UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 2 to Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended October 31, 1994 Commission File No. 1-10411
SAFECARD SERVICES, INCORPORATED
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(Exact name of Registrant as specified in its charter)
Delaware 13-2650534
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3001 E. Pershing Blvd., Cheyenne, Wyoming 82001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (307) 771-2700
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Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
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Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by 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 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. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing market price on February 15, 1995):
$611,306,779.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock (as of February 15, 1995): Common Stock, $.01 Par Value -
28,937,599 shares.
Documents Incorporated By Reference
-----------------------------------
None.
Registrant hereby amends its Form 10-K for its fiscal year ended
October 31, 1994 by adding the following to Part III and deleting the
incorporation by reference of the Company's definitive proxy statement.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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Italicized terms indicate principal occupation.
WILLIAM T. BACON, JR., director since 1978, age 72, ASSOCIATE, THE CHICAGO
CORPORATION, an investment banking firm, November 1994 to present; Associate,
Bacon, Whipple, a division of Stifel, Nicolaus & Co., an investment banking
firm, 1983 to 1994; managing partner of Bacon, Whipple & Co., prior to 1983;
Director, Walbro Corporation, a manufacturer of small engine carburetors and
automobile fuel systems.
MARSHALL L. BURMAN, director since 1993, age 65, OF COUNSEL, WILDMAN,
HARROLD, ALLEN & DIXON, a Chicago, Illinois law firm, 1992 to present;
Chairman, Illinois State Board of Investment, a co-mingled investment fund
whose beneficiaries are Illinois state employees (Chairman since 1985, Board
member since 1979); Partner, Avery, Hodes, Costello & Burman, a Chicago,
Illinois law firm, prior to 1992; Director, Helene Curtis Industries, Inc.,
a manufacturer and marketer of personal care products, and CFI Industries,
Inc., a manufacturer of thermo-plastic packaging.
JOHN ELLIS BUSH, director since January 1995, age 42, PRESIDENT OF THE CODINA
GROUP, INC., a real estate development company, 1981 to present; Republican
Candidate for Governor of Florida, 1993 to 1994; Secretary of Commerce of the
State of Florida, 1987 to 1988; Director, Anchor Glass Container Company and
American Heritage Life Insurance Company.
ROBERT L. DILENSCHNEIDER, director since 1991, age 51, CHIEF EXECUTIVE
OFFICER AND MAJORITY OWNER OF THE DILENSCHNEIDER GROUP, INC., a public
relations firm, 1991 to present; Hill & Knowlton, an international public
relations firm, 1967 to 1991 (Chief Executive Officer, 1986 to 1991);
Director, Cross Country Healthcare Personnel, a privately held health care
organization.
ADAM W. HERBERT, JR., Ph.D., director since January 1995, age 51, PRESIDENT,
UNIVERSITY OF NORTH FLORIDA, 1989 to present; Director, Barnett Bank of
Jacksonville, N.A., a subsidiary of Barnett Banks, Inc., and Baptist Medical
Center (Jacksonville, Florida), a not-for-profit acute care hospital.
PAUL G. KAHN, director since 1993, age 50, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF BOARD OF DIRECTORS OF SAFECARD SERVICES, INCORPORATED (the
"Company"), December 1993 to present; Owner and Chief Executive Officer,
Coleridge Financial Corp., May 1993 to December 1993; President and Chief
Executive Officer, AT&T Universal Card Services Corporation, 1989 to May
1993; Senior Vice President, First National Bank of Chicago, 1988 to 1989.
EUGENE MILLER, director since 1993, age 69, PROFESSOR AND ASSISTANT TO THE
DEAN AT THE COLLEGE OF BUSINESS OF FLORIDA ATLANTIC UNIVERSITY, 1991 to
present; Vice Chairman and Chief Financial Officer, USG Corporation (formerly
known as United States Gypsum Company), 1987 to 1991; Director, MFRI,
Incorporated, a manufacturer of filter bags, and several private
corporations.
THOMAS F. PETWAY, III, director since 1994, age 55, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, HOME BUILDERS INSURANCE SERVICES, INC., a national
marketing and administrative services company specializing in services and
insurance programs for residential contractors, 1977 to present; PRINCIPAL OF
NETWORK REALTY ASSOCIATES, a real estate agency operating under the name
Prudential Network Realty and a member of Prudential Real Estate Affiliates,
Inc., 1988 to present.
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors, and persons who beneficially own more than
ten percent of the Company's stock, to file initial reports of their
beneficial ownership and reports of changes in such ownership with the
Securities and Exchange Commission (the "Commission"); copies of such reports
also are required to be filed with the Company. Based solely on a review of
the copies of such reports furnished to the Company and written
representations from the executive officers and directors that no Form 5
reports were required, the following exceptions with regard to compliance
were noted: Mr. Petway filed one late Form 4 relating to one purchase of
common shares after his appointment to the Board of Directors; the Form 3 for
Susan R. Gottesmann, Senior Vice President-Human Resources, failed to
disclose certain shares of common stock which she purchased in 1981; and the
Form 3 for Mr. Frechette failed to disclose certain shares of common stock
which he purchased in January 1994 prior to joining the Company. In
addition, Joanne Seehousen, a former executive officer of the Company, failed
to provide the Company with a copy of her report or a written representation
that no filing was needed with regard to her beneficial ownership of Company
stock.
Item 11. EXECUTIVE COMPENSATION
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The following table shows, for the years ending October 31, 1994,
1993 and 1992, the cash and other compensation paid or accrued and certain
long-term awards made to the named executives for all services to the Company
in all capacities:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Award
-----
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying Compen-
Principal Salary Bonus sation Award(s) Options/ sation
Position Year ($) ($)(1) ($)(2) ($)(3) SARs (#) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Paul G. Kahn 1994 686,538 950,000 ---- 63,750 1,000,000 49,227
Chairman and CEO
Francis J. Marino 1994 261,154 240,923 ---- 18,625 300,000 21,864
Vice Chairman
G. Thomas Frankland 1994 175,000 172,000 ---- 17,875 300,000 43,990
Vice Chairman and
Chief Financial Officer
Robert M. Frechette 1994 128,269 147,200 ---- -0- 60,000 71,626
Executive Vice
President - Sales
Dorothy S. Schechter 1994 121,635 105,000 ---- 9,250 50,000 - 0 -
Executive Vice President-
Marketing
Gerald R. Cahill 1994 125,000 ---- ---- -0- -0- 154,045
Former Chief 1993 250,000 190,000 ----
Operating Officer 1992 234,273 120,000 ----
W.M. Stalcup, Jr. 1994 125,000 ---- ---- -0- -0- 168,559
Former President 1993 250,000 190,000 ----
1992 220,192 115,000 ----
<FN>
(1) The amounts shown include the following signing bonuses: Mr. Kahn -
$250,000; Mr. Marino - $32,000; Mr. Frankland - $32,000; and Ms. Schechter -
$25,000.
(2) The value of all other personal benefits and perquisites received by the
executives in 1994, 1993 and 1992 was less than the required reporting
threshold.
(3) The amount shown in the table for each named executive officer is equal
to the closing market price on the date of grant multiplied by the number of
shares of restricted stock granted to such executive. Restricted stock
holdings valued as of October 31, 1994 and the restriction period are as
follows (i) Mr. Kahn, 5,000 shares ($80,000) vesting in increments until
December 1, 1997; (ii) Mr. Marino, 0 shares, his 1,000 shares of restricted
stock vested on August 1, 1994; (iii) Mr. Frankland, 1,000 shares ($16,000),
vested on November 1, 1994; and (iv) Ms. Schechter, 500 shares ($8,000),
vested on January 25, 1995.
(4) Amounts shown in this column for 1994 include the following payments:
(i) for Mr. Kahn, payments of term life insurance premiums in 1994 of $3,245
and contributions to a grantor trust as a supplemental retirement benefit of
$45,982; (ii) for Mr. Marino, payments of term life insurance premiums in
1994 of $4,389 and contributions to a grantor trust as a supplemental
retirement benefit of $17,475; (iii) for Mr. Frankland, payments of group
term life insurance premiums in 1994 of $1,955 per year, contributions to a
grantor trust as a supplemental retirement benefit of $11,693 and relocation
benefits of $30,342; (iv) for Mr. Frechette, relocation benefits of $71,626;
(v) for Mr. Cahill, contributions under the Company's 401(k) and Profit
Sharing Plan of $6,827 and payments under his severance agreement of
$147,218, including severance pay of $125,000, reimbursement of medical
insurance premiums of $2,982 and relocation benefits of $19,236; and (vi) for
Mr. Stalcup, contributions under the Company's 401(k) and Profit Sharing Plan
of $6,827 and payments under his severance agreement of $161,732, including
severance pay of $158,750 and reimbursement of medical insurance premiums of
$2,982.
</TABLE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term
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Name Options/ Percent of Exercise Expiration 0% 5% 10%
SARs Total or Base Date
Granted Options/SARS Price
Granted to ($/Sh)
Employees
in Fiscal Year
(#)(1)(2)(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul G. Kahn 1,000,000 42% $12.625 12/3/2003 $0 $3,536,649 $8,072,993
Francis J. Marino 300,000 13% $18.94 1/23/2004 $0 1,640,211 3,744,056
G. Thomas Frankland 300,000 13% $17.875 4/30/2004 $0 1,548,186 3,533,994
Robert M. Frechette 60,000 3% $18.75 4/10/2004 $0 324,794 741,387
Dorothy S. Schechter 30,000 1% $18.9375 1/23/2004 $0 164,021 374,406
20,000 1% $17.375 6/12/2004 $0 100,325 229,009
<FN>
(1) By the terms of the 1994 Long Term Stock-Based Incentive Plan (as
amended, the "1994 Plan"), options granted thereunder are exercisable over a
period not to exceed ten years. Sixty percent of the options granted to each
executive in 1994 vest over a period of four years in annual cumulative
increments of 25% on each anniversary of the date of the grant. Forty
percent of the options granted to each executive vest in three equal
increments when the price of Company Common Stock trades at or above $21, $24
and $27, respectively, over twenty consecutive days and in any case when nine
years have elapsed from the date of grant (except that the vesting prices for
Mr. Kahn are $18, $21 and $24, respectively). Under the 1994 Plan, all
options will immediately vest and become exercisable in the event that a
Change in Control (as defined in the 1994 Plan) of the Company occurs.
(2) The 1994 Plan provides that the committee administering the Plan may
award tax bonuses to grantees under the 1994 Plan to be paid upon the
exercise of options or lapse of restrictions on restricted stock.
(3) The total number of shares granted pursuant to options to all employees
under the 1994 Plan and the Employees Stock Option Plan during fiscal 1994
was 2,357,700. This amount does not include the approximately 537,400 shares
granted in fiscal year 1994 pursuant to options and restricted stock awards
subject to stockholder approval at the Annual Meeting of an increase in the
number of shares available for issuance under the 1994 Plan.
</TABLE>
The following table sets forth information regarding stock options
exercised in fiscal year 1994 by each of the named executive officers and the
value of the unexercised options held by these individuals as of October 31,
1994, based on the market value ($16.00) of the common stock on that date.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Paul G. Kahn - 0 - - 0 - 0/1,000,000 0/3,375,000
Francis J. Marino - 0 - - 0 - 0/300,000 0/0
G. Thomas Frankland - 0 - - 0 - 0/300,000 0/0
Robert M. Frechette - 0 - - 0 - 0/60,000 0/0
Dorothy S. Schechter - 0 - - 0 - 0/50,000 0/0
W.M. Stalcup, Jr. 290,000 $3,846,667 0/0 0/0
Gerald R. Cahill 165,000 $2,050,896 0/0 0/0
</TABLE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The following table sets forth, as of February 15, 1995,
beneficial ownership of the Company's common stock by each current director
and nominee for director, the named executive officers of the Company,
including two former executives who acted as chief executive officer during
a part of 1994, and all of the foregoing, together with all other executive
officers, as a group. Except as described below, each of the persons and
group listed below has sole voting and investment power with respect to the
shares shown.
Number of
Shares Which
May Be
Names of Directors, Acquired Percent of
Nominees and Executive Number of Within 60 Class
Officers Shares Owned Days (5) (%)
William T. Bacon, Jr. (1)100,300 0 *
Marshall L. Burman 2,000 100,000 *
John Ellis Bush 1,000 0 *
Gerald R. Cahill 0 0 *
Robert L. Dilenschneider 100 100,000 *
G. Thomas Frankland 1,000 0 *
Robert M. Frechette (2) 659 9,000 *
Adam W. Herbert, Jr. 1,000 0 *
Paul G. Kahn (3) 5,100 283,333 *
Francis J. Marino 1,000 45,000 *
Eugene Miller 500 100,000 *
Thomas F. Petway, III 14,400 100,000 *
Dorothy S. Schechter (4)500 4,500 *
W.M. Stalcup, Jr. 40,000 0 *
All Directors, Nominees and
Executive Officers as a group 176,059 755,333 3.14
- -----------
* Less than one percent.
1. The shares shown do not include 5,000 shares owned by the wife of Mr.
Bacon, as to which he disclaims beneficial ownership.
2. The shares shown do not include 103 shares owned by the wife of Mr.
Frechette as to which he disclaims beneficial ownership.
3. The shares shown include 5,000 shares of restricted stock, as to which
Mr. Kahn possesses sole voting power, but no investment power, during the
restricted period. Restrictions on the sale or transfer of such stock lapse
in increments over a period ending in December 1997.
4. The shares shown do not include 400 shares owned by the husband of Ms.
Schechter, as to which she disclaims beneficial ownership.
5. The shares shown consist of the Company's common stock subject to stock
options currently exercisable or exercisable within sixty days of February
15, 1995. Not shown are options to purchase the Company's common stock not
currently exercisable and not becoming exercisable sixty days after February
15, 1995, including 716,667 shares subject to options granted to Mr. Kahn,
300,000 shares subject to options granted to Mr. Frankland, 51,000 shares
subject to options granted to Mr. Frechette, 255,000 shares subject to
options granted to Mr. Marino, 45,500 shares subject to options granted to
Ms. Schechter, and 216,500 shares subject to options granted to other
executive officers of the Company. The amounts shown do not include options
granted to a certain executive officer subject to stockholder approval at the
Annual Meeting of a proposed amendment to the 1994 Plan. The amounts shown
also do not include options granted to Mr. Bush and Dr. Herbert subject to
stockholder approval at the Annual Meeting of a proposed Directors Stock
Plan.
PRINCIPAL HOLDERS
The following table sets forth, as of February 15, 1995,
beneficial ownership of the Company's common stock by persons known by the
Company to beneficially own more than 5% of the Company's common stock:
Name and Address Amount and Nature
of Beneficial Holder of Beneficial Ownership Percent of Class(4)
- -------------------- ----------------------- ----------------
FMR Corp 1,992,600(1) 6.89
82 Devonshire Street
Boston, MA 02109
Sound Shore Management, Inc. 1,845,800(2) 6.38
8 Sound Shore Drive
Greenwich, CT 06836
The Equitable Companies Incorporated 1,478,100(3) 5.11
787 Seventh Avenue
New York, New York 10019
1. According to a Schedule 13G filed with the Commission by FMR Corp.
("FMR"), FMR beneficially owned 1,992,600 shares of the Company's common
stock as of December 31, 1994. FMR claimed sole or shared voting power with
respect to none of the shares and sole dispositive power with respect to all
of the shares.
2. According to a Form 13G filed with the Commission, Sound Shore
Management, Inc. claimed sole voting power with respect to 1,702,300 shares
of the Company's common stock and no voting power with respect to 143,500
shares and sole investment power with respect to all of the shares shown as
of December 31, 1994.
3. According to a Form 13G filed with the Commission by five French mutual
insurance companies, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, Alpha Assurances I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle
and Uni Europe Assurance Mutuelle, as a group, The Equitable Companies
Incorporated and their subsidiaries (collectively, "Equitable"), these
entities claim beneficial ownership of 1,478,100 shares of the Company's
common stock as of December 31, 1994. These entities claimed sole voting
power with respect to 1,002,300 of such shares and shared voting power with
respect to 45,000 of such shares and claimed sole dispositive power with
respect to 1,477,800 of the shares and shared dispositive power with respect
to 300 shares shown as of December 31, 1994.
4. The percentage ownership is based on 28,937,599 shares of the Company's
common stock outstanding as of February 15, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Steven J. Halmos. After his resignation as Chief Executive
Officer and a director on December 19, 1992, Steven J. Halmos acted as
Advisor on Marketing and Operational Strategy pursuant to a written agreement
with the Company (as amended and restated as of April 1, 1993, the "Steven J.
Halmos Agreement"). On May 26, 1994, the Company reached a settlement with
Steven J. Halmos to terminate the Steven J. Halmos Agreement and various
other agreements between the Company and Mr. Halmos that provided for
payments to Mr. Halmos of $2,000,000 a year through March 31, 1998. The
settlement, which arose in connection with the Company's management
restructuring in April 1994 and a related decision to cease using Mr. Halmos'
services, resulted in a $4,400,000 cash payment to Mr. Halmos. Subsequent to
his termination, Mr. Halmos exercised options to purchase 3,900,000 shares of
the common stock at exercise prices of $5.50 or $5.125 per share.
Wright Express Corporation. In September 1994, the Company
acquired Wright Express Corporation for $35.5 million in cash. Mr. Paul G.
Kahn, the Company's Chairman and Chief Executive Officer, was a director of
Wright Express Corporation and as a director had received an option to
purchase 25,000 shares of Wright Express common stock. During negotiations
between the Company and Wright Express Corporation, Mr. Kahn did not attend
any meetings or participate in any discussions of the Board of Directors of
Wright Express Corporation and abstained from voting on the acquisition by
the Company's Board of Directors. Mr. Kahn also surrendered for no
consideration his options to purchase Wright Express common stock which he
otherwise could have exercised and sold in the merger with the Company.
Museum Art Properties, Inc. In October 1994, the Company executed
an agreement with Museum Art Properties, Inc. ("MAP") pursuant to which the
Company was granted a license to market certain consumer products and for
which it will pay MAP certain royalties and fees from the sale of such
products. In 1994, the Company paid a promotion fee of $250,000 upon award
of the license and an advance against royalties of $1,500,000 to MAP. In
addition, provided that the Company conducts sales under the agreement, the
Company has guaranteed certain royalties to MAP in 1996 and 1997. Mr.
Dilenschneider, one of the Company's directors, is a director and 10%
stockholder of MAP.
Public Relations and Investor Relations. The Dilenschneider Group,
Inc. ("DGI"), a company owned by one of the Company's directors, provided
public relations counsel and advice to the Company in fiscal year 1994 for an
annual retainer of $180,000. In October 1994, the Company entered into an
engagement letter with DGI for public affairs assistance during 1995 for an
annual retainer of $100,000.
During 1994, DGI also consulted on and assisted the Company with
investor relations for a monthly fee of $12,500. In addition, Eugene Miller,
one of the Company's directors provided investor relations consulting
services to the Company during 1994 for a monthly retainer of $4,167. Both
of these investor relations consulting arrangements ended as of October 31,
1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
SAFECARD SERVICES, INCORPORATED
By: G THOMAS FRANKLAND
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G. Thomas Frankland
Vice Chairman & Chief Financial
Officer
