<PAGE>
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 ss.240.14a-11(c) or ss.240.14a-12
SAFETY COMPONENTS INTERNATIONAL, INC.
- -------------------------------------------------------------------------------
(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):
[ ] 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>
SAFETY COMPONENTS INTERNATIONAL, INC.
3190 PULLMAN STREET
COSTA MESA, CALIFORNIA 92626
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1997
----------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Safety
Components International, Inc. (the "Corporation") will be held at 9:30
o'clock A.M., local time, on September 17, 1997, at The Sky Club, 200 Park
Avenue, 56th Floor, New York, New York, for the following
purposes:
1. To elect two Class II directors of the Corporation to hold office for a
term expiring at the Annual Meeting of Stockholders occurring in 2000 and
until the election and qualification of each of the Class II director's
successor;
2. To approve the amendments to the Safety Components International, Inc.
1994 Stock Option Plan (the "Plan") to (i) increase the number of shares
of the Corporation's Common Stock subject to the Plan from 550,000 shares
in the aggregate to 1,050,000 shares in the aggregate, (ii) increase the
number of Non-Qualified Stock Options ("NQSOs") that a participant may be
granted under the Plan in any one fiscal year from NQSOs to purchase
100,000 shares of Common Stock to NQSOs to purchase 200,000 shares of
Common Stock and (iii) require that the Stock Option Committee members be
composed of "Non-Employee Directors" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended; and
3. To transact such other business as may properly come before the meeting.
Only holders of record of the Corporation's Common Stock at the close of
business on July 22, 1997 are entitled to notice of, and to vote at, the
meeting and any adjournment thereof. Such Stockholders may vote in person or
by proxy.
STOCKHOLDERS WHO FIND IT CONVENIENT ARE CORDIALLY INVITED TO ATTEND THE
MEETING IN PERSON. IF YOU ARE NOT ABLE TO DO SO AND WISH THAT YOUR STOCK BE
VOTED, YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
GEORGE D. PAPADOPOULOS
Secretary
July 29, 1997
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
3190 PULLMAN STREET
COSTA MESA, CALIFORNIA 92626
----------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Safety Components International, Inc., a Delaware
corporation (the "Corporation"), of proxies to be used at the Annual Meeting
of Stockholders of the Corporation to be held at 9:30 o'clock A.M., local
time, on September 17, 1997, at The Sky Club, 200 Park Avenue, 56th Floor,
New York, New York, and at any adjournment thereof. The purposes of
the meeting are:
1. To elect two Class II directors of the Corporation to hold office for a
term expiring at the Annual Meeting of Stockholders occurring in 2000 and
until the election and qualification of each of the Class II director's
successor;
2. To approve the amendments to the Safety Components International, Inc.
1994 Stock Option Plan (the "Plan"), to (i) increase the number of shares
of the Corporation's common stock, par value $.01 per share (the "Common
Stock"), subject to the Plan from 550,000 shares in the aggregate to
1,050,000 shares in the aggregate, (ii) increase the number of
Non-Qualified Stock Options ("NQSOs") that a participant may be granted
under the Plan in any one fiscal year from NQSOs to purchase 100,000
shares of Common Stock to NQSOs to purchase 200,000 shares of Common
Stock and (iii) require that the Stock Option Committee members be
composed of "Non-Employee Directors" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and
3. To transact such other business as may properly come before the meeting.
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock represented thereby will be voted as
instructed on the proxy. If no instructions are given, such shares will be
voted (i) for the election as Class II directors of the nominees of the Board
of Directors named below; (ii) in favor of the proposal to approve the
amendments to the Plan; and (iii) in the discretion of the Proxies named in
the proxy card on any other proposals to properly come before the meeting or
any adjournment thereof. Any proxy may be revoked by a stockholder prior to
its exercise upon written notice to the Secretary of the Corporation, or by
the vote of a stockholder cast in person at the meeting. The approximate date
of mailing of this Proxy Statement is August 6, 1997.
VOTING
Holders of record of Common Stock on July 22, 1997, will be entitled to
vote at the Annual Meeting or any adjournment thereof. A majority of
outstanding shares as of the record date will constitute a quorum for the
transaction of business. As of July 22, 1997 there were 5,015,383 shares of
Common Stock outstanding and entitled to vote. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Each share of Common Stock entitles
the holder thereof to one vote on all matters to come before the Annual
Meeting.
The favorable vote of a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
necessary to elect the nominees for Class II directors of the Corporation, and
the favorable vote of a majority of the votes of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is necessary
to approve the amendments to the Plan. Abstentions and broker non-votes will
have no effect on the outcome of the proposals set forth above. The Board of
Directors recommends a vote FOR each of the proposals set forth above.
3
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The term of the
current Class I director, Mr. DioGuardi, expires in 1999; the term of the
current Class II directors, Messrs. Suozzi and Torok, expires at the Annual
Meeting and the term of the current Class III directors, Messrs. Kaplan and
Zummo, expires in 1998. Directors hold office until the Annual Meeting of
Stockholders of the Corporation in the year in which the term of their class
expires and until their successors have been duly elected and qualified. At
each Annual Meeting of Stockholders of the Corporation, the successors to the
class of directors whose term expires will be elected for a three-year term.
Messrs. Suozzi and Torok, the nominees for Class II directors, are
currently serving in that capacity and have indicated their willingness to
continue to serve if elected. Unless authority to do so is withheld, the
persons named in the accompanying proxy will vote the shares represented
thereby for such nominees. While it is not anticipated that the nominees will
be unable to serve, if any of the nominees should be unable to act as a
director, the persons named in the accompanying proxy may vote for any
substitute nominee proposed by the Board of Directors (unless authority to
vote for the election of the director is withheld).
NOMINEES AND CONTINUING DIRECTORS
The following is certain information, as of July 29, 1997, with respect
to the nominees for Class II directors and with respect to each other director
whose term of office continues after the Annual Meeting.
NOMINEES FOR CLASS II DIRECTORS
(TO BE ELECTED TO SERVE UNTIL 2000)
FRANCIS X. SUOZZI. Age 56, Director since 1994. Mr. Suozzi is currently
employed as the treasurer and a Senior Vice President of Nabisco Holdings
Corporation. Prior to taking this position in March 1995, Mr. Suozzi was a
Vice President of RJR Nabisco, Inc., involved in financings and acquisitions.
Mr. Suozzi is also a director of First Intercontinental Group, an investment
banking concern based in Washington, D.C. Prior to forming First
Intercontinental Group in 1991, Mr. Suozzi was Regional Director of Corporate
Finance for Gruntal & Co., a securities firm headquartered in New York City,
from 1988 to 1991. From 1975 through 1984, Mr. Suozzi was a director of Avco
Community Developers Inc., a real estate development company which was
publicly traded from 1975 to 1978, and was also a director of Nashville City
Bank from 1979 to 1982.
ROBERT J. TOROK. Age 66, Director since 1994. Until May 1996, when Mr.
Torok retired, Mr. Torok was a Vice President and Partner of Korn/Ferry
International, an executive search firm based in New York City, and had served
in such position since 1980. Prior to 1980, Mr. Torok was Senior Vice
President of Sikorsky Aircraft, a division of United Technologies Corporation,
a diversified manufacturing company based in Hartford, Connecticut, where Mr.
Torok worked from 1958 to 1980. Mr. Torok has 22 years of experience in
engineering, manufacturing and management.
CLASS I DIRECTOR
(TO CONTINUE IN OFFICE UNTIL 1999)
JOSEPH J. DIOGUARDI. Age 57, Director since 1994. Mr. DioGuardi was a
member of the United States House of Representatives from 1985 through 1989,
representing the 20th Congressional District in Westchester County, New York.
Since leaving Congress, Mr. DioGuardi founded and now chairs a non-partisan
foundation named "Truth in Government," aimed at promoting fiscal
responsibility and budgetary reform. Mr. DioGuardi is an international
spokesman for human rights and is Chairman of the Albanian American Civic
League. Mr. DioGuardi has 22 years of public accounting experience with Arthur
Andersen & Co., serving as Partner from 1972 to 1984. Mr. DioGuardi is also a
director of Neurocorp, Ltd., a publicly held corporation in the business of
utilizing software, databases and medical devices for the diagnosis and
treatment of brain-related disorders.
4
<PAGE>
CLASS III DIRECTORS
(TO CONTINUE IN OFFICE UNTIL 1998)
ROBERT A. ZUMMO. Age 56, Director since 1994. Mr. Zummo has served as
Chairman of the Board, President and Chief Executive Officer of the
Corporation since its inception in January 1994. Mr. Zummo is also the Chief
Executive Officer of Valentec International Corporation, a wholly-owned
subsidiary of the Corporation ("Valentec"), which was acquired by the
Corporation in May 1997, and has served in such capacity since 1989. Valentec
is a manufacturer of defense-related products and parts for the computer and
medical industries. From 1985 to 1989, Mr. Zummo was President and Chief
Executive Officer of General Defense Corporation, a defense contractor located
in Hunt Valley, Maryland, where he previously served as Executive Vice
President and Chief Operating Officer from 1983 to 1985. Mr. Zummo has more
than 30 years experience in the defense and aerospace manufacturing
industries.
JEFFREY J. KAPLAN. Age 49, Director since February 1997. Mr. Kaplan has
served as Executive Vice President, Chief Financial Officer and a Director of
the Corporation since February 1997. From October 1993 to February 1997, Mr.
Kaplan served as Executive Vice President, Chief Financial Officer and a
Director of International Post Limited ("IPL"), a leading provider of
post-production services for commercial and advertising markets; and he served
as Senior Vice President and Chief Financial Officer of Video Services
Corporation from September 1987 to February 1994 and Senior Vice President and
Chief Financial Officer of Audio Plus Video International, Inc., a subsidiary
of IPL, from September 1987 to February 1997. Mr. Kaplan was a financial
advisor to various public and private companies from September 1985 to
September 1987. From November 1978 until August 1985, Mr. Kaplan was employed
by Clabir Corporation, a New York Stock Exchange listed company, where he last
served as Executive Vice President and Chief Financial Officer.
MEETINGS OF THE BOARD
During the fiscal year ended March 31, 1997, ten meetings of the Board of
Directors were held.
The Board of Directors has an Audit Committee consisting of Messrs.
DioGuardi, Suozzi and Torok. The Audit Committee held one meeting during the
fiscal year ended March 31, 1997. The general functions of the Audit Committee
include selecting the independent auditors (or recommending such action to the
Board of Directors), evaluating the performance of the independent auditors
and their fees for services, reviewing the scope of the annual audit with the
independent auditors and the results of the audit with management and the
independent auditors, consulting with management, internal auditors, if any,
and the independent auditors as to the systems of internal accounting
controls, and reviewing the nonaudit services performed by the independent
auditors and considering the effect, if any, on their independence. In
addition, the Audit Committee is responsible for reviewing, approving and
monitoring all agreements and payments between the Corporation and its
subsidiaries, on the one hand, and Valentec and its other subsidiaries, on the
other hand. See "Certain Transactions."
The Board of Directors has a Compensation Committee which also acts as a
Stock Option Committee, composed of Messrs. DioGuardi, Suozzi and Torok. The
Compensation Committee held three meetings during the fiscal year ended March
31, 1997. The general functions of the Compensation Committee include approval
(or recommendation to the Board of Directors) of the compensation arrangements
for senior management, directors and other key employees and review of benefit
plans in which officers and directors are eligible to participate. The general
function of the Stock Option Committee includes a periodic review of the
equity compensation plans of the Corporation and the grants under such plans.
The Board of Directors has no standing nominating committee. During the
fiscal year ended March 31, 1997, each of the directors attended 75% or more
of the aggregate number of meetings of the Board of Directors and committee(s)
on which he served.
5
<PAGE>
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table and notes set forth certain information regarding the
beneficial ownership of the Common Stock as of July 21, 1997 by all person(s)
known by the Corporation to be the beneficial owner of more than 5% of the
Common Stock, by each director of the Corporation, by each of the Named
Executives (as defined herein) and by all directors and executive officers of
the Corporation as a group. Except as otherwise indicated, each beneficial
owner has the sole power to vote, as applicable, and to dispose of all shares
of Common Stock owned by such beneficial owner.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK(1)
- ------------------------------------ -------------------- ---------------
<S> <C> <C>
Robert A. Zummo (2)(3) .............................. 1,021,576(4) 20.2%
Cramer, Rosenthal McGlynn, Inc. ..................... 276,400(5) 5.5%
707 Westchester Avenue
White Plains, New York 10604
FMR Corp. ........................................... 276,200(6) 5.5%
82 Devonshire Street
Boston, Massachusetts 02109
Victor Guadagno (2) ................................. 16,250(7) *
John L. Hakes (2) ................................... 15,000(7) *
Jeffrey J. Kaplan (2) ............................... 0 *
W. Hardy Myers (2) .................................. 70,500(8) 1.4%
Paul L. Sullivan (2) ................................ 23,000(9) *
Joseph J. DioGuardi (2) ............................. 2,250(7) *
Francis X. Suozzi (2)(3) ............................ 328,051(10) 6.5%
Robert J. Torok (2) ................................. 2,250(7) *
All executive officers and directors as a group
(consisting of 14 individuals) (11) 1,500,127(12) 28.9%
<FN>
- -------------
* Less than 1%.
(1) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of Common Stock outstanding, net of treasury
shares. For purposes of computing the percentage of outstanding shares
held by each person or group of persons named in this table, any
securities which such person or group of persons has the right to acquire
within 60 days of the date hereof is deemed to be outstanding for
purposes of computing the percentage ownership of such person or persons,
but is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Address for each person is c/o Safety Components International, Inc.,
3190 Pullman Street, Costa Mesa, California 92626.
6
<PAGE>
(3) In connection with the Valentec Acquisition (as defined herein), Messrs.
Zummo and Suozzi entered into an agreement, pursuant to which it was
agreed, among other things, that for a period of three years from the
date thereof, Mr. Suozzi will vote all shares of Common Stock
beneficially owned by him on any manner put to a vote of the shareholders
of the Corporation in the same manner as recommended by a majority of the
Board of Directors of the Corporation or if no such recommendation has
been made, as directed by Mr. Zummo; provided, that such agreement shall
terminate if Mr. Suozzi shall cease to be on the Board of Directors
(other than as a result of his resignation).
(4) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 45,000 shares of Common Stock.
(5) Number of shares beneficially owned by Cramer, Rosenthal McGlynn, Inc.
("CRMI"), an investment company registered under Section 8 of the
Investment Advisers Act of 1940, according to a Schedule 13G filed by
CRMI with the Commission in February 1997.
(6) The information in the table relating to FMR Corp. and the information in
this footnote is from a Schedule 13G filed with the Commission in
February 1997, by FMR Corp., Edward C. Johnson, Abigail P. Johnson,
Fidelity Management & Research Company and Fidelity Management Trust
Company. Fidelity Management & Research Company ("Fidelity"), 82
Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary
of FMR Corp. and an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940, is the beneficial owner of 500
shares or 0.01% of the Common Stock as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940. Edward C. Johnson 3d, FMR Corp., through
its control of Fidelity, and the funds each has sole power to dispose of
the 500 shares owned by the Funds. Neither FMR Corp. nor Edward C.
Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct
the voting of the shares of Common Stock owned directly by the Fidelity
Funds, which power resides with the Funds' Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established
by the Funds' Boards of Trustees. Fidelity Management Trust Company, 82
Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary
of FMR Corp. and a bank as defined in Section 3(a)(6) of the Exchange
Act, is the beneficial owner of 276,700 shares or 5.49% of the Common
Stock as a result of its serving as investment manager of the
institutional account(s). Edward C. Johnson 3d and FMR Corp., through its
control of Fidelity Management Trust Company, each has sole dispositive
power over 275,700 shares and sole power to vote or to direct the voting
of 253,900 shares, and no power to vote or to direct the voting of 21,800
shares of Common Stock owned by the institutional account(s) as reported
above. Members of the Edward C. Johnson 3d family and trusts for their
benefit are the predominant owners of Class B shares of common stock of
FMR Corp., representing approximately 49% of the voting power of FMR
Corp. Mr. Johnson 3d owns 12.0% and Abigail Johnson owns 24.5% of the
aggregate outstanding voting stock of FMR Corp. Mr. Johnson 3d is
Chairman of FMR Corp. and Abigail P. Johnson is a Director of FMR Corp.
The Johnson family group and all other Class B shareholders have entered
into a shareholders' voting agreement under which all Class B shares will
be voted in accordance with the majority vote of Class B shares.
Accordingly, through their ownership of voting common stock and the
execution of the shareholders' voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR Corp.
(7) Represents only options which are currently exercisable (or exercisable
within 60 days) to purchase shares of Common Stock.
(8) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 70,000 shares of Common Stock.
(9) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 22,500 shares of Common Stock.
7
<PAGE>
(10) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 2,250 shares of Common Stock.
(11) Includes Mr. Myers who is a Named Executive but departed from the
Corporation in May 1997.
(12) Includes options which are currently exercisable (or exercisable within
60 days) to purchase 184,250 shares of Common Stock.
</TABLE>
EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth the names, ages and all positions and
offices with the Corporation held by the Corporation's present executive
officers.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES PRESENTLY HELD
- ---- --- ------------------------------------
<S> <C> <C>
Robert A. Zummo............ 56 Chairman of the Board, President and Chief
Executive Officer
Thomas W. Cresante......... 50 Executive Vice President and Chief Operating
Officer
Jeffrey J. Kaplan.......... 49 Director, Executive Vice President and Chief
Financial Officer
Victor Guadagno............ 57 President, Valentec Systems, Inc.
John L. Hakes.............. 57 President, European Operations
Paul L. Sullivan........... 51 President, Automotive Safety Components
Asia-Pacific Ltd.
Richard R. Vande Voorde.... 52 President, Galion, Inc.
Paul M. Betz............... 38 Vice President and General Manager, Wells
Division of Valentec International Corporation
George D. Papadopoulos..... 25 Corporate Controller and Secretary
Daniel R. Smith............ 27 Treasurer
</TABLE>
Following is information with respect to the Corporation's executive
officers who are not also directors of the Corporation:
THOMAS W. CRESANTE. Mr. Cresante has served as Executive Vice President
and Chief Operating Officer of the Corporation since May 1997. From October
1996 to May 1997, Mr. Cresante served as President of Worldwide Operations of
AlliedSignal-Safety Restraints Systems. From January 1996 to October 1996, Mr.
Cresante served as Vice President of Operations of AlliedSignal-Aerospace
Sector. From January 1990 to May 1995, Mr. Cresante served as Vice President
of Operations of the TRW Inflatable Restraints Division. From January 1984 to
November 1989, Mr. Cresante served as Vice President of Manufacturing of ITT
Hancock, a manufacturer of components and systems for the automotive industry.
VICTOR GUADAGNO. Mr. Guadagno has served as President of Valentec
Systems, Inc. since the inception of the Corporation's Systems business in
1994 and had served as Vice President/General Manager of Valentec's Wells
Division from September 1994 until September 1995. Mr. Guadagno joined
Valentec in 1986 as Vice President/General Manager of the Product Development
Division, and was promoted to Vice President of Corporate Marketing in 1989.
Prior to joining
8
<PAGE>
Valentec, Mr. Guadagno was President and sole stockholder of Target Research,
Inc., a business engaged in the research and development of ammunition for the
U.S. Army. Mr. Guadagno began his career as a development engineer with the
U.S. Army and has over 35 years of experience in the defense industry,
including systems contracting.
JOHN L. HAKES. Mr. Hakes has served as President of the European
Operations since June 1995. Mr. Hakes has also served as a managing director
of Valentec International Limited, Valentec's majority-owned U.K. subsidiary
which was transferred to Mr. Zummo immediately prior to the Valentec
Acquisition (as defined herein; see "Certain Transactions") ("VIL"), since
June 1995. Mr. Hakes served as the Chief Executive Officer of Thorn Security &
Electronics, an international manufacturer of military electronics, fire
protection and intrusion control products from 1991 through 1994. From 1986
through 1991, Mr. Hakes served as the Chief Executive Officer of Thorn EMI
Electronics, one of the largest military electronics suppliers to the U.K.
Ministry of Defense.
PAUL L SULLIVAN. Mr. Sullivan has served as President of Automotive
Safety Components Asia-Pacific, Ltd. since February 1997. Mr. Sullivan served
as President of the North American Automotive Operations from May 1995 to
February 1997, as Vice President and General Manager of the North American
Automotive Division from January 1994 to May 1995, and was Vice President and
General Manager of Valentec's Wells Division from July 1993 to January 1994.
From July 1992 to July 1993, Mr. Sullivan was Vice President and General
Manager of Valentec's Kisco Division, a manufacturer of component parts for
large caliber tank ammunition. From December 1990 to June 1992, Mr. Sullivan
was plant manager of the Bussman Division of Cooper Industries, a manufacturer
of electrical protection component parts. From January 1988 to December 1990,
Mr. Sullivan was Operations Manager of Valentec's Kisco Division. Mr. Sullivan
has over 25 years of managerial experience in multi-plant operations in the
defense and automotive industries.
RICHARD R. VANDE VOORDE. Mr. Vande Voorde has served as President of
Galion, Inc. since May 1995 and previously served as Vice President and
General Manager of the Corporation's Galion Division since the inception of
the Corporation. From 1989 to January 1994, Mr. Vande Voorde served as
Executive Vice President of Valentec's Galion Division. From 1986 to 1989, Mr.
Vande Voorde was Vice President of Finance of Valentec's Galion Division. From
November 1983 to June 1986, Mr. Vande Voorde served as Manager of Accounting
Operations of Ideal Electric Company, a division of Carrier Corporation which
manufactured custom-designed electrical generators. Carrier Corporation is a
subsidiary of United Technologies Corporation.
PAUL M. BETZ. Mr. Betz has served as General Manager of the Wells
Division of Valentec since January 1997. Mr. Betz served as Vice President of
Sales and Marketing for both Valentec and the Corporation from October 1995 to
December 1996. From April 1994 to September 1995, Mr. Betz served as Director
of Sales and Marketing for Automated Solutions Incorporated. From July 1982 to
March 1994, Mr. Betz held several engineering, program management and account
management positions with General Motors Corporation, General Electric
Corporation and their joint venture affiliate, FANUC, Ltd. of Japan.
GEORGE D. PAPADOPOULOS. Mr. Papadopoulos has served as Corporate
Controller and Secretary of the Corporation since March 1997. From April 1996
to March 1997, Mr. Papadopoulos served as Corporate Controller of
International Post Limited, a leading provider of post-production services for
commercial and advertising markets. From July 1993 to April 1996, Mr.
Papadopoulos was employed by Arthur Andersen LLP, a leading public accounting
firm, serving in various capacities, the most recent of which was as a Senior
Accountant.
DANIEL R. SMITH. Mr. Smith has served as Treasurer of the Corporation
since March 1997. From July 1991 to March 1997, Mr. Smith was employed by
Arthur Andersen LLP, a leading public accounting firm, as a Manager.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Chief
Executive Officer of the Corporation and the four other most highly
compensated executive officers of the Corporation for the Corporation's fiscal
year ended March 31, 1997 (each person appearing in the table is referred to
as a "Named Executive"). The amounts reflected in the table for the period
during fiscal year 1995 prior to the Corporation's initial public offering in
May 1994 (the "Initial Public Offering"), represent an allocation of the total
compensation paid by Valentec to the Named Executives based on an estimate of
the portion of time spent by the Named Executives on matters relating to the
Valentec Automotive Division and Valentec Galion which were transferred to the
Corporation immediately prior to the Initial Public Offering (the "Transfer of
Assets").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------- -------------------- -------------------
OTHER ANNUAL RESTRICTED SECURITIES LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($) OPTIONS(#) ($) ($)(1)
------------------ ------ ------ ----- ------------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert A. Zummo, 1997 297,000 0 0 0 10,000 0 9,600
Chairman of the Board, 1996 275,000 60,000 0 0 10,000 0 7,680
President and Chief 1995 250,000 75,000 0 0 50,000 0 8,000
Executive Officer ....
Victor Guadagno, 1997 162,000 0 0 0 5,000 0 6,000
President, Valentec 1996 150,000 25,000 0 0 15,000 0 6,231
Systems, Inc. ........ 1995 132,212 0 0 0 10,000 0 6,000
John L. Hakes,
President,
European 1997 164,273 0 0 0 10,000 0 0
Operations(2) ........ 1996 147,000 46,500 0 0 25,000 0 0
Paul L. Sullivan,
President, Automotive 1997 145,000 0 0 0 5,000 0 6,000
Safety Components 1996 145,918 25,000 0 0 5,000 0 6,000
Asia-Pacific, Ltd.(3) 1995 123,079 25,000 0 0 25,000 0 6,923
W. Hardy Myers,
President, North 1997 142,000 0 0 0 10,000 0 6,000
American Automotive 1996 132,000 40,000 0 0 10,000 0 4,800
Operations(4) ....... 1995 120,000 50,000 0 0 50,000 0 6,000
<FN>
- ---------
(1) Amounts reflect automobile allowances.
(2) Mr. Hakes joined the Corporation in June 1995.
(3) Mr. Sullivan joined the Corporation in September 1994. Mr. Sullivan
became Vice President, North American Automotive Operations effective
September 26, 1996. Prior to such time, Mr. Sullivan served as President,
North American Automotive Operations.
(4) From February 15, 1997 to the time of Mr. Myers' departure from the
Corporation in May 1997, Mr. Myers was the President, North American
Automotive Operations, Treasurer and Secretary of the Corporation. Prior
to February 15, 1997, Mr. Myers served as Chief Financial Officer,
Treasurer, Secretary and a director of the Corporation.
</TABLE>
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following options were granted to the Named Executives
during fiscal year 1997 under the Corporation's 1994 Stock Option Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED ANNUAL
RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------------- ----------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Zummo 10,000 4.23% $14.17 5/10/2001(1) $39,149 $86,509
John L. Hakes .. 10,000 4.23% $12.88 5/10/2003(1) $52,435 $122,195
Victor Guadagno 5,000 2.12% $12.88 5/10/2006(1) $40,501 $102,637
Paul L. Sullivan 5,000 2.12% $12.88 5/10/2006(1) $40,501 $102,637
W. Hardy Myers . 10,000 4.23% $12.88 5/10/2006(1) $81,002 $205,274
<FN>
- --------
(1) Becomes exercisable in four equal installments beginning May 1997.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes for each of the Named Executives the
number of stock options exercised during the fiscal year ended March 31, 1997,
the aggregate dollar value realized upon exercise, the total number of
unexercised options, if any, held at March 31, 1997 and the aggregate dollar
value of in-the-money, unexercised options, held at March 31, 1997. The value
realized upon exercise is the difference between the fair market value of the
underlying stock on the exercise date and the exercise or base price of the
option. The value of unexercised, in-the-money options at fiscal year-end is
the difference between its exercise or base price and the fair market value of
the underlying stock on March 31, 1997, which was $10.00 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS AT FISCAL YEAR- THE-MONEY OPTIONS AT
ACQUIRED ON VALUE END (#) FISCAL YEAR- END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Zummo.......... 0 NA 27,500/42,500 *
John L. Hakes............ 0 NA 6,250/28,750 *
Victor Guadagno.......... 0 NA 7,500/21,250 *
Paul L. Sullivan......... 0 NA 13,750/21,250 *
W. Hardy Myers........... 0 NA 27,500/42,500 *
<FN>
- ------------
* None of the options referenced in the chart were in-the-money on March 31, 1997.
</TABLE>
11
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Zummo serves as President and Chief Executive Officer of the
Corporation pursuant to a five-year employment agreement which became
effective upon the consummation of the Initial Public Offering. The employment
agreement provides that Mr. Zummo will allocate at least 80% of his working
time, attention and energies to the affairs of the Corporation and the
remaining 20% to Valentec; however, Mr. Zummo has been spending substantially
all of his working time performing services for the Corporation since the
closing of the Valentec Acquisition. Mr. Zummo's base salary for the first
year of the term was $250,000, subject to annual increases at the discretion
of the Board of Directors. In addition to the base salary, the employment
agreement provides for an annual incentive bonus. Mr. Zummo was not awarded a
bonus for fiscal 1997. In July 1997, the Compensation Committee of the Board
of Directors approved a bonus to Mr. Zummo of $75,000, contingent upon the
completion of the acquisition by the Corporation of the air restraints and
technical products division of JPS Automotive, L.P. (the "JPS Acquisition")
based on Mr. Zummo's performance in connection with such acquisition. In the
event Mr. Zummo's employment is terminated without "Cause" (as defined in the
employment agreement), the Corporation is required to pay Mr. Zummo an amount
equal to his full salary and incentive bonus in effect for the year
immediately preceding termination for the remainder of the full term. If Mr.
Zummo's employment is terminated by the Corporation in connection with a
"change in control" (as defined in the employment agreement), the Corporation
is required to pay Mr. Zummo an amount equal to two times his full salary and
bonus in respect of the year immediately preceding termination. In addition,
if Mr. Zummo's employment agreement is not renewed by the Corporation after
the expiration of the initial five-year term other than for "Cause," the
Corporation would be required to continue to pay Mr. Zummo's full salary and
incentive bonus in effect for the year immediately preceding termination for a
period of one year from the time of termination.
Mr. Cresante serves as Executive Vice President and Chief Operating
Officer of the Corporation pursuant to a three-year employment agreement which
became effective in May 1997. The employment agreement provides that Mr.
Cresante will allocate at least 80% of his working time, attention and
energies to the affairs of the Corporation and the remaining 20% to Valentec;
however, Mr. Cresante has been spending substantially all of his working time
performing services for the Corporation since the closing of the Valentec
Acquisition. Mr. Cresante's base salary for the first year of the term is
$235,000, subject to annual increases at the discretion of the Board of
Directors. In addition to the base salary, the employment agreement provides
for an annual incentive bonus, including a minimum bonus of $50,000 for fiscal
1998. Pursuant to the terms of the employment agreement, Mr. Cresante was
awarded options to purchase 225,000 shares of Common Stock issued on May 19,
1997 under the Plan. The issuance of such options is subject to the conditions
set forth in the employment agreement, including the approval by the
stockholders of the Corporation of any increase in the number of shares
authorized for issuance under the Plan as may be necessary for the issuance of
such options. In the event Mr. Cresante's employment is terminated without
"Cause" (as defined in the employment agreement), the Corporation is required
to pay Mr. Cresante an amount equal to his full salary and incentive bonus in
effect for the year immediately preceding termination for the remainder of the
full term. If Mr. Cresante's employment is terminated by the Corporation in
connection with a "change in control" (as defined in the employment
agreement), the Corporation is required to pay Mr. Cresante an amount equal to
two times his full salary and incentive bonus in respect of the year
immediately preceding termination. In addition, if Mr. Cresante's employment
agreement is not renewed by the Corporation after the expiration of the
initial three-year term other than for "Cause," the Corporation would be
required to continue to pay Mr. Cresante's full salary and incentive bonus in
effect for the year immediately preceding termination for a period of one year
from the time of termination.
Mr. Kaplan serves as Executive Vice President and Chief Financial Officer
of the Corporation pursuant to a three-year employment agreement which became
effective in February 1997. The employment agreement provides that Mr. Kaplan
will allocate at least 80% of his working time, attention and energies to the
affairs of the Corporation and the remaining 20% to Valentec; however, Mr.
Kaplan has been spending substantially all of his working time performing
services for the Corporation since the closing of the Valentec Acquisition.
Mr. Kaplan's base salary for the first year of the term is $220,000, subject
to annual increases at the discretion of the Board of Directors. In addition
to the base salary, the employment agreement provides for an annual incentive
bonus, including a minimum bonus of $30,000 for fiscal 1998. Pursuant to the
terms of the employment agreement, Mr. Kaplan was awarded options under the
Plan in accordance with the following schedule: (i) options to purchase
125,000 shares of Common Stock were issued on February 15, 1997;
12
<PAGE>
(ii) options to purchase 50,000 shares of Common Stock were issued on April 1,
1997 and (iii) options to purchase 50,000 shares of Common Stock are to be
issued on April 1, 1998, unless Mr. Kaplan is not, for any reason, an employee
of the Corporation on such date. The issuance of such options is subject to
the conditions set forth in the employment agreement, including the approval
by the stockholders of the Corporation of any increase in the number of shares
authorized for issuance under the Plan as may be necessary for the issuance of
such options. In the event Mr. Kaplan's employment is terminated without
"Cause" (as defined in the employment agreement), the Corporation is required
to pay Mr. Kaplan an amount equal to his full salary and incentive bonus in
effect for the year immediately preceding termination for the remainder of the
full term. If Mr. Kaplan's employment is terminated by the Corporation in
connection with a "change in control" (as defined in the employment
agreement), the Corporation is required to pay Mr. Kaplan an amount equal to
two times his full salary and incentive bonus in respect of the year
immediately preceding termination. In addition, if Mr. Kaplan's employment
agreement is not renewed by the Corporation after the expiration of the
initial three-year term other than for "Cause," the Corporation would be
required to continue to pay Mr. Kaplan's full salary and incentive bonus in
effect for the year immediately preceding termination for a period of one year
from the time of termination.
Mr. Guadagno serves as President of Valentec Systems, Inc. pursuant to a
two-year employment agreement which became effective in September 1994, the
term of which was extended to September 1997. Mr. Guadagno's base salary for
the first year of the term was $150,000, and is subject to annual increases at
the discretion of the Board of Directors. In addition to the base salary, the
employment agreement provides for an annual inventive bonus. Mr. Guadagno was
not awarded a bonus for fiscal 1997. In the event Mr. Guadagno's employment is
terminated without "Cause" (as defined in the employment agreement), the
Corporation would be required to continue to pay Mr. Guadagno's full salary
for a period of twelve months from the time of termination. In addition, if
Mr. Guadagno's employment agreement is not renewed by the Corporation after
the expiration of the term other than for Cause, the Corporation would be
required to continue to pay Mr. Guadagno's full salary for a period of six
months from the time of termination.
Mr. Hakes serves as President, European Operations pursuant to an
employment agreement (the "Hakes Employment Agreement") which became effective
in June 1995. The agreement has an initial term of one year and may be
terminated thereafter on twelve months' notice by either the Corporation or
Mr. Hakes. Mr. Hakes' base salary for the first year of the term is
(pound)95,000, and is subject to annual increases at the discretion of the
Board of Directors. In addition to the base salary, the Hakes Employment
Agreement provides for an annual incentive bonus. Mr. Hakes was not awarded a
bonus for fiscal 1997. If Mr. Hakes' employment is terminated by the
Corporation in connection with "a change in control" (as defined in the Hakes
Employment Agreement), the Corporation is required to pay Mr. Hakes an amount
equal to his full salary effective on the date of the change in control for a
period of one full year. Pursuant to the Hakes Employment Agreement, Mr. Hakes
also provides services to VIL in return from compensation paid by VIL.
Mr. Sullivan serves as President of Automotive Safety Components
Asia-Pacific Ltd. pursuant to a two-year employment agreement which became
effective in September 1994, the term of which was extended to September 1997.
Mr. Sullivan's base salary for the first year of the term was $125,000, and is
subject to annual increases at the discretion of the Board of Directors. In
addition to the base salary, the employment agreement provides for an annual
incentive bonus. Mr. Sullivan was not awarded a bonus for fiscal 1997. In the
event Mr. Sullivan's employment is terminated without "Cause" (as defined in
the employment agreement), the Corporation would be required to continue to
pay Mr. Sullivan's full salary for a period of twelve months from the time of
termination. In addition, if Mr. Sullivan's employment agreement is not
renewed by the Corporation after the expiration of the term other than for
"Cause," the Corporation would be required to continue to pay Mr. Sullivan's
full salary for a period of six months from the time of termination.
From February 1997 until his departure from the Corporation in May 1997,
Mr. Myers served as President, North American Automotive Operations, Treasurer
and Secretary of the Corporation. Prior to February 1997, Mr. Myers served as
Chief Financial Officer, Treasurer and Secretary of the Corporation pursuant
to a three-year employment agreement which became effective upon the
consummation of the Initial Public Offering. The employment agreement provided
that Mr. Myers would allocate at least 80% of his working time, attention and
energies to the affairs of the Corporation. Mr. Myers' base salary for the
first year of the term was $150,000, and was subject to annual increases at
the discretion of the Board of Directors. In addition to the base salary, Mr.
Myers' employment agreement provided for an annual incentive bonus. Mr. Myers
was not awarded a bonus for fiscal 1997. Pursuant to the employment agreement,
in the event Mr. Myers'
13
<PAGE>
employment was terminated without "Cause" (as defined in the employment
agreement), the Corporation would have been required to pay Mr. Myers an
amount equal to his full salary and incentive bonus in effect for the year
immediately preceding termination for the remainder of the full term of
employment. Pursuant to the employment agreement, if Mr. Myers' employment was
terminated by the Corporation in connection with a "change in control" (as
defined in the employment agreement), the Corporation would have been required
to pay Mr. Myers an amount equal to two times his full salary and bonus in
respect of the year immediately preceding termination. The Corporation has
entered into a Consulting Agreement (the "Consulting Agreement") with Mr.
Myers pursuant to which Mr. Myers will provide consulting services to the
Corporation for a term of one year. As compensation for such services, Mr.
Myers will receive $184,000 paid in twelve monthly installments; the options
previously awarded to Mr. Myers under the Plan have been fully vested pursuant
to the Consulting Agreement and are available for exercise within a ninety day
period from the termination date of the Consulting Agreement; and the
Corporation will provide to Mr. Myers certain benefits under the Corporation's
benefit plans as well as certain life and health insurance benefits.
BOARD OF DIRECTORS
Directors who are employees of the Corporation receive no compensation,
as such, for service as members of the Board. Directors who are not employees
of the Corporation receive an annual retainer of $15,000 and an attendance fee
of $1,250 for each Board meeting or committee meeting attended in person by
that director and $300 for each telephonic Board meeting or committee meeting
in which such director participated; provided that fees for in-person meetings
of the Board and committees shall not exceed $1,250 per day. All Directors are
reimbursed for expenses incurred in connection with attendance at meetings.
Effective as of April 1, 1997, the annual retainer for directors who are not
employees of the Corporation was increased to $20,000.
STOCK OPTION PLAN
On January 27, 1994 the Board of Directors of the Corporation adopted,
and the stockholders approved, the Plan and on May 4, 1996 and July 29, 1996,
the Board of Directors approved certain amendments to the Plan which were
subsequently approved by the stockholders (as previously defined, the "Plan").
The Board of Directors of the Corporation adopted amendments to the Plan on
July 22, 1997, and such amendments are being submitted to stockholders for
approval. The Plan is described under the caption "Approval of the Amendments
to the 1994 Stock Option Plan."
DIRECTORS' OPTIONS
Each non-employee director currently receives an option to purchase 2,500
shares of Common Stock, vesting in equal installments over a four-year period,
in each calendar year in which he serves as a director of the Corporation. The
exercise price of the shares of Common Stock subject to options granted to
each non-employee director is the fair market value of the shares of Common
Stock on the date of grant. Options granted to non-employee directors, with
limited exceptions, may only be exercised within ten years of the date of
grant and while the recipient of the option is a director of the Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Suozzi served as a member of the Compensation Committee of the Board
of Directors during fiscal year 1997. Mr. Suozzi is a director of Valentec and
owned approximately 21% of all of the issued and outstanding shares of
Valentec prior to selling all such shares to the Corporation pursuant to the
Valentec Acquisition. See "Certain Transactions".
CERTAIN TRANSACTIONS
Pursuant to a definitive Stock Purchase Agreement, dated as of May 22,
1997, the Corporation acquired (the "Valentec Acquisition") all of the
outstanding stock of Valentec from Robert A. Zummo, Francis X. Suozzi and the
Valentec International Corporation Employee Stock Ownership Plan (the "ESOP").
Valentec was the Corporation's largest
14
<PAGE>
shareholder immediately prior to the Valentec Acquisition owning approximately
27% of the issued and outstanding shares of Common Stock. Immediately prior to
the Valentec Acquisition, Robert A. Zummo, the President and Chief Executive
Officer of the Corporation, was also the President, Chief Executive Officer
and owner of approximately 74% of all of the issued and outstanding shares of
Valentec, and Francis X. Suozzi, a consultant to and a director of Valentec
and a director of the Corporation, was the owner of approximately 21% of all
of the issued and outstanding shares of Valentec. The consideration paid to
the shareholders of Valentec in connection with the Valentec Acquisition
consisted of an aggregate of 1,369,200 newly issued shares of Common Stock,
which was approximately equal to the number of shares of Common Stock held by
Valentec. The shares of Common Stock held by Valentec have become treasury
shares and are not considered outstanding. Therefore, there has been no
increase in the Corporation's outstanding shares as a result of the Valentec
Acquisition. Messrs. Zummo and Suozzi now beneficially own, directly,
approximately 20.2% and 6.5%, respectively, of the outstanding Common Stock of
the Corporation. In addition, Messrs. Zummo and Suozzi and the ESOP received
demand and piggyback registration rights in connection with the Valentec
Acquisition. Indebtedness assumed by the Corporation in connection with the
Valentec Acquisition was approximately $14.7 million as of May 22, 1997,
inclusive of intercompany indebtedness of $4.3 million (which is eliminated in
consolidation) as a result of the Valentec Acquisition, of which approximately
$7.1 million has been repaid or will be repaid in the near term. The
indebtedness assumed by the Corporation included $2.8 million in indebtedness
to VIL of which $800,000 was evidenced by a demand note (of which approximately
$530,000 has been repaid) and $2.0 million is evidenced by a five year note
payable in monthly installments of approximately $40,000. Both such notes bear
interest at 7% per annum. Subsequent to the closing of the Valentec Acquisition
through June 30, 1997, an aggregate of approximately $28,000 in principal and
$12,000 in interest has been paid to VIL by the Corporation under the five year
note.
The purchase price for the Valentec Acquisition was negotiated between
Valentec and a special committee consisting of independent members of the
Board of Directors of the Corporation. The special committee was advised by
independent legal counsel and an independent financial advisor. The
Corporation's Board of Directors received an opinion from the special
committee's financial advisor as to the fairness from a financial point of
view of the consideration received by the Corporation to the Corporation's
shareholders other than Valentec.
Immediately prior to the Valentec Acquisition, Mr. Zummo acquired the
88.8% equity interest in VIL owned by Valentec for a cash payment of $75,000.
Prior to the Valentec Acquisition, certain agreements and arrangements
existed between the Corporation and Valentec. Robert A. Zummo has been an
officer and director of Valentec since 1993, and until the Valentec
Acquisition, was a stockholder of Valentec. Until his departure from the
Corporation in May 1997, W. Hardy Myers was an officer and director of
Valentec. Prior to the consummation of the Valentec Acquisition, Messrs.
Zummo, Cresante and Kaplan were required to spend at least 80% of their
working time performing services for the Corporation with the remaining
portion of their time spent performing services for Valentec and they were
compensated separately by Valentec and the Corporation for the respective
services rendered as employees to each Corporation. Messrs. Zummo, Cresante
and Kaplan presently spend substantially all of their working time performing
services for the Corporation. Mr. Hakes, the president of the Corporation's
European Operations, also provides part time services as a managing director
to VIL pursuant to the Hakes Employment Agreement and is paid separately for
such services by VIL.
Prior to the Valentec Acquisition, the Corporation purchased from
Valentec metal components for inclusion in its passenger side airbags at
prices approved by the Corporation's customers for automotive airbags.
Purchases by the Corporation from Valentec for such components during fiscal
year 1997 totalled $2.6 million. Valentec also supplies directly to such
customers metal components for inclusion in airbag systems manufactured by
such customers.
During the first year following the Initial Public Offering, the
Corporation believed that it was more cost-efficient to continue to receive
certain of the corporate services described above and certain other services
from Valentec, as opposed to duplicating these services on a stand-alone
basis. Accordingly, the Corporation and Valentec entered into a corporate
services agreement (the "Corporate Services Agreement") pursuant to which
Valentec has provided certain facilities and services to the Corporation and
its Subsidiaries, including corporate headquarters, and has charged the
Corporation for its pro rata portion of those costs. In addition, the
Corporation has provided certain executive, financial, accounting and treasury
15
<PAGE>
services to Valentec and has charged Valentec for its pro rata portion of
those costs. There was also a joint purchasing of insurance which, in fiscal
1997, was arranged and paid for by the Corporation and for which Valentec
reimbursed the Corporation for its pro rata share. For fiscal year 1997, the
Corporation charged Valentec $726,000 for the foregoing services. The
Corporate Services Agreement had an initial term of twelve months, subject to
renewal each year thereafter and was terminable at the Corporation's option.
The Corporate Services Agreement was terminated in connection with the
Valentec Acquisition.
The Corporation's U.K. subsidiary and VIL are parties to a Shared
Services Agreement, relating to administration, financial, engineering and
other shared costs. Payments from the Corporation to VIL for fiscal 1997 was
$358,000 under the Shared Services Agreement.
The Corporation sub-leases space from VIL for its European automotive
operations pursuant to a separate sub-lease agreement and facility usage
agreement in the U.K. In addition to the lease payments of approximately
(pound)70,000 per year under the sub-lease agreement, the facility usage
agreement provides for the Corporation to be allocated its pro rata portion of
the manufacturing overhead (e.g. utilities, plant security) and general and
administrative expenses of the facility (e.g. purchasing, plant accounting).
These allocations are based primarily on square footage and on volume of
production. The sub-lease and facility usage agreement relating to the
European automotive operations each have an initial term expiring in 2003.
Payments from the Corporation to VIL under the lease for fiscal year 1997 were
$117,000.
Prior to the Valentec Acquisition, Valentec subcontracted the manufacture
of certain ammunition and automotive components to the Corporation, subject to
the Corporation's manufacturing capacity and certain contractual limitations.
Under these subcontracts, the Corporation was entitled to receive all
compensation relating to the manufacture of such components. The amount paid
by Valentec to the Corporation under such subcontracts for fiscal year 1997
was $104,000.
Under federal law, the Corporation and certain of its subsidiaries would
be subject to liability for the consolidated federal income tax liabilities of
the consolidated group during the period when Valentec was the common parent.
As part of the Transfer of Assets, Valentec agreed, however, to indemnify the
Corporation and such subsidiaries for such federal income tax liability (and
certain state and local tax liabilities) that the Corporation or any such
subsidiary is actually required to pay. Prior to the Valentec Acquisition and
to the extent that Valentec could offset the taxable income generated by
Valentec against losses, if any, generated by such subsidiaries for periods
prior to the Transfer of Assets, the agreements relating to the Transfer of
Assets may have benefited Valentec insofar as loss carry-forwards which would
otherwise have been available to the Corporation would be utilized by
Valentec.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY AND POLICY
The Compensation Committee's policy is to design executive compensation
packages that reward the achievement of both short-term and long-term
objectives of the Corporation. Under this approach, the attainment of yearly
growth in sales and earnings and other short-term targets is compensated
through yearly bonuses and long-term performance of the Corporation is
rewarded through the grant of stock options under the Plan. The bonuses and
stock options are in addition to executives' yearly base salaries, which are
determined in a manner to be competitive with companies which are similarly
situated to the Corporation.
The Compensation Committee has determined that yearly bonuses will be
awarded to the executive officers primarily based on the Corporation's
earnings. The Compensation Committee believes that earnings is an appropriate
measure of performance because it promotes the achievement of corporate-wide
goals. In determining yearly bonuses, the Compensation Committee also
considers outstanding achievement in areas other than the Corporation's
earnings. For example, the Corporation has considered the contributions made
by its executive officers in diversifying the Corporation's customer base,
attaining major new customers, identifying appropriate acquisition candidates
and the consummation of
16
<PAGE>
significant financing transactions of the Corporation. See "Executive
Compensation--Employment Agreements." No bonuses were paid in respect of
fiscal 1997.
The Compensation Committee believes that, since the long-term performance
of the Corporation is reflected in the value of the Corporation's Common
Stock, the grant of options is an appropriate method of compensating
executives for the long-term performance of the Corporation. The Compensation
Committee also believes that the grant of stock options aligns the interest of
the executives with those of the Corporation's stockholders. The Compensation
Committee determines the recipients of stock option grants and the size of the
grants consistent with these principles, and based on the employee's
performance and position with the Corporation. The Corporation generally
utilizes vesting periods to encourage executives to continue in the employ of
the Corporation.
To date, the Compensation Committee approved the grant of a total of
852,499 Options under the Plan to a number of employees and executives of the
Corporation since the Initial Public Offering. These grants were intended to
reward employees for their efforts in contributing to the dramatic growth of
the Corporation's business and to incentivize the Corporation's employees to
continue to contribute to such growth. These grants include an aggregate of
400,000 Options issued in connection with the hiring of Messrs. Kaplan and
Cresante. The Compensation Committee believed it was appropriate to grant
Options at these levels in order to attract executive officers of the caliber
of these individuals.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Effective as of the closing of the Initial Public Offering, Mr. Zummo's
compensation has been determined pursuant to a five-year employment agreement.
(See "Executive Compensation--Employment Agreements" above.) Pursuant to such
employment agreement, Mr. Zummo was paid a base salary of $297,000 for fiscal
year 1997, and his base salary is subject to annual increases at the
discretion of the Board of Directors. The level of Mr. Zummo's salary is based
on a number of factors, including a review of compensation paid by companies
which are similarly situated to the Corporation. In July 1997, the
Compensation Committee of the Board of Directors approved a bonus to Mr. Zummo
of $75,000, contingent upon the completion of the JPS Acquisition, which was
consummated on July 24, 1997. In approving the bonus, the Compensation
Committee took into account, among other things, Mr. Zummo's contribution in
identifying, negotiating and consummating the JPS Acquisition which is in line
with the Corporation's strategic objectives of obtaining new airbag business
and diversifying the Corporation's customer base, integrating low-cost
manufacturing capabilities and increasing manufacturing capacity and pursuing
geographic expansion. In addition, in line with the Compensation Committee's
philosophy of rewarding long-term performance goals through the granting of
stock options, Mr. Zummo was awarded an option to purchase 10,000 shares of
Common Stock under the Plan during fiscal year 1997.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction for compensation over $1,000,000 paid to the Corporation's Chief
Executive Officer and certain other highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the deduction
limit if certain requirements are met. The Plan is intended to comply with
these requirements. The Compensation Committee does not believe that the
applicable renumeration to be paid to the Chief Executive Officer or such
other highly compensated executives will exceed the deduction limit set by
Section 162(m).
COMPENSATION COMMITTEE
Joseph J. DioGuardi
Francis X. Suozzi
Robert J. Torok
17
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Corporation's Common Stock for the period from May 6, 1994 (the date the
Corporation's stock became publicly traded) through March 31, 1997 with the
cumulative total return of the Nasdaq Composite Index (U.S.) and an index of
peer companies constructed by the Corporation. Included in the peer group are
Arvin Industries, Inc., Breed Technologies Incorporated, OEA Inc., Special
Devices, Inc., and Tower Automotive, Inc. The graph assumes that the value of
the investment in the Common Stock was $100 on May 6, 1994 and that all
dividends were reinvested.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
TOTAL RETURN ANALYSIS 5/6/94 3/31/95 3/31/96 3/31/97
------ ------- ------- -------
Safety Components International ..... $100.00 $163.44 $120.43 $86.02
Peer Group .......................... $100.00 $79.43 $83.75 $125.14
Nasdaq Composite (US) .............. $100.00 $112.93 $132.11 $166.71
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ITEM 2. APPROVAL OF THE AMENDMENTS TO THE 1994 STOCK OPTION PLAN
On January 27, 1994 the Board of Directors of the Corporation adopted,
and the stockholders approved, the Plan. On May 4, 1996 and July 29, 1996 the
Board of Directors approved certain amendments to the Plan which were
subsequently approved by the shareholders of the Corporation. The Plan
currently provides for the issuance of options (each an "Option") to purchase
up to 550,000 shares of Common Stock. Of this total, 510,000 shares are
issuable pursuant to either Incentive Stock Options ("ISOs") qualifying under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
Non-Qualified Stock Options ("NQSOs") granted to officers, key employees and
consultants (approximately 30 persons) of the Corporation and 40,000 are
issuable pursuant to NQSOs granted to non-employee directors of the
Corporation (currently 3 persons). The Plan is designed to provide an
incentive to officers, key employees, consultants and non-employee directors
of the Corporation by making available to them an opportunity to acquire a
proprietary interest or to increase their proprietary interest in the
Corporation. As of July 15, 1997, Options to purchase 852,499 shares of Common
Stock were granted under the Plan to officers, key employees and consultants
(of which Options to purchase 400,000 shares have been issued to newly-hired
officers of the Corporation subject to approval of the shareholders of the
Corporation of any increase in the number of shares available for grant under
the Plan as may be necessary for the issuance of such options) and Options to
purchase 21,000 shares of Common Stock were issued to non-employee directors.
The Board of Directors of the Corporation believes that the authorization
of additional shares of Common Stock which may be issued pursuant to Options
granted to officers, key employees and consultants, as well as non-employee
directors under the Plan would assist the Corporation in attracting and
retaining qualified employees, consultants and directors. Accordingly, on July
22, 1997, the Board of Directors approved an amendment to the Plan which would
increase the aggregate number of shares of Common Stock issuable pursuant to
Options granted under the Plan to 1,050,000 shares pursuant to Options granted
to officers, key employees and consultants and (ii) 50,000 shares pursuant to
Options granted to non-employee directors. On such date, the Board of
Directors also approved an amendment to the Plan which would (i) increase the
number of NQSOs that a participant may be granted under the Plan in any one
fiscal year to NQSOs to purchase 200,000 shares of Common Stock, and (ii)
require that the Plan be administered by a Committee composed of not less than
two directors each of whom qualifies as a "Non-Employee Director" within the
meaning of Rule 16b-3 promulgated under the Exchange Act. The Board of
Directors recommended that the amendments to the Plan be presented to the
Corporation's stockholders for approval. If the amendments to the Plan are not
approved, Mr. Cresante's Options and a portion of Mr. Kaplan's Options would
not be issued under the Plan and no additional Options would be granted under
the Plan after the Options initially authorized are granted. The increased
number of shares of Common Stock subject to the Plan would constitute
approximately 10% of the outstanding shares of Common Stock on a fully diluted
basis.
The following is a summary of the material provisions of the Plan. Such
summary should, however, be read in conjunction with, and is qualified in its
entirety by reference to, the complete text of the Plan, as proposed to be
amended, as set forth in Exhibit A to this Proxy Statement.
Administration of the Plan. The Stock Option Committee of the Board of
Directors administers the Plan. The Stock Option Committee has the full power
and authority, subject to the provisions of the Plan, to designate
participants, grant Options and determine the terms of all Options, except
that non-employee directors are granted Options only pursuant to the formula
described below. In addition, the Plan currently provides that no participant
may be granted NQSOs to purchase more than 100,000 shares of Common Stock in
any one fiscal year. The amendments to the Plan would increase the number of
NQSOs that a participant may be granted under the Plan in any one fiscal year
to NQSOs to purchase 200,000 shares of Common Stock. The Stock Option
Committee is required to make adjustments with respect to Options granted
under the Plan in order to prevent dilution or expansion of the rights of any
holder. Members of the Stock Option Committee are not eligible to receive
Options under the Plan other than pursuant to the formula for non-employee
directors. The Plan requires that the Stock Option Committee be composed of at
least two directors each of whom is an "outside director" as that term is
defined for purposes of Section 162(m)of the Internal Revenue Code of 1986, as
amended (the "Code"). The amendments to the Plan would require that the Stock
Option Committee members also be "Non-Employee Directors" within the meaning
of Rule 16b-3 promulgated under the Exchange Act. Each member of the Stock
Option Committee is a "Non-Employee Director" within the meaning of Rule 16b-3
under the Exchange Act and an "outside director" as that term is defined for
purposes of Section 162(m) of the Code.
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The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board of
Directors of the Corporation, but no amendment without the approval of the
stockholders of the Corporation shall be made if shareholder approval would be
required under Section 162(m) of the Code, Section 422 of the Code, Rule 16b-3
under the Exchange Act or any other law or rule of any governmental authority,
stock exchange or other self-regulatory organization to which the Corporation
is subject. Neither the amendment, suspension nor termination of the Plan
shall, without the consent of the holder of such Option, alter or impair any
rights or obligations under any Option theretofore granted.
Options Issued Under Stock Option Plan. The terms of specific Options are
determined by the Stock Option Committee. The per share exercise price of the
Common Stock subject to an Option shall not be less than 100% of the fair
market value of the shares of Common Stock on the date of grant. However, in
the case of an ISO granted to a holder of shares representing at least 10% of
the total combined voting power of the Corporation, or of any subsidiary or
parent thereof (a "10% Shareholder"), the per share exercise price shall not
be less than 110% of the fair market value of the Common Stock on the date of
the grant. The term of each NQSO will be specified by the Stock Option
Committee, which will generally not exceed 10 years from the date of grant.
However, the term of ISOs must not exceed 10 years after the date of the grant
(five years, if granted to a 10% Shareholder). In addition, the fair market
value of shares of Common Stock subject to ISOs (determined as of the date
such ISOs are granted) exercisable for the first time by any individual during
any calendar year may in no event exceed $100,000.
Upon the exercise of an Option, the Option holder shall pay the
Corporation the exercise price plus the amount of the required federal and
state withholding taxes, if any. The Plan allows the participant to pay the
exercise price (i) in cash, shares of Common Stock, outstanding Options or
other consideration or any combination thereof or (ii) pursuant to a
broker-assisted cashless exercise program, provided in each case that such
methods avoid "short-swing" trading profits to the participant under Section
16(b) of the Exchange Act. The Plan also allows participants to elect to have
shares withheld upon exercise for the payment of withholding taxes.
The unexercised portion of any Option granted to an officer or key
employee under the Plan will generally be terminated (a) thirty (30) days
after the date on which the optionee's employment is terminated for any reason
other than (i) Cause (as defined in the Plan), (ii) retirement or mental or
physical disability, or (iii) death; (b) immediately upon the termination of
the optionee's employment for Cause; (c) three months after the date on which
the optionee's employment is terminated by reason of retirement or mental or
physical disability; or (d)(i) 12 months after the date on which the
optionee's employment is terminated by reason of the death of the optionee, or
(ii) three months after the date on which the optionee shall die if such death
shall occur during the three-month period following the termination of the
optionee's employment by reason of retirement or mental or physical
disability. Generally, any Option granted under the Plan which is forfeited,
expires or terminates prior to vesting or exercise will again be available for
award under the Plan.
Directors' Options. The current Plan provides that each non-employee
director who is serving on the Board on December 31 of a year during the term
of the Plan beginning in calendar year 1996 will automatically receive a NQSO
to purchase 2,500 shares of Common Stock on January 1 of the following year.
The exercise price of the shares of Common Stock subject to Options granted to
each non-employee director shall be 100% of the fair market value of the
shares of Common Stock on the date of grant. Options granted to non-employee
directors, with limited exceptions, may only be exercised within ten years of
the date of grant and while the recipient of the Option is a director of the
Corporation. Options granted to non-employee directors terminate (i) upon
termination of the director's service as a director of the Corporation for any
reason other than mental or physical disability or death, (ii) three months
after the date the director ceases to serve as a director of the Corporation
due to physical or mental disability or (iii) (A) 12 months after the date the
director ceases to serve as a director due to the death of the director or (B)
three months after the death of the director if such death shall occur during
the three month period following the date the director ceased to serve as a
director of the Corporation due to physical or mental disability. Except as
discussed herein, Options granted to non-employee directors are on the same
terms and conditions as all other Options granted pursuant to the Plan.
As of July 15, 1997 the following individuals and groups had been granted
Options under the Plan in the amounts indicated: Robert A. Zummo (Chairman of
the Board, President and Chief Executive Officer): 75,000 shares; Victor
20
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Guadagno (President, Valentec Systems, Inc.): 30,000 shares; John L. Hakes
(President, European Operations): 35,000; Paul L. Sullivan (President,
Automotive Safety Components Asia-Pacific Ltd.): 35,000 shares; W. Hardy Myers
(former President, North American Automotive Operations): 70,000; Joseph J.
DioGuardi (Director): 7,000 shares; Francis X. Suozzi (Director): 7,000
shares; Robert J. Torok (Director): 7,000 shares; all current executive
officers as a group: 630,000 shares; all current non-executive officer
directors as a group: 21,000 shares; and all employees, including all current
officers, who are not executive officers, as a group: 138,874 shares. As of
July 22, 1997, the market value of the Common Stock underlying outstanding
Options was approximately $8,886,083.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON.
Each of Messrs. Kaplan and Cresante have a direct interest in the
approval of the amendments to the Plan to (i) increase the number of shares of
Common Stock subject to the Plan from 550,000 shares in the aggregate to
1,050,000 in the aggregate and (ii) increase the number of NQSOs that a
participant may be granted under the Plan in any one fiscal year from NQSOs to
purchase 100,000 shares of Common Stock to NQSOs to purchase 200,000 shares of
Common Stock by reason of their Options under the Plan being subject to the
approval of such amendments by the Corporation's stockholders.
NEW PLAN BENEFITS
The following table sets forth the amount of Options which will be
granted to the three Non-Employee Directors, as a group, under the Plan in
each year:
OPTION PLAN
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS
- ----------------- ------------ ---------------
Non-Employee Director Group .... * 7,500 Shares
- ----------
* Options would be granted at 100% of the fair market value of the shares
of Common Stock on the date of grant.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a description of the federal income tax consequences
under the Code, of the grant and exercise of the benefits awarded under the
Plan.
There will be no federal income tax consequences to employees, directors,
consultants or the Corporation on the grant of a NQSO. On the exercise of a
NQSO, the employee, consultant or director generally will have taxable
ordinary income, subject, in the case of an employee, to withholding, in an
amount equal to the excess of the fair market value of the shares of Common
Stock received on the exercise date over the option price of the shares. The
Corporation will be entitled to a tax deduction in an amount equal to such
excess, provided the Corporation complies with applicable reporting and/or
withholding rules. Any ordinary income realized by an employee, consultant or
director upon exercise of a NQSO will increase his tax basis in the Common
Stock thereby acquired. Upon the sale of Common Stock acquired by exercise of
a NQSO, employees, consultants and directors will realize long-term or
short-term capital gain or loss depending upon their holding period for such
stock.
An employee, consultant or director who surrenders shares of Common Stock
in payment of the exercise price of a NQSO will not recognize gain or loss on
his surrender of such shares, but will recognize ordinary income on the
exercise of the NQSO as described above. Of the shares received in such an
exchange, that number of shares equal to the number of shares surrendered will
have the same tax basis and capital gains holding period as the shares
surrendered. The balance of the shares received will have a tax basis equal to
their fair market value on the date of exercise, and the capital gains holding
period will begin on the date of exercise.
With respect to ISOs, no compensation income is recognized by a
participant, and no deduction is available to the Corporation upon either the
grant or exercise of an ISO. However, the difference between the exercise
price of an ISO and
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the market price of the Common Stock acquired on the exercise date will be
included in alternative minimum taxable income of a participant for the
purposes of the "alternative minimum tax." Generally, if an optionee holds the
shares acquired upon exercise of ISOs until the later of (i) two years from
the grant of the ISOs or (ii) one year from the date of acquisition of the
shares upon exercise of an ISO, any gain recognized by the participant on a
sale of such shares will be treated as capital gain. The gain recognized upon
the sale is the difference between the option price and the sale price of the
Common Stock. The net federal income tax effect on the holder of ISOs is to
defer, other than for alternative minimum tax purposes, until the shares are
sold, taxation of any increase in the value of the Common Stock from the time
of grant to the time of exercise. If the optionee sells the shares prior to
the expiration of the holding period set forth above, the optionee will
realize ordinary compensation income in the amount equal to the difference
between the exercise price and the fair market value on the date of exercise.
The compensation income will be added to the optionee's basis for purposes of
determining the gain on the sale of the shares. Such gain will be capital gain
if the shares are held as capital assets. If the application of the
above-described rule would result in a loss to the optionee, the compensation
income required to be recognized thereby would be limited to the excess, if
any, of the amount realized on the sale over the basis of the shares sold. If
an optionee disposes of shares obtained upon exercise of an ISO prior to the
expiration of the holding period described above, the Corporation will be
entitled to a deduction in the amount of the compensation income that the
optionee recognizes as a result of the disposition, subject to the Corporation
satisfying its withholding and/or reporting obligations.
If an optionee is permitted to, and does, make the required payment of
the option price by delivering shares of Common Stock, the optionee generally
will not recognize any gain as a result of such delivery, but the amount of
gain, if any, which is not so recognized will be excluded from his basis in
the new shares received. However, the use by an optionee of shares previously
acquired pursuant to the exercise of an ISO to exercise an Option will be
treated as a taxable disposition if the transferred shares have not been held
by the optionee for the requisite holding period described above.
If the Corporation delivers cash, in lieu of fractional shares, or shares
of Common Stock to an employee pursuant to a cashless exercise program, the
employee will recognize ordinary income equal to the cash paid and the fair
market value of any shares issued as of the date of exercise. An amount equal
to any such ordinary income will be deductible by the Corporation, provided it
complies with applicable withholding requirements.
Section 162(m) of the Code, which generally disallows a tax deduction for
compensation over $1,000,000 paid to the Chief Executive Officer and certain
other highly compensated employees of publicly held corporations, provides
that "performance-based" compensation will not be subject to the $1,000,000
deduction limitation. Since an employer is not, except in the case of a
disqualifying disposition, entitled to a deduction upon the grant or exercise
of an ISO in any event, this provision generally does not affect the
Corporation's tax treatment with regard to ISOs. Options (other than ISOs)
granted by "outside directors" under a plan approved by stockholders with an
exercise price equal to the fair market value of the underlying stock as of
the date of grant are considered performance-based compensation, if certain
requirements are met. The Plan meets such requirements and, accordingly,
income realized by employees with respect to the Plan are not subject to the
deduction limitation of Section 162(m).
The Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974 and is not required to be qualified under Section
401(a) of the Code.
The Board of Directors recommends a vote FOR approval of the amendments
to the Plan
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation's executive officers and directors are required under the
Exchange Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Corporation. To the Corporation's knowledge, based solely on
the Corporation's review of the copies of such reports it has received, the
Corporation believes that during the fiscal year ended March 31, 1997, each of
Robert A. Zummo, John L. Hakes, Victor Guadagno, Paul L. Sullivan, W. Hardy
Myers, Joseph J. DioGuardi, Robert J. Torok and Francis X. Suozzi failed to
file one report on Form 5 with respect to Options granted in fiscal 1997 to
each such executive officer or non-employee director, as the case may be,
under the Plan.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other matters to be
presented at the Annual Meeting. However, if any other matters properly come
before the meeting, or any adjournment thereof, it is intended that proxies in
the accompanying form will be voted in accordance with the judgment of the
persons named therein.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the next annual
meeting of the Corporation's Stockholders must be received by the Corporation
for inclusion in the Corporation's 1998 Proxy Statement and form of proxy on
or prior to April 2, 1998.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Corporation for the year ended
March 31, 1997 (the "Annual Report") is being furnished simultaneously
herewith. Such Annual Report is not to be considered a part of this Proxy
Statement. Upon the written request of any stockholder, management will
provide, free of charge, a copy of the Corporation's annual report on Form
10-K for the fiscal year ended March 31, 1997 (without exhibits), including
the financial statements and schedules thereto. Requests should be directed to
Secretary, Safety Components International, Inc., 3190 Pullman Street, Costa
Mesa, California 92626.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's financial statements for the fiscal year ended March
31, 1997 have been examined by the firm of Price Waterhouse LLP, independent
certified public accountants. Representatives of Price Waterhouse LLP are
expected to be present at the Annual Meeting of Stockholders to make a
statement if they so desire and they are expected to be available to respond
to appropriate questions.
The Corporation's Board of Directors intends to review the appointment of
independent certified public accountants at a meeting subsequent to the Annual
Meeting of Stockholders.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will
be borne by the Corporation. Directors, officers and employees of the
Corporation may solicit proxies personally or by telephone or other means of
communications. Although there is no formal agreement to do so, arrangements
may be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Corporation may reimburse them for any attendant expenses.
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It is important that your shares be represented at the meeting. If you
are unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
GEORGE D. PAPADOPOULOS
Secretary
Dated: July 29, 1997
Costa Mesa, California
24
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EXHIBIT A
SAFETY COMPONENTS INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purposes of this Safety Components International, Inc. 1994 Stock
Option Plan (the "Plan") are to encourage selected employees, consultants and
directors of Safety Components International, Inc. (together with any
successor thereto, the "Company") and its Affiliates (as defined below) to
acquire a proprietary interest in the growth and performance of the Company,
to generate an increased incentive to contribute to the Company's future
success and prosperity, thus enhancing the value of the Company for the
benefit of its stockholders, and to enhance the ability of the Company and its
Affiliates to attract and retain qualified individuals upon whom, in large
measure, the sustained progress, growth, and profitability of the Company
depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or through one
or more intermediaries, is controlled by, controls or is under common control
with the Company and (ii) any entity in which the Company has a significant
equity interest, as determined by the Committee.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not less than two directors, each
of whom is both a "Non-Employee Director" within the meaning of Rule 16b-3 and
an "outside director" as that term is defined for purposes of Section 162(m)
of the Code.
(e) "Consultant" shall mean any Person who contracts to provide services
to the Company as an independent contractor.
(f) "Fair Market Value" shall mean, with respect to Shares or other
securities (i) the closing price per Share of the Shares on the principal
exchange on which the Shares are then trading, if any, on such date, or, if
the Shares were not traded on such date, then on the next preceding trading
day during which a sale occurred; or (ii) if the Shares are not traded on an
exchange but are quoted on NASDAQ or a successor quotation system, (1) the
last sales price (if the Shares are then listed as a National Market Issue
under the NASDAQ National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the Shares on
such date as reported by NASDAQ or such successor quotation system; or (iii)
if the Shares are not publicly traded on an exchange and not quoted on NASDAQ
or a successor quotation system, the mean between the closing bid and asked
prices for the Shares on such date as determined in good faith by the
Committee; or (iv) if the Shares are not publicly traded, the fair market
value established by the Committee acting in good faith.
(g) "Incentive Stock Option" shall mean an option granted under Section 6
of the Plan that meets the requirements of Section 422 of the Code or any
successor provision thereto.
(h) "Independent Director" shall mean each member of the Board who is not
an employee of the Company or any Affiliate.
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(i) "Key Employee" shall mean any officer, director or other key employee
(as determined by the Board) who is a regular full-time employee of the
Company or its present and future Affiliates.
(j) "Non-Qualified Stock Option" shall mean an option granted under
Section 6 of the Plan that is not an Incentive Stock Option or an Option
granted under Section 7.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(1) "Option Agreement" shall mean a written agreement, contract, or other
instrument or document evidencing an Option granted under the Plan.
(m) "Participant" shall mean a Key Employee, Consultant or Independent
Director who has been granted an Option under the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation thereto.
(p) "Shares" shall mean the common stock of the Company, $.01 par value,
and such other securities or property as may become the subject of Options
pursuant to an adjustment made under Section 4(b) of the Plan.
(q) "Ten Percent Stockholder" shall mean a Person, who together with his
or her spouse, children and trusts and custodial accounts for their benefit,
immediately at the time of the grant of an Option and assuming its immediate
exercise, would beneficially own, within the meaning of Section 424(d) of the
Code, Shares possessing more than ten percent (10%) of the total combined
voting power of all of the outstanding capital stock of the Company.
SECTION 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Option shall be within the sole discretion of the Committee, may be made at
any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Option, any stockholder of the Company or any Affiliate,
and any employee of the Company or of any Affiliate.
(b) Powers. Subject to the terms of the Plan and applicable law and
except as provided in Section 7 hereof, the Committee shall have full power
and authority to: (i) designate Participants; (ii) determine the type or types
of Options to be granted to each Participant under the Plan; (iii) determine
the number of Shares to be covered by Options; (iv) determine the terms and
conditions of any Option; (v) determine whether, to what extent, and under
what circumstances Options may be settled or exercised in cash, Shares, other
Options, or other property, or canceled, forfeited, or suspended, and the
method or methods by which Options may be settled, exercised, canceled,
forfeited, or suspended; (vi) interpret and administer the Plan and any
instruments or agreements relating to, or Options granted under, the Plan;
(vii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (viii) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. ,
(c) Reliance, Indemnification. The Committee may employ attorneys,
consultants, accountants or other persons and the Committee, the Company and
its officers and directors shall be entitled to rely upon the advice, opinions
or valuations of any such persons. No member of the Committee shall be
personally liable for any action, determination or interpretation taken or
made in good faith with respect to the Plan, or Options granted thereunder,
and all members of
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the Committee shall be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 4. SHARES AVAILABLE FOR OPTIONS
(a) Shares Available. Subject to adjustment as provided in Section 4(b):
(i) Limitation on Number of Shares. Options issuable under the Plan
are limited such that the maximum aggregate number of Shares which may
issued pursuant to, or by reason of, Options is 1,050,000, of which
1,000,000 may be issued pursuant to, or by reason of, Options granted to
Key Employees and Consultants and 50,000 may be issued pursuant to, or by
reason of, Options granted to Independent Directors. Further, no
Participant shall be granted Non-Qualified Stock Options to purchase more
than 200,000 Shares in any one fiscal year. To the extent that an Option
granted to a (A) Key Employee or Consultant or (B) an Independent
Director ceases to remain outstanding by reason of termination of rights
granted thereunder, forfeiture or otherwise, the Shares subject to such
Option shall again become available for award under the Plan to (x) Key
Employees and Consultants and (y) Independent Directors, respectively;
provided, however, that in the case of the cancellation or termination of
a Non-Qualified Stock Option in the same fiscal year that such
Non-Qualified Stock Option was granted, both the canceled Non-Qualified
Stock Option and the newly granted Non-Qualified Stock Option shall be
counted in determining whether the recipient has received the maximum
number of such Options under the Plan for such fiscal year.
(ii) Accounting for Awards. For purposes of this Section 4, the
number of Shares covered by an Option to a (A) Key Employee or Consultant
or (B) Independent Director shall be counted on the date of grant of such
Option against the aggregate number of Shares available for granting
Options under the Plan to (x) Key Employees and Consultants or (y)
Independent Directors, respectively.
(iii) Sources of Shares Deliverable Under Options. Any Shares
delivered pursuant to an Option may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that any
(i) subdivision or consolidation of Shares, (ii) dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), (iii) recapitalization or other capital adjustment of the Company
or (iv) merger, consolidation or other reorganization of the Company or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event, affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may
deem necessary to prevent dilution or enlargement of the benefits or potential
benefits intended to be made under the Plan, adjust any or all of (x) the
number and type of Shares which thereafter may be made the subject of Options,
(y) the number and type of Shares subject to outstanding Options, and (z) the
grant, purchase, or exercise price with respect to any Option or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Option; provided, however, in each case, that (i) with respect to Incentive
Stock Options no such adjustment shall be authorized to the extent that such
adjustment would cause the Plan to violate Section 422 of the Code or any
successor provision thereto; (ii) each such adjustment shall be made in such
manner as not to constitute a cancellation and reissuance of a Non-Qualified
Stock Option for purposes of Section 162(m) of the Code, or the regulations
promulgated thereunder, to the extent that such reissuance would result in the
grant of such Options in excess of the maximum permitted to be granted to any
Participant in any fiscal year; and (iii) the number of Shares subject to any
Option denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Except as provided in Section 7, Options may be granted only to Key
Employees and Consultants. In determining the Persons to whom Options shall be
granted and the number of Shares to be covered by each Option, the Committee
shall take into account the nature of the Person's duties, such Person's
present and potential contributions to
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the success of the Company and such other factors as it shall deem relevant in
connection with accomplishing the purposes of the Plan. An Independent
Director will not be eligible to receive an Option except as specifically
provided in Section 7. A Key Employee or Consultant who has been granted an
Option or Options under the Plan may be granted an additional Option or
Options, subject to such limitations as may be imposed by the Code on the
grant of Incentive Stock Options.
SECTION 6. OPTION
The Committee is hereby authorized to grant Options to Participants upon
the following terms and the conditions (except to the extent otherwise
provided in Section 7) and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the Committee
shall determine:
(a) Exercise Price. The purchase price per Share purchasable under
Options shall not be less than 100% of the Fair Market Value of a Share
on the date of grant; provided that the purchase price per Share
purchasable under Incentive Stock Options granted to Ten Percent
Stockholders shall be not less than 110% of the Fair Market Value of a
Share on the date of grant.
(b) Option Term. The term of each Non-Qualified Stock Option shall
be fixed by the Committee but generally shall not exceed 10 years from
the date of grant. The term of each Incentive Stock Option shall in no
event be more than 10 years from the date of grant, or in the case of an
Incentive Stock Option granted to a Ten Percent Stockholder, 5 years from
the date of grant.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part,
and the method or methods by which, and the form or forms in which,
payment of the option price with respect thereto may be made or deemed to
have been made (including, without limitation, (i) cash, Shares,
outstanding Options or other consideration, or any combination thereof,
having a Fair Market Value on the exercise date equal to the relevant
option price and (ii) a broker-assisted cashless exercise program
established by the Committee), provided in each case that such methods
avoid "short-swing" profits to the Participant under Section 16(b) of the
Securities Exchange Act of 1934, as amended. The payment of the exercise
price of an Option may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee.
(d) Early Termination. The unexercised portion of any Option granted
to a Key Employee under the Plan will generally be terminated (i) thirty
(30) days after the date on which the Key Employee's employment is
terminated for any reason other than (A) Cause (as defined below), (B)
retirement or mental or physical disability, or (C) death; (ii)
immediately upon the termination of the Key Employee's employment for
Cause; (iii) three months after the date on which the Key Employee's
employment is terminated by reason of retirement or mental or physical
disability; or (iv)(A) 12 months after the date on which the Key
Employee's employment is terminated by reason of the death of the Key
Employee, or (B) three months after the date on which the Key Employee
shall die if such death shall occur during the three-month period
following the termination of the Key Employee's employment by reason of
retirement or mental or physical disability. The term "Cause," as used
herein, shall mean (w) the Key Employee's willful misconduct or fraud in
the performance of his duties under such Key Employee's employment
arrangement with the Company, (x) the continued failure or refusal of the
Key Employee (following written notice thereof) to carry out any
reasonable request of the Board for the provision of services under such
Key Employee's employment arrangement with the Company, (y) the material
breach by the Key Employee of his employment arrangement with the Company
or (z) the entering of a plea of guilty or nolo contendere to or the
conviction of the Key Employee for a felony or any other criminal act
involving moral turpitude, dishonesty, theft or unethical business
conduct. For purposes of this paragraph (d), no act shall be considered
willful unless done or omitted to be done not in good faith and without
reasonable belief that such action or omission was in the best interest
of the Company.
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(e) Incentive Stock Options. All terms of any Incentive Stock
Options granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder.
(f) No Cash Consideration for Awards. Awards shall be granted for no
cash consideration or such minimal cash consideration as may be required
by applicable law.
(g) Limits on Transfer of Options. Subject to Code Section 422, no
Option and no right under any such Option, shall be assignable,
alienable, saleable, or transferable by a Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder;
provided, however, that, if so determined by the Committee, a Participant
may, in the manner established by the Committee, designate a beneficiary
or beneficiaries to exercise the rights of the Participant, and to
receive any property distributable, with respect to any Option upon the
death of the Participant. Each Option, and each right under any such
Option, shall be exercisable during the Participant's lifetime, only by
the Participant or, if permissible under applicable law with respect to
any Option that is not an Incentive Stock Option, by the Participant's
guardian or legal representative. No Option and no right under any such
Option, may be pledged, alienated, attached, or otherwise encumbered, and
any purported pledge, alienation, attachment, or encumbrance thereof
shall be void and unenforceable against the Company or any Affiliate.
(h) Term of Options. Except as set forth in Section 6(b) and Section
7, the term of each Option shall be for such period as may be determined
by the Committee.
(i) Share Certificates. All certificates for Shares or other
securities of the Company delivered under the Plan pursuant to any Option
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other restrictions of the Securities and
Exchange Commission, any stock exchange upon which such Shares or other
securities are then listed, and any applicable Federal or state
securities laws, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
SECTION 7. OPTIONS AWARDED TO INDEPENDENT DIRECTORS
Each Independent Director who is a member of the Board on December 31 of
a year during the term of the Plan from the date of the initial adoption of
the Plan through December 31, 1995 shall automatically be granted a
Non-Qualified Stock Option to purchase 1,500 Shares on January 1 of the
following year. Each Independent Director who is a member of the Board on
December 31 of a year during the term of the Plan beginning in calendar year
1996 shall automatically be granted a Non-Qualified Stock Option to purchase
2,500 Shares on January 1 of the following year. All Options granted pursuant
to this Section 7 shall (a) be at an exercise price per Share equal to 100% of
the Fair Market Value of a Share on the date of the grant; (b) have a term of
10 years; (c) terminate (i) upon termination of an Independent Director's
service as a director of the Company for any reason other than mental or
physical disability or death, (ii) three months after the date the Independent
Director ceases to serve as a director of the Company due to physical or
mental disability or (iii)(A) 12 months after the date the Independent
Director ceases to serve as a director due to the death of the Independent
Director or (B) three months after the death of the Independent Director if
such death shall occur during the three month period following the date the
Independent Director ceased to serve as a director of the Company due to
physical or mental disability; and (d) be otherwise on the same terms and
conditions as all other Options granted pursuant to the Plan.
SECTION 8. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Option Agreement or in the Plan:
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(a) Amendments to the Plan. The Plan may be wholly or partially amended
or otherwise modified, suspended or terminated at any time or from time to
time by the Board, but no amendment without the approval of the stockholders
of the Company shall be made if stockholder approval would be required under
Section 162(m) of the Code, Section 422 of the Code, Rule 16b-3 or any other
law or rule of any governmental authority, stock exchange or other
self-regulatory organization to which the Company is subject. Neither the
amendment, suspension nor termination of the Plan shall, without the consent
of the holder of such Option, alter or impair any rights or obligations under
any Option theretofore granted.
(b) Adjustments of Options Upon Certain Acquisitions. In the event the
Company or any Affiliate shall assume outstanding employee awards in
connection with the acquisition of another business or another corporation or
business entity, the Committee may make such adjustments, not inconsistent
with the terms of the Plan, in the terms of Options as it shall deem
appropriate in order to achieve reasonable comparability or other equitable
relationship between the assumed awards and the Options granted under the Plan
as so adjusted.
(c) Adjustments of Options Upon the Occurrence of Certain Unusual or
Nonrecurring Events The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits to be
made available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Option in the manner and to the extent it shall deem desirable
to carry the Plan into effect.
SECTION 9. ELECTION TO HAVE SHARES WITHHELD
(a) In combination with or in substitution for cash withholding or any
other legal method of satisfying federal and state withholding tax liability,
a Participant may elect to have Shares withheld by the Company in order to
satisfy federal and state withholding tax liability (a "share withholding
election"), provided, (i) the Committee shall not have revoked its advance
approval of the holder's share withholding election; and (ii) the share
withholding election is made on or prior to the date on which the amount of
withholding tax liability is determined (the "Tax Date"). If a Participant
elects within thirty (30) days of the date of exercise to be subject to
withholding tax on the exercise date pursuant to the provisions of Section
83(b) of the Code, then the share withholding election may be made during such
thirty (30) day period. Notwithstanding the foregoing, a holder whose
transactions in Common Stock are subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, may make a share withholding election only
if the following additional conditions are met: (i) the share withholding
election is made no sooner than six (6) months after the date of grant of the
Option, except, however, such six (6) month condition shall not apply if the
Participant's death or disability (as shall be determined by the Committee)
occurs within such six (6) month period; and (ii) the share withholding
election is made (x) at least six (6) months prior to the Tax Date, or (y)
during the period beginning on the third business day following the date of
release of the Company's quarterly or annual financial results and ending on
the twelfth business day following such date.
(b) A share withholding election shall be deemed made when written notice
of such election, signed by the Participant, has been hand delivered or
transmitted by registered or certified mail to the Secretary of the Company at
its then principal office. Delivery of said notice shall constitute an
irrevocable election to have Shares withheld.
(c) If a Participant has made a share withholding election pursuant to
this Section 9; and (i) within thirty (30) days of the date of exercise of the
Option, the Participant elects pursuant to the provisions of Section 83(b) of
the Code to be subject to withholding tax on the date of exercise of the
Option, then such Participant will be unconditionally obligated to immediately
tender back to the Company the number of Shares having an aggregate fair
market value (as
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<PAGE>
determined in good faith by the Committee), equal to the amount of tax
required to be withheld plus cash for any fractional amount, together with
written notice to the Company informing the Company of the Participant's
election pursuant to Section 83(b) of the Code; or (ii) if the Participant has
not made an election pursuant to the provisions of Section 83(b) of the Code,
then on the Tax Date, such Participant will be unconditionally obligated to
tender back to the Company the number of Shares having an aggregate fair
market value (as determined in good faith by the Committee), equal to the
amount of tax required to be withheld plus cash for any fractional amount.
SECTION 10. VESTING LIMITATION ON INCENTIVE STOCK OPTIONS
The Fair Market Value of Shares subject to Incentive Stock Options
(determined as of the date such Incentive Stock Options are granted)
exercisable for the first time by any individual during any calendar year
shall in no event exceed $100,000.
SECTION 11. GENERAL PROVISIONS
(a) No Rights to Awards. No Key Employee or Consultant shall have any
claim to be granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or Consultants or holders or
beneficiaries of Options under the Plan. The terms and conditions of Options
need not be the same with respect to each recipient.
(b) No Limit on Other Plans. Nothing contained in the Plan shall prevent
the Company or any Affiliate from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) No Right to Employment. The grant of an Option shall not be construed
as giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time dismiss
a Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Option
Agreement.
(d) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable Federal law.
(e) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Option under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering
the intent of the Plan, such provision shall be deemed void, stricken and the
remainder of the Plan and any such Option shall remain in full force and
effect.
(f) No Trust or Fund Created. Neither the Plan nor any Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Option, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(g) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.
(h) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision hereof.
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<PAGE>
SECTION 12. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of May 13, 1994.
SECTION 13. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which all
Options issuable hereunder have been issued, (ii) the termination of the Plan
by the Board or (iii) May 12, 2004. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Option or to waive any conditions or rights under any such Option, and the
authority of the Board to amend the Plan, shall extend beyond such date.
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<PAGE>
[FRONT]
Safety Components International, Inc.
PROXY
Annual Meeting, September 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey J. Kaplan and George D.
Papadopoulos, as Proxies, each with full power to appoint his substitute, and
hereby authorizes them to appear and vote as designated below, all shares of
Common Stock of Safety Components International, Inc. held on record by the
undersigned on July 22, 1997, at the Annual Meeting of Stockholders to be held
on September 17, 1997, and any adjournments thereof.
The undersigned hereby directs this Proxy to be voted:
1. Election of directors:
[ ] FOR the election as Class II directors of all
nominees listed below (except as marked to
the contrary below)
or
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Francis X. Suozzi
Robert J. Torok
(INSTRUCTIONS: To withhold authority to vote for any of the any of
the above listed nominees, please strike a line through that
individual's name)
2. Proposal to approve the amendments to the Company's 1994 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the named proxies may vote on such
other business as may properly come before the Annual
Meeting, or any adjournments or postponements thereof.
The undersigned acknowledges receipt of the accompanying Proxy Statement dated
July 29, 1997.
<PAGE>
[BACK]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE ANNUAL MEETING IN
ACCORDANCE WITH THE STOCKHOLDER'S SPECIFICATIONS ABOVE. THE PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE
UNDERSIGNED.
Date:
-----------------------------
----------------------------------
Signature of stockholder
----------------------------------
Signature if held jointly
NOTE: PLEASE MARK, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE. WHEN
SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE. IF A CORPORATION OR
PARTNERSHIP, PLEASE SIGN IN
CORPORATE OR PARTNERSHIP NAME BY
AN AUTHORIZED PERSON.
