<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>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FIGGIE INTERNATIONAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SAME
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] $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.
5875 LANDERBROOK DRIVE, SUITE 250
MAYFIELD HEIGHTS, OHIO 44124
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 Figgie International Inc., 5875 Landerbrook Drive, Mayfield Heights,
Ohio, on Wednesday, May 20, 1998, at 1:00 p.m. local 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 a
nominee for the class whose term expires in the year 2000, such elected
directors to serve until their successors shall be elected and
qualified.
2. To approve an amendment to the Corporation's Restated Certificate of
Incorporation to change the name of the Corporation.
3. To approve the Director's Stock Option Plan providing for the issuance
of Class A Common Stock to Directors of the Corporation subject to
certain restrictions; and
4. 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 March 24, 1998 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: April , 1998
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.
5875 LANDERBROOK DRIVE, SUITE 250
MAYFIELD HEIGHTS, OHIO 44124
------------------------
PROXY STATEMENT
MAILED ON APRIL , 1998
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 1998
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 May 20, 1998 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 March 24, 1998 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. 401(k) Savings Plan
for Salaried Employees, the Figgie International Inc. 401(k) Savings Plan for
Hourly 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 March 24, 1998, the Corporation had outstanding
13,786,030 shares of Class A Common Stock and 4,711,847 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 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 percent-
1
<PAGE> 4
age"-- 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 March 24, 1998, 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.
The 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 applicable classes. The affirmative vote of a majority of
the votes of holders of Class A Common Stock and holders of Class B Common Stock
voting together and not as separate classes, is required for the adoption of the
proposed amendment to the Restated Certificate of Incorporation. The affirmative
vote of a majority 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, is required for the approval of the
Directors' Stock Option.
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 adoption of the Amendment to the Restated Certificate of
Incorporation, "FOR" the approval of the Directors' Stock Option Plan, and "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. Shares represented by proxies which are marked "ABSTAIN" with
respect to either of the other matters presented for consideration at the annual
meeting will be considered in person or represented by proxy at the meeting and,
accordingly, will have the effect of a negative vote because those matters
require the affirmative vote of a majority of the votes of holders of shares
present in person or represented by proxy.
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
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<PAGE> 5
thereof, the proxies will be voted on such matters in the discretion of the
proxy holders. 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.
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 March 24, 1998. 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 PERCENT
NAME AND ADDRESS OF BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ---------------- --------- -----
<S> <C> <C> <C>
Class A Common Stock NewSouth Capital Management, Inc. 1,660,388(1) 12.0%
1000 Ridgeway Loop Road, Suite 233
Memphis, TN 38120
Class A Common Stock Reich & Tang Asset Management, L.P. 1,657,000(2) 12.0%
600 Fifth Avenue
New York, NY 10020
Class A Common Stock J.O. Hambro & Partners Limited 736,100(3) 5.3%
10 Park Place
London SW1A 1LP
England
Class B Common Stock The Figgie Family Group 939,088(4) 19.9%
37001 Shaker Boulevard
Hunting Valley, OH 44022
Class B Common Stock Wilmington Trust Corporation 876,282(5) 18.6%
1100 North Market Street
Wilmington, DE 19890
Class B Common Stock Mentor Partners LP 433,300(6) 9.2%
500 Park Avenue
New York, NY 10022
Class B Common Stock The Goldman Sachs Group,L.P. 337,388(7) 7.2%
85 Broad Street
New York, NY 10004
</TABLE>
3
<PAGE> 6
- ---------------
(1) This amount, as reflected in a report on Schedule 13G dated February 12,
1998 and as of December 31, 1997, consists of 1,542,888 shares as to which
the reporting person claims sole voting power, 117,500 shares as to which
the reporting person claims shared voting power and 1,660,388 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 February 12,
1998 and as of February 12, 1998, consists of 1,657,000 shares as to which
the reporting person claims shared voting power and 1,657,000 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.
(3) This amount, as reflected in a report on Schedule 13D dated September 9,
1997 and as of July 21, 1997, filed by J. O. Hambro & Partners Limited
("Hambro Partners") Christopher Harwood Bernard Mills, J. O. Hambro &
Company Limited and J. O. Hambro Asset Management Limited, as a group,
consists of 736,100 shares as to which the reporting persons claim shared
voting and dispositive power. The reporting persons do not claim any sole
voting or dispositive power. The Schedule 13D reports that, pursuant to
agreements, Hambro Partners and Christopher Harwood Bernard Mills have the
shared right to transfer or vote the shares owned by two investment trust
companies, In addition, pursuant to agreement, Hambro Partners has the right
to transfer shares owned by an investment company which is managed by an
investment manager that has the right to transfer and vote the shares. The
investment company and investment manager also filed as part of the group.
(4) 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.
(5) This amount, as reflected in a report on Schedule 13G dated February 6, 1998
and as of December 31, 1997, filed by Wilmington Trust Corporation ("WT
Corporation") and its wholly-owned subsidiary, Wilmington Trust Company ("WT
Company"), consists of 244,622 shares as to which WT Corporation and WT
Company claim sole voting and dispositive power and 631,577 shares as to
which WT Corporation and WT Company claim shared voting and dispositive
power.
(6) This amount, as reflected in a report on Schedule 13D/A dated December 28,
1995 and as of December 27, 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.
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<PAGE> 7
(7) This amount, as reflected in a report on Amendment No. 1 to Schedule 13G
dated February 14, 1998 and as of December 31, 1997, filed by The Goldman
Sachs Group, L.P., and its wholly-owned subsidiary, Goldman Sachs & Co.,
consists of 337,388 shares as to which the reporting persons claim shared
voting power and 337,388 shares as to which the reporting persons claim
shared dispositive power. Goldman Sachs Trust on behalf of Goldman Sachs
Small Cap Value Fund, whose ownership is also reflected on Schedule 13G,
claims shared voting power as to 239,300 shares and shared dispositive power
as to 239,300 shares. The reporting persons do not claim any sole voting
power or sole dispositive power.
5
<PAGE> 8
STOCK OWNERSHIP OF DIRECTORS,
NOMINEES FOR DIRECTOR, EXECUTIVE OFFICERS
AND ONE FORMER EXECUTIVE OFFICER
The following table and notes thereto set forth information, as of March
24, 1998 (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 one former Executive Officer) 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
MARCH 24, 1998(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 * 300 *
Glen W. Lindemann...................... 45,577(2)(6) 1,373(2) *
Frank N. Linsalata..................... 0 * 0 *
F. Rush McKnight....................... 1,315(3) * 6,580(3) *
Harrison Nesbit, II.................... 1,005(4) * 6,562(4) *
John P. Reilly......................... 320,054(5) 2.3% 0 *
William J. Sickman..................... 38,134(2)(7) * 847(2) *
Steven L. Siemborski................... 111,589(2)(8) * 482(2) *
All Current Directors, and Executive
Officers as a Group (7 persons)...... 478,508(2) * 19,667(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 414,001
shares of Class A Common Stock with respect to which certain current and
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 the Named
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. Siemborski -- 642 shares of Class A Common Stock and 482
shares of Class B Common Stock; Mr. Sickman -- 927 shares of Class A Common
Stock and 847 shares of Class B Common Stock; and all current Executive
Officers and Directors as a group -- 2,945 shares of Class A Common Stock
and 2,702 shares of Class B Common Stock.
(3) These amounts do not include 75 shares of Class A Common Stock and 75 shares
of Class B Common Stock owned by Mr. McKnight's wife.
6
<PAGE> 9
(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) This amount includes 34,001 shares that may be acquired within sixty (60)
days by exercising a stock option.
(7) This amount includes 32,000 shares that may be acquired within sixty (60)
days by exercising a stock option.
(8) This amount includes 48,000 shares that may be acquired within sixty (60)
days by exercising a stock option.
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<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 seven (7) Directors divided into
three classes of three (3), two (2) and two (2) Directors each. Steven L.
Siemborski resigned from the Corporation and from his position on the Board of
Directors on March 31, 1998. Following his resignation, the Board of Directors
has determined to fix the size of the Board effective April 1, 1998 at six (6)
Directors. 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 Fred
J. Brinkman, F. Rush McKnight and John P. Reilly. F. Rush McKnight and John P.
Reilly have stated that they will stand for re-election as Directors but Fred J.
Brinkman will not stand for re-election. The Board has determined to fix the
size of each class of Directors at two (2) Directors each as of the date of the
Annual Meeting. The Board has nominated for election at this Annual Meeting, F.
Rush McKnight and John P. Reilly as nominees for the class of Directors whose
term expires in 2001 and Frank N. Linsalata as nominee for the class of
Directors whose term expires in 2000. If the nominees are elected at this Annual
Meeting, the Board of Directors shall consist of six (6) Directors divided into
three classes of two (2), 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 (5) years, the occupation or employment during such period,
(ii) the names and principal businesses of the corporations or other
organizations in which such occupation or employment is carried on and/or has
been carried on during the past 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:
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<PAGE> 11
NOMINEES FOR ELECTION AS DIRECTORS
FOR TERMS OF THREE YEARS
<TABLE>
<CAPTION>
IF ELECTED,
TERM EXPIRES
AT ANNUAL
SERVED AS MEETING
DIRECTOR OF STOCKHOLDERS
NAME AND PRINCIPAL OCCUPATION SINCE IN
----------------------------- --------- ---------------
<S> <C> <C>
F. RUSH McKNIGHT, age [68] 1985 2001
Retired Partner, Calfee, Halter & Griswold LLP, Cleveland,
Ohio, law firm until December 31, 1996, and Managing
Partner from 1985 to 1991; Director, Universal
Electronics, Inc.
JOHN P. REILLY, age [54] 1995 2001
Partner, Reilly, Erwin & Company, L.L.C., since September
1997; Advisory Position, Tomkins PLC, April 1, 1997 to
September 1997; President & CEO, Stant Corporation,
January 24, 1997 to April 1997; non-employee Chairman
of the Board, Figgie International Inc., since January
24, 1997; Member of Office of the Chairman, Figgie
International Inc., from January 24, 1997 to September
22, 1997; Chairman of the Board, Figgie International
Inc., from May 16, 1995 to January 24, 1997; President,
Figgie International Inc., from January 3, 1995 to
January 24, 1997; Chief Executive Officer, Figgie
International Inc., from January 3, 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 of Aeroquip-Vickers, Inc. (formerly
known as Trinova Corporation).
</TABLE>
NOMINEE FOR ELECTION AS DIRECTOR
FOR A TERM OF TWO YEARS
<TABLE>
<CAPTION>
IF ELECTED,
TERM EXPIRES
AT ANNUAL
SERVED AS MEETING
DIRECTOR OF STOCKHOLDERS
NAME AND PRINCIPAL OCCUPATION SINCE IN
----------------------------- --------- ---------------
<S> <C> <C>
FRANK L. LINSALATA, age [54] -- 2000
Partner, Linsalata Capital Partners Fund II, L.P., since
1995; Partner, Linsalata Capital Partners I, L.P. since
1990; Partner, Edgecliff Investments, since 1985;
Controlling Owner, Somerset Engineering Division of
Midland-Ross (now Somerset Technologies), since 1983;
Chairman of Somerset Technologies.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR
9
<PAGE> 12
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
IF ELECTED,
TERM EXPIRES
AT ANNUAL
SERVED AS MEETING
DIRECTOR OF STOCKHOLDERS
NAME AND PRINCIPAL OCCUPATION SINCE IN
----------------------------- --------- ---------------
<S> <C> <C>
ROBERT P. COLLINS, age [60] 1997 2000
Retired 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.
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 [71] 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.
</TABLE>
10
<PAGE> 13
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held ten (10) non-telephonic meetings and three (3)
telephonic meetings during the year ended December 31, 1997. 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
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.
On April 1, 1998, the Executive and Finance Committee was eliminated.
AUDIT COMMITTEE
F.R. McKnight, Chairman
F. Brinkman
J. Reilly
The Audit Committee's principal assignment is the oversight and review of
the internal and external audit functions of the Corporation. Until the
Annual Meeting of Stockholders on December 10, 1997, the Audit Committee
included A.A. Sommer, Jr., who did not stand for re-election as a Director.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
F. Brinkman, Chairman
F.R. McKnight
H. Nesbit, II
J. Reilly
R. Collins
The Management Development and Compensation Committee exercises overall
authority with respect to the compensation, development and succession of
executive personnel. Until the Annual Meeting of Stockholders on December
10, 1997, the Committee known then as the Management Development-
Compensation and Nominating Committee included A.A. Sommer, Jr. and W.
Vannoy, who did not stand for re-election as Directors.
NOMINATING COMMITTEE
F.R. McKnight, Chairman
J. Reilly
G. Lindemann
The 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, and recommends candidates to
fill Board vacancies.
11
<PAGE> 14
STOCK OPTION COMMITTEE
H. Nesbit, II, Chairman
F. Brinkman
R. Collins
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 1997:
Executive and Finance Committee zero (0), Audit Committee two (2), Management
Development and Compensation four (4), Nominating Committee four (4), and Stock
Option Committee three (3). Not included in these totals are those instances in
which the committees took action by written unanimous consent.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Development and Compensation 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 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 ranges for
executive officers at amounts that, in general, are substantially similar to the
average base salary amounts expected 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
12
<PAGE> 15
the performance of the executive officers. The base salaries for 1997 for
executive officers, other than the former CEO and the former chief financial
officer, who had employment agreements, and the current CEO were established
during the month of December 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. A bonus 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.
Fifty percent (50%) of the bonus pool is used for the formula-based
component, which is based upon the Corporation achieving a specified amount of
net income, and which entitles all participants to receive the same percent of
target bonus based upon actual performance. The Target bonus is a percent of
base salary, which varies by salary grade, but is the same for all participants
within a salary grade. For 1997, Mr. Lindemann received a bonus for the period
of time while serving as president of the Corporation's Scott Aviation division.
Fifty percent (50%) 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. Mr. Lindemann and Mr. Siemborski received bonuses for
the time served in the Office of the Chairman, until Mr. Lindemann's appointment
to the position of President and CEO. In addition, Mr. Lindemann received a
guaranteed minimum bonus in accordance with a Letter Agreement dated October 17,
1997. Mr. Sickman received a discretionary bonus for 1997.
In the future, the formula-based component will be seventy-five percent
(75%) of the bonus pool and the discretionary component will be twenty-five
percent (25%) because the Compensation Committee believes that bonuses should be
weighted more heavily towards the bottom-line performance of the Corporation.
MANAGEMENT AND RETENTION AGREEMENTS. During 1997, the Corporation entered
into restated and amended management agreements with Glen W. Lindemann and
William J. Sickman. These agreements were entered into to induce the executive
officers to remain with the Corporation. 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.
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,
13
<PAGE> 16
taking into account the general economic environment and conditions in the
industries in which the Corporation operates.
The Corporation had no CEO between January 24, 1997 and September 22, 1997
when it named Glen W. Lindemann the CEO. 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.
Fred J. Brinkman Harrison Nesbit, II Robert P. Collins
F. Rush McKnight John P. Reilly
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.
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 the 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 ninety (90) days after termination of
employment. Stock option grants are now the Corporation's primary equity
incentive compensation program. In 1997, the Stock Option Committee granted
options for 295,000 shares to three of the named executive officers, including
the
14
<PAGE> 17
former chief financial officer who was entitled to exercise the right to buy
shares for $1.17 per share under his employment agreement.
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.
Pursuant to his Employment Agreement, the former Chief Financial Officer
received the right to purchase 150,000 shares of stock over a four-year period
beginning in July, 1994. Prior to 1997, these shares were issued under the
former Restricted Stock Plan. In September, 1997, the former Chief Financial
Officer received the right to purchase 37,500 shares of Class A Common Stock for
$1.00 per share. These shares were issued under the Stock Option Plan.
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, Mr. Reilly's unvested options to acquire
200,000 shares terminated. 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 non-employee Chairman of the Board of Directors and member
of the Office of the Chairman to provide that Mr. Reilly's vested options can be
exercised upon the latter of December 31, 1997 or the date as of which Mr.
Reilly no longer serves as non-employee Chairman of the Board. In February 1998,
the Stock Option Committee extended the period the options can be exercised to
the latter of December 31, 1998 or the date as of which Mr. Reilly no longer
serves as Chairman of the Board.
Upon his appointment to the position of President and CEO in September
1997, Mr. Lindemann was granted options under the Stock Option Plan to acquire
200,000 shares of the Corporation's Class A Common Stock. These options were
provided as the main element of Mr. Lindemann's long-term compensation. The
options are scheduled to vest in 20% increments of 40,000 shares on each of
September 22, 1998, 1999, 2000, 2001 and 2002. Mr. Lindemann was previously
granted options to acquire a total of 52,000 shares of the Corporation's Class A
Common Stock while serving as President of the Corporation's Scott Aviation
division.
Harrison Nesbit, II Fred J. Brinkman Robert P. Collins
15
<PAGE> 18
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
1997 whose total annual salary and bonus exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- -----------------------
RESTRICTED SECURITIES
OTHER STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL ANNUAL AWARD(S) OPTIONS/ COMPENSATION
POSITION YEAR SALARY BONUS COMPENSATION(1) ($) SARS (#) (2)
------------------ ---- ------ ----- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John P. Reilly (3) 1997 $ 41,667 -- -- -- -- $33,407
Chairman, CEO and 1996 500,000 $300,000 -- -- -- 38,241
President 1995 500,000 250,000 $ 67,198 $165,000 500,000 38,178
Glen W. Lindemann (4) 1997 221,417 203,800 -- -- 220,000 26,619
President and CEO
Steven L. Siemborski(5) 1997 350,000 100,000 482,813 -- 62,500 12,820
Senior Vice President 1996 350,000 182,000 344,531 -- -- 21,290
And Chief Financial 1995 350,000 108,000 448,124 -- -- 16,179
Officer
William J. Sickman (6) 1997 141,917 30,000 -- -- 50,000 3,580
Vice President Corporate
Relations
</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 1997, 1996 and 1995 and
the prices paid by Mr. Siemborski for those shares.
(2) Includes the following for 1997:
The discounted value of the benefit to each of the Named Executive Officers
of the premium paid by the Corporation during 1997 for one or more
split-dollar insurance policies under which the executive receives an
interest in the cash surrender value of the policy at the time when the
ownership of the policy is split between the executive and the Corporation.
The Executive Officers paid a portion of the premium based upon a rate for
term life insurance.
(3) 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.
(4) Mr. Lindemann became President and CEO of the Corporation on September 22,
1997. Prior to that time he served as Member of the office of the Chairman
of the Board between January 24, 1997 and September 22, 1997 and President
of the Corporation's Scott Aviation division.
(5) Mr. Siemborski resigned from the Corporation on March 31, 1998.
(6) Mr. Sickman became an executive officer of the Corporation on February 1,
1997.
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<PAGE> 19
STOCK OPTIONS
The following tables provide information on grants of stock options
pursuant to the Stock Option Plan during the year ended December 31, 1997. 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 ten (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.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to options granted or
awarded to the Named Executive Officers during 1997.
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 -- --
Glen W.
Lindemann(2)....... 20,000 3.8 12.375 2/4/97 2/4/04 N/A 100,757 234,808
200,000 38.2 13.75 9/22/97 9/22/04 N/A 1,119,526 2,608.972
Steven L.
Siemborski(3)...... 25,000 4.8 12.375 2/4/97 2/4/04 N/A 125,947 293,509
37,500 7.2 1.00 9/16/97 11/1/97 N/A N/A N/A
William J.
Sickman(4)......... 50,000 9.6 12.375 2/4/97 2/4/04 N/A 251,893 587,019
All Stockholders..... N/A N/A N/A N/A N/A N/A
All Optionees........ 523,000 100% Various Various Various N/A
Options Gain as % of
all Stockholder
Gain............... 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) On February 4, 1997, Mr. Lindemann was granted 20,000 options at an exercise
price of $12.375, scheduled to vest in one-third ( 1/3) cumulative
installments on each of February 4, 1998, 1999, and 2000. On September 22,
1997, Mr. Lindemann was granted 200,000 options at an exercise price of
$13.75, scheduled to vest in one-fifth ( 1/5) cumulative installments on
each of September 22, 1998, 1999, 2000, 2001 and 2002.
17
<PAGE> 20
(3) The 37,500 options were granted pursuant to Mr. Siemborski's employment
agreement dated July 1, 1994. These options were immediately exercisable.
(4) Mr. Sickman's options are scheduled to vest in one-fifth ( 1/5) cumulative
installments on each of February 4, 1998, 1999, 2000, 2001 and 2002.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES TABLE
The following table provides information related to any stock options
exercised by the Named Executive Officers during 1997 and the value of
unexercised in-the-money options held by the Named Executive Officers at
December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS/SARS
SHARES ACQUIRED VALUE (#) AT FY-END ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Reilly........... 0 0 200,000/ 0 $1,325,000/ 0
Glen W. Lindemann........ 0 0 16,667/ 235,333 75,334/ $66,666
Steven L. Siemborski..... 37,500 $482,813 0/ 25,000 0/ 18,750
William J. Sickman....... 0 0 13,344/ 62,656 59,337/ 79,163
</TABLE>
COMPENSATION OF DIRECTORS
Effective April 1, 1998, the Board of Directors approved several changes to
reduce Board costs. Prior to this date, the Directors, except for those who are
also employees of the Corporation, received 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 received $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 and members of the remaining committees other than the Stock Option
Committee received $3,000 per year, an attendance fee of $250 for each meeting,
and a participation fee of $250 for each telephonic meeting. In addition, the
Directors received 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 received certain death
and other benefits.
Effective April 1, 1998, the standing committees were reduced to the Audit
Committee and the Management Development and Compensation Committee, the
Nominating Committee, and the Stock Option Committee. There will be no annual
fee paid to the members of the stock option and nominating committees. 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 $750 for each telephonic meeting of the Board of
Directors. In addition, the non-employee members of the Audit Committee and the
Management Development and Compensation Committees receive $3,000 per year, and
an attendance fee of $500 for each separate meeting (including telephonic
meetings). Non-employee members of the Nominating Committee and the Stock Option
Committee receive an attendance fee of $500
18
<PAGE> 21
for each meeting (including telephonic meetings). The Directors also receive
travel and lodging expenses in connection with their attendance at Board and
committee meetings.
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 (5) years. 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.
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 1997 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 1998, Covered Compensation will equal
$29,304.
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
19
<PAGE> 22
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.
As of December 31, 1997, 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 1997 and were assumed not to exceed
$160,000 after 1998. Covered Compensation ($29,304 for 1998) was assumed not to
increase after 1998, the maximum allowable employer-funded benefit under the
Internal Revenue Code (which is the greater of $130,000 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 -- $0 (as a
result of Mr. Reilly's resignation); Mr. Lindemann -- $15,478; Mr.
Siemborski -- ($0 as a result of Mr. Siemborski's resignation); and Mr.
Sickman -- $9,595.
401(K) SAVINGS PLAN FOR SALARIED EMPLOYEES
All of the Executive Officers of the Corporation participate in the Figgie
International Inc. 401(k) Savings Plan for Salaried Employees ("401(k) Plan"), a
qualified defined contribution plan. The 401(k) Plan covers the salaried
employees of the Corporation. Directors who are not employees are not entitled
to receive benefits under the 401(k) Plan.
Prior to July 1, 1997, under the 401(k) Plan employees were permitted to
defer up to 7% of their earnings, not to exceed $160,000 after 1996; and the
Corporation did not contribute into the Plan. As of July 1, 1997, the
Corporation amended the 401(k) Plan to permit employees to defer up to 15% of
the first $16,000 in earnings, not to exceed the $9,500 maximum deferral in 1997
($10,000 after 1997). The Corporation also commenced making contributions into
the 401(k) Plan. Effective July 1, 1997 the Corporation contributes one dollar
for each dollar saved by the employee for the first 1% of earnings and
twenty-five cents for each dollar saved for the next 4% for earnings (up to the
maximum limits).
The Corporation's contributions into the 401(k) Plan did not exceed 2% of
the first $80,000 of the executives' earnings from July 1997 through December
1997, and do not exceed 2% of the first $160,000 of the executive earnings
annually after 1997.
SENIOR EXECUTIVE BENEFITS PROGRAM
The following plan table shows the annual benefits upon retirement at age
65 in 1997 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.
20
<PAGE> 23
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN(1)
---------------------------------------------------------------
REMUNERATION(2) 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $ 16,390 $ 36,664 $ 29,854 $ 23,044 $ 16,233 $ 9,423
150,000 24,224 48,414 40,104 31,794 23,483 15,173
175,000 33,857 62,864 53,954 45,044 36,133 27,223
200,000 44,690 79,114 70,204 61,294 52,383 43,473
225,000 55,524 95,364 86,454 77,544 68,633 59,723
250,000 66,357 111,614 102,704 93,794 84,883 75,973
300,000 88,024 144,144 135,204 117,383 117,383 108,473
350,000 109,690 176,614 167,704 158,794 149,883 149,883
400,000 131,357 209,114 200,204 191,294 182,383 173,473
450,000 153,024 241,614 232,704 214,883 214,883 214,883
500,000 174,690 274,114 265,204 256,294 247,383 238,473
</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 $24,156 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 1997 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 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, 1997, the credit years of service for the Named
Executive Officers are as follows: Mr. Lindemann, eight (8) years; Mr.
Siemborski, three (3) years; and Mr. Sickman, nine (9) years.
On March 31, 1998, the Board of Directors approved resolutions to
restructure the retirement benefits for its executives in order to provide a
more competitive benefit package. The resolutions directed Management to execute
an amendment to the SEBP in order to freeze participation and benefits
thereunder, and into an agreement with Mr. Sickman to eliminate his rights to
any and all benefits under the SEBP (for which the Company will offer 3,760
stock options to Mr. Sickman). The Board of Directors further resolved to
establish two non-qualified excess plans to provide supplemental benefits with
respect to earnings in excess of the 401(a)(17) Limit. These non-qualified
defined benefit and defined contributions plans will provide benefits similar to
the Salaried Provisions in the Figgie International Inc. Retirement Income Plan
II and the 401(k) Plan for earnings in excess of the IRC Limits. These plans
will cover all excess earnings beginning on January 1, 1998.
21
<PAGE> 24
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.
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 the greater of (i) two years or (ii) the remainder of
the term of the Executive Agreement. The Executive Agreement would have
terminated on
22
<PAGE> 25
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 former Officer Steven L. Siemborski. As
previously disclosed, Mr. Siemborski left the Corporation on March 31, 1998. The
Employment Contract provided 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 provided 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 provided that in the event Mr. Siemborski's employment was terminated
due to death or disability (as defined), Mr. Siemborski (or his successor in
interest) would have been 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 provided that in the event Mr.
Siemborski's employment was terminated by the Corporation without good cause (as
defined) or by Mr. Siemborski for good reason (as defined), Mr. Siemborski would
have been 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 was 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 was 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
was 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 William J. Sickman. The Amended
Agreement provides for Mr. Sickman's employment for a three-year term, and
automatic extensions for successive one-year terms thereafter, as Vice
President, Corporate Relations of the Corporation. Under the terms of this
agreement, either the Corporation or Mr. Sickman can terminate 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. Sickman's employment is terminated
due to his retirement or death, his benefits will be determined in accordance
with the Corporation's retirement and benefits plans then in effect in which Mr.
Sickman is then a participant. In the event Mr. Sickman becomes disabled, the
Corporation can terminate Mr. Sickman's Amended Agreement (but not Mr. Sickman's
employment), and Mr. Sickman's benefits will be determined in accordance with
the Corporation's disability and other applicable plans then in effect. If the
Corporation terminates
23
<PAGE> 26
Mr. Sickman's employment other than for cause (as defined) or Mr. Sickman
terminates his employment for good reason (as defined), the Corporation will, at
Mr. Sickman's election, either continue to pay Mr. Sickman his monthly base
salary then in effect for 24 full calendar months following the date of such
termination or make a lump sum payment to Mr. Sickman of the amount due. In
addition, the Corporation will make payment to Mr. Sickman of an amount equal to
12 months of the monthly vehicle allowance payments being received at the time
of termination; a performance bonus, pro-rated for the current year up to the
date of termination; and all options previously granted to Mr. Sickman pursuant
to the Stock Option Plan will become immediately vested and the period to
exercise such options will be extended to the earlier of: one year from the date
of termination, and the expiration date of the grant. The Corporation also will
be obligated to continue to provide Mr. Sickman with his life insurance and
health care benefits (unless comparable benefits are 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; and the period of severance
will be counted towards vesting in the Corporation's Senior Executive Benefit
Plan. In such an event, Mr. Sickman will also be entitled to 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 will be obligated to
pay when due all other benefits to which Mr. Sickman has a vested right.
24
<PAGE> 27
STOCK PERFORMANCE GRAPH
The graph reflects a cumulative five year total return on an investment of
$100 on December 31, 1992 in Figgie International Inc. Class A and Class B
Common Stock, the Nasdaq Market Index, and the peer group used by the
Corporation in its 1997 Proxy statement (the "Old Peer Group") and a newly
constructed peer group and assumes dividend reinvestment through the fiscal year
ending December 31, 1997, which was constructed because the Old Peer Group
included companies which did not have the intended capitalization. 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 (U.S.)
INDEX, AN OLD PEER GROUP AND A NEW PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
FIGGIE FIGGIE
INTERNATIONAL INTERNATIONAL, NEW
MEASUREMENT PERIOD INC. INC. PEER OLD PEER
(FISCAL YEAR COVERED) CLASS A CLASS B GROUP GROUP NASDAQ
<S> <C> <C> <C> <C> <C>
12/92 100 100 100 100 100
12/93 83 81 110 126 115
12/94 38 36 93 124 112
12/95 64 58 88 146 159
12/96 74 61 98 169 195
12/97 80 69 118 198 240
</TABLE>
- ---------------
* $100 invested on 12/31/92 in stock or index, including reinvestment of
dividends; fiscal year ending December 31.
25
<PAGE> 28
The Old Peer Group was constructed to closely resemble the Corporation's
market capitalization. The companies in the Corporation's Old Peer Group were
companies included on the Fortune 500 Industrial and Farm Equipment Companies
list and the Corporation intended for the selected companies to have a market
capitalization of between $50 million and $600 million. The Old Peer Group
consisted 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>
The New Peer Group was adjusted in 1998 to include only those companies
whose market capitalization fell within the above mentioned parameters. The
newly constructed peer group consists of the companies set forth below:
<TABLE>
<S> <C>
Detroit Diesel Corporation
Fedders Corporation
Figgie International Inc. Class A
IMO Industries Inc.
National Presto Industries Inc.
Terex Corp.
The Toro Company
</TABLE>
CERTAIN TRANSACTIONS
On March 8, 1996, the Corporation loaned to Steven L. Siemborski, the
Corporation's former 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. 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. Mr.
Siemborski repaid this loan in full on December 30, 1997.
26
<PAGE> 29
APPROVAL OF THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE CORPORATION
The text of Article First of the Restated Certificate of Incorporation of
Figgie International Inc., constituting the provision establishing the name of
the Corporation, as proposed to be amended, is included in the Form of
Certificate of Amendment to Restated Certificate of Incorporation attached as
Exhibit A to this Proxy Statement. The discussion, which follows, is qualified
in its entirety by reference to the text of this Article as proposed to be
amended.
At its meeting on February 24, 1998, the Board of Directors unanimously
adopted a resolution approving a proposed amendment (the "Amendment") to Article
First of the Restated Certificate of Incorporation of the Corporation, to change
the name of the Corporation to . The Board of Directors
has concluded that approval of the Amendment would be in the best interests of
the Corporation and its stockholders and the Board recommends that stockholders
vote for approval of the Amendment for the reasons outlined below. In summary,
the Board believes that the Amendment is in the best interests of the
stockholders because the name, , more accurately
communicates the Corporation's view of its Scott Aviation division as the
cornerstone of its business, and more accurately reflects the Corporation's
strategic focus to rebuild the Corporation's business around its Scott Aviation
division.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
The proposed name change will not affect the operations or businesses, or
the rights of stockholders, of the Corporation. As soon as practicable following
effectiveness of the Certificate of Amendment, the Corporation will cause
transmittal letters to be mailed to stockholders for use in forwarding their
stock certificates for surrender and exchange for new stock certificates.
RECOMMENDATION; REQUIRED VOTE
Approval of the Proposed Amendment to the Restated Certificate of
Incorporation will require the affirmative vote of holders of shares
representing a majority of the votes of the outstanding shares, provided a
quorum is present.
THE BOARD OF DIRECTORS CONSIDERS THE AMENDMENT TO BE IN
THE BEST INTERESTS OF THE CORPORATION AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
APPROVAL OF THE FIGGIE INTERNATIONAL INC.
DIRECTORS' STOCK OPTION PLAN
The following is a brief description of the material features of the
Directors' Stock Option Plan. Such description is qualified in its entirety by
reference to such plan, a copy of which is attached hereto as Exhibit B.
On March 31, 1998, the Board of Directors approved, subject to stockholder
approval, the Directors' Stock Option Plan (the "Plan"), providing for the
granting to members of the Board of Directors who are not employees of the
Corporation and its subsidiaries ("Outside Directors") of options to purchase
not more than 175,000 shares of Class A Common Stock of the Corporation. The
Plan, which would be effective July 1, 1998, provides for the issuance to
Outside Directors of nonqualified stock options. The
27
<PAGE> 30
Plan is intended to replace the Corporation's 1993 Restricted Stock Purchase
Plan for Directors which will terminate in July 1998.
PURPOSE OF THE PLAN
The Board of Directors adopted the Plan because it believes that the Plan
will promote the long-term growth and profitability of the Corporation and
improve stockholder value by more closely aligning Outside Directors' economic
interests with those of the Corporation's stockholders. If the Plan is approved
by the stockholders, options to purchase shares of Class A Common Stock will
automatically be issued to Outside Directors under the terms of the Plan.
GRANT OF OPTIONS TO ELIGIBLE PERSONS
The Plan provides that options for 2,500 shares of Class A Common Stock
will be granted on July 1, 1998 and each subsequent July 1 during the period the
Plan is in effect to each person who is an Outside Director on such July 1. Each
such option shall be in addition to any other options granted to the Director
under the Plan on any prior July 1st. There are currently five (5) Outside
Directors. If the nominees for election as Directors are adopted, there will be
five (5) Outside Directors. No options will be granted pursuant to the Plan,
until the stockholders have approved the plan.
SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Class A Common Stock for which options
may be granted under the Plan is 175,000 shares of authorized and unissued
shares of Class A Common Stock. All shares of Class A Common Stock which are the
subject of any lapsed, expired or terminated options will be available for
reoffering under the Plan.
In the event that subsequent to the date of adoption of the Plan by the
Board of Directors the total outstanding shares of the Corporation's Class A
Common Stock should be increased or decreased or changed into or exchanged for a
different number or kind of shares of capital stock of the Corporation or of
another corporation, appropriate adjustments reflecting such changes will be
made with respect to both the number of shares for which options may be granted
in the future and the number and the exercise price for shares already subject
to existing options.
OPTION PROVISIONS
Option Price. The option price per share of Class A Common Stock under the
Plan will be 100% of the fair market value of a share of Class A Common Stock on
the date such an option is granted.
Period of Option. Each option will be exercisable for a period of seven
(7) years from the date upon which the option is granted. However, an option
will be subject to earlier termination if an optionee ceases to be a Director.
Limitations on Exercise and Transfer of Options. Only the Director to whom
the option is granted may exercise the option except where a guardian or other
legal representative has been duly appointed for the Director and except as
otherwise provided in the case of the Director's death. No option is
transferable otherwise than by the Last Will and Testament of the Director to
whom it is granted or, if the Director dies intestate, by the applicable laws of
descent and distribution. No option may be pledged or hypothecated, nor may any
option be subject to execution, attachment or similar process.
28
<PAGE> 31
Conditions Governing Exercise of Option. Options may be exercised by the
optionee giving written notice to the Corporation of the optionee's exercise of
the option accompanied by full payment of the purchase price in cash. Each
option will become exercisable in thirds beginning 12 months after the date of
grant as follows:
<TABLE>
<CAPTION>
CUMULATIVE NUMBER OF SHARES
OF CLASS A COMMON STOCK
AS TO WHICH OPTION JULY 1 ON WHICH THE PORTION
MAY BE EXERCISED OF THE OPTION MAY BE EXERCISED
----------------------------- -------------------------------------------------
<S> <C>
834 12 months after grant
1,667 24 months after grant
2,500 36 months after grant
</TABLE>
Notwithstanding the foregoing, if an optionee is unable to run for reelection as
a Director during the first six (6) months of a calendar year because he has
attained the maximum age for Directors (set forth in a policy of the
Corporation), as further described under "Compensation of Directors" herein),
shares of Class A Common Stock which would have become exercisable on the
following July 1 will instead become exercisable on the date the Corporation
mails proxy material for the annual meeting of its stockholders at which such
Director will not be reelected. To the extent that an option has become
exercisable with respect to a number of shares of Class A Common Stock, as
provided above, the option may be exercised in whole or in part at any time
during the option period, but this right of exercise shall be limited to whole
shares.
Notwithstanding anything in the Plan to the contrary, in the event of a "change
in control," all outstanding options shall automatically become immediately
exercisable notwithstanding any vesting limitation otherwise previously imposed
on such options. Thereafter, an optionee may exercise any and all outstanding
options (in whole or in part), whether or not such options are by their terms
fully exercisable at such time). For purposes of the Plan, the term "change in
control" is defined to include, without limitation, the occurrence of the
following events: (i) the first purchase of shares pursuant to a tender offer or
exchange (other than a tender offer or exchange by the Corporation) for ten
percent (10%) or more of the Corporation's Common Stock of any class or any
securities convertible into such Common Stock; (ii) the receipt by the
Corporation of a Schedule 13D or other advice indicating that a person is the
"beneficial owner" (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of twenty percent (20%) or more of the Corporation's
Common Stock calculated as provided in paragraph (d) of said Rule 13d-3; (iii)
the date of approval by stockholders of the Corporation of an agreement
providing for any consolidation or merger of the Corporation in which the
Corporation will not be the continuing or surviving corporation or pursuant to
which shares of capital stock, of any class or any securities convertible into
such capital stock, of the Corporation would be converted into cash, securities,
or other property, other than a merger of the Corporation in which the holders
of Common Stock of all classes of the Corporation immediately prior to the
merger would have the same proportion of ownership of common stock of the
surviving corporation immediately after the merger; (iv) the date of the
approval by stockholders of the Corporation of any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of the Corporation; or (v) the adoption of any
plan or proposal for the liquidation (but not a partial liquidation) or
dissolution of the Corporation.
Cessation of Status as a Director. If an optionee ceases to be a Director,
the optionee shall be able to exercise an option during the 3 months after the
date the optionee ceased to be a Director (but not beyond the original term of
the option) if the reason for the optionee's cessation as a Director was other
than his death. If an optionee should die prior to the expiration of an option,
the optionee's estate, or the person designated in his Last Will and Testament,
or the person to whom the option is transferred by the applicable laws of
descent and distribution shall be able to exercise the option during the one (1)
year period after the
29
<PAGE> 32
date the optionee ceased to be a Director (but not beyond the original term of
the option) if either (i) the optionee died while he was a Director of the
Corporation or (ii) the optionee died within three (3) months after ceasing to
be a Director of the Corporation.
ADMINISTRATION OF THE PLAN
If adopted, the Plan will be self-executing and will not involve any
discretion as to the dates on which options are to be granted, the persons to
whom options are to be granted, the number of shares of Class A Common Stock
subject to options, the period of an option or the dates upon which an option
will become exercisable. Thus, the administration of the Plan will be purely
ministerial and will be done by the personnel of the Corporation's Legal
Department.
AMENDMENTS TO THE PLAN
Subject to the approval of the stockholders of the Corporation, the
Corporation may at any time amend, modify, suspend or terminate the Plan.
TERMINATION OF THE PLAN
The Plan will terminate on June 30, 2005. All options outstanding at the
time of termination of the Plan will continue in full force and effect according
to their terms and the terms and conditions of the Plan.
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not realize income upon the granting of options under the
Plan; however, in any year in which an optionee exercises a part or all of such
option, the excess, if any, of the fair market value of the shares of Class A
Common Stock at the date of exercise over the option price will be taxed as
compensation at ordinary income tax rates, and the Corporation will be entitled
to a tax deduction for the same amount in the same year.
RECOMMENDATION; REQUIRED VOTE
Approval of the Plan will require the affirmative vote of holders of shares
representing a majority of the number of votes present in person or represented
by proxy at the Annual Meeting, provided a quorum is present.
THE BOARD OF DIRECTORS CONSIDERS THE
FIGGIE INTERNATIONAL INC. DIRECTORS'
STOCK OPTION PLAN TO BE IN THE BEST INTERESTS
OF THE CORPORATION AND ITS STOCKHOLDERS AND RECOMMENDS
A VOTE FOR APPROVAL OF THE PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers and
persons who own more than 10% of the Corporation's outstanding Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership in the Corporation's Common Stock and other
equity securities. Specific due dates for these records have been established
and the Corporation is required to report in this proxy statement any failure to
file by these dates in 1997. Robert P. Collins was required to file Form 3
within 10 days of his election as a director of the Corporation on December 10,
1997. Mr. Collins' Form 3 was filed on April , 1998.
30
<PAGE> 33
INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation's independent public accountants for the fiscal year ended
1997 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
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material to be disseminated by the Corporation in connection with its 1999
Annual Meeting must do so no later than December 17, 1998. To be eligible for
inclusion in the 1999 proxy material, such proposal must conform to the
requirements set forth in Regulation 14A under the Securities Exchange Act of
1934. In order to be considered at an Annual Meeting, a stockholder proposal
must be presented by the proponents or their representatives in attendance at
the meeting.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those listed in the Notice of Annual Meeting of
Stockholders. However, if other matters properly come before the Meeting, it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their best judgment on such matters insofar as the proxies are
not limited to the contrary.
To the extent that information contained in this Proxy Statement is within
the knowledge of persons other than the management of the Corporation, the
Corporation has relied on such persons for the accuracy and completeness
thereof.
Upon the receipt of a written request from any stockholder entitled to vote
at the forthcoming Annual Meeting, the Corporation will mail, at no charge to
the stockholder, a copy of the Corporation's annual report on Form 10-K,
including the financial statements and schedules required to be filed with the
SEC pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, for the
Corporation's most recent fiscal year. Requests from beneficial owners of the
Corporation's voting securities must set forth a good faith representation that,
as of the record date for the Annual Meeting, the person making the request was
the beneficial owner of securities entitled to vote at such meeting. Written
requests for such report should be directed to:
Investor Relations Department
Figgie International Inc.
5875 Landerbrook Drive, Suite 250
Mayfield Heights, Ohio 44124
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: April , 1998
31
<PAGE> 34
EXHIBIT A
FORM OF CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
FIGGIE INTERNATIONAL INC.
PURSUANT TO SECTION 103 AND SECTION 242 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
The undersigned, Glen W. Lindemann and William J. Sickman certify that they
are the President and Secretary, respectively, of Figgie International Inc. a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), and do hereby further certify as follows:
1. The name of the Company is Figgie International Inc.
2. This Certificate of Amendment was unanimously approved by the Board
of Directors of the Company and thereafter duly adopted by the stockholders
thereof, in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
3. Article FIRST of the Restated Certificate of Incorporation of the
Company is hereby amended to read in its entirety as follows:
FIRST: The name of the corporation is ________________ (hereinafter
the "Company").
IN WITNESS WHEREOF, Figgie International Inc. has caused this Certificate
of Amendment to be signed by Glen W. Lindemann, its President, and attested by
William J. Sickman, its Secretary, this ____ day of ____________, 1998.
FIGGIE INTERNATIONAL INC.
----------------------------------
Glen W. Lindemann
ATTEST:
- ------------------------------------------------------
William J. Sickman
32
<PAGE> 35
EXHIBIT B
FIGGIE INTERNATIONAL INC.
DIRECTORS' STOCK OPTION PLAN
Figgie International Inc. hereby adopts a stock option plan for the benefit
of certain members of its Board of Directors and subject to the terms and
provisions set forth below.
1. Definitions. The following terms shall have the meanings set forth
below whenever used in this instrument:
(a) The word "Board" shall mean the Board of Directors of the Company.
(b) The words "Common Stock" shall mean the Class A Common Stock,
$0.10 par value, of the Company.
(c) The word "Company" shall mean Figgie International Inc., a
Delaware corporation, and any successor thereto which shall maintain this
Plan.
(d) The word "Director" shall mean a member of the Board.
(e) The word "Optionee" shall mean any Director to whom a stock option
has been granted pursuant to this Plan.
(f) The words "Outside Director" shall mean a Director who is not an
employee of the Company or a Subsidiary.
(g) The word "Plan" shall mean this instrument, the Figgie
International Inc. Directors' Stock Option Plan, as it is originally
adopted and as it may be amended hereafter.
(h) The word "Subsidiary" shall mean any corporation at least fifty
percent (50%) of the common stock of which is owned directly or indirectly
by the Company.
2. Purpose of the Plan. The purpose of this Plan is to provide Outside
Directors of the Company with greater incentive to serve and promote the
interests of the Company and its stockholders. The premise of this Plan is that
if such persons acquire a proprietary interest in the business of the Company or
increase such proprietary interest as they may already hold, then the incentive
of such persons to work toward the Company's continued success will be
commensurately increased. Accordingly, the Company will, on each July 1st during
the effective period of this Plan, grant to Outside Directors options to
purchase Common Stock in accordance with the terms and subject to the conditions
set forth in this Plan. All such options shall be non-qualified stock options.
3. Effective Date of the Plan. This Plan shall become effective on July 1,
1998, subject to approval of a majority of the votes of holders of Class A
Common Stock and holders of Class B Common Stock present in person or
represented by proxy at a duly constituted meeting of the stockholders of the
Company voting together and not as separate Classes. In the event that the
foregoing condition is not satisfied within twelve (12) months after the date
this Plan is adopted, this Plan and any options granted hereunder shall be null
and void. If, however, this Plan is so approved, subject to the provisions of
Section 10 hereof, no further stockholder approval shall be required with
respect to the granting of any options pursuant to this Plan.
33
<PAGE> 36
4. Administration of the Plan. This Plan shall be administered by the
Company. Subject to the terms and conditions of this Plan, the Company shall
have full and final authority in its absolute discretion to construe and
interpret this Plan and the instruments evidencing options granted under this
Plan. Any such construction or interpretation shall, to the extent permitted by
law, be conclusive and binding upon all Optionees under this Plan and upon any
person claiming under or through such an Optionee.
5. Grant of Options to Eligible Persons. Subject to the restrictions
herein contained, on July 1, 1998, the effective date of this Plan, and each
subsequent July 1st during the period that this Plan is in effect, each person
who is an Outside Director on each such July 1st shall be granted an option to
purchase Two Thousand Five Hundred (2,500) shares of Common Stock. Each such
option shall be in addition to any other options granted to the Director under
this Plan on any prior July 1st.
6. Shares Subject to the Plan. Subject to the provisions of the next
succeeding paragraph of this Section, the aggregate number of shares of Common
Stock for which options may be granted under this Plan shall be One Hundred
Seventy-Five Thousand (175,000) shares of authorized and unissued shares of
Common Stock which shall be so issued. All shares of Common Stock which are the
subject of any lapsed, expired or terminated options shall thereafter be
available for reoffering under this Plan to any Outside Director. If an option
granted under this Plan is exercised pursuant to the terms and conditions set
forth in Subsection 7(d) hereof, any shares of Common Stock which are the
subject thereof shall not thereafter be available for reoffering under this
Plan.
In the event that subsequent to the date of adoption of this Plan by the
Board the outstanding shares of Common Stock are, as a result of a stock split,
stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization, spin-off, split-off, split-up or other such
change or a special dividend or other distribution to the Company's
stockholders, increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company,
then (i) there shall automatically be substituted for each share of Common Stock
subject to an unexercised option granted under this Plan and each share of
Common Stock available for additional grants of options under this Plan the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be exchanged, (ii) the option price per
share of Common Stock or unit of securities shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to the option shall remain the same as immediately prior to such event, and
(iii) the Company shall make such other adjustments to the securities subject to
options, the provisions of this Plan, and the option agreements as may be
appropriate or equitable, in order to prevent dilution or enlargement of option
rights and any such adjustment shall be final, binding and conclusive as to each
Optionee.
7. Option Provisions.
(a) OPTION PRICE. The option price per share of Common Stock which is the
subject of a stock option under this Plan shall be one hundred percent (100%) of
the fair market value of a share of Common Stock on the date the stock option is
granted.
(b) PERIOD OF OPTION. Each option shall be exercisable for seven (7) years
from the date upon which the option is granted. Each option shall be subject to
earlier termination as provided in Subsection 7(e) hereof.
(c) LIMITATION ON EXERCISE AND TRANSFER OF OPTION. Except as otherwise
provided in the event of an Optionee's death, only the Optionee may exercise an
option, provided that a guardian or other legal
34
<PAGE> 37
representative who has been duly appointed for such Optionee may exercise an
option on behalf of the Optionee. No option granted hereunder shall be
transferable other than by the Last Will and Testament of the Optionee or, if
the Optionee dies intestate, by the applicable laws of descent and distribution.
No option granted hereunder may be pledged or hypothecated, nor shall any such
option be subject to execution, attachment or similar process.
(d) CONDITIONS GOVERNING EXERCISE OF OPTION. Except as provided in
Subsection 7(e) hereof, options shall be exercisable as set forth in this
Subsection. Each option will not be exercisable as of the July 1 on which such
option is granted pursuant to Section 5 hereof. After such date the Optionee
shall become entitled to exercise the option as follows:
<TABLE>
<CAPTION>
CUMULATIVE NUMBER JULY 1 ON WHICH
OF SHARES OF COMMON THE PORTION OF THE
STOCK AS TO WHICH OPTION MAY BE
OPTION MAY BE EXERCISED EXERCISED
- ----------------------- -----------------------
<S> <C>
834 12 months after grant
1,667 24 months after grant
2,500 36 months after grant
</TABLE>
To the extent that an option has become exercisable with respect to a number of
shares of Common Stock, as provided above, the option may thereafter be
exercised by the Optionee either as to all or any part of such whole shares at
any time or from time to time prior to the expiration of the option pursuant to
Subsection 7(b) or 7(e) hereof. Notwithstanding the foregoing, if an Optionee is
unable to run for reelection as a Director during the first six (6) months of a
calendar year because he has attained the maximum age for Directors (as set
forth in a policy of the Company), shares of Common Stock which would have
become exercisable on the following July 1st will instead become exercisable on
the date the Company mails proxy material for the annual meeting of its
stockholders at which such Director will not be reelected.
Options shall be exercised by the Optionee giving written notice to the
Secretary of the Company at its principal office, by certified mail, return
receipt requested, of the Optionee's exercise of the option and the number of
shares of Common Stock with respect to which the option is being exercised,
accompanied by full payment of the purchase price in cash. Such notice shall be
deemed delivered when deposited in the mails. Notwithstanding anything in the
foregoing to the contrary, in the event of a "change in control" all outstanding
options shall automatically become immediately exercisable notwithstanding any
vesting limitations otherwise previously imposed on such options. Thereafter an
Optionee may exercise any and all outstanding options (in whole or in part),
whether or not such options are by their terms fully exercisable at such time.
The term "change in control" shall include, but not limited to: (A) the first
purchase of shares pursuant to a tender offer or exchange (other than a tender
offer or exchange by the Company) for ten percent (10%) or more of the Company's
common stock of any class or any securities convertible into such common stock;
(B) the receipt by the Company of a Schedule 13D or other advice indicating that
a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of twenty percent (20%) or more of the
Company's Common Stock calculated as provided in paragraph (d) of said Rule
13d-3; (C) the date of approval by stockholders of the Company of an agreement
providing for any consolidation or merger of the Company in which the Company
will not be the continuing or surviving corporation or pursuant to which shares
of capital stock, of any class or any securities convertible into such capital
stock, of the Company would be converted into cash, securities, or other
property, other than a merger of the Company in which the holder of common stock
of all classes of the Company immediately prior to the merger would have the
same proportion of ownership of common stock of the surviving corporation
immediately after the merger; (D) the date of the approval by stockholders of
the Company of
35
<PAGE> 38
any sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company; and
(E) the adoption of any plan or proposal of the liquidation (but not a partial
liquidation) or dissolution of the Company.
(e) Cessation of Status as a Director. If an Optionee ceases to be a
Director, any of his or her options shall be exercisable as follows:
(i) the Optionee shall be able to exercise an option during the three (3)
months after the date the Optionee ceased to be a Director (but not
beyond the original term of the option) if the reason for the
Optionee's cessation as a Director was other than his death; or
(ii) the Optionee's estate, or the person designated in the Optionee's Last
Will and Testament, or the person to whom the option was transferred
by the applicable laws of descent and distribution shall be able to
exercise an option during the one (1) year period after the date the
Optionee ceased to be a Director (but not beyond the original term of
the option) if either (A) the reason for the Optionee's cessation as a
Director was his death or (B) the Optionee died within three (3)
months after ceasing to be a Director.
8. Investment Representation, Approvals and Listing. The Company may
condition its grant of any option hereunder upon receipt of an investment
representation from the Optionee which shall be substantially similar to the
following:
"Optionee agrees that any shares of Common Stock of Figgie
International Inc. which Optionee may acquire by virtue of the exercise of
this option shall be acquired for investment purposes only and not with a
view to distribution or resale; provided, however, that this restriction
shall become inoperative in the event the shares of Common Stock of Figgie
International Inc. which are subject to this option shall be registered
under the Securities Act of 1933, as amended, or in the event Figgie
International Inc. is otherwise satisfied that the offer or sale of the
shares of Common Stock which are subject to this option may lawfully be
made without registration under the Securities Act of 1933, as amended".
The Company shall not be required to issue any certificates for shares of Common
Stock upon the exercise of an option granted under this Plan prior to (i)
obtaining any approval from any governmental agency which the Company shall, in
its sole discretion, determine to be necessary or advisable, (ii) the admission
of such shares of Common Stock to listing on any national securities exchange on
which the shares of Common Stock may be listed, (iii) completion of any
registration or other qualification of the shares of Common Stock under any
state or federal law or ruling or regulations of any governmental body which the
Company shall, in its sole discretion, determine to be necessary or advisable,
or the determination by the Company, in its sole discretion, that any
registration or other qualification of the shares of Common Stock is not
necessary or advisable, and (iv) obtaining an investment representation from the
Optionee in the form set forth above or in such other form as the Company, in
its sole discretion, shall determine to be adequate.
9. General Provisions.
(a) OPTION AGREEMENTS WILL BE IDENTICAL. The form and substance of option
agreements under this Plan will be identical.
(b) NO RIGHT TO SERVE AS A MEMBER OF THE BOARD, ETC. Nothing in this Plan
or in any option agreement shall confer upon any Optionee any right to continue
to serve as a member of the Board, or to be entitled to receive any remuneration
or benefits not set forth in this Plan or such option agreement, or to interfere
with or limit the right of the stockholders of the Company to remove him or her
as a member of the Board with or without cause.
36
<PAGE> 39
(c) OPTIONEE DOES NOT HAVE RIGHTS OF STOCKHOLDER. Nothing contained in
this Plan or in any option agreement shall be construed as entitling any
Optionee to any rights of a stockholder as a result of the grant of an option
until such time as shares of Common Stock are actually issued to such Optionee
pursuant to the exercise of an option.
(d) SUCCESSORS IN INTEREST. This Plan shall be binding upon the successors
and assigns of the Company.
(e) NO LIABILITY UPON DISTRIBUTION OF SHARES. The liability of the Company
under this Plan and any distribution of Common Stock made hereunder is limited
to the obligations set forth herein with respect to such distribution and no
term or provision of this Plan shall be construed to impose any liability on the
Company in favor of any person with respect to any loss, cost or expense which
the person may incur in connection with or arising out of any transaction in
connection with this Plan, including, but not limited to, any liability to any
Federal, state, or local tax authority and/or any securities regulatory
authority.
(f) TAXES. Appropriate provisions shall be made for all taxes required to
be withheld and/or paid in connection with the options or the exercise thereof,
and the transfer of shares of Common Stock pursuant thereto, under the
applicable laws or other regulations of any governmental authority, whether
Federal, state or local and whether domestic or foreign.
(g) USE OF PROCEEDS. The cash proceeds received by the Company from the
issuance of shares of Common Stock pursuant to this Plan will be used for
general corporate purposes, or in such other manner as the Board deems
appropriate.
(h) EXPENSES. The expenses of administering this Plan shall be borne by
the Company.
(i) CAPTIONS. The captions and section numbers appearing in this Plan are
inserted only as a matter of convenience. They do not define, limit, construe or
describe the scope or intent of the provisions of this Plan.
(j) NUMBER. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
may require.
(k) GENDER. The use of the feminine, masculine or neuter pronoun shall not
be restrictive as to gender and shall be interpreted in all cases as the context
may require.
10. Amendments to the Plan. Subject to the approval of the stockholders,
the Company may at any time amend, modify, suspend or terminate this Plan. No
option may be granted during any suspension of this Plan or after this Plan has
terminated and no amendment, suspension or termination shall, without the
Optionee's consent, alter or impair any of the rights or obligations under an
option theretofore granted to such Optionee under this Plan.
11. Termination of the Plan. This Plan shall terminate on June 30, 2005,
and thereafter no options shall be granted under this Plan. All options
outstanding at the time of termination of this Plan shall continue in full force
and effect according to the terms of the option agreements governing such
options and the terms and conditions of this Plan.
12. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Delaware and any applicable federal
law.
13. Venue. The venue of any claim brought hereunder by a Director shall be
Cleveland, Ohio.
37
<PAGE> 40
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 MAY 20, 1998.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS CARD.
PROXY
The undersigned hereby appoints William Sickman and Debra Kackley, and both of
them, proxies, with full power of substitution to appear on behalf of the
undersigned and to vote all shares of Class A Common Stock of the undersigned at
the Annual Meeting of Stockholders to be held at Figgie International Inc., 5875
Landerbrook Drive, Mayfield Heights, Ohio 44124, on Wednesday, May 20, 1998 at
1:00 p.m. EST, and at any adjournment thereof, upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on the reverse
side of this card, hereby revoking any and all proxies heretofore given.
The proxies will vote for the election of all listed nominees 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: F. Rush McKnight, John P. Reilly, Frank
N. Linsalata.
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> 41
DETACH HERE FGA, FGB 2
PLEASE MARK
X VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. Approval of Amendment to Restated Certificate
of Incorporation. DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL.
FOR WITHHELD
For all nominees except as noted above
2. Election of all Nominees as Directors. DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL.
Nominees: F. Rush McKnight
John P. Reilly
Frank N. Linsalata
FOR WITHHELD
3. Approval of Directors Stock Option Plan DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL
FOR WITHHELD
</TABLE>
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> 42
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 MAY 20, 1998.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS CARD.
PROXY
The undersigned hereby appoints William Sickman and Debra Kackley, and both of
them, proxies, with full power of substitution to appear on behalf of the
undersigned and to vote all shares of Class B Common Stock of the undersigned at
the Annual Meeting of Stockholders to be held at Figgie International Inc., 5875
Landerbrook Drive, Mayfield Heights, Ohio 44124 on Wednesday, May 20, 1998 at
1:00 p.m. EST, and at any adjournment thereof, upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on the reverse
side of this card, hereby revoking any and all proxies heretofore given.
The proxies will vote for the election of all listed nominees 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: F. Rush McKnight, John P. Reilly, Frank
N. Linsalata.
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> 43
DETACH HERE FGA, FGB 2
PLEASE MARK
X VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. Approval of Amendment to Restated Certificate
of Incorporation. DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL.
FOR WITHHELD
For all nominees except as noted above
2. Election of all Nominees as Directors. DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL.
Nominees: F. Rush McKnight
John P. Reilly
Frank N. Linsalata
FOR WITHHELD
3. Approval of Directors Stock Option Plan DIRECTORS RECOMMEND
A VOTE "FOR" THE
PROPOSAL.
FOR WITHHELD
</TABLE>
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:_______________
