<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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> 2
SAFETY COMPONENTS INTERNATIONAL, INC.
CORPORATE CENTER
40 EMERY STREET
GREENVILLE, SOUTH CAROLINA 29605
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 13, 1999
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Safety
Components International, Inc. (the "Corporation") will be held at 2:00 P.M.,
local time, on December 13, 1999, at The Ogletree Room, The Commerce Club, 17th
Floor, One Insignia Financial Plaza, Greenville, South Carolina, for the
following purposes:
1. To elect two Class I directors of the Corporation to hold office for a
term expiring at the Annual Meeting of Stockholders occurring in 2002
and until the election and qualification of each of the Class I
director's successor;
2. To approve the amendment to the Safety Components International, Inc.
1994 Stock Option Plan (the "Plan") to increase the number of shares of
the Corporation's common stock issuable under the Plan to officers, key
employees and consultants on the one hand and non-employee directors on
the other hand from 975,000 and 75,000 shares in the aggregate,
respectively, to 1,375,000 and 125,000 shares in the aggregate,
respectively.
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 November 4, 1999 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,
Marston "Dale" Anderson
Secretary
November 16, 1999
<PAGE> 3
SAFETY COMPONENTS INTERNATIONAL, INC.
CORPORATE CENTER
40 EMERY STREET
GREENVILLE, SOUTH CAROLINA 29605
------------------------
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 (the "Annual Meeting") of the Corporation to be held at 2:00 P.M.,
local time, on December 13, 1999, at The Ogletree Room, The Commerce Club, 17th
Floor, One Insignia Financial Plaza, Greenville, South Carolina, and at any
adjournment thereof. The purposes of the meeting are:
1. To elect two Class I directors of the Corporation to hold office for a
term expiring at the Annual Meeting of Stockholders occurring in 2002
and until the election and qualification of each of the Class I
director's successor;
2. To approve the amendment to the Safety Components International, Inc.
1994 Stock Option Plan (the "Plan") to increase the number of shares of
the common stock of the Corporation, par value $.01 per share (the
"Common Stock"), issuable under the Plan to officers, key employees and
consultants on the one hand and non-employee directors on the other hand
from 975,000 and 75,000 shares in the aggregate, respectively, to
1,375,000 and 125,000 shares in the aggregate, respectively.
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 I directors of the nominees of the Board of Directors named
below; (ii) in favor of the proposal to approve the amendment to the Plan to
increase the number of shares of Common Stock issuable under 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 November
16, 1999.
VOTING
Holders of record of Common Stock on November 4, 1999, 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 November 4, 1999 there were 5,136,316 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 and
entitled to vote thereon is necessary to elect the nominees for Class I
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 and entitled to vote thereon is necessary to approve the
amendment to the Plan. Abstentions are counted as a vote against the proposals
being considered, except for the election of directors as to which they will
have no effect. Broker non-votes will have no effect on the outcome of the
proposals set forth above.
<PAGE> 4
The Board of Directors recommends a vote FOR each of the proposals set
forth above.
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The term of the
current Class III director, Mr. Zummo, expires in 2001; the term of the current
Class II director, Mr. Torok, expires in 2000 and the term of the current Class
I directors, Messrs. Corey and DioGuardi, expires at the Annual Meeting.
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. Corey and DioGuardi, the nominees for Class I 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 November 4, 1999, with respect
to the nominees for Class I directors and with respect to each other director
whose term of office continues after the Annual Meeting.
CLASS I DIRECTOR
(TO CONTINUE IN OFFICE UNTIL 2002)
JOSEPH J. DIOGUARDI. Age 59, 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, a
Certified Public Accountant, has 22 years of public accounting experience with
Arthur Andersen & Co. (currently known as Arthur Andersen, LLP), serving as
Partner from 1972 to 1984. From November 1996 to July 1998 Mr. DioGuardi was 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. Mr. DioGuardi also served as the Chief
Financial Officer of Neurocorp, Ltd. from July 1997 to July 1998.
JOHN C. COREY. Age 52, Mr. Corey has served as President, Chief Operating
Officer and Director of the Corporation since March 1999. Mr. Corey served as
President of Stanley Mechanics Tools, Inc., a division of The Stanley Works, a
company engaged in the business of manufacturing and distributing mechanics hand
tools, from September 1996 to March 1999 where he was responsible for worldwide
operations. Prior to that, Mr. Corey served as an independent consultant while
attending to personal business from December 1995 to August 1996 and as
President of Allied Signal North American Aftermarket, a division of Allied
Signal, Inc., a company engaged in the business of automotive components, from
September 1994 to November 1995. From 1984 to 1994, Mr. Corey served in various
positions for Moog Automotive, Inc., a company engaged in the business of
manufacturing and distributing automotive steering and suspension parts, most
recently as the President of the Steering and Suspension Division. Mr. Corey has
over 15 years of experience in management and manufacturing in the automotive
industry.
2
<PAGE> 5
CLASS II DIRECTORS(1)
(TO CONTINUE IN OFFICE UNTIL 2000)
ROBERT J. TOROK. Age 68, 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 III DIRECTORS(2)
(TO BE ELECTED TO SERVE UNTIL 2001)
ROBERT A. ZUMMO. Age 58, Director since 1994. Mr. Zummo has served as
Chairman of the Board and Chief Executive Officer of the Corporation since its
inception in January 1994, and as its President since its inception in January
1994 until March 1999. Mr. Zummo is also the Chief Executive Officer of Valentec
International Corporation, LLC, a wholly-owned limited liability company of the
Corporation (as successor in interest to Valentec International Corporation)
("Valentec"), which was acquired by the Corporation in May 1997, and has served
in such capacity since 1989. Valentec is a manufacturer of automotive and
defense-related metal components. 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.
MEETINGS OF THE BOARD
During the fiscal year ended March 27, 1999, eight meetings of the Board of
Directors were held.
The Board of Directors has an Audit Committee currently consisting of
Messrs. DioGuardi and Torok. The Audit Committee held six meetings during the
fiscal year ended March 27, 1999. 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.
The Board of Directors has a Compensation Committee, which also acts as a
Stock Option Committee, currently composed of Messrs. DioGuardi and Torok. The
Compensation Committee held six meetings during the fiscal year ended March 27,
1999. 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 27, 1999, 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.
- ---------------
1Francis X. Suozzi resigned as a director of the Company, effective as of July
12, 1999. See "Security Ownership of Certain Beneficial Owners and Management,
Footnote 3" for information regarding a Consulting Agreement, by and between
Mr. Suozzi and the Company.
2Mr. Jeffrey J. Kaplan resigned as an officer and director of the Company,
effective as of August 31, 1999. See "Employment Agreements."
3
<PAGE> 6
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Except as otherwise indicated, the following table and notes set forth
certain information regarding the beneficial ownership of the Common Stock as of
November 4, 1999 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).................................... 1,026,576(4) 19.8%
Cramer Rosenthal McGlynn, LLC. .......................... 869,800(5) 16.9%
707 Westchester Avenue
White Plains, New York 10604
Jeffrey J. Kaplan(2)(10)................................. 166,669(6) 3.2%
Victor Guadagno(2)(10)................................... 20,000(6) *
Stephen Duerk(2)......................................... 16,665(7) *
Philip Lelliott(2)(11)................................... 0(6) *
Thomas W. Cresante(2).................................... 85,667(6) 1.6%
John L. Hakes(2)......................................... 0 0
Joseph J. DioGuardi(2)................................... 10,833(6) 0
Francis X. Suozzi(2)(3)(8)............................... 435,801(9) 8.0%
Robert J. Torok(2)....................................... 10,833(6) *
All current executive officers and directors as a group
(consisting of 8 individuals).......................... 1,088,907(1) 20.8%
</TABLE>
- ---------------
* 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 from November 4, 1999 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., 40
Emery Street, Greenville, South Carolina 29605.
(3) In connection with the acquisition by the Corporation of all of the issued
and outstanding capital stock of Valentec from Robert A. Zummo, Francis X.
Suozzi and the Valentec International Corporation Employee Stock Ownership
Plan, 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 50,000 shares of Common Stock.
(5) Represents the number of shares beneficially owned by Cramer Rosenthal
McGlynn, LLC ("CRM"), an investment company registered under Section 8 of
the Investment Advisers Act of 1940, according to a Schedule 13G filed by
CRM with the Commission in March 1999.
4
<PAGE> 7
(6) Represents only options which are currently exercisable to purchase shares
of Common Stock. See "Executive Compensation -- Employment Agreements."
(7) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 10,833 shares of Common Stock.
(8) In connection with Mr. Suozzi's resignation as a director of the Company,
the vesting schedule of options with respect to 24,167 of such shares was
accelerated and the period of time that Mr. Suozzi could exercise his
options granted under the Plan was extended for the remainder of their
respective terms. Accordingly, all of Mr. Suozzi's options granted by the
Company under the Plan are fully vested. In addition, the Company and Mr.
Suozzi have entered into a Consulting Agreement, pursuant to which (i) Mr.
Suozzi will provide certain consulting services on behalf of the Company
for a term of one year and (ii) in consideration for such services Mr.
Suozzi has received options to purchase 75,000 shares at an exercise price
of 5 11/16 per share. Such options are non-plan options, fully vested and
have a term of ten (10) years.
(9) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 296,668 shares of common stock.
(10) Mr. Kaplan resigned as an officer and director of the Company, effective as
of August 31, 1999. See "Employment Agreements".
(11) Mr. Lelliot resigned as an officer of the Company, effective as of July 30,
1999.
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....................... 58 Chairman of the Board, President and Chief Executive
Officer
John C. Corey......................... 52 Director, President and Chief Operating Officer
Brian P. Menezes...................... 47 Vice President; Chief Financial Officer
Stephen Duerk......................... 57 Vice President; President, North American Automotive
Group
Victor Guadagno....................... 59 Vice President; President, Systems Group
Marston "Dale" Andersen............... 50 Corporate Controller, Secretary and Assistant Treasurer
Daniel R. Smith....................... 29 Treasurer and Assistant Secretary
</TABLE>
- ---------------
(1) Mr. Jeffrey J. Kaplan resigned as an officer and director of the Company,
effective as of August 31, 1999. See "Employment Agreements."
(2) Mr. Philip Lelliot resigned as an officer of the Company, effective as of
July 30, 1999.
Executive officers are appointed by the Board and serve at the discretion
of the Board. Following is information with respect to the Corporation's
executive officers who are not also directors of the Corporation:
STEPHEN B. DUERK. Mr. Duerk has served as President of the Corporation's
North American Automotive Group since April 1998 and as President of Safety
Components Fabric Technologies, Inc., a wholly-owned subsidiary of the
Corporation ("SCFTI"), since January 1998. From July 1997 to January 1998, Mr.
Duerk served the Corporation as Co-Managing Director of SCFTI. Prior to the
Corporation's acquisition (the "JPS Acquisition") of the Air Restraint and
Technical Fabrics Division of JPS Automotive L.P., through SCFTI, in July 1997,
Mr. Duerk served JPS Automotive, L.P., a tier one supplier to the automotive
industry of carpet and knit fabrics for headliner and body cloth for
automobiles, as Vice President of Air Restraint Fabrics in the Greenville, South
Carolina facility from October 1988. From 1965 to October 1988, Mr. Duerk served
in various positions for JP Stevens & Co., Inc., a company engaged in the
business of
5
<PAGE> 8
manufacturing industrial textiles of which JPS Automotive, L.P. was a part until
its restructuring in May 1998, most recently as the Vice President of the
Industrial Synthetic Group.
BRIAN P. MENEZES. Mr. Menezes has served as Vice President and Chief
Financial Officer of the Corporation since September 1999. From October 1997 to
September 1999, Mr. Menezes served as Vice President and General Manager of
Odyssey Knowledge Solutions, Inc., a Canadian software and systems development
company focused on web-based e-commerce and enterprise solutions. From January
1993 to June 1997, Mr. Menezes served as Vice President of Operations for Cooper
Industries (Canada) Inc. Automotive Products ("Cooper"), the largest supplier in
the Canadian automotive replacement parts market. From January 1993 to June
1995, Mr. Menezes also served as the Vice President of Finance of Cooper.
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
Valentec, Mr. Guadagno was President and sole stockholder of Target Research,
Inc., a business engaged in the research and development of ammunition for the
United States Army. Mr. Guadagno began his career as a development engineer with
the United States Army and has over 35 years of experience in the defense
industry, including systems contracting.
MARSTON "DALE" ANDERSON. Mr. Anderson has served as the Corporate
Controller, Secretary and Assistant Treasurer of the Corporation since July
1999. From October 1989 until December 1998, Mr. Anderson served JPS Automotive,
L.P., a tier one supplier to the automotive industry of carpet and knit fabrics
for headliner and body cloth for automobiles, in various positions, most
recently as Corporate Controller. From May 1988 to September 1989, Mr. Anderson
served as Controller for JPS Industrial Fabrics, L.P. From September 1976 to May
1988, Mr. Anderson served in various positions for J.P. Stevens, most recently
as the Division Controller of Industrial Fabrics.
DANIEL R. SMITH. Mr. Smith has served as Treasurer of the Corporation
since March 1997 and as Assistant Secretary of the Corporation since September
9, 1998. From July 1991 to March 1997, Mr. Smith was employed by Arthur
Andersen, LLP, a leading public accounting firm, as a Manager.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company for the Company's fiscal year ended March 27, 1999 (each
person appearing in the table is referred to as a "Named Executive").
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- --------------------------- ----------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) AWARDS($) (#) ($) ($)
- --------------------------- ---- ------- ------- ------------ ---------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert A. Zummo................. 1999 525,000 0 0 0 0/50000 87,388(1)
Chairman of the Board 1998 439,185 491,000(2) 0 0 55,000/40,000 0 89,925(3)
President and Chief 1997 297,000 0 0 0 10,000/0 0 9,600
Executive Officer
Jeffrey J. Kaplan............... 1999 300,000 0 0 0 0/40,000 0 63,763(5)
Executive Vice President 1998 233,018 221,000(6) 0 0 150,000/20,000 0 35,168(7)
and Chief Financial 1997 27,500 0 0 0 125,000/0 0 0
Financial Officer(4)
Victor Guadagno................. 1999 162,000 0 0 0 0 0 11,552(8)
Vice President; President, 1998 162,000 0 0 0 0 7,635(9)
Systems, Group 1997 162,000 0 0 0 5,000/0 0 6,000
Stephen B. Duerk................ 1999 170,833 0 0 0 0/6,000 0 11,975(11)
Vice President; President, 1998 78,981 72,575 0 0 10,500/6,000 0 2,707(12)
North American Automotive
Group(10)
Philip Lelliott................. 1999 120,000 0 0 0 25,000/0 0 9,414(14)
Vice President; President
Europe/Asia Pacific Automotive
Group(13)
Thomas W. Cresante.............. 1999 29,465 0 0 0 0/0 0 124,246(16)
Executive Vice President 1998 205,393 70,000 0 0 85,667/0(17) 0 43,716(18)
and Chief Operating
Officer(15)
John L. Hakes................... 1999 38,628 0 0 0 0/0 0 185,413(20)
President, European 1998 228,835 0 0 0 0/0 0 0
Operations(19) 1997 164,273 45,000(21) 0 0 10,000/0 0 0
</TABLE>
- ---------------
(1) Amount reflects $70,718 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $9,600 automobile
allowance, a $5,000 matching contribution under the company's 401(k) plan,
$720 of long-term disability insurance premiums and $1,350 of group
insurance premiums.
(2) Includes $416,000 earned by Mr. Zummo under the Senior Management Plan (as
defined herein) and a $75,000 transactional bonus earned by Mr. Zummo based
on Mr. Zummo's performance in connection with the JPS Acquisition.
(3) Amount reflects $78,140 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $9,600 automobile
allowance, a $2,020 matching contribution under the Company's 401(k) plan
and $165 long-term disability insurance premiums.
(4) Mr. Kaplan joined the Company in February 1997.
(5) Amount reflects $47,579 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $9,600 automobile
allowance, a $5,000 matching contribution under the Company's 401(k) plan,
$720 of long-term disability insurance premiums and $864 of group insurance
premiums.
(6) Includes $191,000 earned by Mr. Kaplan under the Senior Management Plan and
a $30,000 transactional bonus earned by Mr. Kaplan based on Mr. Kaplan's
performance in connection with the JPS Acquisition, the Valentec
Acquisition and the related financings.
(7) Amount reflects $18,395 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $7,200 car allowance, a
$2,208 matching contribution under the Company's 401(k) plan and $165
long-term disability insurance premiums.
(8) Amount reflects a $6,231 automobile allowance, a $4,313 matching
contribution under the Company's 401(k) plan and $1,008 of group insurance
premiums.
(9) Amount reflects a $6,000 car allowance and a $1,635 matching contribution
under the Company's 401(k) plan.
7
<PAGE> 10
(10) Mr. Duerk joined the Company in July 1997 upon consummation of the JPS
acquisition.
(11) Amount reflects a $6,000 automobile allowance, a $5,000 matching
contribution under the Company's 401(k) plan and $975 of insurance
premiums.
(12) Amount a $1,500 automobile allowance and $1,207 matching contribution under
the Company's 401(k) plan.
(13) Mr. Duerk joined the Company in June 1998.
(14) Amount reflects a $8,789 automobile allowance and $625 of group insurance
premiums.
(15) From May 1997 until the time of Mr. Cresante's resignation as an employee
of the Company in May 1998, Mr. Cresante served as Executive Vice President
and Chief Operating Officer.
(16) Amount reflects payments in the aggregate amount of $83,333 under the
Cresante Consulting Agreement (as defined herein, See "-- Employment
Agreements") $26,800 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), an $13,800 automobile
allowance and a $313 matching contribution under the Company's 401(k) plan.
(17) Mr. Cresante received options to purchase 225,000 shares of Common Stock
under his employment Agreement and SARs with respect to 20,000 shares of
Common Stock under the SAR Plan during fiscal year 1998. However, options
to purchase 139,333 of such shares of Common Stock and all of such SARs
were subsequently forfeited by Mr. Cresante in connection with his
resignation as an employee of the Company and under the terms of the
Cresante Consulting Agreement. See "-- Employment Agreements."
(18) Amount reflects $28,667 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $12,600 car allowance, a
$2,284 matching contribution under the Company's 401(k) plan and $165 of
long-term disability insurance premiums.
(19) From June 1995 until the time of Mr. Hakes' resignation as an employee of
the Company in May 1998, Mr. Hakes served as President, European
Operations.
(20) Amount reflects a payment of $185,413 under the Hakes Consulting Agreement
(as defined herein, See "-- Employment Agreements").
(21) Represents the value of an automobile awarded to Mr. Hakes' as a bonus.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following options and Stock Appreciation Rights ("SARs") were granted
to the Named Executives during the fiscal year ended March 27, 1999 under the
Plan and the Company's Stock Appreciation Rights Award Plan (the "SAR Plan"),
respectively.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZED
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE OR FOR OPTION/SAR TERM
OPTIONS/SARS FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#) YEAR(1)(2) ($/SH)(3) DATE 5%($)(6) 10%($)(6)
- ---- ------------ ------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Zummo.......... 0/50,000 0.0%/40.3% N/A/$14.25 N/A/3/29/01(4) N/A/$112,308 N/A/$235,838
Jeffrey J. Kaplan........ 0/40,000 0.0%/32.3% N/A/$14.25 N/A/3/29/01(4) N/A/$89,846 N/A/$188,670
Victor Guadagno.......... 0/0 0.0%/0.0% N/A N/A N/A N/A
Stephen B. Duerk......... 0/0 0.0%/0.0% N/A N/A N/A N/A
Philip Lelliott.......... 25,000/0 61.0%/0.0% $16.63/N/A 5/31/08(5)/N/A $261,463/N/A $662,598/N/A
Thomas W. Cresante....... 0/0 0.0%/0.0% N/A N/A N/A N/A
John L. Hakes............ 0/0 0.0%/0.0% N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Figures have been rounded to the nearest tenth.
(2) An aggregate of 11,000 of the SARs granted to employees during fiscal year
1999 were subsequently forfeited in connection with the respective
employee's resignation from the Company.
8
<PAGE> 11
(3) Figures have been rounded to the nearest hundredth.
(4) Becomes exercisable on the termination date of the SAR.
(5) Becomes exercisable in three equal annual installments with the first
installment commencing one year from the date of grant.
(6) Rounded the nearest dollar.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table summarizes for each of the Named Executives the number
of stock options and SARs exercised during the fiscal year ended March 27, 1999,
the aggregate dollar value realized upon exercise, the total number of
unexercised options and SARs, if any, held at March 27, 1999 and the aggregate
dollar value of in-the-money, unexercised options and SARs, held at March 27,
1999. 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 or SAR, respectively. The value of unexercised, in-the-money
options or SARs at fiscal year-end is the difference between its exercise or
base price and the fair market value of the underlying stock on March 29, 1999,
which was $8.50 per share.
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON
EXERCISE OR
WITH RESPECT NUMBER OF SECURITIES VALUE OF UNEXERCISED
TO WHICH UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS OR OPTIONS AND SARS AT AND SARS AT
SARS WERE VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME EXERCISED(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Zummo............... 0 NA 50,000/35,000(1) *
Robert A. Zummo............... 0 N/A 0/90,000(2) *
Jeffrey J. Kaplan............. 0 NA 166,669/108,331(1) *
Jeffrey J. Kaplan............. 0 N/A 0/60,000(2) *
Stephen B. Duerk.............. 0 N/A 10,000/30,000(1) *
Stephen B. Duerk.............. 0 N/A 0/12,000 (2) *
Victor Guadagno............... 10,000 $74,925 20,000/0(1) *
Philip Lelliott............... 0 N/A 8,333/16,667(1) *
Thomas W. Cresante............ 0 N/A 85,667/0(1)(3) *
John L. Hakes................. 0 N/A 0/0 *
</TABLE>
- ---------------
* None of the Options or SARs referenced in the chart were in-the-money on
March 27, 1999.
(1) Represents options to purchase Common Stock granted by the Company to the
Named Executive under the Plan.
(2) Represents SARs granted by the Company to the Named Executive under the SAR
Plan.
(3) Mr. Cresante received options to purchase 225,000 shares of Common Stock at
an exercise price of $10.25 per share under his employment agreement during
fiscal year 1998. However, options to purchase 139,333 of such shares of
Common Stock were subsequently forfeited by Mr. Cresante in connection with
his resignation as an employee of the Company in May 1998 and under the
terms of the Cresante Consulting Agreement. See "-- Employment Agreements."
(4) In connection with the expiration of the Hakes Consulting Agreement, Mr.
Hakes forfeited options to purchase as aggregate of 35,000 shares of Common
Stock, all of which were vested.
EMPLOYMENT AGREEMENTS
Mr. Zummo serves as Chief Executive Officer of the Company pursuant to a
five-year employment agreement which became effective as of April 19, 1999. The
employment agreement provides for a base salary for the first year of the term
of $575,000, subject to annual increases of the Compensation Committee of the
Board of Directors commencing in fiscal year 2001. In addition to the base
salary, the employment agreement
9
<PAGE> 12
provides for an annual incentive bonus under the Company's Senior Management
Incentive Plan (the "Senior Management Plan") and a performance based bonus for
fiscal year 2000 of up to a maximum of 50% of his base salary for such fiscal
year based on the achievement of pre-determined target levels of the Company's
earnings. Mr. Zummo did not earn a bonus for fiscal year 1999. In the event Mr.
Zummo's employment is terminated by the Company within the first four years of
the term without "Cause" (other than as a result of death or disability or in
connection with a Change of Control), including by reason of a Constructive
Termination (as each such term is defined in the employment agreement), the
Company 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 such termination occurs during the last year of
the term, the Company is required to pay Mr. Zummo an amount equal to his full
salary and incentive bonus in effect for the year immediately preceding
termination and his pro rata share of his incentive bonus for the year in which
the termination occurs. If Mr. Zummo's employment is terminated for any reason
(other than for Cause, death or disability) by Mr. Zummo or the Company within
the twelve month period following a Change of Control, the Company is required
to pay Mr. Zummo an amount equal to the greater of two times his full salary and
bonus in respect of the year immediately preceding termination and (ii) 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. In
addition, if Mr. Zummo's employment agreement is not renewed by the Company
after the expiration of the initial five-year term other than for "Cause," the
Company 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. Corey serves as President and Chief Operating Officer of the Company
pursuant to a three-year employment agreement which became effective as of March
28, 1999. The employment agreement provides for a base salary for the first year
of the term of $300,000, subject to annual increases in the discretion of the
Compensation Committee of the Board of Directors commencing in fiscal year 2001.
In addition to the base salary, the employment agreement provides for an annual
incentive bonus under the Senior Management Plan commencing in fiscal year 2001
and a performance based bonus for fiscal year 2000 of up to a maximum of 40% of
his base salary for such fiscal year based on the achievement of pre-determined
target levels of the Company's earnings. Pursuant to the terms of the employment
agreement, Mr. Corey was awarded options to purchase 100,000 shares of Common
Stock under the Plan and SARs relating to 40,000 shares of Common Stock under
the SAR Plan. The options granted to Mr. Corey under the Plan vest in three
equal annual installments with the first installment commencing one year from
the date of grant. The SARs granted to Mr. Corey under the SAR Plan have a term
of three years and may only be exercised on the third anniversary of the date of
grant. In the event Mr. Corey's employment is terminated by the Company during
the first two years of the term without "Cause" (other than as a result of death
or disability or in connection with a Change of Control), including by reason of
a Constructive Termination (as each such term is defined in the employment
agreement), the Company is required to pay Mr. Corey an amount equal to his full
salary in effect for the year immediately preceding termination for the
remainder of the full term. If such termination occurs during the last year of
the term, the Company is required to pay Mr. Corey an amount equal to his full
salary in effect for the year immediately preceding termination. If Mr. Corey's
employment is terminated following a Change of Control (including by reason of a
Constructive Termination), the Company is required to pay Mr. Corey an amount
equal to two times his full salary in respect of the year immediately preceding
termination. In addition, if Mr. Corey's employment agreement is not renewed by
the Company after the expiration of the initial three-year term other than for
"Cause," the Company would be required to continue to pay Mr. Corey's full
salary in effect for the year immediately preceding termination for a period of
one year from the time of termination.
Mr. Kaplan served as Executive Vice President and Chief Financial Officer
of the Company pursuant to a three-year employment agreement which became
effective in February 1997 until he resigned effective August 31, 1999. The
employment agreement provided that Mr. Kaplan would allocate at least 80% of his
working time, attention and energies to the affairs of the Company and the
remaining 20% to Valentec; however, Mr. Kaplan had been spending substantially
all of his working time performing services for the Company since the closing of
the Valentec Acquisition. Mr. Kaplan's base salary for the first year of the
term was $220,000, subject to annual increases at the discretion of the Board of
Directors. In each of September
10
<PAGE> 13
1997 and March 1998, the Compensation Committee of the Board of Directors
approved an increase of salary payable to Mr. Kaplan under his employment
agreement to $242,000 and $300,000, respectively. In addition to the base
salary, the employment agreement provided for an annual incentive bonus. Mr.
Kaplan did not earn a bonus for fiscal year 1999. 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; (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 were to be issued on April 1, 1998, but
were actually issued on August 13, 1997 after approval by the Compensation
Committee of the acceleration of the issuance of such options. On September 17,
1997, the vesting schedule of all options granted by the Company under the Plan
was accelerated. Accordingly, all of the options granted to Mr. Kaplan by the
Company under the Plan vest in three equal annual installments (rather than four
equal annual installments) commencing one year from the date of grant. The
Employment Agreement provided that in the event Mr. Kaplan's employment was
terminated without "Cause", including by reason of a Constructive Termination
(as each such term is defined in the employment agreement), the Company would
have been 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 had been terminated by
the Company in connection with a "change in control" (as defined in the
employment agreement), the Company would have been 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 would have not been renewed by the Company after the expiration of the
initial three-year term other than for "Cause," the Company would have been
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. In connection with Mr. Kaplan's determination to
resign from the Company, the Company and Mr. Kaplan entered into an Agreement
effective as of August 31, 1999, providing as follows (i) Mr. Kaplan will
receive one year's salary (i.e. $300,000) payable over a twelve month period,
(ii) the Company will continue to pay certain fringe benefit premiums for twelve
months and automobile lease payments until February 2000, (iii) Mr. Kaplan's
option agreements have been amended to provide for the immediate vesting of all
unvested options and the period of time that Mr. Kaplan can exercise his options
was extended to a period of three years, and (iv) his outstanding SARs were
amended to provide for continued participation during the remainder of the
respective terms thereof.
Mr. Duerk serves as Vice President of the Company and President of the
Company's North American Automotive Group, pursuant to a two year employment
agreement which became effective in June 1998. The employment agreement provides
for a base salary for the first year of the term of $175,000, subject to annual
increases at the discretion of the Compensation Committee of the Board of
Directors. The employment agreement also provides for an annual incentive bonus
under the Company's Management Incentive Plan (the "Management Incentive Plan").
Mr. Duerk did not earn a bonus for fiscal year 1999 under such plan. In
addition, the employment agreement provides that (i) in the event Mr. Duerk's
employment is terminated without "Cause" (as such term is defined in the
employment agreement), the Company is required to continue to pay Mr. Duerk's
full salary (but no bonus compensation) for a period of twelve months from the
time of termination, (ii) if Mr. Duerk's employment is terminated by the Company
in connection with a "change of control" (as such term is defined in the
employment agreement), the Company is required to pay Mr. Duerk an amount equal
to two times his full salary and incentive bonus in respect of the year
immediately preceding termination, and (iii) if Mr. Duerk's employment agreement
is not renewed by the Company after the expiration of the term other than for
Cause, the Company is required to continue to pay Mr. Duerk's full salary (but
no bonus compensation) for a period of twelve months from the time of
termination.
Mr. Guadagno serves as Vice President of the Company and President of the
Company's Systems Group, 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.
Mr. Guadagno's current base salary is $162,000. In addition to the base salary,
the employment agreement provides for an annual incentive bonus. If Mr.
Guadagno's employment agreement is not renewed by the Company after the
expiration of the term other
11
<PAGE> 14
than for Cause, the Company would be required to continue to pay Mr. Guadagno's
full salary for a period of six months from the time of termination.
From January 23, 1998 until July 31, 1999, Mr. Lelliott served as Vice
President of the Company and President of the Company's Europe/Asia Pacific
Automotive Group pursuant to the terms of an offer letter dated as of January
23, 1998. The offer letter provided for an annual base salary of L90,000 British
pounds (approximately $142,200 as of July 22, 1999), which was subject to annual
increases at the discretion of the Board of Directors. In addition to the base
salary, the offer letter also provides for an annual incentive bonus under the
Management Incentive Plan. Mr. Lelliott received a signing bonus of L10,000
British pounds (approximately $15,800 as of July 22, 1999) upon commencing
employment with the Company in May 1998 and a bonus of L15,000 British pounds
(approximately $23,700, as of July 22, 1999) under the Management Incentive Plan
for fiscal year 1999. Pursuant to the terms of the offer letter, Mr. Lelliott
was awarded options to purchase 25,000 shares of Common Stock under the Plan.
Such options were to have vested in three equal annual installments with the
first installment commencing one year from the date of grant.
From June 1995 until his resignation as an employee of the Company in May
1998, Mr. Hakes served as President, European Operations pursuant to an
employment agreement (the "Hakes Employment Agreement"). The agreement had an
initial term of one year and was terminable thereafter on twelve months' notice
by either the Company or Mr. Hakes. Mr. Hakes' base salary for the first year of
the term was L95,000 British pounds (approximately $150,100 as of July 22,
1999), and was subject to annual increases at the discretion of the Board of
Directors. In addition to the base salary, the Hakes Employment Agreement
provided for an annual incentive bonus. Mr. Hakes was not awarded a bonus for
fiscal 1999. Pursuant to the Hakes Employment Agreement, if Mr. Hakes'
employment was terminated by the Company in connection with "a change in
control" (as defined in the Hakes Employment Agreement), the Company would have
been 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 provided services to VIL (as defined
herein) in return for compensation paid by VIL. The Company entered into a
consulting agreement (the "Hakes Consulting Agreement") with Mr. Hakes, pursuant
to which (i) the Hakes Employment Agreement was terminated, (ii) all SARs
granted to Mr. Hakes under the SAR Plan were forfeited, and (iii) Mr. Hakes
agreed to (a) provide certain consulting services to the Company and (b) serve
as the Managing Director of VIL for a term of one year. In consideration for
such services, Mr. Hakes received a lump sum payment of approximately L146,700
British pounds (approximately $231,786 as of July 22, 1999) (less applicable
withholding taxes), which is equal to his annual base salary at the time of
termination of the Hakes Employment Agreement; options to purchase an aggregate
of 35,000 shares of Common Stock previously granted to Mr. Hakes under the Plan
were fully vested pursuant to the Hakes Consulting Agreement and were available
for exercise until thirty days after the termination date of the Hakes
Consulting Agreement; and the Company provided to Mr. Hakes certain life
insurance benefits. Approximately L117,350 British pounds (approximately
$185,413 as of July 22, 1998) of the lump sum payment under the Hakes Consulting
Agreement was made by the Company. The Hakes Consulting Agreement expired in May
1999.
From May 1997 until his resignation as an employee from the Company in May
1998, Mr. Cresante served as Executive Vice President and Chief Operating
Officer of the Company pursuant to a three-year employment agreement. The
employment agreement provided that Mr. Cresante would allocate at least 80% of
his working time, attention and energies to the affairs of the Company and the
remaining 20% to Valentec; however, Mr. Cresante had been spending substantially
all of his working time performing services for the Company since the closing of
the Valentec Acquisition. Mr. Cresante's base salary for the first year of the
term was $235,000, subject to annual increases at the discretion of the Board of
Directors. In addition to the base salary, the employment agreement provided for
an annual bonus. Mr. Cresante did not receive a bonus for fiscal 1999. 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.
Pursuant to the employment agreement, in the event Mr. Cresante's employment was
terminated without "Cause", including by reason of a Constructive Termination
(as each such term is defined in the employment agreement), the Company would
have been required to pay Mr. Cresante an amount equal to his full salary and
incentive
12
<PAGE> 15
bonus in effect for the year immediately preceding termination for the remainder
of the full term. If Mr. Cresante's employment was terminated by the Company in
connection with a "change in control" (as defined in the employment agreement),
the Company would have been 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 was
not renewed by the Company after the expiration of the initial three-year term
other than for "Cause," the Company would have been 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. The Company has entered into a consulting agreement (the "Cresante
Consulting Agreement") with Mr. Cresante pursuant to which Mr. Cresante's
employment agreement was terminated and he will instead provide consulting
services to the Company for a term of two years ending in May 2000. As
compensation for such services, Mr. Cresante will receive $100,000 per year,
payable at least on a monthly basis and options to purchase 85,667 shares of
Common Stock previously granted to Mr. Cresante under the Plan have been fully
vested pursuant to the Cresante Consulting Agreement and are available for
exercise until thirty days after from the termination date of the Cresante
Consulting Agreement. The remaining stock options granted by the Company to Mr.
Cresante under his employment agreement have been forfeited. In addition,
pursuant to the Cresante Consulting Agreement, the Company will provide to Mr.
Cresante certain benefits under the Company's benefit plans as well as certain
life and health insurance benefits.
SENIOR MANAGEMENT PLAN
The Compensation Committee approved, and the Board of Directors and
shareholders of the Company have subsequently ratified, the Senior Management
Plan, which provides for annual performance based bonuses to certain key
executive officers, primarily based on pre-determined target levels of the
Company's earnings. Upon the occurrence of a Change of Control (as such term is
defined in the Senior Management Plan) such pre-determined target levels
relating to the fiscal year in which the Change of Control occurs shall be
deemed to have been achieved and payments of the awards shall be made promptly
after the Change of Control. In the event that the actual performance of the
Company exceeds such target levels, such awards shall be based on the actual
performance of the Company. Messrs. Zummo and Kaplan did not earn a bonus for
fiscal year 1999 under the Senior Management Plan. See "-- Employment
Agreements".
MANAGEMENT INCENTIVE PLAN
The Compensation Committee has approved, and the Board of Directors has
subsequently ratified, the Management Incentive Plan, which provides for annual
performanced based bonuses to certain management level employees (other than key
executive officers), primarily based on pre-determined levels of the Company's
earnings. Messrs. Duerk and Guadagno did not receive a bonus for fiscal year
1999. Mr. Lelliott earned a bonus of L15,000 (approximately $23,700 as of July
22, 1999) for fiscal year 1999 under the Management Incentive Plan.
1994 STOCK OPTION PLAN
On January 27, 1994, the Board of Directors adopted, and the stockholders
approved the Plan. On May 4, 1996, July 29, 1996, July 22, 1997 and May 28,
1998, the Board of Directors approved certain amendments to the Plan which were
subsequently approved by the stockholders of the Company. In July 1999, the Plan
was further amended, (i) to authorize the Compensation Committee of the Board of
Directors to determine when an option granted under the Plan will terminate
following the termination of such optionee's employment, directorship or
consulting arrangement with the Company, as the case may be, and (ii) subject to
shareholder approval, to increase the number of shares of the Corporation's
Common Stock issuable under the Plan to officers, key employees, and consultants
on the one hand and non-employee directors on the other hand from 975,000 and
75,000 shares in the aggregate, respectively, to 1,375,000 and 125,000 shares in
the aggregate, respectively. The Plan currently provides for the issuance of
options to purchase up to 1,050,000 shares of Common Stock, of which options to
purchase 975,000 shares may be issued to officers, key employees and consultants
of the Company and options to purchase 75,000 shares may be issued to
non-employee directors of
13
<PAGE> 16
the Company. Except in certain circumstances, upon the occurrence of a Change of
Control (as such term is defined in the Plan), all options granted under the
Plan that are outstanding and not yet vested (including options granted to
non-employee directors) will become 100% vested effective on the date on which
such Change of Control occurs and will be thereafter exercisable in accordance
with the terms of the Plan and any applicable award agreement between the
Company and the optionee. See Item 2 "-- Approval of the Amendments to the 1994
Stock Option Plan."
SAR PLAN
The SAR Plan was approved by the Compensation Committee of the Board of
Directors on October 13, 1997, effective as of April 1, 1997, and subsequently
ratified by the Board of Directors on May 28, 1998 and approved by the
shareholders of the Company on September 9, 1998. Pursuant to the SAR Plan, the
Compensation Committee of the Board of Directors may grant participating
officers and key employees of the Company SARs, which entitle the recipients
thereof to receive payments in cash equal to the appreciation in the fair market
value of a specified number of shares of Common Stock from the date of grant
until the date of exercise (the "Excess Value"). Upon the occurrence of a Change
of Control (as such term is defined in the SAR Plan), unless otherwise
specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities exchanges, all
SARs granted under the SAR Plan shall become fully exercisable as of the date of
such change of control and each outstanding SAR award shall be deemed to have
been exercised on such date and entitled to an immediate cash payment in an
amount equal to the Excess Value on such deemed date of exercise; provided,
however, that if, following such date, the Common Stock shall continue to be
quoted on NASDAQ (or a successor quotation system) or publicly traded on an
exchange, the participant shall have the option whether or not his or her
employment continues after such date, to exercise his or her respective SARs in
whole, but not in part (i) upon the date of such change in control or (ii) at
any time until the earlier of (x) the expiration date thereof or (y) the date
upon which the Common Stock shall cease to be quoted or publicly traded and in
the case of such delisting, the SAR shall be deemed to have been exercised on
the date of such delisting.
DIRECTORS' COMPENSATION
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company receive an annual retainer of $20,000 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.
Each non-employee director currently receives an automatic option grant
under the Plan, vesting in equal installments over a three-year period, at the
beginning of each calendar year in which he serves as a director of the Company.
On January 14, 1998, the Board of Directors approved an amendment to the Plan
which increased the size of the annual formula grant to non-employee directors
under the Plan from an option to purchase 2,500 shares of Common Stock to an
option to purchase 4,000 shares of Common Stock. 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 Company. See "-- 1994 Stock Option Plan" above for a
discussion of the status of such options upon the occurrence of Change of
Control (as such term is defined in the Plan).
CERTAIN TRANSACTIONS
The Company served as a sales representative in procuring a defense
contract for Valentec International Limited ("VIL"), a corporation formed under
the laws of the United Kingdom, 88.8% of which is owned by Robert A. Zummo, the
Chief Executive Officer and Chairman of the Board of the Company, and arranging
sub-contractors for such defense contract. During fiscal year 1999, the Company
incurred additional costs of
14
<PAGE> 17
approximately $3.4 million on behalf of VIL in connection with such defense
contract. At March 27, 1999 the Company had billed VIL and recorded a receivable
from affiliates in the amount of $4.6 million, of which $1.2 million was
outstanding at March 28, 1998. Such balance at March 28, 1998 included
approximately $700,000 of costs incurred by the Company on behalf of VIL and
$500,000 in respect of fees for certain management services the Company provided
on behalf of VIL. The Company collected approximately $3.4 million of the $4.6
million outstanding balance in May 1999. The Company established a reserve
against the remaining $1.2 million receivable from VIL, in the amount of $0.6
million.
In connection with the termination of the Company's employment agreement
with the Mr. Hakes (the "Hakes Employment Agreement") and his resignation as an
employee of the Company, the Company and VIL entered into a consulting agreement
with Mr. Hakes effective as of May 18, 1998, pursuant to which (i) the Hakes
Employment Agreement was terminated, (ii) all SARs granted to Mr. Hakes under
the SAR Plan were forfeited, and (iii) Mr. Hakes (a) provided certain consulting
services to the Company for a term of one year and (b) served as the Managing
Director of VIL for a term of one year. In consideration for such services, Mr.
Hakes received a lump sum payment of L146,700 British pounds (approximately
$231,786 as of July 22, 1999) (less applicable withholding taxes), which was
equal to his annual base salary at the time of termination of the Hakes
Employment Agreement; options to purchase an aggregate of 35,000 shares of
Common Stock previously granted to Mr. Hakes under the Plan were fully vested
pursuant to the Hakes Consulting Agreement and were available for exercise until
thirty days after the termination date of the Hakes Consulting Agreement; and
the Company provided to Mr. Hakes certain life insurance benefits. Approximately
L117,350 British pounds (approximately $185,413 as of July 22, 1999) of the lump
sum payment under the Hakes Consulting Agreement was made by the Company and the
remainder was made by VIL. The Hakes Consulting Agreement expired in May 1999.
See "Executive Compensation -- Employment Agreements" for a discussion of
an Agreement, effective as of August 31, 1999, with respect to certain
compensation to be paid, and certain other benefits to be provided, to Mr.
Kaplan in connection with his resignation as an officer and director of the
Company.
See "Security Ownership of Certain Beneficial Owners and Management,
footnote 8" for a discussion of a Consulting Agreement, between the Company and
Mr. Suozzi, a former director of the Company.
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
earnings per share is compensated through yearly bonuses and long-term
performance of the Corporation is rewarded through the grant of stock options
under the Plan and/or stock appreciation rights ("SARs") under the SAR Plan. The
bonuses, stock options and SARs 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 officers under the Senior Management Plan and the Corporation's
Management Incentive Plan, as applicable, primarily based on pre-determined
target levels of the Corporation's earnings per share in the case of the Senior
Management Plan and earnings before income taxes, depreciation and amortization
("EBITDA") at the divisional level in the case of the Management Incentive Plan.
The Compensation Committee believes that earnings per share and EBITDA are an
appropriate measure of performance because it promotes the achievement of
corporate-wide goals. In determining yearly bonuses, if any, outside of the
Senior Management Plan and the Corporation's Management Incentive Plan, the
Compensation Committee also considers outstanding achievement in areas other
than the Corporation's earnings per share or EBITDA. For example, the
Corporation has considered the contributions made by its executive officers in
diversifying the Corpora-
15
<PAGE> 18
tion's customer base, attaining major new customers, identifying appropriate
acquisition candidates and the consummation of significant financing
transactions of the Corporation.
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 stock options and/or SARs 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 and/or SARs aligns the
interest of the executives with those of the Corporation's stockholders. The
Compensation Committee determines the recipients of stock option and SAR 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 (i) options to
purchase a total of 1,600,499 shares of Common Stock under the Plan to a number
of employees and executives officers since the Corporation's initial public
offering, of which options to purchase a total of 442,424 shares of Common Stock
have been forfeited prior to vesting and (ii) SARs with respect to a total of
332,000 shares of Common Stock under the SAR Plan to a number of employees and
executive officers since April 1, 1997, the effective date of the SAR Plan.
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. The
Compensation Committee believed it was appropriate to grant Options and SARs at
these levels in order to attract executive officers of the caliber of these
individuals.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Zummo serves as Chief Executive Officer of the Corporation pursuant to
a five-year employment agreement which became effective as of April 19, 1999.
See "Executive Compensation -- Employment Agreements." In approving such
employment agreement, the Compensation Committee considered, among other things,
Mr. Zummo's experience, background, strong performance record and the
compensation packages paid to similarly situated Chief Executive Officers. The
employment agreement provides for a base salary for the first year of the term
of $575,000, subject to annual increase of the Compensation Committee of the
Board of Directors commencing in fiscal year 2001. In addition to the base
salary, the employment agreement provides for an annual incentive bonus under
the Company's Senior Management Plan and a performance based bonus for fiscal
year 2000 of up to a maximum of 50% of his base salary for such fiscal year
based on the achievement of pre-determined target levels of the Company's
earnings. Mr. Zummo did not earn a bonus for fiscal year 1999. Mr. Zummo was
also awarded SARs with respect to 50,000 shares of Common Stock during fiscal
year 1999. From time to time, the Compensation Committee consults with an
independent consulting firm on issues of executive compensation, including the
compensation package of Mr. Zummo.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held corporations 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
constitute "applicable employee remuneration" (as defined for purposes of
Section 162(m) of the Code) subject to the deduction limit if certain
requirements are met. Option grants under the Plan and awards granted to
employees under the Senior Management Plan and SAR Plan during a fiscal year
beginning on or after March 29, 1998 are intended to comply with these
requirements. The Compensation Committee does not believe that the applicable
remuneration 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
Robert J. Torok
16
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock for the period from May 6, 1994 (the date the Corporation's stock
became publicly traded) through March 27, 1999 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.
<TABLE>
<CAPTION>
SAFETY COMPONENTS
INTERNATIONAL PEER GROUP NASDAQ COMPOSITE (U.S.)
----------------- ---------- -----------------------
<S> <C> <C> <C>
May 94 100 100 100
Mar 95 163.44 71.02 111.51
Mar 96 120.43 80.38 150.29
Mar 97 86.02 104.92 170.5
Mar 98 122.58 113.59 248.84
Mar 99 73.12 73.96 330.1
</TABLE>
17
<PAGE> 20
ITEM 2. APPROVAL OF THE AMENDMENT 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, July 29, 1996 and July 22,
1997, the Board of Directors approved certain amendments to the Plan which were
subsequently approved by the stockholders of the Corporation. In July 1999, the
Plan was further amended to authorize the Compensation Committee of the Board of
Directors to determine when an option granted under the Plan will terminate
following the termination of such optionee's employment, directorship or
consulting arrangement with the Company, as the case may be. The Plan currently
provides for the issuance of options (each an "Option") to purchase up to
1,050,000 shares of Common Stock. Of this total, 975,000 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, in the case of
NQSOs, consultants (collectively, approximately 84 persons) of the Corporation
and 75,000 shares are issuable pursuant to NQSOs granted to non-employee
directors of the Corporation (currently 2 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 November 4, 1999, Options to purchase 1,158,075 shares of
Common Stock were granted under the Plan to officers, key employees and
consultants (of which Options to purchase 183,075 shares of Common Stock have
been issued to officers, key employees and consultants subject to approval by
the shareholders of the Corporation) and Options to purchase 105,000 shares of
Common Stock were issued to the non-employee directors (of which Options to
purchase 30,000 shares have been issued to the non-employee directors of the
Corporation subject to approval by the shareholders of the Corporation of the
reallocation described below).
The Board of Directors of the Corporation believes that an increase in the
number of shares of Common Stock issuable under the Plan would assist the
Corporation in attracting and retaining qualified individuals to serve as
officers, key employees, consultants and directors of the Corporation.
Accordingly, the Board of Directors has approved certain amendments to the Plan.
In July, 1999, the Board of Directors approved an amendment to the Plan which
would increase the number of shares of the Corporation's Common Stock issuable
under the Plan to officers, key employees and consultants on the one hand and
non-employee directors on the other hand from 975,000 and 75,000 shares in the
aggregate respectively, to 1,375,000 and 125,000 shares in the aggregate,
respectively. The Board of Directors recommended that such amendment to the Plan
be presented to the Corporation's stockholders for approval. If such amendment
to the Plan is not approved, an aggregate of 30,000 Options granted to the
Corporation's non-employee directors in fiscal year 1999, which are subject to
stockholder approval, would not be issued and no additional Options would be
granted to non-employee directors of the Corporation under the Plan.
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, in addition to discretionary grants, automatically granted
Options on an annual basis pursuant to the formula described below. In addition,
the Plan currently provides that no participant may be granted NQSOs to purchase
more than 200,000 shares of Common Stock in any one fiscal year. 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. 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 Plan also requires that the Stock Option Committee
members 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.
18
<PAGE> 21
Amendment. 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. At the Stock Option Committee's discretion, 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.
Unless otherwise determined by the Compensation Committee, the unexercised
portion of any Option granted to an officer or key employee under the Plan will
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 1998 will automatically receive a NQSO to
purchase shares of Common Stock on January 1 of the following year. On January
14, 1998, the Board of Directors approved an amendment to the Plan which
increased the size of such annual formula grant under the Plan from an Option to
purchase 2,500 shares of Common Stock for each non-employee director to an
Option to purchase 4,000 shares of Common Stock. On January 14, 1998, the Board
also approved an amendment to the Plan, which was not subject to stockholder
approval, authorizing discretionary Option Grants to non-employee directors
under the Plan. In addition, in July, 1999 the Board approved an amendment to
the Plan, subject to stockholder approval, which would increase the number of
shares of Common Stock issuable under the Plan to officers, key employees and
consultants on the one hand and non-employee directors on the other hand from
975,000 and 75,000 shares in the aggregate, respectively, to 1,375,000 and
125,000 shares in the aggregate, respectively. 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
19
<PAGE> 22
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. Unless
otherwise determined by the Compensation Committee, 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 November 4, 1999 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): 135,000 shares;
Jeffrey J. Kaplan (former Executive Vice President and Chief Financial Officer):
325,000 shares; Victor Guadagno (Vice President and President, Systems Group):
30,000 shares; Thomas W. Cresante (former Executive Vice President and Chief
Operating Officer): 225,000 shares (of which options to purchase 139,333 shares
were forfeited in connection with Mr. Cresante's resignation as an employee of
the Corporation and under the terms of the Cresante Consulting Agreement);
Joseph J. DioGuardi (Director): 35,000 shares; Francis X. Suozzi (Director):
35,000 shares; Robert J. Torok (Director): 35,000 shares; all current executive
officers as a group: 375,000 shares; all current non-executive officer directors
as a group: 70,000 shares; and all employees, including all current officers,
who are not executive officers, as a group: 1,158,075 shares. As of November 4,
1999, the market value of the Common Stock underlying outstanding Options was
approximately $3,276,101.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Each of the non-employee directors and the executive officers of the
Corporation has a direct interest in the approval of the amendments to the Plan
to increase the number of shares of Common Stock issuable under the Plan to
officers, key employees and consultants on the one hand and non-employee
directors on the other hand from 975,000 and 75,000 shares in the aggregate to
1,375,000 and 125,000 shares in the aggregate, respectively, as this increases
the number of shares of Common Stock available for issuance to non-employee
directors and executive officers under the Plan, and by reason of a portion of
their Options under the Plan being subject to the approval of such amendment by
the Corporation's stockholders. Options to purchase 183,075 shares of Common
Stock have been issued to officers, key employees and consultants subject to
approval by the shareholders of the Corporation, and an aggregate of 30,000
Options have been issued to the Corporation's non-employee directors subject to
approval by the shareholders of the Corporation.
NEW PLAN BENEFITS
The following table sets forth the amount of Options which will be granted
to the two non-employee directors, as a group, under the Plan in each year:
OPTION PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS
- ----------------- ------------ ---------------
<S> <C> <C>
Non-Employee Director Group................................. * 8,000 Shares
</TABLE>
- ---------------
* 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.
20
<PAGE> 23
There will be no federal income tax consequences to employees, consultants,
directors 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 capital gain or loss, which capital gain may be
subject to a reduced rate of tax if such shares of Common Stock were held for
more than one year.
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 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 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 ("disqualifying disposition"), 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 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
21
<PAGE> 24
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 is 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.
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 27, 1999, each of
Joseph J. DioGuardi, Robert J. Torok and Francis X. Suozzi (who resigned as a
director of the Corporation, effective July 12, 1999) failed to file one report
on Form 5 with respect to Options granted in Fiscal 1999 to each such
non-employee director under the Plan.
OTHER BUSINESS
The Board of Directors of the Corporation currently 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 2000 Proxy Statement and form of proxy on or
prior to March 31, 2000 in accordance with Rule 14a-8(d) promulgated under the
Exchange Act.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Corporation for the year ended
March 27, 1999 (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 27, 1999 (without exhibits), including the financial statements and
schedules thereto. Requests should be directed to Secretary, Safety Components
International, Inc., 40 Emery Street, Greenville, South Carolina 29605.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Effective January 9, 1998, the Audit Committee of the Board of Directors
approved the appointment of Arthur Andersen, LLP as the Corporation's
independent certified public accountants. The Corporation's financial statements
for the fiscal year ended March 27, 1999 have been examined by the firm of
Arthur Andersen, LLP, independent certified public accountants. Representatives
of Arthur Andersen, LLP are
22
<PAGE> 25
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.
On January 9, 1998, the Corporation dismissed Price Waterhouse LLP as its
independent accountants. The decision to change independent accountants was
approved by the Audit Committee of the Board of Directors of the Corporation.
The reports of Price Waterhouse LLP on the financial statements of the
Corporation for the two fiscal years ended March 31, 1997 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
In connection with its audits for the two fiscal years ended March 31, 1997
and through January 9, 1998, there have been no disagreements between the
Corporation and Price Waterhouse LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Price Waterhouse LLP would
have caused it to make reference thereto in their report on the financial
statements for such years.
There were no "reportable events" as described in Item 304(a)(1)(v) of
Regulation S-K with respect to the Corporation within the two fiscal years
ending March 31, 1997 and the subsequent interim period prior to January 9,
1998.
The Company engaged Arthur Andersen, LLP as its new independent accountants
as of January 12, 1998. During the two fiscal years ended March 31, 1997 and
through January 12, 1998, the Corporation did not consult with Arthur Andersen,
LLP regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Corporation's financial statements, and neither a
written report was provided to the Corporation or oral advice was provided that
Arthur Andersen, LLP concluded was an important factor considered by the
Corporation in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
Management has discovered certain matters relating to the Company's
financial statements for fiscal years 1999 and 1998 which will require further
investigation and restatement of the financial statements for those periods, as
well as the financial statements for the thirteen weeks ended June 26, 1999. The
principal components of the adjustments consist of the reversal of a duplicate
booking of a sale and the related receivable in the Company's defense operations
and the reversal of certain items incorrectly recorded in income in connection
with a loan transaction. Although management believes, after an internal review,
that it has found and reported all the adjustments necessary to fairly report
the financial condition and results of operations for the fiscal periods
affected, there can be no assurance that further adjustments will not be
required until the investigation is completed. Upon completion of this
investigation, the Company expects to file amended annual reports on Form 10-K
covering fiscal 1998 and 1999 and the applicable quarterly reports on Form 10-Q
covering fiscal 1998, 1999 and the first quarter of fiscal 2000. Accordingly,
the Company's previously issued fiscal 1998 and 1999 annual financial statements
and the independent auditor's reports thereon, as well as the interim financial
statements for fiscal 1998, 1999 and the first quarter of fiscal 2000, should
not be relied upon.
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,
MARSTON "DALE" ANDERSON
Secretary
Dated: November 16, 1999
Greenville, South Carolina
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<PAGE> 27
EXHIBIT A
SAFETY COMPONENTS INTERNATIONAL, INC.
1994 STOCK OPTION PLAN, AS AMENDED
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) "Change of Control" of the Company shall mean and include each of
the following: (i) the acquisition, in one or more transactions, of
beneficial ownership (within the meaning of Rule 13d-3 of the Rules and
Regulations) by any person or entity or any group of persons or entities
who constitute a group (within the meaning of Section 13(d)(3) of the Rules
and Regulations) (other than Robert A. Zummo, a member of his immediate
family, a trust or similar estate planning vehicle established by Mr.
Zummo, or an entity in which Mr. Zummo owns, directly or indirectly, a
majority of the equity securities or voting rights), of any securities of
the Company such that, as a result of such acquisition, such person, entity
or group either (A) beneficially owns (within the meaning of Rule l3d-3 of
the Rules and Regulations), directly or indirectly, more than 30% of the
Company's outstanding voting securities entitled to vote on a regular basis
for a majority of the members of the Board or (B) otherwise has the ability
to elect, directly or indirectly, a majority of the members of the Board;
(ii) a change in the composition of the Board such that a majority of the
members of the Board are not Continuing Directors; (iii) the closing date
of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which results in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company; or (v) the closing date of the sale or disposition by the Company
(if consummated in more than one transaction, the initial closing date) of
all or substantially all of the Company's assets, following shareholder
approval of such sale or disposition. Notwithstanding the foregoing, the
preceding events shall not be deemed to be a Change of Control if, prior to
any transaction or transactions causing such change, a majority of the
Continuing Directors shall have voted not to treat such transaction or
transactions as resulting in a Change of Control.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "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.
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(f) "Consultant" shall mean any Person who contracts to provide
services to the Company as an independent contractor.
(g) "Continuing Director" shall mean, as of any date of determination,
any member of the Board who (i) was a member of the Board on May 28, 1998
(the effective date of the amendment to the Plan which added the Change of
Control provisions) or (ii) was nominated for election or elected to such
board with the affirmative vote of a majority of the Continuing Directors
who were members of the Board at the time of such nomination or election.
(h) "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.
(i) "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.
(j) "Independent Director" shall mean each member of the Board who is
not an employee of the Company or any Affiliate.
(k) "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.
(l) "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.
(m) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(n) "Option Agreement" shall mean a written agreement, contract, or
other instrument or document evidencing an Option granted under the Plan.
(o) "Participant" shall mean a Key Employee, Consultant or Independent
Director who has been granted an Option under the Plan.
(p) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(q) "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.
(r) "Rules and Regulations" shall mean the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended.
(s) "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.
(t) "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.
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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 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 be
issued pursuant to, or by reason of, Options is 1,500,000, of which
1,375,000 may be issued pursuant to, or by reason of, Options granted to
Key Employees and Consultants and 125,000 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
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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
In addition to Section 7, Options may be granted only to Key Employees,
Independent Directors and Consultants; provided, that Incentive Stock Options
may be granted only to Key Employees of the Company, any parent corporation or
any subsidiary, as these terms are defined in Section 424 of the Code. 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 the success of the Company and such other factors as it shall deem relevant
in connection with accomplishing the purposes of the Plan. 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
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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. Unless otherwise determined by the Committee,
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 or directorship, as the case may be, for Cause; (iii)
three months after the date on which the Key Employee's employment or
directorship, as the case may be, 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 or directorship, as the case may be, 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 or directorship, as the case may be, 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 or directorship, as the case may be, 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 or
directorship arrangement, as the case may be 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.
(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
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Committee may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
(j) Change of Control. Notwithstanding anything contained to the
contrary herein, upon the occurrence of a Change of Control, all Options
granted under the Plan that are outstanding and not yet vested (including
Options granted to Independent Directors under Section 7 hereof), will
become immediately 100% vested effective on the date on which the Change of
Control occurs and shall be thereafter exercisable in accordance with the
terms of the Plan (including, without limitation, as provided in Sections
6(d)) and any applicable award agreement; provided, however, that the
foregoing shall not apply to the extent that such acceleration of vesting
shall make a "pooling of interests" accounting unavailable in the case of a
Change of Control transaction which is intended to be effected as a
"pooling of interests" transaction.
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 beginning in calendar year 1998 shall
automatically be granted a Non-Qualified Stock Option to purchase 4,000 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)
unless otherwise determined by the Committee, 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:
(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.
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(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 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.
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(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.
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.
A-8
<PAGE> 35
PROXY
SAFETY COMPONENTS INTERNATIONAL, INC.
ANNUAL MEETING, DECEMBER 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert A. Zummo and John C. Corey 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 Safety
Components International, Inc. held of record by the undersigned on November 4,
1999, at the Annual Meeting of Stockholders to be held on December 13, 1999, and
any adjournments thereof.
THE UNDERSIGNED HEREBY DIRECTS THIS PROXY TO BE VOTED:
1) ELECTION OF DIRECTORS:
<TABLE>
<C> <S> <C> <C> <C>
---- FOR the election as Class I directors of all or ---- WITHHOLD AUTHORITY
nominees listed below (except as marked to to vote for all nominees listed below
the contrary below)
</TABLE>
Joseph J. DioGuardi
John C. Corey
(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)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
2) PROPOSAL TO APPROVE THE AMENDMENT 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. FOR AGAINST ABSTAIN
---- ---- ----
</TABLE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING PROXY STATEMENT DATED
NOVEMBER 16, 1999.
(Please Sign and Date the Other Side)
<PAGE> 36
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.
<TABLE>
<S> <C>
---------------------------------------------------
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.
</TABLE>
