-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lX3u1rOozW76VLhft5FtTi3Eth0LvePUuD4v9BCVw2/jNOLLm+bj0OxPhwAJ9HsM RQmFGDGey/F3T7ryg2pTfA== 0000950152-95-000649.txt : 19950417 0000950152-95-000649.hdr.sgml : 19950417 ACCESSION NUMBER: 0000950152-95-000649 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950413 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIGGIE INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000720032 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 521297376 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08591 FILM NUMBER: 95528787 BUSINESS ADDRESS: STREET 1: 4420 SHERWIN RD CITY: WILLOUGHBY STATE: OH ZIP: 44094 BUSINESS PHONE: 2169532700 MAIL ADDRESS: STREET 1: 4420 SHERWIN RD CITY: WILLOUGHBY STATE: OH ZIP: 44094 FORMER COMPANY: FORMER CONFORMED NAME: FIGGIE INTERNATIONAL HOLDINGS INC DATE OF NAME CHANGE: 19870112 10-K405 1 FIGGIE INTERNATIONAL, INC. 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED 12/31/94 COMMISSION FILE NUMBER 1-8591 -------------- ------------ FIGGIE INTERNATIONAL INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 52-1297376 - ------------------------------------- ------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4420 SHERWIN ROAD, WILLOUGHBY, OHIO 44094 - ----------------------------------------------- -------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (216) 953-2700 ----------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ 10-3/8% SUBORDINATED DEBENTURES PACIFIC STOCK EXCHANGE INC. - --------------------------------- -------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: CLASS A COMMON STOCK, PAR VALUE $.10 PER SHARE - -------------------------------------------------------------------------------- (TITLE OF CLASS) CLASS B COMMON STOCK, PAR VALUE $.10 PER SHARE - -------------------------------------------------------------------------------- (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 THE PAST 90 DAYS. YES X NO --- --- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ X ] --- STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.) AT 4/10/95 $150,018,773 - -------------------------------------------------------------------------------- INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. Outstanding 4/10/95 CLASS A COMMON STOCK, PAR VALUE $.10 PER SHARE 13,670,916 - -------------------------------------------------------------------------------- CLASS B COMMON STOCK, PAR VALUE $.10 PER SHARE 4,724,869 - -------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424 (B) OR (C) UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD BE CLEARLY DESCRIBED FOR IDENTIFICATION PURPOSES.) PROXY STATEMENT RE:1995 ANNUAL STOCKHOLDERS' MEETING(SEE PART III) - -------------------------------------------------------------------------------- CERTAIN DOCUMENTS INCORPORATED FROM PRIOR FILINGS (SEE PART IV) - -------------------------------------------------------------------------------- 2 Except as otherwise stated, the information contained in this Annual Report is as of December 31, 1994. PART I ------ ITEM 1. BUSINESS Figgie International Inc. (referred to, with all its consolidated subsidiaries and divisions, and their predecessor entities, unless the context otherwise requires, as the "Company") announced in early 1994 that it would dispose of eight of its businesses (the "1994 Divestiture Program"). An additional two businesses were identified for sale during the first half of 1994. The 1994 Divestiture Program was adopted at the time the Company was negotiating with certain lenders who had temporarily waived non-compliance with financial covenants by the Company under a number of agreements. During these negotiations, it was determined that the Company needed to sell certain businesses in order to effectuate the refinancing of debt under these agreements. These negotiations culminated with the execution on August 1, 1994 of an Override Agreement between the Company and its lenders to refinance approximately $315 million in debt and commitments, of which $277 million was outstanding, and $172 million in leases. By the end of 1994, the Company had sold eight businesses. The Company announced on February 15, 1995, its strategic business plan. Under the plan, the Company would focus on technology-driven manufacturing companies and divest fourteen other businesses to reduce debt and return the Company to profitability. The Company's ongoing operations comprise three reportable business segments: 1) Sophisticated electronic systems through its subsidiary, Interstate Electronics Corporation, 2) Protective breathing and oxygen equipment and instruments through Scott and Taylor Environmental Instruments, and 3) Aerial work platforms through its Snorkel unit. The Company's real estate development activities conducted through Figgie Properties is reported as a corporate department. The description of the operations comprising these three reporting segments is set forth below under the caption "Continuing Operations". Those operations to be offered for sale in 1995 as a result of the strategic business plan were categorized as discontinued operations for 1994 financial reporting purposes, and the Company's prior year segment data was recast to reflect the planned divestitures. The businesses comprising the discontinued operations are included in the business description because they were owned by the Company as of December 31, 1994, but are grouped separately below under the caption "Discontinued Operations". Through April 12, 1995, the Company has sold four businesses, Figgie Power Systems, Figgie Acceptance, SpaceGuard Products and Figgie/Alfa Packaging Systems. Twelve additional businesses are for sale. The Company has signed letters of intent for the sale of two of these businesses. For further discussion of the Company's program to divest these various operations, see "Item 7 - Management's Discussion and Analysis of Financial Conditions and Results of Operations", included elsewhere herein. The Company's business is generally managed at the operating division and subsidiary level but centralized financial and legal activities, as well as certain other administrative functions, are performed at the corporate offices of the Company. 2 3 CONTINUING OPERATIONS INTERSTATE ELECTRONICS CORPORATION ("Interstate Electronics") develops and produces sophisticated telemetry, instrumentation, and data recording systems and position measuring systems, Global Positioning Systems ("GPS"), for the U.S. Navy's Polaris/Poseidon, TRIDENT, and TRIDENT II ships; precise GPS for aircraft and turnkey test ranges; and GPS for commercial and business aircraft navigation and landing systems. Interstate Electronics also designs and produces plasma, liquid crystal, and cathode-ray tube display systems for a variety of shipboard and aircraft applications. In addition, Interstate Electronics develops sophisticated bandwidth-on-demand satellite communication modems and terminals for both government and commercial applications. The SCOTT division manufactures the Scott Air Pak* and other life support products for fire fighting and personal protection against industrial contaminants. The air-purifying products provide protection against environmental and safety hazards. Scott is the largest manufacturer of protective breathing equipment, pilot and crew oxygen masks plus emergency oxygen for passengers on commercial, government and private aircraft. Scott is also a leading manufacturer of instruments to detect the presence of combustible or toxic gases and the lack of oxygen. The TAYLOR ENVIRONMENTAL INSTRUMENTS ("Taylor") division manufactures consumer thermometers, barometers and hygrometers. Taylor also manufactures and sells temperature and environmental measuring and testing devices. In addition to use in scientific laboratories, hospitals and universities, these devices are used in heating, ventilation and air conditioning (HVAC), food service and industrial applications. The SNORKEL division manufactures self-propelled aerial work platforms and scissorlifts for use in construction and maintenance activities and self-propelled telescopic and articulating booms. Snorkel also fabricates and services booms that are mounted on fire apparatus to deliver large quantities of water from elevated positions. DISCONTINUED OPERATIONS FRED PERRY SPORTSWEAR designs, licenses and distributes Fred Perry* tennis and other sports apparel products and casual clothing. INTERSTATE ENGINEERING manufactures Compact* and Tri-Star* vacuum cleaners and non-electrical heat-activated home fire alarms. Interstate Engineering also operates an aluminum and zinc die-cast facility. AMERICAN LAFRANCE operates a service center that performs major maintenance, repairs, and refurbishment of fire trucks and apparatus. "AUTOMATIC" SPRINKLER CORPORATION OF AMERICA designs and installs sophisticated fire protection systems for commercial and industrial use and for special hazard facilities. * Registered or common law trademarks and service marks of Figgie International Inc. and its subsidiaries. 3 4 FIGGIE FIRE PROTECTION SYSTEMS manufactures regular and special hazard-fire extinguishing systems devices under ASCOA*, Chemetron*, Range Guard*, and Safety First* brand names. Figgie Fire Protection Systems manufactures fire protection sprinkler devices as well as industrial, consumer and commercial fire extinguishers. Brass products and fittings are also produced for use in standpipe and fire sprinkler systems and for fire engines and fire-fighting equipment. MEDCENTER MANAGEMENT SERVICES manages the joint replacement departments of hospitals in cooperation with physicians. FIGGIE MATERIAL HANDLING SYSTEMS, which trades as Logan Fenamec (U.K.) Limited and Logan Glidepath, manufactures mini-stacker cranes, package handling equipment and conveyor systems. FIGGIE/ALFA PACKAGING SYSTEMS produces uncasing and packing machinery; material handling and packaging systems; automatic screw-type capping, sorting, and sealing machinery; rotary piston fillers; can closing and inspection machines and high-speed labeling machinery. Sold in February, 1995. FIGGIE POWER SYSTEMS manufactures fluid power products including bladder accumulators, piston accumulators, surge and pulsation control products, and hydraulic linear actuators. Sold in March, 1995. SAFWAY STEEL PRODUCTS manufactures and distributes tubular steel scaffolding and wood bleachers and risers for sale or rental as well as vertical shoring, and certain other metal products. S-P/SHEFFER INTERNATIONAL designs and manufactures precision workholding products primarily for the machine tool and metalworking industries as well as rotary actuating cylinders and dimensional control tooling systems. SPACEGUARD PRODUCTS manufactures woven wire partitions for industrial use as well as steel folding gates for commercial use. Sold in February, 1995. HARTMAN ELECTRICAL designs and manufactures high-reliability electrical components principally for use in commercial and military aircraft, missiles, and space vehicles. FIGGIE ACCEPTANCE financed real estate and businesses. Sold in March, 1995. FIGGIE FINANCIAL SERVICES provides asset-based financing, leasing and vehicle management services. FIGGIE NATURAL RESOURCES is engaged in the business of acquiring, exploring, and developing oil and gas properties. * Registered or common law trademarks and service marks of Figgie International Inc. and its subsidiaries. 4 5 1994 DIVESTITURE PROGRAM 1. Businesses discontinued as of December 31, 1993: Rawlings Sporting Goods * Sherwood-Drolet * Advance Security * American LaFrance Essick/Mayco Pump * Medical Devices *** Safety Supply America * Waite Hill Insurance * 2. Businesses discontinued in the first half of 1994: Casi-Rusco * Fred Perry Sportswear 1995 STRATEGIC BUSINESS PLAN 1. Businesses discontinued as of December 31, 1994: "Automatic" Sprinkler Corporation of America Figgie Acceptance ** Figgie Fire Protection Services Figgie Financial Services Figgie Material Handling Systems Figgie Natural Resources Figgie/Alfa Packaging Systems ** Figgie Power Systems ** Hartman Electrical Interstate Engineering Medcenter Management Services Safway Steel Products S-P/Sheffer International SpaceGuard Products ** * Sold in 1994 ** Sold in 1995 *** Closed CUSTOMERS The U.S. Government accounted for approximately 33.0%, 39.3% and 39.1% of the Company's total net sales and approximately 90.7%, 93.2% and 91.1% of the net sales of Interstate Electronics for 1994, 1993 and 1992, respectively. Approximately 82% of Interstate's net sales for the next year are expected to come from U.S. Government contracts. These net sales are subject to the standard government contract clause that permits the Government to terminate such contracts at its convenience. In the event of such termination, there are provisions to enable the Division to recover its costs plus a fee. The Company does not anticipate the termination of any of its major government contracts. No other single customer, other than the U.S. Government, accounted for more than 10% of the Company's net sales. 5 6 COMPETITION All of the Company's segments are engaged in industries characterized by substantial competition in the form of price, service, quality, and design. The Company believes that in the United States it is among the leading manufacturers of protective breathing and emergency oxygen equipment. PATENTS AND TRADEMARKS The Company owns and is licensed under a number of patents and trademarks that it regards as sufficient for its operations. It believes its business as a whole is not materially dependent upon any one patent, trademark, or license or technologically-related group of patents or licenses. BACKLOG OF ORDERS As of December 31, 1994 and 1993, the Company had a total backlog of orders from continuing operations in the approximate amounts of $133 million and $115 million, respectively. On these dates such backlog was believed to be firm. However, final verification of the Company's backlog estimates depends on, among other things, general economic and business conditions in 1995 that cannot be predicted. RAW MATERIALS The Company believes that the principal raw materials and purchased component parts for the manufacture of its products are available from a number of suppliers and are generally available in sufficient quantities to meet its current requirements. EFFECT OF ENVIRONMENTAL COMPLIANCE At the present time, compliance with Federal, state, and local provisions with respect to environmental protection and regulation has not had a material impact on the Company's capital expenditures, earnings, or competitive position. The Company does not believe compliance with respect to environmental protection will have a material adverse effect on the Company's financial position or future operations. EMPLOYEES As of December 31, 1994, the Company employed for continuing and discontinued operations approximately 6,000 individuals. Approximately 5,000 of these were employed in the United States. Approximately 3,000 were hourly paid employees and approximately 3,000 were salaried employees. Approximately 800 employees are covered by collective bargaining agreements with various unions. Substantially all of the Company's contracts with the several unions representing its employees expire at various dates within the next three years. The Company considers its overall relations with its workforce to be satisfactory. 6 7 RESEARCH AND DEVELOPMENT During 1994, the Company's research activities consisted principally of further development of high technology, defense-based products to commercial applications at Interstate Electronics and, to a lesser extent, customary activities of its other business units to improve their products. Research and development expenditures were approximately $18.5 million, $18.0 million and $7.3 million for 1994, 1993 and 1992, respectively. DISTRIBUTION The Company's products and services are marketed through most normal channels of distribution. These vary by industry segment and include direct sales by Company salesmen, sales through independent distributors and dealers, sales through manufacturers' agents, direct sales to government agencies, and the use of licenses and joint ventures. SALES BY PRODUCT LINE
(in thousands) Year Ended December 31 ---------------------------------------- 1994 1993 1992 -------- ------- ------- Interstate Electronics Strategic Weapon Systems $ 52,909 $ 61,360 $ 57,252 Global Positioning Systems 37,964 33,265 15,200 Other 22,764 20,267 41,033 -------- -------- -------- $113,637 $114,892 $113,485 ======== ======== ======== Scott/Taylor Environmental Health/Safety Products $ 62,245 $ 61,340 $ 65,367 Aviation/Government Products 36,445 37,447 39,834 Other 20,095 18,793 19,404 -------- -------- -------- $118,785 $117,580 $124,605 ======== ======== ======== Snorkel Booms $ 51,719 $ 30,497 $ 24,745 Scissorlifts and Other 35,279 24,184 22,155 -------- -------- -------- $ 86,998 $ 54,681 $ 46,900 ======== ======== ========
7 8 Financial Information About the Company's Reporting Segments FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES (in thousands)
Year Ended December 31 ----------------------------------------- 1994 1993 1992 -------- -------- ---------- Sales to Unaffiliated Customers*: Interstate Electronics $113,637 $114,892 $ 113,485 Scott/Taylor Environmental 118,785 117,580 124,605 Snorkel 86,998 54,681 46,900 -------- -------- ---------- Total Sales to Unaffiliated Customers $319,420 $287,153 $ 284,990 ======== ======== ========== Major Customer Sales*: Interstate Electronics $103,095 $107,102 $ 103,379 Scott/Taylor Environmental 2,378 5,244 7,935 Snorkel 75 375 - -------- -------- ---------- Total Sales to U.S. Government $105,548 $112,721 $ 111,314 ======== ======== ========== Export Sales - United States to*: Canada $ 12,588 $ 13,141 $ 14,516 Other 20,794 16,604 20,201 -------- -------- ---------- Total U.S. Export Sales $ 33,382 $ 29,745 $ 34,717 ======== ======== ========== Operating (Loss) Profit*: Interstate Electronics $ 6,010 $ 3,486 $ 8,720 Scott/Taylor Environmental 20,176 18,620 21,683 Snorkel 4,491 (5,108) 617 -------- -------- ---------- Total for Reporting Segments 30,677 16,998 31,020 Corporate and unallocated expenses (45,495) (41,855) (24,940) -------- -------- ---------- Total Operating (Loss) Profit $(14,818) $(24,857) $ 6,080 ======== ======== ========== Identifiable Assets: Interstate Electronics $ 47,263 $ 47,263 $ 48,978 Scott/Taylor Environmental 43,531 43,334 51,027 Snorkel 50,456 51,411 53,525 Corporate 185,613 228,296 202,426 Discontinued Operations 317,601 552,164 656,313 -------- -------- ---------- Total Identifiable Assets $644,464 $922,468 $1,012,269 ======== ======== ========== Capital Expenditures: Interstate Electronics $ 3,713 $ 1,430 $ 179 Scott/Taylor Environmental 2,864 4,493 5,779 Snorkel 5,658 6,573 6,857 Corporate 12,780 11,628 28,516 Discontinued Operations 35,289 85,433 59,023 -------- -------- ---------- Total Capital Expenditures $ 60,304 $109,557 $ 100,354 ======== ======== ========== Depreciation and Amortization: Interstate Electronics $ 1,083 $ 1,177 $ 1,766 Scott/Taylor Environmental 1,524 2,305 2,547 Snorkel 1,591 2,311 1,694 Corporate 3,957 4,396 3,831 Discontinued Operations 33,478 30,644 26,596 -------- -------- ---------- Total Depreciation and Amortization $ 41,633 $ 40,833 $ 36,434 ======== ======== ========== * Excludes those operating units that are discontinued operations. See "Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.
8 9 EXECUTIVE OFFICERS OF THE COMPANY As of April 12, 1995, the following executive officers of the Company serve in the positions indicated: JOHN P. REILLY, Chief Executive Officer and a Director of the Company since January 3, 1995, and President since February 1, 1995. Formerly President and Chief Operating Officer of Brunswick Corporation from September, 1993 to June, 1994. Mr. Reilly previously had been President and Chief Executive Officer of Tenneco Automotive from 1987 to 1993; age 51. WALTER M. VANNOY, Chairman of the Board of the Company since May, 1994 and a member of its Board of Directors since 1981. He was Vice Chairman of the Company from February to May, 1994 and Chief Executive Officer from May, 1994 to January, 1995. Mr. Vannoy has been President of Vannoy Associates, a consulting firm, since December, 1988. Prior to his retirement in 1988, he was Vice Chairman of McDermott International, the corporate parent of Babcock & Wilcox, a diversified energy equipment and services company; age 67. LUTHER A. HARTHUN, Senior Vice President-International, General Counsel and Secretary since April 1981; Vice President-International, General Counsel and Secretary since May 1979; and Vice President, General Counsel and Secretary of the Company since 1970; General Counsel since 1966; age 59. CHARLES C. RIEGER, JR., Senior Vice President of the Company since September 1993; and Group Vice President from 1982 to 1993; age 61. STEVEN L. SIEMBORSKI, Senior Vice President and Chief Financial Officer, and a Director of the Company since July 1, 1994. Mr. Siemborski was associated with the firm of Ernst & Young from 1976 to 1994, most recently as a Partner in Ernst & Young's Special Services Group; age 40. KEITH V. MABEE, Vice President-Corporate Relations since September, 1994; Vice President-Public and Government Affairs from February 1994 until September 1994; and Director-Public and Government Affairs from July 1993 until February 1994. He previously served as Vice President, Communications with Industrial Indemnity, a commercial insurance company, from 1989 to 1993 and prior to 1989 he was Senior Vice President, Corporate Communications with Amfac Inc., a diversified services company; age 47. 9 10 ITEM 2. PROPERTIES The Company's principal manufacturing plants in the United States have approximately 1,100,000 square feet of floor area for manufacturing, warehousing, and administrative uses. Approximately 1,075,000 square feet of this area is owned and the balance is leased. The Company believes its facilities are suitable for its purposes, having adequate productive capacity for the Company's present and anticipated needs. PRINCIPAL FACILITIES
Approx. Floor Area Reporting Segment Location (Sq. Feet) - ----------------- -------- ---------- Interstate Electronics Anaheim, CA 371,000 Scott Monroe, NC 260,000 Lancaster, NY 111,000 South Haven, MI 25,000 Snorkel Elwood, KS 266,000 St. Joseph, MO 15,000 Taylor Environmental Fletcher, NC 52,000
ITEM 3. LEGAL PROCEEDINGS As reported under Item 3 "Legal Proceedings" in the Company's 1993 Form 10-K Annual Report, the Company appealed to the United States Court of Appeals for the Ninth Circuit from a Federal District Court's summary judgment against the Company in a suit brought by the Federal Trade Commission seeking consumer redress in connection with the sale of heat detectors manufactured by the Company's Interstate Engineering division. The Court of Appeals held that the District Court had committed error in ordering the Company to pay a minimum amount of approximately $7.6 million but held that the Company could be required to pay refunds to those buyers who, after notification, can make a valid claim for redress. The Company is working with the Federal Trade Commission toward the completion of a redress program. The Company had established an accrual and no additional material charge to earnings is anticipated. In a class action suit filed on April 18, 1994, in the U.S. District Court for the Northern District of Ohio against the Company and two former officers and directors, the plaintiff stockholder alleged that the defendants disseminated false and misleading information to the investing public concerning the Company's business, management, financial condition, and future prospects in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. A separate class action suit was filed by another stockholder on May 11, 1994, in the same court against the Company and certain former and present officers and directors setting forth similar allegations. Both suits seek monetary damages and costs and have been consolidated into one case. 10 11 In two separate suits reported in the Company's 1993 Form 10-K Annual Report, three stockholders of the Company filed derivative complaints on October 13 and December 2, 1993 in the Common Pleas Court of Lake County, Ohio, seeking recovery on behalf of the Company for alleged self- dealing, waste of corporate assets, financial statement over-statements, gross mismanagement and participation or acquiescence in such practices by Directors of the Company, all of whom were named as defendants. The Court consolidated the two suits and subsequently dismissed them with respect to all defendants. The plaintiffs have appealed the Court's decision. On October 11, 1994 Deloitte & Touche LLP filed suit against the Company in the Cuyahoga County Common Pleas Court of Ohio alleging that the Company was in breach of contract for failure to pay for consulting services rendered by Deloitte & Touche in the approximate amount of $30 million plus interest. On the same date, the Company filed in the same court its complaint against Deloitte & Touche (and later against Deloitte & Touche LLP) alleging that in connection with consulting services rendered to the Company, Deloitte & Touche was liable for breach of contract, negligent misrepresentation, breach of fiduciary duty, professional negligence and fraudulent inducement. The Company seeks $250 million in compensatory damages as well as punitive damages, declaratory relief and an accounting. The Company also filed a counterclaim containing similar allegations, as well as claims of breach of warranty and the unlicensed and unauthorized practice of engineering, in response to the suit filed by Deloitte & Touche LLP. Deloitte & Touche LLP has counterclaimed in the Company's action and the Court has now consolidated the two cases. On December 19, 1994 the Company, its subsidiary Figgie Properties Inc. and the Richard E. Jacobs Group filed an action against the City of Cleveland seeking specific performance of a 1989 Master Development Agreement pertaining to a proposed real estate project known as Chagrin Highlands. The Company's complaint also seeks a declaratory judgment that the Master Development Agreement is in full force and effect and asks for an injunction preventing the City from interfering with the rights of the plaintiffs under that Agreement as well as compensatory damages in the amount of $100 million. The City of Cleveland has filed a motion to dismiss the Company's complaint. The Company is also involved in ordinary routine litigation incidental to its business. Management does not believe that such litigation will have a material adverse effect upon the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual stockholders meeting was held on October 19, 1994 and the nominees for Director were elected pursuant to the following vote:
AUTHORITY BROKER NOMINEE FOR WITHHELD NON-VOTE ------- --- -------- -------- Walter M. Vannoy 4,005,419 181,994 0 A.A. Sommer, Jr. 4,086,768 190,644 0 C.B. Robertson III 4,084,687 192,725 0 Steven L. Siemborski 4,089,253 188,160 0
11 12 The Key Employees Stock Option Plan was approved pursuant to the following vote:
BROKER FOR AGAINST ABSTAIN NON-VOTE --- ------- ------- -------- 1,916,746 1,680,803 113,578 566,288
The approval of the Board of Directors' selection of Arthur Andersen LLP as independent public accountants for the Corporation was approved pursuant to the following vote:
BROKER FOR AGAINST ABSTAIN NON-VOTE --- ------- ------- -------- 4,019,071 186,605 71,739 0
PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the over-the-counter market and quoted in the National Association of Security Dealers Automated Quotation/ National Market System (NASDAQ/NMS) under the following symbols: Class A Common Stock "FIGIA" and Class B Common Stock "FIGI". The dividends paid with respect to the Company's Common Stock as well as the high and low sales prices recorded on the NASDAQ/NMS System for each quarterly period during the years 1994 and 1993 are set forth below.
1994 1993 --------------------------------------- ------------------------------------- QUARTER QUARTER --------------------------------------- ------------------------------------- 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH ----- ---- ----- ----- ----- ----- ----- ----- Dividends paid* per common share: Class A Common $0.000 $0.000 $0.000 $0.000 $.125 $.125 $.125 $.060 Class B Common $0.000 $0.000 $0.000 $0.000 $.125 $.125 $.125 $.060 Sales price Class A Common: Low $8.000 $7.875 $8.625 $4.625 $16.250 $16.500 $16.750 $11.750 High $14.500 $11.125 $10.500 $9.125 $21.500 $19.000 $18.250 $17.500 Class B Common: Low $8.250 $7.250 $8.625 $4.000 $17.000 $16.500 $16.500 $12.500 High $16.000 $11.750 $11.000 $9.000 $21.500 $20.000 $21.000 $20.750 As of April 10, 1995, there were 6,451 holders of Class A Common Stock and 5,660 holders of Class B Common Stock. * The Board of Directors omitted dividends for 1994.
12 13 ITEM 6. SUMMARY OF SELECTED FINANCIAL DATA The following tables set forth selected consolidated financial data of the Company for the five years ended December 31, 1994, which has been derived from the Company's audited consolidated financial statements. These tables should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company included elsewhere herein. The report of Arthur Andersen LLP, independent auditors, covering the Company's consolidated financial statements for the years ended December 31, 1994, 1993 and 1992, is also included elsewhere herein. During the period from January 1, 1993 and continuing through December 31, 1994, the Company changed, as a result of actual and planned sales of a number of its business operations to reduce debt and concentrate on its technology-driven manufacturing companies.
Year Ended December 31 1994 1993 1992 1991 1990 ---------- --------- --------- --------- --------- Financial Data (in thousands) - ----------------------------- Net Sales $ 319,420 $ 287,153 $ 284,990 $ 308,019 $ 404,117 (Loss) before Discontinued Operations and Change in Accounting Principle $ (85,247) $ (82,345) $ (9,200) $ (7,368) $ (2,130) (Loss) Income from Discontinued Operations (81,483) (103,269) 37,499 37,437 41,792 Cumulative Effect of Change in Accounting for Income Taxes - 5,839 - - - --------- --------- -------- -------- -------- Net Income (Loss) $(166,730) $(179,775) $ 28,299 $ 30,069 $ 39,662 ========= ========= ======== ======== ======== Total Assets $ 644,464 $ 922,468 $1,012,269 $1,002,541 $979,080 Total Debt (1) $ 413,311 $ 539,737 $ 453,809 $ 488,293 $496,250 Per Share Data (in dollars) - --------------------------- (Loss) Earnings per Share: (Loss) before Discontinued Operations and Change in Accounting Principle $ (4.81) $ (4.63) $ (0.52) $ (0.42) $ (0.12) (Loss) Income from Discontinued Operations (4.60) (5.81) 2.13 2.14 2.40 Cumulative Effect of Change in Accounting for Income Taxes - .33 - - - ------- ------- ------- ------- ------- Net (Loss) Income $ (9.41) $(10.11) $ 1.61 $ 1.72 $ 2.28 ======= ======= ======= ======= ======= Cash Dividends per Common Share A - 0.435 0.500 0.500 0.500 B - 0.435 0.500 0.500 0.500 Book Value per Common Share $3.54 $11.84 $22.14 $20.57 $18.89 (1) Total debt includes notes payable, current maturities of long-term debt and non-current long-term debt.
13 14 ITEM 7 MANANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL SUMMARY The 1994 after-tax loss from continuing operations was $85.2 million, or $4.81 per share, compared with a loss of $82.3 million, or $4.63 per share in 1993. The comparable loss for 1992 was $9.2 million, or $0.52 per share. Included in the results of operations for 1994 was a pre- tax restructuring and refinancing charge of $55.2 million. The after-tax loss from discontinued operations for 1994 was $81.5 million, or $4.60 per share, compared with a loss of $103.3 million, or $5.81 per share in 1993. Income from discontinued operations for 1992 was $37.5 million, or $2.13 per share. The 1993 full-year results include a benefit of $5.8 million for a change in accounting for income taxes, a non- recurring pre-tax charge of $17.6 million for restructuring, and a $33.9 million charge due to a change in accounting estimate. SEGMENT INFORMATION The Company is a manufacturer of technology-driven products with operations in three reporting segments, Interstate Electronics Corporation, Scott and Taylor Environmental, and Snorkel. The results of operations are most meaningful when analyzed and discussed in this manner. The Company has discontinued other operating units as a result of the February 1995 strategic business plan to restore profitability by focusing primarily on its core manufacturing businesses. The majority of the businesses that have been discontinued were unprofitable. The discontinued units that comprise the net assets of discontinued businesses on the balance sheet are discussed in Note 4 to the consolidated financial statements. The operating results of these discontinued units are presented separately under that caption and their sales have been appropriately excluded from reported sales amounts. 14 15 INTERSTATE ELECTRONICS CORPORATION Interstate Electronics develops and produces sophisticated telemetry, instrumentation, and data recording systems and position measuring systems, Global Positioning Systems ("GPS"), for the U.S. Navy's Polaris/Poseidon, TRIDENT, and TRIDENT II ships; precise GPS for aircraft and turnkey test ranges; and GPS for commercial and business aircraft navigation and landing systems. Interstate Electronics also designs and produces plasma, liquid crystal, and cathode-ray tube display systems for a variety of shipboard and aircraft applications. In addition, Interstate Electronics develops sophisticated bandwidth-on-demand satellite communication modems and terminals for both government and commercial applications. FINANCIAL REVIEW The annual results of operations for Interstate Electronics were as follows:
(in thousands) 94 vs 93 93 vs 92 1994 1993 CHANGE 1992 CHANGE -------- -------- -------- -------- -------- Net Sales $113,637 $114,892 $ (1,255) $113,485 $ 1,407 Cost of Sales 82,884 83,843 (959) 89,852 (6,009) -------- -------- -------- -------- --------- Gross Profit on Sales 30,753 31,049 (296) 23,633 7,416 % of Sales 27.1% 27.0% 20.8% Operating Expenses: Selling, General and Admin. 11,985 14,952 (2,967) 10,539 4,413 Research and Development 12,758 12,611 147 4,374 8,237 -------- -------- -------- -------- -------- Total Operating Expenses 24,743 27,563 (2,820) 14,913 12,650 -------- -------- -------- -------- -------- Operating Profit $ 6,010 $ 3,486 $ 2,524 $ 8,720 $ (5,234) % of Sales 5.3% 3.0% 7.7%
DISCUSSION OF 1994 COMPARED WITH 1993 Net Sales declined in 1994 due mainly to gradual reductions in required support for U.S. Government strategic weapon systems. Selling, General and Administrative Expenses were reduced by $3.0 million, or 20%. A major effort was implemented by the Division to improve operating profits by reducing payroll and operating expenses. Research and Development expenditures continued at the 1993 levels. Interstate Electronics began development of commercial products prior to 1993 and sustained the 1993 level of expenditures in 1994. Development of GPS for commercial aircraft and satellite communication modems represented the majority of research and development efforts. DISCUSSION OF 1993 COMPARED WITH 1992 Net Sales for 1993 increased slightly by 1% over 1992. Gross profit improved significantly due to substantially lower cost of sales. Cost of Sales declined from $89.8 million to $83.8 million. The $6.0 million improvement, a 7% reduction in costs, resulted from aggressive cost reduction activities in direct material, and labor efficiencies. 15 16 Selling, General and Administrative costs were higher by $4.4 million as Interstate Electronics reorganized to a product line focus. Research and Development costs increased $8.2 million. Significant costs were incurred to develop the GPS and satellite communications for commercial markets. 16 17 SCOTT AND TAYLOR ENVIRONMENTAL Scott manufactures the Scott Air Pak and other life support products for fire fighting and personal protection against industrial contaminants. The air-purifying products provide protection against environmental and safety hazards. Scott is the largest manufacturer of protective breathing equipment, pilot and crew oxygen masks plus emergency oxygen for passengers on commercial, government and private aircraft. Scott is also a leading manufacturer of instruments to detect the presence of combustible or toxic gases and the lack of oxygen. Taylor is a manufacturer of consumer thermometers, barometers and hygrometers. Taylor also manufactures and sells temperature and environmental measuring and testing devices. In addition to use in scientific laboratories, hospitals and universities, these devices are used in heating, ventilation and air conditioning (HVAC), food service and industrial applications. FINANCIAL REVIEW The results of operations for Scott and Taylor Environmental were as follows:
(in thousands) 94 vs 93 93 vs 92 1994 1993 CHANGE 1992 CHANGE -------- -------- -------- -------- ------- Net Sales $118,785 $117,580 $1,205 $124,605 $(7,025) Cost of Sales 80,053 81,817 (1,764) 87,412 (5,595) -------- -------- -------- -------- ------- Gross Profit on Sales 38,732 35,763 2,969 37,193 (1,430) % of Sales 32.6% 30.4% 29.8% Operating Expenses: Selling, General and Admin. 14,967 13,736 1,231 13,199 537 Research and Development 3,589 3,407 182 2,311 1,096 -------- -------- -------- -------- -------- Total Operating Expenses 18,556 17,143 1,413 15,510 1,633 -------- -------- -------- -------- -------- Operating Profit $ 20,176 $ 18,620 $ 1,556 $ 21,683 $ (3,063) % of Sales 17.0% 15.8% 17.4%
DISCUSSION OF 1994 COMPARED WITH 1993 Net Sales increased by 1% due to new product sales of consumer thermometers offset somewhat by lower aviation and government sales of breathing and oxygen products. Cost of Sales in 1994 was favorable to 1993 as a result of cost reduction activities and sales of higher margin product lines. Selling, General and Administrative expenses increased primarily due to increased selling activities related to new products and cost associated with the establishment of a United Kingdom sales operation for Taylor. Research and Development expenses related to product enhancements and new product development at both Scott and Taylor were relatively unchanged. DISCUSSION OF 1993 COMPARED WITH 1992 Net Sales declined $7.0 million, or 6% in 1993 as compared with 1992 due to distributors reducing inventories, a depressed aviation market, and reduced government spending. Research and Development increased significantly due to new product development, innovation and redesign. 17 18 SNORKEL Snorkel manufactures self-propelled aerial work platforms and scissorlifts for use in construction and maintenance activities and self- propelled telescopic and articulating booms. Snorkel also fabricates and services booms that are mounted on fire apparatus to deliver large quantities of water from elevated positions. FINANCIAL REVIEW: The results of operations for Snorkel were as follows:
(in thousands) 94 vs 93 93 vs 92 1994 1993 CHANGE 1992 CHANGE -------- -------- -------- -------- ------- Net Sales $86,998 $54,681 $32,317 $46,900 $ 7,781 Cost of Sales 73,791 52,251 21,540 41,050 11,201 ------- ------- ------- ------- ------- Gross Profit on Sales 13,207 2,430 10,777 5,850 (3,420) % of Sales 15.2% 4.4% 12.5% Operating Expenses: Selling, General and Admin. 6,563 5,533 1,030 4,599 934 Research and Development 2,153 2,005 148 634 1,371 ------- ------- ------- ------- ------- Total Operating Expenses 8,716 7,538 1,178 5,233 2,305 ------- ------- ------- ------- ------- Operating (Loss) Profit $ 4,491 $(5,108) $ 9,599 $ 617 $(5,725) % of Sales 5.2% (9.3%) 1.3%
DISCUSSION OF 1994 COMPARED WITH 1993 Net Sales increased significantly in 1994 ($32.3 million, or 59%) due to a full year of sales and aggressive sales and marketing efforts which have resulted in increased market share. In 1993, production was idled by the Missouri River floods resulting in drastically reduced sales from August through October. Gross Profit increased substantially as the result of the increased sales. Selling, General and Administrative expenses increased due to higher expenses related to the re-establishment of the business. DISCUSSION OF 1993 COMPARED WITH 1992 Net Sales increased in 1993 due to an improved market and a concerted effort to manufacture and deliver products on time following the two year disruption associated with the plant modernization program. The Missouri River floods resulted in 1993 net sales being substantially lower than anticipated. Cost of Sales in 1993 was unfavorable as compared to 1992 as fixed costs were incurred while the business was, in effect, shut down by the floods. In addition, costs associated with returning to production, start-up costs such as labor and machine inefficiency and outsourcing parts were incurred until normal production could be achieved. Selling, General and Administrative expenses reflect the high level of business and added expense for flood-related activity. Research and Development expenditures for new products and enhancements increased significantly. 18 19 CORPORATE AND UNALLOCATED COSTS AND EXPENSES: FINANCIAL REVIEW: Corporate activity and unallocated costs and expenses were as follows:
(in thousands) 94 vs 93 93 vs 92 1994 1993 CHANGE 1992 CHANGE --------- --------- -------- -------- --------- Cost of Sales $ 10,526 $ 6,344 $ 4,182 $ (1,403) $ 7,747 ========= ========= ======== ======== ========= Selling, General and Administrative expenses 34,969 35,511 (542) 26,343 9,168 ========= ========= ======== ======== ========= Other Expenses (Income): Restructuring and Refinancing Costs 55,204 17,604 37,600 3,024 14,580 Change in Accounting Estimate - 33,948 (33,948) - 33,948 Interest Expense 42,062 31,942 10,120 31,501 441 Interest Income (3,301) (874) (2,427) (169) (705) Other, Net (550) (5,652) 5,102 (9,869) 4,217
DISCUSSION OF 1994 COMPARED WITH 1993 Cost of Sales were primarily associated with the centralized manufacturing and technology centers ("Centers") created as part of the factory automation program. These Centers were shut down in 1994 to reduce costs. The costs represent machinery-related rental expenses and, in 1994, inventory was written off. Selling, General and Administrative expenses remained relatively unchanged as a one-time executive termination expense in 1994 offset cost reductions in the corporate office during 1994. These reductions included a 30% reduction in corporate staff, the elimination of two corporate aircraft, and numerous other cost-cutting measures. The 1994 Restructuring and Refinancing Costs are comprised of: (1) restructuring costs related to revaluation and write-down of properties held for sale to current realizable market value; (2) refinancing costs for professional and lender fees related to the liquidity crisis of late 1993 and the first half of 1994 and the resultant Override Agreement which restructured $487 million of debt and leases on August 1, 1994; and (3) other various nonrecurring expenses not associated with the ongoing operations of the business. The revaluation of properties results from the strategic business plan to focus on manufacturing operations and to thereby limit the Company's active real estate development activities. The Company will develop two key properties and will market for orderly sale its other real estate holdings including development land, headquarter complexes and former plants. These sales will benefit the Company by reducing current carrying costs such as real estate taxes, insurance and mortgage interest.
(in thousands) Asset Revaluation $23,516 Refinancing Fees to Professionals and Lenders 22,295 Other 9,393 ------- $55,204 =======
19 20 Interest Expense (Net) increased due to higher interest rates and borrowing levels including a short-term factoring line in the first half of 1994. Other (Net) in 1994 represents income from insurance recoveries for the Business Interruption related to the Missouri River floods in 1993, offset in part by realized losses on the sale of assets comprised primarily of properties, an investment in stock, two aircraft, art and antiques and by $3.2 million of costs associated with the derivative lawsuits. Other (net) in 1993 represents income associated with additional recoveries from the U.S. Government as a result of a favorable decision by the Armed Services Board of Contract Appeals resolving a dispute between the Department of the Army and Scott concerning the termination of a mask contract. DISCUSSION OF 1993 AS COMPARED WITH 1992 Cost of Sales in 1993 reflects a full year of production at the Centers while 1992 was the start-up year. Selling, General and Administrative expenses increased as a result of professional fees for auditing, information systems, legal, and consulting. Restructuring and Refinancing Costs represent costs associated with the relocation and consolidation of facilities and operations, costs incurred in retooling, and consulting fees to assist with the development of business marketing plans. At the end of 1990, the Company began a modernization program at its major facilities that involved: (1) the replacement of existing manufacturing processes with state-of-the-art machining centers, fabrication equipment, and robotic welding and assembly; (2) the design and development of factory floor computer systems, and complementary support systems and procedures; (3) the re-training of personnel to schedule and run the newly-automated shop floor efficiently; and (4) the consolidation of smaller plants and operations into larger, more efficient facilities to take advantage of the synergies of a larger operation. This project was originally expected to extend over a five-year timetable; however, former management elected in 1992 to accelerate its implementation so as to complete it in 1993. Restructuring costs in 1993 and 1992 stemmed from: (1) various relocation costs of employees and equipment, (2) consolidation-related costs such as provisions for anticipated losses on sales of real estate, consulting fees to assist with the development of business plans, start-up costs in the new locations, and (3) costs incurred in retooling the plants, such as first production run samples and documenting new procedures and production methods. The future benefits expected to be achieved as a result of this factory automation program included: (1) cost savings associated with reduced levels of personnel, lower operating costs with respect to fewer, more efficient facilities and fewer machine tools, (2) enhanced quality, better delivery times and customer service, and (3) improved overall asset management through reduced inventory levels and increased cash generation. 20 21 The Change in Accounting Estimate is discussed in Note 18 to the consolidated financial statements. Costs associated with the Company's factory automation program included machinery and equipment, software, and outside consulting services for factory automation and management information systems. These project costs had historically been deferred, to be amortized over future periods commencing at the time the equipment was placed into service. Due to a number of factors which arose in 1993 that changed management's estimate of the period of future benefit, including deteriorating operating results, reduced cash flow, and financing difficulties, the Company adopted a change in accounting by expensing all project costs, as incurred, other than those for the purchase of machinery and equipment. As required by generally accepted accounting principles, this accounting change, resulting in a charge of $77.3 million, has been recorded as a change in estimate and reflected in the results of operations for the fourth quarter in 1993. The charge of $33.9 million was associated with the continuing operations and $43.4 million was associated with businesses discontinued in 1994 and included in the $103.3 million loss on discontinued businesses. Other (Net) in 1993 was income of $5.7 million compared to $9.9 million of income in 1992 due to lower gains on sale of properties. FINANCIAL POSITION AND LIQUIDITY: Receivables increased $7.6 million to $45.0 million, reflecting increased sales for the months of November and December in 1994 as compared to 1993. Inventories decreased by $13.3 million, reflecting the Company's concerted efforts to reduce inventories and the shut-down of the Centers. Cash flow from operations and working capital required $15.4 million and the paydown of debt required $125.6 million, all of which were funded by proceeds from divestitures. Expenditures for property, plant and equipment were $60.3 million in 1994, $109.6 million in 1993, and are anticipated to be between $9.0 and $15.0 million in 1995. The primary focus of 1995 expenditures is for improvements in manufacturing efficiencies and tooling related to the production of new products. Capital for these expenditures is expected to be provided from internally generated funds. Liquidity is provided by the Company's cash and cash equivalents, a $20 million facility ($16.3 million was available at December 31, 1994) secured by certain receivables, and a portion of divestiture proceeds which the Company is authorized to retain. As discussed in the Notes to the consolidated financial statements, the Company completed a complex debt refinancing, which was initiated in December, 1993 and completed on August 1, 1994. This refinancing precludes the Company from incurring additional indebtedness and did not provide additional financing to the Company, rather, it specified repayment and other terms through June 30, 1995. 21 22 The Company has completed negotiations with lenders that are party to its Override credit facility (see footnote 7 of Notes to the Financial Statements) to extend the Override Agreement from June 30, 1995 to January 1, 1996. The Company intends to sell in 1995 those businesses whose net assets are presented in the Company's balance sheet as Net Assets Related to Discontinued Operations, and will use a substantial portion of the proceeds to amortize the debt throughout the remainder of 1995. The aforementioned extension will allow the Company to operate in a more orderly manner in enhancing the profitability of the continuing business segments and in divesting the discontinued businesses and reducing corporate overhead. The Company continues to make progress in implementing actions aimed at restoring overall profitability. Through April 12, 1995, the Company has sold four businesses, Figgie Power Systems, Figgie Acceptance, SpaceGuard Products, and Figgie/Alfa Packaging Systems and used the proceeds to reduce debt; and has signed letters of intent for the sale of two other businesses. See Item 1. Business, included elsewhere herein. 22 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Figgie International Inc. We have audited the accompanying consolidated balance sheets of Figgie International Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Figgie International Inc. and Subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As explained in Note 1 to the consolidated financial statements, effective January 1, 1993 the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 "Accounting For Income Taxes". In addition, as explained in Note 18 to the consolidated financial statements, the Company changed its method of accounting for certain costs associated with its factory automation project in the fourth quarter of 1993. ARTHUR ANDERSEN LLP Cleveland, Ohio, April 12, 1995. 23 24 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 (in thousands, except per share data)
1994 1993 1992 --------- --------- -------- CONTINUING OPERATIONS: Net Sales $ 319,420 $ 287,153 $284,990 Costs of Sales 247,254 224,255 216,911 --------- --------- -------- Gross Profit on Sales 72,166 62,898 68,079 --------- --------- -------- Operating Expenses: Selling, General and Administrative 68,484 69,732 54,680 Research and Development 18,500 18,023 7,319 --------- --------- -------- Total Operating Expenses 86,984 87,755 61,999 --------- --------- -------- Operating (Loss) Income (14,818) (24,857) 6,080 --------- --------- -------- Other Expense (Income): Restructuring and Refinancing Costs 55,204 17,604 3,024 Change in Accounting Estimate - 33,948 - Interest Expense 42,062 31,942 31,501 Interest Income (3,301) (874) (169) Other, Net (550) (5,652) (9,869) ------- --------- -------- Loss before Income Tax Benefit (108,233) (101,825) (18,407) Income Tax Benefit 22,986 19,480 9,207 --------- --------- -------- Loss before Discontinued Operations and Change in Accounting Principle (85,247) (82,345) (9,200) Discontinued Operations, net of tax: (Loss) Income from Discontinued Operations (42,905) (103,269) 37,499 Loss on Disposal of Discontinued Operations (38,578) - - --------- --------- -------- (81,483) (103,269) 37,499 (Loss) Income before Cumulative Effect of Change in Accounting Principle (166,730) (185,614) 28,299 Cumulative Effect of Change in Accounting for Income Taxes - 5,839 - --------- --------- -------- Net (Loss) Income $(166,730) $(179,775) $ 28,299 ========= ========= ======== Weighted Average Shares 17,723 17,775 17,539 EARNINGS PER SHARE - ------------------ Loss before Discontinued Operations and $ (4.81) $ (4.63) $ (0.52) Change in Accounting Principle (Loss) Income from Discontinued Operations (4.60) (5.81) 2.13 Cumulative Effect of Change in Accounting for Income Taxes - 0.33 - --------- --------- -------- Net (Loss) Income $ (9.41) $ (10.11) $ 1.61 ========= ========= ======== See Notes to Consolidated Financial Statements.
24 25 (THIS PAGE INTENTIONALLY LEFT BLANK) 25 26 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (in thousands)
1994 1993 ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 28,611 $ 26,954 Restricted cash 18,716 - Trade accounts receivable, less allowance for uncollectible accounts of $259 in 1994 and $184 in 1993 44,994 37,401 Inventories 38,845 52,181 Prepaid expenses 3,225 5,958 Recoverable income taxes 8,108 36,283 Net assets related to discontinued operations 317,601 552,164 --------- --------- Total Current Assets 460,100 710,941 --------- --------- PROPERTY, PLANT AND EQUIPMENT Land and land improvements 29,699 47,085 Buildings and leasehold improvements 46,024 54,589 Machinery and equipment 70,587 71,534 --------- --------- 146,310 173,208 Accumulated depreciation (42,385) (50,721) --------- --------- 103,925 122,487 Property under capital leases, less accumulated depreciation of $4,709 in 1994 and $9,818 in 1993 2,158 6,061 --------- --------- Net Property, Plant and Equipment 106,083 128,548 --------- --------- OTHER ASSETS Prepaid pension costs 9,964 10,591 Prepaid rent on leased equipment 17,075 - Intangible assets 20,244 21,043 Cash surrender value of insurance policies 10,576 19,246 Non-current receivables 5,920 8,607 Prepaid finance costs 8,291 4,307 Other 6,211 19,185 --------- --------- Total Other Assets 78,281 82,979 --------- --------- Total Assets $ 644,464 $ 922,468 ========= =========
26 27 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 (in thousands, except par value)
1994 1993 ----------- ----------- LIABILITIES CURRENT LIABILITIES Debt due within one year $ 171,641 $ 90,891 Accounts payable 55,398 54,162 Accrued insurance reserves 16,889 5,189 Accrued liabilities and expenses 64,706 50,018 Current maturities of long-term debt 7,179 110,576 ---------- ---------- Total Current Liabilities 315,813 310,836 ---------- ---------- Long-term debt 234,491 338,270 Deferred federal income taxes - 20,604 Other non-current liabilities 28,938 30,865 ---------- ---------- Total Liabilities 579,242 700,575 ---------- ---------- STOCKHOLDERS' EQUITY Preferred Stock, $1.00 par value; Authorized, 3,217 shares; Issued and Outstanding, none - - Class A common stock, $.10 par value; 1,370 1,375 Authorized, 18,000 shares; Issued and Outstanding 1994 - 13,695; 1993 - 13,751 Class B common stock, $.10 par value; 471 499 Authorized, 18,000 shares; Issued and Outstanding 1994 - 4,715; 1993 - 4,989 Capital surplus 110,518 127,488 Retained (deficit) earnings (43,198) 124,020 Unearned compensation (3,829) (31,003) Cumulative translation adjustment (110) (486) --------- ---------- Total Stockholders' Equity 65,222 221,893 --------- ---------- Total Liabilities and Stockholders' Equity $ 644,464 $ 922,468 ========= ========== See Notes to Consolidated Financial Statements.
27 28 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (in thousands)
Common Stock Capital Surplus Retained ------------- ---------------- Earnings Class A Class B Class A Class B (Deficit) ------- ------- ------- ------- --------- BALANCE, DECEMBER 31, 1991 $1,361 $502 $108,187 $ 16,762 $298,981 Net Income 28,299 Dividends Declared: Common Stock A, $.50 per share (6,781) Common Stock B, $.50 per share (2,473) Restricted Stock Purchase Plan, Net (2) (1,283) (302) Other Common Stock Transactions, Net (3) (6) (89) 1,511 (2,829) Amortization of Unearned ESOP Compensation (1,116) (520) 501 Translation Adjustments ------ ---- -------- -------- -------- BALANCE, DECEMBER 31, 1992 1,356 496 105,699 17,451 315,698 Net Loss (179,775) Dividends Declared: Common Stock A, $.435 per share (5,850) Common Stock B, $.435 per share (2,141) Restricted Stock Purchase Plan, Net 39 20 6,694 3,400 Other Common Stock Transactions, Net (20) (17) (1,708) (605) (4,392) Amortization of Unearned ESOP Compensation (2,636) (807) 480 Translation Adjustments ------ ---- -------- -------- -------- BALANCE, DECEMBER 31, 1993 1,375 499 108,049 19,439 124,020 Net Loss (166,730) Minimum Pension Liability (488) Restricted Stock Purchase Plan, Net (5) (15) (1,931) (2,596) Other Common Stock Transactions, Net (13) (1,371) Amortization of Unearned ESOP Compensation (3,776) (7,296) Translation Adjustments ------ ---- -------- -------- --------- BALANCE, DECEMBER 31, 1994 $1,370 $471 $102,342 $ 8,176 $ (43,198) ====== ==== ======== ======== ========= Cumulative Unearned Translation Compensation Adjustment Total ------------ ----------- ------------- BALANCE, DECEMBER 31, 1991 $(42,250) $1,120 $384,663 Net Income 28,299 Dividends Declared: Common Stock A, $.50 per share (6,781) Common Stock B, $.50 per share (2,473) Restricted Stock Purchase Plan, Net 4,848 3,261 Other Common Stock Transactions, Net (1,416) Amortization of Unearned ESOP Compensation 7,447 6,312 Translation Adjustments (1,702) (1,702) ------------ ----------- ------------- BALANCE, DECEMBER 31, 1992 (29,955) (582) 410,163 Net Loss (179,775) Dividends Declared: Common Stock A, $.435 per share (5,850) Common Stock B, $.435 per share (2,141) Restricted Stock Purchase Plan, Net (8,493) 1,660 Other Common Stock Transactions, Net (6,742) Amortization of Unearned ESOP Compensation 7,445 4,482 Translation Adjustments 96 96 ------------ ----------- ------------- BALANCE, DECEMBER 31, 1993 (31,003) (486) 221,893 Net Loss (166,730) Minimum Pension Liability (488) Restricted Stock Purchase Plan, Net 4,790 243 Other Common Stock Transactions, Net (1,384) Amortization of Unearned ESOP Compensation 22,384 11,312 Translation Adjustments 376 376 ------------ ----------- ------------- BALANCE, DECEMBER 31, 1994 $ (3,829) $ (110) $ 65,222 ============ =========== ============= See Notes to Consolidated Financial Statements.
28 29 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992 (in thousands)
1994 1993 1992 ---------- ---------- ---------- Operating Activities: (Loss) from Continuing Operations $ (90,687) $ (82,345) $ (9,200) (Loss) Income from Discontinued Operations (76,043) (103,269) 37,499 Cumulative Effect of Accounting Change - 5,839 - Adjustments to Reconcile Net (Loss) Income to Net Cash (Used) Provided by Operating Activities- Change in Accounting Estimate - 77,344 - Depreciation and Amortization 41,633 40,833 36,434 Amortization of Unearned Compensation 5,791 5,557 11,247 Other, Net 9,917 41,773 (5,681) Changes in Operating Assets and Liabilities Trade Accounts Receivable 11,341 (19,088) 56,954 Allowance for Uncollectible Accounts 616 1,531 (682) Finance Receivables 4,780 (13,602) (11,220) Inventories 15,733 9,083 6,314 Prepaid Items (7,523) (5,718) (3,172) Other Assets 37,116 (9,346) (37,400) Accounts Payable (14,293) 38,882 6,959 Accrued Liabilities and Expenses 30,509 39,330 (9,642) Deferred and Accrued Taxes 13,533 (62,131) 8,837 Other Liabilities 2,198 2,887 (2,031) -------- -------- -------- Net Cash (Used) provided by Operating Activities (15,379) (32,440) 85,216 -------- -------- -------- Investing Activities: Capital Expenditures (60,304) (109,557) (100,354) Sale of Investments 7,862 - - Businesses and Investments Acquired - (5,661) (9,792) Proceeds from Sale of Property, Plant and Equipment 42,468 73,952 74,756 Proceeds from Business Divestitures 198,130 - - (Purchases) Sales of Securities by Insurance Subs. (12,739) 1,202 (20,905) -------- -------- -------- Net Cash Provided (Used) in Investing Activities 175,417 (40,064) (56,295) -------- -------- -------- Financing Activities: Proceeds from Debt 4,420 12,104 34,782 Principal Payments on Long-Term Debt (94,945) (38,147) (69,830) (Repayments) Borrowing Under Notes Payable, Net (32,348) 102,842 4,893 Dividends Paid - (7,991) (9,254) Common Stock Transactions, Net (2,681) (6,157) (3,091) -------- -------- -------- Net Cash (Used) Provided by Financing Activities (125,554) 62,651 (42,500) -------- -------- -------- Net Increase (Decrease) in Cash and Cash Equivalents 34,484 (9,853) (13,579) Cash and Cash Equivalents at Beginning of Year 33,816 43,669 57,248 -------- -------- -------- Cash and Cash Equivalents at End of Year $ 68,300 $ 33,816 $ 43,669 ======== ======== ======== - - Continuing Operations - Unrestricted $ 28,611 $ 26,954 $ 38,444 - - Continuing Operations - Restricted $ 18,716 $ - $ - - - Discontinued Operations $ 20,973 $ 6,862 $ 5,225 Supplemental Disclosures of Cash Flow Information: Cash Paid (Received) during the Year for - Interest (Net of Amount Capitalized) $ 41,771 $ 36,781 $38,550 Domestic Federal Income Taxes $(35,856) $(24,232) $ 626 See Notes to Consolidated Financial Statements.
29 30 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Figgie International Inc. (referred to, with all its consolidated subsidiaries and divisions and their predecessor entities, unless the context otherwise requires, as the "Company".) All intercompany account transactions have been eliminated in consolidation. CASH. For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost which approximates their fair market value. The effect of foreign currency translation on cash held by foreign divisions is immaterial. Restricted cash in the amount of $18.7 million represents collateral on letters of credit and divestiture proceeds that have been escrowed for payment of expenses and taxes. CONCENTRATION OF CREDIT RISK. The Company does not have any concentrations of credit risk by major customer, geographic region or activity. The Company generally does not require collateral. INVENTORIES. Manufacturing inventories are stated at the lower of first-in-first-out (FIFO) cost or market. Costs accumulated under government contracts are stated at actual cost, (LIFO method as applicable) net of progress payments, not in excess of realizable value. LONG-TERM CONTRACTS. Government segment sales are principally under long-term contracts and include cost-reimbursement and fixed-price contracts. Sales under cost-reimbursement contracts are recognized as costs are incurred and include a proportion of the fees expected to be realized equal to the ratio of costs incurred to date to total estimated costs. Sales under fixed price contracts are recognized as the actual cost of work performed relates to the estimate at completion. Cost or performance incentives, which are incorporated in certain contracts, are recognized when realization is assured and amounts can be reasonably estimated. Estimated amounts for contract changes and claims are included in contract sales only when realization is probable. Assumptions used for recording sales and earnings are adjusted in the period of change to reflect revisions in contract value and estimated costs. In the period in which it is determined that a loss will be incurred on a contract, the entire amount of the estimated loss is charged to income. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost and depreciated over the estimated useful lives of the assets, generally by the straight-line method. The principal rates of depreciation are: Buildings, 2-1/2%; Machinery and Equipment, 8-1/3%; Leasehold Improvements, life of lease. 30 31 CAPITALIZATION OF INTEREST. The Company capitalizes interest costs during the development period of certain properties. Total interest capitalized was approximately $.8 million in 1994, $.6 million in 1993, and $2.5 million in 1992. INTANGIBLES. Goodwill of $23.1 million at December 31, 1994 and 1993 represents costs in excess of net assets of purchased businesses, and is generally amortized over a 40-year period. At December 31, 1994 and 1993, accumulated goodwill amortization was $5.5 million and $4.9 million, respectively. Management has evaluated goodwill by considering historical and projected operating results, and believes that the asset is realizable and the amortization period is appropriate. Patents of $3.9 million at December 31, 1994 and 1993 are amortized over their statutory or estimated useful lives. As of December 31, 1994 and 1993, accumulated patent amortization was $1.3 million and $1.1 million, respectively. FACTORY AUTOMATION COSTS. The Company incurred certain costs directly related to its factory automation project encompassing owned and leased machinery, software, and outside consultant fees. The owned machinery component of these project costs is depreciated in accordance with the useful lives discussed above. All other project costs are expensed as incurred. Prior to December 31, 1993, all other project costs were deferred and amortized over a period not exceeding five years. See Note 18 "Change in Accounting Estimate". INCOME TAXES. In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("Statement 109"). Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. Under Statement 109, the effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes", effective January 1, 1993. The cumulative effect of such adoption was to increase earnings by $5.8 million, or $.33 per share, for the year ended December 31, 1993. As permitted under the Statement, this accounting standard was adopted prospectively in 1993 and prior periods were not restated. EARNINGS PER SHARE. Earnings per common share are based upon the weighted average number of shares outstanding during each year. The unallocated shares of the non-leveraged Employee Stock Ownership Plan are not considered outstanding for earnings per share purposes. The unallocated shares of the leveraged Employee Stock Ownership Plan are not considered outstanding for earnings per share purposes; for 1993, pursuant to the adoption of Statement of Position 93-6 "Employers' Accounting for Employee Stock Ownership Plans". These shares were, however, considered outstanding for 1992 earnings per share. SELF-INSURANCE PROGRAMS. The Company is self-insured for certain levels of general liability and workers' compensation coverage. Estimated costs of these self-insurance programs are accrued based on projected settlement dates for known and anticipated claims. Adjustments to recorded reserves are reflected in current operating results. 31 32 RECLASSIFICATION OF AMOUNTS. Certain amounts for 1993 and 1992 have been reclassified to reflect comparability with account classifications for 1994. These reclassifications principally relate to the presentation of the operations between continuing and discontinued, and reclassification of long-term debt as of December 31, 1993. (2) RESTRUCTURING AND REFINANCING COSTS: The 1994 Restructuring and Refinancing Costs are comprised of: (1) restructuring costs related to revaluation and write-down of properties held for sale to current realizable market value; (2) refinancing costs for professional and lender fees related to the liquidity crisis of late 1993 and the first half of 1994 and the resultant Override Agreement which restructured $487 million of debt and leases on August 1, 1994; and (3) other various nonrecurring expenses not associated with the ongoing operations of the business. The revaluation of properties results from the strategic business plan to focus on manufacturing operations and to thereby limit the Company's active real estate development activities. The Company will develop two key properties and will market for orderly sale its other real estate holdings including development land, headquarter complexes and former plants. These sales will benefit the Company by reducing current carrying costs such as real estate taxes, insurance and mortgage interest.
(in thousands) Asset Revaluation $23,516 Refinancing Fees to Professionals and Lenders 22,295 Other 9,393 ------- $55,204 =======
In 1993 and 1992, restructuring charges associated with continuing operations amounted to $17.6 million and $3.0 million. The costs were associated with the relocation and consolidation of facilities and operations, provisions for anticipated losses on sales of real estate, consulting fees to assist with the development of strategic business plans, and retooling costs. (3) DIVESTITURES: In January of 1994, the Company commenced a divestiture program as part of its immediate debt refinancing efforts. Certain business units were to be sold through unrelated sales transactions to generate liquidity for working capital and, ultimately, to pay lender debt. The following companies were sold during 1994: Advance Security, CASI-RUSCO, Waite Hill Insurance group (Cardinal Casualty Co., Colony Insurance Co., Hamilton Insurance Co.), Rawlings Sporting Goods, Safety Supply America, Sherwood Drolet Corp Ltd. and Huber-Essick/Mayco Pump. The Company used the gross proceeds of $198.1 million from the sales to repay $124.7 million of debt under the Override Agreement, operating leases, bank fees, interest expense and for working capital. 32 33 (4) DISCONTINUED OPERATIONS: On February 15, 1995, the Company announced that Board of Directors approved a strategic business plan designed, effective December 31, 1994, to restore the Company to profitability. Under the Plan, the Company will operate four technology-driven manufacturing companies, aggressively cut corporate overhead, and sell its fourteen other businesses in 1995 using sale proceeds to reduce debt and operating lease obligations. The majority of these other businesses were unprofitable and had revenue of $442.8 million in 1994. The entities to be sold are reported as discontinued operations at December 31, 1994, and the consolidated financial statements have been reclassified to report separately their net assets and operating results. The Company's prior year financial statements have been restated to reflect the continuing operations, summarized as follows:
(in thousands) ------------------------------------- As Previously Discontinued 1993: Reported Operations As Restated ---------- ---------- ----------- Net Sales $ 768,642 $(481,489) $287,153 ========= ========= ======== Loss from Continuing Operations (179,334) 96,989 (82,345) Loss from Discontinued Operations (6,280) (96,989) (103,269) Cumulative Effect of Change in Accounting for Income Taxes 5,839 - 5,839 --------- --------- --------- Net Loss $(179,775) $ - $(179,775) ========= ========= ========= 1992: Net Sales $ 792,409 $(507,419) $ 284,990 ========= ========= ========= Income (Loss) from Continuing Operations 18,878 (28,078) (9,200) Income (Loss) from Discontinued Operations 9,421 28,078 37,499 --------- --------- --------- Net Income (Loss) $ 28,299 $ - $ 28,299 ========= ========= ========
The $38.6 million estimated loss on disposal consists of an estimated loss on the disposal of businesses of $4.0 million, a provision of $8.9 million for anticipated operating losses until disposal, and income taxes of $25.7 million. Net Assets Related to Discontinued Operations at December 31, 1994 and 1993 consist primarily of accounts receivable, finance receivables, contracts in process, oil and gas interests, inventory, property, plant and equipment, and significant, specialized machinery, net of current liabilities of these businesses. Realization of these discontinued assets is based on management's best estimate and is subject to market conditions, timing and negotiations. 33 34 (5) INCOME TAXES: Income tax provision (benefit) consists of the following components:
(in thousands) Continuing Operations: 1994 1993 1992 -------- -------- -------- Current Federal $ (8,108) $(35,856) $(19,507) Deferred Federal (15,480) 22,518 10,656 State 602 (6,142) (356) -------- -------- -------- Total from Continuing Operations $(22,986) $(19,480) $ (9,207) Discontinued Operations: Operations (20,174) (55,606) 22,129 Disposal 25,654 - - Cumulative Effect of Change in Accounting - (5,839) - -------- -------- -------- Total Tax Provision (Benefit) $(17,506) $(80,925) $ 12,922 ======== ======== ========
A reconciliation of the actual tax provision (benefit) to the U.S. federal income tax rate effective for each year for continuing operations is as follows:
1994 1993 1992 -------- -------- -------- Statutory Federal Tax Rate (35.0)% (35.0)% (34.0)% Benefit and Insurance Plans - 0.2 (8.3) Foreign Sales Corporation (0.4) (0.8) (3.5) International Rate Differential (0.4) - 1.5 Goodwill .3 0.6 3.4 Other (net) (0.7) 7.8 (7.6) State Income Taxes (Net of Federal Tax) .3 (3.9) 5.5 Current Effect of Change in Federal Rate - 2.0 - Valuation Allowance (Net of Tax Credits) 14.7 10.0 ( 7.1) ----- ----- ----- Effective Tax Rate (Benefit) (21.2)% (19.1)% (50.1)% ===== ===== =====
The components of the net deferred tax liability as of December 31, 1994 and 1993 are as follows:
(in thousands) 1994 1993 ---------- -------- Deferred Tax Assets: Allowance for Doubtful Accounts $ 4,054 $ 4,664 Deferred Compensation Plans 5,234 5,307 Insurance and Other Reserves 7,586 7,586 Contingency Reserves 15,698 7,771 Factory Automation 6,873 6,873 Inventory Reserves 5,815 4,026 Operating Losses and Tax Credit Carryforwards (Net) 31,363 19,365 Other (Net) 10,685 10,807 Foreign (Net) 3,031 3,031 -------- -------- Total Deferred Tax Assets $ 90,339 $ 69,430 -------- -------- Deferred Tax Liabilities: Property, Plant and Equipment $(44,192) $(41,291) Benefit Plans (11,076) (11,243) Intangible Drilling Costs (5,069) (5,029) Other (Net) $(30,002) $(32,471) -------- -------- Total Deferred Tax Liabilities (90,339) (90,034) -------- -------- Net Deferred Tax Liabilities $ - $(20,604) ======== ========
34 35 As of December 31, 1994, the Company, for tax reporting purposes, has tax credit carryforwards of $21.9 million which will begin to expire in 1995, and operating loss deduction carryforwards of $104.6 million which will begin to expire in 2006. To the extent these tax carryforward attributes of approximately $58.5 million have exceeded the Company's Deferred Tax Liabilities of $31.4 million, they have been fully reserved. Realization of tax carryforwards is dependent on future taxable income and amounts realized are subject to tax regulations and limitations by year and nature. The 1993 benefit for federal income taxes includes a charge of $1.9 million which represents the effect of the U.S. federal income tax rate increase from 34% to 35% on net deferred tax liabilities. Accumulated unremitted foreign earnings as of January 1, 1994, are not material; accordingly the Company has elected to prospectively provide deferred U.S. income taxes on foreign earnings which may be taxed at a rate below that of the U.S. statutory rate of 35%. Management believes that any liability related to the remittance of foreign earnings from continuing operations would not be material to the financial statements. 35 36 (6) INVENTORIES:
Inventories are summarized as follows: (in thousands) 1994 1993 --------- ------- Manufacturing Inventories: Raw materials $21,509 $28,055 Work in process 6,138 8,703 Finished goods 11,219 15,121 Inventory reserves (1,532) (1,925) -------- ------- Total manufacturing inventories 37,334 49,954 Inventories applicable to government contracts 207,632 196,959 Less: Progress payments (206,121) (194,732) -------- -------- Net contracts in process 1,511 2,227 -------- ------- Total Inventories $ 38,845 $ 52,181 ======== ========
(7) DEBT REFINANCING: On August 1, 1994, the Company executed an agreement ("Override Agreement") with its significant unsecured institutional lenders to refinance approximately $315 million in indebtedness, letters of credit and related facilities ("Override Debt") of which $278 million was outstanding. At the same time, the Company refinanced approximately $172 million in outstanding operating leases. The Override Debt bears interest at a base rate plus 2% (the 2% portion originally payable on June 30, 1995) and a restructuring fee of 3 1/2% (2 1/4% payable on June 30, 1995). Mortgages, the 9-7/8% Notes, the Subordinated Debentures and certain other debt and leases were not part of the refinanced debt. The Override Agreement precludes the Company from paying dividends and secures Override Debt with security interests in shares of certain subsidiaries of the Company and substantially all of the Company's accounts receivable, inventory, intellectual property and related assets. Prior to the refinancing, the Company had divested certain businesses and accumulated sale proceeds to effect the refinancing. On August 1, 1994, the Company distributed $124.7 million in cash as follows: $61.8 million to pay down Override Debt; $36.5 million to pay down operating leases (of which $17.1 million represented prepayments and are recorded as non-current assets); $7.0 million to pay bank fees, interest and expenses of the transaction; and $19.4 million to establish escrow accounts for income taxes and expenses associated with the divesture program. Between August 1 and December 31, 1994, the Company made additional payments against the Override Debt, including releases from escrow accounts, to its lenders of $48.1 million. In December 1994, the Override Agreement was amended to permit the Company to obtain additional letter of credit facilities. 36 37 On March 31, 1995, debt outstanding under the Override Agreement amounted to $135.4 million ($167.4 million outstanding at December 31, 1994 less $32.0 million payments through March 31, 1995). On March 31, 1995, the Override Agreement was amended (the "Second Amendment"), to extend the expiration date to January 1, 1996, set principal amortization payments throughout 1995, reset the net worth, cash flow and capital expenditure financial covenants with amounts applicable to the Company's continuing operations and to permit the Company to incur additional indebtedness, as defined, for performance bonds and for additional letters of credit of up to $5 million, each of which may be secured by a pledge of up to $2 million of cash, respectively. Also effective March 31, 1995, the 2% interest payment deferral was terminated and the amount due was paid. Fees due under the original agreement and extension fees will require a refinancing cost of $10.0 million in 1995. Pursuant to the Second Amendment, the Company has agreed to repay in 1995 a substantial portion of all of the remaining amounts outstanding under the Override Agreement, with any remaining amounts due January 1, 1996. The Company expects to fund these payments through the proceeds of the divesture of those businesses whose net assets are presented in the Company's balance sheet as Net Assets Related to Discontinued Operations; however, all Company sources, including cash reserves, working capital generated, and short-term facilities can be accessed for this purpose. At December 31, 1994, all required restrictions and financial covenants have been satisfied. (8) DEBT DUE WITHIN ONE YEAR: At December 31, 1994 and 1993, debt due within the following year was as follows:
(in thousands) 1994 1993 -------------------------- --------------------------- Balance Average Balance Average Outstanding Rate Outstanding Rate ----------- ------- ----------- ------- Override Debt $ 167,364 10.50% $ 88,101 7.15% Other Debt 4,277 9.85% 2,790 9.48% ----------- ------- ----------- ------- Total $ 171,641 $ 90,891 =========== ===========
Additional terms of the Override Debt are discussed in Footnote 7. The fair value of the Override Debt at December 31, 1994 is estimated at 92.125% based on a sale of the debt between two lenders near year-end. At December 31, 1994, the interest rate on the Override Debt was 10.5% The Other Debt above represents amounts outstanding under short-term notes and foreign lines at variable rates. Based on the short-term nature of the debt and the variable rates it bears, its carrying value is estimated to approximate its market value. The Company has a receivable-based credit facility which permits borrowings of up to $20.0 million based on the balances of certain divisions' receivables. At December 31, 1994, $16.3 million was available under this facility. No amounts were outstanding at December 31, 1994. 37 38 (9) LONG-TERM DEBT: Total long-term debt at December 31, 1994 and 1993 consisted of the following:
(in thousands) -------------------------------------------------------------- 1994 1993 -------------------------- -------------------------- Carrying Fair Carrying Fair Value Value Value Value -------- -------- --------- -------- 9.875% Senior Notes due 1999 $174,000 $143,550 $174,000 $176,610 10.375% Debentures due 1998 9,500 8,313 11,000 11,028 Override Debt - - 185,000 185,000 Mortgage notes 53,076 53,076 66,824 66,824 Obligations under capital lease 4,889 4,889 11,049 11,049 Other debt and notes 205 205 973 973 -------- -------- -------- -------- Total 241,670 $210,033 448,846 $451,484 ======== ======== Less - current maturities (7,179) (110,576) -------- -------- Long-term debt $234,491 $338,270 ======== ======== The fair value estimates were made as follows: the Senior Notes were based on the market price at which the debt traded near year-end; the Debentures were based on management's estimates; the mortgages were based on carrying value given their collateralized nature.
The 9.875% Senior Notes are due October 1, 1999. Interest is payable semi-annually on April 1 and October 1. The 10.375% subordinated Debentures are callable at a premium prior to maturity. Redemption prices (expressed as percentages of the principal amount) during the 12-month period beginning April 1, 1995 are 101.093%, which decrease to 100.547% on April 1, 1996. The Company is required to make annual payments of $1.5 million into a sinking fund through 1997, with a $5.0 million payment in 1998. All required payments have been made. Mortgage notes are secured by real property, are due at various dates through 2009 and bear interest at rates ranging from 7.0% to 12.25%. The scheduled principal payments and sinking fund requirements for all long-term debt, excluding the obligations under capital leases, are approximately as follows: 1995 - $4.4 million; 1996 - $4.7 million; 1997 - $6.1 million; 1998 - $8.6 million; 1999 - $177.8 million; and $35.2 million thereafter. 38 39 (10) LEASES: The Company leases a substantial amount of manufacturing equipment under operating lease arrangements. The Company (through its now discontinued leasing and scaffolding subsidiaries) also leases the vehicle fleet and scaffolding equipment ("Vehicle and Scaffolding Leases") held for lease or rental. All monthly rent and other payments due under all leases have been made, and are current through December 31, 1994. On August 1, 1994, and concurrently with entering into the Override Agreement, the Company executed agreements with certain lessors to restructure leases with balances of approximately $172 million. On March 31, 1995, the Company and those lessors, except the lessors to the Vehicle and Scaffolding Leases, amended or have agreed to amend the leases to conform certain financial covenants of the leases to the financial covenants contained in the Second Amendment to the Override Agreement, and to accelerate certain fees and other terms consistent with the Override Agreement. The Company is in discussion with the lessors to the Vehicle and Scaffolding Leases to similarly amend those leases.
A progression of rental commitments under operating leases as of December 31, 1993 to those as of December 31, 1994 is as follows (in millions): Rental commitments under operating leases at December 31, 1993 including $11.4 related to discontinued operations $177.7 Commitments added as of August 1, 1994 through the negotiated restructuring of the former non- amortizing leases for specific amortization payments 60.0 Commitments added in December 1994 to finance machinery and equipment 13.7 Payments to lessors, including prepaid rent (72.0) Elimination of rental commitments through sale of underlying assets or assignment of leases to purchasers (23.7) ------ Rental Commitments under operating leases at December 31, 1994, including $120.6 million related to discontinued operations $ 155.7 =======
39 40 Rental commitments under non-cancelable operating leases as of December 31, 1994 were as follows (in thousands):
Discontinued Continuing Operations Operations Total ---------- ---------- ----- Year Ending December 31, 1995 $ 34,874 $ 9,111 $ 43,985 1996 37,185 8,226 45,411 1997 25,862 7,703 33,565 1998 13,999 7,014 21,013 1999 & Beyond 8,651 3,039 11,690 -------- ------- -------- Total minimum payments required $120,571 $35,093 $155,664 ======== ======= ========
Funds to pay the $120.6 million of lease obligations related to discontinued operations are expected to be provided primarily through divestiture proceeds of those businesses. As to machinery and equipment that is not purchased or is presently not utilized or underutilized, the Company expects to satisfy the rental payments through its internal funds until such equipment is sold, subleased or assigned. Operating lease expense for continuing operations was approximately $15 million, $16.5 million, and $7.9 million in 1994, 1993, and 1992 respectively. In 1994, 1993 and 1992, the Company completed sale/leasebacks of certain machinery and equipment for $13.7 million, $6.0 million and $49.0 million respectively. Proceeds from the 1994 sale/leaseback were used to pay purchase commitments entered into in 1993. The 1993 and 1992 proceeds were used to repay debt. In 1993, the Company completed, through its Vehicle and Scaffolding businesses, sale/leasebacks for scaffolding and vehicle fleet for $35.0 million and $25.0 million respectively. Proceeds were used to repay debt. In connection with those leases, in 1993, the Company entered into two interest rate swap agreements with a bank. The swap agreements allow the Company to convert the interest rates on $35 million and $25 million from LIBOR-based floating rates to fixed rates. Effective March 29, 1995, those agreements were terminated and the Company received $0.5 million. The Company operates equipment under lease arrangements that are classified as capital leases. The following is a summary of assets under capital leases:
(in thousands) December 31 ------------------------------- 1994 1993 -------- -------- Machinery and equipment $ 6,867 $ 15,879 Less accumulated amortization 4,709 9,818 -------- -------- Net $ 2,158 $ 6,061 ======== ========
40 41 Future minimum lease payments under capital leases and the present value of the net minimum lease payments as of December 31, 1994 are as follows:
(in thousands) Year Ending December 3l, 1995 $ 2,752 1996 1,296 1997 962 1998 211 ------- Total minimum lease payments 5,221 Less amount representing interest 332 ------- Present value of net minimum lease payments $ 4,889 =======
(11) CONTINGENT LIABILITIES: The Company has been working with the Federal Trade Commission toward the completion of a redress program. The Commission sought consumer redress in connection with the sale of heat detectors manufactured by the Company's Interstate Engineering division. The Court held that the Company could be required to pay refunds to those buyers who, after notification, can make a valid claim for redress. The Court required the Company to provide a bank letter of credit initially in the amount of $7.6 million and reduced currently to $4.0 million. The Company had established an accrual and, based on the current amount of claims received by the Redress Administrator, no additional material charge to earnings is anticipated. In a class action suit filed on April 18, 1994, in the U.S. District Court for the Northern District of Ohio against the Company and two former officers and directors, the plaintiff stockholder alleged that the defendants disseminated false and misleading information to the investing public concerning the Company's business, management, financial condition, and future prospects in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. A separate class action suit was filed by another stockholder on May 11, 1994, in the same court against the Company and certain former and present officers and directors setting forth similar allegations. Both suits seek monetary damages and costs and have been consolidated into one case. In two separate suits reported in the Company's 1993 Form 10-K Annual Report, three stockholders of the Company filed derivative complaints on October 13 and December 2, 1993 in the Common Pleas Court of Lake County, Ohio, seeking recovery on behalf of the Company for alleged self-dealing, waste of corporate assets, financial statement over-statements, gross mismanagement and participation or acquiescence in such practices by Directors of the Company, all of whom were named as defendants. The Court consolidated the two suits and subsequently dismissed them with respect to all defendants. The plaintiffs have appealed the Court's decision. On October 11, 1994 Deloitte & Touche LLP filed suit against the Company in the Cuyahoga County Common Pleas Court of Ohio alleging that the Company was in breach of contract for failure to pay for consulting services rendered by Deloitte & Touche in the approximate amount of $30 million plus interest. On the same date, the Company filed in the same court its complaint against Deloitte & Touche (and later against Deloitte & Touche LLP) alleging that in connection with consulting services rendered to the Company, Deloitte & Touche was liable for breach of contract, negligent misrepresentation, breach of fiduciary duty, professional negligence and fraudulent inducement. The Company seeks $250 million in compensatory damages as well as punitive damages, declaratory relief and an accounting. The Company also filed a counterclaim containing similar allegations, as well as claims of breach of warranty and the unlicensed and unauthorized practice of engineering, in response to the suit filed by Deloitte & Touche LLP. Deloitte & Touche LLP has counterclaimed in the Company's action and the Court has now consolidated the two cases. 41 42 On December 19, 1994 the Company, its subsidiary Figgie Properties Inc. and the Richard E. Jacobs Group filed an action against the City of Cleveland seeking specific performance of a 1989 Master Development Agreement pertaining to a proposed real estate project referred known as Chagrin Highlands. The Company's complaint also seeks a declaratory judgment that the Master Development Agreement is in full force and effect and asks for an injunction preventing the City from interfering with the rights of the plaintiffs under that Agreement as well as compensatory damages in the amount of $100 million. The City of Cleveland has filed a motion to dismiss the Company's complaint. Additionally, the Company and its subsidiaries are defendants in various lawsuits arising in the ordinary course of business. The Company has provided a reserve for the estimated liability related to all known cases. In the opinion of management, any additional liability with respect to these matters will not have a material effect on the Company's financial statements. Costs incurred by the Company in the performance of U.S. Government contracts are subject to audit. In the opinion of management, the final settlement of these costs will not result in significant adjustments to recorded amounts. (12) PENSION AND RETIREMENT BENEFITS PLANS: The Company has pension plans covering the majority of its employees. The plan benefits for salaried employees are based on employees' earnings during their years of participation in the plan. Hourly employees' plan benefits are based on various dollar units multiplied by the number of years of eligible service as defined in each plan. The Company's policy has been to fund amounts as necessary on an actuarial basis to comply with the Employee Retirement Income Security Act of 1974. In addition, the Company has adopted a nonqualified supplemental retirement plan covering certain officers and senior executives. The components of net periodic pension expense and the assumptions used in accounting for the benefit plans for the years ended December 31 are as follows:
(in thousands) 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- Service cost $ 4,220 $ 3,399 $ 3,663 Interest cost on projected benefit obligation 5,803 5,145 4,673 Actual loss (gain) on plan assets 2,680 (6,788) (3,405) Net amortization and deferral of actuarial (losses) gains (8,501) 1,251 (1,605) -------- -------- -------- $ 4,202 $ 3,007 $ 3,326 ======== ======== ======== Assumptions: Weighted average discount rates 8.25% 7.50% 8.75% Rate of increase in compensation levels 5.00% 5.00% 5.00% Expected long-term rate of return on assets 10.00% 10.00% 10.00%
42 43 The funded status of the Company's domestic and international plans, along with the reconciliation to amounts reported in the consolidated balance sheets, were as follows:
December 31, 1994 December 31, 1993 -------------------------- ------------------------- Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits Accum. Exceed Accum. Exceed (in thousands) Benefits Assets Benefits Assets - ----------------------------------------------------------------------------------------------------------------- Accumulated benefit obligations $ 54,682 $ 12,548 $ 55,637 $ 12,594 ======== ======== ======== ======== Vested benefit obligations $ 50,462 $ 12,501 $ 51,479 $ 11,805 ======== ======== ======== ======== Plan assets at fair value 60,720 119 64,417 269 Projected benefit obligations (59,187) (12,856) (59,645) (14,374) -------- -------- -------- -------- Assets over (under) projected benefit obligation 1,533 (12,737) 4,772 (14,105) Unrecognized net (assets) liabilities (5,173) 959 (5,715) 1,118 Unrecognized net (gain) loss 12,843 1,089 10,757 3,252 Unrecognized prior service cost 761 - 777 3,940 Adjustment required to recognize minimum liability - (5,172) - (6,530) -------- -------- -------- -------- Prepaid pension cost (liability) $ 9,964 $(15,861) $ 10,591 $(12,325) ======== ======== ======== ========
The plans' assets consist primarily of listed common stocks, corporate and government bonds, real estate investments, and cash and cash equivalents. The plans' assets included 29,175 and 28,883 shares of the Company's Class A Common Stock and 59,334 and 52,115 shares of the Company's Class B Common Stock as of December 31, 1994 and 1993, respectively. In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for certain retired employees. A small percent of the Company's employees become eligible for these benefits paid by the Company if they reach retirement age while working for the Company. For 1994, 1993, and 1992, premiums approximated $20,000 annually. Most of the Company's salaried employees are eligible for medical benefits at retirement by paying the full cost of the benefits. The Company adopted FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993. Adoption had no effect on the financial statements. 43 44 (13) EMPLOYEE STOCK OWNERSHIP PLANS: The Company maintains two employee stock ownership plans: a leveraged ESOP and a non-leveraged ESOP. Under the strategic business plan announced on February 15, 1995, divisions representing a majority of ESOP participants have been discontinued. As such, the Company elected to allocate all remaining shares as of December 31, 1994 for the leveraged ESOP. The Company's financial statements reflect the compensation expense related to all shares. The leveraged ESOP holds a $20 million note that is guaranteed by the Company and bears interest at the rate provided for in the amended Override Agreement. The balance outstanding as of December 31, 1994 is $6.2 million and is expected to be fully paid in 1995 through the amortization required in the Override Agreement. The leveraged ESOP used the proceeds from the note to purchase 756,195 Class B shares. Contributions to fund the interest requirements of the loan are reflected as interest expense in the accompanying consolidated statements of income, approximately $545,000 in 1994, $365,000 in 1993 and 290,000 in 1992 (net of dividends of approximately $328,000 in 1993 and $374,000 in 1992). During 1993, the Company elected to prospectively account for the leveraged ESOP under the provisions of Statement of Position 93-6, "Employers Accounting for Employee Stock Ownership Plans." This election allows the Company to measure compensation expense based on the market value of the shares on the date of allocation. The non-leveraged ESOP was established in 1989 by the transfer of surplus assets from a terminated benefit plan. The transferred funds were used to purchase 1,124,682 Class A and 440,796 Class B shares. Compensation expense is based on the fair market value of the shares on the date of allocation. To the extent the amount available for income tax benefits exceeds the amount recognized as compensation expense, the additional tax benefits are credited to additional paid-in-capital. During 1994, $6.0 million was credited to additional paid-in-capital. Dividends on unallocated shares are charged to expense. Compensation expense associated with the allocation of plan shares is as follows:
(in thousands) 1994 1993 1992 ------------------------------------------------------------------------- Leveraged ESOP $1,739 $1,288 $2,500 Non-leveraged ESOP 3,614 2,708 3,311 Dividends - 486 501 ------ ------ ------ $5,353 $4,482 $6,312 ====== ====== ======
The Company also maintains the Figgie International Inc. Stock Bonus Trust and Plan (the Stock Plan). Under this Plan, shares of the Company's Class B Common Stock are allocated to eligible employee accounts each December 31 based on salary. The Company did not make contributions to this plan in 1994, 1993, or 1992. The Stock Plan held 291,729 and 378,402 shares of the Company's Class B Common Stock as of December 31, 1994 and 1993, respectively. 44 45 (14) CAPITAL STOCK: Each share of Class A Common Stock is entitled to one-twentieth of one vote per share, while each share of the Class B Common Stock is entitled to one vote per share, except, in each case, with respect to shares beneficially owned by a Substantial Stockholder (as defined in the Company's Restated Certificate of Incorporation, as amended), in which case the voting rights of such stock will be governed by the appropriate provisions of the Company's Restated Certificate of Incorporation. (15) RESTRICTED STOCK PURCHASE PLAN: Under the 1993 Restricted Stock Purchase Plan for Employees (the "1993 Employee Plan"), up to 800,000 shares each of either Class A or Class B Common Stock were authorized for possible issuance and executive officers and other key employees have been granted the right to purchase shares of Common Stock at prices substantially below market value. The purchase of Class A and Class B Common Stock under this plan entitles the employee to full voting and dividend rights, but the shares cannot be sold, transferred, or pledged, and the certificates representing the shares are retained in the custody of the Company. At the earliest of retirement, death, or total disability of the employee, or termination of the plan, these restrictions on transferring, pledging, or selling the shares expire, and the employee or heirs take unrestricted custody of the stock. In the event the employee leaves the Company prior to any of these occurrences, the Company can repurchase the shares (or, in the case of retirement, a portion of the shares) at the lower of the original purchase price paid by the employee or the then prevailing market price. At December 31, 1994, 346,385 shares of Class A Common Stock and 16,753 shares of Class B Common Stock, respectively, subject to the above restrictions, were outstanding under the 1993 Employee Plan. Under the 1993 Restricted Stock Purchase Plan for Directors (the "1993 Director Plan"), up to 75,000 shares of Class B Common Stock were authorized for possible issuance and certain Directors of the Company have been granted the right to purchase shares of Class B Common Stock at prices substantially below market value. The 1993 Director Plan contains restrictions and other provisions similar to those of the 1993 Employee Plan. At December 31, 1994, 30,000 shares of Class B Common Stock, subject to the above restrictions, were outstanding under the 1993 Director Plan. The Company's 1988 Restricted Stock Purchase Plan for Employees and 1988 Restricted Stock Purchase Plan for Directors, which was similar in its terms and conditions to the 1993 Employee Plan and 1993 Director Plan, were terminated on December 31, 1992 and June 30, 1993, respectively. 45 46 The excess of market price over purchase price at date of grant for the 1993 Directors Plan and the 1993 Employees Plan, $.6 million and $8.9 million respectively, is deferred as Unearned Compensation and is being amortized as compensation expense. Unamortized amounts (unearned compensation) are shown as a reduction of stockholders' equity. The following amounts were amortized to expense:
(in thousands) 1994 1993 1992 ------ ------ ------ 1993 Employee Plan $ 245 $ 885 $ - 1993 Director Plan 193 64 - 1988 Employee Plan - - 4,690 1988 Director Plan - 126 245 ------ ------ ------ Total $ 438 $1,075 $4,935 ====== ====== ======
(16) STOCK OPTIONS: In 1994, the shareholders approved a stock option plan (the "Plan") under which the options and/or stock appreciation rights may be granted to key employees to purchase common stock at prices not less than the fair market value at the time of grant options vest over a three-year period from the date of grant. The Plan calls for up to an aggregate of 1,500,000 shares of Class A common stock to be available for issuance upon the exercise of options and stock appreciation rights, which may be granted over a ten-year period ending October 19, 2004. No options or rights had been granted as of December 31, 1994. Subsequent to December 31, 1994, 706,500 options were granted pursuant to the Plan. (17) INDUSTRY SEGMENT DATA: The Company's operations are conducted through three reportable business segments. These segments are described in Part I, Item 1 on pages 2 and 3 of this Form 10-K. Page 8 contains a summary of certain financial data for each business segment for 1994, 1993 and 1992. Information concerning the content of this financial data is as follows: Intersegment and foreign sales are immaterial. Operating profit is total revenue less operating expenses (cost of sales, SG&A expense and R&D expense). Operating profit does not include restructuring and refinancing costs, change in accounting estimate expense, interest expense, interest income, or federal and state income taxes. Identifiable assets are those assets used in the Company's operation for each segment. Corporate assets are principally cash, property and other assets. 46 47 (18) CHANGE IN ACCOUNTING ESTIMATE: In connection with its factory automation project, the Company incurred significant costs, including machinery and equipment, software, and outside consulting fees. These project costs historically were deferred and amortized over future periods commencing at the time the equipment was placed into service. A number of factors arose in 1993 which changed management's estimate of the period of future benefit. These factors included deteriorating operating results, cash flow and financing difficulties. As a result, the Company adopted a change in accounting by expensing all project costs, other than machinery and equipment, as incurred. As required by generally accepted accounting principles, the accounting change, amounting to an after tax charge approximating $50 million ($77 million pre-tax) or $2.80 per share, was recorded as a change in estimate and recorded in the results of operations for the fourth quarter of 1993. The charge of $33.9 million was associated with the continuing operations and $43.4 million was associated with businesses discontinued in 1994 and included in the $103.3 million loss on discontinued businesses. 47 48 QUARTERLY FINANCIAL DATA (UNAUDITED) ------------------------------------ This information is required by the Securities and Exchange Commission and is unaudited.
First Second Third Fourth Quarter Quarter Quarter Quarter -------- ------- -------- --------- (in thousands except for per share data) - ----------------------------------------------------------------------------------------------------------------- 1994 RESTATED (SEE NOTE A): - -------------------------- Net sales $ 73,111 $ 80,030 $ 79,792 $ 86,487 NOTE Gross profit 16,725 18,871 18,324 18,246 C Net income (loss): Continuing Operations (16,253) (10,068) (10,848) (48,078) Discontinued operations (4,084) (7,803) (4,995) (64,601) -------- ------- --------- --------- Net (loss) $(20,337) $(17,871) $ (15,843) $(112,679) ======== ======= ========= ========= Earnings (loss) per share: Continuing operations $ (0.91) $ (0.56) $ (0.61) $ (2.74) Discontinued operations (0.23) (0.44) (0.28) (3.68) -------- ------- --------- --------- Net income (loss) $ (1.14) $ (1.00) $ (0.89) $ (6.42) ======== ======= ========= ========= - ----------------------------------------------------------------------------------------------------------------- 1993 RESTATED (SEE NOTE A): - -------------------------- Net sales $ 66,374 $ 79,394 $ 67,292 $ 74,093 NOTE Gross profit 17,610 23,443 5,533 16,312 B Net income (loss): Continuing operations (3,558) (1,667) (11,076) (66,044) Discontinued operations 7,372 2,172 (7,773) (105,040) Cumulative effect of change in accounting for income taxes 5,839 - - - -------- ------- -------- --------- Net income (loss) $ 9,653 $ 505 $(18,849) $(171,084) ======== ======= ======== ========= Earnings (loss) per share: Continuing operations $ (0.20) $ (0.09) $ (0.62) $ (3.67) Discontinued operations 0.42 0.12 (0.43) (5.85) Cumulative effect of change in accounting for income taxes 0.33 - - - -------- ------- -------- --------- Net income (loss) $ 0.55 $ 0.03 $ (1.05) $ (9.52) ======== ======= ======== ========= NOTE A: The previously reported quarters have been restated to reflect - ------ certain businesses as discontinued operations. NOTE B: Fourth quarter 1993 results from continuing operations include - ------ certain significant charges related to (1) a change in accounting estimate to reflect the expensing of certain deferred costs associated with the Company's factory automation program of approximately $22 million or $1.22 per share, (2) a restructuring charge of approximately $11 million or $0.61 per share associated with closing and consolidating facilities and provisions for losses on sales of surplus real estate, (3) approximately $9 million or $.50 per share related to the writeoff of product development costs, and (4) approximately $8 million or $.48 per share related to litigation reserves. NOTE C: Fourth quarter 1994 results from continuing operations included - ------ a $15.3 million or $0.87 per share charge for the revaluation of certain assets.
48 49 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) IDENTIFICATION OF DIRECTORS Information with respect to the members of the Board of Directors of the Company is set forth under the captions "Nominees for Election as Directors to be Elected for a Term of Three Years" and "Directors Continuing in Office" in the Company's definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. (b) IDENTIFICATION OF EXECUTIVE OFFICERS Information with respect to the executive officers of the Company is set forth under the caption "Executive Officers of the Registrant" contained in Part I, Item 1 of this report, which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information required by this Item is set forth under the captions "Compensation of Directors" and "Executive Compensation" in the Company's definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by this Item is set forth under the captions "Principal Stockholders" and "Stock Ownership of Directors and Officers" in the Company's definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this Item is set forth under the caption "Certain Transactions" in the Company's definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. 49 50 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS, SCHEDULES, AND EXHIBITS: Page No. ---- 1. FINANCIAL STATEMENTS Included in Part II of this report: Report of Independent Public Accountants 23 Consolidated Statements of Income for the Years Ended December 31, 1994, 1993, and 1992 24 Consolidated Balance Sheets at December 31, 1994 and 1993 26 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1993, and 1992 28 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993, and 1992 29 Notes to Consolidated Financial Statements 30 Quarterly Financial Data (Unaudited) 48 2. FINANCIAL STATEMENT SCHEDULE Included in Part IV of this report: For the Three Years Ended December 31, 1994 Schedule II - Valuation and Qualifying Accounts 52 All schedules, other than those outlined above, are omitted as the information is not required or is otherwise furnished.
50 51 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Board of Directors and Stockholders, Figgie International Inc.: We have audited in accordance with generally accepted auditing standards, the financial statements of Figgie International Inc. and Subsidiaries included in this Form 10K, and have issued our report thereon dated April 12, 1995. Our report on the financial statements includes an explanatory paragraph with respect to the Company's adoption of the provisions of SFAS No. 109 "Accounting for Income Taxes" in the first quarter of 1993 (as discussed in Note 1 to the financial statements) and to the change in the method of accounting for certain costs associated with its factory automation project in the fourth quarter of 1993 (as discussed in Note 18 to the financial statements). Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Cleveland, Ohio, April 12, 1995. 51 52 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Balance, Balance, Beginning Charged to Amounts End of Description Of Year Costs & Expenses Charged Off Year - --------------------------- ---------- ---------------- ------------- -------- Allowance for uncollectible trade accounts receivables- Year ending December 31, 1994 $ 184 $263 $ 188 $ 259 ======= ==== ======= ======= Year ending December 31, 1993 $ 254 $230 $ 300 $ 184 ======= ==== ======= ======= Year ending December 31, 1992 $ 144 $169 $ 59 $ 254 ======= ==== ======= =======
52 53 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIGGIE INTERNATIONAL INC. (Company) By /s/ S.L. Siemborski ------------------------------- Date: April 12, 1995 S. L. Siemborski Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of April 12, 1995 by the following persons on behalf of the Company and in the capacities indicated. By /s/ John P. Reilly -------------------------------- John P. Reilly, Principal Executive Officer & Director By /s/ F. J. Brinkman By /s/ H. Nesbit, II --------------------------------- --------------------------------- F. J. Brinkman, Director H. Nesbit, II, Director By /s/ V. A. Chiarucci By /s/ C. B. Robertson, III --------------------------------- --------------------------------- V. A. Chiarucci, Director C. B. Robertson III, Director By /s/ D. S. Coenen By /s/ H. B. Scott --------------------------------- --------------------------------- D. S. Coenen, Director H. B. Scott, Director By /s/ A. V. Gangnes By /s/ A. A. Sommer, Jr. --------------------------------- --------------------------------- A. V. Gangnes, Director A. A. Sommer, Jr., Director By /s/ J. S. Lanahan By /s/ S. L. Siemborski --------------------------------- --------------------------------- J. S. Lanahan, Director S. L. Siemborski, Director (Principal financial and accounting officer) By /s/ F. R. McKnight By /s/ W. M. Vannoy --------------------------------- --------------------------------- F. R. McKnight, Director W. M. Vannoy, Director 53 54 EXHIBIT INDEX ------------- (3) (a) The Restated Certificate of Incorporation of the Company, as amended, as Exhibit 19 to the Company's Quarterly Report on Form 10-Q for the quarter ending June 30, 1987, File No. 1-8591, is hereby incorporated herein by reference. (b) The Bylaws of the Company, as amended and restated effective December 13, 1994. (4) Instruments defining rights of security holders, including indentures, for the following classes of securities: (a) Class A Common Stock, par value $.10 per share, are contained in the Restated Certificate of Incorporation, as amended, incorporated by reference in Exhibit (3) above and are incorporated herein by reference. (b) Class B Common Stock, par value $.10 per share, are contained in the Restated Certificate of Incorporation, as amended, and incorporated by reference in Exhibit (3) above and are incorporated herein by reference. (c) Indenture, dated as of October 1, 1989, between Figgie International Inc. and Continental Bank, National Association, as Trustee, with respect to the 9.875% Senior Notes due October 1, 1999, included as Exhibit (4) (c) to the Company's Annual Report on Form 10-K for the year ending December 31, 1989, is hereby incorporated herein by reference. State Street Trust succeeded Continental Bank as Trustee pursuant to an agreement dated as of February 7, 1994, which was included as Exhibit (4)(c) to the Company's Annual Report on Form 10-K for the year ending December 31, 1993, and is hereby incorporated herein by reference. (d) Second Supplemental Indenture, dated as of December 31, 1986, among Figgie International Inc. and Marine Midland Bank, N.A., as Trustee, with respect to the 10.375% Subordinated Debentures due April 1, 1998, included as Exhibit (4)(c) to the Company's Annual Report on Form 10-K for the year ending December 31, 1986, File No. 1- 8591, and the First Supplemental Indenture, dated as of July 18, 1983, among Figgie International Inc., Figgie International Holdings Inc., and Marine Midland Bank, N.A., as Trustee with respect to the 10-3/8% Subordinated Debentures due 1998, along with the Original Indenture dated as of April 1, 1978, included as Exhibit (3)(4)(f) to the Company's Form 8-B filed October 19, 1983, (File No. 1-8591) with the Commission are hereby incorporated herein by reference. (10)(a)* The Company's Compensation Plan for Executives, included as Exhibit (3)(10)(b) to the Company's Form 8-B filed October 19, 1983, with the Commission is hereby incorporated herein by reference. (b)* The description of the Company's Performance Incentive Bonus Program, included in the Company's definitive Proxy Statement filed May 12, 1988, with the Commission, is hereby incorporated herein by reference. 54 55 (c)* The Company's Senior Executive Benefits Program, as amended, included as Exhibit (19) to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 1988, is hereby incorporated herein by reference. (d)* The Company's 1983 Deferred Compensation Agreement, included as Exhibit (3)(10)(f) to the Company's Form 8-B filed October 19, 1983, with the Commission, is hereby incorporated herein by reference. (e)* The Company's 1982 Deferred Compensation Agreement, included as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ending December 31, 1984, File No. 1-8591, is hereby incorporated herein by reference. (f)* The Company's Split Dollar Life Insurance Plan, included as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ending December 31, 1985, File No. 1-8591, is hereby incorporated herein by reference. (g)* The Company's 1993 Restricted Stock Purchase Plan for Employees, included as Exhibit A to the Company's definitive Proxy Statement dated May 25, 1993 is hereby incorporated herein by reference. (h)* The Company's 1993 Restricted Stock Purchase Plan for Directors, included as Exhibit B to the Company's definitive Proxy Statement dated May 25, 1993, is hereby incorporated herein by reference. (i)* Employment Agreement, dated as of November 18, 1988, by and between the Company and Harry E. Figgie, Jr., included as Exhibit 10 (k) to the Company's Annual Report on Form 10-K for the year ending December 31, 1988, is hereby incorporated herein by reference. (j)* Form of Agreement, dated as of May 1, 1989, among the Company and corporate officers and department heads who report to the Company's Chief Executive Officer, included as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 1991, is hereby incorporated herein by reference. (k)* Employment agreement dated July 1, 1994, by and between the Company and Steven L. Siemborski, included as Exhibit 10(b) to the Company's Quarterly Report on Form 10Q for the quarter ending September 30, 1994, is hereby incorporated by reference. (l)* Override Agreement between the Company and various lenders, dated as of June 30, 1994 included as Exhibit 10(a) to the Company's Quarterly Report on Form 10Q for the quarter ending September 30, 1994, is hereby incorporated by reference. (m) First Amendment dated as of December 5, 1994 to the Override Agreement dated as of June 30, 1994 between the Company and various lenders. (n) Second Amendment dated as of March 31, 1995 to the Override Agreement dated as of June 30, 1994 between the Company and various lenders. (o)* Employment Agreement, dated as of October 28, 1994, by and between Walter M. Vannoy and the Company. (p)* Employment Agreement, dated as of January 1, 1995, by and between John P. Reilly and the Company. 55 56 21. Subsidiaries of the Company 23. Consent of Independent Public Accountants 27. Financial Data Schedule (b) Reports on Form 8-K The Company filed a report on Form 8-K on December 6, 1994. * Management contracts or compensatory plans filed pursuant to Item 14(c). 56 EX-3.B 2 EXHIBIT 3.B 1 BYLAWS OF FIGGIE INTERNATIONAL INC. ARTICLE I STOCKHOLDERS SECTION 1. Meetings of Stockholders. (a) Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held at such date and time as shall be determined by the Board of Directors. Upon due notice, there may also be considered and acted upon at an annual meeting any matter which could properly be considered and acted upon at a special meeting. (b) Special Meetings. Special meetings of the stockholders of the Corporation may be held on any business day when called at any time by the Board of Directors or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors, include the power to call such meetings, but special meetings may not be called by any other person or persons. (c) Place of Meetings. Any meeting of the stockholders may be held at such place within or without the State of Delaware as may be designated in the notice of said meeting. (d) Notice of Meeting and Waiver of Notice. (1) Notice. Written notice of the place, date and hour of every meeting of the stockholders, whether annual or special, shall be given to each stockholder of record entitled to vote at the meeting not less than 10 nor more than 60 days before the date of the meeting. Every notice of a special meeting shall state the purpose or purposes thereof. Such notice shall be given by mail to each stockholder entitled thereto, and shall be directed to the stockholder at his address as it appears on the records of the Corporation. Notice shall be deemed to have been given on the day on which it was deposited in the mail. (2) Record Holder of Shares. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claims to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. (3) Waiver. Whenever any written notice is required to be given under the provisions of the Certificate of Incorporation, these Bylaws, or by statute, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting of the stockholders need be specified in any written waiver of notice of such meeting. Attendance of a person, either in person or by proxy, at any meeting, shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. (e) Quorum, Manner of Acting and Adjournment. The holders of record of shares entitled to cast a majority of the votes entitled to be cast by the holders of all shares of the capital stock issued and outstanding (not including treasury stock) and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation, or by these Bylaws. Whether or not a quorum is present, the holders of shares entitled to cast a majority of the votes entitled to be cast by the holders present 2 in person or represented by proxy at the meeting shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. When a quorum is present at any meeting, the vote of a majority of the votes entitled to be cast by the holders of all issued and outstanding shares present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the applicable statute or the Certificate of Incorporation or these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Except upon those questions governed by the aforesaid express provisions, the stockholders present in person or by proxy at a duly organized meeting can continue to do business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a quorum. (f) Organization of Meetings. (1) Presiding Officer. Any "executive officer" of the Corporation, as that term is defined in section 3(g) of Article III of these Bylaws, may call all meetings of the stockholders to order and shall act as Chairman thereof. (2) Minutes. The Secretary of the Corporation, or, in his absence or by his designation, an Assistant Secretary, or, in the absence of both, a person appointed by the Chairman of the meeting, shall act as Secretary of the meeting and shall make and keep a record of the proceedings thereat. (3) Stockholders' List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting. The list shall be arranged in alphabetical order showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. (g) Voting. Except as otherwise provided by statute or the Certificate of Incorporation, every stockholder entitled to vote shall be entitled to cast the vote per share to which such share is entitled, in person or by proxy, on each proposal submitted to the meeting for each share held of record by him on the record date for the determination of the stockholders entitled to vote at the meeting. At any meeting at which a quorum is present, all questions and business which may come before the meeting shall be determined by a majority of votes cast, except when a greater proportion is required by law, the Certificate of Incorporation, or these Bylaws. (h) Proxies. A person who is entitled to attend a stockholders' meeting, to vote thereat, and execute consents, waivers and releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of his rights by proxy or proxies appointed by a writing signed by such person, or by his duly authorized attorney, as provided by the laws of the State of Delaware. SECTION 2. Consent of Stockholders in Lieu of Meeting. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all the holders of outstanding stock entitled to vote thereon, except as the Certificate of Incorporation may otherwise provide. 2 3 SECTION 3. Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 or less than 10 days before the date of such meeting, or more than 60 days prior to any other action. If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. (3) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE II DIRECTORS SECTION 1. General Powers. The business, power, and authority of this Corporation shall be exercised, conducted, and controlled by the Board of Directors, except where the law, the Certificate of Incorporation, or these Bylaws require action to be authorized or taken by the stockholders. SECTION 2. Number, Classification, and Election of Directors. (a) Number. The Board of Directors shall consist of not less than 9 nor more than 16 members. The initial Board of Directors shall consist of 14 members. At any annual meeting, the stockholders by a vote of a majority of the votes entitled to be cast by the holders of all issued and outstanding shares, may increase or decrease the number of the members of the Board of Directors within the above limitation of 9 to 16 members, and may increase or decrease the number of directors of the class whose term shall expire in that year, provided that such class shall continue to consist of, as nearly as may be, one-third ( 1/3) of the whole number of the Board of Directors and in any case of not less than three members. If the Board of Directors determines prior to any annual meeting that an increase in the number of directors of the class whose term shall expire in that year would cause such class not to consist of, as nearly as may be, one-third ( 1/3) of the whole number of the Board of Directors, then the stockholders, by the vote specified in this Section 2(a), may increase by one (1) the number of directors of one (1) of the other classes, provided that such class shall continue to consist of, as nearly as may be, one-third ( 1/3) of the whole number of the Board of Directors. In addition, the Board of Directors may increase or decrease the number of the members of the Board of Directors within the above limitation of 9 to 16 members, and may increase or decrease the number of directors of any class, provided that such class shall continue to consist of, as nearly as may be, one-third ( 1/3) of the whole number of the Board of Directors. No reduction in the number of directors shall itself have the effect of shortening the term of any incumbent director. 3 4 (b) Classification. The directors shall be classified in respect of the time for which they shall hold office by dividing them into three classes, each class consisting, as nearly as may be, of one-third ( 1/3) of the whole number of the Board of Directors, but each class in any case to consist of not less than three members. (c) Election. The directors of the appropriate class shall be elected at the annual meeting of stockholders, or if not so elected, at a special meeting of stockholders called for that purpose. At any meeting of stockholders at which directors are to be elected, only persons nominated as candidates shall be eligible for election, and the candidates receiving the greatest number of votes entitled to be cast by the holders of all issued and outstanding shares shall be elected. Directors of the Corporation need not be residents of Delaware or stockholders. No person shall be appointed or elected a director of the Corporation unless: (1) such person is elected to fill a vacancy in the Board of Directors pursuant to section 3(d) of this Article II; (2) such person is nominated for election as a director of the Corporation by the Board of Directors or a committee thereof; or (3) in the case of a nomination to be made by a stockholder of the Corporation at an annual or special meeting of the stockholders, except in the case a nomination for which proxies are being solicited under applicable regulations of the Securities and Exchange Commission, or a nomination permitted by the affirmative vote of two-thirds ( 2/3) of the "whole board," but only if a majority of the members of the Board of Directors acting upon the matter are "continuing directors" (as these terms are defined in section (a) of Article Sixth of the Certificate of Incorporation), written notice of a stockholder's intent to make a nomination at a meeting of stockholders is filed with the Secretary of the Corporation not later than 10 days after the Notice to Stockholders for that meeting is sent to stockholders, or at least 21 days prior to the date fixed for holding the meeting at which the nomination is intended to be made, whichever is later. Such notice of intent to nominate must contain or be accompanied by the following information, which shall be accurate and current as of the date of such notice, or as of a date no earlier than 60 days prior to the meeting at which the nomination is intended to be made, whichever is later: (A) the name and residence of the stockholder of the Corporation who intends to make the nomination; (B) a representation that the stockholder is a holder of record of the voting shares of the Corporation and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) such information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to the Securities and Exchange Commission's proxy rules had the Board of Directors of the Corporation nominated or intended to nominate each nominee; (D) a description of all arrangements or understandings among the nominating stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; and (E) the consent of each nominee to serve as a director of the Corporation if so elected. SECTION 3. Term of Office of Directors. (a) Term. The term of office of each class of directors shall be three years (so that the term of one class of directors shall expire each year), and the directors shall hold office for the respective terms to which elected until their respective successors are elected and qualified, subject only to prior resignation, death or removal by the directors as provided by law, and subject to the provisions of the Certificate of Incorporation. (b) Removal. Other than as herein stated, no director may be removed from office except for cause. With prior notice thereof, all the directors, or all the directors of a particular class, or any individual director may be removed for cause by a vote of a majority of the votes entitled to be cast by the holders of all issued and outstanding shares at any meeting of stockholders properly called for that purpose. 4 5 (c) Resignation. Any director of the Corporation may resign at any time by giving written notice to the Chairman of the Board of Directors or to the President or the Secretary of the Corporation. A resignation from the Board of Directors shall be deemed to take effect immediately or at such other time as the director may specify. (d) Vacancy. If there shall be any vacancy in the Board of Directors for any reason, including but not limited to death, resignation, or as provided by law, the Certificate of Incorporation, or these Bylaws (including any increase in the authorized number of directors), the remaining directors shall constitute the Board of Directors until such vacancy is filled. The remaining directors may fill any vacancy in the Board for the unexpired term. SECTION 4. Meetings of Directors. (a) Meetings. Meetings of the Board of Directors may be held at any time upon call by the Chairman of the Board, or by the President, or by any Vice President, or by any two directors. Unless otherwise indicated in the notice thereof, any business may be transacted at any such meeting. (b) Place of Meeting. Any meeting of directors may be held at such place within or without the State of Delaware as may be designated in the notice of said meeting. (c) Notice of Meeting and Waiver of Notice. Notice of the time and place of any meeting of the Board of Directors and the waiver thereof shall be governed by such rules as the Board of Directors may prescribe. SECTION 5. Quorum and Voting. At any meeting of directors, not less than one-half ( 1/2) of the directors then in office (or, in the event that the directors then in office are an uneven number, the nearest full number of directors less than one-half ( 1/2) of such number) is necessary to constitute a quorum for such meeting, except that any meeting duly called, whether a quorum is present or otherwise, may, by vote of a majority of the directors present, be adjourned from time to time. At any meeting at which a quorum is present, all acts, questions and business which may come before the meeting shall be determined by a majority of votes cast by the directors present at such meeting, unless the vote of a greater number is required by the Certificate of Incorporation or Bylaws. SECTION 6. Action of Board of Directors Without a Meeting. Any action which may be authorized or taken at a meeting of the Board of Directors may be authorized or taken without a meeting if approved and authorized by a writing or writings, signed by all the directors, which are filed with the minutes of proceedings of the Board. SECTION 7. Compensation. The Board of Directors is authorized to fix a reasonable salary for directors or a reasonable fee for attendance at any meeting of the Board, the Executive and Finance Committee, or other committees appointed by the Board of Directors, or any combination of salary and attendance fee. In addition, directors may be reimbursed for any expenses incurred by them in traveling to and from such meetings. SECTION 8. Committees. (a) Appointment. The Board of Directors may from time to time, by resolution adopted by a majority of the whole Board, appoint one or more of its members to act as a committee or committees. Each such committee and each member thereof shall serve at the pleasure of the Board. Vacancies occurring in any such committee may be filled by the Board of Directors. (b) Executive and Finance Committee. In particular, the Board of Directors may create from its membership an Executive and Finance Committee, the members of which shall hold office during the pleasure of the Board of Directors, and may be removed at any time, with or without cause, by action thereof. During the intervals between meetings of the Board of Directors, the Executive and Finance Committee shall possess and may exercise all of the powers of the Board of Directors in the management and control of the 5 6 business of the Corporation to the extent permitted by law. All action taken by the Executive and Finance Committee shall be reported to the Board of Directors. (c) Committee Action. Unless otherwise provided by the Board of Directors, a majority of the members of any committee appointed by the Board of Directors pursuant to this section shall constitute a quorum at any meeting thereof and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of such committee. Action may also be taken by any such committee without a meeting by a writing or writings, signed by all its members, which is filed with the minutes of proceedings of the committee. Any such committee shall appoint one of its own number as Chairman (provided that the Chairman of the Board shall be the Chairman of the Executive and Finance Committee), who shall preside at all meetings and may appoint a Secretary (who need not be a member of the committee) who shall hold office during the pleasure of such committee. Meetings of any such committee may be held without notice of the time, place or purposes thereof and may be held at such times and places within or without the State of Delaware, as the committee may from time to time determine, at the call of the Chairman or any two members thereof. Any such committee may prescribe such other rules as it shall determine for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors. SECTION 9. Conference Telephone Meetings. One or more directors may participate in a meeting of the Board, or of a committee of the Board, by means of conference telephone or similar communications equipment enabling all persons participating in the meeting to hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting. ARTICLE III OFFICERS SECTION 1. General Provisions. The Board of Directors at such time as it determines may elect such executive officers, as defined in section 3(g), as the Board deems necessary. The Chairman of the Board shall be, but the other executive officers may, but need not, be chosen from the members of the Board. Any two or more executive offices may be held by the same person. Other officers may be appointed in the manner provided for in these Bylaws. The election or appointment of an officer for a given term, or a general provision in the Certificate of Incorporation or in the Bylaws with respect to term of office, shall not be deemed to create any contract rights. SECTION 2. Term of Office, Removal, and Vacancies. (a) Term. Each executive officer of the Corporation shall hold office during the pleasure of the Board of Directors and until his successor is elected and qualified, unless he sooner dies or resigns or is removed by the Board of Directors or the Chairman. (b) Removal. The Board of Directors by a majority vote of the members present at a meeting at which a quorum is present or the Chairman acting alone may remove any executive officer at any time, with or without cause. (c) Vacancies. Any vacancy in any executive office may be filled by the Board of Directors or by the Chairman. SECTION 3. Powers and Duties. (a) In general. All officers, as between themselves and the Corporation, shall respectively have such authority and perform such duties as are customarily incident to their respective offices, and as may be specified from time to time by the Board of Directors, regardless of whether such authority and duties are customarily incident to such office. In the absence of any officer of the Corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate from time to time the powers or duties of such officer, or any of them, to any other officer or to any Director. 6 7 (b) Chairman of the Board. The Chairman of the Board shall, subject to the provisions of these Bylaws, preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have general supervision over the Corporation's property, business, and affairs, and perform all the duties usually incident to such office, subject to the direction of the Board of Directors. He may execute all authorized deeds, mortgages, bonds, contracts, and other obligations in the name of the Corporation and shall have such other powers and duties as may be prescribed by the Board of Directors. (c) President. In the absence of the Chairman of the Board, and subject to the provisions of these Bylaws, the President shall preside at all meetings of the stockholders. The President shall be the chief operating officer of the Corporation and perform all the duties usually incident to such office, subject to the direction of the Board of Directors. He shall also perform such other powers and duties as may be prescribed by the Board of Directors. In case of the absence or disability of the Chairman of the Board, or when circumstances prevent the Chairman of the Board from acting, the President shall perform the duties of the Chairman of the Board, and in such case, may execute all authorized deeds, mortgages, bonds, contracts and other obligations, in the name of the Corporation. (d) Vice Presidents. The Vice Presidents shall have such powers, duties and titles as may be prescribed by the Board of Directors or as may be delegated by the Chairman of the Board or by the President. (e) Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and the Board of Directors. He shall keep such books as may be required by the Board of Directors, shall have charge of the seal, if any, of the Corporation and shall be permitted, subject to the provisions of these Bylaws, to give notices of stockholders' and directors' meetings required by law or by these Bylaws, or otherwise, and have such other powers and duties as may be prescribed by the Board of Directors or the Chairman of the Board. (f) Treasurer. The Treasurer shall receive and have charge of all money, bills, notes, bonds, stock in other corporations and similar property belonging to the Corporation, and shall do with the same as shall be ordered by the Board of Directors. He shall keep accurate financial accounts, and hold the same open for inspection and examination by the directors. On the expiration of his term of office, he shall turn over to his successors, or to the Board of Directors, all property, books, papers, and money of the Corporation in his hands, and shall possess such other powers and duties as may be prescribed by the Board of Directors or the Chairman of the Board. (g) Executive Officers. The officers referred to in subparagraphs (b), (c), (d), (e), and (f) of this section and such other officers as the Board of Directors may by resolution identify shall be executive officers of the Corporation and may be referred to as such. (h) Other Officers. The Assistant Secretaries, Assistant Treasurers, if any, and any other subordinate officers shall be appointed and removed by the executive officer at whose pleasure each shall serve and shall have such powers and duties as such executive officer may prescribe. SECTION 4. Compensation. The Board of Directors is authorized to determine or to provide the method of determining the compensation of all officers. ARTICLE IV SECURITIES HELD BY CORPORATION SECTION 1. Transfer of Securities Owned by the Corporation. All endorsements, assignments, transfers, share powers or other instruments of transfer of securities standing in the name of the Corporation shall be executed for and in the name of the Corporation by the Chairman of the Board, or by the President, or by any Vice President, or by the Secretary or Treasurer or by any additional person or persons as may be thereunto authorized by the Board of Directors. 7 8 SECTION 2. Voting Securities Held by the Corporation. The Chairman of the Board, or the President, or any Vice President, or the Secretary or Treasurer, in person or by another person thereunto authorized by the Board of Directors, in person or by proxy or proxies appointed by him, shall have full power and authority on behalf of the Corporation to vote, act and execute consents, waivers and releases with respect to any securities issued by other corporations which the Corporation may own. ARTICLE V SHARE CERTIFICATES SECTION 1. Transfer and Registration of Certificates. The Board of Directors shall have authority to make such rules and regulations, not inconsistent with law, the Certificate or these Bylaws, as it deems expedient concerning the issuance, transfer and registration of certificates for shares and the shares represented thereby. SECTION 2. Certificates for Shares. Each holder of shares is entitled to one or more certificates for shares of the Corporation in such form not inconsistent with law and the Certificate of Incorporation as shall be approved by the Board of Directors. Each such certificate shall be signed by the Chairman of the Board or the President or any Vice President, and by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer of the Corporation, which certificate shall certify the number and class of shares held by each stockholder in the Corporation, but no certificates for shares shall be executed or delivered until such shares are fully paid. Any of or all the signatures upon such certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, transfer agent or registrar, before the certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent or registrar at the date of its issue. SECTION 3. Transfer Agents, Registrars and Dividend Disbursing Agents. The Board of Directors may from time to time by resolution appoint one or more incorporated transfer agents and registrars (which may or may not be the same corporation) for the shares of the Corporation, and the Board of Directors from time to time by resolutions may appoint a dividend disbursing agent to disburse any and all dividends authorized by the Board of Directors payable upon the shares of the Corporation. SECTION 4. Transfers. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. No transfer shall be made which would be inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform Commercial Code--Investment Securities. SECTION 5. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares in place of any certificate or certificates heretofore issued by the Corporation alleged to have been lost, stolen or destroyed and upon the making of an affidavit of that fact by the person claiming the certificate of stock to have been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion, and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representatives, to attest the same in such manner as it shall require and to give the Corporation a bond in such sum and containing such terms as the Board may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, stolen, or destroyed. 8 9 SECTION 6. Protection of Corporation. The Corporation may treat a fiduciary as having capacity and authority to exercise all rights of ownership in respect to shares of record in the name of the decedent holder, person, firm or corporation in conservation, receivership or bankruptcy, minor, incompetent person, or person under disability, as the case may be, for whom he is acting, or a fiduciary acting as such, and the Corporation, its transfer agent and registrar, upon presentation of evidence of appointment of such fiduciary shall be under no duty to inquire as to the powers of such fiduciary and shall not be liable to any firm, person, or corporation for loss caused by any act done or omitted to be done by the Corporation or its transfer agent or registrar in reliance thereon. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER AUTHORIZED REPRESENTATIVES SECTION 1. Indemnification of Authorized Representatives in Third Party Proceedings. The Corporation shall indemnify any person who was or is an "authorized representative" of the Corporation (which shall mean for purposes of this Article a director or officer of the Corporation, or a person serving at the request of the Corporation as a director, officer, or trustee, of another corporation, partnership, joint venture, trust or other enterprise) and who was or is a "party" (which shall include for purposes of this Article the giving of testimony or similar involvement) or is threatened to be made a party to any "third party proceeding" (which shall mean for purposes of this Article any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the Corporation) by reason of the fact that such person was or is an authorized representative of the Corporation, against expenses (which shall include for purposes of this Article attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such third party proceeding if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal third party proceedings (which could or does lead to a criminal third party proceeding) had no reasonable cause to believe such conduct was unlawful. The termination of any third party proceeding by judgment, order, settlement, indictment, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the authorized representative did not act in good faith and in a manner which such person reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal third party proceeding, had reasonable cause to believe that such conduct was unlawful. SECTION 2. Indemnification of Authorized Representatives in Corporate Proceedings. The Corporation shall indemnify any person who was or is an authorized representative of the Corporation and who was or is a party or is threatened to be made a party to any "corporate proceeding" (which shall mean for purposes of this Article any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor or investigative proceeding by the Corporation) by reason of the fact that such person was or is an authorized representative of the Corporation, against expenses actually and reasonably incurred by such person in connection with the defense or settlement of such corporate action if such person acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such corporate proceeding was pending shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such authorized representative is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. Mandatory Indemnification of Authorized Representatives. To the extent that an authorized representative of the Corporation has been successful on the merits or otherwise in defense of any third party or corporate proceedings or in defense of any claim, issue or matter 9 10 therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith. SECTION 4. Determination of Entitlement to Indemnification. Any indemnification under section 1, 2, or 3 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the authorized representative is proper in the circumstances because such person has either met the applicable standard of conduct set forth in section 1 or 2 or has been successful on the merits or otherwise set forth in section 3 and that the amount requested has been actually and reasonably incurred. Such determination shall be made: (1) by the Board of Directors by a majority of a quorum consisting of directors who were not parties to such third party or corporate proceedings; or (2) if such a quorum is not obtainable, or, even if obtainable, a majority vote of such a quorum so directs, by independent legal counsel in a written opinion; or (3) by the stockholders. SECTION 5. Advancing Expenses. Expenses actually and reasonably incurred in defending a third party or corporate proceeding shall be paid on behalf of an authorized representative by the Corporation in advance of the final disposition of such third party or corporate proceedings upon receipt of an undertaking by or on behalf of the authorized representative to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article. SECTION 6. Employee Benefit Plans. For purposes of this Article, the Corporation shall be deemed to have requested an authorized representative to serve an employee benefit plan where the performance by such person of duties to the Corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on an authorized representative with respect to an employee benefit plan pursuant to applicable law shall be deemed "fines"; and action taken or omitted by such person with respect to an employee benefit plan in the performance of duties for a purpose reasonably believed to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Corporation. SECTION 7. Scope of Article. The indemnification of and advancement of expenses to authorized representatives, as authorized by this Article, shall (1) not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, agreement, vote of stockholders or disinterested directors or otherwise both as to action in an official capacity and as to action in other capacities, (2) continue as to a person who has ceased to be an authorized representative, and (3) inure to the benefit of the heirs, executors, and administrators of such person. SECTION 8. Reliance on Provisions. Each person who shall act as an authorized representative of the Corporation shall be deemed to be doing so in reliance upon rights of indemnification provided by this Article. 10 11 ARTICLE VII FISCAL YEAR The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and shall remain as fixed until changed by resolution of the Board from time to time. ARTICLE VIII CONSISTENCY WITH CERTIFICATE OF INCORPORATION If any provision of these Bylaws shall be inconsistent with the Corporation's Certificate of Incorporation (and as they may be amended from time to time), the Certificate of Incorporation (as so amended at the time) shall govern. ARTICLE IX AMENDMENTS Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended, or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. 11 EX-10.M 3 EXHIBIT 10.M 1 Exhibit 10(m) -1- FIRST AMENDMENT --------------- Dated as of December 5, 1994 to Override Agreement dated as of June 30, 1994 This First Amendment (the "First Amendment"), dated as of December 5, 1994, is made among Figgie International Inc. (the "Company"), a Delaware corporation, on behalf of itself and certain of its subsidiaries listed on Schedule I to the Agreement, Figgie Acceptance Corporation ("FAC"), on behalf of itself and the FAC Subsidiaries, the Override Agent, the FAC Collateral Agent, the Subject Lenders and the Subject Agents. W I T N E S S E T H : - - - - - - - - - - - WHEREAS, the parties hereto have entered into an Override Agreement, dated as of June 30, 1994 (as amended, the "Agreement"); and WHEREAS, subject to the terms and provisions hereof, the parties hereto desire to modify certain terms and conditions of the Agreement as more specifically set forth in this First Amendment; NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. CERTAIN DEFINITIONS. The following terms when used in this First 2 -2- Amendment shall have the following meanings: "FIRST AMENDMENT EFFECTIVE DATE" shall, subject to the occurrence of all of the conditions set forth in Article III of this First Amendment, be December 5, 1994. Section 1.02. OTHER DEFINITIONS. Terms for which meanings are provided in the Agreement are, unless otherwise defined herein or the context otherwise requires, used in this First Amendment with such meanings. ARTICLE II AMENDMENTS TO AGREEMENT Effective on (and subject to the occurrence of) the First Amendment Effective Date, the Agreement is hereby amended in accordance with Sections 2.01 through 2.02 below; except as so amended, the Agreement shall continue in full force and effect. Section 2.01. AMENDMENT TO SECTION 7.1 (RESTRICTIONS ON INDEBTEDNESS). (a) Section 7.1 is hereby amended by adding the following sentence to the end of paragraph (1): "Notwithstanding the foregoing, the Company may guarantee the performance of contracts by Logan Fenemac (U.K.) Limited entered into in the ordinary course of its business and not involving the extension of credit." (b) Section 7.1 of the Agreement is further amended by deleting "and" at the end of paragraph (k) and inserting the following additional paragraphs: "(m) Indebtedness of the Company and Interstate Electronics Corporation in connection with the issuance of bank guaranties or standby letters of credit in an aggregate face amount not exceeding (Subject to Confidential Treatment Request Filed with SEC) for the benefit of (Subject to Confidential Treatment Request Filed with SEC) to secure 3 -3- performance under contracts entered into in the ordinary course of its business; (n) Indebtedness of the Company and Automatic Sprinkler Corporation of America in connection with the issuance of bank guaranties or standby letters of credit in an aggregate face amount not exceeding (Subject to Confidential Treatment Request Filed with SEC) to secure performance under contracts entered into in the ordinary course of business; and (o) Indebtedness of the Company in connection with the issuance of a standby letter of credit in an aggregrate face amount not exceeding $2,400,000 (or, in the alternative, a holdback deposit in such amount) to secure performance under equipment leases permitted under Section 7.1(h)." Section 2.02. AMENDMENT TO SECTION 7.2 (RESTRICTION ON LIENS). (a) Section 7.2 is hereby amended by deleting "and" at the end of paragraph (xi) and adding the following new paragraphs: "(xiii) Liens on cash collateral securing Indebtedness permitted by Section 7.1 (m), (n) and (o), or directly securing the underlying obligations to the extent that such obligations would have been secured by the letters of credit or bank guaranties permitted thereby" ARTICLE III CONDITIONS TO EFFECTIVENESS AND AGREEMENT Section 3.01. EFFECTIVE DATE. This First Amendment shall be and become effective on 4 -4- the date when (i) it has been executed by the Instructing Lenders and (ii) all of the conditions set forth in Sections 3.01 and 3.06 of this First Amendment shall have been satisfied and thereafter this First Amendment shall be known, and may be referred to, as the First Amendment to the Override Agreement. Section 3.02. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Override Agent shall have received from the Company either (a) a copy, certified by a duly authorized officer of such Person to be true and complete on the First Amendment Effective Date, of each of (i) its charter or other constitutive documents as in effect on such date of certification, and (ii) its by-laws, if applicable, as in effect on such date or (b) a certificate by a duly authorized officer of the Company certifying that there has been no amendment to such charter or by-laws since June 30, 1994. Section 3.03. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by the Company of this First Amendment shall have been duly and effectively taken, and evidence thereof satisfactory to the Override Agent shall have been provided to the Override Agent. Section 3.04. INCUMBENCY CERTIFICATE. The Override Agent shall have received from the Company an incumbency certificate, dated as of the First Amendment Effective Date, signed by a duly authorized officer of the Company, and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of the Company, this First Amendment. Section 3.05. EXPENSES. The Company shall have paid to the Subject Lenders (or their representatives) all of such fees, expenses and disbursements incurred by the Subject Lenders referred to in Section 5.06 of this First Amendment. Section 3.06. SATISFACTORY LEGAL FORM. All of the instruments, documents and agreements executed in connection with this First Amendment shall be satisfactory in form and substance to the Override Agent, its counsel and counsel to the Subject Lenders as a group; the Override Agent and its counsel and counsel to the Subject Lenders as a group shall have received all information, and such counterpart originals or such certified or other copies of such materials as the Override Agent, its counsel and counsel to the Subject Lenders as a group may reasonably request; and all legal matters incident 5 -5- to the transactions contemplated by this First Amendment shall be reasonably satisfactory to counsel to the Override Agent and counsel to the Subject Lenders as a group. ARTICLE IV REPRESENTATIONS AND WARRANTIES Each of the Company and FAC represents and warrants as follows: Section 4.01. NO DEFAULT. As of the date hereof, there exists no Event of Default under the Agreement, and no event which, with the giving of notice or lapse of time, or both, would constitute such an Event of Default. Section 4.02. AUTHORIZATION. Each of the Company and FAC has the power to execute, deliver and perform this First Amendment. Each of the Company and FAC has taken all necessary action to authorize the execution, delivery and performance of this First Amendment. No consent or approval of any person, no consent or approval of any landlord or mortgagee, no waiver of any Lien or right of distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is required in connection with the execution, delivery or performance by any of the Subject Companies, or the validity or enforcement of this First Amendment. Section 4.03. NO CONFLICT. The execution, delivery and performance of this First Amendment by each of the Subject Companies will not violate any provision of law and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or the certificate of incorporation or by-laws of any Subject Company, or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which any Subject Company is a party, or by which any of them is bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of any Subject Company. 6 -6- Section 4.04. ENFORCEABILITY. This First Amendment has been duly executed and delivered by each of the Company and FAC, and constitutes the valid and legally binding obligations of each of the Subject Companies, enforceable in accordance with their terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. Section 4.05. DISCLOSURE. No certificate, opinion, or any other statement made or furnished to the Override Agent or the Subject Lenders by or on behalf of any Subject Company in connection with this First Amendment, or the transactions contemplated herein, contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. ARTICLE V MISCELLANEOUS Section 5.01. RATIFICATION. The Agreement, as amended by this First Amendment, is in all respects ratified and confirmed, and the terms and conditions thereof, amended as hereinabove set forth, shall be and remain in full force and effect. Except as specifically amended herein, the Agreement remains in full force and effect in accordance with its respective terms. Section 5.02. CROSS-REFERENCES. References in this First Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this First Amendment. Section 5.03. SUCCESSORS AND ASSIGN. This First Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 5.04. GOVERNING LAW. This First Amendment shall be governed by and construed in accordance with the laws of the State of New York and shall for all purposes be construed in accordance with and governed by the internal laws of said state, without regards to conflicts of laws principles. 7 -7- Section 5.05. COUNTERPARTS. This First Amendment may be executed by the parties hereto in several counterparts, each or which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Section 5.06. EXPENSES. Without limitation on Section 12.2 of the Agreement, the Company hereby agrees, whether or not the transactions hereby contemplated shall be consummated, to pay, indemnify and save each of the Override Agent and the Subject Lenders harmless against liability for the payment of all reasonable out-of-pocket expenses arising in connection with this First Amendment and the other agreements and instruments and the transactions hereby contemplated, including without limitation the consideration of any legal questions relevant thereto, all expenses incurred in connection with reproduction of such agreements and instruments and all stamp and other similar taxes (together in each case with interest and penalties, if any) which may be payable in respect of the execution and delivery of such agreements or instruments, or otherwise pursuant to this First Amendment, and the reasonable fees and disbursements of counsel to the Override Agent and counsel to the Subject Lenders as a group in connection with the negotiation, review preparation, administration, interpretation, production and execution of such agreements and instruments and the transactions hereby and thereby contemplated. The obligations and the Company under this Section shall survive the payment or transfer of any obligations, the enforcement of any provision hereof or thereof, any such amendments or waivers and any such consideration of legal questions. Without limiting the generality of the foregoing paragraph or the Company's obligations under Section 12.2 of the Agreement, the Company hereby agrees to pay in full on the First Amendment Effective Date all such fees, expenses and disbursements of counsel to the Override Agent and counsel to the Subject Lenders as a group incurred in connection with the transactions contemplated hereby as may be stated to be due and payable to such counsel in any statement therefor rendered to the Company by such counsel on or prior to the First Amendment Effective Date, such payment to be made by wire transfer of immediately available funds to an account designated by such counsel for such purpose, and further agrees to pay in full promptly upon receipt of any statement therefor all such additional fees, expenses and disbursements of such counsel as may be incurred by or invoiced to such counsel after the First Amendment Effective Date in connection with the transactions contemplated hereby or arising in connection 8 -8- with the negotiation, preparation, production, reproduction and execution of documents in connection with a proposed restructuring of the indebtedness evidenced by the Agreement, as amended by this First Amendment. Section 5.07. EFFECTIVENESS. The effectiveness of the amendments set forth in Article II of this First Amendment shall be effective as of the First Amendment Effective Date. 9 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. FIGGIE INTERNATIONAL INC. By:_________________________ Name:___________________ Title:__________________ FIGGIE ACCEPTANCE CORPORATION By:_________________________ Name:___________________ Title:__________________ Executed solely to acknowledge the amendments to the Agreement contained in this First Amendment: FIGGIE INTERNATIONAL INC. STOCK OWNERSHIP TRUST AND PLAN By:__________________________ Name:____________________ Title:___________________ 10 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. THE FIRST NATIONAL BANK OF BOSTON, individually and as Override Agent By:_________________________ Name:___________________ Title:__________________ 11 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. THE SANWA BANK, LIMITED, Chicago Branch By:_________________________ Name:___________________ Title:__________________ 12 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. BANQUE NATIONALE de PARIS, Chicago Branch By:_________________________ Name:___________________ Title:__________________ 13 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. THE FIFTH THIRD BANK By:_________________________ Name:___________________ Title:__________________ 14 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED By:________________________ Name:__________________ Title:_________________ 15 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. BANCA NAZIONALE DEL LAVORO, S.p.A. By:_________________________ Name:___________________ Title:__________________ 16 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. ISTITUTO BANCARIO SAN PAOLO di TORINO S.p.A., New York Branch By:_________________________ Name:___________________ Title:__________________ 17 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. SWISS BANK CORPORATION, New York Branch, individually and as FAC Collateral Agent By:_________________________ Name:___________________ Title:__________________ By:_________________________ Name:___________________ Title:__________________ 18 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. DRESDNER BANK AG, New York and Grand Cayman Branches By:_________________________ Name:___________________ Title:__________________ By:_________________________ Name:___________________ Title:__________________ 19 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. NATIONAL CITY BANK, CLEVELAND By:_________________________ Name:___________________ Title:__________________ 20 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. BARCLAYS BANK PLC By:_________________________ Name:___________________ Title:__________________ 21 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. CHEMICAL BANK By:_________________________ Name:___________________ Title:__________________ 22 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. BANK OF AMERICA ILLINOIS By:__________________________ Name:_____________________ Title:____________________ 23 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. MELLON BANK, N.A. By:_________________________ Name:___________________ Title:__________________ 24 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. THE PROVIDENT BANK By:_________________________ Name:___________________ Title:__________________ 25 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:_________________________ Name:___________________ Title:__________________ 26 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. THE LONG-TERM CREDIT BANK OF JAPAN, LTD., Chicago Branch By:_________________________ Name:___________________ Title:__________________ 27 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. SOCIETY NATIONAL BANK By:_________________________ Name:___________________ Title:__________________ 28 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. ABN AMRO BANK N.V. By:_________________________ Name:___________________ Title:__________________ 29 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. SOCIETE GENERALE BANK By:_________________________ Name:___________________ Title:__________________ 30 -1- IN WITNESS WHEREOF, the undersigned have duly executed this First Amendment as a sealed instrument as of the date first set forth above. PEARL STREET L.P. By:_________________________ Name:___________________ Title:__________________ EX-10.N 4 EXHIBIT 10.N 1 Exhibit 10(n) -1- SECOND AMENDMENT ---------------- Dated as of March 31, 1995 to Override Agreement dated as of June 30, 1994 This Second Amendment (the "Second Amendment"), dated as of March 31, 1995, is made among Figgie International Inc. (the "Company"), a Delaware corporation, on behalf of itself and certain of its subsidiaries listed on Schedule I to the Agreement, Figgie Acceptance Corporation ("FAC"), on behalf of itself and the FAC Subsidiaries, the Override Agent, the FAC Collateral Agent, the Subject Lenders and the Subject Agents. W I T N E S S E T H : - - - - - - - - - - - WHEREAS, the parties hereto have entered into an Override Agreement, dated as of June 30, 1994 (as amended, the "Agreement"); and WHEREAS, subject to the terms and provisions hereof, the parties hereto desire to modify certain terms and conditions of the Agreement as more specifically set forth in this Second Amendment; NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. CERTAIN DEFINITIONS. The following term when used in this Second Amendment 2 -2- and the Agreement shall have the following meaning: SECOND AMENDMENT EFFECTIVE DATE shall, subject to the occurrence of all of the conditions set forth in Article III of this Second Amendment, be March 31, 1995. Section 1.02. OTHER DEFINITIONS. Terms for which meanings are provided in the Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Second Amendment with such meanings. ARTICLE II AMENDMENTS TO AGREEMENT Effective on the Second Amendment Effective Date, the Agreement is hereby amended in accordance with Section Section 2.01 through 2.15 below; except as so amended, the Agreement shall continue in full force and effect. Section 2.01. Amendment to Section 1.1 (DEFINITIONS). Section 1.1 is amended by amending the following defined terms as set forth below: ADJUSTED OPERATING CASH FLOW and ADJUSTED OPERATING CASH FLOW FOR CONTINUING OPERATIONS shall be deleted and replaced by the following term: OPERATING CASH FLOW. For any fiscal period, an amount equal to the cash flow of the Continuing Operations adjusted for (i) the charges or credits in that period on their books for debt service, intercompany cost of money and pension charges, and (ii) the charges or credits pertaining to their business in that period on the corporate books for accruals, valuation, and bonuses all as more fully described in and consistent with the Business Plan. BUSINESS PLAN. The divestiture plan delivered to the Subject Lenders at the February 28, 1995 Subject Lender meeting, the Business Plan 1995-1997 dated February 8, 1995 and the 1995 Business Plan - Continuing Divisions dated February 27, 1995. CAPITAL EXPENDITURES. Expenditures made or indebtedness incurred by the Company or any of its Subsidiaries in connection with the purchase or lease by the Company or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such person in accordance with GAAP. CONSOLIDATED TANGIBLE NET WORTH shall be replaced by the following term: CONSOLIDATED NET WORTH. The excess of Consolidated Total Assets over Consolidated Total Liabilities. 3 -3- CONTINUING OPERATIONS. The following divisions or Subsidiaries of the Company: Interstate Electronics, Snorkel Economy, Scott Aviation and Taylor Environmental Instruments. DISCONTINUED OPERATIONS. All operating divisions or Subsidiaries of the Company except Interstate Electronics, Snorkel Economy, Scott Aviation and Taylor Environmental Instruments. DIVESTITURE PLAN. The Company's plan to sell the assets or capital stock of all operating divisions or Subsidiaries of the Company except Interstate Electronics, Snorkel Economy, Scott Aviation and Taylor Environmental Instruments. EXPIRATION DATE. January 1, 1996. Section 2.02. AMENDMENT TO SECTION 2.4 (MATURITY - LETTERS OF CREDIT). Section 2.4(a) is amended by deleting from clause (ii) of the first sentence thereof the phrase "use its best efforts to" and adding the following new sentence after the end of the first sentence: The issuer of any backup letter of credit must be approved by the Subject Lender which is to be the beneficiary thereof, such approval not to be unreasonably withheld. Section 2.03. AMENDMENT TO SECTION 2.5. (INTEREST AND FEES). (a) Section 2.5(a) is amended by deleting clauses (i) and (ii) and replacing them with the following: (i) from and after March 31, 1995, the entire Accrual Rate shall be paid monthly in arrears on the first business day of the succeeding calendar month and on the Override Termination Date, and (ii) interest accrued at the rate of 2% per annum on all Subject Facility Outstandings from June 30, 1994 through March 31, 1995 shall be due and payable on the Second Amendment Effective Date. (b) Section 2.5(c) is amended by adding the following sentence to the end thereof: In the event that any undrawn standby letter of credit is terminated prior to its stated expiration date, the issuer shall refund to the Company any portion of the two percent (2%) per annum fee which has been collected but is attributable to that period of time from the early termination date through the stated expiration date. 4 -4- Section 2.04. AMENDMENT TO SECTION 3.3 (LETTERS OF CREDIT). (a) Section 3.3 is amended by adding to the fourth line from the end thereof after the word "liability" the phrase "or such other ordinary business purpose as is acceptable to the issuer". (b) Section 3.3 is further amended by adding the following new paragraphs (c) and (d) to the end thereof: (c) After all of the Subject Facility Outstandings owing to a Subject Lender have been paid in full, the Company will use its reasonable best efforts to cause any Contingent Amount Subject Facilities provided by such Subject Lender to be transferred to another Subject Lender or replaced by an Excluded Facility. At the time of any transfer or replacement, any cash collateral held in connection with any such Contingent Amount Subject Facility shall be transferred to any Subject Lender to which the Contingent Amount Subject Facility has been transferred and shall be applied to such Subject Lender's Subject Facility Outstandings. If no Subject Lender has agreed to provide a replacement facility, and so long as no Event of Default has occurred and is continuing, any cash collateral held in connection with any such Contingent Amount Subject Facility shall be transferred at the Company's election to the provider of a replacement Excluded Facility. The incurrence of indebtedness and the liens on cash collateral contemplated under this Section 3.3 shall be permitted under Section Section 7.1 and 7.2. (d) Any Subject Lender which provides a Contingent Amount Subject Facility may agree with any other Subject Lender to grant participations in its Contingent Amount Subject Facility and standby letters of credit issued thereunder to any other Subject Lender, and may agree to transfer cash collateral held to secure any standby letter of credit to such participating Subject Lender, which cash collateral shall then be applied to such Subject Lender's Subject Facility Outstandings. Nothing contained in this Section 3.3 shall detract from the Company's obligation to replace any standby letter of credit outstanding under any Contingent Amount Subject Facility on the Override Termination Date. Section 2.05. AMENDMENT TO SECTION 6.18 (1995 FINANCIAL COVENANTS). For all periods from and after January 1, 1995, Section 6.18 is amended by deleting the entire section and replacing it with the following: 6.18 FINANCIAL COVENANTS. The Company shall comply with the financial covenants set forth below: 5 -5- (a) The Company will not make, or permit any Subsidiary of the Company to make, on or after January 1, 1995, Capital Expenditures for Continuing Operations on a cumulative basis in excess of: (Subject to Confidential Treatment Request Filed with SEC) (b) The Company will not permit cumulative Operating Cash Flow, for the period beginning January 1, 1995 and ending as of the dates set forth in the table below, to be less than the amount set forth opposite such date in such table: DATE AMOUNT (Subject to Confidential Treatment Request Filed with SEC) (c) The Company will not permit Consolidated Net Worth as of the dates in the table set forth below to be less than the amounts opposite such dates in such table: DATE AMOUNT (Subject to Confidential Treatment Request Filed with SEC) Section 2.06. WAIVER AND AMENDMENT OF SECTION 6.18 (1994 FINANCIAL COVENANTS) For 1994, the Subject Lenders permanently waive (a) compliance with Section 6.18(a) of the Agreement for all periods through December 31, 1994 so long as Capital Expenditures for the twelve months ended December 31, 1994 did not exceed $60,500,000, (b) compliance with Section 6.18(b) of the Agreement for all periods through December 31, 1994 so long as Operating Cash Flow for the twelve months ended December 31, 1994 was not less than $34,861,000, (c) compliance with Section 6.18(c) of the Agreement at all times through December 31, 1994 so long as Consolidated Net Worth as of December 31, 1994 was not less than $65,000,000 and (d) any Potential Event of Default or Event of Default under Section 8.1(c) of the Agreement which arose as a result of noncompliance waived pursuant to clauses (a), (b) or (c) of this paragraph. The Subject Lenders also waive the requirement contained in Section 6.14(c) that an Auditor's statement be delivered in connection with the financial statements for the Company's fiscal year ended December 31, 1994. Section 2.07. AMENDMENTS TO SECTION 6.19 (AMORTIZATION). (a) Section 6.19(a) is amended by deleting the table therein and replacing it with the following table: 6 -6-
DATE AMOUNT ---- ------ Effective Date $ 5,000,000 September 30, 1994 $70,000,000 December 31, 1994 $20,000,000 March 31, 1995 $25,000,000
(Subject to Confidential Treatment Request Filed with SEC) Expiration Date Remaining Total Subject Facility Maximum Exposure (b) Section 6.19(a) is further amended by adding the following sentence to the end thereof: Payments made with respect to a Subject Facility pursuant to Section 9.5 and payments made to the FAC Subject Lenders pursuant to Section 19.5 on or after January 1, 1995 shall also be credited towards the payments set forth in this Section 6.19 in the order of their maturity. Section 2.08. AMENDMENT TO SECTION 7.1 (RESTRICTIONS ON INDEBTEDNESS). Section 7.1 of the Agreement is amended by deleting "and" at the end of paragraph (n) and adding the following new paragraphs (p) and (q) to the end thereof: (p) Indebtedness in respect of performance bonds obtained in the ordinary course of business; and (q) Indebtedness not in excess of $5,000,000 in the aggregate outstanding at any time in respect of letters of credit obtained in the ordinary course of business. Section 2.09. AMENDMENT TO SECTION 7.2. (RESTRICTIONS ON LIENS). Section 7.2 of the Agreement is amended by deleting "and" at the end of paragraph (xii) and adding the following new paragraphs (xiv) and (xv) to the end thereof: (xiv) liens on cash collateral in an aggregate amount not exceeding $2,000,000 at any time securing Indebtedness permitted under Section 7.1(p) so long as the amount of cash collateral does not exceed 105% of the obligations secured; and 7 -7- (xv) liens on cash collateral in an aggregate amount not exceeding $2,000,000 at any time securing Indebtedness permitted under Section 7.1(q) so long as the amount of cash collateral does not exceed 105% of the obligations secured. Section 2.10. AMENDMENT TO SECTION 8.1 (EVENTS OF DEFAULT). Section 8.1(c)(i) is amended by adding the following provision to the end thereof: PROVIDED, HOWEVER that failure to comply with any of the covenants contained in Section 6.18 shall not constitute an Event of Default until the Override Agent has, at the request of the Instructing Lenders, given notice of the declaration of an Event of Default to the Company; Section 2.11. AMENDMENT TO SECTION 9.1 (NOTIFICATION). Section 9.1(c) is amended by deleting "or Potential Event of Default" from clause (i) thereof. Section 2.12. AMENDMENT TO SECTION 11 (ACCRUED FEE). (a) Section 11 is amended by deleting the last sentence thereof and replacing it with the following: The second installment in an amount equal to two and one quarter percent (2-1/4%) of the Total Subject Facility Maximum Exposure as of the Relevant Time shall be payable in three payments, as follows: $1,000,000 on April 28, 1995 $2,000,000 on May 31, 1995 Remainder on June 30, 1995 (b) Section 11 of the Agreement is further amended by designating the existing paragraph as "(a)" and adding the following new paragraphs (b) and (c): (b) In addition to any other amounts payable by the Company hereunder, the Company agrees to pay to the Override Agent on July 3, 1995 for distribution to the Subject 8 -8- Lenders on a pro rata basis in accordance with the Subject Lender Maximum Exposure of each Subject Lender in relation to the Total Subject Facility Maximum Exposure, in each case as of June 30, 1995, an extension fee equal to one half of one percent (1/2%) of the Total Subject Facility Maximum Exposure (whether or not such exposure is secured by cash collateral) as of June 30, 1995; and (c) In addition to any other amounts payable by the Company hereunder, the Company agrees to pay to the Override Agent on November 1, 1995 for distribution to the Subject Lenders on a pro rata basis in accordance with the Subject Lender Maximum Exposure of each Subject Lender in relation to the Total Subject Facility Maximum Exposure, in each case as of October 31, 1995, an extension fee equal to one half of one percent (1/2%) of the Total Subject Facility Maximum Exposure (whether or not such exposure is secured by cash collateral) as of October 31, 1995. Section 2.13. AMENDMENT TO SECTION 12 (AGENTS' FEES). Section 12.1 is amended by deleting the date "June 30, 1995" and replacing it with the phrase "the Expiration Date". Section 2.14. AMENDMENT TO SECTION 19 (FAC).The Company, FAC and the FAC Subject Lenders hereby agree to amend Section 19 of the Agreement and the definitions related thereto as follows: (a) ELIMINATION OF FAC EXCESS CASH FLOW CALCULATION. Notwithstanding the provisions of Section 19.3, FAC shall not be required to calculate, or deliver reports with respect to, FAC Excess Cash Flow for the period April 1, 1995 through December 31, 1995. (b) Section 19.3(k) is amended to read in full as follows: (k) BEST EFFORTS TO LIQUIDATE. Use its best efforts to liquidate on or before May 31, 1995 the FAC Collateral and any other assets owned by FAC or a FAC Subsidiary as set forth in and in accordance with the FAC Accelerated Disposition of Assets Schedule dated February 28, 1995, and attached hereto as Schedule XXVII (the "Asset Disposition Schedule"). (c) Section 19.5 is amended to read in full as follows: 19.5 CASH DISTRIBUTIONS TO FAC SUBJECT LENDERS. (a) CALCULATION OF PROCEEDS FROM THE DISPOSITION OF FAC ASSETS. As soon as possible upon the closing of any disposition of a FAC asset and, in any event, within three business days after the closing date, FAC shall calculate the amount of net proceeds (the "FAC Net Proceeds") received by FAC as a result of the disposition of any FAC asset. For 9 -9- purposes of this Part 19, the FAC Net Proceeds from the disposition of any FAC asset shall mean (i) the cash consideration due with respect to any FAC asset disposition, including when received in cash, any cash proceeds paid under any deferred payout, earnout, installment or similar arrangement less (ii) all reasonable, direct fees, expenses or costs paid or payable in connection with such disposition, including any brokers' fees, sales commissions, legal or other professional fees paid or payable to third parties, but excluding any amounts paid or payable to the Company, Figgie Leasing Corporation or FAC, including without limitation, any amounts for intercompany services provided by or to FAC or any amounts reserved for taxes other than ordinary and necessary transfer or similar taxes. A copy of the calculation of FAC Net Proceeds shall be sent by FAC to each FAC Subject Lender within three business days after the closing of the FAC asset disposition. Within thirty days after the closing of the disposition of any FAC asset, FAC shall provide the FAC Collateral Agent with a closing book containing copies of the relevant documents with respect to the disposition, together with copies of any other offers made with respect to the FAC asset. In the event any FAC Subject Lender does not agree with the calculation of the FAC Net Proceeds, the FAC Collateral Agent and FAC shall attempt in good faith to resolve any such disagreement. Upon resolution of the dispute, FAC shall remit any additional amount due the FAC Subject Lenders on the next business day after resolution of the dispute. (b) PAYMENT OF FAC NET PROCEEDS. FAC shall pay to the FAC Collateral Agent for distribution to the FAC Subject Lenders, an amount equal to the FAC Net Proceeds from the disposition of any FAC asset within three business days after the closing of any such disposition. In the event any FAC asset set forth on the Asset Disposition Schedule is sold prior to the Second Amendment Effective Date, FAC shall pay the FAC Net Proceeds related thereto to the FAC Collateral Agent within three business days after the Second Amendment Effective Date. In such event, the FAC Net Proceeds related thereto shall be calculated as if this Second Amendment had been in effect on the closing date of the sale, and FAC Excess Cash Flow for the period January 1, 1995 through March 31, 1995 shall be calculated as if the sale had closed on April 1, 1995. (c) METHOD OF PAYMENT. All payments by FAC to the FAC Subject Lenders shall be made by wire transfer to the FAC Collateral Agent for the account of the FAC Subject Lenders not later than 12:00 noon (New York time) on the date when due in dollars in immediately available funds at the office of the FAC Collateral Agent located at 10 East 50th Street, New York, New York 10022, or such other office as the FAC Collateral Agent may hereafter designate in writing. Whenever any payment due hereunder is stated to be due on a day which is not a business day for the FAC Collateral Agent, the due date shall be extended to the next succeeding business day for the FAC Collateral Agent. 10 -10- (d) DISTRIBUTION TO FAC SUBJECT LENDERS. Any amounts payable under Section 19.5 hereof to the FAC Collateral Agent shall be held and distributed by the FAC Collateral Agent pursuant to the FAC Intercreditor Agreement. (e) NO PAYMENTS TO THE COMPANY. FAC and the Company agree that FAC shall not be charged, or pay, any fees or other amounts for intercompany services or with respect to any net Intercompany Debt Increase. (d) Section 19 is amended by adding the following new Section 19.8. 19.8 COMPLETION OF ACCELERATED DISPOSITION FAC OF ASSETS. Upon completion of the disposition of all of the FAC assets and the payment of the FAC Net Proceeds in accordance with Part 19, the FAC Collateral Agent and the FAC Subject Lenders shall promptly release and cancel all security interests and other encumbrances against FAC, and otherwise fully cooperate with the Company and FAC as necessary or appropriate in order for the Company to wind up FAC's operations. Section 2.15. AMENDMENT TO EXHIBIT A (COMPLIANCE CERTIFICATE). Exhibit A to the Agreement is amended by deleting the Compliance Certificate Worksheet attached thereto and substituting therefor a Compliance Certificate Worksheet in a form to be submitted by the Company and approved by the Override Agent. ARTICLE III CONDITIONS TO EFFECTIVENESS AND AGREEMENT Section 3.01. EFFECTIVE DATE. This Second Amendment shall become effective on the date when (i) it has been executed by each of the Subject Lenders and (ii) all of the conditions set forth in Sections 3.01 and 3.07 of this Second Amendment shall have been satisfied. Section 3.02. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Override Agent shall have received from the Company either (a) a copy, certified by a duly authorized officer of such Person to be true and complete as of the Second Amendment Effective Date, of each of (i) its charter or other constitutive documents as in effect on such date of certification, and (ii) its by-laws, if applicable, as in effect on such date or (b) a certificate by a duly authorized officer of the Company certifying that there has been no material amendment to such charter or by-laws since June 30, 1994. 11 -11- Section 3.03. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by the Company of this Second Amendment shall have been duly and effectively taken, and evidence thereof satisfactory to the Override Agent shall have been provided to the Override Agent. Section 3.04. INCUMBENCY CERTIFICATE. The Override Agent shall have received from the Company an incumbency certificate, dated as of the Second Amendment Effective Date, signed by a duly authorized officer of the Company, and giving the name and bearing a specimen signature of each individual who shall be authorized to sign, in the name and on behalf of the Company, this Second Amendment. Section 3.05. LEGAL OPINION. The Override Agent shall have received a legal opinion from the General Counsel to the Company addressed to the Subject Lenders, the Override Agent and the FAC Collateral Agent in form and substance satisfactory to the Override Agent. Section 3.06. EXPENSES. The Company shall have paid to the Subject Lenders (or their representatives) all of such fees, expenses and disbursements incurred by the Subject Lenders referred to in Section 5.06 of this Second Amendment. Section 3.07. SATISFACTORY LEGAL FORM. All of the instruments, documents and agreements executed in connection with this Second Amendment shall be satisfactory in form and substance to the Override Agent, its counsel and counsel to the Subject Lenders as a group; the Override Agent and its counsel and counsel to the Subject Lenders as a group shall have received all information, and such counterpart originals or such certified or other copies of such materials as the Override Agent, its counsel and counsel to the Subject Lenders as a group may reasonably request; and all legal matters incident to the transactions contemplated by this Second Amendment shall be reasonably satisfactory to counsel to the Override Agent and counsel to the Subject Lenders as a group. ARTICLE IV REPRESENTATIONS AND WARRANTIES Each of the Company and FAC represents and warrants as follows: Section 4.01. NO DEFAULT. As of the date hereof and upon the effectiveness of this Second Amendment, there exists no Event of Default under the Agreement, and no event which, with the giving of notice or lapse of time, or both, would constitute such an Event of Default. Section 4.02. AUTHORIZATION. Each of the Company and FAC has the power to execute, 12 -12- deliver and perform this Second Amendment. Each of the Company and FAC has taken all necessary action to authorize the execution, delivery and performance of this Second Amendment. No consent or approval of any person, no consent or approval of any landlord or mortgagee, no waiver of any Lien or right of distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is required in connection with the execution, delivery or performance by any of the Subject Companies, or the validity or enforcement of this Second Amendment. Section 4.03. NO CONFLICT. The execution, delivery and performance of this Second Amendment by each of the Subject Companies will not violate any provision of law and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, or the certificate of incorporation or by-laws of any Subject Company, or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, bond, note or indenture to which any Subject Company is a party, or by which any of them is bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of any Subject Company. Section 4.04. ENFORCEABILITY. This Second Amendment has been duly executed and delivered by each of the Company and FAC, and constitutes the valid and legally binding obligations of each of the Subject Companies, enforceable in accordance with their terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally and except that the remedy of specific performance and other equitable remedies are subject to judicial discretion. Section 4.05. DISCLOSURE. No certificate, opinion, or any other statement made or furnished to the Override Agent or the Subject Lenders by or on behalf of any Subject Company in connection with this Second Amendment, or the transactions contemplated herein, contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. ARTICLE V MISCELLANEOUS Section 5.01. RATIFICATION. The Agreement, as amended by this Second Amendment, is in all respects ratified and confirmed, and the terms and conditions thereof, amended as hereinabove set forth, shall be and remain in full force and effect. Except as specifically amended herein, the Agreement remains in full force and effect in accordance with its 13 -13- respective terms. Section 5.02. CROSS-REFERENCES. References in this Second Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this Second Amendment. Section 5.03. SUCCESSORS AND ASSIGN. This Second Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 5.04. GOVERNING LAW. This Second Amendment shall be governed by and construed in accordance with the laws of the State of New York and shall for all purposes be construed in accordance with and governed by the internal laws of said state, without regards to conflicts of laws principles. Section 5.05. COUNTERPARTS. This Second Amendment may be executed by the parties hereto in several counterparts, each or which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Section 5.06. EXPENSES. Without limitation on Section 12.2 of the Agreement, the Company hereby agrees, whether or not the transactions hereby contemplated shall be consummated, to pay, indemnify and save each of the Override Agent and the Subject Lenders harmless against liability for the payment of all reasonable out-of-pocket expenses arising in connection with this Second Amendment and the other agreements and instruments and the transactions hereby contemplated, including without limitation the consideration of any legal questions relevant thereto, all expenses incurred in connection with reproduction of such agreements and instruments and all stamp and other similar taxes (together in each case with interest and penalties, if any) which may be payable in respect of the execution and delivery of such agreements or instruments, or otherwise pursuant to this Second Amendment, and the reasonable fees and disbursements of counsel to the Override Agent, the FAC Collateral Agent and counsel to the Subject Lenders as a group in connection with the negotiation, review preparation, administration, interpretation, production and execution of such agreements and instruments and the transactions hereby and thereby contemplated. The obligations and the Company under this Section shall survive the payment or transfer of any obligations, the enforcement of any provision hereof or thereof, any such amendments or waivers and any such consideration of legal questions. Without limiting the generality of the foregoing paragraph or the Company's obligations under Section 12.2 of the Agreement, the Company hereby agrees to pay in full on the Second Amendment Effective Date all such fees, expenses and disbursements of counsel to the Override Agent and counsel to the Subject Lenders as a group incurred in connection with the transactions contemplated hereby as may be stated to be due and payable to such counsel 14 -14- in any statement therefor rendered to the Company by such counsel on or prior to the Second Amendment Effective Date, and further agrees to pay in full promptly upon receipt of any statement therefor all such additional fees, expenses and disbursements of such counsel as may be incurred by or invoiced to such counsel after the Second Amendment Effective Date in connection with the transactions contemplated hereby or arising in connection with the negotiation, preparation, production, reproduction and execution of documents in connection with a proposed restructuring of the indebtedness evidenced by the Agreement, as amended by this Second Amendment. Section 5.07. EFFECTIVENESS. The effectiveness of the amendments set forth in Article II of this Second Amendment shall be effective as of the Second Amendment Effective Date. 15 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. FIGGIE INTERNATIONAL INC. By:_________________________ Name:___________________ Title:__________________ FIGGIE ACCEPTANCE CORPORATION By:_________________________ Name:___________________ Title:__________________ Executed solely to acknowledge the amendments to the Agreement contained in this Second Amendment: FIGGIE INTERNATIONAL INC. STOCK OWNERSHIP TRUST AND PLAN By:__________________________ Name:_____________________ Title:______________________ 16 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. THE FIRST NATIONAL BANK OF BOSTON, individually and as Override Agent By:_________________________ Name:___________________ Title:__________________ 17 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. THE SANWA BANK, LIMITED, Chicago Branch By:_________________________ Name:___________________ Title:__________________ 18 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. BANQUE NATIONALE de PARIS, Chicago Branch By:_________________________ Name:___________________ Title:__________________ 19 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. THE FIFTH THIRD BANK By:_________________________ Name:___________________ Title:__________________ 20 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED By:________________________ Name:__________________ Title:_________________ 21 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. BANCA NAZIONALE DEL LAVORO, S.p.A. By:_________________________ Name:___________________ Title:__________________ 22 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. ISTITUTO BANCARIO SAN PAOLO di TORINO S.p.A., New York Branch By:_________________________ Name:___________________ Title:__________________ 23 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. SWISS BANK CORPORATION, New York Branch, individually and as FAC Collateral Agent By:_________________________ Name:___________________ Title:__________________ By:_________________________ Name:___________________ Title:__________________ 24 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. D.K. ACQUISITION PARTNERS G.P. By:_________________________ Name:___________________ Title:__________________ 25 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. NATIONAL CITY BANK, CLEVELAND By:_________________________ Name:___________________ Title:__________________ 26 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. BARCLAYS BANK PLC By:_________________________ Name:___________________ Title:__________________ 27 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. CHEMICAL BANK By:_________________________ Name:___________________ Title:__________________ 28 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. BANK OF AMERICA ILLINOIS By:__________________________ Name:_____________________ Title:____________________ 29 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. MELLON BANK, N.A. By:_________________________ Name:___________________ Title:__________________ 30 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. THE PROVIDENT BANK By:_________________________ Name:___________________ Title:__________________ 31 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:_________________________ Name:___________________ Title:__________________ 32 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. THE LONG-TERM CREDIT BANK OF JAPAN, LTD., Chicago Branch By:_________________________ Name:___________________ Title:__________________ 33 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. SOCIETY NATIONAL BANK By:_________________________ Name:___________________ Title:__________________ 34 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. ABN AMRO BANK N.V. By:_________________________ Name:___________________ Title:__________________ 35 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. SOCIETE GENERALE BANK By:_________________________ Name:___________________ Title:__________________ 36 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. PEARL STREET L.P. By:_________________________ Name:___________________ Title:__________________ 37 -1- IN WITNESS WHEREOF, the undersigned have duly executed this Second Amendment as a sealed instrument as of the date first set forth above. SENIOR HIGH INCOME PORTFOLIO, INC. By:_________________________ Name:___________________ Title:__________________ SENIOR HIGH INCOME PORTFOLIO II, INC. By:_________________________ Name:___________________ Title:__________________ EX-10.O 5 EXHIBIT 10.O 1 EXECUTIVE EMPLOYMENT AGREEMENT ------------------------------ This Executive Employment Agreement is entered into as of this ___ day of October, 1994 between Walter M. Vannoy (the "Executive") and Figgie International Inc., a Delaware corporation ("Company"): WHEREAS, the Company experienced extreme financial difficulties which jeopardized the continued existence of the Company; and WHEREAS, the Board of Directors requested that the Executive temporarily come out of retirement and guide the Company through the most difficult period of the Company's recent existence which period has and continues to involve a complete restructuring of the debt and finances of the Company and the disposition of a significant portion of the Company's businesses; and WHEREAS, despite the complete disruption of his personal life, the Executive has served the Company during this difficult period, first as Vice-Chairman of the Board and then as Chairman of the Board and Chief Executive Officer of the Company, commuting between his home in Virginia and the Company offices in Willoughby, Ohio; and WHEREAS, the Board of Directors is actively searching for a person to become Chief Executive Officer of the Company and desires to have the Executive continue to be employed on a full-time basis until the new Chief Executive Officer has been in office for 90 days and on a part-time basis thereafter; and 2 WHEREAS, the Executive has been paid at a rate of base salary far below the level of comparable executives in order to ease the cash-flow problems of the Company; and WHEREAS, the Executive has been serving the Company solely on the basis of oral representations and promises; and WHEREAS, it is the desire of the Company and the Executive to reduce to writing the full understanding between them relating to the performance of services for the Company by the Executive; NOW THEREFORE, in consideration of the mutual promises contained herein and other consideration the receipt and sufficiency of which is hereby acknowledged, the Executive and the Company agree as follows: 1. EMPLOYMENT. The employment of the Executive with the Company shall be as follows in the following periods: a. Between February 16, 1994 and May 18, 1994, the Executive performed services for the Company on a full-time basis as Vice-Chairman of the Board of Directors. b. On May 18, 1994, the Executive became the Chairman of the Board and Chief Executive Officer of the Company and has served as such until the date of this Agreement. c. From and after the date of this Agreement until such date as a new Chief Executive Officer of the Company, duly elected by the Board of Directors, takes office (the "New CEO Start Date"), the Executive shall 2 3 continue to serve the Company on a full-time basis as Chairman of the Board and Chief Executive Officer. d. From and after the New CEO Start Date until 90 days thereafter ("The 90th Day"), the Executive shall serve the Company on a full-time basis as Chairman of the Board of Directors. e. From and after The 90th Day until the Separation Day, as defined below (the "Follow-Up Period"), the Executive shall serve the Company on a part-time basis with such title, if any, as the Board of Directors shall deem appropriate. The "Separation Day" shall be such day which is the number of days after The 90th Day as will equal the number of days between February 16, 1994 and The 90th Day. 2. DUTIES. The Executive shall have the following duties during the following periods: a. From the date of this Agreement until the New CEO Start Date, the Executive will devote his full business time and best efforts to the business of the Company and its related organizations performing such duties as are customary to the positions of Chairman of the Board and Chief Executive Officer and as may be reasonably requested by the Board of Directors of the Company. b. From the New CEO Start Date until The 90th Day, the Executive will devote his full business time and best efforts to the business of the Company and its related 3 4 organizations performing such duties as are customary to the position of Chairman of the Board and as may be reasonably requested by the Board of Directors of the Company. c. From The 90th Day until the Separation Day, the Executive will perform such duties as may be reasonably requested by the Chief Executive Officer or Board of Directors of the Company provided that such duties shall be on a part- time basis; provided however, that if there has been a "Change of Control" of the Company the Executive will not be required to perform any duties during the Follow-Up Period. For purposes of this Agreement, "Change of Control" shall mean: (i) A change in the composition of the Board of Directors of the Company such that a majority of the Board members are not continuing directors, as that term is defined in Article Sixth of the Company's Certificate of Incorporation as in effect on the date hereof; (ii) Approval by the stockholders of the Company of a reorganization, merger or consolidation with respect to which, in any such case, the persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 51% of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities; or (iii) Liquidation or dissolution of the Company or a sale of all or substantially all of the assets of the Company. The Executive will at all times prior to a Change of Control conduct himself in conformity with the policies of the Company. 4 5 3. COMPENSATION. The Executive shall be entitled to the following compensation for the performance of his duties during the term of this Agreement: a. During the period of this Agreement (from February 16, 1994 to the Separation Day), the Executive will be paid a base salary at an annual rate of $400,000.00. b. For each partial or full calendar year that this Agreement shall be in effect, the Executive will be paid such bonus as shall be determined by the Compensation Committee of the Board of Directors (with the Executive recused from the discussion and vote) of the Company under the regular bonus programs of the Company applicable to senior executives in effect at that time. 4. RESTRICTED STOCK. The Executive has been granted 115,497 shares of restricted stock under the 1993 Restricted Stock Purchase Plan For Employees ("Restricted Stock Plan"). It is understood by Executive that upon the termination of employment of the Executive pursuant to this Agreement, it is the intention of the Company to exercise its right to repurchase the restricted stock in accordance with the schedule set forth in the Restricted Stock Plan applicable to persons who take normal retirement under the Company's Retirement Income Plan II. As long as the Agreement is not terminated pursuant to Section 7 hereof, the date of termination of employment of the Executive for purposes of the Restricted Stock Plan shall be deemed to be the Separation Day. 5 6 5. BENEFIT PLANS. During the term of this Agreement, Executive shall be entitled to participate in all employee benefit plans which are maintained or established by the Company from time to time and which cover the Company's senior executives provided he satisfies any applicable eligibility requirements therefor. Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion; provided however that no such amendment or termination subsequent to a Change of Control shall reduce the level of benefits below the level in effect 90 days prior to the Change of Control. Executive further acknowledges that the Company may wish to maintain insurance on his life for its benefit and agrees to submit to any physical examination which may be required in order to obtain such insurance. 6. EXPENSES. The Executive will be reimbursed for all reasonable expenses incurred by him in performing his duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Such expenses shall include, during the period between February 16, 1994 and The 90th Day, the cost of airplane travel once each week between his home in Virginia and the Company offices in Willoughby, Ohio and the cost of a temporary dwelling unit in the Cleveland, Ohio area. 7. TERMINATION OF EMPLOYMENT. a. DEATH; DISABILITY. In the event of Executive's death or Disability (as hereinafter defined), his employment with the Company shall be deemed 6 7 terminated as of the end of the month in which such death or Disability occurs, and all rights, duties and obligations of the parties hereunder shall immediately cease, except that the Company shall pay Executive or his Successor in Interest amounts due under Section 8 hereof, and except, in the case of a termination due to Disability, Executive's obligations under Sections 10 and 11 shall continue. For purposes of this Section, Disability shall be deemed to have occurred if (a) Executive shall be unable to perform his duties on an active full-time basis by reason of disability or impairment of health for a period of at least ninety (90) consecutive calendar days or (b) the Company shall have received a certificate from a physician reasonably acceptable to both the Company and Executive (or his representative) to the effect that Executive is incapable of reasonably performing services under this Agreement in accordance with past practices. b. BY COMPANY FOR GOOD CAUSE. Executive's employment with the Company may be terminated, prior to a Change of Control, at the option of and by written notice from the Company if the Board of Directors of the Company shall find Good Cause for termination. For purposes of this Agreement, Good Cause shall mean only (i) Executive's willful failure to perform his duties under this Agreement within a reasonable period of time after receipt of written notice from the Company setting 7 8 forth in reasonable detail the duties which Executive has failed to perform and the corrective actions expected of him; (ii) a breach of Executive's duty of loyalty to the Company, including but not limited to a breach of Executive's obligations under Sections 10 or 11 below; (iii) indictment for, conviction of, or written confession to a crime against the Company or a crime which otherwise materially adversely affects Executive's ability to perform his obligations under this Agreement, any business relationships which the Company maintains or the general reputation and good will of the Company; or (iv) Executive shall have been found by the Board of Directors of the Company to have been repeatedly and excessively using alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, (including but not limited to the Company's obligation to pay severance pay under Section 8 hereof), except Executive's obligations under Section 11 hereof. The Executive's employment cannot be terminated after a Change of Control for Good Cause. c. BY COMPANY WITHOUT GOOD CAUSE. The Company may also terminate Executive's employment at any time by written notice without Good Cause, whereupon all rights, obligations and duties of the parties hereunder shall immediately cease, except that the Company shall pay 8 9 Executive amounts due under Section 8 hereof, and except that the Executive shall be bound by his obligations under Section 11 hereof. d. BY EXECUTIVE FOR GOOD REASON. Executive may terminate his employment with the Company upon not less than ninety (90) days advance written notice for "Good Reason." Upon the effective date of any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except for Executive's obligations under Section 11 hereof and the Company's obligations under Section 8 hereof. For purposes of this Agreement, the Executive will have "Good Reason" if (i) the Board of Directors of the Company shall fail to re-elect, or shall remove Executive from the offices specified in Section 1 hereof during the periods specified in said Section 1, (ii) the Board of Directors of the Company shall, during the period prior to the New CEO Start Date, make a significant negative change in the nature or scope of the authorities, powers, functions or duties of Executive , (iii) the Company shall fail to pay when due any compensation provided for in this Agreement and such failure is not corrected within ten days after notice thereof to the Company by the Executive, or (iv) any pattern of harassment done with the approval of the Board of Directors of the Company which impedes the Executive in the exercise of his authorities, powers, functions or duties hereunder in the manner in which they 9 10 would normally be exercised by an officer with similar powers, functions and duties. e. BY EXECUTIVE WITHOUT GOOD REASON. Executive may terminate his employment with the Company upon not less than ninety (90) days advance written notice but in any event not prior to March 31, 1995. Upon the effective date of any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except for Executive's obligations under Section 11 hereof. The Company shall not be prohibited from terminating Executive under Section 7(c) above following receipt of a notice of termination from Executive, subject to its obligations thereunder. 8. SEVERANCE PAY. If Executive's employment is terminated pursuant to Section 7(a), 7(c) or 7(d) above, the Company shall pay a prorata portion of any bonus which would have been payable to the Executive under Section 3(b) hereof. In addition, the Executive or his Successor in Interest shall be entitled to receive the base salary the Executive would have otherwise received under Section 3(a) above during whichever of the following periods shall be applicable: a. If the Executive's employment is terminated prior to The 90th Day, such base salary shall be paid for the number of days subsequent to his termination of employment which is equal to the number of days between February 16, 1994 and his date of termination of employment; or 10 11 b. If the Executive's employment is terminated after The 90th Day, such base salary shall be paid until the Separation Day. Such severance pay shall be paid in accordance with the Company's normal payroll practices. The Executive may designate a Successor (or Successors) in Interest to receive any and all amounts due the Executive in accordance with this Agreement should the Executive be deceased at any time of payment. Such designation of Successor(s) in Interest shall be made in writing and signed by the Executive, and delivered to the Company. Any such designation may be made to any legal person, persons, trust or the Executive's estate as he shall determine in his sole discretion. In the event any designation shall be incomplete, or in the event the Executive shall fail to designate a Successor in Interest, his estate shall be deemed to be his Successor in Interest to receive such portion of all of the payments due hereunder. The Executive may amend, change or revoke any such designation at any time and from time to time, in the same manner. This Section 8 shall not supersede any designation of beneficiary or successor in interest made by the Executive, or separately covered, under any other plan, program, policy or practice of the Company. If the Executive's employment is terminated for any of the reasons set forth in Sections 7(b) or 7(e) hereof, none of the payments provided in this Section 8 will be made by the Company. 11 12 9. TERM. This Agreement will continue in effect from the date hereof until the Separation Day unless sooner terminated under Section 7 hereof. 10. NON-COMPETITION. a. RESTRICTIONS. As consideration for the compensation and benefits to be provided to the Executive under this Agreement, and as an additional incentive for the Company to enter into this Agreement, the Executive will not during the term of this Agreement directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where the Company or any of its Affiliates (as defined below) is then conducting the Business (as defined below) or has, during the previous twelve (12) months, conducted the Business: (1) engage in the Business; (2) render advice, consultation, or services to or otherwise assist any other person or entity who competes, directly or indirectly, with the Company or any of its Affiliates; (3) transact any business in any manner pertaining to suppliers or customers of the Company or any of its Affiliates which, in any manner, would have, or is likely to have, an adverse effect upon the conduct of the Business of the Company or any of its Affiliates; or 12 13 (4) induce any employee, agent or representative of the Company or any of its Affiliates to terminate his or her employment with the Company or such Affiliate. b. DEFINITIONS. For the purposes of this Section 10, the "Business" will mean the business activities of whatever nature of the Company and its Affiliates carried on within a 100 mile radius of any facility or office operated or maintained by the Company or any of its Affiliates. The term "Affiliates" shall mean any entity controlling, controlled by or under common control with the Company, including, but not limited to, the Company divisions and subsidiaries. c. REASONABLENESS; ENFORCEMENT. The Executive understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for above, but acknowledges that he will receive sufficiently higher remuneration and other benefits from the Company hereunder than he would otherwise receive to justify such restriction. The Executive acknowledges that he understands the effect of the provisions of this Section 10, that he has had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions. The Company and the Executive consider the restrictions contained in this Section 10 to be 13 14 reasonable and necessary. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. In the event of a breach or threatened breach of this Section 10 by the Executive, the Company will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions thereof and the Company will be entitled to pursue such other remedies at law or in equity which it deems appropriate. 11. CONFIDENTIAL INFORMATION. a. PROHIBITION ON DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION. The Executive will at all times keep and maintain Confidential Information (as defined below) confidential and will not, at any time, either during or subsequent to his employment with the Company, either directly or indirectly, use any Confidential Information for his own benefit, or otherwise divulge, disclose, or communicate any Confidential Information to any person or entity in any manner whatsoever, other than employees or agents of the Company or its Affiliates who have a need to know such information, and then only to the extent necessary to 14 15 perform their responsibilities on behalf of the Company or its Affiliates. b. DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential Information" will mean any and all information (excluding information in the public domain) relating to the Business, including, without limitation, all patents and patent applications; copyrights (whether registered or to be registered in the United States or elsewhere) which are applied for, issued to or owned by the Company or any of its Affiliates; inventions; trade secrets; computer programs, engineering and technical data, drawings or designs; manufacturing techniques; information concerning pricing and pricing policies; marketing techniques; suppliers; methods and manner of operations; and information relating to the identity and location of all past, present and prospective customers. c. ENFORCEMENT. The Executive's obligations contained in this Section 11 are of a special and unique character which gives them a peculiar value to the Company. The parties recognize that the Company cannot be reasonably or adequately compensated in damages alone in an action at law should the Executive breach such obligations. The Executive therefore expressly agrees that, in addition to any other rights or remedies which the Company may possess, it will be entitled to injunctive and other equitable relief in the form of preliminary and permanent injunctions, without bond or 15 16 other security, in the event of any actual or threatened breach of such obligations by the Executive, in order to enforce this Section 11. 12. SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by him without the prior written consent of the Company. Any amounts payable and stock issuable after the death of the Executive shall be paid to his spouse if then living and otherwise to the executor or administrator of his estate. This Agreement will inure to the benefit of and be binding upon the Company, its Affiliates and their successors and assigns. 13. GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. Any action brought to enforce this Agreement or to seek relief based upon any provision of it will be brought in a court of competent jurisdiction in the State of Ohio. 14. MERGER. This Agreement supersedes any and all prior agreements, whether written or oral, with respect to the Executive's employment by the Company or any of its Affiliates and contains all of the promises, representations, warranties and agreements between the parties with respect to such employment. 15. MODIFICATION. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties or their respective successors. 16. NOTICES. All notices or other communications hereunder will be writing and will be given by hand delivery to the 16 17 other party or by registered or certified mail, return receipt requested, postage prepaid, to the following: If to the Executive: Walter M. Vannoy 4709 John Scott Drive Lynchburg, Va. 24503 If to the Company: Figgie International Inc. 4420 Sherwin Road Willoughby, Ohio 44094 Attn: Vice President International, General Counsel and Secretary Any party may from time to time change its address for purposes of this Agreement by giving notice of such change to the other party, but no such change will be deemed effective until actually received by the party to whom it is directed. Notice and communications under this Agreement will be effective when actually received by the party to whom they are directed. 17 18 IN WITNESS WHEREOF, this Agreement is executed by or on behalf of the undersigned as of this ______ day of October, 1994. THE EXECUTIVE: ______________________________ FIGGIE INTERNATIONAL INC. By:___________________________ Title:________________________ 18 EX-10.P 6 EXHIBIT 10.P 1 Exhibit 10(p) EXECUTIVE EMPLOYMENT AGREEMENT ------------------------------ This Executive Employment Agreement is entered into as of this 1st day of January, 1995 between John P. Reilly (the "Executive") and Figgie International Inc., a Delaware corporation ("Figgie" or "Company"): WHEREAS, Figgie wishes to obtain the services of the Executive; and WHEREAS, the Executive desires to obtain employment with Figgie pursuant to the terms of this Agreement; NOW THEREFORE, in consideration of the mutual promises contained herein and other consideration the receipt and sufficiency of which is hereby acknowledged, the Executive and Figgie agree as follows: 1. EMPLOYMENT. As of January 1, 1995, Figgie will employ the Executive as Chief Executive Officer of Figgie and the Executive agrees to be employed by Figgie as Chief Executive Officer of Figgie in accordance with the terms and conditions set forth herein. In accordance with such position, he will have appropriate responsibilities, duties and authorities for the management of the Company and to accomplish the objectives assigned him, responsible only to the Board of Directors of Figgie (the "Board") and its stockholders. The Executive shall be appointed to fill a vacancy on the Board and shall be appointed as a member of its Finance and Executive Committee. 2. DUTIES. The Executive will devote his full business time and best efforts to the business of Figgie and its related organizations performing such duties as are customary to his 2 position and as may be reasonably requested by the Board. The Executive will at all times conduct himself in conformity with the policies of Figgie. The Executive shall be assigned realistically obtainable performance targets to be mutually agreed upon each year with the Board. 3. COMPENSATION. The Executive shall be entitled to the following compensation for the performance of his duties during the term of this Agreement: a. During the first year of this Agreement, the Executive will be paid a base salary at an annual rate of $500,000.00 in installments which are no less frequent than monthly. b. If the Executive remains an employee of the Figgie until April 30, 1996, he will receive, in lieu of his participation in Figgie's Compensation Plan for Executives for the year 1995, a guaranteed lump sum payment of $250,000. Such guaranteed lump sum payment will be paid on April 30, 1996. The Compensation Committee of the Company's Board of Directors may determine that Executive should be granted additional bonuses hereunder at such times and in such amounts as it shall determine in its sole and absolute discretion. c. During the second year and each subsequent year of this Agreement, the Executive will be paid a base salary determined by the Compensation Committee of the Board of Directors, but not in any such year less than $500,000.00. In addition, the Executive will be awarded 2 3 the bonus payable to him with respect to the year under the regular bonus programs of Figgie applicable to senior executives in effect at that time without any guaranteed payments pursuant to such programs. 4. RESTRICTED STOCK AND STOCK OPTIONS. a. Within 30 days after he commences employment with Figgie, the Executive will, pursuant to Figgie's 1993 Restricted Stock Purchase Plan For Employees, be given the right to purchase 30,000 shares of Figgie's Common Stock for One Dollar ($1.00) per share. Such shares shall be Class A Common Stock. Such right to purchase such shares shall expire sixty (60) days after the date the right to purchase the shares is granted. Such shares will be subject in all respects to the terms and provisions of Figgie's 1993 Restricted Stock Purchase Plan For Employees including the restrictions on transfer and the provisions for forfeiture contained in such Plan. b. In addition, the Executive will, within 30 days after he commences employment with Figgie, be issued an option to purchase 500,000 shares of Class A Common Stock of the Company pursuant to Figgie's Key Employees Stock Option Plan ("Stock Option Plan"). Such option shall 3 4 have an option price equal to the fair market value of such stock determined under the Stock Option Plan on the date of the issuance of the option and shall be exercisable as follows provided that the Executive is still employed by Figgie on the dates specified:
================================================================================================= CUMULATIVE NUMBER OF SHARES AS TO DATE WHICH THE OPTION CAN BE EXERCISED ------------------------------------------------------------------------------------------------- Date of issuance of the Option until 1st 100,000 Shares anniversary of issuance ------------------------------------------------------------------------------------------------- 1st anniversary of issuance to 2nd anniversary of 200,000 Shares issuance ------------------------------------------------------------------------------------------------- 2nd anniversary of issuance to 3rd anniversary of 300,000 Shares issuance ------------------------------------------------------------------------------------------------- 3rd anniversary of issuance to 4th anniversary of 400,000 Shares issuance ------------------------------------------------------------------------------------------------- 4th anniversary of issuance to 7th anniversary of 500,000 Shares issuance =================================================================================================
Notwithstanding anything in the foregoing to the contrary, in the event of a "change in control" as defined in the Stock Option Plan, the option shall become immediately exercisable in full and shall remain fully exercisable until the date of expiration of the option. Such option shall be an Incentive Stock Option under the terms of Section 422 of the Internal Revenue Code to the maximum extent allowed by such Section 422 and such part of the option shall be subject to the terms and provisions of the Stock Option Plan applicable to Incentive Stock Options. The remainder of the option shall be a non-qualified stock option and such part of the option shall be subject to the terms and provisions 4 5 of the Stock Option Plan applicable to non-qualified stock options. Figgie reserves the right to issue separate options for the portion of the option which is an Incentive Stock Option and the portion of the option which is a non-qualified stock option. Such option shall expire and shall not thereafter be exercisable upon the earlier to occur of: (1) the 7th anniversary of the date of grant of the option; (2) In the event of the termination of employment of the Executive for any reason other than death or disability, the end of the third month after the Executive's termination of employment; or (3) In the event of the termination of employment of the Executive by reason of death or disability, the end of one year after the Executive's termination of employment. 5. BENEFIT PLANS. During the term of this Agreement, the Executive shall be entitled to participate in all employee benefit plans which are maintained or established by Figgie from time to time and which cover Figgie's senior executives provided he satisfies any applicable eligibility requirements therefor. The Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion. The Executive further acknowledges that the Company may wish to maintain insurance on his life for its benefit and agrees to submit 5 6 to any physical examination which may be required in order to obtain such insurance. 6. EXPENSES. The Executive will be reimbursed for all reasonable expenses incurred by him in performing his duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Figgie. The Executive will also be reimbursed by the Company for reasonable legal fees and related costs incurred by him in connection with the preparation and enforcement of this Employment Agreement. 7. TERMINATION OF EMPLOYMENT. a. DEATH; DISABILITY. In the event of the Executive's death or Disability (as hereinafter defined), his employment with the Company shall be deemed terminated for purposes of this Agreement as of the end of the month in which such death or Disability occurs, and all rights, duties and obligations of the parties hereunder shall thereupon cease, except that the Company shall pay a prorata portion of any guaranteed payment or bonus which would have been payable to the Executive under Sections 2(b) and 2(c) hereof, and, in the case of a termination due to Disability, the Executive's obligations under Section 11 shall continue. For purposes of this Section, Disability shall be deemed to have occurred if (a) the Executive shall be unable to perform his duties on an active full-time basis by reason of disability or impairment of health for a period of at 6 7 least one hundred eighty (180) consecutive calendar days or (b) the Company shall have received a certificate from a physician reasonably acceptable to both the Company and the Executive (or his representative) to the effect that the Executive is incapable of reasonably performing services under this Agreement in accordance with past practices. b. BY COMPANY FOR GOOD CAUSE. The Executive's employment with the Company may be terminated at the option of and by written notice from the Company if the Board of Directors of the Company shall find Good Cause for termination. For purposes of this Agreement, Good Cause shall mean only (i) the Executive's willful failure to perform his duties under this Agreement within a reasonable period of time after receipt of written notice from the Board of Directors of the Company setting forth in reasonable detail the duties which the Executive has failed to perform and the corrective actions expected of him; (ii) a breach of the Executive's duty of loyalty to the Company, including but not limited to a breach of the Executive's obligations under Sections 10 or 11 below; (iii) indictment for, conviction of, or written confession to a crime against the Company or a crime which otherwise materially adversely affects the Executive's ability to perform his obligations under this Agreement, any business relationships which the Company maintains or the general reputation and good will of the 7 8 Company; or (iv) the Executive shall have been found by the Board of Directors of the Company to have been repeatedly and excessively using alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, (including but not limited to the Company's obligation to pay severance pay under Section 8 hereof), except the Executive's obligations under Section 11 hereof. c. BY COMPANY WITHOUT GOOD CAUSE. The Company may also terminate the Executive's employment at any time by written notice without Good Cause, whereupon all rights, obligations and duties of the parties hereunder shall immediately cease, except that the Company shall pay the Executive the amounts due under Section 8 hereof, and except for the Executive's obligations under Section 11 hereof. d. BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate his employment with the Company upon not less than ninety (90) days advance written notice for "Good Reason," specifying the reasons therefore with particularity. Upon the effective date of any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except for the Executive's obligations under Section 11 hereof and the Company's obligations under Section 8 hereof. For purposes of this Agreement, the Executive will have 8 9 "Good Reason" if (i) the Board of Directors of Figgie shall fail to reelect as, or shall remove the Executive from the office of Chief Executive Officer of Figgie, (ii) the Board of Directors of Figgie shall make a significant negative change in the nature or scope of the authorities, powers, functions or duties of the Executive hereunder, (iii) Figgie shall fail to pay when due any compensation provided for in this Agreement and such failure is not corrected within ten days after notice thereof to Figgie by the Executive, or (iv) any pattern of harassment done with the approval of the Board of Directors of Figgie which impedes the Executive in the exercise of his authorities, powers, functions or duties hereunder in the manner in which they would normally be exercised by a chief executive officer. e. BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive may terminate his employment with the Company upon not less than ninety (90) days advance written notice but in any event not prior to January 1, 1996. Upon the effective date of any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except for the Executive's obligations under Section 11 hereof. The Company shall not be prohibited from terminating the Executive under Section 7(c) above following receipt of a notice of termination from the Executive under this Section 7(e), subject to its obligations thereunder. 9 10 8. SEVERANCE PAY. If the Executive's employment is terminated by the Company pursuant to Section 7(c) or by the Executive pursuant to Section 7(d) above, the Executive shall be entitled to severance pay as follows: a. Severance pay shall be paid in the form of the continuance of the Executive's base salary as in effect prior to the date of notice of termination of employment pursuant to such Section 7(c) or 7(d) for the greater of the following periods: (1) the remainder of the term of this Agreement as set forth in Section 9 hereof; and (2) two (2) years. b. Such severance pay shall be paid in accordance with the Company's normal payroll practices for the payment of base salary to senior executives. c. Notwithstanding the foregoing to the contrary, severance pay shall cease in the event of the death of the Executive during the period described in paragraph 8(a) above. If the Executive's employment is terminated for any of the reasons set forth in Sections 7(a), 7(b) or 7(e) hereof, none of the payments provided in this Section 8 will be made by Figgie. 9. TERM. This Agreement will continue in effect from the date hereof until three (3) years thereafter unless sooner terminated under Section 7 hereof. This Agreement will be automatically extended for successive one (1) year periods unless 10 11 at least sixty (60) days prior to January 1, 1998 or any successive January 1, the Company or the Executive gives written notice to the other of its or his desire that the Agreement expire on such January 1. 10. NON-COMPETITION. a. RESTRICTIONS. As consideration for the compensation and benefits to be provided to the Executive under this Agreement, and as an additional incentive for Figgie to enter into this Agreement, the Executive will not during the term of this Agreement directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where Figgie or any of its Affiliates (as defined below) is then conducting the Business (as defined below) or has, during the previous twelve (12) months, conducted the Business: (1) engage in the Business; (2) render advice, consultation, or services to or otherwise assist any other person or entity who competes, directly or indirectly, with Figgie or any of its Affiliates; (3) transact any business in any manner pertaining to suppliers or customers of Figgie or any of its Affiliates which, in any manner, would have, or is likely to have, an adverse effect upon the conduct of the Business of Figgie or any of its Affiliates; or 11 12 (4) induce any employee, agent or representative of Figgie or any of its Affiliates to terminate his or her employment with Figgie or such Affiliate. b. DEFINITIONS. For the purposes of this Section 10, the "Business" will mean the business activities of whatever nature of Figgie and its Affiliates carried on within a 100 mile radius of any facility or office operated or maintained by Figgie or any of its Affiliates. The term "Affiliates" shall mean any entity controlling, controlled by or under common control with Figgie, including, but not limited to, Figgie divisions and subsidiaries. c. REASONABLENESS; ENFORCEMENT. The Executive understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for above, but acknowledges that he will receive sufficiently higher remuneration and other benefits from Figgie hereunder than he would otherwise receive to justify such restriction. The Executive acknowledges that he understands the effect of the provisions of this Section 10, that he has had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions. Figgie and the Executive consider the restrictions contained in this Section 10 to be reasonable and necessary. Nevertheless, 12 13 if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. In the event of a breach or threatened breach of this Section 10 by the Executive, Figgie will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions hereof and Figgie will be entitled to pursue such other remedies at law or in equity which it deems appropriate. 11. CONFIDENTIAL INFORMATION. a. PROHIBITION ON DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION. The Executive will at all times keep and maintain Confidential Information (as defined below) confidential and will not, at any time, either during or subsequent to his employment with Figgie, either directly or indirectly, use any Confidential Information for his own benefit, or otherwise divulge, disclose, or communicate any Confidential Information to any person or entity in any manner whatsoever, other than employees or agents of Figgie or its Affiliates who have a need to know such information, and then only to the extent necessary to perform their responsibilities on behalf of Figgie or its Affiliates. 13 14 b. DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential Information" will mean any and all information (excluding information in the public domain) relating to the Business, including, without limitation, all patents and patent applications; copyrights (whether registered or to be registered in the United States or elsewhere) which are applied for, issued to or owned by Figgie or any of its Affiliates; inventions; trade secrets; computer programs, engineering and technical data, drawings or designs; manufacturing techniques; information concerning pricing and pricing policies; marketing techniques; suppliers; methods and manner of operations; and information relating to the identity and location of all past, present and prospective customers. c. ENFORCEMENT. The Executive's obligations contained in this Section 11 are of a special and unique character which gives them a peculiar value to Figgie. The parties recognize that Figgie cannot be reasonably or adequately compensated in damages alone in an action at law should the Executive breach such obligations. The Executive therefore expressly agrees that, in addition to any other rights or remedies which Figgie may possess, it will be entitled to injunctive and other equitable relief in the form of preliminary and permanent injunctions, without bond or other security, in the event of any actual or threatened breach of such obligations by the Executive, in order to enforce this Section 11. 14 15 12. RESIDENCE. The Executive hereby agrees that, within 180 days of the commencement of his employment with Figgie, he and his spouse will establish a permanent residence in the greater Cleveland metropolitan area and will maintain such a permanent residence for the duration of this Agreement unless otherwise agreed by the Board of Directors; such residence shall be in addition to and not in replacement of his current residence at Lake Forest, Illinois. 13. SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by him without the prior written consent of Figgie. Any amounts payable after the death of the Executive shall be paid to his spouse if then living and otherwise to the executor or administrator of his estate. This Agreement will inure to the benefit of and be binding upon Figgie, its Affiliates and their successors and assigns. 14. GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. Any action brought to enforce this Agreement or to seek relief based upon any provision of it will be brought in a court of competent jurisdiction in the State of Ohio. 15. MERGER. This Agreement supersedes any and all prior agreements, whether written or oral, with respect to the Executive's employment by Figgie or any of its Affiliates and contains all of the promises, representations, warranties and agreements between the parties with respect to such employment. 15 16 16. MODIFICATION. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties or their respective successors. 17. NOTICES. All notices or other communications hereunder will be writing and will be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, to the following: If to the Executive: John P. Reilly 644 Spruce Lane Lake Forest, Illinois 60045 If to Figgie: Figgie International Inc. 4420 Sherwin Road Willoughby, Ohio 44094 Attn: Senior Vice-President International, General Counsel and Secretary Any party may from time to time change its address for purposes of this Agreement by giving notice of such change to the other party, but no such change will be deemed effective until actually received by the party to whom it is directed. Notice and communications under this Agreement will be effective when actually received by the party to whom they are directed. 16 17 IN WITNESS WHEREOF, this Agreement is executed by John P. Reilly and the duly authorized officer of Figgie International Inc. as of the 1st day of January, 1995. THE EXECUTIVE: ______________________________ John P. Reilly FIGGIE INTERNATIONAL INC. By:___________________________ Title:________________________ 17 EX-21 7 EXHIBIT 21 1 Subsidiaries of the Company (as of April 12, 1995) Exhibit 21
Percentage of Jurisdiction of Securities Owned Name Incorporation By the Company ---- --------------- ---------------- Allied Industrial Distributors California 100% A-T-O Inc. Delaware 100% "Automatic" Sprinkler Corporation of America Ohio 100% ASCOA "Automatic" Sprinkler Nederland B.V. Netherlands 100% "Automatic" Sprinkler Belgium Belgium 100% Carter Controls (U.K.) Ltd. United Kingdom 100% Logan Fenamec (France) S.A.R.L. France 100% Chemetronics Caribe, Inc. Delaware 100% Economy Engineering Company Illinois 100% Figgie Acceptance Corporation Delaware 100% Sooner Hotel Corporation Delaware 100% X.Z. Acquisition Corporation Delaware 100% Figgie Apparel Inc. New York 100% Figgie Asia Pte. Ltd. Singapore 100% Figgie Canadian Holdings Ltd. Canada-Federal 100% Figgie Canada Inc. Canada-Federal 100% Thermometer Corporation of Canada Ltd. Ontario 100% Figgie Communications Inc. Ohio 100% Figgie do Brasil Industria e Commercio Ltda. Brazil 100% Figgie Foreign Sales Corporation Virgin Islands 100% Figgie (G.B.) Limited United Kingdom 100% Figgie Material Handling Products (U.K.) Limited United Kingdom 100% Glidepath U.K. Limited United Kingdom 100% Fred Perry Sportswear (U.K.) Limited United Kingdom 100% Fred Perry Sportswear GmbH Germany 100% Logan Fenamec (U.K.) Limited United Kingdom 100% Figgie International (H.K.) Ltd. Hong Kong 100% Figgie International Real Estate Inc. Delaware 100% Cafig Inc. Delaware 100% Dusk Corporation Delaware 100% Quire Corp. Delaware 100% Figgie Investment Trustee Ltd. United Kingdom 50% Figgie Leasing Corporation Delaware 100%
57 2 Subsidiaries of the Company (as of April 12, 1995) Exhibit 21
Percentage of Jurisdiction of Securities Owned Name Incorporation By the Company ---- --------------- ---------------- Figgie Licensing Corporation Delaware 100% Figgie Packaging Systems Pty. Ltd. Australia 100% Figgie Pension Trustee Ltd. United Kingdom 50% Figgie Properties Inc. Delaware 100% Chagrin Highlands Inc. Ohio 100% Cudahy Self Storage, Inc. Wisconsin 100% FGPI-1 Inc. Florida 100% Virginia Center Inc. Virginia 100% Figgie Security, Inc. Florida 100% Logan/Glidepath Company Kansas 80% Interstate Electronics Corporation California 100% Kohol Incorporated Ohio 51% Logan Glidepath Australia Pty. Ltd. South Australia 100% Logan-Fenamec (N.Z.) Ltd. New Zealand 100% Logan Fenamec Transporttechnik GmbH Germany 100% Astro-Pneumatic GmbH Germany 90% Logan Glidepath New Zealand Limited New Zealand 75% Glidepath Asia Pte Limited (in liquidation) Singapore 100% Logan Transportteknik Sweden AB Sweden 100% Maquiladora TCA de Juarez, S.A. de C.V. Mexico 100% Medcenter Management Services, Inc. Ohio 100% Oden Corporation New York 49% Fred Perry Sportswear Limited United Kingdom 100% FP Sportswear B.V. Netherlands 100% SP/Sheffer International Inc. Ohio 100% Safway Steel Products Inc. Delaware 100% Talon-Snorkel Limited New Zealand 100% Talon/Snorkel Pty Limited Australia 100% Waite Hill Holdings Inc. Delaware 100% Waite Hill Assurance Ltd. Bermuda 100% Waite Hill Services, Inc. Delaware 100% Wimbledon Shirt Company Limited United Kingdom 100%
58 EX-23 8 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statements File No. 33-66208 and File No. 33-56705. ARTHUR ANDERSEN LLP Cleveland, Ohio, April 12, 1995. 59 EX-27 9 EXHIBIT 27
5 0000720032 FIGGIE INTERNATIONAL 1,000 U.S. DOLLARS YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 1 47,327 0 45,253 259 38,845 460,100 146,310 42,385 644,464 315,813 234,491 1,841 0 0 63,381 644,464 319,420 319,420 247,254 334,238 55,204 263 38,761 (108,233) 22,986 (85,247) (81,483) 0 0 (166,730) (9.41) (9.41)
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