<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarter ended September 30, 1997 Commission file number 1-8591
------------------ ------
FIGGIE INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1297376
- --------------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4420 Sherwin Road
Willoughby, Ohio 44094
- --------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(216) 953-2700
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding as of November 3, 1997
- -------------------------------------------------------------------------------
Class A Common Stock, par value $.10 per share 13,738,930
Class B Common Stock, par value $.10 per share 4,712,747
<PAGE> 2
FIGGIE INTERNATIONAL INC.
-------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION..........................................................................3
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996................................................3
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996...............................................4
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996.............................................................5
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996................................................7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................8
Summary of Significant Accounting Policies.......................................................8
Receivables......................................................................................8
Inventories......................................................................................9
Discontinued Operations..........................................................................9
Income Taxes....................................................................................11
Credit Facility.................................................................................11
Long-Term Debt..................................................................................12
Capital Stock...................................................................................12
Leases..........................................................................................13
Contingent Liabilities..........................................................................13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................................14
Results of Operations Summary...................................................................14
Scott...........................................................................................16
Interstate Electronics Corporation..............................................................17
Corporate and Unallocated Costs and Expenses....................................................18
Financial Position and Liquidity................................................................18
PART II. OTHER INFORMATION............................................................................20
SIGNATURES.............................................................................................22
EXHIBIT INDEX..........................................................................................23
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net Sales $ 185,574 $ 169,428
Cost of Sales 128,374 118,290
--------- ---------
Gross Profit on Sales 57,200 51,138
--------- ---------
Operating Expenses:
Selling, General and Administrative 27,861 30,038
Research and Development 8,996 8,483
--------- ---------
Total Operating Expenses 36,857 38,521
--------- ---------
Operating Income 20,343 12,617
--------- ---------
Other Expense (Income):
Refinancing Costs 393 740
Interest Expense 16,394 14,825
Interest Income (4,065) (1,106)
Other, Net 2,081 706
--------- ---------
Income (Loss) from Continuing Operations
before Income Tax 5,540 (2,548)
Income Tax 1,864 -
--------- ---------
Income (Loss) from Continuing Operations 3,676 (2,548)
Discontinued Operations, net of tax:
Income from Operations 7,660 19,801
(Loss) on Disposal (6,000) -
--------- ---------
Net Income $ 5,336 $ 17,253
========= =========
Weighted Average Shares 18,720 18,757
Per Share Data
- --------------
Income (Loss) from Continuing Operations $ 0.20 $ (0.14)
Income from Discontinued Operations 0.09 1.06
--------- ---------
Net Income $ 0.29 $ 0.92
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net Sales $ 60,154 $ 57,611
Cost of Sales 41,904 40,215
-------- --------
Gross Profit on Sales 18,250 17,396
-------- --------
Operating Expenses:
Selling, General and Administrative 8,899 9,589
Research and Development 3,530 3,248
-------- --------
Total Operating Expenses 12,429 12,837
-------- --------
Operating Income 5,821 4,559
-------- --------
Other Expense (Income):
Refinancing Costs 131 254
Interest Expense 5,514 4,834
Interest Income (1,973) (544)
Other, Net 707 (75)
-------- --------
Income from Continuing Operations
before Income Tax 1,442 90
Income Tax 470 -
-------- --------
Income from Continuing Operations 972 90
Discontinued Operations, net of tax:
Income from Operations 1,252 6,538
(Loss) on Disposal - -
-------- --------
Net Income $ 2,224 $ 6,628
======== ========
Weighted Average Shares 18,737 18,728
Per Share Data
- --------------
Income from Continuing Operations $ 0.05 $ -
Income from Discontinued Operations 0.07 0.35
-------- --------
Net Income $ 0.12 $ 0.35
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Sep. 30, Dec. 31,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 46,524 $ 44,447
Trade Accounts Receivable, less Allowance
for Uncollectible Accounts of $193 in 1997
and $151 in 1996 38,414 43,480
Inventories 37,286 32,903
Prepaid Expenses 3,297 826
Recoverable Income Taxes 6,270 7,689
Current Deferred Tax Asset 12,600 12,600
Net Assets Related to Discontinued Operations 66,286 59,901
--------- ---------
Total Current Assets 210,677 201,846
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land and Land Improvements 44,006 42,845
Buildings and Leasehold Improvements 29,233 28,828
Machinery and Equipment 42,860 40,608
--------- ---------
116,099 112,281
Accumulated Depreciation (46,803) (43,478)
--------- ---------
Net Property, Plant and Equipment 69,296 68,803
--------- ---------
OTHER ASSETS
Deferred Divestiture Proceeds, Net 18,515 20,073
Prepaid Pension Costs 10,811 10,811
Prepaid Rent on Leased Equipment --- 2,644
Intangible Assets 1,974 2,039
Investments 11,181 10,764
Cash Surrender Value of Insurance Policies 4,168 6,629
Prepaid Finance Costs 1,418 1,954
Deferred Tax Asset 29,358 30,595
Other 2,700 2,894
--------- ---------
Total Other Assets 80,125 88,403
--------- ---------
Total Assets $ 360,098 $ 359,052
========= =========
</TABLE>
5
<PAGE> 6
FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(in thousands, except par value)
<TABLE>
<CAPTION>
Sep. 30, Dec. 31,
1997 1996
----------- ----------
(Unaudited)
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 12,821 $ 16,735
Accrued Insurance Reserves 29,396 12,174
Accrued Compensation 7,082 7,342
Accrued Interest 8,616 4,395
Accrued Environmental Reserves 2,026 3,348
Accrued Liabilities and Expenses 1,686 8,008
Current Maturities of Long-Term Debt 7,516 2,100
--------- ---------
Total Current Liabilities 69,143 54,102
--------- ---------
Long-Term Debt 177,133 184,156
Non-Current Insurance Reserves 15,195 27,345
Other Non-Current Liabilities 19,464 18,888
--------- ---------
Total Liabilities 280,935 284,491
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 Par Value;
Authorized, 3,217 Shares;
Issued and Outstanding, None - -
Class A Common Stock, $.10 Par Value; 1,373 1,370
Authorized, 18,000 Shares;
Issued and Outstanding
1997 - 13,724; 1996 - 13,695
Class B Common Stock, $.10 Par Value; 471 471
Authorized, 18,000 Shares;
Issued and Outstanding
1997 - 4,707 ; 1996 - 4,708
Capital Surplus 109,819 109,538
Accumulated Deficit (32,381) (37,717)
Unearned Compensation (37) (74)
Cumulative Translation Adjustment (82) 973
--------- ---------
Total Stockholders' Equity 79,163 74,561
--------- ---------
Total Liabilities and Stockholders' Equity $ 360,098 $ 359,052
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Operating Activities:
Income (Loss) from Continuing Operations $ 3,676 $ (2,548)
Income from Discontinued Operations 1,660 19,801
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 6,217 5,500
Amortization of Unearned Compensation 37 314
Other, Net (1,799) (300)
Changes in Operating Assets and Liabilities
Accounts Receivable (756) (8,040)
Inventories (11,403) (7,443)
Prepaid Items (2,299) (840)
Other Assets 6,976 1,819
Accounts Payable 358 (1,830)
Accrued Liabilities and Expenses 15,510 (1,337)
Accrued Income Taxes 1,088 -
Other Liabilities (12,163) (6,570)
-------- --------
Net Cash (Used) Provided by Operating Activities 7,102 (1,474)
-------- --------
Investing Activities:
Capital Expenditures for Continuing Operations (4,105) (4,069)
Capital Expenditures for Discontinued Operations (1,676) (2,817)
Proceeds from Sale of Property, Plant and Equipment 74 4,420
Proceeds from Business Divestitures 2,005 32,442
-------- --------
Net Cash Provided (Used) by Investing Activities (3,702) 29,976
-------- --------
Financing Activities:
Principal Payments on Debt (1,607) (27,821)
Proceeds from Issuing Common Stock 669 175
Payments to Reacquire Common Stock (385) (10)
-------- --------
Net Cash (Used) by Financing Activities (1,323) (27,656)
-------- --------
Net Increase in Cash and Cash Equivalents 2,077 846
Cash and Cash Equivalents at Beginning of Year 44,447 25,856
-------- --------
Cash and Cash Equivalents at End of Period $ 46,524 $ 26,702
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE> 8
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The financial information included herein has been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
and properly reflects all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to present a fair statement
of the financial results of operations for the periods covered by this report.
The results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year.
(1) Summary of Significant Accounting Policies:
-------------------------------------------
The financial statements have been prepared in accordance with the accounting
policies described in Note 1 of the Notes to Consolidated Financial Statements
appearing in Figgie International Inc.'s 1996 Form 10- K405.
(2) Receivables:
------------
Receivables consist of the following components (in thousands):
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
U.S. Government
<S> <C> <C>
Billed $ 11,138 $ 12,687
Unbilled 11,757 14,920
------- -------
22,895 27,607
Commercial
Billed 15,712 16,024
Allowance for Uncollectible Accounts (193) (151)
------- -------
$38,414 $43,480
======= =======
</TABLE>
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.
8
<PAGE> 9
(3) Inventories:
------------
Inventories consist of the following components (in thousands):
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
<S> <C> <C>
Raw Materials $ 7,928 $ 7,867
Work in Process 18,665 14,336
Finished Goods 12,251 11,812
Inventory Reserves (1,558) (1,112)
------- -------
$37,286 $32,903
======= =======
</TABLE>
(4) Discontinued Operations:
------------------------
SALE OF SNORKEL - On July 1, 1997, the Board of Directors resolved to sell the
Company's Snorkel aerial work platform business. On July 19, 1997, the Company
executed a definitive agreement to sell the business to Omniquip International,
Inc. and on November 9, 1997 amended that agreement. The agreement, as amended,
provides for $100 million to be paid to the Company at closing plus a contingent
additional amount. The contingent amount will be the amount of sales of the
Snorkel business for the twelve-month period commencing on April 1, 1998 and
ending on March 31, 1999 (the "Earn-Out Period") in excess of $140 million, such
additional payment not to exceed $20 million, plus 70% of the amount of sales of
the Snorkel business during the Earn-Out Period in excess of $160 million, such
additional amount not to exceed $30 million. The agreement further provides for
the assumption by the Buyer of certain liabilities and operating lease
commitments of the Snorkel business. The sale of Snorkel is expected to be
completed during November 1997, at which time a gain on the sale will be
recognized in the Company's financial statements. 1996 financial statements have
been restated to reflect Snorkel as a discontinued operation and are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
As
Previously As
Nine Months ended September 30,1996: Reported Snorkel Restated
--------- --------- --------
<S> <C> <C> <C>
Net Sales $293,523 $(124,095) $169,428
======== ========= ========
Income from Continuing Operations 15,862 (18,410) (2,548)
Income from Discontinued Operations 1,391 18,410 19,801
-------- --------- --------
Net Income $ 17,253 $ - $ 17,253
======== ========= ========
As
Previously As
Three Months ended September 30,1996: Reported Snorkel Restated
--------- --------- --------
Net Sales $ 95,407 $ (37,796) $ 57,611
======== ========= ========
Income from Continuing Operations 5,711 (5,621) 90
Income from Discontinued Operations 917 5,621 6,538
-------- --------- --------
Net Income $ 6,628 $ - $ 6,628
======== ========= =========
</TABLE>
9
<PAGE> 10
PRIOR DIVESTITURES - In the second quarter of 1997, the Company recorded a $10
million provision to increase its accrued self-insurance liability to reflect
adverse developments in a specific lawsuit that relates to a previously
discontinued business. The adverse developments consist of 1) an appellate court
decision on July 16, 1997 affirming the trial court's ruling of liability, 2)
notification to the Company in May 1997 that the Company's insurance carriers
would deny coverage for the alleged damages, and 3) settlement discussions with
the plaintiff. As to the underlying case, the Company is pursuing the next level
of appellate proceedings before the Florida Supreme Court and, in the interim,
is preparing for trial on the issue of damages. As to insurance coverage, the
Company is a party to a declaratory action in which the Company is seeking
coverage for the alleged damages. The Company has also filed with the state
insurance commission its intention to bring suit against one of the insurance
carriers for bad faith and other claims.
Prior to 1997, the Company divested a number of it businesses. 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
10
<PAGE> 11
public company, Rawlings Sporting Goods, Inc.
Net assets related to discontinued operations as of September 30, 1997 in the
amount of $66.3 million principally represent the net assets related to the
Snorkel division.
Deferred divestiture proceeds include management's 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 a reserve of $21.2 million at September 30,
1997 against these assets and former facilities of discontinued businesses,
which is presented as a deduction from deferred divestiture proceeds.
(5) Income Taxes:
-------------
For the nine-month and three-month periods ended September 30, 1997, the
following income tax provisions (benefits) have been provided (in thousands):
<TABLE>
<CAPTION>
Nine Months Three Months
Sept. 30, 1997 Sept. 30, 1997
-------------- --------------
<S> <C> <C>
Continuing Operations $ 1,864 $ 470
======= =======
Discontinued Operations:
Operations 4,991 801
Disposal (4,000) -
------- -------
$ 991 $ 801
======= =======
</TABLE>
Net provision amounts have reduced the Federal deferred tax asset. No provision
was recorded for 1996 due to loss carryforwards.
Recoverable Income Taxes represent refunds claimed from prior taxes paid. The
current deferred tax asset as of September 30, 1997 reflects the tax benefits
the Company expects to utilize in the succeeding twelve month period in respect
of operating results and the gain on the divestiture of Snorkel.
(6) Credit Facility:
---------------
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 (1) the
highest of the U.S. prime rate, the 90 day commercial paper rate, or the Federal
Funds rate plus 50 basis points or (2) LIBOR plus 200 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
11
<PAGE> 12
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 September 30, 1997, $16.7 million of letters of credit were outstanding
under the facility, there were no borrowings outstanding ($39.7 million was
available) and all financial covenants were satisfied.
(7) Long-Term Debt:
---------------
Total debt consists of the following components (in thousands):
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
<S> <C> <C>
Long-Term Debt:
9.875% Senior Notes due October 1, 1999 $174,000 $174,000
Mortgage Notes 10,276 11,076
Obligations under Capital Lease 373 1,180
-------- --------
Total 184,649 186,256
Less - Current Maturities (7,516) (2,100)
-------- --------
Long-Term Debt $177,133 $184,156
======== ========
</TABLE>
Mortgage notes, which 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 as of September 30, 1997 include a $6.7 million mortgage that
the Company paid subsequent to the end of the third quarter.
(8) Capital Stock:
--------------
Each share of Class A Common Stock is entitled to one-twentieth of one vote per
share, while each share of Class B Common Stock is entitled to one vote per
share, except, in each case, with respect to shares beneficially owned by any
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 for the nine months and third quarter periods ended September
30, 1997 and 1996 were calculated using the following share data.
<TABLE>
<CAPTION>
(in thousands)
1997 1997 1996 1996
3rd Qtr 9 Mos. 3rd Qtr 9 Mos.
------- ------ ------- ------
<S> <C> <C> <C> <C>
Primary Weighted-Average Number of Shares:
Allocated Shares 18,414 18,396 18,341 18,370
Common Stock Equivalents of Stock Options 287 219 387 375
------ ------ ------ ------
Primary Weighted-Average 18,701 18,615 18,728 18,745
====== ====== ====== ======
Fully Diluted Weighted-Average Number of Shares:
Common Stock Equivalents 36 105 - 12
------ ------ ----- ------
Fully Diluted Weighted-Average 18,737 18,720 18,728 18,757
====== ====== ====== ======
</TABLE>
12
<PAGE> 13
(9) Leases:
-------
Rental commitments under operating leases have had the following activity during
the nine month period (in millions):
<TABLE>
<CAPTION>
Discontinued Continuing
Operations Operations Total
---------- ---------- -----
<S> <C> <C> <C>
Rental commitments at
December 31, 1996 $ 4.5 $ 18.9 $ 23.4
Rental payments (3.7) (3.0) (6.7)
Obligations of Snorkel 10.5 (10.5) -
New leases 0.8 2.0 2.8
Buy out of equipment at
lease-stipulated values (3.1) - (3.1)
------- ------- -------
Rental commitments at
September 30, 1997 $ 9.0 $ 7.4 $ 16.4
======= ======= =======
</TABLE>
At the termination of 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 of 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 at the purchase price of approximately $5.0 million.
(10) Contingent Liabilities:
-----------------------
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 Government contracts. The Company has furnished
documents and other information and denies any wrongdoing in both
investigations. During the third quarter of 1997, the Government advised that
the criminal investigation of allocated corporate charges had been concluded and
that no formal action, claims, charges, or other litigation against the company
was initiated. The supplier investigation is ongoing and could result in
sanctions by the government and affect the Company's ability to obtain future
Government contracts.
See, also, footnote 4 with reference to discontinued businesses.
The Company and its subsidiaries are defendants in various other 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 condition, cash flow or results of operations.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS SUMMARY
- -----------------------------
(in thousands) 1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr.
1997 1997 1997 1997 1996 1996
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 62,651 $ 62,769 $ 60,154 $185,574 $169,428 $57,611
Cost of Sales 43,187 43,283 41,904 128,374 118,290 40,215
-------- -------- -------- -------- -------- -------
Gross Profit on Sales 19,464 19,486 18,250 57,200 51,138 17,396
% of Net Sales 31.1% 31.0% 30.3% 30.8% 30.2% 30.2%
Operating Expenses:
Selling, General & Admin. 9,742 9,220 8,899 27,861 30,038 9,589
Research & Development 2,825 2,641 3,530 8,996 8,483 3,248
-------- -------- -------- -------- -------- -------
Total Operating Expenses 12,567 11,861 12,429 36,857 38,521 12,837
-------- -------- -------- -------- -------- -------
Operating Income 6,897 7,625 5,821 20,343 12,617 4,559
% of Net Sales 11.0% 12.1% 9.7% 11.0% 7.4% 7.9%
Other Expense (Income):
Refinancing Costs 131 131 131 393 740 254
Interest Expense 5,453 5,427 5,514 16,394 14,825 4,834
Interest Income (1,115) (977) (1,973) (4,065) (1,106) (544)
Other, Net 724 650 707 2,081 706 (75)
-------- -------- -------- -------- -------- -------
Income from Continuing
Operations before
Income Tax 1,704 2,394 1,442 5,540 (2,548) 90
Income Tax (Benefit) 587 807 470 1,864 - -
-------- -------- -------- -------- -------- -------
Income (Loss) from
Continuing Operations 1,117 1,587 972 3,676 (2,548) 90
Discontinued Operations,
net of tax 3,400 (2,992) 1,252 1,660 19,801 6,538
-------- -------- -------- -------- -------- -------
Net Income $ 4,517 $ (1,405) $ 2,224 $ 5,336 $ 17,253 $ 6,628
======== ======== ======== ======== ======== =======
</TABLE>
For the first nine months of 1997, Net Sales increased $16.1 million, or 9.5%,
to $185.6 million from Net Sales of $169.4 million for the same period in 1996.
The 1997 third quarter sales were $2.5 million, or 4.4%, higher when compared to
the 1996 third quarter. For all periods, increases were achieved at Scott, and
slight decreases occurred at Interstate Electronics.
Gross Profit for the nine months improved $6.1 million to $57.2 million and
represented 30.8% of Net Sales as compared to 30.2% in 1996. The Gross Profit
for the third quarter improved $0.9 million, or 30.3% of Net Sales, compared to
30.2% in 1996. Scott was responsible for the margin improvements.
Selling, General and Administrative expenses for the nine months improved as a
percentage of Net Sales to 15.0% in 1997, compared to 17.7% in 1996. Lower
corporate expenses were responsible for the majority of the improvement.
Operating Income for the nine months amounted to $20.3 million in 1997, as
compared to Operating Income of $12.6 million in 1996, due to the aforementioned
factors: increased sales, improved margins and lower corporate expenses.
Income taxes for 1997 were $1.9 million for the nine month period and $.5
million for the third quarter. Income tax provisions were not recorded for 1996
due to operating loss carryforwards.
14
<PAGE> 15
Income from Continuing Operations in the nine months and third quarter of 1997
improved significantly compared to corresponding periods of 1996 due to the
operating income improvements discussed in the preceding paragraphs and after
tax provisions in 1997.
Discontinued Operations reflect the operating earnings of Snorkel, net of tax,
and, in the second quarter of 1997, the provision for adverse developments in
respect of a specific retained liability. See note 4 to the financial
statements.
SEGMENT INFORMATION
- -------------------
The Company has operations in two reporting segments, Scott and Interstate
Electronics Corporation. The results of operations are most meaningful when
analyzed and discussed in this manner.
15
<PAGE> 16
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.
The results of operations for Scott were as follows (in thousands):
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr.
1997 1997 1997 1997 1996 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 39,958 $ 40,709 $ 38,084 $118,751 $100,650 $ 34,367
Cost of Sales 27,173 27,231 26,051 80,455 69,692 24,126
-------- -------- -------- -------- -------- --------
Gross Profit on Sales 12,785 13,478 12,033 38,296 30,958 10,241
% of Net Sales 32.0% 33.1% 31.6% 32.2% 30.8% 29.8%
Operating Expenses:
Selling, General & Admin. 3,644 3,886 3,921 11,451 9,317 3,071
Research and Development 1,178 810 629 2,617 2,079 838
-------- -------- -------- -------- -------- --------
Total Operating Expenses 4,822 4,696 4,550 14,068 11,396 3,909
-------- -------- -------- -------- -------- --------
Operating Income (Loss) $ 7,963 $ 8,782 $ 7,483 $ 24,228 $ 19,562 $ 6,332
-------- -------- -------- -------- -------- --------
% of Net Sales 19.9% 21.6% 19.6% 20.4% 19.4% 18.4%
</TABLE>
Discussion of 1997 Compared to 1996:
- ------------------------------------
Net Sales increased for the nine months and third quarter due to increased
shipments of oxygen products to aviation/government customers of approximately
24% and 20% respectively, and increased shipments of Air-Paks to health and
safety customers of approximately 16% and 12%, respectively.
Gross Margin increased for the nine months and third quarter due to significant
increased sales volume in the major product lines.
Selling, General and Administrative expenses have increased in dollar amounts,
but as a percentage of Net Sales are only slightly higher when compared to the
same periods for 1996.
Research and Development expenses in 1997 are lower for the third quarter but
remain higher than the 1996 nine month period due to new product development
expenses incurred during the first half of 1997, primarily for the health and
safety line products.
16
<PAGE> 17
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 submarines; 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. In
addition, Interstate Electronics develops sophisticated bandwidth-on-demand
satellite communication modems and terminals for both government and commercial
applications.
The results of operations for Interstate Electronics were as follows (in
thousands):
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr.
1997 1997 1997 1997 1996 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 22,693 $ 22,060 $ 22,070 $ 66,823 $ 68,778 $ 23,244
Cost of Sales 16,014 16,052 15,853 47,919 48,598 16,089
-------- -------- -------- -------- -------- --------
Gross Profit on Sales 6,679 6,008 6,217 18,904 20,180 7,155
% of Net Sales 29.4% 27.2% 28.2% 28.3% 29.3% 30.8%
Operating Expenses:
Selling, General & Admin. 3,303 3,735 3,228 10,266 8,692 2,713
Research and Development 1,647 1,831 2,901 6,379 6,404 2,410
-------- -------- -------- -------- -------- --------
Total Operating Expenses 4,950 5,566 6,129 16,645 15,096 5,123
-------- -------- -------- -------- -------- --------
Operating Income (Loss) $ 1,729 $ 442 $ 88 $ 2,259 $ 5,084 $ 2,032
-------- -------- -------- -------- -------- --------
% of Net Sales 7.6% 2.0% 0.4% 3.4% 7.4% 8.7%
</TABLE>
Discussion of 1997 Compared to 1996:
- ------------------------------------
Net Sales declined slightly for the nine months as decreases in strategic
weapons systems of approximately 12% and displays of approximately 23% were
offset by increases in military GPS of approximately 2% and satellite
communications systems of approximately 104%.
Net Sales declined slightly for the third quarter as decreases in strategic
weapons systems of approximately 10%, displays of approximately 17% and military
GPS of approximately 8% were offset by increases in satellite communications
systems of approximately 57%.
Gross Margin decreased for the nine months and third quarter due primarily to
reduced sales volume.
Selling, General and Administrative expenses are higher for the nine months and
third quarter due to marketing, selling and bidding costs to compete for orders
and contracts in the different product lines.
Research and Development costs are relatively constant for the nine month
period. These expenditures are greater in the third quarter compared to the 1996
third quarter and previous 1997 quarters due to continued software development
and testing of the model 9002 Flight Management System and the model 8001 Ground
Station, on going development of the IEC-3000 satellite communication product
and GPS smart weapon development.
17
<PAGE> 18
CORPORATE AND UNALLOCATED COSTS AND EXPENSES
- --------------------------------------------
Corporate and unallocated costs and expenses were as follows (in thousands):
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr.
1997 1997 1997 1997 1996 1996
-------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Selling, General & Admin. $2,795 $1,599 $1,750 $6,144 $12,029 $3,805
Other Expenses (Income):
Refinancing Costs 131 131 131 393 740 254
Interest Expense 5,453 5,427 5,514 16,394 14,825 4,834
Interest Income (1,115) (977) (1,973) (4,065) (1,106) (544)
Other, Net 724 650 707 2,081 706 (75)
</TABLE>
Discussion of 1997 Compared to 1996:
- ------------------------------------
Selling, General and Administrative expenses decreased significantly in the 1997
year-to-date and quarterly periods compared to 1996 amounts due to the
continuing benefit from prior year corporate cost savings initiatives and the
expected net periodic pension credit for the year of $1.6 million for the nine
months and $.5 million for the third quarter.
Interest expense increased for the nine months and third quarter of 1997 due to
interest expense on the discounted present value of insurance reserves.
Interest income increased for the nine months and third quarter of 1997 due to
the improvement in the Company's cash position, and in the third quarter of 1997
from the accrued interest income arising from negotiated Federal and foreign tax
audits.
FINANCIAL POSITION AND LIQUIDITY
- --------------------------------
At September 30, 1997, Cash and Cash Equivalents totaled $46.5 million, an
increase of $2.1 million from December 31, 1996.
Net cash provided by Operating Activities was $7.1 million reflecting net income
of $5.3 million, depreciation and amortization of $6.2 million and the net
change in other operating activities of $(4.4) million.
Net cash used by Investing Activities was $3.7 million, reflecting capital
expenditures and proceeds from the sale of a previously divested business.
Capital Expenditures for Continuing Operations were $4.1 million in the first
three quarters of 1997 for machinery, equipment, tooling and real estate
development costs and are expected to be approximately $5.5 million for all of
1997. Such amounts will be funded from internally generated funds and leases.
Net cash used by Financing Activities was $1.3 million, principally payments on
debt.
Liquidity is provided by the Company's Cash and Cash Equivalents and by the
credit facility of which $39.7 million was available at September 30, 1997.
The Company expects to continue to focus on internal growth at its two segments;
investigate acquisitions for Scott; and consider alternative strategies that may
further enhance stockholder value.
18
<PAGE> 19
The Net Proceeds of approximately $95 million expected to be received upon
consummation of the Snorkel divestiture will be available for general corporate
purposes. Those purposes include investment in the current operations of the
Company, payment of liabilities associated with previously divested businesses,
use as all or a portion of the purchase price of possible acquisitions, debt
reductions and stock repurchase alternatives.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is a defendant in litigation at the District Court of
Appeal of Florida, Third District, Case Number 96-895. The Company has filed an
appeal with the Florida Supreme Court and expects a case number for the
proceedings in that court to be assigned by November 15, 1997. In October of
1989 the Company as a result of the operations of a previously discontinued
business, was named a defendant in the lawsuit captioned DENNIS TROY ALDERMAN,
ET AL. V. THE GRAHAM COMPANIES, ET AL. filed in the 11th Judicial Circuit, Dade
County, Florida, Case Number 89-37617 CA (30). The case involves personal
injuries sustained by the plaintiff when he fell from a scaffold manufactured by
the Company. Prior to trial the trial court granted Plaintiff's motion for Entry
of Default Judgment against the Company on the basis that the Company had
engaged in certain discovery violations and ordered the case to trial on the
issue of damages. The trial court's order was appealed and on July 16, 1997 the
District Court of Appeal of Florida, Third District, Case Number 96-895,
affirmed the trial court's order. The Company filed motions for rehearing and
rehearing en banc, which were denied. The Company is pursuing the next level of
appellate proceedings before the Florida Supreme Court. Plaintiffs are seeking
twenty-three million dollars ($23,000,000) in damages.
In May of 1997, the Company's insurance carriers notified the Company
that they would deny coverage for the alleged damages to be determined at trial,
and as a result the Company is a party to a declaratory action captioned
RELIANCE INSURANCE COMPANY OF ILLINOIS V. FIGGIE INTERNATIONAL INC. filed in the
11th Judicial Circuit, Dade County, Florida, Case Number 97-13713 CA (02) in
which the Company is seeking coverage for the alleged damages.
During the third quarter of 1997, the U.S. Government advised the
Company that the criminal investigation of allocated corporate charges had been
concluded and that no formal action, claims, charges or other litigation against
the company was initiated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
10.0 Material Contracts
(a) Executive Arrangement, approved by the Management
Development, Compensation and Nominating Committee Of
the Board of Directors on February 18, 1997.
(b) Amended and Restated Management Agreement, dated June
9, 1997, by and between Glen W. Lindemann and the
Company.
(c) Amended and Restated Management Agreement, Dated June
11, 1997, by and between William J. Sickman and the
Company.
(d) Amended and Restated Management Agreement, dated June
11, 1997, by and between Robert D. Vilsack and the
Company.
(e) Letter Agreement, dated October 15, 1997, by and
between Glen W. Lindemann and the Company.
20
<PAGE> 21
27.0 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter
NONE
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Figgie International Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIGGIE INTERNATIONAL INC.
By: /s/ Steven L. Siemborski
-----------------------------
Steven L. Siemborski
Senior Vice President and
Chief Financial Officer
(Duly Authorized and
Principal Financial Officer)
Date: November 12, 1997
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description of Exhibits Page No.
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.0 Material Contracts
(a) Executive Arrangement, approved by the Management Development,
Compensation and Nominating Committee of the Board of
Directors on February 18, 1997. 24
(b) Amended and Restated Management Agreement, dated June 9, 1997,
by and between Glen W. Lindemann and the Company. 25
(c) Amended and Restated Management Agreement, dated June 11, 1997, by
and between William J. Sickman and the Company. 37
(d) Amended and Restated Management Agreement, dated June 11, 1997,
by and between Robert D. Vilsack and the Company. 49
(e) Letter Agreement, dated October 15, 1997, by and between Glen
W. Lindemann and the Company. 62
27.0 Financial Data Schedule --
</TABLE>
23
<PAGE> 1
Exhibit 10.0 (a)
Executive Arrangements
- ----------------------
On February 18, 1997, the Management Development, Compensation and
Nominating Committee of the Board of Directors approved an arrangement to pay
Steven L. Siemborski, Sr. V.P. & Chief Financial Officer and Glen W. Lindemann,
President of Scott Aviation (at the time) a bonus for serving in the Office of
the Chairman. This arrangement provided for each executive to be paid a
guaranteed amount equal to $12,500 per month served (one-half of the bonus the
former C.E.O. would have received at the conclusion of the year if performance
targets were achieved "at plan"). This arrangement covered the period beginning
on February 1, 1997 and ending on the last day of the month in which the Chief
Executive Officer was appointed.
<PAGE> 1
Exhibit 10.0 (b)
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
--------------------
This AMENDED and RESTATED MANAGEMENT AGREEMENT ("Agreement") is
entered into as of this 9th day of June, 1997, 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 the Scott Aviation Division 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:
SECTION 1. DEFINITIONS. For purposes of this Agreement: the following terms
shall have the following meanings whenever used in this Agreement.
1.1 BUSINESS UNIT, "Business Unit" shall mean the Scott Aviation
Division of the Company.
1.2 SALE OF THE COMPANY. "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
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
<PAGE> 2
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.
1.3 SALE OF THE BUSINESS UNIT. "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.
1.4 NET PROCEEDS. "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 released ("Holdbacks")), less the legal fees, investment banking fees and
other costs associated with the Sale 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 Sale 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 Net Proceeds.
SECTION 2. 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 to December 31, 1998. The Executive will continue to serve the Company
as President of the Scott Aviation 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
<PAGE> 3
satisfactory discharge of the responsibilities of his offices, performing such
other duties as might reasonably be requested by the Company's Chief Executive
Officer.
The initial period of employment will be automatically extended for one
(1) additional year at the end of the initial term, and then again after each
successive year thereafter. However, either party may terminate this Agreement
at the end of the initial 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,
the term of the employment of the Executive shall then become indefinite and can
be terminated by the Company without notice. Similarly, subject to the
provisions of this Agreement relating to nondisclosure of confidential
information and noninterference with employees, customers and suppliers, the
Executive can quit, at any time thereafter, without notice to the Company.
SECTION 3. BENEFIT PLANS
-------------
During his employment, the Executive shall be entitled to participate
in all employee benefit plans and perquisites which are maintained or
established by the Company from time to time and which cover the Company's
executives provided he satisfies any applicable eligibility requirements
therefor.
SECTION 4. CONTINUED SERVICE BONUS.
------------------------
4.1 AMOUNT OF 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 to 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
acquirer and approved by the Management Development,
Compensation and Nominating Committee of the Board of
Directors of the Company and shall be final.
(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
<PAGE> 4
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.
4.2 CONDITION PRECEDENT TO RECEIPT OF CONTINUED SERVICE BONUS. As a
condition precedent to receiving the Continued Service Bonus described in
Section 4.2 hereof, the Executive must relinquish all claim that he has
immediately prior to the Sale of the Company or the Sale of the Business, to any
stock options which are not exercisable in accordance with their terms. If for
some reason the Executive fails to relinquish such options and receives an
amount in exchange for such options, the amount payable under Section 4.1 hereof
shall be reduced by the amount received by the Executive for such options.
4.3 EFFECT ON EMPLOYEE BENEFIT PLANS. 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.
SECTION 5. EMPLOYMENT TERMINATIONS
-----------------------
5.1 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 employment with the Company shall be
deemed terminated as of the effective date of retirement or at the end of the
month in which such death occurs and all 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,
except that in the case of the death of the Executive the Company will pay a pro
rata portion of any bonus which would have been payable to the Executive under
Section 5.6a. hereof. In no event will the other benefits described in the
remainder of Section 5.6 or the severance pay described in Section 5.7 be paid
in the event of death and in no event will any of the severance benefits
described in Section 5.6 or severance pay described in Section 5.7 be paid in
the event of retirement.
For purposes of this Section 5.1, the determination of whether a
termination qualifies as a retirement will be made in accordance with the then
established rules and definitions of the Company's tax qualified defined benefit
plan.
<PAGE> 5
5.2 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 (but not 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, except that in the case of the disability of
the Executive the Company will pay a pro rata portion of any bonus which would
have been payable to the Executive under Section 5.6a. hereof. In no event will
the other benefits described in the remainder of Section 5.6 or the severance
pay described in Section 5.7 be paid in the event of the disability of the
Executive.
5.3 VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may terminate
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 (including but not limited to unused vacation time, COBRA benefits
and stock option benefits). In such event, the Executive shall not be entitled
to the Severance Benefits set forth in Section 5.6 hereof and shall not be
entitled to the severance pay set forth in Section 5.7 hereof. The Executive
shall, however, comply with the provisions of Sections 6.1 and 6.2 hereof.
5.4 TERMINATION BY THE COMPANY OTHER THAN FOR 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, subject to the terms and conditions of this
Agreement, by either the Executive or the Company at any time upon notice to the
other as provided for herein and for any reason not prohibited by law. However,
if the Company terminates the Executive's employment other than for "Cause" (as
defined in Section 5.5 hereof), the Executive will be entitled to receive the
Severance Benefits set forth in Section 5.6 hereof and the Severance Pay set
forth in Section 5.7 hereof.
5.5 TERMINATION BY THE COMPANY 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
<PAGE> 6
obligation under this Agreement. As used herein, "Cause" will be determined by
the Company in the exercise of good faith and reasonable judgment 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.
Upon any such termination all rights, obligations and duties of the parties
hereunder shall immediately cease, except Executive's obligations under Section
4 hereof.
5.6 SEVERANCE BENEFITS. In the event that the Company shall terminate
the employment of the Executive other than for "Cause" as defined in Section 5.5
hereof, the Company will, upon the effective date of such termination:
a. Pay to the Executive in a cash lump sum a pro rata bonus under
the Bonus Plan with respect to the year in which he is
terminated, which Bonus shall be calculated using the formula
contained in the Bonus Plan based on the actual results of the
Company for such year but without any discretionary adjustment
of the amounts payable to the Executive that might otherwise
be permitted under the Bonus Plan. Such bonus will be paid to
the Executive on the same day as bonuses under the Plan are
paid to the executives of the Company who are still employed
with the Company.
b. Pay for the costs of outplacement services actually used by
the Executive provided however, that the total fee paid for
such services will be limited to an amount equal to seventeen
percent (17%) of the Executive's annual base salary rate as of
the effective date of termination of employment.
c. Pay to the Executive, 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 bonus payments described in
Section 4 hereof.
d. 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
<PAGE> 7
program.
5.7 SEVERANCE PAY. If the Executive executes the Non-competition
Agreement attached hereto and delivers such executed Agreement to the Company no
later than thirty (30) days after the date of this Agreement, and if the
employment of the Executive is terminated by the Company other than for "Cause"
as defined in Section 5.5 hereof, the Executive shall be entitled to Severance
Pay as follows:
a. The Company shall continue to pay to the Executive for the
twenty-four (24) months following his termination of
employment, 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.
b. In addition, the Company, throughout such twenty-four 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 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.
SECTION 6. COVENANTS
---------
6.1 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
<PAGE> 8
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.
6.2 CO-OPERATION. 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. Executive hereby agrees
not to make any statement or take any action, directly or 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. Executive agrees that subsequent to his termination of
employment he will, in conjunction with a Company request, reasonably cooperate
with the Company in connection with transition matters, disputes and litigation
matters upon reasonable notice, at reasonable times, and will be paid or
reimbursed for reasonable expenses incurred by the Executive relating to such
matters.
6.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of
any of the provisions of this Section 4 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.
SECTION 7. MISCELLANEOUS
-------------
7.1 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.
<PAGE> 9
7.2 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.
7.3 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.
7.4 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.
7.5 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.
7.6 INDEMNIFICATION. The Company has obtained an opinion of Arthur
Andersen LLP that the payments and benefits under this Agreement do not exceed
the maximum amount which can be paid to the Executive without incurring an
excise tax under Section 4999 of the Internal Revenue Code. If the Internal
Revenue Service asserts that the amounts payable to the Executive under this
Agreement nonetheless give rise to an excise tax under Sections 4999 of the
Internal Revenue Code and the Executive co-operates with the Company in
appealing the determination of the Internal Revenue Service through whatever
level of administrative or judicial appeals is deemed appropriate by the
Company, the Company shall indemnify the Executive for the amount of such excise
tax, for any interest and penalties applicable thereto, and for any income or
excise taxes payable on such indemnification. The Company shall pay all costs of
challenging the determination that the excise tax applies to payments hereunder
including any administrative costs, court costs, attorney fees, and accounting
fees, whether incurred by the Company or incurred by the Executive.
7.7 REPLACEMENT OF EXISTING CONTRACTS. This Agreement will replace the
Management Agreement dated December 9, 1994 between Figgie and the Executive and
the Retention Agreement dated July 17, 1996 between Figgie and the Executive.
<PAGE> 10
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
FIGGIE INTERNATIONAL INC.
By: /s/ William J. Sickman
---------------------------------------
William J. Sickman
Attest: /s/ Robert D. Vilsack
------------------------------------
Robert D. Vilsack
/s/ Glen W. Lindemann
- -----------------------------------------
Glen W. Lindemann
<PAGE> 11
NON-COMPETITION AGREEMENT
In consideration of the promises and covenants of Figgie International
Inc. ("Figgie" or the "Company") contained in the Amended and Restated
Management Agreement between the Executive and Figgie including the possible
payment of twenty-four (24) months of severance pay to the Executive under
certain circumstances, the Executive hereby agrees that the Executive will not,
without the prior written consent of the Company, for a period of two (2) years
after his termination of employment from Figgie, directly or indirectly, for
himself or for others, in any state of the United States or in any foreign
country where Scott Aviation Division is then conducting business:
(1) engage, as an employee, partner, or sole proprietor, in
any business segment of any person or entity which
competes, directly or indirectly, with the product lines
of Scott Aviation Division; or
(2) in connection with any product lines of Scott Aviation
Division, render advice, consultation, or services to or
otherwise assist any other person or entity which
competes, directly or indirectly, with Scott Aviation
Division with respect to such product lines.
For the purposes of this Agreement, employment with the purchaser of the Scott
Aviation Division or the Company subsequent to the Sale of the Business Unit or
Sale of the Company, as such terms are defined in the Amended and Restated
Management Agreement dated June 9, 1997 between the Executive and Figgie, will
not constitute competition under this Non-competition Agreement.
The Executive understands that the foregoing restrictions may limit his
ability to engage in certain business pursuits during the period provided for
above, but acknowledges that he will receive sufficiently higher compensation,
benefits and severance pay from Figgie than he would otherwise receive to
justify such restriction. The Executive acknowledges that he understands the
effect of the provisions of this Agreement, that he has had reasonable time to
consider the effect of these provisions, and that he was encouraged to and had
an opportunity to consult an attorney with respect to these provisions. Figgie
and the Executive consider the restrictions contained in this Agreement to be
reasonable and necessary. Nevertheless, if any aspect of these restrictions is
found to be unreasonable or otherwise unenforceable by a Court of competent
jurisdiction, the parties intend for such restrictions to be modified by such
Court so as to be reasonable and enforceable and, as so modified by the Court,
to be fully enforced.
<PAGE> 12
IN WITNESS WHEREOF, the Executive has executed this Agreement as of
this 13th day of June, 1997.
/s/ Glen W. Lindemann
- ---------------------------------------
Glen W. Lindemann
<PAGE> 1
Exhibit 10.0 (c)
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
--------------------
This AMENDED and RESTATED MANAGEMENT AGREEMENT ("Agreement") is entered
into as of this 11th day of June, 1997, by and between Figgie International Inc.
(the "Company") and William J. Sickman (the "Executive").
WHEREAS, the Executive is presently in the employ of the Company as
Vice President-Corporate Relations 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:
SECTION 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 Vice President-Corporate Relations 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 offices, performing such other duties as might
reasonably be requested by the Company's Chief Executive Officer.
<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,
the term of the employment of the Executive shall then become indefinite and can
be terminated by the Company without notice. Similarly, subject to the
provisions of this Agreement relating to nondisclosure of confidential
information and noninterference with employees, customers and suppliers, the
Executive can quit, at any time thereafter, without notice to the Company.
SECTION 2. BENEFIT PLANS
-------------
During his employment, the Executive shall be entitled to participate
in all employee benefit plans and perquisites which are maintained or
established by the Company from time to time and which cover the Company's
senior executives provided he satisfies any applicable eligibility requirements
therefor.
SECTION 3. EMPLOYMENT TERMINATIONS
-----------------------
3.1 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 employment with the Company shall be
deemed terminated as of the effective date of retirement or at the end of the
month in which such death occurs and all 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,
except that in the case of the death of the Executive the Company will pay a pro
rata portion of any bonus which would have been payable to the Executive under
Section 3.7a. hereof. In no event will the other benefits described in the
remainder of Section 3.7 or the severance pay described in Section 3.8 be paid
in the event of death and in no event will any of the severance benefits and
severance pay described in Sections 3.7 and 3.8 be paid in the event of
retirement.
For purposes of this Section 3.1, the determination of whether a
termination qualifies as a retirement
<PAGE> 3
will be made in accordance with the then established rules and definitions of
the Company's Senior Executive Benefits Program or, if the Senior Executive
Benefits Program should no longer exist, the Company's tax qualified defined
benefit plan.
3.2 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 (but not 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, except that in the case of the disability of
the Executive the Company will pay a pro rata portion of any bonus which would
have been payable to the Executive under Section 3.7a. hereof. In no event will
the other benefits described in the remainder of Section 3.7 or the severance
pay described in Section 3.8 be paid in the event of the disability of the
Executive.
3.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON.
The Executive may terminate his employment other than for Good Reason as such
term is defined in Section 3.4 hereof at any time by giving the Company written
notice of intent to terminate, delivered at least thirty (30) calendar days
prior to the effective date of such termination. The Company will pay the
Executive his full base salary, at the rate then in effect, through the
effective date of such termination, plus all other benefits to which the
Executive has a vested right at that time (including but not limited to unused
vacation time, COBRA benefits and stock option benefits). If such Termination is
other than for Good Reason, the Executive shall not be entitled to the Severance
Benefits set forth in Section 3.7 hereof or the Severance Pay set forth in
Section 3.8 hereof. The Executive shall, however, comply with the provisions of
Sections 4.1 and 4.2 hereof.
3.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the
event that the Executive terminates his employment with Good Reason as defined
below in this Section 3.4, the Executive will be entitled to receive the
Severance Benefits set forth in Section 3.7 hereof and, if he qualifies
therefor, the Severance Pay set forth in Section 3.8 hereof.
For purposes of this Agreement, an Executive shall be deemed to have
terminated his employment
<PAGE> 4
for "Good Reason" if his termination of employment occurs:
a. within three (3) months after a "Change of Control" as defined
in the Company's Stock Option Plan;
b. during the period which is within three (3) months after the
last of four (4) consecutive calendar quarters during which
the Consolidated Revenues of the Company, as shown on the
quarterly financial results distributed to shareholders, shall
have been less than Seventy-Five Million Dollars in each of
such four (4) calendar quarters;
c. within twelve (12) months after the completion of:
i. a move of the Company's Headquarters to a location
which is outside of a one hundred (100) mile radius
of the current location of the Company's Headquarters
in Willoughby, Ohio; or
ii. a relocation of the place where the Executive is
assigned to work to a location which is outside of a
one hundred (100) mile radius of the current location
of the Company's Headquarters in Willoughby, Ohio;
provided that such move or relocation occurs within the two
(2) year period next following the date of execution of this
Agreement;
d. within three (3) months after:
i. the Board of Directors of the Company shall fail to
re-elect or shall remove the Executive from the
office of Vice President-Corporate Relations;
ii. the Chief Executive Officer or the Board of Directors
of the Company shall make a significant negative
change in the nature or scope of the authorities,
powers, functions or duties of the Executive
hereunder;
iii. the Company shall fail to pay when due any
compensation due and owing to the Executive or a
reduction in the Executive's base pay or material
reduction in benefits and such failure is not
corrected within ten (10) days after notice thereof
to the Company by the Executive; or
<PAGE> 5
iv. any pattern of harassment which occurs within the
first twelve (12) months after the execution of this
Agreement, which is done with the approval of the
Chief Executive Officer or the Board of Directors of
the Company and which impedes the Executive in the
exercise of his authorities, powers, functions or
duties hereunder in the manner in which they would
normally be exercised by a Vice President-Corporate
Relations.
In the event that the Executive shall terminate his employment with Good Reason,
he shall provide the Company with thirty (30) days advance notice of his date of
termination of employment.
3.5 TERMINATION BY THE COMPANY OTHER THAN FOR 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, subject to the terms and conditions of this
Agreement, by either the Executive or the Company at any time upon notice to the
other as provided for herein and for any reason not prohibited by law. However,
if the Company terminates the Executive's employment other than for "Cause" (as
defined in Section 3.6 hereof), the Executive will be entitled to receive the
Severance Benefits set forth in Section 3.7 hereof and, if he qualifies
therefor, the Severance Pay set forth in Section 3.8 hereof.
3.6 TERMINATION BY THE COMPANY 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 judgment and will include (i) Executive's
willful failure to perform his duties under this Agreement within a reasonable
period of time after receipt of written notice from the Company setting forth in
reasonable detail the duties which Executive has failed to perform and the
corrective actions expected of him; (ii) a breach of Executive's obligations
under Section 4 below; (iii) indictment for, conviction of, or written
confession to a crime against the Company or a felony; or (iv) Executive shall
have been found by the Board of Directors of the Company to have been repeatedly
and excessively abusing alcohol, drugs and/or any other intoxicating or
controlled substance. Upon any such termination all rights, obligations and
duties of the parties hereunder shall immediately cease, except Executive's
obligations under Section 4 hereof.
3.7 SEVERANCE BENEFITS. In the event that the Company shall terminate
the employment of the
<PAGE> 6
Executive other than for "Cause" as defined in Section 3.6 hereof, or in the
event the Executive terminates his employment pursuant to Section 3.4 hereof
with Good Reason, the Company will, upon the effective date of such termination
and in lieu of any other severance which may otherwise be payable:
a. Pay to the Executive in a cash lump sum a pro rata bonus under
the Bonus Plan with respect to the year in which he is
terminated, which Bonus shall be calculated using the formula
contained in the Bonus Plan based on the actual results of the
Company for such year but without any discretionary adjustment
of the amounts payable to the Executive that might otherwise
be permitted under the Bonus Plan. Such bonus will be paid to
the Executive on the same day as bonuses under the Plan are
paid to the executives of the Company who are still employed
with the Company.
b. Pay for the costs of outplacement services actually used by
the Executive provided however, that the total fee paid for
such services will be limited to an amount equal to seventeen
percent (17%) of the Executive's annual base salary rate as of
the effective date of termination of employment.
c. Pay to the Executive a cash lump sum, net of taxes, equal to
twelve (12) months of the monthly car allowance then
applicable to the Executive. Such payment shall be paid to the
Executive with thirty (30) days following his termination of
employment.
d. Cause all stock options granted to the Executive pursuant to
the Key Employees' Stock Option Plan (the "Option Plan") (or
the grant of any right under any future stock plan) to become
immediately exercisable in full and to remain fully
exercisable until the earlier of the date of expiration of the
option or one (1) year after his date of termination of
employment; provided, however, that nothing herein shall
affect the continued applicability of Section 7(d) of the
Option Plan, a copy of which is attached hereto, to such
options.
e. Provide to the Executive tax and/or legal consultation with
respect to the benefits granted hereunder up to a maximum cost
to the Company of $5,000;
f. Provide assistance to the Executive in obtaining the financing
necessary for the Executive to
<PAGE> 7
exercise his stock options during the period specified in
Section 3.7d. hereof; and
g. 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.
3.8 SEVERANCE PAY. If the Executive executes the Non-competition
Agreement attached hereto and delivers such executed Agreement to the Company no
later than thirty (30) days after the date of this Agreement, and if the
employment of the Executive is terminated by the Company other than for "Cause"
as defined in Section 3.6 hereof, or by the Executive pursuant to Section 3.4
hereof with Good Reason, the Executive shall be entitled to Severance Pay as
follows:
a. At the election of the Executive, the Company shall either
continue to pay to the Executive for the twenty-four (24)
months following his termination of employment, 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 or make a lump sum payment to the Executive of the
amount due above. Any such lump sum will be payable within
thirty (30) days after the date the Company receives written
notice of the Executive's election to receive the lump sum. In
addition, the Company, throughout such twenty-four 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 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.
b. Count the twenty-four (24) month period of severance pay as
continued service with the Company for purposes of determining
the Executive's vested benefits under the Company's
<PAGE> 8
Senior Executive Benefits Program.
3.9 VESTING OF STOCK OPTIONS. In the event the proceeds from a sale or
disposition of any of the Divisions or Subsidiaries which the Company owns on
the date of this Agreement are used to provide a dividend to the shareholders of
the Company, then immediately upon the effective date of such sale or
disposition the Company will cause all stock options granted to the Executive
pursuant to the Key Employees' Stock Option Plan (the "Option Plan") to become
immediately exercisable in full and to remain fully exercisable so that the
Executive shall be entitled to become a shareholder of record such that the
Executive shall be entitled to receive the benefits of the dividend.
SECTION 4. COVENANTS
---------
4.1 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.
4.2 CO-OPERATION. 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. Executive hereby agrees
not to make any statement or take any action, directly or indirectly,
<PAGE> 9
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. Executive agrees that subsequent to his
termination of employment he will, in conjunction with a Company request,
reasonably cooperate with the Company in connection with transition matters,
disputes and litigation matters upon reasonable notice, at reasonable times, and
will be paid or reimbursed for reasonable expenses incurred by the Executive
relating to such matters.
4.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of
any of the provisions of this Section 4 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.
SECTION 5. MISCELLANEOUS
-------------
5.1 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.
5.2 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.
5.3 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.
5.4 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.
5.5 GOVERNING LAW. To the extent not preempted by federal law, the
provisions of this
<PAGE> 10
Agreement will be construed and enforced in accordance with the laws of the
State of Ohio.
5.6 INDEMNIFICATION. The Company has obtained an opinion of Arthur
Andersen LLP that the payments and benefits under this Agreement do not exceed
the maximum amount which can be paid to the Executive without incurring an
excise tax under Section 4999 of the Internal Revenue Code. If the Internal
Revenue Service asserts that the amounts payable to the Executive under this
Agreement nonetheless give rise to an excise tax under Sections 4999 of the
Internal Revenue Code and the Executive co-operates with the Company in
appealing the determination of the Internal Revenue Service through whatever
level of administrative or judicial appeals is deemed appropriate by the
Company, the Company shall indemnify the Executive for the amount of such excise
tax, for any interest and penalties applicable thereto, and for any income or
excise taxes payable on such indemnification. The Company shall pay all costs of
challenging the determination that the excise tax applies to payments hereunder
including any administrative costs, court costs, attorney fees, and accounting
fees, whether incurred by the Company or incurred by the Executive.
5.7 REPLACEMENT OF EXISTING CONTRACTS. This Agreement will replace the
Management Agreement dated February 27, 1995 between Figgie and the Executive
and the Retention Agreement dated March 20, 1996 between Figgie and the
Executive.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.
FIGGIE INTERNATIONAL INC.
By: /s/ F.R. McKnight
------------------------------------
F.R. McKnight
And: /s/ Steven L Siemborski
-----------------------------------
Steven L Siemborski
/s/ William J. Sickman
- --------------------------------------
William J. Sickman
<PAGE> 11
NON-COMPETITION AGREEMENT
In consideration of the promises and covenants of Figgie International
Inc. ("Figgie" or the "Company") contained in the Amended and Restated
Management Agreement between the Executive and Figgie including the possible
payment of twenty-four (24) months of severance pay to the Executive under
certain circumstances, the Executive hereby agrees that the Executive will not,
for a period of two (2) years after his termination of employment from Figgie,
directly or indirectly, for himself or for others, in any state of the United
States or in any foreign country where Figgie or any of its Affiliates (as
defined below) is then conducting business:
(1) engage, as an employee, partner, or sole proprietor, in
any business segment of any person or entity which
competes, directly or indirectly, with the product lines
of Figgie or its Affiliates; or
(2) in connection with any product lines of Figgie or its
Affiliates, render advice, consultation, or services to or
otherwise assist any other person or entity which
competes, directly or indirectly, with Figgie or any of
its Affiliates with respect to such product lines.
For the purposes of this Agreement, the term "Affiliates" shall mean any entity
controlled by or under common control with Figgie on the date of execution of
this Agreement, including, but not limited to, Figgie divisions and
subsidiaries.
The Executive understands that the foregoing restrictions may limit his
ability to engage in certain business pursuits during the period provided for
above, but acknowledges that he will receive sufficiently higher severance pay
from Figgie than he would otherwise receive to justify such restriction. The
Executive acknowledges that he understands the effect of the provisions of this
Agreement, that he has had reasonable time to consider the effect of these
provisions, and that he was encouraged to and had an opportunity to consult an
attorney with respect to these provisions. Figgie and the Executive consider the
restrictions contained in this Agreement to be reasonable and necessary.
Nevertheless, if any aspect of these restrictions is found to be unreasonable or
otherwise unenforceable by a Court of competent jurisdiction, the parties intend
for such restrictions to be modified by such Court so as to be reasonable and
enforceable and, as so modified by the Court, to be fully enforced.
47
<PAGE> 12
IN WITNESS WHEREOF, the Executive has executed this Agreement as of
this 11th day of June, 1997.
/s/ William J. Sickman
- --------------------------------------
William J. Sickman
<PAGE> 1
Exhibit 10.0 (d)
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
--------------------
This AMENDED and RESTATED MANAGEMENT AGREEMENT ("Agreement") is
entered into as of this 11th day of June, 1997, 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
Vice President, General Counsel and Secretary 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:
SECTION 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 Vice President, General Counsel and Secretary or in such other
future capacity as he and the Company might mutually agree and will devote his
full business time and best efforts to the satisfactory discharge of the
responsibilities of his offices, performing such other duties as might
reasonably be requested by the Company's Chief Executive Officer.
<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, the term of the employment of the Executive shall then become
indefinite and can be terminated by the Company without notice. Similarly,
subject to the provisions of this Agreement relating to nondisclosure of
confidential information and non-interference with employees, customers and
suppliers, the Executive can quit, at any time thereafter, without notice to the
Company.
SECTION 2. BENEFIT PLANS
-------------
During his employment, the Executive shall be entitled to
participate in all employee benefit plans and perquisites which are maintained
or established by the Company from time to time and which cover the Company's
senior executives provided he satisfies any applicable eligibility requirements
therefor.
SECTION 3. EMPLOYMENT TERMINATIONS
-----------------------
3.1 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 employment with the Company shall be
deemed terminated as of the effective date of retirement or at the end of the
month in which such death occurs and all 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,
except that in the case of the death of the Executive the Company will pay a pro
rata portion of any bonus which would have been payable to the Executive under
Section 3.7a. hereof. In no event will the other benefits described in the
remainder of Section 3.7 or the severance pay described in Section 3.8 be paid
in the event of death and in no event will any of the severance benefits and
severance pay described in Sections 3.7 and 3.8 be paid in the event of
retirement.
For purposes of this Section 3.1, the determination of whether a
termination qualifies as a
<PAGE> 3
retirement will be made in accordance with the then established rules and
definitions of the Company's Senior Executive Benefits Program or, if the Senior
Executive Benefits Program should no longer exist, the Company's tax qualified
defined benefit plan.
3.2 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 (but not 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, except that in the case of the
disability of the Executive the Company will pay a pro rata portion of any bonus
which would have been payable to the Executive under Section 3.7a. hereof. In no
event will the other benefits described in the remainder of Section 3.7 or the
severance pay described in Section 3.8 be paid in the event of the disability of
the Executive.
3.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD
REASON. The Executive may terminate his employment other than for Good Reason as
such term is defined in Section 3.4 hereof at any time by giving the Company
written notice of intent to terminate, delivered at least thirty (30) calendar
days prior to the effective date of such termination. The Company will pay the
Executive his full base salary, at the rate then in effect, through the
effective date of such termination, plus all other benefits to which the
Executive has a vested right at that time (including but not limited to unused
vacation time, COBRA benefits and stock option benefits). If such Termination is
other than for Good Reason, the Executive shall not be entitled to the Severance
Benefits set forth in Section 3.7 hereof or the Severance Pay set forth in
Section 3.8 hereof. The Executive shall, however, comply with the provisions of
Sections 4.1 and 4.2 hereof.
3.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the
event that the Executive terminates his employment with Good Reason as defined
below in this Section 3.4, the Executive will be entitled to receive the
Severance Benefits set forth in Section 3.7 hereof and, if he qualifies
therefor, the Severance Pay set forth in Section 3.8 hereof.
For purposes of this Agreement, an Executive shall be deemed to
have terminated his employment
<PAGE> 4
for "Good Reason" if his termination of employment occurs:
a. within three (3) months after a "Change of Control" as
defined in the Company's Stock Option Plan;
b. during the period which is within three (3) months after
the last of four (4) consecutive calendar quarters during
which the Consolidated Revenues of the Company, as shown
on the quarterly financial results distributed to
shareholders, shall have been less than Seventy-Five
Million Dollars in each of such four (4) calendar
quarters;
c. within twelve (12) months after the completion of:
i. a move of the Company's Headquarters to a location
which is outside of a one hundred (100) mile radius
of the current location of the Company's Headquarters
in Willoughby, Ohio; or
ii. a relocation of the place where the Executive is
assigned to work to a location which is outside of a
one hundred (100) mile radius of the current location
of the Company's Headquarters in Willoughby, Ohio;
provided that such move or relocation occurs within the
two (2) year period next following the date of execution
of this Agreement;
d. within three (3) months after:
i. the Board of Directors of the Company shall fail to
re-elect or shall remove the Executive from the
office of Vice President, General Counsel and
Secretary;
ii. the Chief Executive Officer or the Board of Directors
of the Company shall make a significant negative
change in the nature or scope of the authorities,
powers, functions or duties of the Executive
hereunder;
<PAGE> 5
iii. the Company shall fail to pay when due any
compensation due and owing to the Executive or a
reduction in the Executive's base pay or material
reduction in benefits and such failure is not
corrected within ten (10) days after notice thereof
to the Company by the Executive; or
iv. any pattern of harassment which occurs within the
first twelve (12) months after the execution of this
Agreement, which is done with the approval of the
Chief Executive Officer or the Board of Directors of
the Company and which impedes the Executive in the
exercise of his authorities, powers, functions or
duties hereunder in the manner in which they would
normally be exercised by a Vice President, General
Counsel and Secretary.
In the event that the Executive shall terminate his employment with Good Reason,
he shall provide the Company with thirty (30) days advance notice of his date of
termination of employment.
3.5 TERMINATION BY THE COMPANY OTHER THAN FOR 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, subject to the terms and conditions of this
Agreement, by either the Executive or the Company at any time upon notice to the
other as provided for herein and for any reason not prohibited by law. However,
if the Company terminates the Executive's employment other than for "Cause" (as
defined in Section 3.6 hereof), the Executive will be entitled to receive the
Severance Benefits set forth in Section 3.7 hereof and, if he qualifies
therefor, the Severance Pay set forth in Section 3.8 hereof.
3.6 TERMINATION BY THE COMPANY 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 judgment and will include (i) Executive's
willful failure to perform his duties under this Agreement within a reasonable
period of time after receipt of written notice from the
<PAGE> 6
Company setting forth in reasonable detail the duties which Executive has failed
to perform and the corrective actions expected of him; (ii) a breach of
Executive's obligations under Section 4 below; (iii) indictment for, conviction
of, or written confession to a crime against the Company or a felony; or (iv)
Executive shall have been found by the Board of Directors of the Company to have
been repeatedly and excessively abusing alcohol, drugs and/or any other
intoxicating or controlled substance. Upon any such termination all rights,
obligations and duties of the parties hereunder shall immediately cease, except
Executive's obligations under Section 4 hereof.
3.7 SEVERANCE BENEFITS. In the event that the Company shall
terminate the employment of the Executive other than for "Cause" as defined in
Section 3.6 hereof, or in the event the Executive terminates his employment
pursuant to Section 3.4 hereof with Good Reason, the Company will, upon the
effective date of such termination and in lieu of any other severance which may
otherwise be payable:
a. Pay to the Executive in a cash lump sum a pro rata bonus
under the Bonus Plan with respect to the year in which he
is terminated, which Bonus shall be calculated using the
formula contained in the Bonus Plan based on the actual
results of the Company for such year but without any
discretionary adjustment of the amounts payable to the
Executive that might otherwise be permitted under the
Bonus Plan. Such bonus will be paid to the Executive on
the same day as bonuses under the Plan are paid to the
executives of the Company who are still employed with the
Company.
b. Pay for the costs of outplacement services actually used
by the Executive provided however, that the total fee paid
for such services will be limited to an amount equal to
seventeen percent (17%) of the Executive's annual base
salary rate as of the effective date of termination of
employment.
c. Pay to the Executive a cash lump sum, net of taxes, equal
to twelve (12) months of the monthly car allowance then
applicable to the Executive. Such payment shall be paid to
the Executive with thirty (30) days following his
termination of employment.
<PAGE> 7
d. Cause all stock options granted to the Executive pursuant
to the Key Employees' Stock Option Plan (the "Option
Plan") (or the grant of any right under any future stock
plan) to become immediately exercisable in full and to
remain fully exercisable until the earlier of the date of
expiration of the option or one (1) year after his date of
termination of employment; provided, however, that nothing
herein shall affect the continued applicability of Section
7(d) of the Option Plan, a copy of which is attached
hereto, to such options.
e. Provide to the Executive tax and/or legal consultation
with respect to the benefits granted hereunder up to a
maximum cost to the Company of $5,000;
f. Provide assistance to the Executive in obtaining the
financing necessary for the Executive to exercise his
stock options during the period specified in Section 3.7d.
hereof; and
g. 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.
3.8 SEVERANCE PAY. If the Executive executes the Non-competition
Agreement attached hereto and delivers such executed Agreement to the Company no
later than thirty (30) days after the date of this Agreement, and if the
employment of the Executive is terminated by the Company other than for "Cause"
as defined in Section 3.6 hereof, or by the Executive pursuant to Section 3.4
hereof with Good Reason, the Executive shall be entitled to Severance Pay as
follows:
a. At the election of the Executive, the Company shall either
continue to pay to the Executive for the twenty-four (24)
months following his termination of employment, 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 or make a lump sum payment to the
Executive of the amount due above. Any such lump sum will
be payable within thirty (30) days after the date the
Company receives written notice of the Executive's
election to receive the lump sum. In addition, the
Company, throughout such twenty-four month period, will
continue the Executive's life insurance and health care
benefits coverage on the same terms and
<PAGE> 8
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 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.
b. Count the twenty-four (24) month period of severance pay
as continued service with the Company for purposes of
determining the Executive's vested benefits under the
Company's Senior Executive Benefits Program.
3.9 VESTING OF STOCK OPTIONS. In the event the proceeds from a sale
or disposition of any of the Divisions or Subsidiaries which the Company owns on
the date of this Agreement are used to provide a dividend to the shareholders of
the Company, then immediately upon the effective date of such sale or
disposition the Company will cause all stock options granted to the Executive
pursuant to the Key Employees' Stock Option Plan (the "Option Plan") to become
immediately exercisable in full and to remain fully exercisable so that the
Executive shall be entitled to become a shareholder of record such that the
Executive shall be entitled to receive the benefits of the dividend.
SECTION 4. COVENANTS
---------
4.1 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
<PAGE> 9
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.
4.2 CO-OPERATION. 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. Executive hereby agrees
not to make any statement or take any action, directly or 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. Executive agrees that subsequent to his termination of
employment he will, in conjunction with a Company request, reasonably cooperate
with the Company in connection with transition matters, disputes and litigation
matters upon reasonable notice, at reasonable times, and will be paid or
reimbursed for reasonable expenses incurred by the Executive relating to such
matters.
4.3 INJUNCTIVE RELIEF. In the event of a breach or threatened
breach of any of the provisions of this Section 4 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.
SECTION 5. MISCELLANEOUS
-------------
5.1 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.
<PAGE> 10
5.2 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.
5.3 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.
5.4 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.
5.5 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.
5.6 INDEMNIFICATION. The Company has obtained an opinion of Arthur
Andersen LLP that the payments and benefits under this Agreement do not exceed
the maximum amount which can be paid to the Executive without incurring an
excise tax under Section 4999 of the Internal Revenue Code. If the Internal
Revenue Service asserts that the amounts payable to the Executive under this
Agreement nonetheless give rise to an excise tax under Sections 4999 of the
Internal Revenue Code and the Executive co-operates with the Company in
appealing the determination of the Internal Revenue Service through whatever
level of administrative or judicial appeals is deemed appropriate by the
Company, the Company shall indemnify the Executive for the amount of such excise
tax, for any interest and penalties applicable thereto, and for any income or
excise taxes payable on such indemnification. The Company shall pay all costs of
challenging the determination that the excise tax applies to payments hereunder
including any administrative costs, court costs, attorney fees, and accounting
fees, whether incurred by the Company or incurred by the Executive.
5.7 REPLACEMENT OF EXISTING CONTRACTS. This Agreement will replace
the Management Agreement dated February 1, 1996 between Figgie and the Executive
and the Retention Agreement dated March 20, 1996 between Figgie and the
Executive.
<PAGE> 11
IN WITNESS WHEREOF, the Executive and the Company have executed
this Agreement as of the day and year first above written.
FIGGIE INTERNATIONAL INC.
By: /s/ F.R. McKnight
------------------------------------
F.R. McKnight
And: /s/ Steven L Siemborski
-----------------------------------
Steven L Siemborski
/s/ Robert D. Vilsack
- --------------------------------------
Robert D. Vilsack
<PAGE> 12
NON-COMPETITION AGREEMENT
In consideration of the promises and covenants of Figgie
International Inc. ("Figgie" or the "Company") contained in the Amended and
Restated Management Agreement between the Executive and Figgie including the
possible payment of twenty-four (24) months of severance pay to the Executive
under certain circumstances, the Executive hereby agrees that the Executive will
not, for a period of two (2) years after his termination of employment from
Figgie, directly or indirectly, for himself or for others, in any state of the
United States or in any foreign country where Figgie or any of its Affiliates
(as defined below) is then conducting business:
(1) engage, as an employee, partner, or sole proprietor, in
any business segment of any person or entity which
competes, directly or indirectly, with the product lines
of Figgie or its Affiliates; or
(2) in connection with any product lines of Figgie or its
Affiliates, render advice, consultation, or services to or
otherwise assist any other person or entity which
competes, directly or indirectly, with Figgie or any of
its Affiliates with respect to such product lines.
For the purposes of this Agreement, the term "Affiliates" shall mean any entity
controlled by or under common control with Figgie on the date of execution of
this Agreement, including, but not limited to, Figgie divisions and
subsidiaries.
The Executive understands that the foregoing restrictions may limit his
ability to engage in certain business pursuits during the period provided for
above, but acknowledges that he will receive sufficiently higher severance pay
from Figgie than he would otherwise receive to justify such restriction. The
Executive acknowledges that he understands the effect of the provisions of this
Agreement, that he has had reasonable time to consider the effect of these
provisions, and that he was encouraged to and had an opportunity to consult an
attorney with respect to these provisions. Figgie and the Executive consider the
restrictions contained in this Agreement to be reasonable and necessary.
Nevertheless, if any aspect of these restrictions is found to be unreasonable or
otherwise unenforceable by a Court of competent jurisdiction, the parties intend
for such restrictions to be modified by such Court so as to be reasonable and
enforceable and, as so modified by the Court, to be fully enforced.
<PAGE> 13
IN WITNESS WHEREOF, the Executive has executed this Agreement as of
this 11th day of June, 1997.
/s/ Robert D. Vilsack
- --------------------------------------
Robert D. Vilsack
<PAGE> 1
Exhibit 10.0(e)
October 15, 1997
Mr. G. W. Lindemann
c/o Figgie International Inc.
4420 Sherwin Road
Willoughby, Ohio 44094
Dear Glen:
This letter shall serve to confirm the terms of employment as Chief Executive
Officer and President of Figgie International Inc. and is issued under the
authority of the Management Development, Compensation and Nominating Committee
of the Board of Directors.
From October 1, 1997 through December 31, 1997 the terms of employment shall be
governed by this letter; and thereafter by the terms of an executive employment
agreement with an initial term of three years.
The following terms shall cover the period beginning October 1, 1997 through
December 31, 1997:
Base Salary
- -----------
Bases salary shall be $29,166.67 per month.
Bonus
- -----
The normal executive bonus plan shall apply, but with a guaranteed minimum bonus
of $7,500 per month for the three month period. However, if the corporate
performance targets are met, the bonus shall not be less than $16,250 per month
for the three month period. The bonus will be paid within the normal time period
under the plan.
Total Cash Compensation
- -----------------------
The total cash compensation for 1997 shall not be less than the following:
<TABLE>
<S> <C> <C>
Scott Salary (through 9/30/97) $133,917
Scott Bonus (through 9/30/97) $ 57,528 (at 100% of Plan)
Corporate Bonus (through 9/30/97) $ 0 (must meet 90% of Plan)
Office of the Chairman Bonus $100,000 (8 months @ $12,500/mo)
Corporate Salary (after 10/1/97) $ 87,500
Corporate Bonus (after 10/1/97) $ 22,500
------------------------------- --------
Total 1997 Cash Compensation $401,445
</TABLE>
<PAGE> 2
G. W. Lindemann
October 15, 1997
Page 2
Stock Options
- -------------
The Stock Option Committee has granted to you an option to purchase 200,000
shares of Class "A" Common stock at a price equal to the market close on
September 19, 1997. Such option shall be "qualified" to the extent possible.
This option grant shall have a life of seven years and exercisable in accordance
with the following:
<TABLE>
<CAPTION>
Cumulative Shares
Exercisable Effective Date
----------- --------------
<S> <C>
40,000 September 22, 1998
80,000 September 22, 1999
120,000 September 22, 2000
160,000 September 22, 2001
200,000 September 22, 2002
</TABLE>
Other Benefits
- --------------
You are eligible for the normal executive benefits including: relocation
allowance, medical insurance, dental insurance, split-dollar life insurance,
country club and vehicle allowance
The Senior Executive Benefits Plan (S.E.B.P.) shall be deferred until the Board
of Directors receives from management specific recommendations regarding changes
to this plan. Thereafter, you will be offered a S.E.B.P. agreement after
changes, if any, have been adopted; with the intent of providing a benefit which
is competitive with other similar U.S. corporations. In any event, the time
served as C.E.O. from October 1, 1997 will be credited towards the senior
executive benefit, as will all service from date of hire as such time may apply
under the terms of this Plan.
The members of the Nominating Committee are extremely pleased that you have
accepted the appointment as C.E.O. and President of Figgie International, and
look forward to the company continuing on a successful track under your
leadership.
Sincerely,
/s/ William J. Sickman
William J. Sickman
Vice President, Corporate Relations
cc: Nominating Committee
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 46,524
<SECURITIES> 0
<RECEIVABLES> 38,607
<ALLOWANCES> 193
<INVENTORY> 37,286
<CURRENT-ASSETS> 210,677
<PP&E> 116,099
<DEPRECIATION> 46,803
<TOTAL-ASSETS> 360,098
<CURRENT-LIABILITIES> 69,143
<BONDS> 177,133
0
0
<COMMON> 1,844
<OTHER-SE> 77,319
<TOTAL-LIABILITY-AND-EQUITY> 360,098
<SALES> 185,574
<TOTAL-REVENUES> 185,574
<CGS> 128,374
<TOTAL-COSTS> 165,231
<OTHER-EXPENSES> 2,474
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 12,329
<INCOME-PRETAX> 5,540
<INCOME-TAX> 1,864
<INCOME-CONTINUING> 3,676
<DISCONTINUED> 1,660
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,336
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
