<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec 240.14a-11(c) or sec 240.14a-12
The Kroll-O'Gara Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
KROLL-O'GARA LOGO
9113 LeSaint Drive
Fairfield, Ohio 45014
(513) 874-2112
fax (513) 874-1262
June 26, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders of
The Kroll-O'Gara Company on Wednesday, July 26, 2000, at 9:00 a.m. at The Omni
Netherland Plaza Hotel, 35 West 5th Street, Cincinnati, Ohio.
The Notice of 2000 Annual Meeting and Proxy Statement accompanying this letter
describe the business to be acted on at the meeting. The Annual Report for the
year ended December 31, 1999 also is enclosed.
Your vote is important no matter how many shares you own. We hope you will be
able to attend the meeting in person; but, in any event, please sign and date
the enclosed proxy and return it in the accompanying envelope. If you wish to
communicate directly with The Kroll-O'Gara Company, the mailing address of our
Shareholder Information Department is 9113 LeSaint Drive, Fairfield, Ohio 45014.
Sincerely,
Jules B. Kroll
Chairman of the Board
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THE KROLL-O'GARA COMPANY
9113 LESAINT DRIVE
FAIRFIELD, OHIO 45014
(513) 874-2112
June 26, 2000
Dear Shareholder:
The Annual Meeting of Shareholders of The Kroll-O'Gara Company will be held at
The Omni Netherland Plaza Hotel, 35 West 5th Street, Cincinnati, Ohio on July
26, 2000 at 9:00 a.m. (EDT), for the purpose of considering and acting upon the
following:
1. The election of nine directors of the Company.
2. Approval and adoption of the Company's Employee Stock Purchase Plan.
3. The ratification of Arthur Andersen LLP as auditors of the Company for the
fiscal year ending December 31, 2000.
4. Such other matters as may properly come before the meeting.
Only shareholders of record at the close of business on June 12, 2000 are
entitled to receive notice of, and to vote at, the meeting. Management, at
present, knows of no other business to be brought before the meeting.
By Order of The Board of Directors
Abram S. Gordon
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES OR CANADA. PROXIES MAY BE
REVOKED BY WRITTEN NOTICE OF REVOCATION, THE SUBMISSION OF A LATER DATED PROXY,
OR ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE> 4
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JULY 26, 2000
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of The Kroll-O'Gara Company (the "Company") of proxies to be
voted at the Annual Meeting of Shareholders on July 26, 2000. This Proxy
Statement and the accompanying proxy card are first being mailed to shareholders
of the Company on or about June 26, 2000.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on June 12, 2000, the
record date for the meeting, was 22,311,173 shares of Common Stock, $.01 par
value, each entitled to one vote, owned by approximately 222 shareholders of
record. A list of shareholders of the Company may be examined at the offices of
the Company at the address given on the Notice of Annual Meeting.
PROXIES AND VOTING
When the enclosed proxy card is properly executed and returned, the shares it
represents will be voted as specified; if no instructions are given, proxies
will be voted in accordance with the recommendations of the Board of Directors.
Any shareholder giving a proxy has the power to revoke it at any time before it
is voted by giving written notice to the Company, by giving a later dated proxy
indicating a desire to vote differently or by appearing at the meeting and
casting a ballot.
The cost of solicitation of proxies will be paid by the Company. In addition to
the solicitation of proxies by use of the mails, solicitation may be made by
officers and regular employees of the Company by personal interview, telephone
and facsimile. Banks, brokerage houses and other record owners will be
reimbursed for their reasonable expenses incurred in forwarding soliciting
material to beneficial owners and in obtaining voting instructions from those
owners.
The affirmative vote of a plurality of the votes cast at the meeting will be
sufficient for the election of directors. The Company's Common Stock has no
cumulative voting rights. The approval of the Employee Stock Purchase Plan and
the ratification of the appointment of auditors each will be determined by the
affirmative vote of a majority of the votes cast, with abstentions having the
effect of negative votes and broker non-votes deemed to be absent shares. There
are no rights of appraisal or similar rights of dissenting shareholders with
respect to any matter to be acted upon at the meeting.
THE BOARD OF DIRECTORS
The Company's corporate powers are exercised, and its business, property and
affairs are managed, by or under the direction of the Board of Directors.
Currently there are nine directors, all of whom have been renominated to serve
until the Annual Meeting in 2001 or until their successors are elected and
qualified. Information on each nominee is given below.
JULES B. KROLL has been Chairman of the Board of the Company since the merger of
The O'Gara Company and Kroll Holdings, Inc. on December 1, 1997. Mr. Kroll was
named Co-Chief Executive Officer of the Company and Chief Executive Officer of
the Investigations and Intelligence Group in April 2000. Previously he had
served as the Company's Chief Executive Officer since the Kroll Holdings merger.
He founded the Company's Kroll Associates, Inc. subsidiary in 1972 and has been
the Chairman of the Board of Directors and Chief Executive Officer of Kroll
Associates and Kroll Holdings since their foundings. Mr. Kroll also is a
director of Presidential Life Insurance Company and Security Technologies Group,
Inc. He has been a director of the Company since December 1997. Age 59.
THOMAS M. O'GARA has been Vice Chairman of the Board since the Kroll Holdings
merger. He served as Chairman of the Board of the Company from August 1996 until
December 1997. Mr. O'Gara also has been Chairman of the Board of the Company's
O'Gara-Hess & Eisenhardt Armoring Company ("OHE") subsidiary
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<PAGE> 5
since 1990 and was OHE's Chief Executive Officer from 1990 until 1995. He has
been a director of the Company since August 1996 and a director of OHE since
1988. Mr. O'Gara has served in the Company, its subsidiaries and its
predecessors in numerous executive capacities since 1975. Thomas M. O'Gara and
Wilfred T. O'Gara are brothers. Age 49.
WILFRED T. O'GARA was named Co-Chief Executive Officer of the Company and Chief
Executive Officer of the Security Products and Services Group in April 2000.
Previously he had served as the Company's President and Chief Operating Officer
since the Kroll Holdings merger and as its Chief Executive Officer from August
1996 until that merger. Mr. O'Gara has been associated with the Company, its
subsidiaries and its predecessors since 1983 and has held numerous executive
officer and director positions, including serving as Chief Executive Officer of
OHE since January 1996, President and Chief Operating Officer of OHE from 1991
through 1995 and Vice President -- Sales and Marketing of OHE from 1988 until
1991. Mr. O'Gara has been a director of the Company since August 1996 and a
director of OHE since 1991. Mr. O'Gara also is a director of LSI Industries,
Inc. Age 42.
MICHAEL G. CHERKASKY has been President and Chief Operating Officer of the
Company's Investigations and Intelligence Group since December 1997. Prior to
the Kroll Holdings merger he had been an Executive Managing Director of Kroll
Holdings since April 1997 and Chief Operating Officer of Kroll Holdings since
January 1997. From November 1995 to January 1997, he was the head of Kroll
Holdings' North American Region and from February 1994 to November 1995 he was
the head of Kroll Holdings' Monitoring Group. From June 1993 to November 1993,
Mr. Cherkasky was a candidate for public office. From 1978 to June 1993, Mr.
Cherkasky was with the District Attorney's office for New York County, his last
position being Chief of the Investigation Division. He became a director of the
Company in December 1997. Age 50.
MARSHALL S. COGAN has been Chairman of Foamex International, Inc., a
manufacturer of polyurethane foam products, since May 1997. Mr. Cogan was
Chairman and Chief Executive Officer of United Auto Group, Inc., a franchisor of
car and light truck dealerships, from 1997 to 1999. He was Chairman of the
Executive Committee of Foamex International from 1993 until 1997 and was Chief
Executive Officer of Foamex International from 1994 until 1997. Since 1974 he
has been the principal shareholder, Chairman or Co-Chairman of the Board of
Directors, and Chief Executive Officer or Co-Chief Executive Officer, of Trace
International Holdings, Inc., a holding company operating businesses in the auto
sales, foam, textile and publishing industries. Mr. Cogan is a director of
United Auto Group. Mr. Cogan has been a director of the Company since December
1997. Age 63.
MICHAEL J. LENNON has been President and Chief Operating Officer of the
Company's Security Products and Services Group since December 1997. He also has
been the President and Chief Operating Officer of OHE since January 1996. Mr.
Lennon joined OHE in February 1994 as Manager of Commercial and Military
Programs; he became Vice President for Sales, Marketing and Program Management
in October 1994 and served OHE in that capacity through 1995. Prior to joining
OHE, Mr. Lennon had 15 years' experience in engineering, manufacturing, quality
control and marketing with General Electric Company, which he joined in 1979.
From 1990 to 1994, he was Manager of Advanced Technology Marketing for its G.E.
Aircraft Engines business. Mr. Lennon has been a director of the Company since
March 1998. Age 44.
RAYMOND E. MABUS is President of International Management and Development Group
Ltd., a provider of workforce analysis, foreign investment planning and resource
generation services, and of counsel to the law firm of Baker, Donaldson, Bearman
and Caldwell. He also manages a family timber business. He served as the United
States Ambassador to the Kingdom of Saudi Arabia from 1994 until 1996, as a
consultant to Mobil Telecommunications Technology from 1992 until 1994 and as
Governor of the State of Mississippi from 1988 until 1992. Mr. Mabus has been a
director of the Company since November 1996. Age 51.
HUGH E. PRICE is head of the Company's Crisis Management Group and its Kroll
Information Services Group, both of which are part of the Security Products and
Services Group. During 1995 and 1996, prior to joining the Company, he was a
consultant to various businesses and organizations. Until his retirement in
1995, Mr. Price had been employed by the Central Intelligence Agency since 1964.
His positions with the Agency included Deputy and Associate Deputy Director for
Operations (1991-1995), Chief and Deputy Chief for Counterintelligence
(1988-1990) and Director of Personnel (1986-1988). Mr. Price has been a director
of the Company since October 1996. Age 63.
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<PAGE> 6
WILLIAM S. SESSIONS is a partner in the law firm of Sessions & Sessions, L.C.
and is a consultant to various public and private businesses. From 1987 until
1993, Mr. Sessions was Director of the Federal Bureau of Investigation. He
served as a United States District Judge for the Western District of Texas from
1974 until 1987. Mr. Sessions is a director of Zenith National Insurance
Company. He has been a director of the Company since November 1996. Age 70.
MEETINGS; COMMITTEES OF THE BOARD. The Board of Directors held eight meetings in
1999. The Board has an Audit Committee and a Compensation Committee, both of
which are composed of Messrs. Cogan, Mabus and Sessions. The Audit Committee
recommends the appointment of independent accountants and reviews and discusses
with the independent accountants the scope of their examination, their proposed
fee and the overall approach to the audit. The Audit Committee also reviews with
the independent accountants and the Company's financial management the annual
financial statements and discusses the effectiveness of internal accounting
controls. The Audit Committee met one time in 1999. The Compensation Committee
has responsibility for establishing executive officers' compensation and fringe
benefits. The Compensation Committee met two times in 1999. The Board does not
have a Nominating Committee. Each incumbent director attended more than seventy
five percent of the aggregate of all meetings of the Board which he was eligible
to attend and all meetings of committees on which he served during 1999.
COMPENSATION OF DIRECTORS. Directors who are not employees of the Company
receive annually a $15,000 fee, plus options to purchase 2,000 shares of Common
Stock, for serving as directors. These directors are paid $1,000 for each Board
meeting attended in person and $750 for Board meetings held by telephone. Each
Committee Chairman receives an annual fee of $1,600 and committee members,
including the Chairman, receive $750 per meeting attended, whether in person or
by telephone, unless the meeting occurs on the same day as a Board meeting, in
which case no separate fee is paid. Employee directors are not separately
compensated for their services as directors.
Under the Company's Outside Directors' Deferred Compensation Plan, each
nonemployee director is entitled to defer all or a portion of his director's
fees into a bookkeeping account. The account is credited with "phantom" units
representing shares of the Company's Common Stock equivalent in value to the
amount of each fee deferred, at the time earned. Unless a later time is selected
by a director, the value of the units in the director's account will be paid in
cash when the director's service on the Company's Board terminates or at the
time of a "change in control" of the Company as defined in the Plan.
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION. The Kroll-O'Gara Company Employee Stock Purchase Plan (the
"Section 423 Plan" or the "Plan") is being established to provide employees of
the Company and certain of its subsidiaries with an opportunity and an incentive
to acquire an ownership interest in the Company's Common Stock. A summary of the
Section 423 Plan follows. The full text of the Plan is set forth as Exhibit A to
this Proxy Statement.
The Board of Directors believes that the Section 423 Plan will advance the
interests of the Company by providing its employees with additional incentive to
remain with the Company and with a proprietary interest in the success of the
Company.
The Board of Directors recommends a vote "FOR" approval of the Section 423 Plan.
THE SECTION 423 PLAN. A maximum of 1,000,000 shares of Common Stock may be
purchased under the Section 423 Plan by eligible employees of the Company and
its designated subsidiaries. Currently, all of the Company's U.S. subsidiaries
are designated subsidiaries for purposes of participation in the Plan. To be
eligible, an employee must have been employed by the Company or a designated
subsidiary for at least 90 continuous days and may not own stock possessing 5%
or more of the voting power or value of all classes of stock of the Company or a
subsidiary. The Company estimates that approximately 1,500 employees currently
are eligible to participate in the Section 423 Plan. Appropriate adjustments in
the number of shares issuable under the Plan will be made to reflect changes in
the Company's capitalization.
An employee who elects to participate in the Plan must authorize regular
after-tax payroll deductions. The minimum deduction allowed by the Plan is $5
per week. The maximum deduction permitted is 10% of the
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<PAGE> 7
employee's W-2 earnings per payroll. Deductions will be credited to the
participant's stock purchase account maintained by The Fifth Third Bank, the
Plan's custodian. In addition to payroll deduction amounts, a participant's
account will be credited with any dividends on shares held in the account.
Participants will receive no interest on accrued funds in their stock purchase
accounts.
The Plan establishes Offering Periods which generally will run from January
through June and July through December of each year. Immediately following the
end of each Offering Period, Fifth Third Bank will purchase whole shares of the
Company's Common Stock with the funds available in a participant's account.
Purchases may be made on the open market or from the Company. Initially, it is
expected that all purchases will be made from the Company. The purchase price to
the participant will be 85% of the Fair Market Value of the stock at the
beginning of the Offering Period or at the end of the Offering Period, whichever
is less. The Company will bear the remainder (15%) of the cost and the brokerage
fees on any open market purchases. The Plan Committee has the authority to
change the timing and/or length of the Offering Periods. For purposes of the
Plan "Fair Market Value" generally means the closing sale price of the Company's
Common Stock reported in The Wall Street Journal on an applicable date.
In any calendar year, a participant may not purchase Common Stock under the
Section 423 Plan having a market value of more than $25,000, calculated based on
the full Fair Market Value of the Common Stock at the beginning of each Offering
Period that year. Participants have the right to direct the voting of all shares
held in their accounts and to receive statements twice a year on the status of
their accounts. A participant may designate one or more beneficiaries to receive
his or her interest in the Plan in the event of the participant's death.
Distributions from a participant's account will be made either on the request of
the participant or in accordance with the requirements of the Section 423 Plan.
A participant may request a withdrawal from his or her account at any time;
however, the participant then must withdraw everything in the account, must
cease payroll deductions under the Plan and may not resume payroll deductions
under the Plan until the start of an Offering Period beginning at least six
months after the withdrawal.
The Section 423 Plan requires that all shares of Common Stock and cash in a
participant's account be distributed (1) if the participant ceases to be
eligible to participate in the Plan (for example, as the result of termination
of employment) or (2) if the Plan is terminated.
The Section 423 Plan will be administered by a Committee of at least two persons
chosen by the Company's Board of Directors. Subject to the general control of
the Board and the terms of the Plan, the Committee has full power to adopt rules
relating to the Plan and to administer and interpret the Plan. The Plan may be
amended at any time by the Board. The Board also has the power to terminate or
suspend the Plan at any time.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. Contributions to the Section 423 Plan
are made by payroll deductions after federal, state and local taxes have been
withheld. In addition, a participant in the Plan is responsible for taxes on any
dividends paid on the shares of Common Stock held in his or her account and for
all tax consequences resulting from the sale of shares bought under the Plan.
The tax consequences from the sale of Section 423 Plan shares depend in part on
the length of time the shares have been held and whether a gain or loss is
realized at the time of sale. Under all circumstances, if a gain is realized, a
participant (or the participant's estate) will be required to report as ordinary
income the 15% discount in purchase price (or, if less, the actual amount of the
gain). Also, if the shares from an Offering Period are sold less than two years
from the beginning of that Offering Period, any additional gain on the sale of
the stock will be taxed as ordinary income and the Company will be entitled to
take an income tax deduction equal to that additional amount.
The Plan is designed to qualify as an employee stock purchase plan under Section
423 of the Internal Revenue Code. If the Plan at any time does not comply with
Code Section 423, it will be terminated as promptly as practicable.
ACCOUNTING. Under current accounting practices, a Section 423 plan is considered
to be noncompensatory. As a result, the Company's sale of stock in accordance
with the Plan does not result in any charge against earnings.
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<PAGE> 8
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board desires to obtain from shareholders an indication of their approval or
disapproval of the Board's action in appointing Arthur Andersen LLP independent
public accountants of the Company for the year 2000.
Arthur Andersen LLP has served the Company since its inception in 1996.
Representatives of Arthur Andersen LLP will be in attendance at the meeting,
with the opportunity to make a statement if they desire, and will be available
to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" approval of Arthur Andersen LLP.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY INFORMATION. The following table sets forth, for the fiscal years
indicated, amounts of cash and certain other compensation paid by the Company
and its subsidiaries, for services in all capacities, to Jules B. Kroll, the
Company's Chief Executive Officer during 1999, and each of the five other most
highly compensated executive officers during 1999. These persons are sometimes
referred to as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------- -----------------------
SECURITIES
OTHER UNDERLYING
ANNUAL RESTRICTED STOCK
COMPEN- STOCK OPTION ALL OTHER
NAME AND CURRENT SALARY BONUS SATION AWARDS GRANTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
------------------ ---- ------- ------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jules B. Kroll 1999 375,000 -- -- -- -- 14,661
Chairman and Co-Chief 1998 375,000 -- -- -- -- 31,915
Executive Officer 1997 489,583 -- -- -- -- 32,965
Thomas M. O'Gara 1999 275,000 -- -- -- -- 3,324
Vice Chairman 1998 275,000 -- -- -- -- 3,909
1997 252,083 -- -- -- 23,150 4,568
Wilfred T. O'Gara 1999 350,000 -- -- -- 17,000 2,967
Co-Chief Executive 1998 350,000 -- -- -- -- 2,292
Officer 1997 240,000 45,000 -- -- 98,150 4,898
Michael G. Cherkasky 1999 400,000 100,000 -- 155,628 50,000 9,740
Chief Operating
Officer -- 1998 400,000 -- -- -- -- 25,930
Investigations and 1997 400,000 -- -- -- 25,000 28,914
Intelligence Group 26,767
Nazzareno E. Paciotti 1999 275,520 66,667 -- -- 10,000 8,777
Chief Financial Officer 1998 275,520 66,667 -- -- -- 19,813
1997 275,520 66,667 -- -- 15,000 26,984
</TABLE>
---------------
(1) Represents 6,000 shares of restricted stock for Mr. Cherkasky, awarded on
March 25, 1999 under the Company's 1998 Stock Incentive Plan and having an
aggregate value at December 31, 1999 of $93,000. No other shares of
restricted stock are held by Mr. Cherkasky. The shares vest over a three
year period, with 50% vesting ratably over the first 12 months after the
date of grant and an additional 25% vesting ratably over each of the second
and third 12 months after the date of grant. Until vested, the shares have
no dividend rights.
(2) Represents profit-sharing contributions of $2,400 for each person;
supplemental disability plan benefits of $7,674 for Mr. Kroll, $4,639 for
Mr. Cherkasky and $4,002 for Mr. Paciotti; group term life insurance
benefits of $4,567 for Mr. Kroll, $2,701 for Mr. Cherkasky and $2,375 for
Mr. Paciotti; and executive disability insurance plan benefits of $924 for
Mr. Thomas M. O'Gara and $567 for Mr. Wilfred T. O'Gara.
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<PAGE> 9
EMPLOYMENT AGREEMENTS. The Company has employment agreements expiring on
November 30, 2000 with each of the following executive officers providing for
annual base salaries in the listed amounts: Jules B. Kroll, $375,000; Thomas M.
O'Gara, $275,000; Wilfred T. O'Gara, $350,000; Michael J. Lennon, $185,000;
Nazzareno E. Paciotti, $275,000; Nicholas P. Carpinello, $180,000; Abram S.
Gordon, $150,000. Each of these executive officers also is entitled to
participate in an annual bonus plan established by the Compensation Committee of
the Board and to receive up to 50% of the bonus in shares of the Company's
Common Stock. Pursuant to these employment agreements, employment may be
terminated by the Company at any time with or without cause, except that, in a
case of termination without cause, the employee is entitled to receive
compensation for the greater of the balance of the term of the agreement or one
year. The agreements also provide that if the Company does not renew the
agreement for one year or more at the end of the term, the employee will receive
an amount equal to one year's base salary. Each employment agreement restricts
the executive officer from competing with the Company during the term of the
agreement, and for two years thereafter if termination of employment is for
cause or at the volition of the employee. Each of Messrs. Thomas M. and Wilfred
T. O'Gara has further agreed that during his employment and for a period of 10
years thereafter he will not directly or indirectly own any interest in or
perform any services for any entity which uses the word "O'Gara" as a business
or trade name and competes with the Company. Additionally, Mr. Kroll has agreed
that during his employment and for a period of 10 years thereafter he will not
directly or indirectly own any interest in or perform any services for any
entity which uses the word "Kroll" as a business or trade name and competes with
the Company.
In May 1999 Mr. Cherkasky entered into an employment agreement with the Company
for an "evergreen" two year term. The agreement provides for a base salary of
$400,000 for 1999 and for subsequent annual calendar year increases of at least
4%. Mr. Cherkasky also is entitled to participate in the Company's annual bonus,
stock option, stock incentive and other benefit plans. In connection with the
agreement, he received a signing bonus of $140,000, payable $40,000 in May 1999
and $100,000 in January 2000. On each three-year anniversary of the agreement he
will receive an additional $350,000. In the event the agreement is terminated
due to Mr. Cherkasky's death or disability or by the Company for other than
cause or by Mr. Cherkasky for good reason, he is entitled to receive a lump sum
payment equal to the value of his salary, annual bonus, the three-year
anniversary payment, stock options and incentive stock for the remainder of the
term. During his employment and for two years after his employment terminates,
if the termination occurs during the first two years of the agreement and is by
the Company for cause or by him for other than good reason, Mr. Cherkasky is
restricted from directly or indirectly engaging in the investigations and
intelligence business. For purposes of the agreement, "cause" means conviction
of a felony and "good reason" includes a change in duties or responsibilities, a
reduction in compensation or any person or group other than Jules Kroll becoming
the beneficial owner of 35% or more of the voting power of the Company's
securities.
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<PAGE> 10
STOCK OPTIONS. The following table presents information on option grants to the
named executive officers during 1999 pursuant to the Company's 1996 Stock Option
Plan. The Plan does not provide for the grant of stock appreciation rights
("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE APPRECIATION
OPTIONS GRANTED TO OR FOR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jules B. Kroll -- -- -- -- -- --
Thomas M. O'Gara -- -- -- -- -- --
Wilfred T. O'Gara 17,000 2.6 26.938 3/24/09 288,021 729,902
Michael G. Cherkasky 50,000 7.7 26.938 3/24/09 847,121 2,146,771
Nazzareno E. Paciotti 10,000 1.5 26.938 3/24/09 169,424 429,354
</TABLE>
---------------
(1) All options vest one-third per year beginning one year after the date of
grant. The exercise price of all options may be paid in cash or by the
transfer of shares of the Company's Common Stock valued at their fair market
value on the date of exercise. Each option becomes exercisable in full in
the event of the execution of an agreement of merger, consolidation or
reorganization pursuant to which the Company is not to be the surviving
corporation or the execution of an agreement of sale or transfer of all or
substantially all of the assets of the Company.
With respect to each named executive officer, the following table sets forth
information concerning stock options exercised during 1999 and unexercised stock
options held at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
VALUE UNEXERCISED IN-THE-MONEY
REALIZED($) OPTIONS AT OPTIONS AT
---------------- FY-END(#) FY-END($)
(MARKET PRICE ON -------------- -------------
SHARES ACQUIRED EXERCISE LESS EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) EXERCISE PRICE) UNEXERCISABLE UNEXERCISABLE
---- --------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Jules B. Kroll -- -- -- --
Thomas M. O'Gara -- -- 15,443/7,717 67,905/33,955
Wilfred T. O'Gara 14,703 341,240 62,730/49,717 86,612/42,444
Michael G. Cherkasky -- -- 109,445/62,084 1,188,931/--
Nazzareno E. Paciotti -- -- 100,529/15,000 1,188,931/--
</TABLE>
-8-
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The policy of the Compensation Committee of the Board is to provide compensation
that attracts, motivates, and retains a highly qualified management team meeting
the special management requirements of this Company. The compensation program is
central to the successful operation and growth of the Company and is intended to
align closely the interests of management with those of the Company's
shareholders.
Statement of Purpose. The Committee believes that a compensation program must
enable the Company to attract a limited number of executives with critical
experience for key positions and to retain and motivate strong, capable
management. At the same time, the cost of management compensation must bear a
reasonable relationship to the performance of the Company and the total return
to shareholders on their investment in the Company. The purposes of the program
approved and actions taken by the Compensation Committee are as follows:
- Encourage and reward an entrepreneurial spirit and business success each year
in the operating divisions of the Company and, at the same time, build the
structure and teamwork necessary for profitable long-term growth in the
Company's business.
- Provide executives who succeed within the Company the opportunity to build
capital value through stock options and stock, as long as shareholders build
corresponding value.
Cash Compensation. To achieve these purposes, the Committee has set total cash
compensation at levels that it believes are reasonable in light of the Company's
size and financial results. Salaries are reviewed annually and are determined
based on specific executive responsibilities, the changing nature of these
responsibilities and performance. Total cash compensation each year can be
increased or decreased substantially from the prior year depending on the size
of the annual incentive payment awarded.
The Company has employment agreements with its executive officers, including Mr.
Kroll, the Company's Chief Executive Officer during 1999. These agreements,
including the annual base salary of each executive officer, are described above
under "Employment Agreements."
In early 1998, the Company engaged William M. Mercer, Incorporated, a well
regarded compensation consulting firm, to formulate a new incentive compensation
plan for the Company. After review and evaluation of that firm's
recommendations, the Company implemented a plan designed to reinforce the
Company's entrepreneurial culture. The plan emphasizes a pay-for-performance
compensation philosophy in which base salaries are set at competitive market
median levels and annual incentive opportunities are based on aggressive
financial performance targets. If the financial performance targets are
achieved, then total cash compensation will be above market median levels. At
the time the plan was adopted, the current base salaries for the Chief Executive
Officer and most other executive officers were within the ranges set forth in
the plan. Therefore, the base salaries of the Chief Executive Officer and most
of the other executive officers were not increased for 1999. All salaries were
reviewed at the end of 1999 and, based on the Company's financial results, were
not increased.
Based on the guidelines set forth in the compensation plan for financial
performance, cash incentive compensation was not awarded for 1999 to the Chief
Executive Officer or any of the named executive officers. Mr. Cherkasky's bonus
was part of a signing bonus required by his employment agreement. Mr. Paciotti's
bonus was based on a compensation plan in effect at Kroll Associates at the time
of the Company's merger with Kroll Holdings, which now is fully paid.
Long-Term Stock Incentives. The Company's overall compensation plan also
provides long term incentives principally through the granting of stock options
at market competitive levels under the Company's 1996 Stock Option Plan, with
the Committee responsible for grants to the Company's executive officers. The
purpose of the 1996 Plan is to provide long-term compensation which, because it
is based upon stock price appreciation, directly aligns the interest of
management with that of shareholders. Options were awarded to Messrs. Wilfred T.
O'Gara, Cherkasky and Paciotti in April 1999. Due to their significant ownership
interests in the Company, Messrs. Kroll and Thomas M. O'Gara did not receive
stock option grants.
-9-
<PAGE> 12
In 1998 the Company adopted a Stock Incentive Plan providing for the grant of
shares of restricted stock, primarily to non-executive officer management
employees. Two of the Company's executive officers, including Mr. Cherkasky,
have been awarded an aggregate of 8,500 shares of restricted stock under the
Stock Incentive Plan.
Section 162(m) of the Internal Revenue Code and its related regulations
(together "Section 162(m)") limit the deductibility of non-"performance based"
compensation received by each of the Company's named executive officers to $1
million per year. Compensation meeting criteria specified in Section 162(m) is
considered "performance based" and is excluded from the limitation on
deductibility. The Company's 1996 Stock Option Plan and all options granted to
the Company's named executive officers under the Plan are designed to meet the
Section 162(m) criteria for performance based compensation. In 1999, no named
executive officer received non-performance based compensation in excess of
$500,000, and the Committee currently does not expect the Section 162(m)
limitation to be an issue in its compensation decisions during 2000. The policy
of the Committee is to maintain a compensation program that maximizes the
creation of long-term shareholder value. As appropriate in the future, the
Committee will consider qualifying the deductibility of compensation to the
extent consistent with the objectives of the Company's executive compensation
program and with maintaining competitive compensation.
William S. Sessions, Chairman
Marshall S. Cogan
Raymond E. Mabus
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<PAGE> 13
KROLL-O'GARA STOCK PRICE PERFORMANCE
The following graph compares the performance of the Company's Common Stock with
the performance of companies included in the Russell 2000 Index of Small
Capitalization Companies and in a self-constructed peer group index. The graph
assumes that $100 was invested on November 13, 1996, the first day of trading of
the Company's Common Stock, and that any dividends were reinvested.
COMPARISON OF 37 MONTH CUMULATIVE TOTAL RETURN*
AMONG THE KROLL-O'GARA COMPANY, THE RUSSELL 2000 INDEX
AND A PEER GROUP
[COMPARISON GRAPH]
*$100 INVESTED ON 11/13/96 IN STOCK OR ON
10/31/96 IN INDEX -- INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
11/13/96 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C>
The Kroll-O'Gara Company $100 $108 $196 $438 $183
Russell 2000 Index $100 $109 $143 $134 $132
Peer Group Index $100 $ 98 $110 $ 88 $ 86
</TABLE>
Because the Company operates in three business segments, no published peer group
accurately mirrors the Company's business. Accordingly, the Company has created
a special peer group, currently composed of Armor Holdings, Inc., Simula, Inc.
and Spartan Motors, Inc. The returns of each company are weighted according to
its respective stock market capitalization. The peer group was selected based
upon criteria including business activities, industries served, size of company
and market capitalization. Previously, the peer group included Pinkerton's,
Inc., which is no longer a public company. The graph above has been revised to
reflect the current peer group.
-11-
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
GENERAL
In connection with the Company's initial public offering, the Board adopted a
policy requiring that any future transactions, including loans, between the
Company and its officers, directors, principal shareholders and their affiliates
be on terms no less favorable to the Company than could be obtained from
unrelated third parties and that any such transactions be approved by a majority
of the disinterested members of the Board.
Described below are certain transactions and relationships between the Company
and certain of its officers, directors and shareholders which have occurred
during the last fiscal year. Except with respect to interest rates charged on
certain of the intercompany notes and accounts payable/receivable, the Company
believes that the material terms of the various transactions were as favorable
as could have been obtained from unrelated third parties.
VICTORY AVIATION
Victory Aviation Services, Inc. is a Delaware corporation of which Messrs.
Thomas M. O'Gara, Wilfred T. O'Gara and Carpinello own approximately 92%, 1% and
1%, respectively, of the outstanding capital stock.
Lease agreements. The Company has a Master Equipment Lease with Victory
Aviation, entered into in July 1995, under which the Company leases various
items of equipment from Victory Aviation. As of December 31, 1999, the Company
had approximately $1,250,000 of equipment under lease for terms up to 36 months,
beginning on various dates between July 1995 and April 1996. Rental expenses
were $566,213 for the year ended December 31, 1999.
Supplier arrangements. During 1995 and 1996, the Company purchased the dual-hard
steel required for its vehicle armoring from Victory Aviation, which distributed
the steel for an unrelated third party. At December 31, 1999, the Company had
receivables of $282,345 from Victory Aviation in connection with the prior
arrangement, which sum is guaranteed by the shareholders of Victory Aviation.
All other aspects of the arrangement have been terminated.
Corporate aircraft. In February 1995, the Company entered into a lease for a
Gulfstream G-II aircraft owned by Victory Aviation. Effective June 1, 1998, the
Company reached an agreement to amend the corporate aircraft lease. The terms of
the aircraft lease addendum provide the Company with a hourly discount from the
normal commercial hourly rate on future charters of corporate aircraft from
Victory Aviation in order to amortize the remaining portion of existing lease
deposits from the original aircraft lease. The Company had approximately
$403,000 in unamortized lease deposits with Victory Aviation as of December 31,
1999. Rental expense related to the Gulfstream lease, including amortization of
the deposit, was $82,000 for 1999.
INTERCOMPANY NOTES AND ACCOUNTS PAYABLE/RECEIVABLE AND CERTAIN LOANS
During 1999, the Company and Mr. Kroll agreed to reimburse the Company for a
portion of general and administrative expenses, including outside professional
fees, office rent and travel expenses, which were incurred for the benefit of
both the Company and Mr. Kroll. Amounts due to the Company at December 31, 1999
pursuant to this agreement were $281,561.
During 1999, the Company rendered risk management services, including marketing
support, and claims investigations services to American International Group,
Inc. and its subsidiaries. The Company billed AIG and its subsidiaries
$4,779,449 in 1999 for these services. The year-end accounts receivable balance
for AIG was $1,231,685 at December 31, 1999. Since 1995, the Company has
purchased some of its liability insurance, including Professional Errors and
Omissions and Directors and Officers liability insurance, from AIG's
subsidiaries. AIG's subsidiaries billed the Company $361,320 for this insurance
during 1999. The Company obtains the coverage through an independent insurance
broker and where possible obtains competitive proposals from unrelated third
parties.
-12-
<PAGE> 15
PRINCIPAL SHAREHOLDERS AND HOLDINGS OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock on June 12, 2000 by (1) each beneficial
owner of more than five percent of the Common Stock, (2) each director and named
executive officer individually, and (3) all directors and executive officers of
the Company as a group. Unless otherwise indicated, all shares are owned
directly and the indicated owner has sole voting and dispositive power with
respect to such shares.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NAME NUMBER PERCENT
---- ----------- ---------
<S> <C> <C>
Jules B. Kroll(2)(3)........................................ 2,879,991 12.9
Thomas M. O'Gara(2)......................................... 2,441,369 10.9
Wilfred T. O'Gara........................................... 319,156 1.4
Michael G. Cherkasky........................................ 156,146 *
Marshall S. Cogan........................................... 2,000 *
Michael J. Lennon........................................... 38,594 *
Raymond E. Mabus............................................ 4,000 *
Nazzareno E. Paciotti....................................... 117,178 *
Hugh E. Price............................................... 14,889 *
William S. Sessions......................................... 4,000 *
All directors and executive officers as a group
(12 persons).............................................. 6,076,620 26.7
American International Group, Inc.(2)....................... 1,444,212 6.5
Lord, Abbett & Co.(2)....................................... 1,865,950 8.4
</TABLE>
---------------
* Less than 1%.
(1) Includes the following numbers of shares of Common Stock which may be
acquired through the exercise of currently exercisable stock options or
stock options which become exercisable within 60 days after June 12, 2000:
Mr. Kroll, none; Mr. Thomas M. O'Gara, 23,150 shares; Mr. Wilfred T. O'Gara,
76,113 shares; Mr. Cherkasky, 123,861 shares; Mr. Cogan, 2,000 shares; Mr.
Lennon, 25,303 shares; Mr. Mabus, 4,000 shares; Mr. Paciotti, 103,862
shares; Mr. Price, 14,889 shares; Mr. Sessions, 4,000 shares; and all
directors and executive officers as a group, 421,842 shares. Also includes
for Messrs. Cherkasky and Lennon, 250 and 104 shares, respectively, of
restricted stock that vest within 60 days of June 12, 2000.
(2) Mr. Kroll's address is 900 Third Avenue, New York, New York 10022. Mr.
O'Gara's address is 9113 LeSaint Drive, Fairfield, Ohio 45014. AIG's address
is 70 Pine Street, New York, New York 10270. Lord, Abbett & Co.'s address is
767 Fifth Avenue, New York, New York 10153.
(3) Does not include 192,560 shares held by trusts for the benefit of Mr.
Kroll's adult children, in which Mr. Kroll disclaims any beneficial
interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of the Company's equity securities, to file reports of security
ownership and changes in such ownership with the Securities and Exchange
Commission. These persons also are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based upon a review of
copies of such forms and written representations from its executive officers and
directors, the Company believes that all Section 16(a) forms were filed on a
timely basis during and for 1999.
SHAREHOLDER PROPOSALS
Shareholder proposals will be considered for inclusion in the Proxy Statement
for the 2001 Annual Meeting if they are received by the Company before the close
of business on February 23, 2001.
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<PAGE> 16
In addition, the Company will retain its discretionary authority to vote proxies
on any matter raised by a shareholder at the 2001 Annual Meeting (and not
included in the Company's Proxy Statement) unless the Company is notified prior
to May 11, 2001 that the shareholder intends to present the matter at that
meeting. If there is a change in the date after which shareholder notification
is untimely, the Company will so inform shareholders by notice in a filing with
the SEC.
OTHER BUSINESS
The Company is not aware of any matters which properly may be presented at the
meeting other than those discussed above. However, if other matters do come
before the meeting, proxies will be voted on those matters in accordance with
the recommendation of the Board.
-14-
<PAGE> 17
Exhibit A
THE KROLL-O'GARA COMPANY
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Kroll-O'Gara Company Employee Stock Purchase Plan enables an Eligible
Employee to acquire Kroll-O'Gara Stock through payroll deductions and is
intended to advance the interests of Kroll-O'Gara by encouraging stock ownership
by Eligible Employees.
2. DEFINITIONS
2.1 "Available Funds" mean authorized payroll deductions and cash
dividends which are credited to a Participant's Stock Purchase Account and are
available for the purchase of Kroll-O'Gara Stock.
2.2 "Board of Directors" means the Board of Directors of Kroll-O'Gara.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means a committee consisting of at least two members
chosen by the Board of Directors to administer the Plan.
2.5 "Continuous Service" means the length of time an Employee has been in
the continuous employ of Kroll-O'Gara and/or a Subsidiary as determined by the
continuity of service rules of Kroll-O'Gara or such Subsidiary.
2.6 "Custodian" means the custodian for this Plan, currently The Fifth
Third Bank, Cincinnati, Ohio.
2.7 "Designated Subsidiary" means the Subsidiaries listed on Exhibit 1 to
this Plan, as well as any future Subsidiary which is designated by the Board of
Directors from time to time, in its sole discretion, to participate in this
Plan.
2.8 "Eligible Employee" means any person who:
(i) is an Employee of Kroll-O'Gara or a Designated Subsidiary;
(ii) has at least ninety (90) days of Continuous Service; and
(iii) is not deemed for purposes of Section 423(b)(3) of the Code to
own stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of Kroll-O'Gara or a parent or
subsidiary corporation.
2.9 "Employee" means any person employed by Kroll-O'Gara or a Designated
Subsidiary.
2.10 "Exercise Date" means the last day of an Offering Period.
2.11 "Exercise Price" means the price at which Kroll-O'Gara Stock is
purchased for the benefit of Participants in any Offering Period. The Exercise
Price for an Offering Period shall be an amount equal to 85% of the Fair Market
Value of a share of Kroll-O'Gara Stock on the Grant Date or on the Exercise Date
of that Offering Period, whichever is less.
2.12 "Fair Market Value" means the closing sale price per share of
Kroll-O'Gara Stock on the principal United States stock exchange or national
market system on which Kroll-O'Gara Stock is traded, as that closing sale price
is reported in The Wall Street Journal (or such other source as the Committee
deems reliable). If there are no reported sales on the date on which an Offering
Period begins, then the closing sale price on the next following day on which a
sale is transacted shall be used. If there are no reported sales on the date on
which an Offering Period ends, then the closing sale price on the most recent
preceding date on which a sale was transacted shall be used. If for any reason a
closing sale price is not readily available, the Committee shall determine the
price on such basis as it considers appropriate.
A-1
<PAGE> 18
2.13 "Grant Date" means the first day of an Offering Period.
2.14 "Kroll-O'Gara" means The Kroll-O'Gara Company.
2.15 "Kroll-O'Gara Stock" means shares of Kroll-O'Gara's common stock, $.01
par value.
2.16 "Offering Period" means a period of time which either (i) begins on
January 1 and ends on June 30 or (ii) begins on July 1 and ends on December 31;
provided that the Committee shall have the authority to change the beginning and
ending dates and/or the duration of Offering Periods from time to time so long
as any change is announced to Participants at least five days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.
2.17 "Participant" means an Eligible Employee who elects to participate in
the Plan.
2.18 "Plan" means this Employee Stock Purchase Plan.
2.19 "Stock Purchase Account" means the account maintained for each
Participant which consists of (i) the Participant's Available Funds, (ii)
Kroll-O'Gara Stock purchased for the Participant's account with Available Funds
and (iii) any other Kroll-O'Gara Stock credited to the account.
2.20 "Subsidiary" means any corporation of which not less than 50% of the
voting shares are held by Kroll-O'Gara or another Subsidiary.
3. ENTRY INTO AND PARTICIPATION IN THE PLAN
Any Eligible Employee may elect to become a Participant in the Plan by
authorizing a payroll deduction on an authorization form provided by
Kroll-O'Gara. The Eligible Employee's election to participate will be effective
as of the first Grant Date following the delivery to Kroll-O'Gara (in accordance
with Section 16 below) of the fully executed authorization form, and shall
remain in effect until changed or revoked by the Eligible Employee. An Eligible
Employee shall remain a Participant until that Eligible Employee receives
distribution of all Available Funds and Kroll-O'Gara Stock credited to his or
her Stock Purchase Account. No rights of a Participant to purchase Kroll- O'Gara
Stock under this Plan may in any way be transferred to, or exercised by, another
person.
4. AUTHORIZED DEDUCTIONS
A Participant shall authorize a regular payroll deduction of a whole dollar
amount or a whole percentage amount subject to the following limitations: (i)
the minimum deduction for any Participant shall be Five Dollars ($5.00) per
week, (ii) the maximum deduction for any Participant per payroll shall be ten
percent (10%) of the Participant's W-2 earnings associated with that payroll,
and (iii) the maximum deduction in any calendar year shall be limited so as to
comply with Section 8. The authorized deduction shall be made after federal,
state and local income taxes, Social Security taxes, and any other authorized
deductions have been deducted from compensation. A Participant may increase or
decrease the amount of his or her deduction by executing an amended
authorization form and filing it with Kroll-O'Gara; the change shall be
effective with the first pay check received by the Participant which is no less
than three business days after the amended authorization form is filed with the
Human Resources Department of Kroll-O'Gara. A Participant also may discontinue
deductions at any time; provided, however, that any Participant who ceases
payroll deductions under this Plan altogether (other than to comply with Section
8), or who withdraws the Available Funds and Kroll-O'Gara Stock held in the
Participant's Stock Purchase Account, will not be permitted to resume authorized
payroll deductions until a Grant Date that is at least six (6) months after the
date of such cessation of deductions or withdrawal. A Participant may resume
authorized payroll deductions in accordance with Section 3.
5. STOCK PURCHASE ACCOUNTS
A Stock Purchase Account will be maintained in the name of each
Participant. Authorized deductions will be credited to the Participant's Stock
Purchase Account. Interest will not accrue or be paid to a Participant on
Available Funds held in the Participant's Stock Purchase Account.
A-2
<PAGE> 19
Kroll-O'Gara Stock purchased will be held in the Stock Purchase Account
maintained by the Custodian for each Participant, and any dividends paid on the
Kroll-O'Gara Stock will be credited to that Stock Purchase Account. The
Participant will be responsible for all taxes on any such dividends. Any cash
dividends paid on Kroll-O'Gara Stock held in a Participant's Stock Purchase
Account shall be used to purchase additional shares of Kroll-O'Gara Stock.
Statements of a Participant's Stock Purchase Account balance shall be
distributed to the Participant as soon as practical after the close of each
Offering Period.
6. GRANT OF OPTION TO PURCHASE
On each Grant Date, each Participant shall be granted an option to purchase
on the Exercise Date of such Offering Period the largest number of whole shares
of Kroll-O'Gara Stock that can be purchased with the Available Funds in the
Participant's Stock Purchase Account at the Exercise Price, provided that the
maximum number of shares of Kroll-O'Gara Stock that may be purchased for the
Participant may not exceed the limit set forth in Section 8 below.
7. EXERCISE OF OPTION TO PURCHASE
Unless a Participant has withdrawn from the Plan as provided in Section
13.1 or the Plan has been terminated or suspended, a Participant's option to
purchase Kroll-O'Gara Stock shall be exercised automatically on each Exercise
Date. No fractional shares of Kroll-O'Gara Stock shall be purchased upon
exercise of a Participant's option. Any Available Funds which are not sufficient
to purchase a whole share of Kroll-O'Gara Stock shall be retained in the
Participant's Stock Purchase Account for use in a subsequent Offering Period.
8. LIMITATION ON RIGHT TO PURCHASE
In any calendar year, a Participant shall not be permitted to purchase an
amount of Kroll-O'Gara Stock, through this or any other Code Section 423 plan,
which exceeds $25,000 of fair market value of such Stock, determined based upon
the fair market value of Kroll-O'Gara Stock on the Grant Date.
9. SHAREHOLDER RIGHTS
Kroll-O'Gara Stock purchased on behalf of a Participant as of an Exercise
Date shall, for all purposes, be deemed to have been purchased at the close of
business on that Exercise Date. Prior to that time none of the rights or
privileges of a shareholder of Kroll-O'Gara shall exist with respect to such
shares.
10. SHARES AVAILABLE
Not more than 1,000,000 shares of Kroll-O'Gara Stock may be sold under this
Plan (such aggregate number to be appropriately adjusted to reflect any increase
or decrease in the number of shares of Kroll-O'Gara Stock resulting from a
subdivision or combination of shares, stock dividend payable to all shareholders
or other capital adjustment). Shares of Kroll-O'Gara Stock may be purchased
directly from Kroll-O'Gara (and may be either authorized and unissued shares or
treasury shares) or on the open market. If Kroll-O'Gara Stock is purchased on
the open market, Kroll-O'Gara shall pay the difference between the Exercise
Price and the cost of such purchases, including any brokerage fees on all
purchases. If, as of any Exercise Date, the purchase of shares of Kroll-O'Gara
Stock with all Available Funds would cause the purchase of a number of shares in
excess of that number of shares then available for purchase under the Plan, the
Committee shall proportionately reduce the number of shares that could otherwise
be purchased by each Participant on that Exercise Date in order to eliminate the
excess and thereafter shall suspend further purchases and payroll deductions and
cause the excess Available Funds of each Participant to be refunded.
11. BENEFICIARY DESIGNATION
A Participant may designate, on a form provided by Kroll-O'Gara for that
purpose, a beneficiary or beneficiaries to receive the Participant's interest in
this Plan in the event of the Participant's death, but such a
A-3
<PAGE> 20
designation shall not be effective for any purpose until it has been filed with
Kroll-O'Gara by the Participant during the Participant's lifetime. In the event
that a Participant fails to designate a beneficiary, or if for any reason such
designation shall be legally ineffective, or if all designated beneficiaries
predecease the Participant or die simultaneously with the Participant,
distribution shall be made to the Participant's spouse; or if none, to the
Participant's children in equal shares; or if none, to the Participant's parents
in equal shares; or if none, to the Participant's estate.
12. ADMINISTRATION OF THE PLAN
Subject to the general control of, and superseding action by, the Board of
Directors, the Committee shall have full power to administer this Plan,
including the power to construe, interpret and apply the terms of the Plan, to
determine eligibility and to adjudicate disputes relating to the Plan. Every
finding, decision and determination of the Committee shall, subject as
aforesaid, be final and binding on all parties.
The members of the Committee shall be selected by the Board of Directors
and are subject to removal by the Board of Directors.
13. WITHDRAWALS AND DISTRIBUTIONS
13.1 REQUESTED BY PARTICIPANT
Available Funds and Kroll-O'Gara Stock held in a Participant's Stock
Purchase Account may be withdrawn by that Participant at any time by giving
written notice to Kroll-O'Gara on a form provided for that purpose. A
Participant may not withdraw less than all the Available Funds and Kroll-O'Gara
Stock in the Participant's Stock Purchase Account. A Participant who makes such
a withdrawal must cease all current payroll deductions under the Plan and will
not be permitted to resume authorized payroll deductions under the Plan until a
Grant Date that is at least six (6) months after the date of withdrawal.
13.2 REQUIRED BY THE PLAN
All Available Funds and Kroll-O'Gara Stock in a Participant's Stock
Purchase Account shall be distributed to the Participant in the event:
(i) the Participant ceases to be an Eligible Employee; or
(ii) the Plan is terminated.
14. AMENDMENT OF THE PLAN
The Board of Directors may at any time, or from time to time, alter or
amend this Plan in any respect.
15. EXPIRATION, TERMINATION AND SUSPENSION OF THE PLAN
This Plan is designed to comply with the provisions of Section 423 of the
Code. If this Plan does not at any time comply with Section 423, it shall be
terminated by action of the Board of Directors as promptly as is practicable.
This Plan has no termination date; however, the Board of Directors shall have
the right to terminate or suspend the Plan at any time.
16. NOTICES
Any notice which a Participant files pursuant to this Plan shall be in the
appropriate form and shall be delivered by hand or mailed, postage prepaid, to
Kroll-O'Gara's Human Resources Department.
17. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the service of Kroll-O'Gara or any Subsidiary or to
interfere with the right of Kroll-O'Gara or any Subsidiary to discipline,
discharge or rehire any Employee at any time.
A-4
<PAGE> 21
18. USE OF FUNDS
All payroll deductions received or held by Kroll-O'Gara under the Plan may
be used by Kroll-O'Gara for any corporate purpose, and Kroll-O'Gara shall not be
obligated to segregate such amounts.
19. TAXES
At the time an option is exercised, or at the time any Kroll-O'Gara Stock
acquired under the Plan is disposed of, a Participant must make adequate
provision for any resulting federal, state or other tax withholding obligations
imposed on Kroll-O'Gara. At any time, Kroll-O'Gara may, but shall not be
obligated to, withhold from the Participant's compensation the amount necessary
for Kroll-O'Gara to satisfy its withholding obligations, including any
withholding required to make available to Kroll-O'Gara any tax deductions or
benefits attributable to the sale or early disposition of Kroll-O'Gara Stock by
the Participant.
20. OTHER CONDITIONS
No Kroll-O'Gara Stock shall be issued pursuant to this Plan unless the
issuance and delivery complies with all applicable provisions of law, including,
without limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, the rules and regulations promulgated under each, and the requirements of
any stock exchange or national market system on which Kroll-O'Gara Stock may
then be listed.
A-5
<PAGE> 22
THE KROLL-O'GARA COMPANY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR ANNUAL MEETING
The undersigned hereby appoints Jules B. Kroll, Wilfred T. O'Gara and Abram S.
Gordon, and each of them, attorneys with the powers which the undersigned would
possess if personally present, including the power of substitution, to vote all
shares of the undersigned at the Annual Meeting of Shareholders of The
Kroll-O'Gara Company to be held at The Omni Netherland Plaza Hotel, 35 West 5th
Street, Cincinnati, Ohio on July 26, 2000, at 9:00 a.m. (EDT), and at any
adjournments thereof:
1. Election of Jules B. Kroll, Thomas M. O'Gara, Wilfred T. O'Gara, Michael G.
Cherkasky, Marshall S. Cogan, Michael J. Lennon, Raymond E. Mabus, Hugh E. Price
and William S. Sessions as directors.
[ ] FOR all nominees [ ] WITHHELD from all nominees
[ ] For all nominees except as noted on line below:
*EXCEPTIONS _________________________________________
2. [ ] FOR [ ] AGAINST [ ] ABSTAIN on the proposal to approve and adopt the
Company's Employee Stock Purchase
Plan.
3. [ ] FOR [ ] AGAINST [ ] ABSTAIN on the proposal to ratify the appointment
of Arthur Andersen LLP as
independent auditors.
4. Upon such other business as may properly come before the meeting.
The proxy will be voted on the above as specified. IF NO SPECIFICATION IS MADE,
THE PROXY WILL BE VOTED "FOR" THE PROPOSALS AND IN FAVOR OF THE NOMINEES LISTED
ABOVE.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
As to any other matter or if any of the nominees is not available for election,
said attorneys shall vote in accordance with the recommendation of the Board of
Directors.
Please mark: I do [ ] do not [ ] plan to attend the meeting.
Dated_______________________________, 2000
------------------------------------------
------------------------------------------
(Signature of Shareholder)
IMPORTANT: Please date and sign exactly as
name appears hereon. If shares are held
jointly, each shareholder named should sign.
Executors, administrators, trustees, etc.
should so indicate when signing. If the
signer is a corporation, please sign full
corporate name by duly authorized officer.
