<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
FIGGIE INTERNATIONAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
================================================================================
<PAGE> 2
FIGGIE INTERNATIONAL INC.
4420 SHERWIN ROAD
WILLOUGHBY, OHIO 44094
(THROUGH DECEMBER 1, 1997)
5875 LANDERBROOK DRIVE
MAYFIELD HEIGHTS, OHIO 44124
(AFTER DECEMBER 1, 1997)
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Class A
Common Stock, par value $.10 per share, and the holders of Class B Common Stock,
par value $.10 per share, of Figgie International Inc. (the "Corporation") will
be held at Interstate Electronics Corporation, 604 East Vermont Avenue, Anaheim,
California, on Wednesday, December 10, 1997, at 9:00 a.m. Pacific Standard Time,
to consider and take action with respect to the following:
1. To elect a class of two Directors each for a term of three years and
until their successors shall be elected and qualified; and
2. To conduct such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Holders of Class A Common Stock and holders of Class B Common Stock of
record at the close of business on November 3, 1997 are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
Glen W. Lindemann
President and Chief Executive
Officer
Dated: November 7, 1997
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY/VOTING
INSTRUCTION CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
FIGGIE INTERNATIONAL INC.
4420 SHERWIN ROAD
WILLOUGHBY, OHIO 44094
(THROUGH DECEMBER 1, 1997)
5875 LANDERBROOK DRIVE
MAYFIELD HEIGHTS, OHIO 44124
(AFTER DECEMBER 1, 1997)
------------------------
PROXY STATEMENT
MAILED ON NOVEMBER 7, 1997
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 10, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Figgie International Inc. (the
"Corporation") to be used at the Annual Meeting of the holders of Class A Common
Stock, par value $.10 per share (the "Class A Common Stock"), and the holders of
Class B Common Stock, par value $.10 per share (the "Class B Common Stock"), of
the Corporation to be held on December 10, 1997 and at any adjournments thereof.
The time and place of the Annual Meeting are stated in the Notice of Annual
Meeting of Stockholders which accompanies this Proxy Statement.
The expense of soliciting proxies, including the costs of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Corporation. In addition to the use of the mail, proxies may be solicited
personally or by telephone, facsimile or telegraph, and the Corporation may pay
persons holding shares for others their expenses in sending proxy material to
their principals. Solicitation of proxies may also be made on behalf of the
Board of Directors by Morrow & Company at a total cost, including fees and
expenses, of approximately $6,000. Proxies may be solicited by Morrow & Company
by personal interview, mail, telephone, facsimile and telegraph.
VOTING RIGHTS
Only stockholders of record at the close of business on November 3, 1997
are entitled to notice of and to vote at the Annual Meeting. The proxy will also
serve to instruct the trustees of the Figgie International Inc. Stock Ownership
Trust and Plan (the "ESOP"), the Figgie International Inc. Supplementary
Retirement Savings Plan, the Figgie International Inc. Savings Plan for Hourly
Paid Employees and the Figgie International Inc. 401(k) Savings Plan for
Bargaining Unit Employees on how to vote any shares of the Corporation's common
stock held by the plans. The number of shares printed on the proxy/voting
instruction card accompanying this proxy statement includes, when applicable,
shares allocated to the participants in any such plan.
At the close of business on November 3, 1997, the Corporation had
outstanding 13,738,930 shares of Class A Common Stock and 4,712,747 shares of
Class B Common Stock. The holders of issued and outstanding shares of Class A
Common Stock are generally entitled to 1/20 of one vote for each share held by
them on each matter to be presented with certain exceptions set forth below. The
holders of issued and outstanding shares of Class B Common Stock are generally
entitled to one vote for each share held by them on each matter to be presented
with certain exceptions set forth below.
Article Sixth of the Corporation's Restated Certificate of Incorporation
(the "Substantial Stockholder Provision") places limitations on the ability of
certain persons coming within the definition of a "Substantial Stockholder"
(other than any employee stock ownership or similar plan of the Corporation
1
<PAGE> 4
or a trustee with respect thereto) to vote shares of the Corporation's voting
stock beneficially owned by them. A Substantial Stockholder is defined as any
beneficial owner of more than a "threshold percentage" -- generally 20.00% -- of
the outstanding shares of any class of voting stock of the Corporation. If a
stockholder's percentage of shares of a class of voting stock of the Corporation
increases above the threshold applicable to him as a result of purchases,
redemptions or other acquisitions of shares of the class by the Corporation or
decreases below the threshold applicable to him as a result of an issuance of
shares of a class by the Corporation or a reduction in beneficial ownership by
the stockholder, then the stockholder's threshold percentage is adjusted to
equal the percentage of outstanding shares of the class held immediately after
such event, but never below 20.00%. The record holders of any shares
beneficially owned by a Substantial Stockholder are entitled to 1/20 of one vote
for each share of Class A Common Stock held and one vote for each share of Class
B Common Stock held up to the Substantial Stockholder's threshold percentage of
each class or series, and 1/100 of such vote for each share held in excess of
such threshold percentage for each class or series. Thus, a Substantial
Stockholder holding shares in excess of the applicable threshold percentage
would be entitled to 1/2000 of a vote for each such share of Class A Common
Stock and 1/100 of a vote for each such share of Class B Common Stock. Also, a
Substantial Stockholder may exercise a maximum percentage of the voting power of
each class or series equal to his threshold percentage for that class plus 5%.
The excess shares owned above the threshold percentage plus 5% cannot be voted
by the Substantial Stockholder. The aggregate voting power of a Substantial
Stockholder, so limited, is allocated proportionately among the record holders
of the shares beneficially owned by the Substantial Stockholder.
As of September 30, 1997, the Corporation believes that no stockholder of
the Corporation beneficially owned shares in excess of such stockholder's
applicable threshold percentage.
The holders of record of shares entitled to cast a majority of the votes
entitled to be cast must be present in person or represented by proxy in order
to constitute a quorum for the holding of the Annual Meeting.
Candidates for election as Directors receiving a plurality of the votes of
holders of Class A Common Stock and holders of Class B Common Stock present in
person or represented by proxy, voting together and not as separate classes,
will be elected to the seats on the Board of Directors of the class whose term
expires in 2000.
Shares entitled to vote represented by proxies which are properly executed
and returned before the Annual Meeting will be voted at the Annual Meeting as
directed therein. If no vote is specified therein, the shares will be voted
"FOR" the election of the nominees for Director named in the Proxy Statement.
Shares represented by proxies which are marked "WITHHELD" with regard to the
election of the nominees for Director will be excluded entirely from the vote
and will have no effect.
The Board of Directors does not know of any other business to be presented
for consideration at the Annual Meeting. If any other business properly comes
before the Annual Meeting or any adjournment thereof, the proxies will be voted
on such matters in the discretion of the proxy holders insofar as the proxies
are not limited to the contrary. The Delaware General Corporation Law provides
that, unless otherwise provided in the proxy and unless the proxy is coupled
with an interest, a stockholder may revoke a proxy previously given at any time
prior to its exercise at the Annual Meeting. A stockholder who has given a proxy
may revoke it at any time before it is exercised by delivering to any of the
persons named as proxies, or to the Corporation addressed to the Secretary, an
instrument revoking the proxy, by appearing at the Annual Meeting and voting in
person or by executing a later dated proxy which is exercised at the Annual
Meeting.
2
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The stockholders named in the following table are those which are known to
the Corporation to be the beneficial owners of 5% or more of the Corporation's
Class A Common Stock or Class B Common Stock. Unless otherwise indicated, the
information is as of November 3, 1997. For purposes of this table, and as used
elsewhere in this Proxy Statement, the term "beneficial owner" means any person
who, directly or indirectly, has or shares the power to vote, or to direct the
voting of, a security or the power to dispose, or to direct the disposition of,
a security or has the right to acquire shares within sixty (60) days. Except as
otherwise indicated, the Corporation believes that each owner listed below
exercises sole voting and dispositive power over his or its shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- ----------------------- ----------------------------------- ------------ ---------
<S> <C> <C> <C>
Class A Common Stock NewSouth Capital Management, Inc. 1,827,991(1) 13.3%
1000 Ridgeway Loop Road, Suite 233
Memphis, TN 38120
Class A Common Stock The Prudential Insurance Company of 969,600(2) 7.1%
America
Prudential Plaza
Newark, NJ 07102-3777
Class A Common Stock Westchester Capital Management 927,627 (3) 6.8%
100 Summit Lake Drive
Valhalla, NY 10595
Class A Common Stock Wellington Management Company 825,000 (4) 6.0%
75 State Street
Boston, MA 02109
Class A Common Stock J.O. Hambro & Partners Limited 736,100(5) 5.4%
10 Park Place
London SW1A 1LP
England
Class B Common Stock Wilmington Trust Corporation 1,028,868(6) 21.8%
1100 North Market Street
Wilmington, DE 19890
Class B Common Stock The Figgie Family Group 939,088(7) 19.9%
37001 Shaker Boulevard
Hunting Valley, OH 44022
Class B Common Stock Mentor Partners LP 433,300(8) 9.2%
500 Park Avenue
New York, NY 10022
Class B Common Stock The Goldman Sachs Group, L.P. 283,188(9) 6.0%
85 Broad Street
New York, NY 10004
</TABLE>
3
<PAGE> 6
- ---------------
(1) This amount, as reflected in a report on Schedule 13G dated February 13,
1996 and as of December 31, 1995, consists of 1,737,991 shares as to which
the reporting person claims sole voting power, 90,000 shares as to which the
reporting person claims shared voting power and 1,827,991 shares as to which
the reporting person claims sole dispositive power. The reporting person
does not claim any shared dispositive power.
(2) This amount, as reflected in a report on Schedule 13G dated January 28, 1997
and as of December 31, 1996, consists of 720,600 shares as to which the
reporting person claims sole voting power, 241,300 shares as to which the
reporting person claims shared voting power, 720,600 shares as to which the
reporting person claims sole dispositive power and 249,000 shares as to
which the reporting person claims shared dispositive power.
(3) This amount, as reflected in a report on Schedule 13G dated February 5, 1997
and as of December 31, 1996, consists of 863,872 shares as to which the
reporting person claims sole voting power, 63,800 shares as to which the
reporting person claims shared voting power, 863,872 shares as to which the
reporting person claims sole dispositive power and 63,800 shares as to which
the reporting person claims shared dispositive power.
(4) This amount, as reflected in a report on Schedule 13G dated January 24, 1997
and as of December 31, 1996, consists of 405,400 shares as to which the
reporting person claims shared voting power and 825,000 shares as to which
the reporting person claims shared dispositive power. The reporting person
does not claim any sole voting power or sole dispositive power.
(5) This amount, as reflected in a report on Schedule 13D dated September 9,
1997 and as of September 9, 1997, consists of 736,100 shares as to which the
reporting person claims shared voting and dispositive power. The reporting
person does not claim any sole voting or dispositive power.
(6) This amount, as reflected in a report on Schedule 13G dated February 3, 1997
and as of December 31, 1996, filed by Wilmington Trust Corporation ("WT
Corporation") and Wilmington Trust Company ("WT Company") consists of
261,872 shares as to which WT Corporation and WT Company claim sole voting
and dispositive power and 766,996 shares as to which WT Corporation and WT
Company claim shared voting and dispositive power.
(7) This amount, based upon reports on Form 4 dated August 25, 1997, filed by
Harry E. Figgie, Jr. and Nancy F. Figgie, and a report on Schedule 13D/A
dated July 2, 1997, filed by Harry E. Figgie, Jr., Nancy F. Figgie, Harry E.
Figgie, III, Mark P. Figgie, Matthew P. Figgie, The Figgie Family Foundation
and The Clark-Reliance Corporation, as a group, consists of 579,734 shares
as to which Harry E. Figgie, Jr. claims sole voting and dispositive power,
57,881 shares as to which Nancy F. Figgie claims sole voting and dispositive
power, 105,995 shares as to which Harry E. Figgie, III claims sole voting
and dispositive power, 58,189 shares as to which Mark P. Figgie claims sole
voting and dispositive power, 613 shares as to which Matthew P. Figgie
claims sole voting and dispositive power, 2,112 shares as to which The
Figgie Family Foundation claims sole voting and dispositive power and as to
which Harry E. Figgie, Jr. claims shared voting and dispositive power and
134,564 shares as to which The Clark-Reliance Corporation claims sole voting
and dispositive power. Except as indicated, the reporting persons do not
claim any shared voting power or shared dispositive power. The members of
the Figgie Family Group filed a report on Schedule 13D/A with the Securities
and Exchange Commission (the "SEC") on September 11, 1995 to report their
formation of a "group" for the purpose of disposing of their investment in
the Corporation.
4
<PAGE> 7
(8) This amount, as reflected in a report on Schedule 13D/A dated December 27,
1995 and as of December 31, 1995, consists of 433,300 shares as to which the
reporting person claims sole voting and dispositive power. The reporting
person does not claim any shared voting power or shared dispositive power.
(9) This amount, as reflected in a report on Schedule 13G dated February 14,
1997 and as of December 31, 1996, filed by The Goldman Sachs Group, L.P. and
Goldman Sachs & Co. consists of 293,188 shares as to which the reporting
person claims shared voting power and 293,188 shares as to which the
reporting person claims shared dispositive power. The reporting person does
not claim any sole voting power or sole dispositive power.
5
<PAGE> 8
STOCK OWNERSHIP OF DIRECTORS,
NOMINEES FOR DIRECTOR, EXECUTIVE OFFICERS
AND THREE FORMER EXECUTIVE OFFICERS
The following table and notes thereto set forth information, as of
September 30, 1997 (except as specified below), with respect to the beneficial
ownership of shares of Class A Common Stock and Class B Common Stock by each
Director, each nominee for Director and each Executive Officer named in the
Summary Compensation Table (which includes three former Executive Officers) and,
as a group, by the Directors and current Executive Officers of the Corporation,
based upon information furnished to the Corporation by such persons.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP AS OF
SEPTEMBER 30, 1997(1)
---------------------------
CLASS A PERCENTAGE CLASS B PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK OF CLASS COMMON STOCK OF CLASS
- --------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Fred J. Brinkman................. 500 * 3,600 *
Robert P. Collins................ 0 * 0 *
Glen W. Lindemann................ 11,576(2) * 1,373(2) *
F. Rush McKnight................. 1,315(3) * 6,503(3) *
Harrison Nesbit, II.............. 1,005(4) * 6,562(4) *
John P. Reilly................... 320,582(5) 2.3% 237 *
Steven L. Siemborski............. 138,480(2) 1.0% 482(2) *
A. A. Sommer, Jr................. 2,250 * 7,750 *
Walter M. Vannoy................. 25,982(2) * 10,068(2) *
L. A. Harthun.................... 6,265(2)(6) * 566(2) *
Keith V. Mabee................... 30,000(2)(7) * 0 *
Robert D. Vilsack................ 10,292(8) * 459 *
All Directors and Current
Executive Officers
as a Group (9 persons)......... 521,158(2) 3.8% 37,425(2) *
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Except as otherwise indicated in footnote (2) and as limited by the terms of
applicable stock plans, each Director, Executive Officer or former Executive
Officer owning shares listed or included in this table exercises sole voting
and dispositive power over such shares. The shares shown include 330,000
shares of Class A Common Stock with respect to which certain former
Executive Officers have a right to acquire beneficial ownership within sixty
(60) days.
(2) These amounts include shares of Class A Common Stock and Class B Common
Stock held by the ESOP which are subject to certain pass-through voting and
tendering rights. Participants in this plan are entitled to instruct the
trustee of the plan (the "Trustee"), on a confidential basis, on how to vote
and how to respond to a tender or exchange offer for shares allocated to
their accounts. Under the trust agreement, as amended in November 1994,
shares for which no instructions are received can be voted or tendered by
the Trustee. The numbers of shares of Class A Common Stock and Class B
Common Stock held by the ESOP which have been allocated to Mr. Lindemann,
Mr. Vannoy, the Named Executive Officers, and all of the current Executive
Officers and Directors as a group are as follows: Mr. Lindemann -- 1,376
shares of Class A Common Stock and 1,373 shares of Class B Common Stock; Mr.
Vannoy -- 460 shares of Class A Common Stock and 542 shares of Class B
Common Stock; Mr. Siemborski -- 642 shares of Class A Common Stock and 482
shares of Class B Common Stock; Mr. Harthun -- 598 shares of Class A Common
Stock and 566 shares of Class B Common Stock; Mr. Vilsack -- 542 shares of
6
<PAGE> 9
Class A Common Stock and 459 shares of Class B Common Stock; and all current
Executive Officers and Directors as a group -- 3,405 shares of Class A
Common Stock and 3,247 shares of Class B Common Stock.
(3) These amounts do not include 575 shares of Class A Common Stock and 575
shares of Class B Common Stock owned by Mr. McKnight's wife.
(4) These amounts do not include 2,405 shares of Class A Common Stock and 47
shares of Class B Common Stock owned by Mr. Nesbit's wife.
(5) This amount includes 300,000 shares that may be acquired within sixty (60)
days by exercising a stock option.
(6) Mr. Harthun retired from the Corporation on July 5, 1996.
(7) This amount represents 30,000 shares that may be acquired within sixty (60)
days by exercising a stock option. Mr. Mabee resigned from the Corporation
as of January 30, 1997.
(8) Mr. Vilsack resigned from the Corporation as of September 19, 1997.
7
<PAGE> 10
NOMINATION AND ELECTION OF DIRECTORS
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than five (5) nor more than eleven (11) members and that,
within such limits, the Board of Directors is empowered to increase or decrease
the total number of Directors as well as the number of Directors in each class
provided that each class shall continue to consist of, as nearly as may be,
one-third of the whole number of the Board of Directors. At present, the Board
of Directors of the Corporation is fixed at eight (8) Directors divided into
three classes of three (3), three (3) and two (2) Directors each. The Board of
Directors has determined to fix the size of the Board effective as of the 1997
Annual Meeting at seven (7) Directors, divided into three classes of three (3),
two (2) and two (2) Directors each. The term of office of one class of Directors
expires each year, and at each annual meeting the successors to the Directors of
the class whose term is expiring in that year are elected to hold office for a
term of three (3) years and until their successors shall be elected and
qualified.
The three (3) directorships expiring this year are presently filled by
Steven L. Siemborski, A.A. Sommer, Jr. and Walter M. Vannoy. Steven L.
Siemborski has stated that he will stand for re-election as a Director but A.A.
Sommer, Jr. and Walter M. Vannoy will not stand for re-election. The Board has
nominated Steven L. Siemborski and Robert P. Collins as nominees for the class
of Directors to be elected at this Annual Meeting. If both nominees are elected
at this Annual Meeting, the Board of Directors shall consist of seven (7)
Directors divided into three classes of three (3), two (2) and two (2) Directors
each.
Each of the nominees has informed the Corporation that he is willing to
serve for the term to which he is nominated if he is elected. If a nominee for
Director should become unavailable for election or is unable to serve as a
Director, the shares represented by proxies voted in favor of that nominee will
be voted for any substitute nominee as may be named by the Board of Directors.
The information appearing in the following tables and the notes thereto has
been furnished to the Corporation, where appropriate, by the nominees for
Director and the Directors continuing in office with respect to: (i) the present
principal occupation or employment of each respective nominee and continuing
Director and, if such principal occupation or employment has not been carried on
during the past five years, the occupation or employment during such period,
(ii) the names and principal businesses of the corporations or other
organizations in which such occupation or employment is carried on and/or has
been carried on during the past five years, and (iii) the directorships held by
each respective nominee or continuing Director on the boards of publicly held
and certain other corporations and entities:
8
<PAGE> 11
NOMINEES FOR ELECTION AS DIRECTORS TO BE
ELECTED FOR A TERM OF THREE YEARS
<TABLE>
<CAPTION>
IF ELECTED,
TERM EXPIRES
SERVED AS AT ANNUAL MEETING
DIRECTOR OF STOCKHOLDERS
NAME AND PRINCIPAL OCCUPATION SINCE IN
- ------------------------------------------------------------ --------- ------------------
<S> <C> <C>
ROBERT P. COLLINS, age 59 -- 2000
President and Chief Executive Officer, GE Fanuc Automation
North America, Inc., a manufacturer of industrial
control systems; Co-Chairman, GE Fanuc
Automation -- Europe; Chairman, GE Fanuc Eberle
Automation; Chairman, AFE Ltd.; Director, Fanuc
Robotics Corporation, Beijing Fanuc Mechatronics and
Fanuc GE Automation -- Singapore.
STEVEN L. SIEMBORSKI, age 43(1) 1994 2000
Senior Vice President and Chief Financial Officer, Figgie
International Inc., since July 1, 1994; Member of
Office of the Chairman, Figgie International Inc., from
January 24, 1997 to September 22, 1997; former Partner,
Ernst & Young LLP.
</TABLE>
- ---------------
(1) See discussion under the caption "CERTAIN TRANSACTIONS."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR.
9
<PAGE> 12
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
SERVED AS TERM EXPIRES AT
NAME AND DIRECTOR ANNUAL MEETING OF
PRINCIPAL OCCUPATION SINCE STOCKHOLDERS IN
- ------------------------------------------------------------ --------- ------------------
<S> <C> <C>
GLEN W. LINDEMANN, age 58................................... 1996 1999
President and Chief Executive Officer, Figgie
International Inc., since September 22, 1997; Member of
Office of the Chairman, Figgie International Inc., from
January 24, 1997 to September 22, 1997; President of
Figgie International Inc.'s Scott Aviation division
from 1989 to September 22, 1997; President, Paxall
Circle Machinery from 1986 to 1989; President, Telesis
Controls Corp. from 1983 to 1986; General Manager,
Norton Company, Safety Equipment Group from 1979 to
1983.
HARRISON NESBIT, II, age 70................................. 1969 1999
Retired; Chairman and Director, Godine, Nesbit, McCabe &
Co., an insurance brokerage firm, from 1987 to 1993;
former General Agent, State of Virginia, Massachusetts
Mutual Life Insurance Co.; Director, St. George Metals,
Inc.
FRED J. BRINKMAN, age 68.................................... 1992 1998
Consultant; Partner, Arthur Andersen LLP, public
accountants, until June 30, 1991, Senior Partner,
Asia--Pacific area from 1978 to 1989, and Managing
Partner of the firm's Washington, D.C. office from 1981
to 1987; Director, Washington Gas Light Co., Charles E.
Smith Residential Realty Inc., and Washington Mutual
Investors Fund.
F. RUSH McKNIGHT, age 68.................................... 1985 1998
Partner, Calfee, Halter & Griswold, Cleveland, Ohio, law
firm until January 1, 1997, and Managing Partner from
1985 to 1991; Director, Universal Electronics, Inc.
JOHN P. REILLY, age 54...................................... 1995 1998
President and CEO, Reilly, Erwin & Co., since October 1,
1997; President and CEO, Stant Corporation, January 27,
1997 to August 31, 1997; Non-employee chairman, Figgie
International Inc., since January 24, 1997; Member of
Office of the Chairman, Figgie International Inc., from
January 24, 1997 to September 22, 1997; former Chief
Executive Officer, Figgie International Inc., from
January 3, 1995 to January 24, 1997; former President,
Figgie International Inc., from May 16, 1995 to January
24, 1997; President and Chief Executive Officer,
Brunswick Corporation, from 1993 to 1994; President and
Chief Executive Officer, Tenneco Automotive, from 1987
to 1993; Director, Aeroquip-Vickers (formerly known as
Trinova Corporation).
</TABLE>
10
<PAGE> 13
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 9 non-telephonic meetings and 1 telephonic
meeting during the year ended December 31, 1996. During the year, no incumbent
Director attended fewer than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors held during the period he served as a
Director and (ii) the total number of meetings held by any Committee of the
Board on which he served.
The committees of the Board of Directors, their principal functions and
their respective memberships are as follows:
EXECUTIVE AND FINANCE COMMITTEE
J. Reilly, (Chairman)
W. Vannoy
F. Brinkman
F.R. McKnight
H. Nesbit, II
S. Siemborski (ex-officio and non-voting)
G. Lindemann (ex-officio and non-voting)
The Executive and Finance Committee acts on behalf of the Board of
Directors during the periods of the year in which the Board does not meet
and focuses particularly on the review and oversight of budgets, issuance
of securities, proposed financings and acquisitions and dispositions. Until
the Annual Meeting of Stockholders on November 26, 1996, the Executive and
Finance Committee during 1996 consisted of W. Vannoy (Chairman), F.
Brinkman and H. Nesbit, II with J. Reilly and S. Siemborski as ex-officio
and non-voting observers.
AUDIT COMMITTEE
A.A. Sommer, Jr., Chairman
F. Brinkman
F.R. McKnight
The Audit Committee's principal assignment is the oversight and review of
the internal and external audit functions of the Corporation. The Audit
Committee during 1996 also included H. Nesbit, II.
MANAGEMENT DEVELOPMENT--COMPENSATION AND NOMINATING COMMITTEE
F.R. McKnight, Chairman
H. Nesbit, II
F. Brinkman
A.A. Sommer, Jr.
W. Vannoy
J. Reilly
The Management Development-Compensation and Nominating Committee evaluates
candidates for Board membership, makes recommendations with respect to the
number of Directors and candidates to be included in the annual proxy
materials, recommends candidates to fill Board vacancies and exercises
overall authority with respect to the compensation, development and
succession of executive personnel. Until the Annual Meeting of Stockholders
on November 26,
11
<PAGE> 14
1996, the Management-Compensation and Nominating Committee included Alfred
V. Gagnes, who did not stand for re-election as a director, and John P.
Reilly as an ex-officio and non-voting observer.
STOCK OPTION COMMITTEE
A. A. Sommer, Jr., Chairman
F. Brinkman
H. Nesbit, II
The Stock Option Committee administers the Figgie International Inc. Key
Employees' Stock Option Plan (the "Stock Option Plan") and administered the
1993 Restricted Stock Purchase Plan for Employees (the "Restricted Stock
Plan") until its termination as of January 2, 1997.
The Board committees held the following numbers of meetings during 1996:
Executive and Finance Committee 3, Audit Committee 2, Management
Development-Compensation and Nominating Committee 6, and Stock Option Committee
3. Not included in these totals are those instances in which the committees took
action by written unanimous consent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until the Annual Meeting of the Stockholders on November 26, 1996, the
Management Development-Compensation and Nominating Committee of the Board of
Directors consisted of Harrison Nesbit, II (Chairman), Fred J. Brinkman, Alfred
V. Gangnes, F. Rush McKnight, A.A. Sommer, Jr., and Walter M. Vannoy, with John
P. Reilly participating in an ex-officio and non-voting basis. After the Annual
Meeting, the members of the committee during 1996 remained the same except that
Mr. Gangnes was no longer a member because he was no longer a director. The
composition of the Committee is different in 1997, as set forth above.
The members of the Stock Option Committee of the Board of Directors during
1996 were A.A. Sommer, Jr. (Chairman), Fred J. Brinkman and Harrison Nesbit, II.
The Corporation entered into an employment agreement dated October 28, 1994
(the "Agreement") with Walter M. Vannoy. The Agreement provided for Mr. Vannoy's
employment as Vice-Chairman of the Board of Directors between February 16, 1994
and May 18, 1994, as CEO from May 18, 1994 until such time as a new CEO was duly
elected and took office, and as Chairman of the Board from May 18, 1994 until a
new Chairman was named, and provided him with a salary and various benefits for
a specified period thereafter. Mr. Vannoy's annual base salary under the
Agreement was $400,000. In addition to his base salary, Mr. Vannoy was entitled
to receive a discretionary bonus under the regular bonus programs of the
Corporation, and to be reimbursed for all reasonable expense incurred while
performing his duties under the Agreement. Upon Mr. Vannoy's retirement from the
Corporation, the Corporation repurchased 50% of the 115,497 shares of restricted
stock acquired by Mr. Vannoy pursuant to the Agreement and under the Restricted
Stock Plan. During 1995, Mr. Vannoy received $400,000 pursuant to the provisions
of the Agreement as well as the use of an apartment and a car and reimbursement
of moving expenses, and during 1996, he received $150,000 until the termination
of his employment under the Agreement.
Notwithstanding anything to the contrary, the following reports of the
Compensation Committee and the Stock Option Committee and the Performance
Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934,
12
<PAGE> 15
as amended, except to the extent that the Corporation specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Development-Compensation and Nominating Committee (the
"Compensation Committee") of the Board of Directors has overall authority with
respect to, among other things, the cash compensation paid by the Corporation to
executive personnel and other key employees. The Stock Option Committee of the
Board of Directors oversees the Corporation's long-term incentive program under
which stock options and restricted stock are awarded to key employees, including
executives.
Set forth below are the reports of each committee with respect to executive
compensation.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE CASH COMPENSATION
The Compensation Committee's cash compensation policies are designed: (a)
to align closely the financial interests of the Corporation's executive
officers, including the chief executive officer (the "CEO"), with the financial
interests of the Corporation's stockholders and thereby to enhance the
Corporation's profitability and stockholder value; (b) to provide compensation
packages that are competitive and will attract and retain qualified personnel;
and (c) to reward individual performance. The Corporation's cash compensation
policies are designed to provide an incentive for executive officers to achieve
the Corporation's goals by relating a substantial portion of executive
compensation directly to the Corporation's performance.
Executive Officer Compensation Policies
The Compensation Committee, assisted by both an independent compensation
consultant and data generated by independent executive compensation analysts,
annually establishes ranges of total cash compensation to be paid to executives
in each pay grade based upon its review of national surveys of executive
compensation which include peer data for diversified corporations of a similar
size.
BASE SALARY. The Compensation Committee establishes base salary amount
ranges for pay grades for executive officers at amounts that, in general, are
substantially similar to the average base salary amounts expected by the
Corporation to be paid by companies of comparable size to executives having
comparable positions. The performance of such companies is not taken into
account by the Compensation Committee because it believes that the Corporation
must pay competitive base salaries in order to attract and retain qualified
executives. In determining base salaries for specific executive officers, the
Compensation Committee takes into account the performance of the executive
officers. The base salaries for 1996 for executive officers other than the CEO
and the chief financial officer, who have employment agreements, were
established during the month of January 1996.
ANNUAL CASH INCENTIVE AMOUNTS. The Corporation has an incentive program
under which the officers have the opportunity to receive a bonus which is
directly related to the performance of the Corporation. An incentive pool for
officers and other key executives is established based upon actual performance
against the Corporation's business plan. The bonus amount for each participant
is then calculated in two components: a formula-based component and a
discretionary component.
13
<PAGE> 16
Fifty percent of the bonus pool is used for the formula-based component,
which is based upon the Corporation achieving a specified amount of net income.
All participants receive the same percent of target bonus based upon actual net
income. The percent of base salary in the formula varies by salary grade, but is
the same for all participants within a salary grade. For 1996, formula-based
bonuses were awarded in line with the Corporation having achieved its
performance targets.
Fifty percent of the bonus pool is reserved for the discretionary
component. The CEO recommends the amount of the discretionary component for each
executive officer, other than himself, after assessing the performance of each
of those executives. The Compensation Committee then determines the amount of
the discretionary award for each executive, including the CEO, up to the maximum
percentage of base salary for such award. The discretionary component is based
upon the executive's performance, including such person's contributions to the
success of those operations for which such person is responsible and to the
Corporation in general. Discretionary bonuses were paid for 1996.
MANAGEMENT AND RETENTION AGREEMENTS. During 1996, the Corporation entered
into an agreement with Robert Vilsack that was substantially the same as the
management agreements it had entered into with two executive officers during
1995. These agreements were entered into to induce the executive officers to
remain with the Corporation for the periods provided in such agreements. The
Compensation Committee determined that the Corporation's best interests required
continuity of the Corporation's management team during the Corporation's efforts
to accomplish a comprehensive plan for restructuring the Corporation's diverse
businesses in order to improve its financial condition and operating results.
In addition, during 1996, the Corporation entered into retention agreements
with three executive officers in order to induce them to remain with the
Corporation while the Corporation explored strategic alternatives for the
Corporation including a merger, consolidation or sale of the Corporation.
CEO Compensation
In determining a CEO's base salary and the maximum percentages of such base
salary amount payable as formula-based and discretionary bonus awards, the
Compensation Committee historically has evaluated the compensation paid to chief
executive officers of comparable companies. In addition, the amounts of a CEO's
base salary and any discretionary bonus award have generally reflected a CEO's
performance with respect to operations for which he is specifically responsible
as well as the overall success of the Corporation in achieving the strategic
goals defined by him and the Corporation's Board of Directors, taking into
account the general economic environment and conditions in the industries in
which the Corporation operates.
Mr. Reilly, the Corporation's CEO during 1996, entered into an employment
agreement with the Corporation dated January 1, 1995 when he became the CEO of
the Corporation. The compensation provided for in the employment agreement was
determined based upon the amounts of base salaries paid and the terms of other
awards provided to chief executive officers of companies of a comparable size to
that of the Corporation at that time and as a result of the negotiations with
Mr. Reilly. Pursuant to his employment contract, the CEO received a base salary
of $500,000 for 1996. Mr. Reilly's employment agreement is described elsewhere
in this Proxy Statement. The Committee awarded Mr. Reilly a bonus of $300,000
for 1996 based upon the performance of the Corporation in 1996, including its
consistent profitability, overall improved operating results and the completion
of the Corporation's divestiture plan. Although Mr. Reilly resigned as CEO of
the Corporation prior to the payment of the 1996 bonus, which entitled the
Committee to withhold payment of the bonus, he agreed to continue to serve as
Chairman of
14
<PAGE> 17
the Board and member of the Office of the Chairman. The Committee determined to
pay Mr. Reilly the 1996 bonus on a monthly basis during 1997 and no other
compensation.
Harrison Nesbit, II Fred J. Brinkman F. Rush McKnight
A.A. Sommer, Jr. Walter M. Vannoy
STOCK OPTION COMMITTEE REPORT
ON LONG-TERM EXECUTIVE COMPENSATION
The Stock Option Committee has administered the Corporation's long-term
incentive program under which executive officers and other senior executives of
the Corporation are provided the opportunity to buy shares of the Common Stock
of the Corporation. Starting in 1978, four five-year restricted stock purchase
plans were approved by the Corporation's stockholders. In 1993, the
Corporation's stockholders approved the 1993 Restricted Stock Purchase Plan for
Employees (the "Restricted Stock Plan"), which was substantially similar to
prior plans. On October 19, 1994, the Corporation's stockholders approved the
Figgie International Inc. Key Employees' Stock Option Plan (the "Stock Option
Plan"). Stock option grants have become the primary equity incentive
compensation program of the Corporation since the Restricted Stock Plan was
terminated as of January 2, 1997.
Restricted Stock Purchase Plan
Under the Restricted Stock Plan, shares of the Corporation's Common Stock
were sold to executives at a price of $1.00 per share. The executives were
entitled to vote and receive dividends on the shares they acquired under the
Restricted Stock Plan, but the certificates representing the restricted shares
were held by the Corporation in escrow until the transfer restrictions lapsed,
generally at the termination of the Plan. Because of the transfer restrictions,
the participants could not sell the stock and thus disengage the benefits under
the Plan from the Corporation's performance. Generally, unless otherwise
directed by the Stock Option Committee, upon the termination of the employment
of any participant prior to the termination of the Plan, other than terminations
resulting from death or total disability, the Corporation had the right to
repurchase all, or, in the case of the retirement of a participant, a specific
portion, of the restricted shares at a price equal to the lesser of the price
paid by the participant for such shares or the then fair market value of the
shares. The transfer restrictions on the restricted shares lapsed upon the
expiration of the Corporation's repurchase right or the termination of the
employment of a participant resulting from death or total disability prior to
the termination of the Restricted Stock Plan. The Board of Directors terminated
the Restricted Stock Plan as of January 2, 1997 and before its scheduled July 1,
1998 termination because it determined that the Stock Option Plan should be its
sole stock-based plan. The Stock Option Committee does not expect that another
restricted stock purchase plan will be proposed for adoption by the
stockholders.
Awards were initially made under the Restricted Stock Plan in 1993. A
maximum award was established for each executive pay grade. In determining this
maximum award, the Stock Option Committee, assisted by an independent
compensation consultant, took into account the relationship between cash and
bonus amounts paid to executive officers, including CEOs, in comparable
companies and the benefits that such companies provided their executive
officers, including CEOs, from their stock incentive plans. Maximum award
amounts were calculated based upon average award sizes of the comparable
companies and without regard to restricted stock awards made under prior plans.
In a manner consistent with awards under the earlier similar restricted stock
plans, the sizes of the actual awards made to executive officers, including the
then CEO, were based upon the executives' perform-
15
<PAGE> 18
ance over the prior five years. If an executive officer, including the CEO,
received during the five preceding fiscal years an aggregate of either 70% or
80%, depending upon the executive's pay grade, of the aggregate amount of the
potential discretionary bonus awards he could have received over that period,
the Stock Option Committee awarded the executive 100% of the maximum award
established for the executive under the Restricted Stock Plan. If the executive
received less than the requisite percentage of the potential discretionary bonus
awards justifying the maximum award, he received between 25% and 75% of the
maximum award, depending upon the percentage of the aggregate amount of the
potential discretionary bonus awards he had received over the five-year period.
Prior to the termination of the Plan in 1997, the Stock Option Committee could
award to an executive who did not receive the maximum award additional
restricted stock awards in aggregate amounts of up to the balance of the maximum
restricted stock award depending upon the executive's performance. In addition,
under the Restricted Stock Plan, persons who were promoted could receive
additional restricted stock awards in amounts that took into account their new
pay grade and newly hired executives could receive restricted stock awards in
amounts based upon their pay grade but reflecting the remaining restricted
period. (The Stock Option Committee's award of restricted stock to the CEO is
described below.)
Pursuant to his employment agreement, the chief financial officer received
the right to purchase 150,000 shares of stock over a four-year period beginning
in July 1994. In each of July 1994, July 1995 and July 1996, in accordance with
his employment agreement, the Stock Option Committee granted to the chief
financial officer the right to purchase 37,500 shares of Class A Common Stock
for $1.00 per share. The shares, which were issued under the Restricted Stock
Plan, contained no restrictions on resale. The Stock Option Committee did not
award to the chief financial officer any other rights to acquire restricted
shares under the Restricted Stock Plan.
Stock Option Plan
Under the Stock Option Plan, the Corporation may issue non-qualified stock
options, "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
stock appreciation rights (giving the right to elect a payment equal to the
appreciation of the stock value over the option price) to executives and other
key employees. The Stock Option Plan is intended to provide additional
incentives which will enhance the Corporation's ability to attract and retain
key employees and align employees' economic interests with those of the
Corporation's stockholders.
The Stock Option Committee has determined that stock option grants will be
made in amounts determined by reference to equity awards made by the companies
included in Corporation's peer group and under the same circumstances in which
annual cash incentive awards are made. In December 1996, the Stock Option Plan
was amended to authorize the Stock Option Committee to provide that options can
be exercised for a period longer than 90 days after termination of employment.
Stock option grants are now the Corporation's primary equity incentive
compensation program.
The Stock Option Committee believes that stock options granted under the
Stock Option Plan will not be subject to the $1,000,000 limit contained in
Section 162(m) of the Internal Revenue Code as it is intended that the option
price will be at least the fair market value on the date of grant and that the
composition of the committee will meet certain requirements as to independence
contained in regulations adopted pursuant to Section 162(m) of the Internal
Revenue Code.
16
<PAGE> 19
CEO Compensation
In his employment agreement, Mr. Reilly, the Corporation's CEO in 1996, was
given the right to acquire 30,000 shares of restricted stock in 1995 under the
Restricted Stock Plan. Mr. Reilly exercised the right at a time when the value
of the restricted shares he acquired (less the purchase price of $1.00 per
share) was $165,000. In addition, pursuant to the terms of his employment
agreement, Mr. Reilly was granted options under the Stock Option Plan to acquire
500,000 shares of the Corporation's Class A Common Stock. The options were
scheduled to vest in 20% increments of 100,000 shares on each of January 4,
1995, 1996, 1997, 1998 and 1999. Upon Mr. Reilly's resignation as CEO of the
Corporation effective January 24, 1997, options to acquire 200,000 shares were
unvested and thus were returned to the Stock Option Plan. The Stock Option
Committee amended Mr. Reilly's stock option agreement at the time he resigned
from the Corporation and agreed to continue to serve as Chairman of the Board of
Directors and member of the Office of the Chairman to provide that the options
can be exercised upon the latter of December 31, 1997 or the date as of which
Mr. Reilly no longer serves as Chairman of the Board.
A.A. Sommer, Jr. Fred J. Brinkman Harrison Nesbit, II
17
<PAGE> 20
EXECUTIVE COMPENSATION
Summary of Compensation
The following table shows information concerning the annual and long-term
compensation earned during the last three fiscal years, if required, by the
Corporation's CEO and each of the Corporation's other executive officers during
1996 whose total annual salary and bonus exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------------------
------------------------------------- RESTRICTED SECURITIES
OTHER STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL ANNUAL AWARD(S) OPTIONS/ COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION(1) ($)(2) SARS (#) (3)
- -------------------------- ---- -------- -------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John P. Reilly (4) 1996 $500,000 $300,000 -- -- -- 38,241
Chairman, CEO and
President 1995 $500,000 250,000 $ 67,198 $165,000 500,000 38,178
Steven L. Siemborski (5) 1996 350,000 182,000 344,531 -- -- 21,290
Senior Vice President
and Chief Financial 1995 350,000 108,000 448,124 -- -- 16,179
Officer 1994 175,000 25,000 258,126 -- -- 60,363
Keith V. Mabee (6) 1996 200,000 104,000 -- 79,790 15,000 16,288
Vice President-Corporate 1995 192,916 52,000 -- -- 15,000 13,141
Relations 1994 152,666 -- -- 18,464 -- 12,919
Robert D. Vilsack (7) 1996 114,666 56,700 -- 55,463 14,000 8,025
General Counsel and
Secretary
L.A. Harthun (8) 1996 125,000 65,000 -- 29,727 -- 20,697
Senior Vice President
Legal and Secretary 1995 239,166 80,000 -- -- 17,000 20,941
1994 229,166 -- -- -- -- 18,520
</TABLE>
(1) The amounts indicated with respect to Mr. Siemborski represent the
difference between the fair market values of the 37,500 shares of Class A
Common Stock acquired by Mr. Siemborski in each of 1996, 1995 and 1994 and
the prices paid by Mr. Siemborski for those shares.
(2) The transfer and pledge restrictions on the restricted shares reflected in
the table lapsed upon the termination of the 1993 Restricted Stock Purchase
Plan for Employees (the "Restricted Stock Plan"). The Board of Directors
accelerated the termination date from July 1, 1998 pursuant the terms of the
plan. As of December 31, 1996, the aggregate number of shares and the value
of the shares of restricted stock held by the Named Executive Officers (less
the purchase price paid by the executive) were as follows: Mr. Reilly,
30,000 shares of Class A Common Stock having a market value (less purchase
price) of $330,000; Mr. Mabee, 14,675 shares of Class A Common Stock having
a market value (less purchase price) of $161,425; and Mr. Vilsack, 5,100
shares of Class A Common Stock having a market value (less purchase price)
of $56,100.
(3) Includes the following for 1996:
(a) The discounted value of the benefit to each of the Named Executive
Officers of the premium paid by the Corporation during 1996 for one or
more split-dollar insurance policies under which the executive receives
an interest in the cash surrender value of the policy at the time
18
<PAGE> 21
when the ownership of the policy is split between the executive and the
Corporation, which then becomes the beneficiary of a policy on the
executive's life with a cash surrender value equivalent to the
Corporation's premium payments. The Executive Officers paid a portion of
the premium based upon a rate for term life insurance. The amounts
reflected in the table for split-dollar insurance are as follows: Mr.
Reilly -- $34,173; Mr.Siemborski -- $12,912; Mr. Harthun -- $7,417; Mr.
Mabee -- $7,958; and Mr. Vilsack -- $2,645.
(b) The allocations for 1996 of equivalent shares of Class A Common Stock or
Class B Common Stock under the ESOP for Salaried Employees. The dollar
values as of December 31, 1996 of the allocations for each of the Named
Executive Officers of the Corporation are as follows: Mr.
Reilly -- $4,068; Mr. Siemborski -- $8,378; Mr. Harthun -- $13,230; Mr.
Mabee -- $8,330; and Mr. Vilsack -- $5,380.
(4) Mr. Reilly resigned as CEO and President of the Corporation on January 24,
1997 and remained as the non-employee Chairman of the Board of Directors. He
was not employed by the Corporation prior to 1995.
(5) Mr. Siemborski became Senior Vice President and Chief Financial Officer of
the Corporation effective July 1, 1994. He was not employed by the
Corporation prior to 1994.
(6) Mr. Mabee became an executive officer of the Corporation on February 23,
1994 and left the Corporation on January 30, 1997.
(7) Mr. Vilsack left the Corporation on September 19, 1997.
(8) Mr. Harthun retired from the Corporation on July 5, 1996.
STOCK OPTIONS
The following tables provide information on grants of stock options
pursuant to the Stock Option Plan during the year ended December 31, 1996. The
Stock Option Plan is administered by the Stock Option Committee of the Board of
Directors, which has the authority to determine the individuals to whom options
are granted and the terms of all grants thereunder. The Stock Option Plan
provides for the issuance of nonqualified stock options and "incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"), for the Corporation's Class A
Common Stock and the granting of stock appreciation rights ("SARs"). The options
granted pursuant to the Stock Option Plan have terms of up to 10 years from the
date of grant and an exercise price equal to one hundred percent (100%) of the
fair market value on the date of grant and are non-transferable.
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<PAGE> 22
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to options granted or
awarded to the Named Executive Officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OF FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) GRANT DATE DATE 0% 5% 10%
- ---------------------- ----------- ------------ ----------- ---------- ---------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Reilly........ -- -- -- -- -- N/A -- --
Steven L.
Siemborski.......... -- -- -- -- -- N/A -- --
Keith V. Mabee(2)..... 15,000 6.3 $11.125 02/01/96 02/21/03 N/A $67,929 $158,312
Robert D.
Vilsack(3).......... 14,000 5.8 11.125 02/01/96 02/21/03 N/A 63,400 147,759
L.A. Harthun(4)....... 17,000 7.1 11.125 02/01/96 02/21/03 N/A 76,900 179,422
All Stockholders...... N/A N/A N/A N/A N/A N/A
All Optionees......... 237,500 100% Various Various Various N/A
Options Gain as % of
all Stockholder
Gain................ N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the results of calculations at
assumed annual rates of stock price appreciation of zero percent (0%), five
percent (5%) and ten percent (10%). These assumed rates of growth were
selected by the SEC for illustration purposes only. They are not intended to
forecast possible future appreciation, if any, of the Corporation's stock
price. Since Optionees received options with an exercise price equal to the
market value on the date of grant, no gain is possible without an increase
in stock prices, which will benefit all stockholders. A zero percent (0%)
gain in stock price will result in a zero percent (0%) benefit to such
Optionees.
(2) Mr. Mabee's options were scheduled to vest in one-third ( 1/3) cumulative
installments on each of February 21, 1997, February 21, 1998 and February
21, 1999. Upon Mr. Mabee's departure from the Corporation on January 30,
1997, his options vested and are now exercisable until seven years from the
date of grant.
(3) Mr. Vilsack's options were scheduled to vest in one-third ( 1/3) cumulative
installments on each of February 21, 1997, February 21, 1998 and February
21, 1999. After his resignation from the Corporation on September 19, 1997
Mr. Vilsack exercised that portion of his option that had vested.
(4) Mr. Harthun's options were scheduled to vest in one-third ( 1/3) cumulative
installments on each of February 21, 1997, February 21, 1998 and February
21, 1999. Mr. Harthun's options terminated ninety days after his retirement
from the Corporation.
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<PAGE> 23
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES TABLE
The following table provides information related to any stock options
exercised by the Named Executive Officers during 1996 and the value of
unexercised in-the-money options held by the Named Executive Officers at
December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
SHARES ACQUIRED VALUE OPTIONS AT FY-END (#) AT FY-END ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#)(1) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------- --------------- -------- --------------------- -----------------------
<S> <C> <C> <C> <C> <C>
John P. Reilly......... 0 0 200,000/300,000 $1,100,000/ $1,650,000
Steven L. Siemborski... 0 0 0/ 0 0/ 0
Keith V. Mabee......... 0 0 5,000/ 25,000 21,875/ 89,775
Robert D. Vilsack...... 0 0 0/ 14,000 0/ 12,250
L.A. Harthun........... 5,667 $ 36,481 0/ 0 0/ 0
</TABLE>
- ---------------
(1) Mr. Harthun retired from the Corporation prior to the exercise of the
option.
COMPENSATION OF DIRECTORS
The Directors, except for those who are also employees of the Corporation,
receive an annual stipend of $15,000, an attendance fee of $1,000 for each
meeting of the Board of Directors, and an attendance fee of $750 for each
separately called meeting of non-management Directors. In addition, the
non-employee members of the Executive and Finance Committee receive $3,000 per
year, an attendance fee of $750 for each meeting of the Executive and Finance
Committee, and a participation fee of $750 for each regularly scheduled
telephonic meeting and $250 for each special telephonic meeting of the Executive
and Finance Committee and members of the remaining committees other than the
Stock Option Committee receive $3,000 per year, an attendance fee of $250 for
each meeting, and a participation fee of $250 for each telephonic meeting. The
Directors also receive travel and lodging expenses in connection with their
attendance at Board and committee meetings.
In addition, the Directors receive one-time grants of up to 3,000 shares of
Class B Common Stock, depending upon when they first became directors, under the
Figgie International Inc. Stock Purchase Plan for Directors and receive certain
death and other benefits. The Corporation has agreed to pay a death benefit, in
the amount of $200,000, to the estate of each Director, other than a Director
who is also an employee, upon his death. This benefit is provided to a Director
while in office and after retirement if he has served five years. The benefit is
payable from the general assets of the Corporation, and the Corporation has
insured this liability by purchasing life insurance policies on the lives of the
eligible Directors. A Director who does not stand for re-election because he is
72 or older or a Director who does not stand for re-election and who was a
Director in 1976 is designated a "Director Emeritus", is entitled to attend
Board meetings of the Corporation, which reimburses his travel expenses incurred
in attending such Board meetings, and is paid the annual fee to which Directors
are entitled for a period ending upon the earlier of his death or the third
anniversary of the date upon which he ceased to be a Director.
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<PAGE> 24
RETIREMENT PLANS
RETIREMENT INCOME PLAN II
All of the Executive Officers of the Corporation are currently accruing
retirement income credits under, or will accrue them upon their satisfaction of
the eligibility requirements set forth in, the Salaried Employee Retirement
Income Provisions of the Figgie International Inc. Retirement Income Plan II
(the "Salaried Provisions"), a defined benefit pension plan. The Salaried
Provisions cover the salaried employees of the Corporation except employees of
certain non-participating divisions and subsidiaries. Directors who are not
employees are not entitled to receive retirement benefits under the Figgie
International Inc. Retirement Income Plan II.
In general, the Salaried Provisions, as amended effective July 31, 1993,
provide that salaried employees accrue dollar units of retirement income credits
for each calendar year of participation in the Salaried Provisions on the basis
of their "Annual Pensionable Earnings." To receive full benefits under the
Salaried Provisions, employees must contribute two percent (2%) of their "Annual
Pensionable Earnings" over their "Covered Compensation." The following sets
forth the percentage Annual Pensionable Earnings which is accrued as a
Retirement Income Credit under the Salaried Provisions:
<TABLE>
<CAPTION>
ANNUAL PENSIONABLE EARNINGS (1)
-------------------------------------
0-100% OVER 100% OF
OF COVERED COVERED
COMPENSATION (2) COMPENSATION (2)
---------------- ----------------
<S> <C> <C>
Retirement Income Credit............ 0.7% 1.2%
</TABLE>
- ---------------
(1) "Annual Pensionable Earnings" includes cash salaries and bonuses received by
the participant but excludes any such earnings in excess of $160,000 for
calendar year 1996 and thereafter (plus any increase for cost-of-living as
shall be prescribed by the Secretary of the Treasury pursuant to Sections
401(a)(17) and 415(d) of the Internal Revenue Code).
(2) "Covered Compensation" means the average of the contributions and benefit
bases in effect under Section 230 of the Social Security Act for each such
calendar year in the 35 calendar years ending immediately prior to each such
calendar year. For calendar year 1997, Covered Compensation will equal
$27,596.
Generally, any salaried employee of the Corporation except employees of
certain non-participating divisions and subsidiaries is eligible to participate
in the Salaried Provisions after the earlier of the completion of one year of
service or attainment of age 40. A participant becomes vested in the Salaried
Provisions five years after the participant's hire date. Upon reaching normal
retirement at age 65, each participant is generally entitled to receive an
annual retirement benefit for life equal to the total of the retirement income
credits accrued by him during his period of participation. Such benefit is not
subject to any deduction for Social Security benefits. A reduced annual
retirement income benefit may be payable to a retired employee under other
actuarially equivalent forms of pay-out provided for in the Salaried Provisions.
The Salaried Provisions also contain provisions for early retirement and
preretirement death benefits payable to spouses and dependent children of
certain deceased participants. During 1996, certain employees of the Corporation
and its subsidiaries accrued retirement benefits under separate retirement plans
of the Corporation which cover employees of its divisions or subsidiaries which
are not or were not at the time participating under the Salaried Provisions or a
prior plan which was terminated on November 21, 1988 (the "Prior Plan").
22
<PAGE> 25
As of December 31, 1996, the annual benefits payable upon retirement under
the Salaried Provisions, including accrued benefits from the Prior Plan, to the
Named Executive Officers are stated below. In determining such benefits, the
executives' earnings were estimated through 1996 and were assumed not to exceed
$160,000 after 1997. Covered Compensation ($27,596 for 1997) was assumed not to
increase after 1997, the maximum allowable employer-funded benefit under the
Internal Revenue Code (which is the greater of $125,000 or the accrued benefit
as of December 31, 1982) was assumed to continue to retirement and executives
were assumed to continue working until at least age 65 and to be fully vested.
Based upon the preceding assumptions, the annual benefits payable to such
persons including benefits payable as a result of voluntary contributions and
the accrued benefits from the Prior Plan are as follows: Mr. Reilly -- $24,140
($0 as a result of Mr. Reilly's resignation); Mr. Siemborski -- $44,709; Mr.
Harthun -- $94,091; Mr. Vilsack -- $6,471 ($986.23 as a result of Mr. Vilsack's
resignation); and Mr. Mabee -- $34,028 ($5,662 as a result of Mr. Mabee's
resignation).
SENIOR EXECUTIVE BENEFITS PROGRAM
The following plan table shows the annual benefits upon retirement at age
65 in 1996 for various combinations of compensation and lengths of service which
may be payable under the Corporation's Senior Executive Benefits Program (the
"SEBP") to the Named Executive Officers. These amounts are paid in addition to
the amounts payable under the Corporation's Salaried Provisions discussed above.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN(1)
REMUNE- -------------------------------------------------------------------------
RATION(2) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $ 16,678 $ 36,952 $ 30,142 $ 23,332 $ 16,521 $ 9,711
150,000 24,512 48,702 40,392 32,082 23,771 15,461
175,000 34,145 63,152 54,242 45,332 36,421 27,511
200,000 44,978 79,402 70,492 61,582 52,671 43,761
225,000 55,812 95,652 86,742 77,832 68,921 60,011
250,000 66,645 111,902 102,992 94,082 85,171 76,261
300,000 88,312 144,402 135,492 117,671 117,671 108,761
350,000 109,978 176,902 167,992 19,082 150,171 150,171
400,000 131,645 209,402 200,492 191,582 182,671 173,761
450,000 153,312 241,902 232,992 215,171 215,171 215,171
500,000 174,978 274,402 265,492 256,582 247,671 238,761
</TABLE>
- ---------------
(1) Annual benefits are computed on the basis of one hundred percent (100%)
joint and survivor benefits. The annual benefits reflected in the table
constitute sixty-five percent (65%) of final covered remuneration prorated
for service less than fifteen (15) years, less assumed social security
benefits of $23,868 and less assumed amounts of benefits payable under the
Salaried Provisions. The benefits under the Salaried Provisions have been
calculated based upon the assumptions that the amount of Covered
Compensation, as defined in the Salaried Provisions, remains fixed for all
years of participation and the amount of Annual Pensionable Earnings, as
defined in the Salaried Provisions, is limited to amounts that do not exceed
$160,000. (See the description of the Salaried Provisions set forth above.)
(Accrual under the Salaried Provisions for years prior to 1996 may be less
than as assumed.) The gross annual benefits will be increased by ten percent
(10%) of the final covered remuneration for a participant in the SEBP as of
February 18, 1987 or a person hired prior
23
<PAGE> 26
to February 18, 1987 who completes 20 years of service. The annual benefits
will be reduced by any retirement or deferred compensation plans of other
employers.
(2) Consists of base salary and the installment payments that have been received
by an executive under the discretionary bonus component of the Corporation's
incentive bonus arrangements.
As of December 31, 1996, the credit years of service for the Named
Executive Officers are as follows: Mr. Reilly, 2 years; Mr. Siemborski, 2 years;
Mr. Harthun, 30.5 years; Mr. Vilsack, 6 years; and Mr. Mabee, 3 years.
24
<PAGE> 27
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Corporation entered into a letter agreement dated October 15, 1997 (the
"Letter Agreement") with Glen W. Lindemann. The Letter Agreement provides for
Mr. Lindemann's employment as President and CEO of the Corporation from October
1, 1997 through December 31, 1997, at a base salary of $29,166.67 per month. In
addition, the Letter Agreement provides Mr. Lindemann the following: (i)
participation in the Corporation's executive bonus and benefit plans with a
guaranteed minimum bonus of $7,500 per month for the three month period with a
minimum bonus of $16,250 per month should certain corporate performance targets
be met; and (ii) an option to purchase 200,000 shares of the Corporation's Class
A Common Stock, at an option price equal to the market closing price on
September 19, 1997. It is anticipated that the Corporation will enter into an
employment agreement with Mr. Lindemann for a three year period commencing
January 1, 1998.
The Corporation entered into an amended and restated management agreement
dated June 9, 1997 (the "Restated Agreement") with Glen W. Lindemann. The
Restated Agreement provided for Mr. Lindemann's employment until December 31,
1998, and automatic extensions for successive one year terms thereafter, as
President of the Corporation's Scott Aviation division. Either the Corporation
or Mr. Lindemann could have terminated the Restated Agreement on December 31,
1998 or at the end of any successive one year term thereafter. If Mr.
Lindemann's employment were terminated due to his retirement or death, his
benefits would have been determined in accordance with the Corporation's
retirement and benefit plans then in effect in which Mr. Lindemann was then a
participant. In the event Mr. Lindemann had become disabled, the Corporation
could have terminated the Restated Agreement (but not Mr. Lindemann's
employment), and Mr. Lindemann's benefits would have been determined in
accordance with the Corporation's disability and other applicable plans then in
effect. If the Corporation terminated Mr. Lindemann's employment other than for
cause (as defined), the Corporation would have continued to pay Mr. Lindemann
his monthly base salary then in effect, as well as his life insurance and health
care benefits (unless comparable benefits were provided by a subsequent
employer), for 24 full calendar months following the date of such termination.
In such an event, Mr. Lindemann would also have been entitled to reimbursement
for the cost of outplacement services in an amount equal to up to seventeen
percent (17%) of his annual base salary. In the event of any termination, the
Corporation would have been obligated to pay when due all other benefits to
which Mr. Lindemann had a vested right.
The Corporation entered into an employment agreement dated January 1, 1995
(the "Executive Agreement") with John P. Reilly. The Executive Agreement
provided for Mr. Reilly's employment as CEO of the Corporation at an annual base
salary of $500,000. In addition, the Executive Agreement provided Mr. Reilly the
following: (i) a guaranteed lump sum payment for 1995 of $250,000 (which was
paid) if he remained an employee of the Corporation until April 30, 1996; (ii)
the right (which was exercised) to acquire 30,000 shares of the Corporation's
Common Stock pursuant to the terms of the Restricted Stock Plan; and (iii) an
option to purchase 500,000 shares of the Corporation's Class A Common Stock
pursuant to the Stock Option Plan, at an option price equal to the fair market
value of such stock determined under the plan, exercisable not later than the
seventh anniversary of the date of issuance (which was granted). In addition,
the Executive Agreement entitled Mr. Reilly to participate in the Corporation's
regular bonus and benefit plans for senior executives. In the event of Mr.
Reilly's death or disability (as defined), Mr. Reilly's employment would have
been deemed to have terminated, except that the Corporation would have been
required to pay a pro rata portion of any guaranteed payment or bonus otherwise
payable. If the Corporation had terminated Mr. Reilly's employment without good
cause (as defined), then the Corporation would have been required to pay Mr.
Reilly's base salary for
25
<PAGE> 28
the greater of (i) two years or (ii) the remainder of the term of the Executive
Agreement. The Executive Agreement would have terminated on January 1, 1998,
subject to automatic extensions for successive one-year periods unless the
Corporation or Mr. Reilly had given notice of termination. Mr. Reilly resigned
from the Corporation on January 24, 1997.
The Corporation entered into an employment agreement dated July 1, 1994
(the "Employment Contract") with Steven L. Siemborski. The Employment Contract
provides for Mr. Siemborski's employment as Senior Vice President and Chief
Financial Officer of the Corporation at an annual base salary of $350,000. In
addition, the Employment Agreement provides Mr. Siemborski the following: (i) a
special $50,000 transition payment (which was paid in 1994), an incentive bonus
of $25,000 for reducing financial consulting fees by fifty percent (50%) during
his first four months of employment (which was paid on June 30, 1995) and an
additional incentive bonus of $50,000 for reducing such financial consulting
fees to zero by June 30, 1995 (which was paid on June 30, 1995) during the first
year of the Employment Contract; (ii) the greater of a bonus of $50,000 or the
bonus payable to him with respect to the 1995 calendar year under the regular
bonus programs of the Corporation during the second year of the Employment
Contract (which was paid); and (iii) a discretionary bonus under the regular
bonus programs of the Corporation during the third and fourth years of the
Employment Contract. Mr. Siemborski also received the right to purchase 150,000
shares of the Corporation's Common Stock, the class to be determined by the
Stock Option Committee, for one dollar ($1.00) per share in four annual
increments of 37,500 shares exercisable between July 1 and the following
November 1st beginning in 1994. (Mr. Siemborski has exercised fully his right to
acquire shares of Class A Common Stock.) In addition, Mr. Siemborski was given
the right to participate in other benefit plans provided by the Corporation, and
to be reimbursed for all reasonable expenses incurred while performing his
duties under the Employment Contract. Further, the Employment Contract provides
that in the event Mr. Siemborski's employment is terminated due to death or
disability (as defined), Mr. Siemborski (or his successor in interest) would be
entitled to the pro rata portion of any bonus which would have been payable
during the second, third and fourth years of the Employment Contract and to his
stock purchase rights under the Employment Contract. The Employment Contract
also provides that in the event Mr. Siemborski's employment is terminated by the
Corporation without good cause (as defined) or by Mr. Siemborski for good reason
(as defined), Mr. Siemborski would be entitled to his stock purchase rights
under the Employment Contract and to severance pay based upon the date of
termination of his employment as follows: (i) if employment is terminated during
the first year of the Employment Contract, a proportional amount of $400,000
with respect to the year of his termination and $400,000, $350,000 and $350,000
for the succeeding three years; (ii) if employment is terminated during the
second year of the Employment Contract, a proportional amount of $400,000 with
respect to that year and $350,000 for each of the next succeeding two years; or
(iii) if employment is terminated during the third year of the Employment
Contract, a proportional amount of $350,000 with respect to that year and
$350,000 for the succeeding year.
The Corporation entered into an amended and restated management agreement
dated June 11, 1997 (the "Amended Agreement") with its former officer Robert D.
Vilsack. As previously disclosed, Mr. Vilsack left the Corporation on September
19, 1997. The Amended Agreement provided for Mr. Vilsack's employment for a
three-year term, and automatic extensions for successive one-year terms
thereafter, as Vice President, General Counsel and Secretary of the Corporation.
Either the Corporation or Mr. Vilsack could have terminated the Amended
Agreement at the end of the initial three-year period or at the end of any
successive one-year term thereafter. If Mr. Vilsack's employment were terminated
due to his retirement or death, his benefits would have been determined in
accordance with the Corporation's retirement and benefit plans then in effect in
which Mr. Vilsack was then a participant.
26
<PAGE> 29
In the event Mr. Vilsack had become disabled, the Corporation could have
terminated the Amended Agreement (but not Mr. Vilsack's employment), and Mr.
Vilsack's benefits would have been determined in accordance with the
Corporation's disability and other applicable plans then in effect. If the
Corporation terminated Mr. Vilsack's employment other than for cause (as
defined), the Corporation would have, at Mr. Vilsack's election, either
continued to pay Mr. Vilsack his monthly base salary then in effect for 24 full
calendar months following the date of such termination or made a lump sum
payment to Mr. Vilsack of the amount due. The Corporation also would have
continued to provide Mr. Vilsack with his life insurance and health care
benefits (unless comparable benefits were provided by a subsequent employer) for
twenty-four months on the same terms and at the same cost as provided to a
similarly situated full-time employee. In such an event, Mr. Vilsack would also
have been entitled to reimbursement for the cost of outplacement services in an
amount equal to up to seventeen percent (17%) of his annual base salary. In the
event of any termination, the Corporation would have been obligated to pay when
due all other benefits to which Mr. Vilsack had a vested right. The Amended
Agreement replaced a Management Agreement dated February 1, 1996 and a Retention
Agreement dated March 20, 1996, between the Corporation and Mr. Vilsack. These
agreements were substantially the same as the management and retention
agreements entered into by the Corporation and Keith Mabee described below
(except where indicated).
The Corporation entered into management and retention agreements with its
former officer Keith V. Mabee. The management agreement dated February 23, 1995,
provided for employment for a three-year period followed by automatic extensions
for successive one-year terms thereafter. Either the Corporation or Mr. Mabee
could have terminated the agreement at the end of the three year period or at
the end of any successive one year term thereafter. Upon termination of
employment due to retirement or death, Mr. Mabee's benefits were to be
determined in accordance with the Corporation's retirement and benefit plans
then in effect in which Mr. Mabee was then a participant. In the event of
disability, the Corporation could have terminated Mr. Mabee's employment, and
Mr. Mabee's benefits were to have been determined in accordance with the
Corporation's disability and other applicable plans then in effect. If the
Corporation had terminated Mr. Mabee's employment other than for cause (as
defined), the Corporation would have continued to pay Mr. Mabee's monthly base
salary then in effect, as well as his life insurance and health care benefits
(unless comparable benefits were provided by a subsequent employer), for 24 full
calendar months (12 months for Mr. Vilsack) following the date of such
termination. In such an event, Mr. Mabee would also have been entitled to
reimbursement for the cost of out-placement services in an amount equal to up to
fifteen percent (15%) of his annual base salary. In the event of any
termination, the Corporation would have been obligated to pay when due all other
benefits to which Mr. Mabee had a vested right.
The retention agreement dated March 20, 1996, was effective until May 31,
1997. Unless earlier terminated by Mr. Mabee without cause or by the Corporation
based on Mr. Mabee's death or disability or for cause (as defined), the
retention agreement granted to Mr. Mabee a continued service bonus, as an
incentive for Mr. Mabee to remain an employee of the Corporation, payable on the
earlier of (i) the execution of an agreement for a merger, consolidation, sale
or divestiture of substantially all of the assets of the Corporation, (ii) the
termination by Mr. Mabee of his employment within three months of the
Corporation making a significant negative change in the nature or scope of Mr.
Mabee's authorities, powers, functions or duties (the earlier of (i) or (ii)
being a "Release Date"), or (iii) the execution of an agreement for a merger,
consolidation, sale or divestiture of substantially all of the assets of any one
of the Interstate Electronics, Snorkel, Scott or Taylor Divisions of the
Corporation and a corresponding declaration by the Board of Directors of a
dividend payable to stockholders. The continued service bonus provided the right
to purchase 3,668 shares (2,550 shares for Mr. Vilsack) of the Corporation's
common
27
<PAGE> 30
stock under the Restricted Stock Plan and immediate vesting of all options
previously granted to Mr. Mabee pursuant to the Stock Option Plan. On a Release
Date, if any, Mr. Mabee would have been entitled to an additional service bonus
consisting of: (i) a lump sum payment or monthly payments, in an amount equal to
24 full calendar months (12 months for Mr. Vilsack) of Mr. Mabee's salary in
effect on the Release Date, (ii) a lump sum payment or monthly payments, in an
amount equal to 12 months of the monthly car allowance being received by Mr.
Mabee on the Release Date, (iii) a waiver of the Corporation's right to
repurchase shares previously purchased by Mr. Mabee pursuant to the Restricted
Stock Plan, (iv) any then unpaid installments of bonuses previously awarded to
Mr. Mabee pursuant to the Corporation's Compensation Plan for Executives, and
(v) such additional bonuses as the Management Development-Compensation and
Nominating Committee of the Board of Directors may have awarded to Mr. Mabee
with respect to Mr. Mabee's 1996 performance and his contribution toward the
successful completion of a merger, consolidation or the sale of a part or all of
the Corporation.
Mr. Mabee entered into a separation agreement in January 1997, under which
he received the compensation to which he was entitled under the management and
retention agreements he entered into with the Corporation.
The Corporation entered into a management agreement dated April 28, 1995
(the "Management Agreement") with Luther A. Harthun. The Management Agreement,
as amended on January 31, 1996, provided for Mr. Harthun's continued employment
until July 3, 1996 (unless mutually extended or terminated) as Senior Vice
President--Legal and Secretary of the Corporation, at his current base salary on
April 28, 1995, a guaranteed bonus for 1995 to be paid in 1996 of $80,000 and
various benefits upon his termination of employment prior to July 3, 1996 under
specified circumstances. Mr. Harthun retired on July 5, 1996.
The Corporation entered into a retention agreement dated March 20, 1996
(the "Management Retention Agreement") with Mr. Harthun. As noted above, Mr.
Harthun retired on July 5, 1996. The Management Retention Agreement provided
similar benefits to those provided to Mr. Mabee in his retention agreement with
the Corporation except that the periods for which such benefits were to be
provided were shorter.
28
<PAGE> 31
STOCK PERFORMANCE GRAPH
The graph reflects a cumulative five year total return on an investment of
$100 on December 31, 1991 in Figgie International Inc. Class A and Class B
Common Stock, the Nasdaq Market Index, and a peer group and assumes dividend
reinvestment through the fiscal year ending December 31, 1996. The returns of
each company in the peer group are weighted based upon market capitalization.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FIGGIE INTERNATIONAL INC. CLASS A
AND B, THE NASDAQ STOCK MARKET-US
INDEX, AND A PEER GROUP
12/91 12/92 12/93 12/94 12/95 12/96
FIGGIE CLASS B 100 96 78 34 56 59
FIGGIE CLASS A 100 130 109 49 83 96
PEER GROUP 100 111 129 123 144 162
NASDAQ 100 116 134 131 185 227
- ---------------
* $100 invested on 12/31/91 in stock or index-including reinvestment of
dividends; fiscal year ending December 31.
29
<PAGE> 32
The peer group was constructed to closely resemble the Corporation's
current market capitalization. The companies in the Corporation's peer group are
companies included on the Fortune 500 Industrial and Farm Equipment Companies
list and having a market capitalization of between $50 million and $600 million.
The peer group consists of the companies set forth below:
<TABLE>
<S> <C>
Ago Corporation NAACO Industries Inc.
Detroit Diesel Corporation National Presto Industries Inc.
Fedders Corporation Pentair Inc.
Figgie International Inc. Class A Tecumseh Products Co.
Giddings & Lewis Inc. Terex Corp.
IMO Industries Inc. The Toro Company
Lincoln Electric Company
</TABLE>
CERTAIN TRANSACTIONS
On March 8, 1996, the Corporation loaned to Steven L. Siemborski, the
Corporation's Senior Vice President and Chief Financial Officer and a Director,
$430,000 with interest at the applicable Federal Rate of 5.32% in lieu of Mr.
Siemborski selling stock and using the proceeds to repay a loan he incurred in
order to pay income taxes resulting from his purchase of 75,000 shares of Class
A Common Stock in 1994 and 1995 pursuant to his Employment Contract. The
principal and interest on the loan were due on March 8, 1997. Further, the
Corporation agreed to pay to Mr. Siemborski a bonus in an amount equal to the
accrued interest, grossed-up for all applicable taxes, provided that Mr.
Siemborski was not then in default on the loan. Upon maturity of the loan, the
loan note was canceled and a new note with a maturity date of March 11, 1998,
and with otherwise identical terms as contained in the original note, was
executed. As of October 24, 1997, the principal amount plus accrued interest
remained outstanding. In addition, in November 1996, the Corporation paid
withholding taxes in the amount of $165,000 owed by Mr. Siemborski upon his
acquisition of 37,500 shares of Class A Common Stock pursuant to his Employment
Contract. Mr. Siemborski reimbursed the Corporation for such payment on March
17, 1997.
Certain transactions or relationships relating to the Corporation are
described under the caption "Compensation Committee Interlocks and Insider
Participation."
INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's independent public accountants for the fiscal year ended
1996 were Arthur Andersen LLP. Representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they so desire and to respond to appropriate questions.
STOCKHOLDER PROPOSAL REQUIREMENTS
The Corporation intends to schedule its 1998 annual meeting on a date
consistent with the dates on which it held its annual meetings in years prior to
1994. Accordingly, any stockholder who wishes to submit a proposal for inclusion
in the proxy material to be disseminated by the Corporation in connection with
its 1998 Annual Meeting must do so no later than January 1, 1998. To be eligible
for inclusion in the 1998 proxy material, such proposal must conform to the
requirements set forth in
30
<PAGE> 33
Regulation 14A under the Securities Exchange Act of 1934. In order to be
considered at an Annual Meeting, a stockholder proposal must be presented by the
proponents or their repre sentatives in attendance at the meeting.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those listed in the Notice of Annual Meeting of
Stockholders. However, if other matters properly come before the Meeting, it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their best judgment on such matters insofar as the proxies are
not limited to the contrary.
To the extent that information contained in this Proxy Statement is within
the knowledge of persons other than the management of the Corporation, the
Corporation has relied on such persons for the accuracy and completeness
thereof.
Upon the receipt of a written request from any stockholder entitled to vote
at the forthcoming Annual Meeting, the Corporation will mail, at no charge to
the stockholder, a copy of the Corporation's annual report on Form 10-K,
including the financial state ments and schedules required to be filed with the
SEC pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, for the
Corporation's most recent fiscal year. Requests from beneficial owners of the
Corporation's voting securities must set forth a good faith representation that,
as of the record date for the Annual Meeting, the person making the request was
the beneficial owner of securities entitled to vote at such meeting. Written
requests for such report should be directed to:
<TABLE>
<S> <C>
Investor Relations Department Investor Relations Department
Figgie International Inc. Figgie International Inc.
4420 Sherwin Road 5875 Landerbrook Drive
Willoughby, OH 44094 Mayfield Heights, Ohio 44124
(Through December 1, 1997) (After December 1, 1997)
</TABLE>
You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the Annual Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
By Order of the Board of Directors
Glen W. Lindemann
President and Chief Executive Officer
Dated: November 7, 1997
31
<PAGE> 34
2240-PS-97
<PAGE> 35
DETACH HERE FGA 2
[FIGGIE
INTERNATIONAL LOGO] PROXY/VOTING INSTRUCTION CARD
FIGGIE INTERNATIONAL INC. CLASS A COMMON STOCK
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON DECEMBER 10, 1997.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS
CARD.
The undersigned hereby appoints William Sickman and Debra Kackley, and both
of them, proxies, with full power of substitution to appear on behalf of
P the undersigned and to vote all shares of Class A Common Stock of the
undersigned at the Annual Meeting of Stockholders to be held at Interstate
R Electronics Corporation, 604 East Vermont Avenue, Anaheim, California on
Wednesday, December 10, 1997 at 9:00 a.m., and at any adjournment thereof,
O upon all subjects that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject to any
X directions indicated on the reverse side of this card, hereby revoking any
and all proxies heretofore given.
Y
The proxies will vote for the election of all listed nominees as Directors
if the applicable box is not marked and at their discretion on any other
matter that may properly come before the meeting.
Nominees for election as Directors are: Robert P. Collins and Steven L.
Siemborski.
PLEASE RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE
TO P.O. BOX 1628, BOSTON, MA 02105-1628, SO THAT YOUR SHARES CAN BE
REPRESENTED AT THE MEETING.
------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
------------------
<PAGE> 36
DETACH HERE FGA, FGB 2
___
| |PLEASE MARK
| X |VOTES AS IN
|___|THIS EXAMPLE.
_____
|
|
|
1. Election of all Nominees as Directors. DIRECTORS RECOMMEND
A VOTE "FOR" THE
Nominees: Robert P. Collins and PROPOSAL.
Steven L. Siemborski
FOR WITHHELD
___ ___
| | | |
| | | |
|___| |___|
___
| |
| |
|___|_______________________________________
For both nominees except as noted above
___
| |
MARK HERE IF YOU PLAN TO ATTEND THE MEETING | |
|___|
___
| |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
|___|
Please sign and return this Proxy Card so that your
shares can be represented at the meeting. If signing
for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are
signing. If you do attend the meeting and decide to
vote by ballot, such vote will supersede this proxy.
Signature:________________________ Date:_______________
Signature:________________________ Date:_______________
<PAGE> 37
DETACH HERE FGB 2
[FIGGIE
INTERNATIONAL LOGO] PROXY/VOTING INSTRUCTION CARD
FIGGIE INTERNATIONAL INC. CLASS B COMMON STOCK
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON DECEMBER 10, 1997.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS
CARD.
The undersigned hereby appoints William Sickman and Debra Kackley, and both
of them, proxies, with full power of substitution to appear on behalf of
P the undersigned and to vote all shares of Class B Common Stock of the
undersigned at the Annual Meeting of Stockholders to be held at Interstate
R Electronics Corporation, 604 East Vermont Avenue, Anaheim, California on
Wednesday, December 10, 1997 at 9:00 a.m., and at any adjournment thereof,
O upon all subjects that may properly come before the meeting, including the
matters described in the proxy statement furnished herewith, subject to any
X directions indicated on the reverse side of this card, hereby revoking any
and all proxies heretofore given.
Y
The proxies will vote for the election of all listed nominees as Directors
if the applicable box is not marked and at their discretion on any other
matter that may properly come before the meeting.
Nominees for election as Directors are: Robert P. Collins and Steven L.
Siemborski.
PLEASE RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE
TO P.O. BOX 1628, BOSTON, MA 02105-1628, SO THAT YOUR SHARES CAN BE
REPRESENTED AT THE MEETING.
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
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<PAGE> 38
DETACH HERE FGA, FGB 2
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| |PLEASE MARK
| X |VOTES AS IN
|___|THIS EXAMPLE. _____
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1. Election of all Nominees as Directors. DIRECTORS RECOMMEND
A VOTE "FOR" THE
Nominees: Robert P. Collins and PROPOSAL.
Steven L. Siemborski
FOR WITHHELD
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For both nominees except as noted above
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MARK HERE IF YOU PLAN TO ATTEND THE MEETING | |
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MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
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Please sign and return this Proxy Card so that your
shares can be represented at the meeting. If signing
for a corporation or partnership or as agent, attorney
or fiduciary, indicate the capacity in which you are
signing. If you do attend the meeting and decide to
vote by ballot, such vote will supersede this proxy.
Signature:________________________ Date:_______________
Signature:________________________ Date:_______________
