<PAGE> 1
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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FIGGIE INTERNATIONAL
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FIGGIE INTERNATIONAL
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE> 2
FIGGIE INTERNATIONAL INC.
4420 SHERWIN ROAD
WILLOUGHBY, OHIO 44094
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Class A
Common Stock, par value $.10 per share, and the holders of Class B Common Stock,
par value $.10 per share, of Figgie International Inc. (the "Corporation") will
be held at Franklin Hall at the Corporation's Headquarters, 4420 Sherwin Road,
Willoughby, Ohio 44094 on Tuesday, October 17, 1995 at 1:00 p.m., Eastern
Daylight Savings Time, to consider and take action with respect to the
following:
1. To elect a class of 3 Directors each for a term of 3 years and until
their successors shall be elected and qualified; and
2. To conduct such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Holders of Class A Common Stock and holders of Class B Common Stock of
record at the close of business on September 8, 1995 are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
L. A. Harthun
Secretary
Dated: September 14, 1995
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY/VOTING
INSTRUCTION CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
FIGGIE INTERNATIONAL INC.
4420 SHERWIN ROAD
WILLOUGHBY, OHIO 44094
------------------------
PROXY STATEMENT
MAILED ON SEPTEMBER 14, 1995
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 17, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Figgie International Inc. (the
"Corporation") to be used at the Annual Meeting of the holders of Class A Common
Stock, par value $.10 per share, and the holders of Class B Common Stock, par
value $.10 per share, of the Corporation to be held on October 17, 1995 and at
any adjournments thereof. The time and place of the Annual Meeting are stated in
the Notice of Annual Meeting of Stockholders which accompanies this Proxy
Statement.
The expense of soliciting proxies, including the costs of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Corporation. In addition to the use of the mails, proxies may be solicited
personally or by telephone or telegraph, and the Corporation may pay persons
holding shares for others their expenses in sending proxy material to their
principals. Solicitation of proxies may also be made on behalf of the Board of
Directors by Morrow & Company at a total cost, including fees and expenses, of
approximately $6,000.00. Proxies may be solicited by Morrow & Company by
personal interview, mail, telephone and telegraph.
VOTING RIGHTS
Only stockholders of record at the close of business on September 8, 1995
are entitled to notice of and to vote at the Annual Meeting. The proxy will also
serve to instruct the trustees of the Figgie International Inc. Stock Ownership
Trust and Plan (the "ESOP"), the Figgie International Inc. Stock Ownership Trust
and Plan for Salaried Employees (the "ESOP for Salaried Employees"), the Figgie
International Inc. Stock Bonus Trust and Plan (the "Stock Bonus Plan") and the
Figgie International Inc. Supplementary Retirement Savings Plan (the "SRSP") on
how to vote any shares of the Corporation's common stock held by the plans. The
number of shares printed on the proxy/voting instruction card accompanying this
proxy statement includes, when applicable, shares allocated to the participants
in any such plan. The instructions given by the participants in such plans will
also serve to instruct the trustees of such plans on how to vote any unallocated
shares held by such plans.
At the close of business on September 8, 1995, the Corporation had
outstanding and entitled to vote 13,645,748 shares of Class A Common Stock and
4,726,669 shares of Class B Common Stock. The holders of issued and outstanding
shares of Class A Common Stock are generally entitled to 1/20 of one vote for
each share held by them on each matter to be presented with certain exceptions
set forth below. The holders of issued and outstanding shares of Class B Common
Stock are generally entitled to one vote for each share held by them on each
matter to be presented with certain exceptions set forth below.
Article Sixth of the Corporation's Restated Certificate of Incorporation
(the "Substantial Stockholder Provision") places limitations on the ability of
certain persons coming within the definition of a
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<PAGE> 4
"Substantial Stockholder" to vote shares of the Corporation's voting stock
beneficially owned by them. A Substantial Stockholder is defined as any
beneficial owner of more than a "threshold percentage" -- generally 20.00% -- of
the outstanding shares of any class of voting stock of the Corporation. If a
stockholder's percentage of shares of a class of voting stock of the Corporation
increases above the threshold applicable to him as a result of purchases,
redemptions or other acquisitions of shares of the class by the Corporation or
decreases below the threshold applicable to him as a result of an issuance of
shares of a class by the Corporation or a reduction in beneficial ownership by
the stockholder, then the stockholder's threshold percentage is adjusted to
equal the percentage of outstanding shares of the class held immediately after
such event, but never below 20.00%. The record holders of any shares
beneficially owned by a Substantial Stockholder are entitled to 1/20 of one vote
for each share of Class A Common Stock held and one vote for each share of Class
B Common Stock held up to the Substantial Stockholder's threshold percentage of
each class or series, and 1/100 of such vote for each share held in excess of
such threshold percentage for each class or series. Thus, a Substantial
Stockholder holding shares in excess of the applicable threshold percentage
would be entitled to 1/2000 of a vote for each such share of Class A Common
Stock and 1/100 of a vote for each such share of Class B Common Stock. Also, a
Substantial Stockholder may exercise a maximum percentage of the voting power of
each class or series equal to his threshold percentage for that class plus 5%.
The excess shares owned above the threshold percentage plus 5% cannot be voted
by the Substantial Stockholder. The aggregate voting power of a Substantial
Stockholder, so limited, is allocated proportionately among the record holders
of the shares beneficially owned by the Substantial Stockholder.
At September 1, 1995, the Corporation believes that no stockholder of the
Corporation beneficially owned shares in excess of such stockholder's applicable
threshold percentage.
The holders of Class A Common Stock are entitled to cast 682,287 votes at
the Annual Meeting and the holders of Class B Common Stock are entitled to cast
4,726,669 votes at the Annual Meeting. The total number of votes of both classes
entitled to be cast at the Annual Meeting is 5,408,956. The holders of record of
shares entitled to cast a majority of such votes must be present in person or
represented by proxy in order to constitute a quorum for the holding of a
meeting.
Candidates for election as Directors receiving a plurality of the votes of
holders of Class A Common Stock and holders of Class B Common Stock present in
person or represented by proxy, voting together and not as separate classes,
will be elected to the seats on the Board of Directors of the class whose term
expires in 1998.
Shares entitled to vote represented by proxies which are properly executed
and returned before the Annual Meeting will be voted at the Annual Meeting as
directed therein. If no vote is specified therein, the shares will be voted
"FOR" the election of the Directors named as nominees in the Proxy Statement.
Shares represented by proxies which are marked "WITHHELD" with regard to
the election of Directors will be excluded entirely from the vote and will have
no effect. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions with respect to a particular matter ("broker non-votes"), those
shares will have no effect on the outcome of such matter.
The Board of Directors does not know of any other business to be presented
for consideration at the Annual Meeting. If any other business properly comes
before the Annual Meeting or any adjournment thereof, the proxies will be voted
on such matters in the discretion of the proxy holders insofar as the proxies
are not limited to the contrary. The Delaware General Corporation Law provides
that, unless otherwise provided in the proxy and unless the proxy is coupled
with an interest, a stockholder may
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<PAGE> 5
revoke a proxy previously given at any time prior to its exercise at the Annual
Meeting. A stockholder who has given a proxy may revoke it at any time before it
is exercised by delivering to any of the persons named as proxies, or to the
Corporation addressed to the Secretary, an instrument revoking the proxy, by
appearing at the Annual Meeting and voting in person or by executing a later
dated proxy which is exercised at the Annual Meeting.
PRINCIPAL STOCKHOLDERS
The stockholders named in the following table are those which are known to
the Corporation to be the beneficial owners of 5% or more of the Corporation's
Class A Common Stock or Class B Common Stock. Unless otherwise indicated, the
information is as of September 1, 1995. For purposes of this table, and as used
elsewhere in this Proxy Statement, the term "beneficial owner" means any person
who, directly or indirectly, has or shares the power to vote, or to direct the
voting of, a security or the power to dispose, or to direct the disposition of,
a security. Except as otherwise indicated, the Corporation believes that each
individual owner listed below exercises sole voting and dispositive power over
his or its shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
----------------------- ----------------------------------- ------------ ---------
<S> <C> <C> <C>
Class A Common Stock NewSouth Capital Management Inc. 2,094,785(1) 15.4%
755 Crossover Lane, Suite 233
Memphis, TN 38117
Class A Common Stock The Goldman Sachs Group, L.P. 971,800(2) 7.1%
85 Broad Street
New York, NY 10004
Class A Common Stock Wellington Management Company 803,000(3) 5.9%
75 State Street
Boston, MA 02109
Class A Common Stock First Pacific Advisors, Inc. 755,000(4) 5.5%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, CA 90064
Class B Common Stock Harry E. Figgie, Jr. 759,534(5) 16.1%
37001 Shaker Boulevard
Hunting Valley, OH 44022
Class B Common Stock Mentor Partners, L.P. 299,500(6) 6.3%
500 Park Avenue
New York, NY 10022
</TABLE>
---------------
(1) This amount, as reflected in a report on Schedule 13G dated June 3, 1994,
consists of 2,007,785 shares as to which the reporting person claims sole
voting power, 87,000 shares as to which the reporting person claims shared
voting power and 2,094,785 shares as to which the reporting person claims
sole dispositive power.
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<PAGE> 6
(2) This amount, as reflected in a report on Schedule 13G dated April 7, 1995,
filed by The Goldman Sachs Group, L.P., Goldman Sachs & Co. and Goldman
Sachs Equity Portfolios, Inc. (on behalf of Goldman Sachs Small Cap Equity
Fund), as a group, consists of 822,700 shares as to which The Goldman Sachs
Group, L.P. and Goldman Sachs & Co. claim shared voting power, 971,800
shares as to which The Goldman Sachs Group, L.P. and Goldman Sachs & Co.
claim shared dispositive power and 734,700 shares as to which Goldman Sachs
Equity Portfolios, Inc. (on behalf of Goldman Sachs Small Cap Equity Fund)
claims shared voting power and shared dispositive power.
(3) This amount, as reflected in a report on Schedule 13G dated February 3,
1995, consists of 565,300 shares as to which the reporting person claims
shared voting power and 803,000 shares as to which the reporting person
claims shared dispositive power.
(4) This amount, as reflected in a report on Schedule 13G dated February 13,
1995, consists of 755,000 shares as to which the reporting person claims
shared voting power and shared dispositive power.
(5) For a description of Mr. Figgie's beneficial ownership, see the table under
the caption "STOCK OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTORS, EXECUTIVE
OFFICERS AND CERTAIN FORMER EXECUTIVE OFFICERS" and footnotes (5), (11),
(12) and (13) thereto.
(6) This amount, as reflected in a report on Schedule 13D dated August 18, 1995,
consists of 299,500 shares as to which the reporting person claims sole
voting and dispositive power.
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<PAGE> 7
STOCK OWNERSHIP OF DIRECTORS,
NOMINEES FOR DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN FORMER EXECUTIVE OFFICERS
The following table and notes thereto set forth information, as of
September 1, 1995, with respect to the beneficial ownership of shares of Class A
and Class B Common Stock by each Director, each nominee for Director and each
Executive Officer named in the Summary Compensation Table (which includes the
three executive officers who have resigned, Harry E. Figgie, Jr., Vincent A.
Chiarucci, and Charles C. Rieger, Jr.) and, as a group, by the current Directors
and Executive Officers of the Corporation, based upon information furnished to
the Corporation by such persons.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP AS OF SEPTEMBER
1, 1995(1)
---------------------------
CLASS A PERCENTAGE CLASS B PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK OF CLASS COMMON STOCK OF CLASS
------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Fred J. Brinkman 500 * 3,600 *
Vincent A. Chiarucci 27,689(2) * 9,840(2) *
Dale S. Coenen 300 * 3,000 *
Alfred V. Gangnes 22,371(3) * 12,504(3) *
John S. Lanahan 358 * 6,536 *
F. Rush McKnight 1,315(4) * 6,503( )(5) *
Harrison Nesbit, II 1,005(6) * 6,562(6) *
C.B. Robertson, III 2,500(7) * 9,000 *
John P. Reilly 130,000(8) 1.0% 0 *
Harold B. Scott 7,600(9) * 4,500 *
Steven L. Siemborski 75,117(2)(10) * 242 *
A. A. Sommer, Jr. 2,250 * 7,750 *
Walter M. Vannoy 100,095(2) * 23,319 *
Harry E. Figgie, Jr. (11) 365,904(12) 2.7% 759,534( (13) 16.1%
L.A. Harthun 17,972(2) * 461(2) *
Charles C. Rieger, Jr. 359(2) * 3,044(2) *
All Current Directors and
Executive Officers as a
Group** (15 persons) 397,255(2) 2.9% 94,319(2) 2.0%
</TABLE>
---------------
* Less than 1%.
** Does not include beneficial ownership of Harry E. Figgie, Jr. and Charles
C. Rieger, Jr.
(1) Except as otherwise indicated in footnotes (2), (3), (8), (9), (10) and
(13) and as limited by the terms of applicable restricted stock plans, each
Director, Executive Officer or former Executive Officer owning shares
listed or included in this table exercises sole voting and dispositive
power over such shares. The shares shown include 137,500 shares of Class A
Common Stock with respect to which certain executive officers have a right
to acquire beneficial ownership within 60 days.
(2) These amounts include shares of Class A and Class B Common Stock held by
the ESOP, the ESOP for Salaried Employees and the Stock Bonus Plan which
are subject to certain pass-through voting and tendering rights.
Participants in those plans are entitled to instruct the trustee of the
plans (The "Trustee"), on a confidential basis, on how to vote and how to
respond to a
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<PAGE> 8
tender or exchange offer for shares allocated to their accounts and on how
to vote and how to respond to a tender or exchange offer for certain of the
unallocated shares. Under the trust agreement, as amended in November 1994,
allocated and unallocated shares for which no instructions are received can
be voted or tendered by the Trustee. Each active participant is entitled to
instruct the Trustee as to the voting or tendering of a portion of the
unallocated shares in the proportion that his prior year's compensation
(subject to a maximum amount of compensation) bears to the prior year's
compensation of all active participants. The numbers of shares of Class A
and Class B Common Stock held by the ESOP for Salaried Employees, the ESOP
and the Stock Bonus Plan which have been allocated to the Executive
Officers named in the Summary Compensation Table (the "named Executive
Officers") and all current Executive Officers as a group, including the
numbers of shares allocated as of December 31, 1994, are as follows: (1)
allocated shares in the ESOP for Salaried Employees: Mr. Vannoy -- 201
shares of Class A Common Stock and 64 shares of Class B Common Stock; Mr.
Siemborski -- 117 shares of Class A Common Stock and 37 shares of Class B
Common Stock; and all current Executive officers as a group -- 549 shares
of Class A Common Stock and 117 shares of Class B Common Stock; and (2)
allocated shares in the ESOP: Mr. Vannoy -- 352 shares of Class B Common
Stock; Mr. Chiarucci -- 270 shares of Class B Common Stock; Mr.
Harthun -- 310 shares of Class B Common Stock; Mr. Siemborski -- 205 shares
of Class B Common Stock; Mr. Rieger -- 261 shares of Class B Common Stock;
and all current Executive Officers as a group -- 1,519 shares of Class B
Common Stock. The numbers of shares of Class A and Class B Common Stock
held by the ESOP for Salaried Employees and the ESOP which have not been
allocated and are reflected in the table above as beneficially owned by the
named Executive Officers and all current Executive Officers as a group are
as follows: (1) unallocated shares in the ESOP for Salaried Employees: Mr.
Chiarucci -- 359 shares of Class A Common Stock and 130 shares of Class B
Common Stock; Mr. Harthun -- 359 shares of Class A Common Stock and 130
shares of Class B Common Stock; Mr. Rieger -- 359 shares of Class A Common
Stock and 130 shares of Class B Common Stock; and all current Executive
Officers as a group -- 853 shares of Class A Common Stock and 311 shares of
Class B Common Stock; and (2) unallocated shares in the ESOP: Mr.
Chiarucci -- 20 shares of Class B Common Stock; Mr. Harthun -- 20 shares of
Class B Common Stock; Mr. Rieger -- 20 shares of Class B Common Stock; and
all current Executive Officers as a group -- 47 shares of Class B Common
Stock.
(3) Mr. Gangnes shares voting and dispositive power with respect to 22,371
shares of Class A Common Stock and 12,504 shares of Class B Common Stock
with his wife.
(4) These amounts do not include 575 shares of Class A Common Stock and 575
shares of Class B Common Stock owned by Mr. McKnight's wife.
(5) These amounts do not include 47,493 shares of Class B Common Stock held in
a trust established by Mr. Figgie for a member of his immediate family. Mr.
McKnight served as 1 of 3 trustees of such trust until September 7, 1995.
(6) These amounts do not include 2,405 shares of Class A Common Stock and 47
shares of Class B Common Stock owned by Mr. Nesbit's wife.
(7) This amount does not include 2,500 shares of Class A Common Stock owned by
Mr. Robertson's wife.
(8) This amount includes 100,000 shares underlying an option which was granted
to Mr. Reilly under the Corporation's Key Employees' Stock Option Plan in
accordance with Mr. Reilly's employment agreement.
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<PAGE> 9
(9) This amount includes 3,600 shares of Class A Common Stock for which Mr.
Scott has shared voting and dispositive power as a co-trustee of a trust
and 500 shares of Class A Common Stock for which Mr. Scott has shared
voting and dispositive power as the custodian of a custodial account for
his minor children.
(10) This amount includes 37,500 shares of Class A Common Stock which Mr.
Siemborski is entitled to acquire pursuant to his employment agreement.
(11) Harry E. Figgie, Jr. resigned from his positions as the Corporation's Chief
Executive Officer and Chairman of the Board as well as a member of the
Board on May 18, 1994.
(12) The aggregate number of shares beneficially owned by Mr. Figgie excludes a
total of 66,223 shares of Class A Common Stock beneficially owned, or that
may be deemed to be beneficially owned, by members of Mr. Figgie's
immediate family, certain Figgie family trusts and The Clark-Reliance
Corporation, an Ohio corporation ("Clark-Reliance") of which Mr. Figgie was
Chairman of the Board and Chief Executive Officer until his resignation on
October 19, 1994 and is presently Chairman Emeritus of the Board. (As of
December 28, 1994, Mr. Figgie owned 22.7% of the outstanding shares of
common stock of Clark-Reliance, Mr. Figgie's wife owned 22.7% of the
outstanding shares of common stock of Clark-Reliance, and each of Mr.
Figgie's adult sons, Dr. Harry E. Figgie, III, Dr. Mark P. Figgie, and
Matthew P. Figgie, owned 18.2% of the outstanding shares of common stock of
Clark-Reliance.) Of the excluded shares; (i) 37,844 shares of Class A
Common Stock are owned by Clark-Reliance; (ii) 18,239 shares of Class A
Common Stock are held in trust for members of Mr. Figgie's immediate
family, (iii) 8,640 shares are owned directly by other members of Mr.
Figgie's family, and (iv) 1,500 shares are owned by the Figgie Family
Foundation, of which Mr. Figgie is one of six trustees.
(13) This amount, as reflected in a report on Form 4 for January 1995 consists
of 759,534 shares of Class B Common Stock as to which Mr. Figgie has sole
voting power, 749,534 shares of Class B Common Stock as to which Mr. Figgie
has sole dispositive power, and 10,000 shares of Class B Common Stock as to
which Mr. Figgie has shared dispositive power. Based upon Mr. Figgie's
Schedule 13D filed January 6, 1995 (showing beneficial ownership
information as of December 19, 1994) and his January 1995 Form 4, the
aggregate number of shares beneficially owned by Mr. Figgie includes 13,537
shares of Class B Common Stock held in his account with the Clark-Reliance
Employee Profit Sharing and Savings and Trust Plan and excludes a total of
418,345 shares of Class B Stock beneficially owned, or that may be deemed
to be beneficially owned, by members of Mr. Figgie's immediate family, The
Figgie Family Foundation, certain Figgie family trusts and Clark-Reliance
(see footnote 10 above). Of the excluded shares (i) 134,564 shares of Class
B Common Stock are owned by Clark-Reliance; (ii) 57,881 shares (excluding
those held in trust as noted below) of Class B Common Stock are owned by
Mr. Figgie's wife; (iii) 465 shares (excluding those held in trust as noted
below) of Class B Common Stock are owned by Matthew P. Figgie, Mr. Figgie's
son; (iv) 58,394 shares (excluding those held in trust as noted below) of
Class B Common Stock are beneficially owned by Dr. Harry E. Figgie, III,
Mr. Figgie's son; (v) 58,189 shares (excluding those held in trust as noted
below) of Class B Common Stock are owned by Dr. Mark P. Figgie, Mr.
Figgie's son; (vi) 2,112 shares of Class B Common Stock are owned by The
Figgie Family Foundation, of which Mr. Figgie is one of six trustees; (vii)
51,750 shares of Class B Common Stock are held in trust for Mr. Figgie's
wife; (viii) 47,493 shares of Class B Common Stock are held in trust for
Matthew P. Figgie, for which Dr. Harry E. Figgie, III, Mr. McKnight and Mr.
David L. Carpenter serve as trustees; and (ix) 7,497 shares of Class B
Common Stock are held in three separate trusts, each holding 2,499 for the
benefit of Mr. Figgie's three children, for which National City Bank acts
as trustee.
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<PAGE> 10
Notwithstanding anything to the contrary, the following reports of the
Management Development & Compensation Committee and the Stock Option
Committee, and the Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or
under the Securities Exchange Act of 1934, as amended, except to the extent
that the Corporation specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The basic elements of the Corporation's compensation program originated at
the time the ownership of the Corporation changed in 1963. The Management
Development & Compensation Committee of the Board of Directors has had overall
authority with respect to the cash compensation paid by the Corporation to
executive personnel and other key employees. The Stock Option Committee of the
Board of Directors oversees the Corporation's long-term incentive programs under
which stock options and restricted stock are awarded to key employees, including
executives.
Between January 1994 and May 18, 1994, the members of the Compensation
Committee were Harry E. Figgie, Jr., Dale S. Coenen, Russell W. McFall and Dr.
Harry E. Figgie, III. Mr. Figgie resigned from his positions as the
Corporation's chief executive officer and chairman of the Board of Directors and
a member of the Board on May 18, 1994. Dr. Figgie resigned from his position as
the Corporation's vice chairman in March 1994, and from the Corporation's Board
of Directors on May 18, 1994. The Compensation Committee was subsequently
reconstituted and renamed the Management Development & Compensation Committee
(the "Compensation Committee"), with its members during the rest of the year
being Harrison Nesbit, II, Fred J. Brinkman, Alfred V. Gangnes, Walter M. Vannoy
and Dale S. Coenen. The members of the Stock Option Committee were Dale S.
Coenen, Russell W. McFall and A. A. Sommer, Jr. until Mr. McFall passed away on
March 26, 1994. The current members of the Stock Option Committee are Dale S.
Coenen, A. A. Sommer, Jr. and Fred J. Brinkman.
Set forth below are the reports of each committee with respect to executive
compensation.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE CASH COMPENSATION
The Compensation Committee's cash compensation policies are designed: (a)
to align closely the financial interests of the Corporation's executive officers
including the chief executive officer (the "CEO") with the financial interests
of the Corporation's stockholders and thereby to enhance the Corporation's
profitability and stockholder value; (b) to provide compensation packages that
are competitive and will attract and retain qualified personnel; and (c) to
reward individual performance. The Corporation's cash compensation policies are
designed to provide an incentive for executive officers to achieve the
Corporation's goals by relating a substantial portion of executive compensation
directly to the Corporation's performance. During the last year, the
Compensation Committee, assisted by an independent compensation consultant,
reviewed the Corporation's compensation policies and determined to revise
compensation levels based upon the Corporation's lower level of revenues and to
simplify the cash incentive portion of the compensation.
Executive Officer Compensation Policies
The Compensation Committee, assisted by both an independent compensation
consultant and data generated by independent executive compensation analysts,
annually establishes ranges of total cash
8
<PAGE> 11
compensation to be paid to executives in each pay grade based upon its review of
national surveys of executive compensation which include peer data for
diversified corporations. In January 1995, the Compensation Committee modified
the Corporation's peer group to reflect the lower level of net revenue which has
resulted from the Corporation's divestitures in 1994. The change will not result
in lower salary levels for current officers and has no effect on the salary
levels of those executive officers with whom the Corporation has entered into
employment agreements, but will affect future increases in base salaries and
salaries offered to newly hired employees.
In 1994 and January 1995, the Compensation Committee approved the terms of
employment agreements entered into by the Corporation with Messrs. Siemborski
and Reilly to induce those individuals to become the Corporation's chief
financial officer and CEO, respectively, and with Mr. Vannoy who had agreed to
serve as an interim CEO. These agreements are described elsewhere in the Proxy
Statement.
BASE SALARY. The Compensation Committee establishes base salary amount
ranges for pay grades for executive officers at amounts that, in general, are
substantially similar to the average base salary amounts expected by the
Corporation to be paid by companies of comparable size to executives having
comparable positions. (Exceptions to this approach were made in connection with
the hiring of Messrs. Siemborski, Reilly and Vannoy.) The performance of such
companies is not taken into account by the Compensation Committee because it
believes that the Corporation must pay competitive base salaries in order to
attract and retain qualified executives. In determining base salaries for
specific executive officers, the Compensation Committee takes into account the
performance of the executive officers. The base salaries for 1994 were
established during the month of March 1994. The base salaries established for
Mr. Vannoy and Mr. Siemborski were not based upon the established ranges for
their respective pay grades because the Compensation Committee determined to
separately negotiate compensation packages with these persons to induce them to
become the Corporation's interim CEO and chief financial officer, respectively.
ANNUAL CASH INCENTIVE AMOUNTS. The Corporation has an incentive program
under which executive officers, including the CEO, have the opportunity to
receive a bonus which is awarded in two components: a formula-based component
and a discretionary component. The maximum potential amount of each such
component is pre-established based upon the pay grade of each executive. The
amounts of the bonuses for a particular year are determined and awarded after
the end of that year.
An incentive pool is calculated for payment of the formula-based award
amounts. The amount of the pool has been based upon the extent to which the
Corporation's performance during the fiscal year attained pre-established levels
with respect to three measures: return on sales, return on assets and annual
growth in earnings. In 1993 and 1994, the Compensation Committee gave the return
on sales and the return on assets more weight than the annual growth in earnings
in assessing the Corporation's performance. The weight to be given each
performance ratio, which was approved annually by the Compensation Committee,
reflected the Corporation's strategic objectives and plans. The target
performance levels were subject to adjustment by the Compensation Committee in
the event of changes in the Corporation's structure. As a result of the review
of the Corporation's cash incentive program, the Compensation Committee has
determined that in the future the amount of the incentive pool will be based
upon the Corporation's net income.
The Compensation Committee also reviews whether adjustments should be made
in the components to the ratios to reflect unusual corporate developments, such
as unusual expenses that the Compensation Committee determines should be
recognized over a period of time. The amount of the
9
<PAGE> 12
incentive pool is reduced by the aggregate amount of the discretionary bonus
awards made in the most recently completed fiscal year. The remainder of the
incentive pool is then distributed to the executive officers and each executive
receives a bonus based upon the same percentage of base salary.
The discretionary component of the incentive award is generally based upon
the performance of the individual executives. The CEO recommends the amounts of
the discretionary bonus awards for the executive officers, other than himself,
after assessing the performance of each of those executives. The Compensation
Committee then determines the amount of the discretionary award for each
executive, including the CEO, up to the predetermined maximum percentage of base
salary for such award, based on the executive's performance, including such
person's contributions to the success of those operations for which such person
is responsible and to the Corporation in general.
The entire formula-based component of the bonus award is payable in the
year in which it is declared. Historically, the discretionary component of the
bonus award has been paid in four equal annual installments. The first
installment was normally paid in the year in which the bonus was declared. The
remaining installments have normally been paid in the three consecutive years
after the first payment, but only to those executives who have remained in the
employ of the Corporation or whose employment termination has been due to death,
disability or retirement. In cases of termination for any other reason, the
Compensation Committee has had sole discretion to determine whether the
remaining bonus installments will be paid. As a result of the simplification of
the cash incentive plan, any discretionary bonus declared for 1995 and
thereafter will be payable in a single cash payment in the year in which such
award is declared.
For 1994, the Corporation's executive officers were not eligible to receive
formula-based incentive bonuses because of the Corporation's financial results.
The Compensation Committee determined that the Corporation's performance also
did not warrant the grant of any discretionary bonus awards to executive
officers for 1994. The chief financial officer earned a bonus and transition
payment pursuant to the terms of his employment agreement.
CEO Compensation
In determining the CEO's base salary and the maximum percentages of such
base salary amount payable as formula-based and discretionary bonus awards, the
Compensation Committee generally evaluates the compensation paid to chief
executive officers of comparable companies. In addition, the amounts of the
CEO's base salary and any discretionary bonus award generally reflect the CEO's
performance with respect to operations for which he is specifically responsible
as well as the overall success of the Corporation in achieving the strategic
goals defined by him and the Corporation's Board of Directors, taking into
account the general economic environment and conditions in the industries in
which the Corporation operates.
For 1994, the members of the Compensation Committee, excluding Mr. Harry E.
Figgie, the former CEO, who recused himself from discussions regarding his
compensation, determined not to increase the former CEO's base salary. The
former CEO resigned on May 18, 1994 and the Compensation Committee determined
not to grant him a bonus for 1994 in view of the Corporation's performance in
1994.
Mr. Vannoy, who succeeded Mr. Harry E. Figgie as CEO on May 18, 1994,
received as CEO the same base salary that he had received as Vice Chairman
beginning in February 1994, which is a base salary commensurate with the rate
determined for the Corporation's President. This rate was lower than that
previously paid to Mr. Harry E. Figgie because of the expected interim nature of
Mr. Vannoy's
10
<PAGE> 13
position. For 1994, the Compensation Committee determined not to grant Mr.
Vannoy a bonus in view of the Corporation's performance in 1994. Mr. Vannoy, as
a member of the Compensation Committee, did not participate in either the
determination of his base salary or the consideration of his bonus.
The Compensation Committee is studying the implications of Section 162(m)
of the Internal Revenue Code, which was added by the Omnibus Budget
Reconciliation Act of 1993 (signed into law on August 10, 1993), and has not
decided whether to adjust the incentive compensation program in light of such
section.
Harrison Nesbit, II Fred J. Brinkman Alfred V. Gangnes
Walter M. Vannoy Dale S. Coenen
11
<PAGE> 14
STOCK OPTION COMMITTEE REPORT
ON LONG-TERM EXECUTIVE COMPENSATION
The Stock Option Committee has administered the Corporation's long-term
incentive program under which executive officers and other senior executives of
the Corporation historically have been provided the opportunity to buy
restricted shares. Starting in 1978, four five-year restricted stock purchase
plans have been approved by the Corporation's stockholders. In 1993, the
Corporation's stockholders approved the 1993 Restricted Stock Purchase Plan for
Employees (the "Restricted Stock Plan"), which is substantially similar to prior
plans. On October 19, 1994, the Corporation's stockholders approved the Figgie
International Inc. Key Employees' Stock Option Plan (the "Stock Option Plan").
It is expected that stock options will become the primary equity incentive
compensation program of the Corporation with grants of restricted stock under
the Restricted Stock Plan generally being used only to supplement the Stock
Option Plan.
Restricted Stock Plan
Under the Restricted Stock Plan, shares of the Corporation's common stock
are sold to executives at a price of $1.00 per share. When participants acquire
the shares, they become holders of the restricted shares and are eligible to
vote and receive any dividends declared on the shares, but the certificates
representing the restricted shares are held by the Corporation in escrow until
the transfer restrictions lapse, generally at the termination of the plan.
Because of the transfer restrictions, the participants cannot sell the stock and
thus disengage the benefits they receive under the Restricted Stock Plan from
the Corporation's performance. Generally, unless otherwise directed by the Stock
Option Committee, upon the termination of the employment of any participant
prior to the termination of the Plan and the lapse of the transfer restrictions,
other than terminations resulting from death or total disability, the
Corporation has the right to purchase all, or, in the case of the retirement of
a participant, a specific portion, of the restricted shares at a price equal to
the lesser of the price paid by the participant for such shares or the then fair
market value of the shares.
Awards were initially made under the Restricted Stock Plan in 1993. A
maximum award was established for each executive pay grade. In determining this
maximum award, the Stock Option Committee, assisted by an independent
compensation consultant, took into account the relationship between cash and
bonus amounts paid to executive officers, including CEOs, in comparable
companies and the benefits that such companies provided their executive
officers, including CEOs, from their stock incentive plans. Maximum award
amounts were calculated based upon average award sizes of the comparable
companies and without regard to restricted stock awards made under prior plans.
In a manner consistent with awards under the earlier similar restricted stock
plans, the sizes of the actual awards made to executive officers, including the
CEO, were based upon the executives' performance over the prior five years. If
an executive officer, including the CEO, received during the five preceding
fiscal years an aggregate of either 70% or 80%, depending upon the executive's
pay grade, of the aggregate amount of the potential discretionary bonus awards
he could have received over that period, the Stock Option Committee awarded the
executive 100% of the maximum award established for the executive under the
Restricted Stock Plan. If the executive received less than the requisite
percentage of the potential discretionary bonus awards justifying the maximum
award, he would receive between 25% and 75% of the maximum award, depending upon
the percentage of the aggregate amount of the potential discretionary bonus
awards he had received over the five-year period. In such case, the Stock Option
Committee can award the executive the balance of the maximum restricted stock
award if the executive receives during the next five years aggregate
discretionary bonus awards in specified
12
<PAGE> 15
percentages of the potential maximum discretionary bonus awards for those years.
In addition, under the Restricted Stock Plan, persons who are promoted can
receive additional restricted stock awards in amounts that take into account
their new pay grade and newly hired executives can receive restricted stock
awards in amounts based upon their pay grade but reflecting the remaining
restricted period.
Pursuant to his employment agreement, the chief financial officer is
entitled to receive the right to purchase 150,000 shares of stock over a
four-year period beginning in July 1994. In July 1994, in accordance with the
employment agreement, the Stock Option Committee granted the chief financial
officer the right to purchase 37,500 shares of Class A Common Stock for $1.00
per share. As a result of that grant, the Stock Option Committee reduced the
number of shares of Class A Common Stock reserved for issuance under the
Restricted Stock Plan by 37,500 shares. The Stock Option Committee did not award
the chief financial officer the right to acquire any restricted shares under the
Restricted Stock Plan.
Stock Option Plan
Under the Stock Option Plan, the Corporation may issue non-qualified stock
options, "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code, and stock appreciation rights (giving the employee the
right to elect a payment equal to the appreciation of the stock value over the
option price) to executives and other key employees. The Stock Option Plan is
intended to provide additional incentives which will enhance the Corporation's
ability to attract and retain key employees and align employees' economic
interests with those of the Corporation's stockholders.
No awards were made under the Stock Option Plan in 1994. The Stock Option
Committee has determined that stock option grants will be made in amounts
determined by reference to equity awards made by the Corporation's peer group
and under the same circumstances in which annual cash incentive awards are made.
It is expected that stock options will become the primary equity incentive
compensation program of the Corporation.
The Stock Option Committee believes that stock options granted under the
Stock Option Plan will not be subject to the $1,000,000 limit contained in
Section 162(m) of the Internal Revenue Code as it is intended that the option
price will be at least the fair market value on the date of grant and that the
composition of the Committee will meet certain requirements as to independence
which will be contained in Treasury Regulations which are currently proposed by
the Treasury Department.
CEO Compensation
Harry E. Figgie, Jr., the Corporation's former CEO, was not awarded any
restricted stock in 1994 under the Restricted Stock Plan. Mr. Vannoy, who
succeeded Mr. Harry E. Figgie as CEO, was awarded 115,497 shares of restricted
stock pursuant to the Restricted Stock Plan in accordance with his employment
agreement. The agreement provides that the restricted shares are subject to
repurchase by the Corporation upon termination of Mr. Vannoy's employment in
accordance with the provisions of the Restricted Stock Plan relating to
repurchases from retirees.
Dale S. Coenen A.A. Sommer, Jr. Fred J. Brinkman
13
<PAGE> 16
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table shows information concerning the annual and long-term
compensation earned during the last three fiscal years by the Corporation's CEO
as of December 31, 1994, each of the four other most highly compensated
executives of the Corporation, and Harry E. Figgie, Jr., who resigned as CEO on
May 18, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------
OTHER RESTRICTED ALL OTHER
NAME AND ANNUAL STOCK COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) SATION(4)
----------------------------- ---- -------- -------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Walter M. Vannoy (5) 1994 $333,333 -- $ 62,599 $ 1,039,563 $ 61,694
Chairman and CEO
Vincent A. Chiarucci 1994 394,375 0 -- 43,097
President 1993 371,875 -- 1,434,825 116,931
1992 331,250 332,050 -- 39,187
L. A. Harthun 1994 229,166 -- -- 18,520
Senior Vice President-- 1993 219,000 -- 277,405 23,026
International, General 1992 207,333 189,856 -- 26,723
Counsel and Secretary
Steven L. Siemborski(6) 1994 175,000 25,000 248,438 -- 60,363
Senior Vice President and
Chief Financial Officer
Charles C. Rieger, Jr. 1994 168,000 -- -- 16,191
Senior Vice President 1993 161,000 -- 277,405 19,210
1992 156,667 50,000 -- 20,751
Harry E. Figgie, Jr. 1994 293,769 -- 68,381 -- 521,618
Former Chairman and CEO 1993 775,000 -- 118,861 2,539,087 644,541
1992 695,000 663,692 92,758 -- 957,662
</TABLE>
---------
(1) (a) Includes, except with respect to Mr. Siemborski, the full amount of the
discretionary component of the bonus awarded with respect to the applicable
fiscal year, although only one quarter of that bonus was paid in the year
it was declared and the remaining three quarters of that bonus are paid in
equal installments in each of the three years after the discretionary bonus
was declared if the executive continues to be employed by the Corporation
or if the termination of employment is due to death, disability or
retirement. In cases of termination for any other reason, the Management
Development & Compensation Committee has sole discretion to determine
whether the remaining bonus installments will be paid.
(b) Mr. Siemborski earned a $25,000 incentive bonus pursuant to the terms
of his employment agreement discussed in the section entitled "Employment
and Severance Agreements."
14
<PAGE> 17
(2) (a) The amount indicated with respect to Mr. Vannoy represents his use of a
company car ($9,735) and the payment of his moving expenses ($52,864).
(b) The amounts indicated with respect to Mr. Figgie represent the
incremental cost to the Corporation of expenses associated with his use of
a company car ($47,632, $46,971 and $34,653, in 1994, 1993 and 1992,
respectively), aircraft ($8,558, $19,078 and $26,354, in 1994, 1993 and
1992, respectively) and club dues ($12,195, $39,753 and $31,751, in 1994,
1993 and 1992, respectively), and, for 1993, $13,059 relating to an
interest free loan provided to Mr. Figgie at the time the restrictions on
the restricted stock issued under the 1988 Restricted Stock Purchase Plan
for Employees (the "1988 Restricted Stock Plan") were terminated in
December 1992.
(c) The amount indicated with respect to Mr. Siemborski represents the
difference between the price paid by Mr. Siemborski for 37,500 shares of
Class A Common Stock and the fair market value of the shares on the date of
purchase.
(3) The transfer and pledge restrictions on the restricted shares reflected in
the table with respect to 1994 and 1993 are scheduled to lapse upon the
termination of the Restricted Stock Plan on July 1, 1998 under the terms of
the plan. As of December 31, 1994, the aggregate number of shares and the
value of the shares of restricted stock held by the executives (less the
purchase price paid by the executive) were as follows: Mr. Vannoy, 98,744
shares of Class A Common Stock and 16,753 shares of Class B Common Stock
having a market value (less purchase price) of $594,016; Mr. Chiarucci,
91,000 shares of Class A Common Stock having a market value (less purchase
price) of $466,888; Mr. Harthun, 17,613 shares of Class A Common Stock
having a market value of (less purchase price) of $90,267; Mr. Rieger,
17,613 shares of Class A Common Stock having a market value (less purchase
price) of $90,267; and Mr. Figgie, 5,645 shares of Class A Common Stock and
10,000 shares of Class B Common Stock having a market value (less purchase
price) of $81,431.
(4) (a) Includes the rating payment paid by the Corporation on a split-dollar
insurance policy for the benefit of Mr. Figgie and the discounted value of
the benefit to each of the named Executive Officers of the premium paid by
the Corporation during 1994 for one or more split-dollar insurance policies
under which the executive receives an interest in the cash surrender value
of the policy at the time when the ownership of the policy is split between
the executive and the Corporation, which then becomes the beneficiary of a
policy on the executive's life with a cash surrender value equivalent to
the Corporation's premium payments. The Executive Officers paid a portion
of the premium based upon a rate for term life insurance. The amounts
reflected in the table for split-dollar insurance are as follows: Mr.
Vannoy -- $41,387; Mr. Chiarucci -- $39,540; Mr. Harthun -- $13,446; Mr.
Siemborski -- $8,203; Mr. Rieger -- $11,777; and Mr. Figgie -- $113,916.
(b) Includes the monthly payments made by the Corporation to Mr. Figgie for
1994 in an aggregate amount of $407,702 under the Corporation's Senior
Executive Benefits Program. This program formerly provided retirement and
other benefits prior to retirement in the event that a person remained an
employee of the Corporation after the normal retirement date of age 65 (or
in certain circumstances, age 62).
(c) Includes the allocations for 1994 of equivalent shares of Class A
Common Stock or Class B Common Stock under the ESOP, the ESOP for Salaried
Employees and the Stock Bonus Plan. The dollar values as of December 31,
1994 of the allocations for each of the named executive officers of the
Corporation are as follows: Mr. Vannoy -- $3,557; Mr. Chiarucci -- $3,557;
Mr. Harthun -- $5,074; Mr. Siemborski -- $2,160 and Mr. Rieger -- $4,414.
15
<PAGE> 18
(d) Includes fees paid to Mr. Vannoy in the amount of $16,750 for services
as a director of the Corporation.
(e) Includes $50,000 paid to Mr. Siemborski pursuant to the terms of his
employment agreement. See the section entitled "Employment and Severance
Agreements."
(5) Mr. Vannoy became interim CEO and Chairman of the Board of Directors of the
Corporation on May 18, 1994 and Vice Chairman of the Corporation on
February 16, 1994. He was not employed by the Corporation as an officer
prior to 1994. On January 4, 1995, Mr. Vannoy resigned from his position as
CEO when John P. Reilly was appointed CEO and resigned from his position as
Chairman of the Board of Directors when Mr. Reilly became Chairman on May
16, 1995.
(6) Mr. Siemborski became Senior Vice President and Chief Financial Officer of
the Corporation effective July 1, 1994. He was not employed by the
Corporation prior to 1994.
16
<PAGE> 19
STOCK PERFORMANCE GRAPH
The graph reflects a cumulative 5 year total return on an investment of
$100 on December 31, 1989 in Figgie International Inc. Class A and Class B
Common Stock, the NASDAQ Market Index and a peer group index and assumes
dividend reinvestment through the fiscal year ending December 31, 1994. The
returns of each company in the peer group index are weighted based on market
capitalization.
<TABLE>
<CAPTION>
Measurement Period FIGGIE CLASS FIGGIE CLASS NASDAQ STOCK
(Fiscal Year Covered) A PEER GROUP B MARKET- US
<S> <C> <C> <C> <C>
12/89 100 100 100 100
12/90 65 84 67 85
12/91 65 89 76 136
12/92 85 101 72 159
12/93 71 143 59 182
12/94 32 142 26 178
12/95
</TABLE>
The peer group is comprised of the companies set forth below, which are
among the companies included on the Fortune 500 Industrial and Farm Equipment
Companies list:
<TABLE>
<S> <C> <C>
AM International Inc. Dresser Industries, Inc. Outboard Marine Corp.
Applied Materials Inc. Figgie International Inc. Parker Hannifin Corp.
Baker Hughes Incorporated Class A Pentair Inc.
Black and Decker Corp. Great American Management Stewart & Stevenson
Briggs & Stratton Corp. & Investment, Inc. Services, Inc.
Caterpillar Inc. Harnischfeger Industries, Tecumseh Products Co.
Cincinnati Milacron Inc. Inc. Tenneco Inc.
Clark Equipment Co. IMO Industries Inc. Terex Corp.
Cummins Engine Company, Ingersoll-Rand Company The Timken Company
Inc. Kennametal Inc. The Toro Company
Deere & Company NACCO Industries, Inc. Trinova Corporation
Dover Corporation Nortek Inc.
</TABLE>
17
<PAGE> 20
NOMINATION AND ELECTION OF DIRECTORS
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than nine nor more than sixteen members but, within such
limits, the Board of Directors is empowered to increase or decrease the total
number of Directors as well as the number of Directors in each class provided
that each class shall continue to consist of, as nearly as may be, one-third of
the whole number of the Board of Directors. Messrs. Scott, Chiarucci and Coenen,
whose terms expire at this Annual Meeting, have stated that they will not stand
for re-election and Mr. Robertson, whose term would expire in 1997, has stated
that he will resign from the Board of Directors effective on the date of this
Annual Meeting. The Board accordingly took the following actions: (i) nominated
Mr. F. Rush McKnight as an additional candidate in the class of Directors to be
elected at this Annual Meeting; (ii) passed a resolution reducing the total
number of Directors to nine effective upon the date of this Annual Meeting; and
(iii) reduced the number of Directors to be elected at this Annual Meeting and
whose terms will expire at the Annual Meeting in 1998, to three.
The three nominees for election at this Annual Meeting are Fred J.
Brinkman, F. Rush McKnight and John P. Reilly, all of whom have informed the
Corporation that they are willing to serve for the term to which they are
nominated if they are elected. If a nominee for Director should become
unavailable for election or is unable to serve as a Director, the shares
represented by proxies voted in favor of that nominee will be voted for any
substitute nominee as may be named by the Board of Directors.
18
<PAGE> 21
The information appearing in the following table and the notes thereto has
been furnished to the Corporation, where appropriate, by the nominees for
Director and the Directors continuing in office with respect to: (i) the present
principal occupation or employment of each respective nominee and continuing
Director and, if such principal occupation or employment has not been carried on
during the past 5 years, the occupation or employment during such period, (ii)
the names and principal businesses of the corporations or other organizations in
which such occupation or employment is carried on and/or has been carried on
during the past 5 years, and (iii) the directorships held by each respective
nominee or continuing Director on the boards of publicly held and certain other
corporations and entities:
NOMINEES FOR ELECTION AS DIRECTORS TO BE
ELECTED FOR A TERM OF THREE YEARS
<TABLE>
<CAPTION>
IF ELECTED,
TERM EXPIRES
SERVED AS AT ANNUAL
NAME AND DIRECTOR MEETING OF
PRINCIPAL OCCUPATION SINCE STOCKHOLDERS IN
---------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
FRED J. BRINKMAN, age 66 1992 1998
Consultant; former Partner, Arthur Andersen LLP, public
accountants, Senior Partner, Asia-Pacific area from 1978 to
1989 and Managing Partner of the firm's Washington, D.C.
office from 1981 to 1987; Director, Washington Gas Light
Co. and Charles E. Smith Residential Realty Inc.
JOHN P. REILLY, age 51 1995 1998
Chief Executive Officer, Figgie International Inc., since
January 4, 1995; President, Figgie International Inc.,
since February 1, 1995 and Chairman of the Board of Figgie
International Inc. since May 16, 1995; former President and
Chief Operating Officer, Brunswick Corporation, 1993-1994;
former President and Chief Executive Officer, Tenneco
Automotive, 1987-1993; Director, Trinova Corporation;
Director, Atwood Industries; Director, Barat College.
F. RUSH McKNIGHT, age 65(1) 1985 1998
Partner, Calfee, Halter & Griswold, Cleveland, Ohio, law firm;
Managing Partner from 1985 to 1991.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR.
19
<PAGE> 22
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
TERM EXPIRES
SERVED AS AT ANNUAL
NAME AND DIRECTOR MEETING OF
PRINCIPAL OCCUPATION SINCE STOCKHOLDERS IN
---------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
JOHN S. LANAHAN, age 73 1985 1996
Consultant; former Senior Vice President-Commercial, Chessie
System Railroads; former President and Managing Director, the
Greenbrier Resort Hotel.
ALFRED V. GANGNES, age 74 1972 1996
Retired; former President, Figgie International Inc.; former
Director, Evaluation Research Corporation.
HARRISON NESBIT, II, age 68 1969 1996
Retired; former Chairman and Director, Godine, Nesbit, McCabe
& Co., an insurance brokerage firm, from 1987 to 1993; former
General Agent, State of Virginia, Massachusetts Mutual Life
Insurance Co.; Director, St. George Metals, Inc.; Director,
O-Three Limited.
STEVEN L. SIEMBORSKI, age 40 1994 1997
Senior Vice President and Chief Financial Officer, Figgie
International Inc., since July 1, 1994; former Partner, Ernst
& Young; Certified Public Accountant.
A.A. SOMMER, JR., age 71 1986 1997
Counsel, Morgan, Lewis & Bockius, Washington, D.C., law firm
since October 1, 1994; former Partner, Morgan, Lewis &
Bockius, 1979 to 1994; Chairman, Public Oversight Board of the
American Institute of Certified Public Accountants; Vice
Chairman, Board of Governors, National Association of
Securities Dealers.
WALTER M. VANNOY, age 67 1981 1997
Retired; former Chairman of the Board, Figgie International
Inc., May 18, 1994 to May 16, 1995; former Chief Executive
Officer, Figgie International Inc., May 18, 1994 to January 4,
1995; former Vice Chairman of the Board, Figgie International
Inc., February 1994 to May 1994; former Vice Chairman,
McDermott International Inc.; former President and Chief
Operating Officer, Babcock & Wilcox; Director, Illinova Corp.
</TABLE>
---------
(1) See discussion under the caption "CERTAIN TRANSACTIONS."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 11 non-telephonic meetings during the year
ended December 31, 1994. During the year, no incumbent Director attended fewer
than 75% of the aggregate of (i) the total number of meetings of the Board of
Directors held during the period he served as a Director and (ii) the total
number of meetings held by any Committee of the Board on which he served.
20
<PAGE> 23
Effective upon the date of the Annual Meeting, the committees of the Board
of Directors, their principal functions and their respective memberships are
expected to be as follows:
AUDIT COMMITTEE
A. A. Sommer, Jr., Chairman
F. Brinkman
F.R. McKnight
H. Nesbit, II
The Audit Committee will continue to have as its principal assignment the
oversight and review of the internal and external audit functions of the
Corporation.
EXECUTIVE AND FINANCE COMMITTEE
W. Vannoy, Chairman
F. Brinkman
J. Reilly
F. R. McKnight
H. Nesbit, II
S. Siemborski (ex-officio and non-voting)
The Executive and Finance Committee will continue to be empowered to act on
behalf of the Board of Directors during the periods of the year in which
the Board does not meet and will focus particularly on the review and
oversight of budgets, issuance of securities, proposed financings and
acquisitions and dispositions.
STOCK OPTION COMMITTEE
A. A. Sommer, Jr., Chairman
F. Brinkman
The Stock Option Committee administers the 1993 Restricted Stock Purchase
Plan for Employees (the "Restricted Stock Plan") and the Figgie
International Inc. Key Employees' Stock Option Plan.
MANAGEMENT DEVELOPMENT-COMPENSATION AND NOMINATING COMMITTEE
H. Nesbit, II, Chairman
F. Brinkman
A. Gangnes
F. R. McKnight
J. Reilly (ex-officio and non-voting)
A. A. Sommer, Jr.
W. Vannoy
The Management Development-Compensation and Nominating Committee will
continue to perform the functions previously performed by the Management
Development & Compensation Committee and the Nominating Committee. This
Committee will evaluate candidates for Board membership, make recommendations
with respect to the number of Directors and candidates to be included in the
annual proxy materials, recommend candidates to fill Board vacancies and
exercise overall authority with respect to the compensation, development and
succession of executive personnel.
21
<PAGE> 24
The Board committees which existed during 1994 held the following numbers
of meetings during that year: Executive and Finance Committee - 5, Audit
Committee - 9, Management Development & Compensation Committee - 5,
International Committee - 1, Real Estate Committee - 5, Stock Option Committee -
1, Strategic Planning & Operations Committee - 15, Nominating Committee - 1, and
CEO Search Committee - 2. Not included in these totals are those instances in
which the committees took action by written unanimous consent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Development & Compensation Committee of the Board of
Directors consists of Harrison Nesbit, II, Dale S. Coenen, Fred J. Brinkman,
Alfred V. Gangnes, John P. Reilly and Walter M. Vannoy. During 1994, the same
individuals other than Mr. Reilly served on that Committee after the
resignations of Harry E. Figgie, Jr. and Dr. Harry E. Figgie, III, and Russell
W. McFall's death. Mr. Vannoy became Vice Chairman of the Corporation on
February 16, 1994 and CEO and Chairman of the Board of Directors on May 18,
1994. Until his retirement from the Corporation on May 18, 1994, Harry E.
Figgie, Jr. was the Chairman of the Board of the Corporation and its CEO and the
Chairman of the Board of The Clark-Reliance Corporation. Dr. Figgie is the
President of The Clark-Reliance Corporation and, until March 15, 1994, was Vice
Chairman of Technology and Strategic Planning of the Corporation. Mr. Coenen is
a director of The Clark-Reliance Corporation.
The Stock Option Committee of the Board of Directors currently consists of
Dale S. Coenen, A.A. Sommer, Jr. and Fred J. Brinkman. During 1994, the same
individuals served on that Committee.
On August 25, 1993, the Corporation made a loan to Harry E. Figgie, Jr. to
enable him to acquire restricted shares under the Restricted Stock Plan. The
loan was in the amount of $156,450, was payable on demand and bore an interest
rate equal to the Bank of Boston's prime rate. The full amount of the loan was
repaid in April 1994.
Nancy Figgie, the wife of Harry E. Figgie, Jr., was Vice President of
Facilities Planning of the Corporation until her resignation in February 1994;
Matthew Figgie was Director of Mergers and Acquisitions, Currency Trading and
Corporate Investments of the Corporation prior to his resignation in May 1994;
and Dr. Harry E. Figgie, III was Vice Chairman and a Director of the Corporation
until his resignation from those positions in March and May 1994, respectively.
In 1994, Mrs. Figgie, Matthew Figgie and Dr. Figgie collectively received from
the Corporation $388,419 in their foregoing capacities.
As of October 30, 1991, the Corporation purchased $1,000,000 of 10%
Convertible Subordinated Debentures due October 30, 2001 issued by
Trans-Industries, Inc. The debentures provide for prepayment without premium of
$142,857 per year commencing in 1995 and additional optional prepayments at
declining premiums over the same period. The debentures are convertible at any
time at the option of the Corporation into common stock of Trans-Industries at
$2.00 per share. Mr. Coenen is President, Chairman of the Board and a
shareholder of Trans-Industries. Mr. Harry E. Figgie, Jr. is also a shareholder
of Trans-Industries. The common stock of Trans-Industries is publicly traded in
the over-the-counter market. The purchase was approved by the Board of Directors
with Mr. Figgie and Mr. Coenen abstaining.
COMPENSATION OF DIRECTORS
The Directors, except for those who are also employees of the Corporation,
currently receive an annual stipend of $20,000. In addition, the non-employee
members of the Executive and Finance Committee receive $9,000 per year and
members of the remaining committees other than the Stock
22
<PAGE> 25
Option Committee receive $6,000 per year. The non-employee Chairmen of the
committees receive an additional $1,000 per year for each chairmanship held
except for the Chairman of the Stock Option Committee.
The Board of Directors adopted resolutions effective as of the date of this
Annual Meeting amending the compensation of all non-employee members of the
Board of Directors in the following respects: (1) the annual stipend for members
of the Board was reduced to $15,000; (2) the annual stipend for membership on
all committees other than the Stock Option Committee was reduced to $3,000; (3)
the annual stipend of $1,000 for committee chairmen was omitted; (4) an
attendance fee of $1,000 was established for each meeting of the Board of
Directors; (5) an attendance fee of $750 was established for each meeting of the
Executive and Finance Committee and an attendance fee of $250 was established
for all other Board committees except for the Stock Option Committee; (6) an
attendance fee of $750 was established for each separately called meeting of
non-management directors; (7) a participation fee of $750 was established for
regularly scheduled telephonic meetings and $250 for special telephonic meetings
of the Executive and Finance Committee; and (8) a participation fee of $250 was
established for all telephonic meetings of all other committees except for the
Stock Option Committee.
The Corporation has agreed to pay a death benefit in the amount of $200,000
to the estate of each Director, other than a director who is also an employee,
upon his death. This benefit is provided to a Director while in office and after
retirement if he has served 5 years. The benefit is payable from the general
assets of the Corporation and the Corporation has insured this liability by
purchasing life insurance policies on the lives of the eligible Directors.
The Directors also receive travel and lodging expenses in connection with
their attendance at Board and committee meetings.
DERIVATIVE ACTIONS
In two separate suits, three stockholders of the Corporation filed
complaints in 1993 in the Common Pleas Court of Lake County, Ohio seeking
recovery on behalf of the Corporation for alleged self-dealing, waste of
corporate assets, financial statement overstatements, gross mismanagement and
participation or acquiescence in such practices by the directors of the
Corporation then in office, all of whom were named as defendants. The Court
consolidated and subsequently dismissed both suits with respect to all
defendants. The plaintiffs appealed the Court's decision and the parties reached
an agreed upon settlement in June 1995, the principal terms of which were
described in a notice mailed to the Corporation's stockholders of record.
Stockholders were permitted to voice their objections to the settlement at a
hearing before the Court held on August 7, 1995. The terms of the settlement
were approved by the Court on August 10, 1995 and the appeal period with respect
to the Court's order will expire on September 11, 1995.
RETIREMENT PLANS
RETIREMENT INCOME PLAN II
All of the Executive Officers of the Corporation are currently accruing
retirement income credits under, or will accrue them upon their satisfaction of
the eligibility requirements set forth in, the Salaried Employee Retirement
Income provisions of the Figgie International Inc. Retirement Income Plan II
(the "Salaried Provisions"), a defined benefit pension plan. The Salaried
Provisions cover the salaried employees of the Corporation except employees of
certain non-participating divisions and subsidiaries.
23
<PAGE> 26
Directors who are not employees are not entitled to receive retirement benefits
under the Retirement Income Plan II.
In general, the Salaried Provisions, as adopted effective July 31, 1993,
provide that salaried employees accrue dollar units of retirement income credits
for each calendar year of participation in the Salaried Provisions on the basis
of their "Annual Pensionable Earnings." To receive full benefits under the
Salaried Provisions, employees must contribute 2% of their "Annual Pensionable
Earnings" over their "Covered Compensation." The following sets forth the
percentage of Annual Pensionable Earnings which is accrued as a Retirement
Income Credit under the Salaried Provision:
<TABLE>
<CAPTION>
ANNUAL
PENSIONABLE EARNINGS (1)
-----------------------------
0-100% OF OVER 100% OF
COVERED COVERED
COMPENSATION COMPENSATION
(2) (2)
------------ ------------
<S> <C> <C>
Retirement Income Credit 0.7% 1.2%
</TABLE>
---------------
(1) "Annual Pensionable Earnings" includes cash salaries and bonuses received by
the participant but excludes any such earnings in excess of $150,000 for
calendar year 1995 and thereafter (plus any increase for cost-of-living as
shall be prescribed by the Secretary of the Treasury pursuant to Sections
401(a)(17) and 415(d) of the Internal Revenue Code).
(2) "Covered Compensation" means the average of the contributions and benefit
bases in effect under Section 230 of the Social Security Act for each such
calendar year in the 35 calendar years ending immediately prior to each
calendar year. For calendar year 1995, Covered Compensation will equal
$24,312.
Generally, any salaried employee of the Corporation except employees of
certain nonparticipating divisions and subsidiaries is eligible to participate
in the Salaried Provisions after the earlier of the completion of one year of
service or attainment of age 40. A participant becomes vested in the Salaried
Provisions five years after the participant's hire date. Upon reaching normal
retirement at age 65, each participant is generally entitled to receive an
annual retirement benefit for life equal to the total of the retirement income
credits accrued by him during his period of participation. Such benefit is not
subject to any deduction for Social Security benefits. A reduced annual
retirement income benefit may be payable to a retired employee under other
actuarially equivalent forms of pay-out provided for in the Salaried Provisions.
The Salaried Provisions also contain provisions for early retirement and pre-
retirement death benefits payable to spouses and dependent children of certain
deceased participants. During 1994, certain employees of the Corporation and its
subsidiaries accrued retirement benefits under separate retirement plans of the
Corporation which cover employees of its divisions or subsidiaries which are not
or were not at the time participating under the Salaried Provisions or a prior
plan which was terminated on November 21, 1988 (the "Prior Plan").
As of December 31, 1994, the annual benefits payable upon retirement under
the Salaried Provisions, including accrued benefits from the Prior Plan, to the
individuals named in the Summary Compensation Table are stated below. Mr. Figgie
resigned from the Corporation on May 18, 1994 and is receiving total annual
retirement benefits in the amount of $407,702. In determining the benefits
payable to the other individuals named in the Summary Compensation Table, the
executives' earnings were estimated through 1995 and were assumed not to exceed
$150,000 after 1995. Covered Compensation ($24,312 for 1995) was assumed not to
increase after 1995, the maximum allowable employer-funded benefit under the
Internal Revenue Code (which is the greater of $118,800 or the accrued benefit
as of
24
<PAGE> 27
December 31, 1982) was assumed to continue to retirement and executives were
assumed to continue working until at least age 65 and to be fully vested. Based
upon the preceding assumptions, the annual benefits payable to such persons
including benefits payable as a result of voluntary contributions and the
accrued benefits from the Prior Plan are as follows: Mr. Vannoy -- $133; Mr.
Chiarucci -- $13,704; Mr. Harthun -- $99,770; Mr. Siemborski -- $42,219; and Mr.
Rieger -- $44,118.
SENIOR EXECUTIVE BENEFITS PROGRAM
The following pension plan table shows the annual benefits upon retirement
at age 65 in 1994 for various combinations of compensation and lengths of
service which may be payable under the Corporation's Senior Executive Benefits
Program (the "SEBP") to the individuals named in the Summary Compensation Table.
These amounts are paid in addition to the amounts payable under the
Corporation's Salaried Provisions discussed above.
PENSION PLAN TABLE
Annual Benefit for Years of Credited Service Shown (1):
<TABLE>
<CAPTION>
REMUNERATION(2) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $15,800 $38,991 $32,099 $25,207 $18,314 $11,423
150,000 26,634 50,741 42,349 33,957 25,565 17,173
175,000 37,667 66,991 58,599 50,207 41,815 33,423
200,000 48,301 83,241 74,849 66,457 58,065 49,673
225,000 59,134 99,491 91,099 82,707 74,315 65,923
250,000 69,967 115,741 107,349 98,957 90,565 82,173
300,000 91,634 148,241 139,849 131,457 123,065 114,673
400,000 134,967 213,241 204,849 196,457 188,065 179,673
450,000 156,634 245,741 237,349 228,957 220,565 212,173
500,000 178,300 278,241 269,849 261,457 253,065 244,673
</TABLE>
---------------
(1) Annual benefits are computed on the basis of 100% joint and survivor
benefit. The annual benefits reflected in the table constitute 65% of final
covered remuneration, less assumed social security benefits of $21,582 and
less assumed amounts of benefits payable under the Salaried Provisions. The
benefits under the Salaried Provisions have been calculated based upon the
assumptions that the amount of Covered Compensation, as defined in the
Salaried Provisions, remains fixed and the amount of Annual Pensionable
Earnings, as defined in the Salaried Provisions, is limited to amounts that
do not exceed $150,000. (See the description of the Salaried Provisions set
forth above.) The annual benefits will be increased by 10% of the final
covered remuneration for a participant in the SEBP as of February 18, 1987
or a person hired prior to February 18, 1987 who completes 20 years of
service. The annual benefits will be reduced by any retirement or deferred
compensation plans of other employers.
(2) Consists of base salary and the installment payments that have been received
by an executive under the discretionary bonus component of the Corporation's
incentive bonus arrangements.
As of December 31, 1994, the years of credited service for the 6
individuals named in the Summary Compensation Table are as follows: Walter M.
Vannoy, 1 year; Vincent A. Chiarucci, 7 years; L. A. Harthun, 29 years; Steven
L. Siemborski, 0 years; Charles C. Rieger, Jr., 12 years; and Harry E. Figgie,
Jr., 30 years. Harry E. Figgie, Jr. is not accruing any additional benefits
under the SEBP since his resignation from the Corporation.
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<PAGE> 28
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Corporation entered into an employment agreement dated October 28, 1994
(the "Agreement") with Walter M. Vannoy. The Agreement provides for Mr. Vannoy's
employment as Vice-Chairman of the Board of Directors between February 16, 1994
and May 18, 1994, as CEO from May 18, 1994 until such time as a new CEO is duly
elected and takes office (the "New CEO Start Date"), and as Chairman of the
Board from May 18, 1994 until a new Chairman is named. Mr. Vannoy's annual base
salary under the Agreement is $400,000. In addition to his base salary, Mr.
Vannoy is entitled to receive a discretionary bonus under the regular bonus
programs of the Corporation, to participate in other benefit plans provided by
the Corporation, and to be reimbursed for all reasonable expenses incurred while
performing his duties under the Agreement. In accordance with the Agreement, the
115,497 shares of restricted stock granted to Mr. Vannoy under the 1993
Restricted Stock Purchase Plan for Employees are subject to repurchase by the
Corporation upon termination of Mr. Vannoy's employment with the Corporation
pursuant to the provisions of the Restricted Stock Plan relating to repurchases
from retirees. Further, the Agreement provides that in the event Mr. Vannoy's
employment is terminated due to death or disability (as defined), by the
Corporation without good cause (as defined), or by Mr. Vannoy for good reason
(as defined), Mr. Vannoy (or his successor in interest) would be entitled to a
pro rata portion of any bonus payable to Mr. Vannoy under the Agreement and the
base salary that Mr. Vannoy would have otherwise received as follows: (i) if
employment is terminated prior to the 90th day following the New CEO Start Date,
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 (ii) if terminated after the 90th day following
the New CEO Start Date, for the number of days between his date of termination
of employment and such date which represents the number of days after the 90th
day following the New CEO Start Date and will equal the number of days between
February 16, 1994 and the 90th day following the New CEO Start Date (the
"Separation Day"). The Agreement provides that upon completion of his term of
employment under the Agreement until the Separation Day, Mr. Vannoy will
continue to serve the Corporation on a part-time basis with such title, if any,
as the Board of Directors deems appropriate.
The Corporation entered into an employment agreement dated July 1, 1994
(the "Employment Contract") with Steven L. Siemborski. The Employment Contract
provides for Mr. Siemborski's employment as Senior Vice President and Chief
Financial Officer of the Corporation, at an annual base salary of $350,000. In
addition to his base salary, Mr. Siemborski is entitled to receive: (i) a
special $50,000 transition payment (which was paid in 1994), an incentive bonus
of $25,000 for reducing financial consulting fees by 50% during the first four
months of employment (which was paid on June 30, 1995) and an additional
incentive bonus of $50,000 for reducing such financial consulting fees to zero
by June 30, 1995 (which was paid on June 30, 1995) during the first year of the
Employment Contract; (ii) the greater of a bonus of $50,000 or the bonus payable
to him with respect to the 1995 calendar year under the regular bonus programs
of the Corporation during the second year of the Employment Contract; and (iii)
a discretionary bonus under the regular bonus programs of the Corporation during
the third and fourth years of the Employment Contract. Mr. Siemborski also
received the right to purchase 150,000 shares of the Corporation's Common Stock,
the class to be determined by the Stock Option Committee, for one dollar ($1.00)
per share in four annual increments of 37,500 shares beginning July 1, 1994
(such rights to expire if not exercised by Mr. Siemborski prior to the following
November 1st), to participate in other benefit plans provided by the
Corporation, and to be reimbursed for all reasonable expenses incurred while
performing his duties under the Employment Contract. Further, the Employment
Contract provides that in the event Mr. Siemborski's employment is terminated
due to death or disability (as defined), Mr. Siemborski (or his successor in
interest) would
26
<PAGE> 29
be entitled to the pro rata portion of any bonus which would have been payable
during the second, third and fourth years of the Employment Contract and to his
stock purchase rights under the Employment Contract. The Employment Contract
also provides that in the event Mr. Siemborski's employment is terminated by the
Corporation without good cause (as defined) or by Mr. Siemborski for good reason
(as defined), Mr. Siemborski would be entitled to his stock purchase rights
under the Employment Contract and to severance pay based upon the date of
termination of his employment as follows: (i) if
employment is terminated during the first year of the Employment Contract, a
proportional amount of $400,000 with respect to the year of his termination and
$400,000, $350,000 and $350,000 over the succeeding three years; (ii) if
employment is terminated during the second year of the Employment Contract, a
proportional amount of $400,000 with respect to that year and $350,000 for each
of the next succeeding two years; or (iii) if employment is terminated during
the third year of the Employment Contract, a proportional amount of $350,000
with respect to that year and $350,000 over the succeeding year.
The Corporation entered into a management agreement dated April 28, 1995
(the "Management Agreement") with Luther A. Harthun. The Management Agreement
provides for Mr. Harthun's continued employment until July 3, 1996 (unless
mutually extended or terminated) as Senior Vice President -- International,
General Counsel and Secretary of the Corporation, at his then current base
salary and a guaranteed bonus to be paid in 1996 of $80,000. If Mr. Harthun's
employment is terminated due to his retirement or death, his benefits will be
determined in accordance with the Corporation's other retirement and benefit
plans as in effect on the date of the Management Agreement. In the event Mr.
Harthun becomes disabled, the Corporation may terminate his employment but will
be obligated to pay Mr. Harthun his base salary and guaranteed bonus as if Mr.
Harthun had remained a full time employee and retired on July 3, 1996. Such
payments will be in lieu of the payments due Mr. Harthun prior to July 3, 1996
pursuant to the Corporation's SEBP. If Mr. Harthun voluntarily terminates his
employment, he will receive his full base salary through the termination date,
and will receive the guaranteed bonus only if such termination is after April
30, 1996. If the Corporation terminates Mr. Harthun's employment other than for
cause (as defined), Mr. Harthun can elect to receive, in lieu of any other
severance payments which may be due Mr. Harthun, either (i) his base salary and
health and life insurance benefits for twenty-four months following the date of
such termination or (ii) his salary, guaranteed bonus, retirement and other
payments provided in the Management Agreement as if Mr. Harthun had remained a
full time employee and retired on July 3, 1996. In addition, the Corporation
will continue to be obligated to pay when due all other benefits Mr. Harthun is
due under the Corporation's other retirement and benefit plans. If Mr. Harthun
retires from the Corporation after May 31, 1996, he will receive those
retirement benefits to which he would be entitled under the Corporation's SEBP.
The Corporation entered into an employment agreement dated January 1, 1995
(the "Executive Agreement") with John P. Reilly. The Executive Agreement
provides for Mr. Reilly's employment as Chief Executive Officer of the
Corporation, at an annual base salary of $500,000. In addition to his base
salary, Mr. Reilly is entitled to receive the following: (i) a guaranteed lump
sum payment of $250,000 if he remains an employee of the Corporation until April
30, 1996; (ii) 30,000 shares of the Corporation's Common Stock pursuant to the
terms of the Corporation's Restricted Stock Plan; (iii) an option to purchase
500,000 shares of the Corporation's Class A Common Stock pursuant to the
Corporation's Key Employees' Stock Option Plan, at an option price equal to the
fair market value of such stock determined under the plan, exercisable not later
than the seventh anniversary of the date of issuance. In addition, the Executive
Agreement entitles Mr. Reilly to participate in the Corporation's regular bonus
and benefit plans for senior executives. In the event of Mr. Reilly's death or
disability (as defined), Mr.
27
<PAGE> 30
Reilly's employment shall be deemed to have terminated, except that the
Corporation will pay a pro rata portion of any guaranteed payment or bonus
otherwise payable. If the Corporation terminates Mr. Reilly's employment without
good cause (as defined), then the Corporation must pay Mr. Reilly's base salary
for the greater of (i) two years or (ii) the remainder of the term of the
Executive Agreement. The Executive Agreement terminates on January 1, 1998, and
will be automatically extended for successive one-year periods unless the
Corporation or Mr. Reilly gives notice of termination.
In May 1989, all corporate officers and corporate level department heads,
other than Mr. Figgie, who reported to the Chief Executive Officer of the
Corporation, entered into severance agreements (the "Severance Agreements") with
the Corporation which become effective in the event of a change of control of
the Corporation (as defined). The Severance Agreements provide compensation in
the event that within 3 years of such change of control the executive is
terminated other than for cause (as defined) or such employment terminates
because the executive's duties, title, compensation, employee benefits or place
of employment are adversely changed. In addition, if the executive terminates
his employment during a period of 30 days following the end of 6 months after a
change of control, the executive is entitled to severance compensation. Upon
termination of employment where severance compensation is payable under the
Severance Agreements, the executive is entitled to receive a payment comprised
of 2 times his highest annual base salary, discretionary bonus and formula-based
bonus awards through the date of his termination of employment, together with
payments relating to the fair market value of any restricted stock forfeited by
such executive pursuant to the terms of the related restricted stock purchase
plan, all amounts payable which had previously been deferred on such executive's
behalf and amounts provided under the Corporation's compensation or retirement
plans to the extent such executive participated in such plan or plans at the
time of such change of control. These payments are subject to reduction to the
extent necessary to keep the aggregate amount of such severance compensation
within the limits imposed by Section 280G of the Internal Revenue Code.
The Corporation has been discussing with Harry E. Figgie, Jr., the former
Chairman of the Board and former CEO of the Corporation, the resolution of
various matters relating to the employment agreement that the Corporation
entered into with Mr. Figgie on November 18, 1988 (the "Employment Agreement").
As stated above, Mr. Figgie resigned from his positions with the Corporation on
May 18, 1994. The Employment Agreement provided for, among other things, Mr.
Figgie's employment through December 31, 1995 at an annual base salary of at
least $500,000, payment of annual bonuses at minimum amounts and certain
benefits upon the termination of Mr. Figgie's employment under specified
circumstances.
CERTAIN TRANSACTIONS
Mr. McKnight, a member of the Board of Directors, is a partner in the law
firm of Calfee, Halter & Griswold which performs legal services for the
Corporation. For services rendered during 1994, the Corporation paid Calfee,
Halter & Griswold $3,574,338.
Certain transactions relating to the Corporation and Harry E. Figgie, Dr.
Figgie and Mr. Coenen are described above under the caption "Compensation
Committee Interlocks and Insider Participation" and are incorporated by
reference.
INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's independent public accountants for the fiscal year ended
1994 were Arthur Andersen LLP. Representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting, and will have an opportunity to
make a statement if they so desire or respond to appropriate questions.
28
<PAGE> 31
The Corporation has not made a final decision as to the selection of its
independent public accountants for the current year and is considering as
potential candidates several public accounting firms including Arthur Andersen
LLP.
STOCKHOLDER PROPOSAL REQUIREMENTS
The Corporation intends to schedule its 1996 Annual Meeting on a date
consistent with the dates on which it has held its annual meetings in years
prior to 1994. Accordingly, and based upon the date of the mailing of the proxy
statement for the Corporation's Annual Meeting in 1993, any stockholder who
wishes to submit a proposal for inclusion in the proxy material to be
disseminated by the Corporation in connection with its 1996 Annual Meeting must
do so no later than January 25, 1996. To be eligible for inclusion in the 1996
proxy material, such proposal must conform to the requirements set forth in
Regulation 14A under the Securities Exchange Act of 1934. In order to be
considered at an Annual Meeting, a stockholder proposal must be presented by the
proponents or their representatives in attendance at the meeting.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those listed in the Notice of Annual Meeting of
Stockholders. However, if other matters properly come before the Meeting, it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their best judgment on such matters insofar as the proxies are
not limited to the contrary.
To the extent that information contained in this Proxy Statement is
peculiarly within the knowledge of persons other than the management of the
Corporation, the Corporation has relied on such persons for the accuracy and
completeness thereof.
Upon the receipt of a written request from any stockholder entitled to vote
at the forthcoming Annual Meeting, the Corporation will mail, at no charge to
the stockholder, a copy of the Corporation's annual report on Form 10-K,
including the financial statements and schedules required to be filed with the
SEC pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, for the
Corporation's most recent fiscal year. Requests from beneficial owners of the
Corporation's voting securities must set forth a good faith representation that,
as of the record date for the Annual Meeting, the person making the request was
the beneficial owner of securities entitled to vote at such meeting. Written
requests for such report should be directed to:
Ira Gamm
Manager Corporate Communications and Investor Relations
Figgie International Inc.
4420 Sherwin Road
Willoughby, Ohio 44094
You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the Annual Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
By Order of the Board of
Directors
L. A. Harthun
Secretary
Dated: September 14, 1995
29
<PAGE> 32
FIGGIE [LOGO]
INTERNATIONAL PROXY/VOTING INSTRUCTION CARD
P FIGGIE INTERNATIONAL INC. CLASS A COMMON STOCK
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON OCTOBER 17, 1995.
O
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF
X THIS CARD.
Y The undersigned hereby appoints Keith Mabee, L.A. Harthun, Mary E.
Reeve and each of them, proxies, with full power of substitution to
appear on behalf of the undersigned and to vote all shares of Class A
Common Stock of the undersigned at the Annual Meeting of Stockholders
to be held at Franklin Hall at the Corporation's Headquarters, 4420
Sherwin Road, Willoughby, Ohio 44094 on October 17, 1995, at 1:00
p.m., E.D.S.T., and at any adjournment thereof, upon all subjects that
may properly come before the meeting, including the matters described
in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card, hereby revoking any and
all proxies heretofore given.
The proxies will vote for the election of all listed nominees if the
applicable boxes are not marked and at their discretion on any other
matter that may properly come before the meeting.
Nominees for election as Directors are: Fred J. Brinkman, F. Rush
McKnight, John P. Reilly.
Please return promptly in the enclosed postage-paid envelope or
otherwise to P.O. Box 1628, Boston, MA 02105-1628, so that your shares
can be represented at the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 33
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
DIERCTORS RECOMMEND A VOTE "FOR" THE PROPOSAL
1. Election of all Directors.
NOMINEES: Fred J. Brinkman, F. Rush McKnight, John P. Reilly
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR WITHHELD
/ / / / MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
/ / CHANGE AND TO ATTEND
-------------------------------------- NOTE AT LEFT THE MEETING
For all nominees except as noted above
Please sign and return this Proxy Card so that your shares can be
represented at the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the capacity
in which you are signing. If you do attend the meeting and decide
to vote by ballot such vote will supersede this proxy.
Signature:_________________________________________Date:____________________
Signature:_________________________________________Date:____________________
</TABLE>
<PAGE> 34
FIGGIE [LOGO]
INTERNATIONAL PROXY/VOTING INSTRUCTION CARD
P FIGGIE INTERNATIONAL INC. CLASS B COMMON STOCK
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON OCTOBER 17, 1995.
O
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF
X THIS CARD.
Y The undersigned hereby appoints Keith Mabee, L.A. Harthun, Mary E.
Reeve and each of them, proxies, with full power of substitution to
appear on behalf of the undersigned and to vote all shares of Class B
Common Stock of the undersigned at the Annual Meeting of Stockholders
to be held at Franklin Hall at the Corporation's Headquarters, 4420
Sherwin Road, Willoughby, Ohio 44094 on October 17, 1995, at 1:00
p.m., E.D.S.T., and at any adjournment thereof, upon all subjects that
may properly come before the meeting, including the matters described
in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card, hereby revoking any and
all proxies heretofore given.
The proxies will vote for the election of all listed nominees if the
applicable boxes are not marked and at their discretion on any other
matter that may properly come before the meeting.
Nominees for election as Directors are: Fred J. Brinkman, F. Rush
McKnight, John P. Reilly.
Please return promptly in the enclosed postage-paid envelope or
otherwise to P.O. Box 1628, Boston, MA 02105-1628, so that your shares
can be represented at the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 35
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
DIERCTORS RECOMMEND A VOTE "FOR" THE PROPOSAL
1. Election of all Directors.
NOMINEES: Fred J. Brinkman, F. Rush McKnight, John P. Reilly
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<S> <C> <C> <C> <C>
FOR WITHHELD
/ / / / MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
/ / CHANGE AND TO ATTEND
-------------------------------------- NOTE AT LEFT THE MEETING
For all nominees except as noted above
Please sign and return this Proxy Card so that your shares can be
represented at the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the capacity
in which you are signing. If you do attend the meeting and decide
to vote by ballot such vote will supersede this proxy.
Signature:_________________________________________Date:____________________
Signature:_________________________________________Date:____________________
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