<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 12/31/96 Commission file number 1-8591
FIGGIE INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1297376
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4420 SHERWIN ROAD, WILLOUGHBY, OHIO 44094
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (216) 953-2700
Securities registered pursuant to Section 12(G) of the Act:
Class A Common Stock, Par Value $.10 Per Share
(TITLE OF CLASS)
Class B Common Stock, Par Value $.10 Per Share
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN,AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [ X ]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF
FILING.)
At January 24, 1997 - $199,429,616
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Outstanding as of 1/24/97
Class A Common Stock, Par Value $.10 Per Share 13,681,977
Class B Common Stock, Par Value $.10 Per Share 4,712,747
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE
DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY
PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE
424 (b) OR UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD
BE CLEARLY DESCRIBED FOR IDENTIFICATION PURPOSES.)
Proxy Statement Re: 1996 Annual Stockholders' Meeting(See Part III)
Certain documents incorporated from prior filings (See Part IV) <PAGE>
<PAGE>2
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . .4
Customers. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Competition. . . . . . . . . . . . . . . . . . . . . . . . . .5
Patents and Trademarks . . . . . . . . . . . . . . . . . . . .5
Backlog of Orders. . . . . . . . . . . . . . . . . . . . . . .5
Raw Materials. . . . . . . . . . . . . . . . . . . . . . . . .6
Effect of Environmental Compliance . . . . . . . . . . . . . .6
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . .6
Research and Development . . . . . . . . . . . . . . . . . . .6
Distribution . . . . . . . . . . . . . . . . . . . . . . . . .6
Financial Information About the Company's Business Segments. .7
Executive Officers of the Company. . . . . . . . . . . . . . .8
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . .9
Principal Facilities . . . . . . . . . . . . . . . . . . . . .9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . .9
Item 4. Submission of Matters to a Vote of Security Holders . . 10
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters. . . . . . . . . . . . . . . . . 11
Item 6. Summary of Selected Financial Data . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 13
FINANCIAL SUMMARY. . . . . . . . . . . . . . . . . . . . . . 13
INTERSTATE ELECTRONICS CORPORATION . . . . . . . . . . . . . 15
SCOTT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SNORKEL. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CORPORATE AND UNALLOCATED COSTS AND EXPENSES . . . . . . . . 21
Item 8. Financial Statements and Supplementary Data. . . . . 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . 24
CONSOLIDATED STATEMENTS OF OPERATIONS. . . . . . . . . . . . 25
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . 26
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY. . . . . . . 28
CONSOLIDATED STATEMENTS OF CASH FLOWS. . . . . . . . . . . . 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . 30
(1) Summary of Significant Accounting Policies . . . . . 30
PRINCIPLES OF CONSOLIDATION. . . . . . . . . . . . . 30
NATURE OF OPERATIONS . . . . . . . . . . . . . . . . 30
USE OF ESTIMATES . . . . . . . . . . . . . . . . . . 30
CASH . . . . . . . . . . . . . . . . . . . . . . . . 30
LONG-TERM CONTRACTS. . . . . . . . . . . . . . . . . 30
CONCENTRATION OF CREDIT RISK . . . . . . . . . . . . 31
INVENTORIES. . . . . . . . . . . . . . . . . . . . . 31
PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . 31
LAND AND LAND IMPROVEMENTS . . . . . . . . . . . . . 31<PAGE>
<PAGE>3
INTANGIBLES. . . . . . . . . . . . . . . . . . . . . 31
CAPITALIZATION OF INTEREST . . . . . . . . . . . . . 31
ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . 31
INCOME TAXES . . . . . . . . . . . . . . . . . . . . 31
SELF-INSURANCE PROGRAMS. . . . . . . . . . . . . . . 32
EARNINGS PER SHARE . . . . . . . . . . . . . . . . . 32
STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . 32
(2) Restructuring and Refinancing Costs. . . . . . . . . 33
(3) Discontinued Operations. . . . . . . . . . . . . . . 34
(4) Income Taxes . . . . . . . . . . . . . . . . . . . . 36
(5) Inventories. . . . . . . . . . . . . . . . . . . . . 37
(6) Receivables. . . . . . . . . . . . . . . . . . . . . 38
(7) Credit Facility and Debt Refinancing . . . . . . . . 38
(8) Long-Term Debt . . . . . . . . . . . . . . . . . . . 39
(9) Leases . . . . . . . . . . . . . . . . . . . . . . . 40
(10) Contingent Liabilities . . . . . . . . . . . . . . . 41
(11) Pension and Retirement Benefits Plans. . . . . . . . 42
(12) Capital Stock. . . . . . . . . . . . . . . . . . . . 43
(13) Stock Options. . . . . . . . . . . . . . . . . . . . 43
(14) Restricted Stock Purchase Plans. . . . . . . . . . . 45
(15) Employee Stock Ownership Plans . . . . . . . . . . . 46
(16) Industry Segment Data. . . . . . . . . . . . . . . . 47
QUARTERLY FINANCIAL DATA (UNAUDITED) . . . . . . . . . . . . 48
Item 9. Disagreements on Accounting and Financial Disclosure 49
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 10. Directors and Executive Officers of the Registrant . 49
Item 11. Executive Compensation . . . . . . . . . . . . . . . 49
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . 49
Item 13. Certain Relationships and Related Transactions . . . 49
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . 50
VALUATION AND QUALIFYING ACCOUNTS. . . . . . . . . . . . . . 54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . 55
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SUBSIDIARIES OF THE COMPANY. . . . . . . . . . . . . . . . . . . 59
CONSENTS OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . 60
<PAGE>
<PAGE>4
Except as otherwise stated, the information contained in this Annual
Report is as of December 31, 1996.
PART I
Item 1. Business
Figgie International Inc. (referred to, with all of its consolidated
subsidiaries and divisions, and their predecessor entities, unless the
context otherwise requires, as the "Company") is comprised of three
reporting segments as set forth below:
Interstate Electronics Corporation ("Interstate Electronics") develops
and produces sophisticated telemetry, instrumentation and data
recording systems and position measuring systems referred to as Global
Positioning Systems ("GPS"), for the U.S. Navy's Polaris/Poseidon,
TRIDENT, and TRIDENT II ships; precise GPS for aircraft and turnkey
test ranges; and GPS for commercial and business aircraft navigation
and landing systems. Interstate Electronics also designs and produces
plasma, liquid crystal and cathode-ray tube display systems for a
variety of shipboard and aircraft applications. In addition,
Interstate Electronics manufactures sophisticated bandwidth-on-demand
satellite communication modems and terminals for government and
commercial applications.
The Scott Aviation ("Scott") division manufactures the Scott Air Pak*
and other life support products for fire fighting and personal
protection against industrial contaminants. The air-purifying
products provide protection against environmental and safety hazards.
Scott manufactures protective breathing equipment, pilot and crew
oxygen masks plus emergency oxygen for passengers on commercial,
government and private aircraft. Scott also manufactures instruments
to detect the presence of combustible or toxic gases and the lack of
oxygen.
The Snorkel division manufactures self-propelled aerial work
platforms, such as telescopic and articulating booms and scissorlifts
for use in construction and maintenance activities. Snorkel also
fabricates and services booms that are mounted on fire apparatus to
deliver large quantities of water from elevated positions. The
division also includes the operations of the Company's subsidiary in
New Zealand, which manufacturers trailer mounted booms in New Zealand
and distributes Snorkel products in Australia, New Zealand and
Southeast Asia.
The Company's business is generally managed at the operating division and
subsidiary level. Financial, legal, real estate and certain
administrative functions are performed at the corporate offices of the
Company. The Company's real estate development activities, conducted
through its subsidiary, Figgie Properties, Inc., are reported as a
corporate department.
* Registered or common law trademarks and service marks of Figgie
International Inc. and its subsidiaries.
<PAGE>
<PAGE>5
Through December 31, 1996, the Company concluded the sales of all of its
previously discontinued businesses. For further discussion of the
Company's divestment of these operations, see "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations", included elsewhere herein.
Customers
The U.S. Government accounted for 24.7%, 28.4% and 35.2% of the
Company's total net sales and 91.4%, 87.6% and 90.7% of the net sales of
Interstate Electronics for 1996, 1995 and 1994, respectively. No other
single customer accounted for more than 10% of the Company's net sales.
Approximately 80% of Interstate's net sales for the next year are
expected to come from U.S. government contracts. These net sales are
subject to the standard government contract clause that permits the
government to terminate such contracts at its convenience. In the event
of such termination, there are provisions to enable the Company to
recover its costs plus a fee. The Company does not anticipate the
termination of any of its major government contracts.
Competition
The Company's segments are engaged in industries characterized by
substantial competition in the form of price, service, quality, and
design. The Company believes that in the United States it is among the
leading manufacturers of protective breathing and emergency oxygen
equipment.
Patents and Trademarks
The Company owns and is licensed under a number of patents and trademarks
that it regards as sufficient for its operations. It believes its
business as a whole is not materially dependent upon any one patent,
trademark or license or technologically-related group of patents or
licenses.
Backlog of Orders
As of December 31, 1996 and 1995, the Company had a backlog of orders as
follows (in millions):
1996 1995
Interstate Electronics:
Under contract $ 12 $ 46
Under contract and funded 53 38
65 84
Scott 53 48
Snorkel 45 81
$163 $213
On these dates such backlog amounts were believed to be firm. However,
final verification of the Company's backlog estimates depends on, among
other things, government funding and general economic and business conditions
in 1997 that cannot be predicted. Of the backlog, $5.3 million and $37.8
million at December 31, 1996 and 1995, respectively, are not expected to
be completed within twelve months.
<PAGE>
<PAGE>6
Raw Materials
The Company believes that the principal raw materials and purchased
component parts for the manufacture of its products are available from a
number of suppliers and are generally available in sufficient quantities
to meet its current requirements.
Effect of Environmental Compliance
At the present time, compliance with federal, state, and local provisions
with respect to environmental protection and regulation has not had and
is not expected to have a material impact on the Company's capital
expenditures, earnings, operations, financial position or competitive
position.
Employees
As of December 31, 1996, the Company's workforce was comprised of 2,468
employees. Approximately 200 employees are covered by a collective
bargaining agreement expiring on November 12, 1999 . The Company
considers its overall relations with its workforce to be satisfactory.
Research and Development
During 1996, the Company's research and development activities consisted
principally of further development of high technology, defense-based
products to commercial applications at Interstate Electronics and, to a
lesser extent, customary product development activities at Scott and
Snorkel. Research and development expenditures were $14.7 million,
$13.6 million and $18.2 million for 1996, 1995 and 1994, respectively.
Distribution
The Company's products and services are marketed through most normal
channels of distribution. These vary by industry segment and include
direct sales by Company salesmen, sales through independent distributors
and dealers, sales through manufacturers' agents, direct sales to
government agencies, and the use of licenses and joint ventures.
<PAGE>
<PAGE>7
Financial Information About the Company's Business Segments
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
(in thousands)
Year Ended December 31
Sales to Unaffiliated Customers* and by Product Line: 1996 1995 1994
Interstate Electronics
Strategic Weapon Systems $ 45,494 $ 50,914 $ 52,909
Global Positioning Systems 26,099 28,205 37,964
Other 18,944 19,146 22,764
90,537 98,265 113,637
Scott
Health/Safety Products $ 70,783 $ 62,058 $ 62,243
Aviation/Government Products 65,901 50,511 36,447
136,684 112,569 98,690
Snorkel
Booms $ 87,263 $ 78,209 $ 51,719
Scissorlifts and Other 71,233 51,775 35,279
158,496 129,984 86,998
Total Sales to Unaffiliated Customers $385,717 $340,818 $299,325
Major Customer Sales*:
Interstate Electronics $ 82,752 $ 86,121 $103,095
Scott 12,591 10,648 2,335
Snorkel 10 6 75
Total Sales to U.S. Government $ 95,353 $ 96,775 $105,505
Export Sales - United States to*:
Canada $ 14,974 $ 14,690 $ 11,726
Other 25,079 24,477 20,254
Total U.S. Export Sales $ 40,053 $ 39,167 $ 31,980
Operating Profit (Loss)*:
Interstate Electronics $ 5,055 $ 5,883 $ 6,010
Scott 26,914 21,145 17,775
Snorkel 22,078 12,584 4,491
Total for Reporting Segments 54,047 39,612 28,276
Corporate and unallocated expenses (14,019) (18,436) (45,495)
Total Operating Profit (Loss) $ 40,028 $ 21,176 $(17,219)
Identifiable Assets:
Interstate Electronics $ 58,395 $ 52,813 $ 50,750
Scott 48,787 37,331 31,901
Snorkel 67,202 59,234 50,556
Corporate 170,882 136,055 177,322
Discontinued Operations 27,519 79,423 326,481
Total Identifiable Assets $372,785 $364,856 $637,010
Capital Expenditures:
Interstate Electronics $ 2,518 $ 1,113 $ 3,713
Scott 2,202 1,251 1,501
Snorkel 2,816 2,199 5,658
Corporate 2,183 1,624 2,780
Discontinued Operations 560 19,157 36,652
Total Capital Expenditures $ 10,279 $ 25,344 $ 60,304
Depreciation and Amortization:
Interstate Electronics $ 1,737 $ 1,616 $ 1,083
Scott 1,597 1,179 1,024
Snorkel 2,589 2,014 1,591
Corporate 441 855 3,957
Discontinued Operations 789 630 33,978
Total Depreciation and Amortization $ 7,153 $ 6,294 $ 41,633
* Excludes those operating units that are discontinued operations. See
"Item 7- Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.
<PAGE>
<PAGE>8
Executive Officers of the Company
As of February 3,1997, the following executive officers of the Company
serve in the positions indicated:
GLEN W. LINDEMANN, President, Scott Aviation since June 15, 1989; and
a Director of the Company since November, 1996; age 57.
STEVEN L. SIEMBORSKI, Senior Vice President and Chief Financial
Officer, and a Director of the Company since July 1, 1994. Mr.
Siemborski was associated with the firm of Ernst & Young from 1976 to
1994, most recently as a Partner in Ernst & Young's Special Services
Group; age 42.
WILLIAM J. SICKMAN, Vice President - Corporate Relations since
February 1, 1997; Director - Human Resources and Administration from
September, 1994 to January, 1997; Manager - Manpower Development from
March, 1992 to August, 1994; Manager - Employee Relations from August,
1988 to February, 1992; age 44.
ROBERT D. VILSACK, Vice President, General Counsel and Secretary since
February 1, 1997; General Counsel and Secretary from July, 1996 until
February, 1997; General Counsel and Assistant Secretary from February,
1996 until July, 1996; Corporate Counsel from September, 1990 until
July, 1996; age 35.
In addition, as of February 3, 1997 the Chief Executive Office functions
of the Company are being performed by the Office of the Chairman, formed
by the Board of Directors of the Company upon the resignation on January
24, 1997 of John P. Reilly as Chief Executive Officer and President. Mr.
Reilly remains Chairman of the Board of the Company. The members of the
Office of the Chairman are Messrs. Reilly, Lindemann and Siemborski.
<PAGE>
<PAGE>9
Item 2. Properties
The Company's principal manufacturing plants in the United States have
approximately 915,000 square feet of floor area for manufacturing,
warehousing and administrative uses. Approximately 720,000 square feet
of this area is owned and the balance is leased. The Company believes
its facilities are suitable for its purposes, having adequate productive
capacity for the Company's present and anticipated needs.
Principal Facilities
Approx.
Floor Area
Reporting Segment Location (Sq. Feet)
Interstate Electronics Anaheim, CA 376,000
Scott Monroe, NC 123,000
Lancaster, NY 111,000
South Haven, MI 25,000
Snorkel Elwood, KS 81,000
St. Joseph, MO 15,000
Elwood, KS(leased) 185,000
Item 3. Legal Proceedings
On December 19, 1994, the Company, its subsidiary Figgie Properties Inc.
and the Richard E. Jacobs Group filed an action in the Common Pleas Court
of Cuyahoga County, Ohio against the City of Cleveland seeking specific
performance of a 1989 Master Development Agreement pertaining to a
proposed real estate project known as Chagrin Highlands. The Company's
complaint also seeks a declaratory judgement that the Master Development
Agreement is in full force and effect and asks for an injunction
preventing the City from interfering with the rights of the plaintiffs
under that Agreement as well as compensatory damages in the amount of
$100 million. The City of Cleveland filed a motion to dismiss the
Company's complaint. On May 1, 1995, the Court denied the City's motion
to dismiss the complaint and granted its motion to dismiss the Jacobs
Group as a party plaintiff. On January 24, 1996, the Court denied the
City's motion for summary judgement and granted the Company's motion for
summary judgement with respect to several counts of a counterclaim filed
by the City. On May 1, 1996, the parties reached an agreement on the
general terms of a settlement and the litigation was dismissed without
prejudice. The settlement is subject to final approval by Council for
the City of Cleveland.
Costs charged by the Company to the U.S. Government in the performance of
U.S. Government contracts are subject to inquiry and audit. Several
years are open. The Company has provided a reasonable reserve for
possible disallowed costs. The Company has been cooperating with the
U.S. Government in two criminal investigations, one involving possible
improprieties at a facility where a division of the Company was a
supplier, and the second involving the amount of corporate charges<PAGE>
<PAGE>10
allocated to certain of the Company's operating units. The Company has
furnished documents and other information and denies any wrongdoing in
both investigations. Nevertheless, the ultimate resolution of these
matters could result in sanctions and damages sought by the government,
and affect the Company's ability to obtain future government contracts.
The Company is also involved in ordinary routine litigation incidental to
its business. Management does not believe that such litigation will have
a material adverse effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The annual stockholders meeting was held on November 26, 1996. The votes
cast by the record holders on the record date for the annual meeting of
13,641,613 shares of Class A Common Stock (1/20th of a vote per share)
and 4,715,807 shares of Class B Common Stock (1 vote per share) entitles
to cast 682,081 and 4,695,314 votes, respectively, were as follows:
Amendment to the Bylaws. The proposed amendment to the Bylaws to provide
that the Board shall consist of not less than five nor more than eleven
Directors was adopted pursuant to the following vote:
For 4,596,858
Against 162,492
Abstain 125,583
Election of Directors. The nominees for Director were elected pursuant
to the following vote:
AUTHORITY
NOMINEE FOR WITHHELD
Glen Lindemann 3,696,592 1,118,343
Harrison Nesbit II 3,867,848 1,017,087
<PAGE>
<PAGE>11
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder
Matters
The Company's Common Stock is traded on the over-the-counter market and
quoted in the National Association of Security Dealers Automated
Quotation/ National Market System (NASDAQ/NMS) under the following
symbols: Class A Common Stock "FIGIA" and Class B Common Stock "FIGI".
The high and low sales prices recorded on the NASDAQ/NMS System for each
quarterly period during the years 1996 and 1995 are set forth below.
1996 1995
Quarter Quarter
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Class A Common:
Low $10.00 $13.00 $12.50 $10.00 $5.938 $7.875 $8.375 $9.875
High $13.625 $16.375 $15.75 $13.75 $9.125 $9.625 $14.125 $13.25
Class B Common:
Low $10.00 $12.25 $11.625 $9.125 $6.00 $7.00 $7.50 $9.00
High $12.875 $15.50 $14.625 $12.875 $9.00 $8.75 $13.75 $12.75
As of January 24, 1997, there were 5,977 holders of Class A Common Stock
and 4,877 holders of Class B Common Stock.
No dividends were paid in 1996 or 1995.
<PAGE>
<PAGE>12
Item 6. Summary of Selected Financial Data
The following tables set forth selected consolidated financial data of
the Company for the five years ended December 31, 1996. This data has
been derived from the Company's audited consolidated financial
statements. These tables should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements of the Company included
elsewhere herein. The report of Arthur Andersen LLP, independent
auditors, covering the Company's consolidated financial statements for
the years ended December 31, 1996, 1995 and 1994, is also included
elsewhere herein.
Beginning in 1994 and concluding in 1996, the Company sold a number of
itsbusiness operations to reduce debt and concentrate on its
technology-driven manufacturing companies.
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994 1993 1992
Financial Data (in thousands)
<S> <C> <C> <C> <C> <C>
Net Sales $ 385,717 $ 340,818 $ 299,325 $ 268,297 $ 265,578
Income (Loss) from
Continuing Operations
before Change in Accounting
Principle $ 50,302 $ (12,364) $ (86,784) $ (83,829) $ (11,262)
(Loss) from Discontinued
Operations (27,002) (3,726) (79,946) (101,785) 39,561
Cumulative Effect of Change
in Accounting Principle - - - 5,839 -
Net Income(Loss) $ 23,300 $ (16,090) $(166,730) $ (179,775) $ 28,299
Total Assets $ 372,785 $ 364,856 $ 637,010 $ 919,078 $1,008,269
Total Debt $ 186,256 $ 214,328 $ 413,311 $ 539,737 $ 453,809
Per Share Data
Income (Loss) from
Continuing Operations
before Change in Accounting
Principle $ 2.69 $ (0.68) $ (4.90) $ (4.71) $ (0.64)
(Loss)from Discontinued
Operations (1.44) (0.21) (4.51) (5.73) 2.25
Cumulative Effect of Change
in Accounting Principle - - - .33 -
Net Income (Loss) $ 1.25 $ (0.89) $ (9.41) $(10.11) $ 1.61
Cash Dividends Class A Shares - - - 0.435 0.500
Class B Shares - - - 0.435 0.500
Book Value $ 4.05 $ 2.71 $ 3.55 $ 11.84 $ 22.14
</TABLE>
<PAGE>
<PAGE>13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL SUMMARY
Discussion of 1996 Compared to 1995
Net sales increased 13% in 1996 to $385.7 million from $340.8 million in
1995. Greater volume at both Snorkel and Scott offset the reduction at
Interstate Electronics. Gross profit improved 20% in 1996 to $103.2
million from $86.3 million in 1995 as a result of higher sales and
improved margins. The operating profit improved by $18.8 million to
$40.0 million as a result of the improved gross profit and lower SG&A
expenses. Significant reductions of interest expense and refinancing
costs combined with the increase in operating income contributed to
pretax income from continuing operations of $22.6 million compared with a
loss of $12.4 million in 1995.
Included in the results of continuing operations was an income tax
benefit of $27.7 million representing the recognition of tax loss
carryforwards given the Company's sustained profitability for six
quarters. The Company also recorded a $27.0 million charge, net of
related tax benefits of $14.5 million, related to discontinued
operations. The net income for 1996 was $23.3 million or $ 1.25 per
share compared to a loss of $16.1 million or $0.89 per share in 1995.
1996 Quarterly Results were as follows:
(in thousands)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
1996 1996 1996 1996 1996
Net Sales $ 96,701 $ 101,415 $ 95,407 $ 92,194 $385,717
Cost of Sales 71,240 73,682 69,856 67,785 282,563
Gross Profit on Sales 25,461 27,733 25,551 24,409 103,154
% of Sales 26.3% 27.3% 26.8% 26.5% 26.7%
Operating Expenses:
Selling, General and Admin. 12,980 12,963 11,643 10,852 48,438
Research and Development 3,133 3,455 3,904 4,196 14,688
Total Operating Expenses 16,113 16,418 15,547 15,048 63,126
Operating Profit $ 9,348 $ 11,315 $ 10,004 $ 9,361* $40,028
% of Sales 9.7% 11.2% 10.5% 10.1% 10.4%
Other Expense (Income):
Refinancing Costs 218 268 254 253 993
Interest Expense 5,119 4,927 4,867 4,907 19,820
Interest Income (211) (372) (551) (998) (2,132)
Other, Net 381 182 (277) (1,529) (1,243)
Income from Continuing
Operations before tax 3,841 6,310 5,711 6,728 22,590
Income Tax Benefit - - - 27,712 27,712
Income from Continuing
Operations 3,841 6,310 5,711 34,440 50,302
Discontinued Operations:
Income (Loss) from
Operations, net of tax 365 109 917 (111) 1,280
Loss on Disposal,net of tax - - - (28,282) (28,282)
Total 365 109 917 (28,393) (27,002)
Net Income 4,206 6,419 6,628 6,047 23,300
* Includes $2,514,000 of net favorable adjustments as discussed on pages
15 through 21.
<PAGE>
<PAGE>14
Per Share Data:
Income from Continuing
Operations before tax $0.20 $0.34 $0.31 $ 0.36 $ 1.21
Income Tax Benefit - - - 1.48 1.48
Income from Continuing
Operations 0.20 0.34 0.31 1.84 2.69
Discontinued Operations:
Income from Operations,
net of tax 0.02 - 0.05 - 0.07
Loss on Disposal, net of tax - - - (1.51) (1.51)
Total 0.02 - 0.05 (1.51) (1.44)
Net Income $0.22 $0.34 $0.36 $ 0.33 $1.25
Discussion of 1995 Compared to 1994
The Company continued to make progress in 1995 toward achieving
meaningful profitability. Net Sales increased 14% in 1995 to $340.8
million from $299.3 million in 1994. Greater volume at Snorkel and to a
lesser extent at Scott offset the expected reduction at Interstate
Electronics. Gros profit improved 32% in 1995 to $86.3 million from $65.4
million in 1994 as a result of higher sales and improved margins. The
gross margin improved by 3.4 margin points to 25.3% as a result of
increased manufactured volumes through the plants and modest price
increases. Operating income improved by $38.4 million to $21.2 million as
a result of the improved gross profit, lower SG&A expenses and lower R&D
expenses. Significant amounts of interest expense and refinancing costs
associated with the Company's 1994 financial crisis offset the operating
income and produced a 1995 loss before discontinued operations of $12.4
million, or $.68 per share, compared with a loss of $86.8 million, or
$4.90 per share, in 1994. Included in the results of operations for 1995
was a loss from discontinued operations of $3.7 million, as discussed in
note 3 of this Form 10-K. The $3.7 million loss, or $.21 per share, in
1995, compared with a loss of $79.9 million, or $4.51 per share, in
1994. The net loss for 1995 was $16.1 million, or $.89 per share.
Segment Information
The Company is a manufacturer of technology-driven products with
operations in three reporting segments, Interstate Electronics
Corporation, Scott and Snorkel. The results of operations are most
meaningful when analyzed and discussed in this manner.
The U.S. Government accounted for 24.7% of the Company's 1996 sales as
compared with 28.4% and 35.2% of 1995 and 1994 sales, respectively. Costs
charged by the Company to the U.S. Government in the performance of U.S.
Government contracts are subject to inquiry and audit. Several years are
open. The Company has provided a reasonable reserve for possible
disallowed costs. The Company has been cooperating with the U.S.
Government in two criminal investigations, one involving possible
improprieties at a facility where a division of the Company was a
supplier, and the second involving the amount of corporate charges
allocated to certain of the Company's operating units. The Company has
furnished documents and other information and denies any wrongdoing in
both investigations. Nevertheless, the ultimate resolution of these
matters could result in sanctions by the government, and affect the
Company's ability to obtain future government contracts.
<PAGE>
<PAGE>15
INTERSTATE ELECTRONICS CORPORATION
Interstate Electronics develops and produces sophisticated telemetry,
instrumentation and data recording systems and position measuring
systems, Global Positioning Systems ("GPS"), for the U.S. Navy's
Polaris/Poseidon, TRIDENT, and TRIDENT II ships; precise GPS for aircraft
and turnkey test ranges; and GPS for commercial and business aircraft
navigation and landing systems. Interstate Electronics also designs and
produces plasma, liquid crystal and cathode-ray tube display systems for
a variety of shipboard and aircraft applications. In addition,
Interstate Electronics develops sophisticated bandwidth-on-demand
satellite communication modems and terminals for both government and
commercial applications.
Financial Review
The annual results of operations were as follows:
(in thousands)
96 v 95 95 vs 94
1996 1995 CHANGE 1994 CHANGE
Net Sales $ 90,537 $ 98,265 $(7,728) $113,637 $(15,372)
Cost of Sales 65,039 71,253 (6,214) 82,884 (11,631)
Gross Profit on Sales 25,498 27,012 (1,514) 30,753 (3,741)
% of Sales 28.2% 27.5% 27.1%
Operating Expenses:
Selling, General and Admin. 11,430 12,611 (1,181) 11,985 626
Research and Development 9,013 8,518 495 12,758 (4,240)
Total Operating Expenses 20,443 21,129 (686) 24,743 (3,614)
Operating Profit $ 5,055 $ 5,883 $ (828) $ 6,010 $ (127)
% of Sales 5.6% 6.0% 5.3%
Discussion of 1996 Compared to 1995
Net sales declined for the year due to lower revenue from military GPS
and strategic weapon systems and an increase in the reserve for possible
disallowed cost related to government contracts. There was a minimal
amount of commercial sales for the year.
Gross Margin increased for the year due to favorable overhead rates based
on year-to-date spending.
Selling, General and Administrative expenses were lower for the year due
to cost reduction activities but higher as a percentage of Net Sales
because fixed costs unrelated to sales activities.
Research and Development was higher for the year and as a percent of Net
Sales due to expenditures associated with the certification process for
the flight management system.
<PAGE>
<PAGE>16
1996 Quarterly Results were as follows:
(in thousands)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
1996 1996 1996 1996 1996
Net Sales $ 22,447 $ 23,087 $ 23,244 $ 21,759* $ 90,537
Cost of Sales 15,983 16,526 16,089 16,441 65,039
Gross Profit on Sales 6,464 6,561 7,155 5,318 25,498
% of Sales 28.8% 28.4% 30.8% 24.4% 28.2%
Operating Expenses:
Selling, General and Admin. 3,083 2,896 2,713 2,738 11,430
Research and Development 1,796 2,198 2,410 2,609 9,013
Total Operating Expenses 4,879 5,094 5,123 5,347 20,443
Operating Profit (Loss) $ 1,585 $ 1,467 $ 2,032 $ (29) $ 5,055
% of Sales 7.1% 6.4% 8.7% --% 5.6%
*Includes $1.0 million reduction in revenue and operating profit to
increase the reserve for possible disallowed costs.
Discussion of 1995 Compared to 1994
Net Sales and Gross Profit declined due to expected reductions in U.S.
Government defense spending and concurrent costs to launch Interstate
Electronics Corporation's commercial GPS and commercial Satellite
Communication businesses. Commercial sales and profits in 1995 were not
meaningful.
Net Sales declined in all product lines due to expected reductions in
defense spending. The gross margin improved in 1995 from 27.1% to 27.5%
due to improvements in the displays product line. In comparing 1995 to
1994 the gross profit fell by $3.7 million due to the sales volume drop.
Operating Profit as a percent of Net Sales for 1995 increased to 6.0%
from 5.3% in 1994. This was primarily due to lower research and
development expense in 1995 and lower general and administrative
expenses. Lower R&D expense was a result of the conclusion of the
initial product development phase of two major commercial ventures: 1) A
bandwidth-on-demand Time Divided Multiple Access ("TDMA") mesh network
product from the Satellite Communication Systems business unit, and 2) A
Flight Management and Navigation Landing System ("FMS") from the Global
Positioning Systems business unit. The 1995 expenses primarily reflect
the costs necessary to finalize the products.
General and administrative expenses were reduced from 1994 by aggressive
cost controls, which included reducing indirect employees from a five to
a four day work week and reducing executive compensation.
<PAGE>
<PAGE>17
SCOTT
Scott manufactures the Scott Air Pak and other life support products for
fire fighting and personal protection against industrial contaminants.
The air-purifying products provide protection against environmental and
safety hazards. Scott manufactures protective breathing equipment, pilot
and crew oxygen masks plus emergency oxygen for passengers on commercial,
government and private aircraft. Scott also manufactures instruments to
detect the presence of combustible or toxic gases and the lack of oxygen.
Financial Review
The results of operations were as follows:
(in thousands)
96 vs 95 95 vs 94
1996 1995 CHANGE 1994 CHANGE
Net Sales $136,684 $112,569 $ 24,115 $ 98,690 $13,879
Cost of Sales 93,963 76,979 16,984 66,740 10,239
Gross Profit on Sales 42,721 35,590 7,131 31,950 3,640
% of Sales 31.3% 1.6% 32.4%
Operating Expenses:
Selling, General and Admin 12,869 11,855 1,014 10,844 1,011
Research and Development 2,938 2,590 348 3,331 (741)
Total Operating Expenses 15,807 14,445 1,362 14,175 270
Operating Profit $ 26,914 $ 21,145 $ 5,769 $ 17,775 $ 3,370
% of Sales 19.7% 18.8% 18.0%
Discussion of 1996 Compared to 1995
Net Sales increased by 21% for the year due to the impact of emergency
escape breathing equipment sales to the government, increased oxygen
product sales to aviation customers and increased breathing apparatus
sales to safety customers.
Gross Margin was lower for the year due to a shift in product mix
reflected by increased sales to government and aviation customers, as
well as the shipment of a large, lower margin order to a new customer in
the third quarter.
Selling, General and Administrative expenses increased for the year
in support of increased sales, but were lower as a percent of Net Sales
when compared to last year.
Research and Development expenses increased slightly for the year due to
an increase in new product development. R & D expenses as a percentage
of Net Sales were consistent with last year.
<PAGE>
<PAGE>18
1996 Quarterly Results were as follows: (in thousands)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
1996 1996 1996 1996 1996
Net Sales $ 32,941 $ 33,342 $ 34,367 $ 36,034 $136,684
Cost of Sales 22,618 22,948 24,126 24,271* 93,963
Gross Profit on Sales 10,323 10,394 10,241 11,763 42,721
% of Sales 31.3% 31.2% 29.8% 32.6% 31.3%
Operating Expenses:
Selling, General and Admin. 3,147 3,099 3,071 3,552 12,869
Research and Development 625 616 838 859 2,938
Total Operating Expenses 3,772 3,715 3,909 4,411 15,807
Operating Profit $ 6,551 $ 6,679 $ 6,332 $ 7,352 $ 26,914
% of Sales 19.9% 20.0% 18.4% 20.4% 19.7%
* Includes $1,434,000 of favorable adjustments as a result of fourth
quarter inventory.
Discussion of 1995 Compared to 1994
Net Sales increased by 14% compared to last year due to continued strong
orders for oxygen products from aviation customers and $7 million of
unexpected orders for emergency escape breathing equipment from
government customers.
Gross Margin was down slightly due to a shift in product mix reflected by
increased sales to government and aviation customers.
Selling, General and Administrative expenses increased slightly but were
lower as a percent of Net Sales when compared to the same periods last
year.
Research and Development expenses were lower for the year due to
completion of some major new programs such as the Integrated Personal
Alert Safety System ("PASS") which were underway in 1994.<PAGE>
<PAGE>19
SNORKEL
The Snorkel division manufactures self-propelled aerial work platforms,
such as telescopic and articulating booms and scissorlifts for use in
construction and maintenance activities. Snorkel also fabricates and
services booms that are mounted on fire apparatus to deliver large
quantities of water from elevated positions. The division also includes
the operations of the Company's subsidiary which manufacturers trailer
mounted booms in New Zealand and distributes Snorkel products in
Australia, New Zealand and Southeast Asia.
Financial Review
The results of operations were as follows:
(in thousands)
96 vs 95 95 vs 94
1996 1995 CHANGE 1994 CHANGE
Net Sales $158,496 $129,984 $28,512 $86,998 $42,986
Cost of Sales 123,561 106,283 17,278 73,791 32,492
Gross Profit on Sales 34,935 23,701 11,234 13,207 10,494
% of Sales 22.0% 18.2% 15.2%
Operating Expenses:
Selling, General and Admin. 10,120 8,577 1,543 6,563 2,014
Research and Development 2,737 2,540 197 2,153 387
Total Operating Expenses 12,857 11,117 1,740 8,716 2,401
Operating Profit $ 22,078 $12,584 $ 9,494 $ 4,491 $ 8,093
% of Sales 13.9% 9.7% 5.2%
Discussion of 1996 Compared to 1995
Net Sales increased 22% compared to last year due to high market demand
for aerial work platforms. Domestic sales increased 18% for the year.
International sales increased 46% for the year.
Gross Profit amounts and gross margin percentages improved substantially
for the year due to increased plant throughput, improved purchasing costs
and manufacturing efficiencies in the scissorlift line. In addition,
cost of sales was favorably impacted by inventory adjustments.
Selling, General and Administrative expenses for the year increased due
to additional selling costs related to the increased sales volume.
<PAGE>
<PAGE>20
1996 Quarterly Results were as follows:
(in thousands)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
1996 1996 1996 1996 1996
Net Sales $ 41,313 $ 44,986 $ 37,796 $ 34,401 $158,496
Cost of Sales 32,639 34,208 29,641 27,073* 123,561
Gross Profit on Sales 8,674 10,778 8,155 7,328 34,935
% of Sales 21.0% 24.0% 21.6% 21.3% 22.0%
Operating Expenses:
Selling, General and Admin 2,679 2,815 2,054 2,572 10,120
Research and Development 712 641 656 728 2,737
Total Operating Expenses 3,391 3,456 2,710 3,300 12,857
Operating Profit $ 5,283 $ 7,322 $ 5,445 $ 4,028 $ 22,078
% of Sales 12.8% 16.3% 14.4% 11.7% 13.9%
* Includes $1,370,000 of favorable adjustments as a result of fourth
quarter inventory and warranty experience.
Discussion of 1995 Compared to 1994
Net Sales increased 49% compared to last year due to continued high
domestic market demand for aerial work platforms ("AWP"), penetration of
international AWP markets and continued improvement in plant output.
Gross Profit amounts and gross margin percentages improved substantially
compared with 1994 due to increased plant throughput and improving
manufacturing efficiencies.
Selling, General and Administrative expenses improved as a percent of Net
Sales due to additional sales volume.
Research and Development expenses increased due to product development
expenditures for AWPs and fire service products.
<PAGE>
<PAGE>21
CORPORATE AND UNALLOCATED COSTS AND EXPENSES
Financial Review
Corporate activity and unallocated costs and expenses were as follows:
(in thousands)
96 vs 95 95 vs 94
1996 1995 CHANGE 1994 CHANGE
Cost of Sales $ - $ - $ - $ 10,526 $ (10,526)
Selling, General and
Administrative $ 14,019 $ 18,436 $ (4,417) $ 34,969 $ (16,533)
Other Expenses (Income):
Restructuring and
Refinancing Costs 993 11,855 (10,862) 55,204 (43,349)
Interest Expense 19,820 29,255 (9,435) 42,062 (12,807)
Interest Income (2,132) (3,248) (1,116) (3,269) (21)
Other, Net (1,243) (4,322) (3,079) (1,446) 2,876
Discussion of 1996 Compared to 1995
Selling, General and Administrative expenses decreased in 1996 due to the
recurring impact of the 1995 cutback of corporate staff, a decrease in
travel and other expenses associated with divestitures, and numerous
other cost-cutting measures had a favorable adjustment to pension
expense.
Refinancing Costs are down significantly because the 1995 expenses were
for lender fees related to the Override Agreement which was paid-off at
the end of 1995.
Interest Expense is down significantly due to significantly lower levels
of bank and mortgage debts outstanding.
1996 Quarterly Results were as follows:
(in thousands)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
1996 1996 1996 1996 1996
Selling, General and
Administrative $ 4,071 $ 4,153 $ 3,805 $ 1,990* $ 14,019
Other Expenses (Income):
Restructuring and
Refinancing Costs 218 268 254 253 993
Interest Expense 5,119 4,927 4,867 4,907 19,820
Interest Income (211) (372) (551) (998) (2,132)
Other, Net 381 182 (277) (1,529) (1,243)
* Includes $710,000 net favorable adjustment to the actuarially-computed
pension expense for the year and to the actuarially-computed self
insurance reserves at year end.
<PAGE>
<PAGE>22
Discussion of 1995 Compared to 1994
Selling, General and Administrative expenses were reduced significantly
in 1995. These reductions included numerous cost-cutting measures,
principally, legal and professional fees, reductions in Corporate staff
and Corporate expenses, the full year 1995 effect of the mid-1994 sale
and related elimination of expenses of Corporate aircraft and, in the
second quarter of 1995, the reversal of the 1994 bonus accrual ($1.4
million). In the second quarter of 1995, the Company paid only required
bonuses and did not pay discretionary bonuses following the 1994
consolidated loss; accordingly, the accrual was reversed.
Refinancing Costs in 1995 were principally lender fees related to the
Override Agreement which restructured $487 million of debt and leases on
August 1, 1994. In the third quarter of 1995 refinancing costs decreased
substantially as a result of the completion of the amortization of the
3-1/2% fee from the original portion of the Override Agreement during the
original refinancing period ended June 30, 1995.
Interest Expense decreased due to lower debt levels in 1995 offset
somewhat by higher interest rates than in 1994.
Other, Net was favorably impacted in 1995 by adjustments to litigation
and environmental reserves established in 1994. The adjustments were
made as a result of favorable developments that occurred in the third and
fourth quarters of 1995. In the third quarter of 1995, the Company (a)
agreed to a settlement of the class action complaint filed against the
Company alleging false and misleading disclosures in violation of federal
securities laws and (b) resolved derivative suits filed in 1993 by two
shareholders. Also in the third quarter, the Company revised downward
the estimated environmental clean-up costs at three locations based upon
developments occurring in the quarter. In the fourth quarter, certain
litigation brought against the Company was dismissed on summary judgment
and the accrual was reversed.
INCOME TAXES
In the fourth quarter of 1996, the Company achieved its sixth consecutive
quarter of pretax income and developed its operating plan for 1997 and
future years which show continued profitability. As a result, management
has assessed that it is more likely than not that operating income will
be sufficient to recognize, and the Company did recognize as a benefit,
deferred tax assets of $42,250,000. Generally Accepted Accounting
Principles require that the realization of these tax assets be included
in Continuing Operations except for the effect of items solely related to
Discontinued Operations. Accordingly, the Company has recorded
$27,712,000 of the benefit as a component of Continuing Operations and
$14,538,000 as a component of Discontinued Operations.
<PAGE>
<PAGE>23
DISCONTINUED OPERATIONS
Income (Loss) from Operations in 1996 and 1995 represents the operating
results of the Company's Taylor Environmental unit through its sale on
November 25, 1996; and, in 1994 represents the operating results of
Taylor and entities previously discontinued.
Loss from Disposal in 1996 represents a loss provision of $28.3 million,
which is net of a tax benefit of $15.2 million, recorded by the Company
in the fourth quarter of 1996. The provision reflects valuation
adjustments to recorded assets arising from and accruals for costs and
probable losses on obligations related to previously discontinued
businesses. The loss consists of a $20.5 million addition to the
self-insurance accrual as a result of a December, 1996
actuarially-prepared valuation of the liabilities to negotiate the sale
of a minority position to a third party; a $14.8 million write-down of
carrying value of net assets related to discontinued operations and of
deferred proceeds to reflect fourth quarter negotiated resolutions of
disputes and events that gave rise to greater risk of realization; a $2.6
million reserve for litigation arising from the businesses of the
discontinued units and a $5.6 million accrual to buyout certain employee
benefit legacy obligations.
FINANCIAL POSITION AND LIQUIDITY
Accounts Receivable at December 31, 1996 are $55.4 million, compared to
$53.5 million as of the end of 1995. Increased Scott sales account for
the increase.
Inventories increased by $15.5 million due to raw material,
work-in-process production and finished goods levels to fill order
backlog for Scott customers, finished goods inventories at Snorkel and
work-in-process inventory at Interstate Electronics.
Operations used $ 5.1 million. The recording of the net deferred tax
asset, as discussed in Note 4 to the consolidated financial statements,
was offset primarily by increases in insurance and other reserves and
writedowns of certain carrying values; neither of these events affected
the company's liquidity. The proceeds from divestitures and asset sales
generated $ 61.3 million which was used in part to pay down $ 28.3
million of debt.
Expenditures for property, plant and equipment were $9.7 million for
continuing operations in 1996. 1996 expenditures were for manufacturing
equipment and tooling related to the production of products. Capital
expenditures in 1997 are expected to be approximately $7.5 million and
are expected to be funded from internally generated funds and the
Company's credit facility.
Liquidity was provided in 1996 and will be provided in 1997 by the
Company's cash and cash equivalents, divestiture proceeds and the credit
facility ($29.4 million was available at December 31, 1996).
<PAGE>
<PAGE>24
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders
Figgie International Inc.
We have audited the accompanying consolidated balance sheets of Figgie
International Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Figgie International Inc. and Subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
/s/
Cleveland, Ohio,
January 22, 1997
<PAGE>
<PAGE>25
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
(in thousands, except per share data)
1996 1995 1994
Net Sales $ 385,717 $ 340,818 $ 299,110
Costs of Sales 282,563 254,515 233,726
Gross Profit on Sales 103,154 86,303 65,384
Operating Expenses:
Selling, General and Administrative 48,438 1,479 4,361
Research and Development 14,688 13,648 18,242
Total Operating Expenses 63,126 65,127 82,603
Operating Income (Loss) 40,028 21,176 (17,219)
Other Expense (Income):
Restructuring and Refinancing Costs 993 11,855 55,204
Interest Expense 19,820 29,255 42,062
Interest Income (2,132) (3,248) (3,269)
Other, Net (1,243) (4,322) (1,446)
Income (Loss) from Continuing Operations 22,590 (12,364) (109,770)
before Income Tax Benefit
Income Tax Benefit 27,712 - 22,986
Income (Loss) from Continuing Operations 50,302 (12,364) (86,784)
Discontinued Operations, net of tax:
Income (Loss) from Operations 1,280 1,871 (41,368)
(Loss) on Disposal (28,282) (5,597) (38,578)
(27,002) (3,726) (79,946)
Net Income (Loss) $ 23,300 $(16,090)$(166,730)
Weighted Average Shares 18,728 18,202 17,723
Per Share Data:
Income (Loss) from Continuing Operations $ 2.69 $ (0.68) $ (4.90)
(Loss) from Discontinued Operations (1.44) (0.21) (4.51)
Net Income (Loss) $ 1.25 $ (0.89) $ (9.41)
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>26
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(in thousands)
1996 1995
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 44,447 $ 25,856
Trade Accounts Receivable, less Allowance for
Uncollectible Accounts of $311 in 1996 and
$303 in 1995 55,434 53,462
Inventories 59,365 43,841
Prepaid Expenses 1,703 1,518
Recoverable Income Taxes 7,689 12,495
Current Deferred Tax Asset 12,600 -
Net Assets Related to Discontinued Operations 7,446 45,488
Total Current Assets 188,684 182,660
PROPERTY, PLANT AND EQUIPMENT
Land and Land Improvements 43,352 52,393
Buildings and Leasehold Improvements 35,526 37,333
Machinery and Equipment 52,553 45,151
131,431 134,877
Accumulated Depreciation (50,200) (47,699)
81,231 87,178
Equipment under Capital Leases 282 342
Net Property, Plant and Equipment 81,513 87,520
OTHER ASSETS
Deferred Divestiture Proceeds, Net 20,073 33,935
Prepaid Pension Costs 10,811 9,892
Prepaid Rent on Leased Equipment 2,644 17,075
Intangible Assets 16,133 16,694
Cash Surrender Value of Insurance Policies 6,629 8,748
Investments 10,764 1,029
Prepaid Finance Costs 1,954 3,818
Deferred Tax Asset 30,595 -
Other 2,985 3,485
Total Other Assets 102,588 94,676
Total Assets $ 372,785 $ 364,856
<PAGE>
<PAGE>27
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(in thousands, except par value)
1996 1995
LIABILITIES
CURRENT LIABILITIES
Accounts Payable 27,305 29,142
Accrued Insurance Reserves 12,174 11,113
Accrued Compensation 9,045 8,129
Accrued Interest 4,395 5,097
Accrued Environmental Reserves 3,348 4,754
Accrued Liabilities and Expenses 9,520 8,022
Current Maturities of Long-Term Debt 2,100 19,373
Total Current Liabilities 67,887 85,630
Long-Term Debt 184,156 194,955
Non-Current Insurance Reserves 27,345 16,245
Other Non-Current Liabilities 18,888 18,272
Total Liabilities 298,276 315,102
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 Par Value; Authorized, - -
3,217 Shares; Issued and Outstanding, None
Class A Common Stock, $.10 Par Value; 1,370 1,365
Authorized, 18,000 Shares; Issued and
Outstanding 1996 - 13,695; 1995 - 13,651
Class B Common Stock, $.10 Par Value; 471 472
Authorized, 18,000 Shares; Issued and
Outstanding 1996 - 4,708; 1995 - 4,718
Capital Surplus 109,538 109,046
Retained Deficit (37,717) (60,008)
Unearned Compensati on (74) (1,340)
Cumulative Translation Adjustment 921 219
Total Stockholders' Equity 74,509 49,754
Total Liabilities and Stockholders' Equity $ 372,785 $ 364,856
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>28
<TABLE>
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(in thousands)
<CAPTION>
Retained Cumulative
Common Stock Capital Surplus Earnings Unearned Translation
Class A Class B Class A Class B (Deficit) Comp. Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 1,375 499 108,049 19,439 124,020 (31,003) (486) 221,893
Net Loss (166,730) (166,730)
Minimum Pension Liability (488) (488)
Restricted Stock Purchase Plan, Net (5) (15) (1,931) (2,596) 4,790 243
Other Common Stock Transactions, Net (13) (1,371) (1,384)
Unearned ESOP Compensation (3,776) (7,296) 22,384 11,312
Translation Adjustments 465 465
BALANCE, DECEMBER 31, 1994 1,370 471 102,342 8,176 (43,198) (3,829) (21) 65,311
Net Loss (16,090) (16,090)
Minimum Pension Liability (720) (720)
Restricted Stock Purchase Plan, Net (5) 1 (1,434) (38) 2,489 1,013
Translation Adjustments 240 240
BALANCE, DECEMBER 31, 1995 1,365 472 100,908 8,138 (60,008) (1,340) 219 49,754
Net Income 23,300 23,300
Minimum Pension Liability (1,009) (1,009)
Restricted Stock Purchase Plan, Net 5 (1) 607 (115) 1,266 1,762
Translation Adjustments 702 702
BALANCE, DECEMBER 31, 1996 $1,370 $471 $101,515 $ 8,023 $ (37,717) $ (74) $ 921 $ 74,509
<FN>
<F1>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<PAGE>29
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
Operating Activities:
Income (Loss) from Continuing Operations $ 50,302 $ (12,364) $ (86,784)
(Loss) from Discontinued Operations (27,002) (3,726) (79,946)
Adjustments to Reconcile Income (Loss) to Net Cash
Used by Operating Activities-
Depreciation and Amortization 7,153 6,294 41,633
Amortization of Unearned Compensation 973 952 5,791
Other, Net (692) 1,740 9,917
Changes in Operating Assets and Liabilities-
Receivables (2,183) (1,802) 16,737
Inventories (15,736) (15,800) 15,733
Prepaid Items (1,138) 8,164 (7,523)
Other Assets 11,549 11,252 37,116
Accounts Payable (1,799) (27,132) (14,293)
Accrued Liabilities and Expenses (3,731) 8,952 30,509
Income Taxes (35,246) 3,176 13,533
Other Liabilities 12,414 (12,719) 2,198
Net Cash Used by Operating Activities (5,136) (33,013) (15,379)
Investing Activities:
Capital Expenditures for Continuing Operations (9,719) (6,187) (23,652)
Capital Expenditures for Discontinued Operations (560) (19,157) (36,652)
Proceeds from Sale of Property, Plant and Equip.13,240 11,637 42,468
Proceeds from Business Divestitures 48,049 203,487 198,130
Purchases of Securities - (40) (12,739)
Sale of Investments - - 7,862
Net Cash Provided by Investing Activities 51,010 189,740 175,417
Financing Activities:
Proceeds from Debt 200 3,963 4,420
Principal Payments on Debt (28,272) (202,946) (94,945)
Repayments of Notes Payable, Net - - (32,348)
Common Stock Transactions, Net 789 (188) (2,681)
Net Cash (Used) by Financing Activities (27,283) (199,171) (125,554)
Net Increase(Decrease)in Cash and Cash Equiv. 18,591 (42,444) 34,484
Cash and Cash Equivalents at Beginning of Year 25,856 68,300 33,816
Cash and Cash Equivalents at End of Year $ 44,447 $ 25,856 $ 68,300
- - Continuing Operations - Unrestricted $ 44,447 $ 25,583 $ 28,611
- - Continuing Operations - Restricted $ - $ 273 $ 18,716
- - Discontinued Operations $ - $ - $ 20,973
Supplemental Disclosures of Cash Flow Information:
Cash Paid (Received) during the Year for -
Interest (Net of Amount Capitalized) $ 18,390 $ 32,565 $ 41,771
Domestic Federal Income Taxes $ (3,732) $(15,671) $(35,856)
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>30
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies:
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Figgie International Inc. (referred to, with all
its consolidated subsidiaries and divisions and their predecessor
entities, unless the context otherwise requires, as the "Company".) All
intercompany account transactions have been eliminated in consolidation.
NATURE OF OPERATIONS. The Company is a United States-based multinational
corporation. Principal business segments are (in decreasing order based
on sales): (1) aerial work platforms, (2) protective breathing and
oxygen equipment and instruments, and (3) sophisticated electronic
systems. The largest single customer is the U.S. Government, accounting
for 24.7%, 28.4% and 35.2% of the Company's total net sales for 1996,
1995 and 1994, respectively. The Company's products are marketed through
most normal channels of business, principally in North America.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
the estimates.
CASH. For purposes of the statements of cash flows, the Company
considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents are stated
at cost which approximates their fair market value. The effect of
foreign currency translation on cash held by foreign divisions is
immaterial.
LONG-TERM CONTRACTS. Government sales are principally under long-term
contracts and include cost-reimbursement and fixed-price contracts. Sales
under cost-reimbursement contracts are recognized as costs are incurred
and include a proportion of the fees expected to be realized equal to the
ratio of costs incurred to date to total estimated costs. Sales under
fixed price contracts are recognized as the actual cost of work performed
relates to the estimate at completion.
Cost or performance incentives, which are incorporated in certain
contracts, are recognized when realization is assured and amounts can be
reasonably estimated. Estimated amounts for contract changes and claims
are included in contract sales only when realization is probable.
Assumptions used for recording sales and earnings are adjusted in the
period of change to reflect revisions in contract value and estimated
costs. In the period in which it is determined that a loss will be
incurred on a contract, the entire amount of the estimated loss is
charged to income.
<PAGE>
<PAGE>31
CONCENTRATION OF CREDIT RISK. The Company does not have any
concentrations of credit risk by major customer, geographic region or
activity. The Company generally does not require collateral.
INVENTORIES. Manufacturing inventories are stated at the lower of
first-in-first-out cost or market. Costs accumulated under government
contracts are stated at actual cost.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated
at cost and depreciated over the estimated useful lives of the assets,
generally by the straight-line method. The principal rates of
depreciation are: Buildings, 2-1/2%; Machinery and Equipment, 8-1/3%;
Leasehold Improvements, life of lease.
LAND AND LAND IMPROVEMENTS. Land and land improvements includes $41.2
million and $50.3 million at December 31, 1996 and 1995, respectively, of
developed and developable land and improvements. The recorded amounts
are net of reserves of $ 5.3 million and $ 7.7 million at December 31,
1996 and 1995, respectively. The recorded amounts include the Company's
investment in the Chagrin Highlands project which amounted to $11.3
million and $10.7 million at December 31, 1996 and 1995, respectively.
INTANGIBLES. Goodwill of $ 22.5 million at December 31, 1996 and 1995
represents costs in excess of net assets of purchased businesses, and is
generally amortized over a 40-year period. At December 31, 1996 and
1995, accumulated goodwill amortization was $6.5 million and $5.9
million, respectively. The Company has evaluated the realizability of
goodwill based upon expectations of undiscounted cash flows and operating
income of the related business unit and has concluded that no impairment
exists.
CAPITALIZATION OF INTEREST. The Company capitalizes interest costs
during the development period of certain properties. Total interest
capitalized was approximately $.4 million in 1996, $.3 million in 1995
and $.8 million in 1994.
ENVIRONMENTAL COMPLIANCE. At the present time, compliance with federal,
state, and local provisions with respect to environmental protection and
regulation has not had a material impact on the Company's capital
expenditures, earnings, or competitive position. The Company believes
compliance with respect to environmental matters will not have a material
adverse effect on the Company's financial position, future operations or
cash flows.
INCOME TAXES. Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be recovered or settled.
<PAGE>
<PAGE>32
SELF-INSURANCE LIABILITIES. The Company is self-insured for certain
levels of general liability (including product liability) and workers'
compensation coverage. The costs and balance sheet accruals for
self-insurance programs are based on actuarial calculations prepared by
outside actuaries. Adjustments to recorded reserves of continuing
operations are reflected in current operating results.
EARNINGS PER SHARE. Earnings per common share are based upon the
weighted average number of shares outstanding during each year, including
allocated ESOP shares and the common stock equivalents of stock options.
STOCK OPTIONS. The Company accounts for stock options under APB Opinion
No. 25, under which no compensation cost has been recognized.
<PAGE>
<PAGE>33
(2) Restructuring and Refinancing Costs:
In 1996, Refinancing Costs represent the amortization of prepaid
financing costs. In 1995, Refinancing Costs consist of fees to lenders
and lessors, principally the 3-1/2% fee related to the August 1, 1994
refinancing of $487 million of debt and leases.
The 1994 Restructuring and Refinancing Costs were comprised of: (1)
restructuring costs related to revaluation and write-down of properties
held for sale to current realizable market value; (2) refinancing costs
for professional and lender fees related to the Company's liquidity
crisis of late 1993 and the first half of 1994 and the resultant Override
Agreement which restructured $487 million of debt and leases on August 1,
1994; and (3) other various nonrecurring expenses not associated with the
ongoing operations of the business.
The 1994 revaluation of properties resulted from the Company's Strategic
Business Plan to focus on manufacturing operations and to thereby limit
the Company's active real estate development activities. The Company is
developing three key properties and has been marketing for orderly sale
its other real estate holdings including development land, headquarter
complexes and former plants. These sales will benefit the Company by
reducing current carrying costs such as real estate taxes, insurance and
mortgage interest.
(in thousands)
Asset Revaluation $23,516
Refinancing Fees to Professionals and Lenders 22,295
Other 9,393
$55,204
<PAGE>
<PAGE>34
(3) Discontinued Operations:
In October, 1996, the Board of Directors decided to sell the Taylor
Environmental Instruments business. Prior year financial statements have
been restated and are summarized as follow:
(in thousands)
As Previously
Reported Taylor As Restated
1995:
Net Sales $ 359,032 $ (18,214) $ 340,818
Loss from Continuing Operations (10,493) (1,871) (12,364)
Loss from Discontinued Operations (5,597) 1,871 (3,726)
Net Loss $ (16,090) $ - $ (16,090)
1994:
Net Sales $ 319,420 $ (20,095) $ 299,325
Loss from Continuing Operations (85,247) (1,537) (86,784)
Loss from Discontinued Operations (81,483) 1,537 (79,946)
Net Loss $ (166,730) $ - $ (166,730)
Loss on Disposal in 1996 represents a loss provision of $28.3 million,
which is net of a tax benefit of $15.2 million, recorded by the Company
in the fourth quarter of 1996. The provision reflects valuation
adjustments to recorded assets arising from and accruals for costs and
probable losses on obligations related to previously discontinued
businesses. The loss consists of a $20.5 million addition to the
self-insurance accrual as a result of a December, 1996
actuarially-prepared valuation of the liabilities to negotiate the sale
of a minority position to a third party; a $14.8 million write-down of
carrying value of net assets related to discontinued operations and of
deferred proceeds to reflect negotiated resolutions of disputes and
events that gave rise to greater risk of realization; a $2.6 million
reserve for litigation arising from the businesses of the discontinued
units and a $5.6 million accrual to buyout certain employee benefit
legacy obligations.
The $5.6 million loss on disposal in 1995 consisted of a $21.6 million
loss on the disposal of businesses, $4.0 million loss on operating losses
of the businesses prior to disposal in excess of the 1994 provision, and
an income tax benefit of $20.0 million.
The $38.6 million loss on disposal in 1994 consisted of an estimated loss
on the disposal of businesses of $4.0 million, a provision of $8.9
million for anticipated operating losses until disposal, and income taxes
of $25.7 million.<PAGE>
<PAGE>35
The contract terms under which businesses were divested included
representations and warranties, covenants and indemnification provisions
made (a) by the Company to purchasers of the businesses and (b) by
purchasers of businesses to the Company. Each transaction has contract
terms specific to that transaction. The extent of representations and
warranties made ranged from those qualified by time, knowledge, and
dollar materiality to those representations and warranties which are
unqualified. Covenants require the Company to act, or prevent the Company
from acting, in a variety of ways, such as not competing with the
purchasers of a business. Covenants also require the purchasers to act,
or prevent them from acting, in a variety of ways. The duration of
covenants ranges from those effective for a specified period of time to
those which are indefinite.
Remedies available for breaches of representations and warranties and
covenants range from monetary relief in specific amounts for specific
breaches or violations to unlimited amounts.
Under the contracts, the Company has generally retained liability for
events that occurred prior to sale. The Company believes that it has
established appropriate accruals for losses that may arise, such as
workers' compensation, product liability, general liability,
environmental risks and federal and state tax matters.
The Company has indemnified purchasers and has received indemnifications
from purchasers for a variety of items. In some transactions, a portion
of the purchase price was held back or escrowed at banks to support
indemnification provisions. Such amounts are reflected within the assets
of the Company as deferred divestiture proceeds.
Proceeds and other consideration from divestitures which will be paid to
the Company upon fulfillment of contractual provisions, the passage of
time, or the occurrence of future events have been recorded as
non-current assets. Deferred divestiture proceeds consist of cash held
in bank escrow accounts, cash held back by purchasers, receivables
expected from purchasers arising from final calculations of the purchase
price and cash due to the Company from future tax benefits under a tax
sharing agreement with an unaffiliated public company, Rawlings Sporting
Goods, Inc.
Net assets related to discontinued operations as of December 31, 1996 in
the amount of $7.4 million represent the net assets of Willoughby
Assurance, Ltd., a dormant reinsurance subsidiary of the Company,
installation contracts in process of completion from the "Automatic"
Sprinkler business and former facilities of discontinued business units.
Deferred divestiture proceeds and net assets related to discontinued
operations include managements' best estimates of the amounts expected to
be realized on the collection and sale of discontinued operations. The
amounts the Company will ultimately realize could differ materially from
the amounts recorded. The Company has established a reserve of $21.7
million at December 31, 1996 and $20.8 million at December 31, 1995
against these assets, which is presented as a deduction from deferred
divestiture proceeds.
<PAGE>
<PAGE>36
(4) Income Taxes:
Income tax provision (benefit) consists of the following components:
(in thousands)
Continuing Operations: 1996 1995 1994
Currently Payable:
Federal $ 25,384 $ - $ (8,108)
Recognition of Asset Carryforwards (25,384) - -
State - - 602
$ 0 $ 0 $ (7,506)
Deferred and other:
Federal (17,149) - (15,480)
Recognition of Asset Carryforwards (10,563) - -
Total from Continuing Operations (27,712) 0 (15,480)
Discontinued Operations:
Operations 690 - (20,174)
Disposal (15,228) (20,009) 25,654
Total from Discontinued Operations (14,538) (20,009) 5,480
Total Tax Benefit $(42,250) $(20,009) $(17,506)
A reconciliation of the actual tax provision (benefit) to the U.S. federal
income tax rate effective for each year for continuing operations is as
follows:
1996 1995 1994
Statutory Federal Tax Rate 35.0% (35.0)% (35.0)%
Foreign Sales Corporation - (0.1) (0.4)
International Rate Differential - - (0.4)
Goodwill 2.5 4.6 0.3
Other (net) 1.9 2.4 (0.7)
State Income Taxes (Net of
Federal Tax) - - 0.3
Valuation Allowance (Net of Tax Credits) (161.8) 28.1 14.7
Effective Tax Rate (Benefit) (122.4)% 0 % (21.2)%
The components of the net deferred tax asset as of December 31, 1996 and
1995 are as follows:
(in thousands)
1996 1995
Deferred Tax Assets:
Deferred Compensation Plans $ 4,525 $ 1,212
Insurance and Other Reserves 15,780 9,594
Contingency Reserves 2,200 2,158
Inventory Reserves 596 253
Operating Losses and Tax Credit Carryforwards 63,975 17,558
Discontinued Operations and Other 2,002 23,301
Total Deferred Tax Assets $ 89,078 $ 54,076
Deferred Tax Liabilities:
Property, Plant and Equipment $(19,156) $(27,866)
Benefit Plans (3,104) (3,300)
Discontinued Operations and Other (23,623) (22,910)
Total Deferred Tax Liabilities $(45,883) $(54,076)
Net Deferred Tax Assets $ 43,195 $ 0
<PAGE>
<PAGE>37
As of December 31, 1996, for tax reporting purposes, the Company has tax
credit carryforwards of $20.7 million, and operating loss and charitable
contribution deduction carryforwards of $123.5 million($43.2 million tax)
which will begin to expire in 2005 and 2008, respectively. Based on the
Company's sustained profitability over the last six quarters and the
historic operating earnings of the continuing divisions, management has
determined that operating income will more likely than not be sufficient
to recognize fully all deferred tax assets. Therefore, the financial
statements reflect the benefit for previously reserved attributes, offset
by reconciliation to return items.
The Company has capital loss carryforwards of $39.5 million ($13.8
million tax) which it incurred in the current year. At the present time,
the Company does not have sufficient capital gains in order to
use these losses. These losses will be recognized when and if the
Company incurs capital gains.
Realization of tax carryforwards is dependent on future taxable income
and amounts realized are subject to tax regulations which include
limitations by year and type of tax attribute being carried forward. The
Company has similar carryforward attributes for federal alternative
minimum tax purposes and for state income tax purposes. Accumulated
unremitted foreign earnings are not material and any liability related to
the remittance of foreign earnings would not be material to the financial
statements.
(5) Inventories:
Inventories are summarized as follows:
(in thousands)
1996 1995
Manufacturing Inventories:
Raw materials $ 21,332 $ 20,519
Work in process 18,953 12,741
Finished goods 20,907 11,966
Inventory reserves (1,827) (1,385)
Total Inventories $ 59,365 $ 43,841
<PAGE>
<PAGE>38
(6) Receivables:
Receivables consist of the following components (in thousands):
1996 1995
U.S. Government
Billed $12,688 $11,604
Unbilled 14,919 16,713
27,607 28,317
Commercial
Billed 28,138 25,448
Allowance for Uncollectible Accounts (311) (303)
$55,434 $53,462
U.S. Government receivables include amounts derived from contracts on
which the Company performs on a prime contractor or subcontractor basis.
Unbilled receivables represent the difference between revenue recognized
on a percentage of completion basis for financial accounting and
reporting purposes and amounts permitted to be billed to customers under
contract terms. These amounts will be billed in subsequent periods based
on provisions of the agreements.
(7) Credit Facility:
As of December 31, 1996, the Company has a $75 million, revolving credit
loan and letter of credit facility ("Credit Agreement"). Within the
Credit Agreement, the Company can issue up to $60 million in letters of
credit. Borrowings are available up to the lesser of $75 million or a
borrowing base which is tied to eligible receivables, inventory and
equipment, less 50% of outstanding letters of credit. At the Company's
option, borrowings bear interest at alternate rates based on the U.S.
prime rate or LIBOR plus 200 to 250 basis points. The facility is
secured by certain accounts receivable, inventory, machinery and
equipment and intangibles. The facility contains various affirmative and
negative covenants, including restrictions on dividends and certain
financial covenants. The financial covenants include limitations on
capital expenditures and requirements as to minimum tangible net worth,
minimum earnings before interest, taxes, depreciation and amortization,
the current ratio and the fixed charge coverage ratio. The facility
expires on January 1, 1999.
As of December 31, 1996, $15.6 million of letters of credit were
outstanding under the facility, there were no borrowings outstanding
($29.4 million was available) and all financial covenants have been
satisfied.
<PAGE>
<PAGE>39
(8) Long-Term Debt:
Long-term debt at December 31, 1996 and 1995 consisted of the following:
(in thousands)
1996 1995
Carrying Fair Carrying Fair
Value Value Value Value
9.875% Senior Notes due 1999 $174,000 $180,960 $174,000 $176,610
10.375% Debentures due 1998 - 8,000 8,040
Mortgage Notes 11,076 11,076 30,301 30,301
Obligations under Capital Lease 1,180 1,180 2,027 2,027
Total 186,256 $193,216 214,328 $216,978
Less - Current Maturities (2,100) (19,373)
Long-Term Debt $184,156 $194,955
The 9.875% Senior Notes are due October 1, 1999. Interest is payable
semi-annually on April 1 and October 1.
The 10.375% subordinated Debentures were prepaid by the Company in August
1996.
Mortgage notes are secured by real property, are due at various dates
through 2009 and bear interest at rates ranging from 7.5% to 10.52%.
Current maturities of long-term debt at December 31, 1995 include $15.7
million of 10.52% mortgage notes which the Company purchased from the
noteholder on December 29, 1995 with a settlement date of January 31,
1996.
The fair value estimates were made as follows: the Senior Notes were
based on the market price at which the debt traded near year-end; the
Debentures were based on management's estimates; and the mortgages were
based on carrying value given their collateralized nature.
The scheduled principal payments for long-term debt are as follows: 1997
- $ 2.1 million; 1998 - $ 1.2 million; 1999 - $ 175.0 million; 2000 - $
1.1 million; and 2001 and after - $ 6.9 million.
<PAGE>
<PAGE>40
(9) Leases:
The Company leases manufacturing equipment under operating leases.
Rental commitments under non-cancelable operating leases as of December
31, 1996 were as follows
(in thousands):
Discontinued Continuing
Operations Operations Total
Year Ending December 31,
1997 $ 1,972 $ 7,629 $ 9,601
1998 1,691 6,545 8,236
1999 790 3,541 4,331
2000 0 570 570
2001 & Beyond 0 633 633
Total minimum payments required $ 4,453 $18,918 $23,371
At the termination of the equipment leases, which is principally over the
period December 1998 through June 1999, the Company is effectively
required to purchase the equipment for a fixed price of approximately
one-third the original lease value. As a result of these provisions and
the anticipated need for continued use of the equipment in the Company's
operations, the Company currently expects to purchase this equipment.
The purchase price would be $9.3 million, less prepaid rent of $2.6
million.
As to leased machinery and equipment that was not sold with divested
business units, the Company is satisfying the rental payments through its
internal funds until such equipment is sold or subleased.
Operating lease expense for continuing operations was approximately $7.6
million, $ 8.9 million, and $14.1 million in 1996, 1995, and 1994,
respectively.
The Company also leases equipment under arrangements that are classified
as capital leases. The following is a summary of assets under capital
leases:
(in thousands)
December 31
1996 1995
Machinery and equipment $ 657 $ 719
Less accumulated amortization 375 377
Net $ 282 $ 342
Future minimum lease payments under capital leases and their present
value as of December 31, 1996 are as follows:
Year Ending December 3l, (in thousands)
1997 $ 946
1998 268
Total minimum lease payments 1,214
Less amount representing interest (34)
Present value of net minimum lease payments $ 1,180
<PAGE>
<PAGE>41
(10) Contingent Liabilities:
The Company and its subsidiaries are defendants in various lawsuits
arising in the ordinary course of business. In the opinion of
management, any liability with respect to these matters will not have a
material adverse effect on the Company's financial statements.
Costs charged by the Company to the U.S. Government in the performance of
U.S. Government contracts are subject to inquiry and audit. Several
years are open. The Company has provided a reasonable reserve for
possible disallowed costs. The Company has been cooperating with the
U.S. Government in two crimianl investigations, one involving possible
improprieties at a facility where a division of the Company was a
supplier, and the second involving the amount of corporate charges
allocated to certain of the Company's operating units. The Company has
furnished documents and other information and denies any wrongdoing in
both investigations. Nevertheless, the ultimate resolution of these
matters could result in sanctions and damages sought by the government,
and affect the Company's ability to obtain future government contracts.
<PAGE>
<PAGE>42
(11) Pension and Retirement Benefits Plans:
The Company has pension plans covering the majority of its employees.
The plan benefits for salaried employees are based on employees' earnings
during their years of participation in the plan. Hourly employees' plan
benefits are based on various dollar units multiplied by the number of
years of eligible service as defined in each plan. The Company's policy
has been to fund amounts as necessary on an actuarial basis to comply
with the Employee Retirement Income Security Act of 1974. In addition,
the Company has a nonqualified supplemental retirement plan covering
certain officers and senior executives.
The components of net periodic pension expense and the actuarial
assumptions used in accounting for the benefit plans for the years ended
December 31 are as follows:
(dollars in thousands) 1996 1995 1994
Service cost $ 2,054 $ 2,558 $ 4,220
Interest cost on projected
benefit obligation 5,385 5,408 5,803
Actual (gain) loss on plan assets (8,880) (10,866) 2,680
Net amortization and deferral of
actuarial gains (losses) 2,716 5,811 (8,501)
$ 1,275 $ 2,911 $ 4,202
Assumptions:
Weighted average discount rates 7.50% 7.50% 8.25%
Rate of increase in compensation
level 5.00% 5.00% 5.00%
Expected long-term rate
of return on assets 10.00% 10.00% 10.00%
The funded status of the Company's domestic and international plans,
along with the reconciliation to amounts reported in the consolidated
balance sheets, were as follows:
December 31, 1996 December 31, 1995
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
Accum. Exceed Accum. Exceed
(in thousands) Benefits Assets Benefits Assets
Actuarial Present Value of
Benefit Obligations:
Accumulated
benefit obligations $ 58,387 $ 15,109 $ 56,930 $ 13,239
Vested benefit obligations $ 56,034 $ 14,809 $ 53,500 $ 12,626
Plan assets at fair value 66,209 0 61,312 0
Projected benefit obligations (59,686) (15,180) (58,823) (13,308)
Assets over (under) projected
benefit obligation 6,523 (15,180) 2,489 (13,308)
Unrecognized net (assets)
liabilities (3,761) 0 (4,331) 799
Unrecognized net (gain) loss 7,606 3,479 11,213 1,538
Unrecognized prior service cost 444 0 521 0
Adjustment required to
recognize minimum liability 0 (3,408) 0 (2,268)
Prepaid pension cost asset
(liability) $ 10,811 $(15,109) $ 9,892 $(13,239)
<PAGE>
<PAGE>43
The plans' assets consist primarily of listed common stocks, corporate
and government bonds, real estate investments, and cash and cash
equivalents. The plans' assets included 27,621 shares of the Company's
Class B Common Stock as of December 31, 1996 and 1995, respectively.
(12) Capital Stock:
Each share of Class A Common Stock is entitled to one-twentieth of one
vote per share, while each share of the Class B Common Stock is entitled
to one vote per share, except, in each case, with respect to shares
beneficially owned by a Substantial Stockholder (as defined in the
Company's Restated Certificate of Incorporation, as amended), in which
case the voting rights of such stock are governed by the appropriate
provisions of the Company's Restated Certificate of Incorporation.
Earnings per share were calculated using the following share data.
Primary weighted-average shares were used in 1995 and 1994 as fully
diluted shares would have been anti-dilutive.
1996 1995 1994
Primary Weighted-Average Number of Shares:
Allocated Shares 18,371 17,987 17,723
Common Stock Equivalents of Stock Options 357 215 -
Primary Weighted-Average 18,728 18,202 17,723
Fully Diluted Weighted-Average Number of Shares:
Unallocated ESOP shares
1994 - - 196
1995 - 196 196
1996 - 196 196
Common Stock Equivalents - 29 -
Fully Diluted Weighted-Average 18,728 18,623 18,311
(13) Stock Options:
The Figgie International Inc. Key Employees' Stock Option Plan ("The
Stock Option Plan") was approved by shareholders on October 19, 1994.
The Company accounts for this plan under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for
stock options been determined consistent with FASB Statement No. 123, the
Company's operating results would have been calculated as follows:
1996 1995
Net Income (Loss):
As Reported $ 23,300 $(16,090)
Pro Forma 22,600 (16,486)
Primary EPS:
As Reported 1.25 (0.89)
Pro Forma 1.21 (0.91)
Fully Diluted EPS:
As Reported 1.25 (0.89)
Pro Forma 1.21 (0.91)
<PAGE>
<PAGE>44
FASB Statement 123 has not been applied to periods prior to January 1,
1995 since no options were granted until 1995.
The Company may grant options for up to 1,500,000 shares. The Company
has granted options on 1,031,000 shares through December 31, 1996. Option
exercise prices equal the stock's market price on date of grant. Options
generally vest after three years and expire after seven years.
A summary of the status of the Stock Option Plan at December 31, 1996 and
1995 and changes during the years then ended is presented in the table
and narrative below:
1996 1995
Shares Wtd Avg Shares Wtd Avg
(000) Ex Price (000) Ex Price
Outstanding, Beg of year 769.5 $ 7.12 0.0
Granted 237.5 $11.26 793.5 $ 7.18
Exercised (23.8) $ 7.63 0.0
Cancelled (93.8) $ 9.86 (24.0) $ 9.11
Outstanding, End of year 889.4 $ 7.92 769.5
Exercisable at end of year 292.6 $ 7.06 100.0 $ 6.50
Weighted average fair value
of options granted $5.77 $3.82
Of the 889,331 options outstanding at December 31, 1996, 649,331 have
exercise prices between $6.50 and $9.75, with a weighted average exercise
price of $6.76 and a weighted average remaining contractual life of 5.0
years. 273,171 of these options are exercisable. The remaining 240,000
options have exercise prices between $9.75 and $13.50, with a weighted
average price of $11.07 and a weighted average remaining contractual life
of 6.1 years. 19,401 of these options are exercisable.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions used for the eight option grants in 1995 and 1996: risk-free
interest rates of 5.56, 5.86, 6.23, 6.48, 6.61. 6.76, 7.51, and 7.79
percent; expected dividend yields of 0.00 percent; expected life of 7.0
years; expected volatility of 35.47, 35.90, 36.64, 37.99, 37.99, 38.29,
38.29, and 38.82 percent.<PAGE>
<PAGE>45
(14) Restricted Stock Purchase Plans:
Under the 1993 Restricted Stock Purchase Plan for Employees ("Employee
Plan"), up to 800,000 shares of Common Stock were authorized for possible
issuance and employees have been granted the right to purchase shares of
Common Stock at prices substantially below market value. The purchase of
Common Stock under this plan entitles the employee to full voting and
dividend rights but, generally, the shares cannot be sold, transferred,
or pledged, and the certificates representing the shares are retained in
the custody of the Company. At the earliest of the employee's
retirement, death, or total disability, or the termination of the plan,
these restrictions on transferring, pledging, or selling the shares
expire, and the employee or heirs take unrestricted custody of the stock.
In the event the employee leaves the Company prior to any of these
occurrences, the Company can repurchase the shares (or, in the case of
retirement, a portion of the shares) at the lower of the original
purchase price paid by the employee or the then prevailing market price.
In addition, under an employment contract with an executive officer of
the Company, the Company is obligated to offer to the officer in 1997 the
right to purchase 37,500 Class A shares and the Company accelerated such
right to January 2, 1997. On December 4, 1996, the Board decided to
terminate the Employee Plan, effective January 2, 1997, and all
restrictions on outstanding shares lapsed. Accordingly, the Company
wrote-off in 1996 all unearned compensation with respect to this plan.
In 1996, the Corporation loaned to an executive officer and director,
$430,000 with interest at the applicable federal rate of 5.32% in lieu of
the officer and director selling stock and using the proceeds to repay a
loan he incurred in order to pay federal income taxes resulting from his
purchase of 75,000 shares of Common Stock pursuant to his employment
contract. The principal and the interest on the loan are due on March 8,
1997. The Corporation has agreed to pay a bonus in an amount equal to
the accrued interest, grossed-up for all applicable taxes, provided that
the loan is not in default. As of December 31, 1996, the entire $430,000
is outstanding.
Under the 1993 Restricted Stock Purchase Plan for Directors ("Director
Plan"), up to 75,000 shares of Class B Common Stock were authorized for
possible issuance and certain Directors of the Company have been granted
the right to purchase shares of Class B Common Stock at prices
substantially below market value. The Director Plan contains
restrictions and other provisions similar to those of the Employee Plan.
At December 31, 1996, 15,000 shares of Class B Common Stock, subject to
the above restrictions, were outstanding under the Director Plan.
The excess of market price over purchase price at date of grant for the
Director Plan, $0.6 million, is deferred as Unearned Compensation and is
being amortized as compensation expense over the restricted period.
Unamortized amounts (unearned compensation) are shown as a reduction of
stockholders' equity. The following amounts were amortized to expense:
<PAGE>
<PAGE>46
(in thousands)
1996 1995 1994
Employee Plan $904 $ 862 $ 245
Director Plan 69 90 193
Total $ 973 $ 952 $ 438
(15) Employee Stock Ownership Plans:
The Company had maintained leveraged and non-leveraged employee stock
ownership plans. For financial reporting purposes, both plans were
curtailed in 1994 and $5,353,000 of the Unamortized Unearned
Compensation was written off in 1994.
The leveraged ESOP was established in 1989 by borrowing $20 million
through a term note that was guaranteed by the Company. The leveraged
ESOP used the proceeds from the note to purchase 756,195 Class B shares.
Prior to the August 1, 1994 refinancing, the ESOP note was being
amortized according to its scheduled term. Contributions to fund the
interest requirements of the loan are reflected as interest expense in
the accompanying consolidated statements of income, none in 1996 and
approximately $382,000 and $545,000 in 1995 and 1994, respectively. The
August 1, 1994 refinancing had the effect of requiring the eight-year
note to be paid in 1994 and 1995. This acceleration and the Strategic
Business Plan that provided for the divestiture of fourteen additional
businesses required the Company to expense the Unamortized Unearned
Compensation and to curtail the plan for financial accounting purposes.
The Board of Directors resolved to allocate to participants all
unallocated shares, effective as of December 31, 1994.
The non-leveraged ESOP was established in 1989 with the purchase of
1,124,682 Class A and 440,796 Class B shares. The aforementioned
divestitures required the Company to expense the Unamortized Unearned
Compensation and to curtail the plan for financial accounting purposes.
The Board resolved to allocate the unallocated shares, effective as of
June 30, 1996.
Under the Stock Bonus Trust and Plan, shares of the Company's Class B
Common Stock are allocated to eligible employee accounts each December 31
based on salary. The Company did not make contributions to this plan in
1996, 1995, or 1994. The Stock Plan held 269,074 and 197,562 shares of
the Company's Class B Common Stock as of December 31, 1996 and 1995,
respectively.
<PAGE>
<PAGE>47
(16) Industry Segment Data:
The Company's operations are conducted through three reportable business
segments. These segments are described in Part I, Item 1 on page 4 of
this Form 10-K.
Page 7 contains a summary of certain financial data for each business
segment for 1996, 1995 and 1994. Information concerning the content of
this financial data is as follows: Intersegment and foreign sales are
immaterial. Operating profit is total revenue less operating expenses
(cost of sales, SG&A expense and R&D expense). Operating profit does not
include restructuring and refinancing costs, interest expense, interest
income, or federal and state income taxes. Identifiable assets are those
assets used in the Company's operation for each segment. Corporate
assets are principally cash, property and other assets.
<PAGE>
<PAGE>48
QUARTERLY FINANCIAL DATA (UNAUDITED)
This information is required by the Securities and Exchange Commission
and is unaudited.
First Second Third Fourth
Quarter Quarter Quarter Quarter
(in thousands except for per share data)
1996:
Net sales $ 96,701 $ 101,415 $ 95,407 $ 92,194
Gross profit 25,461 27,733 25,551 24,409
Net income (loss):
Continuing operations 3,841 6,310 5,711 34,440
Discontinued operations 365 109 917 (28,393)
Net income $ 4,206 $ 6,419 $ 6,628 $ 6,047
Earnings (loss) per share:
Continuing operations $ .20 $ .34 $ 0.31 $ 1.84
Discontinued operations .02 .00 .05 (1.51)
Net income (loss) $ .22 $ .34 $ 0.36 $ .33
Fourth quarter adjustments consist of:
1.) $1,000,000 unfavorable, reserve for possible disallowed costs
2.) $2,804,000 favorable, inventory results and warranty experience
3.) $ 710,000 favorable, actuarial pension and self-insurance
1995:
Net sales $ 80,840 $ 84,998 $ 87,286 $ 87,694
Gross profit 20,834 20,865 22,092 22,512
Net income (loss):
Continuing operations (8,475) (5,822) 298 1,635
Discontinued operations 437 (8) 676 (4,831)
Net income (loss) $ (8,038) $ (5,830) $ 974 $(3,196)
Earnings (loss) per share:
Continuing operations $ (0.46) $ (0.32) $ 0.01 $ 0.09
Discontinued operations .02 (.01) 0.04 (0.26)
Net income (loss) $ (0.44) $ (0.33) $ 0.05 $ (0.17)
<PAGE>
<PAGE>49
Item 9. Disagreements on Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
Information with respect to the members of the Board of Directors of
the Company is set forth under the captions "Nominees for Election as
Directors to be Elected for a Term of Three Years" and "Directors
Continuing in Office" in the Company's definitive proxy statement to
be filed pursuant to Regulation 14A, which information is incorporated
herein by reference.
(b) Identification of Executive Officers
Information with respect to the executive officers of the Company is
set forth under the caption "Executive Officers of the Company"
contained in Part I, Item 1 of this report, which information is
incorporated herein by reference.
Item 11. Executive Compensation
Information required by this Item is set forth under the captions
"Executive Compensation", "Compensation of Directors", "Retirement
Plans", "Pension Plan Table" and "Employment and Severance Agreements"
in the Company's definitive proxy statement to be filed pursuant to
Regulation 14A, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information required by this Item is set forth under the captions
"Principal Stockholders" and "Stock Ownership of Directors, Nominees
for Directors and Executive Officers" in the Company's definitive
proxy statement to be filed pursuant to Regulation 14A, which
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is set forth under the caption
"Certain Transactions" in the Company's definitive proxy statement to
be filed pursuant to Regulation 14A, which information is incorporated
herein by reference.
<PAGE>
<PAGE>50
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
Page
No.
(a) Financial Statements, Schedules and Exhibits:
1. Financial Statements
Included in Part II of this report:
Report of Independent Public Accountants 24
Consolidated Statements of Operations for the
Years Ended December 31, 1996, 1995, and 1994 25
Consolidated Balance Sheets at December 31, 1996 and 1995 26-27
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995, and 1994 28
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995, and 1994 29
Notes to Consolidated Financial Statements 30-47
Quarterly Financial Data (Unaudited) 48
2. Schedules
Included in Part IV of this report:
Schedule II - Valuation and Qualifying Accounts for
the Years Ended December 31, 1996, 1995 and 1994 54
Report of Independent Public Accountants 55
3. Exhibits:
(3) Articles of incorporation and by-laws:
(i) The Restated Certificate of Incorporation of the
Company, as amended, as Exhibit 19 to the Company's
Quarterly Report on Form 10-Q for the quarter ending
June 30, 1987, File No. 1-8591, is hereby
incorporated herein by reference.
(ii) The Bylaws of the Company, as amended and restated
effective November 26, 1996.
<PAGE>
<PAGE>51
(4) Instruments defining rights of security holders, including
indentures, for the following classes of securities:
(i) Class A Common Stock, par value $.10 per share, are
contained in the Restated Certificate of
Incorporation, as amended, incorporated by reference
in Exhibit (3)(i) above and are incorporated herein
by reference.
(ii) Class B Common Stock, par value $.10 per share, are
contained in the Restated Certificate of
Incorporation, as amended, and incorporated by
reference in Exhibit (3)(i) above and are
incorporated herein by reference.
(iii) Indenture, dated as of October 1, 1989, between
Figgie International Inc. and Continental Bank,
National Association, as Trustee, with respect to
the 9.875% Senior Notes due October 1, 1999,
included as Exhibit (4) to the Company's Annual
Report on Form 10-K for the year ending December 31,
1989, is hereby incorporated herein by reference.
State Street Trust succeeded Continental Bank as
Trustee pursuant to an agreement dated as of
February 7, 1994, which was included as Exhibit
(4)(c) to the Company's Annual Report on Form 10-K
for the year ending December 31, 1993, and is hereby
incorporated herein by reference.
(10) Material contracts:
(i)* The Company's Compensation Plan for Executives,
included as Exhibit (3)(10)(b) to the Company's
Form 8-B filed October 19, 1983 with the Commission,
is hereby incorporated herein by reference.
(ii)* The Company's Senior Executive Benefits Program, as
amended, included as Exhibit (19) to the Company's
Quarterly Report on Form 10-Q for the quarter ending
September 30, 1988, is hereby incorporated herein by
reference.
(iii)* The Company's 1983 Deferred Compensation Agreement,
included as Exhibit (3)(10)(f) to the Company's Form
8-B filed on October 19, 1983 with the Commission,
is hereby incorporated herein by reference.
(iv)* The Company's 1982 Deferred Compensation Agreement,
included as Exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ending December 31,
1984, File No. 1-8591, is hereby incorporated herein
by reference.
(v)* The Company's Split Dollar Life Insurance Plan,
included as Exhibit 10(h) to the Company's Annual
Report on Form 10-K for the year ending December 31,
1985, File No. 1-8591, is hereby incorporated herein
by reference.
<PAGE>
<PAGE>52
(vi)* The Company's 1993 Restricted Stock Purchase Plan
for Employees, included as Exhibit A to the
Company's definitive Proxy Statement dated May 25,
1993, is hereby incorporated herein by reference.
(vii)* The Company's 1993 Restricted Stock Purchase Plan
for Directors, included as Exhibit B to the
Company's definitive Proxy Statement dated May 25,
1993, is hereby incorporated herein by reference.
(viii)* The Company's Key Employees' Stock Option Plan,
included as Exhibit A to the Company's definitive
Proxy Statement dated September 22, 1994, is hereby
incorporated herein by reference.
(ix)* Employment agreement dated July 1, 1994, by and
between the Company and Steven L. Siemborski,
included as Exhibit 10(b) to the Company's Quarterly
Report on Form 10Q for the quarter ending September
30, 1994, is hereby incorporated herein by
reference.
(x)* Employment Agreement, dated as of January 1, 1995,
by and between John P. Reilly and the Company,
included as Exhibit 10(p) to the Company's Annual
Report on Form 10K for the year ending December 31,
1994, is hereby incorporated herein by reference.
(xi) Credit Agreement between the Company and General
Electric Capital Corporation, dated as of December
19, 1995; Waiver and Amendment No. 1 dated as of
January 30, 1996; Amendment No. 2 dated as of
February 19, 1996, included as Exhibit 10(xiv) on
Form 10K for the year ending December 31, 1995, is
hereby incorporated herein by reference.
(xii)* Management Agreement, dated February 1, 1996, by and
between Robert D. Vilsack and the Company.
(xiii)* Retention Agreement, dated March 20, 1996, by and
between Robert D. Vilsack and the Company.
(xiv)* Separation Agreement and General Release, dated
January 31, 1997, by and between Keith V. Mabee and
the Company.
(xv)* Management Agreement, dated December 9, 1994, by and
between Glen W. Lindemann and the Company.
(xvi)* Retention Agreement, dated July 17, 1996, by and
between Glen W. Lindemann and the Company.
(xvii) Amendment No. 3, dated June 6, 1996, of Credit
Agreement between the Company and General Electric
Capital Corporation.
* Management contracts or compensatory plans filed pursuant
to Item 14(c) of the Form 10-K.
<PAGE>
<PAGE>53
(21) Subsidiaries of the Company
(23) Consents of Independent Public Accountants
(27) Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated March 1, 1996 filed March 15, 1996.
(c) See Exhibits to this report.
<PAGE>
<PAGE>54
(d) SCHEDULE II
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance, Charged Amounts Balance,
Beginning to Costs Charged End of
Description of Year & Expenses Off Year
ALLOWANCE FOR UNCOLLECTIBLE
TRADE ACCOUNTS RECEIVABLES
Year ended December 31, 1996 $ 303 $ 92 $ (84) $ 311
Year ended December 31, 1995 $ 189 $ 207 $ (93) $ 303
Year ended December 31, 1994 $ 124 $ 249 $ (184) $ 189
ALLOWANCE FOR PROPERTIES
HELD FOR SALE
Land and Land Improvements $ 7,694 - $(2,350) $ 5,344
Building and Leasehold Improvements 3,490 - (3,490) -
Year ended December 31, 1996 $11,184 $ 0 $(5,840) $ 5,344
Land and Land Improvements $12,772 - $(5,078) $ 7,694
Building and Leasehold Improvements 4,083 - (593) 3,490
Year ended December 31, 1995 $16,855 $ 0 $(5,671) $11,184
Land and Land Improvements $ - $12,772 - $12,772
Building and Leasehold Improvements - 4,083 - 4,083
Year ended December 31, 1994 $ 0 $16,855 $ 0 $16,855
ALLOWANCE FOR DEFERRED
DIVESTITURE PROCEEDS
Year ended December 31, 1996 $20,825 $ 8,519 $(7,601) $21,743
Year ended December 31, 1995 $ 0 $20,825 - $20,825
<PAGE>
<PAGE>55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders,
Figgie International Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Figgie International Inc. and Subsidiaries
included in this Form 10K, and have issued our report thereon dated
January 22, 1997. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
financial statement schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/
Cleveland, Ohio,
January 22, 1997
<PAGE>
<PAGE>56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FIGGIE INTERNATIONAL INC.
(Company)
By /s/
Date: February 3, 1997 S. L. Siemborski
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed as of January 24, 1997 by the following
persons on behalf of the Company and in the capacities indicated.
By /s/ By /s/
J. P. Reilly, Principal H. Nesbit, II, Director
Executive Officer & Director
By /s/ By /s/
F. J. Brinkman, Director A. A. Sommer, Jr., Director
By /s/ By /s/
G.W. Lindemann, Director S. L. Siemborski, Director
(Principal financial and
accounting officer)
By /s/ By /s/
F. R. McKnight, Director W. M. Vannoy, Director
<PAGE>
<PAGE>57
EXHIBIT INDEX
(3) Articles of incorporation and by-laws:
(i) The Restated Certificate of Incorporation of the Company,
as amended, as Exhibit 19 to the Company's Quarterly
Report on Form 10-Q for the quarter ending June 30, 1987,
File No. 1-8591, is hereby incorporated herein by
reference.
(ii) The Bylaws of the Company, as amended and restated
effective November 26, 1996.
(4) Instruments defining rights of security holders, including
indentures, for the following classes of securities:
(i) Class A Common Stock, par value $.10 per share, are
contained in the Restated Certificate of Incorporation,
as amended, incorporated by reference in Exhibit (3)(i)
above and are incorporated herein by reference.
(ii) Class B Common Stock, par value $.10 per share, are
contained in the Restated Certificate of Incorporation,
as amended, and incorporated by reference in Exhibit
(3)(i) above and are incorporated herein by reference.
(iii) Indenture, dated as of October 1, 1989, between Figgie
International Inc. and Continental Bank, National
Association, as Trustee, with respect to the 9.875%
Senior Notes due October 1, 1999, included as Exhibit
(4)(c) to the Company's Annual Report on Form 10-K for
the year ending December 31, 1989, is hereby
incorporated herein by reference. State Street Trust
succeeded Continental Bank as Trustee pursuant to an
agreement dated as of February 7, 1994, which was
included as Exhibit (4)(c) to the Company's Annual
Report on Form 10-K for the year ending December 31,
1993, and is hereby incorporated herein by reference.
(10) Material contracts:
(i) The Company's Compensation Plan for Executives, included
as Exhibit (3)(10)(b) to the Company's Form 8-B filed
October 19, 1983 with the Commission, is hereby
incorporated herein by reference.
(ii) The Company's Senior Executive Benefits Program, as
amended, included as Exhibit (19) to the Company's
Quarterly Report on Form 10-Q for the quarter ending
September 30, 1988, is hereby incorporated herein by
reference.
(iii) The Company's 1983 Deferred Compensation Agreement,
included as Exhibit (3)(10)(f) to the Company's Form 8-B
filed on October 19, 1983 with the Commission, is hereby
incorporated herein by reference.
(iv) The Company's 1982 Deferred Compensation Agreement,
included as Exhibit 10(g) to the Company's Annual Report
on Form 10-K for the year ending December 31, 1984, File
No. 1-8591, is hereby incorporated herein by reference.
<PAGE>
<PAGE>58
(v) The Company's Split Dollar Life Insurance Plan, included
as Exhibit 10(h) to the Company's Annual Report on Form
10-K for the year ending December 31, 1985, File No.
1-8591, is hereby incorporated herein by reference.
(vi) The Company's 1993 Restricted Stock Purchase Plan for
Employees, included as Exhibit A to the Company's
definitive Proxy Statement dated May 25, 1993, is hereby
incorporated herein by reference.
(vii) The Company's 1993 Restricted Stock Purchase Plan for
Directors, included as Exhibit B to the Company's
definitive Proxy Statement dated May 25, 1993, is hereby
incorporated herein by reference.
(viii) The Company's Key Employees' Stock Option Plan, included
as Exhibit A to the Company's definitive Proxy Statement
dated September 22, 1994, is hereby incorporated herein
by reference.
(ix) Employment agreement dated July 1, 1994, by and between
the Company and Steven L. Siemborski, included as
Exhibit 10(b) to the Company's Quarterly Report on Form
10Q for the quarter ending September 30, 1994, is hereby
incorporated herein by reference.
(x) Employment Agreement, dated as of January 1, 1995, by
and between John P. Reilly and the Company, included as
Exhibit 10(p) to the Company's Annual Report on Form 10K
for the year ending December 31, 1994, is hereby
incorporated herein by reference.
(xi) Credit Agreement between the Company and General
Electric Capital Corporation, dated as of December 19,
1995; Waiver and Amendment No. 1 dated as of January 30,
1996; Amendment No. 2 dated as of February 19, 1996,
included as Exhibit 10(xiv) on Form 10K for the year
ending December 31, 1995, is hereby incorporated herein
by reference.
(xii) Management Agreement, dated February 1, 1996, by and
between Robert D. Vilsack and the Company.
(xiii) Retention Agreement, dated March 20, 1996, by and
between Robert D. Vilsack and the Company.
(xiv) Separation Agreement and General Release, dated January
31, 1997, by and between Keith V. Mabee and the Company.
(xv) Managment Agreement, dated December 9, 1994, by and
between Glen W. Lindemann and the Company.
(xvi) Retention Agreement, dated July 17, 1996, by and between
Glen W. Lindemann and the Company.
(xvii) Amendment No. 3, dated June 6, 1996, of the Credit
Agreement between the Company and General Electric
Capital Corporation.
(21) Subsidiaries of the Company
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule
<PAGE>
<PAGE>59
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY (AS OF JANUARY 22, 1997)
Percentage of
Jurisdiction of Securities Owned
Name Incorporation By the Company
Allied Industrial Distributors California 100%
Figgie Acceptance Corporation Delaware 100%
Figgie Asia Pte. Ltd. Singapore 100%
Figgie Canadian Holdings Ltd. Canada-Federal 100%
Figgie Canada Inc. Canada-Federal 100%
Figgie Communications Inc. Ohio 100%
Figgie do Brasil Industria e
Commercio Ltda. (in liq.) Brazil 100%
Figgie Foreign Sales Corporation Virgin Islands 100%
Figgie (G.B.) Limited United Kingdom 100%
Figgie (U.K.) Limited United Kingdom 100%
Figgie Sportswear (U.K.) Limited United Kingdom 100%
Figgie International (H.K.) Ltd. Hong Kong 100%
Figgie International Real Estate Inc. Delaware 100%
Cafig Inc. Delaware 100%
Dusk Corporation Delaware 100%
Figgie Investment Trustee Limited United Kingdom 50%
Figgie Leasing Corporation Delaware 100%
Figgie Licensing Corporation Delaware 100%
Figgie Packaging Systems Pty. Ltd. Australia 100%
Figgie Pension Trustee Limited United Kingdom 50%
Figgie Properties Inc. Delaware 100%
Chagrin Highlands Inc. Ohio 100%
Cudahy Self Storage, Inc. Wisonsin 100%
Figgie Risk Management Company Florida 85%
Virginia Center Inc. Virginia 100%
Figgie Sportswear Limited United Kingdom 100%
FP Sportswear B.V. Netherlands 100%
Figgie Transportteknik Sweden AB Sweden 100%
Interstate Electronics Corporation California 100%
Logan Fenamec Transporttechnik GmbH Germany 100%
Mojonnier de Mexico S de RL de CV (in liq) Mexico 49%
Mojonnier do Brasil Industria e Commercio
de Equipamentos Ltda. (in liq) Brazil 100%
Snorkel Elevating Work Platforms Limited New Zealand 100%
Snorkel Elevating Work Platforms Pty Limited Australia 100%
Willoughby Holdings Inc. Delaware 100%
Willoughby Assurance Ltd. Bermuda 100%
Willoughby Services, Inc. Delaware 100%
Wimbledon Shirt Company Limited United Kingdom 100%
<PAGE>
<PAGE>60
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statements File No. 33-66208, File No. 33-56705, File
No. 33-33177 and File No. 333-12183.
ARTHUR ANDERSEN LLP
/s/
Cleveland, Ohio,
February 3, 1997.
<PAGE>1
Exhibit 3(ii)
BYLAWS
OF
FIGGIE INTERNATIONAL INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. Meetings of Stockholders.
(a) Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held at such date and time as shall be determined by the
Board of Directors. Upon due notice, there may also be considered and acted upon
at an annual meeting any matter which could properly be considered and acted
upon at a special meeting.
(b) Special Meetings. Special meetings of the stockholders of the
Corporation maybe held on any business day when called at any time by the Board
of Directors or by acommittee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as provided
in a resolution of the Board of Directors, include the power to call such
meetings, but special meetings may not be called by any other person or persons.
(c) Place of Meetings. Any meetings of the stockholders may be held at
such place within or without the State of Delaware as may be designated in the
notice of said meeting.
(d) Notice of Meeting and Waiver of Notice.
(1) Notice. Written notice of the place, date and hour of
every meeting of the stockholders, whether annual or special, shall
be given to each stockholder of record entitled to vote at the meeting
not less than 10 nor more than 60 days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes
thereof. Such notice shall be given by mail to each stockholder
entitled thereto, and shall be directed to the stockholder at his
address as it appears on the records of the Corporation. Notice shall
be deemed to have been given on the day on which it was deposited in
the mail.
(2) Record Holder of Shares. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books
as the ownerof shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to recognize
any equitable or other claims to or interest in such share or shares
on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the
laws of Delaware.
(3) Waiver. Whenever any written notice is required to be
given under the provisions of the Certificate of Incorporation, these
Bylaws, or by statute, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose
of any meeting of the stockholders need be specified in any
written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any
meeting, shall constitute a waiver of notice of such meeting, except
where a person attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting was not
lawfully called or convened.
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<PAGE>2
(e) Quorum, Manner of Acting and Adjournment. The holders of record of
shares entitled to cast a majority of the votes entitled to be cast by the
holders of all shares of the capital stock issued and outstanding (not including
treasury stock) and entitled to vote, thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute, by the
Certificate of Incorporation, or by these Bylaws. Whether or not a quorum is
present, the holders of shares entitled to cast a majority of the votes
entitled to be cast by the holders present in person or represented by
proxy at the meeting shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting, at which a quorum shall
be present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. If the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of a majority of the votes entitled to be cast by
the holders of all issued and outstanding shares present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the applicable
statute or the Certificate of Incorporation or these Bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Except upon those questions governed by the aforesaid
express provisions, the stockholders present in person or by proxy at a duly
organized meeting can continue to do business until adjournment, notwithstanding
withdrawal of enough stockholders to leave less than a quorum.
(f) Organization of Meetings.
(1) Presiding Officer. Any "executive officer" of the
Corporation, as that term is defined in section 3(g) of Article III of
these Bylaws, may call all meetings of the stockholders to order and
shall act as Chairman thereof.
(2) Minutes. The Secretary of the Corporation, or, in his
absence or by his designation, an Assistant Secretary, or, in the
absence of both, a person appointed by the Chairman of the meeting,
shall act as Secretary of the meeting and shall make and keep a
record of the proceedings thereat.
(3) Stockholders' List. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting. The list shall be
arranged in alphabetical order showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting
either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
(g) Voting. Except as otherwise provided by statute or the Certificate
of Incorporation, every stockholder entitled to vote shall be entitled to cast
the vote per share to which stock share is entitled, in person or by proxy, on
each proposal submitted to the meeting for each share held of record by him on
the record date for the determination of the stockholders entitled to vote at
the meeting. At any meeting at which a quorum is present, all questions and
business which may come before the meeting shall be determined by a majority
of votes cast, except when a greater proportion is required by law, the
Certificate of Incorporation, or these Bylaws.<PAGE>
<PAGE>3
(h) Proxies. A person who is entitled to attend a stockholders'
meeting, to vote thereat, and execute consents, waivers and releases, may be
represented at such meeting or vote thereat, and execute consents, waivers and
releases, and exercise any of his rights by proxy or proxies appointed by a
writing signed by such person, or by his duly authorized attorney, as provided
by the laws of the State of Delaware.
SECTION 2. Consent of Stockholders in Lieu of Meeting.
Any action required to be taken at any annual or special meeting of
stockholdersof the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by all the holders of outstanding stock
entitled to vote thereon, except as the Certificate of Incorporation may
otherwise provide.
SECTION 3. Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 or less than 10 days before the date of such meeting, or
more than 60 days prior to any other action.
If no record date is fixed:
(1) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(2) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed.
(3) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE II
DIRECTORS
SECTION 1. General Powers.
The business, power, and authority of this Corporation shall be
exercised, conducted, and controlled by the Board of Directors, except where the
law, the Certificate of Incorporation, or these Bylaws require action to be
authorized or taken by the stockholders.
<PAGE>
<PAGE>4
SECTION 2. Number, Classification, and Election of Directors.
(a) Number. The Board of Directors shall consist of not less than 5
nor more than 11 members. At any annual meeting, the stockholders by a vote of
a majority of the votes entitled to be cast by the holders of all issued and
outstanding shares, may increase or decrease the number of the members of the
Board of Directors within the above limitation of 5 to 11 members, and may
increase or decrease the number of directors of the class whose term shall
expire in that year, provided that such class shall continue to consist of,
as nearly as may be, one-third (1/3) of the whole number of the Board of
Directors. If the Board of Directors determines prior to any annual meeting
that an increase in the number of directors of the class whose term shall
expire in that year would cause such class not to consist of, as nearly as may
be, one-third (1/3) of the whole number of the Board of Directors, then the
stockholders, by the vote specified in this Section 2(a), may increase by one
(1) the number of directors of one (1) of the other classes, provided that such
class shall continue to consist of, as nearly as may be, one-third (1/3) of the
whole number of the Board of Directors. In addition, the Board of Directors
may increase or decrease the number of the members of the Board of Directors
within the above limitation of 5 to 11 members, and may increase or decrease
the number of directors of any class, provided that such class shall continue
to consist of, as nearly as may be, one-third (1/3) of the whole number of the
Board of Directors. No reduction in the number of directors shall itself have
the effectof shortening the term of any incumbent director.
(b) Classification. The directors shall be classified in respect of
the time for which they shall hold office by dividing them into three classes,
each class consisting, as nearly as may be, of one-third (1/3) of the whole
number of the Board of Directors.
(c) Election. The directors of the appropriate class shall be elected
at the annual meeting of stockholders, or if not so elected, at a special
meeting of stockholders called for that purpose. At any meeting of stockholders
at which directors are to be elected, only persons nominated as candidates shall
be eligible for election, and the candidates receiving the greatest number of
votes entitled to be cast by the holders of all issued and outstanding shares
shall be elected.
Directors of the Corporation need not be residents of Delaware or
stockholders. No person shall be appointed or elected a director of the
Corporation unless:
(1) such person is elected to fill a vacancy in the Board of
Directors pursuant to section 3(d) of this Article II;
(2) such person is nominated for election as a director of the
Corporation by the Board of Directors or a committee thereof; or
(3) in the case of a nomination to be made by a stockholder of
the Corporation at an annual or special meeting of the stockholders,
except in the case a nomination for which proxies are being solicited
under applicable regulations of the Securities and Exchange Commission
or a nomination permitted by the affirmative vote of two-thirds (2/3)
of the "whole board," but only if a majority of the members of the
Board of Directors acting upon the matter are "continuing directors"
(as these terms are defined in section (a) of Article Sixth of the
Certificate of Incorporation), written notice of a stockholder's
intent to make a nomination at a meeting of stockholders is filed with
the Secretary of the Corporation not later than 10 days after the
Notice to Stockholders for that meeting is sent to stockholders, or at
least 21 days prior to the date fixed for holding the meeting at which
the nomination is intended to be made, whichever is later. Such
notice of intent to nominate must contain or be accompanied by the
following information, which shall be accurate and current as of the
date of such notice, or as of a date no earlier than 60 days prior to
the meeting at which the nomination is intended to be made, whichever
is later:
<PAGE>
<PAGE>5
(A) the name and residence of the stockholder of the
Corporation who intends to make the nomination:
(B) a representation that the stockholder is a holder of
record of the voting shares of the Corporation and intends to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice;
(C) such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to
the Securities and Exchange Commission's proxy rules had the
Board of Directors of the Corporation nominated or intended to
nominate each nominee;
(D) a description of all arrangements or understandings among
the nominating stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the
stockholder; and
(E) the consent of each nominee to serve as a director of the
Corporation if so elected.
SECTION 3. Term of Office of Directors.
(a) Term. The term of office of each class of directors shall be three
years (so that the term of one class of directors shall expire each year), and
the directors shall hold office for the respective terms to which elected until
their respective successors are elected and qualified, subject only to prior
resignation, death or removal by the directors as provided by law, and subject
to the provisions of the Certificate of Incorporation.
(b) Removal. Other than as herein stated, no director may be removed
from office except for cause. With prior notice thereof, all the directors, or
all the directors of a particular class, or any individual director may be
removed for cause by a vote of a majority of the votes entitled to be cast by
the holders of all issued and outstanding shares at any meeting of stockholders
properly called for that purpose.
(c) Resignation. Any director of the Corporation may resign at any
time by giving written notice to the Chairman of the Board of Directors or to
the President or the Secretary of the Corporation. A resignation from the Board
of Directors shall be deemed to take effect immediately or at such other time as
the director may specify.
(d) Vacancy. If there shall be any vacancy in the Board of Directors
for any reason, including but not limited to death, resignation, or as provided
by law, the Certificate of Incorporation, or these Bylaws (including any
increase in the authorized number of directors), the remaining directors shall
constitute the Board of Directors until such vacancy is filled. The remaining
directors may fill any vacancy in the Board for the unexpired term.
SECTION 4. Meetings of Directors.
(a) Meetings. Meetings of the Board of Directors may be held at any
time upon call by the Chairman of the Board, or by the President, or by any Vice
President, or by any two directors. Unless otherwise indicated in the notice
thereof, any business may be transacted at any such meeting.
(b) Place of Meeting. Any meeting of directors may be held at such
place within or without the State of Delaware as may be designated in the notice
of said meetings.
<PAGE>
<PAGE>6
(c) Notice of Meeting and Waiver of Notice. Notice of the time and
place of any meeting of the Board of Directors and the waiver thereof shall be
governed by such rules as the Board of Directors may prescribe.
SECTION 5. Quorum and Voting.
At any meeting of directors, not less than one-half (1/2) of the
directors then in office (or, in the event that the directors than in office are
an uneven number, the nearest full number of directors less than one-half (1/2)
of such number) is necessary to constitute a quorum for such meeting, except
that any meeting duly called, whether a quorum is present or otherwise, may, by
vote of a majority of the directors present, be adjourned from time to time.
At any meeting at which a quorum is present, all acts, questions and business
which may come before the meeting shall be determined by a majority of votes
cast by the directors present at such meeting, unless the vote of a greater
number is required by the Certificate of Incorporation or Bylaws.
SECTION 6. Action of Board of Directors Without a Meeting.
Any action which may be authorized or taken at a meeting of the Board
of Directors may be authorized or taken without a meeting if approved and
authorized by a writing or writings, signed by all the directors, which are
filed with the minutes of proceedings of the Board.
SECTION 7. Compensation.
The Board of Directors is authorized to fix a reasonable salary for
directors or a reasonable fee for attendance at any meeting of the Board, the
Executive and Finance Committee, or other committees appointed by the Board of
Directors, or any combination of salary and attendance fee. In addition,
directors may be reimbursed for any expenses incurred by them in traveling to
and from such meetings.
SECTION 8. Committees.
(a) Appointment. The Board of Directors may from time to time, by
resolution adopted by a majority of the whole Board, appoint one or more of its
members to act as a committee or committees. Each such committee and each member
thereof shall serve at the pleasure of the Board. Vacancies occurring in any
such committee may be filed by the Board of Directors.
(b) Executive and Finance Committee. In particular, the Board of
Directors may create from its membership an Executive and Finance Committee, the
members of which shall hold office during the pleasure of the Board of Directors
and may be removed at any time, with or without cause, by action thereof. During
the intervals between meetings of the Board of Directors, the Executive and
Finance Committee shall possess and may exercise all of the powers of the Board
of Directors in the management and control of the business of the Corporation to
the extent permitted by law. All action taken by the Executive and Finance
Committee shall be reported to the Board of Directors.
(c) Committee Action. Unless otherwise provided by the Board of
Directors, a majority of the members of any committee appointed by the Board of
Directors pursuant to this section shall constitute a quorum at any meeting
thereof and the act of a majority of the members present at a meeting at which a
quorum is present shall be the act of such committee. Action may also be taken
by any such committee without a meeting by a writing or writings, signed by all
its members, which is filed with the minutes of proceedings of the committee.
Any such committee shall appoint one of its own number as Chairman who shall
preside at all meetings and may appoint a Secretary (who need not be a member
of the committee) who shall hold office during the pleasure of such committee.
Meetings of any such committee may be held without notice of the time, place or
purpose thereof and may be held at such times and places within or without the
State of
<PAGE>
<PAGE>7
Delaware, as the committee may from time to time determine, at the call of the
Chairman or any two members thereof. Any such committee may prescribe such other
rules as it shall determine for calling and holding meetings and its method of
procedure, subject to any rules prescribed by the Board of Directors.
SECTION 9. Conference Telephone Meetings.
One or more directors may participate in a meeting of the Board, or of
a committee of the Board, by means of conference telephone or similar
communications equipment enabling all persons participating in the meeting to
hear each other. Participants in a meeting pursuant to this section shall
constitute presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. General Provisions
The Board of Directors at such time as it determines may elect such
executive officers, as defined in section 3(g), as the Board deems necessary.
The Chairman of the Board shall be, but the other executive officers may, but
need not, be chosen from the members of the Board. Any two or more executive
offices may be held by the same person. Other officers may be appointed in the
manner provided for in these Bylaws. The election or appointment of an officer
for a given term, or a general provision in the Certificate of Incorporation
or in the Bylaws with respect to term of office, shall not be deemed to create
any contract rights.
SECTION 2. Term of Office, Removal, and Vacancies.
(a) Term. Each executive officer of the Corporation shall hold office
during the pleasure of the Board of Directors and until his successor is elected
and qualified, unless he sooner dies or resigns or is removed by the Board of
Directors or the Chairman.
(b) Removal. The Board of Directors by a majority vote of the members
present at a meeting at which a quorum is present or the Chairman acting alone
may remove any executive officer at any time, with or without cause.
(c) Vacancies. Any vacancy in any executive office may be filled by
the Board of Directors or by the Chairman.
SECTION 3. Powers and Duties.
(a) In general. All officers, as between themselves and the
Corporation, shall respectively have such authority and perform such duties as
are customarily incident to their respective offices, and as may be specified
from time to time by the Board of Directors, regardless of whether such
authority and duties are customarily incident to such office. In the absence
of any officer of the Corporation, or for any other reason the Board of
Directors may deem sufficient, the Board of Directors may delegate from
time to time the powers or duties of such officer, or any of them, to any other
officer or to any Director.
(b) Chairman of the Board. The Chairman of the Board shall, subject to
the provisions of these Bylaws, preside at all meetings of the stockholders and
of the Board of Directors. The Chairman of the Board shall have general
supervision over the Corporation's property, business, and affairs, and perform
all the duties usually incident to such office, subject to the direction of the
Board of Directors. He may execute all authorized deeds, mortgages, bonds,
contracts, and other obligations in the name of the Corporation and shall have
such other powers and duties as may be prescribed by the Board of Directors.
<PAGE>
<PAGE>8
(c) President. In the absence of the Chairman of the Board, and
subject to the provisions of these Bylaws, the President shall preside at all
meetings of the stockholders. The President shall be the chief operating officer
of the Corporation and perform all the duties usually incident to such office,
subject to the direction of the Board of Directors. In case of the absence or
disability of the Chairman of the Board, or when circumstances prevent the
Chairman of the Board from acting, the President shall perform the duties of
the Chairman of the Board, and in such case, may execute all authorized deeds,
mortgages, bonds, contracts and other obligations, in the name of the
Corporation.
(d) Vice Presidents. The Vice Presidents shall have such powers,
duties and titles as may be prescribed by the Board of Directors or as may be
delegated by the Chairman of the Board of by the President.
(e) Secretary. The Secretary shall keep the minutes of all meetings of
the stockholders and the Board of Directors. He shall keep such books as may be
required by the Board of Directors, shall have charge of the scal, if any, of
the Corporation and shall be permitted, subject to the provisions of these
Bylaws, to give notices of stockholders' and directors' meetings required by law
or by these Bylaws, or otherwise, and have such other powers and duties as may
be prescribed by the Board of Directors or the Chairman of the Board.
(f) Treasurer. The Treasurer shall receive and have charge of all
money, bills, notes, bonds, stock in other corporations and similar property
belonging to the Corporation, and shall do with the same as shall be ordered by
the Board of Directors. He shall keep accurate financial accounts, and hold the
same open for inspection and examination by the directors. On the expiration of
his term of office, he shall turn over to his successors, or to the Board of
Directors, all property, books, papers, and money of the Corporation in his
hands, and shall possess such other powers and duties as may be prescribed by
the Board of Directors or the Chairman of the Board.
(g) Executive Officers. The officers referred to in subparagraphs (b),
(c), (d),(e), and (f) of this section and such other officers as the Board of
Directors may be resolution identify shall be executive officers of the
Corporation and may be referred to as such.
(h) Other Officers. The Assistant Secretaries, Assistant Treasurers,
if any, and any other subordinated officers shall be appointed and removed by
the executive officer at whose pleasure each shall serve and shall have such
powers and duties as such executive officer may prescribe.
SECTION 4. Compensation.
The Board of Directors is authorized to determine or to provide the
method of determining the compensation of all officers.
ARTICLE IV
SECURITIES HELD BY CORPORATION
SECTION 1. Transfer of Securities Owned by the Corporation.
All endorsements, assignments, transfers, share powers, or other
instruments of transfer of securities standing in the name of the Corporation
shall be executed for an in the name of the Corporation by the Chairman of the
Board, or by the President, or by any Vice President, or by the Secretary or
Treasurer or by any additional person or persons as may be thereunto authorized
by the Board of Directors.
<PAGE>
<PAGE>9
SECTION 2. Voting Securities Held by the Corporation.
The Chairman of the Board, or the President, or any Vice President, or
the Secretary or Treasurer, in person or by another person thereunto authorized
by the Board of Directors, in person or by proxy or proxies appointed by him,
shall have full power and authority on behalf of the Corporation to vote, act
and execute consents, waivers and releases with respect to any securities issued
by other corporations which the Corporation may own.
ARTICLE V
SHARE CERTIFICATES
SECTION 1. Transfer and Registration of Certificates.
The Board of Directors shall have authority to make such rules and
regulations, not inconsistent with law, the Certificate or these Bylaws, as it
deems expedient concerning the issuance, transfer and registration of
certificates for shares and the shares represented thereby.
SECTION 2. Certificates for Shares.
Each holder of shares is entitled to one or more certificates for
shares of the Corporation in such form not inconsistent with law and the
Certificate of Incorporation as shall be approved by the Board of Directors.
Each such certificate shall be signed by the Chairman of the Board or the
President or any Vice President, and by the Secretary, an Assistant Secretary,
the Treasurer, or an Assistant Treasurer of the Corporation, which certificate
shall certify the number and class of shares held by each stockholder in the
Corporation, but no certificates for shares shall be executed or delivered
until such shares are fully paid. Any of or all the signatures upon such
certificate may be a facsimile, engraved or printed. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if he were such officer, transfer agent or registrar at
the date of its issue.
SECTION 3. Transfer Agents, Registrars and Dividend Disbursing Agents.
The Board of Directors may from time to time by resolution appoint one
or more incorporated transfer agents and registrars (which may or may not be the
same corporation) for the shares of the Corporation, and the Board of Directors
from time to time by resolutions may appoint a dividend disbursing agent to
disburse any and all dividends authorized by the Board of Directors payable upon
the shares of the Corporation.
SECTION 4. Transfers.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
No transfer shall be made which would be inconsistent with the provisions of
Article 8, Title 6 of the Delaware Uniform Commercial Code--Investment
Securities.
SECTION 5. Lost, Stolen or Destroyed Certificates.
The Corporation may issue a new certificate for shares in place of any
certificate or certificates heretofore issued by the Corporation alleged to have
been lost, stolen or destroyed and upon the making of an affidavit of that fact
by the person claiming the certificate of stock to have been lost, stolen or
destroyed. When authorizing such issue of a new certificate
<PAGE>
<PAGE>10
or certificates, the Board of Directors may, in its discretion, and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representatives,
to attest the same in such manner as it shall require and to give the
Corporation a bond in such sum and containing such terms as the Board may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been lost, stolen,
or destroyed.
SECTION 6. Protection of Corporation.
The Corporation may treat a fiduciary as having capacity and authority
to exercise all rights of ownership in respect to shares of record in the name
of the decedent holder, person, firm or corporation in conservation,
receivership or bankruptcy, minor, incompetent person, or person under
disability, as the case may be, for whom he is acting, or a fiduciary acting
as such, and the Corporation, its transfer agent and registrar, upon
presentation of evidence of appointment of such fiduciary shall be under no
duty to inquire as to the powers of such fiduciary and shall not be liable to
any firm, person, or corporation for loss caused by any act done or omitted
to be done by the Corporation or its transfer agent or registrar is reliance
thereon.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
AND OTHER AUTHORIZED REPRESENTATIVES
SECTION 1. Indemnification of Authorized Representative in Third Party
Proceedings.
The Corporation shall indemnify any person who was or is an
"authorized representative" of the Corporation (which shall mean for purposes of
this Article a director or officer of the Corporation, or a person serving at
the request of the Corporation as a director, officer, or trustee, of another
corporation, partnership, joint venture, trust or other enterprise) and who was
or is a "party" (which shall include for purposes of this Article the giving
of testimony or similar involvement) or is threatened to be made a party to
any "third party proceeding" (which shall mean for purposes of this Article
the giving of testimony or similar involvement) or is threatened to be made a
party to any "third party proceeding" (which shall mean for purposes of this
Article any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, other than an action
by or in the right of the Corporation) by reason of the fact that such person
was or is an authorized representative of the Corporation, against expenses
(which shall include for purposes of this Article attorneys' fees), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such third party proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in, or
not opposed to , the best interests of the Corporation and, with respect to
any criminal third party proceedings (which could or does lead to a criminal
third party proceeding) had no reasonable cause to believe such conduct was
unlawful. The termination of any third party proceeding by judgment, order,
settlement, indictment, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the authorized
representative did not act in good faith and in a manner which such person
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal third party proceeding, had
reasonable cause to believe that such conduct was unlawful.
SECTION 2. Indemnification of Authorized Representatives in Corporate
Proceedings.
The Corporation shall indemnify any person who was or is an authorized
representative of the Corporation and who was or is a party or is threatened to
be made a party to any "corporate proceeding" (which shall
<PAGE>
<PAGE>11
mean for purposes of this Article any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor or
investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to , the best
interests of the Corporation, except that no indemnification shall be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such corporate proceeding was
pending shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
SECTION 3. Mandatory Indemnification of Authorized Representatives.
To the extent that an authorized representative of the Corporation has
been successful on the merits or otherwise in defense of any third party or
corporate proceedings or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses actually and reasonably incurred by
such person in connection therewith.
SECTION 4. Determination of Entitlement to Indemnification.
Any indemnification under section 1, 2, or 3 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because such person has either met
the applicable standard of conduct set forth in section 1 or 2 or has been
successful on the merits or otherwise act forth in section 3 and that the
amount requested has been actually and reasonably incurred. Such determination
shall be made:
(1) by the Board of Directors by a majority of a quorum
consisting of directors who were not parties to such third party or
corporate proceedings; or
(2) If such a quorum is not obtainable, or, even if obtainable
a majority vote of such a quorum so directs, by independent legal
counsel in a written opinion; or
(3) by the stockholders.
SECTION 5. Advancing Expenses.
Expenses actually and reasonably incurred in defending a third party
or corporate proceeding shall be paid on behalf of an authorized representative
by the Corporation in advance of the final disposition of such third party or
corporate proceedings upon receipt of an undertaking by or on behalf of the
authorized representative to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Corporation
as authorized in this Article.
SECTION 6. Employee Benefit Plans.
For purposes of this Article, the Corporation shall be deemed to have
requested an authorized representative to serve an employee benefit plan where
the performance by such person of duties to the Corporation also imposes duties
on, or otherwise involves services by, such person to the plan or participants
or beneficiaries of the plan; excise taxes assessed on an authorized
representative with respect to an employee benefit plan pursuant to applicable
law shall be deemed "fines"; and action taken or
<PAGE>
<PAGE>12
omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed to be in the interest of
the participant and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interest of the Corporation.
SECTION 7. Scope of Article.
The indemnification of and advancement of expenses to authorized
representatives, as authorized by this Article, shall (1) not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
stockholders or disinterested directors or otherwise both as to action in an
official capacity and as to action in other capacities, (2) continued
as to a person who has ceased to be an authorized representative, and (3) inure
to the benefit of the heirs, executors, and administrators of such person.
SECTION 8. Reliance on Provisions.
Each person who shall act as an authorized representative of the
Corporation shall be deemed to be doing so in reliance upon rights of
indemnification provided by this Article.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors and shall remain as fixed until changed by resolution of the
Board from time to time.
ARTICLE VIII
CONSISTENCY WITH CERTIFICATE OF INCORPORATION
If any provision of these Bylaws shall be inconsistent with the
Corporation's Certificate of Incorporation (and as they may be amended from time
to time), the Certificate of Incorporation (as so amended at the time) shall
govern.
ARTICLE IX
AMENDMENTS
Except as otherwise provided in the Certificate of Incorporation,
these Bylaws may be altered, amended, or repealed or new bylaws may be adopted
by the stockholders or by the Board of Directors at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new bylaws be contained in the notice of such
special meeting.
<PAGE>1 Exhibit 10(xii)
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT is entered into as of this 1st day of
February, 1996, by and between Figgie International Inc. (the "Company") and
Robert D. Vilsack (the "Executive").
WHEREAS, the Executive is presently in the employ of the Company as
General Counsel of the Company; and
WHEREAS, the Company desires to retain the employment of the Executive
and the Executive desires to continue to serve the Company in such capacity;
and
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and provisions of such employment and of certain severance
and other payments to be made to the Executive under certain circumstances;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements set forth in this Agreement and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
Article 1. Term of Employment
The Company will employ the Executive in accordance with the terms and
conditions set forth herein commencing as of the date of this Agreement and
extending for an initial period of three (3) years, subject, however, to
earlier termination as expressly provided herein. The Executive will continue
to serve the Company as General Counsel or in such other future capacity as he
and the Company might mutually agree and will devote his full business time
and best efforts to the satisfactory discharge of the responsibilities of his
office, performing such other duties as might reasonably be requested by the
Company's Chief Executive Officer or his designee.<PAGE>
<PAGE>2
The initial three (3) year period of employment will be automatically
extended for one (1) additional year at the end of the initial three (3) year
term, and then again after each successive year thereafter. However, either
party may terminate this Agreement at the end of the initial three (3) year
period, or at the end of any successive one (1) year term thereafter, by
giving the other party written notice of intent not to renew, delivered at
least three (3) months prior to the end of such initial period or successive
term.
In the event such notice of intent not to renew is properly delivered,
this Agreement, along with all corresponding rights, duties, and covenants will
automatically expire at the end of the initial period or successive term then in
progress.
Article 2. Employment Terminations
2.1 Termination Due to Retirement or Death. In the event the
Executive's employment is terminated by reason of retirement or death during
the term of this Agreement, the Executive's benefits will be determined in
accordance with the Company's retirement, survivor's benefits, insurance,
Compensation Plan for Executives and other applicable programs then in effect.
For purposes of this Paragraph 2.1, the determination of whether a
termination qualifies as a retirement will be made in accordance with the
then established rules and definitions of either; 1) the Company's Senior
Executive Benefits Plan if the Executive is a participant in such Plan, or
2) the Company's tax qualified retirement plan if the Executive is not a
participant in the Company's Senior Executive Benefits Plan.
<PAGE>
<PAGE>3
2.2 Termination Due to Disability. In the event the Executive during
the term ofthis Agreement becomes, in the opinion of the Company and based upon
reasonable medical opinion, so disabled as to be unable to satisfactorily
perform his duties hereunder, the Company will have the right to terminate
this Agreement and the Executive's employment upon thirty (30) days written
notice to the Executive. In such event, the Executive's benefits will be
determined in accordance with the Company's disability and other applicable
plans and programs then in effect.
2.3 Voluntary Termination by the Executive. The Executive may terminate
this Agreement and his employment at any time by giving the Company written
notice of intent to terminate, delivered at least ninety (90) calendar days
prior to the effective date of such termination. The Company will pay the
Executive his full base salary, at the rate then in effect, through the
effective date of such termination, plus all other benefits to which the
Executive has a vested right at that time.
2.4 Termination by the Company Without Cause. The Executive
acknowledges that he is, has been and will continue at all times to be an
at-will employee of the Company and as such his employment has been and
continues to be terminable by either the Executive or the Company at any time
upon notice to the other and for any reason not prohibited by law. However,
if the Company terminates the Executive's employment and this Agreement
without Cause (as defined in Section 2.5 hereof), the Company will in
lieu of any severance which may otherwise be payable, continue to pay to the
Executive for twelve (12) full calendar months following the date of such
termination his monthly base salary at the rate in effect as of the date of
such termination in accordance with the Company's normal payroll practices.
In addition, the Company throughout such twelve (12) calendar month period
will continue the Executive's life insurance and<PAGE>
<PAGE>4
health care benefits coverage on the same terms and at the same cost to the
Executive as would be applicable to a similarly situated full-time employee
provided however, that in the event the Executive begins to receive
comparable life insurance and health care benefits (determined at the sole
discretion of the Company) from a subsequent employer during such twelve (12)
month period, the Company may immediately terminate its life insurance and
health care benefits coverage of the Executive. Coverage under the Company's
health care benefits plan will be in lieu of health care continuation under
the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for periods such
coverage is in effect under this Agreement.
Following such termination of the Executive's employment without Cause,
the Company will pay for the costs of outplacement services on behalf of the
Executive provided however, that the total fee paid will be limited to an
amount equal to fifteen percent (15%) of the Executive's annual base salary
rate as of the effective date of termination. The Company will also continue to
be obligated to pay when due all other benefits to which the Executive has a
vested right according to the provisions of any applicable retirement or
other benefit plan or program. The Company and the Executive thereafter will
have no further obligations under this Agreement.
2.5 Termination For Cause. Nothing in this Agreement will be construed
to prevent the Company from terminating the Executive's employment for Cause
and without any further duty or obligation under this Agreement. As used
herein, "Cause" will be determined by the Company in the exercise of good
faith and reasonable judgement and will include any breach of this Agreement by
the Executive or any act by him
<PAGE>
<PAGE>5
of gross personal misconduct, insubordination, misappropriation of Company
funds, fraud, dishonesty, gross neglect of or failure to perform the duties
reasonably required of him pursuant to this Agreement or any conduct which is in
violation of any applicable law or regulation pertaining to the business of the
Company.
Article 3. Covenants
3.1 Disclosure or Use of Information. The Executive will at all times
during and after the term of his employment by the Company keep and maintain
the confidentiality of all Confidential Information and will not at any time
either directly or indirectly use such information for his own benefit or
otherwise divulge, disclose or communicate such information to any person or
entity in any manner whatsoever other than employees or agents of the Company
who have a need to know such information and then only to the extent
necessary to perform their responsibilities on behalf of the Company. As
used herein, "Confidential Information" will mean any and all information
(excluding information in the public domain) which relates to the
business of the Company including without limitation all patents and patent
applications, copyrights applied for, issued to or owned by the Company,
inventions,trade secrets, computer programs, engineering and technical data,
drawings or designs, manufacturing techniques, information concerning pricing
and pricing policies, marketing techniques, suppliers, methods and manner of
operations, and information relating to the identity and/or location of all
past, present and prospective customers of the Company.
3.2 Suppliers, Customers and Other Employees. During the term of this
Agreement and for a period of twenty-four (24) months following its termination,
the Executive will not attempt to induce any employee of the Company to
terminate his or her employment with the Company nor will he
<PAGE>
<PAGE>6
take any action with respect to any of the suppliers or customers of the
of the Company which would have or might be likely to have an adverse effect
upon the business of the Company.
3.3 Injunctive Relief. In the event of a breach or threatened breach
of any of the provisions of this Article 3 by the Executive, the Company will
be entitled to preliminary and permanent injunctive relief, without bond or
security, sufficient to enforce the provisions thereof and the Company will be
entitled to pursue such other remedies at law or in equity as it deems
appropriate.
Article 4. Miscellaneous
4.1 Successors. This Agreement is personal to the Executive and will
not be assignable by him without the prior written consent of the Company.
This Agreement may be assigned or transferred to and will be binding upon and
inure to the benefit of any Successor of the Company. As used herein, the term
"Successor" will include any person, firm, corporation or business entity which
acquires all or substantially all of the assets or succeeds to the business of
the Company or the Division.
4.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof and constitutes the entire agreement of
the parties with respect thereto.
4.3 Modification. This Agreement will not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement in a
written instrument executed by the Company and the Executive or their legal
representatives.<PAGE>
<PAGE>7
4.4 Tax Withholding. The Company may withhold from any benefits payable
under this Agreement all Federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
4.5 Governing Law. To the extent not preempted by Federal law, the
provisions of this Agreement will be construed and enforced in accordance with
the laws of the state of Ohio.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of this 1st day of February, 1996.
Figgie International Inc. Robert D. Vilsack
By: /s/ /s/
Attest: /s/
<PAGE>1
Exhibit 10(xiii)
RETENTION AGREEMENT
This Agreement is made and entered into at Willoughby, Ohio by and
among Figgie International Inc., a Delaware corporation (the "Company") and
Robert D. Vilsack (the "Executive") as of this 20th day of March, 1996.
WHEREAS, the Executive has been and continues to serve the Company as
the General Counsel; and
WHEREAS, the Company has determined to explore and evaluate strategic
alternatives to enhance stockholder value and such alternatives may include a
merger, consolidation or a sale of a portion or all of the Company; and
WHEREAS, the Company has determined that it is in its and its
stockholders best interests to assure that the Company will have the continued
dedication and service of the Executive during the term of this Agreement; and
WHEREAS, the Company has determined that the best way to assure that
the Company will have the continued service and dedication of the Executive is
to continue his employment as "employment at will" but to provide incentives
for him to remain an employee of the Company subject to the terms hereof;
NOW THEREFORE, the Executive and the Company agree as follows:
1. Employment At Will
The Company hereby agrees to continue the Executive in its employ and
the Executive agrees to remain in such employ as an employment at will
employee of the Company. Subject to the terms and conditions of this
Agreement, the Company retains the right to terminate the services of the
Executive at any time without cause and the Executive retains the right to
terminate his services for the Company at any time in his sole discretion.
<PAGE>
<PAGE>2
2. Salary and Benefits
The continued service bonus provided for in this Agreement is intended
to be in addition to and not in lieu of any and all other benefits and
compensation which the Executive is currently receiving as an employee of the
Company. Accordingly, it is intended that the provisions hereof may have the
affect of increasing any such benefits to which the Executive might otherwise
be entitled pursuant to the Company's benefit plans or programs and may affect
the way the provisions under which such plans or programs or their related
benefits may be calculated or administered.
3. Continued Service Bonus
Unless this Agreement is earlier terminated pursuant to Paragraphs
7(a), (b), (d) or (e) hereof, effective on the earlier of (i) the Release Date
(as hereinafter defined); or (ii) the execution of an agreement for a merger,
consolidation, sale or divestiture of substantially all of the assets of any
one of the Interstate Electronics, Snorkel, Scott or Taylor Divisions of the
Company and as a result of such merger, consolidation, sale or divestiture,
the Board of Directors of the Company declares a dividend payable to the
shareholders (the "Effective Date"), then the Company will:
(a) grant the Executive the right to purchase 2,550 shares of common
stock pursuant to and in accordance with the 1993 Restricted
Stock Purchase Plan for Employees (the "RSPP"); and
(b) shall cause all options previously granted to the Executive
pursuant to the Key Employees' Stock Option Plan (the "Stock
Option Plan") to become immediately exercisable in full and shall
remain fully exercisable until the date of expiration of the
option.
<PAGE>
<PAGE>3
4. Additional Service Bonus
Unless this Agreement is earlier terminated pursuant to Paragraphs
7(a), (b), (d) or (e) hereof, effective on the earlier of the (i) the
execution of an agreement for a merger, consolidation, sale or divestiture of
substantially all of the assets of the Company; or (ii) if the Company shall
make a significant negative change in the nature or scope of the authorities,
powers, functions or duties of the Executive and the Executive terminates his
employment within three months of such change (either being the "Release
Date"), the Company will:
(a) waive its right to repurchase any of the shares previously
purchased by the Executive pursuant to the RSPP; and
(b) make a lump sum payment of the amount due the Executive pursuant
to Section 2.4 of that certain Management Agreement by and
between the Company and the Executive dated February 1, 1996 (the
"Management Agreement") unless the Executive elects to receive
monthly payments in accordance with the Management Agreement. At
any time after the Release Date and upon written notice to the
Company, the Executive may elect to receive a lump payment of
whatever monthly payments are then remaining; and
(c) make a lump sum payment to the Executive, net of taxes, in an
amount equal to 12 months of the monthly car allowance then being
received by the Executive, unless the Executive elects to receive
12 consecutive monthly payments. At any time after the Release
Date and upon written notice to the Company, the Executive may
elect to receive a lump sum payment ofwhatever monthly payments
are then remaining.
<PAGE>
<PAGE>4
5. Additional Bonus Considerations
In addition to the continued service bonus, the Executive will also be
entitledto receive on the Release Date those presently unpaid installments, if
any, of all bonuses previously awarded to the Executive pursuant to the
Compensation Plan forExecutives (the "Plan"). The Executive will also be
considered as a possiblerecipient of a bonus under such Plan with respect to
his 1996 performance and such consideration by the Management Development and
Compensation Committee of the Board of Directors will be made, and the payment
of such bonus shall be made to the Executive on the Release Date. The Company
in its sole discretion may also award to the Executive whatever additional
bonus it deems desirable taking into consideration the contribution which the
Executive makes toward the successful completion of a merger, consolidation or
the sale of a part of or all of the Company; and if awarded, will be paid to
the Executive on the Release Date.
6. Miscellaneous Benefits
It is the desire and intent of the Company to provide to the Executive
the following additional miscellaneous benefits at no cost to the Executive:
(a) tax planning and/or consultation with respect to the benefit
granted hereunder pursuant to a program initiated by the Company
to provide accounting or legal services;
(b) assistance in obtaining financing for the purchase of the
Executive's stock options granted pursuant to the Stock Option
Plan; and
(c) additional consideration to cover the tax implications should the
benefit hereunder trigger an excise tax.
<PAGE>
<PAGE>5
7. Termination of Agreement
This Agreement will continue in full force and effect from the date
hereof until the earliest of:
a. the death of the Executive,
b. the determination by the Company upon reasonable medical evidence
that the Executive due to disability is no longer able to
effectively perform the customary duties of his position,
c. the completion of any payments to the Executive in accordance
with the terms and conditions contained herein,
d. the termination of the employment of the Executive for any of the
following reasons: (i) the Executive's willful failure to
perform his duties under this Agreement; (ii) conviction of a
felony; or (iii) repeated and excessive use of alcohol, drugs
and/or any other intoxicating or controlled substance,
e. The termination of the employment of the Executive without cause
by the Executive,
f. May 31, 1997.
Upon the termination of this Agreement, all rights and obligations of
theExecutive and the Company will terminate and the provisions hereof will be
of no further force or effect, except that the Company will continue even
after such termination to be obligated to make any payments provided for in
this Agreement and which were previously earned by the Executive while this
Agreement was in effect.
<PAGE>
<PAGE>6
8. Successors
This Agreement is personal to the Executive and may not be assigned by
him. This Agreement may be assigned or transferred to and will be binding
upon and inure to the benefit of any Successor of the Company. As used
herein, the term "Successor" will include any person, firm, corporation or
business entity which acquires all or substantially all of the assets or
succeeds to the business of the Company.
9. Modification
This Agreement will not be varied, altered, modified, canceled,
changed or in any way amended except by the mutual agreement of the Executive
and the Company set forth in a written instrument executed by them or their
respective legal representatives.
10.Tax Withholding
The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as may be required by law or any
governmental regulation or ruling.
11.Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement will be construed and enforced in accordance with the laws of the
State of Ohio.
12.Entire Agreement
This Agreement and the Management Agreement supersede any prior
agreements or understandings oral or written between the Executive and the
Company pertaining to the subject matter hereof and constitutes the entire
agreement between them with respect thereto.
Figgie International Inc. Executive:
By: /s/ /s/
William J. Sickman Robert D. Vilsack
<PAGE>1
Exhibit 10 (xiv)
January 31, 1997
SEPARATION AGREEMENT AND GENERAL RELEASE
This Agreement is made and entered into by and between Figgie International Inc.
(hereinafter "Company") and Keith V. Mabee (hereinafter "Employee"). The
Company and Employee are from time to time referred to herein as the parties.
By this Agreement, the parties intend to and do hereby settle any and all
differences, disputes, grievances, claims, charges and complaints, whether
known or unknown, accrued or unaccrued, that Employee either has or arguably may
have against the Company which arise out of or in any manner relate to
Employee's employment with the Company and his separation therefrom.
In consideration of the mutual covenants, conditions and obligations set forth
herein, the parties agree as follows:
1. At-Will Employment
Employee acknowledges that he was at all times an at-will employee and
that his employment was at all times terminable by either Employee
or the Company at any time upon notice to the other and for any reason
not prohibited by law.
2. Separation from Employment
Except as provided herein and effective January 31, 1997, Employee will
cease to be an employee of the Company for all purposes whatsoever,
including the right to receive or accrue any further compensation or any
further pension, insurance, profit sharing, stock option, stock
purchase, or other fringe benefit rights or to bind the Company in any
way unless otherwise stated in this Agreement. Employee is vested
under the Retirement Income Plan II and the Stock Ownership Trust and
Plan. The parties agree that:
a. The Company shall respond to inquiries concerning the reason(s) for
Employee's separation from employment by stating that Employee's
position was eliminated as part of a corporate restructuring and
not due to any lack of performance on Employee's behalf.<PAGE>
<PAGE>2
Keith V. Mabee
January 31, 1997
Page 2
b. The Company shall waive its right to repurchase the 14,675 shares
previously purchased by the Employee under the 1993 Restricted
Stock Purchase Plan for Employees (the "RSPP") upon the
termination of the RSPP on January 2, 1997.
c. The Company shall cause all remaining stock options granted to the
Employee pursuant to the Key Employees' Stock Option Plan to become
immediately exercisable in full and shall remain fully exercisable
until the date of expiration of the option (seven years from the
grant date).
d. On February 15, 1997, the Company shall pay to Employee one (1)
payment of four hundred twenty thousand dollars ($420,000) (less
applicable deductions) for severance, car allowance and
miscellaneous items. Unused 1997 vacation entitlement will be
included in the January 31, 1997 salary payment.
e. As further consideration and inducement for Employee's promises
and covenants contained in this Agreement, and without any
obligation to do so, the Company will pay to Employee the sum of
fifty-six thousand three hundred fifty dollars ($56,350) (less
applicable deductions) on February 15, 1997. Additionally,
and as further consideration and inducement for Employee's
promises and covenants contained in this Agreement, and without
any obligation to do so, the Company will pay to Employee the
sum of fifty-six thousand three hundred fifty dollars ($56,350)
(less applicable deductions) on or before April 30, 1997.
f. In lieu of outplacement, the Company will pay the Employee thirty
thousand dollars ($30,000) on February 15, 1997.
g. The Company will provide tax planning and/or consultation
assistance through its outside consultants.
h. The Company shall maintain Employee's split-life insurance and
health care benefits coverage on the same terms and at the same
cost to Employee as would be applicable to a similarly situated
full-time employee provided for a period of twenty-four (24)
calendar months following the date of termination, however, that in
the event Employee is eligible for life insurance equal or
greater than the current face amount ($700,000) and comparable
health care benefits (determined at the sole discretion of the
Company) from a subsequent employer during such twenty-four (24)
month period, the Company may immediately terminate its life
insurance and health care benefits coverage
<PAGE>
<PAGE>3
Keith V. Mabee
January 31, 1997
Page 3
of the Employee. Thereafter, Employee's health care coverages shall
terminate unless Employee exercises his rights under COBRA to extend
such coverages.
i. Employee acknowledges and agrees that should the Employee breach
any term or condition of this Agreement, the Company shall not be
obligated to make any further payments or provide any further
benefits hereunder to Employee.
j. All future benefits provided to Employee under the Senior
Executive Benefits Plan ("SEBP") shall remain in force in accordance
with the provisions of the SEBP. (Employee became 100% vested under
the provisions of the Significant Management Change clause of
Section II of the SEBP in 1994.)
k. The Company shall sell to Employee the vehicle currently used by
Employee for a purchase price of ten thousand dollars ($10,000), and
facsimile machine (#105150) for a purchase price of seventy-five
dollars ($75).
3. Acknowledgment of Payments
Except as provided herein, employee acknowledges that he has received full
payment of all monies due to him [e.g., salary, bonus, sick pay, and all
other items of direct and indirect employee compensation] that he earned
and to which he is entitled based upon his services to the Company as an
employee from the beginning of his employment to and including the date of
this Agreement, except that this paragraph shall not apply to any pension
or retirement benefits which might have vested on Employee's behalf before
the date of this Agreement.
4. Rights Under COBRA
Employee acknowledges that he has received notice of his rights under
COBRA to procure continued health insurance coverage following the
termination of his employment with the Company.
<PAGE>
<PAGE>4
Keith V. Mabee
January 31, 1997
Page 4
5. Covenant Not to Disclose and/or Utilize
Confidential or Proprietary Information
Employee acknowledges that, during the course of his employment with the
Company, he has obtained information that is confidential, proprietary and
sensitive to the Company. Employee represents and agrees that he shall
not utilize, whether for his benefit or the benefit of another, disclose
to any other person, firm or entity, whether directly or indirectly,
any trade secrets, financial information or other confidential proprietary
information that Employee obtained or to which Employee had access
during the course of his employment with the Company. Employee hereby
agrees not to make any statement or take any action, directly,
indirectly, that will disparage or discredit the Company, its Officers,
Directors, employees or any of its products, or in any way damage its
reputation or ability to do business or conduct its affairs.
6. Return of Property
Employee shall immediately return to the Company all keys, combinations,
credit cards, automobiles, files, memoranda, records,documents,and other
physical and personal property belonging to the Company, including all
copies thereof, if any such items have not already been returned, which
Employee received or obtained from the Company or its agents during the
course of his employment.
7. General Release
Employee hereby fully releases and forever discharges the Company, its
officers,directors, shareholders, agents, representatives, and employees,
from any and all claims, debts, liabilities, demands and obligations
(hereinafter collectively referred to as "claims," excluding benefits
which have accrued under qualified stock and retirement plans or COBRA)
of any kind, character and nature, which he has or arguably may have now
or in the future against the Company and any of the persons and entities
identified above, especially, but not limited to, those matters which
arise out of or in any way relate to Employee's employment with the Company
and Employee's separation therefrom. This release is intended to be
broadly construed to encompass all possible legal and equitable claims, and
is intended to include, but not be limited in any way to, claims for breach
of contract, wrongful discharge, breach of the implied covenant of good
faith and fair dealing, race, age, sex, national origin, handicap or other
form of discrimination under either the state or federal laws
prohibiting the same, including, but not<PAGE>
<PAGE>5
Keith V. Mabee
January 31, 1997
Page 5
limited to the Age Discrimination in Employment Act of 1967, Title VII of
the Civil Rights Act of 1964, intentional or negligent infliction of
emotional distress, violation of ERISA, breach of fiduciary duty, fraud, or
any other tort. Employee warrants and represents that he understands and
acknowledges the significance and consequences of this release and waiver,
that he has been advised of his right to consult with an attorney for
information and advice concerning such release and waiver, and that such
release and waiver are freely and voluntarily given. Employee further
warrants and acknowledges that he has carefully read, understands and
agrees to each and every provision contained in this Agreement.
8. Successors
This Agreement shall be binding upon Employee and his heirs,
administrators, executors, attorneys, successors and assigns, and shall
inure to the benefit of the Company, its owners, officers, agents,
representatives and employees, and their successors and assigns.
9. No Admission of Liability
It is expressly understood and agreed that neither this Agreement as a
whole nor any of its provisions shall at any time be treated or construed
by either party, or by any other person, firm or entity, as an admission of
liability or wrongdoing in any manner whatsoever.
10.Construction
This Agreement shall be interpreted and construed in accordance with the
laws of the State of Ohio.
<PAGE>
<PAGE>6
Keith V. Mabee
January 31, 1997
Page 6
11.Entire Agreement
This Agreement sets forth the entire agreement between the Company and
Employee, and supersedes the Management Agreement dated February 23, 1995
and the Retention Agreement dated March 20, 1996, any and all prior
agreements or understandings between the parties relating to the matters
contained herein. Any and all prior agreements or understandings that
are not embodied in this Agreement shall be of no force and effect.
Moreover, the terms of this Agreement may not be modified, except in
writing and signed by the party against whom the endorsement of any such
modification may be sought.
DATED: January 31, 1997
FIGGIE INTERNATIONAL INC.
/s/
William J. Sickman
Director, Human Resources & Administration
DATED: January 31, 1997
EMPLOYEE
/s/
Keith V. Mabee
<PAGE>1
Exhibit 10 (xv)
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT is entered into as of this 9th day of December
1994, by and between Figgie International Inc. (the "Company") and Glen W.
Lindemann (the "Executive").
WHEREAS, the Executive is presently in the employ of the Company as
President of its Scott Aviation division (the "Division"); and
WHEREAS, the Company desires to retain the employment of the Executive and
the Executive desires to continue to serve the Company in such capacity; and
WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and provisions of such employment and of certain severance
and other payments to be made to the Executive under certain circumstances;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements set forth herein this Agreement and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
Article 1. Term of Employment
The Company will employ the Executive in accordance with the terms and
conditions set forth herein commencing as of the date of this Agreement and
extending for an initial period of three (3) years, subject, however, to
earlier termination as expressly provided herein. The Executive will continue
to serve the Company as the President of the Division or in such other future
capacity as he and the Company might mutually agree and will devote his full
business time and best efforts to the satisfactory discharge of the
responsibilities of his office, performing such other duties as might
reasonably be requested by the Company's Chief Executive Officer or his
designee.
The initial three (3) year period of employment will be automatically
extended for one (1) additional year at the end of the initial three (3) year
term, and then again after each successive year thereafter. However, either
party may terminate this Agreement at the end of the initial three (3) year
period, or at the end of any successive one (1) year term thereafter, by giving
the other party written notice of intent not to renew, delivered at least
three (3) months prior to the end of such initial period or successive term.
<PAGE>
<PAGE>2
In the event such notice of intent not to renew is properly delivered, this
Agreement, along with all corresponding rights, duties, and covenants will
automatically expire at the end of the initial period or successive term then in
progress.
Article 2. Employment Terminations
2.1 Termination Due to Retirement or Death. In the event the Executive's
employment is terminated by reason of retirement (as defined under the then
established rules of the Company's tax-qualified retirement plan) or death
during the term of this Agreement, the Executive's benefits will be determined
in accordance with the Company's retirement, survivor's benefits, insurance,
Compensation Plan for Executives and other applicable programs then in effect.
2.2 Termination Due to Disability. In the event the Executive during the
term of this Agreement becomes, in the opinion of the Company and based upon
reasonable medical opinion, so disabled as to be unable to satisfactorily
perform his duties hereunder, the Company will have the right to terminate this
Agreement and the Executive's employment upon thirty (30) days written notice
to the Executive. In such event, the Executive's benefits will be determined
in accordance with the Company's disability and other applicable plans and
programs then in effect.
<PAGE>
<PAGE>3
2.3 Voluntary Termination by the Executive. The Executive may terminate
this Agreement and his employment at any time by giving the Company written
notice of intent to terminate, delivered at least ninety (90) calendar days
prior to the effective date of such termination. The Company will pay the
Executive his full base salary, at the rate then in effect, through the
effective date of such termination,plus all other benefits to which the
Executive has a vested right at that time.
2.4 Termination by the Company Without Cause. The Executive acknowledges
that he is, has been and will continue at all times to be an at-will employee of
the Company and as such his employment has been and continues to be terminable
by either the Executive or the Company at any time upon notice to the other and
for any reason not prohibited by law. However, if the Company terminates the
Executive's employment and this Agreement without Cause (as defined in Section
2.5 hereof), the Company will in lieu of any severance which may otherwise be
payable, continue to pay to the Executive for twenty-four (24) full calendar
months following the date of such termination his monthly base salary at the
rate in effect as of the date of such termination in accordance with the
Company's normal payroll practices. In addition,the Company throughout such
twenty-four (24) calendar month period will continue the Executive's life
insurance and health care benefits coverage on the same terms and at
the same cost to the Executive as would be applicable to a similarly situated
full-time employee provided however, that in the event the Executive begins to
receive comparable life insurance and health care benefits (determined at the
sole discretion of the Company) from a subsequent employer during such twenty-
four (24) month period, the Company may immediately terminate its life insurance
and health care benefits coverage of the Executive. Coverage under the
Company's health care benefits plan will be in lieu of health care
continuation under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") for periods such coverage is in effect under this Agreement.
<PAGE>
<PAGE>4
Following such termination of the Executive's employment without Cause, the
Company will pay for the costs of outplacement services on behalf of the
Executive provided however, that the total fee paid will be limited to an amount
equal to fifteen percent (15%) of the Executive's annual base salary rate as of
the effective date of termination. The Company will also continue to be
obligated to pay when due all other benefits to which the Executive has a
vested right according to the provisions of any applicable retirement or other
benefit plan or program. The Company and the Executive thereafter will have no
further obligations under this Agreement.
2.5 Termination For Cause. Nothing in this Agreement will be construed to
prevent the Company from terminating the Executive's employment for Cause and
without any further duty or obligation under this Agreement. As used herein,
"Cause" will be determined by the Company in the exercise of good faith and
reasonable judgement and will include any breach of this Agreement by the
Executive or any act by him of gross personal misconduct, insubordination,
misappropriation of Company funds, fraud, dishonesty, gross neglect of or
failure to perform the duties reasonably required of him pursuant to this
Agreement or any conduct which is in violation of any applicable law or
regulation pertaining to the business of the Company.
Article 3. Covenants
3.1 Competition. Without the prior written consent of the Company, the
Executive will not, during the term of this Agreement and for any period
thereafter during which the Executive is receiving any payments from the Company
pursuant to this Agreement, either directly or indirectly operate or perform any
advisory or consulting services for, or invest in or otherwise become associated
with in any capacity, any company, partnership, organization, proprietorship or
other entity which develops, manufactures, prepares, sells or distributes
products or performs services in competition with the products developed,
manufactured, prepared, sold or distributed or services rendered by the
Division within those geographical areas in which such division then
develops, manufactures, sells or distributes such products or renders such
services. The Executive acknowledges that this prohibition on competition is
in consideration for the compensation and benefits to be provided to
the Executive pursuant to this Agreement and constitutes an additional incentive
for the Company to enter into this Agreement. The Executive acknowledges that
this prohibition on competition is in consideration for the compensation and
benefits to be provided to the Executive pursuant to this Agreement and
constitutes an additional incentive for the Company to enter into this
Agreement. The Executive also understands the effect of the provisions of this
Section 3.1, has had reasonable time to consider the effect of such
provisions and has had the opportunity to consult an attorney with respect
thereto. The Company and the Executive consider the restrictions contained
in this Section 3.1 to be reasonable and necessary but if any aspect of such
restrictions is found to be unreasonable or otherwise unenforceable by
a court of competent jurisdiction, the Executive and the Company intend for such
restrictions to be modified by such court so as to be reasonable and enforceable
and as so modified, to be fully enforced.
<PAGE>
<PAGE>5
Nothing contained in this Section 3.1 will prevent the Executive from
acquiring and holding for investment five percent (5%) or less of the shares of
any corporation whose shares are regularly traded on a national securities
exchange or in the over-the-counter market.
3.2 Disclosure or Use of Information. The Executive will at all times
during and after the term of his employment by the Company keep and maintain the
confidentiality of all Confidential Information and will not at any time either
directly or indirectly use such information for his own benefit or otherwise
divulge, disclose or communicate such information to any person or entity in any
manner whatsoever other than employees or agents of the Company who have a need
to know such information and then only to the extent necessary to perform their
responsibilities on behalf of the Company. As used herein, "Confidential
Information" will mean any and all information (excluding information in the
public domain) which relates to the business of the Company including without
limitation all patents and patent applications, copyrights applied for, issued
to or owned by the Company, inventions, trade secrets, computer programs,
engineering and technical data, drawings or designs, manufacturing techniques,
information concerning pricing and pricing policies, marketing techniques,
suppliers, methods and manner of operations, and information relating to the
identity and/or location of all past, present and prospective customers of
the Company.
3.3 Suppliers, Customers and Other Employees. During the term of this
Agreement and for a period of twenty-four (24) months following its termination,
the Executive will not attempt to induce any employee of the Company to
terminate his or her employment with the Company nor will he take any action
with respect to any of the suppliers or customers of the Company which would
have or might be likely to have an adverse effect upon the business of the
Company.
<PAGE>
<PAGE>6
3.4 Injunctive Relief. In the event of a breach or threatened breach of
any of the provisions of this Article 3 by the Executive, the Company will be
entitled to preliminary and permanent injunctive relief, without bond or
security, sufficient to enforce the provisions thereof and the Company will be
entitled to pursue such other remedies at law or in equity as it deems
appropriate.
Article 4. Miscellaneous
4.1 Successors. This Agreement is personal to the Executive and will
not be assignable by him without the prior written consent of the Company. This
Agreement may be assigned or transferred to and will be binding upon and inure
to the benefit of any Successor of the Company. As used herein, the term
"Successor" will include any person, firm, corporation or business entity which
acquires all or substantially all of the assets or succeeds to the business of
the Company or the Division.
4.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof and constitutes the entire agreement of the
parties with respect thereto.
4.3 Modification. This Agreement will not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement in a written
instrument executed by the Company and the Executive or their legal
representatives.
4.4 Tax Withholding. The Company may withhold from any benefits payable
under this Agreement all Federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
4.5 Governing Law. To the extent not preempted by Federal law, the
provisions of this Agreement will be construed and enforced in accordance with
the laws of the state of Ohio.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of this 9th day of December, 1994.
Figgie International Inc. Glen W. Lindemann
By: /s/ /s/
Attest: /s/
<PAGE>1
Exhibit 10 (xvi)
RETENTION AGREEMENT
This Retention Agreement is made and entered into at Willoughby, Ohio by
and among Figgie International Inc., a Delaware corporation (the "Company") and
Glen W. Lindemann (the "Executive") as of this 17th day of July, 1996.
WHEREAS, the Executive has been and continues to serve the Company as
President of its Scott Aviation division (the "Business Unit"); and
WHEREAS, the Company (collectively with the Business Unit, "Figgie") has
determined to explore and evaluate strategic alternatives to enhance stockholder
value and such alternatives may include a merger, consolidation or a sale of the
Business Unit or of the Company; and
WHEREAS, the Company has determined that it is in its and its stockholders'
best interests to assure that the Company and the Business Unit will have the
continued dedication and service of the Executive during the term of this
Agreement; and
WHEREAS, the Company has determined that the best way to assure that Figgie
will have the continued service and dedication of the Executive is to continue
his employment as "employment at will" but to provide incentives for him to
remain an employee of Figgie subject to the terms hereof;
NOW THEREFORE, the Executive and the Company agree as follows:
1. Definitions
For the purposes of this Agreement:
(a) "Sale of the Company"shall mean the first to occur of the following:
(A) any person (including any individual, firm, partnership,
association, trust, trustee, personal representative, group as
defined in Rule 13d-5 under the Securities Exchange Act of 1934,
as amended, body corporate, corporation, unincorporated
organization, syndicate or other entity) (other than the Company)
is or becomes the beneficial owner, directly or indirectly, of
(i) securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding
securities or (ii) assets of the Company comprising 50% or more
of such assets; or
<PAGE>
<PAGE>2
(B) the consummation of any consolidation or merger of the Company
with any other entity, other than a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at least 50% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.
(b) "Sale of the Business Unit" shall have occurred when any person (other
than the Company or any subsidiary of the Company) is or becomes the
beneficial owner, directly or indirectly, of assets of the Business Unit
comprising 50% or more of such assets.
(c)"Net Proceeds" shall mean all cash consideration and the fair market
value of other consideration (at the time such consideration is received)
received by the Company in connection with the Sale of the Business Unit,
or, as applicable, the aggregate cash consideration and the fair market
value of other consideration (at the time such consideration is received)
received by the stockholders of the Company (or received by the Company if
such consideration is first received by the Company and then distributed to
its stockholders) in connection with the Sale of the Company (excluding,
if applicable, holdbacks and amounts deposited in escrow which amounts have
not been release ("Holdbacks")), less the legal fees, investment banking
fees and other costs associated with the Sales of the Business Unit or the
Sale of the Company, as applicable. "Net Proceeds" shall also include the
value of any long-term liabilities (including any and all debt obligations)
of the Company or Business Unit, as applicable, indirectly or directly
assumed by the buyer or successor entity, as applicable, in connection with
the Sales of the Business Unit or the Sale of the Company, as applicable.
Net Proceeds shall be approved by the Management Development, Compensation
and Nominating Committee of the Board of Directors of the Company and
shall be final. At such time as any Holdbacks are released to the
stockholders (or to the Company if such Holdbacks are first released to
the Company and then distributed to its stockholders) such holdbacks
shall constitute a portion of the Net Proceeds.
2. Employment At Will
(a) The Company hereby agrees to continue the Executive as an employee of
Figgie and the Executive agrees to remain in such employ as an employment
at-will employee of Figgie. Subject to the terms and conditions of this
Agreement, Figgie retains the right to terminate the
<PAGE>
<PAGE>3
services of the Executive at any time without cause (as defined below) and
the Executive retains the right to terminate his services for Figgie at any
time; provided, however, that if the Executive's employment with Figgie is
terminated by Figgie without cause (as defined below), in the event that a
Sale of the Company or a Sale of the Business Unit occurs during the period
that would have constituted the term of this Agreement absent such
termination of employment, the Executive shall be entitled to the
transaction bonus described in paragraph 4 (a) hereof.
(b) For the purposes of this Agreement, "cause" shall be determined by the
Company in the exercise of good faith and reasonable judgement and will
include any breach of the Agreement by the Executive or any act by him of
gross personal misconduct, insubordination, misappropriation of Company
funds, fraud, dishonesty, gross neglect of or failure to perform the duties
reasonably required of him pursuant to this Agreement or any conduct which
is in willful violation of any applicable law or regulation pertaining to
the business of the Company.
(c) Any activity which the Executive shall undertake for the acquiror of
the Business Unit shall not be deemed to be a violation of the
noncompetition, nondisclosure and other covenants contained in Article 3 of
the Management Agreement.
3. Salary and Benefits
The payments provided for in this Agreement are in addition to and not in
lieu of any and all other benefits and compensation which the Executive is
currently receiving as an employee of Figgie.
4. Continued Service Bonus
As of the earlier of (i) Sale of the Company and (ii) Sale of the Business
Unit (such earlier date, the "Release Date"):
(a) the Company shall pay to the Executive in a cash lump sum a
transaction bonus determined as follows:
(i) if paid upon the Sale of the Business Unit, the transaction bonus
shall equal two tenths of one percent (0.2%) of the Net Proceeds:
(ii) if paid upon the Sale of the Company, the transaction bonus shall
equal two tenths of one percent (0.2%) of the portion of the Net
Proceeds of the Sale of the Company which is allocable to the
Business Unit, the amount and method of which allocation shall be
determined by the acquiror and approved by the Management
Development, Compensation and Nominating Committee of the Board
of Directors of the Company and shall be final;
<PAGE>
<PAGE>4
(b) the Company shall pay to the Executive in a cash lump sum those
presently unpaid installments, if any, of all bonuses previously awarded
to the Executive pursuant to the Compensation Plan for Executives (the
"Bonus Plan"); and
(c) the Company shall pay to the Executive in a cash lump sum a pro-rata
bonus under the Bonus Plan with respect to the year in which the Release
Date occurs, which bonus shall be based on the Executive's performance
through the date of sale under the Scott Aviation business plan for such
year.
5. Nature of Payments under this Agreement
No amount paid or payable to the Executive under this Agreement shall
constitute salary or compensation for the purposes of any employee benefit plan
maintained by Figgie.
6. Tax Indemnity
(a) In the event that any payment or benefit received or to be received by
the Executive in connection with a "change in ownership or control" (as
defined in Section 280G(b) (2) (A) (i) of the Internal Revenue Code of
1986, as amended (the"Code"))) of the Company ( a "Change in Control") or
the termination of the Executive's employment (whether pursuant to the
terms of this Agreement, Management Agreement between the Executive and the
Company date December 9, 1994 ("Management Agreement"), or any other plan,
arrangement or agreement with the Company, any person whose actions result
in a Change in Control or any person affiliated with the Company or such
person) becomes subject to the excise tax (the "Excise Tax") pursuant to
Section 4999 of the Code, the Company shall promptly pay Executive the
amount or amounts (a "Gross-Up Payment") that are necessary to place the
Executive in the same after-tax (taking into account federal, state and
local income and employment taxes) financial position that he would have
been in if he had not incurred any tax liability under Section 4999 of
the Code.
(b) Each party will notify the other in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after such party is
informed in writing of such a claim and such party shall apprise the other
party of the nature of such claim and the date on which such claim is
requested to be paid.
(c) The Company shall bear and pay directly all costs and expenses
(including legal fees and additional interest and penalties) incurred in
connection with any such claim or proceeding, to the extent related to the
Excise Tax, and shall indemnify and hold the Executive harmless,
<PAGE>
<PAGE>5
on an after tax basis, as provided in Section 6 (a), for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
7. Termination of Agreement
This Agreement will continue in full force and effect from the date hereof
until the earliest of:
a. the death of the Executive;
b. the determination by the Company upon reasonable medical evidence that
the Executive, due to disability, is no longer able to effectively
perform the customary duties of his position;
c. the completion of any payments to the Executive under this Agreement;
d. the termination of the employment of the Executive's employment for
any reason, except to the extent set forth in paragraph 2 (b); or
e. May 31, 1997.
Upon the termination of this Agreement, all rights and obligations of the
Executive and the Company will terminate and the provisions hereof will be of no
further force or effect, except that the Company will continue to be obligated
to make any payments provided for in this Agreement to which the Executive
became entitled during the term of this Agreement.
8. Successors
This Agreement is personal to the Executive and may not be assigned by
him. This Agreement may be assigned or transferred to and will be binding upon
and inure to the benefit of any Successor of the Company. As used herein, the
term "Successor" will include any person, firm, corporation or business entity
which acquires all or substantially all of the assets or succeeds to the
business of the Company or the Business Unit.
In the event a Successor fails to assume this Agreement, such failure shall
be deemed to constitute a termination of the Executive's employment by the
Company for reason other than for Cause under the Management Agreement and shall
entitle the Executive to the payments described in Section 2.4 of the Management
Agreement and to the payments described in paragraph 4 hereof.
<PAGE>
<PAGE>6
9. Modification
This Agreement may not be varied, altered, modified, canceled, changed or
in any way amended except by the mutual agreement of the Executive and the
Company set forth in a written instrument executed by them or their respective
legal representatives.
10.Tax Withholding
The Company may withhold from any amounts payable under this Agreement all
federal, state, city or other taxes as may be required by law or any
governmental regulation or ruling.
11.Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement will be construed and enforced in accordance with the laws of the
State of Ohio.
12.Entire Agreement
This Agreement and the Management Agreement supersede any prior agreements
or understandings oral or written between the Executive and the Company
pertaining to the subject matter hereof and constitute the entire agreement
between them with respect thereto.
Figgie International Inc. Executive:
By: /s/ /s/
William J. Sickman Glen W. Lindemann
<PAGE>1
Exhibit 10 (xvii)
Figgie International Inc.
4420 Sherwin Road
Willoughby, Ohio 44090
June 6, 1996
General Electric Capital Corporation,
as Agent and Lender
201 High Ridge Road
Stamford, CT 06927-5100
Gentlemen:
Reference is made to that certain Credit Agreement, dated as of December
19, 1995, as amended, among Figgie International Inc., the lenders party thereto
and General Electric Capital Corporation, as agent for such lenders (the "Credit
Agreement"). This letter is Amendment No. 3 to the Credit Agreement.
Capitalized terms defined in the Credit Agreement are used herein as so defined.
The Credit Agreement is amended as follows:
(a) Section 5.3 is amended by deleting all the words after the word
"Financials" on the sixth line thereof.
(b) Section 11.9 is amended by deleting "on Schedule 11.10" in the fourth
line from the end thereof and substituting the words "in Section 11.10(c)".
(c) The reference to "Schedule 11.9" in the definition of Eligible
Equipment in Annex A is hereby deleted and "Schedule 1.5(c)" is substituted
therefore. Attached hereto is Schedule 1.5(c) to the Credit Agreement which was
inadvertently omitted from the Schedules to the Credit Agreement at the time it
was signed.
(d) The references to Schedule 3.4 - Financial Statements and Projections
and Schedule 6.5 - Acquisitions in the Index of Annexes, Schedules and Exhibits
is hereby deleted and Schedule 1.5(c) - Eligible Equipment is added thereto.
This Amendment No. 3 shall be deemed to be effective as of December 19,
1995. Except as amended hereby, the Credit Agreement is hereby ratified and
confirmed and shall remain in full force and effect.
<PAGE>
<PAGE>2
Kindly confirm your agreement to the foregoing by signing below where
indicated.
Very truly yours,
FIGGIE INTERNATIONAL
By: /s/
James M. Schulte
Confirmed and Agreed to:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
By: /s/
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720032
<NAME> FIGGIE INTERNATIONAL
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 44,447
<SECURITIES> 0
<RECEIVABLES> 55,745
<ALLOWANCES> 311
<INVENTORY> 59,365
<CURRENT-ASSETS> 188,684
<PP&E> 132,088
<DEPRECIATION> 50,575
<TOTAL-ASSETS> 372,785
<CURRENT-LIABILITIES> 67,887
<BONDS> 184,156
0
0
<COMMON> 1,841
<OTHER-SE> 72,668
<TOTAL-LIABILITY-AND-EQUITY> 372,785
<SALES> 385,717
<TOTAL-REVENUES> 385,717
<CGS> 282,563
<TOTAL-COSTS> 345,689
<OTHER-EXPENSES> (250)
<LOSS-PROVISION> 99
<INTEREST-EXPENSE> 17,688
<INCOME-PRETAX> 22,590
<INCOME-TAX> (27,712)
<INCOME-CONTINUING> 50,302
<DISCONTINUED> (27,002)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,300
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
