UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended November 2, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9474
FORSTMANN & COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1651326
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Avenue of the Americas, New York, NY 10036
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(Address of principal executive offices) (Zip Code)
(212) 642-6900
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange
Act of 1934: None.
Securities registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934:
Common Stock, $0.01
-------------------
(Title of Class)
Indicate by a check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by a check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. __________
The aggregate market value of Common Stock held by
non-affiliates of the registrant as of January 28, 1998 was $11,815,789, based
on the trading price in the over-the-counter market on such date.
Indicate by a check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes (X) No ( )
As of January 28, 1998, there were 4,384,436 shares of Common
Stock of the Company outstanding.
DOCUMENTS INCORPORATED BY REFERENCE None.
<PAGE>
The undersigned registrant hereby amends Items 10, 11, 12 and
13 of Part III of its Annual Report on Form 10-K for the fiscal year ended
November 2, 1997 (the "Annual Report") to read as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors of the Company
Each of Bruce W. Gregory, Margaret Bertelsen Hampton and James
E. Kjorlien is a member of the Board of Directors (the "Board") of Forstmann &
Company, Inc. (the "Company") and is not an officer or employee of the Company.
In addition, each has been nominated by the Board for re-election at the 1998
Annual Meeting of Shareholders which is scheduled to take place on April 17,
1998 (the "Annual Meeting") to serve as a director until the Annual Meeting of
Shareholders in 1999 or until a successor is elected and qualified.
The following table provides information regarding the
directors:
Name Age Date Appointed Director
- ----- --- -----------------------
Bruce W. Gregory 33 September 1997
Margaret Bertelsen Hampton 39 July 1997
James E. Kjorlien 46 July 1997
On July 23, 1997, pursuant to a Plan of Reorganization under
which the Company emerged from bankruptcy, the Board was reconstituted, with Ms.
Hampton, Mr. Kjorlien, Robert N. Dangremond and Jerome H. Walthers appointed as
the initial directors of the Company. In September 1997, Mr. Walthers resigned
from the Board and Mr. Gregory was appointed to replace him. On January 6, 1998,
Mr. Dangremond was named acting Chief Financial Officer of Zenith Electronics
Corporation and, on January 26, 1998, Mr. Dangremond resigned as a director, as
well as Chief Executive Officer and President of the Company.
Bruce W. Gregory is a Managing Director of Daystar L.L.C., a
Rye, New York-based investment management firm that specializes in investments
in companies that are in the midst of restructurings. Before joining Daystar
L.L.C. in 1996, Mr. Gregory was employed by Progressive Partners, an investment
management firm, as an equity portfolio manager from 1990 to 1996. Previously,
Mr. Gregory was employed by Chase Manhattan Bank in the North American Corporate
Finance Group and Investment Management Group of US Private Banking. Mr. Gregory
serves on the Board of Trustees of Trinity Presbyterian Church and Here's Life
Inner City New York. Mr. Gregory is a Chartered Financial Analyst and a member
of the Association of Investment Management and Research and the New York
Society of Security Analysts.
<PAGE>
Margaret Bertelsen Hampton joined Grace Brothers, Ltd., an
investment management firm based in Evanston, Illinois, in March 1997. Prior to
joining Grace Brothers, Ltd., Ms. Hampton was a Managing Director of the
Distressed Investments Unit of First Chicago Capital Corporation, which she
joined in 1991. Previously, Ms. Hampton worked in the Financial Restructuring
Group of Bear Stearns & Co., Inc. Ms. Hampton is a director of several
privately-held companies, one of which is in the worsted wool manufacturing
business and may, from time to time, compete with the Company. She is a member
of the Board of Trustees of Northwestern University.
James E. Kjorlien is a Managing Member of Credit Research and
Trading LLC, a Greenwich, Connecticut-based broker-dealer. Mr. Kjorlien joined
Credit Research in June 1990.
None of the directors has any family relationship with any
other director or with any executive officer of the Company.
Executive Officers of the Company
The following table provides information regarding the
Company's executive officers:
Name Age Title
- ------------------ ---- ------------------------------
Brian A. Moorstein 37 President (Principal Executive
Officer)
Rodney J. Peckham 42 Executive Vice President
Finance, Administration and
Strategic Planning,
Secretary and Treasurer
(Principal Financial
Officer)
Gary E. Schafer 46 Vice President and Corporate
Controller (Principal Financial
Accounting Officer)
Brian A. Moorstein became President of the Company on January
26, 1998. Mr. Moorstein started his career at the Company in 1984 working in
styling and then moved into sales. In 1986, he founded the Company's Women's
Wear Worsted Department. During 1990, his responsibilities were expanded to
include Women's Wear Woolen, sportswear and coatings.
Rodney J. Peckham became Executive Vice President Finance,
Administration and Strategic Planning and Secretary on January 26, 1998. Mr.
Peckham also serves as Chief Financial Officer and Treasurer of the Company. He
became Chief Financial Officer of the Company in March 1996. From October 1995
until he became Chief Financial Officer, Mr. Peckham was employed as Director of
Financial Operations. Mr. Peckham was previously employed by the Company from
August 1986 through May 1995 during which time he served as Corporate Controller
from August 1986 until he became Treasurer in March 1992, and he also served as
Secretary from December 1992 to September 1993. From May 1995 through October
1995, Mr. Peckham was self-employed and provided various financial consulting
services to the Company.
Gary E. Schafer became Vice President and Corporate Controller
of the Company in March 1992. Mr. Schafer joined the Company in 1990 as Director
of Cost Accounting.
<PAGE>
Executive officers are appointed by and serve at the
discretion of the Board of Directors for a term beginning after the first
regular meeting of the Board of Directors following the Annual Meeting of
Shareholders and until their respective successors are duly appointed and
qualified.
None of the executive officers has any family relationships
with any other executive officer.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") requires the Company's directors, executive officers and persons
who own beneficially more than 10% of the outstanding Common Stock to file with
the Securities and Exchange Commission initial reports of beneficial ownership
and reports of changes in beneficial ownership of the Common Stock and other
securities of the Company on Forms 3, 4 and 5, and to furnish the Company with
copies of all such forms they file. Based on a review of copies of such reports
furnished to it, the Company believes that all the Company's directors and
officers timely filed all reports required during the Company's 1997 fiscal
year, except that the Forms 3 for each of Ms. Hampton and Mr. Kjorlien were
filed late.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
four executive officers of the Company during the 1997, 1996 and 1995 fiscal
years of the Company.
<TABLE>
Other Annual Securities All Other
Name and Fiscal Bonus Compensation Underlying Compensation
Principal Position Year Salary($) ($)1 ($)2 Options (#)3,4 ($)5,6,7,8
------------------ ---- --------- ----- ------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brian A. Moorstein 1997 193,000 53,446 8,479 19,501 50,000
President 1996 174,667 0 7,234 0 0
(Principal 1995 171,000 0 7,354 12,500 0
Executive Officer)
Rodney J. Peckham6 1997 234,015 63,381 8,625 19,501 50,616
Executive Vice President 1996 238,013 0 2,486 0 0
Finance, Administration 1995 93,312 0 3,787 12,500 97,155
and Strategic Planning
(Principal Financial
Officer)
Gary E. Schafer 1997 125,000 32,715 4,750 4,875 17,500
Vice President and 1996 119,708 0 4,322 0 578
Corporate Controller 1995 109,075 0 4,357 12,500 0
(Principal Financial
Accounting Officer)
Robert N. Dangremond8 1997 -- -- -- -- 1,440,571
Former President and CEO 1996 -- -- -- -- 897,098
1995 -- -- -- -- 274,275
</TABLE>
<PAGE>
- ------------------------
1 The amount of any bonus earned for a fiscal year, although included in
the fiscal year earned, is actually determined and paid after the end
of the fiscal year. The amount in the 1997 fiscal year reflects the
actual amount earned under the Company's Management Incentive Plan for
the 1997 fiscal year, of which 70% was paid in December 1997 with the
remaining amount deferred for payment after the end of fiscal year
1998.
2 Represents tax liability reimbursed by the Company arising from
contributions made by the executive officer and for investment earnings
thereon under a Company employee savings plan.
3 Pursuant to the Company's Plan of Reorganization, an aggregate of
487,528 shares of the Common Stock were reserved for issuance on
exercise of options granted or to be granted pursuant to the Company's
Executive Stock Option Plan and, as of the effective date of the Plan
of Reorganization (the "Effective Date"), 146,258 options were granted
to certain employees of the Company at an exercise price of $12.88 per
share. Amounts reflected for the 1997 fiscal year represent the options
granted under the Executive Stock Option Plan of which 25% vested on
the Effective Date and an additional 25% will vest on each of the first
three anniversaries of the Effective Date.
4 Information for the 1995 fiscal year represents incentive stock options
granted under the Company's Common Stock Incentive Plan on January 6,
1995 to purchase shares of common stock at an exercise price of $8.50
per share, exercisable for 33-1/3% of such shares commencing on each of
January 6, 1996, January 6, 1997 and January 9, 1998. The options
granted on January 6, 1995 were granted at an amount greater than fair
market value. Pursuant to the Plan of Reorganization, all options
outstanding under the Company's Common Stock Incentive Plan were
canceled.
5 Includes amounts paid for health club dues.
6 The amount shown for Mr. Peckham includes $89,800 for financial
consulting services paid to Mr. Peckham between June 1995 to October
1995. The remaining $7,355 represents reimbursement of Mr. Peckham's
relocation expenses.
7 Effective as of November 14, 1996, the court administering the
Company's bankruptcy approved the Company's Incentive Compensation and
Retention Program which provided certain eligible employees with a
predetermined confirmation bonus and provided for a discretionary bonus
to certain employees selected by the Company's Chief Executive Officer
in consultation with the Board of Directors. During the 1997 fiscal
year, Messrs. Moorstein and Peckham were paid $50,000 and Mr. Schafer
was paid $17,500 under this program.
8 Robert N. Dangremond served as President and Chief Executive Officer of
the Company during the 1997 fiscal year. On January 6, 1998, Mr.
Dangremond was named acting Chief Financial Officer of Zenith
Electronics Corporation and, on January 26, 1998, Mr. Dangremond
resigned as a director, as well as Chief Executive Officer and
President of the Company.
<PAGE>
Mr. Dangremond provided services to the Company pursuant to a Letter
Agreement, dated July 31, 1995 (as amended), between the Company and J.
Alix & Associates ("J. Alix"), a consulting firm specializing in
corporate restructurings, of which Mr. Dangremond is a principal. The
amounts shown were paid to J. Alix on account of fees for the services
rendered by Mr. Dangremond and to reimburse J. Alix for travel and
lodging expenses incurred by Mr. Dangremond in the course of performing
his duties to the Company. The amount shown for the 1997 fiscal year
includes a $400,000 success fee which became payable following the
Company's emergence from bankruptcy, of which $200,000 was paid in the
1997 fiscal year and $200,000 was paid in the 1998 fiscal year. The
Company also issued 30,000 shares of the Common Stock to J. Alix (which
are not shown in the table) as an additional success fee, which was the
number of shares issuable under the Company's Plan of Reorganization to
the holder of an allowed unsecured claim against the Company of
$600,000.
Compensation Arrangements with Mr. Moorstein and Mr. Peckham
On January 26, 1998, Mr. Moorstein was appointed President of
the Company and Mr. Peckham was appointed Executive Vice President Finance,
Administration and Strategic Planning and Chief Financial Officer. Each of them
will receive an annual salary of $265,000 and will participate in the Management
Incentive Plan and the Executive Stock Option Plan.
Stock Options Granted During the 1997 Fiscal Year
The Company granted 146,258 stock options under the Company's
Executive Stock Option Plan during the 1997 fiscal year at an exercise price of
$12.88 per share.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------
Exercise
Number of Securities Percent of Total or
Underlying Options/SARs Base
Options/SARs(1) Granted to Employees Price Expiration
Name Granted (#) in Fiscal Year(3) ($/Sh) Date
- ------------------- -------------------- -------------------- -------- -------------
<S> <C> <C> <C> <C>
Brian A. Moorstein 19,500(2)(3) 13.3% $12.88 July 23, 2007
Rodney J. Peckham 19,500(2)(3) 13.3% $12.88 July 23, 2007
Gary E. Schafer 4,875(2)(3) 3.3% $12.88 July 23, 2007
</TABLE>
(1) To date, the Company has issued no SARs.
(2) 25% of these options vested on the July 23, 1997, the Effective Date of
the Plan of Reorganization, and an additional 25% will vest on each of
the first three anniversaries of the Effective Date.
<PAGE>
(3) Includes all options granted to executives pursuant to the Company's
Executive Stock Option Plan.
Stock Options Held at the End of the 1997 Fiscal Year
The following table sets forth the total number of exercisable
and unexercisable stock options granted under the Company's Executive Stock
Incentive Plan held by each executive officer named below on November 2, 1997.
No options to purchase shares of the Common Stock were exercised during the 1997
fiscal year. As of November 2, 1997, the last sales price of the Common Stock in
the over-the-counter market was $11.75 per share.
<TABLE>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
at Fiscal Year End (#) Fiscal Year End
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Brian A. Moorstein 4,875 14,625 $0.00 $0.00
Rodney J. Peckham 4,875 14,625 0.00 0.00
Gary E. Schafer 1,219 3,656 0.00 0.00
</TABLE>
Retirement Pension Plan
The Company maintains a Retirement Pension Plan (the "Pension
Plan") for its salaried employees. The Pension Plan is a defined benefit pension
plan providing a formula benefit, on vesting, for employees 21 years of age or
older who have completed one year of service with the Company. The Pension Plan
generally takes into account credited service and annual compensation earned
under the pension plan of a predecessor of the Company (the "Predecessor Plan"),
but the benefit payable from the Pension Plan, depending on the circumstances,
may be reduced by any benefit payable under the Predecessor Plan.
The following table shows the estimated annual benefits upon
retirement to participants in the Pension Plan in specified annual compensation
and years of credited service classifications. The amounts shown are subject to
the maximum benefit limitations set forth in Section 415 of the Internal Revenue
Code of 1986 (the "Code") and are subject to reduction for amounts payable under
the Predecessor Plan. The pension benefits shown are based upon retirement at
age 65 and the payment of a single-life annuity to the participants. The pension
benefits in the table reflect the limitation under Section 401(a)(17) of the
Code on the maximum amount of annual compensation ($150,000 effective February
1, 1994 and $160,00 effective February 1, 1997 (the "Code Limitation")), that
can be utilized for determining benefits under the Pension Plan.
<TABLE>
<PAGE>
Years of Credited Service at Retirement
Highest Five
Year Average
Annual 5 10 15 20 25 30 35
Compensation* ------- ------- ------- ------- ------- ------- -------
- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $ 6,722 $13,444 $20,165 $26,887 $33,609 $40,331 $47,053
110,000 7,472 14,944 22,415 29,887 37,359 44,831 52,303
120,000 8,222 16,444 24,665 32,887 41,109 49,331 57,553
130,000 8,972 17,944 26,915 35,887 44,859 53,831 62,803
140,000 9,722 19,444 29,165 38,887 48,609 58,331 68,053
150,000 10,472 20,944 31,415 41,887 52,359 62,831 73,303
160,000 10,622 21,244 31,865 42,487 53,109 63,731 74,353
</TABLE>
* Annual compensation is the amount reportable on a participant's Form
W-2 for federal income tax purposes, and consists of the amounts
reported in the table included under "Summary of Compensation in the
1997, 1996 and 1995 fiscal years as salary, bonus, other annual
compensation and all other compensation.
Credited years of service for benefit accruals under the
Pension Plan, as of December 31, 1997, for the following executive officers are:
Brian A. Moorstein 14 years
Rodney J. Peckham 12 years
Gary E. Schafer 8 years
A participant's annual pension payable as of his or her normal retirement date
at age 65 will be equal to 1% of that portion of the participant's "final
average compensation" (as defined in the Pension Plan) which is equal to the
"social security integration level" (as defined in the Pension Plan) in effect
for the year in which the participant retires, plus 1-1/2% of that portion of
the participant's final average compensation in excess of the social security
integration level, multiplied by the number of years of credited service not to
exceed 35 years. A reduced pension benefit is payable upon (i) early retirement
at or after age 55, (ii) death, under certain circumstances, and (iii)
disability if the participant has completed at least five years of vesting
service. A reduced pension benefit is also payable, at the election of a
participant who terminates employment after completing at least five years of
vesting service, at any time at or after age 55. Generally, the payment of
benefits will be in the form of a straight life annuity for participants who are
not married and a joint and survivor annuity for those who are married.
Agreements Relating to a Change In Control
Under the Company's Incentive Compensation and Retention
Program (the "Program"), adopted in November 1996, an aggregate of $1,500,000 of
bonus compensation became payable to certain employees of the Company in part in
connection with the Company's emergence from bankruptcy and in part on a
discretionary basis during the 1997 fiscal year. One-half of this amount was
paid in August 1997 and the balance was paid in late January 1998. This program
also provides that certain key employees, including the Company's three
<PAGE>
principal executive officers, will be entitled to receive termination awards if
terminated "without cause" (as defined in the Program) after a "change in
control" of the Company and within two years after the date of confirmation of
the Company's Plan of Reorganization (July 9, 1997). A termination award would
be equal to 150% of the affected employee's base salary at the time of the
termination. Since a "change in control" was defined under the Program to
include, among other things, the confirmation of the Company's Plan of
Reorganization, termination awards will be payable to such key employees if
their employment is terminated "without cause" at any time prior to July 9,
1999.
Indemnity Agreements
The Company is party to an indemnity agreement with each of
its directors and certain of its executive officers which provides that the
indemnitee will be entitled to receive indemnification, which may include
advancement of expenses, to the full extent permitted by law for all expenses,
judgements, fines, penalties and settlement payments incurred by the indemnitee
in actions brought against the indemnitee in connection with any act taken in
the indemnitee's capacity, and within the indemnitee's scope of authority, as a
director or executive officer of the Company. These agreements provide for the
appointment of independent legal counsel to determine whether a director or
executive officer is entitled to indemnity after a change in control. It also
requires the Company to use reasonable efforts to maintain specified levels of
directors' and officers' liability insurance for so long as an indemnitee may be
subject to any possible, threatened or pending action, except that the Company
will not be obligated to pay annual premiums to do so in excess of 150% of the
annualized rate of premiums paid during the 1997 fiscal year.
Compensation Committee Interlocks and Insider Participation
The Board of Directors established the Compensation Committee
in December 1997, after the end of the 1997 fiscal year, to oversee all issues
of executive compensation. During the 1997 fiscal year, Robert N. Dangremond,
former President and Chief Executive Officer of the Company, participated in
discussions of the Board of Directors concerning executive compensation.
Directors' Fees and Benefits
In October 1997, the Board of Directors of the Company adopted
the 1997 Directors Compensation Plan (the "Directors Plan"), which is being
submitted and recommended to the shareholders for approval at the Annual
Meeting. The Directors Plan became effective on December 19, 1997 and will
terminate on December 31, 2007, unless earlier terminated by the shareholders of
the Company. Directors of the Company who are not also officers or employees of
the Company or its subsidiaries are eligible to participate in the Directors
Plan (each a "Participant").
Each Participant will receive for services as a director a
payment of $3,000 for each fiscal quarter during each fiscal year of the Company
from 1998 through 2007, subject to a prorated adjustment if the Participant was
not a director at the time of each meeting of the Board of Directors held during
such fiscal quarter. Each Participant will also receive a $1,000 fee for each
meeting of the Board of Directors he or she attends in each fiscal year from
1998 through 2007 in excess of six meetings during such fiscal year. Each
Participant who also serves as Chairperson of the Board of Directors or of any
committee thereof will also receive an additional fee of $375 for each fiscal
quarter of such fiscal years.
<PAGE>
A total of 450,000 shares of the Common Stock will be
available, and have been reserved, for issuance under the Directors Plan
pursuant to stock options granted or to be granted, and share awards made or to
be made, under the Directors Plan. The Directors Plan provides for the automatic
grant of a fixed number of stock options and the automatic making of share
awards having a fixed fair market value to each Participant. If any stock option
or share award made under the Directors Plan is canceled or forfeited, the
shares subject to the stock option or share award will again be available for
issuance under the Directors Plan.
The Directors Plan authorizes the Company to grant
non-qualified stock options, but not incentive stock options (within the meaning
of Section 422 of the Code). On the date that an individual becomes a
Participant, he or she will automatically be granted an option to purchase
12,000 shares of the Common Stock (an "Initial Option"). On the third
anniversary of such initial grant and on each anniversary date thereafter,
provided that a Participant is still a director, he or she will automatically be
granted an option to purchase an additional 2,500 shares. Each option will
become exercisable as to one-third of the shares subject to such option on the
date of grant and on each of the first two anniversary dates of the date of
grant. Options will be exercisable for a term of 10 years or until earlier
terminated.
The exercise price of an option granted under the Directors
Plan will be the Fair Market Value (as defined in the Directors Plan) of the
Common Stock on the date of grant, except that the exercise price of any Initial
Option will in no event be less than $12.88 per share. The exercise price of an
option, together with any required taxes, must be paid in full at the time of
exercise in cash, by the delivery of shares of the Common Stock (subject to
certain conditions) or a combination of cash and shares.
Each Participant will receive for services as a director, for
each fiscal quarter during each fiscal year of the Company from 1998 through
2007, an award of that number of shares of the Common Stock (rounded to the
nearest whole number) as equals $3,000 divided by the Fair Market Value of a
share of the Common Stock as of the last business day of such fiscal quarter,
subject to a prorated adjustment if the Participant was not a director at the
time of each meeting of the Board of Directors held during such fiscal quarter.
Pursuant to the Directors Plan, 239 shares of the Common Stock
were awarded to each of Ms. Hampton and Mr. Kjorlien and 159 shares were awarded
to Mr. Gregory in respect of their services as directors during the fiscal
quarter of the Company ended November 2, 1997, based on a Fair Market Value of
$12.56 per share. Ms . Hampton and Mr. Kjorlien were directors during all of
such fiscal quarter, while Mr. Gregory was appointed to the Board on September
15, 1997. Further, 217 shares of the Common Stock were awarded to each of the
directors for the fiscal quarter of the Company ended February 2, 1998 based on
a Fair Market Value of $ 13.83 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
At the close of business on February 20, 1998, there were
issued and outstanding 4,385,770 shares of the Common Stock, par value $0.01 per
share, of the Company (the "Common Stock"). Each share is entitled to one vote.
There was no other class of voting securities outstanding at that date.
<PAGE>
To the knowledge of the Company, as of February 20, 1998, no
person owned beneficially (for purposes of Rule 13d-3 under the Securities Act
of 1934) more than 5% of the outstanding shares of the Common Stock except as
set forth in the following table. Except as noted below, each such person has
sole voting and investment power with respect to all shares.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership 1 Class 1
- ------------------------ ---------------------- ----------
Daystar L.L.C.2 1,374,688 31.3%
411 Theodore Fremd Avenue
Rye, NY 10580
Credit Suisse First Boston, Inc.3 1,006,345 22.9%
11 Madison Avenue
New York, NY 10010
BankAmerica Corporation4 759,130 17.3%
555 California Street
San Francisco, CA 94104
Grace Brothers, Ltd.5 412,124 9.4%
1560 Sherman Avenue
Suite 900
Evanston, Il 60201
- -------------------------------
1 On July 23, 1997, pursuant to a Plan of Reorganization, the Company
emerged from bankruptcy proceedings commenced by the Company in
September 1995 under Chapter 11 of the United States Bankruptcy Code.
Pursuant to such Plan of Reorganization, which had been approved by the
Company's shareholders and creditors and confirmed by the bankruptcy
court, all general unsecured claims of the Company were converted into
100% of the Common Stock, based on a ratio of 50 shares for each $1,000
of allowed unsecured claim. Holders of the Company's pre-bankruptcy
common stock and preferred stock were issued warrants to purchase an
aggregate of 87,756 shares of the Common Stock exercisable at a
purchase price of $23.00 per share during the period ending July 23,
1999, and their prior holdings were canceled.
2 Based on Schedule 13D, dated February 13, 1998. Daystar L.L.C. serves
as General Partner of Daystar Special Situations Fund, L.P. (the
"Fund), a Delaware limited partnership, which owns 784,936 (17.9% of
the outstanding) shares of the Common Stock, and as such has full
discretionary authority to vote and dispose of such shares. Daystar
L.L.C. also acts, with full discretionary authority, as investment
advisor to clients who own in the aggregate 585,376 (13.4% of the
outstanding) shares of the Common Stock. The managing directors of
Daystar L.L.C., who are jointly responsible for managing the Fund and
such client advisory accounts, are Bruce W. Gregory, a director of the
Company, Warren J. Malone, Michael C. Murr and John C. Sites, Jr. Mr.
Gregory also holds 376 shares of the Common Stock awarded to him by the
Company pursuant to the Directors Plan and options to purchase 12,000
shares of the Common Stock granted to him pursuant to the Directors
Plan, of which options to purchase 4,000 shares are currently
exercisable and options to purchase 8,000 shares are not currently
exercisable. He holds such shares and stock options for the benefit of
Daystar L.L.C., which is deemed to be the beneficial owner of such
shares and stock options.
<PAGE>
3 Based on Schedule 13D, dated October 16, 1997, indicating indirect
ownership by Credit Suisse First Boston, Inc. of 435,178 shares owned
directly by Credit Suisse First Boston Management Corporation and
571,167 shares owned directly by Credit Suisse First Boston
Corporation.
4 Based on Schedule 13D, dated October 15, 1997 indicating that
BankAmerica Corporation may be deemed to beneficially own shares which
are owned directly by its subsidiary, BankAmerica Investment
Corporation.
5 Based on Schedule 13G, dated January 27, 1998.
-------------------------------
The following table sets forth information as of February 20,
1998 with respect to the beneficial ownership of the Common Stock by each
director and nominee for director, each of the executive officers named in the
Summary Compensation Table (see above) and all directors and executive officers
as a group. Except as noted below, each such person has sole voting and
investment power with respect to all shares.
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership(1) Class(1)
- --------------------------- ----------------- ----------
Robert N. Dangremond 0(2) *
Bruce W. Gregory 1,374,688(3) 31.3%
Margaret Bertelsen Hampton 4, 456(4) *
James E. Kjorlien 21,296(5) *
Brian A. Moorstein 4,875(6) *
Rodney J. Peckham 4,875(6) *
Gary E. Schafer 1,219(6) *
All directors and executive 1,411,409(7) 32.2%
officers as a group (7
persons)
-------------------------------
*Less than 1%.
(1) See footnote 1 to the preceding table
(2) Mr. Dangremond resigned as a director and President and Chief Executive
Officer of the Company on January 26, 1998. See footnote 8 to the
Summary Compensation Table as to 30,000 shares of the Common Stock held
by J. Alix & Associates, a firm of which Mr. Dangremond is a principal.
Mr. Dangremond disclaims beneficial ownership of such shares.
(3) See footnote 2 to the preceding table. Includes 4,000 shares of Common
Stock subject to stock options granted to Mr. Gregory pursuant to the
Directors Plan, which are currently exercisable and does not include
8,000 shares subject to stock options granted under the Directors Plan
which are not currently exercisable.
(4) Includes 4,000 shares of Common Stock subject to stock options granted
to Ms. Hampton pursuant to the Directors Plan, which are currently
exercisable and does not include 8,000 shares subject to stock options
granted under the Directors Plan which are not currently exercisable.
<PAGE>
(5) Includes 11,519 shares of the Common Stock owned by Edison Capital LLC,
a company controlled by Mr. Kjorlien. Includes 4,000 shares of Common
Stock subject to stock options granted to Mr. Kjorlien pursuant to the
Directors Plan, which are currently exercisable and does not include
8,000 shares subject to stock options granted under the Directors Plan
which are not currently exercisable.
(6) Represents shares issuable on exercise of currently exercisable options
under the Company's Executive Stock Option Plan. Does not include
14,625 shares of the Common Stock subject to stock options granted to
each of Mr. Moorstein and Mr. Peckham and 3,656 shares subject to stock
options granted to Mr. Schafer pursuant to the Company's Executive
Stock Option Plan, none of which are currently exercisable.
(7) Includes shares issuable on exercise of currently exercisable options
under the Company's Executive Stock Option Plan and the Directors Plan.
Does not include an aggregate of 24,000 shares of the Common Stock
subject to stock options granted to the Company's three directors
pursuant to the Directors Plan or an aggregate of 32,906 shares subject
to stock options granted to the Company's three executive officers
pursuant to the Executive Stock Option Plan, none of which are
currently exercisable.
For purposes of the preceding table, each of the directors and
executive officers is deemed to be the beneficial owner of shares which may be
acquired by him or her within 60 days through the exercise of options, if any,
and such shares are deemed to be outstanding for the purpose of computing the
percentage of the Common Stock beneficially owned by him or her and by the
directors and executive officers as a group. Such shares, however, are not
deemed to be outstanding for the purpose of computing the percentage of the
Common Stock beneficially owned by any other person.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Robert N. Dangremond served as President and Chief Executive
Officer of the Company during the 1997 fiscal year. On January 6, 1998, Mr.
Dangremond was named acting Chief Financial Officer of Zenith Electronics
Corporation and, on January 26, 1998, Mr. Dangremond resigned as a director, as
well as Chief Executive Officer and President of the Company.
Mr. Dangremond provided services to the Company pursuant to a
Letter Agreement, dated July 31, 1995 (as amended), between the Company and J.
Alix & Associates ("J. Alix"), a consulting firm specializing in corporate
restructurings, of which Mr. Dangremond is a principal. The amounts shown were
paid to J. Alix on account of fees for the services rendered by Mr. Dangremond
and to reimburse J. Alix for travel and lodging expenses incurred by Mr.
Dangremond in the course of performing his duties to the Company. The amount
shown for the 1997 fiscal year includes a $400,000 success fee which became
payable following the Company's emergence from bankruptcy, of which $200,000 was
paid in the 1997 fiscal year and $200,000 was paid in the 1998 fiscal year. The
Company also issued 30,000 shares of the Common Stock to J. Alix as an
additional success fee, which was the number of shares issuable under the
Company's Plan of Reorganization to the holder of an allowed unsecured claim
against the Company of $600,000.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: February 27, 1998 FORSTMANN & COMPANY, INC.
By: /s/ Rodney J. Peckham
-----------------------
Rodney J. Peckham
Chief Financial Officer
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Brian A. Moorstein
- ------------------------
Brian A. Moorstein President February 27, 1998
(Principal Executive
Officer)
/s/ Rodney J. Peckham
- -----------------------
Rodney J. Peckham Executive Vice February 27, 1998
President Finance,
Administration and
Strategic Planning
(Principal Financial
Officer)
/s/ Gary E. Schafer
- ---------------------
Gary E. Schafer Vice President and February 27, 1998
Corporate Controller
(Principal Financial
Accounting Officer)
/s/ Bruce W. Gregory
- ----------------------
Bruce W. Gregory Director February 27, 1998
/s/ Margaret Bertelsen Hampton
- -------------------------------
Margaret Bertelsen Hampton Director February 27, 1998
/s/ James E. Kjorlien
- ----------------------
James E. Kjorlien Director February 27, 1998
