<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SAFESKIN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------
(3) Filing Party:
--------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
<PAGE> 2
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
---------------------
The annual meeting of shareholders of Safeskin Corporation, a Florida
corporation (the "Company"), will be held at the Company's corporate
headquarters at 12671 High Bluff Drive, San Diego, California 92130 on
Wednesday, May 6, 1998, beginning at 9:00 a.m., local time, and thereafter as it
may from time to time be adjourned, for the following purposes:
1. to elect six directors, each to serve until the next shareholders'
meeting at which directors are elected and until the director's successor
is duly elected and qualified;
2. to consider and act upon a proposal to grant 1,200,000 performance
stock options to the Company's Chief Executive Officer; and
3. to transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 18, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting or any postponements or adjournments thereof. A list of
shareholders entitled to notice of the meeting shall be available for inspection
by any shareholder, during regular business hours, for a period of ten days
prior to the annual meeting at the principal office of the Company, 12671 High
Bluff Drive, San Diego, California 92130 and at the annual meeting.
The Board of Directors of the Company urges you to sign, date and mail the
accompanying proxy in the enclosed postage prepaid envelope, regardless of
whether or not you intend to be present at the meeting. You are urged, however,
to attend the meeting. Proxies may be revoked at any time prior to the meeting
by giving written notice of revocation to the Secretary of the Company, by
giving a later dated proxy or by attending the meeting and voting in person.
By Order of the Board of Directors,
Seth S. Goldman
Secretary
San Diego, California
April 6, 1998
<PAGE> 3
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Safeskin Corporation, a Florida corporation
(the "Company"), for use at the annual meeting of shareholders of the Company to
be held at the Company's corporate headquarters at 12671 High Bluff Drive, San
Diego, California, on Wednesday, May 6, 1998, beginning at 9:00 a.m., local
time, and thereafter as it may from time to time be adjourned. This Proxy
Statement and the accompanying proxy were first sent to the Company's
shareholders on or about April 6, 1998.
You are requested to complete, date and sign the accompanying proxy, and
return it to the Company in the enclosed postage prepaid envelope. Proxies may
be revoked at any time prior to the meeting by giving written notice of
revocation to the Secretary of the Company, by giving a later dated proxy or by
attending the meeting and voting in person. Proxies duly executed and received
in time for the meeting will be voted in accordance with the shareholder's
instructions. If no instructions are given, proxies will be voted as follows:
1. FOR the election as directors of the six nominees named herein,
each to serve until the next shareholders' meeting at which directors are
elected and until the director's successor is duly elected and qualifies;
2. FOR the adoption of a proposal to grant 1,200,000 performance stock
options to the Company's Chief Executive Officer; and
3. In the discretion of the proxyholders, FOR or AGAINST such other
business as may properly come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on March 18, 1998 as
the record date for determining the shareholders entitled to notice of and to
vote at the annual meeting. On the record date, there were 53,710,384
outstanding shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), as adjusted to reflect the 100% stock dividend paid by the
Company on April 1, 1998. Holders of the Common Stock are entitled to one vote
per share held as of the record date. The presence in person or by proxy of
shareholders entitled to cast a majority of all votes entitled to be cast at the
annual meeting constitutes a quorum. All holders of issued and outstanding
shares of Common Stock are entitled to vote on Proposal 1 and 2. The affirmative
vote of a plurality of the votes cast by holders of outstanding shares of the
Common Stock is required for the approval of the election of the directors. With
regard to Proposal 1, votes may be cast in favor of or withheld from any or all
nominees. Votes that are withheld with respect to this matter will be excluded
entirely from the vote and will have no effect, other than for purposes of
determining the presence of a quorum. The affirmative vote of a majority of the
votes cast by holders of outstanding shares of Common Stock is required for
approval of Proposal 2 and any other matters to be voted upon at the meeting or
any adjournment thereof. Any abstentions will have the same effect as votes
against Proposal 2. Broker non-votes, for either Proposal 1 or Proposal 2, will
have no effect on the approval of either proposal.
Unless otherwise indicated, all share data included in this Proxy Statement
have been adjusted to reflect the 100% stock dividends paid by the Company on
April 1, 1998 and January 2, 1997.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
Six persons are nominated for election by the holders of the Common Stock
as directors to serve until the next annual meeting of shareholders and until
his respective successor is duly elected and qualified. Although the Board of
Directors anticipates that all of the nominees will be able to serve, if any
nominee is unable or unwilling to serve at the time of the annual meeting, the
proxy will be voted for a substitute nominee chosen by the Board of Directors,
or the number of directors to be elected may be reduced in accordance with the
Company's Bylaws.
All of the nominees for director named below are currently serving as
directors of the Company for terms expiring at the annual meeting. The following
table sets forth certain information as to the persons nominated for election as
directors of the Company at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
IDENTIFIED BELOW.
NOMINEES TO BE VOTED ON BY THE SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Irving Jaffe.................................. 79 Chairman Emeritus and Director 1988
Richard Jaffe(1).............................. 45 Chairman of the Board, 1988
President, Chief Executive
Officer and Director
Neil K. Braverman(1).......................... 59 Director 1985
Cam L. Garner(2)(3)........................... 49 Director 1996
Howard L. Shecter(1)(2)....................... 54 Director 1993
Joseph Stemler(2)(3).......................... 67 Director 1995
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Mr. Irving Jaffe became Chairman Emeritus of the Company in May 1996 and
has served as a director of the Company since April 1988. He served as the
Chairman of the Board between August 1988 and May 1996 and as Chief Executive
Officer of the Company from August 1988 through March 1993. Since 1986, he has
been the Senior Managing Partner of the Jaffe Family Partnership, a family
investments partnership. From 1977 through 1985, Mr. Jaffe was the Chairman of
the Board and Chief Executive Officer of Nutri Foods International, Inc., a
manufacturer of frozen desserts ("Nutri Foods"). In 1985, Nutri Foods was sold
to The Coca-Cola Company. Mr. Jaffe attended New York University. Mr. Jaffe is
the father of Richard Jaffe.
Mr. Richard Jaffe became the Chairman of the Board, President and Chief
Executive Officer of the Company in May 1996 and has served as a director of the
Company since April 1988. Between March 1993 and May 1996, he was the Vice
Chairman of the Board and Co-Chief Executive Officer of the Company. Mr. Jaffe
served as the President of Safeskin Corporation (Malaysia) Sdn. Bhd. and Chief
Operating Officer of the Company between April 1988 and March 1993. In 1977, Mr.
Jaffe founded Nutri Foods. He served as President of Nutri Foods until December
1987. Mr. Jaffe served on the executive operating committee of the Foods
Division of The Coca-Cola Company from 1985 through 1987. Mr. Jaffe has been a
Managing General Partner of the Jaffe Family Partnership since 1985. Mr. Jaffe
is currently a director of DAOU Systems, Inc., a provider of information
technology services for the healthcare industry. Mr. Jaffe holds a B.S. degree
in industrial and labor relations from Cornell University. Mr. Jaffe is the son
of Irving Jaffe.
Mr. Braverman has served as a director since he founded the Company in
1985. In January 1997, Mr. Braverman entered into a consulting agreement with
the Company. Between May 1996 and December 1996, he served as the Co-Chairman of
the Company and between May 1993 and May 1996 as Co-Chief Executive Officer of
the Company. From 1985 through May 1996 Mr. Braverman served as President of the
Company. At various times during the period from 1972 through 1985, Mr.
Braverman was President of Reserve Energy Corporation, an oil drilling company,
and was President of Paramount Oil Co., a manufacturer of lubricating oils. From
1964 to 1972, he was President and Chief Executive Officer of Flair, Inc., a
consumer products 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.
2
<PAGE> 5
Mr. Garner became a director of the Company in June 1996. He has served as
the Chairman of Dura Pharmaceuticals, Inc. ("Dura"), 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. 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, Trega Biosciences, CardioDynamics International, Nanogen
Corporation and Spiros Development Corporation. He holds a B.A. degree in
biology from Virginia Wesleyan College and an M.B.A. from Baldwin-Wallace
College.
Mr. Shecter became a director of the Company in June 1993. He has been a
partner since 1973 in the law firm of Morgan, Lewis & Bockius LLP. Mr. Shecter
served as the managing partner of Morgan, Lewis & Bockius LLP from 1979 to 1983
and was the Chairman of the Executive Committee of that firm in 1985. Mr.
Shecter holds an A.B. degree in government from Harvard College and a J.D.
degree from the University of Pennsylvania Law School.
Mr. Stemler became a director of the Company in June 1995. He has served as
Chairman of the Board, President and Chief Executive Officer of Maret
Corporation, a biopharmaceutical company since February 1998. From January 1996
through February 1997, Mr. Stemler served as President, Chairman and Chief
Executive Officer of Scholle Corporation, an aseptic packaging company. Since
July 1995 Mr. Stemler has served as Chairman of the Board of La Jolla
Pharmaceutical Company ("La Jolla"). Previously, Mr. Stemler served as
President, Chief Executive Officer and Chairman of the Board of Directors of La
Jolla from its formation in 1989 to 1995. From 1985 to 1989, Mr. Stemler served
as President and Chairman of Quidel Corporation (the predecessor of La Jolla).
From 1978 and 1985, he served as President of Bentley Laboratories and then as
President of American Hospital Supply Corporation's Bentley subsidiary. Mr.
Stemler also serves as a director of Sunrise Medical Inc., a publicly held
manufacturer and provider of medical products used in the rehabilitation and
recovery phases of patient care and Scholle Corporation. He holds a B.S. degree
in engineering from Illinois Institute of Technology and holds advanced degrees
in engineering and business administration.
COMPENSATION OF DIRECTORS
In December 1997, the Board of Directors revised the Amended and Restated
Equity Compensation Plan (the "Plan") to compensate outside directors with
16,000 non-qualified stock options for services rendered as a director during
1998 and 10,000 non-qualified stock options for services rendered as a director
in subsequent years (each a "Formula Grant"). Outside directors who were in
office on December 11, 1997, specifically Messrs. Cam Garner, Irving Jaffe,
Howard Shecter and Joseph Stemler, received the Formula Grant at the exercise
price of $25.4375, the fair market value of the Common Stock on the date of the
grant, in lieu of cash compensation for 1998. Formula Grant options shall have a
per share exercise price equal to the fair market value of the Common Stock on
the date of grant (or on the most recently preceding business day). Of the
16,000 options granted on December 11, 1997 to each outside director, 6,000
options vested and became exercisable on the date of grant and 5,000 options
will vest and become exercisable on each of the first and second anniversaries
of the date of grant. All subsequent Formula Grant options will vest in
accordance with the following schedule: 4,000 options will vest and become
exercisable on the date of grant and 3,000 options will vest and become
exercisable on each of the first and second anniversaries of the date of grant.
Formula Grant options expire on the tenth anniversary of the date of grant or 60
days after the individual ceases to serve as a director or employee of the
Company; provided, however, that in the event of an outside director's death or
disability, any stock option may thereafter be exercised, to the extent then
exercisable, for a period of one year from the date of such death or disability
or until the stated expiration of the Formula Grant, whichever period is
shorter.
Prior to December 1997, each outside director, upon election to the Board
was entitled to receive options to purchase 80,000 shares of Common Stock, as
adjusted for the 100% stock dividends distributed on January 2, 1997 and April
1, 1998, at an exercise price equal to the fair market value of the Common Stock
on the date of grant. Such options were granted to each of the following
directors upon their election: in 1993, to Howard Shecter, in 1995, to Joseph
Stemler and in 1996, to Cam Garner. In December 1997, the Board amended the Plan
to provide that any new outside directors elected to the Board would receive
options to purchase 50,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of grant. The options
granted to outside directors upon their election become exercisable at the rate
of 20% on each anniversary of the date of grant and expire on the tenth
anniversary of the date of grant or 60 days after such individual ceases to
serve as a director or employee of the Company. The employee directors do not
receive additional compensation for their services as director.
3
<PAGE> 6
On February 27, 1997 all non-employee directors, including Neil K.
Braverman and Irving Jaffe, received options to purchase 30,000 shares of Common
Stock at an exercise price of $9.00, the fair market value of the Common Stock
on the date of the grant. Of these options, 20,000 became exercisable when the
market price of the Company's Common Stock reached $27.50 for 30 consecutive
days prior to December 31, 1998 and 10,000 options became exercisable when the
market price of the Company's Common Stock reached $30.00 for 30 consecutive
days prior to December 31, 1999; all of these options are currently exercisable.
Beginning in 1993, the Company began paying Irving Jaffe for his services
as Chairman of the Board and for consulting services provided to the Company in
the areas of marketing and public relations. Irving Jaffe is currently paid at a
rate of $100,000 per annum for his consulting services. As of January 1, 1997,
Mr. Braverman resigned as an executive officer of the Company and entered into a
consulting agreement with the Company. During 1997, Mr. Braverman was paid at a
rate of $300,000 per annum and received a bonus of $150,000. In addition, on
December 11, 1997, Mr. Braverman received, in connection with his service as a
consultant, 50,000 options at the exercise price of $25.4375, the fair market
value of the Common Stock on the date of the grant. These options become
exercisable at the rate of 20% on each anniversary of the date of grant and
expire on the tenth anniversary of the date of grant or 60 days after Mr.
Braverman ceases to serve as a director, consultant or employee of the Company.
During 1998, Mr. Braverman will continue to be paid as a consultant at a rate of
$300,000 per annum and be eligible to receive a bonus of $150,000 based on
achieving certain objectives. Mr. Braverman does not receive either cash
compensation or the Formula Grant for his services as director.
COMMITTEES AND MEETINGS
During the year ended December 31, 1997, the Board of Directors held four
regular meetings and one special meeting. All of the directors attended at least
75 percent of the number of meetings of the Board of Directors and of the
committees thereof held during their respective terms.
The Executive Committee consisted of Neil K. Braverman, Richard Jaffe and
Howard L. Shecter during 1997. The Executive Committee held two meetings during
the year ended December 31, 1997. The Executive Committee has all the authority
held by the full Board of Directors, except with respect to certain matters
reserved to the Board of Directors by law.
The Compensation Committee consisted of Cam Garner and Joseph Stemler
during 1997. The Compensation Committee held seven meetings during the year
ended December 31, 1997. The primary function of the Compensation Committee is
to review and approve the Company's compensation policies and practices, to
propose compensation levels for executive officers and other key employees and
to administer the Plan.
The Audit Committee consisted of Cam Garner, Joseph Stemler and Howard L.
Shecter during 1997. The Audit Committee held three meetings during the year
ended December 31, 1997. The primary function of the Audit Committee is to
assist the Board of Directors in fulfilling its responsibilities with respect to
the accounting and financial reporting practices of the Company and to address
the scope and results of the audit and other services performed by the Company's
independent accountants.
The Board of Directors does not have a separate nominating committee and
therefore performs the functions of a nominating committee.
4
<PAGE> 7
EXECUTIVE COMPENSATION
TOTAL ANNUAL COMPENSATION
The following table sets forth certain information relating to the total
annual compensation paid or accrued by the Company and its subsidiaries, during
the fiscal years ending December 31, 1997, December 31, 1996 and December 31,
1995, to its Chief Executive Officer and its other four most highly compensated
executive officers who served in such capacities on December 31, 1997 (the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
----------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK UNDERLYING OTHER
POSITION YEAR SALARY ($) BONUS(2) ($) COMPENSATION AWARD(S) ($) OPTIONS(3) COMPENSATION(4)
- ------------------ ---- ---------- ------------ ------------ ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Jaffe, 1997 $450,000 $450,000 * -- 600,000 $17,229
Chairman of the 1996 450,000 360,000 * -- 1,100,000 3,167
Board, President 1995 400,000 -- * -- -- 3,080
and Chief Executive
Officer
David Morash, 1997 $214,240 $140,000 * -- -- $ 9,926
Executive Vice 1996 206,000 120,000 * -- 120,000 3,167
President and 1995 200,500 68,000 * -- -- 3,080
Chief Financial
Officer
Lee Chee Ming, 1997 $162,391 $140,791 * -- -- --
Executive Vice 1996 157,673 59,583 * -- 120,000 --
President and 1995 136,814 42,987 * -- -- --
Managing Director,
Southeast Asian
Operations(1)
Jeffrey A. Martin, 1997 $164,800 $113,750 * -- -- $ 6,917
Vice President, 1996 157,500 102,375 * -- 80,000 3,167
Sales 1995 150,500 50,000 * -- -- 3,080
John G. Brewer, 1997 $150,000 $105,000 * -- 20,000 $ 3,542
Vice President, 1996 85,462 87,500 * -- 100,000 --
Logistics and 1995 -- -- -- -- -- --
Information
Technology
</TABLE>
- ---------------
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for the
executive officer and, therefore is not required to be disclosed pursuant to
Securities and Exchange Commission rules.
(1) All amounts paid to Mr. Lee are paid in Malaysian ringgits and converted to
dollars at the exchange rate for 1997 (US $1.00 = M $2.8250), 1996 (US $1.00
= M $2.5175) and 1995 (US $1.00 = M $2.5108).
(2) Includes amounts accrued during year presented but paid in the subsequent
year.
(3) All share data have been adjusted to reflect the 100% stock dividends paid
by the Company on January 2, 1997 and on April 1, 1998.
(4) Amounts shown include the Company's matching contribution to the Company's
401(k) plan and deferred compensation plan.
5
<PAGE> 8
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth the stock options granted to and exercised
by the Named Officers during the year ended December 31, 1997.
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES
SECURITIES OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER FOR OPTION TERM
OPTIONS EMPLOYEES IN SHARE EXPIRATION ---------------------------
NAME GRANTED(#)(1) FISCAL-YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------- ------------ --------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe 400,000(2) 19.16% $ 9.00 Feb. 26, 2007 $2,264,021 $5,737,473
200,000(3) 9.58% 21.75 Sept. 23, 2007 2,735,692 6,932,780
David Morash -- -- -- -- -- --
Lee Chee Ming -- -- -- -- -- --
Jeffrey A. Martin -- -- -- -- -- --
John G. Brewer 20,000(4) 0.96% $ 12.00 Jan. 16, 2007 $ 150,935 $ 382,498
</TABLE>
- ---------------
(1) All share data have been adjusted to reflect the 100% stock dividend paid by
the Company on April 1, 1998.
(2) Fifty percent of these options became exercisable when the average daily
closing price of the Common Stock on the Nasdaq National Market was equal to
or greater than $13.75 during a 30 consecutive trading day period prior to
December 31, 1998. Fifty percent of these options became exercisable when
the average daily closing price of the Common Stock on the Nasdaq National
Market during any 30 consecutive trading day period prior to December 31,
1999 was equal to or greater than $15.00.
(3) Fifty percent of these options became exercisable when the average daily
closing price of the Common Stock on the Nasdaq National Market was equal to
or greater than $25.00 during a 30 consecutive trading day period prior to
March 31, 1999. Fifty percent of these options became exercisable when the
average daily closing price of the Common Stock on the Nasdaq National
Market was equal to or greater than $30.00 during a 30 consecutive trading
day period prior to December 31, 1999.
(4) These options vest over a five year period at a rate of 20% each year,
beginning on the first anniversary of the date of the grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END(1) AT YEAR-END(1)
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe............ 159,000 $2,321,063 1,961,000 560,000 $41,677,875 $11,816,250
David L. Morash.......... -- -- 124,000 196,000 3,005,750 4,729,250
Lee Chee Ming(2)......... 176,708 4,078,230 120,000 216,000 2,920,500 5,230,500
Jeffrey A. Martin........ 80,000 888,188 52,000 188,000 1,264,750 4,532,750
John G. Brewer........... -- -- 20,000 100,000 $ 386,250 $ 1,872,500
</TABLE>
- ---------------
(1) All share data have been adjusted to reflect the 100% stock dividend paid by
the Company on April 1, 1998.
(2) Calculated based on the difference between the fair market value of the
Common Stock of $28.375 per share on December 31, 1997 and the exercise
price of such options.
(3) Includes options granted to Mr. Lee in 1990 (outside the Equity Compensation
Plan). These options became exercisable at the rate of 176,708 on April 15
of each of 1993 through 1997.
6
<PAGE> 9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (the "Committee") consisted of Cam Garner and
Joseph Stemler during 1997. Neither of the committee members has ever been an
officer or employee of the Company or its subsidiaries.
COMPENSATION COMMITTEE REPORT
The Committee has the authority to determine the compensation of the
Company's executive officers and to administer the Plan. The Committee currently
consists of two outside directors who are not officers or employees of the
Company. The Committee currently meets the requirements of outside directors
under Section 162(m) of the Internal Revenue Code of 1986, as amended.
Since the Company's initial public offering of Common Stock in November
1993, the Committee has focused on the formulation of compensation policies that
reflect the Company's status as a public company. Prior to June 1996,
compensation for the Company's Chief Executive Officer, Richard Jaffe, and
former Co-Chief Executive Officer, Neil Braverman, was subject to the terms of
employment agreements approved by the Board of Directors in June 1993.
Subsequent to June 1996, the Company sought to compensate its Chief Executive
Officer in a competitive manner that utilizes salary, cash bonuses and non-cash
compensation to closely align the interests of the Chief Executive Officer with
those of the shareholders. The cash bonus awarded the Chief Executive Officer in
1998 for 1997 performance was based in part on the individual's performance and
in part on the Company's performance. In 1997, the Committee made two stock
option grants and proposed one additional stock option grant, subject to
shareholder approval, to the Chief Executive Officer, the value of each of which
was tied to future increases in the price of the Company's Common Stock. The two
options granted during 1997 vest once the market price of the Company's Common
Stock maintains a minimum market price for 30 days within specified time periods
or, if not sooner vested, 8 years after the date of the grant. Once vested,
these options become immediately exercisable. The terms of the additional
proposed stock options are discussed in Proposal 2 of this Proxy Statement.
The Committee believes that the Company's compensation plans should be
administered in a manner that will enable the Company to:
(1) recruit, develop and retain the highest quality executives, by
paying executives base compensations competitive with those of its peers;
(2) maximize financial performance, balancing appropriately the short
and long term goals of the Company; and
(3) align the interests of Company executives with those of its
shareholders through the use of stock options to link a significant portion
of compensation to increases in shareholder value.
To achieve its policy goals, the Committee has utilized salary, cash
bonuses and non-cash compensation, including grants of stock and stock options.
The Committee has focused on the establishment of competitive salary levels for
each of its executive officers. The Committee has utilized publicly available
information in determining competitive salary levels, both for new and existing
executives.
The Company has retained a leading independent compensation consulting firm
to assist the Committee in defining appropriate policies with respect to base
and incentive compensation for the Company's executive officers and other key
employees. In developing such policies, the Committee considered information and
data concerning compensation paid by corporations that compete with the Company
for executive talent, including corporations engaged in high growth (including
technology-based) industries and manufacturing concerns, and not necessarily the
Company's peers that are used to compare shareholder returns.
Cash bonuses have been used to encourage and reward short term performance.
All executives officers were awarded cash bonuses in 1998 based on 1997
performance. The Committee has established a maximum bonus target for each
executive and determined the actual bonus amount to be paid to each executive
based upon the individual's performance as measured against the individual's
goals and responsibilities. Factors such as achievement of sales targets in the
case of sales and marketing personnel, product availability and quality in the
case of manufacturing personnel and other, largely subjective, criteria in the
case of financial and administrative personnel were taken into consideration in
this process. In addition, the Committee has established an over-achievement
bonus percentage for each executive which is paid if the Company achieves a
previously established earnings per share target.
7
<PAGE> 10
Stock options have been utilized by the Committee to encourage and reward
both long term and short term compensation goals. The Committee believes that
stock options provide a particularly effective incentive for the enhancement of
shareholder value since the full benefit of stock option grants will not be
realized unless there has been appreciation in per share values over an extended
period of time. With the exception of certain options granted to the Chief
Executive Officer, all of the Company's option grants to employees vest in
installments over a period of years, generally five years, thus creating an
additional incentive for the individual to remain in the employ of the Company.
In addition, certain stock options have been structured to be utilized as an
incentive for short- and medium-term performance. The Committee authorized the
grant of stock options to selected key employees, based upon the employee's
performance in 1997. The options would vest in installments of 20% per year over
the ensuing five years.
Compensation Committee
Cam L. Garner
Joseph Stemler
8
<PAGE> 11
PERFORMANCE GRAPH
The Company's Common Stock began trading on the Nasdaq National Market on
November 17, 1993 when its initial public offering commenced. The following
graph shows the total return to shareholders of an investment in the Company's
Common Stock as compared to (a) an investment in a peer group (see "Peer Index")
made up of (i) Ballard Medical Products, Inc., (ii) ICU Medical, Inc., (iii)
Maxxim Medical, Inc., (iv) Arrow International, Inc. and (v) Vital Signs, Inc.
and (b) an investment in the Nasdaq Composite Index (the "Nasdaq Index"). The
time frame for the Peer Index corresponds directly to the period during which
the Company's Common Stock has been traded (i.e., for the period November 17,
1993 through December 31, 1997). The four companies in the Peer Index have been
selected because they represent comparable companies in the medical products
manufacturing business. The time frame for the Nasdaq Index, which is compiled
on a monthly basis, begins with the period immediately preceding the Company's
initial public offering (i.e., October 31, 1993) and continues through December
31, 1997.
Total shareholder return is determined by dividing (i) the sum of the
cumulative amount of dividends for a given period (assuming dividend
reinvestment) and the difference between the share price at the end and the
beginning of the period, by (ii) the share price at the end of the period.
<TABLE>
<CAPTION>
Measurement Period SAFESKIN PEER GROUP NASDAQ
(Fiscal Year Covered) CORPORATION INDEX MARKET INDEX
<S> <C> <C> <C>
11/17/93 100.00 100.00 100.00
12/31/93 123.08 97.32 102.79
12/31/94 109.62 104.73 100.48
12/31/95 130.77 146.03 142.10
12/31/96 375.00 122.19 174.78
12/31/97 873.08 148.36 214.47
</TABLE>
- ---------------
* Reflects performance related to $100 invested on November 17, 1993 in each of
the Company's Common Stock and the Peer Index and $100 invested on October 31,
1993 in the Nasdaq Index, in each case including reinvestment of dividends,
through fiscal year ending December 31, 1997. All share data have been
adjusted to reflect the 100% stock dividends paid by the Company on April 1,
1998 and January 2, 1997.
9
<PAGE> 12
SECURITY OWNERSHIP
The following table sets forth information, as of March 2, 1998, with
respect to the beneficial ownership of shares of the Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the aggregate
shares of Common Stock outstanding, (ii) each director and nominee for election
as a director, (iii) each Named Officer and (iv) all directors and executive
officers of the Company as a group. On March 2, 1998, there were 53,472,904
shares of Common Stock outstanding. Unless indicated, each of the persons in the
table below has sole voting power and sole dispositive power as to all of the
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
- ---- --------------------- --------
<S> <C> <C>
Richard Jaffe............................................... 4,443,600(1)(4) 8.01%
Neil K. Braverman........................................... 4,594,240(2)(4) 8.44%
Irving Jaffe................................................ 2,542,628(3)(4) 4.75%
John G. Brewer.............................................. -- *
Lee Chee Ming............................................... 250,124(4) *
Jeffrey A. Martin........................................... 56,000(4) *
David L. Morash............................................. 124,000(4) *
Cam Garner.................................................. 56,000(4) *
Howard L. Shecter........................................... 102,000(4) *
Joseph Stemler.............................................. 68,000(4) *
All directors and executive................................. 12,359,392(4) 41.69%
officers as a group
(21 persons)
Nicholas-Applegate Capital Management....................... 4,168,106(5) 7.79%
600 West Broadway, 29th Floor
San Diego, CA 92101
</TABLE>
- ---------------
* Does not exceed one percent.
The address of each 5% shareholder, other than those otherwise specified, is
c/o Safeskin Corporation, 12671 High Bluff Drive, San Diego, California 92130.
(1) Includes 1,654,560 shares held by Richard B. Jaffe and Ann Jaffe, as
trustees for the Jaffe Family Trust U/A/D 10/04/90.
(2) Includes (i) 2,049,200 shares held, directly or indirectly, by the Braverman
Family Partnership, Ltd., of which Neil Braverman is a limited partner and
whose general partner is a corporation owned by Neil Braverman, (ii) 412,688
shares beneficially owned by Jeanne D. Braverman, the reporting person's
spouse and (iii) 1,146,352 shares held by trusts for which Ms. Braverman
serves as trustee.
(3) Includes 506,628 shares held by I&E Nevada Limited Partners, of which Irving
Jaffe has a 67.4% limited partnership interest, Eleanor Jaffe has a 31.6%
limited partnership interest and a company controlled by Irving Jaffe has a
1% general partnership interest.
(4) Includes shares beneficially owned under currently exercisable options as
follows: Richard Jaffe -- 2,001,000; Neil K. Braverman -- 986,000; Irving
Jaffe -- 36,000; Lee Chee Ming -- 120,000; Jeffrey A. Martin -- 56,000;
David Morash -- 124,000; Cam Garner -- 52,000; Howard L. Shecter -- 94,000;
Joseph Stemler -- 68,000; and all directors and executive officers as a
group -- 3,659,000.
(5) As reported on the Form 13-G filed by reporting person on February 13, 1998.
10
<PAGE> 13
PROPOSAL 2
APPROVAL OF CHIEF EXECUTIVE OFFICER PERFORMANCE OPTIONS
Overview of Chief Executive Officer Performance Options. On December 11,
1997, the Compensation Committee (the "Committee") approved a grant, subject to
shareholder approval, of 1,200,000 performance stock options (as adjusted to
reflect the 100% stock dividend paid by the Company on April 1, 1998) to the
Company's Chief Executive Officer (the "Chief Executive Officer Performance
Options" or "CEOPO"). Unlike options granted under the Company's existing
Amended and Restated Equity Compensation Plan (the "Plan"), a significant
portion of the CEOPO requires the Company's Common Stock price to increase
significantly to a specified threshold level, within a given time frame, before
the Chief Executive Officer will have the right to exercise the options.
Furthermore, the Chief Executive Officer will not realize a significant gain
from exercising the performance stock options until the Company's stock price
increases well above that threshold level. The exercise prices of the CEOPO are
set to ensure that the Chief Executive Officer will receive only minimal gain
from the CEOPO for average Company stock price growth, but the CEOPO provide
significantly greater rewards to the Chief Executive Officer for achieving well
above average stock price growth, thereby keeping the Chief Executive Officer
focused on increasing shareholder value.
If approved by the shareholders, the CEOPO grant will become effective on
May 6, 1998 (the "Effective Date"). A detailed description of the CEOPO grant
follows.
Value of CEOPO. The CEOPO allow the Chief Executive Officer to purchase
1,200,000 shares of the Company's Common Stock. The Committee intends that the
CEOPO will have a grant value calculated to provide the Chief Executive Officer
with three years' worth of competitive long-term compensation. The Chief
Executive Officer will not receive subsequent grants of restricted stock or
stock options under the Plan or otherwise during the three-year period after the
Effective Date, without shareholder approval.
Exercise Prices. To determine the exercise prices of the CEOPO, the
Committee hired an independent consultant who reviewed the "reasonableness" of
the exercise prices against similar plans adopted by other companies. With
respect to one-third of the CEOPO, or 400,000 options, the exercise price will
be $32.50 per share; with respect to another one-third of the CEOPO, or 400,000
options, the exercise price will be $40.00 per share; and with respect to the
final one-third of the CEOPO, or 400,000 options, the exercise price will be
$50.00 per share. If on the Effective Date, the closing price of a share of the
Company's Common Stock exceeds the exercise price of any premium price option,
the option will instead be granted at that closing price. On December 11, 1997,
the date the grant was approved by the Committee, the closing price of the
Common Stock was $25.4375 per share as reported by the Nasdaq National Market.
On March 30, 1998, the closing price of the Common Stock was $36.8125 per share
as reported by the Nasdaq National Market.
Vesting and Exercisability. The CEOPO will only vest if the Common Stock
price reaches the exercise price within a specified period (the "Performance
Period"). For options with an exercise price of $32.50, the Performance Period
will end on December 31, 1999; for options with an exercise price of $40.00, the
Performance Period will end December 31, 2000; and for options with an exercise
price of $50.00, the Performance Period will end on December 31, 2001.
Performance stock options which fail to vest within the applicable Performance
Period immediately expire. Once vested, the CEOPO become immediately exercisable
and may be exercised for a period of ten years from the Effective Date.
Expiration Date. The CEOPO expire ten years after the Effective Date,
unless the Chief Executive Officer's employment terminates in certain situations
described below. In addition, the CEOPO expire if the Common Stock price fails
to reach the exercise price for the option within the relevant Performance
Period.
Eligibility. The only person who will receive stock options under this
CEOPO grant will be the Chief Executive Officer, Richard Jaffe.
Termination. If the Chief Executive Officer ceases to be employed by the
Company, the CEOPO shall expire, based upon the reason for such termination, in
accordance with the following schedule:
(a) Termination by Reason of Death. Unless otherwise determined by
the Committee, if the Chief Executive Officer's employment by the Company
terminates by reason of death, the CEOPO may thereafter be exercised, to
the extent then exercisable or on such accelerated basis as the Committee
may determine at or after the Effective Date of the grant, by the legal
representative of the estate or by the legatee of the Chief Executive
Officer under the will of the Chief Executive Officer, for a period of one
year from the date of such death or until the expiration of the stated term
of the CEOPO, whichever period is shorter;
11
<PAGE> 14
(b) Termination by Reason of Disability. Unless otherwise determined
by the Committee, if the Chief Executive Officer's employment by the
Company terminates by reason of disability, the CEOPO may thereafter be
exercised by the Chief Executive Officer, to the extent then exercisable or
on such accelerated basis as the Committee may determine at or after the
Effective Date, for a period of one year from the date of such termination
of employment or until the expiration of the stated term of the CEOPO,
whichever period is shorter; provided, however, that, if the Chief
Executive Officer dies within such one-year period, any unexercised portion
of the CEOPO held by the Chief Executive Officer shall thereafter be
exercisable to the extent to which it was exercisable at the time of death
for a period of one year from the date of such death or until the
expiration of the stated term of the CEOPO, whichever period is shorter;
(c) Termination by Reason of Retirement. Unless otherwise determined
by the Committee, if the Chief Executive Officer's employment by the
Company terminates by reason of normal or early retirement, any portion of
the CEOPO held by the Chief Executive Officer may thereafter be exercised
by the Chief Executive Officer, to the extent then exercisable or on such
accelerated basis as the Committee may determine at or after the Effective
Date, for a period of 90 days from the date of such retirement or the
expiration of the stated term of the CEOPO, whichever period is shorter;
provided, however, that, if the Chief Executive Officer dies within such 90
day period, any unexercised portion of the CEOPO held by the Chief
Executive Officer shall thereafter be exercisable, to the extent to which
it was exercisable at the time of death, for a period of one-year from the
date of such death or until the expiration of the stated term of the CEOPO,
whichever period is shorter;
(d) Involuntary Termination Without Cause. Unless otherwise
determined by the Committee, if the Chief Executive Officer's employment by
the Company is involuntarily terminated without cause, any portion of the
CEOPO held by the Chief Executive Officer may thereafter be exercised by
the Chief Executive Officer, to the extent then exercisable or on such
accelerated basis as the Committee may determine at or after the Effective
Date, for a period of 90 days from the date of such termination or the
expiration of the stated term of the CEOPO, whichever period is shorter;
provided, however, that, if the Chief Executive Officer dies within such 90
day period, any unexercised portion of the CEOPO held by the Chief
Executive Officer shall thereafter be exercisable, to the extent to which
it was exercisable at the time of death, for a period of one-year from the
date of such death or until the expiration of the stated term of the CEOPO,
whichever period is shorter; or
(e) Other Termination. Unless otherwise determined by the Committee,
if the Chief Executive Officer's employment by the Company terminates for
any reason other than death, disability, normal or early retirement or
involuntary termination without cause, the CEOPO shall thereupon expire.
Transferability of Options. The CEOPO will not be transferable, except in
the following situations (i) by will or the laws of decent or distribution or
(ii) to family members, a trust established for the benefit of such family
members or other persons or entities, according to such terms as the Committee
may determine; provided, however, that the Chief Executive Officer may not
receive consideration for the transfer of such option and the transferred option
must continue to be subject to the same terms and conditions as were applicable
to the CEOPO immediately before the transfer.
Adjustment Provisions. If there is any change in the Common Stock as a
result of a stock dividend, recapitalization, stock split, or combination or
exchange of the Common Stock, or a merger, reorganization or consolidation of
the Company or any other change in the capital structure made without the
receipt of consideration, then unless such event results in the termination of
the CEOPO, the number and class of shares available for an issuance pursuant to
the CEOPO and the price per share of such CEOPO will be proportionately adjusted
by the Committee to reflect any increase or decrease in the number or kind of
issued shares of Common Stock.
Change in Control of the Company. In the event of a Change in Control (as
defined herein), the CEOPO would become fully vested and immediately exercisable
(with no change in the exercise price) without regard to whether the Common
Stock price has reached the option exercise price by the applicable cutoff date.
The value of the outstanding CEOPO may be cashed out by the Company on the basis
of the highest price paid for Common Stock during the 60 days preceding the
Change in Control. The Committee may take similar actions in the case of a
potential Change in Control. For purposes of the CEOPO, "Change in Control"
means the occurrence of any of the following: (i) the acquisition by a third
party of 30% or more of the outstanding shares of the Company's Common Stock;
(ii) when, during any consecutive two year period prior to the expiration of the
CEOPO, the individuals who at the beginning of such period constitute the Board
of Directors of the Company cease for any reason, other than death, to
constitute at least a two-thirds majority thereof, provided, however, that a
director who was not a director at the beginning of such period shall be deemed
to have satisfied the two year requirement
12
<PAGE> 15
if such director was elected by, or on the recommendation of, at least
two-thirds of the directors who were directors at the beginning of such period;
(iii) any transactions or event relating to the Company required to be described
pursuant to the requirements of Item 6(e) of Schedule 14A of the Exchange Act;
or (iv) a transaction requiring shareholder approval for the acquisition of the
Company or substantially all of its assets by an entity other than the Company
through purchase, by merger, or otherwise.
Payment of Exercise Price. The Chief Executive Officer must pay the full
exercise price for the CEOPO. The Chief Executive Officer may arrange for a
broker to sell a portion of the shares covered by the CEOPO and have the sale
proceeds applied to the exercise price. In addition, the Chief Executive Officer
may use already-owned shares of the Company as payment of the exercise price.
Tax Deductibility. The Company believes that compensation received by the
Chief Executive Officer in the exercise of the CEOPO will be considered
performance-based compensation and will not be subject to the $1,000,000 limit
on the tax deductibility of compensation under Section 162(m) of the Internal
Revenue Code.
Federal Income Tax Consequences Under the CEOPO. On the Effective Date of
the CEOPO, the Chief Executive Officer recognizes no taxable income and the
Company can claim no tax deduction. When the Chief Executive Officer exercises
the CEOPO, or a portion thereof, the Chief Executive Officer recognizes ordinary
income to the extent of the difference between the exercise price and the fair
market value of the Company's Common Stock on the date of exercise. The Company
can claim a deduction for the same amount at such time. Any appreciation or
depreciation in the stock between exercise of an option and sale of the stock is
short-term, mid-term or long-term capital gain or loss depending on the length
of time the stock is held. The Company cannot deduct any appreciation in the
stock after exercise.
Payments Upon a Change in Control. In the event of a Change in Control,
the CEOPO will become immediately exercisable. In any such event, a portion of
the value of the options at such time may be treated as "parachute payments"
under tax regulations contained in the Internal Revenue Code. These amounts will
be treated as parachute payments if the amounts, when combined with the value of
all other amounts that are paid or accelerated as a result of the Change in
Control, equal or exceed a threshold amount equal to 300% of the Chief Executive
Officer's average annual compensation over the preceding five years. In such
case, the excess of the parachute payments over the Chief Executive Officer's
average annual compensation will be subject to a 20% nondeductible excise tax in
addition to any income tax payable. The amount subject to the excise tax may be
reduced, however, if, and to the extent that, the Chief Executive Officer
establishes that payments include compensation for personal services rendered
after the date of the Change in Control. To the extent payments are subject to
the excise tax, the Company will not be entitled to a deduction.
Administration of CEOPO. The CEOPO shall be administered by the Committee.
Amendments. The CEOPO grant may be amended by the Committee at any time;
provided, however, that any such amendments will be subject to shareholder
approval if shareholder approval is required under Section 162(m) of the Code.
Copy of Official Chief Executive Officer Performance Options Document. A
copy of the full text of the official CEOPO grant document may be requested from
the Company's Corporate Secretary at the following address: Safeskin
Corporation, 12671 High Bluff Drive, San Diego, California 92130.
NEW PLAN BENEFITS
CHIEF EXECUTIVE OFFICER PERFORMANCE OPTIONS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTIONS
- ----------------- ---------
<S> <C>
Richard Jaffe............................................... 1,200,000
Chairman of the Board, President
and Chief Executive Officer
All current executive officers as a group (12 persons)...... 1,200,000
All current directors who are not executive officers as a
group (5 persons)......................................... --
All eligible employees (1 person)........................... 1,200,000
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
13
<PAGE> 16
OTHER EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 2, 1998,
with respect to the executive officers of the Company who are not also directors
of the Company or nominees for election as directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Terrance J. Bieker.................. 52 Executive Vice President and Chief Operating Officer
Lee Chee Ming....................... 49 Executive Vice President and Managing Director, Southeast
Asian Operations
David L. Morash..................... 52 Executive Vice President and Chief Financial Officer
Robert Zabaronick................... 51 Sr. Vice President -- Human Resources
Calvin Branch....................... 48 Vice President, Marketing
John G. Brewer...................... 45 Vice President, Logistics and Information Technology
Seth S. Goldman..................... 40 Vice President, Finance, Controller and Secretary
Harold G. Hambrice.................. 54 Vice President, Technology Development
Robert C. Hatch..................... 35 Vice President and General Manager, Scientific Business
William R. LaRue.................... 46 Vice President and Treasurer
Jeffrey A. Martin................... 46 Vice President, Sales
William C. Miller................... 60 Vice President and General Counsel
Hans R. Sleeuwenhoek................ 38 Vice President and General Manager, International
Business
Wava Truscott, Ph.D................. 48 Vice President, Scientific Affairs
Richard J. Witmeyer, Ph.D........... 49 Vice President, Technical Affairs
</TABLE>
Mr. Bieker joined the Company in December 1997 as Executive Vice President
and Chief Operating Officer of the Company. Prior to joining the Company, Mr.
Bieker served from 1989 through 1997 as the President, Chief Executive Officer
and Chairman of the Board of Sanofi Diagnostics Pasteur, Inc., a $100 million
division of Sanofi, S.A., a French healthcare company. Mr. Bieker holds a B.A.
degree from the University of Minnesota with a concentration in pre-medicine,
economics, law and business.
Mr. Lee has been the Executive Vice President and Managing Director,
Southeast Asian Operations of the Company since February 1998. From November
1996 to February 1998, Mr. Lee served as the Managing Director, Southeast Asian
Operations. 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. Morash has been the Executive Vice President and Chief Financial
Officer of the Company since August 1994. Formerly, as Managing Director, he
helped found Bedford Management Group, Inc. in 1992, a twenty member consulting
firm specializing in advising clients on financial, marketing and human resource
issues. From 1990 to 1992, Mr. Morash was Executive Vice President, Chief
Financial Officer of H.B.S.A. Industries, a department store fixture and
construction firm. His prior experience includes the positions of Vice
President, Treasurer of Merrill Lynch Realty, a publicly traded residential real
estate and relocation management firm, and Vice President, Business Investment
of Primerica Corporation (now Travelers Group, Inc.), a diversified financial
services company. Mr. Morash holds a B.A. in economics from Columbia College and
an M.B.A. in finance from the Columbia Graduate School of Business.
Mr. Zabaronick was named Senior Vice President, Human Resources in December
1997. Mr. Zabaronick served as Vice President, Human Resources for Encad, Inc.
from January 1997 to November 1997, and held the same position at Brooktree
Corporation from July 1987 to January 1997. Mr. Zabaronick holds a B.A. degree
in history and education from Franklin College and a M.B.A. degree from Southern
Illinois University.
Mr. Branch joined the Company in February 1998 as Vice President,
Marketing. From June 1997 to February 1998, Mr. Branch served as President of
the Paradime Leadership Group, a consulting firm which he founded, which
specialized in advising companies on operations issues. While at Paradime
Leadership Group, Mr. Branch served as a consultant to the Company. He was a
sales and marketing executive for Chromium Graphics, a printing technology
company from April 1996 to February 1997, and served in the same capacity for
Upper Deck Company from June 1994 to January 1996. Mr. Branch served as a sales
and marketing executive for Coca-Cola Foods, a $1.5 billion subsidiary of The
Coca-Cola Company from March 1985 to May 1994. Mr. Branch holds a B.A. degree in
political science from North Carolina Central University.
14
<PAGE> 17
Mr. Brewer has served as Vice President, Logistics and Information
Technology of the Company since October 1996. He served as Vice President,
Logistics of the Company between April 1996 and October 1996. Between February
1994 and April 1996, Mr. Brewer served as the Chief Financial Officer of The
Masters Alliance, Inc., a remodeling and property management company and served
as a Supply Chain Manager for Nestle USA, Inc., a conglomerate, from August 1991
and February 1994. Mr. Brewer holds a B.S. in accounting from the University of
Tennessee.
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. Hambrice joined the Company in January 1997 as Vice President,
Technology Development. Mr. Hambrice was previously employed by Baxter
Healthcare Corporation ("Baxter"), a manufacturer of medical products, from 1976
through December 1996 during which time he held a variety of positions. Most
recently Mr. Hambrice served as Vice President and General Manager of Baxter's
manufacturing plant in Penang, Malaysia where he was responsible for the medical
and scientific glove manufacturing operations. He holds a B.S. in accounting and
business administration from Ouachita University.
Mr. Hatch joined the Company in February 1998 as Vice President and General
Manager, Scientific Business upon the Company's acquisition of AQL, a
California-based marketer of glove products for the high technology and
scientific markets. Prior to joining the Company, Mr. Hatch served as President
of AQL, a company he founded in September 1992. He holds a B.S. degree in
political economics from the University of California at Berkeley.
Mr. LaRue has served as Vice President and Treasurer of the Company since
June 1997 and as Treasurer of the Company since January 1997. Between January
1993 and January 1997, he was Treasurer of GDE Systems, Inc., a defense
electronics company. From March 1992 to January 1993, Mr. LaRue was a principal
of Fredericks, Shield & Co., an investment banking firm specializing in debt and
equity recapitalizations and merger and acquisition financing. Prior to March
1992, Mr. LaRue served as Vice President -- Finance and Chief Financial Officer
of AMCON Corporation, a wholesale distribution company, and has served as a Vice
President of Bank of America, a financial services company. He holds a B.S.
degree in business administration and an M.B.A. in finance from the University
of Southern California.
Mr. Martin has served as Vice President, Sales since February 1998. He
served as Vice President, Marketing and Business Development from October 1996
to February 1998 and as Vice President, Marketing between March 1994 and October
1996. He was Southeast Regional Sales Manager for the Company from April 1993
through August 1993 when he became Regional Vice President, Sales, Southeast
Region. From 1986 through 1993, Mr. Martin served in a variety of management and
sales positions with James River Corporation and its successor, Regent Hospital
Products Ltd. Mr. Martin holds a B.S. degree in engineering from the Georgia
Institute of Technology.
Mr. Miller joined the Company in September 1996 as Vice President and
General Counsel of the Company. From September 1995 to September 1996 he served
as Vice President and General Counsel of Gen-Probe Incorporated, a manufacturer
of medical diagnostic tests. He served in the same positions for Collagen
Corporation, a publicly traded biomedical device company, between October 1992
and September 1995. Mr. Miller was the Vice President, General Counsel and
Secretary of Boehringer Mannheim Corporation, a manufacturer of medical supplies
and instruments, between 1985 and October 1992. He holds a B.A. degree in
journalism from Washington and Lee University, an LL.B. from Washington and Lee
Law School, an LL.M. in comparative law from New York University and has
completed the Advanced Management Program at Harvard Business School.
Mr. Sleeuwenhoek has served as Vice President and General Manger,
International Business since February 1998 and as General Manager, International
Business since September 1997. Mr. Sleeuwenhoek joined the Company in March 1997
upon the Company's acquisition of Tactyl Technologies, Inc. ("Tactyl") and
continued to serve as Tactyl's General Manager until September 1997. From
September 1994 to March 1997 he served as President and Chief Executive Officer
of Tactyl. He served in the same positions for Mediscon, B.V., a Netherlands
company which specializes in the distribution of medical devices and medical
disposables, from February 1994 to September 1994. Mr. Sleeuwenhoek was an
Executive Vice President, and later President, of Interlander Spreigroup B.V., a
direct marketing company, from February 1990 to February 1994. He holds a B.A.
degree in international business administration from the American College in
Paris.
15
<PAGE> 18
Dr. Truscott has served as Vice President, Scientific Affairs since
September 1993. Between July 1993 and September 1993, she served as the
Company's Director of Scientific Affairs. She served as the Director of
Regulatory Affairs, Pharmaceutical Division, for Baxter between January 1991 and
July 1993. Dr. Truscott holds a B.S. in botany from Brigham Young University, an
M.B.A. from the University of La Verne and a Ph.D. in comparative pathology from
the University of California at Davis.
Dr. Witmeyer joined the Company in June 1995 as Vice President, Technical
Affairs. In May 1995, he served as the Executive Vice President and Chief
Operating Officer of BioBarrier, Inc., a manufacturer of examination gloves.
Between September 1992 and April 1995, he was the Vice President of Technical
Affairs for Standard Textile Company, Inc., a healthcare textile company. Dr.
Witmeyer served as the Vice President, Scientific Affairs, for Regent Hospital
Products, Ltd./London International U.S. Holdings between April 1990 and
September 1992. He holds a B.S. and an M.S. degree in chemical engineering from
Lehigh University, an M.B.A. from Georgia State University and a Ph.D. in
materials engineering from North Carolina State University.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1998, the Company acquired AQL for approximately $7 million
plus certain contingent payments based upon the performance of the Company's
scientific business unit. Mr. Hatch, an executive officer of the Company,
founded AQL and served as its President until it was acquired by the Company. At
the time AQL was acquired by the Company, Mr. Hatch owned 92% of the outstanding
shares of AQL. During 1997, AQL advanced the sum of $102,000 to Mr. Hatch in
connection with Mr. Hatch's purchase of certain real estate. The loan bore
interest at a rate of eight percent per annum. The loan was fully repaid,
including both principal and interest, in March 1998.
Mr. Shecter, a director of the Company, is a senior partner at Morgan,
Lewis & Bockius LLP which served as the Company's outside counsel during 1997.
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons owning more than 10% of
the Company's equity securities to file with the Securities and Exchange
Commission reports of ownership of the Company's equity securities. During the
year ended December 31, 1997, Mr. Robert Zabaronick, Mr. Harold Hambrice, Mr.
William LaRue and Mr. Terrance J. Bieker filed the initial statement of
beneficial ownership after the due date. During the year ended December 31,
1997, Mr. Shecter did not include one reportable transaction in a timely-filed
statement of beneficial ownership.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP was approved by the Board of Directors,
on October 6, 1997, as the Company's independent public accountants for the year
ended December 31, 1997 and will continue as the Company's independent public
accountants for the current year. Deloitte & Touche LLP replaced Coopers &
Lybrand LLP. ("Coopers & Lybrand") which had previously audited the accounts of
the Company.
A representative of Deloitte & Touche LLP is expected to be present at the
annual meeting, with the opportunity to make a statement if he or she desires to
do so, and is expected to be available to respond to appropriate questions.
On September 30, 1997, the Company dismissed Coopers & Lybrand LLP as the
Company's independent public accountants and auditors, a capacity in which that
firm had served for several years. The decision to change the Company's
accountants and auditors was approved by the Company's Audit Committee and Board
of Directors at meetings held on September 4, 1997.
During the two fiscal years ended December 31, 1997 and the subsequent
period through September 30, 1997, the date on which Coopers & Lybrand was
dismissed as the Company's independent public accountants and auditors, there
were no disagreements between the Company and Coopers & Lybrand on any matter
relating to accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements, if not resolved to Coopers
& Lybrand's satisfaction, would have caused them to make reference in connection
with their reports to the subject matter of the disagreement. In addition,
Coopers & Lybrand's reports on the Company's financial statements for the most
recent two fiscal years contained no adverse opinions or
16
<PAGE> 19
disclaimers of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles.
FINANCIAL STATEMENTS
The annual report of the Company for the year ended December 31, 1997 is
enclosed with this Proxy Statement.
GENERAL INFORMATION
Other Matters. The Board of Directors does not intend to present any
matter for action at this meeting other than the matters described in this Proxy
Statement. If any other matters properly come before the annual meeting, it is
intended that the holders of the proxies hereby solicited will act in respect to
such matters in accordance with their best judgment.
Deadline for Shareholder Proposals. Proposals by holders of the Common
Stock which are intended to be presented at the next annual meeting of
shareholders must be received by the Company for inclusion in the Company's next
proxy statement and form of proxy relating to that meeting no later than
December 7, 1998. Such proposals must also comply in full with the requirements
of Rule 14a-8 promulgated under the Securities Exchange Act of 1934.
Expenses of Solicitation. Proxies will be solicited by mail, telephone, or
other means of communication. Solicitation also may be made by directors,
officers and regular employees of the Company. The entire cost of solicitation
will be borne by the Company.
By Order of the Board of Directors,
Seth S. Goldman,
Secretary
April 6, 1998
17
<PAGE> 20
APPENDIX A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 794-8111
The undersigned hereby appoints Richard Jaffe with the power
to appoint his substitute, proxy to represent the undersigned and vote as
designated below all of the shares of Common Stock of Safeskin Corporation held
of record by the undersigned on March 18, 1998, at the Annual Meeting of
Shareholders to be held on May 6, 1998 and at any adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.
IRVING JAFFE NEIL K. BRAVERMAN RICHARD JAFFE
CAM L. GARNER HOWARD L. SHECTER JOSEPH STEMLER
2. APPROVAL OF THE GRANT OF 1,200,000 PERFORMANCE STOCK OPTIONS
TO THE COMPANY'S CHIEF EXECUTIVE OFFICER
/ / FOR approval of the Grant / / AGAINST approval of the Grant
3. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE> 21
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1 AND "FOR" PROPOSAL 2.
Dated: _____________________________
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
Please sign exactly as name
appears to the left. When
shares are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sign
in full corporate name by
president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 22
Appendix A
SAFESKIN CORPORATION
CHIEF EXECUTIVE OFFICER
PERFORMANCE OPTION
SECTION 1. PURPOSE; GRANT OF OPTION
The purpose of the Safeskin Corporation Chief Executive Officer
Performance Option is to give the Chief Executive Officer of Safeskin
Corporation (the "Company"), Richard Jaffe, an incentive to work toward
increasing substantially the value of the Company's Common Stock.
The Company hereby grants to Richard Jaffe an option (the "Option") to
purchase 1,200,000 shares of Common Stock of the Company on the terms described
herein, subject to approval by the shareholders of the Company. The Option shall
be effective as of the conclusion of the 1998 annual meeting of the Company's
shareholders if the shareholders approve the Option grant at that meeting. If
the shareholders do not approve the Option grant, the Option will be void and of
no effect.
SECTION 2. DEFINITIONS
For the purposes of this Agreement, the following terms shall be
defined as set forth below:
a. "BOARD" means the Board of Directors of the Company.
b. "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
c. "COMMITTEE" means the Committee designated by the Board to
administer this Agreement.
d. "COMPANY" means Safeskin Corporation, its subsidiaries or any
successor organization.
e. "DISABILITY" means permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
f. "EARLY RETIREMENT" means retirement from active employment
with the Company pursuant to the early retirement procedures
of the Company.
g. "EFFECTIVE DATE" means the conclusion of the 1998 annual
meeting of the Company's shareholders.
h. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
i. "FAIR MARKET VALUE" means, if there is a public market for the
Stock and the Stock is registered under the Exchange Act, the
per share value of the Stock as of any given date, as
determined by reference to the price of the last traded share
of Stock on the over-the- counter market, as reported by the
Nasdaq National Market ("Nasdaq") for such date or the next
preceding date that Stock was traded on such market, or, in
the event the Stock is listed on a stock exchange, the closing
price per share of Stock as reported on such exchange for such
date. If the Stock is not traded on Nasdaq or an exchange,
Fair Market Value shall mean the fair market value of the
Stock as determined by the Committee in good faith based on
the best available facts and circumstances at the time.
<PAGE> 23
j. "NORMAL RETIREMENT" means retirement from active employment
with the Company pursuant to the normal retirement procedures
of the Company.
k. "PARTICIPANT" means the Chief Executive Officer of the
Company, Richard Jaffe.
l. "PERFORMANCE PERIOD" means the period beginning on the
Effective Date during which the Fair Market Value of the Stock
must attain a specified level in order for a Tranche of the
Option to become exercisable pursuant to Section 5(b).
m. "RETIREMENT" means Normal or Early Retirement.
n. "SECURITIES ACT" means the Securities Act of 1933, as amended.
o. "STOCK" means the Common Stock of the Company, par value $.01
per share.
p. "STOCK OPTION" or "OPTION" means the option to purchase shares
of Stock granted pursuant to this Agreement.
q. "TRANCHE," "FIRST TRANCHE," "SECOND TRANCHE," and "THIRD
TRANCHE" shall have the meanings given those terms in Section
5(a).
In addition, the terms "CHANGE IN CONTROL," "POTENTIAL CHANGE IN
CONTROL" and "CHANGE IN CONTROL PRICE" shall have meanings set forth,
respectively, in Sections 6(b), (c) and (d) below.
SECTION 3. ADMINISTRATION
This Agreement shall be administered by a Committee designated by the
Board consisting of not less than two members of the Board who may be "outside
directors" under section 162(m) of the Code and "non-employee directors" under
Rule 16b-3 of the Exchange Act. The Committee shall, subject to the limitations
and terms of this Agreement, have the authority to determine the terms and
conditions, not inconsistent with the terms of this Agreement, of the Option and
to amend the terms of the Option (with the consent of the Participant) to
reflect terms not otherwise inconsistent with this Agreement.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Agreement as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of this Agreement and the Option (and any agreements relating thereto); and to
otherwise supervise the administration of this Agreement. All decisions made by
the Committee pursuant to the provisions of this Agreement shall be final and
binding on all persons, including the Company and the Participant.
SECTION 4. STOCK SUBJECT TO THIS AGREEMENT
(a) Subject to adjustment pursuant to Section 4(b) below, the aggregate
number of shares of Stock that may be issued under this Agreement to the
Participant is 1,200,000 shares. Such shares may be authorized but unissued
shares or reacquired shares.
(b) If any change is made to the Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of the Option, the Committee shall preserve
the value of the outstanding Option by
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<PAGE> 24
adjusting the maximum number and class of shares issuable under this Agreement
to reflect the effect of such event or change in the Company's capital
structure, and by making appropriate adjustments to the number and class of
shares subject to the Option and the Option price, except that any fractional
shares resulting from such adjustments shall be eliminated by rounding any
portion of a share equal to .500 or greater up, and any portion of a share equal
to less than .500 down, in each case to the nearest whole number.
SECTION 5. TERMS OF STOCK OPTION
The Stock Option shall be a nonqualified stock option (and not an
incentive stock option under Section 422 of the Code). The Stock Option shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Agreement, as the
Committee shall deem appropriate:
(a) OPTION PRICE. The option price per share of Stock subject to
the Stock Option shall be determined as follows:
(i) With respect to 400,000 shares (the "First Tranche"),
the Option price is $32.50 per share.
(ii) With respect to an additional 400,000 shares (the
"Second Tranche"), the Option price is $40.00 per
share.
(iii) With respect to an additional 400,000 shares (the
"Third Tranche"), the Option price is $50.00 per
share.
(iv) Notwithstanding the foregoing, if, on the Effective
Date, the Fair Market Value of a share of Stock
equals or exceeds any of the Option prices described
above, that Tranche of the Option will have an Option
price equal to the Fair Market Value of the Stock on
the Effective Date.
(b) EXERCISABILITY. The Stock Option shall become exercisable if
and when the Fair Market Value of the Stock attains each of
the following price goals during the applicable Performance
Period and if the Participant is then employed by the Company:
(i) The First Tranche will become exercisable if and when
the Fair Market Value of the Stock attains $32.50
during the Performance Period beginning on the
Effective Date and ending on December 31, 1999.
(ii) The Second Tranche will become exercisable if and
when the Fair Market Value of the Stock attains
$40.00 during the Performance Period beginning on the
Effective Date and ending on December 31, 2000.
(iii) The Third Tranche will become exercisable if and when
the Fair Market Value of the Stock attains $50.00
during the Performance Period beginning on the
Effective Date and ending on December 31, 2001.
(iv) Notwithstanding the foregoing, if the Fair Market
Value of the Stock on the Effective Date equals or
exceeds any of the price goals described above, that
Tranche of the Option shall be fully exercisable as
of the Effective Date.
If any of the foregoing Tranches fails to become exercisable
during the applicable Performance Period, that Tranche of the
Option shall terminate at the end of the Performance Period.
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<PAGE> 25
For purposes of this Agreement, the Participant shall be
considered to be employed by the Company as long as he is an
employee of the Company or a member of the Board.
(c) OPTION TERM. The term of the Stock Option shall be ten years
from the Effective Date. The Option may not be exercised by
any person after expiration of the Option term.
(d) METHOD OF EXERCISE. After the Stock Option becomes
exercisable, the exercisable portion of the Stock Option may
be exercised in whole or in part at any time and from time to
time during the Option period, by giving written notice of
exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full
of the purchase price, either by certified or bank check, or
such other instrument as the Committee may accept. Payment in
full or in part may also be made in the form of unrestricted
Stock already owned by the Participant (based on the Fair
Market Value of the Stock so tendered as of the date the
Option is exercised, as determined by the Committee). If
payment of the Option price is made in whole or in part in the
form of unrestricted Stock already owned by the Participant,
the Company may require that the Stock have been owned by the
Participant for a minimum period of time specified by the
Committee.
The Participant shall not have any rights to dividends or
other rights of a shareholder with respect to shares subject
to the Option until such time as Stock is issued upon exercise
of the Option in accordance with this Agreement.
(e) NON-TRANSFERABILITY OF OPTIONS. Except as provided below, the
Stock Option shall not be transferable by the Participant
otherwise than by will or by the laws of descent and
distribution, and the Stock Option shall be exercisable,
during the Participant's lifetime, only by the Participant.
Notwithstanding the foregoing, the Participant may transfer
the Stock Option to family members, a trust established for
the benefit of such family members or other persons or
entities according to such terms as the Committee may
determine; provided that the Participant receives no
consideration for the transfer of the Stock Option and the
transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option
immediately before the transfer.
Upon a transfer by will or by the laws of descent or
distribution, or a transfer to a family member or entity as
described above, the person to whom the Option is transfered
shall have the right to exercise the Option in accordance with
this Agreement. Any attempt to assign, transfer, pledge or
dispose of the Option contrary to the provisions hereof, and
the levy of any execution, attachment or similar process upon
the Option, shall be null and void and without effect.
(f) TERMINATION BY REASON OF DEATH. Unless the Committee
determines otherwise, if the Participant's employment by the
Company terminates by reason of death, any portion of the
Stock Option held by the Participant may thereafter be
exercised, to the extent then exercisable or on such
accelerated basis as the Committee may determine at or after
grant, by the legal representative of the estate or by the
legatee of the Participant under the will of the Participant,
for a period of one year from the date of such death or until
the expiration of the stated term of the Stock Option,
whichever period is shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless the Committee
determines otherwise, if the Participant's employment by the
Company terminates by reason of Disability, any portion of the
Stock Option held by the Participant may thereafter be
exercised by the Participant, to the extent it was exercisable
at the time of termination, or on such accelerated basis as
the Committee may determine at or after grant, for a period of
one year from the date of such termination of employment or
until the expiration of the stated term of the Stock Option,
whichever period is shorter; provided, however, that, if the
Participant dies within such one-year period (or such shorter
period as the Committee shall specify at grant), the
unexercised Stock Option held by the Participant shall
thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months
from the date of such death or until the expiration of the
stated term of the Stock Option, whichever period is shorter.
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<PAGE> 26
(h) TERMINATION BY REASON OF RETIREMENT. Unless the Committee
determines otherwise, if the Participant's employment by the
Company terminates by reason of Normal or Early Retirement,
any portion of the Stock Option held by the Participant may
thereafter be exercised by the Participant, to the extent it
was exercisable at the time of such Retirement or on such
accelerated basis as the Committee may determine at or after
grant, for a period of 90 days from the date of such
termination of employment or the expiration of the stated term
of the Stock Option, whichever period is shorter; provided,
however, that, if the Participant dies within such 90-day
period, any unexercised portion of the Stock Option held by
the Participant shall thereafter be exercisable, to the extent
to which it was exercisable at the time of death, for a period
of twelve months from the date of such death or until the
expiration of the stated term of the Stock Option, whichever
period is shorter.
(i) INVOLUNTARY TERMINATION. Unless the Committee determines
otherwise, if the Company involuntarily terminates the
Participant's employment without cause (as determined by the
Committee), any portion of the Stock Option held by the
Participant may be exercised by the Participant, to the extent
that it was exercisable at the time of such termination of
employment or on such accelerated basis as the Committee may
determine at or after grant, for a period of 90 days from the
date of termination of employment or the expiration of the
stated term of the Stock Option, whichever period is shorter;
provided, however, that if the Participant dies within such
90-day period, any unexercised portion of the Stock Option
held by the Participant shall thereafter be exercisable, to
the extent to which it was exercisable at the time of death,
for a period of twelve months from the date of such death or
until the expiration of the stated term of the Stock Option,
whichever period is shorter.
(j) OTHER TERMINATION. Unless the Committee determines otherwise,
if the Participant's employment by the Company terminates for
any reason other than death, Disability, Normal or Early
Retirement, or involuntary termination without cause, the
Stock Option shall thereupon terminate.
(k) FORFEITURE OF OPTION UPON TERMINATION OF EMPLOYMENT. Except as
described above, any portion of the Option that is not
exercisable at the date of the Participant's termination of
employment shall immediately terminate.
(l) CASHLESS EXERCISE. To the extent permitted under the
applicable laws and regulations, at the request of the
Participant, and with the consent of the Committee, the
Company agrees to cooperate in a "cashless exercise" of an
Option. The cashless exercise shall be effected by the
Participant delivering to a registered securities broker
designated by the Company instructions to sell a sufficient
number of shares of Stock to cover the costs and expenses
associated therewith. The Committee may permit the Participant
to pay any applicable withholding taxes by delivering a
sufficient number of previously-owned shares of Stock to the
Company to satisfy such taxes or, upon the Participant's
request, by having the Company withhold the number of shares
of Stock obtainable on the exercise of the Option which when
valued at Fair Market Value (determined as of the day
preceding the date of exercise) is equivalent to the minimum
required withholding taxes due.
SECTION 6. CHANGE IN CONTROL PROVISIONS
(a) IMPACT OF EVENT. In the event of:
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<PAGE> 27
(x) A "Change in Control" as defined in Section 6(b),
unless otherwise determined by the Committee or the
Board at or after grant, but prior to the occurrence
of such Change in Control, or
(y) A "Potential Change in Control" as defined in Section
6(c), but only if and to the extent so determined by
the Committee or the Board at or after grant (subject
to any right of approval expressly reserved by the
Committee or the Board at the time of such
determination),
the following acceleration and valuation provisions shall apply:
(i) The outstanding Option shall become fully exercisable
(with no change in the Option price).
(ii) The Committee may determine that the value of the
outstanding Option shall be cashed out on the basis
of the "Change in Control Price" as defined in
Section 6(d) as of the date of such Change in Control
or such Potential Change in Control is determined to
have occurred or such other date as the Committee may
determine prior to the Change in Control.
(iii) Upon a Change in Control where the Company is not the
surviving corporation (or survives only as a
subsidiary of another corporation), unless the
Committee determines otherwise, any unexercised
portion of the outstanding Option shall be assumed
by, or replaced with a comparable option by, the
surviving corporation.
(iv) Notwithstanding anything in this Agreement to the
contrary, in the event of a Change in Control or
Potential Change in Control, the Committee shall not
have the right to take any actions described in this
Agreement (including without limitation actions
described in paragraph (iii) above) that would make
the Change in Control ineligible for pooling of
interests accounting treatment or that would make the
Change in Control ineligible for desired tax
treatment if, in the absence of such right, the
Change in Control would qualify for such treatment
and the Company intends to use such treatment with
respect to the Change in Control. In addition,
notwithstanding anything in this Agreement to the
contrary, if and to the extent that any amendment to
this Agreement would make a Change in Control
ineligible for pooling of interests accounting
treatment and the Company intends to use such
treatment with respect to the Change in Control, such
amendment shall not be effective and this Agreement
shall be administered as if that amendment had not
been adopted.
(b) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Agreement, a "Change in Control" means the happening of any of
the following:
(i) When any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, other than the
Company, an "affiliate" (as defined in Rule 12b-2
under the Exchange Act) of the Company immediately
prior to its initial public offering or any Company
employee benefit plan (including any trustee of such
plan acting as trustee), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) directly or indirectly of
securities of the Company representing 30% or more of
the combined voting power of the Company's then
outstanding securities;
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<PAGE> 28
(ii) The occurrence of any transaction or event relating
to the Company that is required to be described
pursuant to the requirements of Item 6(e) of Schedule
14A of the Exchange Act;
(iii) When, during any period of two consecutive years
during the existence of this Agreement, the
individuals who, at the beginning of such period,
constitute the Board of Directors of the Company
cease for any reason other than death to constitute
at least a two-thirds majority thereof, provided,
however, that a director who was not a director at
the beginning of such period shall be deemed to have
satisfied the two year requirement if such director
was elected by, or on the recommendation of, at least
two-thirds of the directors who were directors at the
beginning of such period (either actually or by prior
operation of this Section 6(b) (iii)); or
(iv) The occurrence of a transaction requiring shareholder
approval for the acquisition of the Company or
substantially all of its assets by an entity other
than the Company through purchase, by merger, or
otherwise.
(c) DEFINITION OF POTENTIAL CHANGE IN CONTROL. For purposes of
this Agreement, a "Potential Change in Control" means the
happening of any one of the following:
(i) The entering into an agreement by the Company, the
consummation of which would result in a Change in
Control of the Company as defined in Section 6(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group other than
the Company or any Company employee benefit plan
(including any trustee of such plan acting as such
trustee) of securities of the Company representing
five percent or more of the combined voting power of
the Company's outstanding securities and the adoption
by the Board of a resolution to the effect that a
Potential Change in Control of the Company has
occurred for the purposes of this Agreement.
(d) DEFINITION OF CHANGE IN CONTROL PRICE. For purposes of this
Agreement, "Change in Control Price" means the highest bid
price per share paid in any transaction as reported by Nasdaq
or quoted on a national securities exchange, or the highest
price paid or offered in any bona fide transaction related to
a potential or actual Change in Control of the Company, at any
time during the preceding sixty-day period as determined by
the Committee.
SECTION 7. AMENDMENTS AND TERMINATION
The Board may amend, alter or discontinue this Agreement at any time
and from time to time, but no amendment, alteration, or discontinuation shall be
made which would impair the rights of the Participant under the Stock Option,
without the Participant's consent, and no amendment, alteration or
discontinuation that would require shareholder approval under Section 162(m) of
the Code shall be made without the approval of the Company's shareholders.
The Committee may amend the terms of the Stock Option, prospectively or
retroactively, but no such amendment shall impair the rights of the Participant
without the Participant's consent. Subject to the above provisions, the Board
shall have broad authority to amend this Agreement to take into account changes
in applicable tax laws, securities laws and accounting rules, as well as other
developments.
-7-
<PAGE> 29
SECTION 8. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares
pursuant to the Stock Option to represent to and agree with
the Company in writing that he or she is acquiring the shares
without a view to distribution thereof. The certificates for
such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer under the
Securities Act or any state securities law.
All certificates for shares of Stock or other securities
delivered under this Agreement shall be subject to such
stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other
requirements of the Securities Act, the Exchange Act, any
stock exchange upon which the Stock is then listed, and any
applicable federal or state securities law, and the Committee
may cause a legend or legends to be put on any such
certificates to make appropriate reference to such
restrictions.
(b) This Agreement is intended to constitute an "unfunded"
agreement for incentive compensation. With respect to any
payments not yet made to the Participant by the Company,
nothing contained herein shall give the Participant any rights
that are greater than those of a general creditor of the
Company.
(c) Nothing contained in this Agreement shall prevent the Board
from adopting other or additional compensation arrangements,
subject to shareholder approval if such approval is required;
and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) The adoption of this Agreement shall not confer upon the
Participant any right to continued employment with the
Company, nor shall it interfere in any way with the right of
the Company to terminate its relationship with the Participant
at any time.
(e) No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal
income tax purposes with respect to the Stock Option, the
Participant shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any
federal, state, local or other taxes of any kind required by
law to be withheld with respect to such amount. Unless
otherwise determined by the Committee, the minimum required
withholding obligations may be settled with Stock, including
Stock that is subject to the Option. The obligations of the
Company under this Agreement shall be conditional on such
payment or arrangements and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the Participant.
(f) The validity, construction and effect of this Agreement shall
be determined in accordance with the laws of the state of
Florida, without giving effect to the principles of conflicts
of law thereof.
(g) Any notice to the Company provided for in this Agreement shall
be addressed to it in care of the Executive Vice President and
Chief Financial Officer of the Company, Safeskin Corporation,
12671 High Bluff Drive, San Diego, California 92130 and any
notice to the Grantee shall be addressed to the Grantee at the
current address shown on the payroll of the Company,or to such
other address as the Grantee may designate to the Company in
writing. Any notice provided for hereunder shall be delivered
by hand, sent by telecopy or telex or enclosed in a properly
sealed envelope addressed as stated above, registered and
deposited, postage and registry being prepaid, in a post
office or branch post office regularly maintained by the
United States Postal Service.
SECTION 9. EFFECTIVE DATE AND TERM OF AGREEMENT
This Agreement shall be effective as of the Effective Date, subject to
approval by the Company's shareholders.
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WITNESS the following signatures:
SAFESKIN CORPORATION
By:
- ------------------------- ----------------------------------
Date
I hereby accept the Option according to the terms described in the foregoing
Agreement, subject to shareholder approval of the Option.
Date
- ------------------------- -------------------------------------
Richard Jaffe
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