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