES
The Company owns two manufacturing facilities located in Ipoh, Malaysia,
totaling approximately 300,000 square feet, and a latex concentrate
manufacturing and processing plant located in Seremban, Malaysia, comprised of
approximately 30,000 square feet. The Company leases the land where its
facilities are located under long-term leaseholds from the state government
which have expiration dates ranging from the year 2063 to the year 2072. Any
transfer of a land leasehold by the Company requires the prior approval of the
state. The Company has announced plans to close one of the Malaysian facilities
in 1997. See 'Recent Developments.'
The Company also owns a manufacturing facility in Hat Yai, Thailand
totaling approximately 300,000 square feet. The Company owns the approximately
46 acres of land on which the facility is located.
In the United States, the Company leases warehouse space in Hanover,
Maryland and San Diego, California, of approximately 40,000 square feet and
45,000 square feet, respectively. The Company also utilizes the services of a
logistical management company which provides warehouse services in Des Plaines,
Illinois. The Company leases approximately 42,000 square feet of office space in
San Diego, California for its headquarters and approximately 1,755 square feet
of additional office space in Boca Raton, Florida. The Company also leases
approximately 2,746 square feet of space in San Diego, California for its
research and development laboratory.
27
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Irving Jaffe 78 Chairman Emeritus and Director
Richard Jaffe(1) 43 Chairman, President, Chief Executive Officer and Director
Neil K. Braverman(1) 57 Co-Chairman and Director
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
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. 47 Vice President, Scientific Affairs
Richard J. Witmeyer, Ph.D. 48 Vice President, Technical Affairs
Cam L. Garner (2)(3) 48 Director
Howard L. Shecter(1)(2) 53 Director
Joseph Stemler(2)(3) 65 Director
</TABLE>
- ------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of 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. In 1985, Nutri Foods International, Inc. 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 International, Inc., a manufacturer of frozen
desserts. He served as President of Nutri Foods International, Inc. until
December 1987. Nutri Foods International, Inc. was sold to The Coca-Cola Company
in 1985. 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 became Co-Chairman of the Company in May 1996 and has served
as a director since he founded the Company in 1985. He served as the Co-Chief
Executive Officer of the Company between March 1993 and May 1996 and as the
President of the Company between 1985 and May 1996. At various times during the
period from 1972 through 1985, Mr. Braverman was President of Reserve Energy
Corporation, an oil drilling
28
<PAGE>
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 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. Effective
January 1, 1997, Mr. Braverman will resign as Co-Chairman and enter into a
one-year consulting arrangement with the Company. See 'Recent Developments.'
Mr. Morash has been the Executive Vice President, 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 key financial, marketing and human resource
issues. As Executive Vice President, Chief Financial Officer, he was part of an
investment and management team brought in to turn around H.B.S.A. Industries in
1990, 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 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 March 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 December 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.
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 the healthcare division of James River
Corporation and the successor of that division, 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.
29
<PAGE>
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 June 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 June 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.
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. and Houghton Pharmaceuticals, Inc. 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. He has been the
President, Chairman and Chief Executive Officer of Scholle Corporation, an
aseptic packaging company, since January 1996. 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 December 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 serves as a director of La
Jolla Pharmaceutical Company and Sunrise Medical Inc., a publicly held
manufacturer and provider of medical products used in the rehabilitation and
recovery phases of patient care. He is an engineering graduate of Illinois
Institute of Technology and holds advanced degrees in engineering and business
administration.
------------------------
All directors hold office until the next annual meeting of shareholders.
Officers are elected annually by the Board of Directors and serve at the
discretion of the directors.
The Executive Committee of the Board of Directors 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 to be approved by the
Board of Directors, except such reserved matters, must first be approved by the
Executive Committee.
The Board of Directors has also established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the scope and results of the
audit and other services performed by the Company's independent accountants. The
Compensation Committee sets compensation to be paid to executive officers and
other key employees and is charged with the administration of the Company's
Equity Compensation Plan.
30
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information, as of September 30, 1996 or
such other date as set forth in the notes to this table, 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 of the five most highly compensated executive officers and (iv) all
directors and executive officers of the Company as a group. On September 30,
1996, there were 25,708,448 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>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING NUMBER OWNED AFTER OFFERING
----------------------- OF SHARES -----------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Neil K. Braverman (1) ............. 4,176,120 16.01% 2,000,000 2,176,120 8.35%
1181 S. Rogers Circle
Suite 14
Boca Raton, Florida 33487
Irving Jaffe (2)(3) ............... 2,349,066 9.14% 1,000,000 1,349,066 5.25%
12671 High Bluff Drive
San Diego, California 92130
Richard Jaffe (3)(4) .............. 1,693,544 6.52% 200,000 1,493,544 5.75%
12671 High Bluff Drive
San Diego, California 92130
Eleanor Jaffe (3)(5) .............. 2,349,066 9.14% -- 1,349,066 5.25%
12671 High Bluff Drive
San Diego, California 92130
Ann Jaffe (6) ..................... 1,693,544 6.52% -- 1,493,544 5.75%
12671 High Bluff Drive
San Diego, California 92130
Jeanne D. Braverman (7) ........... 4,176,120 16.01% -- 2,176,120 8.35%
1181 S. Rogers Circle
Suite 14
Boca Raton, Florida 33487
TCW Group, Inc. (8) ............... 1,777,400 6.91% -- 1,777,400 6.91%
865 South Figueroa Street
Los Angeles, California 90017
FMR Corp. (8) ..................... 1,311,600 5.08% -- 1,311,600 5.08%
82 Devonshire Street
Boston, Massachusetts 02109
Travelers Group Inc. (8)(9) ....... 1,337,386 5.20% -- 1,337,386 5.20%
388 Greenwich Street
New York, New York 10013
Cam L. Garner ..................... 2,000 * -- 2,000 *
Howard L. Shecter (10) ............ 20,000 * -- 20,000 *
Joseph Stemler (10) ............... 8,000 * -- 8,000 *
Jeffrey A. Martin (10) ............ 8,000 * -- 8,000 *
Lee Chee Ming ..................... 185,062 * -- 185,062 *
David L. Morash (10) .............. 20,000 * -- 20,000 *
All directors and executive
officers as a group
(16 persons)..................... 8,507,192 31.92% 3,200,000 5,307,192 20.06%
</TABLE>
- ------------------
* Does not exceed one percent.
(1) Includes 2,450,600 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, 348,612 shares
held by Jeanne D. Braverman, Mr. Braverman's spouse, 977,176 shares held by
trusts for which Ms. Braverman serves as trustee, 31,732
(Footnotes continued on next page)
31
<PAGE>
(Footnotes continued from previous page)
shares held in trust for the benefit of Mr. Braverman and 368,000 shares
subject to exercisable options. In the event the Underwriters exercise their
over-allotment option in full, Mr. Braverman will sell 180,000 shares
pursuant to such option.
(2) Includes 870,930 shares held by Eleanor Jaffe, Irving Jaffe's spouse, and
1,167,104 shares held in trust for his benefit. In the event the
Underwriters exercise their over-allotment option in full, Mr. Jaffe will
sell 100,000 shares pursuant to such option.
(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 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. In 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. The matter has not yet been resolved.
(4) Includes 1,228,000 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 and 280,000 shares subject to exercisable option. In
the event the Underwriters exercise their over-allotment option in full, Mr.
Jaffe will sell 200,000 shares pursuant to such option.
(5) Includes 75,000 shares held by Irving Jaffe, Eleanor Jaffe's spouse,
1,167,104 shares held in trust for the benefit of Irving Jaffe, and 185,544
shares to which Irving Jaffe claims beneficial ownership, as further
described in note (3) above.
(6) Includes 1,228,000 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 280,000 shares
subject to exercisable options beneficially owned by Richard Jaffe.
(7) Includes 2,450,600 shares held by the Braverman Family Partnership, Ltd.
(see note 1), 31,732 shares held in trust for the benefit of Neil K.
Braverman, 368,000 shares subject to Mr. Braverman's exercisable options and
977,176 shares held by trusts for which Ms. Braverman serves as trustee.
(8) As reported on Schedule 13G filed with the Securities and Exchange
Commission on December 11, 1996 in the case of FMR Corp., and as reported on
Form 13F filed with the Securities and Exchange Commission on October 28,
1996 in the case of TCW Group, Inc. and as reported on Form 13F filed with
the Securities and Exchange Commission on November 13, 1996 in the case of
Travelers Group Inc. FMR Corp. reported sole voting authority over 119,400
shares and sole investment discretion over 1,311,600 shares. TCW Group, Inc.
reported sole voting authority over 1,608,400 shares and sole investment
discretion over 1,608,400 shares. Travelers Group Inc., and its affiliates,
including Smith Barney Inc., reported sole voting authority over 321,400
shares, shared voting authority over 90,000 shares and shared investment
discretion over 1,337,386 shares.
(9) Travelers Group Inc. has informed the Company that as of December 31, 1996,
Travelers Group Inc. and its affiliates, including Smith Barney Inc., had
beneficial ownership of 1,942,358 shares (representing approximately 7.50%
of the Company's outstanding Common Stock at that time).
(10) Includes shares beneficially owned under currently exercisable options as
follows: David L. Morash--20,000; Jeffrey A. Martin--8,000; Howard L.
Shecter--20,000; Joseph Stemler--8,000.
Subsequent to September 30, 1996, Irving Jaffe and Eleanor Jaffe initiated a
series of transactions conveying 400,000 shares beneficially owned by them to
Richard B. Jaffe, Jack A. Jaffe and Daniel J. Gatto, as trustees of the Jaffe
Charitable Remainder Unitrust, a California charitable remainder unitrust, which
shares will be sold in the offering. Such shares constituted all the shares held
by the trustees in such capacity prior to the offering.
Subsequent to September 30, 1996, Richard Jaffe and Ann Jaffe initiated a
series of transactions conveying 200,000 shares beneficially owned by them to
IceJuicee, a California Limited Partnership, a California limited partnership
which shares will be sold in the event the underwriters exercise their
over-allotment option in full. Such shares constituted all the shares held by
IceJuicee prior to the offering.
Subsequent to September 30, 1996, Neil K. Braverman and Jeanne D. Braverman
initiated a series of transactions conveying: 200,000 shares beneficially owned
by them to Braverman Holdings, Limited, a Texas limited partnership; 869,500
shares beneficially owned by them to North Military, Ltd., a Texas limited
partnership; 178,428 shares beneficially owned by them to JSB Ventures, Ltd., a
Texas limited partnership; 178,428 shares beneficially owned by them to JDB
Ventures, Ltd., a Texas limited partnership; and 90,090 shares beneficially
owned by them to JNB Ventures, Ltd., a Texas limited partnership. All such
shares will be sold in the offering. Such shares constituted all the shares held
by such Texas limited partnerships prior to the offering.
32
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Selling Shareholders have agreed to sell to such
Underwriter, shares of Common Stock which equal the number of shares set forth
opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
----------
<S> <C>
Smith Barney Inc................................................................
Donaldson, Lufkin & Jenrette Securities Corporation.............................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................
----------
Total........................................................................... 3,200,000
----------
----------
</TABLE>
The Underwriters are obligated to take and pay for all shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated
are acting as Representatives, propose initially to offer part of the shares of
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part of the shares to certain dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. The
Representatives have advised the Company that the Underwriters do not intend to
confirm sales to any account over which they exercise discretionary authority.
The Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 480,000 additional shares of Common Stock at the public offering
price set forth on the cover page hereof less underwriting discounts and
commissions. The Underwriters may exercise such option to purchase additional
shares solely for the purpose of covering over-allotments, if any, incurred in
connection with the sale of the shares offered hereby. To the extent such option
is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriter's name in the preceding
table bears to the total number of shares in such table.
In connection with this offering, the Underwriters and selling group
members (if any) or their respective affiliates who are qualifying market makers
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Rule 10b-6A under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), during the two business
day period before commencement of offers or sales of the Common Stock offered
hereby. The passive market making transactions must comply with applicable
volume and price limits and be identified as such. In general, a passive market
maker may display its bid at a price not in excess of the highest independent
bid for such security. If all independent bids are lowered below the passive
market maker's bid, however, such bid must then be lowered when certain purchase
limits are exceeded. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.
33
<PAGE>
The Company and the Selling Shareholders and the Underwriters have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act.
All of the Company's executive officers and directors, including the
Selling Shareholders, and certain other shareholders have agreed that they will
not, without the prior consent of Smith Barney Inc., directly or indirectly
offer to sell, sell or otherwise dispose of any shares of Common Stock of the
Company owned by them for a period of 90 days after the date of this Prospectus.
In addition, the Company has agreed that for a period of 90 days after the date
of this Prospectus, it will not, without the prior written consent of Smith
Barney Inc., directly or indirectly offer to sell, issue, distribute or
otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities or any options, rights or warrants with
respect to any equity securities except for the issuance of the shares of Common
Stock offered hereby, the issuance of shares of Common Stock upon the exercise
of outstanding options and the issuances of options and shares of Common Stock
underlying options granted pursuant to the Company's Equity Compensation Plan.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Morgan, Lewis & Bockius LLP, New York,
New York. Howard L. Shecter, a partner of Morgan, Lewis & Bockius LLP and a
director of the Company, holds, as of the date of this Prospectus, options to
purchase 46,000 shares of Common Stock of the Company, of which options to
purchase 14,000 shares are currently exercisable. The validity of the Common
Stock will be passed upon for the Underwriters by Dewey Ballantine, New York,
New York. As to matters of Florida law, Dewey Ballantine will rely on the
opinion of Morgan, Lewis & Bockius LLP.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and 1995 and the
consolidated statements of operations, cash flows and shareholders' equity for
each of the three years in the period ended December 31, 1995, included in the
Company's 1995 Annual Report on Form 10-K and incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'Commission'). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549, as well as at the following
Commission Regional Offices: Seven World Trade Center, 13th Floor, New York, NY
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies can be obtained from the Commission by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Branch, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549.
Such material may also be accessed electronically by means of the Commission's
Web site on the Internet (http://www.sec.gov).
This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all exhibits thereto, referred to as the 'Registration
Statement') filed by the Company with the Commission under the Securities Act of
1933, as amended (the 'Securities Act'), with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and to the exhibits thereto for further information with
respect to the Company and the securities offered hereby. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission
described above. Statements contained herein concerning the
34
<PAGE>
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-22726) are incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1995.
(2) Quarterly reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
(3) The description of the Company's Common Stock which is contained
in the Company's Registration Statement on Form 8-A filed under the
Exchange Act on November 2, 1993, as amended by the Company's Form 8-A/A
filed under the Exchange Act on January 2, 1997.
(4) Current Report on Form 8-K filed under the Exchange Act on January
2, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (not including exhibits to the
documents incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that the Prospectus incorporates)
are available without charge to each person to whom a Prospectus is delivered
upon written or oral request. Requests should be directed to Safeskin
Corporation, 12671 High Bluff Drive, San Diego, California 92130, Attention:
Secretary (telephone number 619-794-8111).
35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES
NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
Prospectus Summary.......................... 3
The Company................................. 6
Risk Factors................................ 6
Use of Proceeds............................. 9
Recent Developments......................... 9
Price Range of Common Stock................. 10
Dividend Policy............................. 11
Capitalization.............................. 11
Selected Consolidated Financial Data........ 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 13
Business.................................... 18
Management.................................. 28
Principal and Selling Shareholders.......... 31
Underwriting................................ 33
Legal Matters............................... 34
Experts..................................... 34
Available Information....................... 34
Incorporation of Certain Documents by
Reference................................. 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,200,000 SHARES
SAFESKIN CORPORATION
COMMON STOCK
[LOGO OF SAFESKIN CORPORATION]
------------
P R O S P E C T U S
JANUARY , 1997
------------
Smith Barney Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Merrill Lynch & Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table shows the estimated expenses of the issuance and
distribution of the securities offered hereby, other than underwriting discounts
and commissions:
<TABLE>
<S> <C>
SEC Registration Fee.............................................................. $ 28,646
NASD Filing Fee................................................................... 9,953
Printing and Engraving............................................................ 80,000
Legal Fees and Expenses........................................................... 225,000
Accounting Fees and Expenses...................................................... 50,000
Blue Sky Qualification Fees and Expenses.......................................... 5,000
Miscellaneous..................................................................... $ 1,401
--------
Total........................................................................ $400,000
--------
--------
</TABLE>
All of the amounts shown are estimates except for the fees payable to the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Amended and Restated Articles of Incorporation provide that
the Company shall, to the full extent permitted by Section 607.0850 of the
Florida Business Corporation Act, as amended from time to time ('FBCA'),
indemnify all persons whom it may indemnify pursuant thereto. In addition, the
Company's Articles of Incorporation limit the personal liability of its
directors to the full extent permitted by Section 607.0831 of the FBCA, as
amended from time to time.
Section 607.0850 of the FBCA permits a corporation, under specified
circumstances, to indemnify any person who was or is a party to any proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the Company, or that they were or are serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against liability and expenses actually and reasonably incurred in connection
with such proceeding, including any appeal thereof, if such person acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful.
Section 607.0831 of the FBCA provides that the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director is limited to any breach or failure to perform
the director's duties which constitutes (i) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (ii)
unlawful payments of distributions to shareholders as provided in Section
607.0834 of the FBCA; (iii) any transaction from which the director derived an
improper personal benefit; (iv) conscious disregard for the best interest of the
corporation, or willful misconduct, in a proceeding by or in the right of the
corporation to procure a judgment in its favor or by or in the right of a
shareholder; or (v) recklessness, bad faith, malicious purpose or with wanton
and willful disregard of human rights, safety or property in a proceeding by or
in the right of someone other than the corporation or a shareholder.
Pursuant to Florida law, the Company may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the applicable provisions of the Bylaws of the Company or
applicable law. The Company has such an insurance policy.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<S> <C>
1 Form of Underwriting Agreement.
5 Opinion of Morgan, Lewis & Bockius LLP regarding legality.**
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5).**
24 Powers of Attorney (included on the signature page).**
</TABLE>
- ------------------
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan, annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on January 22, 1997.
SAFESKIN CORPORATION
By: /s/ RICHARD JAFFE
---------------------------------
Richard Jaffe Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -----------------
<C> <S> <C>
/s/ RICHARD JAFFE Chairman, President, Chief Executive January 22,1997
- ------------------------------------------ Officer and Director
Richard Jaffe
/s/ DAVID L. MORASH Executive Vice President and Chief January 22, 1997
- ------------------------------------------ Financial Officer
David L. Morash
* Vice President, Finance, Controller and January 22, 1997
- ----------------------------------------- Secretary
Seth S. Goldman
* Co-Chairman and Director January 22, 1997
- -----------------------------------------
Neil K. Braverman
* Director January 22, 1997
- -----------------------------------------
Cam L. Garner
* Chairman Emeritus and Director January 22, 1997
- -----------------------------------------
Irving Jaffe
* Director January 22, 1997
- ----------------------------------------
Howard L. Shecter
* Director January 22, 1997
- ----------------------------------------
Joseph Stemler
*By: /s/ DAVID L. MORASH
- ---------------------------------------
David L. Morash, Attorney-in-fact
</TABLE>
II-3
<PAGE>
Draft of January 17, 1997
3,200,000 Shares
SAFESKIN CORPORATION
Common Stock
UNDERWRITING AGREEMENT
----------------------
, 1997
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
The persons named in Schedule I hereto as selling
shareholders (the "Selling Shareholders") severally propose to sell to the
several underwriters named in Schedule II hereto (the "Underwriters") an
aggregate of 3,200,000 shares (the "Firm Shares") of common stock, par value
$.01 per share (the "Common Stock"), of Safeskin Corporation, a Florida
corporation (the "Company"). In addition, solely for the purpose of covering
over-allotments, the Selling Shareholders severally propose to sell to the
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up
to an additional 480,000 shares (the "Additional Shares") of Common Stock. The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares." The Company and the Selling Shareholders are hereinafter
sometimes referred to as the "Sellers."
The Company and the Selling Shareholders wish to confirm as
follows their agreement with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
<PAGE>
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 under the Act (the "registration
statement"), including a prospectus subject to completion, relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective or, if the registration statement
became effective prior to the execution of this Agreement, as supplemented or
amended prior to the execution of this Agreement. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment. If an abbreviated registration statement relating to
the offering of the Shares is prepared and filed with the Commission in
accordance with Rule 462(b) under the Act (an "Abbreviated Registration
Statement"), the term "Registration Statement" as used in this Agreement
includes the Abbreviated Registration Statement. The term "Prospectus" as used
in this Agreement means the prospectus in the form included in the Registration
Statement, or, if the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Act and such information is
included in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Act, the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as supplemented
by the addition of the Rule 430A information contained in the prospectus filed
with the Commission pursuant to Rule 424(b). The term "Prepricing Prospectus"
as used in this Agreement means the prospectus subject to completion in the
form included in the registration statement at the time of the initial filing
of the registration statement with the Commission and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
2. Agreements to Sell and Purchase. Subject to such adjustments as you
may determine to avoid fractional shares, each of the Selling Shareholders
agrees, subject to all the terms and conditions set forth herein, to sell to
the respective Underwriters the number of Firm Shares set forth opposite the
name of such Selling Shareholder on Schedule I hereto and, upon the basis of
the representations, warranties and agreements of the Sellers herein contained
and subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from each Selling Shareholder,
at a purchase price of $ per share (the "purchase price per share"), that
number of Firm Shares which bears the same proportion to the number of Firm
Shares set forth opposite the name of such Selling Shareholder in Schedule I
hereto as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof) bears to the aggregate number of Firm Shares to
be sold by the Selling Shareholders.
Each of the Selling Shareholders listed in Schedule I hereto
also agrees, subject to all the terms and conditions set forth herein, to sell
to the Underwriters, and, upon the basis of the representations, warranties and
agreements of the Sellers herein contained and subject to all the terms and
conditions set forth herein, the Underwriters shall have the right to purchase
2
<PAGE>
from the Selling Shareholders listed in Schedule I hereto, at the purchase
price per share, pursuant to an option (the "over-allotment option") which may
be exercised at any time and from time to time prior to 9:00 p.m., New York
City time, on the 30th day after the date of the Prospectus (or, if such 30th
day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading), up to an
aggregate of 480,000 Additional Shares from the Selling Shareholders listed in
Schedule I hereto. Additional Shares may be purchased solely to cover
over-allotments made in connection with the offering of the Firm Shares. Upon
any exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase from the Selling Shareholders the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be purchased by the Underwriters as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule II hereto
(or such number of Firm Shares increased as set forth in Section 12 hereof)
bears to the aggregate number of Firm Shares.
Certificates in transferable form for the Shares that each of
the Selling Shareholders agrees to sell pursuant to this Agreement have been
placed in custody with [_______] (the "Custodian") for delivery under this
Agreement pursuant to a Custody Agreement and Power of Attorney (the "Custody
Agreement") executed by each of the Selling Shareholders appointing [_______]
and [_______] as agents and attorneys-in-fact (the "Attorneys-in-Fact"). Each
Selling Shareholder agrees that (i) the Shares represented by the certificates
held in custody pursuant to the Custody Agreement are subject to the interests
of the Underwriters, the Company and each other Selling Shareholder, (ii) the
arrangements made by the Selling Shareholders for such custody are, except as
specifically provided in the Custody Agreement, irrevocable and (iii) the
obligations of the Selling Shareholders hereunder and under the Custody
Agreement shall not be terminated by any act of such Selling Shareholder or by
operation of law, whether by the death or incapacity of any Selling Shareholder
or the occurrence of any other event. If any Selling Shareholder shall die or
be incapacitated or if any other event shall occur before the delivery of the
shares hereunder, certificates for the Shares to be sold by such Selling
Shareholder shall be delivered to the Underwriters by the Attorneys-in-Fact in
accordance with the terms and conditions of this Agreement and the Custody
Agreement as if such death or incapacity or other event had not occurred,
regardless of whether or not the Attorneys-in-Fact or any Underwriter shall
have received notice of such death, incapacity or other event. Each
Attorney-in-Fact represents that he is authorized, on behalf of each of the
Selling Shareholders, to execute this Agreement and any other documents
necessary or desirable in connection with the sale and public offering of such
Shares, to distribute the balance thereof to such Selling Shareholder, and to
take such other actions as may be necessary or desirable in connection with the
transactions contemplated by this Agreement. Each Attorney-in-Fact agrees to
perform his duties under the Custody Agreement.
3
<PAGE>
3. Terms of Public Offering. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, at 10:00
A.M., New York City time, on , 1997 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
among you, the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than two nor later than ten business days after
the giving of the notice hereinafter referred to, as shall be specified in a
written notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement between you and
the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request by written notice, it being understood that a facsimile
transmission shall be deemed written notice, prior to 9:30 A.M., New York City
time, on the second business day preceding the Closing Date or any Option
Closing Date, as the case may be. Such certificates shall be made available to
you in New York City for inspection and packaging not later than 9:30 A.M., New
York City time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and any Additional Shares to be purchased hereunder shall be delivered
to you on the Closing Date or the Option Closing Date, as the case may be,
against payment of the purchase price therefor in immediately available funds.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or a post-effective amendment
thereto or any Abbreviated Registration Statement to be declared or, in the
case of an Abbreviated Registration Statement, to become effective before the
offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment or Abbreviated
Registration Statement to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing,
when the Registration Statement or such post-effective amendment or Abbreviated
Registration Statement has become effective.
4
<PAGE>
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the Commission
for amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of the suspension of qualification of the Shares
for offering or sale in any jurisdiction or the initiation of any proceeding
for such purpose; and (iii) within the period of time referred to in paragraph
(f) below, of any change in the Company's condition (financial or other),
business, prospects, properties, net worth or results of operations, or of the
happening of any event, which makes any statement of a material fact made in
the Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations
thereunder to be stated therein or necessary in order to make the statements
therein not misleading in any material respect, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you, without charge, one
signed copy of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and
all exhibits to the Registration Statement and will also furnish to you,
without charge, such number of conformed copies of the Registration Statement
as originally filed and of each amendment thereto, but without exhibits, as you
may request.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you shall object
after being so advised or (ii) so long as, in the opinion of counsel for the
Underwriters, a prospectus is required to be delivered in connection with sales
by any Underwriter or dealer, file any information, documents or reports
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), without delivering a copy of such information, documents or reports to
you, as Representatives of the Underwriters, prior to or concurrently with such
filing.
(e) Prior to the execution and delivery of this Agreement,
the Company has delivered or will deliver to you, without charge, in such
quantities as you have requested or may hereafter request, copies of each form
of the Prepricing Prospectus. The Company consents to the use, in accordance
with the provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and
by dealers, prior to the date of the Prospectus, of each Prepricing Prospectus
so furnished by the Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Underwriters a prospectus is required by the Act
to be delivered in connection with sales by any Underwriter or dealer, the
Company will expeditiously deliver to each Underwriter and each dealer, without
5
<PAGE>
charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as you may request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If during such period of time any event shall occur that in the judgment of the
Company or in the opinion of counsel for the Underwriters is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set
forth therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of paragraph
(d) above, file with the Commission an appropriate supplement or amendment
thereto and will expeditiously furnish copies thereof to the Underwriters and
dealers in such quantities as you shall request. In the event that the Company
and you, as Representatives of the several Underwriters, agree that the
Prospectus should be amended or supplemented, the Company, if requested by you,
will promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided,
however, that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering
a twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as
practicable after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to shareholders or filed with the Commission, and (ii) from time
to time such other information concerning the Company as you may reasonably
request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 12 hereof or by notice given by you terminating
this Agreement pursuant to Section 12 or Section 13 hereof), or if this
Agreement shall be terminated by the Underwriters because of any
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failure or refusal on the part of the Company or the Selling Shareholders to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Representatives for all out-of-pocket expenses
(including fees and expenses of counsel for the Underwriters) incurred by you
in connection herewith.
(k) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(l) The Company will not (and will not announce or otherwise
disclose any intention to) offer to sell, contract to sell, sell or otherwise
transfer or dispose of, or grant any option or warrant to purchase, any shares
of Common Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) for a period of 90 days after the date of the
Prospectus (the "Lock-up Period") without the prior written consent of Smith
Barney Inc.; provided, however, that the Company shall be entitled, without the
consent of Smith Barney Inc., to (i) issue shares of Common Stock upon exercise
of options or warrants disclosed to be outstanding in the Prospectus and (ii)
grant stock options pursuant to plans or arrangements currently in effect that
are disclosed in the Registration Statement and the Prospectus.
(m) The Company has furnished or will furnish to you
"lock-up" letters, in form and substance satisfactory to you, signed by each of
its current officers and directors and each of its shareholders appearing in
the "Principal and Selling Shareholders" table in the Prospectus.
(n) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
6. Agreements of the Selling Shareholders. Each of the Selling
Shareholders agrees with the several Underwriters as follows:
(a) Such Selling Shareholder will cooperate to the extent
necessary to cause the registration statement, any Abbreviated Registration
Statement or any post-effective amendment thereto to become effective at the
earliest possible time.
(b) Such Selling Shareholder will pay all federal and other
taxes, if any, on the transfer or sale of any Shares that are sold by such
Selling Shareholder to the Underwriters.
(c) Such Selling Shareholder will do or perform all things
reasonably required to be done or performed by such Selling Shareholder prior
to the Closing Date to satisfy all conditions precedent to the delivery of the
Shares by such Selling Shareholder pursuant to this Agreement.
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(d) Such Selling Shareholder will not (and will not announce
or otherwise disclose any intention to) offer to sell, contract to sell, sell
or otherwise transfer or dispose of, or grant any option to purchase, any
shares of Common Stock (or any securities convertible or exercisable or
exchangeable for Common Stock), or exercise any registration rights with
respect to the sale of Common Stock, except for the sale of Shares to the
Underwriters pursuant to this Agreement, without the prior written consent of
Smith Barney Inc. for a period of 90 days after the date of the Prospectus.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Shareholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Shareholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of
time referred to in Section 5(f) hereof, of any change in information relating
to such Selling Shareholder and of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations or any other information relating to the Company or relating to any
matter stated in the Prospectus or any amendment or supplement thereto that
comes to the attention of such Selling Shareholder that suggests that any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented, if amended or supplemented) is or
may be untrue in any material respect or that the Registration Statement or
Prospectus (as then amended or supplemented, if amended or supplemented) omits
or may omit to state a material fact or a fact necessary to be stated therein
in order to make the statements therein not misleading in any material respect.
(g) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982, as amended, with respect to the transactions herein
contemplated, such Selling Shareholder agrees to deliver to you prior to or on
the Closing Date a properly completed and executed United States Treasury
Department Form W-9 if required by Treasury Department regulations (or any
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
7. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Company meets the requirements for use of Form S-3
under the Act. The registration statement in the form in which it became or
becomes effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the
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Prospectus and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) under the Act, complied or will comply in all
material respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the registration statement or the prospectus
made in reliance upon and in conformity with the information relating to any
Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) The incorporated documents, listed under "Incorporation
of Certain Documents by Reference" in the Prospectus, heretofore filed were
filed in a timely manner and, when they were filed (or, if any amendment with
respect to any such document was filed, when such document was filed),
conformed with the requirements of the Exchange Act and did not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and any
further Incorporated Documents will, when so filed, be filed in a timely manner
and conform with the requirements of the Exchange Act and will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(d) All the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, are free of any preemptive or similar rights (other than such
rights as shall terminate upon completion of, and be inapplicable to, the
offering contemplated hereby) and have been issued and sold in compliance with
all Federal and state securities laws. The capital stock of the Company
conforms in all material respects to the description thereof incorporated by
reference in the Registration Statement and the Prospectus.
(e) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not
have a material adverse effect on the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company and
the Subsidiaries (as defined below), taken as a whole (a "Material Adverse
Effect").
(f) All of the Company's subsidiaries (as defined in the Act)
are referred to herein individually as a "Subsidiary" and collectively as the
"Subsidiaries." For purposes of this Agreement, a "Material Subsidiary" shall
mean any Subsidiary of the Company (i) the assets of which represented more
than 5% of the consolidated assets of the Company at December 31, 1995, (ii)
the pre-tax income of which represented more than 5% of the consolidated
pre-tax
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income of the Company for the Company's most recent fiscal year, (iii) the
revenues of which represented more than 5% of the consolidated revenues of the
Company for the Company's most recent fiscal year or (iv) which is listed in
Schedule III hereto. Each Subsidiary is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its incorporation, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration, except
where the failure so to register or qualify would not have a Material Adverse
Effect. All the outstanding shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and nonassessable
and are wholly-owned by the Company directly or indirectly through one of the
other Subsidiaries, free and clear of any lien, adverse claim, security
interest, equity or other encumbrance, except as disclosed in the Registration
Statement and the Prospectus (or any amendment or supplement thereto).
(g) There are no legal or governmental proceedings pending
or, to the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries, or to which the Company or any of the Subsidiaries or any of
their respective properties is subject, that are required to be described in
the Registration Statement or the Prospectus but are not described as required.
There are no agreements, contracts, indentures, leases or other instruments
that are required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that are
not described or filed as required by the Act.
(h) Neither the Company nor any of the Material Subsidiaries
is (i) in violation of its certificate of incorporation or by-laws or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Material Subsidiaries or of any decree of any court or governmental agency or
body having jurisdiction over the Company or any of the Material Subsidiaries
other than violations that would not have a Material Adverse Effect, or (ii) in
default in any material respect in the performance of any obligation, agreement
or condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Company or any of the Material Subsidiaries is a party or by which
any of them or any of their respective properties may be bound other than
defaults that would not have a Material Adverse Effect.
(i) Neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required for the registration of the Shares
under the Act and the Exchange Act, all of which have been or will be effected
in accordance with this Agreement, and compliance with the securities or Blue
Sky laws of various jurisdictions and the clearance of the offering with the
National Association of Securities Dealers, Inc. (the "NASD")) or conflicts or
will conflict with or constitutes or will constitute a breach of, or a default
under, the
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certificate of incorporation or bylaws, or other organizational documents, of
the Company or any of the Material Subsidiaries or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, any indenture, bond, note, lease or other agreement or instrument to
which the Company or any of the Material Subsidiaries is a party or by which
the Company or any of the Material Subsidiaries or any of their respective
properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to the
Company or any of the Material Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the Material
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of
their respective property or assets is subject.
(j) The accountants, Coopers & Lybrand, who have certified or
shall certify the financial statements incorporated by reference in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto), are independent public accountants as required by the Act.
(k) The financial statements, together with the related
schedules and notes incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), comply in all
material respects with the requirements of the Act and present fairly the
consolidated financial position, results of operations and changes in
shareholders' equity and cash flows of the Company and the Subsidiaries on the
basis incorporated by reference in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are accurately presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries.
(l) The Company has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution and delivery of, and the performance by the Company of its
obligations under, this Agreement have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as rights to indemnity
and contribution hereunder may be limited by federal or state securities laws
or principles of public policy and subject to the qualification that the
enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
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(m) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction that is
material to the Company and the Subsidiaries, taken as a whole, and there has
not been any material change in the capital stock, or material increase in the
consolidated short-term or long-term debt, of the Company and the Subsidiaries,
or any Material Adverse Effect, or any development having or which may
reasonably be expected to have a prospective Material Adverse Effect.
(n) Each of the Company and the Material Subsidiaries has
good and marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the
Registration Statement and the Prospectus or which would not have a Material
Adverse Effect. All the property described in the Prospectus as being held
under lease by the Company or any of the Material Subsidiaries is held by it
under valid, subsisting and enforceable leases except to the extent the failure
to be valid, subsisting or enforceable would not have a Material Adverse
Effect.
(o) The Company has not distributed and, prior to the later
to occur of (i) the Closing Date and (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act and state securities or Blue Sky laws.
(p) The Company and each of the Material Subsidiaries has
such permits, licenses, franchises and authorizations of governmental or
regulatory authorities ("permits") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectus, except where failure to have such permits, licenses, franchises and
authorizations does not have a Material Adverse Effect, subject to such
qualifications as may be set forth in the Prospectus; the Company and each of
the Material Subsidiaries has fulfilled and performed all its material
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the holder
of any such permit except where such failure to perform, revocation,
termination or impairment does not have a Material Adverse Effect, subject in
each case to such qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, none of such permits contains any
restriction that is materially burdensome to the Company or any of the Material
Subsidiaries.
(q) The Company has not been advised, and has no reason to
believe, that either it or any of its Material Subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state, federal and foreign environmental laws
and regulations, except where failure to be so in compliance does not have a
Material Adverse Effect.
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(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) To the Company's knowledge, neither the Company nor any
of its Material Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Material
Subsidiary or received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(t) The Company and each of the Material Subsidiaries have
filed all tax returns required to be filed, which returns are complete and
correct in all material respects, and neither the Company nor any Subsidiary is
in default in the payment of any taxes which were payable pursuant to said
returns or any assessments with respect thereto.
(u) No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or consummation of
the transactions contemplated by this Agreement.
(v) The Company and the Material Subsidiaries own or possess
all patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them or
necessary for the conduct of their respective businesses, except where failure
to possess such does not have a Material Adverse Effect, and the Company is not
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Material Subsidiaries with respect to the
foregoing.
(w) The Company is not now, and after sale of the Shares to
be sold by it hereunder will not be, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(x) The Company has complied with all provisions of Florida
Statutes, ss. 517.075, relating to issuers doing business with Cuba.
(y) The Company and its Material Subsidiaries comply in all
material respects with all Environmental Laws (as defined below)(except to the
extent that failure to comply with such Environmental Laws would not have a
Material Adverse Effect). Neither the Company nor any of its Subsidiaries is
the subject of any pending or threatened federal, state or local investigation
in the United States or the Federation of Malaysia evaluating whether any
remedial
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action by the Company or any of its Material Subsidiaries is needed to respond
to a release of any Hazardous Materials (as defined below) into the
environment, resulting from the Company's or any of its Material Subsidiaries'
business properties or assets or is in contravention of any Environmental Laws
that could reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of its Material Subsidiaries has received any notice or
claim, nor are there pending or threatened lawsuits against them, with respect
to violations of any Environmental Laws or in connection with any release of
any Hazardous Material into the environment that, in the aggregate, if the
subject of any unfavorable decision, ruling or finding, could reasonably be
expected to have a Material Adverse Effect. As used herein, "Environmental
Laws" means any federal, state or local law, regulation, rule or order of any
governmental authority, administrative body or court in the United States or
the Federation of Malaysia applicable to the Company's or any of its
Subsidiaries' business operations or ownership or possession of any of their
properties or assets relating to environmental matters, and "Hazardous
Materials" means those substances that are regulated by or form the basis of
liability under any Environmental Laws.
8. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder represents and warrants to each Underwriter that:
(a) Such Selling Shareholder now has, and on the Closing Date
will have, valid and marketable title to the Shares to be sold by such Selling
Shareholder, free and clear of any lien, claim, security interest or other
encumbrance, including, without limitation, any restriction on transfer or
other defect in title.
(b) Such Selling Shareholder now has, and on the Closing Date
will have, full legal right and power and any approval required by law (except
such as may be required under the Act or state securities or Blue Sky laws
governing the purchase and distribution of the Shares), to sell, assign,
transfer and deliver such Shares in the manner provided in this Agreement, and
upon delivery of and payment for such Shares hereunder, the several
Underwriters will acquire valid and marketable title to such Shares, free and
clear of any lien, claim, security interest or other encumbrance, restriction
on transfer or defect in title.
(c) This Agreement and the Custody Agreement have been duly
executed and delivered by or on behalf of such Selling Shareholder and are the
valid and binding agreements of such Selling Shareholder enforceable against
such Selling Shareholder in accordance with their terms except as rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of such Selling Shareholder's obligations hereunder may
be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights generally
and by general equitable principles.
(d) Neither the execution and delivery of this Agreement or
the Custody Agreement by or on behalf of such Selling Shareholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Shareholder requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
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administrative agency or other governmental body, agency or official (except
such as may be required under the Act or state securities or Blue Sky laws
governing the purchase and distribution of the Shares) or conflicts or will
conflict with or constitutes or will constitute a breach of, or default under,
or violates or will violate, any agreement, indenture or other instrument to
which such Selling Shareholder is a party or by which such Selling Shareholder
is or may be bound or to which any of such Selling Shareholder's property or
assets is subject, or any statute, law, rule, regulation, ruling, judgement,
injunction, order or decree applicable to such Selling Shareholder or to any
property or assets of such Selling Shareholder, except in each case as would
not adversely affect the ability of such Selling Shareholder to consummate the
transactions contemplated by this Agreement.
(e) The Registration Statement and the Prospectus and any
amendment or supplement thereto do not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(f) The representations and warranties of such Selling
Shareholder in the Custody Agreement are, and on the Closing Date will be, true
and correct.
(g) Such Selling Shareholder has not taken, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares, except for the lock-up
arrangements described in the Prospectus.
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or
in the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based upon any
such untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with (i) information relating to such Underwriter furnished in writing to the
Company by or on behalf of such Underwriter through you expressly for use in
connection therewith or (ii) information relating to any Selling Shareholder
furnished in writing to the Company by or on behalf of such Selling Shareholder
expressly for use in connection therewith; provided, however, that the
indemnification contained in this paragraph (a) with respect to any Prepricing
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of Shares by such
Underwriter to any person if (i) a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the
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Act and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus and (ii) the Company delivered the Prospectus to
the several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. The foregoing indemnity agreement shall be in addition to
any liability which the Company may otherwise have.
(b) Each Selling Shareholder, severally and not jointly,
agrees to indemnify and hold harmless each of you and each other Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Prepricing
Prospectus or in the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any such untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon and
in conformity with the information relating to such Underwriter furnished in
writing to the Company by or on behalf of such Underwriter through you
expressly for use in connection therewith; provided, however, that the
indemnification contained in this paragraph (b) with respect to any Prepricing
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of Shares by such
Underwriter to any person if (i) a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Prepricing Prospectus was corrected in the
Prospectus and (ii) the Company delivered the Prospectus to the several
Underwriters in requisite quantity on a timely basis to permit such delivery or
sending; and provided, further, that such Selling Shareholder shall not be
liable under this Section 9 or any other provision of this Agreement in an
amount exceeding the net proceeds received by such Selling Shareholder from the
sale of the Shares sold by such Selling Shareholder and that the Underwriters
may seek to enforce their rights to indemnity against any Selling Shareholder
pursuant to this paragraph (b) only if the Underwriters believe in good faith
that there is a material risk that they may not obtain such payment from the
Company despite using their best efforts to do so. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(c) If any action, suit or proceeding shall be brought
against any Underwriter or any person controlling any Underwriter in respect of
which indemnity may be sought against the Company or any Selling Shareholder,
such Underwriter or such controlling person shall promptly notify the parties
against whom indemnification is being sought (the "indemnifying parties"; and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Such Underwriter or
any such controlling person shall have the right to employ separate counsel in
any such action, suit or
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proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Underwriter or such controlling
person unless (i) the indemnifying parties have agreed in writing to pay such
fees and expenses, (ii) the indemnifying parties have failed to assume the
defense and employ counsel, or (iii) the named parties to any such action, suit
or proceeding (including any impleaded parties) include both such Underwriter
or such controlling person and the indemnifying parties and such Underwriter or
such controlling person shall have been advised by its counsel that
representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without
their written consent, but if settled with such written consent, or if there be
a final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of
such settlement of judgment.
(d) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, each Selling Shareholder, and any person who
controls the Company or any Selling Shareholder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company and any Selling Shareholder to each
Underwriter, but only with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter through you expressly
for use in the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its directors, any such
officer, any Selling Shareholder, or any such controlling person based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be
sought against any Underwriter pursuant to this paragraph (d), such Underwriter
shall have the rights and duties given to the Company by paragraph (c) above
(except that if the Company or any Selling Shareholder shall have assumed the
defense thereof such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, any Selling Shareholder, and any such
controlling person shall have the rights and
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duties given to the Underwriters by paragraph (c) above. The foregoing
indemnity agreement shall be in addition to any liability which any Underwriter
may otherwise have.
(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsection (a) above or, where the
indemnified party is the Company or its officers, directors or controlling
persons, under subsection (d) above, in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and the Underwriters
on the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. If the indemnification provided for in this
Section 9 is unavailable to an indemnified party under subsection (b) above or,
where the indemnified party is any Selling Shareholder or its controlling
persons, under subsection (d) above in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in
lieu of indemnifying such indemnified party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand from the
offering of the Shares, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations; provided,
however, the Underwriters may seek to enforce their rights to contribution
against any Selling Shareholder pursuant to this Section 9 only if the
Underwriters believe in good faith that there is a material risk that they may
not obtain such contribution from the Company despite using their best efforts
to do so. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Selling Shareholders bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus;
provided that, in the event that the Underwriters shall have purchased any
Additional Shares hereunder, any determination of the relative benefits
received by the Selling Shareholders or the Underwriters from the offering of
the Shares shall include the net proceeds (before deducting expenses) received
by the Selling Shareholders, and the underwriting discounts and commissions
received by the Underwriters from the sale of such Additional Shares, in each
case computed on the basis of the respective amounts set forth in the notes to
the table on the cover page of the Prospectus. The relative fault of the
Company and the Selling Shareholders on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company, by the Selling Shareholders or by the
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Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(f) The Company, each Selling Shareholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by a pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (e) above. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities and expenses referred
to in paragraph (e) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating any claim or defending
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 9, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several in proportion to the respective numbers
of Firm Shares set forth opposite their names in Schedule I hereto (or such
numbers of Firm Shares increased as set forth in Section 12 hereof) and not
joint.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and each Selling Shareholder set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any Selling Shareholder or any person controlling the Company or any Selling
Shareholder, (ii) acceptance of any Shares and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to any Underwriter or any
person controlling any Underwriter, or to the Company, its directors or
officers, any Selling Shareholder, or any person controlling the Company or any
Selling Shareholder, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 9.
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10. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto or an Abbreviated Registration Statement to be declared effective
before the offering of the Shares may commence, the registration statement or
such post-effective amendment or Abbreviated Registration Statement shall have
become effective not later than 5:30 P.M., New York City time, on the date
hereof, or at such later date and time as shall be consented to in writing by
you, and all filings, if any, required by Rules 424 and 430A under the Act
shall have been timely made; no stop order suspending the effectiveness of the
registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the Commission
for additional information (to be included in the registration statement or the
prospectus or otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, prospects, properties, net worth, or results of operations of the
Company or any of the Subsidiaries not contemplated by the Prospectus, which in
your opinion, as Representatives of the several Underwriters, would materially,
adversely affect the market for the Shares, or (ii) any event or development
relating to or involving the Company, any officer or director of the Company or
any Selling Shareholder, which makes any statement of a material fact made in
the Prospectus untrue or which, in the opinion of the Company and its counsel
or the Underwriters and their counsel, requires the making of any addition to
or change in the Prospectus in order to state a material fact required by the
Act or any other law to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if amending or supplementing the Prospectus to reflect
such event or development would, in your opinion, as Representatives of the
several Underwriters, materially, adversely affect the market for the Shares.
(c) You shall have received on the Closing Date an opinion of
Morgan, Lewis & Bockius LLP, counsel for the Company and the Selling
Shareholders, dated the Closing Date and addressed to you, as Representatives
of the several Underwriters, that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the State of
Florida with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
so to register or qualify would not have a Material Adverse Effect;
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(ii) Each Material Subsidiary is a corporation duly
incorporated and validly existing and in good standing under the laws
of the jurisdiction of its organization, with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus
(and any amendment or supplement thereto); each Material Subsidiary is
duly registered and qualified to conduct its business and is in good
standing as a foreign corporation in each jurisdiction or place where
the nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure so to
register or qualify or to be in good standing would not have a
Material Adverse Effect; and all the outstanding shares of capital
stock of each of the Material Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable, and are owned by
the Company directly, or indirectly through one of the other Material
Subsidiaries, free and clear of any perfected security interest or, to
such counsel's knowledge, any other security interest, lien, adverse
claim, equity or other encumbrance, except for the stock of Safeskin
Latex Company which is held by the Nominees pursuant to the Deed of
Trust Agreements for the benefit of the Company free and clear of all
liens, encumbrances, equities, claims, security interests, voting
trusts or other defects of title whatsoever;
(iii) The Deed of Trust Agreements, by which the
Company is the beneficial owner of all of the outstanding shares of
stock of Safeskin Latex Company Sdn. Bhd., were duly and validly
authorized by all necessary corporate action of the Company, were duly
and validly executed and delivered by and on behalf of all the parties
thereto, are valid and binding agreements of the Company and the
Nominees, and are enforceable against the Company and the Nominees in
accordance with their terms; and no approval, authorization, order,
consent, registration, filing, qualifications, license or permit of or
with any court, regulatory, administrative or other governmental body
was or is required for the execution, delivery and performance of the
Deed of Trust Agreements and the consummation of the transactions
contemplated therein;
(iv) At September 30, 1996, the authorized and
outstanding capital stock of the Company is as set forth under the
caption "Capitalization" in the Prospectus; all necessary and proper
corporate proceedings have been validly taken in order to authorize
such capital stock; and the authorized capital stock of the Company
conforms in all material respects as to legal matters to the
description thereof incorporated in the Prospectus by reference to the
Company's Form 8-A/A;
(v) All the outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are fully
paid and nonassessable, have been issued in compliance with applicable
federal and state securities laws (assuming compliance with the
applicable blue sky laws in connection with the Company's prior public
offerings), were not issued in violation of or subject to any
preemptive rights or other rights, known to such counsel, to subscribe
for or purchase any securities;
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(vi) The form of certificates for the Shares conform
to the requirements of the Florida Business Corporation Act;
(vii) Such counsel has received oral confirmation
from the staff of the Commission that the Registration Statement and
all post-effective amendments, if any, have become effective under the
Act and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending before or contemplated by the
Commission; and any required filing of the Prospectus pursuant to Rule
424(b) has been made in accordance with Rule 424(b);
(viii) The Company has the corporate power and
authority to enter into this Agreement, and this Agreement has been
duly authorized, executed and delivered by the Company and is a valid,
legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement of rights
to indemnity and contribution hereunder may be limited by federal or
state securities laws or principles of public policy and subject to
the qualification that the enforceability of the Company's obligations
hereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable
principles;
(ix) To the knowledge of such counsel, neither the
Company nor any of the Material Subsidiaries is in violation of its
certificate of incorporation or bylaws, or other organizational
documents, or in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness, or in any agreement,
indenture, lease or other instrument to which the Company or any of
the Material Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, in each case that is made an
exhibit to the Registration Statement;
(x) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this Agreement,
compliance by the Company with the provisions hereof nor consummation
by the Company of the transactions contemplated hereby conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, the certificate of incorporation or bylaws, or other
organizational documents, of the Company or any of the Material
Subsidiaries or any agreement, indenture, bond, note, lease or other
agreement or instrument to which the Company or any of the Material
Subsidiaries is a party or by which the Company or any of the Material
Subsidiaries or any of their respective properties is bound that is
made an exhibit to the Registration Statement, or to the knowledge of
such counsel will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any of the Material Subsidiaries, nor will any such action result in
any violation of any existing law, regulation, ruling (assuming
compliance with all applicable state securities or Blue Sky laws),
judgment, injunction, order or decree known to such counsel and
applicable to the Company or any of the Material Subsidiaries
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or any of their respective properties except for violations which do
not have a Material Adverse Effect;
(xi) No consent, approval, authorization or other
order of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
is required on the part of the Company or any Selling Shareholder
(except as have been obtained under the Act and the Exchange Act or
such as may be required under state securities or Blue Sky laws
governing the purchase and distribution of the Shares) for execution
of this Agreement by the Company or any Selling Shareholder, the
Custody Agreement by each Selling Shareholder or for the sale of the
Shares to the Underwriters as contemplated by this Agreement;
(xii) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the financial
statements and the notes thereto and the schedules and other financial
and statistical data included therein, as to which such counsel need
not express any opinion) comply as to form in all material respects
with the requirements of the Act;
(xiii) To the knowledge of such counsel, (A) there
are no legal or governmental proceedings pending or threatened against
the Company or any of the Material Subsidiaries, or to which the
Company or any of the Material Subsidiaries or any of their respective
properties is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement
thereto) that are not described as required and (B) there are no
agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the
Prospectus (or any amendment or supplement thereto) or to be filed as
an exhibit to the Registration Statement that are not described or
filed as required, as the case may be;
(xiv) To the knowledge of such counsel, neither the
Company nor any of the Material Subsidiaries is in violation of any
law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Material Subsidiaries or of
any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Material Subsidiaries, the
violation of which would have a Material Adverse Effect;
(xv) The statements in the Registration Statement
and Prospectus, insofar as they are descriptions of contracts,
agreements or other legal documents, or refer to statements of law or
legal conclusions, are accurate in all material respects and present
fairly the information required to be shown;
(xvi) This Agreement and the Custody Agreement have
each been duly executed and delivered by or on behalf of each of the
Selling Shareholders and are valid and binding agreements of each
Selling Shareholder enforceable against each Selling Shareholder in
accordance with their terms except as may be limited by Federal or
state securities laws or principles of public policy and subject to
the qualification that the
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enforceability of each of the Selling Shareholder's obligations
hereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors' rights generally and by general equitable
principles; and the Custodian has been duly and validly authorized to
act as the custodian of the Shares to be sold by each of the Selling
Shareholders;
(xvii) To knowledge of such counsel, each Selling
Shareholder has full legal right and power, and any approval required
by law, to enter into this Agreement and the Custody Agreement and to
sell, assign, transfer and deliver good and marketable title to the
Shares which such Selling Shareholder has agreed to sell pursuant to
this Agreement;
(xviii) The execution and delivery of this Agreement
and the Custody Agreement by the Selling Shareholders and the
consummation of the transactions contemplated hereby and thereby will
not conflict with, violate, result in a breach of or constitute a
default under the terms or provisions of any agreement, indenture,
mortgage or other instrument known to such counsel to which any
Selling Shareholder is a party or by which any of them or any of their
assets or property is bound, or any court order or decree known to
such counsel or any law, rule, or regulation applicable to any Selling
Shareholder or to any of the property or assets of any Selling
Shareholder;
(xix) Except as described in the Prospectus, there
are no outstanding options, warrants or other rights calling for the
issuance of, and such counsel does not know of any commitment, plan or
arrangement to issue, any shares of capital stock of the Company or
any security convertible into or exchangeable or exercisable for
capital stock of the Company;
(xx) Except as described in the Prospectus, there is
no holder of any securities of the Company or any other person who has
the right, contractual or otherwise, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of,
any of the Shares or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or
the right, as a result of the filing of the Registration Statement, to
require the Company to register under the Act any shares of Common
Stock or other securities of the Company;
(xxi) The Company and, to the knowledge of such
counsel, each Material Subsidiary has full corporate power and
authority, and all necessary governmental authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental regulatory officials and bodies (except where the failure
so to have any such authorizations, approvals, orders, licenses,
certificates, franchises or permits, individually or in the aggregate,
would not have a Material Adverse Effect), to own their respective
properties and to conduct their respective businesses as now being
conducted, as described in the Prospectus;
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(xxii) The Company and the Material Subsidiaries own
all patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Prospectus as
being owned by them or any of them or necessary for the conduct of
their respective businesses, including the trademarks SAFESKIN(R),
HYPOCLEAN(R) and HYPOCLEAN 100(R) and such counsel is not aware of any
claim to the contrary or any challenge by any other person to the
rights of the Company and the Material Subsidiaries with respect to
the foregoing;
(xxiii) No transfer taxes are required to be paid in
connection with the sale and delivery of the Shares to the
Underwriters hereunder;
(xxiv) The Company is not an "investment company" or
a person "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; and
(xxv) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and
does not assume any responsibility for, the accuracy, completeness or
fairness of the statements in the Registration Statement, such counsel
has participated in the preparation of the Registration Statement and
the Prospectus, including review and discussion of the contents
thereof, and nothing has come to the attention of such counsel that
has caused it to believe that the Registration Statement, at the time
the Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, as of its date and as
of the Closing Date contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or that any
amendment or supplement to the Prospectus, as of its date, and as of
the Closing Date contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to
the financial statements and the notes thereto and the schedules and
other financial and statistical data included in the Registration
Statement or the Prospectus).
In rendering their opinion as aforesaid, counsel may rely
entirely upon an opinion or opinions, each dated the Closing Date, of other
counsel retained by them or the Company as to laws of any jurisdiction other
than the United States or the State of New York; provided, however that
(1) each such counsel is acceptable to the Representatives, (2) such reliance
is expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance,
satisfactory to them and counsel for the Underwriters and (3) counsel shall
state in their opinion that they believe that they and the Underwriters are
justified in relying thereon.
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(d) You shall have received on the Closing Date an opinion of
Henry Lim & Co., Malaysian counsel for the Company and its subsidiaries
incorporated in the Federation of Malaysia (Safeskin Corporation (Malaysia)
Sdn. Bhd., Safeskin Engineering and Machinery Sdn. Bhd. and Safeskin Latex
Company Sdn. Bhd., herein collectively referred to as the "Malaysian
Subsidiaries") dated the Closing Date, addressed to you, as Representatives of
the several Underwriters, and in form and substance satisfactory to counsel for
the Underwriters and stating that it may be relied upon by counsel for the
Underwriters in giving their opinion, to the effect that:
(i) Each of the Malaysian Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, is duly registered and qualified to
conduct its business as a foreign corporation and is in good standing
in all other jurisdictions where the nature of its properties or the
conduct of its business requires such registration or qualification
with full corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus;
(ii) The failure of the Company and each of its Subsidiaries
(except its Malaysian Subsidiaries) to be a corporation duly
registered and qualified to conduct its business as a foreign
corporation and be in good standing in the Federation of Malaysia and
each state thereof where such registration or qualification would
otherwise be required, does not have a Material Adverse Effect;
(iii) All of the issued and outstanding shares of each
Malaysian Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company, directly or
indirectly through one of the other Subsidiaries, free and clear of
any perfected security interest, or, to the knowledge of such counsel,
any other security interest, lien, adverse claim, equity or other
encumbrance except for the stock of Safeskin Latex Company Sdn. Bhd.
which is held by the Nominees pursuant to the Deed of Trust Agreements
for the benefit of the Company free and clear of any perfected
security interest or any other security interest, lien, adverse claim,
equity or other encumbrance whatsoever;
(iv) The Deed of Trust Agreements, by which the Company is
the beneficial owner of all of the outstanding shares of stock of
Safeskin Latex Company Sdn. Bhd., were duly and validly authorized by
all necessary corporate action of the Company, were duly and validly
executed and delivered by and on behalf of all the parties thereto,
are valid and binding agreements of the Company and the Nominees, and
are enforceable against the Company and the Nominees in accordance
with their terms; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body was or is
required for the execution, delivery and performance of the Deed of
Trust Agreements and the consummation of the transactions contemplated
therein;
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(v) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance with
the provisions of this Agreement, nor consummation of the transactions
contemplated by this Agreement conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under the
articles of association or memoranda of association, or other
organizational documents, of any of the Malaysian Subsidiaries or any
agreement, indenture, bond, note, lease or other agreement or
instrument to which the Company or any of the Malaysian Subsidiaries
is a party or by which any of them or any of their respective
properties is bound, and which is known to such counsel, or will
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Malaysian Subsidiaries, nor will any such action result in any
violation of any existing law, regulation, ruling, judgment,
injunction, order or decree of any court or governmental body of the
Federation of Malaysia or any state or subdivision thereof known to
such counsel after reasonable inquiry to be applicable to the Company,
the Malaysian Subsidiaries or any of their respective properties;
(vi) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
of the Federation of Malaysia is required on the part of the Company
or any Selling Shareholder for execution of this Agreement by the
Company or any Selling Shareholder, the Custody Agreement by each
Selling Shareholder or for the sale of the Shares to the Underwriters
as contemplated by this Agreement;
(vii) To the knowledge of such counsel, no Malaysian
Subsidiary is in violation of its articles of association or
memorandum of association, or other organizational documents and
neither the Company nor any of the Material Subsidiaries is in default
in the performance of any material obligation, agreement or condition
contained in any bond, debenture, note or other evidence of
indebtedness, or in any agreement, indenture, lease or other
instrument to which the Company or any of the Material Subsidiaries is
a party or by which any of them or any of their respective properties
may be bound; and, to the knowledge of such counsel, the Company and
its Material Subsidiaries are in compliance with all laws, statutes,
ordinances, administrative and governmental rules and regulations of
the Federation of Malaysia and each state and subdivision thereof and
all judgments, decrees and orders of any court or governmental agency
or body of the Federation of Malaysia or any state or subdivision
thereof to which the Company or any of the Material Subsidiaries is
subject, except where noncompliance would not have a Material
Adversely Effect;
(viii) To the knowledge of such counsel, the Company and each
of the Material Subsidiaries is in possession of and operating in
compliance with all authorizations, approvals, orders, licenses,
certificates, franchises, permits, consents, certificates and orders
material to the ownership of their respective properties and to the
conduct of their respective businesses in the Federation of Malaysia,
all of which are valid and in full force and effect;
27
<PAGE>
(ix) To the knowledge of such counsel, the Company and each
of the Material Subsidiaries has good and marketable title to all the
properties and assets located in Malaysia reflected as owned by the
Company or such subsidiary in the financial statements hereinabove
described (or elsewhere in the Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those,
if any, reflected in such financial statements (or else in the
Prospectus), or (ii) those which are not material in amount and do not
adversely affect the use made and proposed to be made of such property
by the Company and its subsidiaries. The Company or the applicable
Subsidiary holds its leased Malaysia properties under valid and
binding leases, with such exceptions as are not materially significant
in relation to the business of the Company and the Subsidiaries taken
as a whole;
(x) To the knowledge of such counsel, (A) there are no legal
or governmental proceedings pending or threatened against the Company
or any of the Malaysian Subsidiaries, or to which the Company or any
of the Malaysian Subsidiaries or any of their respective properties is
subject, which are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement thereto) that
are not described as required and (B) there are no agreements,
contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus (or
any amendment or supplement thereto) or to be filed as an exhibit to
the Registration Statement that are not described or filed as
required, as the case may be;
(xi) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements
or other legal documents, or refer to statements of law or legal
conclusions relating to the Malaysian Subsidiaries are accurate and
present fairly the information required to be shown; and
(xii) The Malaysian Subsidiaries own all patents, trademarks,
trademark registrations, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights necessary
for the conduct of their respective businesses as currently being
conducted and we are not aware of any claim to the contrary or any
challenge by any other person to the rights of the Malaysian
Subsidiaries with respect to the foregoing.
In rendering their opinion as aforesaid, counsel may rely
upon an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other than the
laws of the Federation of Malaysia, provided that (1) each counsel is
acceptable to the Representatives and their counsel, (2) such reliance is
expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance
satisfactory to them and their counsel, and (3) Henry Lim & Co. shall state in
their opinion that they believe that they and the Underwriters are justified in
relying thereon.
(e) You shall have received on the Closing Date an opinion of
Tilleke & Gibbins, Thai counsel for the Company and its subsidiary incorporated
in the Kingdom of
28
<PAGE>
Thailand (Safeskin Corporation Thailand Limited herein referred to as the "Thai
Subsidiary") dated the Closing Date, addressed to you, as Representatives of
the several Underwriters, and in form and substance satisfactory to counsel for
the Underwriters and stating that it may be relied upon by counsel for the
Underwriters in giving their opinion, to the effect that:
(i) The Thai Subsidiary is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction
of its organization, is duly registered and qualified to conduct its
business as a foreign corporation and is in good standing in all other
jurisdictions where the nature of its properties or the conduct of its
business requires such registration or qualification with full
corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus;
(ii) The failure of the Company and each of its Subsidiaries
(excepts its Thai Subsidiary) to be a corporation duly registered and
qualified to conduct its business as a foreign corporation and be in
good standing in the Kingdom of Thailand and each state thereof where
such registration or qualification would otherwise be required, does
not have a Material Adverse Effect;
(iii) All of the issued and outstanding shares of the Thai
Subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable and are owned by the Company, directly or
indirectly through one of the other Subsidiaries, free and clear of
any perfected security interest, or, to the knowledge of such counsel,
any other security interest, lien, adverse claim, equity or other
encumbrance free and clear of any perfected security interest or any
other security interest, lien, adverse claim, equity or other
encumbrance whatsoever;
(iv) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance with
the provisions of this Agreement, nor consummation of the transactions
contemplated by this Agreement conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under the
articles of association or memoranda of association, or other
organizational documents, of the Thai Subsidiary or any agreement,
indenture, bond, note, lease or other agreement or instrument to which
the Company or the Thai Subsidiary is a party or by which any of them
or any of their respective properties is bound, and which is known to
such counsel, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or the Thai Subsidiary, nor will any such action result in any
violation of any existing law, regulation, ruling, judgment,
injunction, order or decree of any court or governmental body of the
Kingdom of Thailand or any state or subdivision thereof known to such
counsel after reasonable inquiry to be applicable to the Company, the
Thai Subsidiary or any of their respective properties;
(v) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official
of the Kingdom of Thailand is required on the part of the
29
<PAGE>
Company or any Selling Shareholder for execution of this Agreement by
the Company or any Selling Shareholder, the Custody Agreement by each
Selling Shareholder or for the sale of the Shares to the Underwriters
as contemplated by this Agreement;
(vi) To the knowledge of such counsel, the Thai Subsidiary is
not in violation of its articles of association or memorandum of
association, or other organizational documents and neither the Company
nor the Thai Subsidiary is in default in the performance of any
material obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any
agreement, indenture, lease or other instrument to which the Company
or the Thai Subsidiary is a party or by which any of them or any of
their respective properties may be bound; and, to the knowledge of
such counsel, the Company and its Thai Subsidiary are in compliance
with all laws, statutes, ordinances, administrative and governmental
rules and regulations of the Kingdom of Thailand and each state and
subdivision thereof and all judgments, decrees and orders of any court
or governmental agency or body of the Kingdom of Thailand or any state
or subdivision thereof to which the Company or the Thai Subsidiary is
subject, except where noncompliance would not have a Material
Adversely Effect;
(vii) To the knowledge of such counsel, the Company and the
Thai Subsidiary are in possession of and operating in compliance with
all authorizations, approvals, orders, licenses, certificates,
franchises, permits, consents, certificates and orders material to the
ownership of their respective properties and to the conduct of their
respective businesses in the Kingdom of Thailand, all of which are
valid and in full force and effect;
(viii) To the knowledge of such counsel, the Company and the
Thai Subsidiary have good and marketable title to all the properties
and assets located in Thailand reflected as owned by the Company or
the Thai Subsidiary in the financial statements hereinabove described
(or elsewhere in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such financial statements (or else in the Prospectus), or
(ii) those which are not material in amount and do not adversely
affect the use made and proposed to be made of such property by the
Company and its Thai Subsidiary. The Company or the Thai Subsidiary
holds its leased Thailand properties under valid and binding leases,
with such exceptions as are not materially significant in relation to
the business of the Company or the Thai Subsidiary taken as a whole;
(ix) To the knowledge of such counsel, (A) there are no legal
or governmental proceedings pending or threatened against the Company
or the Thai Subsidiary, or to which the Company or the Thai Subsidiary
or any of their respective properties is subject, which are required
to be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) that are not described as required
and (B) there are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the
Registration Statement or the Prospectus (or any
30
<PAGE>
amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement that are not described or filed as required, as
the case may be;
(x) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements
or other legal documents, or refer to statements of law or legal
conclusions relating to the Thai Subsidiary are accurate and present
fairly the information required to be shown; and
(xi) The Thai Subsidiary owns all patents, trademarks,
trademark registrations, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights necessary
for the conduct of its respective business as currently being
conducted and we are not aware of any claim to the contrary or any
challenge by any other person to the rights of the Thai Subsidiary
with respect to the foregoing.
In rendering their opinion as aforesaid, counsel may rely
upon an opinion or opinions, each dated the Closing Date, of other counsel
retained by them or the Company as to laws of any jurisdiction other than the
laws of the Kingdom of Thailand, provided that (1) each counsel is acceptable
to the Representatives and their counsel, (2) such reliance is expressly
authorized by each opinion so relied upon and a copy of each such opinion is
delivered to the Representatives and is, in form and substance satisfactory to
them and their counsel, and (3) Tilleke & Gibbins shall state in their opinion
that they believe that they and the Underwriters are justified in relying
thereon.
(f) You shall have received on the Closing Date an opinion of
Dewey Ballantine, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, generally
with respect to the matters referred to in clauses (vii), (viii), (xii) and
(xxvi) of the foregoing paragraph (c) and such other related matters as you may
request.
(g) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Coopers & Lybrand, independent certified public accountants,
substantially in the forms heretofore approved by you.
(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
contemplated by the Commission at or prior to the Closing Date and any request
of the Commission for additional information (to be included in the
registration statement or the prospectus or otherwise) shall have been complied
with; (ii) there shall not have been any material change in the capital stock
of the Company nor any material increase in the short-term or long-term debt of
the Company and the Material Subsidiaries, taken as a whole, from that set
forth or contemplated in the Registration Statement or the Prospectus (or any
amendment or supplement thereto); (iii) there shall not have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), except as may
otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement thereto), any Material Adverse
31
<PAGE>
Effect; (iv) neither the Company nor any of the Subsidiaries shall have any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Company and the
Subsidiaries, taken as a whole, other than those reflected in or contemplated
by the Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the date hereof and on and as of the Closing Date as if made on
and as of the Closing Date, and you shall have received a certificate, dated
the Closing Date and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you), as to the matters set forth in this Section 10(g) and in Section 10(h)
hereof.
(i) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(j) All the representations and warranties of the Selling
Shareholders contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by or on behalf of the Selling Shareholders to the effect set forth
in this Section 10(j) and in Section 10(k) hereof.
(k) The Selling Shareholders shall not have failed at or
prior to the Closing Date to have performed or complied with any of their
agreements herein contained and required to be performed or complied with by
them hereunder at or prior to the Closing Date.
(l) The Sellers shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you, as Representatives of the several Underwriters,
and counsel for the Underwriters.
Any certificate or document signed by any officer of the
Company or by or on behalf of any Selling Shareholder and delivered to you, as
Representatives of the several Underwriters, or to counsel for the
Underwriters, shall be deemed a representation or warranty by the Company or
such Selling Shareholder, as the case may be, to each Underwriter as to the
statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 10, except
that, if any Option Closing Date is other than the Closing Date, the
certificates, opinions and letters referred to in paragraphs (c) through (j)
shall be dated the Option Closing Date in question and the opinions called for
by paragraphs (c), (d) and (e) shall be revised to reflect the sale of
Additional Shares.
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<PAGE>
11. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including any stamp taxes
in connection with the offering of the Shares; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Shares; (v)
the registration of the Common Stock under the Exchange Act; (vi) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states as provided in Section 5(g)
hereof (including the reasonable fees, expenses and disbursements of counsel
for the Underwriters relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees and the reasonable fees
and expenses of counsel for the Underwriters in connection with any filings
required to be made with the National Association of Securities Dealers, Inc.
in connection with the offering; (viii) the transportation and other expenses
incurred by or on behalf of representatives of the Company in connection with
presentations to prospective purchasers of the Shares; (ix) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company and the Selling
Shareholders.
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto or an
Abbreviated Registration Statement to be declared or become effective before
the offering of the Shares may commence, when notification of the effectiveness
of the registration statement or such post-effective amendment has been
released by the Commission or such Abbreviated Registration Statement has,
pursuant to the provisions of Rule 462 under the Act, become effective. Until
such time as this Agreement shall have become effective, it may be terminated
by the Company by notifying you and the Attorneys in Fact, or by you, as
Representatives of the several Underwriters, by notifying the Company and the
Attorneys in Fact.
If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date, each non-defaulting Underwriter shall be obligated,
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule II hereto bears to the aggregate number of Firm Shares set
forth opposite the names of all non-defaulting
33
<PAGE>
Underwriters or in such other proportion as you may specify in accordance with
Section 20 of the Master Agreement Among Underwriters of Smith Barney, Harris
Upham & Co. Incorporated (predecessor of Smith Barney Inc.), to purchase the
Shares which such defaulting Underwriter or Underwriters agreed, but failed or
refused, to purchase. If any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they are obligated to purchase on the Closing
Date and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement. The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule II hereto who, with your approval
and the approval of the Company, purchases Shares which a defaulting
Underwriter agreed, but failed or refused, to purchase.
Any notice under this Section 12 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
13. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Sellers, by notice to the Company and the Attorneys in Fact,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be,
(i) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
14. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside front cover page and the statements in the first and third paragraphs
under the caption "Underwriting" in any Prepricing Prospectus and in the
Prospectus constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 7(b)
and 9 hereof.
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<PAGE>
15. Miscellaneous. Except as otherwise provided in Sections 5, 12 and
13 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company or the Selling
Shareholders, at the office of the Company at Del Mar Corporate Plaza, 12671
High Bluff Drive, San Diego, California 92130, Attention: Richard Jaffe, with a
copy to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178,
Attention: Howard L. Schecter, Esq.; or (ii) if to you, as Representatives of
the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division, with a
copy to Dewey Ballantine, 1301 Avenue of the Americas, New York, New York
10019, Attention: Frederick W. Kanner, Esq.
This Agreement has been and is made solely for the benefit of
the several Underwriters, the Company, its directors, its officers who sign the
Registration Statement, the Selling Shareholders and the controlling persons
referred to in Section 9 hereof and, to the extent provided herein, their
respective successors and assigns and no other person shall acquire or have any
right under or by virtue of this Agreement. Neither the term "successor" nor
the term "successors and assigns" as used in this Agreement shall include a
purchaser from any Underwriter of any of the Shares in his status as such
purchaser.
16. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the several Underwriters.
Very truly yours,
SAFESKIN CORPORATION
By:
-------------------------------
Richard Jaffe
Chairman, President
and Chief Executive Officer
EACH OF THE SELLING
SHAREHOLDERS NAMED
IN SCHEDULE I HERETO
By:
----------------------------
Attorney-in-Fact
Confirmed as of the date first By:
above mentioned on behalf of ----------------------------
themselves and the other several Attorney-in-Fact
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
As Representatives of the Several Underwriters
By: SMITH BARNEY INC.
By:
--------------------------
Managing Director
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<PAGE>
SCHEDULE I
SAFESKIN OFFERING
Legal Name of Entity/Individual
(State of Organization, Number of Number of
if applicable) Firm Shares Additional Shares
- ------------------------------- ----------- -----------------
Irving Jaffe............................ 300,000 50,000
Eleanor Jaffe........................... 300,000 50,000
Richard B. Jaffe, Jack A. Jaffe and
Daniel J. Gato, as trustees of the
Jaffe Charitable Remainder Unit
Trust (California)...................... 400,000
Richard Jaffe........................... 200,000
IceJuicy, a California Limited
Partnership (California)................ 200,000
Neil K. Braverman and Jeanne D.
Braverman, as trustees of the
Braverman Family Trust for the
benefit of David Braverman
(Florida)............................... 200,000
Steven Braverman, as trustee of the
Neil K. Braverman FLINT Trust
(Florida)............................... 31,732
Braverman Family Partnership, Ltd.
(Florida)............................... 148,268
Braverman Holdings, Limited (Texas)..... 200,000
North Military, Ltd. (Texas)............ 869,500
JSB Ventures, Ltd. (Texas).............. 178,428
JDB Ventures, Ltd. (Texas).............. 178,428
JNB Ventures, Ltd. (Texas).............. 90,090
Jeanne Braverman........................ 83,554
--------- -------
Total............................... 3,200,000 480,000
========= =======
<PAGE>
SCHEDULE II
SAFESKIN CORPORATION
Number of
Underwriter Firm Shares
- ----------- -----------
Smith Barney Inc..................................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Merrill Lynch, Pierce, Fenner & Smith Incorporated................
----------
Total...................................... 3,200,000
==========
<PAGE>
SCHEDULE III
SAFESKIN CORPORATION
Subsidiaries
- ------------
Safeskin Corporation (Malaysia) Sdn.Bhd.
Safeskin Engineering and Machinery Sdn.Bhd.
Safeskin Latex Company Sdn.Bhd.
Safeskin Corporation Thailand Limited
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of Safeskin Corporation on Form S-3 of our report dated
February 28, 1996 on our audits of the consolidated financial statements
and financial statement schedules of Safeskin Corporation as of December
31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995. We also consent to the reference to our Firm under
the caption "Experts."
COOPERS & LYBRAND L.L.P.
San Diego, California
January 21, 1997
