SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6003
FEDERAL SIGNAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1063330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1415 WEST 22ND STREET, OAK BROOK, ILLINOIS 60521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 954-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, PAR VALUE $1.00 PER SHARE,
WITH PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 1, 1994.
Common stock, $1.00 par value -- $852,243,000
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of March 1, 1994.
Common stock, $1.00 par value -- 45,566,616 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended
December 31, 1993, are incorporated by reference into Parts I and II.
Portions of the proxy statement for the Annual Meeting of Shareholders
to be held on April 18, 1994, are incorporated by reference into Part
III.
PART I
Item 1. Business.
Federal Signal Corporation, founded in 1901, was reincorporated as a
Delaware Corporation in 1969. The company is a manufacturer and worldwide
supplier of public safety, signaling and communications equipment, fire
trucks and emergency vehicles, street sweeping, vacuum loader and catch basin
cleaning vehicles, parking control equipment, custom on-premise signage,
cutting tools, precision punches and related die components.
Products produced and services rendered by Registrant and its
subsidiaries (referred to collectively as "Registrant" herein, unless context
otherwise indicates) are divided into groups (business segments) as follows:
Signal, Sign, Tool and Vehicle. This classification of products and services
is based upon Registrant's historical divisional structure established by
management for the purposes of internal control, marketing and accounting.
Developments, including acquisitions of businesses, considered
significant to the company or individual segments are described under the
following discussions of the applicable groups.
The Financial Review sections, "Consolidated Results of Operations,"
"Group Operations" and "Financial Position and Cash Flow," and Note N -
Segment Information contained in the annual report to shareholders for the
year ended December 31, 1993 are incorporated herein by reference.
On February 3, 1994, the Registrant's Board of Directors declared
a 4-for-3 common stock split distributed March 1, 1994 to shareholders of
record on February 14, 1994. The 554,088 post-split treasury shares
held on February 14, 1994 were used to partially effect the split.
Previously reported financial information has been restated to give effect to
the stock split.
Signal Group
Signal Group products manufactured by Registrant consist of (1) a
variety of visual and audible warning and signaling devices used by private
industry, federal, state and local governments, building contractors, police,
fire and medical fleets, utilities and civil defense and (2) parking, revenue
control, and access control equipment and systems for parking facilities,
commercial businesses, bridge and pier installation and residential
developments.
The visual and audible warning and signaling devices include emergency
vehicle warning lights, electromechanical and electronic vehicle sirens and
industrial signal lights, sirens, horns, bells and solid state audible
signals, audio/visual emergency warning and evacuation systems, including
weather and nuclear power plant warning notification systems and fire alarm
system panels and devices.
Parking, revenue control, and access control equipment and systems
includes parking and security gates, card access readers, ticket issuing
devices, coin and token units, fee computers, various forms of electronic
control units and personal computer-based revenue and access control systems.
Warning and signaling products, which account for the principal portion
of the group's business, are marketed to both industrial and governmental
users. Products are sold to industrial customers through manufacturers'
representatives who sell to approximately 1,400 wholesalers. Products are
also sold to governmental customers through more than 900 active independent
distributors as well as through original equipment manufacturers and direct
sales. International sales are made through the Registrant's independent
foreign distributors or on a direct basis.
Because of the large number of Registrant's products, Registrant
competes with a variety of manufacturers and suppliers and encounters varying
competitive conditions among its different products and encounters different
classes of customers. Because of the variety of such products and customers,
no meaningful estimate of either the total number of competitors or
Registrant's overall competitive position can be made. Generally,
competition is intense as to all of Registrant's products and, as to most
such products, is based on price, including competitive bidding, on product
reputation and performance, and on product servicing. Although some
competitors in certain product lines are larger than Registrant, the
Registrant believes it is the leading supplier of particular products.
In May 1992, the Registrant acquired all of the outstanding shares of
Aplicaciones Tecnologicas VAMA S.L. for cash and an earnout to be based upon
future profitability of the company for a five-year period. VAMA is a
leading European manufacturer of emergency vehicular signaling products
located in Barcelona, Spain. The acquisition accelerates the Signal Group's
strategic objective of increasing international market penetration,
particularly in Europe.
The backlogs of orders of Signal Group products believed to be firm at
December 31, 1993 and 1992 were $9.7 million and $8.4 million, respectively.
Almost all of the backlogs of orders at December 31, 1993, are reasonably
expected to be filled within the current fiscal year.
Sign Group
The Sign Group, operating principally under the name "Federal Sign"
designs, engineers, manufactures, installs and maintains illuminated and non-
illuminated sign displays, for both sale and lease. Registrant additionally
provides sign repair services and also enters into maintenance service
contracts, usually over three-year to five-year periods, for signs it
manufactures as well as for signs produced by other manufacturers. Its
operations are oriented to custom designing and engineering of commercial and
industrial signs or groups of signs for its customers.
The sale and lease of signs and the sale of maintenance contracts are
conducted primarily through Registrant's direct sale organization which
operates from its twenty-two principal sales and manufacturing facilities
located strategically throughout the continental U.S. Customers for sign
products and services consist of local commercial businesses, as well as
major national and multi-national companies.
The Sign Group's markets stabilized during 1993, while the Registrant
continued with aggressive, strategic restructuring programs. The group
focused on reducing nonvalue-added tasks, redesigned work flow and emphasized
training programs to empower employees and to improve quality and customer
service. These programs, combined with a marketing effort targeted at more
sophisticated, higher value-added projects, resulted in a return to
profitability in 1993.
A large number of Registrant's displays are leased to customers for
terms of typically three to five years with both the lease and the
maintenance portions of many such contracts then renewed for successive
periods.
Registrant is nationally a principal producer of custom-designed signs,
but has numerous competitors (estimated at about 3,500 in total), most of
whom are localized in their operations. Competition for sign products and
services is intense and competitive factors consist largely of prices, terms,
aesthetic and design considerations, and maintenance services. In some
instances, smaller and more localized operations may enjoy some cost
advantages which may permit lower pricing for particular displays. However,
Registrant's reputation for creative design, quality manufacture and complete
nationwide service together with its financial ability to maintain customer
leasing programs and to undertake large project commitments in many cases
offset competitors' price advantages.
Total backlog at December 31, 1993, applicable to sign products and
services was approximately $54.2 million compared to approximately $54.6
million at December 31, 1992. A significant part of Registrant's sign
products and services backlog relates to sign maintenance contracts since
such contracts are usually performed over long periods of time. At
December 31, 1993, the Sign Group had a backlog of approximately $41.5
million compared to approximately $41.3 million at December 31, 1992,
represented by in-service sign maintenance contracts. With the exception of
the sign maintenance contracts, most of the backlog orders at December 31,
1993 are reasonably expected to be filled within the current fiscal year.
Tool Group
Tool Group products are produced by the Registrant's wholly-owned sub-
sidiaries including: Dayton Progress Corporation, Schneider Stanznormalien
GmbH, acquired in 1992, Container Tool Corp., acquired in 1991, Manchester
Tool Company, Dico Corporation, acquired in 1992, Bassett Rotary Tool Company
and Jamestown Punch and Tooling, Inc.
Dayton Progress Corporation manufactures and purchases for resale an
extensive variety of consumable die components for the metal stamping
industry. These components consist of piercing punches, matched die
matrixes, punch holders or retainers and many other products related to the
metal stamper's needs. Registrant also produces a large variety of
consumable precision metal products for customers' nonstamping needs,
including special heat exchanger tools, beverage container tools, powder
compacting units and molding components.
In March 1992, Dayton Progress Corporation acquired for cash the assets
of Schneider Stanznormalien GmbH, a German manufacturer of precision punch
and die components. This acquisition gives Dayton Progress manufacturing
capabilities on the European continent and provides greater access to
European markets.
In October 1991, Dayton Progress Corporation acquired for cash and stock
all of the outstanding shares of Container Tooling Corporation. Container
Tool manufactures and distributes body punch tooling used in the production
of aluminum and steel beverage cans. The product complements Dayton
Progress' tab-top tooling product line.
In July 1989, Dayton Progress Corporation acquired for cash all of the
outstanding stock of Electro Diecraft, a Canadian tool manufacturer. The
name of the corporation was changed to Dayton Progress Canada, Ltd.
Manchester Tool Company manufactures consumable carbide insert tooling
for cutoff and deep grooving metal cutting applications.
In November 1992, Manchester Tool Company acquired for cash all of the
outstanding shares of Dico Corporation, a manufacturer of polycrystalline
diamond and cubic boron nitride cutting tools. This product line complements
Manchester Tool's carbide insert products and allows for entry into new
market niches within general business areas already served.
Bassett Rotary Tool Company is a manufacturer of consumable carbide
cutting tools. Its products are medium to high precision in their
manufacture and at times are quite complex in their configuration. The
products represent a narrow band of the much broader cutting tool industry
and require a high level of manufacturing skill.
Jamestown Punch and Tooling, Inc. (previously known as Jamestown
Perforators, Inc.) manufactures an extensive line of consumable special die
components for the metal stamping and plastic molding industries in addition
to a variety of precision ground high alloy parts. The markets served are
located primarily east of the Mississippi River and price is an important
purchasing factor in this highly competitive market. Sales are made on both
a direct basis and through a limited distributor organization.
Because of the nature of and market for the Registrant's products,
competition is great at both domestic and international levels. Many
customers have some ability to produce the product themselves, but at a cost
disadvantage. Major market emphasis is placed on quality of product and
level of service.
Tool Group products are labor intensive with the only significant
outside cost being the purchase of the tool steel, carbide and diamond raw
material, as well as items necessary for manufacturing. Inventories are
maintained to assure prompt service to the customer with the average order
for standard tools filled in less than one week for domestic shipments and
within two weeks for international shipments.
Tool Group customers include metal and plastic fabricators and tool and
die shops throughout the world. Because of the nature of the products,
volume depends mainly on repeat orders from customers numbering in the
thousands. These products are used in the manufacturing process of a broad
range of items such as automobiles, appliances, construction products,
electrical motors, switches and components and a wide variety of other
household and industrial goods. Almost all business is done with private
industry.
Registrant's products are marketed in the United States, Japan and
Europe principally through industrial distributors. Foreign sales and
distribution offices are maintained in Weston, Ontario; Sagamihara and Tokyo,
Japan; Kenilworth, England and Oberursel, Germany. Foreign manufacturing
facilities are located in Weston, Ontario, Sagamihara, Japan and Oberursel,
Germany. Sales to nondomestic customers are made through five wholly-owned
subsidiaries: Dayton Progress Canada, Ltd., Dayton Progress International
Corporation, Dayton Progress (UK) Ltd., Nippon Dayton Progress K.K. and
Schneider Stanznormalien GmbH.
Order backlogs of the Tool Group as of December 31, 1993 and December
31, 1992 were $7.5 million and $6.7 million, respectively. Almost all of the
backlogs of orders at December 31, 1993 are expected to be filled within the
current fiscal year.
Vehicle Group
The Vehicle Group is composed of Emergency One, Inc., Superior Emergency
Vehicles, Ltd., acquired in 1991, Elgin Sweeper Company, Guzzler
Manufacturing, Inc., acquired in 1993, and Ravo International, acquired in
1990.
Emergency One, Inc. is the leading manufacturer of custom-designed fire
trucks and rescue vehicles including four and six-wheel drive rescue trucks,
tankers, pumpers, aerial ladder trucks, and airport rescue and fire fighting
vehicles (each of aluminum construction for rust-free operation and energy
efficiency).
In December 1991, Emergency One acquired for cash all of the outstanding
shares of Frontline Corporation, a manufacturer and distributor of
ambulances, rescue trucks and mobile communication vehicles. The acquisition
of Frontline Corporation complemented Emergency One's product line and
enabled Emergency One to provide a complete product line of fire trucks, fire
apparatus, emergency support and ambulance vehicles for distribution through
Emergency One's domestic and international dealer network. During 1993, the
company's ambulance operations were relocated to Emergency One's facilities
in Ocala, Florida and the mobile communications vehicles product line was
sold. The company was merged into Emergency One in January 1994.
In December 1991, Emergency One acquired for cash, Superior Emergency
Vehicles, Ltd., a manufacturer and distributor of a full range of fire truck
bodies primarily for the Canadian market. In addition to increased
manufacturing capacity, the acquisition of Superior Emergency Vehicles, Ltd.
provides greater access to the Canadian market.
In October 1989, Emergency One acquired for cash, American Eagle Fire
Apparatus Company, Inc., a manufacturer of a full range of bodies for fire
apparatus vehicles. The acquisition of American Eagle provided Emergency One
with additional capacity to accommodate its rapid growth. This company was
merged into Emergency One in June 1992.
Elgin Sweeper Company is the leading manufacturer in the United States
of self-propelled street cleaning vehicles. Utilizing three basic cleaning
methods (mechanical sweeping, vacuuming and recirculating air), Elgin's
products are primarily designed for large-scale cleaning of curbed streets
and other paved surfaces.
In March 1993, Elgin Sweeper Company acquired, principally for cash, all
of the outstanding shares of Guzzler Manufacturing, Inc. Guzzler is an
Alabama-based manufacturer and marketer of waste removal vehicles, using
state-of-the-art vacuum technology, for worldwide industrial, environmental
and municipal markets. The acquisition of Guzzler Manufacturing, Inc.
complements Elgin Sweeper Company's product distribution and provides for
increased exposure to the industrial and municipal marketplaces for Elgin and
Guzzler, respectively.
In December 1990, the Registrant, through Federal Signal Europe BV,
acquired all of the outstanding shares of Van Raaij Holdings BV (which, along
with its subsidiaries, is referred to herein as Ravo International), a
Netherlands-based street sweeper manufacturer, for cash and an earnout to be
based upon future profitability of the company for a five-year period. Ravo
International is a leading European manufacturer and marketer of self-
propelled street and sewer cleaning vehicles. Utilizing the vacuuming
cleaning method, Ravo's products are primarily designed for cleaning of
curbed streets and other paved surfaces. Both Ravo International and Elgin
Sweeper Company also sell accessories and replacement parts for their
sweepers. Ravo International also provides after market service and support
for its products in the Netherlands.
Some products and components thereof are not manufactured by Registrant
but are purchased for incorporation with products of Registrant's
manufacture.
A majority of Vehicle Group sales are made to domestic and overseas
municipalities and other governmental units, although in the street sweeper
market and with the 1993 acquisition of Guzzler Manufacturing, Inc., there is
an emerging trend towards commercial, industrial and private customers.
Worldwide sales are principally conducted by domestic and international
dealers, in most areas, with some sales being made on a direct-to-user basis.
Registrant competes with several domestic and foreign manufacturers and
due to the diversity of products offered, no meaningful estimate of either
the number of competitors or Registrant's relative position within the market
can be made, although Registrant does believe it is a major supplier within
these product lines. Registrant competes with numerous foreign manufacturers
principally in international markets.
At December 31, 1993, the Vehicle Group backlogs were $150.3 million
compared to $128.2 million at December 31, 1992. The backlogs at December
31, 1993, included approximately $3.2 million of backlog attributable to
Guzzler Manufacturing, Inc., which was acquired in March 1993. A substantial
majority of the orders in the backlogs at December 31, 1993 are reasonably
expected to be filled within the current fiscal year. Approximately $34.3
million of the backlogs at December 31, 1993 and $30.3 million of the
backlogs at December 31, 1992 represent the funded portion of a subcontract
to build P-23 airport rescue and fire fighting vehicles for the U.S. Air
Force, about half of which is expected to be produced and shipped after
December 31, 1994.
Additional Information
Registrant's sources and availability of materials and components are
not materially dependent upon either a single vendor or very few vendors.
Registrant owns a number of patents and possesses rights under others to
which it attaches importance, but does not believe that its business as a
whole is materially dependent upon any such patents or rights. Registrant
also owns a number of trademarks which it believes are important in
connection with the identification of its products and associated goodwill
with customers, but no material part of Registrant's business is dependent on
such trademarks.
Registrant's business is not materially dependent upon research
activities relating to the development of new products or services or the
improvement of existing products and services, but such activities are of
importance as to some of Registrant's products. Expenditures for research
and development by the Registrant were approximately $5.6 million in 1993,
$5.2 million in 1992 and $5.1 million in 1991.
Note N - Segment Information, presented in the annual report to
shareholders for the year ended December 31, 1993, contains information
concerning the Registrant's foreign sales, export sales and operations by
geographic area, and is incorporated herein by reference.
No material part of the business of Registrant is dependent either upon
a single customer or very few customers. There are no significant seasonal
aspects to Registrant's business or any material portion thereof. The
Registrant is in substantial compliance with federal, state and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of
the environment. These provisions have had no material adverse impact upon
capital expenditures, earnings or competitive position of the Registrant
and its subsidiaries. The Registrant employed 4,426 people in ongoing
businesses at the close of 1993. The Registrant believes relations with its
employees have been satisfactory.
Item 2. Properties.
As of March 1, 1994, the Registrant utilized twenty-four principal
manufacturing plants located primarily throughout North America, as well as
six in Europe and one in the Far East. In addition, there were thirty-six
sales and service/warehouse sites, with thirty being domestically based and
six located overseas. The majority of the manufacturing plants are owned,
whereas all the sales and service/warehouse sites are leased.
In total, the Registrant devoted approximately 1,202,000 square feet to
manufacturing and 788,000 square feet to service, warehousing and office
space, as of March 1, 1994. Of the total square footage, approximately 23%
is devoted to the Signal Group, 19% to the Sign Group, 13% to the Tool Group
and 45% to the Vehicle Group. Not included in the manufacturing square
footage is approximately 37,000 square feet of unutilized manufacturing space
that resulted from the rearrangement of the Registrant's manufacturing
operations, mostly in the Sign Group. This space is presently being marketed
for sale or lease to nonaffiliates. Approximately 71% of the total square
footage is owned by the Registrant, with the remaining 29% being leased.
All of the Registrant's properties, as well as the related machinery and
equipment, are considered to be well-maintained, suitable and adequate for
their intended purposes. In the aggregate, these facilities are of
sufficient capacity for the Registrant's current business needs.
Capital expenditures for the years ended December 31, 1993, 1992, and
1991 were $10.1 million, $8.8 million, and $12.0 million, respectively.
Capital expenditures in 1991 included expenditures relating to the airport
rescue and fire fighting vehicle manufacturing facility at Emergency One.
Registrant anticipates total capital expenditures in 1994 will not be
significantly greater than 1993 amounts.
Item 3. Legal Proceedings.
The Registrant is subject to various claims, other pending and possible
legal actions for product liability and other damages and other matters
arising out of the conduct of the Registrant's business. The Registrant
believes, based on current knowledge and after consultation with counsel,
that the outcome of such claims and actions will not have a material adverse
effect on the Registrant's consolidated financial position or the results of
operations.
On May 3, 1993, a Texas federal court jury rendered a verdict of
$17,745,000 against Federal Sign, a division of the company, for alleged
violation of the Texas Deceptive Trade Practices Act and misrepresentations
to Duravision, Inc. and Manufacturers Product Research Group of North
America, Inc. in connection with a 1988 research and development project for
indoor advertising signs. The company believes the court erroneously
excluded important evidence and that the verdict was against the weight of
the evidence. Both inside and outside counsel that initially handled the
case opined at the time of the verdict that the likelihood of a substantially
unfavorable result to the company on appeal was remote. Trial counsel has
turned the case over to new appellate counsel and has stated they cannot
currently give an opinion on the appeal because they are no longer handling
the case. Appellate counsel now handling the appeal of the case has not
issued an opinion on its outcome. However, if the company loses its appeal
of this case, there would be a charge to earnings for this verdict, plus
interest and attorney fees. The company believes that the ultimate
resolution of this contingency will not have a material effect on its
financial condition, and accordingly, the company has not recorded any
accruals for potential losses resulting from this judgment.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise during the three months ended
December 31, 1993.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters.
Federal Signal Corporation's Common Stock is listed and traded on the
New York Stock Exchange under the symbol FSS. Per share data listed in Note
O -Selected Quarterly Data (Unaudited) contained in the 1993 annual report to
shareholders is incorporated herein by reference. As of March 1, 1994, there
were 4,818 holders of record of the Registrant's common stock.
Certain long-term debt agreements impose restrictions on Registrant's
ability to pay cash dividends on its common stock. All of the retained
earnings at December 31, 1993, were free of any restrictions.
Item 6. Selected Financial Data.
Selected Financial Data contained in the 1993 annual report to
shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Financial Review sections "Consolidated Results of Operations,"
"Group Operations" and "Financial Position and Cash Flow" contained in the
1993 annual report to shareholders are incorporated herein by reference.
Note M - Contingency, contained in the annual report to shareholders for
the year ended December 31, 1993, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and accompanying footnotes of the
Registrant and the report of the independent auditors set forth in the
Registrant's 1993 annual report to shareholders are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information under the caption "Election of Directors" contained in
the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held on April 18, 1994 is incorporated herein by reference.
The following is a list of the Registrant's executive officers, their
ages, their business experience and their positions and offices as of March
1, 1994:
Joseph J. Ross, age 48, was elected Chairman, President and Chief
Executive Officer in February, 1990. Previously he served as President and
Chief Executive Officer since December 1987 and as Chief Operating Officer
since July 1986.
Charles R. Campbell, age 54, was elected Senior Vice President and Chief
Financial and Administrative Officer in July 1986.
John A. DeLeonardis, age 46, was elected Vice President-Taxes in January
1992. He first joined the company as Director of Tax in November 1986.
Theodore S. Fries, age 49, was elected President of Emergency One, Inc.
in August 1984.
Richard G. Gibb, age 50, was appointed President of the Signal Products
Division in February 1985.
Roger B. Parsons, age 53, was elected President of Elgin Sweeper Company
in January 1983.
Jesse N. Polan, age 44, was appointed President of Federal APD in
February 1985.
Robert W. Racic, age 45, was elected Vice President and Treasurer in
April 1984.
Richard L. Ritz, age 40, was elected Vice President and Controller in
January 1991. He was appointed Controller effective November 1985.
Richard R. Thomas, age 60, was appointed President of the Tool Group in
January 1983.
Kim A. Wehrenberg, age 42, was elected Vice President, General Counsel
and Secretary effective October 1986.
These officers hold office until the next annual meeting of the
respective Boards following their election and until their successors shall
have been elected and qualified.
There are no family relationships among any of the foregoing executive
officers.
Item 11. Executive Compensation.
The information contained under the caption "Executive Compensation" of
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held April 18, 1994 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the caption "Security Ownership of
Certain Beneficial Owners" of Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held April 18, 1994 is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
The information contained under the caption "Executive Compensation" of
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held April 18, 1994 is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)1. Financial Statements
The following consolidated financial statements of Federal Signal
Corporation and Subsidiaries included in the 1993 annual report of
the Registrant to its shareholders are filed as a part of this
report and are incorporated by reference in Item 8:
Consolidated Balance Sheets -- December 31, 1993 and 1992
Consolidated Statements of Income -- Years ended December 31,
1993, 1992 and 1991
Consolidated Statements of Cash Flows -- Years ended December
31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedules of
Federal Signal Corporation and Subsidiaries, for the three years
ended December 31, 1993, are filed as a part of this report in
response to Item 14(d):
Schedule II -- Amounts receivable from related parties and
underwriters, promoters and employees other than related
parties
Schedule VIII -- Valuation and qualifying accounts
Schedule IX -- Short-term borrowings
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore, have been omitted.
3. Exhibits
3. a. Restated Certificate of Incorporation of Registrant and
Certificate of Amendment, filed as Exhibit (3)(a) to
Registrant's Form 10-K for the year ended December 31,
1991, is incorporated herein by reference.
b. By-laws of Registrant, filed as Exhibit (3)(b) to
Registrant's Form 10-K for the year ended December 31,
1991, is incorporated herein by reference.
4. a. Rights Agreement.
b. The Registrant has no long-term debt agreements for which
the related outstanding debt exceeds 10% of consolidated
total assets as of December 31, 1993. Copies of debt
instruments for which the related debt is less than 10%
of consolidated total assets will be furnished to the
Commission upon request.
10. a. 1988 Stock Benefit Plan, filed as Exhibit (10)(a) to
Registrant's Form 10-K for the year ended December 31,
1991, is incorporated herein by reference.
b. Corporate Management Incentive Bonus Plan, filed as
Exhibit (10)(b) to Registrant's Form 10-K for the year
ended December 31, 1990, is incorporated herein by
reference.
c. Subsidiaries, Division and Other Designated Profit
Centers Management Incentive Bonus Plan, filed as exhibit
(10)(c) to Registrant's Form 10-K for the year ended
December 31, 1989, is incorporated herein by reference.
d. Supplemental Pension Plan, filed as Exhibit (10)(d) to
Registrant's Form 10-K for the year ended
December 31, 1990, is incorporated herein by reference.
e. Executive Disability, Survivor and Retirement Plan, filed
as Exhibit (10)(e) to Registrant's Form 10-K for the
year ended December 31, 1990, is incorporated herein by
reference.
f. Supplemental Savings and Investment Plan.
g. Employment Agreement with Charles R. Campbell, filed as
Exhibit (10)(g) to Registrant's Form 10-K for the year
ended December 31, 1989, is incorporated herein by
reference.
h. Employment Agreement with Joseph J. Ross, filed as
Exhibit (10)(h) to Registrant's Form 10-K for the year
ended December 31, 1989, is incorporated herein by
reference.
i. Change of Control Agreement with Kim A. Wehrenberg, filed
as Exhibit (10)(i) to Registrant's Form 10-K for the year
ended December 31, 1989, is incorporated herein by
reference.
j. Director Deferred Compensation Plan, filed as Exhibit
(10)(j) to Registrant's Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
k. Director Retirement Plan, filed as Exhibit (10)(k) to
Registrant's Form 10-K for the year ended December 31,
1992, is incorporated herein by reference.
11. Computation of net income per common share
13. 1993 Annual Report to Shareholders of Federal Signal
Corporation. Such report, except for those portions thereof
which are expressly incorporated by reference in this Form
10-K, is furnished for the information of the Commission only
and is not to be deemed "filed" as part of this filing.
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended December
31, 1993.
(c) and (d)
The response to this portion of Item 14 is being submitted as a separate
section of this report.
Other Matters
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into Registrant's Registration Statements on
Form S-8 Nos. 33-12876, 33-22311, 33-38494, 33-41721 and 33-49476, dated
April 14, 1987, June 26, 1988, December 28, 1990, July 15, 1991 and June 9,
1992, respectively:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FEDERAL SIGNAL CORPORATION
By: /s/ Joseph J. Ross March 25, 1994
Chairman, President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below, on March 25, 1994, by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ Charles R. Campbell /s/ Walter R. Peirson
Senior Vice President and Chief Director
Financial and Administrative Officer
/s/ Richard L. Ritz /s/ J. Patrick Lannan, Jr.
Vice President and Controller Director
/s/ James A. Lovell, Jr.
Director
/s/ Thomas N. McGowen, Jr.
Director
<PAGE>
<TABLE>
SCHEDULE II
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Amounts Receivable from Related Parties and Underwriters, Promoters
and Employees Other than Related Parties
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
Balance at Balance
beginning Amounts at end
Name of debtor of year Additions collected of year
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Joseph J. Ross, two demand
notes outstanding: one in
the amount of $121,359 at
3.41% per annum compounded
quarterly, and one in the
amount of $8,590 at 6.88%
per annum compounded
annually $127,108 $ 4,398 $ 1,557 $129,949
Year ended December 31, 1992:
Joseph J. Ross, two demand
notes outstanding: one in
the amount of $117,305 at
4.12% per annum compounded
quarterly, and one in the
amount of $9,803 at 6.88%
per annum compounded
annually $237,112 $ 19,496 $129,500 $127,108
Year ended December 31, 1991:
Joseph J. Ross, demand note,
8.5% per annum compounded
semi-annually $218,171 $ 18,941 -0- $237,112
Robert L. Gray, demand note,
8.5% per annum compounded
semi-annually $124,471 $ 7,798 $132,269 -0-
Charles R. Campbell, demand
note, 7.25% per annum
compounded semi-annually -0- $274,711 $274,711 -0-
</TABLE>
<PAGE>
<TABLE>
SCHEDULE VIII
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
Deductions
Additions Accounts
Balance at Charged to written off Balance
beginning costs and net of at end
Description of year expenses recoveries of year
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $1,688,000 $2,215,000
Financial service activities 1,138,000 976,000
Total $2,826,000 $2,710,000 $2,345,000 $3,191,000
Year ended December 31, 1992:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $1,392,000 $1,688,000
Financial service activities 857,000 1,138,000
Total $2,249,000 $2,521,000 $1,944,000 $2,826,000
Year ended December 31, 1991:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $1,392,000 $1,392,000
Financial service activities 734,000 857,000
Total $2,126,000 $2,310,000 $2,187,000 $2,249,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE IX<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Short-term Borrowings
For the Years Ended December 31, 1993, 1992 and 1991
<CAPTION>
Maximum Average Weighted
Weighted amount amount average
average outstanding outstanding interest
Category of aggregate Balance at interest during during rate during
short-term borrowings end of year rate the year the year* the year*
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Commercial paper and notes
payable to banks $74,443,000 3.60% $99,080,000 $89,180,000 3.54%
Year ended December 31, 1992:
Commercial paper and notes
payable to banks $72,794,000 3.79% $88,362,000 $77,231,000 4.47%
Year ended December 31, 1991:
Commercial paper and notes
payable to banks $64,034,000 5.26% $64,034,000 $42,580,000 7.02%
<FN>
* Computed on an average daily basis.
</TABLE>
Exhibit 4.a.
RIGHTS AGREEMENT
Agreement, dated as of June 24, 1988, between Federal Signal
Corporation, a Delaware corporation (the "Company"), and The
First National Bank of Boston, a national banking association,
(the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a
"Right") for each Common Share (as hereinafter defined) of the
Company outstanding as of the Close of Business on July 5, 1988,
each Right representing the right to purchase one one-hundredth
of a share of Series A Preferred Stock, $1.00 par value per
share, of the Company having the rights and preferences set forth
in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A, upon the terms and subject to the
conditions herein set forth, and has further authorized the
issuance of one Right with respect to each Common Share that
shall become outstanding between July 5, 1988 and the earliest of
the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all
Affiliates and Associates (as such terms are hereinafter
defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 20% or more of the
Common Shares then outstanding, but shall not include the
Company, any wholly-owned Subsidiary (as such term is
hereinafter defined) of the Company or any employee benefit
plan of the Company or any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of
any such plan.
(b) "Affiliate," "Associate" and "Control" shall have
the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on June 24, 1988.
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any
security under this Section 1(c)(ii)(B) if the
agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations
of the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person or any Affiliate or
Associate thereof with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company.
(d) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in
the Commonwealth of Massachusetts are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean
5:00 P.M., Boston time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00
P.M., New York City time, on the next succeeding Business
Day.
(f) "Common Shares" when used with reference to the
Company (or without express reference to another Person)
shall mean the shares of Common Stock, par value $1.00 per
share, of the Company or any other shares of capital stock
of the Company into which the Common Shares are reclassified
or changed. "Common Shares" when used with reference to any
Person other than the Company shall mean the capital stock
(or other equity or beneficial interest) of such other
Person with the greatest aggregate voting power.
(g) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
(h) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(i) "Person" shall mean any individual, firm,
corporation or other entity, and shall include any successor
(by merger or otherwise) of such entity.
(j) "Preferred Shares" shall mean the shares of Series
A Preferred Stock, $1.00 par value per share, of the
Company.
(k) "Redemption Date" shall have the meaning set forth
in Section 7(a) hereof.
(l) "Shares Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such.
(m) "Subsidiary" of any Person shall mean any
corporation or other entity of which a majority of the
voting power of the voting equity securities or equity or
other beneficial interests is owned, directly or indirectly,
by such Person or which is otherwise Controlled by such
Person.
(n) "Tender Offer" shall mean a tender or exchange
offer made in accordance with the provisions of the Exchange
Act and the rules and regulations thereunder, including the
payment of applicable fees, announcement of a tender offer
and the dissemination of tender offer materials (as those
terms are defined respectively in such regulations), which
the Board of Directors of the Company or the Executive
Committee or other duly authorized committee of such Board
shall not have determined to be frivolous or not made in
good faith; any such determination made promptly and in good
faith to be conclusive for the purposes of this Agreement.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the Company
and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders
of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates.
(a) Until the earlier of (i) the Close of Business on
the tenth day after the Shares Acquisition Date or (ii) the
Close of Business on the tenth day after the date of the
commencement of a Tender Offer by any Person (other than the
Company, any wholly-owned Subsidiary of the Company, or any
employee benefit plan of the Company or of any wholly-owned
Subsidiary of the Company or any entity holding Common
Shares for or pursuant to the terms of any such plan) or the
public announcement of the intention to commence a Tender
Offer the consummation of which offer would result in
beneficial ownership by a Person of 30% or more of the
outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance
of the Rights; the earlier of such dates described in
clauses (i) and (ii) above being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced
(subject to the Sections 3(b) and (c)) by the certificates
for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right
certificates) and not by separate Right certificates, and
(y) the Rights will be transferable only in connection with
the transfer of the underlying Common Shares. As soon as
practicable after the Distribution Date, the Rights Agent
will send by first-class, insured, postage-prepaid mail, to
each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such
holder shown on the records of the Company, a Right
certificate, in substantially the form of Exhibit B hereto
(a "Right Certificate"), evidencing one Right for each
Common Share so held, subject to adjustment as provided
herein. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As soon as practicable after July 5, 1988, the
Company will send a copy of a Summary of Rights to Purchase
Preferred Shares, in substantially the form of Exhibit C
hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on July 5, 1988, at the address
of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of
July 5, 1988, until the Distribution Date, the Rights will
be evidenced by such certificates for Common Shares
registered in the names of the holders thereof together with
a copy of the Summary of Rights. Until the Distribution
Date (or the earlier of the Redemption Date or Final
Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on July 5, 1988,
with or without a copy of the Summary of Rights attached
thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Certificates issued for Common Shares which
certificates become outstanding after July 5, 1988 but prior
to the earliest of the Distribution Date, the Redemption
Date and the Final Expiration Date shall be deemed to be
certificates for Rights and shall have impressed on, printed
on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights
Agreement between Federal Signal Corporation and The
First National Bank of Boston, dated as of June 24,
1988 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of
Federal Signal Corporation. Under certain
circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate.
Federal Signal Corporation will mail to the holder of
this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor.
Under certain circumstances, Rights beneficially owned
by Acquiring Persons or any Affiliates or Associates
thereof (as such terms are defined in the Rights
Agreement) may become null and void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date, the Rights associated
with the Common Shares represented by such certificates
shall be evidenced by such certificates alone and registered
holders of such Common Shares shall also be the registered
holders of the associated Rights, and the surrender for
transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares
represented thereby.
Section 4. Form of Right Certificates. The Right
Certificates (and the forms of election to purchase shares and of
assignment and certificates to be printed on the reverse thereof)
shall be substantially the same as Exhibit B hereto and may have
such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on
which the Rights may from time to time be listed, or to conform
to usage. Subject to the provisions of Section 23 hereof, the
Right Certificates, whenever issued, shall be dated as of July 5,
1988, and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred Share
as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its
President and Chief Executive Officer or any Vice President, and
shall be attested by the Secretary or an Assistant Secretary of
the Company, in all cases either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a
facsimile thereof. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature
by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by
the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company
to sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such person was not such
an officer.
Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal offices, books for
registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates,
the number of each Right Certificate and the date of each of the
Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates. Subject to the provisions of Section 14 hereof, at
any time after the Close of Business on the Distribution Date,
and at or prior to the Close of Business on the earlier of the
Redemption Date or the Final Expiration Date (as such terms are
defined in Section 7 hereof), any Right Certificate or Right
Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Right Certificates, entitling
the registered holder to purchase a like number of Preferred
Shares as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged
at the principal office of the Rights Agent designated for such
purpose. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right
Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction
or mutilation of a Right Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the
Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company
will make and deliver a new Right Certificate of like tenor to
the Rights Agent for delivery to the registered owner in lieu of
the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.
(a) The Rights shall not be exercisable prior to the
Distribution Date. The registered holder of any Right
Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase and
certificate on the reverse side thereof duly executed, to
the Rights Agent at the principal office of the Rights Agent
designated for such purpose, together with payment of the
Purchase Price for each one one-hundredth of a Preferred
Share as to which the Rights are exercised, at or prior to
the earlier of (i) the Close of Business on July 5, 1998
(the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 24 hereof (the
"Redemption Date").
(b) The Purchase Price for each one one-hundredth of a
Preferred Share pursuant to the exercise of a Right shall
initially be $90, shall be subject to adjustment from time
to time as provided in Sections 11 and 13 hereof and shall
be payable in lawful money of the United States of America
in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase
duly executed, accompanied by payment of the Purchase Price
for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of
such Right certificate in accordance with Section 9 hereof
in cash, or by certified check or cashier's check payable to
the order of the Company, the Rights Agent shall thereupon
promptly (i)(A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is
a transfer agent) certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent
depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased
(in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of
fractional shares in accordance with Section 15, (iii) after
receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and
(iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such
Right Certificate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights
evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such
Right Certificate or to his duly authorized assigns, subject
to the provisions of Section 15 hereof.
Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the purpose
of exercise, transfer, split up, combination or exchange shall,
if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled
by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Rights Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Right Certificates
to the Company, or shall, at the written request of the Company,
destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred
Shares. The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury the
number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights.
So long as the Preferred Shares issuable upon the exercise
of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for
such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery
of the certificates for such Preferred Shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued
and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes
and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Preferred Shares
upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect
of any transfer or delivery of Right Certificates to a Person
other than, or the issuance or delivery of certificates or
depositary receipts for the Preferred Shares in a name other than
that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or deliver
any certificates or depositary receipts for Preferred Shares upon
the exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is
due.
Section 10. Preferred Shares Record Date. Each Person in
whose name any certificate for Preferred Shares is issued upon
the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares represented
thereby on, and such certificate shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable
transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred
Shares transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares
on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Shares transfer books of the
Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate, as such, shall not be
entitled to any rights of a holder of Preferred Shares for which
the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights. The Purchase Price, the number and
kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on
the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of
Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the
effective date of such subdivision, combination or
reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books
of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(ii) In the event
A. any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after
the date of this Agreement, directly or indirectly, (1)
shall consolidate with or merge into the Company or any
of its Subsidiaries or otherwise combine with the
Company or any of its Subsidiaries and the Company or
such Subsidiary shall be the continuing or surviving
corporation of such consolidation, merger or
combination and the Common Shares of the Company shall
remain outstanding and not changed into or exchanged
for stock or other securities of any other Person or
the Company or cash or any other property, (2) shall,
in one or more transactions, other than in connection
with the exercise of Rights or in connection with the
exercise or conversion of securities exchangeable or
convertible into capital stock of the Company or any of
its Subsidiaries, transfer any assets to the Company or
any of its Subsidiaries in exchange (in whole or in
part) for shares of any class of capital stock of the
Company or any of its Subsidiaries or for securities
exercisable for or convertible into shares of any class
of capital stock of the Company or any of its
Subsidiaries or otherwise obtain from the Company or
any of its Subsidiaries, with or without consideration,
any additional shares of any class of capital stock of
the Company or any of its Subsidiaries or securities
exercisable for or convertible into shares of any class
of capital stock of the Company or any of its
Subsidiaries (other than as a part of a pro rata
distribution to all holders of such shares of any class
of capital stock of the Company or any of its
Subsidiaries), (3) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise
dispose of or acquire (in one or more trans-actions),
to, from, or with, as the case may be, the Company or
any of its Subsidiaries, assets (including securities)
on terms and conditions less favorable to the Company
than the Company would be able to obtain in
arm's-length negotiation with an unaffiliated third
party, (4) shall receive any compensation from the
Company or any of its Subsidiaries other than
compensation for full-time employment as a regular
employee or for services as a director at rates in
accordance with the Company's (or its Subsidiaries')
past practices, or (5) shall receive the benefit,
directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax
credits or other tax advantage provided by the Company
or any of its Subsidiaries, or
B. during such time as there is an Acquiring
Person, there shall be any reclassification of
securities (including any reverse stock split), or
recapitalization of the Company, or any merger or
consolidation of the Company with any of its
Subsidiaries or any other transaction or series of
transactions involving the Company or any Subsidiaries
of the Company (whether or not with or into or
otherwise involving an Acquiring Person) which has the
effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding
shares of any class of equity securities or of
securities exercisable for or convertible into
securities of the Company or any of its Subsidiaries
which is directly or indirectly owned beneficially by
any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, then, and in each such case,
proper provision shall be made so that each holder of a
Right, except as provided below, shall thereafter have
a right to receive, upon exercise thereof at an
aggregate exercise price equal to the then current
Purchase Price times the number of one one-hundredths
of a Preferred Share for which such Right is then
exercisable (without giving any effect to the
adjustment called for below in this sentence), in
accordance with the terms of this Agreement, in lieu of
Preferred Shares, such number of Common Shares as shall
equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right
is then exercisable and dividing that product by (y)
50% of the current per share market price of the Common
Shares (determined pursuant to Section 11(d)) on the
fifth day after the earlier of the date of the
occurrence or the date of the first public announcement
of the applicable event listed above in this Section
11(a)(ii); provided, however, that if the transaction
that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section
13 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii).
Notwithstanding the foregoing, upon the occurrence of any of
the events listed above in this Section 11(a)(ii), any Rights
that are or were on or after the earlier of the Distribution Date
or the Shares Acquisition Date beneficially owned by an Acquiring
Person (or any Associate or Affiliate of such Acquiring Person)
shall become void and any holder of such Rights shall thereafter
have no right to exercise such Rights under any provision of this
Agreement. Any Right Certificate issued pursuant to Section 3
hereof that represents Rights beneficially owned by an Acquiring
Person or any Associate or Affiliate thereof and any Right
Certificate issued at any time upon the transfer of any Rights to
an Acquiring Person or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate, and
any Right Certificate issued pursuant to Section 6, 7(d) or 23
hereof or this Section 11 upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this
sentence, shall contain the following legend:
The Rights represented by this Right Certificate were
issued to a Person who was an Acquiring Person or an
Affiliate or an Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). This
Right Certificate and the Rights represented hereby may
become void in the circumstances specified in Section
11(a)(ii) of the Rights Agreement.
(iii) In the event that there shall not be
sufficient issued but not outstanding, or authorized
but unissued, Common Shares to permit the exercise in
full of the Rights in accordance with Section
11(a)(ii), the Company shall take all such action as
may be necessary to authorize additional Common Shares
for issuance upon exercise of the Rights and shall not
consummate any of the transactions described in such
Section 11(a)(ii) unless and until such additional
Common Shares have been authorized.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to all holders
of Preferred Shares entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe
for or purchase Preferred Shares or shares having the same
rights, privileges and preferences as Preferred Shares
("equivalent preferred shares") (or securities convertible
into Preferred Shares or equivalent preferred shares) at a
price per Preferred Share or equivalent preferred share (or
having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred
shares) less than the then current per share market price of
the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current
market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or
equivalent preferred shares to be offered for subscription
or purchase (or into which the convertible securities so to
be offered are initially convertible). In case such
subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed;
and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for
the making of a distribution to all holders of the Preferred
Shares (including any such distribution made in connection
with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular periodic cash
dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to
in Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the
current per share market price of the Preferred shares (as
defined in Section 11(d)) on such record date, less the fair
market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the
portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of
which shall be such current per share market price of the
Preferred Shares. Such adjustments shall be made
successively whenever such a record date is fixed; and in
the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had
not been fixed.
(d) (i) For the purpose of any computation hereunder,
the "current per share market price" of the Common Shares on
any date shall be deemed to be the average of the daily
closing prices per share of such Common Shares for the 30
consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however,
that in the event that the current per share market price of
the Common Shares is determined during a period following
the announcement by the issuer of such Common Shares of (A)
a dividend or distribution on such Common Shares payable in
such Common Shares or securities convertible into such
Common Shares, or (B) any subdivision, combination or
reclassification of such Common Shares and prior to the
expiration of 30 Trading Days after the ex-dividend date for
such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in
each such case, the current market price shall be
appropriately adjusted to reflect the current market price
per Common Share equivalent. The closing price for each day
shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common
Shares are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the Common Shares are listed or admitted to trading
or, if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other system
then in use, or, if on any such date the Common Shares are
not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares selected
by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common
Shares, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the
Company shall be used and shall be conclusive for all
purposes. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the
Common Shares are listed or admitted to trading is open for
the transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Shares are not
publicly held or not so listed or traded, "current per share
market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current per share market price" of the Preferred
Shares shall be determined in the same manner as set
forth above for Common Shares in Section 11(d)(i)
including, without limitation, by a good faith
determination by the Board of Directors of the Company
if the Preferred Shares are not publicly held or not so
listed or traded. Any such determination by the Board
of Directors of the Company shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however,
that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the
nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one-millionth of a Preferred Share
as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section
11 shall be made no later than the earliest of (i) three
years from the date of the transaction which requires such
adjustment, (ii) the Redemption Date or (iii) the Final
Expiration Date.
(f) If, as a result of an adjustment made pursuant to
Section 11(a), the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock
of the Company other than Preferred Shares, thereafter the
number of such other shares so receivable upon exercise of
any Right shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Preferred Shares
contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 hereof with respect
to the Preferred Shares shall apply on like terms to any
such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of one one-hundredths of
a Preferred Share purchasable from time to time hereunder
upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment
of the Purchase Price as a result of the calculations made
in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by
a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of
one one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable
for the number of one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one ten-thousandth)
obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed
to holders of record of Right Certificates on such record
date Right Certificates evidencing, subject to Section 15
hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option
of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the
holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a
Preferred Share issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the purchase Price below one
one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective
as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock
or securities of the Company, if any, issuable upon such
exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to
be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of
the Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable
for Preferred Shares, dividends on Preferred Shares payable
in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Preferred Shares shall
not be taxable to such stockholders.
(n) In the event that at any time after the date of
this Agreement and prior to the Distribution Date, the
Company shall (i) declare or pay any dividend on the Common
Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common
Shares (by reclassification or otherwise than by payment of
dividends in Common Shares) into a greater or lesser number
of Common Shares, then in any such case (x) the number of
one one-hundredths of a Preferred Share purchasable after
such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-hundredths
of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the
number of Common Shares outstanding immediately before such
event and the denominator of which is the number of Common
Shares outstanding immediately after such event, and (y)
each Common Share outstanding immediately after such event
shall have issued with respect to it that number of Rights
which each Common Share outstanding immediately prior to
such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made
successively whenever such a dividend is declared or paid or
such a subdivision, combination or consolidation is
effected. If an event occurs which would require an
adjustment under Section 11(a)(ii) and this Section 11(n),
the adjustments provided for in this Section 11(n) shall be
in addition and prior to any adjustment required pursuant to
Section 11(a)(ii).
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in
Sections 11 and 13 hereof, the Company shall promptly (a) prepare
a certificate setting forth such adjustment, and a brief
statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common
Shares and the Preferred Shares a copy of such certificate and
(c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 26 hereof. The Rights
Agent shall be fully protected in relying on such Certificate and
shall not be deemed to have knowledge of any adjustment unless
and until it shall have received such Certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. (a) In the event, directly or
indirectly, (1) the Company shall consolidate with, or merge with
and into, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or
merger, (2) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares
shall be changed into or exchanged for stock or other securities
of any other Person (or the Company) or cash or any other
property, or (3) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company or one or more of its
wholly-owned Subsidiaries), then, and in each such case, proper
provision shall be made so that (i) each holder of a Right
(except as otherwise provided herein) shall thereafter have the
right to receive, upon the exercise thereof at an aggregate
exercise price equal to the then current Purchase Price times the
number of one one-hundredths of a Preferred Share for which such
Right is then exercisable (without giving any effect to the
adjustment called for below in this sentence), in accordance with
the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable and freely tradeable
Common Shares of the Principal Party (as such term is hereinafter
defined) free and clear of any liens, encumbrances or other
adverse claims and not subject to any rights of call or first
refusal, as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) hereof) and
dividing that product by (y) 50% of the current per share market
price of the Common Shares of such Principal Party (determined
pursuant to Section 11(d)) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement;
(iii) except for purposes of Section 1(f) hereof the term
"Company" shall thereafter be deemed to refer to such Principal
Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9 hereof)
in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in
clause (1) or (2) of the first sentence of Section 13(a),
the Person that is the issuer of any securities into which
Common Shares of the Company are converted in such merger or
consolidation, and if no securities are so issued, the
Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in
clause (3) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest portion of
the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a
party to such transaction or transactions receives the same
portion of the assets or earning power so transferred or if
the Person receiving the greatest portion of the assets or
earning power cannot be determined, (X) whichever of such
Persons is the issuer of the Registered Common Shares (as
such term is hereinafter defined) having the greatest
aggregate market value or (Y) if no such Person has
Registered Common Shares outstanding, whichever of such
Persons is the corporation having the greatest stockholders'
equity or (Z) if no such Person is a corporation, whichever
of such Persons is the entity having the greatest net
assets; provided, however, that in any such case, (1) if the
Common Shares of such Person are not at such time and have
not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act
("Registered Common Shares"), or such Person is not a
corporation, and such Person is a direct or indirect
Subsidiary of another Person which has Registered Common
Shares outstanding, "Principal Party" shall refer to such
other Person; (2) if the Common Shares of such Person are
not Registered Common Shares or such Person is not a
corporation, and such Person is a direct or indirect
Subsidiary of another Person but is not a direct or indirect
Subsidiary of another Person which has Registered Common
Shares outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (3)
if the Common Shares of such Person are not Registered
Common Shares or such Person is not a corporation, and such
Person is directly or indirectly Controlled by more than one
Person, and one or more of such latter Persons have
Registered Common Shares outstanding, "Principal Party"
shall refer to whichever of such latter Persons is the
issuer of the Registered Common Shares having the greatest
aggregate market value; and (4) if the Common Shares of such
Person are not Registered Common Shares or such Person is
not a corporation, and such Person is directly or indirectly
Controlled by more than one Person, and none of such latter
Persons have Registered Common Shares outstanding,
"Principal Party" shall refer to whichever ultimate parent
entity is the corporation having the greatest stockholders'
equity or, if no such ultimate parent entity is a
corporation, shall refer to whichever ultimate parent entity
is the entity having the greatest net assets.
(c) Notwithstanding anything herein to the contrary,
if the Principal Party as determined pursuant to Section
13(b) above is not a corporation, proper provision shall be
made so that such Principal Party shall create or otherwise
make available for purposes of the exercise of the Rights in
accordance with the terms of this Agreement, a type or types
of securities having fair a market value (as determined by a
nationally recognized investment banking firm selected by
the Board of Directors of the Company) equal to at least the
value of the Common Shares which each holder of a Right
would have been entitled to receive if such Principal Party
had been a corporation.
(d) The Company shall not consummate any such
consolidation, merger, sale or transfer unless (1) at the
time of such consummation the Principal Party shall have
sufficient Common Shares authorized to permit the exercise
in full of the Rights in accordance with this Section 13 and
(2) prior to such consummation the Company and such
Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the
terms set forth in Sections 13(a), 13(b) and, if applicable,
13(c), and further providing that, as soon as practicable
after the date of any consolidation, merger or sale or
transfer of assets mentioned in Section 13(a), the Principal
Party will:
(i) prepare and file a registration statement
under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Rights and the
securities purchasable upon exercise of the Rights on
an appropriate form, and will use its best efforts to
cause such registration statement to (A) become
effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until
the earlier of the Redemption Date or the Final
Expiration Date, and similarly comply with applicable
state securities laws; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
(e) The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or
other transfers.
Section 14. Additional Covenants.
(a) Except as expressly provided herein, no adjustment
to the Purchase Price, the number of Preferred Shares (or
fractions of a share) for which a Right is exercisable or
the number of Rights outstanding (except as permitted by
Section 24 hereof) or any similar adjustment shall be made
or be effective if such adjustment would have the effect of
reducing or limiting the benefits the holders of the Rights
would have had absent such adjustment, including, without
limitation, the benefits under Section 11(a)(ii) and Section
13 hereof, unless the terms of this Agreement are amended so
as to preserve such benefits.
(b) The Company covenants and agrees that, following
the earlier of the Shares Acquisition Date or the
Distribution Date, except as permitted by Sections 24 and 27
hereof, it shall not, directly or indirectly, take any
action the purpose or effect of which is to eliminate or
otherwise diminish in any material respect the benefits
intended to be afforded by the Rights.
(c) The Company covenants and agrees that it shall not
consummate any of the transaction described in Section
11(a)(ii) hereof or clauses (1), (2) and (3) of the first
sentence of Section 13(a) hereof if (i) at the time of or
after such consummation there would be any charter or by-law
provisions or any rights, warrants or other instruments or
securities outstanding or agreements in effect or any other
action taken the purpose or effect of which is to eliminate
or otherwise diminish in any material respect the benefits
intended to be afforded by the Rights or (ii) in the case of
a transaction covered by Section 13(a) hereof, the
stockholders of the Principal Party shall have received,
either prior to, simultaneously with, or after the
consummation of such transaction, a distribution of Rights
previously owned by the Principal Party or any of its
Affiliates and Associates.
(d) The Company further covenants and agrees that it
shall not consummate any of the transactions described in
clauses (1), (2) and (3) of the first sentence of Section
13(a) hereof unless prior thereto the Company and the
Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement evidencing compliance
with Section 14(c) above and further providing that the
Principal Party covenants and agrees that it shall not,
directly or indirectly, take any action the purpose or
effect of which is to eliminate or otherwise diminish in any
material respect the benefits intended to be afforded by the
Rights. The provisions of this Section 14(d) and Section
14(c) above shall similarly apply to successive mergers,
consolidations, sales or other transfers.
Section 15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value
of a whole Right. For the purposes of this Section 15(a),
the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price for any day
shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the
closing bid an asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are
not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the
Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the
Company shall be used and shall be conclusive for all
purposes.
(b) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). Fractions of Preferred
Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by
it, provided that such agreement shall provide that the
holders of such depositary receipts shall have all the
rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market
value of one Preferred Share. For purposes of this Section
15(b), the current market value of a Preferred Share shall
be the closing price of a Preferred Share (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the
Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right
(except as provided above).
Section 16. Rights of Action. All rights of action in
respect of this Agreement, excepting any rights of action of the
Rights Agent under Section 19 hereof, are vested in the
respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common
Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution
Date, of the Common Shares), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise
act in respect of, his right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this
Agreement.
The Company or, in the case of the exercise of Rights
pursuant to Section 13 of this Agreement, the Principal Party,
shall pay to the registered holders of the Right Certificates, on
demand, any and all costs, fees, charges and other expenses
(including, without limitation, reasonable attorneys' fees and
legal expenses), whether legal or otherwise, incurred by such
holders in enforcing or attempting to enforce their right to
exercise the Right evidenced by such Right Certificates.
Section 17. Agreement of Right Holders. Every holder and
Beneficial Owner of a Right, by accepting the same, consents and
agrees with the Company and the Rights Agent and with every other
holder and Beneficial Owner of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the
Common Shares;
(b) after the Distribution Date, the Right
Certificates are transferable only on the registry books of
the Rights Agent if surrendered at the principal office of
the Rights Agent duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to
the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates
or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary.
Section 18. Right Certificate Holder Not Deemed a
Stockholder. No holder or Beneficial Owner, as such, of any
Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the Preferred Shares or
any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be
construed to confer upon the holder or Beneficial Owner of any
Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have
been exercised in accordance with the provisions hereof.
Section 19. Concerning the Rights Agent. The Company
agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of
its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the
costs and expenses of defending against any claim of liability in
the premises.
The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Right Certificate or certificate
for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person
or persons, or otherwise upon the advice of counsel as set forth
in Section 21(a) hereof.
Section 20. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 22 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any
of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates
either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have
been countersigned but not delivered, the Rights Agent may adopt
the countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been counter-signed, the
Rights Agent may countersign such Right Certificates either in
its prior name or in its changed name; and in all such cases such
Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 21. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by any one of the President and Chief
Executive Officer, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals
contained in this Agreement or in the Right Certificates
(except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement
or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition
contained in this Agreement or in any Right Certificate; nor
shall it be responsible for any change in the exercisability
of the Rights (including the Rights becoming void pursuant
to Section 11(a)(ii) hereof) or any adjustment in the terms
of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13, or 24, or the
ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of
its duties hereunder from any one of the President and Chief
Executive Officer, any Vice President, the Secretary or the
Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it
in good faith in accordance with instructions of any such
officer. Any application by the Rights Agent for written
instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be
taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action
shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date
specified in such application (which date shall not be less
than five Business Days after the date any such officer of
the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier
date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or
deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which
the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and
continued employment thereof.
Section 22. Change of Right Agent. The Rights Agent or
any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common
Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within
a period of 30 days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity
by the resigning or incapacitated Rights Agent or by the holder
of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and
doing business under the laws of the United States or of The
Commonwealth of Massachusetts or of the State of New York or
Illinois (or of any other state of the United States so long as
such corporation is authorized to do business as a banking
institution in The Commonwealth of Massachusetts or in the States
of New York or Illinois), in good standing, having a principal
office in The Commonwealth of Massachusetts or in the States of
New York or Illinois which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and
which either (A) has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50 million, or
(B) is a member of a bank holding company system, which bank
holding company system has an aggregate combined capital and
surplus of at least $50 million, provided that such corporation's
separate capital and surplus shall at all times be at least $10
million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property
at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the
Common Shares and Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 22,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 23. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new
Right Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this
Agreement. In addition, the Company may, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Right
Certificates in connection with the issuance of Common Shares
following the Distribution Date.
Section 24. Redemption.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the Close of
Business on the twentieth day following the Shares
Acquisition Date, or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a
redemption price of $.10 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to
as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares
(based on the "current per share market price," as defined
in Section 11(d)(i) hereof, of the Common Shares at the time
of redemption) or cash. If, following the occurrence of a
Shares Acquisition Date and following the expiration of the
right of redemption hereunder but prior to the occurrence of
any event described in Section 11(a)(ii) or Section 13(a)
hereof (a "Triggering Event"), (i) each Person who is an
Acquiring Person shall have transferred or otherwise
disposed of a number of Common Shares in one transaction or
series of transactions, not directly or indirectly involving
the Company or any of its Subsidiaries, which did not result
in the occurrence of Triggering Event such that each such
Person is thereafter a Beneficial Owner of 10% or less of
the outstanding shares of Common Shares, and (ii) there are
no other Persons, immediately following the occurrence of
the event described in clause (i) of this sentence, who are
Acquiring Persons, then the right of redemption set forth in
the preceding sentence shall be reinstated and thereafter be
subject to the provisions of this Section 24.
Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable after the
first occurrence of an event described in Section 11(a)(ii)
hereof until such time as the Company's right of redemption
set forth in the first sentence of this Section 24(a) has
expired.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the
Rights, and without any further action and without any
notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be
to receive the Redemption Price. Within 10 days after the
action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption
to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the
payment of the Redemption Price will be made.
(c) Neither the Company nor any of its Subsidiaries,
Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner except (i)
pursuant to a redemption in accordance with Section 24(a)
hereof or (ii) in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 25. Notice of Certain Events. In case the
Company shall propose after the Distribution Date (a) to pay any
dividend payable in stock of any class to the holders of
Preferred Shares or to make any other distribution to the holders
of Preferred Shares (other than a regular periodic cash
dividend), or (b) to offer to the holders of Preferred Shares
rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other
securities, rights or options, or (c) to effect any
reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding
Preferred Shares), or (d) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of
the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person or Persons, or (e) to
effect the liquidation, dissolution or winding up of the Company,
or (f) to declare or pay any dividend on the Common Shares
payable in Common Shares or to effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares), then,
in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice
of such proposed action, which shall specify the record date for
the purposes of such stock dividend, or distribution of rights or
warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution,
or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be
so given in the case of any action covered by clause (a) or (b)
above at least 20 days prior to the record date for determining
holders of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of
this Agreement shall occur, then, in any such case, the Company
shall as soon as practicable thereafter give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the
holder of any Right Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Federal Signal Corporation
1415 West 22nd Street
Oak Brook, Illinois 60521
Attention: Secretary with another copy to the
attention of the President
Subject to the provisions of Section 22 hereof, any notice or
demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
The First National Bank of Boston
P. O. Box 1865
Boston, Massachusetts 02105
Attn: Shareholder Services Division
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Right Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this
Section 27, the Company may and the Rights Agent shall, if the
Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date
and subject to the penultimate sentence of this Section 27, the
Company may and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided,
this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable, or (B) any other time period
unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to,
the holders of Rights (other than any Acquiring Person and its
Affiliates and Associates). Upon the delivery of a certificate
from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such
supplement or amendment. Notwithstanding anything contained in
this Agreement to the contrary, no supplement or amendment shall
be made which changes the Redemption Price, the Final Expiration
Date, the Purchase Price or the number of one one-hundredths of a
Preferred Share for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights shall
be deemed coincident with the interests of the holders of Common
Shares.
Section 28. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the
Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation
other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of
such State applicable to contracts to be made and performed
entirely within such State, except for Sections 19, 20, 21 and 22
which for all purposes shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
Section 32. Counterparts. This Agreement may be executed
in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
Section 33. Descriptive Headings. Descriptive headings
of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
FEDERAL SIGNAL CORPORATION
Attest:
By: Kim A. Wehrenberg By: Joseph J. Ross
Secretary President and Chief
Executive Officer
THE FIRST NATIONAL
BANK OF BOSTON
Attest:
By: Rosanna Garofalo By:Robert G. Bergman
Senior Account Administrator Vice President
<PAGE>
Exhibit A
WHEREAS, the Board of Directors deems it desirable and in
the best interests of the Corporation and its shareholders that
steps be taken to preserve for shareholders the long-term value
of the Corporation in the event of a takeover; and
WHEREAS, the Board of Directors believes that a dividend to
holders of the Corporation's Common Stock, $1.00 par value
("Common Shares"), of rights to purchase shares of a newly
created series of the Corporation's Preference Stock, having the
powers, designation, preference and relative, participating and
other special rights, and the qualifications, limitations or
restrictions thereof as are set forth below, on the terms and
subject to the conditions hereinafter provided, will contribute
to the preservation of the Corporation's long-term value for its
shareholders.
NOW, THEREFORE, BE IT AND IT IS HEREBY RESOLVED, that the
Board of Directors hereby declares that a dividend of one right
(the "Rights") for each Common Share be paid on July 5, 1988 to
shareholders of record of the Common Shares issued and
outstanding at the close of business on such date, each Right
representing the right to purchase one one-hundredth of a share
of Series A Preferred Stock (as hereafter authorized) upon
substantially the terms and subject to the conditions set forth
in the form of the Rights Agreement between the Corporation and
The First National Bank of Boston presented to this meeting (the
"Rights Agreement"), which agreement is hereby approved in all
respects.
RESOLVED FURTHER, that the exercise price of the Rights
shall be $90 per Right and that the redemption price therefor
shall be $0.10 per Right.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized in the
name and on behalf of the Corporation to execute the Rights
Agreement, with such modifications as the officers executing the
same shall approve, and to deliver the same to the Rights Agent
thereunder, such execution and delivery conclusively to evidence
the due authorization and approval thereof by the Corporation.
RESOLVED FURTHER, that certificates evidencing the Rights
(the "Right Certificates") shall be substantially in the form set
forth in the Rights Agreement and shall be issued and delivered
as provided therein.
RESOLVED FURTHER, that the Right Certificates shall be
signed by the President and Chief Executive Officer or any Vice
President and by the Secretary, an Assistant Secretary, or the
Treasurer of the Corporation under its corporate seal (which may
be in the form of a facsimile of the seal of the Corporation),
provided that the signatures of any of said officers of the
Corporation may, but need not be, a facsimile signature imprinted
or otherwise reproduced on the Right Certificates, and that the
Corporation adopts for such purpose the facsimile signature of
the present or any future President and Chief Executive Officer,
Vice President, Secretary, Assistant Secretary, or Treasurer of
the Corporation, notwithstanding the fact that at the time the
Right Certificates shall be authenticated and delivered or
disposed of he shall have ceased to be such officer.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized to execute
on behalf of the Corporation and under its corporate seal (which
may be in the form of a facsimile of the seal of the Corporation)
Right Certificates issued to replace lost, stolen, mutilated or
destroyed Right Certificates, and such Right Certificates as may
be required for exchange, substitution or transfer as provided in
the Rights Agreement in the manner and form to be required in, or
contemplated by, the Rights Agreement.
RESOLVED FURTHER, that the Right Certificates shall be
manually countersigned by the Rights Agent and books for the
registration and transfer of the Right Certificates shall be
maintained by the Rights Agent at its principal offices.
RESOLVED FURTHER, that pursuant to the authority vested in
the Board of Directors of this Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, a series
of Preference Stock of the Corporation, to be designated Series A
Preferred Stock, be, and it hereby is, created, and that the
designation and amount thereof and the voting powers, preferences
and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations or
restrictions thereof are as set forth in Annex A hereto.
RESOLVED FURTHER, that 100,000 shares of Series A Preferred
Stock be, and they hereby are, initially reserved for issuance
upon exercise of the Rights, such number to be subject to
adjustment from time to time in accordance with the Rights
Agreement.
RESOLVED FURTHER, that The First National Bank of Boston
(the "Bank"), or such other bank as the officers of the
Corporation shall designate, be, and it hereby is, appointed
Rights Agent under the Rights Agreement, and that upon
presentation to it of Right Certificates for exercise in
accordance with the Rights Agreement, the Bank is authorized, as
Transfer Agent and Registrar for the Series A Preferred Stock, to
issue originally, countersign, register and deliver the Series A
Preferred Stock issuable upon such exercise.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized and
directed, for and on behalf of the Corporation, to execute
personally or by attorney-in-fact and cause to be filed with the
Securities and Exchange Commission a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") for
the registration of the Series A Preferred Stock issuable upon
exercise of the Rights, and thereafter to execute and cause to be
filed any amended registration statement or registration
statements and amended prospectus or prospectuses, or amendments
or supplements to any of the foregoing, and to cause such
registration statement and any amendments thereto to become
effective in accordance with the Securities Act and the General
Rules and Regulations of the Securities and Exchange Commission
thereunder.
RESOLVED FURTHER, that the Secretary of the Corporation is
hereby appointed as agent for service of the Corporation with
respect to said registration statement with all the powers and
functions specified in the General Rules and Regulations of the
Securities and Exchange Commission under the Securities Act.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized, jointly
and severally, in the name and on behalf of the Corporation, to
take all such actions, including the filing of the Registration
Statement on Form 8-A for the Rights and a Current Report on Form
8-K reporting the adoption of these Resolutions, and to execute
all such documents as they may deem necessary or appropriate in
connection with the issuance of the Rights and the shares of
Series A Preferred Stock issuable upon exercise of the Rights in
order to comply with the Securities Exchange Act of 1934, as
amended.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized, jointly
and severally, in the name and on behalf of the Corporation, to
execute and file such application or applications, and amendments
and supplements thereto, and take such other action as may be
necessary to list the Rights (and, if in the judgment of such
officers it is appropriate to do so, the Series A Preferred Stock
issuable upon exercise thereof) on the New York Stock Exchange
and on any other stock exchanges deemed appropriate by such
officers of the Corporation, and that proper officers of the
Corporation be, and each of them hereby is, authorized to appear
before the Securities and Exchange Commission and the New York
Stock Exchange and any such other stock exchanges, and to execute
such papers and agreements as may be necessary to conform with
the requirements of the Securities and Exchange Commission and
the New York Stock Exchange and any such other stock exchanges
and to effectuate such listing and registrations.
RESOLVED FURTHER, that the form of Indemnity Agreement
required by the New York Stock Exchange, indemnifying the New
York Stock Exchange and others against loss resulting from
reliance on the facsimile signatures of the officers of the
Corporation on the Rights (or shares of Series A Preferred Stock
issuable upon exercise thereof) be, and it hereby is, approved,
and that the proper officers of the Corporation be, and each of
them hereby is, authorized to execute and deliver such Indemnity
Agreement.
RESOLVED FURTHER, that so long as the Rights are attached to
the Common Shares as provided in the Rights Agreement, one
additional Right shall be delivered with each Common Share issued
after July 5, 1988, including but not limited to Common Shares
issued upon conversion of any convertible securities of the
Corporation and the exercise of options to purchase Common Shares
granted by the Corporation.
RESOLVED FURTHER, that the Board of Directors deems it
desirable and in the best interests of the Corporation that the
Series A Preferred Stock issuable upon exercise of the Rights be
qualified or registered for sale in various jurisdictions; that
the President and Chief Executive Officer or any Executive Vice
President or any Vice President and the Secretary or an Assistant
Secretary be, and each of them hereby is, authorized to determine
the jurisdictions in which appropriate action shall be taken to
qualify or register for sale all or such part of the Series A
Preferred Stock issuable upon exercise of the Rights as said
officers may deem advisable; that said officers are hereby
authorized to perform on behalf of the Corporation any and all
such acts as they may deem necessary or advisable in order to
comply with the applicable laws of any such jurisdictions, and in
connection therewith to execute and file all requisite papers and
documents, including, but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys
for service of process; and the execution by such officers of any
such papers or documents or the doing by them of any act in
connection with the foregoing matters shall conclusively
establish their authority therefor and the approval and
ratification by the Corporation of the papers and documents so
executed and the action so taken.
RESOLVED FURTHER, that the Board of Directors hereby adopts,
as if expressly set forth herein, the form of any resolution
required by any authority to be filed in connection with any
applications, consents to service, issuer's covenants or other
documents if (i) in the opinion of the officers of the
Corporation executing the same, the adoption of such resolutions
is necessary or desirable and (ii) the Secretary or an Assistant
Secretary of the Corporation evidences such adoption by inserting
in the minutes of this meeting copies of such resolutions, which
will thereupon be deemed to be adopted by the Board of Directors
with the same force and effect as if presented at this meeting.
RESOLVED FURTHER, that the proper officers of the
Corporation be, and each of them hereby is, authorized and
directed, jointly and severally, for and on behalf of the
Corporation, to execute and deliver any and all certificates,
agreements and other documents, take any and all steps and do any
and all things which they may deem necessary or advisable in
order to effectuate the purposes of each and all of the foregoing
resolutions.
RESOLVED FURTHER, that any actions taken by such officers
prior to the date of this meeting that are within the authority
conferred hereby are hereby ratified, confirmed and approved in
all respects as the act and deed of the Corporation.
<PAGE>
Annex A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A PREFERRED STOCK
of
FEDERAL SIGNAL CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Joseph J. Ross, President, and Kim A. Wehrenberg, Secretary
of Federal Signal Corporation, a corporation organized and
existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the
said Corporation, the said Board of Directors on June 24, 1988
adopted the following resolution creating a series of one hundred
thousand (100,000) shares of Preferred Stock designated as Series
A Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, a series
of Preferred Stock of the Corporation be and it hereby is
created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Preferred Stock," with
$1.00 par value, and the number of shares constituting such
series shall be 100,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon
conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(a) Subject to the prior rights of the holders of any
series of capital stock of the Corporation ranking prior and
superior to the shares of Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of Common Stock, $1.00 par value, of
the Corporation ("Common Stock"), and of any other junior stock,
shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the fifteenth day
of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $25 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (a) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $25 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue
of such shares of Series A Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share by share basis among all such
shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series
A Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to one hundred votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(b) Except as otherwise provided herein, in any other
Certificate of Designation establishing a series of Preference
Stock or any similar stock, or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, holders of Series A
Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding
up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend
rates and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preference Stock and may be reissued as part
of a new series of Preference Stock, subject to the conditions
and restrictions on issuance set forth herein, in the Restated
Certificate of Incorporation, in any other Certificate of
Designation establishing a series of Preference Stock or any
similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock,
including Common Stock, ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per
share to holders of Common Stock, or (ii) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock
and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon
such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such
case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event
under the proviso in clause (i) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
the shares of Series A Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall
rank prior to all Common Stock as to payment of dividends and
distribution of assets, but shall be junior to all other series
of the Corporation's Preference Stock as to payment of dividends
and distribution of assets (except to the extent a series is made
pari passu with the Series A Preferred Stock).
Section 10. Amendment. The Restated Certificate of
Incorporation of the Corporation, as amended, shall not be
amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote
of the holders of two-thirds of the outstanding shares of Series
A Preferred Stock, voting together as a single class.
<PAGE>
Exhibit B
[Form of Right Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER THE CLOSE OF BUSINESS JULY 5, 1998 OR
EARLIER IF REDEMPTION OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.10 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN
SECTION 11(a)(ii) OF THE RIGHTS AGREEMENT), RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN
SECTION 11(a)(ii) OF THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHT CERTIFICATE WERE ISSUED TO A
PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 11(a)(ii) OF THE RIGHTS
AGREEMENT.]*
Right Certificate
Federal Signal Corporation
This certifies that , or registered
assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement
dated as of June 24, 1988 (the "Rights Agreement") between
Federal Signal Corporation, a Delaware corporation (the
"Company"), and The First National Bank of Boston, a national
banking association (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 p.m. (Boston
time) on July 5, 1998 at the office of the Rights Agent
designated for such purpose, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Preferred Stock, with $1.00 par
value (the "Preferred Shares"), of the Company, at an initial
purchase price of $90 per one one-hundredth of a Preferred Share
(the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred
Share which may be purchased upon exercise thereof) set forth
above, and the Purchase Price set forth above, are the number and
Purchase Price as of June 24, 1988, based on the Preferred Shares
as constituted at such date.
________________________________________
* The portion of the legend in brackets shall be inserted only
if applicable.
<PAGE>
As provided in the Rights Agreement, the Purchase Price and
the number of one one-hundredths of a Preferred Share which may
be purchased upon the exercise of the Rights evidenced by this
Right Certificate are subject to modification and adjustment upon
the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file
at the principal executive offices of Federal Signal Corporation.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the
Rights Agent, or at its office in New York, New York, may be
exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the
Rights evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate may, but are not required
to, be redeemed by the Company at a redemption price of $.10 per
Right, in cash or stock.
No fractional Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share,
which may, at the election of the Company, be evidenced by
depositary receipts) will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to
vote or receive dividends or be deemed for any purpose the holder
of the Preferred Shares or of any other securities of the Company
which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, to receive notice of
meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as
provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights
Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of [July 5, 1988].
ATTEST: FEDERAL SIGNAL CORPORATION
By:
Secretary [Name and Title]
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON
By:
[Authorized Officer]
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificates.)
FOR VALUE RECEIVED hereby sells, assigns
and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint
attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: , 19
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United
Stated States.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -
(To be completed if applicable)
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement).
Signature
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires
to exercise the Right Certificate.)
To: FEDERAL SIGNAL CORPORATION:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares be issued in
the name of:
Please insert social security
of other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by
this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and
delivered to:
Please insert social security
or other identifying number:
(Please print name and address)
Dated: , 19
Signature
(Signature must conform in all respects to name of
holder as specified on the face of this Right
Certificate in every particular, without alteration or
enlargement or any change whatsoever)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United
States.
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -
(To be completed if applicable)
The undersigned hereby certifies that the Rights evidenced
by this Right Certificate are not beneficially owned by an
Acquiring Person or an Affiliate or Associate thereof (as defined
in the Rights Agreement).
Signature
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -
NOTICE
The signatures in the foregoing Forms of Assignment and
Election must conform to the name as written upon the face of
this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the certification set forth above in the Forms
of Assignment and Election is not completed, the Company will
deem the beneficial owner of the Rights evidenced by this Right
Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and, in
the case of an Assignment, will affix a legend to that effect on
any Right Certificates issued in exchange for this Right
Certificate.
<PAGE>
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 24, 1988, the Board of Directors of Federal Signal
Corporation (the "Company") declared a dividend distribution of
one preferred share purchase right (a "Right") for each
outstanding share of common stock, par value $1.00 per share (the
"Common Shares"), of the Company. The dividend is payable as of
the Close of Business on July 5, 1988 to shareholders of record
on that date. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of a
Series A Preferred Stock, $1.00 par value, of the Company (the
"Preferred Shares") at a price of $90 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment.
The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") dated as of June 24, 1988
between the Company and The First National Bank of Boston, as
Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") acquired or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding
Common Shares or (ii) 10 days following the commencement or
announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in the beneficial
ownership by a person or group of 30% or more of such outstanding
Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect
to any of the Common Share certificates outstanding as of July 5,
1988, by such Common Share certificate with a copy of this
Summary of Rights attached thereto. The Rights Agreement
provides that, until the Distribution Date, the Rights will be
transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the
Rights), new Common Share certificates issued after the Close of
Business on July 5, 1988 upon transfer or new issuance of the
Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares, outstanding as of
the Close of Business on July 5, 1988, even without such notation
or a copy of this Summary of Rights being attached thereto, will
also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close
of business on the Distribution Date and such separate Right
Certificates alone will then evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on after the Close of Business on July 5,
1998, unless earlier redeemed by the Company as described below.
The Purchase Price payable, and the number of Preferred
Shares or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred
Shares at a price, or securities convertible into Preferred
Shares with a conversion price, less than the current market
price of the Preferred Shares or (iii) upon the distribution to
holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends out of earnings
or retained earnings or dividends payable in Preferred Shares) or
of subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of
each Right are also subject to adjustment in the event of a stock
split of the Common Shares or a stock dividend on the Common
Shares payable in Common Shares or subdivisions, consolidations
or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payable of $25 per share but will
be entitled to an aggregate dividend of 100 times the dividend
declared per Common Share. In the event of liquidation, the
holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be
entitled to an aggregate payment of 100 times the payment made
per Common Share. Each Preferred Share will have one hundred
votes, voting together with the Common Shares. Finally, in the
event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be
entitled to receive 100 times the amount received per Common
Share. These rights are protected by customary antidilution
provisions.
In the event that the Company is acquired in a merger or
other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, proper provision
will be made so that each holder of a Right will thereafter have
the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of
common stock of the acquiring company which at the time of such
transaction would have a market value of two times the exercise
price of the Right. In the event that the Company was the
surviving corporation in a merger and the Common Shares were not
changed or exchanged, or in the event that an Acquiring Person
engages in one of a number of self-dealing transactions specified
in the Rights Agreement, proper provision will be made so that
each holder of a Right, other than Rights that were beneficially
owned by the Acquiring Person on the earlier of the Distribution
Date or the date an Acquiring Person acquires 20% or more of the
outstanding Common Shares (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of
Common Shares having a market value of two times the exercise
price of the Right.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
Preferred Shares will be issued (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share,
which may, at the election of the Company, be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Shares on
the last trading date prior to the date of exercise.
The Board of Directors, under certain circumstances, is
entitled to redeem the Rights at $.10 per Right (payable in cash
or Common Shares) at any time prior to the expiration of 20 days
(subject to extension by the Board of Directors) following the
public announcement that a 20% position has been acquired.
Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights generally may be amended by the
Board of Directors of the Company without the consent of the
holders of the Rights except that no such amendment may adversely
affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a shareholder of the Company, including,
without limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does
not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated
herein by reference.
Exhibit 10.f.
FEDERAL SIGNAL CORPORATION
SUPPLEMENTAL SAVINGS AND INVESTMENT PLAN
Article I. Establishment and Construction
1.1 The Plan and Its Effective Date. The FEDERAL SIGNAL
CORPORATION SUPPLEMENTAL SAVINGS AND INVESTMENT PLAN (the "Plan")
is hereby established by FEDERAL SIGNAL CORPORATION (the
"Company"), effective January 1, 1983 (the "effective date").
1.2 Purpose. The Company and certain affiliates ("Employer")
adopted a profit sharing plan known as the Federal Signal
Corporation Savings and Investment Plan (the "Savings Plan") which
is intended to meet the requirements of a "qualified" plan under
section 401(a) of the Internal Revenue Code (the "Code") and a
qualified cash or deferred arrangement under Code section 401(k).
While the Code places limitations on the maximum amount of benefits
which may be provided for individuals under a qualified defined
contribution plan, the Employee Retirement Income Security Act of
1974 (ERISA) permits the maintenance of an unfunded "excess benefit
plan" for the purpose of providing benefits in excess of the
limitations on contributions imposed by the Code. It is the intent
of the Employer to provide benefits under this Plan that are
reasonably comparable to those a Participant would have received
under the Savings Plan if it were not for the limitations imposed
by the Code and to allow Participants to defer part of their cash
compensation.
1.3 Gender and Number. Except when otherwise indicated by
the context, words in the masculine gender shall include the
feminine and neuter genders; the plural shall include the singular
and the singular shall include the plural.
1.4 Employment Rights. Establishment of the Plan shall not
be construed to give any Participant the right to be retained by
the Employer or to any benefits not specifically provided by the
Plan.
1.5 Severability. In the event any provision of the Plan
shall be held invalid or illegal for any reason, any illegality or
invalidity shall not affect the remaining parts of the Plan, but
the Plan shall be construed and enforced as if the illegal or
invalid provision had never been inserted, and the Company shall
have the privilege and opportunity to correct and remedy such
questions of illegality or invalidity by amendment as provided in
the Plan.
1.6 Applicable Law. This Plan is fully exempt from the
provisions of ERISA pursuant to section 4(b)(5). The Plan shall be
governed and construed in accordance with the laws of the State of
Illinois.
Article II. Participation Benefits
2.1 Participation. A person who is--
(a) a key employee of his Employer, and approved by the
President, and
(b) a participant in the Savings Plan and who elects to
participate in this Plan.
2.2 Contribution Election. With respect to each plan year
of the Savings Plan beginning on or after January 1, 1983, a
Participant in this Plan may elect to reduce his compensation and
have credited to an account on the books of his Employer an amount
set forth in his election form. The election shall be made
pursuant to rules established by the Administrative Committee of
the Savings Plan, and shall be applicable only with respect to
compensation earned after the effective date of the election. Such
election may be changed but such change shall have prospective
application only.
2.3 Employer Contributions. If an Employer's matching
contributions on behalf of a Participant under the Savings Plan are
reduced on account of Code limitations, the Participant's Employer
shall credit to an account on its books an amount equal to the
difference between (a) and (b) where--
(a) is the product of--
(1) the applicable matching
percentage under the Savings
Plan, and
(2) the sum of--
(A) the elective basic
contributions actually
made under the Savings
Plan, and
(B) the amount of the
reduction (if any)
under the Code to the
elective basic
contributions with
respect to which the
Participant elects to
reduce his salary under
section 2.2 of this
Plan; and
(b) is the amount of the Employer's matching
contribution actually contributed on the Participant's
behalf to the Savings Plan.
2.4 Adjustment to Accounts. The accounts described in
sections 2.2 and 2.3 shall be adjusted to reflect the earnings,
gains, losses and expenses that would have been credited or debited
to the amounts described in such sections had they been contributed
to the investment accounts described in the Savings Plan which are
approved by the Administrative Committee for this Plan and elected
by the Participant. Such adjustment shall be determined by the
Administrative Committee and its determination shall be final and
conclusive.
2.5 Vesting. Participants shall have a full and immediate
nonforfeitable interest in amounts credited pursuant to section
2.2, as adjusted pursuant to section 2.4. Amounts credited
pursuant to section 2.3, as adjusted pursuant to section 2.4, shall
become nonforfeitable when and to the extent they would have become
nonforfeitable had they been Employer contributions under the
Savings Plan. Notwithstanding the preceding sentence, a
Participant or his beneficiary shall have no right to amounts
credited under section 2.3 (as adjusted) if the Administrative
Committee, the Company or an affiliate determines that he engaged
in a willful, deliberate, or gross act of commission or omission
which is substantially injurious to the finances or reputation of
the Company or its affiliates.
2.6 Funding. All amounts paid under this Plan shall be paid
in cash from the general assets of the Participant's Employer.
Such amounts shall be reflected on the accounting records of the
Employer but any trust, custodial or escrow account shall comply
with Revenue Procedure 92-64. No employee shall have any right,
title or interest whatever in or to any investment reserves,
accounts or funds that the Employer may purchase, establish or
accumulate to aid in providing the benefits under this Plan.
Nothing contained in this Plan, and no action taken pursuant to its
provision, shall create a trust or fiduciary relationship of any
kind between an Employer or an employee or any other person.
Neither an employee or beneficiary of an employee shall acquire any
interest greater than that of an unsecured creditor and the plan
constitutes a mere promise of the Employer to make benefit payments
in the future.
2.7 Benefit Payments. No payments shall be made to a
Participant under this Plan prior to his termination of employment
except for financial hardship as determined under the Savings Plan
or a date certain designated at the time of the deferral. At
termination of employment, benefits shall become payable by the
Employer in any form of payment that the Participant may elect,
subject to the consent of the Administrative Committee and pursuant
to is rules. The Employer may withhold from any payment any taxes
required to be withheld and such sum as the Employer may reasonably
estimate as necessary to cover any taxes for which the Employer may
be liable and which may be assessed with regard to such payment.
2.8 Death Benefits. In the event of the death of the
Participant prior to full payment of amounts credited to the
Participant's account under this Plan, the unpaid amounts shall be
paid to the beneficiary designated by the Participant pursuant to
the terms of the Savings Plan, and in the absence of such
designation, as provided by the Savings Plan.
Article III. General Provisions
3.1 Administration. This Plan shall be administered by the
Administrative Committee of the Savings Plan. The Committee shall
have, to the extent appropriate, the same powers, rights, duties,
and obligations with respect to this Plan as it does with respect
to the Savings Plan.
3.2 Interests not Transferable. The interests of the
Participants and their beneficiaries under the Plan are not subject
to the claims of their creditors and may not be voluntary or
involuntarily transferred, assigned, alienated or encumbered.
3.3 Action by the Company or Affiliates. Any action required
of or permitted by the Company or an affiliate under the Plan shall
be by resolution of the respective Board of Directors or any person
or persons authorized by resolution of such Board.
3.4 Effect on other Benefit Plans. Amounts credited or paid
under this Plan, and the amount of any compensation reduced
pursuant to section 2.2 shall be treated under other employee
benefit plans pursuant to the provisions of such plans.
Article IV. Amendment and Termination
The Company reserves the right to amend the Plan from time to
time or to terminate the Plan at any time.
* * * * * * * *
IN WITNESS WHEREOF, the Company has caused this amended
instrument to be executed by its duly authorized officers on this
16th day of June, 1993.
ATTEST: FEDERAL SIGNAL CORPORATION
By: Kim Wehrenberg By: Walter R. Peirson
Vice President/Secretary Chairman
Compensation/Stock Option
Committee
<TABLE>
EXHIBIT 11
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Computation of Income Per Common Share
Income per common share was computed by dividing income by the weighted average
number of common and common equivalent shares outstanding during each year. The
treasury stock method was applied to those stock options that would have a dilutive
effect on income per share. The average market price of the Registrant's stock was
used in determining income per common share, while the year-end market price (if
greater than the average market price) was used in determining income per common
share - assuming full dilution. Fully diluted income per share was based upon
income plus add back of $113,000 in 1991, representing interest on convertible
debentures less applicable income taxes. This add back was not applicable to 1993
or 1992 income, as the conversion option on the Registrant's debentures expired on
December 1, 1992.
The weighted average number of common and common equivalent shares (adjusted for the
4-for-3 stock split distributed March 1, 1994) used in these computations were:
<CAPTION>
Income Per Common Share 1993 1992 1991
(in thousands except per share data)
<S> <C> <C> <C>
Weighted average shares outstanding 45,738 45,544 45,519
Effect of dilutive options 555 584 607
Total 46,293 46,128 46,126
Income:
Income before cumulative effects
of accounting changes $39,780 $34,430 $31,046
Cumulative effects of accounting changes 30
Net income $39,780 $34,460 $31,046
Net income per share $ .86 $ .75 $ .67
Assuming Full Dilution
(in thousands except per share data)
Weighted average shares outstanding 45,738 45,544 45,519
Effect of dilutive options 555 584 607
Effect of convertible debentures* 333
Total 46,293 46,128 46,459
Income:
Income before cumulative effects
of accounting changes $39,780 $34,430 $31,159
Cumulative effects of accounting changes 30
Net income $39,780 $34,460 $31,159
Net income per share $ .86 $ .75 $ .67
<FN>
* Conversion option expired on December 1, 1992.
</TABLE>
EXHIBIT 13
----------
1993 ANNUAL REPORT TO SHAREHOLDERS OF FEDERAL SIGNAL CORPORATION
-----------------------------------------------------------------
<TABLE>
FEDERAL SIGNAL CORPORATION
Selected Financial Data
<CAPTION>
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results (in millions):
Net sales $ 565.2 $ 518.2 $ 466.9 $ 439.4 $ 398.4 $ 361.4 $ 305.8 $ 273.3 $ 264.5 $ 241.3 $ 208.5
Income before income taxes (a) $ 58.8 $ 49.9 $ 45.6 $ 42.5 $ 34.6 $ 28.4 $ 23.8 $ 20.9 $ 16.3 $ 14.9 $ 10.6
Income from continuing operations (b) $ 39.8 $ 34.5 $ 31.0 $ 28.1 $ 22.1 $ 18.2 $ 14.5 $ 12.3 $ 11.9 $ 9.2 $ 6.4
Common Stock Data (per share) (c):
Income from continuing operations $ 0.86 $ 0.75 $ 0.67 $ 0.61 $ 0.48 $ 0.40 $ 0.31 $ 0.26 $ 0.26 $ 0.20 $ 0.14
Cash dividends $ 0.36 $ 0.32 $ 0.27 $ 0.22 $ 0.19 $ 0.16 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15
Market price range:
High $21- $17-5/8 $15-1/4 $10-3/4 $7-1/8 $4-7/8 $4-7/8 $4-1/2 $3-3/4 $3-5/8 $4-1/4
Low $15-3/4 $12-3/8 $9-1/4 $6-1/4 $4-1/4 $3-1/2 $2-7/8 $3-1/8 $2-5/8 $2-1/2 $2-7/8
Average common shares
outstanding (in thousands) 46,293 46,128 46,126 46,038 46,103 45,639 47,137 46,767 45,335 45,357 45,716
Financial Position at Year-End
(dollars in millions):
Working capital (d) $ 52.8 $ 49.5 $ 44.9 $ 42.7 $ 63.8 $ 59.5 $ 53.9 $ 52.8 $ 58.2 $ 60.6 $ 60.3
Current ratio (d) 1.5 1.6 1.5 1.5 2.1 2.0 1.9 2.2 2.3 2.5 2.6
Total assets $ 405.7 $ 363.7 $ 341.2 $ 295.8 $ 271.3 $ 251.1 $ 233.3 $ 191.4 $ 187.4 $ 178.7 $ 166.2
Shareholders' equity $ 199.2 $ 179.0 $ 164.8 $ 146.4 $ 130.4 $ 115.5 $ 103.2 $ 102.4 $ 91.1 $ 85.3 $ 84.7
% Debt to capitalization ratio (d) 1 2 1 2 10 18 22 4 15 18 20
% Return on average common
shareholders' equity 21.0 20.0 20.0 20.4 18.7 17.0 14.5 12.2 13.3 11.0 8.5
Other (dollars in millions) (e):
New business $ 584.2 $ 510.3 $ 462.7 $ 467.6 $ 429.9 $ 382.4 $ 328.3 $ 276.4 $ 274.6 $ 246.5 $ 225.6
Backlog $ 221.8 $ 198.0 $ 203.2 $ 199.9 $ 171.7 $ 140.2 $ 119.2 $ 96.7 $ 93.6 $ 83.5 $ 78.3
Cash flow from operations $ 48.8 $ 40.2 $ 43.9 $ 48.3 $ 34.6 $ 22.5 $ 20.1 $ 22.7 $ 16.5 $ 13.6 $ 2.1
Capital expenditures $ 10.1 $ 8.8 $ 12.0 $ 8.3 $ 9.2 $ 7.3 $ 6.9 $ 6.3 $ 6.9 $ 4.5 $ 6.9
Depreciation $ 9.2 $ 8.7 $ 8.2 $ 7.8 $ 7.9 $ 7.1 $ 5.5 $ 5.2 $ 5.3 $ 4.8 $ 4.1
Employees 4,426 4,268 4,212 4,158 4,142 3,880 3,653 3,183 3,190 2,962 2,830
<FN>
(a) in 1985, reflects pre-tax provisions to expense for non-recurring charges of $4.6 million
(b) in 1992, reflects net cumulative effects of accounting changes for postretirement benefits and income taxes of $30,000;
in 1985, reflects cumulative effect of accounting change for investment tax credits of $2.2 million and after-tax
provisions to expense for non-recurring charges of $2.3 million
(c) reflects 10% stock dividends each paid in 1983, 1988 and 1989, 3-for-2 stock splits in 1990, 1991 and 1992, and a 4-for-3
stock split distributable March 1, 1994
(d) manufacturing operations only
(e) continuing operations only
</TABLE>
FINANCIAL REVIEW
Consolidated Results of Operations
Federal Signal Corporation again achieved record levels of net sales
(28th consecutive annual increase) and net income (10th consecutive
annual increase). Net sales increased to $565.2 million, 9% higher
than 1992's $518.2 million. Net income increased 15% to $39.8
million in 1993 from $34.5 million in 1992. These increases follow
1992's increases of 11% in sales and in net income. Net income per
share for 1993 increased 15% to $.86 per share compared to $.75 in
1992 and $.67 per share in 1991.
The 1993 sales increase of 9% resulted from volume increases of 8%
(including 4% resulting from the acquisition of Guzzler
Manufacturing, Inc. in March) and price increases of 1%. Domestic
sales increased 14% in 1993 while foreign sales declined 7% from
1992's record levels. Excluding the sales of Guzzler, domestic sales
were 10% higher in 1993 while foreign sales declined 9% due largely
to the recessionary European economic environment. In light of the
generally slow-growth nature of the domestic economy as well as the
slow-growth nature of most of the company's markets, the company
anticipates domestic sales growth in 1994 will be somewhat lower than
1993's rate. Foreign sales are expected to again increase in 1994.
Foreign sales accounted for 20% of the company's total sales in 1993
compared to 23% of total sales in 1992.
The 1993 sales increases follow an 11% increase in sales in 1992 over
1991 levels. The increase in sales in 1992 resulted from volume
increases of 10% and price increases of 1%. Excluding the effect of
companies acquired in 1992 and in late 1991, domestic sales were even
with 1991 levels. Foreign sales increased 52% in 1992 including 22%
from companies acquired in 1992 and late 1991.
Operating margins have increased from 10.6% in 1989 to 11.3% in 1993,
despite generally declining gross profit margins as the following
data shows:
(percent of sales)
1993 1992 1991 1990 1989
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 67.8 68.2 67.9 66.8 66.3
Gross profit margin 32.2 31.8 32.1 33.2 33.7
Selling, general and
administrative expenses 20.9 21.2 21.3 22.4 23.1
Operating margin 11.3% 10.6% 10.8% 10.8% 10.6%
Gross profit margins have generally declined principally due to
sales of the Vehicle Group increasing more rapidly than sales of the
other groups. The Vehicle Group normally experiences higher cost of
sales percentages but lower operating expense percentages than the
other groups. This was exacerbated in 1992 due to the late 1991
acquisitions of Superior Emergency Vehicles and Frontline Emergency
Vehicles. This trend reversed in 1993 due to improving gross
margins of three of the company's four groups, most notably Signal
and Sign. Due to the reorganization costs incurred in 1992 for
newly acquired businesses and certain costs incurred at Ravo for
development and other operational changes, the percentage of
selling, general and administrative expenses did not decline in 1992
as rapidly as normally would be expected. In 1993, however,
reductions in the percentage of selling, general and administrative
costs did occur. The reduction in 1993 occurred as a result of: 1)
higher sales, and the resultant impact of fixed costs being spread
over those higher sales, and 2) operational improvements made,
particularly in the Sign Group. All of the company's groups
continue to work toward reducing their manufacturing and purchase
costs as well as seek improved operating efficiencies.
Because of the varied nature of the company's operations, the
company recognizes that changes in operating income as a percentage
of net sales on a consolidated basis may sometimes distort its real
operating performance. In order to monitor the operating
performance of its operations, the company utilizes various methods,
one of which is a return on assets approach. Return on assets is
defined as operating income divided by the identifiable assets of
its businesses. In recent years, the company's operations have
achieved strong returns as summarized in the chart below.
The company has improved its returns on assets of its existing
businesses over the years by increasing profit margins and asset
turnover. Returns for the total company remained even with last
year's level. Return on assets for the Signal and Sign Groups
increased significantly above 1992 results while returns for the
Tool and Vehicle Groups declined. Excluding the effects of
acquisitions made in 1993 and late 1992, returns on manufacturing
assets for the total company and the Tool Group improved over 1992
results while the return for the Vehicle Group remained even.
The company acquires businesses which facilitate and meet the
company's growth and other strategic objectives. It is anticipated
that businesses acquired will not generate the same levels of
returns as the company's other businesses for some time following
their respective acquisition. However, the company's strategies
include making constant improvements in all of its businesses. The
results of these efforts are evidenced by the improving returns on
manufacturing assets of businesses operated for two years or more.
Excluding the effects of the companies acquired in 1993 and late
1992, the company's return on manufacturing assets increased to 24%
in 1993 from 22% in 1992. The declines in 1992 and 1991 were due
solely to the acquisitions made during those respective years or
late in previous years. Excluding the effects of companies acquired
in 1992 and late 1991, return on assets in 1992 was 26%, or equal to
1991's 26% determined on a similar basis. In addition to continuing
programs undertaken to reduce manufacturing and operating costs and
improve productivity, the company also has continuing programs to
improve asset turnover. Improving inventory turnover and
accelerating the collection of accounts receivable have also had a
significant positive impact on return on assets.
Interest expense declined $.3 million in 1993 following an increase
of $.8 million in 1992. The decline in 1993 was the result of lower
interest rates offset partially by increased average borrowings.
Increased borrowings were incurred to support increases in the
company's financial services activities, fund repurchases of the
company's stock at the end of 1992, and fund the purchase of Guzzler
Manufacturing in March 1993. Purchases of companies in 1992,
increases in the company's financial services assets and repurchases
of the company's stock at the end of 1991 resulted in the increase
in interest expense in 1992.
The company's effective tax rate of 32.3% in 1993 increased from
rates of 31.0% and 31.9% in 1992 and 1991, respectively, largely as
a result of the enacted change in the statutory federal income tax
rate in 1993.
Effective January 1, 1992, the company adopted the provisions of
Statements of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," and No. 109, "Accounting for Income Taxes." See
discussions of the respective provisions of these statements in
Note B to the financial statements. In November 1992, the Financial
Accounting Standards Board issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This statement is required
to be adopted no later than for the year ended 1994. The company
anticipates that the adoption of this statement will have an
insignificant impact on results of operations in 1994 and future
years.
At the end of 1993, the company changed its assumptions for discount
rates used in determining the actuarial present values of
accumulated and projected benefit obligations for its postretirement
plans from 8.5% to 7.6%. This reduction resulted from the lower
interest rate environment being experienced at the end of 1993. The
company also reduced its estimate for projected rates of increase in
compensation levels from 5% to 4% for future years as a result of
continued low levels of inflation, the expectation that low levels
will continue for the foreseeable future and the fact that average
increases, for some time, have been at lower than assumed rates.
The company expects that the changes in assumptions will have an
insignificant impact on 1994 results of operations.
Group Operations
Except for the company's Sign Group, domestic markets were generally
stronger in 1993 compared to relatively weak markets in 1992 and
1991. As mentioned previously, foreign sales declined somewhat from
the record levels achieved in 1992 due to weak economies experienced
in key overseas markets. All four of the company's groups
experienced increases in both sales and operating income in 1993.
The Sign and Signal Groups achieved the most significant earnings
increases.
Signal
All of the group's units experienced improved profitability in 1993
and contributed to the group's 20% increase in earnings. Signal
Group sales increased 9% in 1993 as all units also experienced
increased sales over 1992 levels. A small portion of the sales
increase was attributable to the full year inclusion of VAMA
acquired in May 1992. Domestic sales were up 3% while foreign sales
increased 35%. In 1992, earnings increased 22% on a sales increase
of 18%. About one-third of the sales increase in 1992 resulted from
the acquisition of VAMA. The group's 1992 domestic sales increased
13% while foreign sales increased 47% (9% excluding the effect of
VAMA).
For the seventh consecutive year, the Signal Group's operating
margin increased. Continued emphasis on cost reductions and the
impact of new product sales and increased penetration of foreign
markets contributed to the improved results including an increase in
the group's return on manufacturing assets. The Signal Group
continued its efforts to further improve its manufacturing
throughput and reduce manufacturing costs and operating expenses.
Signal Products continued to make improvements in its inventory
turnover. Reductions in inventories have resulted in LIFO credits
of $.3 million in 1993 and $.5 million in both 1992 and 1991. The
acquisition of VAMA in 1992 resulted in a dilutive effect on the
group's return on manufacturing assets. Excluding the effects of
VAMA, the group's return on manufacturing assets in 1992 increased
to 38%. The company expects that further operational improvements,
particularly at VAMA, will result in improved asset returns in the
future.
Sign
The Sign Group posted losses in 1992 and 1991 following profitable
years in 1989 and 1990. In 1993, Sign returned to profitability,
albeit at a modest level. Severe declines in 1990 and 1991 and an
additional slight decline in 1992 in commercial and industrial
construction activity caused severe price competition and excess
capacity in the custom sign industry. As a result, the Sign Group's
sales and profitability declined dramatically during that period.
In 1990, the group began taking steps to consolidate its
manufacturing resources. These efforts continued into 1993 along
with improvements in its systems and support activities. During
1993, Sign's markets appeared to have stabilized. Significant
reductions in operating expenses, increased training, and a focus on
higher margin sales resulted in improved profitability in 1993.
While the group's market conditions will likely continue to be weak
in the near term, management is confident that the group's markets
in 1994 will be somewhat similar to those experienced in 1993. The
steps taken by the group and the continued stable market conditions
expected for 1994 should result in improved operating results next
year.
Tool
In 1993, the Tool Group achieved a 7% increase in income and a 12%
increase in sales. Domestic sales increased 17% in 1993, of which
about one-half resulted from the late 1992 acquisition of Dico
Corporation. Foreign sales declined 7% in 1993 largely due to the
weak economies in Europe and Japan. All of the Tool Group businesses
achieved higher sales and earnings principally as a result of domestic
sales gains. The 1993 sales increases follow domestic and foreign
sales increases of 10% and 20%, respectively, in 1992. The decline in
the return on manufacturing assets in 1991 was principally due to
competitive price pressure which negatively affected margins. Returns
on manufacturing assets available through investments in newly
acquired companies have been lower than historical returns produced by
existing operations. As mentioned earlier, this is anticipated in the
company's acquisition objectives. Excluding the impact of Dico,
acquired in late 1992, the return on manufacturing assets increased to
42% in 1993 from 41% in 1992.
Vehicle
Earnings for the Vehicle Group increased 7% in 1993 on a sales
increase of 9%. Most of the sales increase and about half of the
earnings increase were attributable to the addition of the sales and
earnings of Guzzler Manufacturing, Inc., acquired in March 1993.
Domestic sales increased 20% in 1993. About half of the domestic
increase resulted from the acquisition of Guzzler. Foreign sales
declined 16% in 1993 from 1992's record levels due to weaker markets,
particularly in Europe. Sales in 1992 increased 12%, about two-thirds
of which resulted from the acquisitions of Superior Emergency Vehicles
and Frontline Emergency Vehicles. Earnings increased 3% in 1992 as
performance improvements at Emergency One were partially offset by
substantial reorganization costs incurred by newly acquired businesses
and by costs related to product development and operational changes at
Ravo. Return on manufacturing assets declined in 1992 and again in
1993 due to the effects of companies acquired. Excluding the impact
of the acquisition of Guzzler in 1993, return on manufacturing assets
was 17%.
Financial Services Activities
The company maintains a large investment ($111.6 million at 1993's
year-end) in lease financing receivables which are generated
principally by its vehicle operations with the balance generated by
its sign operations. These assets continued to be conservatively
leveraged at or below the company's stated financial objectives for
these assets for the five-year period ending December 31, 1993 (see
further discussion in Financial Position and Cash Flow).
Financial services assets have repayment terms generally ranging from
two to ten years. The increases in these assets resulted from
increasing sales of the Vehicle Group as well as continuing greater
acceptance by customers of the benefits of using Federal as their
source of financing vehicle purchases.
Financial Position and Cash Flow
The company continues to place emphasis on generating strong cash
flows from its operations. During 1993, cash flow from operations
increased to a level of $48.8 million compared to $40.2 million in
1992 and $43.9 million in 1991. These results are directly reflective
of: 1) efforts to lower costs; and 2) the amount of improvement
(reduction) in the relative amounts of working capital required to
support the company's increased sales volumes. The company has
reduced its working capital to sales ratio by nearly half since 1987
principally by improving its days-sales-outstanding and inventory
turnover ratios. As a result of the reductions achieved so far, the
company anticipates that significant further reduction in the working
capital to sales ratio is unlikely to be achieved going forward.
Nevertheless, the company expects to continue to focus aggressively on
improving its efficiencies and costs as well as its working capital
management.
During the 1989-1993 period, the company has utilized its strong cash
flows from operations to: 1) fund in whole or in part strategic
acquisitions of companies operating in markets related to those
already served by the company; 2) purchase increasing amounts of
equipment principally to provide for further cost reductions and
increased productive capacity for the future as well as tooling for
new products; 3) increase its investment in financial services
activities; 4) pay increasing amounts in cash dividends to
shareholders; and 5) repurchase up to 1-2% of its outstanding common
stock each year.
Cash flows for the five-year period ending December 31, 1993 are
summarized as follows:
(in millions of dollars)
1993 1992 1991 1990 1989
Cash provided by
(used for):
Operating activities $ 48.8 $ 40.2 $ 43.9 $ 48.3 $ 34.6
Investing activities (38.1) (26.9) (47.8) (14.7) (24.1)
Financing activities (10.3) (11.2) 2.5 (34.6) (8.9)
Increase (decrease) in
cash and cash
equivalents $ .4 $ 2.1 $ (1.4) $ (1.0) $ 1.6
In order to present the distinct characteristics of the company's
investment in its manufacturing activities and its investment in its
financial services activities, the company has presented separately
these investments and their related liabilities. Each of these two
types of activities are supported by different percentages of debt and
equity.
One of the company's financial objectives is to maintain a strong
financial position. The company defines its goal as normally having a
debt to capitalization ratio of 30% or less for its manufacturing
operations. At December 31, 1993 and 1992, the company's debt to
capitalization ratios of its manufacturing operations were 1% and 2%,
respectively. Also, at December 31, 1993 and 1992, the company's debt
to capitalization ratios for its financial services activities were
86% and 82%, respectively. The company believes that its financial
assets, due to their overall quality, are capable of sustaining a
leverage ratio in the range of 85% to 87% on average. The company
intends to maintain this range of leverage for its financial
activities in the future and at the same time fulfill its financial
objective with respect to its manufacturing debt to capitalization
ratio. These intentions are consistent with its investment grade
credit rating obtained in connection with its commercial paper
program.
As indicated earlier, substantial effort is focused on improving the
utilization of the company's working capital. The company's current
ratio for its manufacturing operations was 1.5 at December 31, 1993
and 1.6 at December 31, 1992. These ratios are slightly lower than
those in prior years as a result of reduced working capital needs for
receivables and inventories and improved management of cash
disbursements. The company anticipates that its financial resources
and major sources of liquidity, including cash flow from operations,
will continue to be adequate to meet its operating and capital needs
in addition to its financial commitments.
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Assets
Manufacturing activities:
Current assets
Cash and cash equivalents $ 2,576,000 $ 2,223,000
Accounts receivable, net of allowances
for doubtful accounts of $2,215,000
and $1,688,000, respectively 81,593,000 70,704,000
Inventories - Note C 63,022,000 58,185,000
Prepaid expenses 4,627,000 4,618,000
Total current assets 151,818,000 135,730,000
Properties and equipment - Note D 62,204,000 61,269,000
Other assets
Intangible assets, net of accumulated amortization 65,436,000 54,272,000
Other deferred charges and assets 15,666,000 8,399,000
Total manufacturing assets 295,124,000 259,670,000
Financial services activities
Lease financing receivables, net of allowances for
doubtful accounts of $976,000 and $1,138,000,
respectively, and net of unearned finance
revenue - Note E 110,580,000 103,989,000
Total assets $405,704,000 $363,659,000
Liabilities and Shareholders' Equity
Manufacturing activities:
Current liabilities
Short-term borrowings - Note F $ 282,000 $ 259,000
Accounts payable 33,363,000 26,074,000
Accrued liabilities
Compensation and withholding taxes 16,601,000 16,004,000
Other - Note B 44,541,000 37,544,000
Income taxes - Notes B and G 4,269,000 6,349,000
Total current liabilities 99,056,000 86,230,000
Other liabilities
Long-term borrowings - Note F 1,344,000 3,548,000
Deferred income taxes - Notes B and G 10,929,000 9,435,000
Total manufacturing liabilities 111,329,000 99,213,000
Financial services activities - Note F
Short-term borrowings 75,433,000 72,794,000
Long-term borrowings 19,734,000 12,672,000
Total financial services liabilities 95,167,000 85,466,000
Total liabilities 206,496,000 184,679,000
Contingency - Note M
Shareholders' equity - Notes I and J
Common stock, $1 par value, 90,000,000 shares
authorized, 45,738,000 and 34,478,000 shares
issued, respectively 45,738,000 34,478,000
Capital in excess of par value 54,045,000 71,422,000
Retained earnings - Note F 105,471,000 82,160,000
Treasury stock, 264,000 shares, at cost (5,227,000)
Deferred stock awards (1,715,000) (1,941,000)
Foreign currency translation adjustment (4,331,000) (1,912,000)
Total shareholders' equity 199,208,000 178,980,000
Total liabilities and shareholders' equity $405,704,000 $363,659,000
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Net sales $565,163,000 $518,223,000 $466,939,000
Other income, net 1,048,000 1,214,000 691,000
Costs and expenses
Cost of sales 383,087,000 353,231,000 317,135,000
Selling, general and administrative 118,192,000 109,834,000 99,257,000
Interest expense 6,136,000 6,471,000 5,649,000
Total costs and expenses 507,415,000 469,536,000 422,041,000
Income before income taxes 58,796,000 49,901,000 45,589,000
Income taxes - Note G 19,016,000 15,471,000 14,543,000
Income before cumulative effects of changes in
accounting methods 39,780,000 34,430,000 31,046,000
Cumulative effects of changes in accounting
methods - Note B 30,000
Net income $ 39,780,000 $ 34,460,000 $ 31,046,000
Net income per share* $ 0.86 $ 0.75 $ 0.67
Average common shares outstanding* 46,293,000 46,128,000 46,126,000
<FN>
*adjusted for 4-for-3 stock split distributable March 1, 1994
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Operating activities
Net income $39,780,000 $34,460,000 $31,046,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,215,000 8,732,000 8,225,000
Cumulative effects of changes in accounting methods (30,000)
Provision for doubtful accounts 2,710,000 2,521,000 2,310,000
Deferred income taxes (350,000) 2,213,000 266,000
Other, net (1,844,000) (764,000) 1,576,000
Changes in operating assets and liabilities net of
effects from acquisitions and divestitures of companies
Accounts receivable (10,742,000) 1,165,000 (6,307,000)
Inventories (400,000) 1,054,000 7,680,000
Prepaid expenses (935,000) 1,126,000 (431,000)
Accounts payable 5,193,000 (4,170,000) 1,857,000
Accrued liabilities 3,378,000 (4,474,000) (1,270,000)
Income taxes 2,746,000 (1,594,000) (1,049,000)
Net cash provided by operating activities 48,751,000 40,239,000 43,903,000
Investing activities
Purchases of properties and equipment (10,139,000) (8,835,000) (12,034,000)
Principal extensions under lease financing agreements (70,470,000) (66,400,000) (61,351,000)
Principal collections under lease financing agreements 64,041,000 63,063,000 40,096,000
Payments for purchases of companies, net of cash acquired (22,869,000) (14,825,000) (17,042,000)
Other, net 1,378,000 79,000 2,540,000
Net cash used for investing activities (38,059,000) (26,918,000) (47,791,000)
Financing activities
Addition to short-term borrowings 2,542,000 8,160,000 19,773,000
Principal payments on long-term borrowings (1,002,000) (1,215,000) (843,000)
Principal extensions under long-term borrowings 5,080,000
Purchases of treasury stock (1,778,000) (4,679,000) (5,597,000)
Cash dividends paid to shareholders (15,938,000) (13,848,000) (11,710,000)
Other, net 757,000 391,000 846,000
Net cash provided by (used for) financing activities (10,339,000) (11,191,000) 2,469,000
Increase (decrease) in cash and cash equivalents 353,000 2,130,000 (1,419,000)
Cash and cash equivalents at beginning of year 2,223,000 93,000 1,512,000
Cash and cash equivalents at end of year $ 2,576,000 $ 2,223,000 $ 93,000
<FN>
See notes to consolidated financial statements.
</TABLE>
Federal Signal Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note A - Significant Accounting Policies
Principles of consolidation: The consolidated financial statements
include the accounts of Federal Signal Corporation and all of its
subsidiaries.
Cash equivalents: The company considers all highly liquid
investments with a maturity of three months or less, when purchased,
to be cash equivalents.
Inventories: Inventories are stated principally at the lower of
last-in, first-out (LIFO) cost or market.
Properties and depreciation: Properties and equipment are stated at
cost. Depreciation, for financial reporting purposes, is computed
principally on the straight-line method over the estimated useful
lives of the assets.
Intangible assets: Intangible assets principally consist of costs in
excess of fair values of net assets acquired in purchase transactions
and are generally being amortized over forty years. Accumulated
amortization aggregated $6,737,000 and $4,949,000 at December 31,
1993 and 1992, respectively.
Revenue recognition: Substantially all of the company's sales are
recorded as products are shipped or services are rendered. The
percentage-of-completion method of accounting is used in certain
instances for custom-manufactured products where, due to the nature
of specific orders, production and delivery schedules exceed normal
schedules.
Income per share: Income per share was computed on the basis of the
weighted average number of common and common equivalent shares
(dilutive stock options) outstanding during the year. Income per
share amounts have been restated to give retroactive effect to the
split to be distributed March 1, 1994 (See Note K).
Note B - Changes in Accounting for Postretirement Benefits and
Income Taxes
Effective January 1, 1992, the company adopted the provisions of
Statements of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," and No. 109, "Accounting for Income Taxes." The
provisions of SFAS No. 106 require that expenses associated with
certain postretirement benefits be recognized during the eligible
service lives of the respective employees. Prior to adoption of SFAS
No. 106, the company recorded the expenses for such benefits when the
claims were incurred. The company elected to recognize the
transition obligation of $1,931,000 ($1,231,000 net of the related
income tax benefits) immediately in net income in 1992, the year of
adoption. The provisions of SFAS No. 109 require that income tax
liabilities and assets are to be determined based upon tax rates and
legislation enacted as of the respective balance sheet date. Prior
to the company's adoption of SFAS No. 109, the company's income tax
liabilities and assets were determined using historical tax rates.
The company elected to record the cumulative adjustment of $1,261,000
in net income in 1992, the year of adoption. Net income and related
per share amounts would not be significantly different if the
provisions of these statements had been used by the company in 1991.
The following summarizes the changes in the balance sheet at
December 31, 1992 resulting from the adoptions of SFAS No. 106 and
No. 109.
Increase (decrease) in $000
SFAS SFAS
No. 106 No. 109 Total
Manufacturing assets $ $ (210) $ (210)
Manufacturing liabilities 1,231 (1,471) (240)
Retained earnings (1,231) 1,261 30
Note C - Inventories
Inventories at December 31 are summarized as follows:
1993 1992
Finished goods $15,860,000 $11,856,000
Work in process 18,567,000 19,975,000
Raw materials 28,595,000 26,354,000
Total inventories $63,022,000 $58,185,000
If the first-in, first-out cost method, which approximates
replacement cost, had been used by the company, inventories would
have aggregated $71,541,000 and $66,981,000 at December 31, 1993 and
1992, respectively.
Note D - Properties and Equipment
A comparative summary of properties and equipment at December 31 is
as follows:
1993 1992
Land $ 5,502,000 $ 5,578,000
Buildings and improvements 36,014,000 34,279,000
Machinery and equipment 93,481,000 88,607,000
Accumulated depreciation (72,793,000)(67,195,000)
Total properties and equipment $62,204,000 $61,269,000
Note E - Lease Financing Receivables
As an added service to its customers, the company is engaged in
financial services activities. These activities primarily consist of
providing long-term financing for certain customers of the company's
sign and vehicle operations. A substantial portion of the lease
financing receivables of the Vehicle Group are due from
municipalities. Financing is provided through sales-type lease
contracts with terms which range typically as follows:
Sign-related leases 3 - 5 years
Vehicle-related leases 2 - 10 years
At the inception of the lease, the company records the product sales
price and related costs and expenses of the sale. Financing revenues
are included in income over the life of the lease. The amounts
recorded as lease financing receivables represent amounts equivalent
to normal selling prices less subsequent customer payments.
Lease financing receivables will become due as follows:
$40,239,000 in 1994, $21,077,000 in 1995, $16,666,000 in 1996,
$12,104,000 in 1997, $8,062,000 in 1998 and $13,408,000 thereafter.
At December 31, 1993 and 1992, unearned finance revenue on these
leases aggregated $18,924,000 and $21,328,000, respectively.
Note F - Debt
Short-term borrowings at December 31 consisted of the following:
1993 1992
Commercial paper $21,422,000 $
Notes payable 53,021,000 72,794,000
Current maturities of long-term debt 1,272,000 259,000
Total short-term borrowings $75,715,000 $73,053,000
Long-term borrowings at December 31 consisted of the following:
1993 1992
7.59% unsecured note payable in 2001
($4,000,000) and 2002 ($8,000,000) $12,000,000 $12,000,000
6.58% unsecured discounted notes
payable in eight annual installments
of $1,000,000 beginning in 1994 and
ending in 2001 6,403,000
Other 3,947,000 4,479,000
Subtotal 22,350,000 16,479,000
Less current maturities 1,272,000 259,000
Total long-term borrowings $21,078,000 $16,220,000
The above amounts of short-term and long-term borrowings are
apportioned to the following activities of the company at December
31:
Short-term 1993 1992
Manufacturing activities $ 282,000 $ 259,000
Financial services activities 75,433,000 72,794,000
Total short-term borrowings $75,715,000 $73,053,000
Long-term
Manufacturing activities $ 1,344,000 $ 3,548,000
Financial services activities 19,734,000 12,672,000
Total long-term borrowings $21,078,000 $16,220,000
The company's financial assets are, due to their overall quality,
capable of sustaining a leverage ratio of 85% to 87% on average.
Mortgage debt and debt not otherwise apportioned to the company's
financial activities is apportioned to manufacturing activities.
Aggregate maturities of long-term debt amount to approximately
$1,272,000 in 1994, $1,186,000 in 1995, $1,122,000 in 1996,
$3,399,000 in 1997 and $1,042,000 in 1998. The company believes that
the fair values of borrowings are not substantially different from
recorded amounts.
The 7.59% note was renegotiated in late 1993; as a result, the
interest rate was reduced from 10.85% and the amounts payable were
each extended seven years beyond the original respective payment
dates. The note contains various restrictions relating to
maintenance of minimum working capital, amount of short-term debt,
payments of cash dividends, purchases of the company's stock, and
principal and interest of any subordinated debt. All of the
company's retained earnings at December 31, 1993 were free of any
restrictions.
At December 31, 1993, the company had various agreements with
financial institutions to swap interest rates on notional amounts
totaling $15,000,000 thereby reducing its exposure to floating
interest rates on a portion of its outstanding variable rate loans.
The agreements provide that the company will pay interest at an
average fixed annual rate of 6.09% and will receive interest based
upon the London Interbank Offered Rate (LIBOR) or the Federal Reserve
Statistical Release (Form H.15) one-month composite commercial paper
rate. The agreements expire in various amounts and at various dates
from 1994 to 1995.
The company paid interest of $5,437,000 in 1993, $5,871,000 in 1992
and $5,527,000 in 1991.
At December 31, 1993, the company had unused credit lines of
$60,000,000, which expire on June 20, 1996. Commitment fees, paid in
lieu of compensating balances, were insignificant.
Note G - Income Taxes
The provisions for income taxes consisted of the following:
1993 1992 1991
Current:
Federal and foreign $17,200,000 $11,817,000 $12,919,000
State and local 1,946,000 1,441,000 1,358,000
Total 19,146,000 13,258,000 14,277,000
Deferred (credit):
Federal and foreign (226,000) 2,117,000 243,000
State and local (124,000) 96,000 23,000
Total (350,000) 2,213,000 266,000
Enacted rate change
effect on deferred
liabilities 220,000
Total income taxes $19,016,000 $15,471,000 $14,543,000
Differences between the statutory federal income tax rate and the
effective income tax rate are summarized below:
1993 1992 1991
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of federal
tax benefit 2.0 2.0 2.0
Tax-exempt interest (3.0) (3.4) (3.5)
Enacted rate change effect on
deferred liabilities .4
Other, net (2.1) (1.6) (.6)
Effective income tax rate 32.3% 31.0% 31.9%
In the accompanying balance sheets, the caption "Income taxes"
includes net deferred income tax benefits of $2,057,000 in 1993 and
$110,000 in 1992. The company paid income taxes of $16,938,000 in
1993, $13,503,000 in 1992 and $14,208,000 in 1991.
Deferred tax liabilities (assets) comprised the following at
December 31, 1993: Depreciation and amortization - $10,708,000;
revenue recognized on lease financing receivables and custom
manufacturing contracts - $8,393,000; accrued expenses deductible in
future periods - $(7,593,000); and other $(2,636,000). Deferred tax
liabilities (assets) comprised the following at December 31, 1992:
Depreciation and amortization - $9,572,000; revenue recognized on
lease financing receivables and custom manufacturing contracts -
$7,678,000; accrued expenses deductible in future periods -
$(6,556,000); and other $(1,369,000).
Note H - Postretirement Benefits
The company and its subsidiaries sponsor a number of defined benefit
retirement plans covering certain of its salaried employees and
hourly employees not covered by plans under collective bargaining
agreements. Benefits under these plans are primarily based on final
average compensation as defined within the provisions of the
individual plans. The company's policy is to contribute amounts
sufficient to meet the minimum funding requirements of applicable
laws and regulations. Plan assets consist principally of a broadly
diversified portfolio of equity securities, corporate and U.S.
Government obligations and guaranteed-return insurance contracts.
The company also participates in several multiemployer retirement
plans which provide benefits to employees under certain collective
bargaining agreements.
Pension expense is summarized as follows:
1993 1992 1991
Company-sponsored plans
Service cost $1,511,000 $1,415,000 $1,350,000
Interest cost 2,290,000 2,053,000 1,923,000
Return on plan assets (6,428,000) (3,827,000) (6,171,000)
Other amortization and
deferral 1,943,000 (219,000) 2,591,000
Total (684,000) (578,000) (307,000)
Multiemployer plans 561,000 530,000 508,000
Total pension expense
(credit) $ (123,000) $ (48,000) $ 201,000
The following summarizes the funded status of the company-sponsored
plans at December 31, 1993 and 1992 and the major assumptions used
to determine these amounts. At December 31, 1993 and 1992, all of
the company's plans had assets which exceeded accumulated benefits.
1993 1992
Actuarial present value of:
Vested benefit obligation $24,193,000 $18,674,000
Nonvested benefits 1,874,000 1,369,000
Accumulated benefit obligation $26,067,000 $20,043,000
Actuarial present value of projected
benefit obligation $32,457,000 $26,808,000
Plan assets at market value 45,058,000 39,843,000
Plan assets in excess of projected
benefit obligation 12,601,000 13,035,000
Unrecognized net obligation at
January 1, 1993 and 1992,
respectively (2,455,000) (2,640,000)
Unrecognized net experience
(gain) (10,646,000) (11,579,000)
Accrued pension liability $( 500,000) $(1,184,000)
The following significant assumptions were used in determining
pension costs for the years ended December 31, 1993, 1992 and 1991:
1993 1992 1991
Discount rate 8.5% 8.5% 9%
Rate of increase in
compensation levels 5% 5% 6%
Expected long-term rate of
return on plan assets 11% 11% 11%
The company also provides certain medical, dental and life benefits
to certain eligible retired employees. These benefits are funded
when the claims are incurred. Participants generally become
eligible for these benefits at age 60 after completing at least
fifteen years of service. The plan provides for the payment of
specified percentages of medical and dental expenses reduced by any
deductible and payments made by other primary group coverage and
government programs. The corporation will continue to reduce the
percentage of the cost of benefits that it will pay as the company's
future costs are limited to 150% of the 1992 cost.
As indicated in Note B, the company adopted the provisions of SFAS
No. 106 in 1992. The following table sets forth the status of the
retiree health care benefits at December 31, 1993 and 1992,
respectively:
1993 1992
Accumulated postretirement benefit
obligation:
Retirees $ 696,000 $ 511,000
Fully eligible active
plan participants 22,000 15,000
Other active plan participants 1,465,000 1,486,000
Accrued postretirement benefit
liability $2,183,000 $2,012,000
The net periodic postretirement benefit cost for 1993 and 1992
consisted of the following:
1993 1992
Service cost of benefits earned $ 89,000 $ 94,000
Interest cost on accumulated
postretirement benefit obligation 163,000 167,000
Net periodic postretirement
benefit cost $252,000 $261,000
The expected postretirement benefit obligation was measured using an
assumed 12% increase in the per capita claims medical costs and a
10% increase in the per capita dental claims costs for 1993 and
1994. These increases are reduced by .65% and .55%, respectively,
after 1993 through 2003 and remain at 5.5% and 4.5%, respectively,
thereafter. The weighted average discount rate used in determining
the accumulated postretirement benefit obligation was 7.6% at
December 31, 1993 and 8.5% at January 1, 1992 and December 31, 1992.
If the health care cost trend rates were increased 1%, the
accumulated postretirement benefit obligation as of December 31,
1993 would have increased by 1%. The effect of this change on the
aggregate of service and interest cost for 1993 would be an increase
of 2%.
Note I - Stock Options and Awards
The company's stock benefit plan, approved by the company's
shareholders, authorizes the grant of up to 2,737,500 (as adjusted
for subsequent stock splits and dividends) benefit shares or units
to key employees and directors until May 1998. This excludes shares
which were issued under predecessor plans. Benefit shares or units
include stock options, both incentive and non-incentive, stock
awards and other stock units.
Stock options are primarily granted at the fair market value of the
shares on the date of grant and become exercisable one year after
grant at a rate of one-half annually and are exercisable in full on
the second anniversary date. All options and rights must be
exercised within 10 years from date of grant. At the company's
discretion, vested stock option holders are permitted to elect an
alternative settlement method in lieu of purchasing common stock at
the option price. The alternative settlement method permits the
employee to receive, without payment to the company, cash, shares of
common stock or a combination thereof equal to the excess of market
value of common stock over the option purchase price.
Changes in outstanding shares under option during 1993 (adjusted for
the 4-for-3 stock split to be distributed March 1, 1994) were as
follows:
Option price
Option shares range
Outstanding at December 31, 1992 1,815,911 $ 2.80-$17.19
Granted 217,720 $16.59-$20.63
Canceled or expired (18,285) $11.50-$17.34
Exercised (321,012) $ 2.80-$17.19
Outstanding at December 31, 1993 1,694,334 $ 2.80-$20.63
Exercisable at December 31, 1993 1,208,431 $ 2.80-$15.47
Stock award shares are granted to employees at no cost. Awards
primarily vest at the rate of 25% annually commencing one year from
the date of award, provided the recipient is still employed by the
company on the vesting date. The cost of stock awards, based on the
fair market value at the date of grant, is being charged to expense
over the four-year vesting period.
Available for future grant were 658,707 and 894,875 benefit shares or
units at December 31, 1993 and 1992, respectively.
<TABLE>
Note J - Shareholders' Equity
The company has 90,000,000 authorized shares of common stock, $1 par value and 800,000 authorized and unissued shares
of preference stock, $1 par value.
The changes in shareholders' equity for each of the three years in the period ended December 31, 1993 were as follows:
<CAPTION>
Foreign
Common Capital in Deferred currency
stock excess of Retained Treasury stock translation
par value par value earnings stock awards adjustment
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1990 - 23,200,000 shares
issued $23,200,000 $87,500,000 $43,311,000 $(7,274,000) $(1,199,000) $ 896,000
Net income 31,046,000
Cash dividends declared (12,294,000)
Conversion of debentures 26,000 236,000
Exercise of stock options:
Cash proceeds 120,000 733,000
Exchange of shares 101,000 583,000 (684,000)
Stock awards granted 66,000 1,524,000 (1,590,000)
Stock awards canceled (1,000) (8,000) 9,000
Tax benefits related to
stock compensation plans 2,001,000
Retirement of treasury
stock (52,000) (1,332,000) 1,384,000
Purchases of 235,000 shares
of treasury stock (5,597,000)
Issuance related to
acquisitions 81,000 1,919,000
Amortization of deferred
stock awards 662,000
Foreign currency
translation adjustment 107,000
Other (700,000)
Balance at December 31,
1991 - 23,541,000 shares
issued 23,541,000 93,156,000 62,063,000 (12,871,000) (2,118,000) 1,003,000
Net income 34,460,000
Cash dividends declared (14,363,000)
Conversion of debentures 133,000 798,000
Exercise of stock options:
Cash proceeds 56,000 337,000
Exchange of shares 69,000 300,000 (369,000)
Stock awards granted 26,000 508,000 (534,000)
Tax benefits related to
stock compensation plans 656,000
Retirement of treasury
stock (44,000) (812,000) 856,000
Purchases of 264,000 shares
of treasury stock (5,249,000)
3-for-2 stock split,
10,697,000 shares issued 10,697,000 (23,590,000) 12,893,000
Amortization of deferred
stock awards 711,000
Foreign currency
translation adjustment (2,915,000)
Other 69,000 (487,000)
Balance at December 31,
1992 - 34,478,000 shares
issued 34,478,000 71,422,000 82,160,000 (5,227,000) (1,941,000) (1,912,000)
Net income 39,780,000
Cash dividends declared (16,469,000)
Exercise of stock options:
Cash proceeds 86,000 438,000
Exchange of shares 155,000 938,000 (1,093,000)
Stock awards granted 30,000 659,000 (689,000)
Stock awards canceled (2,000) (57,000) 59,000
Tax benefits related to
stock compensation plans 1,562,000
Retirement of treasury
stock (81,000) (1,929,000) 2,010,000
Purchases of 99,000 shares
of treasury stock (2,689,000)
4-for-3 stock split,
11,072,000 shares issued 11,072,000 (18,988,000) 7,916,000
Amortization of deferred
stock awards 856,000
Foreign currency
translation adjustment (2,419,000)
Other (917,000)
Balance at December 31,
1993 - 45,738,000 shares
issued $45,738,000 $54,045,000 $105,471,000 $ - $(1,715,000) $(4,331,000)
</TABLE>
In June 1988, the company declared a dividend distribution of one
preferred share purchase right on each share of common stock
outstanding on and after July 5, 1988. The rights are not
exercisable until the rights distribution date, defined as the
earlier of: (1) the tenth day following a public announcement that a
person or group of affiliated or associated persons acquired or
obtained the right to acquire beneficial ownership of 20% or more of
the outstanding common stock or (2) the tenth day following the
commencement or announcement of an intention to make a tender offer
or exchange offer, the consummation of which would result in the
beneficial ownership by a person or group of 30% or more of such
outstanding common shares. Each right, when exercisable, entitles
the holder to purchase from the company one one-hundredth of a share
of Series A Preferred stock of the company at a price of $90 per one
one-hundredth of a preferred share, subject to adjustment. The
company is entitled to redeem the rights at $.10 per right, payable
in cash or common shares, at any time prior to the expiration of
twenty days following the public announcement that a 20% position has
been acquired. In the event that the company is acquired in a merger
or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold, proper provision will
be made so that each holder of a right will thereafter have the right
to receive, upon the exercise thereof at the then current exercise
price of a right, that number of shares of common stock of the
acquiring company which at the time of such transaction would have a
market value of two times the exercise price of the right. The
rights expire on July 5, 1998 unless earlier redeemed by the company.
Until exercised, the holder of a right, as such, will have no rights
as a shareholder, including, without limitation, the right to vote or
to receive dividends.
Note K - Subsequent Event
On February 3, 1994, the company's board of directors authorized a
4-for-3 stock split to be distributed March 1, 1994. The number of
common shares issued as of December 31, 1993 and per share data for
all years presented have been adjusted retroactively as if the split
had occurred on that date.
Note L - Acquisitions and Divestitures
During the three-year period ended December 31, 1993, the company
made the following acquisitions, all principally for cash and
earnouts to be based upon the future profitability of the respective
business, except as noted. Generally, earnouts are payable at the
end of a five-year period, a portion of which are sometimes
guaranteed. In March 1993, the company acquired the outstanding
shares of Guzzler Manufacturing, Inc., an Alabama-based manufacturer
of vacuum loader vehicles. As a result of this acquisition, the
company recorded approximately $6.0 million of working capital, $6.1
million of fixed and other assets, $.8 million of debt assumed and
$12.7 million of costs in excess of fair values. In November 1992,
the company acquired the outstanding shares of Dico Corporation, a
Michigan-based manufacturer of polycrystalline diamond and cubic
boron nitride cutting tools. In May 1992, the company acquired the
outstanding shares of Aplicaciones Tecnologicas Vama S.L., a leading
European manufacturer of emergency vehicular signaling products
located in Barcelona, Spain. In March 1992, the company acquired the
assets of Schneider Stanznormalien GmbH, a German manufacturer of
precision punch and die components, for cash. As a result of the
1992 acquisitions, the company recorded approximately $7.2 million of
working capital, $2.8 million of fixed and other assets, $.5 million
of debt assumed and $12.0 million of costs in excess of fair values.
In December 1991, the company acquired, in two independent
transactions, the outstanding shares of Superior Emergency Equipment,
Ltd. (Superior) and Frontline Corporation. Superior is a Canadian-
based manufacturer of a full range of fire truck bodies primarily for
the Canadian market. Frontline manufactured ambulances and rescue
trucks. In October 1991, the company purchased for cash and stock,
the outstanding shares of Container Tool Corporation, a manufacturer
of precision beverage can tooling. As a result of the 1991
acquisitions, the company recorded approximately $4.8 million of
working capital, $2.6 million of fixed and other assets, $3.5 million
of debt assumed and $15.9 million of costs in excess of fair values.
All of the acquisitions in the three-year period ended December 31,
1993 have been accounted for as purchases. Accordingly, the results
of operations of the acquired companies have been included in the
consolidated statements of income from the effective dates of the
acquisitions. Assuming the 1993 acquisitions occurred on January 1,
1992 and the 1992 acquisitions occurred on January 1, 1991, the
company estimates that consolidated net sales would have been
increased 1% and 7% in 1993 and 1992, respectively, while net income
would not have been materially different from amounts reported.
Note M - Contingency
On May 3, 1993, a Texas federal court jury rendered a verdict of
$17,745,000 against Federal Sign, a division of the company, for
alleged violation of the Texas Deceptive Trade Practices Act and
misrepresentations to Duravision, Inc. and Manufacturers Product
Research Group of North America, Inc. in connection with a 1988
research and development project for indoor advertising signs. The
company believes the court erroneously excluded important evidence
and that the verdict was against the weight of the evidence. Both
inside and outside counsel that initially handled the case opined at
the time of the verdict that the likelihood of a substantially
unfavorable result to the company on appeal was remote. Trial
counsel has turned the case over to new appellate counsel and has
stated they cannot currently give an opinion on the appeal because
they are no longer handling the case. Appellate counsel now handling
the appeal of the case has not issued an opinion on its outcome.
However, if the company loses its appeal of this case, there would be
a charge to earnings for this verdict, plus interest and attorney
fees. The company believes that the ultimate resolution of this
contingency will not have a material effect on its financial
condition, and accordingly, the company has not recorded any accruals
for potential losses resulting from this judgment.
Note N - Segment Information
The principal activities of the company's primary industry segments
are as follows:
Signal Group: The Signal Group produces a variety of visual and
audible warning and signal devices used by private industry and
various governmental agencies, paging, local signaling, and building
security, parking and access control systems.
Sign Group: The Sign Group manufactures for sale or lease
illuminated, non-illuminated and electronic advertising sign
displays. It also enters into contracts to provide maintenance
service for the signs it manufactures as well as for signs
manufactured by others.
Tool Group: The Tool Group manufactures a variety of perishable
tools which include die components for the metal stamping industry,
a large selection of precision metal products for non-stamping needs
and a line of precision cutting and deep grooving tools.
Vehicle Group: The Vehicle Group manufactures chassis, fire trucks
including Class A pumpers, mini-pumpers and tankers, airport and
other rescue vehicles, ambulances and aerial ladder trucks, a
variety of self-propelled street cleaning vehicles, vacuum loader
vehicles and catch basin cleaners.
Total revenue by business segment reflects sales to unaffiliated
customers, as reported in the company's consolidated statements of
income. Operating profit includes all costs and expenses directly
related to the segment involved. In determining operating profit,
neither corporate nor interest expenses were included. Business
segment depreciation expense, identifiable assets and capital
expenditures relate to those assets that are utilized by the
respective business segment. Corporate assets consist principally
of cash and cash equivalents, notes and other receivables and fixed
assets.
Foreign sales, including export and foreign operations, aggregated
$113,210,000 in 1993, $121,332,000 in 1992 and $79,875,000 in 1991.
Export sales aggregated $59,324,000 in 1993, $61,355,000 in 1992 and
$39,439,000 in 1991.
A summary of the company's operations by geographic area for the
three-year period ended December 31, 1993 is as follows (in
thousands):
1993 1992 1991
United States
Net sales $511,277 $458,246 $426,503
Operating income 62,977 53,863 48,026
Identifiable assets 353,172 307,088 295,723
All foreign (principally
Europe, Canada and Japan)
Net sales $ 53,886 $ 59,977 $ 40,436
Operating income 907 1,295 2,521
Identifiable assets 52,532 56,571 45,443
For the years ended December 31,
(in thousands)
1993 1992 1991
Net sales
Signal $104,927 $ 95,946 $ 81,240
Sign 58,550 56,074 59,031
Tool 111,879 99,619 88,947
Vehicle 289,807 266,584 237,721
Total net sales $565,163 $518,223 $466,939
Operating income
Signal $ 16,159 $ 13,518 $ 11,063
Sign 1,169 (1,815) (1,846)
Tool 23,273 21,715 19,583
Vehicle 30,289 28,267 27,458
Corporate expense (7,006) (6,527) (5,711)
Total operating income 63,884 55,158 50,547
Interest expense ( 6,136) ( 6,471) (5,649)
Other income 1,048 1,214 691
Income before income taxes $ 58,796 $ 49,901 $ 45,589
Depreciation
Signal $ 1,757 $ 1,792 $ 1,757
Sign 1,684 1,856 1,958
Tool 2,313 1,957 1,789
Vehicle 3,412 3,082 2,673
Corporate 49 45 48
Total depreciation $ 9,215 $ 8,732 $ 8,225
Identifiable assets
Manufacturing activities
Signal $ 51,092 $ 47,043 $ 35,962
Sign 24,480 23,237 23,762
Tool 62,035 61,803 49,736
Vehicle 142,158 120,507 128,864
Corporate 15,359 7,080 1,909
Total manufacturing
activities 295,124 259,670 240,233
Financial services activities
Sign 17,282 19,958 21,944
Vehicle 93,298 84,031 78,989
Total financial services
activities 110,580 103,989 100,933
Total identifiable assets $405,704 $363,659 $341,166
Capital expenditures
Signal $ 2,675 $ 1,366 $ 1,544
Sign 988 1,227 1,557
Tool 2,614 2,710 2,710
Vehicle 3,848 3,513 6,219
Corporate 14 19 4
Total capital expenditures $ 10,139 $ 8,835 $ 12,034
<TABLE>
Note O - Selected Quarterly Data (Unaudited)
(in thousands of dollars except per share amounts)
<CAPTION>
For the three months ended
1 9 9 3 1 9 9 2
March June September December March June September December
31 30 30 31 31 30 30 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $127,447 $146,463 $142,740 $148,513 $119,817 $131,909 $135,513 $130,984
Gross margin $ 40,472 $ 46,244 $ 46,365 $ 48,995 $ 37,214 $ 42,048 $ 42,689 $ 43,041
Net income (a) $ 7,151 $ 10,602 $ 10,661 $ 11,366 $ 6,205 $ 9,332 $ 9,275 $ 9,648
Per share data (b):
Net income (a) $ .15 $ .23 $ .23 $ .25 $ .13 $ .20 $ .20 $ .21
Dividends paid $ .09 $ .09 $ .09 $ .09 $ .08 $ .08 $ .08 $ .08
Market price range
High $ 18 1/4 $ 19 $ 21 $ 21 $ 17 5/8 $ 17 1/8 $ 15 3/8 $ 16 1/4
Low 15 3/4 16 1/2 17 7/8 19 1/2 14 1/8 13 12 3/8 13 1/4
<FN>
(a) three months ended March 31, 1992 includes $30 (fractional amount per share) relating to the cumulative
effects of changes in accounting for postretirement benefits and income taxes (see Note B).
(b) amounts adjusted for the 4-for-3 stock split distributable March 1, 1994.
</TABLE>
Report of Ernst & Young, Independent Auditors
To the Shareholders and Board of Directors
of Federal Signal Corporation
We have audited the accompanying consolidated balance sheets of
Federal Signal Corporation and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Federal Signal Corporation and subsidiaries as of December 31,
1993 and 1992, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note B to the financial statements, in 1992 the
company changed its methods of accounting for postretirement benefits
and income taxes.
Ernst & Young
Chicago, Illinois
January 25, 1994, except for
Note K, as to which the date is
February 3, 1994
APPENDIX A
----------
FEDERAL SIGNAL CORPORATION
1993 Annual Report Graphic Material
The following table sets forth bar graph information contained in the
Financial Review section of the 1993 Annual Report paper format. It
is presented here in tabular format in order to conform with
electronic filing requirements.
(IN PERCENT)
1989 1990 1991 1992 1993
RETURN ON MANUFACTURING
ASSETS:
Total Company (1) 24% 25% 24% 22% 22%
Signal 19% 24% 30% 31% 34%
Sign 19% 10% -10% -12% 1%
Tool (2) 46% 46% 44% 41% 37%
Vehicle (3) 16% 21% 22% 17% 15%
WORKING CAPITAL TO SALES:
Total Company 15% 11% 9% 10% 10%
(1) excluding acquisitions, return was 24% in 1993
(2) excluding acquisitions, return was 42% in 1993
(3) excluding acquisitions, return was 17% in 1993
EXHIBIT 21
FEDERAL SIGNAL CORPORATION
Subsidiaries of the Registrant
The following table sets forth information concerning significant
subsidiaries of the Registrant.
Jurisdiction
in which
Name Organized
---------------------------------------- --------------
Aplicaciones Tecnologicas VAMA S.L. Spain
Bassett Rotary Tool Company Indiana
Container Tool Corp. New Jersey
Dayton Progress Canada, Ltd. Ontario, Canada
Dayton Progress Corporation Ohio
Dayton Progress International Corporation Ohio
Dayton Progress (U.K.), Ltd. United Kingdom
Dico Corporation Michigan
Elgin Sweeper Company Delaware
Emergency One, Inc. Delaware
Federal APD, Inc. Michigan
Federal Signal Credit Corporation Delaware
Federal Signal International (FSC), Ltd. Jamaica, W.I.
Guzzler Manufacturing, Inc. Alabama
Jamestown Punch and Tooling, Inc. New York
Manchester Tool Company Delaware
Nippon Dayton Progress K.K. Japan
Ravo International (Van Raaij Holdings BV
and its subsidiaries) Netherlands
Schneider Stanznormalien GmbH Germany
Superior Emergency Vehicles, Ltd. Alberta, Canada
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Federal Signal Corporation of our report dated January 25, 1994,
except for Note K as to which the date is February 3, 1994, included in the
1993 Annual Report to Shareholders of Federal Signal Corporation.
Our audits also included the financial statement schedules of Federal
Signal Corporation listed in item 14(a)2. These schedules are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 Nos. 33-12876, 33-22311, 33-38494, 33-41721 and 33-
49476) pertaining to the Stock Option Plan and Employee Savings and
Investment Plans of our report dated January 25, 1994, except for Note K as
to which the date is February 3, 1994, with respect to the consolidated
financial statements incorporated herein by reference, and our report
included in the preceding paragraph with respect to the financial statement
schedules included in this Annual Report (Form 10-K) of Federal Signal
Corporation.
Ernst & Young
Chicago, Illinois
March 25, 1994
