UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended March 25, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______
Commission File Number 0-23938
SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0596831
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Emery Street 29605
Greenville, South Carolina (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code (864) 240-2600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of Class)
10 1/8% Senior Subordinated Notes due 2007, Series B
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].
The aggregate market value of the common stock held by persons other than
affiliates of the registrant, as of July 7, 2000, was approximately $250,000.
The number of shares outstanding of the registrant's common stock, as of
July 7, 2000, is as follows:
--------------------------------------------------------------------------------
Class Number of Shares
--------------------------------------------------------------------------------
Common Stock, par value $.01 per share 5,136,316
--------------------------------------------------------------------------------
<PAGE>
This Form 10-K/A Amendment No. 1 (this "Amendment") amends and supplements
the Form 10-K (the "Original Form 10-K") filed by Safety Components
International, Inc., a Delaware corporation (the "Company"), on July 10, 2000.
The sole purpose of this Amendment is to amend and restate Items 10, 11, 12 and
13 of Part III of the Original Form 10-K to read in their entirety as set forth
below and to supplement Item 14 of Part III of the Original Form 10-K as set
forth below. Defined terms not otherwise defined herein shall have the
respective meanings ascribed thereto in the Original Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
The following table sets forth the names, ages and all positions and
offices with the Company held by the Company's present executive officers.
Name Age Positions and Offices Presently Held
---- --- ------------------------------------
Robert A. Zummo................ 59 Chairman of the Board and Chief Executive
Officer
John C. Corey.................. 53 Director, President and Chief Operating
Officer
Brian P. Menezes............... 47 Vice President; Chief Financial Officer
Stephen Duerk.................. 58 Vice President; President, North American
Automotive Group
Victor Guadagno................ 60 Vice President; President, Systems Group
Marston "Dale" Andersen........ 50 Corporate Controller,
Secretary and Assistant Treasurer
----------
Executive officers are appointed by the Board of Directors of the Company
(the "Board") and serve at the discretion of the Board. Following is information
with respect to the Company's executive officers:
Robert A. Zummo. Mr. Zummo has served as Chairman of the Board and Chief
Executive Officer of the Company 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 Company (as successor in interest
to Valentec International Corporation) ("Valentec"), which was acquired by the
Company 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.
John C. Corey. Mr. Corey has served as President, Chief Operating Officer
and Director of the Company 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.
<PAGE>
Brian Menezes. Mr. Menezes has served as Vice President and Chief Financial
Officer of the Company 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.
Stephen B. Duerk. Mr. Duerk has served as Vice President of the Company and
as President of the Company's North American Automotive Group since May 1998 and
as President of Safety Components Fabric Technologies, Inc., a wholly-owned
subsidiary of the Company ("SCFTI"), since January 1998. From July 1997 to
January 1998, Mr. Duerk served the Company as Co-Managing Director of SCFTI.
Prior to the Company'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 the 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 J.P. Stevens & Co., Inc. ("JPS Stevens"), a company
engaged in the business of 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.
Victor Guadagno. Mr. Guadagno has served as President of Valentec Systems,
Inc. since the inception of the Company'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 Company 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.
Directors
The following table sets forth the names and ages of the directors of the
Company:
Name Age
---- ---
Robert A. Zummo 59
John C. Corey 53
Joseph J. DioGuardi 60
Robert J. Torok 69
----------
The Board is divided into three classes. The term of the Class I directors,
Messrs. Corey and DioGuardi, expires in 2002; the term of the Class II director,
Mr. Torok, expires at the next Annual Meeting of Stockholders of the Company;
the term of the Class III director, Mr. Zummo, expires in 2001. Directors hold
office until the Annual Meeting of Stockholders of the Company 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 Company,
2
<PAGE>
the successors to the class of directors whose term expires will be elected for
a three-year term. Following is information with respect to the directors of the
Company who are not also executive officers of the Company:
Joseph J. DioGuardi. Mr. DioGuardi has been a 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 has been an
international spokesman for human rights and founded and now chairs The Albanian
American Civic League Foundation. Since leaving Congress, Mr. DioGuardi has also
founded and now chairs a non-partisan foundation named "Truth in Government,"
aimed at promoting fiscal responsibility and budgetary reform. 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 Company 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.
Robert J. Torok. Mr. Torok has served as a 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 Company, a
diversified manufacturing company based in Hartford, Connecticut, where Mr.
Torok worked from 1958 to 1980. Mr. Torok has 23 years of experience in
engineering, manufacturing and management.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company's executive officers and directors are required under the
Securities Exchange Act of 1934, as amended, 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 Company. To the Company's knowledge,
based solely on the Company's review of the copies of such reports it has
received, the Company believes that during the fiscal year ended March 25, 2000,
all such reports were timely filed.
3
<PAGE>
ITEM 11. 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 25, 2000 (each
person appearing in the table is referred to as a "Named Executive").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Securities
Underlying All Other
Name and Salary Bonus Options/SARs Compensation
Principal Position Year ($) ($) (#) ($)
--------------------------------------------- ---- ------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Robert A. Zummo ............................. 2000 564,588 0 50,000/50,000 95,787(1)
Chairman of the Board, 1999 525,000 0 0/50,000 87,388(2)
President and Chief
Executive Officer 1998 439,185 491,000(3) 55,000/40,000 89,925(4)
John C. Corey ............................... 2000 303,776 0 150,000/40,000 70,006(6)
President and Chief
Operating Officer(5)
Stephen B. Duerk, ........................... 2000 175,000 0 15,000/6,000 14,707(7)
Vice President; President 1999 170,833 0 0/6,000 11,975(8)
North American Automotive 1998 78,981 0 10,500/6,000 2,707(9)
Group
Victor Guadagno, ............................ 2000 162,000 0 10,000/0 12,687(10)
Vice President; President, 1999 162,000 0 0 11,552(11)
Systems Group 1998 162,000 0 0 7,635(12)
Brian P. Menezes, ........................... 2000 109,976 0 50,000/0 9,967(14)
Vice President and Chief
Financial Officer(13)
Jeffrey J. Kaplan, .......................... 2000 262,500 0 50,000/40,000 46,478(16)
Executive Vice President and 1999 300,000 0 0/40,000 63,763(17)
Chief Financial 1998 233,018 221,000(18) 150,000/20,000 35,168(19)
Officer(15)
</TABLE>
---------
(1) Amount reflects a $18,000 automobile allowance, $69,494 elective life
insurance premiums, a $5,000 matching contribution under the Company's
401(k) plan, $720 long-term disability premiums, and $2,573 group life
insurance premiums.
(2) 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.
(3) 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.
(4) 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.
(5) Mr. Corey joined the Company in March 1999.
(6) Amount reflects $45,290 relocation expense, a $14,400 automobile allowance,
$3,461 retro pay, a $5,062 matching contribution to the Company's 401(k)
plan, $660 long-term disability premiums, and $1,133 group life premiums.
(7) Amount reflects a $6,000 automobile allowance, $2,796 of club dues, a
$4,625 matching contribution under the Company's 401(k) plan, and $975 of
group insurance premium.
(8) Amount reflects a $6,000 automobile allowance, a $5,000 matching
contribution under the Company's 401(k) plan and $975 of insurance
premiums.
(9) Amount reflects a $1,500 automobile allowance and $1,207 matching
contribution under the Company's 401(k) plan.
4
<PAGE>
(10) Amount reflects a $6,000 automobile allowance, a $4,874 matching
contribution under the Company's 401(k) plan, and $1,813 group life
insurance premiums.
(11) 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.
(12) Amount reflects a $6,000 automobile allowance and a $1,635 matching
contribution under the Company's 401(k) plan.
(13) Mr. Menezes joined the Company in August 1999.
(14) Amount reflects $500 elective insurance premiums, a $2,219 matching
contribution under the Company's 401(k) plan, $326 long-term disability
premiums, a $6,750 automobile allowance, and $172 group life insurance
premiums.
(15) Mr. Kaplan's employment was terminated on August 31, 1999.
(16) Amount reflects $39,915 elective life insurance premiums, a $4,407 matching
contribution to the Company's 401(k) plan, $630 long-term disability
premiums, and $1,526 group life insurance premiums.
(17) 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.
(18) 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.
(19) Amount reflects $18,395 of life insurance premiums (which constitutes a
gross-up amount to offset income tax exposure), a $14,400 automobile
allowance, a $2,208 matching contribution under the Company's 401(k) plan
and $165 long-term disability insurance premiums.
5
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following options and Stock Appreciation Rights ("SARs") were granted
to the Named Executives during the fiscal year ended March 25, 2000 under the
Plan and the Company's Stock Appreciation Rights Award Plan (the "SAR Plan"),
respectively.
<TABLE>
<CAPTION>
Individual Grants
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
for Option Term
Number of % of Total
Securities Options/SARs Exercise or
Underlying Granted to Base
Options/SARs Employees in Price Expiration
Name Granted(#) Fiscal Year(1)(2) ($/sh)(3) Date 5%($)(6) 10%($)(6)
------------------------------ -------------- ---------------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert A. Zummo .............. 50,000/50,000 9.3%/35.5% $5.13/8.50 05/09/03/02 40,430 84,902
John C. Corey ................ 100,000/40,000 18.6/28.4 $8.50/$8.50 03/09/03/02 133,981 281,350
John C. Corey ................ 50,000/0 9.3/N/A 5.13/NA 05/09/NA 40,430 84,902
Stephen B. Duerk ............. 15,000/6,000 2.8/4.0 5.13/$8.50 05/09/03/02 12,129 25,470
Victor Guadagno .............. 10,000/0 1.9/N/A 5.13/NA 05/09/NA 8,086 16,980
Brian Menezes ................ 50,000/0 9.3/N/A 5.34/NA 08/09/NA 42,086 88,377
Jeffrey J. Kaplan ............ 50,000/40,000 9.3/28.4 5.13/$8.50 05/09/03/02 40,430 84,902
</TABLE>
----------
(1) Figures have been rounded to the nearest tenth.
(2) An aggregate of 40,000 of the SARs granted to employees during fiscal year
2000 were subsequently forfeited in connection with the respective
employee's resignation from the Company.
(3) Figures have been rounded to the nearest cent.
(4) SARs become exercisable on the termination date of the SAR.
(5) Options become exercisable in three equal annual installments with the
first installment commencing one year from the date of grant.
(6) Rounded to the nearest dollar.
As a result of the Company's Chapter 11 filing, the SAR Plan will be dissolved;
any ensuing SAR plan after emergence from bankruptcy will be determined by the
new Board of Directors.
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 25, 2000,
the aggregate dollar value realized upon exercise, the total number of
unexercised options and SARs, if any, held at March 25, 2000 and the aggregate
dollar value of in-the-money, unexercised options and SARs, held at March 25,
2000. 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 25, 2000,
which was $0.52 per share.
6
<PAGE>
<TABLE>
<CAPTION>
Shares Acquired
on Exercise or Number of Securities Value of Unexercised
with respect to Underlying Unexercised In-the-Money Options
which Options Options and SARs at Fiscal and SARs at
or SARs were Value Year-End (#) Fiscal Year- End ($)
Name exercised (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Zummo........... 0 N/A 66,668/68,332(1) *
Robert A. Zummo........... 0 N/A 0/140,000(2) *
John C. Corey............. 0 N/A 0/150,000(1) *
John C. Corey............. 0 N/A 0/40,000(2) *
Stephen B. Duerk.......... 0 N/A 20,000/25,000(1) *
Stephen B. Duerk.......... 0 N/A 0/18,000(2) *
Victor Guadagno........... 0 N/A 20,000/10,000(1) *
Brian P. Menezes ......... 0 N/A 0/50,000(2) *
Jeffrey J. Kaplan......... 0 N/A 325,000/0(1) *
Jeffrey J. Kaplan......... 0 N/A 0/100,000(2) *
</TABLE>
----------
* None of the Options or SARs referenced in the chart were in-the-money on
March 25, 2000.
(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.
As a result of the Company's Chapter 11 filing, the SAR Plan will be dissolved;
any ensuing SAR plan after emergence from bankruptcy will be determined by the
new Board of Directors.
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 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 2000. On April 10, 2000, the Company filed a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for
the District of Delaware. In connection with that filing, Mr. Zummo, the Company
and representatives of holders of the Company's 10 1/8% Senior Subordinated
Notes due 2007, Series B have entered into a restructuring agreement dated as of
April 6, 2000 (the "Restructuring Agreement"). The Restructuring Agreement
provides, among other things, that upon the effective date of a plan for the
reorganization of the Company, Mr. Zummo's service as Chief Executive Officer of
the Company will terminate and Mr. Zummo will begin to serve the Company as a
business consultant for a period of two years. The Restructuring Agreement
provides further that in consideration of his service as a business consultant
to the Company, during the term of that service the Company will pay Mr. Zummo
the salary and health and insurance benefits (other than bonuses) due to him
under the employment agreement.
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 at 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
7
<PAGE>
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. 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. Menezes serves as Vice President and Chief Financial Officer of the
Company pursuant to a two year employment agreement which become effective as of
August 23, 1999. The employment agreement provides for a base salary for the
first year of the term of $180,000, subject to annual increases in the
discretion of the Compensation Committee of the Board of Directors. In addition
to the base salary, the employment agreement provides for an annual incentive
bonus for fiscal year 2000 of not less than $20,000. In succeeding years of his
term he will be entitled to Bonus Compensation pursuant to the Management
Incentive Plan. Mr. Menezes was awarded options to purchase 50,000 shares of
common stock under the Plan. In the event Mr. Menezes' employment is terminated
without "Cause" (as such term is defined in the employment agreement), the
Company is required to pay Mr. Menezes' full salary (but no bonus compensation)
for a period of six months 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 and terminated on August 31, 1999. 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 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. 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
8
<PAGE>
issued on August 13, 1997 after approval by the Compensation Committee of the
acceleration of the issuance of such options. In connection with Mr. Kaplan's
resignation from the Company effective as of August 31, 1999, (i) Mr. Kaplan
will receive one year's salary (i.e. $300,000) payable over a twelve month
period, (ii) the Company also agreed to continue to pay certain fringe benefit
premiums for twelve months and automobile lease payments until February 2000,
(iii) his option agreements were amended to provide for the immediate vesting of
all unvested options and to extend the time that Mr. Kaplan can exercise his
options 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.
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. No bonuses for fiscal year 2000 were granted 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
performance based bonuses to certain management level employees (other than key
executive officers), primarily based on pre-determined levels of the Company's
earnings. No bonuses for fiscal year 2000 were granted under the Management
Incentive Plan.
Executive Severance Program
The Board of Directors has adopted, and the Creditors Committee and the
Bankruptcy Court have approved, an executive severance plan (the "Severance
Plan"). The Severance Plan provides for the Company to pay certain benefits to a
Key Executive (as defined below) if his employment is terminated either by the
Company without Cause (as defined therein) or by the executive for Good Reason
(as defined therein). The following table sets forth (i) the names of the
executives eligible to participate in the Severance Plan (the "Key Executives"),
(ii) the cash payment each Key Executive is eligible to receive thereunder and
(iii) the period of time for which each Key Executive would continue to receive
the health insurance coverage in effect at the time of termination thereunder:
Health Insurance
Executive Cash Severance Benefit ($) Continuation Period (months)
--------- -------------------------- ----------------------------
John C. Corey 600,000 24
Brian P. Menezes 270,000 18
Stephen B. Duerk 262,000 18
Daniel R. Smith* 105,000 12
----------
* Mr. Smith resigned as an employee of the Company effective as of June
12, 2000 and is not entitled to benefits under the Severance Plan.
Key Executives will not be entitled to severance under any other plan, program,
arrangement or agreement with the Company or any subsidiary thereof and the
benefits received under the Severance Plan will be reduced, dollar for dollar,
by any such severance received. Unless his termination was preceded by a Change
in Control of the Company (as defined therein), a Key Executive receiving
benefits under the Severance Plan will be required to enter into a release with
respect to the Company in consideration of receiving such benefits.
9
<PAGE>
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, May 28, 1998,
and July 12, 1999, the Board of Directors approved certain amendments to the
Plan which were subsequently approved by the stockholders of the Company.
Additionally, in July 1999, the Plan was further amended to provide that the
Compensation Committee of the Board of Directors has discretion to extend the
period of time that an option granted under the Play may be exercised by an
optionee after 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 to purchase up to 1,500,000 shares of
Common Stock, of which options to purchase 1,375,000 shares may be issued to
officers, key employees and consultants of the Company and options to purchase
125,000 shares may be issued to non-employee directors of 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. As a result
of the Company's Chapter 11 filing, the Plan will be dissolved; any ensuing
stock option plan after emergence from bankruptcy will be determined by the
Board of Directors.
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. As a result of the Company's Chapter 11 filing, the
SAR Plan will be dissolved; any ensuing SAR Plan after emergence from bankruptcy
will be determined by the new Board of Directors.
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
10
<PAGE>
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)
and as a result of the Company's Chapter 11 filing.
ITEM 12. SECURITY OWNERSHIP OF 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
July 7, 2000 by all person(s) known by the Company to be the beneficial owner of
more than 5% of the Common Stock, by each director of the Company, by each of
the Named Executives (as defined herein) and by all directors and executive
officers of the Company 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.
11
<PAGE>
<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)........................................... 1,043,244(3) 19.0%
Cramer Rosenthal McGlynn, LLC................................ 671,100(4) 13.1%
707 Westchester Avenue
White Plains, New York 10604
John C. Cotton and Janet H. Cotton, as joint tenants ........ 298,800(5) 5.8%
Apartado Postal 362B, Sucursal B
Puerto Vallarta, Jalisco Mexico
Dimensional Fund Advisors Inc. .............................. 280,300(6) 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
John C. Corey................................................ 54,000 *
Stephen Duerk................................................ 20,100(9) *
Victor Guadagno(2) .......................................... 20,000(8) *
Brian P. Menezes(2) ......................................... 16,667(8) *
Jeffrey J. Kaplan(2)......................................... 325,000(8) 6.3%
Joseph J. DioGuardi(2)....................................... 18,833(8) 0
Francis X. Suozzi(3)(9)...................................... 435,801(10) 6.3%
Robert J. Torok(2)........................................... 18,833(8) *
All executive officers and directors as a group
(consisting of 8 individuals)........................... 1,195,010(11) 22.4%
</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 July 7, 2000 is deemed to be outstanding for purposes of
computing the percentage ownership of such person.
(2) Address for each person is c/o Safety Components International, Inc., 40
Emery Street, Greenville, South Carolina 29605.
(3) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 66,668 shares of Common Stock. Pursuant to the terms of
the Restructuring Agreement, Mr. Zummo's shares will be cancelled upon the
Company's emergence from bankruptcy.
(4) 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 2000.
(5) Includes 23,000 shares owned by the John C. Cotton IRA and 15,600 shares
owned by the Janet H. Cotton IRA, according to a Schedule 13G filed by Mr.
And Ms. Cotton with the Commission in January 2000.
(6) Represents the number of shares beneficially owned by Dimensional Fund
Advisors Inc. ("Dimensional"), an investment company registered under
Section 203 of the Investment Advisers Act of 1940, according to a Schedule
13G filed by Dimensional with the Commission in February 2000.
(7) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 50,000 shares of Common Stock.
12
<PAGE>
(8) Represents only options which are currently exercisable (or exercisable
within 60 days) to purchase shares of Common Stock.
(9) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 20,000 shares of Common Stock.
(10) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 110,000 shares of Common Stock. 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 reached an agreement
in principle with respect to a consulting arrangement, subject to the
negotiation and execution of definitive agreement, pursuant to which (i)
Mr. Suozzi will provide certain consulting services on behalf of the
Company for a term of one year (ii) in consideration for such services Mr.
Suozzi shall receive options to purchase 75,000 shares of Common Stock at
an exercise price of $5-11/16 per share. Such options are to be non-Plan
options, fully vested and have a term of ten years.
(11) Includes options which are currently exercisable (or exercisable within 60
days) to purchase 197,667 shares of Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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
subcontractors for such defense contract. During fiscal year 1999, the Company
incurred additional costs on behalf of VIL in connection with the defense
contract procured for VIL during fiscal 1998. These additional costs,
approximately $3.4 million, were collected in May 1999. The Company established
a reserve in the amount of $0.6 million in the second quarter of fiscal 2000
against its receivable of $1.2 million from VIL, an affiliated party, as a
result of uncertainty as to the affiliate's ability to generate sufficient cash
to repay such amount. An agreement was signed in January 2000 between the
Company and Mr. Zummo, whereby Mr. Zummo pledged to the Company his stock in the
Company as collateral against such indebtedness. Further, Mr. Zummo has agreed
to direct VIL to remit to the Company in satisfaction of a portion of the
receivable, $564,000 to be received from a foreign customer. In connection with
the Restructuring Agreement, discussed in Note 1 to consolidated financial
statements, the pledged collateral has diminished in value, and Mr. Zummo has
agreed to reduce future payments to him under his employment agreement to cover
such receivable in the event the cash is not received from the foreign customer
by July 1, 2001. In addition, the Company has agreed to release VIL from any
amounts due in excess of such receivable. There were no sales to VIL during
fiscal 2000.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 14 is hereby supplemented to include the following Exhibit, which is filed
with this Attachment.
(a) (3) Exhibits:
10.68 Executive Severance Program
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: /s/ Brian Menezes
----------------------------
Brian Menezes
Chief Financial Officer
Date: July 21, 2000
14
