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SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarter ended September 30, 1995
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)
(216) 953-2700
Registrant's telephone number, including area code
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 and Exchange Act of 1934 during the preceding 12
months (or 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Class Outstanding as of November 3, 1995
Class A Common Stock, par value $.10 per share 13,637,208
Class B Common Stock, par value $.10 per share 4,726,669
18,363,877
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FIGGIE INTERNATIONAL INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the Nine
Months Ended September 30, 1995 and 1994 3
Consolidated Statements of Income for the Three
Months Ended September 30, 1995 and 1994 4
Consolidated Balance Sheets at September 30, 1995
and December 31, 1994 5-6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8-12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-21
PART II. OTHER INFORMATION 22-23
SIGNATURES 24
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(in thousands, except per share data)
(Unaudited)
1995 1994
CONTINUING OPERATIONS:
Net Sales $266,305 $232,933
Cost of Sales 198,195 179,013
Gross Profit on Sales 68,110 53,920
Operating Expenses:
Selling, General and Administrative 40,219 50,175
Research and Development 10,299 14,145
Total Operating Expenses 50,518 64,320
Operating Income (Loss) 17,592 (10,400)
Other Expense (Income):
Refinancing Costs 10,806 17,313
Interest Expense 23,075 31,124
Interest Income (1,731) (2,673)
Other, Net (1,664) (8,942)
Income (Loss) before Income Tax Benefit (12,894) (47,222)
Income Tax Benefit - 10,053
Income (Loss) from Continuing Operations (12,894) (37,169)
Income (Loss) from Discontinued Operations,
Net of Tax - (16,882)
Net Income (Loss) $(12,894) $(54,051)
Weighted Average Shares 18,175 17,781
Per Share Data
Income (Loss) from Continuing Operations $ (0.71) $ (2.09)
Income (Loss) from Discontinued Operations - (0.95)
Net Income (Loss) $ (0.71) $ (3.04)
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(in thousands, except per share data)
(Unaudited)
1995 1994
CONTINUING OPERATIONS:
Net Sales $ 92,349 $ 79,792
Cost of Sales 68,435 61,468
Gross Profit on Sales 23,914 18,324
Operating Expenses:
Selling, General and Administrative 13,898 14,278
Research and Development 3,792 2,734
Total Operating Expenses 17,690 17,012
Operating Income (Loss) 6,224 1,312
Other Expense (Income):
Refinancing Costs 756 9,365
Interest Expense 6,446 10,054
Interest Income (306) (1,139)
Other, Net (1,646) (8,884)
Income (Loss) before Income Tax 974 (8,084)
Income Tax - (2,764)
Income (Loss) from Continuing Operations 974 (10,848)
Income (Loss) from Discontinued Operations,
Net of Tax - (4,995)
Net Income (Loss) $ 974 $(15,843)
Weighted Average Shares 18,270 17,722
Per Share Data
Income (Loss) from Continuing Operations $ 0.05 $ (0.61)
Income (Loss) from Discontinued Operations - (0.28)
Net Income (Loss) $ 0.05 $ (0.89)
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(in thousands)
Sept. 30, Dec. 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 29,108 $ 28,611
Restricted Cash 27,430 18,716
Trade Accounts Receivable,
less Allowance for Uncollectible
Accounts of $303 in 1995
and $259 in 1994 54,752 44,994
Inventories 46,071 38,845
Prepaid Expenses 3,398 3,225
Recoverable Income Taxes - 8,108
Net Assets Related to
Discontinued Operations 74,526 298,411
Total Current Assets 235,285 440,910
PROPERTY, PLANT AND EQUIPMENT
Land and Land Improvements 24,683 29,699
Buildings and Leasehold Improvements 39,724 46,024
Machinery and Equipment 63,873 70,587
128,280 146,310
Accumulated Depreciation (42,864) (42,385)
85,416 103,925
Property under Capital Leases, less
Accumulated Depreciation of $4,312
in 1995 and $4,709 in 1994 1,797 2,158
Net Property, Plant and Equipment 87,213 106,083
OTHER ASSETS
Deferred Divestiture Proceeds 44,130 19,190
Prepaid Pension Costs 10,946 9,964
Prepaid Rent on Leased Equipment 17,075 17,075
Intangible Assets 19,645 20,244
Cash Surrender Value of Insurance Policies 9,176 10,576
Non-current Receivables 5,680 5,920
Prepaid Finance Costs 4,002 8,291
Other 5,428 6,211
Total Other Assets 116,082 97,471
Total Assets $ 438,580 $ 644,464
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(in thousands, except par value)
Sept. 30, Dec. 31,
1995 1994
(Unaudited)
LIABILITIES
CURRENT LIABILITIES
Debt Due Within One Year $ 43,440 $ 171,641
Accounts Payable 39,922 55,398
Accrued Insurance Reserves 14,595 16,889
Accrued Liabilities and Expenses 47,163 64,706
Current Maturities of Long-term Debt 4,788 7,179
Total Current Liabilities 149,908 315,813
Long-term Debt 211,237 234,491
Other Non-current Liabilities 23,998 28,938
Total Liabilities 385,143 579,242
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 Par Value;
Authorized, 3,217 Shares;
Issued and Outstanding, None - -
Class A Common Stock, $.10 Par Value; 1,365 1,370
Authorized, 18,000 Shares;
Issued and Outstanding
1995 - 13,651; 1994 - 13,695
Class B Common Stock, $.10 Par Value; 472 471
Authorized, 18,000 Shares;
Issued and Outstanding
1995 - 4,719; 1994 - 4,715
Capital Surplus 109,046 110,518
Accumulated Deficit (56,092) (43,198)
Unearned Compensation (1,474) (3,829)
Cumulative Translation Adjustment 120 (110)
Total Stockholders' Equity 53,437 65,222
Total Liabilities and
Stockholders' Equity $ 438,580 $ 644,464
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(in thousands)
(Unaudited)
1995 1994
Operating Activities:
Loss from Continuing Operations $ (12,894) $ (37,169)
Loss from Discontinued Operations - (16,882)
Adjustments to Reconcile Net Loss to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization 4,966 34,689
Amortization of Unearned Compensation 1,068 3,472
Other, Net (428) (18,232)
Changes in Operating Assets and Liabilities:
Trade Accounts Receivable (7,636) (1,873)
Allowance for Uncollectible Accounts (1,044) 280
Finance Receivables 391 4,413
Inventories (9,298) 9,771
Prepaid Items 6,473 (12,783)
Prepaid Pension Cost (1,022) (1,188)
Other Assets 8,183 3,360
Accounts Payable (20,244) (12,777)
Accrued Liabilities and Expenses 10,645 (4,172)
Accrued Income Taxes 14,410 24,802
Other Liabilities (4,318) 3,869
Net Cash Used by Operating Activities (10,748) (20,420)
Investing Activities:
Capital Expenditures for Continuing Operations (4,419) (14,008)
Capital Expenditures for Discontinued Operations (18,483) (29,797)
Proceeds from Sale of Property,
Plant and Equipment 10,858 9,274
Sale of Investment - 7,861
Proceeds from Business Divestitures 186,156 173,565
Purchases of Securities by Insurance Subs. (159) (6,691)
Net Cash Provided by Investing Activities 173,953 140,204
Financing Activities:
Proceeds from Debt 3,963 3,126
Principal Payments on Debt (157,809) (67,263)
Borrowings Under Notes Payable, Net - (18,114)
Common Stock Transactions, Net (189) (2,614)
Net Cash Used by Financing Activities (154,035) (84,865)
Net Increase in Cash and Cash Equivalents 9,170 34,919
Cash and Cash Equivalents at Beginning of Year 68,300 33,816
Cash and Cash Equivalents at End of Period $ 77,470 $ 68,735
- - Continuing Operations - Unrestricted $ 29,108 $ 45,514
- - Continuing Operations - Restricted $ 27,430 $ 20,129
- - Discontinued Operations $ 8,482 $ 3,092
- - Deferred Divestiture Proceeds $ 12,450 $ -
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial information included herein has been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission and properly reflects all adjustments
(consisting of normal recurring accruals) which are, in the opinion
of management, necessary to present a fair statement of the
financial position and results of operations for the periods
covered by this report. The results of operations for the three
months and nine months ended September 30, 1995 are not necessarily
indicative of the results to be expected for the entire year.
(1) Summary of Significant Accounting Policies:
The financial statements for the three months and nine months ended
September 30, 1995 have been prepared in accordance with the
accounting policies described in Note 1 of the Notes to
Consolidated Financial Statements appearing in Figgie International
Inc.'s 1994 Form 10-K.
(2) Discontinued Operations:
On February 15, 1995, the Company announced that the Board of
Directors had approved a strategic business plan, effective
December 31, 1994, designed to restore the Company to
profitability. Under the plan, the Company will operate four
technology-driven manufacturing companies, aggressively cut
corporate overhead, sell its fourteen other businesses in 1995 and
use the sale proceeds to reduce debt and operating lease
obligations. The entities to be sold were reported as discontinued
operations for the year ended December 31, 1994.
Through September 30, 1995, the Company sold through unrelated
sales transactions the following twelve businesses: Figgie
Acceptance; Figgie Power Systems; Spaceguard Products; Figgie/Alfa
Packaging Systems; Figgie Financial Services; Medcenter Management
Services; American LaFrance; Safway Steel Products; Figgie Fire
Protection Services; S-P/Sheffer International; "Automatic"
Sprinkler Corporation of America; and Figgie Material Handling
Systems.
Proceeds and other considerations from divestitures which will be
paid to the Company upon fulfillment of contractual provisions, the
passage of time, or the occurrence of future events have been
recorded as non-current assets. Amounts consist of cash held in
bank escrow accounts, cash held back by purchasers to support
indemnification provisions and final purchase price determinations,
receivables expected from purchasers arising from purchase price
audits and cash due to the Company from future tax benefits under
tax sharing agreements with purchasers.
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(2) Discontinued Operations: - continued
Net Assets Related to Discontinued Operations consist primarily of
accounts receivable, installation contracts in process of
completion from the "Automatic" Sprinkler business, 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.
(3) Inventories:
Inventories are summarized as follows:
(in thousands)
Sept. 30, Dec. 31,
1995 1994
Manufacturing Inventories:
Raw materials $ 18,704 $ 21,509
Work in process 17,133 6,138
Finished goods 12,036 11,219
Inventory reserves (2,181) (1,532)
Total manufacturing inventories 45,692 37,334
Inventories applicable to
government contracts 218,729 207,632
Less: Progress payments (218,350) (206,121)
Net contracts in process 379 1,511
Total Inventories $ 46,071 $ 38,845
(4) Debt Refinancing:
On August 1, 1994, the Company executed an agreement ("Override
Agreement") with 21 unsecured institutional lenders to refinance
approximately $315 million in indebtedness ("Override Debt"), of
which $278 million was loans outstanding ("Funded Debt") and $37
million was letters of credit ("Contingent Debt"). 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%. A restructuring fee of 3-1/2% has been fully
paid as of June 30, 1995. Mortgages, the 9-7/8% Senior Notes, the
10-3/8% 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. In December 1994, the Override Agreement was
amended to permit the Company to obtain additional letter of credit
facilities.
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4) Debt Refinancing: continued
On March 31, 1995, the Override Agreement was amended (the "Second
Amendment") to extend the expiration date to January 1, 1996, set
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 permit the
Company to incur additional indebtedness as defined. Fees due
under the original agreement and extension fees will require a
refinancing cost of $11.5 million to $12.0 million in 1995 of which
$10.8 million was expensed as of September 30, 1995.
Pursuant to the Second Amendment, the Company agreed to repay in
1995 a substantial portion of all of the remaining Funded Debt
outstanding, 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.
Amortization payments made by the Company to the lenders are
allocated to the 21 lenders in proportion to each lender's total
refinanced debt; that is, the original total of their Funded Debt
and Contingent Debt. As a result of amortization payments made by
the Company since August 1, 1994, certain of the lenders have had
all of their Funded Debt repaid and are entitled to and do receive
amortization payments on behalf of their Contingent Debt. These
payments serve as cash collateral for the Contingent Debt. As of
September 30, 1995, such cash collateral amounted to $11.0 million
and the amount is included in restricted cash.
At September 30, 1995, all required restrictions and financial
covenants have been satisfied.
(5) Debt Due Within One Year:
Debt due within one year is as follows:
(in thousands)
9/30/95 12/31/94
Average Average
Outstanding Rate Outstanding Rate
Override Debt $ 43,399 10.75% $167,364 10.50%
Other Debt 41 8.75% 4,277 9.85%
Total $ 43,440 $171,641
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 September 30, 1995, $8.4 million was
available under this facility. No amounts were borrowed during the
nine-month period ended September 30, 1995.
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(6) Long-Term Debt:
Total long-term debt at September 30, 1995 and December 31, 1994
consisted of the following:
(in thousands)
1995 1994
9.875% Senior Notes due 1999 $174,000 $174,000
10.375% Debentures due 1998 8,000 9,500
Mortgage notes 31,247 53,076
Obligations under capital leases 2,778 4,889
Other debt and notes - 205
Total 216,025 241,670
Less - current maturities (4,788) (7,179)
Long-term debt $211,237 $234,491
Mortgage notes secured by real property are due at various dates
through 2009 and bear interest at rates ranging from 7.5% to
12.25%. During the period ended September 30, 1995, the Company
paid down $25.6 million of long-term debt, including $21.8 million
of mortgages.
(7) Leases:
The Company leases a substantial amount of manufacturing equipment
under operating lease arrangements. All monthly rent payments due
under all leases have been made.
On August 1, 1994, and concurrently with entering into the Override
Agreement, the Company executed agreements with certain lessors to
restructure approximately $172 million of outstanding leases.
Effective March 31, 1995, the Company and those lessors amended
certain financial covenants of the leases to conform to the
financial covenants contained in the Second Amendment to the
Override Agreement, and to accelerate certain fees and to amend
other terms consistent with the Override Agreement.
The changes in rental commitments under operating leases from those
as of December 31, 1994 to those as of September 30, 1995 are as
follows (in millions):
Actual
Rental commitments under operating leases
at December 31, 1994, including $120.6
related to discontinued operations $ 155.7
Payments to lessors 23.4
Elimination of rental commitments
through sale of underlying assets
or assignment of leases to purchasers 79.6
Rental commitments under operating leases
at September 30, 1995, including $22.7
related to discontinued operations $ 52.7
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(7) Leases: (continued)
Funds to pay lease obligations related to discontinued operations
are provided through the divestiture proceeds of those businesses
and, with respect to machinery and equipment that is not purchased,
not utilized or is underutilized, through the Company's internal
funds until such equipment is sold, subleased or assigned.
(8) Contingent Liabilities:
In the third quarter 1995, the Company resolved two significant
pieces of litigation. On September 11, 1995, the settlement
agreement between the Company and parties that filed derivative
complaints in 1993 became final. On September 29, 1995, the Company
and the parties who had brought two class action suits against the
Company in 1994 alleging securities law violations agreed upon a
settlement, as to which the parties are currently negotiating a
formal agreement. The financial impact of these matters was not
significant and has been reflected in the September 30, 1995
financial statements. These matters are more fully described in
Part II, Item 1 of this Form 10-Q.
On October 12, 1995, the Company and Deloitte & Touche LLP executed
a settlement agreement to resolve litigation over consulting
services and payment for those services. This matter is more fully
discussed in Part II, Item 1 of this Form 10-Q. The settlement is
not expected to have a material effect on the Company's financial
condition, results of operations or cash flow.
On December 19, 1994 the Company 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 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 trial is scheduled to begin in early December, 1995.
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
associated with significant 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 position, results
of operations or cash flow.
Costs charged by the Company to the U.S. Government in the
performance of U.S. Government contracts are subject to inquiry and
audit. Several years are open. The Company has provided a
reasonable reserve for possible disallowed costs.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
RESULTS OF OPERATIONS SUMMARY
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr Nine Mos Nine Mos 3rd Qtr
(in thousands) 1995 1995 1995 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 85,266 $ 88,690 $ 92,349 $266,305 $232,933 $ 79,792
Cost of Sales 63,013 66,747 68,435 198,195 179,013 61,468
Gross Profit on Sales 22,253 21,943 23,914 68,110 53,920 18,324
% of Net Sales 26.1% 24.7% 25.9% 25.6% 23.1% 23.0%
Operating Expenses:
Selling, General & Admin. 13,830 12,491 13,898 40,219 50,175 14,278
Research and Development 3,510 2,997 3,792 10,299 14,145 2,734
Total Operating Expenses 17,340 15,488 17,690 50,518 64,320 17,012
Operating Income (Loss) $ 4,913 $ 6,455 $ 6,224 $17,592 $(10,400) $ 1,312
% of Net Sales 5.8% 7.3% 6.7% 6.6% (4.5)% 1.6%
</TABLE>
Discussion of 1995 Compared to 1994:
For the first nine months of 1995, Net Sales increased $33.4
million, or 14%, to $266.3 million from net sales of $232.9 million
for the same period in 1994. Sales increased 44% at Snorkel and
10% at the Scott/Taylor segment. Sales at Interstate Electronics
decreased 6%. For the third quarter, 1995 sales of $92.3 million
were 16% higher than 1994 third quarter sales. Third quarter 1995
sales increased $3.7 million or 4% over the second quarter of 1995.
Gross Profit for the nine months ended September 30 improved $14.2
million to $68.1 million and represented 25.6% of net sales as
compared to 23.1% in 1994. All three segments achieved gross
profit dollar improvements.
Selling, General and Administrative expenses decreased in dollars
and as a percentage of net sales. For the nine months, selling,
general and administrative expenses were 15.1% in 1995, compared to
21.5% in 1994. Lower Corporate general and administrative expense
was responsible for substantially all of the improvement.
Operating Income amounted to $17.6 million in 1995, as compared to
an operating loss of $10.4 million in 1994.
Income from Continuing Operations and Net Income were both $1.0
million for the three months ended September 30, 1995 compared to
a loss from continuing operations of $10.8 million and net loss of
$15.8 million for the comparable 1994 period. On a year-to-date
basis, the 1995 loss from continuing operations and the net loss of
$12.9 compares favorably with the 1994 loss from continuing
operations of $37.2 million and the net loss of $54.1 million.
SEGMENT INFORMATION
The Company is a manufacturer of technology-driven products with
operations in three reporting segments, Interstate Electronics
Corporation, Scott/Taylor Environmental, and Snorkel. The results
of operations are most meaningful when analyzed and discussed in
this manner.
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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.
<TABLE>
The results of operations for Interstate Electronics were as
follows:
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr Nine Mos Nine Mos 3rd Qtr
(in thousands) 1995 1995 1995 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 24,787 $ 26,934 $ 23,971 $ 75,692 $ 80,352 $ 27,051
Cost of Sales 17,888 19,627 17,849 55,364 60,195 19,652
Gross Profit on Sales 6,899 7,307 6,122 20,328 20,157 7,399
% of Net Sales 27.8% 27.1% 25.5% 26.9% 25.1% 27.4%
Operating Expenses:
Selling, General & Admin. 2,677 3,110 2,989 8,776 9,131 3,411
Research and Development 2,187 1,748 2,330 6,265 10,079 1,412
Total Operating Expenses 4,864 4,858 5,319 15,041 19,210 4,823
Operating Income (Loss) $ 2,035 $ 2,449 $ 803 $ 5,287 $ 947 $ 2,576
% of Net Sales 8.2% 9.1% 3.3% 7.0% 1.2% 9.5%
</TABLE>
Discussion of 1995 Compared to 1994:
Net Sales, Margins and Profits for the third quarter declined due
to expected reductions in U.S. Government defense spending and
concurrent costs to launch Interstate Electronics Corporation's
commercial GPS and Satellite Communication businesses. Meaningful
commercial sales and profits are not expected in 1995.
Net Sales for the quarter and year-to-date declined due to
expected reductions in defense spending. In comparing the first
nine months of 1995 to 1994 the GPS and Strategic Weapon Systems
businesses were flat while the Displays and Satellite Communication
Systems business experienced a drop in sales. The gross profit
performance has improved during the nine month period this year
from 25.1% to 26.9% due to improvement in the Displays and GPS
business product lines. In comparing the third quarter 1995 to
1994 the gross profit fell by $1.3 million. The two major factors
were the sales volume drop of $3.1 million and lower margins across
the segment.
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<PAGE>15
INTERSTATE ELECTRONICS CORPORATION - continued
Operating Profit as a percent of sales for the first nine months of
1995 increased to 7.0% from 1.2% in 1994. This is primarily due to
lower research and development expense in 1995 as a result of the
conclusion of the initial product development phase of two major
commercial ventures: 1) A bandwidth-on-demand Time Divided Multiple
Access ("TDMA") mesh network product from the Satellite
Communication Systems business unit, and 2) A Flight Management and
Navigation Landing System ("FMS") from the Global Positioning
Systems business unit. The 1995 expenses primarily reflect the
costs necessary to finalize the products. TDMA is scheduled for a
public demonstration in the winter of 1995. FMS is currently
undergoing FAA certification tests which will continue into early
1996.
Operating Profit for the third quarter dropped from 9.5% in 1994 to
3.3% in 1995. The two major factors were the reduction of gross
margin from 27.4% to 25.5% and the increase in research and
development costs (from 5.2% to 9.7%) to finalize the commercial
products. Selling, general and administrative expenses as a
percent of sales were 12.5% in the third quarter of 1995, down
slightly from 12.6% in the prior year quarter. The amount of
general and administrative expenses in the third quarter was
reduced from the second quarter 1995 by aggressive cost controls,
which included reducing indirect employees from a five to a four
day work week and reducing executive compensation.
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<PAGE>16
SCOTT/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 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.
<TABLE>
The results of operations for Scott/Taylor Environmental were as
follows:
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr Nine Mos Nine Mos 3rd Qtr
(in thousands) 1995 1995 1995 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 30,510 $ 32,056 $ 33,787 $ 96,353 $ 87,214 $ 29,739
Cost of Sales 20,565 21,838 22,625 65,028 58,426 19,892
Gross Profit on Sales 9,945 10,218 11,162 31,325 28,788 9,847
% of Net Sales 32.6% 31.9% 33.0% 32.5% 33.0% 33.1%
Operating Expenses:
Selling, General & Admin. 3,764 3,947 3,698 11,409 10,953 3,390
Research and Development 772 664 796 2,232 2,717 896
Total Operating Expenses 4,536 4,611 4,494 13,641 13,670 4,286
Operating Income (Loss) $ 5,409 $ 5,607 $ 6,668 $17,684 $ 15,118 $ 5,561
% of Net Sales 17.7% 17.5% 19.7% 18.4% 17.3% 18.7%
Discussion of 1995 Compared to 1994:
Net Sales for the first nine months of 1995 increased by 10%
compared to last year (14% increase for the third quarter) due to
continued strong orders for oxygen products from Aviation
customers, as well as continued orders for emergency breathing
equipment from Government customers.
Gross Margin for the nine months and the third quarter is down
slightly due to less favorable product mix.
Selling, General and Administrative expenses for the first nine
months and the third quarter have increased slightly but are lower
as a percent of sales when compared to the same periods last year.
Research and Development expenses are lower for the year due to
completion of some major new programs which were underway last
year.<PAGE>
<PAGE>17
SNORKEL
Snorkel manufacturers 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.
</TABLE>
<TABLE>
The results of operations for Snorkel were as follows:
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr Nine Mos Nine Mos 3rd Qtr
(in thousands) 1995 1995 1995 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 29,969 $ 29,700 $ 34,591 $ 94,260 $65,367 $ 23,002
Cost of Sales 24,560 25,282 27,961 77,803 54,015 19,265
Gross Profit on Sales 5,409 4,418 6,630 16,457 11,352 3,737
% of Net Sales 18.0% 14.9% 19.2% 17.5% 17.4% 16.2%
Operating Expenses:
Selling, General & Admin. 1,850 1,989 2,070 5,909 4,725 1,669
Research and Development 551 585 666 1,802 1,349 426
Total Operating Expenses 2,401 2,574 2,736 7,711 6,074 2,095
Operating Income (Loss) $ 3,008 $ 1,844 $ 3,894 $ 8,746 $ 5,278 $ 1,642
% of Net Sales 10.0% 6.2% 11.3% 9.3% 8.1% 7.1%
Discussion of 1995 Compared to 1994:
Net Sales increased 44% for the nine months and 50% for the third
quarter, compared to last year due to continued high domestic
market demand for aerial work platforms ("AWP"), resurgent
international AWP markets and continued improvement in plant
output.
Gross Profit amounts and gross margin percentages improved for the
nine months and the third quarter as compared with 1994 due to
increased plant throughput and improving manufacturing
efficiencies.
Selling, General and Administrative expenses as a percentage of net
sales improved for the nine month and three month periods compared
to 1994.
Research and Development expenses increased due to product
development expenditures for AWPs and fire service products.
<PAGE>
<PAGE>18
CORPORATE AND UNALLOCATED COSTS AND EXPENSES
</TABLE>
<TABLE>
Corporate activity and unallocated costs and expenses were as
follows:
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr Nine Mos Nine Mos 3rd Qtr
(in thousands) 1995 1995 1995 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Cost of Sales $ - $ - $ - $ - $ 6,377 $ 2,659
Selling, General & Admin. $ 5,539 $ 3,445 $ 5,141 $ 14,125 $ 25,366 $ 5,808
Other Expenses (Income):
Refinancing Costs 4,522 5,528 756 10,806 17,313 9,365
Interest Expense 9,074 7,555 6,446 23,075 31,124 10,054
Interest Income (844) (581) (306) (1,731) (2,673) (1,139)
Other, Net 199 (217) (1,646) (1,664) (8,942) (8,884)
Discussion of 1995 Compared to 1994:
Cost of Sales were primarily associated with the centralized
manufacturing and technology centers created as part of the factory
automation program. These Centers were shut down in 1994 to reduce
costs. The 1994 costs represent machinery-related rental expenses
and inventory that was written off.
Selling, General and Administrative expenses were reduced
significantly in 1995. These reductions included numerous cost-
cutting measures, principally, legal and professional fees, a 41%
reduction in Corporate staff and the elimination of Corporate
aircraft and, in the second quarter of 1995, the reversal of the
1994 bonus accrual ($1.4 million). In the second quarter, the
Company paid only required bonuses and did not pay discretionary
bonuses following the 1994 consolidated loss; accordingly, the
accrual was reversed.
Refinancing Costs are 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. The 1995 expenses are
predominantly lender fees, while 1994 expenses were for
professional fees. Refinancing costs decreased substantially in
the third quarter of 1995 as the 3-1/2% fee from the original
portion of the Override Agreement was amortized over the
refinancing period ended June 30, 1995.
Interest Expense decreased for the nine months and for the third
quarter due to lower debt levels in 1995 offset somewhat by higher
interest rates than in 1994.
<PAGE>
<PAGE>19
CORPORATE AND UNALLOCATED COSTS AND EXPENSES - continued
Other, Net was favorably impacted in the third quarter of 1995 by
adjustments to litigation and environmental reserves established in
1994. The adjustments were made as a result of favorable
developments that occurred in the third quarter of 1995. In August
and September 1995 the Company resolved the litigation referred to
in paragraph 1 of Note 8. Also in the quarter, the Company revised
downward the estimated environmental clean-up costs at three
locations based upon developments occurring in the quarter. Other,
Net in 1994 reflects the proceeds from business interruption
insurance associated with the Missouri River flood in August, 1993.
<PAGE>
<PAGE>20
FINANCIAL POSITION AND LIQUIDITY
Accounts Receivable at September 30, 1995 are $54.8 million,
compared to $45.0 million as of the end of the year. Increased
Snorkel sales and slow payments from the government account for the
increase.
Inventories increased by $7.2 million due to a shortage of vendor
supplied quality parts which resulted in unfinished production
remaining in inventory.
Cash from operations and working capital required $10.7 million,
consisting of a loss from operations (due principally to payments
of refinancing fees and interest) mostly offset by the tax refund.
The proceeds from divestitures and miscellaneous asset sales
generated $197.0 million, of which $157.8 million was applied to
pay down debt since year-end 1994.
Expenditures for property, plant and equipment were $4.4 million
for continuing operations ($18.5 million for discontinued
operations) in 1995. 1995 expenditures are for improvements in
manufacturing efficiencies and tooling related to the production of
new products. Capital expenditures are expected to be funded from
internally generated funds.
As discussed in Note 4 to the Consolidated Financial Statements,
the Company completed a debt refinancing which precludes the
Company from incurring additional indebtedness and specifies
repayment and other terms through January 1, 1996. In 1995, the
Company has been selling those businesses whose net assets have
been presented in the Company's balance sheet as Net Assets Related
to Discontinued Operations and applying a substantial portion of
the proceeds to amortize the refinanced indebtedness. The Company
will continue to do so throughout the remainder of 1995.
Net Assets Related to Discontinued Operations at September 30, 1995
is $74.5 million, a decrease of $223.9 million from $298.4 million
at the beginning of the year. The divestitures of twelve
businesses noted in Note 2 account for this decrease. In the third
quarter, the Company made amortization payments of $47 million in
accordance with the Override agreement, of which $38 million was
applied against Funded Debt and $9 million was used to cash
collateralize Contingent Debt.
All financial covenants in the Override Agreement have been
satisfied. These covenants specify minimum net worth balances of
$50 million at September 30, 1995 (the Company achieved $53
million) and $56 million at December 31, 1995. In the event the
Company fails to satisfy a financial covenant, the Agreement
contains a provision which permits the lenders with notice to the
Company to accelerate the due date of the remaining scheduled
<PAGE>
<PAGE>21
FINANCIAL POSITION AND LIQUIDITY - continued
Override Debt and to require the Company to cash collateralize all
outstanding Contingent Debt.
Management expects that the Company will continue to comply with
the financial covenants and to maintain sufficient liquidity to
fund future required loan payments and operations. The Company
expects its outstanding Funded Debt of $43.4 million at September
30, 1995 to be paid out and the Contingent Debt to be renegotiated
or fully cash collateralized by December 31, 1995.
The Company is in the process of negotiating a new credit facility
and anticipates that the negotiations will be completed and a new
facility in place by year-end. If a replacement facility is not in
place by January 1, 1996 and the Override Agreement expires, then
all remaining Funded Debt and reimbursement obligations under
Contingent Debt mature. In such event, the Company would be
required to pay Funded Debt in full and to satisfy Contingent Debt
by providing replacement or back-up letters of credit or cash
collateral for each letter of credit.
Liquidity as of September 30, 1995 consisted of $29.1 million of
unrestricted cash, an unused line of credit, cash balances at the
discontinued businesses and cash flow from the ongoing businesses.
The high level of interest to service outstanding debt requires the
continual divestiture of the discontinued operations so that as
these entities are divested, the proceeds can be applied to pay
down outstanding debt and thereby reduce interest expense.
<PAGE>
<PAGE>22
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
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 sought monetary damages and costs and were
consolidated into one case. The parties subsequently agreed
upon a settlement in September 1995 and are negotiating a
formal agreement incorporating the settlement terms. The
provisions of the settlement will be specified in a notice to
be sent to the members of the affected stockholder class who
will be afforded an opportunity to object to the settlement.
The terms of the settlement will thereafter be subject to
final court approval.
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 appealed the Court's decision, and before the
appeals court issued a ruling, the parties reached a
settlement. The principal terms of the settlement were
included in a notice mailed to the Company's stockholders of
record and they were provided an opportunity to object.
Following a hearing held on August 7, 1995, the Court entered
a judgment on August 10, 1995 approving the settlement and
dismissing the litigation. The judgment was not appealed and
became final on September 11, 1995, when the time for appeal
expired. The terms of the settlement were described in the
supplement to the proxy statement for the Company's 1995
Annual Meeting of Stockholders held on October 17, 1995.
On October 11, 1994, Deloitte & Touche LLP filed suit against
the Company in the Cuyahoga Common Pleas Court of Ohio
alleging that the Company was in breach of contract for
<PAGE>
<PAGE>23
PART II. OTHER INFORMATION - continued
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 Court consolidated
the two cases and subsequently entered its order of dismissal
on October 26, 1995 after the parties entered into a
settlement agreement, which is not expected to have a
material effect on the Company's financial condition, results
of operations or cash flow.
On December 19, 1994 the Company, its subsidiary Figgie
Properties Inc. and the Richard E. Jacobs Group filed an
action in the Common Pleas Court of Cuyahoga County, Ohio
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 filed a motion to
dismiss the Company's complaint and on May 1, 1995, the Court
denied the City's motion to dismiss the complaint and granted
its motion to dismiss the Jacobs Group as a party plaintiff.
The trial is scheduled to being in early December, 1995.
ITEM 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
10.1 Management Agreement entered into with Luther
A. Harthun dated April 28, 1995.
10.2 Charles B. Miner, et al. v. Figgie, Jr., et
al. and MacDavid v. Figgie, Jr., et al.
settlement dated September 11, 1995.
27.0 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter
Form 8-K dated July 21, 1995 filed August 4, 1995
under Items 2, 5 and 7.
<PAGE>
<PAGE>24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Figgie International Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIGGIE INTERNATIONAL
By:_______/s/____________
Steven L. Siemborski
Senior Vice President and
Chief Financial Officer
(Duly Authorized and
Principal Financial Officer)
Date: November 8, 1995
<PAGE>
</TABLE>
<PAGE>1
Exhibit List
10.1 Management Agreement entered into with Luther A. Harthun
dated April 28, 1995.
10.2 Charles B. Miner, et al. v. Figgie, Jr., et al. and
MacDavid v. Figgie, Jr., et al. settlement dated
September 11, 1995.
27.0 Financial Data Schedule
<PAGE>
<PAGE>1
EXHIBIT 10.1
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT entered this 28th day of April,
1995, by and between Figgie International Inc. (the "Company") and
Luther A. Harthun (the "Executive").
WHEREAS, the Executive has served the Company for in excess of
twenty-nine (29) years - most recently as Senior Vice President -
International, General Counsel and Secretary; and
WHEREAS, the Executive has expressed a desire to retire from
his employment with the Company; and
WHEREAS, the Company wishes to retain the Executive in his
present capacity in order to obtain the advantages of his
experience and expertise particularly through the difficult period
which the Company is facing; and
WHEREAS, the Executive is willing to continue his employment
with the Company beyond his desired retirement date of April 30th,
1995 in accordance with and because of the provisions of this
Agreement; and
WHEREAS, the Company and the Executive desire to set forth in
a written agreement the terms and provisions of such employment and
of certain severance and other payments to be made to the Executive
under certain circumstances;
NOW THEREFORE, in consideration of the foregoing, the mutual
covenants set forth in this Agreement and for other good and
valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Company and the Executive agree as
follows:
Article 1. Term of Employment.
The Company will employ the Executive in accordance with the
terms and conditions set forth herein commencing on the date hereof
and extending to July 3, 1996, subject however, to extension by
mutual agreement of the parties or to earlier termination as
expressly provided herein. The Executive will continue to serve
the Company as Senior Vice President - International, General
Counsel and Secretary or in such other future capacity as he and
the Company might mutually agree and will devote his full business
time and best efforts to the satisfactory discharge of the
responsibilities of his office, performing such other duties
commensurate with such office as might reasonably be requested by
the Company's Chief Executive Officer.
<PAGE>
<PAGE>2
Article 2. Employment Terminations.
2.1 Termination Due to Retirement Or Death
In the event the Executive's employment is terminated by
reason of retirement or death during the term of this Agreement,
the benefits of the Executive, his survivors and beneficiaries will
be determined in accordance with the Company's retirement, Senior
Executive Benefits Program, insurance, Compensation Plan for
Executives and other applicable programs as in effect on the date
of this Agreement.
For purposes of this Section 2.1, the determination of
whether a termination qualifies as a retirement will be made in
accordance with the then established rules and definitions of the
Company's Senior Executive Benefits Program.
2.2 Termination Due to Disability. In the event the
Executive during the term of this Agreement becomes, in the opinion
of qualified medical authority, so disabled as to be unable to
satisfactorily perform his duties hereunder, the Company will have
the right to terminate the Executive's employment upon thirty (30)
days written notice to the Executive but will continue to be
obligated to pay the Executive those amounts of salary, guaranteed
bonus and other payments provided in this Agreement as if the
Executive had remained a full-time employee of the Company and
retired on July 3, 1996. Such payments shall be in lieu of the
payments due to the Executive prior to July 3, 1996 in accordance
with the Company's Senior Executive Benefits Program. After July
3, 1996, any remaining payments due under the Senior Executive
Benefits Program by reason of the disability or retirement of the
Executive shall be paid.
2.3 Voluntary Termination by the Executive. The
Executive may terminate this Agreement and his employment at any
time by giving the Company written notice of intent to terminate,
delivered at lease thirty (30) calendar days prior to the effective
date of such termination. The Company will pay the Executive his
full base salary, at the rate then in effect, through the effective
date of such termination, plus all other benefits to which the
Executive has a vested right at that time. In the event that the
voluntary termination of employment of the Executive shall be prior
to April 30, 1996, the bonus described in Section 3.2 hereof shall
not be paid. In the event that the voluntary termination of
employment of the Executive shall be subsequent to April 30, 1996,
such bonus will be paid.
<PAGE>
<PAGE>3
2.4 Termination by the Company Without Cause. The
Executive acknowledges that he is, has been and will continue at
all times to be an at-will employee of the Company and as such his
employment has been and continues to be terminable by either the
Executive or the Company at any time upon notice to the other and
for any reason not prohibited by law. However, if the Company
terminates the Executive's employment without Cause (as defined in
Section 2.5 hereof), the Executive, in his sole discretion, can
elect to receive the compensation described in either of the
following two options as he shall choose:
Option A: the Company will continue to pay to the Executive
for twenty-four (24) full calendar months following
the date of such termination his monthly base
salary at the rate in effect as of the date of such
termination in accordance with the Company's normal
payroll practices. In addition, the Company
throughout such twenty-four (24) calendar month
period will continue the Executive's life insurance
and health care benefits coverage on the same terms
and at the same cost to the Executive as would be
applicable to a similarly situated full-time
employee provided however, that in the event the
Executive begins to receive comparable life
insurance and health care benefits (determined at
the sole discretion of the Company) from a
subsequent employer during such twenty-four (24)
month period, the Company may immediately terminate
its life insurance and health care benefits
coverage of the Executive. Coverage under the
Company's health care benefits plan will be in lieu
of health care continuation under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") for
periods such coverage is in effect under this
Agreement.
Option B: the Company will continue to make all of the
salary, bonus, retirement and other payments
provided in this Agreement as if the Executive had
remained a full-time employee of the Company until
July 3, 1996 and had retired on July 3, 1996. In
addition, the Company will continue the Executive's
life insurance and health care benefits coverage
until July 3, 1996 on the same terms and at the
same cost to the Executive as would be applicable
to a similarly situated full-time employee.
<PAGE>
<PAGE>4
The Company will also continue to be obligated to pay
when due all other benefits to which the Executive has a vested
right according to the provisions of any applicable retirement or
other benefit plan or program provided, however, that benefits
under the Company's Senior Executive Benefits Program will not
commence until the cessation of payments under Option A or Option
B, whichever shall have been selected by the Executive, and
provided further that payments under Option A or Option B shall be
in lieu of any severance pay which may otherwise be payable to the
Executive. Finally, coverage under the Company's health care
benefits plan under Option A or Option B will be in lieu of health
care continuation under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA") for periods such coverage is in effect
under this Agreement.
Any election by the Executive shall be made in writing
within thirty (30) days after his date of termination of
employment. In the event the executive fails to make such election
on a timely basis he will be presumed to have elected Option B.
2.5 Termination For Cause. Nothing in this Agreement
will be construed to prevent the Company from terminating the
Executive's employment for Cause. As used herein, "Cause" will
include any material breach of this Agreement by the Executive or
any act by him of gross personal misconduct against the Company,
misappropriation of Company funds, insubordination, fraud,
dishonesty or gross neglect of or failure to perform the duties
reasonably required of him pursuant to this Agreement or any
conduct which is in violation of any applicable law or regulation
pertaining to the business of the Company.
2.6 Termination For Good Reason. If at any time the
Company, without the Executive's prior express written consent,
breaches or threatens to breach the provisions of this Agreement by
reducing or attempting to reduce the Executive's compensation,
benefits, rights, Status (as defined in Section 2.7) or
entitlements which he currently enjoys or which are provided by
this Agreement or by any plan or program in which the Executive
participates, the Executive will be entitled to terminate his
employment with the Company immediately and to receive all of such
payments and benefits he would have received had he been terminated
without Cause as provided in Section 2.4 above. The foregoing will
not apply to changes in benefits or perquisites which were
announced prior to the date of this Agreement. Such changes
include the reduction in the number of private clubs paid by the
Company to one (1) and the discontinuance of the provision of home
security to the Executive.
<PAGE>
<PAGE>5
2.7 Definition of "Status". For purposes of this
Agreement the word "Status" shall mean the relative perquisites and
stature of the Executive within the Company. "Status" shall be
determined on a relative basis taking into account the downsizing
of the Company so that a reduction in the size of the legal
department (not affecting the continued employment of the
Executive) or a reduction in the size of the budget of the legal
department will not be considered to be a reduction in the "Status"
of the Executive.
Article 3. Salary, Bonus and Retirement
3.1 Salary. During the period of this Agreement, the
Executive will be paid a base salary of no less than $20,000.00 per
month payable at such intervals as corresponds with the Company's
normal payroll practices.
3.2 Guaranteed Bonus. If the Executive remains in the
employ of the Company until April 30, 1996 or if the Executive's
employment with the Company is terminated pursuant to Sections 2.2,
2.4 or 2.6 hereof, he shall be paid, in addition to those bonus
installments already due the Executive pursuant to the Company's
Compensation Plan for Executives, a guaranteed lump sum bonus in
the amount of $80,000.00, $41,750.00 of which will be included in
the calculation base for determining the Executive's retirement
benefits pursuant to the Senior Executive Benefits Program and
$38,250.00 of which will not be included in such base calculation.
Such bonus payment shall be paid no later than April 30, 1996.
3.3 Retirement Payments. Upon the Executive's
retirement from the Company at any time after May 31, 1996, the
Executive's annual benefit under the Company's Senior Executive
Benefits Program, computed prior to any Offsets under such Program,
will not be less than $218,295.00 per year for the remainder of his
life in accordance with the calculation prepared by the Company and
attached to this Agreement as Exhibit A.
<PAGE>
<PAGE>6
Article 4. Non-Diminution
It is expressly agreed by the Company and the Executive that
the benefits provided by this Agreement will be in addition to
benefits to which the Executive is now or will be entitled in
accordance with the provisions of the plans, agreements and
programs which are already provided for the benefit of the
Executive and which are not specifically modified in this
Agreement. Nothing contained in this Agreement will be interpreted
to diminish or inhibit in any way the Executive's right to such
benefits. To this end it is understood that the benefits provided
by this Agreement were offered by the Company to the Executive in
order to induce the Executive to continue in the employ of the
Company rather than to follow his expressed desire to retire.
Except as provided in Section 2.6 hereof, the Company will
undertake no action which would in any way reduce or diminish any
compensation, program, insurance, indemnities, plans, fringe
benefits or rights of any kind to which the Executive is now or
will be entitled to receive and no amendment, modification or
alteration of any kind will be made thereto or pertaining to the
Executive's Status, authority, duties, or office perquisites
without the Executive's prior express written consent. It is
agreed that the Company can modify, amend or terminate any and all
such programs, insurance, indemnities, plans, fringe benefits or
rights with respect to all other participants without the consent
of the Executive as long as provision is made for the continuation
of the program, insurance, indemnities, plans, fringe benefits or
rights for the Executive.
Article 5. Covenants
5.1 Disclosure or Use of Information. The Executive will at
all times during and after the term of his employment by the
Company keep and maintain the confidentiality of all Confidential
Information and will not at any time either directly or indirectly
use such information for his own benefit or otherwise divulge,
disclose or communicate such information to any person or entity in
any manner whatsoever other than employees or agents of the Company
who have a need to know such information and then only to the
extent necessary to perform their responsibilities on behalf of the
Company. As used herein, "Confidential Information" will mean any
and all information (excluding information in the public domain)
which relates to the business of the Company including without
limitation all patents and patent applications, copyrights applied
for, issued to or owned by the Company, 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/or location of all past, present and prospective customers of
the Company.
<PAGE>
<PAGE>7
5.2 Suppliers, Customers and Other Employees. During the term
of this Agreement and for a period of twenty-four (24) months
following its termination, the Executive will not attempt to induce
any employee of the Company to terminate his or her employment with
the Company nor will he take any action with respect to any of the
suppliers or customers of the of the Company which would have or
might be likely to have an adverse effect upon the business of the
Company.
5.3 Injunctive Relief. In the event of a breach or threatened
breach of any of the provisions of this Article 5 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 as it deems appropriate.
Article 6 Miscellaneous
6.1 Successors. This Agreement is personal to the
Executive and will not be assignable by him without the prior
written consent of the Company. This Agreement may be assigned or
transferred to and will be binding upon and inure to the benefit of
any Successor of the Company. As used herein, the term "Successor"
will include any person, partnership, firm, corporation or business
entity which acquires all or substantially all of the assets of the
Company or which succeeds to its business whether by way of
purchase, acquisition, foreclosure, merger, consolidation or
otherwise.
6.2 Modification. This Agreement will not be varied,
altered, modified, canceled, changed, or in any way amended except
by mutual agreement in a written instrument executed by the Company
and the Executive or their legal representatives.
6.3 Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all Federal, state, city, or
other taxes as may be required pursuant to any law or governmental
regulation or ruling.
6.4 Governing Law. To the extent not preempted by
Federal law, the provisions of this Agreement will be construed and
enforced in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement on this 28th day of April, 1995.
FIGGIE INTERNATIONAL INC. LUTHER A. HARTHUN
By:_______________________ ___________________________
Attest:___________________
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EXHIBIT 10.2
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
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Case No.: 93CV001575
Judge Mitrovich
STIPULATION AND AGREEMENT
OF COMPROMISE AND SETTLEMENT
The parties to the above-captioned action, including
the parties to the action entitled Donald I. MacDavid v. Harry E.
Figgie, Jr., et al., Case No. 93CV001798, which has been
consolidated by order of this Court with the above-captioned
action (collectively referred to as the "Actions"), by and
through their respective attorneys, propose the following
Stipulation and Agreement of Compromise and Settlement (the
"Stipulation") for the Court's approval:
WHEREAS,
A. Plaintiffs in the Actions, Charles B. Miner, Anne
Howells and Donald I. MacDavid, who are owners of common
stock of Figgie International Inc. ("FII"), have asserted
claims derivatively on behalf of FII, arising out of the
alleged handling of assets of FII, its capital investment
and operational activities, its dealings with a related
entity, and certain accounting treatments.
B. The Actions have been brought pursuant to Rule
23.1 of the Ohio Rules of Civil Procedure ("Ohio Rules")
against defendants Harry E. Figgie, Jr. ("Figgie, Jr.") and
Harry E. Figgie III ("Figgie III"), who were at the time of
filing, but are no longer, officers and directors of FII;
Vincent A. Chiarucci, a director who was at the time of
filing, but is no longer, an officer of FII; Fred J.
Brinkman, Dale S. Coenen, Alfred V. Gangnes, John S.
Lanahan, F. Rush McKnight, Harrison Nesbit II, C.B.
Robertson III, Harold B. Scott, A.A. Sommer, Jr., and Walter
M. Vannoy, non-management directors of FII; Gerald K.
Rugger, who was at the time of filing, but is no longer, a
non-management director of FII; and Russell W. McFall and
Robert A. Weaver, Jr., who were non-management directors of
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FII at the time of filing, but are since deceased. Claims
against Mr. McFall were dismissed following his death. Mr.
Weaver's estate by Betsy Weaver, Executrix has been
substituted as a party for Mr. Weaver. FII is named in the
Actions as a nominal defendant, and no claims are asserted
against it.
C. The original complaint in the Miner action was
filed on October 18, 1993, and later amended on or about
January 28, 1994. The complaint in the MacDavid action was
filed on December 2, 1993. The Actions were consolidated by
an order of this Court on March 16, 1994, and the amended
complaint in the Miner action was designated as the
controlling complaint for the consolidated cases (the
"Complaint").
D. The Complaint alleges that defendants breached
their fiduciary duties over a number of years in a broad
range of respects that plaintiffs divide into four
categories:
1. That The Clark-Reliance Corporation ("Clark-
Reliance"), a privately held company controlled by
Figgie, Jr., Figgie III and other members of the Figgie
family, was improperly enriched at the expense of FII.
2. That there was waste of assets and mismanagement
involving, among various other things, relocations of
FII's corporate headquarters, the acquisition of
corporate aircraft, and investments in a conversion to
"world-class" manufacturing techniques.
3. That FII resources were improperly diverted to the
personal use of members of the Figgie family; and
4. That various accounting irregularities were caused
and permitted to occur.
E. Figgie, Jr. and Figgie III (jointly represented),
the non-management directors (jointly represented), Vincent
A. Chiarucci, and FII filed separate motions to dismiss the
Actions for failure to comply with the demand requirement of
Rule 23.1 of the Ohio Rules. Those motions were granted,
and the Actions were dismissed by the Court on May 4, 1994.
The plaintiffs appealed the order of dismissal, and those
appeals have been fully briefed. On June 12, 1995, the
parties filed a joint motion requesting the Court of Appeals
to remand the matter for purposes of settlement, and upon
remand the Stipulation will be filed in the Court of Common
Pleas.
F. Each of the defendants vigorously denies all
material allegations directed at him in the Complaint;
further denies any charges directed at him of breach of
fiduciary duties, negligence, self-dealing, waste of
corporate assets, or mismanagement; asserts that his conduct
with respect to the matters complained of was in all
respects and at all times proper, lawful, and in good faith,
and that his conduct was in the best interests of FII's
shareholders; and, states that, in the event the order of
the Court of Common Pleas granting the motions to dismiss
were to be reversed in whole or in part and the matter
proceed to trial, he would advance various further defenses
that he believes to be meritorious.
G. Prior to execution of this Stipulation,
plaintiffs, with the assistance of counsel, analyzed the
law, examined the facts and circumstances of the matters
complained of and allegations set forth in the Complaint,
and considered all possible avenues of legal and equitable
relief. They have examined publicly available materials,
drawn on the knowledge and experience of Mr. Miner, a former
senior executive of FII, reviewed materials prepared by
Ernst & Young following an extensive inquiry regarding
allegations in the Complaint, spoken with representatives of
Ernst & Young concerning the inquiry they made and its
results, and deposed Walter M. Vannoy, a director of FII,
and Steven Siemborski, the Chief Financial Officer of FII,
who was formerly a partner with Ernst & Young and
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<PAGE>3
participated in the Ernst & Young inquiry. Based on this work
and analysis, plaintiffs have concluded that:
1. Even if the appeal were to be pursued to
conclusion and the dismissal order reversed, which
itself is uncertain, it is uncertain as to the extent
that, under the applicable law and facts, plaintiffs
would be able to obtain relief in excess of the
proposed settlement after the trial of the Actions;
2. The substantial benefits that will be conferred on
FII and its shareholders upon the consummation of the
settlement provided for in this Stipulation outweigh
the possible benefits of continued prosecution,
particularly given that, even if the appeal were to be
successful, any future proceedings in the Actions will
be protracted and expensive and the ultimate result
uncertain.
H. In light of all the foregoing considerations,
plaintiffs and their counsel, without in any manner
conceding the lack of merit of any of their claims, have
concluded that it is in the best interests of FII and its
shareholders to settle and dismiss the Actions with
prejudice in the manner set forth below, and have further
concluded that the terms of this Stipulation are fair,
reasonable, and adequate and will result in substantial and
material benefits to FII and its shareholders. Nevertheless
it is expressly agreed that if for any reason this
settlement is not consummated in its entirety, these
conclusions will be of no significance.
I. Each of the defendants, while denying all the
allegations of wrongdoing alleged at him in the Complaint
and disclaiming any liability with respect thereto, and
relying on the provision below that this Stipulation shall
in no event be construed as or deemed to be evidence of, or
an admission or concession on the part of any of them of,
any fault or liability whatsoever, and without conceding any
infirmity in their motions to dismiss or the order of this
Court granting dismissal, or in the defenses each would
assert in the event dismissal of the Actions is in whole or
in part reversed on appeal and the Actions then proceed,
considers it desirable that the Actions be dismissed on the
terms set forth below in order to avoid further expense, to
dispose of burdensome and protracted litigation, to permit
attention to his business and other affairs, including
attention by directors, executives, and other officials of
FII to its business operations, unhindered by expensive
litigation and associated distraction and diversion, and
thereby to put to rest all controversy concerning all claims
that have been or might have been asserted in the Actions.
J. FII, its directors, and its counsel have
determined that it is unlikely that either FII or its
shareholders would benefit if the litigation were to
continue and that it is desirable and in the best interests
of FII and its shareholders to compromise and settle the
claims alleged in the Actions in the manner and on the terms
and conditions set forth in this Stipulation to avoid
further expense, inconvenience, and the distraction of
burdensome litigation, and thereby to put to rest all
controversy concerning all claims that have been or might
have been asserted in these Actions and to confer on FII and
its shareholders the meaningful benefits of the settlement
set forth in this Stipulation.
K. As a result, inter alia, of the institution of
these Actions and plaintiffs' prosecution thereof, extensive
arms-length settlement discussions were held between counsel
for plaintiffs, counsel for the various separately
represented defendant groups, and counsel for FII, and these
discussions have resulted in the agreements set forth in
this Stipulation.
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<PAGE>4
L. This Stipulation and the final judgment provided
herein, if entered, are intended finally to dismiss,
compromise, and settle all claims, rights, or causes of
action, whether known or unknown, that have been asserted or
could have been asserted in these Actions, or that in any
way encompass or relate to any of the matters, transactions,
events, situations, courses of conduct, representations,
omissions, facts, or circumstances that have been alleged or
could have been alleged in the Complaint in these Actions.
NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by
and among the undersigned, and subject to the approval of the
Court pursuant to Rule 23.1 of the Ohio Rules, that the Actions,
including, but not limited to, any potential claims premised upon
violations of fiduciary duties, negligence, self-dealing,
mismanagement, or waste of assets, shall be and the same are
hereby settled, compromised, and dismissed with prejudice and
without court costs to any party, upon and subject to the
following terms and conditions:
ADDITIONAL DEFINITIONS
1. As used in this Stipulation and the related
documents attached hereto as exhibits which are to be executed
pursuant to, and are incorporated by reference in, this
Stipulation, the following terms (not already defined in the
recitals set forth above) shall have the meanings set forth below
when used with initial capital letters:
a. "Person" means any individual or legal
entity.
b. "Current Shareholder" means a person who is
identifiable as an owner of shares of common stock of FII, as of
the most recent practical date before the time Notice is sent
under Paragraph 13, below.
c. "Notice" means the form of Notice of Pendency
of Derivative Action and of Hearing on Proposed Settlement and
Dismissal of Action attached hereto as Exhibit A1.
d. "Hearing Date" means the date set by the
Court to consider whether the settlement set forth in this
Stipulation shall be approved; and
e. The "Effective Date" of the settlement shall be
the day following the day on which the judgment described in
Paragraph 15, below, becomes final. For purposes of this
Stipulation, a judgment shall be deemed final on the later of (i)
the thirty-third day after it is entered, if no appeal is taken
therefrom, or (ii) if an appeal is taken therefrom, on the day
subsequent to the date on which it is not subject to further
judicial review or appeal, either by reason of affirmance by a
court of last resort or by reason of lapse of time or otherwise.
f. The "Figgie Interests" shall mean defendants
Figgie, Jr. and Figgie III, and in addition Nancy Figgie (spouse
of Figgie, Jr.), Matthew Figgie and Mark Figgie (sons of Figgie,
Jr.), and Clark-Reliance, which are not defendants in the Actions
but have become parties to this Stipulation for settlement
purposes only in order to facilitate resolution of the
controversies underlying the Actions.
UNDERTAKINGS OF DEFENDANTS
1. The Figgie Interests will, on or before the
Effective Date, pay to FII the sum of $3,300,000, by delivery of
a certified or cashier's check in that amount or other
appropriate means for the transfer of funds. Interest on this
entire sum will accrue from the date this Stipulation is fully
executed ("Execution Date") up to the Effective Date or, if
earlier, the date of payment, at the rate for 90-day U.S.
Treasury obligations as published in The Wall Street Journal on
the Execution Date.
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<PAGE>5
2. (a) Figgie, Jr. hereby relinquishes any and all
rights under his 1988 Employment Agreement to the base salary,
annual bonuses, incentive pay, consulting fees, restricted stock
and accumulated unpaid annual bonuses to which he would have been
entitled upon the termination of his employment from FII (his
entitlement to which is disputed by FII); (b) Figgie, Jr. hereby
relinquishes to FII the right to determine whether to keep
Prudential split dollar life insurance policy No. 79-674-621 in
force; and (c) otherwise, the rights of Figgie, Jr. (who retired
from all positions with FII as of May 18, 1994) under the terms
of standard benefits plans or programs of FII will remain
unaffected.
3. Figgie, Jr., Figgie III, and Clark-Reliance hereby
assign to FII such rights, if any, as any of them may have to
pursue Deloitte & Touche ("D&T") and Boston Consulting Group
("BCG") to recover moneys paid for consulting fees regarding FII
or Clark-Reliance, or damages arising from or related to services
performed by D&T and BCG.
4. Figgie, Jr. will not contest FII's repurchase, at
the contractually established price of $1 per share, of 90% of
the shares he received pursuant to FII's 1993 Restricted Stock
Purchase Plan ("RSPP"). Figgie, Jr. will retain the rights to
the other 10% of the shares he received under the RSPP.
5. Clark-Reliance will assume ultimate financial
responsibility, commencing as of the scheduled payment dates in
May, 1995, for lease payments for the remaining life of leases on
five machines at Clark-Reliance on which FII is currently liable,
identified as follows: 3 Mazak H-500/50 machines, Serial Nos.
76525, 76527, 84022; 1 Mazak AJU 35-80, Serial No. 77025; and 1
Multiplex 620, Serial No. 91967. Clark-Reliance will, if
reasonably possible, execute replacement leases on these
machines, or if not reasonably possible then will make such other
arrangements as are necessary and reasonably possible for Clark-
Reliance to make the periodic lease payments to the lessors on
FII's behalf under the existing leases or periodically to provide
to FII the funds necessary to make those payments to the lessors
as they become due, the intent being that Clark-Reliance assume
direct rights and liabilities in respect of the machines to the
greatest extent reasonably possible, and that FII relinquish
those rights and be relieved of those liabilities to the greatest
extent reasonably possible. In either event, Clark-Reliance
shall have the right to take title to the machines in place of
FII under the terms of whatever lease governs at the time
transfer of title is permissible.
6. Clark-Reliance:
(a) Will retain certain IBM hardware and
associated maintenance obligations for which FII is
currently obligated to make periodic payments,
identified as follows together with amounts of
respective periodic payments: 4 DASD 600s, Serial Nos.
95B9A, 914AA, 95AFA, 914EA ($1,076); 1 AS/400 D45,
Serial No. A1480 ($1,774); 1 MES #B48133 D45 ($39); 1
Rack 2, Serial No. A7957 ($66); 1 Modem 1, Serial No.
B0371 ($14); 1 D45 to E50 Upgrade, Serial No. A1480
($2,560); 1 Mag tape subsystem C11, Serial No. N1041
($896); 1 Disk unit 1714MB 20, Serial No. 32449 ($710);
Miscellaneous items 9993 ($162); UPS and cabling AS/400
($376); Extended maintenance option EMO, Serial No.
2482 ($714); and maintenance charge financing 9995
($557). Clark-Reliance will assume direct
responsibility for the periodic payments beginning with
the first payment due following the Effective Date. In
addition, Clark-Reliance will retain, and have
ownership of, an IBM Memory Drive 8595, Serial No.
23KWM, for which it has previously paid.
(b) Will retain additional systems hardware for
which FII is currently obligated to make periodic
payments, and will, beginning with the first payment
due following the Effective Date, assume responsibility
for the periodic payments as to such hardware that is
included as a subject of the following leases: IBM
Credit Corporation 083817, Randolph 33, 40, 42, 46, 51,
60 and 78.
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<PAGE>6
7. Clark-Reliance relinquishes any rights it may have
to seek recovery from FII based on the costs of restructuring its
hardware, software, or other, systems.
8. Clark-Reliance and FII will terminate all other
existing business relationships.
9. Not later than the first regularly scheduled
meeting of the Board of Directors of FII following the Effective
Date, the directors of FII shall adopt one or more resolutions
("Resolution(s)") providing for the effectuation and
implementation of the following measures:
(a) Restructuring the Board of Directors, committees
of the Board of Directors, and cash compensation
of non-management directors as follows:
(1) Reducing the number of director positions as
of the immediately succeeding annual meeting
of shareholders to nine, of which, at least
initially, two will be members of management
and seven will not be members of management.
(2) Reducing the number of standing committees of
the Board of Directors from six to three, to
be named, at least initially, the Executive
and Finance Committee, the Audit Committee,
and the Management Development and
Compensation Committee (which will, among
other things, assume the functions of the
present Nominating Committee).
(3) Reducing the annual stipend payable to non-
management directors from $20,000 to $15,000,
plus $1,000 per board meeting actually
attended (with an anticipated five regularly
scheduled meetings annually).
(4) Reducing the annual stipend payable to non-
management directors for service on
committees of the Board from $6,000 ($9,000
in the case of Executive and Finance
Committee, $10,000 for its chairman, and
$7,000 for the chairman of the Management
Development and Compensation Committee) to
$3,000 for each member, plus $750 per
committee meeting actually attended.
(5) Reducing the number of non-management members
of the Executive and Finance Committee from
four to three.
(b) Establishing that, as a matter of corporate
policy, there shall be a majority of independent
directors on FII's Board. For purposes of this
policy, a director is not considered independent
if he/she (i) is an officer of a corporation where
an officer of FII is a director; (ii) is, or
within the last three years has been, an employee
of FII (except that this shall not apply to Walter
M. Vannoy, for many years a non-management
director, who then served for slightly more than
one year as a senior executive of FII on an
interim basis and has recently returned to non-
management status, although he remains under
contract on a part-time basis to perform such
duties as may be requested, until mid-May, 1996);
or (iii) is a director, officer, or employee, or a
partner or substantial investor in, an enterprise
that is a substantial customer of FII or a
substantial supplier of goods or services to FII.
If and to the extent the Board as presently
constituted, or as it might become constituted in
the future through events not within the control
of the Board, might be deemed not to meet the
independence test, the Board will within the
strictures imposed by the size of the Board and
the expiration of directors' terms of office,
adjust the composition of the Board through
nominations or, if deemed appropriate, appointment
of new directors until the independence test is
met.
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(c) Directing that the non-management members of one
of the standing committees of the Board, currently
the Management Development and Compensation
Committee, annually assess, and report to the full
Board its assessment of, the Board's performance.
The report shall be made to and discussed by the
full Board, normally at the first regular Board
meeting following the end of each fiscal year.
The directors responsible for the report may, if
they so desire, but need not, secure the
assistance of outside advisors in making the
assessment. The assessment is to be directed to
the Board's contribution as a whole, and shall
specifically review areas in which the Board
and/or senior management believe a stronger
contribution could be made.
The Resolution(s) shall remain in effect for a period of at least
five years from the Effective Date, except as otherwise provided
immediately below, and thereafter shall remain in effect until
such time as the directors deem appropriate. Prior to expiration
of five years from the Effective Date, the directors of FII may
terminate the Resolution(s) with or without adopting a
replacement resolution, or amend the Resolution(s) only (i) if
FII ceases to be a public company (defined as having a class of
voting stock that is listed on a national securities exchange,
authorized for quotation on an inter-dealer quotation system of a
registered national securities association, or held of record by
more than 2000 stockholders; or, (ii) by majority vote of a
quorum composed of directors that meet the independence test.
10. The contributions and other undertakings set forth
in Paragraphs 1 through 9 above, shall constitute full and
complete discharge of the entire obligation of all defendants
under this Stipulation, and no defendant shall have any further
liability to plaintiffs (individually, or acting derivatively on
behalf of FII) or to FII except as otherwise specifically
provided in this Stipulation.
ATTORNEYS' FEES AND DISBURSEMENTS,
AND INCENTIVE PAYMENTS
11. Upon receipt of payment from the Figgie Interests
on the Effective Date, FII will pay to the firm of Murray &
Murray, as receiving agent for all counsel for all plaintiffs in
the Actions the amount of $1,935,000 as attorneys' fees and
expenses. FII will at the same time pay plaintiff Charles B.
Miner $15,000, plaintiff Anne Howells $7,500, and plaintiff
Donald I. MacDavid $7,500, as incentive compensation in respect
of the commencement and pursuit of the Actions. Interest shall
accrue on these amounts, for fees, expenses, and incentive
compensation, from the Execution Date to the Effective Date or,
if earlier, the date of payment, at the rate for 90-day U.S.
Treasury obligation as published in The Wall Street Journal on
the Execution Date.
12. Except as provided in this Stipulation, FII shall
not bear any fees, expenses or costs incurred in connection with
the prosecution or settlement of the Actions, except that FII
intends to take steps necessary to indemnify the defendants for
expenses (including legal fees) incurred in connection with the
defense and settlement of the Actions. Plaintiffs will not
object to or oppose that indemnification.
NOTICE PROCEDURE
13. Immediately after execution of this Stipulation,
plaintiffs' counsel and defendants' counsel shall jointly apply
to the Court for an Order providing for Notice to Current
Shareholders substantially in the form annexed hereto as Exhibit
A, the entry of which Order shall be a condition precedent to any
obligation of any party pursuant to this Stipulation. The
responsibility for, and costs of, giving Notice shall be borne by
FII, who shall serve and file affidavits evidencing compliance
with the Order within twenty days after Notice has been mailed.
HEARING
14. Each Current Shareholder who files an objection to
the settlement set forth herein in the manner and within the time
prescribed in the Notice shall be afforded an opportunity to be
heard at the Hearing.
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FINAL ORDER AND JUDGMENT
15. If, after the Notice and Hearing provided for
herein, the Court approves this Stipulation, the Court shall
enter a Final Order and Judgment substantially in the form
annexed as Exhibit B dismissing the Actions with prejudice.
FINALITY OF THE JUDGMENT
16. Following the Effective Date, no default by any
person in the performance of any of the covenants or obligations
under this Stipulation, or any judgment or order entered in
connection with any of the foregoing, shall affect the dismissal
of the Actions, the discharge and release of defendants, or any
other provision of the Final Order and Judgment embodying these
provisions.
RELEASES
17. FII shall execute and deliver to each of the
defendants and to Matthew Figgie, Mark Figgie, Nancy Figgie and
Clark-Reliance a release in the form attached hereto as Exhibit
C, on the Effective Date.
18. Figgie, Jr., Figgie III, Matthew Figgie, Mark
Figgie, Nancy Figgie and Clark-Reliance shall execute and deliver
to FII a release in the form attached hereto as Exhibit D, on the
Effective Date.
EFFECT OF DISAPPROVAL OF SETTLEMENT
19. If final approval of the Stipulation, including
such modifications as may be ordered by the Court with the
consent of all the parties, is not obtained or is reversed on
appeal, or if the Effective Date does not occur, or if the
judgment described in paragraph 15 hereof is finally reversed or
modified on appeal, then except for the obligations of the
parties under this paragraph 19 and the provisions of paragraphs
13 and 20 of this Stipulation, this Stipulation shall be null and
void, shall have no further force and effect with respect to any
party in the Actions, and shall not be used in the Actions or in
any other proceedings for any purpose; and this Stipulation and
all negotiations, proceedings and statements made in connection
herewith shall be without prejudice to any person, shall not be
deemed or construed to be an admission or concession by any party
of any fact, matter or proposition, and shall not be used in any
manner or for any purpose in any subsequent proceeding in these
Actions or in any court; and all parties to the Actions shall
stand in the same position, without prejudice, as if this
Stipulation had not been made or filed with the Court.
STIPULATION NOT AN ADMISSION
20. This Stipulation and the settlement, whether or
not consummated, and any proceedings taken hereunder are not and
shall not in any event be construed as or deemed to be an
admission or concession by the parties, or any of them, of the
truth of any fact alleged or the validity of any claim or defense
asserted in the Actions or of liability of any or all defendants;
nor are they a concession or an admission of any fault or
omission in any statement or written document, report, or
financial statement heretofore issued, filed, approved, or made
by any defendant; nor shall this Stipulation, nor the settlement,
nor any papers related to them, nor any of the terms hereof be
offered or received in evidence or in any way referred to against
any defendant herein in the Actions or in any other civil,
criminal, or administrative action or proceeding other than such
proceedings in these Actions as may be necessary to consummate or
enforce this Stipulation; nor shall they be construed by anyone
for any purpose whatsoever as an admission, concession, or
presumption of any wrongdoing on the part of defendants or any of
them nor an admission by plaintiffs or plaintiffs' counsel that
the consideration to be given hereunder represents the amount
which could be recovered after trial. Each defendant has denied,
and continues to deny, all allegations of fault, wrongdoing, or
liability advanced in the Complaint, or at any other point in the
Actions, and all averments that plaintiffs, FII, or any of its
shareholders suffered any monetary damage or other damage by
reason of the alleged wrongdoing; defendants have entered into
this Stipulation solely to avoid the further inconvenience and
burdens of protracted and costly litigation. Nothing in this
Stipulation shall be construed as an admission or concession that
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<PAGE>9
plaintiffs, FII, or any of its shareholders suffered any damage
or that any defendant is liable to plaintiffs, FII, or its
shareholders.
MISCELLANEOUS PROVISIONS
21. The parties and their attorneys further agree to
cooperate fully with one another in seeking Court approval of
this Stipulation and to use their best efforts to effect the
consummation of this Stipulation and the settlement provided
hereunder, including but not limited to executing and delivering
such additional documents as may be necessary to carry out the
commitments undertaken in this stipulation.
22. Pending final determination of whether the
settlement reflected in this Stipulation should be approved,
plaintiffs shall not commence or prosecute any action, either
derivatively on behalf of FII or directly on behalf of themselves
or any other person, asserting claims against any defendant
herein which have been or could have been asserted, or which
arise from or are related to any of the matters, transactions,
agreements, situations, courses of conduct, facts, or
circumstances referred to in these Actions.
23. The undersigned plaintiffs' counsel represent that
they have been authorized by the plaintiffs on behalf of
themselves individually and derivatively on behalf of FII to
execute this Stipulation, and the undersigned defendants' counsel
represent that they have been authorized by their respective
clients to execute this Stipulation.
24. The headings in this Stipulation are solely for
the convenience of the attorneys for the parties and the Court.
The headings shall not be deemed to be a part of this Stipulation
and shall not be considered in construing or interpreting this
Stipulation.
25. This Stipulation shall be binding upon and inure
to the benefit of the parties hereto and their respective
subsidiaries, affiliates, directors, officers, employees, heirs,
partners, successors, and assigns and any corporation or other
entity into or with which any corporate party hereto may merge or
consolidate.
26. This Stipulation may be executed in multiple
counterparts and may be filed with the Court with separately
executed counterpart signature pages attached. For this purpose,
signature pages transmitted by telecopier shall be deemed to be
original signature pages.
27. This Stipulation shall be construed and entered
into in accordance with the laws of the State of Delaware.
28. The foregoing constitutes the entire agreement
between the parties with regard to the subject matter hereof and
may not be modified or amended except in writing signed by all
parties hereto.
Dated: June __, 1995 MURRAY & MURRAY CO., L.P.A.
By:
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
Attorneys for Plaintiffs Charles B.
Miner and Anne Howells
GALLAGHER, SHARP, FULTON & NORMAN
By:
Seventh Floor, Bulkley Bldg.
1501 Euclid Avenue
Cleveland, Ohio 44115
Attorneys for Plaintiff Donald I.
MacDavid
WILMER, CUTLER & PICKERING
By:
2445 M. Street, N.W.
Washington, D.C. 20037
<PAGE>
<PAGE>10
BARRY M. BYRON & CO., LPA
By:
Interstate Square Bldg. 1
4230 State Rte. 306
Willoughby, Ohio 44094
Attorneys for Defendants Harry E.
Figgie, Jr. and Harry E. Figgie III
and also for Matthew Figgie,
Mark Figgie, Nancy Figgie and
The Clark-Reliance Corporation
SQUIRE, SANDERS & DEMPSEY
By:
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Attorneys for Defendant Vincent A.
Chiarucci
JONES, DAY, REAVIS & POGUE
By:
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attorneys for Defendants Fred J.
Brinkman, Dale S. Coenen, Alfred V.
Gangnes, John S. Lanahan, F. Rush
McKnight, Harrison Nesbit II, C.B.
Robertson III, Gerald K. Rugger,
Harold B. Scott, A.A. Sommer, Jr.,
Walter M. Vannoy, and Estate of
Robert A. Weaver, Jr. by Betsy
Weaver, Executrix
BAKER, HACKENBERG & COLLINS CO.,
L.P.A.
By:
77 North St. Clair Street
Painesville, Ohio 44077
Attorneys for Nominal Defendant
Figgie International Inc.
<PAGE>
<PAGE>11
IN THE COURT OF COMM ON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No.: 93CV001575
Judge Mitrovich
ORDER APPROVING SUBMISSION
OF SETTLEMENT TO
SHAREHOLDERS AND PROVIDING
FOR NOTICE
The parties to the above captioned shareholder
derivative action (the "Action"), having entered into a
Stipulation and Agreement of Settlement and Compromise (the
"Stipulation") executed by counsel for all parties and presented
to the Court on _______________, and having jointly moved this
Court to approve a settlement and dismissal of the Action upon
terms set forth in the Stipulation; and
The Court having determined preliminarily that the
proposed settlement appears to be the product of serious,
informed, non-collusive negotiations, has no obvious
deficiencies, and falls within the range of possible approval;
and
The Court having further determined on this basis,
after due deliberation, that it is necessary and appropriate to
submit the proposed settlement to the owners of common stock of
Figgie International Inc. ("FII") and to convene a hearing for
the purpose of determining on a final basis the fairness,
reasonableness and adequacy of the proposed settlement;
IT IS HEREBY ORDERED that:
29. For purposes of settlement only, this Action is
hereby authorized to proceed as a derivative action under Ohio R.
Civ. P. 23.1 on behalf of FII.
30. A hearing shall be held on __________, 1995 at
______, ___M. (the "Hearing) to determine the fairness,
reasonableness and adequacy of the settlement proposed in the
Stipulation and whether the settlement should be approved by the
Court and judgment entered on it.
31. Persons who are shareholders of common stock of
FII as of _______________________, 1995 ("Current Shareholders")
are entitled to receive notice of the pendency of this Action and
of the Hearing on the proposed Settlement and dismissal of the
action (the "Notice"), and Notice will be required as set forth
below.
32. FII shall cause the Notice, substantially in the
form annexed hereto as Exhibit A1 to be mailed by first class
mail, postage prepaid, on or before ______, 1995 to all persons
shown on the stock records maintained by or on behalf of FII to
be Current Shareholders.
33. Upon receiving the Notice, all brokerage firms and
other nominees ("Nominees") for beneficial owners who are Current
Stockholders are requested promptly either (a) to send a copy of
the Notice to Current Stockholders and to furnish written
confirmation thereof to the Settlement Administrator, Heffler,
Radetich & Saitta L.L.P., Suite 800, 1515 Market Street,
Philadelphia, PA 19102, Attention: Figgie Derivative Litigation,
or (b) to furnish the Settlement Administrator, in the manner
noted immediately above, with the names and addresses of Current
Stockholders. Upon receipt of such list, the Settlement
Administrator shall mail a copy of the Notice to such persons.
Upon the request of any Nominee, the Settlement Administrator
shall furnish sufficient quantities of the Notice for each of the
beneficial owners represented by the respective Nominee. After
notice to the persons for whom the Nominee has acted, the Nominee
may apply for reimbursement of its actual out-of-pocket expenses,
reasonably incurred, in identifying the beneficial owners
identified above, plus postage, by presenting to the Settlement
Administrator an affidavit that sets forth the name and address
<PAGE>
<PAGE>12
of each beneficial owner notified and the expenses incurred and
which represents that "such expenses would not have been incurred
but for the requirement that notice be provided" to such persons.
34. Notice given in the form and manner provided in
paragraph 4 of this Order is hereby found to be due, adequate and
sufficient notice, of the pendency of the Action and the proposed
settlement and dismissal of the Action, and the best practicable
under the circumstances, and shall constitute the notice required
by Ohio R. Civ. P. 23.1. FII shall serve and file an affidavit
evidencing its compliance with this Order governing notice on or
before _____________, 1995.
35. The costs of identifying and notifying Current
Shareholders (including the costs of printing the Notice)
pursuant to this Order shall be borne by FII as provided in the
Stipulation.
36. The Stipulation and all papers in support thereof
shall be available for inspection at the office of the Clerk of
Court, Lake County Courthouse, Painesville, Ohio, or the office
of the law firm of Murray & Murray Co., L.P.A., 111 East
Shoreline Drive, Sandusky, Ohio 44870, commencing on the date of
this Order, during reasonable business hours upon one day's
notice.
37. Any Current Shareholder who objects to the
Stipulation, the fairness, reasonableness or adequacy of the
proposed settlement or who otherwise wishes to be heard, may
appear in person or by his attorney at the hearing and present
any evidence or argument that may be proper and relevant;
provided, however, that no person other than the named plaintiffs
and defendants in this Action shall be heard, and no papers,
briefs, or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct) unless no later
than ten days prior to the hearing, notice of the intention to
appear, a statement of such person's objections or comments and
the grounds for such objections or comments or the reasons for
such person's desiring to appear and to be heard, as well as all
papers and other materials that such person desires the Court to
consider, shall be filed in writing by such person with the Clerk
of the Court and, on or before the date of such filing, shall be
served upon the following counsel of record:
Dennis Murray, Esq. Counsel for Plaintiffs
Murray & Murray Co., L.P.A.
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
James F. Koehler, Esq. Counsel for Plaintiffs
Gallagher, Sharp, Fulton
& Norman
7th Floor
Bulkley Building
Cleveland, Ohio 44115
and
John M. Newman, Jr., Esq. Counsel for Non-Management
Jones, Day, Reavis & Pogue Director Defendants
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Frances Floriano Goins, Esq. Counsel for Defendant
Squire, Sanders & Dempsey Vincent A. Chiarucci
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Richard W. Cass, Esq. Counsel for Defendants
Karen Barr, Esq. Harry E. Figgie, Jr. and
Wilmer, Cutler & Pickering Harry E. Figgie, III
2445 M Street, N.W.
Washington, D.C. 20037-1420
<PAGE>
<PAGE>13
James Hackenberg, Esq. Counsel for Nominal Defendant
Baker, Hackenberg & Figgie International Inc.
Collins Co., L.P.A.
77 North St. Clair Street
Suite 100
Painesville, Ohio 44077
38. Any Current Shareholder of FII who does not make
his, her, or its objection in the manner provided shall be deemed
to have waived such objection and shall forever be foreclosed
from making any objection to the fairness.
39. The Court expressly reserves the right to approve
the Stipulation and the settlement (including any modification
thereof made with the consent of plaintiffs and defendants as
provided for in the Stipulation without further notice to Current
Shareholders), and to adjourn the aforesaid hearing from time to
time, by oral announcement at the hearing without further notice
to Current Shareholders. All Current Shareholders shall be bound
by any order or judgment entered pursuant to the Stipulation
(including any modification thereof made with the consent of
plaintiffs and defendants as provided for in the Stipulation).
40. Pending final determination of whether the
settlement reflected in this Stipulation should be approved,
plaintiffs and FII's shareholders, or any of them, shall not
commence or prosecute against any defendant herein any action,
either derivatively on behalf of FII or directly on behalf of
themselves or any other person, asserting claims, rights or
causes of action whether known or unknown, that have been
asserted or could have been asserted in these Actions, or that in
any way encompasses or relates to any of the matters,
transactions, events, situations, courses of conduct,
representations, omissions, facts, or circumstances that have
been alleged or could have been alleged in these Actions.
Dated: June __, 1995 SO ORDERED
Painesville, Ohio
Paul H. Mitrovich
Judge
<PAGE>
<PAGE>14
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No.: 93CV001575
Judge Mitrovich
ORDER APPROVING SUBMISSION
OF SETTLEMENT TO
SHAREHOLDERS AND PROVIDING
FOR NOTICE
The parties to the above captioned shareholder
derivative action (the "Action"), having entered into a
Stipulation and Agreement of Settlement and Compromise (the
"Stipulation") executed by counsel for all parties and presented
to the Court on _______________, and having jointly moved this
Court to approve a settlement and dismissal of the Action upon
terms set forth in the Stipulation; and
The Court having determined preliminarily that the
proposed settlement appears to be the product of serious,
informed, non-collusive negotiations, has no obvious
deficiencies, and falls within the range of possible approval;
and
The Court having further determined on this basis,
after due deliberation, that it is necessary and appropriate to
submit the proposed settlement to the owners of common stock of
Figgie International Inc. ("FII") and to convene a hearing for
the purpose of determining on a final basis the fairness,
reasonableness and adequacy of the proposed settlement;
IT IS HEREBY ORDERED that:
41. For purposes of settlement only, this Action is
hereby authorized to proceed as a derivative action under Ohio R.
Civ. P. 23.1 on behalf of FII.
42. A hearing shall be held on __________, 1995 at
______, ___M. (the "Hearing) to determine the fairness,
reasonableness and adequacy of the settlement proposed in the
Stipulation and whether the settlement should be approved by the
Court and judgment entered on it.
43. Persons who are shareholders of common stock of
FII as of _______________________, 1995 ("Current Shareholders")
are entitled to receive notice of the pendency of this Action and
of the Hearing on the proposed Settlement and dismissal of the
action (the "Notice"), and Notice will be required as set forth
below.
44. FII shall cause the Notice, substantially in the
form annexed hereto as Exhibit A1 to be mailed by first class
mail, postage prepaid, on or before ______, 1995 to all persons
shown on the stock records maintained by or on behalf of FII to
be Current Shareholders.
45. Upon receiving the Notice, all brokerage firms and
other nominees ("Nominees") for beneficial owners who are Current
Stockholders are requested promptly either (a) to send a copy of
the Notice to Current Stockholders and to furnish written
confirmation thereof to the Settlement Administrator, Heffler,
Radetich & Saitta L.L.P., Suite 800, 1515 Market Street,
Philadelphia, PA 19102, Attention: Figgie Derivative Litigation,
or (b) to furnish the Settlement Administrator, in the manner
noted immediately above, with the names and addresses of Current
Stockholders. Upon receipt of such list, the Settlement
Administrator shall mail a copy of the Notice to such persons.
Upon the request of any Nominee, the Settlement Administrator
shall furnish sufficient quantities of the Notice for each of the
beneficial owners represented by the respective Nominee. After
notice to the persons for whom the Nominee has acted, the Nominee
may apply for reimbursement of its actual out-of-pocket expenses,
reasonably incurred, in identifying the beneficial owners
identified above, plus postage, by presenting to the Settlement
Administrator an affidavit that sets forth the name and address
<PAGE>
<PAGE>15
of each beneficial owner notified and the expenses incurred and
which represents that "such expenses would not have been incurred
but for the requirement that notice be provided" to such persons.
46. Notice given in the form and manner provided in
paragraph 4 of this Order is hereby found to be due, adequate and
sufficient notice, of the pendency of the Action and the proposed
settlement and dismissal of the Action, and the best practicable
under the circumstances, and shall constitute the notice required
by Ohio R. Civ. P. 23.1. FII shall serve and file an affidavit
evidencing its compliance with this Order governing notice on or
before _____________, 1995.
47. The costs of identifying and notifying Current
Shareholders (including the costs of printing the Notice)
pursuant to this Order shall be borne by FII as provided in the
Stipulation.
48. The Stipulation and all papers in support thereof
shall be available for inspection at the office of the Clerk of
Court, Lake County Courthouse, Painesville, Ohio, or the office
of the law firm of Murray & Murray Co., L.P.A., 111 East
Shoreline Drive, Sandusky, Ohio 44870, commencing on the date of
this Order, during reasonable business hours upon one day's
notice.
49. Any Current Shareholder who objects to the
Stipulation, the fairness, reasonableness or adequacy of the
proposed settlement or who otherwise wishes to be heard, may
appear in person or by his attorney at the hearing and present
any evidence or argument that may be proper and relevant;
provided, however, that no person other than the named plaintiffs
and defendants in this Action shall be heard, and no papers,
briefs, or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct) unless no later
than ten days prior to the hearing, notice of the intention to
appear, a statement of such person's objections or comments and
the grounds for such objections or comments or the reasons for
such person's desiring to appear and to be heard, as well as all
papers and other materials that such person desires the Court to
consider, shall be filed in writing by such person with the Clerk
of the Court and, on or before the date of such filing, shall be
served upon the following counsel of record:
Dennis Murray, Esq. Counsel for Plaintiffs
Murray & Murray Co., L.P.A.
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
James F. Koehler, Esq. Counsel for Plaintiffs
Gallagher, Sharp, Fulton
& Norman
7th Floor
Bulkley Building
Cleveland, Ohio 44115
and
John M. Newman, Jr., Esq. Counsel for Non-Management
Jones, Day, Reavis & Pogue Director Defendants
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Frances Floriano Goins, Esq. Counsel for Defendant
Squire, Sanders & Dempsey Vincent A. Chiarucci
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Richard W. Cass, Esq. Counsel for Defendants
Karen Barr, Esq. Harry E. Figgie, Jr. and
Wilmer, Cutler & Pickering Harry E. Figgie, III
2445 M Street, N.W.
Washington, D.C. 20037-1420
<PAGE>
<PAGE>16
James Hackenberg, Esq. Counsel for Nominal Defendant
Baker, Hackenberg & Figgie International Inc.
Collins Co., L.P.A.
77 North St. Clair Street
Suite 100
Painesville, Ohio 44077
50. Any Current Shareholder of FII who does not make
his, her, or its objection in the manner provided shall be deemed
to have waived such objection and shall forever be foreclosed
from making any objection to the fairness.
51. The Court expressly reserves the right to approve
the Stipulation and the settlement (including any modification
thereof made with the consent of plaintiffs and defendants as
provided for in the Stipulation without further notice to Current
Shareholders), and to adjourn the aforesaid hearing from time to
time, by oral announcement at the hearing without further notice
to Current Shareholders. All Current Shareholders shall be bound
by any order or judgment entered pursuant to the Stipulation
(including any modification thereof made with the consent of
plaintiffs and defendants as provided for in the Stipulation).
52. Pending final determination of whether the
settlement reflected in this Stipulation should be approved,
plaintiffs and FII's shareholders, or any of them, shall not
commence or prosecute against any defendant herein any action,
either derivatively on behalf of FII or directly on behalf of
themselves or any other person, asserting claims, rights or
causes of action whether known or unknown, that have been
asserted or could have been asserted in these Actions, or that in
any way encompasses or relates to any of the matters,
transactions, events, situations, courses of conduct,
representations, omissions, facts, or circumstances that have
been alleged or could have been alleged in these Actions.
Dated: June __, 1995 SO ORDERED
Painesville, Ohio
Paul H. Mitrovich
Judge
<PAGE>
<PAGE>17
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No. 93CV001575
Judge Mitrovich
NOTICE OF PENDENCY OF
DERIVATIVE ACTION AND OF
HEARING ON PROPOSED
SETTLEMENT AND DISMISSAL OF
ACTION
TO: OWNERS OF COMMON STOCK OF FIGGIE INTERNATIONAL INC. ("FII").
PLEASE READ THIS NOTICE WITH CARE AS IT
AFFECTS YOUR RIGHTS WITH RESPECT TO THIS
ACTION. THIS NOTICE IS NOT AN EXPRESSION OF
ANY OPINION BY THIS COURT AS TO THE MERITS OF
ANY OF THE CLAIMS OR DEFENSES ASSERTED BY ANY
PARTY IN THIS ACTION. THIS NOTICE IS SENT
FOR THE PURPOSE OF INFORMING YOU OF THE
PENDENCY OF THIS ACTION, THE PROPOSED
SETTLEMENT, AND THE HEARING TO CONSIDER COURT
APPROVAL OF THE PROPOSED SETTLEMENT.
YOU ARE HEREBY NOTIFIED, pursuant to Rule 23.1 of the Ohio Rules
of Civil Procedure ("Ohio Rules") and an Order of the Court of
Common Pleas of Lake County, Ohio (the "Court"), that the above
entitled derivative action and a second derivative action that
has been consolidated with it by order of the Court, Donald I.
MacDavid v. Harry E. Figgie, Jr., et al. (the "Actions"), are
pending in the Court of Common Pleas for Lake County, Ohio, and
that the Court has entered an order preliminarily approving a
Stipulation and Agreement of Compromise and Settlement (the
"Settlement") between the parties to the Actions. That Order
provides that the Settlement is subject to final approval by the
Court, and if it is approved, the Settlement will result in,
among other things, (a) the receipt of certain funds, materials
and other financial benefits by Figgie International Inc.
("FII"), (b) the institution or continuation of certain measures
by FII (relating to the Board of Directors of FII), (c) the
dismissal of the Actions with prejudice and the release of the
defendants from certain liabilities, and (d) payment of
attorneys' fees and expenses to counsel for the plaintiffs and of
certain incentive payments to the plaintiffs. A hearing has been
set regarding the Settlement, and you have certain rights in that
regard which you may exercise if you choose.
I. DESCRIPTION OF THE LITIGATION
A. Background
Plaintiffs in the Actions, Charles B. Miner, Anne
Howells and Donald I. MacDavid, are owners of common stock of FII
and in that capacity have asserted claims derivatively on behalf
of FII.
Named as defendants in the Actions are Harry E. Figgie,
Jr. and Harry E. Figgie III, former officers and directors of
FII; Vincent A. Chiarucci, a director and former officer of FII;
Gerald K. Rugger, a former director of FII; Fred J. Brinkman,
Dale S. Coenen, Alfred V. Gangnes, John S. Lanahan, F. Rush
McKnight, Harrison Nesbit II, C.B. Robertson III, Harold B.
Scott, A.A. Sommer, Jr., and Walter M. Vannoy, directors of FII;
and the Estate of Robert A. Weaver, Jr. (a former director
deceased since the commencement of the Actions) by Betsy Weaver,
Executrix. FII is named in both Actions as a nominal defendant,
and no claims are asserted against it.
The original complaint in the Miner action was filed on
October 18, 1993, and was later amended on or about January 28,
1994. The complaint in the MacDavid action was filed on December
2, 1993. The Actions were consolidated by an order of the Court
of Common Pleas on March 16, 1994, and the amended complaint in
the Miner action was designated as the controlling complaint for
the consolidated cases (the "Complaint").
<PAGE>
<PAGE>18
B. Plaintiffs' Claims
The Complaint alleges that the defendants breached
their fiduciary duties over a number of years in a broad range of
aspects that plaintiffs divide into four categories. They allege
that The Clark-Reliance Corporation ("Clark-Reliance"), a
privately held company controlled by Harry E. Figgie, Jr.
("Figgie Jr.), Harry E. Figgie III ("Figgie III") and other
members of the Figgie family, was improperly enriched at the
expense of FII; that there was waste of assets and mismanagement
involving, among various other things, relocations of FII's
corporate headquarters, the acquisition of corporate aircraft,
and investments in a conversion to "world-class" manufacturing
techniques; that FII resources were improperly diverted to the
personal use of members of the Figgie family; and that various
accounting irregularities were caused and permitted to occur.
C. Defendants' Responses and Related Proceedings
All individual defendants, and FII as nominal
defendant, filed motions to dismiss the Actions for failure to
comply with the requirement for a demand upon directors of FII
under Rule 23.1 of the Ohio Rules. Those motions were granted,
and the actions were dismissed by the Court on May 4, 1994. The
plaintiffs appealed the order dismissing the Actions, and those
appeals have been fully briefed but have not yet been presented
by oral argument or decided by the Court of Appeals. In view of
the Settlement, the matter has been returned by the Court of
Appeals to the Court of Common Pleas for purposes of considering
and passing upon the Settlement.
Defendants have denied and continue to deny all of the
claims and contentions directed at them in the Complaint. They
have vigorously defended this lawsuit, and in the event the order
of the Court of Common Pleas granting the motions to dismiss were
to be reversed in whole or in part, they would advance various
further defenses that they believe to be meritorious.
D. Investigations and Negotiations
Plaintiffs, with the assistance of counsel, have
conducted both formal and informal discovery and investigation in
connection with the claims asserted in the Complaint. They have
considered all possible avenues of legal and equitable relief,
and have fully explored the facts and law underlying their
claims. Plaintiffs' counsel also have engaged in discussions
and arms-length negotiations with counsel for the defendants.
These negotiations and investigations have resulted in the
proposed Settlement of the Actions described in this Notice.
E. Benefits Of Settlement To FII And Its Shareholders
Counsel for plaintiffs recognize and acknowledge the
expense and length of continued proceedings necessary to
prosecute the Actions against defendants through trial and
appeals. They have taken into account the uncertain outcome and
the risk of any litigation, especially in complex actions such as
these derivative lawsuits, and even more particularly where a
motion to dismiss the Actions has been granted and is on appeal.
They have also taken into account the costs of such protracted
litigation. Plaintiffs and their counsel have, therefore,
determined, on the basis of their knowledge and investigation of
the facts and the law relating to the acts, events and conduct
complained of in the Actions, that the Settlement, as described
below under the heading "SUMMARY OF THE PROPOSED SETTLEMENT," is
fair to and in the best interests of FII and its shareholders,
and will result in substantial benefits to FII and its
shareholders.
F. Benefits Of Settlement To Defendants
Defendants have concluded, without conceding liability,
that it is desirable for the Actions to be settled on the basis
proposed in order to avoid the substantial expense,
inconvenience, and distraction of further burdensome and
protracted legal proceedings and to put to rest the claims
asserted in the Actions and all further controversy related to
them.
<PAGE>
<PAGE>19
II. SUMMARY OF THE PROPOSED SETTLEMENT
The Settlement of the Actions has been reached between
plaintiffs, acting derivatively on behalf of FII and the
defendants. The terms and conditions of the Settlement are set
forth in detail in a stipulation dated June __, 1995 and filed
with the Court. The stipulation is subject to and becomes
effective only upon final approval of the Court.
The following description of the Settlement
is only a summary. Reference should be made
to the text of the Stipulation on file with
the Court for a full statement of its
provisions
A. In summary, the Stipulation provides for the
payment of three million three hundred thousand dollars
($3,300,000) and various other concessions to FII by the Figgie
Interests (defined to include defendants Figgie, Jr. and Figgie
III, and also Figgie, Jr.'s spouse and two additional children
and Clark-Reliance, which are not a parties to the Actions but
are participating in the settlement in order to facilitate
resolution of the matters in controversy). The $3,300,000
payment bears interest from the date the stipulation is signed
until the date payment is made. Under the settlement, Figgie,
Jr. also relinquishes certain benefits to which he may otherwise
be entitled under a 1988 employment agreement with FII (his
entitlement to which is disputed by FII), will relinquish certain
rights under a Company sponsored split-dollar life insurance
policy, and will not contest FII's repurchase at the contractual
price of $1 per share, of 90% of the shares of FII stock that he
received pursuant to FII's 1993 Restricted Stock Purchase Plan.
Further, the Figgie Interests assign to FII certain rights
relating to possible claims against Deloitte & Touche and Boston
Consulting Group and Clark-Reliance (1) will assume
responsibility for lease payments for the remaining life of
leases on five machines at Clark-Reliance on which FII is
currently liable; (2) will assume responsibility for lease
payments for the remaining life of leases on certain systems
hardware at Clark-Reliance on which FII is currently liable; (3)
will relinquish any rights to seek recovery from FII for costs of
restructuring its hardware, software and other systems; and (4)
mutually with FII will terminate all other relationships between
the two companies. In addition FII will, through action by its
directors, initiate and/or confirm the prior initiation of,
various measures relating to the organization and functioning of
the Board of Directors (the "Measures"). The Measures will
remain in effect for at least five years and may be changed or
eliminated during that period only with the majority vote of a
quorum composed of independent directors. The Measures
encompass, in summary, the following:
1. Reducing the number of directors to nine, reducing
the number of standing committees of the Board to
three, and reducing the annual stipend for service
on the Board to $15,000 (plus $1,000 per meeting
actually attended) and for service on any
committee of the Board to $3,000 (plus $1,000 per
meeting actually attended) respectively.
2. Establishing a corporate policy that the Board
shall have a majority of independent directors.
3. Providing that certain non-management members of
the Board annually assess and report to the full
Board its assessment of the Board's performance.
B. FII will pay to counsel for plaintiffs in the
Actions the amount of $1,935,000 as attorneys' fees and expenses.
FII will at the same time pay plaintiff Charles B. Miner $15,000,
plaintiff Anne Howells $7,500, and plaintiff Donald I. MacDavid
$7,500, as incentive compensation in respect of the commencement
and pursuit of the Actions. Interest shall accrue on these
amounts in the same manner as on the amount to be paid by the
Figgie Interests to FII.
C. FII intends to take steps necessary to indemnify
the Director Defendants for expenses (including legal fees)
incurred in connection with the defense and settlement of the
Actions. Plaintiffs will not oppose that indemnification.
<PAGE>
<PAGE>20
D. A judgment will be entered dismissing the Actions
as against all defendants with prejudice. FII and its
shareholders, acting derivatively, will be forever barred and
enjoined from commencing or prosecuting any lawsuits against
defendants for, and defendants and the Figgie Interests and their
heirs, successors, representatives and assigns will be released
from, liabilities incurred up to the date of the release,
including liabilities arising out of any claims, rights, or
causes of action, whether known or unknown, that have been
asserted or could have been asserted in the Actions, or that in
any way encompass or relate to any of the matters, transactions,
events, situations, courses of conduct, representations,
omissions, facts, or circumstances that have been alleged or
could have been alleged in this Actions. FII will obtain a
similar release of claims from the Figgie Interests.
E. If the Court does not approve the Settlement, or if
it is otherwise terminated in accordance with the stipulation,
then the rights and duties of the parties will revert to their
respective status as of the date and time immediately prior to
the execution of the stipulation.
III. NOTICE OF SETTLEMENT HEARING AND RIGHT TO OBJECT
A. The Court has ordered that a hearing (the
"Hearing") be held before the Honorable Paul H. Mitrovich, Court
of Common Pleas of Lake County, Ohio, in Room ___________, Lake
County Courthouse, 47 Park Place, Painesville, Ohio on
___________, 1995 at ____________ _.m. for the purpose of
determining whether the Settlement is fair, reasonable, and
adequate, whether it should be approved by the Court and the
Actions dismissed on the merits and with prejudice, and whether
judgment should be entered as provided in the Settlement. The
Hearing may be adjourned from time to time by the Court at the
Hearing or any adjourned session thereof without further notice.
B. Any owner of FII common stock may appear personally
or by counsel and be heard at the Hearing and may object to or
express views regarding the terms of the Settlement, as to
whether it should or should not be approved, provided, however,
that unless the Court in its discretion shall direct otherwise,
no such person will be heard or entitled in any way to contest
approval of the Settlement unless on or before ___________, 1995,
such person files with the Clerk of the Court in writing a notice
of intention to appear and a statement of the person's objections
or comments and the grounds for the objections or comments or the
reasons for desiring to appear, together with all papers or other
materials to be submitted to the Court at the Hearing and, on or
before the date of such filing, serves a complete set of such
material by mail on each of the following counsel for the
parties:
Dennis Murray, Esq. Counsel for Plaintiffs
Kirk J. Delli Bovi, Esq.
David D. Yeagley, Esq.
Murray & Murray Co., L.P.A.
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
James F. Koehler, Esq. Counsel for Plaintiffs
Gallagher, Sharp, Fulton
& Norman
7th Floor
Bulkley Building
Cleveland, Ohio 44115
and
John M. Newman, Jr., Esq. Counsel for Non-Management
Jones, Day, Reavis & Pogue Director Defendants
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
<PAGE>
<PAGE>21
Frances Floriano Goins, Esq. Counsel for Defendant
Squire, Sanders & Dempsey Vincent A. Chiarucci
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Richard W. Cass, Esq. Counsel for Defendants
Karen Barr, Esq. Harry E. Figgie, Jr. and
Wilmer, Cutler & Pickering Harry E. Figgie III
2445 M Street, N.W.
Washington, D.C. 20037-1420
James Hackenberg, Esq. Counsel for Nominal Defendant
Baker, Hackenberg & Figgie International Inc.
Collins Co., L.P.A.
77 North St. Clair Street
Suite 100
Painesville, Ohio 44077
Any such person who does not make his or her objection or
opposition in the manner provided above shall be deemed to have
waived all objections and opposition to the fairness,
reasonableness, and adequacy of the Settlement.
IV. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES
Pursuant to an Order of the Court, all brokerage firms
and other nominees ("Nominees") for beneficial owners of FII
common stock are requested promptly either (a) to send a copy of
the Notice to the beneficial owners and to furnish written
confirmation thereof to the Settlement Administrator, Heffler,
Radetich & Saitta L.L.P., Suite 800, 1515 Market Street,
Philadelphia, PA 19105-0290, Attention: Figgie Derivative
Litigation, or (b) to furnish the Settlement Administrator, in
the manner noted immediately above, with the names and addresses
of the beneficial owners. Upon receipt of such list the
Settlement Administrator will mail a copy of the Notice to such
persons. Upon the request of any Nominee, the Settlement
Administrator will furnish sufficient additional copies of the
Notice for each of the beneficial owners represented by the
respective Nominee. After providing notice to the persons for
whom the Nominee has acted, the Nominee may apply for
reimbursement of its actual out-of-pocket expenses, reasonably
incurred, in identifying the beneficial owners identified above,
plus postage, by presenting to the Settlement Administrator an
affidavit which sets forth the name and address of each
beneficial owner notified and the expenses incurred and which
represents that "such expenses would not have been incurred but
for the requirement that notice be provided" to such persons.
V. EXAMINATION OF PAPERS
This Notice is not a comprehensive description of the
Settlement. For the full details of the matters disclosed in
this Notice, and for further information concerning the Actions,
files may be inspected during normal business hours at the office
of the Clerk of Court, Lake County Courthouse, 47 North Park
Place, Painseville, Ohio 44077, or at the offices of Murray &
Murray Co., L.P.A., 111 East Shoreline Drive, Post Office Box 19,
Sandusky, Ohio 44871-0019, Plaintiffs' Counsel. Appointments to
inspect such materials at Murray & Murray should be made at least
one business day in advance of the date inspection is to be made.
Dated: _____________, 1995
Painesville, Ohio
Andy J. Totin
Clerk of Courts
Court of Common Pleas
Lake County, Ohio
<PAGE>
<PAGE>22
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL,
Defendants.
)
)
)
)
)
)
)
)
)
Case No.: 93CV001575
Judge Mitrovich
FINAL ORDER AND JUDGMENT
APPROVING SETTLEMENT AND
DISMISSING ACTION
Having considered the Stipulation and Agreement of
Compromise and Settlement dated June __, 1995 (the
"Stipulation"), including the exhibits annexed thereto; notice
having been duly given to owners of common stock of Figgie
International Inc. ("FII") in accordance with the order of this
Court; a hearing having been held on ______, 1995 for the purpose
of determining whether the terms of the settlement reflected in
the Stipulation are fair, reasonable and adequate to FII and to
FII's shareholders; having received and considered written
materials, and heard and considered oral presentations,
concerning the Stipulation; and upon all papers and proceedings
had in the shareholder derivative cases entitled Charles B. Miner
v. Harry Figgie, Jr., et al. and Donald I. MacDavid v. Harry E.
Figgie, Jr., et al. (the "Actions).
Now, upon joint application of plaintiffs and
defendants, by their attorneys, it is hereby ORDERED, ADJUDGED
AND DECREED as follows:
1. The terms of settlement of these Actions set out
in the Stipulation are fair, reasonable and adequate to FII and
its shareholders and are hereby approved, and the parties are
directed to consummate the settlement in accordance with its
terms, including but not limited to the execution and delivery of
releases in the form attached to the Stipulation.
2. The Actions are dismissed as to all defendants on
the merits with prejudice and without court costs, in accordance
with Rule 23.1 of the Ohio Rules of Civil Procedure, and all
defendants and their respective heirs, executors, administrators,
successors, and assigns, and present or former directors,
officers, employees, agents, subsidiaries, affiliates, parents
and divisions shall be and the same hereby are, released and
discharged from any and all claims, rights, causes of action and
liabilities whatsoever whether known or unknown, that have been
alleged or asserted or could have been alleged or asserted in the
Actions, or that are in any way based upon, encompass, relate to,
or arise out of any of the matters, actions, transactions,
agreements, situations, events, courses of conduct,
representations, omissions, facts or circumstances alleged or
referred to or that could have been alleged or referred to, in
the Actions. Nothing contained in the Stipulation or in this
Final Order and Judgment shall be deemed an admission or finding
of wrongdoing by or with respect to any party.
3. All persons, firms, corporations or other entities
who participate in any way in this settlement, and their
respective heirs, executors, administrators, representatives,
successors and assigns, including but not limited to FII, its
successors, assigns, subsidiaries, affiliates and divisions and
the shareholders of FII acting derivatively, whether or not such
persons appeared in this Action, are permanently barred, enjoined
and restrained from commencing or prosecuting any action, suit,
proceeding, claim or cause of action in any jurisdiction or court
against any of the individual defendants or any of their
respective heirs, executors, administrators, representatives,
successors and assigns, that in any way is based upon,
encompasses relates to or arises out of any of the matters,
actions, transactions, agreements, situations, events, courses of
conduct, representations, omissions, facts or circumstances that
have been discharged and released pursuant to paragraph 2 hereof.
<PAGE>
<PAGE23>
4. Upon the occurrence of the Effective Date (as
defined in the Stipulation):
a. The respective parties shall make the
payments, assume the obligations, and
otherwise carry out the requirements,
established by the terms of paragraphs 1
through 9 of the Stipulation under the
heading "Undertakings of Defendants."
b. Releases in the form set forth as Exhibits C
and D to the Stipulation shall be executed
and delivered as provided in the Stipulation.
5. If the Effective Date does not occur for any
reason whatsoever, this Final Order and Judgment shall be deemed
null and void and shall be of no force and effect whatsoever.
6. The Court reserves jurisdiction over the
consummation, administration and enforcement of the terms of the
Stipulation in accordance with this Final Order and Judgment.
Dated: ______________, 1995 SO ORDERED
Painesville, Ohio
Paul H. Mitrovich
Judge
<PAGE>
<PAGE>24
RELEASE
TO ALL WHOM THESE PRESENTS MAY COME OR MAY CONCERN,
WHEREAS, Figgie International Inc. ("FII") is a nominal
defendant in the derivative action entitled Charles B. Miner, et
al. v. Harry E. Figgie, Jr., et al., Case No. 93CV001575 filed in
the Court of Common Pleas of Lake County, Ohio (the "Court"), and
in the derivative action entitled Donald I. MacDavid v. Harry E.
Figgie, Jr., et al., Case No. 93CV001798 filed in the same Court
and later consolidated with the Miner action (together referred
to as the "Actions"); and
WHEREAS, the Actions are brought in the name of and on
behalf of FII against the various defendants; and
WHEREAS, the parties to the Actions have entered into a
Stipulation and Agreement of Compromise and Settlement
("Stipulation") which was filed with the Court of Common Pleas of
Lake County, Ohio on June 16, 1995; and
WHEREAS, the Court, following a hearing held on August
7, 1995, has issued a Final Order and Judgment approving the
settlement, and the Effective Date, as defined in the
Stipulation, has occurred making the judgment final;
NOW, THEREFORE,
1. As provided in the Stipulation, FII for good and
valuable consideration, the receipt and sufficiency or which is
hereby acknowledged, by these presents for its predecessors,
successors, assigns, parents, subsidiaries, affiliates and
divisions does hereby remise, release and forever discharge each
and all of the defendants in the Actions (specifically, Harry E.
Figgie, Jr., Harry E. Figgie III, Vincent A. Chiarucci, Fred J.
Brinkman, Dale S. Coenen, Alfred V. Gangnes, John S. Lanahan, F.
Rush McKnight, Harrison Nesbit II, C.B. Robertson III, Gerald K.
Rugger, Harold B. Scott, A.A. Sommer, Jr., Walter M. Vannoy, and
the Estate of Robert A. Weaver, Jr. by Betsy Weaver, Executrix)
and the respective spouses and children of Harry E. Figgie, Jr.
and Harry E. Figgie III, and The Clark-Reliance Corporation,
which are not parties to the Actions, and the past or present
officers, directors, employees, agents, advisors, attorneys,
representatives, insurers, shareholders, affiliates,
subsidiaries, parents, predecessors, successors, assigns,
divisions, heirs, executors or administrators of any of the
foregoing (collectively the "Releasees"), of and from all manner
of actions, causes of action, suits, debts, contracts,
agreements, promises, damages, rights, claims and demands
whatsoever, whether known or unknown, in law or in equity, from
the beginning of the world to the date of this Release,
(hereinafter collectively referred to as "Claims"), which against
the Releasees, or any of them, FII or FII's predecessors,
successors, assigns, parents, subsidiaries, affiliates and
divisions ever had or now has or hereafter can, shall or may
have, including but not limited to Claims by reasons of, based
upon, encompassing, or arising out of or related to any of the
matters, actions, transactions, agreements, situations, events,
courses of conduct, representations, omissions, facts or
circumstances, actual or purported, alleged or referred to or
which might have been alleged or referred to in the pleadings in
the foregoing Actions, or which might have been alleged in any
other court or tribunal.
2. Notwithstanding the foregoing, this Release shall
not in any way apply to or otherwise affect rights of FII (a)
under its employment agreement with Walter M. Vannoy, or (b)
under the respective undertakings executed by each of the
individual defendants specified in paragraph 1 hereof in respect
of repayment of expenses advanced in connection with the
foregoing Actions.
3. Nothing in this Release shall be deemed to be or
construed as an admission of any liability of any Releasee, which
liability is expressly denied.
4. Nothing in this Release shall relieve the Releasees
from any obligation that may be created by the Stipulation and
the Final Order and Judgment of the Court in connection
therewith.
5. This Release shall be governed and construed in
accordance with the laws of the State of Ohio.
<PAGE>
<PAGE>25
6. The person who executes this Release on behalf of
FII warrants and represents that he has been authorized by FII to
enter into and execute this Release.
7. This Release may not be changed or amended orally.
IN WITNESS WHEREOF, the undersigned has for and on
behalf of FII executed these presents this ____ day of
________________, 1995.
FIGGIE INTERNATIONAL INC.
By
Its
<PAGE>
<PAGE>26
RELEASE
TO ALL TO WHOM THESE PRESENTS MAY COME OR MAY CONCERN,
WHEREAS, Harry E. Figgie, Jr. and Harry E. Figgie III
are defendants in the derivative action entitled Charles B.
Miner, et al. v. Harry E. Figgie, Jr., et al., Case No.
93CV001575 filed in the Court of Common Pleas of Lake County,
Ohio (the "Court"), and in the derivative action entitled Donald
I. MacDavid v. Harry E. Figgie, Jr., et al., Case No. 93CV001798
filed in the same Court and later consolidated with the Miner
action (together referred to as the "Actions"); and
WHEREAS, the Actions are brought in the name of and on
behalf of Figgie International, Inc. ("FII") against the various
defendants; and
WHEREAS, the parties to the Actions have entered into a
Stipulation and Agreement of Compromise and Settlement
("Stipulation") which was filed with the Court of Common Pleas of
Lake County, Ohio on June __, 1995; and
WHEREAS, the Court, following a hearing held on
__________, 1995, has issued a Final Order and Judgment approving
the settlement, and the Effective Date, as defined in the
Stipulation, has occurred making the judgment final; and
WHEREAS, Mark Figgie and Matthew Figgie are sons, and
Nancy Figgie the spouse, of Harry E. Figgie, Jr.; and
WHEREAS, The Clark-Reliance Corporation ("Clark-
Reliance") is a privately held company controlled by Harry E.
Figgie, Jr., Harry E. Figgie III and other members of the Figgie
Family:
NOW, THEREFORE,
1. As provided in the Stipulation, Harry E. Figgie,
Jr., Harry E. Figgie III, Matthew Figgie, Mark Figgie, Nancy
Figgie, and Clark-Reliance (the "Releasors"), for good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, by these presents for their predecessors,
successors, heirs, executors, administrators and assigns and, in
the case of Clark-Reliance, also its parents, subsidiaries,
affiliates and divisions, do hereby remise, release and forever
discharge FII and any of the past or present officers, directors,
employees, agents, advisors, attorneys, representatives,
insurers, shareholders, affiliates, subsidiaries, parents,
predecessors, successors, assigns, divisions, heirs, executors,
or administrators of any of the foregoing (collectively the
"Releasees"), of and from all manner of actions, causes of
action, suits, debts, contracts, agreements, promises, rights,
claims and damages whatsoever, whether known or unknown, in law
or in equity, from the beginning of the world to the date of this
Release (hereinafter collectively referred to as "Claims"), which
against the Releasees, or any of them, the Releasors or any of
the Releasors' predecessors, successors and assigns and, in the
case of Clark-Reliance, also any of its past or present officers,
directors, employees or agents, acting in any capacity, ever had
or now has or hereafter can, shall or may have, including but not
limited to Claims by reason of, based upon, encompassing, or
arising out of or related to any of the matters, actions,
transactions, agreements, situations, events, courses of conduct,
representations, omissions, facts or circumstances, actual or
purported, alleged or referred to or which might have been
alleged or referred to in the pleadings in the foregoing Actions,
or which might have been alleged in any other court or tribunal.
2. Notwithstanding the foregoing, this Release shall
not in any way apply to or otherwise affect rights accrued (a) to
Harry E. Figgie, Jr. or Harry E. Figgie III under the terms of
any standard benefits plans or programs of FII to which either
may be entitled as a former officer, director or employee of FII
or any of its subsidiaries, except (i) as to being a Director
Emeritus, or (ii) as expressly provided in Paragraph 2(a) and
2(b) of the Undertakings in the Stipulation; (b) to Harry E.
Figgie, Jr., Harry E. Figgie III, Nancy Figgie or Matthew Figgie
in respect of indemnification as an "authorized representative"
within the meaning of FII's bylaws; or (c) to Harry E. Figgie
III, Matthew Figgie, or Mark Figgie in respect of any split
dollar insurance program.
3. Nothing in this Release shall be deemed to be or
construed as an admission of any liability of any Releasee, which
liability is expressly denied.
<PAGE>
<PAGE>27
4. Nothing in this Release shall relieve the
Releasees from any obligations that may be created by the
Stipulation and Final Order and Judgment of the Court in
connection therewith.
5. This Release shall be governed and construed in
accordance with the laws of the State of Ohio.
6. The person who executes this Release on behalf of
Clark-Reliance warrants and represents that he has been
authorized by Clark-Reliance to enter into and execute this
Release.
7. This Release may not be changed or amended orally.
IN WITNESS WHEREOF, the undersigned have executed these
presents this __day of _________________, 1995.
___________________________
Harry E. Figgie, Jr.
___________________________
Harry E. Figgie III
___________________________
Nancy Figgie
___________________________
Mark Figgie
___________________________
Matthew Figgie
CLARK-RELIANCE CORPORATION
By_________________________
Its______________________
<PAGE>
<PAGE>28
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No.: 93CV001575
Judge Mitrovich
ORDER APPROVING SUBMISSION
OF SETTLEMENT TO
SHAREHOLDERS AND PROVIDING
FOR NOTICE
The parties to the above captioned shareholder
derivative action (the "Action"), having entered into a
Stipulation and Agreement of Settlement and Compromise (the
"Stipulation") executed by counsel for all parties and presented
to the Court on _______________, and having jointly moved this
Court to approve a settlement and dismissal of the Action upon
terms set forth in the Stipulation; and
The Court having determined preliminarily that the
proposed settlement appears to be the product of serious,
informed, non-collusive negotiations, has no obvious
deficiencies, and falls within the range of possible approval;
and
The Court having further determined on this basis,
after due deliberation, that it is necessary and appropriate to
submit the proposed settlement to the owners of common stock of
Figgie International Inc. ("FII") and to convene a hearing for
the purpose of determining on a final basis the fairness,
reasonableness and adequacy of the proposed settlement;
IT IS HEREBY ORDERED that:
7. For purposes of settlement only, this Action is
hereby authorized to proceed as a derivative action under Ohio R.
Civ. P. 23.1 on behalf of FII.
8. A hearing shall be held on __________, 1995 at
______, ___M. (the "Hearing) to determine the fairness,
reasonableness and adequacy of the settlement proposed in the
Stipulation and whether the settlement should be approved by the
Court and judgment entered on it.
9. Persons who are shareholders of common stock of
FII as of _______________________, 1995 ("Current Shareholders")
are entitled to receive notice of the pendency of this Action and
of the Hearing on the proposed Settlement and dismissal of the
action (the "Notice"), and Notice will be required as set forth
below.
10. FII shall cause the Notice, substantially in the
form annexed hereto as Exhibit A1 to be mailed by first class
mail, postage prepaid, on or before ______, 1995 to all persons
shown on the stock records maintained by or on behalf of FII to
be Current Shareholders.
11. Upon receiving the Notice, all brokerage firms and
other nominees ("Nominees") for beneficial owners who are Current
Stockholders are requested promptly either (a) to send a copy of
the Notice to Current Stockholders and to furnish written
confirmation thereof to the Settlement Administrator, Heffler,
Radetich & Saitta L.L.P., Suite 800, 1515 Market Street,
Philadelphia, PA 19102, Attention: Figgie Derivative Litigation,
or (b) to furnish the Settlement Administrator, in the manner
noted immediately above, with the names and addresses of Current
Stockholders. Upon receipt of such list, the Settlement
Administrator shall mail a copy of the Notice to such persons.
Upon the request of any Nominee, the Settlement Administrator
shall furnish sufficient quantities of the Notice for each of the
beneficial owners represented by the respective Nominee. After
notice to the persons for whom the Nominee has acted, the Nominee
may apply for reimbursement of its actual out-of-pocket expenses,
reasonably incurred, in identifying the beneficial owners
identified above, plus postage, by presenting to the Settlement
Administrator an affidavit that sets forth the name and address
<PAGE>
<PAGE>29
of each beneficial owner notified and the expenses incurred and
which represents that "such expenses would not have been incurred
but for the requirement that notice be provided" to such persons.
12. Notice given in the form and manner provided in
paragraph 4 of this Order is hereby found to be due, adequate and
sufficient notice, of the pendency of the Action and the proposed
settlement and dismissal of the Action, and the best practicable
under the circumstances, and shall constitute the notice required
by Ohio R. Civ. P. 23.1. FII shall serve and file an affidavit
evidencing its compliance with this Order governing notice on or
before _____________, 1995.
13. The costs of identifying and notifying Current
Shareholders (including the costs of printing the Notice)
pursuant to this Order shall be borne by FII as provided in the
Stipulation.
14. The Stipulation and all papers in support thereof
shall be available for inspection at the office of the Clerk of
Court, Lake County Courthouse, Painesville, Ohio, or the office
of the law firm of Murray & Murray Co., L.P.A., 111 East
Shoreline Drive, Sandusky, Ohio 44870, commencing on the date of
this Order, during reasonable business hours upon one day's
notice.
15. Any Current Shareholder who objects to the
Stipulation, the fairness, reasonableness or adequacy of the
proposed settlement or who otherwise wishes to be heard, may
appear in person or by his attorney at the hearing and present
any evidence or argument that may be proper and relevant;
provided, however, that no person other than the named plaintiffs
and defendants in this Action shall be heard, and no papers,
briefs, or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct) unless no later
than ten days prior to the hearing, notice of the intention to
appear, a statement of such person's objections or comments and
the grounds for such objections or comments or the reasons for
such person's desiring to appear and to be heard, as well as all
papers and other materials that such person desires the Court to
consider, shall be filed in writing by such person with the Clerk
of the Court and, on or before the date of such filing, shall be
served upon the following counsel of record:
Dennis Murray, Esq. Counsel for Plaintiffs
Murray & Murray Co., L.P.A.
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
James F. Koehler, Esq. Counsel for Plaintiffs
Gallagher, Sharp, Fulton
& Norman
7th Floor
Bulkley Building
Cleveland, Ohio 44115
and
John M. Newman, Jr., Esq. Counsel for Non-Management
Jones, Day, Reavis & Pogue Director Defendants
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Frances Floriano Goins, Esq. Counsel for Defendant
Squire, Sanders & Dempsey Vincent A. Chiarucci
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Richard W. Cass, Esq. Counsel for Defendants
Karen Barr, Esq. Harry E. Figgie, Jr. and
Wilmer, Cutler & Pickering Harry E. Figgie, III
2445 M Street, N.W.
Washington, D.C. 20037-1420
<PAGE>
<PAGE>30
James Hackenberg, Esq. Counsel for Nominal Defendant
Baker, Hackenberg & Figgie International Inc.
Collins Co., L.P.A.
77 North St. Clair Street
Suite 100
Painesville, Ohio 44077
16. Any Current Shareholder of FII who does not make
his, her, or its objection in the manner provided shall be deemed
to have waived such objection and shall forever be foreclosed
from making any objection to the fairness.
17. The Court expressly reserves the right to approve
the Stipulation and the settlement (including any modification
thereof made with the consent of plaintiffs and defendants as
provided for in the Stipulation without further notice to Current
Shareholders), and to adjourn the aforesaid hearing from time to
time, by oral announcement at the hearing without further notice
to Current Shareholders. All Current Shareholders shall be bound
by any order or judgment entered pursuant to the Stipulation
(including any modification thereof made with the consent of
plaintiffs and defendants as provided for in the Stipulation).
18. Pending final determination of whether the
settlement reflected in this Stipulation should be approved,
plaintiffs and FII's shareholders, or any of them, shall not
commence or prosecute against any defendant herein any action,
either derivatively on behalf of FII or directly on behalf of
themselves or any other person, asserting claims, rights or
causes of action whether known or unknown, that have been
asserted or could have been asserted in these Actions, or that in
any way encompasses or relates to any of the matters,
transactions, events, situations, courses of conduct,
representations, omissions, facts, or circumstances that have
been alleged or could have been alleged in these Actions.
Dated: June __, 1995 SO ORDERED
Painesville, Ohio
Paul H. Mitrovich
Judge
<PAGE>
<PAGE>31
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL.,
Plaintiffs,
v.
HARRY FIGGIE, JR., ET AL.,
Defendants.
)
)
)
)
)
)
)
)
)
Case No.: 93CV001575
Judge Mitrovich
ORDER APPROVING SUBMISSION
OF SETTLEMENT TO
SHAREHOLDERS AND PROVIDING
FOR NOTICE
The parties to the above captioned shareholder
derivative action (the "Action"), having entered into a
Stipulation and Agreement of Settlement and Compromise (the
"Stipulation") executed by counsel for all parties and presented
to the Court on _______________, and having jointly moved this
Court to approve a settlement and dismissal of the Action upon
terms set forth in the Stipulation; and
The Court having determined preliminarily that the
proposed settlement appears to be the product of serious,
informed, non-collusive negotiations, has no obvious
deficiencies, and falls within the range of possible approval;
and
The Court having further determined on this basis,
after due deliberation, that it is necessary and appropriate to
submit the proposed settlement to the owners of common stock of
Figgie International Inc. ("FII") and to convene a hearing for
the purpose of determining on a final basis the fairness,
reasonableness and adequacy of the proposed settlement;
IT IS HEREBY ORDERED that:
19. For purposes of settlement only, this Action is
hereby authorized to proceed as a derivative action under Ohio R.
Civ. P. 23.1 on behalf of FII.
20. A hearing shall be held on __________, 1995 at
______, ___M. (the "Hearing) to determine the fairness,
reasonableness and adequacy of the settlement proposed in the
Stipulation and whether the settlement should be approved by the
Court and judgment entered on it.
21. Persons who are shareholders of common stock of
FII as of _______________________, 1995 ("Current Shareholders")
are entitled to receive notice of the pendency of this Action and
of the Hearing on the proposed Settlement and dismissal of the
action (the "Notice"), and Notice will be required as set forth
below.
22. FII shall cause the Notice, substantially in the
form annexed hereto as Exhibit A1 to be mailed by first class
mail, postage prepaid, on or before ______, 1995 to all persons
shown on the stock records maintained by or on behalf of FII to
be Current Shareholders.
23. Upon receiving the Notice, all brokerage firms and
other nominees ("Nominees") for beneficial owners who are Current
Stockholders are requested promptly either (a) to send a copy of
the Notice to Current Stockholders and to furnish written
confirmation thereof to the Settlement Administrator, Heffler,
Radetich & Saitta L.L.P., Suite 800, 1515 Market Street,
Philadelphia, PA 19102, Attention: Figgie Derivative Litigation,
or (b) to furnish the Settlement Administrator, in the manner
noted immediately above, with the names and addresses of Current
Stockholders. Upon receipt of such list, the Settlement
Administrator shall mail a copy of the Notice to such persons.
Upon the request of any Nominee, the Settlement Administrator
shall furnish sufficient quantities of the Notice for each of the
beneficial owners represented by the respective Nominee. After
notice to the persons for whom the Nominee has acted, the Nominee
may apply for reimbursement of its actual out-of-pocket expenses,
reasonably incurred, in identifying the beneficial owners
identified above, plus postage, by presenting to the Settlement
Administrator an affidavit that sets forth the name and address
<PAGE>
<PAGE>32
of each beneficial owner notified and the expenses incurred and
which represents that "such expenses would not have been incurred
but for the requirement that notice be provided" to such persons.
24. Notice given in the form and manner provided in
paragraph 4 of this Order is hereby found to be due, adequate and
sufficient notice, of the pendency of the Action and the proposed
settlement and dismissal of the Action, and the best practicable
under the circumstances, and shall constitute the notice required
by Ohio R. Civ. P. 23.1. FII shall serve and file an affidavit
evidencing its compliance with this Order governing notice on or
before _____________, 1995.
25. The costs of identifying and notifying Current
Shareholders (including the costs of printing the Notice)
pursuant to this Order shall be borne by FII as provided in the
Stipulation.
26. The Stipulation and all papers in support thereof
shall be available for inspection at the office of the Clerk of
Court, Lake County Courthouse, Painesville, Ohio, or the office
of the law firm of Murray & Murray Co., L.P.A., 111 East
Shoreline Drive, Sandusky, Ohio 44870, commencing on the date of
this Order, during reasonable business hours upon one day's
notice.
27. Any Current Shareholder who objects to the
Stipulation, the fairness, reasonableness or adequacy of the
proposed settlement or who otherwise wishes to be heard, may
appear in person or by his attorney at the hearing and present
any evidence or argument that may be proper and relevant;
provided, however, that no person other than the named plaintiffs
and defendants in this Action shall be heard, and no papers,
briefs, or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct) unless no later
than ten days prior to the hearing, notice of the intention to
appear, a statement of such person's objections or comments and
the grounds for such objections or comments or the reasons for
such person's desiring to appear and to be heard, as well as all
papers and other materials that such person desires the Court to
consider, shall be filed in writing by such person with the Clerk
of the Court and, on or before the date of such filing, shall be
served upon the following counsel of record:
Dennis Murray, Esq. Counsel for Plaintiffs
Murray & Murray Co., L.P.A.
111 East Shoreline Drive
Post Office Box 19
Sandusky, Ohio 44871-0019
James F. Koehler, Esq. Counsel for Plaintiffs
Gallagher, Sharp, Fulton
& Norman
7th Floor
Bulkley Building
Cleveland, Ohio 44115
and
John M. Newman, Jr., Esq. Counsel for Non-Management
Jones, Day, Reavis & Pogue Director Defendants
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Frances Floriano Goins, Esq. Counsel for Defendant
Squire, Sanders & Dempsey Vincent A. Chiarucci
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Richard W. Cass, Esq. Counsel for Defendants
Karen Barr, Esq. Harry E. Figgie, Jr. and
Wilmer, Cutler & Pickering Harry E. Figgie, III
2445 M Street, N.W.
Washington, D.C. 20037-1420
<PAGE>
<PAGE>33
James Hackenberg, Esq. Counsel for Nominal Defendant
Baker, Hackenberg & Figgie International Inc.
Collins Co., L.P.A.
77 North St. Clair Street
Suite 100
Painesville, Ohio 44077
28. Any Current Shareholder of FII who does not make
his, her, or its objection in the manner provided shall be deemed
to have waived such objection and shall forever be foreclosed
from making any objection to the fairness.
29. The Court expressly reserves the right to approve
the Stipulation and the settlement (including any modification
thereof made with the consent of plaintiffs and defendants as
provided for in the Stipulation without further notice to Current
Shareholders), and to adjourn the aforesaid hearing from time to
time, by oral announcement at the hearing without further notice
to Current Shareholders. All Current Shareholders shall be bound
by any order or judgment entered pursuant to the Stipulation
(including any modification thereof made with the consent of
plaintiffs and defendants as provided for in the Stipulation).
30. Pending final determination of whether the
settlement reflected in this Stipulation should be approved,
plaintiffs and FII's shareholders, or any of them, shall not
commence or prosecute against any defendant herein any action,
either derivatively on behalf of FII or directly on behalf of
themselves or any other person, asserting claims, rights or
causes of action whether known or unknown, that have been
asserted or could have been asserted in these Actions, or that in
any way encompasses or relates to any of the matters,
transactions, events, situations, courses of conduct,
representations, omissions, facts, or circumstances that have
been alleged or could have been alleged in these Actions.
Dated: June __, 1995 SO ORDERED
Painesville, Ohio
Paul H. Mitrovich
Judge
<PAGE>
<PAGE>34
IN THE COURT OF COMMON PLEAS
LAKE COUNTY, OHIO
CHARLES B. MINER, ET AL., ) Case No.: 93CV001575
)
Plaintiffs, ) Judge Mitrovich
)
v. )
)
HARRY FIGGIE, JR., ET AL., )
)
Defendants. )
JOINT MOTION FOR ORDER APPROVING SUBMISSION
OF SETTLEMENT TO SHAREHOLDERS AND PROVIDING FOR NOTICE
Pursuant to Rule 23.1 of the Ohio Rules of Civil
Procedure, the parties to this shareholder derivative action (the
"Action") jointly move the Court to enter an Order, a form of
which is provided herewith, to do the following:
(a) preliminarily approve the terms of the settlement
set forth in the Stipulation and Agreement of Compromise and
Settlement (the "Stipulation") entered into by the parties;
(b) establish a date for a hearing to determine the
fairness, reasonableness, and adequacy of the settlement set
forth in the Stipulation;
(c) provide for notice to the owners of common stock
of Figgie International Inc. of the pendency of the Action and of
the hearing on the proposed settlement and dismissal of the
Action.
The terms of the settlement are set forth in full in
the Stipulation which, together with each of the exhibits to
which it refers, is being presented to the Court at the same time
as this joint motion. Preliminary approval of that settlement
and submission to the shareholders is warranted because the
settlement is the product of serous, informed, non-collusive
negotiations and has no obvious deficiencies.
Dated: June __, 1995 MURRAY & MURRAY CO., L.P.A.
By: ________________________
111 East Shoreline Drive
Post office Box 19
Sandusky, Ohio 44871-0019
Attorneys for Plaintiffs
Charles B. Miner and Anne Howells
GALLAGHER, SHARP, FULTON & NORMAN
By: _______________________________
Seventh Floor, Bulkley Bldg.
1501 Euclid Avenue
Cleveland, Ohio 44ll5
Attorneys for Plaintiff Donald
I. MacDavid
WILMER, CUTLER & PICKERING
By: ______________________________
2445 M. Street, N.W.
Washington, D.C. 20037
BARRY M. BYRON & CO., LPA
By:
Interstate Square Bldg. 1
4230 State Rte. 306
Willoughby, Ohio 44094
<PAGE>
<PAGE>35
Attorneys for Defendants Harry E.
Figgie, Jr. and Harry E. Figgie III
and also for Matthew Figgie,
Mark Figgie, Nancy Figgie and
The Clark-Reliance Corporation
SQUIRE, SANDERS & DEMPSEY
By:
4900 Society Center
127 Public Square
Cleveland, Ohio 44114
Attorneys for Defendant Vincent A.
Chiarucci
JONES, DAY, REAVIS & POGUE
By:
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attorneys for Defendants Fred J.
Brinkman, Dale S. Coenen, Alfred V.
Gangnes, John S. Lanahan, F. Rush
McKnight, Harrison Nesbit II, C.B.
Robertson III, Gerald K. Rugger,
Harold B. Scott, A.A. Sommer, Jr.,
Walter M. Vannoy, and Estate of
Robert A. Weaver, Jr. by Betsy
Weaver, Executrix
BAKER, HACKENBERG & COLLINS CO.,
L.P.A.
By:
77 North St. Clair Street
Painesville, Ohio 44077
Attorneys for Nominal Defendant
Figgie International Inc.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720032
<NAME> FIGGIE INTERNATIONAL
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 56,538
<SECURITIES> 0
<RECEIVABLES> 55,055
<ALLOWANCES> 303
<INVENTORY> 46,071
<CURRENT-ASSETS> 235,285
<PP&E> 134,389
<DEPRECIATION> 47,176
<TOTAL-ASSETS> 438,580
<CURRENT-LIABILITIES> 149,908
<BONDS> 211,237
<COMMON> 1,837
0
0
<OTHER-SE> 51,600
<TOTAL-LIABILITY-AND-EQUITY> 438,580
<SALES> 266,305
<TOTAL-REVENUES> 266,305
<CGS> 198,195
<TOTAL-COSTS> 248,713
<OTHER-EXPENSES> 9,142
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 21,344
<INCOME-PRETAX> (12,894)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,894)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,894)
<EPS-PRIMARY> (0.71)
<EPS-DILUTED> (0.71)
</TABLE>
