-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WdaMqSKpeIhDbzjTNqVkRLTQqc1hyTolJ6riiVx12QGONIdFOotzKSXJn6dN1uCI OFGBavz7ILgEsq+l3IMH8A== 0000950152-98-009008.txt : 19981118 0000950152-98-009008.hdr.sgml : 19981118 ACCESSION NUMBER: 0000950152-98-009008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCOTT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000720032 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 521297376 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12558 FILM NUMBER: 98750625 BUSINESS ADDRESS: STREET 1: 5875 LANDERBROOK DR STREET 2: STE 250 CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124 BUSINESS PHONE: 4404461333 MAIL ADDRESS: STREET 1: 5875 LANDERBROOK DR STREET 2: STE 250 CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124 FORMER COMPANY: FORMER CONFORMED NAME: FIGGIE INTERNATIONAL INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FIGGIE INTERNATIONAL HOLDINGS INC DATE OF NAME CHANGE: 19870112 10-Q 1 SCOTT TECHNOLOGIES, INC. 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended September 30, 1998 Commission file number 1-8591 ------------------ ----- SCOTT TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 52-1297376 - ------------------------------------------ ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5875 Landerbrook Drive, Suite 250 Mayfield Heights, Ohio 44124 - ------------------------------------------ ------------------------- (Address of principal executive offices) (Zip Code) (440) 446-1333 ------------------------------- (Registrant's telephone number) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date.
Class Outstanding as of October 29, 1998 - -------------------------------------------------------------------------------- Class A Common Stock, par value $.10 per share 13,321,065 Class B Common Stock, par value $.10 per share 4,549,822
2 SCOTT TECHNOLOGIES, INC. ------------------------ (FORMERLY FIGGIE INTERNATIONAL INC.) TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION..........................................................................3 ITEM 1. FINANCIAL STATEMENTS........................................................................3 CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997................................................3 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997...............................................4 CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND DECEMBER 31, 1997.............................................................5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997................................................7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................8 Name Change......................................................................................8 Summary of Significant Accounting Policies.......................................................8 Receivables......................................................................................8 Inventories......................................................................................9 Discontinued Operations..........................................................................9 Income Taxes....................................................................................11 Credit Facility.................................................................................11 Long-Term Debt..................................................................................12 Capital Stock...................................................................................12 Contingent Liabilities..........................................................................14 Extraordinary Item - Early Extinguishment of Debt...............................................15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................................................16 Forward-Looking Information.....................................................................16 Results of Operations Summary...................................................................16 Scott Aviation..................................................................................18 Corporate and Unallocated Costs and Expenses....................................................19 Financial Position and Liquidity................................................................19 Factors Affecting the Company's Prospects.......................................................21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................23 PART II. OTHER INFORMATION............................................................................23 ITEM 5. OTHER INFORMATION..........................................................................23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................................................24 SIGNATURES.............................................................................................25 EXHIBIT INDEX..........................................................................................26
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (in thousands, except per share data) (Unaudited)
September 30, September 30, 1998 1997 ------------ ------------ Net Sales $ 135,375 $ 118,751 Cost of Sales 91,159 80,455 ------------ ------------ Gross Profit on Sales 44,216 38,296 ------------ ------------ Operating Expenses: Selling, General and Administrative 18,793 17,595 Research and Development 2,484 2,617 ------------ ------------ Total Operating Expenses 21,277 20,212 ------------ ------------ Operating Income 22,939 18,084 ------------ ------------ Other Expense (Income): Refinancing Costs 521 393 Interest Expense 9,895 16,118 Interest Income (2,893) (4,019) Other, Net 2,034 2,237 ------------ ------------ Income from Continuing Operations before Income Tax and Extraordinary Item 13,382 3,355 Income Tax 5,386 991 ------------ ------------ Income from Continuing Operations before Extraordinary Item 7,996 2,364 Discontinued Operations, Net of Tax: (Loss) Income from Operations (6,954) 8,972 (Loss) on Disposal (5,898) (6,000) ------------ ------------ (12,852) 2,972 (Loss) Income before Extraordinary Item (4,856) 5,336 Extraordinary Item - (Loss) on Extinguishment of Debt, Net of Tax (1,689) - ------------ ------------ Net (Loss) Income $ (6,545) $ 5,336 ============ ============ Weighted Average Shares - Basic 18,435 18,396 Weighted Average Shares - Diluted 18,657 18,629 Per Share Data - Basic EPS: --------------------------- Income from Continuing Operations $ 0.43 $ 0.13 (Loss) Income from Discontinued Operations (0.70) 0.16 ------------ ------------ (Loss) Income Before Extraordinary Item (0.27) 0.29 Extraordinary Item (Loss) (0.09) - ------------ ------------ Net (Loss) Income $ (0.36) $ 0.29 ============ ============ Per Share Data - Assuming Dilution: ----------------------------------- Income from Continuing Operations $ 0.43 $ 0.13 (Loss) Income from Discontinued Operations (0.69) 0.16 ------------ ------------ (Loss) Income Before Extraordinary Item (0.26) 0.29 Extraordinary Item (Loss) (0.09) - ------------ ------------ Net (Loss) Income $ (0.35) $ 0.29 ============ ============
See Notes to Consolidated Financial Statements. 3 4 SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (in thousands, except per share data) (Unaudited)
September 30, September 30, 1998 1997 ------------ ------------ Net Sales $ 43,197 $ 38,084 Cost of Sales 29,468 26,051 ------------ ------------ Gross Profit on Sales 13,729 12,033 ------------ ------------ Operating Expenses: Selling, General and Administrative 6,577 5,671 Research and Development 800 629 ------------ ------------ Total Operating Expenses 7,377 6,300 ------------ ------------ Operating Income 6,352 5,733 ------------ ------------ Other Expense (Income): Refinancing Costs 131 131 Interest Expense 2,594 5,400 Interest Income (543) (1,957) Other, Net 826 729 ------------ ------------ Income from Continuing Operations before Income Tax and Extraordinary Item 3,344 1,430 Income Tax 1,361 462 ------------ ------------ Income from Continuing Operations before Extraordinary Item 1,983 968 Discontinued Operations, Net of Tax: (Loss) Income from Operations (5,522) 1,256 (Loss) on Disposal (5,898) - ------------ ------------ (11,420) 1,256 (Loss) Income before Extraordinary Item (9,437) 2,224 Extraordinary Item - (Loss) on Extinguishment of Debt, Net of Tax (44) - ------------ ------------ Net (Loss) Income $ (9,481) $ 2,224 ============ ============ Weighted Average Shares - Basic 18,294 18,413 Weighted Average Shares - Diluted 18,506 18,701 Per Share Data - Basic EPS: --------------------------- Income from Continuing Operations $ 0.11 $ 0.05 (Loss) Income from Discontinued Operations (0.63) 0.07 ------------ ------------ (Loss) Income Before Extraordinary Item (0.52) 0.12 Extraordinary Item - - Net (Loss) Income $ (0.52) $ 0.12 ============ ============ Per Share Data - Assuming Dilution: ----------------------------------- Income from Continuing Operations $ 0.11 $ 0.05 (Loss) Income from Discontinued Operations (0.62) 0.07 ------------ ------------ (Loss) Income Before Extraordinary Item (0.51) 0.12 Extraordinary Item - - ------------ ------------ Net (Loss) Income $ (0.51) $ 0.12 ============ ============
See Notes to Consolidated Financial Statements. 4 5 SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 (in thousands)
September 30, December 31, ASSETS 1998 1997 ------------ ------------ (Unaudited) CURRENT ASSETS Cash and Cash Equivalents $ 31,359 $ 103,264 Trade Accounts Receivable, less Allowance for Uncollectible Accounts of $242 in 1998 and $194 in 1997 15,940 12,416 Inventories 23,205 23,398 Prepaid Expenses 554 449 Recoverable Income Taxes - 4,120 Current Deferred Tax Asset 19,600 6,400 Net Assets of Discontinued Operations 23,270 33,376 ------------ ------------ Total Current Assets 113,928 183,423 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT Land and Land Improvements 42,937 42,758 Buildings and Leasehold Improvements 13,352 12,942 Machinery and Equipment 16,765 14,445 ------------ ------------ 73,054 70,145 Accumulated Depreciation (16,755) (14,758) ------------ ------------ Net Property, Plant and Equipment 56,299 55,387 ------------ ------------ OTHER ASSETS Deferred Divestiture Proceeds and Other, Net 26,023 29,324 Prepaid Pension Costs 12,723 12,723 Intangible Assets 1,888 1,953 Cash Surrender Value of Insurance Policies 3,476 3,596 Prepaid Finance Costs 214 759 Deferred Tax Asset 34,699 44,060 Other 2,372 1,589 ------------ ------------ Total Other Assets 81,395 94,004 ------------ ------------ Total Assets $ 251,622 $ 332,814 ============ ============
5 6 SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 (in thousands)
September 30, December 31, LIABILITIES 1998 1997 ------------ ------------ (Unaudited) CURRENT LIABILITIES Accounts Payable $ 11,186 $ 15,614 Accrued Insurance Reserves 13,209 11,693 Accrued Compensation 4,165 4,075 Accrued Interest 4,846 3,827 Accrued Environmental Reserve 2,641 3,217 Accrued Liabilities and Expenses 9,640 8,145 Current Portion of Long-Term Debt 284 513 ------------ ------------ Total Current Liabilities 45,971 47,084 ------------ ------------ Long-Term Debt 98,202 158,920 Non-Current Insurance Reserves 27,713 31,410 Other Non-Current Liabilities 22,924 23,804 ------------ ------------ Total Liabilities 194,810 261,218 ------------ ------------ STOCKHOLDERS' EQUITY Preferred Stock, $1.00 Par Value; Authorized, 3,217 Shares; Issued and Outstanding, None - - Class A Common Stock, $0.10 Par Value; Authorized, 18,000 Shares; Issued and Outstanding 1998 - 13,844; 1997 - 13,729 1,384 1,373 Class B Common Stock, $0.10 Par Value; Authorized, 18,000 Shares; Issued and Outstanding 1998 - 4,711; 1997 - 4,707 471 471 Treasury Stock, Common Shares at Cost (9,225) - 1998 - 685 Shares; 1997 - 0 Shares Capital Surplus 110,827 109,871 Accumulated Deficit (46,563) (40,018) Other Equity (82) (101) ------------ ------------ Total Stockholders' Equity 56,812 71,596 ------------ ------------ Total Liabilities and Stockholders' Equity $ 251,622 $ 332,814 ============ ============
See Notes to Consolidated Financial Statements. 6 7 SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (in thousands) (Unaudited)
September 30, September 30, 1998 1997 ------------ ------------ Operating Activities: Income from Continuing Operations $ 6,307 $ 2,364 Income from Discontinued Operations (12,852) 2,972 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities- Depreciation and Amortization 3,959 6,254 Other, Net 962 (1,799) Changes in Operating Assets and Liabilities Accounts Receivable 3,760 (756) Inventories 1,771 (11,403) Prepaid Items 284 (2,299) Other Assets 3,205 6,976 Accounts Payable (6,252) 358 Accrued Liabilities and Expenses 5,710 15,510 Accrued Income Taxes 130 1,088 Other Liabilities (4,638) (12,163) ------------ ------------ Net Cash Provided by Operating Activities 2,346 7,102 ------------ ------------ Investing Activities: Capital Expenditures for Continuing Operations (6,061) (3,533) Capital Expenditures for Discontinued Operations (598) (2,248) Proceeds from Sale of Property, Plant and Equipment 3,194 74 Proceeds from Business Divestitures - 2,005 ------------ ------------ Net Cash (Used) by Investing Activities (3,465) (3,702) ------------ ------------ Financing Activities: Principal Payments on Debt (61,074) (1,607) Proceeds from Issuing Common Stock 968 669 Payments to Reacquire Common Stock (9,226) (385) ------------ ------------ Net Cash (Used) by Financing Activities (69,332) (1,323) ------------ ------------ Net (Decrease) Increase in Cash and Cash Equivalents (70,451) 2,077 Cash and Cash Equivalents at Beginning of Year 104,243 44,447 ------------ ------------ Cash and Cash Equivalents at End of Period $ 33,792 $ 46,524 ============ ============
Cash and Cash Equivalents include cash from Discontinued Operations. See Notes to Consolidated Financial Statements. 7 8 SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES (formerly FIGGIE INTERNATIONAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The financial information included herein has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and properly reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present a fair statement of the financial results of operations for the periods covered by this report. The results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results to be expected for the entire year. (1) Name Change: ----------- Effective May 22, 1998, the Company changed its name from Figgie International Inc. to Scott Technologies, Inc. (2) Summary of Significant Accounting Policies: ------------------------------------------ The financial statements have been prepared in accordance with the accounting policies described in Note 1 of the Notes to Consolidated Financial Statements appearing in SCOTT TECHNOLOGIES, INC.'s (formerly FIGGIE INTERNATIONAL INC.) 1997 Form 10-K. (3) Receivables: ----------- Receivables consist of the following components (in thousands):
September 30, December 31, 1998 1997 ---------- ---------- U.S. Government Billed $ 657 $ 1,193 Unbilled - - ---------- ---------- 657 1,193 Commercial Billed 15,525 11,417 Allowance for Uncollectible Accounts (242) (194) ---------- ---------- $ 15,940 $ 12,416 ========== ==========
U.S. Government receivables include amounts derived from contracts on which the Company performs on a prime contractor or subcontractor basis. Costs charged by the Company to the U.S. Government in the performance of U.S. Government contracts are subject to audit. The year 1994 is currently under audit. 8 9 (4) Inventories: ----------- Inventories consist of the following components (in thousands):
September 30, December 31, 1998 1997 ----------- ------------ Raw Materials $ 7,899 $ 6,182 Work In Process 1,386 3,146 Finished Goods 14,806 14,594 Inventory Reserves (886) (524) ----------- ------------ Total Inventories $ 23,205 $ 23,398 =========== ============
(5) Discontinued Operations: ----------------------- INTERSTATE ELECTRONICS: On October 21, 1998, the Board of Directors announced that it intends to divest the Interstate Electronics business. As a result, the Consolidated Statements of Income for 1998 and the Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 reflect the Company's Interstate Electronics Corporation division ("IEC") as a discontinued operation; however, in the Consolidated Statements of Cash Flows, items relating to discontinued operations have not been disaggregated as they have in the aforementioned financial statements. Previously reported 1997 financial information has been restated to reflect IEC as a discontinued operation and is summarized as follows (in thousands):
As Previously As Reported IEC Restated -------- -------- -------- NINE MONTHS ENDED SEPTEMBER 30, 1997: Net Sales $185,574 $(66,823) $118,751 ======== ======== ======== Income from Continuing Operations 3,676 (1,312) 2,364 Income from Discontinued Operations 1,660 1,312 2,972 -------- -------- -------- Net Income $ 5,336 $ - $ 5,336 ======== ======== ======== THREE MONTHS ENDED SEPTEMBER 30, 1997: Net Sales $ 60,154 $(22,070) $ 38,084 ======== ======== ======== Income from Continuing Operations 972 (4) 968 Income from Discontinued Operations 1,252 4 1,256 -------- -------- -------- Net Income $ 2,224 $ - $ 2,224 ======== ======== ========
IEC's third quarter results include the following charges: 1) $2.6 million as a result of expensing previously capitalized costs, 2) $2.5 million to recognize warranty liabilities and expected losses on contracts, 3) $1.7 million in inventory write-downs to reflect shrinkage, slow moving, and obsolete inventory, 4) $2.1 million to reflect potential losses relating to billed and unbilled contracts, 5) $1.0 million to reserve for additional potential disallowance of costs connected with government contracts for years subject to audit, and 6) $0.5 million for additional restructuring charges 9 10 primarily due to severance. Loss on Disposal: - ----------------- For the quarter ended September 30, 1998, the Company recorded a loss of $9.8 million ($5.9 million after tax) on disposal of discontinued operations. Included in this loss was a $5.0 million addition to the self-insurance accrual to reflect a more conservative valuation of the liability in light of historically adverse experience, $3.2 million related to underfunded foreign pension plans, and $1.6 million loss provision for litigation defense costs related to discontinued operations. Prior Divestitures: - ------------------- Prior to 1998, the Company divested a number of its businesses. The contract terms under which businesses were divested include representations and warranties, covenants and indemnification provisions made (a) by the Company to purchasers of the businesses and (b) by purchasers of the businesses to the Company. Each transaction has contract terms specific to that transaction. The extent of representations and warranties made ranged from those qualified by time, knowledge, and dollar materiality to those representations and warranties which are unqualified. Covenants require the Company to act, or prevent the Company from acting, in a variety of ways, such as not competing with the purchasers of a business. Covenants also require the purchasers to act, or prevent them from acting, in a variety of ways. The duration of covenants ranges from those effective for a specified period of time to those which are indefinite. Remedies available for breaches of representations and warranties and covenants range from monetary relief in specific amounts for specific breaches or violations to unlimited amounts. Under the contracts, the Company has generally retained liability for events that occurred prior to sale. The Company believes that it has established appropriate accruals for losses that may arise, such as workers' compensation, product liability, general liability, environmental risks and federal and state tax matters. The Company has indemnified purchasers and has received indemnifications from purchasers for a variety of items. In some transactions, a portion of the purchase price was held back or escrowed at banks to support indemnification provisions. Such amounts are reflected as the assets of the Company within deferred divestiture proceeds. Proceeds and other consideration from divestitures which will be paid to the Company upon fulfillment of contractual provisions, the passage of time, or the occurrence of future events have been recorded as deferred divestiture proceeds classified as non-current assets. Deferred divestiture proceeds consist of cash held in bank escrow accounts from the sale of the Company's Hartman Electrical and Safway Steel Products operations, cash held back by purchasers from the sale of the Company's Waite Hill Insurance and Figgie Financial Services operations, receivables expected from Safway Steel Products arising 10 11 from final calculations of the purchase price, a note receivable from the purchaser of the Taylor Instruments business, a partnership interest in the entity that acquired Interstate Engineering (a vacuum cleaner manufacturer), cash due to the Company from future tax benefits under a tax sharing agreement with an unaffiliated public company, Rawlings Sporting Goods Company, Inc., the net assets of Willoughby Assurance, Ltd., a dormant reinsurance subsidiary of the Company, installation contracts in process of completion from the "Automatic" Sprinkler business, former facilities of discontinued business units and other items. Deferred divestiture proceeds do not include any contingent additional amount associated with the Snorkel sale. Deferred divestiture proceeds include management's best estimates of the amounts expected to be realized on the collection of deferred proceeds and sale of residual assets related to discontinued operations. The amounts the Company will ultimately realize could differ materially from the amounts recorded. The Company has a reserve of $28.0 million at September 30, 1998 against these assets, which is presented as a deduction from deferred divestiture proceeds. (6) Income Taxes: ------------ For the nine-month and three-month periods ended September 30, 1998, the following income tax provisions (benefits) have been provided (in thousands):
Nine Months Three Months September 30, 1998 September 30, 1998 ------------------ ------------------ Continuing Operations $ 5,386 $ 1,361 ============ ============ Discontinued Operations $ (8,569) $ (7,611) ============ ============ Extraordinary Item $ (1,126) $ (29) ============ ============
For the period ended September 30, 1998, net federal tax benefit amounts have increased the deferred tax asset. The current deferred tax asset as of September 30, 1998 reflects the tax benefits the Company expects to utilize in the succeeding twelve-month period. (7) Credit Facility: --------------- As of September 30, 1998, the Company has a $75 million revolving credit loan and letter of credit facility ("Credit Agreement"). Within the Credit Agreement, the Company can issue up to $60 million in letters of credit. Borrowings are available up to $75 million less outstanding letters of credit. At the Company's option, borrowings bear interest at alternate rates based on (1) the highest of the U.S. prime rate, the 90 day commercial paper rate, or the Federal Funds rate plus 50 basis points or (2) LIBOR plus 200 basis points. The facility is secured by certain accounts receivable, inventory, machinery and equipment and intangibles. The facility contains various affirmative and negative covenants, including restrictions on dividends and certain financial covenants. The facility expires on January 1, 1999. As of September 30, 1998, $16.1 million of letters of credit were outstanding 11 12 under the facility, there were no borrowings outstanding ($54.2 million was available) and all financial covenants were satisfied. (8) Long-Term Debt: -------------- Total debt consists of the following components (in thousands):
September 30, December 31, 1998 1997 ------------ ------------ Long-Term Debt: 9 7/8% Senior Notes due October 1, 1999 $ 97,647 $ 158,270 Mortgage Notes 839 979 Obligations under Capital Lease - 184 ------------ ------------ Total 98,486 159,433 Less - Current Portion (284) (513) ------------ ------------ Long Term Debt $ 98,202 $ 158,920 ============ ============
The 9 7/8% Senior Notes are due October 1, 1999. Interest is payable semi-annually on April 1 and October 1. During the third quarter of 1998, the Company purchased in the market $2.0 million of Senior Notes at market prices. These Senior Notes have been returned to the Indenture Trustee for retirement. (9) Capital Stock: ------------- Each share of Class A Common Stock is entitled to one-twentieth of one vote per share, while each share of Class B Common Stock is entitled to one vote per share, except, in each case, with respect to shares beneficially owned by certain persons coming within the definition of a Substantial Stockholder (as defined in the Company's Restated Certificate of Incorporation, as amended), in which case the voting rights of such stock are governed by the appropriate provisions of the Company's Restated Certificate of Incorporation. The Company's Board of Directors has authorized the Company to purchase up to three million shares of its common stock. During the quarter ended September 30, 1998 the Company purchased 522,800 shares of Class A and 161,800 shares of Class B at a cost of $9.2 million on the open market. The total cost of purchasing the shares is reflected as treasury stock on the Company's Balance Sheet. Earnings per share ("EPS") for the three-month and nine-month periods ended September 30, 1998 and 1997 were calculated using the following share data. Reconciliation of the numerators and denominators of the basic and diluted EPS calculation are as follows (in thousands, except per share data): 12 13
FOR THE THREE-MONTH PERIOD ENDED - -------------------------------- Income Shares Per Share SEPTEMBER 30, 1998 Numerator Denominator Amount - ------------------ --------- ----------- ------ Basic EPS Income available to common stockholders $(9,481) 18,294 $ (0.52) Effect of dilutive securities Stock Options 212 Diluted EPS Income available to common stockholders $(9,481) 18,506 $ (0.51)
Options to purchase shares of common stock which were outstanding as of September 30, 1998 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares are as follows:
Grant Date # of Shares Option Price Expiration Date ---------- ----------- ------------ --------------- August 27, 1996 9 $13.50 August 27, 2003 September 22, 1997 200 $13.75 September 22, 2004 April 20, 1998 7 $14.75 April 20, 2005 May 20, 1998 4 $14.75 May 20, 2005 July 1, 1998 15 $14.6875 July 1, 2005 July 7, 1998 70 $15.00 July 7, 2005 July 22, 1998 58 $14.875 July 22, 2005
FOR THE NINE-MONTH PERIOD ENDED - ------------------------------- Income Shares Per Share SEPTEMBER 30, 1998 Numerator Denominator Amount - ------------------ --------- ----------- ------ Basic EPS Income available to common stockholders $(6,545) 18,435 $ (0.36) Effect of dilutive securities Stock Options 222 Diluted EPS Income available to common stockholders $(6,545) 18,657 $ (0.35)
Options to purchase shares of common stock which were outstanding as of September 30, 1998 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares are as follows:
Grant Date # of Shares Option Price Expiration Date ---------- ----------- ------------ --------------- September 22, 1997 200 $13.75 September 22, 2004 April 20, 1998 7 $14.75 April 20, 2005 May 20, 1998 4 $14.75 May 20, 2005 July 1, 1998 15 $14.6875 July 1, 2005 July 7, 1998 70 $15.00 July 7, 2005 July 22, 1998 58 $14.875 July 22, 2005
13 14
FOR THE THREE-MONTH PERIOD ENDED - -------------------------------- Income Shares Per Share SEPTEMBER 30, 1997 Numerator Denominator Amount - ------------------ --------- ----------- ------ Basic EPS Income available to common stockholders $2,224 18,413 $ 0.12 Effect of dilutive securities Stock Options 288 Diluted EPS Income available to common stockholders $2,224 18,701 $ 0.12
Options to purchase shares of common stock which were outstanding as of September 30, 1997 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares are as follows:
Grant Date # of Shares Option Price Expiration Date ---------- ----------- ------------ --------------- None
FOR THE NINE-MONTH PERIOD ENDED - ------------------------------- Income Shares Per Share SEPTEMBER 30, 1997 Numerator Denominator Amount - ------------------ --------- ----------- ------ Basic EPS Income available to common stockholders $ 5,336 18,396 $ 0.29 Effect of dilutive securities Stock Options 233 Diluted EPS Income available to $ 5,336 18,629 $ 0.29 common stockholders
Options to purchase shares of common stock which were outstanding as of September 30, 1997 but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares are as follows:
Grant Date # of Shares Option Price Expiration Date ---------- ----------- ------------ --------------- April 16, 1996 1 $13.1875 April 16, 2003 April 30, 1996 5 $13.00 April 30, 2003 August 27, 1996 9 $13.50 August 27, 2003 September 22, 1997 200 $13.75 September 22, 2004
(10) Contingent Liabilities: ---------------------- The Company and its subsidiaries are defendants in various lawsuits arising in the ordinary course of business. In the opinion of management, any liability with respect to these matters will not have a material adverse effect on the Company's financial condition, cash flow or results of operations. The Company has been cooperating with the U.S. Government in a criminal investigation involving possible improprieties at an Army facility where the Company's Scott Aviation division was a supplier. The Company has furnished documents and other requested information and denies any wrongdoing. This investigation is ongoing and could result in sanctions by the Government which could affect the Company's ability to obtain future Government contracts. 14 15 (11) Extraordinary Item - Early Extinguishment of Debt: ------------------------------------------------- In the third quarter of 1998, the Company paid $2.2 million to extinguish $2.0 million of its 9 7/8% Senior Notes due October 1, 1999. The payments included a $0.1 million premium for the early retirement of the debt and $0.1 million of accrued interest. Accordingly, the Company recorded a third quarter extraordinary after tax loss of $0.1 million on the premiums to extinguish $2.0 million of Senior Notes. For the nine-month period ended September 30, 1998, the Company paid $64.0 million to extinguish $60.6 million of its 9 7/8% Senior Notes due October 1, 1999. The payments included a $2.7 million premium for the early retirement of the debt and $0.7 million of accrued interest. For the nine-month period, the Company recorded an extraordinary after tax loss of $1.7 million on the premiums to extinguish $60.6 million of Senior Notes. 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING INFORMATION: Information contained in this Report includes forward-looking statements, which can be identified by the use of forward- looking terminology such as "believes," "may," "will," "expects," "intends," "plans," "anticipates," "estimates" or "continues" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company undertakes no obligation to revise these forward-looking statements to reflect any future events or circumstances. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed under the caption "Factors Affecting the Company's Prospects." RESULTS OF OPERATIONS SUMMARY - ----------------------------- (in thousands)
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr. 1998 1998 1998 1998 1997 1997 --------- --------- --------- --------- --------- --------- Net Sales $ 46,214 $ 45,964 $ 43,197 $ 135,375 118,751 $ 38,084 Cost of Sales 31,311 30,380 29,468 91,159 80,455 26,051 --------- --------- --------- --------- --------- --------- Gross Profit on Sales 14,903 15,584 13,729 44,216 38,296 12,033 % of Net Sales 32.2% 33.9% 31.8% 32.7% 32.2% 31.6% Operating Expenses: Selling, General and Administrative 6,150 6,066 6,577 18,793 17,595 5,671 Research & Development 891 793 800 2,484 2,617 629 --------- --------- --------- --------- --------- --------- Total Operating Expenses 7,041 6,859 7,377 21,277 20,212 6,300 --------- --------- --------- --------- --------- --------- Operating Income 7,862 8,725 6,352 22,939 18,084 5,733 --------- --------- --------- --------- --------- --------- % of Net Sales 17.0% 19.0% 14.7% 16.9% 15.2% 15.1% Other Expense(Income): Refinancing Costs 259 131 131 521 393 131 Interest Expense 4,216 3,085 2,594 9,895 16,118 5,400 Interest Income (1,441) (909) (543) (2,893) (4,019) (1,957) Other, Net 542 666 826 2,034 2,237 729 --------- --------- --------- --------- --------- --------- Income from Continuing Operations before Income Tax and Extraordinary Item 4,286 5,752 3,344 13,382 3,355 1,430 Income Tax 1,712 2,313 1,361 5,386 991 462 --------- --------- --------- --------- --------- --------- Income from Continuing Operations before Extraordinary Item 2,574 3,439 1,983 7,996 2,364 968 Discontinued Operations, Net of Tax (1,875) 443 (11,420) (12,852) 2,972 1,256 Extraordinary Item - (Loss) on Extinguish- ment of Debt, Net of Tax (80) (1,565) (44) (1,689) - - --------- --------- --------- --------- --------- --------- Net Income (Loss) $ 619 $ 2,317 $ (9,481) $ (6,545) $ 5,336 $ 2,224 ========= ========= ========= ========= ========= =========
16 17 For the first nine months of 1998, Net Sales increased $16.6 million, or 14.0%, to $135.4 million from Net Sales of $118.8 million for the same period in 1997. For the third quarter of 1998 Net Sales increased by $5.1 million, or 13.4%, to $43.2 million from $38.1 million in the third quarter of 1997. Gross Profit for the nine months ended September 30, 1998 increased by $5.9 million to $44.2 million and represented 32.7% of Net Sales as compared to 32.2% in 1997. Gross profit for the third quarter of 1998 increased by $1.7 million to $13.7 million and represented 31.8% of Net Sales as compared to 31.6% in 1997. Selling, General and Administrative expenses for the nine months improved as a percentage of Net Sales to 13.9% in 1998, compared to 14.8% in 1997. For the third quarter, Selling, General and Administrative expenses increased as a percentage of Net Sales to 15.2% in 1998, compared to 14.9% in 1997. The increase was related to corporate expense and was due to reversal of certain balance sheet accruals in the third quarter of 1997, combined with an increase in expenses in the third quarter of 1998 as a result of the Company's name change and professional fees. Operating Income for the nine months amounted to $22.9 million in 1998, as compared to Operating Income of $18.1 million in 1997. Operating income for the third quarter of 1998 was $6.4 million compared to $5.7 million in the third quarter of 1997. Income from Continuing Operations in the nine months of 1998 increased to $8.0 million compared to $2.4 million in the corresponding period of 1997. Income from continuing operations for the third quarter of 1998 increased to $2.0 million compared to $1.0 million in the third quarter of 1997. The increases were attributed primarily to improved results at Scott Aviation and lower corporate net interest expense. The loss on discontinued operations for the nine months and third quarter of 1998 included loss from operations and loss on disposal. Loss from operations represents IEC's net operating results for the nine months and third quarter of 1998. IEC's third quarter results include the following charges: 1) $2.6 million as a result of expensing previously capitalized costs, 2) $2.5 million to recognize warranty liabilities and expected losses on contracts, 3) $1.7 million in inventory write-downs to reflect shrinkage, slow moving, and obsolete inventory, 4) $2.1 million to reflect potential losses relating to billed and unbilled contracts, 5) $1.0 million to reserve for additional potential disallowance of costs connected with government contracts for years subject to audit, and 6) $0.5 million for additional restructuring charges primarily due to severance. Loss on disposal for the nine months and third quarter of 1998 include the following items: a $5.0 million addition to the self-insurance accrual to reflect a more conservative valuation of the liability in light of historically adverse experience, $3.2 million related to underfunded foreign pension plans, and $1.6 million loss provision for litigation defense costs related to discontinued operations. SEGMENT INFORMATION - ------------------- The Company has operations in one reporting segment, Scott Aviation. The results of operations are as follows: 17 18 SCOTT AVIATION - -------------- Scott Aviation is a leading manufacturer of life support respiratory products and consists of two principal business units: Health and Safety; and Aviation and Government. The two units have benefited from several similarities. Scott Aviation has used its broad experience and expertise in high pressure gas regulation and distribution developed from the two product lines to provide end-users with products that are reliable, light weight, compact in size and user friendly. Each unit has also benefited from the common use of manufacturing cell and team technology. In addition, Scott Aviation's uniform quality assurance program has allowed the units to work jointly to comply with the rigorous quality requirements of the government, regulatory agencies and customers. Scott Aviation's Health and Safety unit manufactures the Scott Aviation Air- Pak* (a self-contained breathing apparatus), air-purifying products, gas detection instruments and other life support products for firefighting and personal protection against environmental and safety hazards. Scott Aviation's Aviation and Government unit manufactures protective breathing equipment, pilot and crew oxygen masks, and emergency oxygen for passengers and crew members on commercial, government and private aircraft and ships. Results of Operations Summary - ----------------------------- (in thousands)
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr. 1998 1998 1998 1998 1997 1997 ------- ------- ------- -------- -------- ------- Net Sales $46,214 $45,964 $43,197 $135,375 $118,751 $38,084 Cost of Sales 31,311 30,380 29,468 91,159 80,455 26,051 ------- ------- ------- -------- -------- ------- Gross Profit on Sales 14,903 15,584 13,729 44,216 38,296 12,033 % of Net Sales 32.2% 33.9% 31.8% 32.7% 32.2% 31.6% Operating Expenses: Selling, General and Administrative 3,904 3,926 3,948 11,778 11,451 3,921 Research & Development 891 793 800 2,484 2,617 629 ------- ------- ------- -------- -------- ------- Total Operating Expenses 4,795 4,719 4,748 14,262 14,068 4,550 ------- ------- ------- -------- -------- ------- Operating Income $10,108 $10,865 $ 8,981 $ 29,954 $ 24,228 $ 7,483 ------- ------- ------- -------- -------- ------- % of Net Sales 21.9% 23.6% 20.8% 22.1% 20.4% 19.6%
Discussion of 1998 Compared to 1997: - ------------------------------------ Net Sales for the nine months ended September 30, 1998 and the third quarter of 1998 increased by approximately 14% and 13% respectively, compared to Net Sales for the same periods in 1997. The increase for the nine months ended September 30, 1998 compared to the same period in 1997 was due to an increase in the amount of shipments of oxygen products to aviation/government customers of approximately $7.2 million, or 12%, and an increase in the amount of shipments of products, principally Air-Paks, to health and safety customers of approximately $9.4 million, or 16%. The increase for the third quarter of 1998 compared to the same period in 1997 was due to an increase in the amount of shipments of oxygen products to aviation/government customers of approximately $0.8 million, or 4%, and an increase in the amount of shipments of products, principally Air-Paks, to health and safety customers of approximately $4.3 million, or 23%. Gross Profit Margin increased for both the nine months ended September 30, 1998 and the third quarter of 1998 due primarily to increased sales volume in the major product lines. *Registered or common law trademarks and service marks of SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) and its subsidiaries. 18 19 Selling, General and Administrative expenses increased slightly in dollar amounts during the nine months and third quarter ended September 30, 1998 due to increased sales but are lower as a percentage of Net Sales when compared to the same periods for 1997. Research and Development expenses in 1998 were lower for the nine months and slightly higher for the third quarter when compared to the same periods last year. CORPORATE AND UNALLOCATED COSTS AND EXPENSES - -------------------------------------------- Results of Operations Summary - ----------------------------- (in thousands)
1st Qtr. 2nd Qtr. 3rd Qtr. Nine Mos. Nine Mos. 3rd Qtr. 1998 1998 1998 1998 1997 1997 -------- -------- -------- -------- -------- -------- Selling, General and Administrative $ 2,246 $ 2,140 $ 2,629 $ 7,015 $ 6,144 $ 1,750 Other Expenses: Refinancing Costs 259 131 131 521 393 131 Interest Expense 4,216 3,085 2,594 9,895 16,118 5,400 Interest Income (1,441) (909) (543) (2,893) (4,019) (1,957) Other, Net 542 666 826 2,034 2,237 729
Discussion of 1998 Compared to 1997: - ------------------------------------ Selling, General and Administrative expenses have increased $0.9 million for the first nine months and third quarter of 1998 compared with last year. The increase for the quarter was related to corporate expense and was due to reversal of certain balance sheet accruals in the third quarter of 1997, combined with an increase in expenses in the third quarter of 1998 as a result of the Company's name change and professional fees. Interest Expense decreased for the nine months and third quarter of 1998 due to lower outstanding debt and reduced interest expense on the discounted present value of insurance reserves. Interest Income decreased for the nine months and third quarter of 1998 due primarily to the reduction in the Company's cash position, combined with accrued interest income arising from negotiated Federal and Foreign tax audits recognized in the third quarter of 1997. FINANCIAL POSITION AND LIQUIDITY - -------------------------------- The Company's Consolidated Statements of Cash Flows contains items relating to discontinued operations which have not been disaggregated as they have in the Consolidated Balance Sheet. At September 30, 1998 Cash and Cash Equivalents for both continuing and discontinued operations totaled $33.8 million, compared to $104.2 million at December 31, 1997. Net Cash provided by Operating Activities was $2.3 million reflecting a net loss of $6.5 million, depreciation and amortization of $4.0 million and the net cash provided by other operating activities of $4.8 million. Net Cash used by Investing Activities was $3.5 million, reflecting capital expenditures and proceeds from the sale of real estate. Capital Expenditures were $6.7 million in the first nine months of 1998 for machinery, equipment, tooling and real estate development costs and are expected to be approximately $9 million for all of 1998. Proceeds from the sale of real estate were $3.2 million. Capital Expenditures will be funded from internally generated funds and or credit facilities. Net Cash used by Financing Activities was $69.3 million, which included $61.1 19 20 million for principal payments on debt, $9.2 million to repurchase 684,600 shares of common stock at market prices, and $1.0 million in proceeds from the issuing of common stock in connection with the Company's stock option plan. Liquidity is provided by the Company's Cash and Cash Equivalents, which totaled $33.8 million at September 30, 1998, and by the credit facility of which $54.2 million was available at September 30, 1998. In the first nine months of 1998, the Company used cash to reduce its debt by repurchasing $60.6 million of its 9 7/8% Senior Notes. The repurchasing of the Senior Notes has resulted in lower interest expense, and to a lesser extent, lower interest income. The Company expects to continue to focus on internal growth and market expansion at Scott Aviation; investigate acquisitions; and consider alternative strategies that may further enhance stockholder value. The Company's cash balance at September 30, 1998 is available for general corporate purposes. Those purposes may include investment in the current operations of the Company, payment of liabilities associated with previously divested businesses, use as all or a portion of the purchase price of possible acquisitions, additional repurchases of its 9 7/8% Senior Notes and stock repurchases. The Company's Board of Directors has authorized the Company to purchase up to three million shares of its common stock. To date, approximately 685,000 shares have been purchased. 20 21 FACTORS AFFECTING THE COMPANY'S PROSPECTS - ----------------------------------------- The prospects of the Company may be affected by a number of factors, including the matters discussed below: DEPENDENCE ON GOVERNMENT CONTRACTS - Sales to the U.S. Government represented approximately 40% of the Company's combined total net sales of IEC and Scott Aviation in each of the last three years. With the discontinuance of IEC, these sales represented approximately 10% of Scott Aviation's sales. The Company expects to continue to derive a portion of Scott Aviation's revenues from Government contracts. Consequently, fluctuations in military spending by the U.S. Government could adversely affect the Company's revenues and profitability. In addition, since these contracts are the result of competitive bidding processes, there can be no assurance that the Company will be awarded future contracts, or that once awarded, the Government will not terminate such contracts at its convenience. Finally, the Company has been cooperating with the U.S. Government in a criminal investigation involving possible improprieties at an Army facility where the Company's Scott Aviation division was a supplier. The Company has furnished documents and other requested information and denies any wrongdoing. The investigation could result in sanctions by the Government which could affect the Company's ability to obtain future Government contracts. COMPETITION - The GPS and Displays markets which IEC participates in are highly competitive, subject to rapid change and significantly affected by new product introductions. Competition may intensify, particularly as companies well established in the defense industry increase their focus on GPS. In addition, the development and commercialization of new types of displays or position measuring systems could reduce the demand for the Company's products. Scott Aviation's Health and Safety unit manufactures the Scott Aviation Air-Pak** (a self-contained breathing apparatus), air-purifying products, gas detection instruments and other life support products for firefighting and personal protection against environmental and safety hazards. Scott Aviation's Aviation and Government unit which manufactures protective breathing equipment, pilot and crew oxygen masks, and emergency oxygen for passengers and crew members on commercial, government and private aircraft and ships. Both of these manufacturing units participate in markets which are technology based, industry regulated, and highly competitive. Failure by Scott Aviation to develop new products and or remain competitive with changing industry conditions could adversely affect market share. Certain competitors in the respective markets have significantly greater financial, technical and marketing resources. These competitive factors could adversely affect the Company's financial condition, cash flow, results of operations or expected benefits from its restructuring initiatives. LEVERAGE - As part of the Company's strategy is to grow through acquisitions, any such future acquisition could involve incurring significant additional leverage. In addition, the Company's Board has authorized the Company to purchase up to three million shares of its common stock on the open market. To date, approximately 685,000 shares have been purchased. Future purchases of common stock could affect leverage. The degree to which the Company is leveraged could: (i) impair the Company's ability to obtain future financing for acquisitions, a refinancing, or **Registered or common law trademarks and service marks of SCOTT TECHNOLOGIES, INC. (formerly FIGGIE INTERNATIONAL INC.) and its subsidiaries. 21 22 other purposes; (ii) make it more vulnerable than some of its competitors in a prolonged economic downturn; and (iii) restrict its ability to exploit new business opportunities and limit its flexibility to respond to changing business conditions. DISCONTINUED OPERATIONS - Since January 1, 1994, the Company has sold numerous businesses. The contract terms included representations, warranties, and indemnification provisions made by the Company. Remedies available for breaches of representations and warranties range from monetary relief in specific amounts for specific breaches to unlimited amounts. The Company has generally retained liability for the conduct of the sold businesses prior to the date of sale. As a result, the Company is subject to various known and contingent liabilities, including indemnification obligations, with respect to its discontinued operations. The Company has established accruals and reserves for losses that may arise out of workers' compensation, product liability and general liability claims, environmental risks, tax matters and other matters. The Company believes that its accruals and reserves are appropriate and adequate. However, as these contractual matters may be subject to significant uncertainty and as litigation is inherently unpredictable, no assurances can be given that resolution will not have a material adverse effect upon the Company's financial position, operating results or cash flows or require additional reserves. Further, at September 30, 1998, the Company's balance sheet reflected $26.0 million of deferred divestiture proceeds which is net of a reserve of $28.0 million. Deferred divestiture proceeds include management's best estimates of the amounts expected to be realized after the resolution of the underlying matters. Additionally, at September 30, 1998 the Company's balance sheet reflected $23.3 million of Net Assets of Discontinued Operations. This amount represents the net book value of IEC. The Company expects to realize net proceeds from the sale of IEC in excess of the carrying value. The amounts the Company will ultimately realize could differ materially from the amounts recorded. STRATEGIC PLAN - The Company's strategic plan contemplates continued development and marketing of new products, international expansion, and future acquisitions. The Company expects to continue to make investments in new product development. There can be no assurance that the Company will be able to develop and introduce, in a timely manner, new products or enhancements to its existing products which satisfy customer needs or achieve market acceptance. To the extent that the Company makes substantial marketing and R&D investments and such investments do not lead to commercially successful products, the Company's results of operations could be adversely affected. Expansion into international markets will depend on numerous factors which are beyond the Company's control, including its ability to develop or acquire additional manufacturing and distribution capabilities outside the United States. In addition, international expansion may increase the Company's exposure to certain risks inherent in doing business outside the United States, such as currency exchange rate fluctuations, compliance with foreign codes and standards and political risks. If the Company pursues this strategy through acquisitions, strategic alliances or joint ventures, any integration of the acquired businesses into the Company's business would entail expense and management attention. If the Company pursues this strategy through the establishment of new operations, it will be subject to 22 23 the difficulties inherent in starting a new business in foreign jurisdictions. There can be no assurance that the business and competitive environment in international markets will be as favorable to the Company as is the U.S. market currently. Part of the Company's strategy is to grow through acquisitions. There can be no assurance, however, that the Company will identify attractive acquisitions, that such acquisitions will be consummated, or that, if consummated, any anticipated benefits will be realized from such acquisitions. In addition, the availability of additional acquisition financing cannot be assured and, depending on the terms of such additional acquisitions, could be restricted by the terms of the Credit Facility. Moreover, the process of integrating acquired operations into the Company's existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of the Company's existing operations. Future acquisitions by the Company would likely result in amortization expense of goodwill which could have a material adverse effect on the Company's financial condition and operating results. YEAR 2000 ISSUE - The Year 2000 Issue refers to a number of date-related problems that may affect software applications, including codes imbedded in chips and other hardware devices. These problems include software programs that identify a year by its last two digits so that a year identified as "00" would be recognized as the year "1900" rather than the year "2000." The Company is in the process of identifying and assessing the extent to which its manufacturing equipment, business systems and products could be affected by the Year 2000 Issue. The Company expects to complete its assessment of the impact of the Year 2000 Issue and formalize its plan to resolve any noncompliance issues by the end of the year. As part of its Year 2000 Issue assessment, the Company is taking into account whether third parties with which the Company has material relationships, including the U.S. Government, are Year 2000 compliant. In addition, the Company will develop contingency strategies, as appropriate, as part of its Year 2000 plan. At this time, the Company cannot assess the extent to which it will be dependent upon third parties to address such issues and does not have an estimate of the cost of compliance. To date, the Company's expenses have been limited to internal costs incurred in the Year 200 Issue assessment process. The Company does not separately track such internal costs which are principally associated with payroll expenses. To date, these costs have not been material. Any failure by the Company or third parties to ensure that its computer systems are Year 2000 compliant could have a material adverse effect on the Company's operations, liquidity and financial position. Any failure of the Company's products to perform could result in claims against the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable PART II. OTHER INFORMATION Item 5 Other Information - ------ ----------------- (a) PROPOSED RESTRUCTURING PLAN - The Company has issued a proxy statement dated November 10, 1998 for a special meeting of its stockholders to be held on December 15, 1998 at which time, among other things, a proposal will be considered to amend Article Fourth of the Charter to eliminate the Corporation's dual class capital structure and to provide, instead, for a single, new class of common stock designated as "Common Stock", 23 24 par value $.10 per share (the "New Common Stock"), consisting of 36,000,000 shares of New Common Stock authorized for issuance, with each share entitled to one vote, thereby effecting the reclassification and conversion of each share of Class A Common Stock and each share of Class B Common Stock as and into one share of New Common Stock, and to restate the Charter to reflect the foregoing amendments. (b) MANAGEMENT CHANGE - Effective November 3, 1998, Robert P. Collins became the Chairman of the Board, succeeding John P. Reilly, who served as a director of the Company since 1995 and had served as the nonemployee Chairman since 1997. Mr. Reilly continues to serve as a director. On November 6, 1998, William J. Sickman, Vice President - Corporate Relations, gave notice of his resignation effective on December 21, 1998. (c) OWNERSHIP - On May 7, 1998, Harry E. Figgie, Jr., the Company's founder, and his affiliates sold their interests in the Corporation to Richard C. Blum & Associates, L.P. ("Blum"). In connection with Blum's acquisition of the shares, the Board appointed N. Colin Lind, a managing director of Blum, as a director of the Company. Blum's acquisition resulted in Blum owning 1,184,213 shares of Class A Common Stock and 1,503,333 of Class B Common Stock. Item 6 Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) List of Exhibits 10.0 Material Contracts (i) Management agreement, addendum to June 11, 1997 management agreement, dated as of August 13, 1998, by and between William J. Sickman and the Company. (ii) Management agreement, amended and restated management agreement, dated as of August 13, 1998, by and between William J. Sickman and the Company. (iii) Management agreement, second addendum to June 11, 1997 management agreement and first addendum to August 13, 1998 management agreement and amendment to non-qualified stock option agreement dated August 13, 1998, dated as of October 30, 1998, by and between William J. Sickman and the Company. (iv) Management agreement, dated as of September 10, 1998, by and between Debra L. Kackley and the Company. (v) Management agreement, amended and restated management agreement, dated as of August 17, 1998, by and between Glen W. Lindemann and the Company. (vi) Management agreement, dated as of August 25, 1998, by and between Mark A. Kirk and the Company. (vii) Amendment No. 5, dated October 8, 1998 and effective August 14, 1998, to the Credit Agreement between the Company and General Electric Capital Corporation. (viii) Amendment No. 6 and Exhibit A, dated October 21, 1998 and effective September 30, 1998, to the Credit Agreement between the Company and General Electric Capital Corporation. 27.0 Financial Data Schedule 24 25 (b) Reports on Form 8-K filed during the quarter - None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, SCOTT TECHNOLOGIES, INC. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SCOTT TECHNOLOGIES, INC. By: /s/ ------------------------------ Mark A. Kirk Senior Vice President and Chief Financial Officer (Duly Authorized and Principal Accounting Officer) Date: November 13, 1998 25 26 EXHIBIT INDEX
Number Description of Exhibits Page No. - ------ ------------------------------------------------------------- -------------- 10.0 Material Contracts (i) Management agreement, addendum to June 11, 1997 27 management agreement, dated as of August 13, 1998, by and between William J. Sickman and the Company. (ii) Management agreement, amended and restated manage- 30 ment agreement, dated as of August 13, 1998, by and between William J. Sickman and the Company. (iii) Management agreement, second addendum to June 11, 47 1997 management agreement and first addendum to August 13, 1998 management agreement and amendment to non-qualified stock option agreement dated August 13, 1998, dated as of October 30, 1998, by and between William J. Sickman and the Company. (iv) Management agreement, dated as of September 10, 51 1998, by and between Debra L. Kackley and the Company. (v) Management agreement, amended and restated manage- 67 ment agreement, dated as of August 17, 1998, by and between Glen W. Lindemann and the Company. (vi) Management agreement, dated as of August 25, 1998, 84 by and between Mark A. Kirk and the Company. (vii) Amendment No. 5, dated October 8, 1998 and effective 101 August 14, 1998, to the Credit Agreement between the Company and General Electric Capital Corporation. (viii) Amendment No. 6 and Exhibit A, dated October 21, 1998 103 and effective September 30, 1998, to the Credit Agreement between the Company and General Electric Capital Corporation. 27.0 Financial Data Schedule
26 EX-10.0.I 2 EXHIBIT 10.0(I) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (I) ADDENDUM TO JUNE 11, 1997 MANAGEMENT AGREEMENT ---------------------------------- This ADDENDUM to the Management Agreement executed by and between William J. Sickman (the "Executive") and Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called the "Company") as of June 11, 1997 (the "Agreement") is entered into as of this 13th day of August, 1998, by and between the Company and the Executive. WHEREAS, as a result of the occurrence of certain events since the execution of the Agreement, it is desirable for the Company and the Executive to acknowledge that certain events have occurred and agree to modify the Agreement to include certain additional provisions and adjust certain existing provisions in order to take into account said events; NOW THEREFORE, in consideration of the foregoing, the Company and the Executive agree as follows: (1) As of the date of this Addendum, the Company and the Executive agree that the Consolidated Revenues of the Company, as shown on the quarterly financial results distributed to shareholders, have been less than Seventy-Five Million Dollars for four (4) consecutive calendar quarters. (2) As of the date of this Addendum, the Executive hereby rescinds his letter of May 6, 1998 to the Company's Chief Executive Officer (a copy of which is attached hereto as Exhibit A) regarding the freeze of his benefits under the Company's Senior Executive Benefits Program. (3) Effective November 1, 1998 if the Executive has not given notice of his intent to quit the employ of the Company, the Executive agrees to the elimination of any and all of his benefits (including any which would be payable as a result of his death) under the Company's Senior Executive Benefits Program in exchange for the issuance, on November 1, 1998, of three thousand seven hundred 27 2 sixty (3,760) stock options to the Executive pursuant to a Stock Option Agreement (a copy of which is attached hereto as Exhibit B) under the Key Employees' Stock Option Plan which options shall have an option price equal to the value of the Company's Class A Common Stock at the close of business on October 30, 1998. (4) Effective as of the date of this Addendum, the Company and the Executive hereby agree that Section 3.4 of the Agreement shall be deemed to be modified to read as follows: "3.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates his employment with Good Reason as defined below in this Section 3.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 3.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 3.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated his employment for >Good Reason' if his termination of employment occurs prior to January 1, 1999 and he gives the Company advance written notice of his termination of employment at least sixty (60) days prior to his termination of employment and, in any event, by October 31, 1998." (5) As of the date of this Addendum, the Company and the Executive agree that the proposed Amended and Restated Management Agreement for the Executive (a copy of which is attached hereto as Exhibit C) shall become effective as of November 1, 1998 unless the Executive provides written notice to the Company on or before October 31, 1998 of his intention to terminate his employment with the Company. (6) This Addendum supersedes any contrary provisions of the Agreement. IN WITNESS WHEREOF, the Executive and the Company have executed this Addendum to the Agreement as of the day and year first above written. 28 3 SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- Debra I. Kackley /s/ ----------------- William J. Sickman ------------------ 29 EX-10.0.II 3 EXHIBIT 10.0(II) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (II) AMENDED AND RESTATED MANAGEMENT AGREEMENT This AMENDED and RESTATED MANAGEMENT AGREEMENT ("Agreement") is entered into as of this 13th day of August, 1998, by and between Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called the "Company") and William J. Sickman (the "Executive"). WHEREAS, the Executive is presently in the employ of the Company as Vice President - Corporate Relations of the Company; and WHEREAS, the Company desires to retain the employment of the Executive and the Executive desires to continue to serve the Company in such capacity; and WHEREAS, the Company and the Executive desire to set forth in a written agreement the terms and provisions of such employment and of certain severance and other payments to be made to the Executive under certain circumstances; NOW THEREFORE, effective as provided in Section 1 hereof, in consideration of the foregoing, the mutual covenants and agreements set forth in this Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: SECTION 1. TERM OF EMPLOYMENT AND COMPENSATION ----------------------------------- This Agreement shall become effective November 1, 1998 provided that the Executive has not prior thereto given notice of his termination of employment with "Good Reason" as set forth in Section 3.4 of the Management Agreement between the Company and the Executive dated June 11, 1997 as modified by an Addendum dated August 13, 1998. If such notice is given prior to November 1, 1998, then 30 2 this Amended and Restated Management Agreement shall be null and void. The Company will employ the Executive in accordance with the terms and conditions set forth herein as of November 1, 1998 and extending for an initial period ending December 31, 2000 (the "initial period"), subject, however, to earlier termination as expressly provided herein. The Executive will continue to serve the Company as Vice President - Corporate Relations or in such other future capacity as he and the Company might mutually agree and will devote his full business time and best efforts to the satisfactory discharge of the responsibilities of his office, performing such other duties as might reasonably be requested by the Company's Chief Executive Officer or Board of Directors. During the initial period the Executive will be paid a base salary at an annual rate of One Hundred Forty-Eight Thousand Seven Hundred Dollars ($148,700.00) in installments which are no less frequently than monthly, together with such increases as the Compensation Committee of the Board of Directors shall from time to time approve. The initial period will be automatically extended for one (1) additional year at the end of the initial period, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, the term of the employment of the Executive shall then become indefinite and can be terminated by the Company without notice. Similarly, subject to the provisions of this Agreement relating to nondisclosure of confidential information and non-interference with employees, customers and suppliers, the Executive can quit, at any time thereafter, without notice to the Company. 31 3 SECTION 2. BENEFIT PLANS ------------- During his employment, the Executive shall be entitled to participate in all employee benefit plans and perquisites which are maintained or established by the Company from time to time and which cover the Company's senior executives provided he satisfies any applicable eligibility requirements therefor. The Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion. The Executive further acknowledges that the Company may wish to maintain insurance on his life for its benefit and agrees to submit to any physical examination which may be required in order to obtain such insurance. SECTION 3. EXPENSES -------- The Executive will be reimbursed for all reasonable expenses incurred by him in performing his duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. SECTION 4. EMPLOYMENT TERMINATIONS ----------------------- 4.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated by reason of retirement or death during the term of this Agreement, the Executive's employment with the Company shall be deemed terminated as of the effective date of retirement or at the end of the month in which such death occurs and all benefits will be determined in accordance with the Company's retirement plans, survivor's benefits, insurance, Compensation Plan for Executives and other applicable programs then in effect, except that in the case of the death of the Executive the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof to his spouse if then living and otherwise to the executor or administrator of his estate. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of death and in no event will any of 32 4 the Severance Benefits and Severance Pay described in Sections 4.7 and 4.8 hereof be paid in the event of retirement. In the event of retirement, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. For purposes of this Section 4.1, the determination of whether a termination qualifies as a retirement will be made in accordance with the then established rules and definitions of the Company's Retirement Income Plan II which are applicable to salaried employees of the Company. 4.2 TERMINATION DUE TO DISABILITY. In the event the Executive during the term of this Agreement becomes, in the opinion of the Company and based upon reasonable medical opinion, so disabled as to be unable to satisfactorily perform his duties hereunder, the Company will have the right upon thirty (30) days written notice to the Executive to terminate the continued active service of the Executive and the payment of compensation and benefits under this Agreement, except as provided in this Section 4.2. In such event, the Executive's benefits will be determined in accordance with the Company's disability and other applicable plans and programs then in effect, provided, however, that the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of the disability of the Executive. In the event of disability, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may terminate his employment other than for Good Reason as such term is defined in Section 4.4 hereof at any time by giving the Company written notice of intent to terminate, delivered at least sixty (60) calendar days prior to the effective date of such termination. The Company will pay the Executive his full base salary, at the rate then in effect, through the effective date of such termination, plus all other 33 5 benefits to which the Executive has a vested right at that time (including but not limited to unused vacation time, COBRA benefits and stock option benefits). If such termination of employment is other than for Good Reason, the Executive shall not be entitled to the Severance Benefits set forth in Section 4.7 hereof or the Severance Pay set forth in Section 4.8 hereof. The Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates his employment with Good Reason as defined below in this Section 4.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated his employment for "Good Reason" if his termination of employment occurs: a. within four (4) months after a Change in Control; b. within four (4) months after: i. the Board of Directors of the Company shall fail to re-elect or shall remove the Executive from the office then being held by the Executive; ii. the Chief Executive Officer or the Board of Directors of the Company shall make a significant negative change in the nature or scope of the authorities, powers, functions or duties of the Executive hereunder; iii. the Company shall fail to pay when due any compensation due and owing to the Executive or shall make a reduction in the Executive's then current base salary or a material reduction in his benefits and such failure is not corrected within ten (10) days after notice thereof to the Company by the Executive; iv. any pattern of harassment which occurs within the first twelve (12) months after 34 6 the execution of this Agreement, which is done with the approval of the Chief Executive Officer or the Board of Directors of the Company and which impedes the Executive in the exercise of his authorities, powers, functions or duties hereunder in the manner in which they would normally be exercised by a similar officer; or v. the Board of Directors of the Company has given the Executive written notice of its intention not to renew this Agreement. In the event that the Executive shall terminate his employment with Good Reason, he shall provide the Company with sixty (60) days advance notice of his date of termination of employment. 4.5 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Executive acknowledges that he is, has been and will continue at all times to be an at-will employee of the Company and as such his employment has been and continues to be terminable, subject to the terms and conditions of this Agreement, by either the Executive or the Company at any time upon notice to the other as provided for herein and for any reason not prohibited by law. However, if the Company terminates the Executive's employment other than for "Cause" (as defined in Section 4.6 hereof), the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. 4.6 TERMINATION BY THE COMPANY FOR CAUSE. Nothing in this Agreement will be construed to prevent the Company from terminating the Executive's employment for Cause. As used herein, "Cause" will be determined by the Board of Directors of the Company in the exercise of good faith and reasonable judgment and will include (i) Executive's willful failure to perform his duties under this Agreement within a reasonable period of time after receipt of written notice from the Board of Directors of the Company setting forth in reasonable detail the duties which the Executive has failed to perform and the corrective 35 7 actions expected of him; (ii) a breach of Executive's obligations under Section 5 below; (iii) indictment for, conviction of, or written confession to a crime against the Company or a felony; or (iv) Executive shall have been found by the Board of Directors of the Company to have been repeatedly and excessively abusing alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except Executive's obligations under Section 5 hereof. 4.7 SEVERANCE BENEFITS. In the event that the Company shall terminate the employment of the Executive other than for "Cause" as defined in Section 4.6 hereof, or in the event the Executive terminates his employment pursuant to Section 4.4 hereof with Good Reason, the Company will, upon the effective date of such termination and in lieu of any other severance which may otherwise be payable: a. Pay to the Executive in a cash lump sum a pro rata bonus under the Bonus Plan with respect to the year in which he is terminated, which Bonus shall be calculated using the formula contained in the Bonus Plan based on the actual results of the Company for such year but without any discretionary adjustment of the amounts payable to the Executive that might otherwise be permitted under the Bonus Plan. Such bonus will be paid to the Executive on the same day as bonuses under the Plan are paid to the executives of the Company who are still employed with the Company. b. Pay for the costs of outplacement services actually used by the Executive; provided, however, that the total fee paid for such services will be limited to an amount equal to seventeen percent (17%) of the Executive's annual base salary rate as of the effective date of termination of employment. c. Pay to the Executive a cash lump sum, net of taxes, equal to twelve (12) months of the monthly car allowance then applicable to the Executive. Such payment shall be paid to 36 8 the Executive with thirty (30) days following his termination of employment. d. Cause all stock options granted to the Executive pursuant to the Company's Key Employees' Stock Option Plan (the "Option Plan"), or the grant of any right under any future stock plan, to become immediately exercisable in full and to remain fully exercisable until the earlier of the date of expiration of the option or one (1) year after his date of termination of employment. e. Provide to the Executive tax and/or legal consultation with respect to the benefits granted hereunder up to a maximum cost to the Company of Five Thousand Dollars ($5,000.00); f. Provide assistance to the Executive in obtaining the financing necessary for the Executive to exercise his stock options during the period specified in Section 4.7d. hereof; and g. Continue to be obligated to pay when due all other benefits to which the Executive has a vested right according to the provisions of any applicable retirement or other benefit plan or program. 4.8 SEVERANCE PAY. If the Executive executes the Non-Competition Agreement attached hereto and delivers such executed Agreement to the Company no later than thirty (30) days after the date of this Agreement, and if the employment of the Executive is terminated by the Company other than for "Cause" as defined in Section 4.6 hereof, or by the Executive pursuant to Section 4.4 hereof with Good Reason, the Executive shall be entitled to Severance Pay as follows: a. At the election of the Executive, the Company shall either continue to pay to the Executive for the twenty-four (24) months following his termination of employment, his monthly base salary at the rate in effect as of the date of such termination in accordance with the Company's normal payroll practices or make a lump sum payment to the Executive of the amount due above. Any such lump sum will be payable within thirty (30) 37 9 days after the date the Company receives written notice of the Executive's election to receive the lump sum. b. In addition, the Company, throughout such twenty-four (24) month period, will continue the Executive's life insurance and health care benefits coverage on the same terms and at the same cost to the Executive as would be applicable to a similarly situated full-time employee; provided, however, that in the event the Executive begins to receive comparable life insurance and health care benefits (determined at the sole discretion of the Company) from a subsequent employer during such period, the Company may immediately terminate its life insurance and health care benefits coverage of the Executive. Coverage under the Company's health care benefits plan will be in lieu of health care continuation under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for periods such coverage is in effect under this Agreement. 4.9 VESTING OF STOCK OPTIONS. In the event of a Change in Control the Committee under the Option Plan will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full. Such stock options shall remain fully exercisable until their expiration. In the event the proceeds from a sale or disposition of any of the Affiliates which the Company owns on the date of this Agreement are used to provide a dividend to the stockholders of the Company, then immediately upon the effective date of such sale or disposition the Company will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full and to remain fully exercisable so that the Executive shall be entitled to become a stockholder of record such that the Executive shall be entitled to receive the benefits of the dividend. SECTION 5. COVENANTS 5.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times during and after the term 38 10 of his employment by the Company keep and maintain the confidentiality of all Confidential Information and will not at any time either directly or indirectly use such information for his own benefit or otherwise divulge, disclose or communicate such information to any person or entity in any manner whatsoever other than employees or agents of the Company or its Affiliates who have a need to know such information and then only to the extent necessary to perform their responsibilities on behalf of the Company or its Affiliates. As used herein, "Confidential Information" will mean any and all information (excluding information in the public domain) which relates to the business of the Company and its Affiliates including without limitation all patents and patent applications, copyrights applied for, issued to or owned by the Company or any of its Affiliates, inventions, trade secrets, computer programs, engineering and technical data, drawings or designs, manufacturing techniques, information concerning pricing and pricing policies, marketing techniques, suppliers, methods and manner of operations, and information relating to the identity and/or location of all past, present and prospective customers of the Company and its Affiliates. 5.2 CO-OPERATION. During the term of this Agreement and for a period of twenty-four (24) months following its termination, the Executive will not attempt to induce any employee of the Company or an Affiliate to terminate his or her employment with the Company or an Affiliate nor will he take any action with respect to any of the suppliers or customers of the Company and its Affiliates which would have or might be likely to have an adverse effect upon the business of the Company and its Affiliates. Executive hereby agrees not to make any statement or take any action, directly or indirectly, that will disparage or discredit the Company and its Affiliates, their Officers, Directors of the Company, their employees or any of their products, or in any way damage their reputation or ability to do business or conduct their affairs. Executive agrees that subsequent to his termination of employment he will, in conjunction with a Company request, reasonably co-operate with the Company in connection with transition matters, 39 11 disputes and litigation matters upon reasonable notice, at reasonable times, and will be paid or reimbursed for reasonable expenses incurred by the Executive relating to such matters. 5.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of any of the provisions of this Section 5 by the Executive, the Company will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions thereof and the Company will be entitled to pursue such other remedies at law or in equity as it deems appropriate. SECTION 6. MISCELLANEOUS ------------- 6.1 SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by him without the prior written consent of the Company. This Agreement may be assigned or transferred to and will be binding upon and inure to the benefit of any Successor of the Company. As used herein, the term "Successor" will include any person, firm, corporation or business entity which acquires all or substantially all of the assets or succeeds to the business of the Company. 6.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto. 6.3 MODIFICATION. This Agreement will not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement in a written instrument executed by the Company and the Executive or their legal representatives. 6.4 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 6.5 GOVERNING LAW. To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the State of Ohio. 40 12 6.6 INDEMNIFICATION. The Company has obtained an opinion of Arthur Andersen LLP that the payments and benefits under this Agreement do not exceed the maximum amount which can be paid to the Executive without incurring an excise tax under Section 4999 of the Internal Revenue Code. If the Internal Revenue Service asserts that the amounts payable to the Executive under this Agreement nonetheless give rise to an excise tax under Section 4999 of the Internal Revenue Code and the Executive co-operates with the Company in appealing the determination of the Internal Revenue Service through whatever level of administrative or judicial appeals is deemed appropriate by the Company, the Company shall indemnify the Executive for the amount of such excise tax, for any interest and penalties applicable thereto, and for any income or excise taxes payable on such indemnification. The Company shall pay all costs of challenging the determination that the excise tax applies to payments hereunder including any administrative costs, court costs, attorney fees, and accounting fees, whether incurred by the Company or incurred by the Executive. 6.7 DEFINITIONS. ----------- a. The term "Affiliate" shall mean any entity controlling, controlled by or under common control with the Company, including, but not limited to, divisions and subsidiaries of the Company. 41 13 b. The term "Change in Control" shall include: i. the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible into such common stock other than any purchases prior to the date of execution of this Agreement by Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients; ii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that a person, other than Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible in such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that Richard C. Blum & Associates, L.P. and/or its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of thirty percent (30%) or more of the Company's combined common stock including any securities convertible into such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iv. 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 42 14 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 holders 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; v. the date of the approval by stockholders of the Company 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 Company; vi. the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company; or vii. such other event as the Compensation Committee of the Board of Directors shall, in its sole and absolute discretion, deem to be a "Change in Control." 6.8 REPLACEMENT OF EXISTING CONTRACT. If this Agreement becomes effective pursuant to Section 1 hereof, it will replace the Management Agreement dated June 11, 1997 between the Company and the Executive and the Addendum to such Agreement dated August 13, 1998. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the day and year first above written. SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- 43 15 Debra L. Kackley /s/ ----------------- William J. Sickman ------------------ 44 16 NON-COMPETITION AGREEMENT In consideration of the promises and covenants of Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called "Scott") contained in the Amended and Restated Management Agreement between the Executive and Scott including the possible payment of twenty-four (24) months of Severance Pay to the Executive under certain circumstances, the Executive hereby agrees that the Executive will not, for a period of two (2) years after his termination of employment from Scott, directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where Scott or any of its Affiliates (as defined below) is then conducting business: (1) engage, as an employee, partner, or sole proprietor, in any business segment of any person or entity which competes, directly or indirectly, with the product lines of Scott or its Affiliates; or (2) in connection with any product lines of Scott or its Affiliates, render advice, consultation, or services to or otherwise assist any other person or entity which competes, directly or indirectly, with Scott or any of its Affiliates with respect to such product lines. For the purposes of this Agreement, the term "Affiliates" shall mean any entity controlled by or under common control with Scott during the period the Executive is employed by Scott or a division or subsidiary of Scott, including, but not limited to, Scott divisions and subsidiaries. In the event of a breach or threatened breach of any of the provisions of this Agreement by the Executive, Scott will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions hereof and Scott will be entitled to pursue such other remedies at law or in equity as it deems appropriate. The Executive understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for above, but acknowledges that he will receive sufficiently higher Severance Pay from Scott than he would otherwise receive to justify such restriction. The Executive acknowledges that he understands the effect of the provisions of this Agreement, that he has 45 17 had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions. Scott and the Executive consider the restrictions contained in this Agreement to be reasonable and necessary. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. IN WITNESS WHEREOF, the Executive has executed this Agreement as of this 13th day of August, 1998. /s/ - ----------------------------- William J. Sickman 46 EX-10.0.III 4 EXHIBIT 10.0(III) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (III) SECOND ADDENDUM TO JUNE 11, 1997 MANAGEMENT AGREEMENT AND FIRST ADDENDUM TO AUGUST 13, 1998 MANAGEMENT AGREEMENT AND AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT DATED AUGUST 13, 1998 These ADDENDA to the Management Agreement executed by and between William J. Sickman (the "Executive") and Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called the "Company") as of June 11, 1997 (the "1997 Agreement") and the contingent Management Agreement executed by and between the Executive and the Company as of August 13, 1998 (the "1998 Agreement") and this AMENDMENT to the Non-Qualified Stock Option Agreement executed by and between the Executive and the Company as of August 13, 1998 (the "Option Agreement") is entered into as of this 30th day of October, 1998, by and between the Company and the Executive. WHEREAS, the 1998 Agreement and the Option Agreement as currently written will not become effective if the Executive gives notice to the Company by October 31, 1998 of his intent to quit the employ of the Company; and WHEREAS, it is desirable for the Company to extend the date by which the Executive must give such notice to the Company from October 31, 1998 to November 16, 1998; NOW THEREFORE, in consideration of the foregoing, the Company and the Executive agree as follows: (1) Effective November 17, 1998 if the Executive has not given notice of his intent to quit 47 2 the employ of the Company, the Executive agrees to the elimination of any and all of his benefits (including any which would be payable as a result of his death) under the Company's Senior Executive Benefits Program in exchange for three thousand seven hundred sixty (3,760) stock options pursuant to the Option Agreement which options shall have an option price equal to the value of the Company's Class A Common Stock at the close of business on November 16, 1998. (2) Effective as of October 30, 1998, the Company and the Executive hereby agree that Section 3.4 of the 1997 Agreement shall be deemed to be modified to read as follows: "3.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates his employment with Good Reason as defined below in this Section 3.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 3.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 3.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated his employment for 'Good Reason' if his termination of employment occurs prior to December 31, 1998 and he gives the Company advance written notice of his termination of employment at least forty-five (45) days prior to his termination of employment and, in any event, by November 16, 1998." (3) As of October 30, 1998, the Company and the Executive agree that the 1998 Agreement shall become effective as of November 17, 1998 unless the Executive provides written notice to the Company on or before November 16, 1998 of his intention to terminate his employment with the Company and further agree that the first three (3) sentences of Section 1 and Section 6.8 in its entirety shall be deemed to be modified to read as follows: "This Agreement shall become effective November 17, 1998 provided that the Executive has not prior thereto given notice of his termination of employment with 'Good Reason' as set forth in Section 3.4 of the Management Agreement between the Company and the Executive 48 3 dated June 11, 1997 as modified by Addenda dated August 13, 1998 and October 30, 1998. If such notice is given prior to November 17, 1998, then this Amended and Restated Management Agreement shall be null and void. The Company will employ the Executive in accordance with the terms and conditions set forth herein as of November 17, 1998 and extending for an initial period ending December 31, 2000 (the >initial period'), subject, however, to earlier termination as expressly provided herein." "6.8 REPLACEMENT OF EXISTING CONTRACT. If this Agreement becomes effective pursuant to Section 1 hereof, it will replace the Management Agreement dated June 11, 1997 between the Company and the Executive and the Addenda to such Agreement dated August 13, 1998 and October 30, 1998." (4) Effective as of October 30, 1998, the Company and the Executive hereby agree that Section 1(h) of the Option Agreement shall be deemed to be modified to read as follows: "(h) The words 'Effective Date' shall mean November 17, 1998." (5) Effective as of October 30, 1998, the Company and the Executive hereby agree that Section 2 of the Option Agreement shall be deemed to be modified to read as follows: "2. Grant of Option. Effective as of the Effective Date, subject to all of the terms and provisions of this Agreement, the Company grants to the Optionee, upon the terms and conditions set forth hereinafter, the right and option to purchase all or any lesser number of an aggregate of three thousand seven hundred sixty (3,760) Class A Common Shares at an Option Price per share equal to the closing sale price of a Class A Common Share as reported on the NASDAQ National Market System on November 16, 1998. All of such Class A Common Shares are intended to be the subject of a non-qualified stock option, and none of such Class A Common 49 4 Shares are intended to be the subject of an Incentive Stock Option." (6) These Addenda and this Amendment supersede any contrary provisions of the 1997 Agreement, the 1998 Agreement and the Option Agreement. IN WITNESS WHEREOF, the Executive and the Company have executed these Addenda to the 1997 and 1998 Agreements and this Amendment to the Option Agreement as of the day and year first above written. SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- Debra L. Kackley /s/ ----------------- William J. Sickman ----------------- 50 EX-10.0.IV 5 EXHIBIT 10.0(IV) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (IV) MANAGEMENT AGREEMENT -------------------- This MANAGEMENT AGREEMENT ("Agreement") is entered into as of this 10th day of September, 1998, by and between Scott Technologies, Inc. (the "Company") and Debra L. Kackley (the "Executive"). WHEREAS, the Executive is presently in the employ of the Company as Vice President, General Counsel and Secretary of the Company; and WHEREAS, the Company desires to retain the employment of the Executive and the Executive desires to continue to serve the Company in such capacity; and WHEREAS, the Company and the Executive desire to set forth in a written agreement the terms and provisions of such employment and of certain severance and other payments to be made to the Executive under certain circumstances; NOW THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth in this Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: SECTION 1. TERM OF EMPLOYMENT AND COMPENSATION ----------------------------------- 1.1 EMPLOYMENT. The Company will employ the Executive in accordance with the terms and conditions set forth herein as of August 10, 1998 and extending for an initial period ending August 9, 2001 (the "initial period"), subject, however, to earlier termination as expressly provided herein. The Executive will continue to serve the Company as Vice President, General Counsel and Secretary or in such other future capacity as she and the Company might mutually agree and will devote her full 51 2 business time and best efforts to the satisfactory discharge of the responsibilities of her offices, performing such other duties as might reasonably be requested by the Company's Chief Executive Officer or Board of Directors. The initial period will be automatically extended for one (1) additional year at the end of the initial period, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, the term of the employment of the Executive shall then become indefinite and can be terminated by the Company without notice. Similarly, subject to the provisions of this Agreement relating to nondisclosure of confidential information and non-interference with employees, customers and suppliers, the Executive can quit, at any time thereafter, without notice to the Company. 1.2 COMPENSATION. During the initial period the Executive will be paid a base salary at an annual rate of One Hundred Twenty Thousand Dollars ($120,000.00) in installments which are no less frequently than monthly, together with such increases as the Compensation Committee of the Board of Directors shall from time to time approve. 52 3 SECTION 2. BENEFIT PLANS ------------- During her employment, the Executive shall be entitled to participate in all employee benefit plans and perquisites which are maintained or established by the Company from time to time and which cover the Company's senior executives provided she satisfies any applicable eligibility requirements therefor. The Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion. The Executive further acknowledges that the Company may wish to maintain insurance on her life for its benefit and agrees to submit to any physical examination which may be required in order to obtain such insurance. SECTION 3. EXPENSES -------- The Executive will be reimbursed for all reasonable expenses incurred by her in performing her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. SECTION 4. EMPLOYMENT TERMINATIONS ----------------------- 4.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated by reason of retirement or death during the term of this Agreement, the Executive's employment with the Company shall be deemed terminated as of the effective date of retirement or at the end of the month in which such death occurs and all benefits will be determined in accordance with the Company's retirement plans, survivor's benefits, insurance, Compensation Plan for Executives and other applicable programs then in effect, except that in the case of the death of the Executive the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof to her spouse if then living and otherwise to the executor or administrator of her estate. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of death and in no event will any of 53 4 the Severance Benefits and Severance Pay described in Sections 4.7 and 4.8 hereof be paid in the event of retirement. In the event of retirement, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. For purposes of this Section 4.1, the determination of whether a termination qualifies as a retirement will be made in accordance with the then established rules and definitions of the Company's Retirement Income Plan II which are applicable to salaried employees of the Company. 4.2 TERMINATION DUE TO DISABILITY. In the event the Executive during the term of this Agreement becomes, in the opinion of the Company and based upon reasonable medical opinion, so disabled as to be unable to satisfactorily perform her duties hereunder, the Company will have the right upon thirty (30) days written notice to the Executive to terminate the continued active service of the Executive and the payment of compensation and benefits under this Agreement, except as provided in this Section 4.2. In such event, the Executive's benefits will be determined in accordance with the Company's disability and other applicable plans and programs then in effect, provided, however, that the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of the disability of the Executive. In the event of disability, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may terminate her employment other than for Good Reason as such term is defined in Section 4.4 hereof at any time by giving the Company written notice of intent to terminate, delivered at least sixty (60) calendar days prior to the effective date of such termination. The Company will pay the Executive her full base salary, at the rate then in effect, through the effective date of such termination, plus all other 54 5 benefits to which the Executive has a vested right at that time (including but not limited to unused vacation time, COBRA benefits and stock option benefits). If such termination of employment is other than for Good Reason, the Executive shall not be entitled to the Severance Benefits set forth in Section 4.7 hereof or the Severance Pay set forth in Section 4.8 hereof. The Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates her employment with Good Reason as defined below in this Section 4.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if she qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated her employment for "Good Reason" if her termination of employment occurs: a. within four (4) months after a Change in Control; b. within four (4) months after: i. the Board of Directors of the Company shall fail to re-elect or shall remove the Executive from the office then being held by the Executive; ii. the Chief Executive Officer or the Board of Directors of the Company shall make a significant negative change in the nature or scope of the authorities, powers, functions or duties of the Executive hereunder; iii. the Company shall fail to pay when due any compensation due and owing to the Executive or shall make a reduction in the Executive's then current base salary or a material reduction in her benefits and such failure is not corrected within ten (10) days after notice thereof to the Company by the Executive; or iv. any pattern of harassment which occurs within the first twelve (12) months after 55 6 the execution of this Agreement, which is done with the approval of the Chief Executive Officer or the Board of Directors of the Company and which impedes the Executive in the exercise of her authorities, powers, functions or duties hereunder in the manner in which they would normally be exercised by a similar officer. In the event that the Executive shall terminate her employment with Good Reason, she shall provide the Company with sixty (60) days advance notice of her date of termination of employment. 4.5 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Executive acknowledges that she is, has been and will continue at all times to be an at-will employee of the Company and as such her employment has been and continues to be terminable, subject to the terms and conditions of this Agreement, by either the Executive or the Company at any time upon notice to the other as provided for herein and for any reason not prohibited by law. However, if the Company terminates the Executive's employment other than for "Cause" (as defined in Section 4.6 hereof), the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if she qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. 4.6 TERMINATION BY THE COMPANY FOR CAUSE. Nothing in this Agreement will be construed to prevent the Company from terminating the Executive's employment for Cause. As used herein, "Cause" will be determined by the Board of Directors of the Company in the exercise of good faith and reasonable judgment and will include (i) Executive's willful failure to perform her duties under this Agreement within a reasonable period of time after receipt of written notice from the Board of Directors of the Company setting forth in reasonable detail the duties which the Executive has failed to perform and the corrective actions expected of her; (ii) a breach of Executive's obligations under Section 5 below; (iii) indictment for, conviction of, or written confession to a crime against the Company or a felony; or (iv) Executive shall 56 7 have been found by the Board of Directors of the Company to have been repeatedly and excessively abusing alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except Executive's obligations under Section 5 hereof. 4.7 SEVERANCE BENEFITS. In the event that the Company shall terminate the employment of the Executive other than for "Cause" as defined in Section 4.6 hereof, or in the event the Executive terminates her employment pursuant to Section 4.4 hereof with Good Reason, the Company will, upon the effective date of such termination and in lieu of any other severance which may otherwise be payable: a. Pay to the Executive in a cash lump sum a pro rata bonus under the Bonus Plan with respect to the year in which she is terminated, which bonus shall be calculated using the formula contained in the Bonus Plan based on the actual results of the Company for such year but without any discretionary adjustment of the amounts payable to the Executive that might otherwise be permitted under the Bonus Plan. Such bonus will be paid to the Executive on the same day as bonuses under the Bonus Plan are paid to the executives of the Company who are still employed with the Company. b. Pay for the costs of outplacement services actually used by the Executive; provided, however, that the total fee paid for such services will be limited to an amount equal to seventeen percent (17%) of the Executive's annual base salary rate as of the effective date of termination of employment. c. Pay to the Executive a cash lump sum, net of taxes, equal to twelve (12) months of the monthly car allowance then applicable to the Executive. Such payment shall be paid to the Executive with thirty (30) days following her termination of employment. d. Cause all stock options granted to the Executive pursuant to the Company's Key 57 8 Employees' Stock Option Plan (the "Option Plan") or the grant of any right under any future stock plan, to become immediately exercisable in full and to remain fully exercisable until the earlier of the date of expiration of the option or one (1) year after her date of termination of employment. e. Provide to the Executive tax and/or legal consultation with respect to the benefits granted hereunder up to a maximum cost to the Company of Five Thousand Dollars ($5,000.00); f. Provide assistance to the Executive in obtaining the financing necessary for the Executive to exercise her stock options during the period specified in Section 4.7d. hereof; and g. Continue to be obligated to pay when due all other benefits to which the Executive has a vested right according to the provisions of any applicable retirement or other benefit plan or program. 4.8 SEVERANCE PAY. If the Executive executes the Non-Competition Agreement attached hereto and delivers such executed Agreement to the Company no later than thirty (30) days after the date of this Agreement, and if the employment of the Executive is terminated by the Company other than for "Cause" as defined in Section 4.6 hereof, or by the Executive pursuant to Section 4.4 hereof with Good Reason, the Executive shall be entitled to Severance Pay as follows: a. At the election of the Executive, the Company shall either continue to pay to the Executive for the twenty-four (24) months following her termination of employment, her monthly base salary at the rate in effect as of the date of such termination in accordance with the Company's normal payroll practices or make a lump sum payment to the Executive of the amount due above. Any such lump sum will be payable within thirty (30) days after the date the Company receives written notice of the Executive's election to receive the lump sum. 58 9 b. In addition, the Company, throughout such twenty-four (24) month period, will continue the Executive's life insurance and health care benefits coverage on the same terms and at the same cost to the Executive as would be applicable to a similarly situated full-time employee; provided, however, that in the event the Executive begins to receive comparable life insurance and health care benefits (determined at the sole discretion of the Company) from a subsequent employer during such period, the Company may immediately terminate its life insurance and health care benefits coverage of the Executive. Coverage under the Company's health care benefits plan will be in lieu of health care continuation under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for periods such coverage is in effect under this Agreement. 4.9 VESTING OF STOCK OPTIONS. In the event of a Change in Control, the Committee under the Option Plan will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full. Such stock options shall remain fully exercisable until their expiration. In the event the proceeds from a sale or disposition of any of the Affiliates which the Company owns on the date of this Agreement are used to provide a dividend to the stockholders of the Company, then immediately upon the effective date of such sale or disposition the Company will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full and to remain fully exercisable so that the Executive shall be entitled to become a stockholder of record such that the Executive shall be entitled to receive the benefits of the dividend. 59 10 SECTION 5. COVENANTS --------- 5.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times during and after the term of her employment by the Company keep and maintain the confidentiality of all Confidential Information and will not at any time either directly or indirectly use such information for her own benefit or otherwise divulge, disclose or communicate such information to any person or entity in any manner whatsoever other than employees or agents of the Company or its Affiliates who have a need to know such information and then only to the extent necessary to perform their responsibilities on behalf of the Company or its Affiliates. As used herein, "Confidential Information" will mean any and all information (excluding information in the public domain) which relates to the business of the Company and its Affiliates including without limitation all patents and patent applications, copyrights applied for, issued to or owned by the Company or any of its Affiliates, inventions, trade secrets, computer programs, engineering and technical data, drawings or designs, manufacturing techniques, information concerning pricing and pricing policies, marketing techniques, suppliers, methods and manner of operations, and information relating to the identity and/or location of all past, present and prospective customers of the Company and its Affiliates. 5.2 CO-OPERATION. During the term of this Agreement and for a period of twenty-four (24) months following its termination, the Executive will not attempt to induce any employee of the Company or an Affiliate to terminate his or her employment with the Company or an Affiliate nor will she take any action with respect to any of the suppliers or customers of the Company and its Affiliates which would have or might be likely to have an adverse effect upon the business of the Company and its Affiliates. Executive hereby agrees not to make any statement or take any action, directly or indirectly, that will disparage or discredit the Company and its Affiliates, their Officers, Directors of the Company, their employees or any of their products, or in any way damage their reputation or ability to do business or conduct their affairs. 60 11 Executive agrees that subsequent to her termination of employment she will, in conjunction with a Company request, reasonably co-operate with the Company in connection with transition matters, disputes and litigation matters upon reasonable notice, at reasonable times, and will be paid or reimbursed for reasonable expenses incurred by the Executive relating to such matters. 5.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of any of the provisions of this Section 5 by the Executive, the Company will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions thereof and the Company will be entitled to pursue such other remedies at law or in equity as it deems appropriate. SECTION 6. MISCELLANEOUS ------------- 6.1 SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by her without the prior written consent of the Company. This Agreement may be assigned or transferred to and will be binding upon and inure to the benefit of any Successor of the Company. As used herein, the term "Successor" will include any person, firm, corporation or business entity which acquires all or substantially all of the assets or succeeds to the business of the Company. 6.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto. 6.3 MODIFICATION. This Agreement will not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement in a written instrument executed by the Company and the Executive or their legal representatives. 6.4 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 61 12 6.5 GOVERNING LAW. To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the State of Ohio. 6.6 INDEMNIFICATION. If the Internal Revenue Service asserts that the amounts payable to the Executive under this Agreement give rise to an excise tax under Section 4999 of the Internal Revenue Code and the Executive co-operates with the Company in appealing the determination of the Internal Revenue Service through whatever level of administrative or judicial appeals is deemed appropriate by the Company, the Company shall indemnify the Executive for the amount of such excise tax, for any interest and penalties applicable thereto, and for any income or excise taxes payable on such indemnification. The Company shall pay all costs of challenging the determination that the excise tax applies to payments hereunder including any administrative costs, court costs, attorney fees, and accounting fees, whether incurred by the Company or incurred by the Executive. 6.7 DEFINITIONS. ----------- a. The term "Affiliate" shall mean any entity controlling, controlled by or under common control with the Company, including, but not limited to, divisions and subsidiaries of the Company. b. The term "Change in Control" shall include: i. the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible into such common stock other than any purchases prior to the date of execution of this Agreement by Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients; ii. the receipt by the Company of a Schedule 13D or other advice after the date of 62 13 execution of this Agreement indicating that a person, other than Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible in such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that Richard C. Blum & Associates, L.P. and/or its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of thirty percent (30%) or more of the Company's combined common stock including any securities convertible into such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iv. 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 holders 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; v. the date of the approval by stockholders of the Company of any sale, lease, 63 14 exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; vi. the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company; or vii. such other event as the Compensation Committee of the Board of Directors shall, in its sole and absolute discretion, deem to be a "Change in Control." IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the day and year first above written. SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- Debra L. Kackley /s/ ----------------- William J. Sickman ----------------- 64 15 NON-COMPETITION AGREEMENT In consideration of the promises and covenants of Scott Technologies, Inc. (hereinafter called "Scott") contained in the Management Agreement between the Executive and Scott including the possible payment of twenty-four (24) months of Severance Pay to the Executive under certain circumstances, the Executive hereby agrees that the Executive will not, for a period of two (2) years after her termination of employment from Scott, directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where Scott or any of its Affiliates (as defined below) is then conducting business: (1) engage, as an employee, partner, or sole proprietor, in any business segment of any person or entity which competes, directly or indirectly, with the product lines of Scott or its Affiliates; or (2) in connection with any product lines of Scott or its Affiliates, render advice, consultation, or services to or otherwise assist any other person or entity which competes, directly or indirectly, with Scott or any of its Affiliates with respect to such product lines. For the purposes of this Agreement, the term "Affiliates" shall mean any entity controlled by or under common control with Scott during the period the Executive is employed by Scott or a division or subsidiary of Scott, including, but not limited to, Scott divisions and subsidiaries. In the event of a breach or threatened breach of any of the provisions of this Agreement by the Executive, Scott will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions hereof and Scott will be entitled to pursue such other remedies at law or in equity as it deems appropriate. The Executive understands that the foregoing restrictions may limit her ability to engage in certain business pursuits during the period provided for above, but acknowledges that she will receive sufficiently higher Severance Pay from Scott than she would otherwise receive to justify such restriction. The Executive acknowledges that she understands the effect of the provisions of this Agreement, that she 65 16 has had reasonable time to consider the effect of these provisions, and that she was encouraged to and had an opportunity to consult an attorney with respect to these provisions. Scott and the Executive consider the restrictions contained in this Agreement to be reasonable and necessary. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. IN WITNESS WHEREOF, the Executive has executed this Agreement as of this 10th day of September, 1998. /s/ - ------------------------------ Debra L. Kackley 66 EX-10.0.V 6 EXHIBIT 10.0(V) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (V) AMENDED AND RESTATED MANAGEMENT AGREEMENT This AMENDED and RESTATED MANAGEMENT AGREEMENT ("Agreement") is entered into as of this 17th day of August, 1998, by and between Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called the "Company") and Glen W. Lindemann (the "Executive"). WHEREAS, the Executive is presently in the employ of the Company as President and Chief Executive Officer of the Company; and WHEREAS, the Company desires to retain the employment of the Executive and the Executive desires to continue to serve the Company in such capacity; and WHEREAS, the Company and the Executive desire to set forth in a written agreement the terms and provisions of such employment and of certain severance and other payments to be made to the Executive under certain circumstances; NOW THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth in this Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: SECTION 1. TERM OF EMPLOYMENT AND COMPENSATION ----------------------------------- The Company will employ the Executive in accordance with the terms and conditions set forth herein as of January 1, 1998 and extending for an initial period ending December 31, 2000 (the "initial period"), subject, however, to earlier termination as expressly provided herein. The Executive will continue to serve the Company as President and Chief Executive Officer or in such other future capacity 67 2 as he and the Company might mutually agree and will devote his full business time and best efforts to the satisfactory discharge of the responsibilities of his offices, performing such other duties as might reasonably be requested by the Company's Board of Directors. During the initial period the Executive will be paid a base salary at an annual rate of Three Hundred Fifty Thousand Dollars ($350,000.00) in installments which are no less frequently than monthly, together with such increases as the Compensation Committee of the Board of Directors shall from time to time approve. The initial period will be automatically extended for one (1) additional year at the end of the initial period, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, the term of the employment of the Executive shall then become indefinite and can be terminated by the Company without notice. Similarly, subject to the provisions of this Agreement relating to nondisclosure of confidential information and non-interference with employees, customers and suppliers, the Executive can quit, at any time thereafter, without notice to the Company. 68 3 SECTION 2. BENEFIT PLANS ------------- During his employment, the Executive shall be entitled to participate in all employee benefit plans and perquisites which are maintained or established by the Company from time to time and which cover the Company's senior executives provided he satisfies any applicable eligibility requirements therefor. The Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion. The Executive further acknowledges that the Company may wish to maintain insurance on his life for its benefit and agrees to submit to any physical examination which may be required in order to obtain such insurance. SECTION 3. EXPENSES -------- The Executive will be reimbursed for all reasonable expenses incurred by him in performing his duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. SECTION 4. EMPLOYMENT TERMINATIONS ----------------------- 4.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated by reason of retirement or death during the term of this Agreement, the Executive's employment with the Company shall be deemed terminated as of the effective date of retirement or at the end of the month in which such death occurs and all benefits will be determined in accordance with the Company's retirement plans, survivor's benefits, insurance, Compensation Plan for Executives and other applicable programs then in effect, except that in the case of the death of the Executive the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof to his spouse if then living and otherwise to the executor or administrator of his estate. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of death and in no event will any of 69 4 the Severance Benefits and Severance Pay described in Sections 4.7 and 4.8 hereof be paid in the event of retirement. In the event of retirement, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. For purposes of this Section 4.1, the determination of whether a termination qualifies as a retirement will be made in accordance with the then established rules and definitions of the Company's Retirement Income Plan II which are applicable to salaried employees of the Company. 4.2 TERMINATION DUE TO DISABILITY. In the event the Executive during the term of this Agreement becomes, in the opinion of the Company and based upon reasonable medical opinion, so disabled as to be unable to satisfactorily perform his duties hereunder, the Company will have the right upon thirty (30) days written notice to the Executive to terminate the continued active service of the Executive as President and Chief Executive Officer and the payment of compensation and benefits under this Agreement, except as provided in this Section 4.2. In such event, the Executive's benefits will be determined in accordance with the Company's disability and other applicable plans and programs then in effect, provided, however, that the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of the disability of the Executive. In the event of disability, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may terminate his employment other than for Good Reason as such term is defined in Section 4.4 hereof at any time by giving the Company written notice of intent to terminate, delivered at least sixty (60) calendar days prior to the effective date of such termination. The Company will pay the Executive his full base salary, at the rate then in effect, through the effective date of such termination, plus all other 70 5 benefits to which the Executive has a vested right at that time (including but not limited to unused vacation time, COBRA benefits and stock option benefits). If such termination of employment is other than for Good Reason, the Executive shall not be entitled to the Severance Benefits set forth in Section 4.7 hereof or the Severance Pay set forth in Section 4.8 hereof. The Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates his employment with Good Reason as defined below in this Section 4.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated his employment for "Good Reason" if his termination of employment occurs: a. within four (4) months after a Change in Control; b. within four (4) months after: i. the Board of Directors of the Company shall fail to re-elect or shall remove the Executive from the office of Chief Executive Officer; ii. the Board of Directors of the Company shall make a significant negative change in the nature or scope of the authorities, powers, functions or duties of the Executive hereunder; iii. the Company shall fail to pay when due any compensation due and owing to the Executive or shall make a reduction in the Executive's then current base salary or a material reduction in his benefits and such failure is not corrected within ten (10) days after notice thereof to the Company by the Executive; iv. any pattern of harassment which occurs within the first twelve (12) months after 71 6 the execution of this Agreement, which is done with the approval of the Board of Directors of the Company and which impedes the Executive in the exercise of his authorities, powers, functions or duties hereunder in the manner in which they would normally be exercised by a Chief Executive Officer; or v. the Board of Directors of the Company has given the Executive written notice of its intention not to renew this Agreement. In the event that the Executive shall terminate his employment with Good Reason, he shall provide the Company with sixty (60) days advance notice of his date of termination of employment. 4.5 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Executive acknowledges that he is, has been and will continue at all times to be an at-will employee of the Company and as such his employment has been and continues to be terminable, subject to the terms and conditions of this Agreement, by either the Executive or the Company at any time upon notice to the other as provided for herein and for any reason not prohibited by law. However, if the Company terminates the Executive's employment other than for "Cause" (as defined in Section 4.6 hereof), the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. 4.6 TERMINATION BY THE COMPANY FOR CAUSE. Nothing in this Agreement will be construed to prevent the Company from terminating the Executive's employment for Cause. As used herein, "Cause" will be determined by the Board of Directors of the Company in the exercise of good faith and reasonable judgment and will include (i) Executive's willful failure to perform his duties under this Agreement within a reasonable period of time after receipt of written notice from the Board of Directors of the Company setting forth in reasonable detail the duties which the Executive has failed to perform and the corrective actions expected of him; (ii) a breach of Executive's obligations under Section 5 below; (iii) indictment 72 7 for, conviction of, or written confession to a crime against the Company or a felony; or (iv) Executive shall have been found by the Board of Directors of the Company to have been repeatedly and excessively abusing alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except Executive's obligations under Section 5 hereof. 4.7 SEVERANCE BENEFITS. In the event that the Company shall terminate the employment of the Executive other than for "Cause" as defined in Section 4.6 hereof, or in the event the Executive terminates his employment pursuant to Section 4.4 hereof with Good Reason, the Company will, upon the effective date of such termination and in lieu of any other severance which may otherwise be payable: a. Pay to the Executive in a cash lump sum a pro rata bonus under the Bonus Plan with respect to the year in which he is terminated, which Bonus shall be calculated using the formula contained in the Bonus Plan based on the actual results of the Company for such year but without any discretionary adjustment of the amounts payable to the Executive that might otherwise be permitted under the Bonus Plan. Such bonus will be paid to the Executive on the same day as bonuses under the Plan are paid to the executives of the Company who are still employed with the Company. b. Pay for the costs of outplacement services actually used by the Executive; provided, however, that the total fee paid for such services will be limited to an amount equal to seventeen percent (17%) of the Executive's annual base salary rate as of the effective date of termination of employment. c. Pay to the Executive a cash lump sum, net of taxes, equal to twelve (12) months of the monthly car allowance then applicable to the Executive. Such payment shall be paid to the Executive with thirty (30) days following his termination of employment. 73 8 d. Cause all stock options granted to the Executive pursuant to the Company's Key Employees' Stock Option Plan (the "Option Plan"), or the grant of any right under any future stock plan, to become immediately exercisable in full and to remain fully exercisable until the earlier of the date of expiration of the option or one (1) year after his date of termination of employment. e. Provide to the Executive tax and/or legal consultation with respect to the benefits granted hereunder up to a maximum cost to the Company of Five Thousand Dollars ($5,000.00); f. Provide assistance to the Executive in obtaining the financing necessary for the Executive to exercise his stock options during the period specified in Section 4.7d. hereof; and g. Continue to be obligated to pay when due all other benefits to which the Executive has a vested right according to the provisions of any applicable retirement or other benefit plan or program. 4.8 SEVERANCE PAY. If the Executive executes the Non-Competition Agreement attached hereto and delivers such executed Agreement to the Company no later than thirty (30) days after the date of this Agreement, and if the employment of the Executive is terminated by the Company other than for "Cause" as defined in Section 4.6 hereof, or by the Executive pursuant to Section 4.4 hereof with Good Reason, the Executive shall be entitled to Severance Pay as follows: a. At the election of the Executive, the Company shall either continue to pay to the Executive for the twenty-four (24) months following his termination of employment, his monthly base salary at the rate in effect as of the date of such termination in accordance with the Company's normal payroll practices or make a lump sum payment to the Executive of the amount due above. Any such lump sum will be payable within thirty (30) days after the date the Company receives written notice of the Executive's election to 74 9 receive the lump sum. b. In addition, the Company, throughout such twenty-four (24) month period, will continue the Executive's life insurance and health care benefits coverage on the same terms and at the same cost to the Executive as would be applicable to a similarly situated full-time employee; provided, however, that in the event the Executive begins to receive comparable life insurance and health care benefits (determined at the sole discretion of the Company) from a subsequent employer during such period, the Company may immediately terminate its life insurance and health care benefits coverage of the Executive. Coverage under the Company's health care benefits plan will be in lieu of health care continuation under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for periods such coverage is in effect under this Agreement. 4.9 VESTING OF STOCK OPTIONS. In the event of a Change in Control the Committee under the Option Plan will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full. Such stock options shall remain fully exercisable until their expiration. In the event the proceeds from a sale or disposition of any of the Affiliates which the Company owns on the date of this Agreement are used to provide a dividend to the stockholders of the Company, then immediately upon the effective date of such sale or disposition the Company will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full and to remain fully exercisable so that the Executive shall be entitled to become a stockholder of record such that the Executive shall be entitled to receive the benefits of the dividend. SECTION 5. COVENANTS --------- 5.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times during and after the term 75 10 of his employment by the Company keep and maintain the confidentiality of all Confidential Information and will not at any time either directly or indirectly use such information for his own benefit or otherwise divulge, disclose or communicate such information to any person or entity in any manner whatsoever other than employees or agents of the Company or its Affiliates who have a need to know such information and then only to the extent necessary to perform their responsibilities on behalf of the Company or its Affiliates. As used herein, "Confidential Information" will mean any and all information (excluding information in the public domain) which relates to the business of the Company and its Affiliates including without limitation all patents and patent applications, copyrights applied for, issued to or owned by the Company or any of its Affiliates, inventions, trade secrets, computer programs, engineering and technical data, drawings or designs, manufacturing techniques, information concerning pricing and pricing policies, marketing techniques, suppliers, methods and manner of operations, and information relating to the identity and/or location of all past, present and prospective customers of the Company and its Affiliates. 5.2 CO-OPERATION. During the term of this Agreement and for a period of twenty-four (24) months following its termination, the Executive will not attempt to induce any employee of the Company or an Affiliate to terminate his or her employment with the Company or an Affiliate nor will he take any action with respect to any of the suppliers or customers of the Company and its Affiliates which would have or might be likely to have an adverse effect upon the business of the Company and its Affiliates. Executive hereby agrees not to make any statement or take any action, directly or indirectly, that will disparage or discredit the Company and its Affiliates, their Officers, Directors of the Company, their employees or any of their products, or in any way damage their reputation or ability to do business or conduct their affairs. Executive agrees that subsequent to his termination of employment he will, in conjunction with a Company request, reasonably co-operate with the Company in connection with transition matters, 76 11 disputes and litigation matters upon reasonable notice, at reasonable times, and will be paid or reimbursed for reasonable expenses incurred by the Executive relating to such matters. 5.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of any of the provisions of this Section 5 by the Executive, the Company will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions thereof and the Company will be entitled to pursue such other remedies at law or in equity as it deems appropriate. SECTION 6. MISCELLANEOUS ------------- 6.1 SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by him without the prior written consent of the Company. This Agreement may be assigned or transferred to and will be binding upon and inure to the benefit of any Successor of the Company. As used herein, the term "Successor" will include any person, firm, corporation or business entity which acquires all or substantially all of the assets or succeeds to the business of the Company. 6.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto. 6.3 MODIFICATION. This Agreement will not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement in a written instrument executed by the Company and the Executive or their legal representatives. 6.4 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 6.5 GOVERNING LAW. To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the State of Ohio. 77 12 6.6 INDEMNIFICATION. The Company has obtained an opinion of Arthur Andersen LLP that the payments and benefits under this Agreement do not exceed the maximum amount which can be paid to the Executive without incurring an excise tax under Section 4999 of the Internal Revenue Code. If the Internal Revenue Service asserts that the amounts payable to the Executive under this Agreement nonetheless give rise to an excise tax under Section 4999 of the Internal Revenue Code and the Executive co-operates with the Company in appealing the determination of the Internal Revenue Service through whatever level of administrative or judicial appeals is deemed appropriate by the Company, the Company shall indemnify the Executive for the amount of such excise tax, for any interest and penalties applicable thereto, and for any income or excise taxes payable on such indemnification. The Company shall pay all costs of challenging the determination that the excise tax applies to payments hereunder including any administrative costs, court costs, attorney fees, and accounting fees, whether incurred by the Company or incurred by the Executive. 6.7 DEFINITIONS. ----------- a. The term "Affiliate" shall mean any entity controlling, controlled by or under common control with the Company, including, but not limited to, divisions and subsidiaries of the Company. b. The term "Change in Control" shall include: i. the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible into such common stock other than any purchases prior to the date of execution of this Agreement by Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients; 78 13 ii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that a person, other than Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible in such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that Richard C. Blum & Associates, L.P. and/or its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of thirty percent (30%) or more of the Company's combined common stock including any securities convertible into such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iv. 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 holders 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; 79 14 v. the date of the approval by stockholders of the Company 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 Company; vi. the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company; or vii. such other event as the Compensation Committee of the Board of Directors shall, in its sole and absolute discretion, deem to be a "Change in Control." 6.8 REPLACEMENT OF EXISTING CONTRACT. This Agreement will replace the Management Agreement dated June 9, 1997 between the Company and the Executive. 80 15 IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the day and year first above written. SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- Debra L. Kackley /s/ ----------------- William J. Sickman ----------------- 81 16 NON-COMPETITION AGREEMENT In consideration of the promises and covenants of Scott Technologies, Inc. (formerly known as Figgie International Inc. and hereinafter called "Scott") contained in the Amended and Restated Management Agreement between the Executive and Scott including the possible payment of twenty-four (24) months of Severance Pay to the Executive under certain circumstances, the Executive hereby agrees that the Executive will not, for a period of two (2) years after his termination of employment from Scott, directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where Scott or any of its Affiliates (as defined below) is then conducting business: (1) engage, as an employee, partner, or sole proprietor, in any business segment of any person or entity which competes, directly or indirectly, with the product lines of Scott or its Affiliates; or (2) in connection with any product lines of Scott or its Affiliates, render advice, consultation, or services to or otherwise assist any other person or entity which competes, directly or indirectly, with Scott or any of its Affiliates with respect to such product lines. For the purposes of this Agreement, the term "Affiliates" shall mean any entity controlled by or under common control with Scott during the period the Executive is employed by Scott or a division or subsidiary of Scott, including, but not limited to, Scott divisions and subsidiaries. In the event of a breach or threatened breach of any of the provisions of this Agreement by the Executive, Scott will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions hereof and Scott will be entitled to pursue such other remedies at law or in equity as it deems appropriate. The Executive understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for above, but acknowledges that he will receive sufficiently higher Severance Pay from Scott than he would otherwise receive to justify such restriction. The Executive acknowledges that he understands the effect of the provisions of this Agreement, that he has 82 17 had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions. Scott and the Executive consider the restrictions contained in this Agreement to be reasonable and necessary. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. IN WITNESS WHEREOF, the Executive has executed this Agreement as of this 17th day of August, 1998. /s/ - ------------------------------ Glen W. Lindemann 83 EX-10.0.VI 7 EXHIBIT 10.0(VI) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (VI) MANAGEMENT AGREEMENT -------------------- This MANAGEMENT AGREEMENT ("Agreement") is entered into as of this 25th day of August, 1998, by and between Scott Technologies, Inc. (the "Company") and Mark A. Kirk (the "Executive"). WHEREAS, the Company wishes to obtain the services of the Executive; and WHEREAS, the Executive desires to obtain employment with the Company; and WHEREAS, the Company and the Executive desire to set forth in a written agreement the terms and provisions of such employment and of certain severance and other payments to be made to the Executive under certain circumstances; NOW THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth in this Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows: SECTION 1. TERM OF EMPLOYMENT AND COMPENSATION ----------------------------------- 1.1 EMPLOYMENT. The Company will employ the Executive in accordance with the terms and conditions set forth herein as of July 6, 1998 and extending for an initial period ending July 5, 2001 (the "initial period"), subject, however, to earlier termination as expressly provided herein. The Executive will serve the Company as Senior Vice President and Chief Financial Officer or in such other future capacity as he and the Company might mutually agree and will devote his full business time and best efforts to the satisfactory discharge of the responsibilities of his offices, performing such other duties as might reasonably be requested by the Company's Chief Executive Officer or Board of Directors. The initial period will be automatically extended for one (1) additional year at the end of the initial 84 2 period, and then again after each successive year thereafter. However, either party may terminate this Agreement at the end of the initial period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least three (3) months prior to the end of such initial period or successive term. In the event such notice of intent not to renew is properly delivered, the term of the employment of the Executive shall then become indefinite and can be terminated by the Company without notice. Similarly, subject to the provisions of this Agreement relating to nondisclosure of confidential information and non-interference with employees, customers and suppliers, the Executive can quit, at any time thereafter, without notice to the Company. 1.2 COMPENSATION. ------------ a. In order to obtain the services of the Executive, the Executive will be paid a hiring bonus of Fifty Thousand Dollars ($50,000.00). Such bonus will be paid to the Executive in a lump sum during the first week of his employment with the Company. b. During the initial period the Executive will be paid a base salary at an annual rate of Two Hundred Thousand Dollars ($200,000.00) in installments which are no less frequently than monthly, together with such increases as the Compensation Committee of the Board of Directors shall from time to time approve. c. In addition to the hiring bonus described in a. above, the Executive will be paid a guaranteed 1998 bonus of Fifty Thousand Dollars ($50,000.00) under the Company's Bonus Plan. Such bonus payment will be paid to the Executive in a lump sum on the same day as bonuses under the Bonus Plan are paid to the executives of the Company who are still employed with the Company. 85 3 SECTION 2. BENEFIT PLANS ------------- During his employment, the Executive shall be entitled to participate in all employee benefit plans and perquisites which are maintained or established by the Company from time to time and which cover the Company's senior executives provided he satisfies any applicable eligibility requirements therefor. The Executive acknowledges the right of the Company to amend or terminate such plans at any time in the exercise of its discretion. The Executive further acknowledges that the Company may wish to maintain insurance on his life for its benefit and agrees to submit to any physical examination which may be required in order to obtain such insurance. SECTION 3. EXPENSES -------- The Executive will be reimbursed for all reasonable expenses incurred by him in performing his duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. SECTION 4. EMPLOYMENT TERMINATIONS ----------------------- 4.1 TERMINATION DUE TO RETIREMENT OR DEATH. In the event the Executive's employment is terminated by reason of retirement or death during the term of this Agreement, the Executive's employment with the Company shall be deemed terminated as of the effective date of retirement or at the end of the month in which such death occurs and all benefits will be determined in accordance with the Company's retirement plans, survivor's benefits, insurance, Compensation Plan for Executives and other applicable programs then in effect, except that in the case of the death of the Executive the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof to his spouse if then living and otherwise to the executor or administrator of his estate. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of death and in no event will any of 86 4 the Severance Benefits and Severance Pay described in Sections 4.7 and 4.8 hereof be paid in the event of retirement. In the event of retirement, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. For purposes of this Section 4.1, the determination of whether a termination qualifies as a retirement will be made in accordance with the then established rules and definitions of the Company's Retirement Income Plan II which are applicable to salaried employees of the Company. 4.2 TERMINATION DUE TO DISABILITY. In the event the Executive during the term of this Agreement becomes, in the opinion of the Company and based upon reasonable medical opinion, so disabled as to be unable to satisfactorily perform his duties hereunder, the Company will have the right upon thirty (30) days written notice to the Executive to terminate the continued active service of the Executive and the payment of compensation and benefits under this Agreement, except as provided in this Section 4.2. In such event, the Executive's benefits will be determined in accordance with the Company's disability and other applicable plans and programs then in effect, provided, however, that the Company will pay a pro rata portion of any bonus which would have been payable to the Executive under Section 4.7a. hereof. In no event will the other benefits described in the remainder of Section 4.7 hereof or the Severance Pay described in Section 4.8 hereof be paid in the event of the disability of the Executive. In the event of disability, the Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.3 VOLUNTARY TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may terminate his employment other than for Good Reason as such term is defined in Section 4.4 hereof at any time by giving the Company written notice of intent to terminate, delivered at least sixty (60) calendar days prior to the effective date of such termination. The Company will pay the Executive his full base salary, at the rate then in effect, through the effective date of such termination, plus all other 87 5 benefits to which the Executive has a vested right at that time (including but not limited to unused vacation time, COBRA benefits and stock option benefits). If such termination of employment is other than for Good Reason, the Executive shall not be entitled to the Severance Benefits set forth in Section 4.7 hereof or the Severance Pay set forth in Section 4.8 hereof. The Executive shall, however, comply with the provisions of Sections 5.1 and 5.2 hereof. 4.4 VOLUNTARY TERMINATION BY THE EXECUTIVE WITH GOOD REASON. In the event that the Executive terminates his employment with Good Reason as defined below in this Section 4.4, the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. For purposes of this Agreement, an Executive shall be deemed to have terminated his employment for "Good Reason" if his termination of employment occurs: a. within four (4) months after a Change in Control; b. within four (4) months after: i. the Board of Directors of the Company shall fail to re-elect or shall remove the Executive from the office then being held by the Executive; ii. the Chief Executive Officer or the Board of Directors of the Company shall make a significant negative change in the nature or scope of the authorities, powers, functions or duties of the Executive hereunder; iii. the Company shall fail to pay when due any compensation due and owing to the Executive or shall make a reduction in the Executive's then current base salary or a material reduction in his benefits and such failure is not corrected within ten (10) days after notice thereof to the Company by the Executive; or iv. any pattern of harassment which occurs within the first twelve (12) months after 88 6 the execution of this Agreement, which is done with the approval of the Chief Executive Officer or the Board of Directors of the Company and which impedes the Executive in the exercise of his authorities, powers, functions or duties hereunder in the manner in which they would normally be exercised by a similar officer. In the event that the Executive shall terminate his employment with Good Reason, he shall provide the Company with sixty (60) days advance notice of his date of termination of employment. 4.5 TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Executive acknowledges that he is, has been and will continue at all times to be an at-will employee of the Company and as such his employment has been and continues to be terminable, subject to the terms and conditions of this Agreement, by either the Executive or the Company at any time upon notice to the other as provided for herein and for any reason not prohibited by law. However, if the Company terminates the Executive's employment other than for "Cause" (as defined in Section 4.6 hereof), the Executive will be entitled to receive the Severance Benefits set forth in Section 4.7 hereof and, if he qualifies therefor, the Severance Pay set forth in Section 4.8 hereof. 4.6 TERMINATION BY THE COMPANY FOR CAUSE. Nothing in this Agreement will be construed to prevent the Company from terminating the Executive's employment for Cause. As used herein, "Cause" will be determined by the Board of Directors of the Company in the exercise of good faith and reasonable judgment and will include (i) Executive's willful failure to perform his duties under this Agreement within a reasonable period of time after receipt of written notice from the Board of Directors of the Company setting forth in reasonable detail the duties which the Executive has failed to perform and the corrective actions expected of him; (ii) a breach of Executive's obligations under Section 5 below; (iii) indictment for, conviction of, or written confession to a crime against the Company or a felony; or (iv) Executive shall 89 7 have been found by the Board of Directors of the Company to have been repeatedly and excessively abusing alcohol, drugs and/or any other intoxicating or controlled substance. Upon any such termination all rights, obligations and duties of the parties hereunder shall immediately cease, except Executive's obligations under Section 5 hereof. 4.7 SEVERANCE BENEFITS. In the event that the Company shall terminate the employment of the Executive other than for "Cause" as defined in Section 4.6 hereof, or in the event the Executive terminates his employment pursuant to Section 4.4 hereof with Good Reason, the Company will, upon the effective date of such termination and in lieu of any other severance which may otherwise be payable: a. Pay to the Executive in a cash lump sum a pro rata bonus under the Bonus Plan with respect to the year in which he is terminated, which bonus shall be calculated using the formula contained in the Bonus Plan based on the actual results of the Company for such year but without any discretionary adjustment of the amounts payable to the Executive that might otherwise be permitted under the Bonus Plan. Such bonus will be paid to the Executive on the same day as bonuses under the Bonus Plan are paid to the executives of the Company who are still employed with the Company. b. Pay for the costs of outplacement services actually used by the Executive; provided, however, that the total fee paid for such services will be limited to an amount equal to seventeen percent (17%) of the Executive's annual base salary rate as of the effective date of termination of employment. c. Pay to the Executive a cash lump sum, net of taxes, equal to twelve (12) months of the monthly car allowance then applicable to the Executive. Such payment shall be paid to the Executive with thirty (30) days following his termination of employment. d. Cause all stock options, other than the Special Stock Option, granted to the Executive 90 8 pursuant to the Company's Key Employees' Stock Option Plan (the "Option Plan") or the grant of any right under any future stock plan, to become immediately exercisable in full and to remain fully exercisable until the earlier of the date of expiration of the option or one (1) year after his date of termination of employment. e. Provide to the Executive tax and/or legal consultation with respect to the benefits granted hereunder up to a maximum cost to the Company of Five Thousand Dollars ($5,000.00); f. Provide assistance to the Executive in obtaining the financing necessary for the Executive to exercise his stock options during the period specified in Section 4.7d. hereof; and g. Continue to be obligated to pay when due all other benefits to which the Executive has a vested right according to the provisions of any applicable retirement or other benefit plan or program. 4.8 SEVERANCE PAY. If the Executive executes the Non-Competition Agreement attached hereto and delivers such executed Agreement to the Company no later than thirty (30) days after the date of this Agreement, and if the employment of the Executive is terminated by the Company other than for "Cause" as defined in Section 4.6 hereof, or by the Executive pursuant to Section 4.4 hereof with Good Reason, the Executive shall be entitled to Severance Pay as follows: a. At the election of the Executive, the Company shall either continue to pay to the Executive for the twenty-four (24) months following his termination of employment, his monthly base salary at the rate in effect as of the date of such termination in accordance with the Company's normal payroll practices or make a lump sum payment to the Executive of the amount due above. Any such lump sum will be payable within thirty (30) days after the date the Company receives written notice of the Executive's election to receive the lump sum. 91 9 b. In addition, the Company, throughout such twenty-four (24) month period, will continue the Executive's life insurance and health care benefits coverage on the same terms and at the same cost to the Executive as would be applicable to a similarly situated full-time employee; provided, however, that in the event the Executive begins to receive comparable life insurance and health care benefits (determined at the sole discretion of the Company) from a subsequent employer during such period, the Company may immediately terminate its life insurance and health care benefits coverage of the Executive. Coverage under the Company's health care benefits plan will be in lieu of health care continuation under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for periods such coverage is in effect under this Agreement. 4.9 VESTING OF STOCK OPTIONS. In the event of a Change in Control, the Committee under the Option Plan will cause all stock options granted to the Executive pursuant to the Option Plan to become immediately exercisable in full. Such stock options shall remain fully exercisable until their expiration. In the event the proceeds from a sale or disposition of any of the Affiliates which the Company owns on the date of this Agreement are used to provide a dividend to the stockholders of the Company, then immediately upon the effective date of such sale or disposition the Company will cause all stock options, other than the Special Stock Option, granted to the Executive pursuant to the Option Plan to become immediately exercisable in full and to remain fully exercisable so that the Executive shall be entitled to become a stockholder of record such that the Executive shall be entitled to receive the benefits of the dividend. In the event a Change in Control occurs after the date such a dividend is provided and the Executive exercises his Special Stock Option, the Company will pay an amount in cash to the Executive equal to the dividend which would have been paid to him if he had 92 10 been a stockholder of record at the time such a dividend was paid to stockholders of the Company. SECTION 5. COVENANTS --------- 5.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times during and after the term of his employment by the Company keep and maintain the confidentiality of all Confidential Information and will not at any time either directly or indirectly use such information for his own benefit or otherwise divulge, disclose or communicate such information to any person or entity in any manner whatsoever other than employees or agents of the Company or its Affiliates who have a need to know such information and then only to the extent necessary to perform their responsibilities on behalf of the Company or its Affiliates. As used herein, "Confidential Information" will mean any and all information (excluding information in the public domain) which relates to the business of the Company and its Affiliates including without limitation all patents and patent applications, copyrights applied for, issued to or owned by the Company or any of its Affiliates, inventions, trade secrets, computer programs, engineering and technical data, drawings or designs, manufacturing techniques, information concerning pricing and pricing policies, marketing techniques, suppliers, methods and manner of operations, and information relating to the identity and/or location of all past, present and prospective customers of the Company and its Affiliates. 5.2 CO-OPERATION. During the term of this Agreement and for a period of twenty-four (24) months following its termination, the Executive will not attempt to induce any employee of the Company or an Affiliate to terminate his or her employment with the Company or an Affiliate nor will he take any action with respect to any of the suppliers or customers of the Company and its Affiliates which would have or might be likely to have an adverse effect upon the business of the Company and its Affiliates. Executive hereby agrees not to make any statement or take any action, directly or indirectly, that will disparage or discredit the Company and its Affiliates, their Officers, Directors of the Company, their employees or any 93 11 of their products, or in any way damage their reputation or ability to do business or conduct their affairs. Executive agrees that subsequent to his termination of employment he will, in conjunction with a Company request, reasonably co-operate with the Company in connection with transition matters, disputes and litigation matters upon reasonable notice, at reasonable times, and will be paid or reimbursed for reasonable expenses incurred by the Executive relating to such matters. 5.3 INJUNCTIVE RELIEF. In the event of a breach or threatened breach of any of the provisions of this Section 5 by the Executive, the Company will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions thereof and the Company will be entitled to pursue such other remedies at law or in equity as it deems appropriate. 94 12 SECTION 6. MISCELLANEOUS ------------- 6.1 SUCCESSORS. This Agreement is personal to the Executive and will not be assignable by him without the prior written consent of the Company. This Agreement may be assigned or transferred to and will be binding upon and inure to the benefit of any Successor of the Company. As used herein, the term "Successor" will include any person, firm, corporation or business entity which acquires all or substantially all of the assets or succeeds to the business of the Company. 6.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or understandings, oral or written, between the Executive and the Company with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto. 6.3 MODIFICATION. This Agreement will not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement in a written instrument executed by the Company and the Executive or their legal representatives. 6.4 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 6.5 GOVERNING LAW. To the extent not preempted by federal law, the provisions of this Agreement will be construed and enforced in accordance with the laws of the State of Ohio. 6.6 INDEMNIFICATION. If the Internal Revenue Service asserts that the amounts payable to the Executive under this Agreement give rise to an excise tax under Section 4999 of the Internal Revenue Code and the Executive co-operates with the Company in appealing the determination of the Internal Revenue Service through whatever level of administrative or judicial appeals is deemed appropriate by the Company, the Company shall indemnify the Executive for the amount of such excise tax, for any interest and penalties applicable thereto, and for any income or excise taxes payable on such 95 13 indemnification. The Company shall pay all costs of challenging the determination that the excise tax applies to payments hereunder including any administrative costs, court costs, attorney fees, and accounting fees, whether incurred by the Company or incurred by the Executive. 6.7 DEFINITIONS. ----------- a. The term "Affiliate" shall mean any entity controlling, controlled by or under common control with the Company, including, but not limited to, divisions and subsidiaries of the Company. b. The term "Change in Control" shall include: i. the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible into such common stock other than any purchases prior to the date of execution of this Agreement by Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients; ii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that a person, other than Richard C. Blum & Associates, L.P. and its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty-five percent (25%) or more of the Company's common stock of any class or any securities convertible in such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iii. the receipt by the Company of a Schedule 13D or other advice after the date of execution of this Agreement indicating that Richard C. Blum & Associates, L.P. 96 14 and/or its limited partnerships and investment advisory clients, is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of thirty percent (30%) or more of the Company's combined common stock including any securities convertible into such common stock calculated as provided in paragraph (d) of said Rule 13d-3; iv. 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 holders 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; v. the date of the approval by stockholders of the Company 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 Company; vi. the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company; or vii. such other event as the Compensation Committee of the Board of Directors shall, in its sole and absolute discretion, deem to be a "Change in Control." c. The term "Special Stock Option" shall mean the option to purchase all or a lesser number of Twenty Thousand (20,000) Class A Common Shares of the Company in the event of 97 15 the occurrence of a Change in Control prior to July 6, 1999 which was granted to the Executive pursuant to the Company's Option Plan. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the day and year first above written. SCOTT TECHNOLOGIES, INC. By: /s/ ----------------- Glen W. Lindemann And: /s/ ----------------- Debra L. Kackley /s/ ----------------- William J. Sickman ----------------- 98 16 NON-COMPETITION AGREEMENT In consideration of the promises and covenants of Scott Technologies, Inc. (hereinafter called "Scott") contained in the Management Agreement between the Executive and Scott including the possible payment of twenty-four (24) months of Severance Pay to the Executive under certain circumstances, the Executive hereby agrees that the Executive will not, for a period of two (2) years after his termination of employment from Scott, directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where Scott or any of its Affiliates (as defined below) is then conducting business: (1) engage, as an employee, partner, or sole proprietor, in any business segment of any person or entity which competes, directly or indirectly, with the product lines of Scott or its Affiliates; or (2) in connection with any product lines of Scott or its Affiliates, render advice, consultation, or services to or otherwise assist any other person or entity which competes, directly or indirectly, with Scott or any of its Affiliates with respect to such product lines. For the purposes of this Agreement, the term "Affiliates" shall mean any entity controlled by or under common control with Scott during the period the Executive is employed by Scott or a division or subsidiary of Scott, including, but not limited to, Scott divisions and subsidiaries. In the event of a breach or threatened breach of any of the provisions of this Agreement by the Executive, Scott will be entitled to preliminary and permanent injunctive relief, without bond or security, sufficient to enforce the provisions hereof and Scott will be entitled to pursue such other remedies at law or in equity as it deems appropriate. The Executive understands that the foregoing restrictions may limit his ability to engage in certain business pursuits during the period provided for above, but acknowledges that he will receive sufficiently higher Severance Pay from Scott than he would otherwise receive to justify such restriction. The Executive acknowledges that he understands the effect of the provisions of this Agreement, that he has 99 17 had reasonable time to consider the effect of these provisions, and that he was encouraged to and had an opportunity to consult an attorney with respect to these provisions. Scott and the Executive consider the restrictions contained in this Agreement to be reasonable and necessary. Nevertheless, if any aspect of these restrictions is found to be unreasonable or otherwise unenforceable by a Court of competent jurisdiction, the parties intend for such restrictions to be modified by such Court so as to be reasonable and enforceable and, as so modified by the Court, to be fully enforced. IN WITNESS WHEREOF, the Executive has executed this Agreement as of this 25th day of August, 1998. /s/ - ------------------------ Mark A. Kirk 100 EX-10.0.VII 8 EXHIBIT 10.0(VII) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (VII) AMENDMENT NO. 5 AMENDMENT NO. 5 (this "Amendment"), dated as of October 8, 1998, and effective as of August 14, 1998 pursuant to Section 3 hereof, between General Electric Capital Corporation (AGE Capital"), as lender ("Lender") and agent ("Agent") under the Credit Agreement referred to below and Scott Technologies, Inc., formerly known as Figgie International, Inc. ("Borrower"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower and GE Capital, as Lender and as Agent, have entered into a Credit Agreement, dated as of December 19, 1995 (as heretofore amended, the "Credit Agreement"; the terms defined in the Credit Agreement being used herein as therein defined, unless otherwise defined herein); and WHEREAS, Borrower, wishes to amend, Section 6.14 (Restricted Payments) of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereby agree as follows: SECTION 1. Amendment to Credit Agreement. ----------------------------- (a) AMENDMENT TO SECTION 6.14(b). Section 6.14(b) is hereby amended to delete the reference to A$2,000,000" therein and to substitute in lieu thereof the reference to A$15,000,000". SECTION 2. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Agent and Lenders as follows: (a) All of the representations and warranties of Borrower contained in the Credit Agreement and in the other Loan Documents are, after giving effect to this Amendment, true and correct on the date hereof as though made on such date, except to the extent that any such representation or warranty expressly relates to an earlier date, for changes permitted or contemplated by the Credit Agreement or as otherwise disclosed in writing to Agent and Lenders. No Default or Event of Default has occurred and is continuing or would result from the transactions contemplated hereby. (b) The execution, delivery and performance by Borrower of this Amendment have been duly authorized by all necessary or proper corporate action and do not require the consent or approval of any Person which has not been obtained. (c) This Amendment has been duly executed and delivered by Borrower and each of this Amendment and the Credit Agreement as amended hereby constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating or affecting creditors' rights and to general equity principles. 101 2 SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of August 14, 1998, provided that each of the following conditions has been satisfied on the date hereof, including the delivery to Agent of each of the documents set forth below in form and substance satisfactory to Agent: (a) Counterparts of this Agreement duly executed by Borrower, each Lender and Agent. (b) All of the representations and warranties of Borrower contained in Section 2 hereof shall be true and correct. SECTION 4. GOVERNING LAW. This Amendment shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to conflict of laws principles thereof. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. SCOTT TECHNOLOGIES, INC. (formerly known as FIGGIE INTERNATIONAL, INC.) By: /s/ -------------------------- Name: Douglas A. Dimond Title: Assistant Treasurer GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: /s/ -------------------------- Name: Charles D. Chiodo Title: Senior Vice President GE Capital Commercial Finance,Inc. Being duly authorized 102 EX-10.0.VIII 9 EXHIBIT 10.0(VIII) 1 MATERIAL CONTRACTS EXHIBIT 10.0 (VIII) AMENDMENT NO. 6 AMENDMENT NO. 6 (this "Amendment"), dated as of October 21, 1998, and effective as of September 30, 1998 pursuant to Section 3 hereof, between General Electric Capital Corporation (AGE Capital"), as lender ("Lender") and agent ("Agent") under the Credit Agreement referred to below and Scott Technologies, Inc., formerly known as Figgie International, Inc. ("Borrower"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower and GE Capital, as Lender and as Agent, have entered into a Credit Agreement, dated as of December 19, 1995 (as heretofore amended, the "Credit Agreement"; the terms defined in the Credit Agreement being used herein as therein defined, unless otherwise defined herein); and WHEREAS, Borrower, wishes to amend, Schedule 6.8 of the Credit Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereby agree as follows: SECTION 1. Amendment to Credit Agreement. ----------------------------- AMENDMENT TO SCHEDULE 6.8. The first page of Schedule 6.8 is hereby deleted in its entirety and a new first page attached hereto as Exhibit A is substituted therefor. SECTION 2. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Agent and Lenders as follows: (a) All of the representations and warranties of Borrower contained in the Credit Agreement and in the other Loan Documents are, after giving effect to this Amendment, true and correct on the date hereof as though made on such date, except to the extent that any such representation or warranty expressly relates to an earlier date, for changes permitted or contemplated by the Credit Agreement or as otherwise disclosed in writing to Agent and Lenders. No Default or Event of Default has occurred and is continuing or would result from the transactions contemplated hereby. (b) The execution, delivery and performance by Borrower of this Amendment have been duly authorized by all necessary or proper corporate action and do not require the consent or approval of any Person which has not been obtained. (c) This Amendment has been duly executed and delivered by Borrower and each of this Amendment and the Credit Agreement as amended hereby constitutes a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating or affecting creditors' rights and to general equity principles. 103 2 SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of September 30, 1998, provided that each of the following conditions has been satisfied on the date hereof, including the delivery to Agent of each of the documents set forth below in form and substance satisfactory to Agent: (a) Counterparts of this Agreement duly executed by Borrower, each Lender and Agent. (b) All of the representations and warranties of Borrower contained in Section 2 hereof shall be true and correct. SECTION 4. GOVERNING LAW. This Amendment shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to conflict of laws principles thereof. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, which shall, collectively and separately, constitute one agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written. SCOTT TECHNOLOGIES, INC. (formerly known as FIGGIE INTERNATIONAL, INC.) By: /s/ -------------------------- Name: Douglas A. Dimond Title: Assistant Treasurer GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: /s/ -------------------------- Name: Charles D. Chiodo Title: Senior Vice President GE Capital Commercial Finance, Inc. Being duly authorized 104 3 Exhibit A SCHEDULE 6.8 ------------ SALE OF ASSETS -------------- The following business units have been classified as discontinued operations and are to be divested: -All assets and liabilities which comprise or are used in the business of Hartman Electrical Systems, a division of Figgie International Inc. -All assets and liabilities which comprise or are used in the business of Interstate Engineering, a division of Figgie International. -All assets and liabilities which comprise or are used in the business of Figgie Natural Resources, a division of Figgie International Inc. -All assets and liabilities which comprise or are used in the business of Interstate Electronics Inc., a subsidiary of Figgie International Inc. The excess or idle real property which is described on Exhibit 1, as attached hereto. The excess or idle equipment which is described on Exhibit 2, as attached hereto. All net proceeds from the winding up of the affairs of business units which had previously been substantially divested and discontinued. [See Exhibit 3] 105 EX-27 10 EXHIBIT 27
5 1,000 US DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1 31,359 0 16,182 242 23,205 113,928 73,054 16,755 251,622 45,971 98,202 0 0 1,855 54,957 251,622 135,375 135,375 91,159 112,436 2,555 50 7,002 13,382 5,386 7,996 (12,852) (1,689) 0 (6,545) (0.36) (0.35)
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