<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or Section240.14a-12
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
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Safeskin Corporation:
Notice is hereby given that the 1999 annual meeting of shareholders of
Safeskin Corporation will be held at:
Date and Time: 9:00 am -- Thursday, September 23, 1999
Place: Hyatt Regency La Jolla
3777 La Jolla Village Drive
San Diego, California 92122
and thereafter as it may from time to time be adjourned, for the following
purposes:
1. To elect seven directors to Safeskin's Board of Directors;
2. To approve and adopt the Safeskin 1999 Employee Stock Purchase Plan;
3. To adopt an amendment to Safeskin's Articles of Incorporation providing
that the Board of Directors shall consist of between five and ten
members, divided into three classes of directors with staggered terms of
office, each of whom may be removed only for cause; and
4. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
Holders of the Safeskin's Common Stock of record at the close of business
on July 16, 1999 are entitled to receive this notice and to vote at the annual
meeting and any adjournment.
YOUR VOTE IS IMPORTANT. Whether you plan to attend the annual meeting or
not, we urge you to complete, sign and return your proxy card as soon as
possible in the envelope provided. This will ensure representation of your
shares in the event you are not able to attend the annual meeting. Proxies may
be revoked at any time prior to the annual meeting by giving written notice of
revocation to the Secretary of Safeskin, by giving a later dated proxy or by
attending the annual meeting and voting in person.
This year many beneficial owners will have a choice of voting over the
INTERNET, by TELEPHONE or by using a traditional instruction card. Check your
card or other information forwarded by your broker, bank or other holder of
record to see which options are available to you.
By Order of the Board of Directors
Seth S. Goldman
Secretary
San Diego, California
July 26, 1999
<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
("Safeskin"), for use at the annual meeting of shareholders of Safeskin to be
held at the Hyatt Regency La Jolla at 3777 La Jolla Village Drive, San Diego,
California 92122 on Thursday, September 23, 1999, beginning at 9:00 a.m., local
time, and thereafter as it may from time to time be adjourned.
You are requested to complete, date and sign the accompanying proxy, and
return it to Safeskin in the enclosed postage prepaid envelope. Proxies may be
revoked at any time prior to the annual meeting by giving written notice of
revocation to the Secretary of Safeskin, by giving a later dated proxy or by
attending the annual meeting and voting in person. Proxies duly executed and
received in time for the annual 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 seven nominees named herein;
2. FOR the proposal to approve and adopt the Safeskin 1999 Employee Stock
Purchase Plan;
3. FOR the proposal to adopt an amendment to Safeskin's Articles of
Incorporation providing that the Board of Directors shall consist of
between five and ten members, divided into three classes of directors
with staggered terms of office, each of whom may be removed only for
cause; and
4. In the discretion of the proxyholders, FOR or AGAINST such other
business as may properly come before the annual meeting or any
adjournment thereof.
VOTING SECURITIES
This Proxy Statement, the foregoing notice and the enclosed proxy are being
sent to shareholders on or about July 26, 1999. The shareholders of record at
the close of business on July 16, 1999 (the "Record Date") are entitled to be
notified of, and to vote at, the annual meeting. On the Record Date, there were
55,137,709 outstanding shares of Safeskin's common stock, par value $.01 per
share (the "Common Stock"). Holders of the Common Stock are entitled to one vote
per share held as of the record date. The presence in person or by proxy of
shareholders entitled to cast a majority of all votes entitled to be cast at the
annual meeting constitutes a quorum. All holders of issued and outstanding
shares of Common Stock are entitled to vote on the proposals.
This year many beneficial owners will have a choice of voting over the
INTERNET, by TELEPHONE or by using a traditional instruction card. Check your
card or other information forwarded by your broker, bank or other holder of
record to see which options are available to you.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
PROPOSAL
At the annual meeting, seven directors, constituting the entire Board of
Directors, are to be elected. If Proposal 3 to amend the Articles of
Incorporation is adopted, the directors will be elected for the terms indicated
below and until their respective successors are duly elected and qualified. If
the proposal is not adopted, the directors will be elected to hold office until
the next annual meeting of shareholders and until their respective successors
are duly elected and qualified. Unless instructions to the contrary are given,
the shares represented by a properly executed proxy will be voted "FOR" the
election of the nominees set forth below. All of the nominees are currently
members of the Board of Directors. If any of the nominees are unavailable for
election, 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 Safeskin's Bylaws.
VOTE REQUIRED
Approval of Proposal 1, the election of the directors, requires the
affirmative vote of a plurality of the votes cast by holders of outstanding
shares of the Common Stock. Votes for Proposal 1 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. In addition, where
brokers are prohibited from exercising discretionary authority in voting shares
for beneficial owners who have not provided voting instructions (commonly
referred to as "broker non-votes"), those shares will not be included in vote
totals, but will be counted for purposes of determining whether there is a
quorum at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
IDENTIFIED BELOW.
The following table sets forth certain information as to the persons
nominated for election as directors of Safeskin at the annual meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
<S> <C> <C> <C>
CLASS I DIRECTORS -- NOMINEES TO SERVE UNTIL 2000 ANNUAL MEETING
Irving Jaffe........................... 80 Chairman Emeritus and Director 1988
Joseph Stemler(2)(3)................... 68 Director 1995
CLASS II DIRECTORS -- NOMINEES TO SERVE UNTIL 2001 ANNUAL MEETING
Cam L. Garner(2)(3).................... 51 Director 1996
Howard L. Shecter(1)(2)................ 56 Director 1993
CLASS III DIRECTORS -- NOMINEES TO SERVE UNTIL 2002 ANNUAL MEETING
Richard Jaffe(1)....................... 46 Chairman of the Board, President, 1988
Chief Executive Officer and
Director
Neil K. Braverman(1)................... 60 Director 1985
Jeffrey Stiefler(3).................... 52 Director 1998
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2)Member of the Audit Committee
(3) Member of the Compensation Committee
2
<PAGE> 5
MR. IRVING JAFFE became Chairman Emeritus of Safeskin in May 1996 and has
served as a director of Safeskin since April 1988. He served as the Chairman of
the Board between August 1988 and May 1996 and as Chief Executive Officer of
Safeskin from August 1988 through March 1993. Since 1986, he has been the Senior
Managing Partner of the Jaffe Family Partnership, a family investment
partnership. 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 Safeskin in May 1996 and has served as a director of
Safeskin since April 1988. Between March 1993 and May 1996, he was the Vice
Chairman of the Board and Co-Chief Executive Officer of Safeskin. Mr. Jaffe
served as the President of Safeskin Corporation (Malaysia) Sdn. Bhd. and Chief
Operating Officer of Safeskin between April 1988 and March 1993. 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 Safeskin in 1985.
In January 1997, Mr. Braverman entered into a consulting agreement with
Safeskin. Between May 1996 and December 1996, he served as the Co-Chairman of
Safeskin and between May 1993 and May 1996 as Co-Chief Executive Officer of
Safeskin. From 1985 through May 1996 Mr. Braverman served as President of
Safeskin. Mr. Braverman holds a B.S. degree in industrial management and
engineering from the Georgia Institute of Technology.
MR. GARNER became a director of Safeskin 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. Mr. Garner is also currently a director of 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 Safeskin 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 that firm in 1985. Mr. Shecter is currently a director
of Total Research Corporation, a marketing research firm. 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. STIEFLER became a director of Safeskin in December 1998. He has served
as the Chief Executive Officer and Chairman of the Board of International Data
Response Corporation since June 1996. He served as President and a director of
American Express Company, a financial services company, from 1993 to 1995. Mr.
Stiefler currently serves as Chairman of OSI Holdings, Inc., a privately held
outsourcing services firm. Mr. Stiefler has been an operating partner of McCown
De Leeuw & Co., a privately held venture capital firm, since January 1996.
MR. STEMLER became a director of Safeskin in June 1995. He has served as
Chairman of the Board, President, Chief Executive Officer and a Director of
Maret Corporation, a biopharmaceutical company since March 1997. From January
1996 through February 1997, Mr. Stemler served as President, Chairman and Chief
Executive Officer of Scholle Corporation, an aseptic packaging company. From
July to December 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. 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 advanced degrees in engineering and business
administration.
3
<PAGE> 6
COMPENSATION OF DIRECTORS
In December 1998, the Board of Directors revised the Amended and Restated
Equity Compensation Plan (the "Plan") to compensate outside directors with 8,000
non-qualified stock options for services rendered as a director (each a "Formula
Grant"). Outside directors who were in office on December 9, 1998, specifically
Messrs. Cam Garner, Irving Jaffe, Howard Shecter, Jeffrey Stiefler and Joseph
Stemler, received the Formula Grant at the exercise price of $20.375, the fair
market value of the Common Stock on the date of the grant, in lieu of cash
compensation for 1999. Of the 8,000 options granted to each outside director on
December 9, 1998, 3,000 options vested and became exercisable on the date of
grant and 2,500 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 Safeskin; 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
of Directors were 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 1998, the Board of
Directors amended the Plan to provide that any new outside directors elected to
the Board of Directors would receive options to purchase 25,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant. Mr. Stiefler was granted options to purchase 25,000 shares of
Common Stock on December 9, 1998 upon his election to the Board of Directors.
The options granted to outside directors upon their election become exercisable
at the rate of 20% on the first through fifth anniversaries 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 Safeskin. The employee
directors do not receive additional compensation for their services as director.
Beginning in 1993, Safeskin began paying Irving Jaffe for his services as
Chairman of the Board and for consulting services provided to Safeskin in the
areas of marketing and public relations. During 1998, Irving Jaffe was paid at a
rate of $100,000 per annum for his consulting services. Effective April 1, 1999,
Irving Jaffe will be paid at a rate of $50,000 per annum for his consulting
services. Beginning in 1997, Mr. Braverman entered into a consulting agreement
with Safeskin. During 1998, Mr. Braverman was paid at a rate of $300,000 per
annum and received a bonus of $150,000. In addition, in January 1999, Mr.
Braverman received, in connection with his service as a consultant, 20,000
options at the exercise price of $21.50, 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 Safeskin. Effective April 1, 1999, Mr.
Braverman will be paid at a rate of $200,000 per annum for his consulting
services and be eligible to receive a bonus of $100,000 based on achieving
certain objectives. Mr. Braverman does not receive either cash compensation or a
Formula Grant for his services as director.
4
<PAGE> 7
COMMITTEES AND MEETINGS
During the year ended December 31, 1998, the Board of Directors held six
regular meetings. 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 1998. The Executive Committee held one meeting during
the year ended December 31, 1998. 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 1998. The Compensation Committee held five meetings during the year ended
December 31, 1998. The primary function of the Compensation Committee is to
review and approve Safeskin'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 1998. The Audit Committee held one meeting during the year ended
December 31, 1998. 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 Safeskin and to address the
scope and results of the audit and other services performed by Safeskin's
independent accountants.
The Board of Directors does not have a separate nominating committee and
therefore performs the functions of a nominating committee.
LITIGATION
A shareholder derivative action has been filed against each of the persons
who served as a director as of July 1998, and Safeskin, as a nominal defendant,
in the Supreme Court of the State of California, San Diego County (the
"Derivative Action"). The Derivative Action alleges breach of fiduciary duty,
waste of corporate assets and gross negligence in connection with Safeskin's
stock repurchase program and seeks an unspecified amount of damages. Defendants'
time to respond to the allegations made in the Derivative Acton has not yet
expired.
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Safeskin's directors, executive officers and persons owning more than 10% of
Safeskin's equity securities to file with the Securities and Exchange Commission
reports of ownership of Safeskin's equity securities. During the year ended
December 31, 1998, Mr. Jeffrey Stiefler, a director, filed the initial statement
of beneficial ownership after the due date. During the year ended December 31,
1998, Mr. David Morash, Executive Vice President and Chief Financial Officer,
filed one statement of beneficial ownership after the due date for one
transaction and Mr. William LaRue, Vice President and Treasurer, filed three
statements of beneficial ownership after the due date, each of which reported
one transaction.
5
<PAGE> 8
EXECUTIVE COMPENSATION
TOTAL ANNUAL COMPENSATION
The following table sets forth certain information relating to the total
annual compensation paid or accrued by Safeskin and its subsidiaries, during the
fiscal years ending December 31, 1998, December 31, 1997 and December 31, 1996,
to its Chief Executive Officer and its other four most highly compensated
executive officers who served in such capacities on December 31, 1998 (the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation Awards
Annual Compensation ----------------------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) COMPENSATION OPTIONS COMPENSATION(4)
--------------------------- ---- -------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe.................... 1998 $468,750 $407,778 * 1,600,000 $172,205
Chairman of the Board, President 1997 450,000 450,000 * 600,000 17,229
and Chief Executive Officer 1996 450,000 360,000 * 1,100,000 3,167
Terrance J. Bieker............... 1998 $275,000 $192,720 $195,020 -- $ 13,333
Executive Vice President and 1997 15,279 9,721 * 200,000 --
Chief Operating Officer(1)
David L. Morash.................. 1998 $226,054 $144,623 * 50,000 $ 63,610
Executive Vice President and 1997 214,240 140,000 * -- 9,926
Chief Financial Officer 1996 206,000 120,000 * 120,000 3,167
Lee Chee Ming.................... 1998 $161,885 $108,744 * 50,000 --
Executive Vice President and 1997 162,391 140,791 * -- --
Managing Director, Southeast 1996 157,673 59,583 * 120,000 --
Asian Operations(2)
Robert W. Zabaronick............. 1998 $180,000 $130,120 * -- $ 8,700
Senior Vice President -- Human 1997 15,000 0 * 100,000 6,917
Resources
</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) Mr. Bieker served as Executive Vice President and Chief Operating Officer
until March 1999.
(2) All amounts paid to Mr. Lee are paid in Malaysian ringgits and converted to
dollars at the exchange rate for 1998 (US $1.00 = M $3.8976), 1997 (US
$1.00 = M $2.8250) and 1996 (US $1.00 = M $2.5175).
(3) Includes amounts accrued during year presented but paid in the subsequent
year.
(4) Amounts shown include Safeskin's matching contributions to Safeskin's 401(k)
plan and deferred compensation plan.
6
<PAGE> 9
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth the stock options granted to and exercised
by the Named Officers during the year ended December 31, 1998.
OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE PRICE OPTION TERM
OPTIONS TO EMPLOYEES PER SHARE EXPIRATION ------------------------
NAME GRANTED(#)(1) IN FISCAL-YEAR ($/SH)(1) DATE 5%($) 10%($)
---- ------------- --------------- -------------- ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe........ 400,000 14.30% $26.3125 January 15, 2008 $6,619,116 $16,774,139
400,000(2) 14.30% 38.0625 May 6, 2008 9,574,921 24,264,729
400,000(2) 14.30% 40.0000 May 6, 2008 8,799,921 23,489,729
400,000(2) 14.30% 50.0000 May 6, 2008 4,799,921 19,489,729
Terrance J. Bieker... -- -- -- -- -- --
David L. Morash...... 50,000 1.79% $26.3125 January 15, 2008 $ 827,389 $ 2,096,767
Lee Chee Ming........ 50,000 1.79% $26.3125 January 15, 2008 $ 827,389 $ 2,096,767
Robert W.
Zabaronick......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) All share and exercise price per share data have been adjusted to reflect
the 100% stock dividend paid by Safeskin on April 1, 1998.
(2) These performance stock options were approved by shareholders on May 6,
1998. These options vest and become immediately exercisable if the price of
the Common Stock reaches the exercise price within a specified period. Those
options with an exercise price of $38.0625 and $40.00 vested during 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME EXERCISE(#) REALIZED($) OPTIONS AT YEAR-END AT YEAR-END($)(1)
---- ----------- ----------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Jaffe................. 520,000 $16,733,375 2,521,000 1,080,000 $26,339,563 $5,557,500
Terrance J. Bieker............ 0 0 40,000 160,000 0 0
David L. Morash............... 14,700 $ 484,931 173,300 182,000 $ 3,458,831 $2,621,250
Lee Chee Ming................. 0 0 192,000 194,000 $ 3,852,000 $2,871,000
Robert W. Zabaronick.......... 0 0 20,000 80,000 $ 65,000 $ 260,000
</TABLE>
- ---------------
(1) Calculated based on the difference between the fair market value of the
Common Stock of $24.125 per share on December 31, 1998 and the exercise
price of such options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (the "Committee") consisted of Cam Garner and
Joseph Stemler during 1998. Neither of the committee members has ever been an
officer or employee of Safeskin or its subsidiaries.
7
<PAGE> 10
REPORT OF COMPENSATION COMMITTEE
The Committee has the authority to determine the compensation of Safeskin's
executive officers and to administer the Plan. The Committee currently consists
of two outside directors who are not officers or employees of Safeskin. The
Committee currently meets the requirements of outside directors under Section
162(m) of the Internal Revenue Code of 1986, as amended.
The Committee believes that Safeskin's compensation plans should be
administered in a manner that will enable Safeskin 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 Safeskin; and
(3) align the interests of Safeskin 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.
Safeskin has retained a leading independent compensation consulting firm to
assist the Committee in defining appropriate policies with respect to base and
incentive compensation for Safeskin'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 Safeskin for
executive talent, including corporations engaged in high growth (including
technology-based) industries and manufacturing concerns, and not necessarily
Safeskin's peers that are used to compare shareholder returns.
Cash bonuses have been used to encourage and reward short term performance.
All executive officers were awarded cash bonuses in 1999 based on 1998
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 and upon Safeskin's performance. Factors such as
achievement of sales targets in the case of sales and marketing personnel,
product availability and quality in the case of manufacturing personnel and
other 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
Safeskin achieves previously established earnings per share targets.
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 Safeskin'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 Safeskin. 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 employees, based upon the employee's
performance in 1998. The options would vest in installments of 20% per year over
the ensuing five years.
8
<PAGE> 11
Prior to June 1996, compensation for Safeskin'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, Safeskin 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 1999 for 1998 performance was based in part on the
individual's performance and in part on Safeskin's performance. In 1998,
shareholders approved a performance stock option grant of 1,200,000 shares to
the Chief Executive Officer ("CEOPO"), granted by the Committee in 1997 subject
to shareholder approval, the value of each of which was tied to future increases
in the price of Safeskin's Common Stock. Unlike options granted under Safeskin's
existing Amended and Restated Equity Compensation Plan (the "Plan"), a
significant portion of these options required Safeskin's Common Stock price to
increase significantly to a specified threshold level, within a given time
frame, before the Chief Executive Officer would have the right to exercise the
options. The exercise prices of these CEOPO were set to ensure that the Chief
Executive Officer would receive only minimal gain from the CEOPO for average
Company stock price growth, but provided 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. During 1998, two thirds of these CEOPO vested and became immediately
exercisable. 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 May 6, 1998, without shareholder approval.
Cam L. Garner
Joseph Stemler
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph shows the total return to shareholders of an investment
in Safeskin's Common Stock as compared to (a) an investment in a peer group (the
"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 Market Index-U.S. (the "Nasdaq
Index"). The four companies in the Peer Index have been selected because they
represent comparable companies in the medical products manufacturing business.
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>
SAFESKIN NASDAQ MARKET
CORPORATION PEER GROUP INDEX INDEX-U.S.
----------- ---------------- -------------
<S> <C> <C> <C>
1993 100 100 100
1994 89.07 106.99 97.75
1995 106.25 151.48 138.26
1996 304.69 152.36 170.01
1997 709.38 226.81 208.58
1998 603.13 210.05 293.21
</TABLE>
- ---------------
* Reflects performance related to $100 invested on January 1, 1994 in each of
Safeskin's Common Stock, the Peer Index and in the Nasdaq Index, in each case
including reinvestment of dividends, through fiscal year ending December 31,
1998. All share data have been adjusted to reflect the 100% stock dividends
paid by Safeskin on January 2, 1997 and April 1, 1998.
10
<PAGE> 13
SECURITY OWNERSHIP
The following table shows the number of shares of common stock of Safeskin
beneficially owned as of June 18, 1999 by (i) each person known to Safeskin to
beneficially own more than 5% of the outstanding shares of Safeskin's common
stock; (ii) each director and nominee for election as a director; (iii) the
Named Officers; and (iv) all directors and executive officers of Safeskin as a
group.
On June 18, 1999, there were 55,120,909 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............................................ 5,243,600(1)(4) 9.08%
Neil K. Braverman........................................ 5,243,958(2)(4) 9.35%
Irving Jaffe............................................. 2,739,928(3)(4) 4.97%
Cam Garner............................................... 60,000(4) *
Howard L. Shecter........................................ 130,000(4) *
Joseph Stemler........................................... 108,000(4) *
Jeffrey Stiefler......................................... 6,200(4) *
Lee Chee Ming............................................ 332,124(4) *
David L. Morash.......................................... 193,300(4) *
Robert Zabaronick........................................ 20,000(4) *
Terrance J. Bieker(5).................................... -- --
All directors and executive officers as a group (17
persons)............................................... 14,181,110(4) 23.81%
</TABLE>
- ---------------
* Does not exceed one percent.
The address of each 5% shareholder is c/o Safeskin Corporation, 12671 High
Bluff Drive, San Diego, California 92130.
(1) Includes (i) 986,600 shares held by Richard B. Jaffe and Ann Jaffe, as
trustees for the Jaffe Family Trust U/A/D 10/04/90 and (ii) 1,656,000 shares
held by the R and A Family Partnership, L.P.
(2) Includes (i) 239,464 shares held directly by Neil Braverman or by a trust
for which Mr. Braverman is the beneficiary and trustee; (ii) 2,538,918
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; (iii) 349,224 shares beneficially
owned by Jeanne D. Braverman, the reporting person's spouse; and (iv)
1,146,352 shares held by trusts for which Ms. Braverman serves as trustee.
(3) Includes (i) 2,609,978 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 and (ii) 85,950 shares held by Daniel
J. Gatto and Jack Jaffe, as co-trustees for the Jaffe Charitable Remainder
Unitrust dated 1/23/97 of which Irving Jaffe and his spouse are the sole
beneficiaries and share investment control over the assets held by the
trust.
(4) Includes shares beneficially owned under currently exercisable options as
follows: Richard Jaffe -- 2,601,000; Neil K. Braverman -- 970,000; Irving
Jaffe -- 44,000; Cam Garner -- 60,000; Howard L. Shecter -- 126,000; Joseph
Stemler -- 108,000; Jeffrey Stiefler -- 3,000; Lee Chee Ming -- 202,000;
David Morash -- 193,300; and all directors and executive officers as a
group -- 4,429,300.
(5) No information is available regarding Terrance Bieker as he left the
employment of Safeskin in April 1999.
11
<PAGE> 14
EXECUTIVE OFFICERS
The following table sets forth certain information, as of June 18, 1999,
with respect to the executive officers of Safeskin who are not also directors of
Safeskin or nominees for election as directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lee Chee Ming..................... 50 Executive Vice President and Managing Director,
Southeast Asian Operations
David L. Morash................... 54 Executive Vice President and Chief Financial
Officer
Bruce P. Garren................... 52 Senior Vice President and General Counsel
Robert Zabaronick................. 52 Senior Vice President -- Human Resources
John R. Amat...................... 37 Vice President, Medical Marketing
Seth S. Goldman................... 41 Vice President, Finance, Controller and Secretary
Robert C. Hatch................... 36 Vice President and General Manager, Scientific
Business
William R. LaRue.................. 47 Vice President and Treasurer
Hans R. Sleeuwenhoek.............. 39 Vice President and General Manager, International
Business
</TABLE>
Mr. Lee has been Safeskin's Executive Vice President and Managing Director,
Southeast Asian Operations 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., Safeskin's manufacturing subsidiary. Mr. Lee
holds an M.S. degree in management from the Asian Institute of Management, The
Philippines.
Mr. Morash has been Safeskin's Executive Vice President and Chief Financial
Officer since August 1994. Prior to joining Safeskin, Mr. Morash served, from
1992 to 1994, as a Managing Director of Bedford Management Group, Inc., 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. 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. Garren has been Safeskin's Senior Vice President and General Counsel
since June 1999. Prior to joining Safeskin, Mr. Garren served as a consultant to
Proctor & Gamble Company from 1997 to 1998. From 1986 to 1997, Mr. Garren held
various positions with Tambrands Inc., including Vice President -- General
Counsel. Mr. Garren holds a B.A. from Antioch College and a J.D. from Cornell
Law School.
Mr. Zabaronick has served as Safeskin's Senior Vice President, Human
Resources since December 1997. Prior to joining Safeskin, Mr. Zabaronick served
as Vice President, Human Resources for Encad, Inc. from January 1997 to November
1997. From July 1987 to January 1997, Mr. Zabaronick served as Vice President,
Human Resources for Brooktree Corporation. 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. John R. Amat has served as Safeskin's Vice President, Medical Marketing
since October 1998. Prior to joining Safeskin, Mr. Amat served as Director North
American Commercial Operations for Beckman Coulter, Inc., a medical supply
company, from April 1997 to September 1998. From November 1990 to April 1997,
Mr. Amat held various positions with Sanofi Diagnostics Pasteur, the $250
million medical division of Elf Aquitane, including Vice President, General
Manager of North America and Latin America. Mr. Amat holds a B.S. in
Biology/Chemistry from Spring Hill College, Mobile Alabama and attended medical
school at the University of Navarra, Pamplona, Spain.
12
<PAGE> 15
Mr. Goldman has served as Safeskin's Vice President of Finance since April
1996, as Secretary since May 1996, and as Controller 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. Hatch joined Safeskin in February 1998 as Vice President and General
Manager, Scientific Business upon Safeskin's acquisition of AQL, a
California-based marketer of glove products for the high technology and
scientific markets. Prior to joining Safeskin, 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 Safeskin's Vice President and Treasurer since June
1997 and as Treasurer 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. He holds a B.S. degree in business
administration and an M.B.A. in finance from the University of Southern
California.
Mr. Sleeuwenhoek has served as Safeskin's Vice President and General
Manager, International Business since February 1998 and as General Manager,
International Business since September 1997. Mr. Sleeuwenhoek joined Safeskin in
March 1997 upon Safeskin'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 holds a B.A. degree in international business administration from
the American College in Paris.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1998, Safeskin acquired AQL for approximately $7 million plus
certain contingent payments based upon the performance of Safeskin's scientific
business unit. Mr. Hatch, an executive officer of Safeskin, founded AQL and
served as its President until it was acquired by Safeskin. At the time AQL was
acquired by Safeskin, 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 largest aggregate amount of indebtedness
outstanding during 1998 was $102,000. The loan was fully repaid, including both
principal and interest, in March 1998.
Mr. Shecter, a director of Safeskin, is a senior partner at Morgan, Lewis &
Bockius LLP which has served as Safeskin's outside counsel since 1993.
13
<PAGE> 16
PROPOSAL 2
APPROVAL AND ADOPTION OF
SAFESKIN STOCK PURCHASE PLAN
PROPOSAL
In order to encourage employee ownership of Safeskin, the Board of
Directors adopted the Safeskin Stock Purchase Plan (the "Plan"), subject to
shareholder approval. The Board of Directors reserved 1,000,000 shares of Common
Stock for the Plan, subject to an adjustment in the event of a subdivision or
consolidation of shares or other capital adjustment, the payment of a stock
dividend, or other increase or decrease in such shares. The Plan provides
eligible employees of Safeskin with a means to purchase, through payroll
deductions, shares of Common Stock at a discount, consistent with the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"). At the annual
meeting, a proposal to approve and adopt the Plan will be presented to
shareholders.
VOTE REQUIRED FOR APPROVAL
Approval of Proposal 2 requires the affirmative vote of a majority of the
votes cast by holders of outstanding shares of Common Stock. Votes for Proposal
2 may be cast in favor of or against the proposal or may abstain. Abstentions
may be specified on the proposal and will be considered present at the annual
meeting, but will not be counted as affirmative votes. Therefore, any
abstentions will have the same effect as votes against Proposal 2. In addition,
broker non-votes, where brokers are prohibited from exercising discretionary
authority in voting shares for beneficial owners who have not provided voting
instructions, will not be included in vote totals for Proposal 2, but will be
counted for purposes of determining whether there is a quorum at the annual
meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL.
The Plan is set forth in Exhibit A to this Proxy Statement. The following
description of the Plan is qualified in its entirety by reference to Exhibit A.
ELIGIBLE PARTICIPANTS
Employees of Safeskin and its subsidiaries are eligible to participate in
the Plan, on a purely voluntary basis, if they meet certain conditions. To be
eligible, an employee must (i) be employed by Safeskin and its subsidiaries as
an employee (and not as an independent contractor); (ii) be customarily employed
for more than twenty (20) hours per week and more than five (5) months per
calendar year; (iii) not be deemed to own stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
Safeskin or any Subsidiary of Safeskin; and (iv) have completed at least one
year of service with Safeskin and its subsidiaries, including any period of
service with any predecessor business unit acquired by Safeskin. An employee who
is a member of a collective bargaining unit will not be eligible to participate
if the collective bargaining agent determines that employees in such collective
bargaining unit will not participate in the Plan; however, such agent may
subsequently authorize participation in the Plan for collective bargaining unit
employees on a prospective basis, provided notice is filed with Safeskin in
advance of such participation.
MATERIAL FEATURES OF THE PLAN
The Board of Directors will appoint a committee (the "Plan Committee") to
administer the Plan. Eligible employees participate in the Plan by completing a
purchase agreement and filing it with the Plan Committee at such time in advance
of each participation date as the Plan Committee designates. An eligible
employee who elects to participate will be granted options to purchase shares of
Common Stock. An eligible employee participates through automatic exercise of
such options to purchase Common Stock. Options are granted, as of the first day
of each purchase period, to eligible employees. Purchase periods are each three-
month period, unless otherwise established by the Plan Committee, during which
the participating employee's stock purchase is funded through payroll
deductions. The first purchase period is October 1, 1999, the proposed effective
date of the Plan, or other date designated by the Board of Directors. The last
day of each purchase period is a purchase date. Common Stock will be purchased
through after-tax payroll deductions
14
<PAGE> 17
from 1% to 15% of each participant's compensation. Common Stock will be
purchased in whole shares at a price equal to the lower of (i) 85% of the market
value of the Common Stock as of the first day of each purchase period, or (ii)
85% of the market value of the Common Stock on the last day of each purchase
period. The market value of the Common Stock will be determined by reference to
the closing price of the Common Stock on the principal market on which the
Common Stock is traded for the date of reference. No employee will be permitted
to purchase shares of Common Stock having an aggregate market value of more than
$25,000, as determined at the beginning of each purchase period, during any
calendar year. The Plan prohibits employees from purchasing Common Stock after
the expiration of the purchase period for the offering. In addition, no employee
may purchase more than 2,500 shares of Common Stock during any purchase period.
Each eligible employee who elects to participate in the Plan will, without
any action on his or her part, automatically be deemed to have exercised his or
her option on the last day of each purchase period if he or she is then
employed, to the extent that the amount withheld through payroll deductions
throughout the purchase period is sufficient to purchase, at the option price,
one or more whole shares of Common Stock. The Plan Committee, in its discretion,
may deliver and issue shares of Common Stock to participants directly, through a
brokerage account for each participant, or through a bank or trust company with
a separate account for each participant. The Plan Committee, in its sole
discretion, may impose restrictions or limitations on the resale of the Common
Stock, the issuance of individual stock certificates or the withdrawal from any
shareholder accounts established for a participant.
All funds received or held by Safeskin under the Plan may be used for any
corporate purpose, and Safeskin is not obligated to segregate such funds.
An option granted under the Plan shall not be transferable by an employee
and is exercisable only by the employee during his or her lifetime. After an
employee dies, unless directed otherwise by the employee's executor,
administrator or other personal representative, any money withheld from the
employee's compensation will be used to purchase Common Stock on the purchase
date.
A participant may voluntarily suspend his or her payroll deductions at any
time by filing a notice of cessation of participation in such form and at such
time in advance of the effective date as the Plan Committee prescribes. A
participant may also change the rate of his or her payroll deductions by filing
notice with the Plan Committee in advance of the purchase period for which the
change is effective. If a participant terminates his or her employment with
Safeskin and its subsidiaries, or ceases to be eligible to participate in the
Plan, the employee's participation in the Plan will be automatically terminated
as of the date of his or her termination of employment, and the participant will
receive a distribution of his or her shares of Common Stock held in his or her
shareholder account, unless the participant elects to have the shares of Common
Stock sold in accordance with the procedures established by the Plan Committee.
FEDERAL INCOME TAX TREATMENT
The Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Code, an employee who elects
to participate in the Plan will not realize income at the time the offering
commences or when the shares are actually purchased under the Plan. If an
employee disposes of such shares after two years from the date the offering of
such shares commences under the Plan and after one year from the actual date of
purchase of such shares under the Plan (collectively the "Holding Period"), the
employee will be required to include in income, as ordinary compensation income
for the year in which such disposition occurs, an amount equal to the lesser of
(i) the excess of the fair market value of such shares at the time of
disposition over the purchase price, or (ii) the excess of the fair market value
of such shares at the time the offering commenced over the purchase price. If
any employee disposes of the shares purchased under the Plan during the Holding
Period, the employee will be required to include in income, as compensation for
the year in which such disposition occurs, an amount equal to the excess, if
any, of the fair market value of such shares on the date of purchase over the
purchase price. The employee's basis in such shares disposed of will be
increased by an amount equal to the amount includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the
15
<PAGE> 18
time of disposition will be capital gain or loss, either short-term or
long-term, depending on the length of the holding period for such shares. In the
event of a disposition during the Holding Period, Safeskin (or the subsidiary by
which the employee is employed) will be entitled to a tax deduction equal to the
amount the employee is required to include in income as a result of such
disposition.
PLAN ADMINISTRATION AND TERMINATION
The Plan provides for administration of the Plan by a committee selected by
the Board of Directors. The Board of Directors may terminate or amend the Plan
in any respect at any time, except that the approval of Safeskin's shareholders
is required for any amendment required under the Code (including an increase in
the total number of shares available for purchase under the Plan). Moreover,
unless the Board of Directors determines otherwise, the Plan will automatically
terminate upon (i) the dissolution or liquidation of Safeskin, or (ii) a merger
or consolidation in which Safeskin is not the surviving corporation. Unless
earlier terminated by the Board of Directors, the Plan will continue in effect
until the date that is ten years after the effective date of the Plan, except
that if on the purchase date of any purchase period the aggregate funds
available for purchase of Common Stock would require a greater number of shares
than is available for purchase, the number of shares that would otherwise be
purchased by each participant at the end of the purchase period will be
proportionately reduced in order to eliminate the excess and the Plan will
automatically terminate after the purchase date. Upon expiration or termination
of the Plan, the balance, if any, in a participant's account from amounts
withheld from the participant's compensation which has not been used to purchase
Common Stock will be refunded to the participant.
16
<PAGE> 19
PROPOSAL TO AMEND SAFESKIN'S
ARTICLES OF INCORPORATION
The Board of Directors has evaluated the potential vulnerability of
Safeskin's shareholders to the threat of unfair or coercive takeover tactics and
has considered the range of possible responses to any such threat. The Board of
Directors has unanimously approved, and recommends to Safeskin's shareholders
for their approval, the amendment to the Articles of Incorporation described
below in Proposal 3 (the "Amendment").
Proposal 3 is designed to assist Safeskin's shareholders in obtaining fair
and equitable treatment in the event of a takeover of Safeskin. The Amendment
modifies Article VI of Safeskin's Articles of Incorporation to provide that the
Board of Directors will consist of between five and ten directors, divided into
three classes of directors with staggered terms of office, each of whom may be
removed only for cause.
CONSIDERATION IN SUPPORT OF PROPOSED AMENDMENTS
The Amendment is not in response to any effort by any third party, of which
Safeskin is aware, to accumulate the Common Stock or to obtain control of
Safeskin. The Board of Directors has observed the relatively common use of
certain coercive takeover tactics in recent years, including the accumulation of
substantial common stock positions as a prelude to hostile attempts to take over
or restructure a corporation or to sell all or part of such corporation's assets
or to take similar extraordinary action. Such actions are often undertaken by
the third party without advance notice to, or in consultation with management.
The Board of Directors believes that the use of these tactics can place undue
pressure on a corporation's board of directors and shareholders to act hastily
and on incomplete information and, therefore, can be highly disruptive to a
corporation as well as result in unfair differences in treatment of shareholders
who act immediately in response to announcement of takeover activity and those
who choose to act later, if at all. In some cases, a third party may not be
truly interested in taking over the corporation, but may seek to use the threat
of a proxy fight or a bid to take over the corporation, or both, as a means for
obtaining for itself a special benefit which might not be available to all of
the corporation's shareholders.
Takeovers or changes in management of Safeskin which are proposed and
effected without prior negotiation with management are not necessarily
detrimental to Safeskin and its shareholders. However, the Board of Directors
believes that the benefits of seeking to protect its ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to take over or
restructure Safeskin outweigh any possible disadvantage of discouraging such
proposals. The Board of Directors believes that, in a situation where a third
party seeks management's cooperation, a corporation's board of directors will be
in a better position to promote consideration of a broader range of relevant
factors, including the structure of the proposed transaction and its tax
consequences and the underlying value and prospects of that corporation.
CONSIDERATIONS AGAINST ADOPTION OF PROPOSED AMENDMENTS
While the Amendment gives added protection to Safeskin's shareholders, it
may also have the effect of making more difficult and discouraging a merger,
tender offer or proxy fight, even if such transaction or occurrence may be
favorable to the interests of some or all of Safeskin's shareholders. The
Amendment also may delay the assumption of control by a holder of a large block
of the Common Stock and the removal of incumbent management, even if such
removal might be beneficial to some or all of the shareholders. Furthermore, the
Amendment may have the effect of deterring or frustrating certain types of
future takeover attempts that may not be approved by the incumbent Board of
Directors, but that the holders of a majority of the shares of Common Stock may
deem to be in their best interests or in which some or all of the shareholders
may receive a substantial premium over prevailing market prices for their stock.
By having the effect of discouraging takeover attempts, the Amendment could have
the incidental effect of inhibiting certain changes in management (some or all
of the members of which might be replaced in the course of a change of control)
and also the temporary fluctuations in the market price of the Common Stock that
often result from actual or rumored takeover attempts.
The Board of Directors recognizes that a takeover might in some
circumstances be beneficial to some or all of Safeskin's shareholders but,
nevertheless, believes that the shareholders as a whole will benefit from the
17
<PAGE> 20
adoption of Proposal 3. The Board of Directors further believes that it is
preferable to act on the proposed Amendments when they can be considered
carefully rather than during an unsolicited bid for control.
If shareholders approve the Amendment, Safeskin will file an amendment to
the Articles of Incorporation of Safeskin with the Secretary of State of the
State of Florida. The Amendment adopted by Safeskin's shareholders will become
effective regardless of whether any of the other Proposals to be acted upon at
the annual meeting are adopted.
PROPOSAL 3
APPROVAL AND AMENDMENT OF ARTICLE VI OF SAFESKIN'S
ARTICLES OF INCORPORATION WITH RESPECT TO THE BOARD OF DIRECTORS
PROPOSAL
The Board of Directors is recommending a proposed amendment to Article VI
of Safeskin's Articles of Incorporation that would stipulate that the Board of
Directors will consist of between five and ten directors, divided into three
classes of directors, with staggered terms, each of whom may be removed only for
cause. This change is intended to increase the commitment of the members of the
Board of Directors by extending the term of each director to three years, and to
reduce the number of directors that are subject to election by the shareholders
at any annual shareholders meeting.
Under the proposed amendment, the Board of Directors will be divided into
three classes, each class to be as nearly equal in number as possible. If the
proposed amendment is adopted, three directors will be elected for a term
expiring at the 2000 annual meeting; two directors will be elected for a term
expiring at the 2001 annual meeting; and two directors will be elected for a
term expiring at the 2002 annual meeting, in each case until their respective
successors are duly elected and qualified. Beginning with the 2000 annual
meeting of shareholders, one class will be elected each year for a three-year
term. In addition, the proposed amendment stipulates that the directors will be
removed only for cause.
In certain contexts, the classification of a board of directors may have an
anti-takeover effect because it would make a change in the composition of a
majority of the Board of Directors more difficult. The staggering of terms of
directors could have the effect of requiring at least two shareholder meetings
instead of one (as is presently the case) to effect a change in majority control
of the Board of Directors. The proposed amendment also stipulates that directors
may only be removed for cause to avoid the possibility that a unsolicited
purchaser could evade the purpose of this amendment and remove without cause
directors whose term did not expire for another one or two years, thereby
immediately effecting a change in majority control of the Board of Directors.
The corporate laws of certain states, including Delaware, generally provide that
if a Board of Directors is classified, directors may be removed only for cause.
However, under Florida law, whether or not a corporation's board of directors is
classified, directors may be removed without cause, unless a specific provision
is included in the articles of incorporation providing that directors may be
removed only for cause. Consequently, this provision of the amendment is
required to permit Safeskin to achieve the desired result.
Under the Florida Business Corporation Act and the bylaws of Safeskin, any
vacancy occurring in the Board of Directors may be filled by the affirmative
vote of a majority of the remaining directors or by the shareholders in the
manner provided in the Florida Business Corporation Act. Any director elected to
fill a vacancy will hold office only until the next election of directors by the
shareholders, at which time a director will be elected to serve the remaining
portion of the term, if the term would not have expired at the annual meeting.
18
<PAGE> 21
If the proposed amendment is approved, the text of Article VI of Safeskin's
Articles of Incorporation would read as set forth below:
ARTICLE VI
BOARD OF DIRECTORS
(1) The total number of directors of this corporation shall be no less
than five and no more than ten, as fixed by the directors in accordance
with the terms and conditions of the bylaws of the Corporation.
(2) The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in
number as possible, one class to be originally elected for a term expiring
at the annual meeting of shareholders to be held in 2000, another class to
be originally elected for a term expiring at the annual meeting of
shareholders to be held in 2001, and another class to be originally elected
for a term expiring at the annual meeting of shareholders to be held in
2002, with each class to hold office until its successor is duly elected
and qualified. At each succeeding annual meeting of shareholders, directors
elected to succeed those directors whose terms then expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
shareholders after their election, with each director to hold office until
such person's successor shall have been duly elected and qualified.
(3) Directors shall only be removable for cause and by the affirmative
vote of the majority of the remaining directors or at a shareholders
meeting by the affirmative vote of the majority of the votes received from
those holders entitled to vote.
VOTE REQUIRED FOR APPROVAL
Approval of Proposal 3 requires the affirmative vote of a majority of the
votes cast by holders of outstanding shares of Common Stock. Votes for Proposal
3 may be cast in favor of or against the proposal or may abstain from voting.
Abstentions may be specified on the proposal and will be considered present at
the annual meeting, but will not be counted as affirmative votes. Therefore, any
abstentions will have the same effect as votes against Proposal 3. In addition,
broker non-votes, where brokers are prohibited from exercising discretionary
authority in voting shares for beneficial owners who have not provided voting
instructions, will not be included in vote totals for Proposal 3, but will be
counted for purposes of determining whether there is a quorum at the annual
meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL.
GENERAL INFORMATION
FINANCIAL STATEMENTS. The Annual Report to shareholders for the year ended
December 31, 1998, including financial statements and other information with
respect to Safeskin, is being mailed to shareholders with this Proxy Statement
but does not constitute a part of this Proxy Statement.
OTHER MATTERS. The Board of Directors does not intend to present any matter
for action at this annual 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. Any shareholder proposal to be
presented at the 2000 annual meeting of shareholders must be received by
Safeskin on or before March 29, 2000 in order to be included in the proxy
statement relating to the annual meeting. Such proposals must comply in full
with the requirements of Rule 14a-8 promulgated under the Securities Exchange
Act of 1934.
If a shareholder does not seek to have a proposal included in the proxy
statement, but nevertheless wishes to present a proper proposal at the 2000
annual meeting of shareholders, and the proposal is received by Safeskin on or
before March 29, 2000, Safeskin will provide information in the proxy statement
relating to that
19
<PAGE> 22
annual meeting as to the nature of the proposal and how persons named in the
proxy solicited by the Board of Directors intend to exercise their discretion to
vote on the matter.
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 Safeskin. Safeskin has retained MacKenzie
Partners, Inc. to assist in the solicitation of proxies from shareholders.
MacKenzie Partners, Inc. will receive a fee of $12,500 plus reimbursement of
certain out-of-pocket expenses. Safeskin will reimburse brokerage firms,
custodians, nominees and fiduciaries in accordance with the rules of the Nasdaq
Stock Market, for reasonable expenses incurred by them in forwarding materials
to the beneficial owners of shares. The entire cost of solicitation will be
borne by Safeskin.
By Order of the Board of Directors,
Seth S. Goldman,
Secretary
July 26, 1999
20
<PAGE> 23
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SAFESKIN CORPORATION
12671 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
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 July 16, 1999, at the Annual Meeting of Shareholders to be held
on September 23, 1999 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 GARNER JOSEPH STEMLER HOWARD L. SHECTER
JEFFREY STIEFLER
2. PROPOSAL TO ADOPT SAFESKIN 1999 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL AMENDMENT TO SAFESKIN'S ARTICLES OF INCORPORATION
PROVIDING THAT THE BOARD OF DIRECTORS SHALL CONSIST OF
BETWEEN FIVE AND TEN MEMBERS, DIVIDED INTO THREE CLASSES OF
DIRECTORS WITH STAGGERED TERMS OF OFFICE, EACH OF WHOM MAY BE
REMOVED ONLY FOR CAUSE.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE> 24
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" EACH OF THE DIRECTOR NOMINEES AND "FOR" PROPOSALS 2 AND 3.
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.
