<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1994
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAL SIGNAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW YORK 38230 16-0445660
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06904
(203) 329-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
EDGAR J. SMITH, JR.
GENERAL SIGNAL CORPORATION
HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06904
(203) 329-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
W. LESLIE DUFFY, ESQ. MICHAEL L. MILLER, ESQ.
WILLIAM B. GANNETT, ESQ. CALFEE, HALTER & GRISWOLD
CAHILL GORDON & REINDEL 800 SUPERIOR AVENUE
80 PINE STREET CLEVELAND, OH 44114
NEW YORK, NY 10005 (216) 622-8200
(212) 701-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of Reliance Electric Company
("Reliance") with and into the Registrant pursuant to the Merger Agreement
disclosed in the enclosed Prospectus have been satisfied or are waived.
If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED(1) REGISTERED(1)(2) PER SHARE(3) PRICE(3) FEE(4)
- ------------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value....... 34,048,329 Shares $24.5625 $836,312,081 $288,383
- ------------------------------------------------------------------------------------------------------------
Class B Common Stock, $1.00 par
value............................. 12,841,253 Shares $2.8066 $36,040,260 $12,428
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Also includes associated General Signal Rights and Class B Rights. See
"Description of General Signal Capital Stock."
(2) The amount of common stock, par value $1.00 per share, of the Registrant
(the "Common Stock") to be registered has been determined on the basis of
the conversion ratio for such shares in the Merger (0.739 of a share of
Common Stock for each outstanding share of common stock, par value $.01 per
share (the "Reliance Class A Stock"), of Reliance Electric Company
("Reliance")) and the maximum number of shares of Reliance Class A Stock
(34,048,329) to be exchanged in the Merger, assuming the exercise prior to
the effective time of the Merger (the "Effective Time") of all Reliance
stock options that are, or prior to the Effective Time will be, exercisable.
The amount of Class B Common Stock, par value $1.00 per share, of the
Registrant (the "Class B Common Stock"), to be registered has been
determined on the basis of the conversion ratio for such shares in the
Merger (each share of Reliance Class B Common Stock, par value $.01 per
share ("Reliance Class B Stock"), is exchangeable for 0.739 shares of Class
B Common Stock and each share of Reliance Class C Common Stock, par value
$.01 per share ("Reliance Class C Stock"), is exchangeable for 2.001 shares
of Class B Common Stock) and the number of shares of Reliance Class B Stock
and Reliance Class C Stock that are outstanding, 3,161,032 and 5,250,000,
respectively.
(3) The maximum aggregate offering price is estimated pursuant to (i) Rule
457(f)(1) of the Securities Act of 1933, as amended (the "Securities Act"),
in the case of the Common Stock, based upon the market value of the shares
of Reliance Class A Stock to be cancelled in the Merger ($24 9/16 per share,
which is the average of the high and low sales prices of a share of Reliance
Class A Stock on the New York Stock Exchange, Inc. on October 12, 1994), and
(ii) Rule 457(f)(2) of the Securities Act, in the case of the Class B Common
Stock, based on the book value, as of September 30, 1994, of 3,161,032
shares of Reliance Class B Stock ($1.99 per share) and 5,250,000 shares of
Reliance Class C Stock ($5.67 per share) to be cancelled in the Merger. The
proposed maximum offering price per share has been determined by dividing
the maximum aggregate offering price (calculated in accordance with the
previous sentence) by the number of shares being registered hereby.
(4) A fee of $262,065 was paid on September 19, 1994 pursuant to Section
14(g)(1)(A)(i) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 0-11 promulgated thereunder ("Rule 0-11") in
respect of the Merger upon the filing by the Registrant and Reliance of
joint preliminary proxy materials relating thereto. Pursuant to Rule 457(b)
promulgated under the Securities Act, and Rule 0-11 and Section 14(g)(1)(B)
of the Exchange Act, the amount of such previously paid fee has been
credited against the registration fee payable in connection with this
filing. Accordingly, an additional filing fee of $38,746 is being paid with
this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE SHEET BETWEEN ITEMS IN
FORM S-4 AND PROSPECTUS PURSUANT TO
ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION HEADING IN PROSPECTUS
- -------- ---------------- ---------------------
<S> <C> <C>
Item 1 Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of Prospectus
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus..................... Available Information; Incorporation of
Documents by Reference; Table of
Contents
Item 3 Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Summary; The Merger
Item 4 Terms of the Transaction................ Summary; The Merger; The Merger
Agreement; Certain Related Matters;
Certain Tax Consequences; Description of
General Signal Capital Stock;
Comparative Rights of Stockholders
Item 5 Pro Forma Financial Information......... Summary; Unaudited Pro Forma Combined
Condensed Financial Statements
Item 6 Material Contacts with the Company Being
Acquired................................ Summary; The Merger; Certain Related
Matters
Item 7 Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Not Applicable
Item 8 Interests of Named Experts and
Counsel................................. Legal Matters; Experts
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
Item 10 Information with Respect to S-3
Registrants............................. Not Applicable
Item 11 Incorporation of Certain Information by
Reference............................... Incorporation of Documents by Reference
Item 12 Information with Respect to S-2 or S-3
Registrants............................. Not Applicable
Item 13 Incorporation of Certain Information by
Reference............................... Not Applicable
Item 14 Information with Respect to Registrants
Other Than S-2 or S-3 Registrants....... Not Applicable
Item 15 Information with Respect to S-3
Companies............................... Incorporation of Documents by Reference
Item 16 Information with Respect to S-2 or S-3
Companies............................... Not Applicable
Item 17 Information with Respect to Companies
Other Than S-2 or S-3 Companies......... Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations are to be Solicited...... Summary; Stockholder Meetings; The
Merger; Board of Directors and
Management of General Signal
Item 19 Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer................. Not Applicable
</TABLE>
<PAGE> 3
[General Signal Letterhead]
[ ], 1994
Dear Shareholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Special Meeting of Shareholders to be held on [Insert DATE and
TIME] at the Corporation's headquarters, One High Ridge Park, Stamford,
Connecticut 06904.
The Notice of Special Meeting and Proxy Statement accompany this letter and
provide an outline of the business to be conducted at the meeting.
At the Special Meeting, shareholders will be asked to adopt an Agreement
and Plan of Merger, for the merger of Reliance Electric Company with and into
General Signal Corporation with General Signal surviving under the name
[ ]. In connection with the Merger, General Signal will issue up
to 37,166,616 shares of Common Stock, of which up to 12,842,365 may be shares of
a new Class B Common Stock. Shareholders also will be asked to vote on the
election of seven new directors to the General Signal Board of Directors.
The merger of General Signal and Reliance is a unique opportunity to
combine two leading industrial companies that have an outstanding complementary
business fit. General Signal and Reliance manufacture a similar range of
electrical, mechanical, and telecommunications equipment for a wide variety of
industrial customers and serve many common industries. This merger creates a
company with more product breadth and depth to compete globally as a world-class
supplier of electrical, mechanical, and telecommunications products and
services.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING. THE
ADOPTION OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF TWO-THIRDS OF
THE OUTSTANDING SHARES OF COMMON STOCK. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON, I URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED. YOUR VOTE IS IMPORTANT.
SINCERELY,
EDMUND M. CARPENTER
Chairman and
Chief Executive
Officer
<PAGE> 4
GENERAL SIGNAL CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ], 1994
---------------------------
The Special Meeting of Stockholders of GENERAL SIGNAL CORPORATION (the
"Corporation") will be held at the Corporation's headquarters, One High Ridge
Park, Stamford, Connecticut 06904 on [Day], [Date], [Time] for the following
purposes:
1. To consider and vote upon a proposal to adopt an Agreement and Plan
of Merger dated August 30, 1994 (the "Merger Agreement"), between General
Signal Corporation, a New York corporation, and Reliance Electric Company,
a Delaware corporation, and the transactions contemplated therein,
including the merger of Reliance with and into General Signal with General
Signal surviving under the name " " and the amendment of the
Certificate of Incorporation to increase the authorized number of shares of
Common Stock to 250,000,000 shares, to authorize 26,500,000 shares of a new
Class B Common Stock and to change the name of the Corporation to
[ ], all upon the terms and conditions set forth in the Merger
Agreement (the "Merger"). The Merger and the transactions contemplated
thereby are more completely described in the accompanying Joint Proxy
Statement/Prospectus and a copy of the Merger Agreement is attached as
Annex A thereto.
2. To elect seven additional directors as provided in the Joint Proxy
Statement/Prospectus.
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on [ ],
1994 will be entitled to vote at the meeting.
By Order of the Board of Directors
EDGAR J. SMITH, JR.
Vice President,
General Counsel
and Secretary
[ ], 1994
---------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE AND
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
---------------------------
<PAGE> 5
[LOGO]
RELIANCE ELECTRIC COMPANY
6065 PARKLAND BOULEVARD
CLEVELAND, OHIO 44124-6106
, 1994
To the Stockholders of Reliance Electric Company:
You are cordially invited to attend a Special Meeting of Stockholders of
Reliance Electric Company to be held at The Forum Conference Center, One
Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio on ,
1994, at a.m., local time.
At the Special Meeting, holders of Reliance's Class A Common Stock will be
asked to adopt a Merger Agreement providing for the merger between Reliance and
General Signal Corporation. The surviving corporation will be " ,"
a New York corporation. In the merger, each outstanding share of Reliance Class
A Common Stock will be converted into 0.739 shares of " " Common
Stock, each outstanding share of Reliance Class B Common Stock will be converted
into 0.739 shares of " " Class B Common Stock, and each
outstanding share of Reliance Class C Common Stock will be converted into 2.001
shares of " " Class B Common Stock.
This merger is a unique opportunity to combine two leading industrial
companies that have an outstanding complementary business fit. Reliance and
General Signal manufacture a wide range of electrical, mechanical, electronic
and telecommunications equipment for a wide variety of industrial customers and
serve many common industries. This merger creates a company with a significantly
greater ability to compete globally as a supplier of industrial products.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE ADOPTION OF THE MERGER AGREEMENT.
A Proxy Card and an Advance Registration Form are enclosed. Please indicate
your voting instructions and sign, date, and return the Proxy Card promptly in
the return envelope provided. If you plan to attend the Special Meeting, please
return, with your signed Proxy, the completed Advance Registration Form and an
admission ticket will be sent to you. Whether or not you plan to attend the
Special Meeting in person, it is important that you return the enclosed Proxy
Card so that your shares are voted.
Sincerely,
JOHN C. MORLEY
President
and
Chief
Executive
Officer
<PAGE> 6
RELIANCE ELECTRIC COMPANY
6065 PARKLAND BOULEVARD
CLEVELAND, OHIO 44124-6106
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
, 1994
A Special Meeting of Stockholders of Reliance Electric Company ("Reliance")
(including any adjournments or postponements thereof, the "Reliance Meeting")
will be held on , 1994 at a.m., local time, at The Forum
Conference Center, One Cleveland Center, 1375 East Ninth Street, Cleveland,
Ohio, for the purpose of voting on the adoption of an Agreement and Plan of
Merger, dated August 30, 1994 (the "Merger Agreement"), by and between Reliance
and General Signal Corporation ("General Signal"), providing for the merger of
Reliance with and into General Signal, with General Signal as the surviving
corporation under the name " ", as described in the accompanying
Joint Proxy Statement/Prospectus, and all other matters properly coming before
the Reliance Meeting which relate to the Merger Agreement and the transactions
contemplated thereby.
Only holders of record of Reliance Class A Common Stock as of the close of
business on , 1994 have the right to receive notice of and to vote
at the Reliance Meeting.
The accompanying document constitutes the Joint Proxy Statement/Prospectus
of Reliance and General Signal for their respective special meetings of
stockholders. A copy of the Merger Agreement is attached as Annex A to the Joint
Proxy Statement/Prospectus and copies of the Amended and Restated Certificate of
Incorporation and By-laws of the surviving corporation are attached as Annexes B
and C, respectively, to the Joint Proxy Statement/Prospectus.
YOU ARE CORDIALLY INVITED TO ATTEND THE RELIANCE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
STOCKHOLDERS WHO ATTEND THE RELIANCE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON.
By Order of the Board of Directors
WILLIAM R. NORTON
Vice President,
General Counsel
and Secretary
Cleveland, Ohio
, 1994
<PAGE> 7
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 19, 1994
---------------------------
GENERAL SIGNAL CORPORATION RELIANCE ELECTRIC COMPANY
JOINT PROXY STATEMENT AND PROSPECTUS
---------------------------
This Joint Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is
being furnished to stockholders of General Signal Corporation ("General Signal")
and Reliance Electric Company ("Reliance") in connection with the solicitation
of proxies by the respective Boards of Directors of such corporations for use at
their respective Special Meetings of Stockholders (including any adjournments or
postponements thereof) to be held on [ ], 1994. This Proxy
Statement/Prospectus relates to the proposed merger of Reliance with and into
General Signal (the "Merger") with General Signal as the surviving corporation
under the name "[ ]" (the "Surviving Corporation"), pursuant to
the Agreement and Plan of Merger (the "Merger Agreement"), dated August 30,
1994, between General Signal and Reliance.
This Proxy Statement/Prospectus also constitutes a prospectus of General
Signal with respect to up to 37,166,616 shares of common stock, par value $1.00
per share, and the associated common stock purchase rights (the "Common Stock"
or "General Signal Common Stock"), and up to 12,842,365 shares of a new Class B
common stock, par value $1.00 per share, and the associated common stock
purchase rights (the "Class B Common Stock"; and together with the Common Stock,
the "Shares"), issuable to Reliance stockholders in the Merger. The Class B
Common Stock is non-voting and each share is convertible at any time at the
option of the holder into one share of Common Stock.
This Proxy Statement/Prospectus and accompanying forms of proxy are first
being mailed to stockholders of General Signal and Reliance on or about
[ ], 1994.
---------------------------
THE SECURITIES ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The date of this Proxy Statement/Prospectus is , 1994
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 1
INCORPORATION OF DOCUMENTS BY REFERENCE............................................... 1
SUMMARY............................................................................... 3
INTRODUCTION.......................................................................... 16
THE COMPANIES......................................................................... 16
General Signal Corporation.......................................................... 16
Reliance Electric Company........................................................... 16
STOCKHOLDER MEETINGS.................................................................. 17
Date; Place; Time; Record Date...................................................... 17
Matters to Be Considered at the Special Meetings.................................... 17
Votes Required; Quorum.............................................................. 17
Proxies............................................................................. 18
Solicitation of Proxies............................................................. 18
THE MERGER............................................................................ 20
Background of the Merger............................................................ 20
Reasons for the Merger; Recommendations of the Boards of Directors.................. 20
Opinions of Financial Advisors...................................................... 22
Interests of Certain Persons in the Merger.......................................... 31
Resales by Affiliates of Reliance................................................... 32
Governmental Regulation............................................................. 32
Appraisal Rights.................................................................... 32
Accounting Treatment................................................................ 33
Board of Directors and Management After the Effective Time.......................... 34
Corporate Headquarters Location After the Merger.................................... 35
Security Ownership of Management and Certain Other Beneficial Owners................ 35
THE MERGER AGREEMENT.................................................................. 39
Representations and Warranties...................................................... 40
Covenants........................................................................... 40
No Solicitation..................................................................... 40
Conditions.......................................................................... 41
Termination......................................................................... 41
Fees and Expenses................................................................... 42
Indemnification; Insurance.......................................................... 43
Amendment........................................................................... 43
Waivers; Consents................................................................... 43
CERTAIN RELATED MATTERS............................................................... 44
CSCL Agreement...................................................................... 44
General Signal Rights Agreement Amendment........................................... 44
Reliance Rights Agreement........................................................... 44
Reliance Employee Benefit Plans..................................................... 45
</TABLE>
i
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 46
CERTAIN TAX CONSEQUENCES.............................................................. 50
General............................................................................. 50
Federal Income Tax Consequences of the Merger....................................... 50
Exercise of Appraisal Rights........................................................ 51
BOARD OF DIRECTORS AND MANAGEMENT OF GENERAL SIGNAL................................... 52
Directors' Compensation............................................................. 53
Executive Compensation.............................................................. 55
DESCRIPTION OF GENERAL SIGNAL CAPITAL STOCK........................................... 66
COMPARATIVE RIGHTS OF STOCKHOLDERS.................................................... 67
Amendments to Certificate of Incorporation.......................................... 67
Amendments to By-laws............................................................... 67
Directors........................................................................... 67
Removal of Directors................................................................ 68
Newly Created Directorships and Vacancies........................................... 68
Vote Required for Certain Transactions.............................................. 68
Business Combinations............................................................... 69
Appraisal Rights.................................................................... 70
Limitation on Directors' Liability.................................................. 70
Indemnification..................................................................... 70
Loans to Directors and Officers..................................................... 71
Special Meetings.................................................................... 71
Stockholder Action.................................................................. 71
Stockholder Action by Written Consent............................................... 72
Payment of Dividends................................................................ 72
Rights or Options................................................................... 72
Preemptive Rights................................................................... 72
LEGAL MATTERS......................................................................... 73
EXPERTS............................................................................... 73
STOCKHOLDER PROPOSALS................................................................. 73
Annex A -- Agreement and Plan of Merger
Annex B -- Form of Restated Certificate of Incorporation of the Surviving Corporation
Annex C -- Form of Restated By-laws of the Surviving Corporation
Annex D -- Section 262 of the Delaware General Corporation Law
Annex E -- Fairness Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
Annex F -- Fairness Opinion of Goldman, Sachs & Co.
Annex G -- Fairness Opinion of Prudential Securities Incorporated
</TABLE>
ii
<PAGE> 10
AVAILABLE INFORMATION
General Signal and Reliance are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and other information with the Securities and
Exchange Commission (the "Commission") relating to their business, financial
position, results of operations and other matters. Such reports and other
information can be inspected and copied at the Public Reference Section
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its Regional Offices located at The Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade
Center, 15th Floor, New York, New York 10048. Copies of such material also can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The General Signal
Common Stock and the Reliance Class A Common Stock are listed on the New York
Stock Exchange ("NYSE") and the General Signal Common Stock also is listed on
the Pacific Stock Exchange ("PSE"). Such material can also be inspected at the
offices of such exchanges. The offices of such exchanges are: the New York Stock
Exchange, 20 Broad Street, New York, New York 10005 and the Pacific Stock
Exchange, 115 Sansome Street, Suite 1104, San Francisco, California 94104.
General Signal has filed with the Commission a registration statement on
Form S-4 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Shares offered hereby. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to the
Registration Statement and to the exhibits relating thereto for further
information with respect to General Signal, Reliance and the Shares offered
hereby.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by General Signal (File
No. 1-996) and Reliance (File No. 1-10404) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement/Prospectus:
1. General Signal's Annual Report on Form 10-K for the year ended
December 31, 1993;
2. General Signal's Quarterly Reports on Form 10-Q for the three
months ended March 31, 1994, as amended by Form 10-Q/A filed on June 10,
1994, and the six months ended June 30, 1994;
3. General Signal's Current Reports on Form 8-K dated March 27, 1986,
June 21, 1990 and June 17, 1993;
4. General Signal's Form 8-A/A-3 dated , 1994;
5. Reliance's Annual Report on Form 10-K for the year ended December
31, 1993; and
6. Reliance's Quarterly Reports on Form 10-Q for the three months
ended March 31, 1994 and the six months ended June 30, 1994.
All documents and reports filed by General Signal and Reliance pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of their special meetings of
stockholders shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL
1
<PAGE> 11
OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL
REQUEST, IN THE CASE OF DOCUMENTS RELATING TO GENERAL SIGNAL, TO GENERAL SIGNAL
CORPORATION, ONE HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904 (TELEPHONE NUMBER
(203) 329-4100), ATTN: CORPORATE SECRETARY, OR, IN THE CASE OF DOCUMENTS
RELATING TO RELIANCE, TO RELIANCE ELECTRIC COMPANY, 6065 PARKLAND BOULEVARD,
CLEVELAND, OHIO 44124 (TELEPHONE NUMBER (216) 266-5800), ATTN: CORPORATE
SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE INCORPORATED DOCUMENTS,
REQUESTS SHOULD BE RECEIVED NO LATER THAN [ ], 1994.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of the securities made under this Proxy Statement/Prospectus shall,
under any circumstances, create an implication that there has been no change in
the affairs of General Signal or Reliance since the date of this Proxy
Statement/Prospectus.
2
<PAGE> 12
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement/Prospectus. This summary does not contain a complete statement of all
material information relating to General Signal, Reliance, the Merger or the
Merger Agreement and is qualified in all respects by reference to the more
detailed information and financial statements contained elsewhere or
incorporated by reference in this Proxy Statement/Prospectus.
GENERAL
This Proxy Statement/Prospectus is being furnished in connection with the
Merger Agreement between General Signal and Reliance. A copy of the Merger
Agreement is attached as Annex A to this Proxy Statement/Prospectus.
THE COMPANIES
General Signal Corporation
One High Ridge Park
Stamford, Connecticut
06904
(203) 329-4100........... General Signal Corporation, incorporated in New
York in 1904, designs, manufactures and sells
equipment and instruments for the process control,
electrical, automotive, mass transportation and
telecommunications industries. General Signal
serves these markets through three product sectors:
(i) Process Controls, (ii) Electrical Controls and
(iii) Industrial Technology.
Reliance Electric Company
6065 Parkland Blvd.
Cleveland, Ohio 44124
(216) 266-5800........... Reliance Electric Company, incorporated in Delaware
in 1986 to succeed to its predecessor business
formed in 1904, designs, manufactures and sells
industrial motors and related controls, generators,
transformers, mechanical power transmission
products and systems, and telecommunications
equipment. Reliance is organized into two business
segments: Industrial and Telecommunications.
STOCKHOLDER MEETINGS
Meetings of Stockholders... A Special Meeting of the stockholders of General
Signal will be held at its headquarters, One High
Ridge Park, Stamford, Connecticut, on [date and
time], Eastern Standard Time ("EST") (including any
postponements or adjournments thereof, the "General
Signal Special Meeting"). A Special Meeting of the
stockholders of Reliance will be held at The Forum
Conference Center, One Cleveland Center, 1375 East
Ninth Street, Cleveland, Ohio on [date and time],
EST (including any postponements or adjournments
thereof, the "Reliance Special Meeting" and,
together with the General Signal Special Meeting,
the "Special Meetings").
Matters to Be Considered
at the Special
Meetings................. At the General Signal Special Meeting the
stockholders of General Signal will consider and
vote upon (i) the adoption of the Merger Agreement
and the transactions contemplated therein (the
"Merger Proposal"), including the merger of
Reliance with and into General Signal with General
Signal surviving under the name " " and
the amendment of the Certificate of Incorporation
to increase the
3
<PAGE> 13
authorized number of shares of Common Stock to
250,000,000 shares, to authorize 26,500,000 shares
of the new Class B Common Stock, and to change the
name of General Signal to [ ], and (ii) the
election to the Board of Directors of seven new
directors (the "New Directors"), effective as of
the effective time of the Merger (the "Effective
Time"), of whom six are currently directors of
Reliance and one is an individual designated by
Court Square Capital Limited, a wholly owned
subsidiary of Citicorp ("CSCL"), pursuant to an
agreement between CSCL and General Signal dated
August 29, 1994 (the "CSCL Agreement").
At the Reliance Special Meeting, the holders of
shares of Reliance Class A Common Stock will
consider and vote upon the adoption of the Merger
Agreement and the transactions contemplated
therein.
Vote Required.............. General Signal. Pursuant to Section 903 of the New
York Business Corporation Law ("NYBCL"), the
affirmative vote of two-thirds of the outstanding
shares of Common Stock is required to adopt the
Merger Proposal. Pursuant to Section 614 of the
NYBCL the New Directors will be elected by a
plurality of votes cast at the General Signal
Special Meeting, assuming a quorum is present.
Reliance. Pursuant to Section 252 of the Delaware
General Corporation Law ("DGCL"), the affirmative
vote of more than 50% of the outstanding shares of
Reliance Class A Common Stock is required to adopt
the Merger Agreement.
Record Date................ The record date for the General Signal Special
Meeting and the Reliance Special Meeting is
, 1994.
THE MERGER
Merger Terms............... The Merger Agreement provides that, subject to the
requisite approval of General Signal's and
Reliance's stockholders and the satisfaction or
waiver of certain other conditions, at the
Effective Time (i) Reliance shall be merged with
and into General Signal as the Surviving
Corporation under the name [ ] and
shall continue its corporate existence under the
laws of the State of New York, (ii) each share of
(a) Reliance Class A Common Stock, par value $.01
per share (the "Reliance Class A Common Stock"),
shall be converted into the right to receive 0.739
(the "Conversion Ratio") shares of Common Stock;
(b) Reliance Class B Common Stock, par value $.01
per share ("Reliance Class B Common Stock"), shall
be converted into the right to receive 0.739 shares
of Class B Common Stock or, at the holder's
election, 0.739 shares of Common Stock; and (c)
Reliance Class C Common Stock, par value $.01 per
share ("Reliance Class C Common Stock"; and
together with the Reliance Class A Common Stock and
the Reliance Class B Common Stock, the "Reliance
Shares"), shall be converted into the right to
receive 2.001 (the "Class C Conversion Ratio")
shares of Class B Common Stock or, at the holder's
election, 2.001 shares of Common Stock, (iii) the
status of all securities of General Signal issued
or reserved for issuance will remain unchanged, and
(iv) the Merger shall have the effects on Reliance
and General Signal as constituent corporations of
the Merger as provided under the DGCL and the
NYBCL. See "The Merger Agreement."
4
<PAGE> 14
Reasons for the Merger;
Recommendations of the
Boards of Directors...... On August 29, 1994, the Board of Directors of
General Signal unanimously approved the Merger
Agreement and the Merger as being in the best
interests of its stockholders and resolved to
recommend that its stockholders (i) adopt the
Merger Agreement and the transactions contemplated
therein, including the merger of Reliance with and
into General Signal with General Signal surviving
under the name " " and the amendment of
the Certificate of Incorporation to increase the
authorized Common Stock to 250,000,000 shares, to
authorize 26,500,000 shares of the new Class B
Common Stock and to change the name of General
Signal to [ ], and (ii) elect seven new
directors to the Board of Directors, of whom six
are currently directors of Reliance and one is an
individual designated by CSCL pursuant to the CSCL
Agreement. See "The Merger -- Reasons for the
Merger; Recommendations of the Boards of
Directors."
On August 29, 1994, the Board of Directors of
Reliance unanimously approved the Merger Agreement
and the Merger as being in the best interests of
its stockholders and resolved to recommend that its
stockholders adopt the Merger Agreement and the
transactions contemplated thereby. See "The
Merger -- Reasons for the Merger; Recommendations
of the Boards of Directors."
Opinions of Financial
Advisors................. General Signal has received the opinion of
Donaldson, Lufkin & Jenrette Securities
Corporation, to the effect that, as of August 29,
1994, the consideration to be paid by General
Signal as the Surviving Corporation to the
stockholders of Reliance is fair to General
Signal's stockholders from a financial point of
view. The written opinion of Donaldson, Lufkin &
Jenrette Securities Corporation, dated August 29,
1994, is attached to this Proxy Statement/
Prospectus as Annex E and should be read in its
entirety. See "The Merger -- Opinions of Financial
Advisors."
Reliance has received the oral opinions of (i)
Goldman, Sachs & Co. to the effect that, as of
August 29, 1994, the Exchange Ratio (defined as the
Conversion Ratio together with the Class C
Conversion Ratio) is fair to the holders of
Reliance Shares and (ii) Prudential Securities
Incorporated to the effect that, as of August 29,
1994, the Exchange Ratio (defined as the Conversion
Ratio together with the Class C Conversion Ratio)
is fair to Reliance stockholders from a financial
point of view. The written opinions of Goldman,
Sachs & Co. and Prudential Securities Incorporated,
each dated [ ], 1994, are attached to this
Proxy Statement/Prospectus as Annexes F and G,
respectively, and should be read in their entirety.
See "The Merger -- Opinions of Financial Advisors."
Interests of Certain
Persons in the Merger.... The Merger Agreement includes certain provisions
relating to the indemnification of Reliance's
officers and directors and provides for the
continuation of current directors' and officers'
liability insurance for Reliance directors and
officers. See "The Merger Agreement --
Indemnification; Insurance."
Prior to executing the Merger Agreement, the
Reliance Board of Directors adopted a Change in
Control Severance Pay Plan for certain
5
<PAGE> 15
Reliance executives to provide severance benefits
similar to those provided to similarly situated
executives at General Signal. The Reliance Board of
Directors also amended certain other existing
employee benefits for Reliance employees in
contemplation of the Merger. In addition, General
Signal has agreed not to amend the terms of certain
Reliance retirement plans for two years following
the Merger. See "The Merger -- Interests of Certain
Persons in the Merger."
Pursuant to the Merger Agreement, the Board of
Directors and the management of the Surviving
Corporation shall be as described under "The
Merger -- Board of Directors and Management After
the Effective Time."
Effective Time of the
Merger................... If the Merger Agreement is adopted by General
Signal's and Reliance's stockholders and the other
conditions to the Merger are satisfied or waived,
the Merger will be consummated and become effective
at the time of filing of, or at such later time
specified in, a certificate of merger to be filed
with the Secretary of State of the State of
Delaware in accordance with the provisions of
Section 252 of the DGCL and by the Department of
State of the State of New York in accordance with
the provisions of Section 904 of the NYBCL.
Assuming all other conditions of the Merger are
satisfied or waived, the Merger is expected to
become effective as promptly as practicable after
obtaining the necessary approval of General
Signal's and Reliance's stockholders. See "The
Merger Agreement."
Conditions to the Merger;
Termination.............. The obligations of General Signal and Reliance to
effect the Merger are subject to the satisfaction
or waiver of certain conditions set forth in the
Merger Agreement, including, among other things,
that General Signal and Reliance have received a
letter from Ernst & Young LLP, reasonably
satisfactory to each party in all respects, that,
in their opinion, the Merger will qualify for
pooling-of-interests accounting treatment, and a
letter from Cahill Gordon & Reindel that, in their
opinion, for federal income tax purposes, the
Merger will be treated as a tax-free
reorganization. See "The Merger
Agreement -- Conditions." The Merger Agreement may
be terminated (i) by mutual consent of General
Signal and Reliance, (ii) by either party if the
Merger is not consummated on or before March 31,
1995, (iii) by either party if any court of
competent jurisdiction in the United States or
other governmental body in the United States shall
have issued an order (other than a temporary
restraining order), decree or ruling or taken any
other action restraining, enjoining or otherwise
prohibiting the Merger, (iv) by either party if the
requisite stockholder approval of either General
Signal or Reliance has not been obtained at the
applicable Special Meeting, (v) by either party if
there has occurred since June 30, 1994 a material
adverse change in the other party, (vi) by one
party if the Board of Directors of the other party
shall withdraw, modify or change its recommendation
of the Merger Agreement or the Merger in a manner
adverse to the other party, or shall have
recommended any proposal in respect of an
Acquisition Transaction (as defined in the Merger
Agreement), (vii) by one party if the Board of
Directors of the other party shall furnish or
disclose non-public information or negotiate,
explore or otherwise communicate in any way with a
third party with respect to any Acquisition
Transaction,
6
<PAGE> 16
or shall have resolved to do any of the foregoing
and publicly disclosed such resolution, and (viii)
in certain other situations. Under certain
circumstances, if the Merger Agreement is
terminated, the terminating party may be entitled
to receive a termination fee of $50 million and the
payment of its fees and expenses relating to the
transaction. See "The Merger
Agreement -- Termination, Effect of Termination and
Fees and Expenses."
Governmental and Regulatory
Matters.................. The Merger is subject to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations
thereunder, which provide that certain transactions
may not be consummated until required information
and material have been furnished to the Antitrust
Division of the Department of Justice (the "Justice
Department") and the Federal Trade Commission (the
"FTC") and certain waiting periods have expired or
been terminated. General Signal and Reliance filed
the required information and material with the
Justice Department and the FTC on September 20,
1994. See "The Merger -- Governmental Regulation."
Certain Federal Income Tax
Consequences............. It is expected that the Merger will qualify as a
tax-free reorganization for federal income tax
purposes. Accordingly, no gain or loss should be
recognized by holders of Reliance Shares upon
receipt solely of the Shares in the Merger in
exchange for such Reliance Shares. See "Certain Tax
Consequences." Reliance and General Signal
stockholders are urged to consult their own tax
advisors as to the specific tax consequences to
them of the Merger. See "Certain Tax Consequences."
Accounting Treatment....... The Merger is expected to qualify as a
pooling-of-interests for accounting and financial
reporting purposes. The receipt of a letter from
Ernst & Young LLP by each of General Signal and
Reliance, confirming that the Merger will qualify
for pooling-of-interests accounting is a condition
to consummation of the Merger.
Comparative Rights of
Stockholders............. For a comparison of New York and Delaware laws and
of the respective certificates of incorporation and
by-laws of General Signal and of Reliance governing
the rights of General Signal stockholders and
Reliance stockholders, respectively, see
"Comparative Rights of Stockholders."
Appraisal Rights........... Holders of Reliance Class A Common Stock do not
have statutory appraisal rights. Holders of
Reliance Class B Common Stock and Reliance Class C
Common Stock have a statutory right to elect to
have the fair value of their shares judicially
appraised and to receive cash in lieu of the
Shares. See "The Merger -- Appraisal Rights." CSCL,
as the only holder of Reliance Class C Common
Stock, has agreed not to exercise its appraisal
rights. See "Certain Related Matters -- CSCL
Agreement."
7
<PAGE> 17
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE MERGER
Directors After the
Merger................... The Board of Directors of the Surviving Corporation
at the Effective Time shall number 18 authorized
members consisting of the existing 10 members of
the General Signal Board of Directors and adding
thereto six members from the Reliance Board of
Directors and one person designated by CSCL
pursuant to the CSCL Agreement, and with one seat
vacant. The stockholders of General Signal will
vote to elect the New Directors to the Board of
Directors of General Signal at the General Signal
Special Meeting. The various Committees of the
General Signal Board of Directors will be increased
in size and the New Directors will be appointed to
fill the vacancies created thereby. See "The
Merger -- Board of Directors and Management After
the Effective Time."
Management After the
Merger................... The officers of the Surviving Corporation shall be
determined by the Board of Directors of the
Surviving Corporation immediately after the
Effective Time, following consultation by the Chief
Executive Officers of Reliance and General Signal,
except that Mr. Edmund M. Carpenter, the Chairman
and Chief Executive Officer of General Signal,
shall be the Chairman and Chief Executive Officer
of the Surviving Corporation and Mr. John C.
Morley, the President and Chief Executive Officer
of Reliance, shall be the Vice Chairman of the
Surviving Corporation. See "The Merger -- Board of
Directors and Management After the Effective Time."
Security Ownership of
Management and Certain
Other Beneficial
Owners................... As of September 19, 1994, directors and executive
officers of General Signal and their affiliates
were beneficial owners of approximately 1.9% of the
outstanding shares of Common Stock. As of September
19, 1994, directors and executive officers of
Reliance and their affiliates were beneficial
owners of approximately 9.5% of the outstanding
shares of Reliance Class A Common Stock. As of the
Effective Time, former stockholders of Reliance
will own approximately 44% of the outstanding stock
of the Surviving Corporation. See "The
Merger -- Board of Directors and Management After
the Effective Time."
8
<PAGE> 18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
OF GENERAL SIGNAL CORPORATION
The following selected financial information of General Signal for each of
the five years ended December 31, 1993, 1992, 1991, 1990 and 1989 has been
derived from General Signal's audited financial statements contained in its
Annual Reports on Form 10-K for the years then ended and is qualified in its
entirety by such documents. The selected financial information of General Signal
as of and for the six months ended June 30, 1994 and 1993 has been derived from
unaudited consolidated financial statements which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the unaudited interim
periods. The operating results for the six months ended June 30, 1994 are not
necessarily indicative of results for the full year. This information should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and the Notes thereto incorporated by reference into this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net sales.................. $815,270 $763,689 $1,530,006 $1,674,205 $1,615,832 $1,694,947 $1,738,287
Cost of sales.............. 577,403 555,556 1,100,590 1,205,622 1,165,325 1,209,705 1,220,421
Selling, general and
administrative
expenses................. 157,198 154,089 308,370 339,818 333,001 356,769 378,973
Disposition of businesses
and restructuring........ -- (12,100)(a) 10,100(b) 85,600(c) -- 122,200(d) (8,679)
-------- -------- ---------- ---------- ---------- ---------- ----------
Total operating costs and
expenses................. 734,601 697,545 1,419,060 1,631,040 1,498,326 1,688,674 1,590,715
-------- -------- ---------- ---------- ---------- ---------- ----------
Operating earnings......... 80,669 66,144 110,946 43,165 117,506 6,273 147,572
Interest expense, net...... (5,551) (10,549) (16,548) (24,379) (28,055) (31,466) (39,090)
-------- -------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) from
continuing operations
before income taxes...... 75,118 55,595 94,398 18,786 89,451 (25,193) 108,482
Income taxes............... 25,540 18,183 27,802 6,321 25,494 (11,917) 28,201
-------- -------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) from
continuing operations.... 49,578 37,412 66,596 12,465 63,957 (13,276) 80,281
Discontinued operations.... -- -- -- -- (9,800)(e) (19,657)(f) (1,830)
Extraordinary charge, net
of taxes................. -- (6,576)(g) (6,576)(g) (330)(g) -- -- --
Cumulative effect of
accounting changes....... -- (25,300)(h) (25,300)(h) (92,400)(i) -- -- --
-------- -------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss)........ $ 49,578 $ 5,536 $ 34,720 $ (80,265) $ 54,157 $ (32,933) $ 78,451
-------- -------- ---------- ---------- ---------- ---------- ----------
Earnings (loss) per share
of common stock
Continuing operations.... $ 1.05 $ 0.87 $ 1.47 $ 0.30 $ 1.66 $ (0.35) $ 2.11
Discontinued operations.. -- -- -- -- (0.26) (0.51) (0.05)
Extraordinary charge..... -- (0.15) (0.14) (0.01) -- -- --
Cumulative effect of
accounting changes..... -- (0.59) (0.56) (2.21) -- -- --
-------- -------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss)...... $ 1.05 $ 0.13 $ 0.77 $ (1.92) $ 1.40 $ (0.86) $ 2.06
-------- -------- ---------- ---------- ---------- ---------- ----------
Cash dividends per share... $ 0.45 $ 0.45 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90
Average common shares
outstanding.............. 47,359 43,215 45,205 41,753 38,572 38,398 38,112
</TABLE>
9
<PAGE> 19
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
-------- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL POSITION
(AT END OF PERIOD):
Working capital................... $ 300,583 $ 268,697 $ 347,798 $ 243,884 $ 310,601 $ 328,825
---------- ---------- ---------- ---------- ---------- ----------
Property, plant and equipment,
net............................. 293,185 263,353 246,858 263,650 283,040 325,060
---------- ---------- ---------- ---------- ---------- ----------
Total assets...................... 1,306,814 1,224,841 1,258,428 1,180,198 1,294,633 1,324,341
---------- ---------- ---------- ---------- ---------- ----------
Long-term debt, net of current
maturities...................... 250,740 191,382 367,654 289,839 397,939 331,164
---------- ---------- ---------- ---------- ---------- ----------
Shareholders' equity.............. 555,821 525,186 374,849 476,436 450,349 506,109
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
(a) Includes a $42.6 million credit representing excess reserves relating to the
disposition of semiconductor equipment operations and a $30.5 million charge
for restructuring Process Controls and Electrical Controls businesses.
(b) Represents a transaction and consolidation charge of $13.2 million for the
acquisition of Revco Scientific, Inc., a charge for prior dispositions of
$19.6 million, a $30.5 million charge for restructuring the Process Controls
and Electrical Controls businesses, and credits of $53.2 million for the
reversal of excess semiconductor equipment operations reserves.
(c) An $85.6 million charge ($58.2 million net of related income tax benefits)
was recorded in the fourth quarter of 1992 related to the determination to
divest General Signal's semiconductor equipment operations.
(d) Pretax earnings from continuing operations for 1990 included non-recurring
charges totaling $122.2 million, consisting of a $76.0 million pretax charge
primarily in connection with the disposal of certain semiconductor units and
a $46.2 million special charge primarily in connection with the reduction of
operating capacity, employment and product lines of Leeds & Northrup
Company.
(e) A $9.8 million charge, net of related income tax benefits, was recorded in
1991 relating to General Signal's decision in 1990 to exit its rail
transportation businesses. The charge represents adjustments to the
estimated net realizable value of the assets sold, additional transaction
costs and other contingencies.
(f) A $19.7 million charge, net of related income tax benefits, was recorded in
1990 in connection with the discontinuance and disposal of General Signal's
New York Air Brake and General Railway Signal units.
(g) Represents charge for early extinguishment of debt.
(h) A non-cash charge of $25.3 million was incurred in 1993 as a result of the
adoption by General Signal of new accounting standards for post-employment
benefits (FAS 112).
(i) A non-cash charge of $92.4 million was incurred in 1992 as a result of
adoption by General Signal of new accounting standards for post-retirement
benefits other than pensions (FAS 106) and income taxes (FAS 109).
10
<PAGE> 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RELIANCE
The following selected financial information of Reliance has been derived
from and should be read in conjunction with Reliance's audited financial
statements contained in its Annual Report on Form 10-K for the year ended
December 31, 1993 and with the unaudited financial statements contained in
Reliance's Form 10-Q for the quarter ended June 30, 1994, which are incorporated
by reference in this Proxy Statement/Prospectus. The selected financial
information of Reliance as of and for the six months ended June 30, 1994 and
1993 has been derived from unaudited consolidated financial statements which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information for
the unaudited interim periods. The operating results for the six months ended
June 30, 1994 are not necessarily indicative of results for the full year. This
information should be read in conjunction with Management's Discussion and
Analysis of Results of Operations and Financial Condition incorporated by
reference into this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net sales................. $830,900 $800,500 $1,607,900 $1,552,500 $1,515,600 $1,547,200 $1,410,900
Cost of sales............. 618,000 605,400 1,222,800 1,155,200 1,110,300 1,110,700 1,028,300
Selling, general and
administrative
expenses................ 142,100 134,600 272,000 262,700 251,300 246,300 202,600
Earnings before interest
and taxes............... 67,800 53,800 92,000(1) 131,600 147,500 176,100 165,100(2)
Interest expense.......... (12,000) (13,400) (26,300) (45,200) (83,500) (88,400) (93,800)
Provision for income
taxes................... 25,700 18,900 33,200 39,100 30,000 40,200 39,000
Earnings from continuing
operations before
extraordinary items and
cumulative effect of
accounting change....... 30,100 21,500 32,500 47,300 34,000 47,500 32,300
Net earnings.............. 27,700(3) 14,400(4) 25,400(4) 25,200(5) 34,000 46,500 48,500(6)
Preferred stock dividends
and accretion(7)........ -- -- -- 15,600 19,300 20,100 10,500
Net earnings available for
common stock............ $ 27,700 $ 14,400 $ 25,400 $ 9,600 $ 14,700 $ 26,400 $ 38,000
Earnings per equivalent
share of common stock
from continuing
operations before
extraordinary items and
cumulative effect of
accounting change....... $ 0.59 $ 0.42 $ 0.64 $ 0.73 $ 0.44 $ 0.83 $ 0.56
Net earnings per share.... $ 0.54 $ 0.28 $ 0.50 $ 0.22 $ 0.44 $ 0.80 $ 0.96
Common dividends per
share................... -- -- -- -- -- -- --
Average common shares
outstanding(8).......... 50,729 50,733 50,664 43,433 33,252 32,763 39,875
</TABLE>
11
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
-------- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL POSITION
(AT END OF PERIOD):
Working capital..................... $ 394,200 $ 350,800 $ 339,800 $ 340,000 $ 319,000 $ 294,100
Property, plant and equipment, net.. 308,200 298,200 287,300 290,500 299,400 304,100
Total assets........................ 1,256,800 1,195,300 1,150,600 1,176,500 1,188,400 1,176,300
Long-term obligations(9)............ 360,700 351,400 368,900 674,600 695,800 732,300
Stockholders' equity................ 410,500 380,800 357,900 67,100 51,500 12,900
</TABLE>
- ---------------
(1) Includes $15.6 million of restructure expense for workforce reductions,
consolidation of manufacturing capacity and international structure changes.
(2) Includes option cancellation charges of $16.5 million, offset by a $5.0
million gain due to the annuitization of certain liabilities related to
terminated pension plans.
(3) SFAS 112 was adopted in the first quarter of 1994, resulting in a $2.4
million net charge to earnings.
(4) Includes $7.0 million of extraordinary charges related to Reliance's 1993
refinancing, principally due to the accelerated amortization of debt
issuance fees and interest rate swap costs.
(5) Includes $22.1 million of extraordinary charges associated with Reliance's
1992 recapitalization relating principally to premiums paid on redeemed
subordinated debentures and accelerated amortization of debt issuance costs.
(6) Includes a $20.9 million net gain on the sale of a discontinued operation.
(7) Represents payments of dividends and the accretion of future dividends and
issuance fees related to Reliance's redeemable preferred stock redeemed in
1992.
(8) The increase in average common shares outstanding after 1991 is due to the
sale in May 1992 of 17.2 million shares of common stock in an initial public
offering. The decrease in average common shares outstanding from 1989 to
1990 is due to a self-tender offer in December 1989.
(9) Includes Reliance's long-term debt and the $1.50 Junior Exchangeable
Preferred Stock at December 31, 1991, 1990 and 1989.
12
<PAGE> 22
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF
SURVIVING CORPORATION AFTER GIVING EFFECT TO THE MERGER
The selected unaudited pro forma financial information of General Signal
and Reliance is derived from the pro forma combined condensed financial
statements and should be read in conjunction with such pro forma financial
statements and notes thereto appearing elsewhere in this Proxy
Statement/Prospectus. Historical and pro forma information for certain periods
is derived from financial statements for certain periods that are not included
or incorporated by reference herein. For pro forma purposes, General Signal's
consolidated financial statements for the six month periods ended June 30, 1994
and 1993 and for each of the five years ended December 31, 1993 have been
combined with the financial statements of Reliance for such periods giving
effect to the proposed transaction under the pooling-of-interests method of
accounting.
The pro forma information is presented for comparative purposes only and
does not purport to be indicative of the operating results or financial position
that would have resulted if the Merger had been in effect at the beginning of
the periods presented and should not be considered indicative of future
operating results or financial position.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating earnings................ $ 148,469 $119,944 $ 202,946 $ 174,765 $ 265,306 $ 182,373 $ 312,672
Earnings from continuing
operations...................... 79,678 58,912 99,096 59,765 97,957 34,224 112,581
Earnings per share from continuing
operations(a)................... 0.94 0.73 1.20 0.60 1.25 0.23 1.51
Weighted average shares and
equivalent shares............... 84,848 80,707 82,646 73,850 63,145 62,610 67,580
Working capital at end of
period.......................... 694,783 -- 619,497 687,598 583,884 629,601 622,925
Property, plant and equipment,
net, at end of period........... 601,385 -- 561,553 534,158 554,150 582,440 629,160
Total assets at end of period..... 2,563,614 -- 2,420,141 2,409,028 2,356,698 2,483,033 2,500,641
Shareholders' equity at end of
period.......................... 966,321 -- 905,986 732,749 543,536 501,849 519,109
Common dividends per share(b)..... 0.45 0.45 0.90 0.90 0.90 0.90 0.90
</TABLE>
- ---------------
(a) After deduction of preferred stock dividends and accretion of $15.6 million,
$19.3 million, $20.1 million and $10.5 million for 1992, 1991, 1990 and
1989, respectively.
(b) Pro forma common dividends per share reflect General Signal's cash dividends
declared in the periods indicated.
13
<PAGE> 23
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and pro forma combined
per share data giving effect to the Merger on a pooling-of-interests accounting
basis as described more fully in the notes to the unaudited combined condensed
pro forma financial statements. The data should be read in conjunction with the
selected historical and unaudited pro forma financial data, the pro forma
combined condensed financial statements and the separate historical consolidated
financial statements of General Signal and Reliance and notes thereto included
or incorporated by reference into this Proxy Statement/Prospectus. The unaudited
pro forma combined financial data are not necessarily indicative of the
operating results that would have been achieved had the transaction been in
effect at the beginning of the periods presented and should not be considered
indicative of future operations.
Pro forma combined per equivalent Reliance share of Class A Common Stock
(assumes conversion of Reliance Class B Common Stock and Reliance Class C Common
Stock into Reliance Class A Common Stock) amounts are calculated by multiplying
the pro forma combined earnings per Surviving Corporation share from continuing
operations, historical dividends per Surviving Corporation share and pro forma
combined book value per Surviving Corporation share by the Conversion Ratio
(0.739 shares of Common Stock for each equivalent share of Reliance Class A
Common Stock) so that the equivalent per share amounts are comparable to
historical amounts for each equivalent share of Reliance Class A Common Stock.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------- ----------------------------
1994 1993 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HISTORICAL PER GENERAL SIGNAL SHARE:
Earnings from Continuing Operations........... $ 1.05 $0.87 $ 1.47 $0.30 $1.66
Dividends..................................... 0.45 0.45 0.90 0.90 0.90
Book Value.................................... 11.76 11.09
HISTORICAL PER EQUIVALENT RELIANCE SHARE OF
CLASS A COMMON STOCK:
Earnings from Continuing Operations........... 0.59 0.42 0.64 0.73 0.44
Dividends..................................... -- -- -- -- --
Book Value.................................... 8.17 7.58
PRO FORMA COMBINED PER SURVIVING CORPORATION
SHARE:
Earnings from Continuing Operations(a)........ 0.94 0.73 1.20 0.60 1.25
Dividends(b).................................. 0.45 0.45 0.90 0.90 0.90
Book Value(c)................................. 11.45 10.72
PRO FORMA COMBINED PER EQUIVALENT RELIANCE
SHARE OF CLASS A COMMON STOCK:
Earnings from Continuing Operations........... 0.69 0.54 0.89 0.44 0.92
Dividends..................................... 0.33 0.33 0.67 0.67 0.67
Book Value.................................... 8.46 7.92
</TABLE>
- ---------------
(a) Based on the aggregate of (1) historical General Signal weighted average
shares outstanding and (2) 0.739 times the historical Reliance weighted
average shares outstanding.
(b) Pro forma combined dividends per share reflect dividends of General Signal
declared in the periods indicated.
(c) Based on the aggregate of (1) historical General Signal shares issued and
outstanding and (2) 0.739 times the historical Reliance shares issued and
outstanding.
14
<PAGE> 24
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
GENERAL SIGNAL AND RELIANCE COMMON STOCK PRICE RANGE AND DIVIDENDS
General Signal Common Stock is listed for trading on the NYSE and the PSE
under the symbol GSX. Reliance Class A Common Stock is listed on the NYSE under
the symbol REE. The following table sets forth the high and low sale prices of
General Signal Common Stock and Reliance Class A Common Stock as reported on the
NYSE Composite Tape for the periods indicated. There was no market for Reliance
Class A Common Stock prior to May 6, 1992. There is no established market for
Reliance Class B Common Stock or Reliance Class C Common Stock.
<TABLE>
<CAPTION>
GENERAL SIGNAL RELIANCE
------------------------- -------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1991
First Quarter.............................. 23 3/8 17 5/8 0.225 -- -- -0-
Second Quarter............................. 23 7/8 20 1/2 0.225 -- -- -0-
Third Quarter.............................. 25 20 5/8 0.225 -- -- -0-
Fourth Quarter............................. 26 7/8 23 3/4 0.225 -- -- -0-
1992
First Quarter.............................. 31 25 7/8 0.225 -- -- -0-
Second Quarter............................. 32 5/8 28 5/8 0.225 20 5/8 16 3/8 -0-
Third Quarter.............................. 29 7/8 26 7/8 0.225 19 1/2 16 3/8 -0-
Fourth Quarter............................. 30 7/8 26 1/2 0.225 20 7/8 15 1/4 -0-
1993
First Quarter.............................. 33 7/8 30 1/8 0.225 23 7/8 19 3/4 -0-
Second Quarter............................. 33 7/8 30 0.225 21 7/8 18 3/4 -0-
Third Quarter.............................. 33 3/8 30 1/2 0.225 20 3/4 16 3/4 -0-
Fourth Quarter............................. 37 7/8 31 1/2 0.225 18 1/2 16 3/8 -0-
1994
First Quarter.............................. 38 32 1/2 0.225 20 16 1/2 -0-
Second Quarter............................. 34 5/8 30 1/8 0.225 19 5/8 16 1/4 -0-
Third Quarter to September 19, 1994........ 37 1/4 32 3/8 0.225 25 5/8 18 -0-
</TABLE>
On August 29, 1994, the last trading day before the announcement of the
Merger, the last reported sale price for General Signal Common Stock on the NYSE
Composite Tape was 37 1/4.
On August 29, 1994, the last trading day before the announcement of the
Merger, the last reported sale price for Reliance Class A Common Stock on the
NYSE Composite Tape was 19 7/8.
Although it is General Signal's and Reliance's present intention that the
Surviving Corporation will continue to pay regular dividends, the payment of
dividends in the future is subject to the discretion of Surviving Corporation's
Board of Directors, which may consider such factors as Surviving Corporation's
earnings and financial condition and other factors which it deems relevant.
15
<PAGE> 25
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to stockholders of
General Signal and Reliance in connection with the solicitation of proxies by
their respective Boards of Directors for use at the Special Meetings.
At the Special Meetings, the stockholders of General Signal and Reliance
will be asked to adopt the Merger Agreement attached as Annex A hereto and more
fully described herein, and to vote on certain matters referred to below. The
approximate date on which this Proxy Statement/Prospectus is first being sent to
stockholders is on or about [ ], 1994.
THE COMPANIES
GENERAL SIGNAL CORPORATION
General Signal Corporation, incorporated in New York in 1904, designs,
manufactures and sells equipment and instruments for the process control,
electrical, automotive, mass transportation and telecommunications industries.
General Signal serves these markets through three product sectors: (i) Process
Controls, (ii) Electrical Controls and (iii) Industrial Technology. General
Signal's corporate strategy is to develop its current three product sectors and
their related core businesses through internal growth, expansion into
international markets and the acquisition of similar businesses which provide
synergistic cost savings and sales growth opportunities with General Signal's
current operations. General Signal seeks to achieve a critical mass of sales in
each of its operating units to allow each business unit to compete effectively
on a global basis.
RELIANCE ELECTRIC COMPANY
Reliance Electric Company was organized in December 1986 as a Delaware
corporation by a group of investors including senior management of Reliance for
the purpose of acquiring Reliance's predecessor from Exxon Corporation. A
predecessor of Reliance, originally formed in 1904, had been acquired by Exxon
in 1979. Reliance designs, manufactures and sells industrial motors and related
controls, generators, transformers, mechanical power transmission products and
systems, and telecommunications equipment. Reliance is organized into two
business segments: Industrial and Telecommunications.
Reliance's Industrial segment, with net sales of $1,172 million, or
approximately 73% of Reliance's total net sales in 1993, designs, manufactures,
markets and services a broad range of products and provides related services to
a variety of industries. Its four operating groups are Electrical, Mechanical,
North American Transformer and Motion Control. Each group has its own
manufacturing, marketing and administrative operations. Because the Electrical,
Mechanical and Motion Control Groups sell to customers in similar industries,
Reliance is able to offer these customers a comprehensive line of products and
systems designed to meet a wide range of their needs.
Reliance's Telecommunications segment, with net sales of $439 million, or
approximately 27% of Reliance's total net sales in 1993, is known in the
industry as Reliance Comm/Tec ("Comm/Tec"). Comm/Tec produces power, connection,
protection and distribution devices and transmission products and systems.
Comm/Tec serves the telephone operating companies including AT&T, the regional
Bell operating companies, other independent telephone companies as well as other
suppliers of communications equipment and services including cable television
system operators, competitive access providers and wireless communications
suppliers. Comm/Tec is organized into four operating divisions: Lorain Products,
Reliable Electric, Transmission Systems and Network Services/Engineered Systems.
16
<PAGE> 26
STOCKHOLDER MEETINGS
DATE; PLACE; TIME; RECORD DATE
A Special Meeting of the stockholders of General Signal will be held at the
General Signal headquarters, One High Ridge Park, Stamford, Connecticut 06904,
on [date and time], EST. Only holders of record of General Signal Common Stock
at the close of business on [ ], 1994 will be entitled to receive
notice of and to vote at the General Signal Special Meeting.
A Special Meeting of the stockholders of Reliance will be held at The Forum
Conference Center, One Cleveland Center, 1375 East Ninth Street, Cleveland, Ohio
44114, on [date and time], EST. Only holders of record of Reliance Class A
Common Stock at the close of business on [ ], 1994 will be
entitled to receive notice of the Reliance Special Meeting, and only holders of
record of Reliance Class A Common Stock at that time will be entitled to vote at
the Reliance Special Meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
At the General Signal Special Meeting, the stockholders of General Signal
will consider and vote upon (i) as a single proposal the adoption of the Merger
Agreement and the transactions contemplated therein, including the merger of
Reliance with and into General Signal with General Signal surviving under the
name " " and the amendment of the Certificate of Incorporation to
increase the authorized number of shares of Common Stock to 250,000,000 shares,
to authorize 26,500,000 shares of the new Class B Common Stock and to change the
name of General Signal to [ ] and (ii) the election of the seven
New Directors to the Board of Directors, effective as of the Effective Time. For
information about the New Directors, see "The Merger -- Board of Directors and
Management After the Effective Time."
Three of the New Directors will be elected to hold office until the 1997
Annual Meeting of Stockholders of the Surviving Corporation, three of the New
Directors will be elected to hold office until the 1996 Annual Meeting and one
of the New Directors will be elected to hold office until the 1995 Annual
Meeting.
Stockholders of General Signal also will consider and vote upon such other
matters as may properly be brought before the meeting.
THE BOARD OF DIRECTORS OF GENERAL SIGNAL HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREIN AND RECOMMENDS A VOTE
FOR THE ADOPTION OF THE MERGER PROPOSAL AND THE ELECTION OF THE NEW DIRECTORS.
At the Reliance Special Meeting, the holders of Reliance Class A Common
Stock will consider and vote upon a proposal to adopt the Merger Agreement and
the transactions contemplated therein and such other matters as may properly be
brought before the meeting.
THE BOARD OF DIRECTORS OF RELIANCE HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS A VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
VOTES REQUIRED; QUORUM
The Merger Agreement must be adopted by (i) in the case of General Signal,
the affirmative vote of two-thirds (2/3) of the outstanding shares of Common
Stock pursuant to Section 903 of the NYBCL and (ii) in the case of Reliance, the
affirmative vote of more than 50% of the outstanding shares of Reliance Class A
Common Stock pursuant to Section 252 of the DGCL. Pursuant to Section 614 of the
NYBCL, at the General Signal Special Meeting, the New Directors will be elected
by a plurality of the votes cast, assuming a quorum is present.
On September 19, 1994, there were 47,309,801 shares of General Signal
Common Stock outstanding, exclusive of shares held in its treasury. On September
19, 1994, there were 32,917,039 shares of Reliance Class A Common Stock
outstanding, exclusive of shares held in its treasury.
17
<PAGE> 27
At the General Signal Special Meeting, only shares voted for the adoption
of the Merger Proposal will be counted as voted in favor in determining whether
the Merger Proposal is adopted. Therefore abstentions and broker non-votes will
have the same effect as votes against adoption of the Merger Proposal. In the
election of directors, votes that are withheld and broker non-votes will have no
effect on the outcome of the election of directors. Under the rules of the NYSE,
brokers who hold shares in street name for beneficial owners are not permitted
to vote to adopt the Merger Proposal or for the election of directors in
connection with the Merger without instructions from beneficial owners.
At the Reliance Special Meeting, only shares voted for adoption of the
Merger Agreement will be counted as voted in favor in determining whether the
Merger Agreement is adopted. Therefore, abstentions and broker non-votes will
have the same effect as votes against adoption of the Merger Agreement. Under
the rules of the NYSE, brokers who hold shares in street name for beneficial
owners are not permitted to vote to adopt the Merger Agreement without
instructions from beneficial owners.
Under the NYBCL and the General Signal By-Laws, the presence, in person or
by proxy, of a majority of the outstanding shares of General Signal Common Stock
is necessary to constitute a quorum of stockholders to take action at the
General Signal Special Meeting. Shares which are present, or represented by a
proxy, at the General Signal Special Meeting will be counted for quorum purposes
regardless of whether the holder of such shares abstains with regard to the
proposal to adopt the Merger Proposal or withholds a vote with respect to the
election of the New Directors. Under applicable New York law, if a broker
returns a proxy with regard to at least one proposal but has not voted on
another proposal, such broker non-vote still will count for purposes of
determining a quorum.
Under the DGCL and the Reliance By-laws, the presence, in person or by
proxy, of a majority of the outstanding shares of Reliance Class A Common Stock
entitled to vote at the meeting is necessary to constitute a quorum of
stockholders to take action at the Reliance Special Meeting. Shares which are
present, or represented by a proxy, at the Reliance Special Meeting will be
counted for quorum purposes regardless of whether the holder of such shares
abstains with regard to the proposal to adopt the Merger Agreement and related
transactions.
PROXIES
Proxy cards for use at the Special Meetings accompany this Proxy
Statement/Prospectus delivered to record holders of General Signal Common Stock
and Reliance Class A Common Stock. A holder of General Signal Common Stock or
Reliance Class A Common Stock may use his or her proxy if he or she does not
attend the appropriate Special Meeting in person or wishes to have the shares
voted by proxy even if he or she does attend the meeting. The proxy may be
revoked in writing by the person giving it at any time before it is exercised by
giving notice of such revocation to the Secretary of General Signal or Reliance,
as appropriate, or by submitting a proxy bearing a later date, or by such person
appearing at the appropriate Special Meeting and voting in person. All proxies
validly submitted and not revoked will be voted in the manner specified. If no
specification is made, the proxies will be voted in favor of the proposals
indicated in the respective notices of the Special Meetings.
General Signal has a confidential voting policy which permits stockholders
to request confidentiality on the proxy card. Pursuant to such a request,
proxies, ballots and voting tabulations that identify the particular vote of the
stockholder will be held permanently confidential except as necessary to meet
applicable legal requirements. General Signal has an agreement with its
tabulators and inspectors of election requiring them to comply with such policy.
SOLICITATION OF PROXIES
Each of General Signal and Reliance will bear the cost of the solicitation
of proxies from its own stockholders, except that General Signal and Reliance
will share equally the cost of printing this Proxy Statement/Prospectus. In
addition to solicitation by mail, the directors, officers and employees of each
company and its subsidiaries may solicit proxies from stockholders of such
company by telephone or telegram or in person. Arrangements also will be made
with brokerage houses and other custodians, nominees and
18
<PAGE> 28
fiduciaries for the forwarding of solicitation material to the beneficial owners
of stock held of record by such persons, and General Signal and Reliance will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith. General Signal has retained D.F.
King & Co. Inc., 77 Water Street, New York, New York 10005, to assist in the
solicitation of proxies from its stockholders at a total estimated cost to
General Signal of $11,000. Reliance has retained Corporate Investors
Communications, Inc. to assist in the solicitation of proxies from its
stockholders at a total estimated cost to Reliance of $4,500.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
19
<PAGE> 29
THE MERGER
BACKGROUND OF THE MERGER
In March 1994, the Chief Executive Officers of General Signal and Reliance
began discussions in which each recognized that by combining the two companies
they would be able to compete more effectively and realize certain operating
synergies. They subsequently agreed that a limited group of senior executive
officers of the two companies, together with their respective financial
advisors, would further explore the possibility of such a merger.
By mid-July, 1994, the Chief Executive Officers of the two companies agreed
to enter into serious negotiations regarding a merger of the two companies and
to accelerate their due diligence reviews. These negotiations culminated on
August 29, 1994 when the respective Boards of Directors of General Signal and
Reliance met and approved the Merger on the terms and conditions set forth in
the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of General Signal believes that the terms of the
Merger are fair to and in the best interests of General Signal and its
stockholders and has unanimously approved the Merger Agreement and the
transactions contemplated thereby, including the Merger, the amendment of its
Certificate of Incorporation, and the election of the New Directors in
connection with the Merger, and recommends approval by its stockholders of the
proposals set forth herein. The Board of Directors of Reliance believes that the
terms of the Merger are fair to and in the best interests of Reliance and its
stockholders and has unanimously approved the Merger Agreement and recommends
its adoption by its stockholders.
Each Board of Directors determined that a merger with another large
industrial company was generally the best alternative for achieving its
strategic objectives because of, among other things, the achievement of the
critical mass necessary to compete effectively in worldwide markets and the
opportunities for increased efficiencies and significant cost savings.
Each Board of Directors believes that the Merger will result in a strong
combined entity with generally complementary businesses and management
philosophies and with the resources to compete more effectively in the rapidly
changing worldwide marketplace and to take advantage of opportunities that would
not be available to either organization on its own. General Signal and Reliance
believe that, following the Merger, the combined entity will be an industry
leader with global strength and leading market shares in electrical equipment,
process controls, mechanical equipment, and telecommunications equipment.
Each Board of Directors believes that the Merger will improve the
capitalization and profitability of the combined entity through the achievement
of economies of scale and strong combined cash flow with resulting improvements
in access to debt and equity markets. By consolidating certain operations and
eliminating redundant expenses, and deploying and sharing combined research and
development and information technologies, it is expected that the combined
entity will achieve substantial savings of operating costs. Such savings are
expected to be realized over time as consolidation is completed, with
substantial benefit to be achieved in 1995 and the full benefit of annual
savings of approximately $70-100 million currently projected to be realized in
1996 and beyond.
Additional Reasons of General Signal
In reaching its conclusions, the Board of Directors of General Signal
considered, with the assistance of management, financial and legal advisors,
among other things, (i) information concerning the financial performance and
condition, assets, liabilities, business operations, and prospects of each of
General Signal and Reliance and their projected future values and prospects as
separate entities and on a combined basis, (ii) current industry, economic and
market conditions, (iii) the structure of the transaction, (iv) the provisions
for executive management succession, (v) the terms of the Merger Agreement and
other documents executed in connection with the Merger, (vi) the analyses and
opinion of its financial advisors
20
<PAGE> 30
described below, (vii) the ability of the combined enterprise to compete in
relevant markets, and (viii) the impact of the Merger on employees, customers
and communities served.
Additional Reasons of Reliance
At its meeting on August 29, 1994, the Board of Directors of Reliance
determined that the Merger and the Merger Agreement are fair to, and in the best
interests of, Reliance and its stockholders. In reaching its determination, the
Reliance Board of Directors consulted with Reliance management, as well as its
financial and legal advisors, and considered a number of factors, including the
following:
(a) The effectiveness of the Merger in creating a combined company
with greater product breadth and resources, especially to compete on an
international basis;
(b) The results of the Reliance Board of Director's review, based in
part on a presentation by Reliance management regarding (i) its due
diligence review of General Signal, including the business, operations,
earnings, financial condition and corporate culture of General Signal on a
historical, prospective and pro forma basis, (ii) the compatibility of
products and corporate goals and the respective contributions the parties
would bring to a combined entity, (iii) the enhanced opportunities for the
combined entity, and (iv) the enhanced opportunities for cost savings and
synergies that are expected to result from the Merger;
(c) The terms of the Merger Agreement and the other documents
executed in connection with the Merger;
(d) The oral opinions of Goldman, Sachs & Co. and Prudential
Securities Incorporated, discussed elsewhere in this Proxy
Statement/Prospectus, that as of August 29, 1994, the Exchange Ratio
(defined as the Conversion Ratio together with the Class C Conversion
Ratio) was fair to the holders of Reliance Shares;
(e) The opportunity that the Merger provides (i) to strengthen and
deepen the management team of the combined entity by integrating and
consolidating the management teams at both Reliance and General Signal and
(ii) to address at an early date, the requirement to identify a successor
Chief Executive Officer of Reliance prior to the retirement of John C.
Morley, Reliance's current Chief Executive Officer;
(f) The expectation that the Merger would be tax-free for federal
income tax purposes to Reliance and its stockholders (other than in respect
of cash paid in lieu of fractional shares and dissenters' shares) and that
the Merger would be accounted for under the pooling-of-interests method of
accounting and, therefore, would not give rise to goodwill; and
(g) The current and prospective economic environment generally and
that facing Reliance in particular.
In considering the Merger, the Reliance Board of Directors determined that
the "merger-of-equals" with General Signal would better serve Reliance's
stockholders than expansion through internal growth and/or acquisitions.
Specifically, the Reliance Board of Directors determined that the Merger would
best advance Reliance's strategic plan because of its belief that the Merger
would combine two financially sound companies with complementary businesses,
thereby creating a stronger combined entity with greater size, flexibility,
breadth of products, efficiency, capital strength and profitability than
Reliance would possess on a stand-alone basis. The Reliance Board of Directors
believes that each company is currently well-managed and possesses management
philosophies and strategic focus that are compatible with those of the other,
that each institution will contribute complementary business strengths resulting
in a well-diversified combined company, and that the strong capitalization of
the combined company will allow it to take advantage of future acquisition
opportunities and international business opportunities which otherwise may not
be available to either company individually. The Reliance Board of Directors
also believes that the Merger will allow the combined company to compete
effectively in the rapidly changing world economy and to take advantage of
opportunities for growth and diversification that may not be available to either
company on its own.
In evaluating the Merger, the Reliance Board of Directors also assigned
importance to the fact that its current Directors would become directors of the
Surviving Corporation and would serve on its various
21
<PAGE> 31
Committees. In addition, John C. Morley would become the Surviving Corporation's
Vice Chairman and Chairman of the Executive Committee for at least a
twelve-month transition period. Furthermore, the Merger Agreement contemplates
that the Reliance name will be prominently included in the name of the Surviving
Corporation and that the recommendation of the location of the Surviving
Corporation's headquarters will be a cooperative effort between Reliance and
General Signal. Because of the foregoing, the Reliance Board of Directors
determined that the businesses of Reliance and General Signal could be
assimilated into a more efficient combined entity.
The Reliance Board of Directors did not assign any specific or relative
weight to the foregoing factors in the course of its consideration.
In evaluating the Merger, the Reliance Board of Directors and management
recognized the size of the transaction, discussed the critical importance of
successfully integrating, and building on the respective strengths of the
management teams and cultures of both companies in a merger-of-equals
transaction, and considered the uncertainties inherent in any such combination
of two very large companies.
OPINIONS OF FINANCIAL ADVISORS
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
In its role as financial advisor to General Signal, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") was asked by General Signal to render an
opinion (the "DLJ Opinion") to the General Signal Board of Directors as to the
fairness to the holders of General Signal Common Stock, from a financial point
of view, of the consideration to be paid by General Signal to the stockholders
of Reliance pursuant to the Merger Agreement. On August 18, 1994, DLJ orally
advised the General Signal Board of Directors that DLJ would be prepared to
deliver a written opinion to the General Signal Board of Directors that the
consideration to be paid by General Signal, as the Surviving Corporation, to the
stockholders of Reliance was fair to the stockholders of General Signal from a
financial point of view, subject to DLJ's review of the final terms and
conditions of the Merger Agreement. After such review of the Merger Agreement,
DLJ issued to the General Signal Board of Directors its written opinion that,
based upon and subject to the matters set forth in its opinion of August 29,
1994, the consideration to be paid by General Signal to the stockholders of
Reliance pursuant to the Merger Agreement is fair to the stockholders of General
Signal from a financial point of view.
The General Signal Board of Directors selected DLJ as its financial advisor
because it is a nationally recognized investment banking firm and the principals
of DLJ have substantial experience in transactions similar to the Merger and are
familiar with General Signal and its businesses. As part of its investment
banking business, DLJ is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions.
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ, DATED AUGUST 29, 1994, IS
ATTACHED HERETO AS ANNEX E. GENERAL SIGNAL STOCKHOLDERS ARE URGED TO READ THE
DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS
OF THE REVIEW OF DLJ.
The DLJ Opinion does not constitute a recommendation to any stockholder as
to how such stockholder should vote at either the General Signal Special Meeting
or the Reliance Special Meeting. DLJ did not, and was not requested by the
General Signal Board of Directors to, make any recommendation as to the form or
amount of consideration to be paid to holders of the Reliance Shares in the
Merger, which issues were resolved in arm's-length negotiations between General
Signal and Reliance, in which negotiations DLJ advised General Signal. DLJ's
opinion does not constitute an opinion as to the price at which the Common Stock
will actually trade at any time. See "Comparative Market Prices." No
restrictions or limitations were imposed by the General Signal Board of
Directors upon DLJ with respect to the investigations made or the procedures
followed by DLJ in rendering its opinion, except that General Signal did not
authorize DLJ to solicit, and DLJ did not solicit, any third party indications
of interest in a purchase of, or business combination with, General Signal or
Reliance.
22
<PAGE> 32
In arriving at its opinion, DLJ reviewed the Merger Agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by General Signal and Reliance, including information provided
during discussions with their respective managements, consolidated financial
statements and other information of General Signal and Reliance for the fiscal
years 1989 through 1993 and for the interim periods for the fiscal years 1993
and 1994. Included in the information provided were certain financial
projections of each of General Signal and Reliance for the 1994, 1995 and 1996
fiscal years prepared by the management of General Signal and Reliance,
respectively. In addition, DLJ examined the impact of the Merger on earnings
attributable to the Common Stock given a range of possible operating results for
General Signal and Reliance and given a range of possible operating synergies
resulting from the Merger; compared the relative contribution to the Surviving
Corporation of both General Signal's and Reliance's revenue, gross profit,
operating profit, operating cash flow, net income and other measures with
General Signal's and Reliance's relative ownership of the Surviving Corporation
upon giving effect to the Merger; compared certain financial and securities data
of General Signal and Reliance with such data of selected companies whose
securities are traded in public markets; reviewed the historical stock prices
and trading volumes of the Common Stock and Reliance Class A Common Stock;
reviewed prices and premiums paid in certain other selected business
combinations and performed a discounted cash flow analysis of Reliance. DLJ also
discussed the past and current operations, financial condition and prospects of
General Signal and Reliance with the respective managements of General Signal
and Reliance and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was available to it from public sources, that was
provided to it by General Signal and Reliance or their representatives, or that
was otherwise reviewed by it. DLJ also assumed that the financial projections
supplied to it were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of General Signal and
Reliance as to the future operating and financial performance of General Signal
and Reliance. In particular, DLJ relied, without independent investigation, upon
the estimates of General Signal and Reliance of the operating synergies
achievable as a result of the Merger and upon its discussion of such synergies
with the managements of General Signal and Reliance. DLJ did not make any
independent evaluation of the assets, liabilities or operations of General
Signal or Reliance, nor did DLJ verify the information reviewed by it. DLJ made
no independent investigation of any legal matters affecting General Signal or
Reliance and assumed the correctness of all legal advice given to the Board of
Directors of General Signal by its counsel.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to it
as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect its opinions, DLJ does not have any
obligation to update, revise or reaffirm the DLJ Opinion.
The following is a summary of the material factors considered and principal
financial analyses performed by DLJ to arrive at its August 29, 1994 fairness
opinion. DLJ performed certain procedures, including each of the financial
analyses described below and reviewed with the managements of General Signal and
Reliance the assumptions on which such analyses were based and other factors,
including the current and projected financial results of such companies.
PRO FORMA MERGER ANALYSIS. DLJ analyzed certain pro forma effects
resulting from the Merger. In conducting its analysis, DLJ relied upon certain
assumptions described above and financial projections provided by the
managements of both General Signal and Reliance. DLJ also reviewed, without
independent verification, the range of cost savings achievable in 1994, 1995 and
1996 by combining the operations of Reliance and General Signal as projected by
the managements of Reliance and General Signal. DLJ analyzed the pro forma
effect of such synergies on net income and earnings per share for the Surviving
Corporation. The analysis indicated that the pro forma earnings per share of the
Surviving Corporation, assuming no synergies, would be approximately 9% to 11%
lower on a pro forma basis in the fiscal year ending 1994, approximately 4% to
9% lower in the fiscal year ending 1995 and approximately 6% to 10% lower in the
fiscal year ended 1996 than comparable projections for General Signal as a
stand-alone company during the same period. The analysis also indicated that the
pro forma earnings per share of the Surviving Corporation, assuming a level of
23
<PAGE> 33
operating synergies in the range forecasted to be realizable by the managements
of General Signal and Reliance ($75 million to $100 million annually), would be
1% to 10% higher in the fiscal year ending 1995 (assuming that one-half the
expected level of annual synergies was achieved in such year) and 7% to 18%
higher in the fiscal year 1996 than comparable projections for General Signal as
a stand-alone company during the same period. The results of the pro forma
combination analysis are not necessarily indicative of future operating results
or financial position.
CONTRIBUTION ANALYSIS. DLJ analyzed General Signal's and Reliance's
relative contribution to the Surviving Corporation with respect to revenues;
earnings before interest, taxes, depreciation and amortization ("EBITDA");
earnings before interest and taxes ("EBIT"); net income; and various balance
sheet measures. Such analysis was considered in both absolute dollar terms and
on a percentage basis and was made, where applicable, for the latest twelve
months ended June 30, 1994 based on actual financial results. As a result of the
Merger, General Signal stockholders will own approximately 56.0% of the
Surviving Corporation. This compares with General Signal's contribution to the
Surviving Corporation's pro forma results for the twelve-month period ended June
30, 1994 (prior to taking into account any operating synergies which may result
from the Merger) of 49% of revenues, 52% of EBITDA, 53% of EBIT, 64% of trailing
net income, 58% of stockholders' equity and 64% of tangible stockholders'
equity. In addition, DLJ analyzed General Signal's projected contribution to net
income of the Surviving Corporation for the fiscal years ending December 31,
1994 and 1995 based on estimates by the Institutional Brokers Estimating Service
("IBES") and the projections of the management of General Signal and Reliance as
each was adjusted by DLJ to reflect a conservative view of the operating
performance of General Signal and Reliance. Based on these adjusted projections,
General Signal will contribute between 62% and 64% of the Surviving
Corporation's 1994 fiscal year projected net income and between 58% and 62% of
the Surviving Corporation's 1995 fiscal year projected net income, in each case
prior to taking into account any operating synergies which may result from the
Merger.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for 16
selected transactions involving the combination of selected industrial
companies. The 16 transactions selected are not intended to represent the
complete list of industrial transactions which have occurred during the last
three years; rather they include only transactions involving combinations of
companies with operating characteristics, size or financial performance
characteristics believed to be comparable to such characteristics of Reliance
and General Signal. DLJ reviewed the consideration paid in such transactions in
terms of the market capitalization of common stock plus total debt less cash and
equivalents ("Adjusted Price") of such transactions as a multiple of revenues,
EBITDA and EBIT for the latest reported twelve months prior to the announcement
of such transaction. The multiple of Adjusted Price to EBITDA, computed based on
the selected transactions announced since June 1991, averaged 10.5 times and
ranged from 5.3 times to 18.1 times compared to 9.8 times EBITDA for the Merger
based on the operating performance of Reliance for the twelve months ended June
30, 1994, and on the product of the price of Common Stock at August 29, 1994,
multiplied by the Conversion Ratio. The multiple of Adjusted Price to EBIT,
computed for the selected transactions announced since June 1991, averaged 18.0
times and ranged from 8.8 times to 39.4 times compared to 13.8 times EBIT for
the Merger, again based on the operating performance of Reliance for the period
ended June 30, 1994, and on the product of the price of Common Stock on August
29, 1994 multiplied by the Conversion Ratio. The ratio of Adjusted Price to
revenues, computed for the selected transactions announced since June 1991,
averaged 1.0 times and ranged from 0.5 times to 1.8 times compared to 1.0 times
revenue for the Merger based on Reliance's operating performance for the twelve
months ended June 30, 1994 and based on the product of the price of Common Stock
on August 29, 1994 multiplied by the Conversion Ratio.
DLJ also reviewed the consideration paid in such transactions in terms of
equity value as a multiple of the latest twelve months net income of Reliance
and of the tangible book value of Reliance at the close of the last fiscal
quarter prior to the date of announcement of the Merger. The average multiple of
stock price to latest twelve months earnings per share computed for the selected
comparable transactions averaged 25.8 times and ranged from 11.9 times to 53.3
times. This compares to the 28.3 times Reliance's latest twelve months earnings
per share for the Merger based upon a value for Reliance at August 29, 1994 of
the product of the price of Common Stock at August 29, 1994 multiplied by the
Conversion Ratio. The average multiple of stock
24
<PAGE> 34
price to tangible book value per share was 2.6 times and ranged from 0.5 times
to 7.3 times. This compares to the 6.8 times tangible book value attributable to
Reliance based upon a value for Reliance at August 29, 1994 of the product of
the price of Common Stock at August 29, 1994 multiplied by the Conversion Ratio.
DLJ's analysis also determined the percentage increase of the offer prices
(represented by the purchase price per share in cash transactions and the stock
price of the constituent securities times the exchange ratio in the case of
stock-for-stock mergers) over the trading prices one day, one week and one month
prior to the announcement date of transactions in three general categories: (i)
the 16 industrial merger and acquisition transactions announced since June 30,
1991, (ii) 17 merger and acquisition transactions since June 1, 1993 with a
transaction value in excess of $1.0 billion, and (iii) 110 stock-for-stock
transactions completed since January 1, 1993. The percentage amount by which
offer prices exceeded the closing stock prices one day, one week and one month
prior to the announcement dates of the selected transactions announced since
June 30, 1991 averaged 34.7%, 36.8% and 38.8%, respectively. The percentage
amount by which offer prices exceeded the closing stock prices one day, one week
and one month prior to the announcement date of all completed merger and
acquisition transactions since June 1, 1993 with a transaction value in excess
of $1.0 billion averaged 25.7%, 27.8% and 28.7%, respectively. The percentage
amount by which offer prices exceeded the closing stock prices one day, one week
and one month prior to the announcement date of stock-for-stock transactions
completed since January 1, 1993 averaged 31.4%, 33.8% and 38.0%, respectively
compared to a premium of 38.5%, 37.7% and 38.5%, respectively over the Reliance
Class A Common Stock price one day, one week and one month prior to August 29,
1994 based on the price of the General Signal Common Stock at August 29, 1994.
Although these various merger and acquisition transactions were used for
comparison purposes, none of such transactions is directly comparable to the
Merger.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. To provide contextual
data and comparative market information, DLJ compared selected historical share
price, earnings, and operating and financial ratios for Reliance to the
corresponding data and ratios of certain other companies whose securities are
publicly traded. Such data and ratios included Adjusted Price as a multiple of
revenues, EBITDA and EBIT for the latest reported twelve months and the growth
rates of each of such items for the three most recent fiscal years. The average
multiple of Adjusted Price to EBITDA for the companies reviewed was 8.8 times,
with a high of 13.9 times and a low of 6.6 times. This compares to the 9.8 times
EBITDA multiple for Reliance based on the product of the Common Stock price at
August 29, 1994 multiplied by the Conversion Ratio. The average multiple of
Adjusted Price to EBIT for the comparable companies was 11.7 times, with a high
of 13.3 times and a low of 10.3 times. This compares to the 13.8 times EBIT
multiple for Reliance based on the product of the Common Stock price at August
29, 1994 multiplied by the Conversion Ratio. The average ratio of Adjusted Price
to revenue for the comparable companies was 1.3 times, with a high of 2.1 times
and a low of 0.7 times. This compares to the 1.0 times revenue multiple for
Reliance based on the product of the Common Stock price at August 29, 1994
multiplied by the Conversion Ratio. In addition, DLJ examined the ratios of
current stock prices to the latest twelve-month ended June 30, 1994 EPS, fiscal
year 1994 estimated EPS (as estimated by IBES), and estimated EPS for the 1995
fiscal year (as estimated by IBES); after-tax cash flow (defined as net income
plus depreciation and amortization plus deferred taxes) and book value for these
companies and compared such ratios with those of Reliance and the value of
Reliance based on the Common Stock price at August 29, 1994 multiplied by the
Conversion Ratio. The average multiple of stock price to latest twelve-month EPS
for the comparable companies was 20.7 times, with a high of 23.4 times and a low
of 15.0 times. This compares to a 28.3 times multiple for Reliance based on the
product of the Common Stock price at August 29, 1994 multiplied by the
Conversion Ratio. The average multiple of stock price to estimated 1994 EPS for
the comparable companies was 19.4 times with a high of 26.4 times and a low of
16.1 times. This compares to a 22.6 times multiple for Reliance based on the
product of the Common Stock price at August 29, 1994 multiplied by the
Conversion Ratio. The average multiple of stock price to estimated 1995 EPS for
the comparable companies was 16.3 times with a high of 18.6 times and a low of
13.6 times. This compares to a 18.5 times multiple for Reliance based on the
product of the Common Stock price at August 29, 1994 multiplied by the
Conversion Ratio. The average multiple of stock price to after-tax cash flow for
the comparable companies was 13.0 times with a high of 20.0 times and a low of
7.2 times. This compares
25
<PAGE> 35
to a 15.6 times multiple for Reliance based on the product of the Common Stock
price at August 29, 1994 multiplied by the Conversion Ratio. The average
multiple of stock price to book value for the comparable companies was 2.9 times
with a high of 3.5 times and a low of 2.4 times. This compares to a 3.4 times
multiple for Reliance based on the product of the Common Stock price at August
29, 1994 multiplied by the Conversion Ratio.
STOCK TRADING HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both General Signal Common Stock and Reliance Class A Common
Stock since January 1990 in the case of General Signal and since May 6, 1992 in
the case of Reliance, with particular focus on the 12 months ended August 29,
1994. DLJ also reviewed the daily closing prices of General Signal Common Stock
and Reliance Class A Common Stock and compared the Reliance closing stock prices
with an index of selected electrical component manufacturing companies. In
addition, DLJ reviewed and analyzed the historical changes in the ratio of the
stock price of General Signal Common Stock to the stock price of Reliance Class
A Common Stock for the twelve months ended August 29, 1994.
DISCOUNTED CASH FLOW ANALYSIS. DLJ also performed a discounted cash flow
analysis to evaluate the consideration being paid in the Merger. In conducting
this analysis, DLJ calculated the net present value to the General Signal
stockholders of the incremental cash flows provided by the Merger based upon
projections provided to DLJ by the managements of General Signal and Reliance
and based upon a weighted average cost of capital for General Signal provided to
DLJ by General Signal's management. For this analysis, Discounted Cash Flow was
defined as projected unleveraged operating income for Reliance (including the
effects of synergies), less taxes plus depreciation, less capital expenditures
and adjusted for changes in non-cash working capital. The terminal value for
this analysis was computed by multiplying Reliance's projected unleveraged
terminal net income by a multiple ranging from 14 times to 16 times, which DLJ
believed to be appropriate based upon the current trading multiples of General
Signal and Reliance. The net present value of the Merger was then calculated by
subtracting the aggregate consideration paid by General Signal to the
stockholders of Reliance based on the General Signal Common Stock price at
August 29, 1994, multiplied by the Conversion Ratio plus net debt assumed by
General Signal in the Merger from the present value of these cash flow streams.
For the purposes of this analysis, a synergy level of $75 million annually was
used with appropriate expenses to realize those synergies as projected by the
managements of General Signal and Reliance. Based upon these assumptions, DLJ
calculated net present value for the Merger to the stockholders of General
Signal of $328 million to $721 million. In addition to the net present value of
the Merger, DLJ also calculated the internal rate of return to General Signal
stockholders. Based upon the above synergy levels and exit multiples, DLJ
calculated an internal rate of return to the stockholders of General Signal in
the Merger ranging from 15.3% to 19.9%.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analysis and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinions. In performing its analyses, DLJ
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated August 16, 1994,
General Signal has agreed to pay DLJ $4,250,000 for acting as financial advisor
in connection with the Merger, including the rendering of its opinion; $150,000
was paid on the date DLJ notified the Board of Directors of General Signal that
it was prepared to deliver its opinion, $350,000 was paid on the date DLJ
delivered its opinion, and the remainder to be paid upon consummation of the
Merger. General Signal has also agreed to reimburse DLJ promptly for all
out-of-pocket expenses (including the reasonable fees and out-of-pocket expenses
of counsel) incurred by DLJ in connection with its engagement, and to indemnify
DLJ and certain related persons against certain
26
<PAGE> 36
liabilities in connection with its engagement, including liabilities under the
federal securities laws. The terms of the fee arrangement with DLJ, which DLJ
and General Signal believe are customary in transactions of this nature, were
negotiated at arm's length between General Signal and DLJ and the General Signal
Board of Directors was aware of such arrangement, including the fact that a
significant portion of the aggregate fee payable to DLJ is contingent upon
consummation of the Merger. DLJ has from time to time rendered various
investment banking and other financial advisory services to General Signal.
Since August 1992, DLJ has earned compensation with respect to such services of
approximately $2,300,000.
In the ordinary course of business, DLJ actively trades the securities of
both General Signal and Reliance for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ is a wholly-owned subsidiary of The Equitable Life
Companies Incorporated of the United States ("The Equitable"). DLJ, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Alliance Capital Management L.P. ("Alliance"), a 65% owned affiliate company of
The Equitable, owns approximately 75,000 shares of General Signal (0.2% of the
outstanding common shares) and approximately 4.3 million shares of Reliance
Class A Common Stock (8.6% of the outstanding Reliance Shares). Although DLJ and
Alliance share a common parent company in The Equitable, DLJ disclaims any
ability to influence the investment decisions made by Alliance.
GOLDMAN, SACHS & CO. AND PRUDENTIAL SECURITIES INCORPORATED
On August 29, 1994, (A) Goldman, Sachs & Co. ("Goldman Sachs") delivered
its oral opinion to the Board of Directors of Reliance to the effect that, as of
such date the Exchange Ratio (defined as the Conversion Ratio together with the
Class C Conversion Ratio) was fair to the holders of Reliance Shares and (B)
Prudential Securities Incorporated ("Prudential Securities") delivered its oral
opinion to the Board of Directors of Reliance to the effect that, as of such
date the Exchange Ratio (defined as the Conversion Ratio together with the Class
C Conversion Ratio) was fair, from a financial point of view, to the
stockholders of Reliance. Each of Goldman Sachs and Prudential Securities
delivered their respective written opinions dated as of , 1994.
THE FULL TEXT OF THE WRITTEN OPINIONS OF GOLDMAN SACHS AND PRUDENTIAL
SECURITIES, EACH DATED AS OF , 1994, WHICH SET FORTH ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS OF THEIR REVIEW, ARE
ATTACHED HERETO AS ANNEXES F AND G, RESPECTIVELY, AND ARE INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF RELIANCE CLASS A COMMON STOCK ARE URGED TO, AND SHOULD,
READ SUCH OPINIONS IN THEIR ENTIRETY.
In connection with their written opinion, dated as of , 1994,
Goldman Sachs reviewed, among other things, the Merger Agreement; Annual Reports
to Stockholders and Annual Reports on Form 10-K of Reliance for the two years
ended December 31, 1993; Annual Reports to Shareholders and Annual Reports on
Form 10-K of General Signal for the five years ended December 31, 1993; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Reliance;
certain interim reports to shareholders and Quarterly Reports on Form 10-Q of
General Signal; certain other communications from Reliance and General Signal to
their respective stockholders; and certain internal financial analyses and
forecasts for Reliance and General Signal prepared by their respective
managements together with certain estimates prepared jointly by the managements
of Reliance and General Signal concerning potential cost savings and synergies
expected to result from the Merger. Goldman Sachs also held discussions with
members of the senior management of Reliance and General Signal regarding the
past and current business operations, financial condition and future prospects
of their respective companies. In addition, Goldman Sachs reviewed the reported
price and trading activity for the Reliance Class A Common Stock and the General
Signal Common Stock, compared certain financial and stock market information for
Reliance and General Signal with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations and performed such other studies and
analyses as they considered appropriate.
27
<PAGE> 37
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by them for
purposes of their opinion, and estimates of cost savings and synergies assumed
that the financial forecasts have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the managements of
Reliance and General Signal as to the expected future financial performance of
their respective companies individually and as combined in the Merger. In
addition, Goldman Sachs has not made an independent evaluation or appraisal of
the assets and liabilities of Reliance or General Signal or any of their
respective subsidiaries and has not been furnished with any such evaluations or
appraisals. Goldman Sachs also assumed that the Merger would be recorded as a
pooling-of-interests under generally accepted accounting principles.
In conducting its analyses and arriving at its written opinion, dated as of
, 1994, Prudential Securities reviewed, among other things (i)
Reliance's and General Signal's historical financial data and financial and
other data and analyses that were publicly available or furnished to Prudential
Securities regarding Reliance and General Signal, including research analysts'
reports; (ii) certain internal financial analyses and projections prepared by
the managements of Reliance and General Signal, respectively; (iii) the Merger
Agreement; (iv) trading histories of the Reliance Class A Common Stock and
General Signal Common Stock; (v) publicly available financial, operating and
stock market data for Reliance and General Signal and for companies engaged in
businesses that Prudential Securities deemed comparable to Reliance and General
Signal, respectively, or otherwise relevant to its inquiry; (vi) the financial
terms of certain other recent transactions that Prudential Securities deemed
relevant; and (vii) such other factors as Prudential Securities deemed
appropriate. Prudential Securities participated in discussions with senior
officers of the managements of Reliance and General Signal regarding the
strategic benefits of and potential synergies arising out of the Merger.
Prudential Securities met with senior officers of management of Reliance and
General Signal to discuss their respective business prospects and financial
conditions, as well as their estimates and judgments on future financial
performance and such other matters as Prudential Securities believed relevant to
its inquiry. Prudential Securities' opinion is based on economic, financial and
market conditions as they existed and could be evaluated as of the date of its
opinion.
Prudential Securities assumed and relied upon the accuracy and completeness
of all of the financial and other information provided to it or publicly
available and did not attempt independently to verify any such information.
Prudential Securities neither made nor obtained any independent appraisals of
the properties or facilities of Reliance or General Signal. With respect to
estimates of future financial performance provided to Prudential Securities by
Reliance and General Signal, Prudential Securities assumed that they represented
the best currently available estimates and judgments of their respective
managements as to the future financial performance of Reliance and General
Signal, respectively, and with respect to estimates of the strategic benefits of
and potential synergies arising out of the Merger, Prudential Securities assumed
they represent the best currently available estimates of the managements of
Reliance and General Signal.
The following is a summary of certain of the financial analyses used by
each of Goldman Sachs and Prudential Securities in connection with providing
their respective oral opinions to the Board of Directors of Reliance on August
29, 1994. Goldman Sachs and Prudential Securities utilized substantially the
same types of financial analyses in preparing their respective written opinions
dated as of , 1994 as they utilized in preparing their respective
oral opinions.
SELECTED COMPANIES ANALYSIS. Goldman Sachs and Prudential Securities
reviewed and compared selected actual and estimated financial, operating and
stock market information for Reliance, General Signal and the pro forma combined
entity resulting from the Merger in comparison with (x) for Reliance: Baldor
Electric Company, Cooper Industries, Inc., Emerson Co., Franklin Electric Co.,
Inc., General Electric Company, Hubbell Incorporated, Magnetek, Inc., and
Westinghouse Electric Corporation (collectively, the "Reliance Selected
Companies"), (y) for General Signal: Ametek, Inc., Cooper Industries, Inc.,
BW/IP, Inc., Dover Corporation, The Duriron Company, Inc., General Electric
Company, Hubbell Incorporated, Ingersoll-Rand Company, Keystone International,
Inc., Parker-Hannifin Corporation and Tyco International Ltd. (collectively, the
"General Signal Selected Companies") and (z) for the pro forma combined entity
resulting from the Merger: Cooper Industries, Inc., Dover Corporation, Emerson
Electric Co., General Electric Company, Hubbell Incorporated, Ingersoll-Rand
Company, Parker-Hannifin Corporation and Tyco
28
<PAGE> 38
International (collectively, the "Surviving Corporation Selected Companies").
Such analysis indicated that (A) leveraged market capitalization as a multiple
of latest twelve-month ("LTM") revenues, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT") (i) ranged from 0.6x to 4.6x, 6.2x to 16.6x and 7.3x to 23.7x,
respectively, with medians of 1.1x, 8.4x and 12.3x, for the Reliance Selected
Companies, as compared to corresponding multiples for Reliance of 0.8x, 7.6x and
10.8x, (ii) ranged from 0.8x to 4.6x, 6.2x to 16.6x and 8.8x to 23.7x,
respectively, with medians of 1.1x, 9.4x and 12.7x, for the General Signal
Selected Companies, as compared to corresponding multiples for General Signal of
1.2x, 10.9x and 15.2x and (iii) ranged from 0.8x to 4.6x, 6.2x to 16.6x and 8.8x
to 23.7x, respectively, with medians of 1.2x, 9.6x and 13.0x, for the Surviving
Corporation Selected Companies, (B) market price as a multiple of LTM earnings,
estimates of 1994 earnings and estimates of 1995 earnings (i) ranged from 12.6x
to 24.8x, 11.5x to 25.5x and 9.1x to 15.5x, respectively, with medians of 15.8x,
17.8x and 14.2x, for the Reliance Selected Companies (based on consensus
analysts' earnings estimates), as compared to corresponding multiples for
Reliance of 26.3x, 15.5x and 12.9x (based on management's estimates of 1994 and
1995 earnings and the closing price of Reliance Class A Common Stock on August
17, 1994 of $20.00 per share), (ii) ranged from 13.4x to 42.0x, 14.1x to 19.1x
and 10.8x to 15.5x, respectively, with medians of 19.6x, 16.3x and 14.0x, for
the General Signal Selected Companies (based on consensus analysts' earnings
estimates), as compared to corresponding multiples for General Signal of 20.8x,
15.3x and 13.2x (based on management's estimates of 1994 and 1995 earnings and
the closing price of General Signal Common Stock on August 17, 1994 of $34.38)
and (iii) ranged from 14.5x to 42.0x, 14.4x to 19.1x and 12.4x to 15.3x,
respectively, with medians of 19.0x, 16.8x and 14.4x, for the Surviving
Corporation Selected Companies (based on consensus analysts' earnings
estimates), (C) five-year compound annual growth rates of sales and earnings per
share (i) ranged from (0.9)% to 12.0% and (7.1%) to 8.5%, respectively, with
medians of 5.1% and 3.0%, for the Reliance Selected Companies, as compared to
corresponding rates for Reliance of 3.3% and 3.4%, (ii) ranged from 1.1% to
12.1% and (10.7%) to 13.9%, respectively, with medians of 5.2% and 0.5%, for the
General Signal Selected Companies, as compared to corresponding rates for
General Signal of (3.1%) and (8.6%) and (iii) ranged from 1.1% to 12.1% and
(10.7%) to 7.5%, with medians of 4.5% and (1.0%), for the Surviving Corporation
Selected Companies and (D) LTM EBIT margins, pre-tax earnings margins and net
margins (i) ranged from 4.1% to 22.3%, 0.6% to 16.3% and 0.2% to 10.4%,
respectively, with medians of 12.0%, 10.3% and 7.2%, for the Reliance Selected
Companies, as compared to corresponding rates of 7.5%, 4.7% and 2.4% for
Reliance, (ii) ranged from 6.3% to 22.3%, 4.1% to 11.4% and 1.9% to 7.9%,
respectively, with medians of 10.7%, 9.9% and 5.5%, for the General Signal
Selected Companies, as compared to corresponding rates of 7.8%, 6.4% and 5.0%
for General Signal and (iii) ranged from 6.3% to 22.3%, 4.1% to 16.3% and 1.9%
to 10.4%, respectively, with medians of 11.1%, 9.8% and 6.0%, for the Surviving
Corporation Selected Control Companies, as compared to corresponding pro forma
rates of 7.7%, 5.6% and 3.7% for the pro forma combined entity resulting from
the Merger.
SELECTED TRANSACTIONS ANALYSIS. Goldman Sachs and Prudential Securities
reviewed and analyzed selected financial and operating information relating to
14 transactions involving industrial companies since February 1985 (the
"Selected Transactions"). Such analysis indicated that, based on the closing
prices of Reliance Class A Common Stock and General Signal Common Stock on
August 17, 1994 of $20.00 and $34.38, respectively, aggregate levered
consideration as a multiple of LTM sales, EBIT and EBITDA ranged from 0.5x to
1.8x, 8.5x to 18.8x and 6.2x to 37.2x, respectively, with medians of 1.2x, 11.0x
and 8.8x, respectively, as compared to corresponding multiples of (i) 1.00x,
14.2x and 9.2x, respectively, based on Reliance's 1993 financial results, (ii)
0.94x, 11.0x and 8.2x, respectively, based on management's estimates of
Reliance's 1994 financial performance and (iii) 0.89x, 8.9x and 6.5x,
respectively, based on management's estimates of Reliance's 1995 financial
performance.
PRO FORMA MERGER ANALYSIS. Goldman Sachs and Prudential Securities
reviewed certain financial information for the pro forma combined entity
resulting from the Merger based on internal financial analyses and forecasts for
Reliance and General Signal prepared by their respective managements, consensus
research analysts' estimates of 1994 and 1995 earnings for Reliance and General
Signal, and the estimates concerning potential cost savings and synergies
expected to result from the proposed Merger prepared jointly by the managements
of Reliance and General Signal. Such analysis indicated that, based on the
Exchange Ratio and based on management's earnings estimates, the Merger would be
dilutive to General Signal's earnings per
29
<PAGE> 39
share in 1994, but accretive in 1995 and 1996 so long as the estimated synergies
and cost savings were realized in the amounts and at the times estimated.
CONTRIBUTION ANALYSIS. Goldman Sachs and Prudential Securities reviewed
certain historical and estimated future operating and financial information
(including, among other things, sales, EBIT and net income for Reliance, General
Signal and the pro forma combined entity resulting from the Merger). Such
analysis indicated that, based on the pro forma 44% ownership interest of
current stockholders of Reliance Class A Common Stock in the pro forma combined
entity resulting from the Merger, Reliance's contribution to sales, EBIT and net
income of the pro forma combined entity resulting from the Merger (i) would have
been 48.1%, 54.9% and 47.8%, based on an average of the past five years
financial results for each of Reliance and General Signal, (ii) would have been
51.2%, 48.3% and 32.5%, based on 1993 financial results for each of Reliance and
General Signal, (iii) would be 49.5%, 46.0% and 38.5%, based on 1994 estimates
of financial performance for each of Reliance and General Signal prepared by
their respective managements and (iv) would be 48.5%, 44.8% and 41.1%, based on
1995 estimates of financial performance for each of Reliance Electric and
General Signal prepared by their respective managements. In a related analysis,
Goldman Sachs and Prudential Securities compared the amounts of market value,
earnings, revenues, operating income, operating cash flow, assets, book value
and dividends, all on a per share basis, being exchanged by a holder of Reliance
Class A Common Stock in the Merger, assuming $100 million of synergies, for the
amounts of such items of General Signal to be received. That analysis showed a
significant increase in projected earnings per share in each of 1994, 1995 and
1996, a slight increase in book value per share and an improvement from no
dividend to a $0.66 per share dividend. That analysis also showed reductions in
1993 operating cash flow, assets and 1994 estimated revenues, and a small
decline in 1994 estimated operating income, all on a per share basis.
HISTORICAL STOCK TRADING ANALYSIS. Goldman Sachs and Prudential Securities
reviewed and compared the historical stock price performance of each of Reliance
and General Signal. This analysis showed that during the period from May 8, 1992
through August 12, 1994, Reliance Class A Common Stock traded at a high price of
$23.375 and a low price of $15.75 and that from the start to the end of that
period had a stock market performance slightly worse than a composite comprising
the Reliance Selected Companies and the S&P 400. This analysis also showed that
during the period from August 12, 1991 through August 12, 1994, General Signal
Common Stock traded at a high price of $37.625 and a low price (early in the
period examined) of $20.875 and that from the start to the end of that period
General Signal had a stock market performance superior to a composite comprising
the eleven General Signal Selected Companies and to the S&P 400. This analysis
also showed that during the period from May 8, 1992 through August 12, 1994, the
ratio of the price of Reliance Class A Common Stock to the price of General
Signal Common Stock ranged from a high of .723 to a low of .462 and that during
the year ended August 17, 1994 this ratio ranged from a high of .633 to a low of
.462.
OTHER ANALYSIS. Goldman Sachs and Prudential Securities analyzed available
information regarding current institutional holdings of Reliance Shares and
General Signal Common Stock and pro forma institutional holdings of common stock
of the pro forma combined entity resulting from the Merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' and Prudential Securities' respective opinions. In
arriving at their respective fairness determinations, Goldman Sachs and
Prudential Securities considered the results of all such analyses. No company or
transaction used in the above analysis as a comparison is identical to Reliance
or General Signal or the proposed Merger. The analyses were prepared solely for
purposes of Goldman Sachs and Prudential Securities providing their respective
opinions as to the fairness, with respect to the Prudential Securities opinion,
from a financial point of view, of the Exchange Ratio to the holders of Reliance
Shares, to the Board of Directors of Reliance and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. As described above, Goldman
Sachs' and Prudential Securities' respective opinions to the Board of Directors
of Reliance
30
<PAGE> 40
were two of many factors taken into consideration by the Reliance Board of
Directors in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the analyses
performed by Goldman Sachs and Prudential Securities and is qualified by
reference to the respective written opinions of Goldman Sachs and Prudential
Securities set forth in Annexes F and G, respectively, hereto.
Each of Goldman Sachs and Prudential Securities is an internationally
recognized investment banking firm and each is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. Each of Goldman Sachs and
Prudential Securities is familiar with Reliance, having provided certain
investment banking and financial advisory services to Reliance from time to
time, including (i) having acted as financial advisor to Reliance in connection
with the potential sale of Reliance in 1991, (ii) having acted as a managing
underwriter of the initial public offering of Reliance Class A Common Stock in
May 1992, (iii) having acted as a managing underwriter of a public offering of
6.80% Notes of Reliance in April 1993 and (iv) having acted as Reliance's
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Merger Agreement. In addition (i) H. Virgil
Sherrill, Chairman of the Board of Directors of Reliance, is a Senior Director
of Prudential Securities, a non-officer position and (ii) affiliates of
Prudential Securities participated as equity investors in the acquisition and
related financing of Reliance in 1986 and 1987, as a result of which affiliates
of Prudential Securities continued to own approximately 2,466,968 shares of
Reliance Class B Common Stock as of the date of Prudential Securities' opinion.
Reliance selected Goldman Sachs and Prudential Securities as its financial
advisors based on their familiarity with Reliance and their experience in
mergers and acquisitions and securities valuation generally.
Pursuant to separate letter agreements dated July 5, 1994 (the "Engagement
Letters"), Reliance engaged Goldman Sachs and Prudential Securities to act as
its financial advisors in connection with the contemplated transaction. Pursuant
to the terms of the Engagement Letters, Reliance agreed to pay each of Goldman
Sachs and Prudential Securities (i) $200,000 on the date of the Engagement
Letters, (ii) $200,000 on the date of the Merger Agreement and (iii) a
transaction fee of .3125% of the aggregate consideration paid for Reliance
Shares pursuant to the Merger, less any fees previously paid to such financial
advisor, upon consummation of the Merger. Reliance has also agreed to reimburse
each of Goldman Sachs and Prudential Securities for their reasonable
out-of-pocket expenses, including the fees and disbursements of their attorneys
plus any sales, use or similar taxes arising in connection with their respective
engagements, and to indemnify each of Goldman Sachs and Prudential Securities
against certain liabilities arising in connection with their respective
engagements, including certain liabilities under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
INDEMNIFICATION. Pursuant to the terms of the Merger Agreement the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of Reliance and its
subsidiaries against all losses, claims, damages, expenses or liabilities
arising out of actions or omissions or alleged actions or omissions occurring at
or prior to the Effective Time to the same extent and on the same terms and
conditions (including with respect to advancement of expenses) provided for in
Reliance's Certificate of Incorporation and By-laws and agreements in effect on
August 30, 1994 (to the extent consistent with applicable law).
The Merger Agreement further provides that for a period of six years after
the Effective Time, the Surviving Corporation shall cause to be maintained in
effect, with certain limited exceptions, the current policies of directors' and
officers' liability insurance maintained by Reliance (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time.
EMPLOYEE PLANS AND SEVERANCE ARRANGEMENTS. In lieu of severance benefits
previously provided to certain Reliance executives, on August 29, 1994
Reliance's Board of Directors adopted the Reliance Electric
31
<PAGE> 41
Change in Control Severance Pay Plan (the "Severance Plan"). The Severance Plan
provides severance benefits to certain Reliance executives if their employment
is terminated within two years of the Merger. The benefits provided by the
Severance Plan are similar to those provided to General Signal executives in its
Severance Pay Plan. Under the Severance Plan, Reliance executives would be
entitled to a lump sum payment of between one and three years' salary and the
continuation of certain other benefits, depending on the executive's level.
In addition, on that same date, the Reliance directors adopted an amendment
to the 1994 Reliance Electric Executive Long Term Incentive Plan (the "Amended
LTIP"). The Amended LTIP provides that the maximum level of awards thereunder
becomes payable within 30 days of the consummation of the Merger. The amount of
the Award Payout (as defined in the Amended LTIP), however, is being reduced pro
rata based upon the period of time the Performance Units (as defined in the
Amended LTIP) are outstanding prior to the consummation of the Merger as more
specifically set forth in the Amended LTIP.
BOARD OF DIRECTORS AND MANAGEMENT. The Merger Agreement contains certain
agreements with respect to the directors and management after the Effective
Time. See "Board of Directors and Management After the Effective Time."
RESALES BY AFFILIATES OF RELIANCE
None of the Shares received by Reliance stockholders in connection with the
Merger will be subject to restrictions on transfer under the Securities Act,
except that Shares received by persons who are deemed to be "affiliates" (as
such term is defined in Rule 144 under the Securities Act) of Reliance prior to
the Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145(d) or, in the case of any such persons who become
affiliates of General Signal, Rule 144 under the Securities Act, or as otherwise
permitted under the Securities Act.
Pursuant to the terms of the CSCL Agreement, General Signal has agreed to
give CSCL certain registration rights with respect to the Shares received by
CSCL in the Merger, substantially equivalent to the registration rights
previously held by CSCL with respect to its Reliance Class C Common Stock.
Specifically, CSCL will be entitled to demand two registrations of its unsold
shares, with such demands to be at least one year apart. The Surviving
Corporation generally will pay all registration expenses in connection with such
registrations, whether or not the registration is effected.
GOVERNMENTAL REGULATION
Certain acquisition transactions, including the Merger, may not be
consummated until certain information has been furnished to the Justice
Department and the FTC pursuant to the HSR Act, and certain waiting period
requirements thereunder have been satisfied. General Signal and Reliance filed
the required information and material with the Justice Department and the FTC
with respect to the Merger Agreement on September 20, 1994. No additional
filings are applicable with respect to the Merger pursuant to the HSR Act and
the rules promulgated thereunder.
At any time before or after the Effective Time, the Justice Department or
the FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger or to cause the Surviving Corporation to
divest itself, in whole or in part, of businesses presently conducted by General
Signal or Reliance. There can be no assurance that a challenge to the Merger
will not be made or that, if such a challenge is made, General Signal and
Reliance will prevail. The obligations of General Signal and Reliance to
consummate the Merger are subject to the conditions that any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and that there be no preliminary or permanent
injunction or other order by any court or governmental or regulatory authority
of competent jurisdiction prohibiting consummation of the Merger.
APPRAISAL RIGHTS
In accordance with Section 262 of the DGCL, holders of Class A Common Stock
do not have statutory appraisal rights. Pursuant to Section 262 of the DGCL, any
holders of Reliance Class B Common Stock and
32
<PAGE> 42
Reliance Class C Common Stock may dissent from the Merger and elect to have the
fair value of their shares of such Reliance stock, excluding any element of
value arising from the accomplishment or expectation of the Merger, judicially
determined and paid to them, together with a fair rate of interest, if any, on
such amount, in the event that the Merger is approved. CSCL, as the only holder
of Reliance Class C Common Stock, has agreed not to exercise its appraisal
rights. See "Certain Related Matters -- CSCL Agreement."
In order to perfect its right to have such fair value so determined and
paid, a holder of Reliance Class B Common Stock must deliver by registered or
certified mail, before the taking of the vote on the Merger, to the Surviving
Corporation, One High Ridge Park, Stamford, Connecticut 06904, a written demand
for the appraisal of its shares within 20 days after the Surviving Corporation
has mailed notice of the effectiveness of the Merger as described below. A
failure to consent to the approval of the Merger shall not constitute such a
demand. Only stockholders who have made such a demand, and who do not consent to
approval of the Merger, are entitled to appraisal rights with respect to such
Reliance Class B Common Stock. If any stockholder fails to comply with any of
these conditions, it will not be entitled to any appraisal of its shares.
Within ten days after the Effective Time, the Surviving Corporation must
give notice to each stockholder who has perfected its appraisal rights and who
has not voted in favor of the Merger of the date when the Merger has become
effective to each holder of Reliance Shares.
Any holder of Reliance Class B Common Stock who has demanded appraisal of
its shares may, within 60 days after the Effective Time, accept the terms of the
Merger by withdrawing its demand for an appraisal by written notice to the
Surviving Corporation and receive the appropriate number of shares of Common
Stock or Class B Common Stock.
Within 120 days after the Effective Time, the Surviving Corporation or any
such stockholder who has perfected its appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
its shares. In determining fair value, the court is to take into account all
relevant factors. The costs of the proceeding will be apportioned among the
parties as the Court deems equitable and, upon the application of a stockholder
party, the Court may order all or a portion of the expenses incurred by any such
stockholder in the appraisal proceeding (including reasonable attorneys' fees
and expenses of experts) to be charged pro rata against the value of all shares
entitled to an appraisal.
Stockholders who have duly demanded appraisal rights are not entitled after
the Effective Time to vote their shares for any purpose or to receive dividends
or other distributions on their shares payable to stockholders of record at a
date after the Effective Time.
The foregoing is a brief summary of the statutory procedures to be followed
by a holder of Reliance Class B Common Stock in order to perfect such holder's
right of appraisal under Section 262 of the DGCL and is qualified in its
entirety by reference to such Section 262, the text of which is attached hereto
as Annex D. Stockholders wishing to exercise their right of appraisal are urged
to consult their own legal counsel.
ACCOUNTING TREATMENT
The Merger will be accounted for by the pooling-of-interests method. See
"Unaudited Pro Forma Combined Condensed Financial Statements."
33
<PAGE> 43
BOARD OF DIRECTORS AND MANAGEMENT AFTER EFFECTIVE TIME
BOARD OF DIRECTORS
The Board of Directors of the Surviving Corporation at the Effective Time
shall number 18 authorized members consisting of the existing 10 members of the
General Signal Board of Directors and adding thereto the six members of the
Reliance Board of Directors and one person designated by CSCL pursuant to the
CSCL Agreement, and with one seat vacant. The stockholders of General Signal
will vote at the General Signal Special Meeting to elect the New Directors to
the Board of Directors of General Signal at the Effective Time. Three of the New
Directors will be elected to hold office until the 1997 Annual Meeting of
Stockholders of the Surviving Corporation, three of the New Directors will be
elected to hold office until the 1996 Annual Meeting, and one of the New
Directors will be elected to hold office until the 1995 Annual Meeting, as
indicated below. The current directors of General Signal will continue to serve
in accordance with their previous election. See "Board of Directors and
Management of General Signal."
ANTHONY C. HOWKINS, (to serve until 1996) 70, a director of Reliance since
1987. Group Head and Policy Committee Member of Citicorp and Citibank, N.A. from
1982 to 1986. Serves as a director of Yasuda Trust and Banking Co. Ltd.
JOHN C. MORLEY, (to serve until 1997) 63, a Director of Reliance since its
formation in 1986. President and Chief Executive Officer of Reliance since 1980.
Held numerous executive positions with Exxon Corporation, including President of
Exxon Chemical USA and Senior Vice President of Exxon USA, from 1958 to 1980.
Serves as a director of AMP Incorporated, Ferro Corporation and KeyCorp.
ALFRED M. RANKIN, JR., (to serve until 1996) 52, a Director of Reliance
since January 1993. President and Chief Executive Officer of NACCO Industries,
Inc., a holding company for The North American Coal Corporation, Hamilton
Beach/Proctor Silex, Inc., NACCO Materials Handling Group, Inc., Materials
Handling, Inc. and The Kitchen Collection, Inc. since 1991. President and Chief
Operating Officer of NACCO Industries, Inc. from 1989 to 1991. Serves as a
director of NACCO Industries, Inc., NACCO Materials Handling Group, Inc., The BF
Goodrich Company, The Standard Products Company and The Vanguard Group.
DUDLEY P. SHEFFLER, (to serve until 1997) 49, a Director of Reliance since
October 1993. Vice President of Reliance since 1981 and President of its wholly
owned subsidiary, Reliance Comm/Tec Corporation, since 1989.
H. VIRGIL SHERRILL, (to serve until 1997) 74, Chairman of the Board of
Directors of Reliance since 1986. Senior Director, a non-officer position, of
Prudential Securities since 1986. Formerly Vice Chairman and President of
Prudential Securities. Mr. Virgil Sherrill is the father of Mr. Stephen
Sherrill.
E. MANDELL DE WINDT, (to serve until 1996) 73, a Director of Reliance since
1987. Chairman and Chief Executive Officer of Eaton Corporation from 1969 to
1986. Serves as a director of Cleveland-Cliffs Corp., Birmingham Steel, Inc. and
DTM Investors Inc., and is a trustee of Carnegie Funds Group.
STEPHEN C. SHERRILL, (to serve until 1995) 41, is currently a Managing
Director of Citicorp Venture Capital Ltd. and from 1989 to 1994 served as a Vice
President of Citicorp Venture Capital Ltd. Mr. Sherrill also serves as a
director of Galey & Lord, Inc. Mr. Stephen Sherrill is the nominee designated by
CSCL pursuant to the CSCL Agreement and is the son of Mr. Virgil Sherrill.
COMMITTEES
Each of the Committees of the Board of Directors of General Signal existing
prior to the Effective Time with an even number of members shall be increased by
an equal number of members and committees with an odd number of members shall be
increased by an equal number of members minus one. Such newly created vacancies
shall be filled by the New Directors. Accordingly, the members of the Audit
Committee shall be increased to eight members, including as additional members
Messrs. [ ] and [ ]; the Employee Benefits Committee
to nine members, including as additional members Messrs. [ ] and
[ ]; the Executive Committee to twelve members, including as
additional
34
<PAGE> 44
members Messrs. [ ] and [ ]; the Personnel and
Compensation Committee to nine members, including as additional members Messrs.
[ ] and [ ]; and the Committee on Directors to five
members, including as additional members Messrs. [ ] and
[ ]. The existing members of the Committees will continue to serve
on such Committees in accordance with their previous appointments. See "Board of
Directors and Management of General Signal."
MANAGEMENT AFTER THE MERGER
The officers of the Surviving Corporation shall be determined by the Board
of Directors of the Surviving Corporation immediately after the Effective Time,
following consultation between the respective Chief Executive Officers of
General Signal and Reliance, except that Mr. Carpenter shall be the Chairman and
Chief Executive Officer of the Surviving Corporation and Mr. Morley shall be the
Vice Chairman of the Surviving Corporation. Each officer will hold office from
and after the Effective Time until his or her successor is duly appointed and
qualified in the manner provided in the By-laws of the Surviving Corporation or
as otherwise provided by law or his or her earlier resignation or removal. The
Vice Chairman shall be a Director and an executive officer of the Surviving
Corporation and shall serve as Chairman of the Executive Committee. For a period
of twelve (12) months following the Effective Time, the Vice Chairman's duties
shall be focused primarily on the development of the strategy for and
implementation of the transition of the Reliance business with the business of
General Signal upon consultation with and under the direction of the Chairman of
the Board. During the above period, the Chairman of the Board, with the advice
of the Vice Chairman of the Board, shall select Presidents of the segments of
the Surviving Corporation's business to be operated as divisions. In addition,
the Vice Chairman of the Board shall have such other duties as the Chairman of
the Board and the Vice Chairman of the Board shall agree.
CORPORATE HEADQUARTERS LOCATION AFTER THE MERGER
The process of establishing the location of the combined headquarters of
the Surviving Corporation contemplates the appointment of a study team composed
of Reliance and General Signal personnel, who may engage consultants to develop
and recommend a location to the Chief Executive Officer of General Signal. The
study team will recommend a headquarters site to the Chief Executive Officer of
General Signal prior to the consummation of the Merger. Such Chief Executive
Officer will then consult with the Chief Executive Officer of Reliance
concerning the decision, which will be made by the Chief Executive Officer of
General Signal.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER BENEFICIAL HOLDERS
The following table sets forth information based upon General Signal's and
Reliance's records and Commission filings as of September 19, 1994 (unless
otherwise noted) with respect to (i) each person known to be the beneficial
owner of more than 5% of General Signal Common Stock, (ii) the number of shares
of General Signal Common Stock owned by each director and certain executive
officers of General Signal and by all directors and executive officers of
General Signal as a group and the percentage of the total number of outstanding
shares of General Signal Common Stock that such numbers represent, and (iii) the
percentage of the total number of outstanding shares of General Signal Common
Stock to be owned at the Effective Time by the persons named in clauses (i) and
(ii) and by the New Directors and each person known to be the beneficial owner
of more than 5% of Reliance Class A Common Stock as of September 19, 1994. All
directors and certain executive officers of General Signal owned 1.9% of the
outstanding General Signal Common Stock as of September 19, 1994. As of
September 19, 1994 none of the New Directors owned any shares of General Signal
Common Stock nor did they have any relationships with General Signal.
35
<PAGE> 45
<TABLE>
<CAPTION>
PRE-EFFECTIVE TIME
-----------------------------
AMOUNT AND POST-EFFECTIVE TIME
NATURE OF -------------------
NAME OF BENEFICIAL PERCENT TOTAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS OF OUTSTANDING(3)
- ---------------- --------------- -------- -----------------
<S> <C> <C> <C>
GENERAL SIGNAL
J.P. Morgan & Co., Incorporated.............. 5,414,462(4) 11.43% 6.41%
60 Wall Street
New York, N.Y. 10260
FMR Corp. ................................... 3,305,057(5) 6.99% 3.91%
82 Devonshire Street
Boston, MA 02109
College Retirement Equities Fund............. 2,751,000(6) 5.81% 3.26%
730 Third Avenue
New York, NY 10017
Ralph E. Bailey.............................. 5,182 * *
Van C. Campbell.............................. 1,440 * *
Edmund M. Carpenter.......................... 308,284 * *
Ronald E. Ferguson........................... 2,421 * *
Joel S. Friedman............................. 118,646(7) * *
John P. Horgan............................... 9,368(8) * *
C. Robert Kidder............................. 1,000 * *
Richard J. Kogan............................. 1,000 * *
Peter A. Laing............................... 123,653 * *
Stephen W. Nagy.............................. 118,454 * *
Nathan R. Owen............................... 56,408(8) * *
Roland W. Schmitt............................ 992(8) * *
John R. Selby................................ 3,269(8) * *
Edgar J. Smith, Jr........................... 38,584 * *
All General Signal directors and executive
officers as a group (21 persons)........... 905,773(9)(10) 1.9% 1.1%
RELIANCE
Citicorp(11)................................. 12.44%
399 Park Ave.
New York, N.Y. 10043
College Retirement Equities Fund(12)......... 1.31%
The Equitable Companies Incorporated(13)..... 3.55%
787 Seventh Avenue
New York, N.Y. 10019
Society National Bank, as Trustee under
Reliance's Savings and Investment
Plan(14)................................... 2.17%
127 Public Square
Cleveland, OH 44114
Anthony C. Howkins(15)....................... *
John C. Morley(16)........................... *
Alfred M. Rankin, Jr.(17).................... *
Dudley P. Sheffler(18)....................... *
H. Virgil Sherrill(19)....................... 1.00%
E. Mandell de Windt(20)...................... *
Stephen C. Sherrill(21)...................... *
All nominees as a group (7 persons).......... 2.3%
</TABLE>
36
<PAGE> 46
- ---------------
* Less than 1%.
(1) The figures shown include the interest of executive officers of General
Signal in an aggregate of 47,635 shares of General Signal Common Stock held
by the trustee under General Signal's Savings and Stock Ownership Plan (the
"Savings Plan") as of June 30, 1994 and include the following shares of
General Signal Common Stock which the persons listed have the right to
acquire as of September 19, 1994 or within 60 days of that date through the
exercise of stock options: Edmund M. Carpenter (252,679); Joel S. Friedman
(97,771); Peter A. Laing (114,012); Stephen W. Nagy (116,875); Edgar J.
Smith, Jr. (20,521); and all directors and executive officers of General
Signal as a group (680,926).
(2) General Signal executive officers also own "stock units" not reflected in
the table. The "stock units" represent compensation deferred and credited
as "phantom stock units" under General Signal's Deferred Compensation Plan
(see "Stock Ownership Guidelines" for a description of this Plan). For
Ronald E. Ferguson, the "stock units" represent director fees deferred to
his share-denominated account under General Signal's Deferred Compensation
Plan for directors as of July 8, 1994 (see General Signal's 1994 Proxy
Statement for a description of this Plan). Under both Plans, the value of
the "stock units" at the time of distribution will be based on the market
value of General Signal Common Stock, but the deferred amounts will be paid
in cash. The ownership of "stock units" (the value of which is tied to the
value of General Signal Common Stock) beneficially owned as of June 30,
1994 (unless otherwise noted above) was as follows: Edmund M. Carpenter
1,743 units; Ronald E. Ferguson 5,276 units; Joel S. Friedman 572 units;
Peter A. Laing 409 units; Stephen W. Nagy 702 units; Edgar J. Smith, Jr.
341 units; and all General Signal directors and executive officers as a
group 10,356 units.
(3) All percentages assume the Merger took effect on September 19, 1994 and
that all Class B Common Stock outstanding at the Effective Time has been
converted to an equivalent number of shares of Common Stock.
(4) Based on a review of a Schedule 13G filed by J.P. Morgan & Co.,
Incorporated ("J.P. Morgan") as of December 31, 1993, J.P. Morgan had sole
voting power with respect to 3,024,972 shares, shared voting power with
respect to 3,400 shares, sole dispositive power with respect to 5,382,019
shares and shared dispositive power with respect to 32,443 shares.
(5) Based on certain correspondence received by General Signal from FMR Corp.,
as of September 14, 1994, FMR Corp. had sole voting power with respect to
185,525 shares of Common Stock and sole dispositive power with respect to
3,305,057 shares of Common Stock. In addition, General Signal has become
aware, through information obtained from an outside subscriber service,
that as of June 30, 1994, IDS Financial Corp. had sole voting power with
respect to 2,105,000 shares of Common Stock, shared voting power with
respect to 665,000 shares of Common Stock and no voting power with respect
to 17,629 shares of Common Stock. The report does not indicate whether IDS
Financial Corp. has dispositive power over any of the shares of Common
Stock held by it.
(6) Based on a review of a Schedule 13G filed by College Retirement Equities
Fund ("CREF") as of December 31, 1993, CREF had sole voting power and sole
dispositive power with respect to 2,751,000 shares.
(7) Includes 5,200 shares owned by the wife of Joel S. Friedman with respect to
which he does not disclaim beneficial ownership.
(8) Messrs. Campbell, Horgan, Owen, Schmitt and Selby have elected to defer all
or part of their cash compensation as directors and to receive in lieu
thereof restricted stock under General Signal's 1992 Stock Incentive Plan
(see General Signal's 1994 Proxy Statement for a description of this Plan
as it applies to non-employee directors). The figures shown include the
shares of restricted stock with respect to which the holders had sole
voting power, but no investment power during the restricted period as
follows: John P. Horgan (1,368); Nathan R. Owen (2,504); Roland W. Schmitt
(592); and John R. Selby (2,669).
(9) Includes 2,040 shares of restricted stock held by four current executive
officers with respect to which the holders had sole voting power, but no
investment power during the restricted period.
(10) Includes 200 shares owned by the children of an executive officer with
respect to which he does not disclaim beneficial ownership.
37
<PAGE> 47
(11) As of September 19, 1994, Citicorp owned 5,250,000 shares of Reliance Class
C Common Stock which were held by its wholly owned subsidiary, CSCL, and
which are convertible into 14,217,000 shares of Reliance Class A Common
Stock.
(12) As of June 30, 1994, CREF owned 1,502,900 shares of Reliance Class A Common
Stock. This information was obtained by Reliance from CREF's Schedule 13F
as filed with the Commission.
(13) As of June 30, 1994, the Equitable Companies Incorporated ("Equitable")
owned 4,061,905 shares of Reliance Class A Common Stock. This information
was obtained by Reliance from Equitable's Schedule 13F as filed with the
Commission.
(14) Society National Bank ("Society") is the Trustee of Reliance's Savings and
Investment Plan. As of July 31, 1994, Reliance's Savings and Investment
Plan held 2,478,272 shares of Reliance Class A Common Stock on behalf of
participants in the Plan. All participants in this Plan, including the
executive officers of Reliance, have the power to vote the shares of
Reliance Class A Common Stock in their personal accounts under the Plan.
(15) Mr. Howkins is a director of Reliance and as of September 19, 1994, owned
30,000 shares of Reliance Class A Common Stock.
(16) Mr. Morley is a director and an executive officer of Reliance. As of
September 19, 1994, Mr. Morley's ownership of Reliance Class A Common Stock
was comprised of 769,584 shares of which he owned directly, 6,736 shares
owned by one of his children, 205 shares which he owned indirectly through
Reliance's Savings and Investment Plan and 60,000 shares which he had the
right to acquire through the exercise of stock options. The ownership of
the shares held by his child is attributed to Mr. Morley pursuant to
Commission rules.
(17) Mr. Rankin is a director of Reliance and as of September 19, 1994, owned
2,000 shares of Reliance Class A Common Stock.
(18) Mr. Sheffler is a director and an executive officer of Reliance. As of
September 19, 1994, Mr. Sheffler's ownership of Reliance Class A Common
Stock was comprised of 182,920 shares which he owned directly, 207 shares
which he owned indirectly through Reliance's Savings and Investment Plan
and 30,000 shares which he had the right to acquire through the exercise of
stock options.
(19) Mr. Sherrill is a director of Reliance. As of September 19, 1994, Mr.
Sherrill's share ownership of Reliance Class A Common Stock was comprised
of 1,091,820 shares which he owned directly and 40,000 shares owned by the
Sherrill Foundation, of which Mr. Sherrill is the President. Mr. Sherrill
has no financial interest in the shares owned by the Sherrill Foundation.
The ownership of the shares held by the Sherrill Foundation is attributed
to Mr. Sherrill pursuant to Commission rules.
(20) Mr. de Windt is a director of Reliance. As of September 19, 1994, Mr. de
Windt's share ownership of Reliance Class A Common Stock was comprised of
75,000 shares which he had the right to acquire through the exercise of
stock options.
(21) Mr. Stephen C. Sherrill is CSCL's nominee to General Signal's Board of
Directors. As of September 19, 1994, Mr. Sherrill's share ownership of
Reliance Class A Common Stock was comprised of 274,560 shares which he
owned directly and 16,200 shares which he held as custodian for his
children.
38
<PAGE> 48
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex A to this Proxy Statement/Prospectus and
is incorporated herein by reference in its entirety. This summary is qualified
in its entirety by reference to the Merger Agreement.
The Merger Agreement provides that, following the adoption of the Merger
Proposal by the requisite vote of the stockholders of General Signal, the
adoption of the Merger Agreement by the requisite vote of the holders of
Reliance Class A Common Stock and the satisfaction or waiver of the other
conditions to the Merger, Reliance will be merged with and into General Signal.
The Merger will become effective upon the filing with the Secretary of State of
the State of Delaware and the filing by the office of the Department of State of
the State of New York of a duly executed Certificate of Merger, in the form
required by and in accordance with the DGCL and the NYBCL, or at such time
thereafter as is provided in the Certificate of Merger.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof: (i) each share of Reliance's Class A Common
Stock issued and outstanding immediately prior to the Effective Time (except for
shares owned by Reliance or any of its subsidiaries) shall be converted into the
right to receive 0.739 shares of Common Stock (ii) each share of Reliance's
Class B Common Stock issued and outstanding immediately prior to the Effective
Time (except for shares owned by Reliance or any of its subsidiaries and any
Dissenting Shares (as defined in the Merger Agreement)) shall be converted into
the right to receive 0.739 shares of Class B Common Stock, or, if General Signal
receives, at least two business days prior to the Closing Date (as defined in
the Merger Agreement), a written notice from any holder of Reliance Class B
Common Stock that it elects to receive Common Stock in lieu of the Class B
Common Stock it would otherwise be entitled to receive under this clause, 0.739
shares of Common Stock; and (iii) each share of Reliance Class C Common Stock
issued and outstanding immediately prior to the Effective Time (except for
shares owned by Reliance or any of its subsidiaries and any Dissenting Shares)
shall be converted into the right to receive 2.001 shares of Class B Common
Stock, or, if General Signal receives, at least two business days prior to the
Closing Date, a written notice from any holder of Reliance Class C Common Stock
that it elects to receive Common Stock in lieu of the Class B Common Stock it
would otherwise be entitled to receive under this clause, 2.001 shares of Common
Stock. Each share of Reliance Class A Common Stock, Reliance Class B Common
Stock and Reliance Class C Common Stock owned by Reliance as treasury stock or
owned by any subsidiary of Reliance shall be cancelled. The status of all
securities of General Signal, issued or reserved for issuance, shall remain
unchanged.
The Certificate of Incorporation, as amended in accordance with the Merger
Agreement, and By-laws of General Signal as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation until thereafter amended as provided by law.
The number of authorized directors of the Surviving Corporation shall be 18
until otherwise determined pursuant to the By-laws of the Surviving Corporation.
The directors of General Signal and, subject to the requisite vote of the
stockholders of General Signal, the New Directors shall be directors of the
Surviving Corporation and will hold office from and after the Effective Time
until their respective successors are duly elected or appointed and qualified in
the manner provided in the Certificate of Incorporation and By-laws of the
Surviving Corporation or as otherwise provided by law or their earlier
resignation or removal.
The officers of the Surviving Corporation shall be determined by the Board
of Directors of the Surviving Corporation immediately after the Effective Time,
following consultation between the respective Chief Executive Officers of
General Signal and Reliance, and will hold office until their respective
successors are duly appointed and qualified in the manner provided in the
By-laws of the Surviving Corporation or as otherwise provided by law or their
earlier resignation or removal, except that Mr. Carpenter shall be the Chairman
and Chief Executive Officer of the Surviving Corporation and Mr. Morley shall be
the Vice Chairman of the Surviving Corporation. The Vice Chairman shall be an
executive officer of the Surviving Corporation with the duties set forth in the
By-laws of the Surviving Corporation.
39
<PAGE> 49
Each standing committee of the General Signal Board of Directors in
existence immediately prior to the Effective Time shall be increased in size at
the Effective Time so that each such committee (i) with an even number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by such number of members and (ii) with an odd number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by such number of members minus one, and, in each case, such
newly-created vacancies shall be filled, subject to the requisite vote of the
stockholders of General Signal, by the New Directors, immediately after the
Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties by
each of General Signal and Reliance (as to such party) concerning: the
organization and qualification of General Signal and Reliance and their
respective subsidiaries; the capitalization of each of General Signal and
Reliance; the authority of each of General Signal and Reliance relative to the
execution and delivery of, and performance of its respective obligations under,
the Merger Agreement and approval by the Board of Directors of each of General
Signal and Reliance regarding certain related matters; obtaining necessary
approvals to consummate the transactions contemplated by the Merger Agreement
and the absence of any conflict with, or violations of, the corporate documents
and certain binding instruments of each of General Signal and Reliance or their
respective subsidiaries or with or of any statute, rule, regulation, order or
decree of courts or governmental entities, subject to certain exceptions; the
accuracy of reports and documents filed by each of General Signal and Reliance
with the Commission since January 1, 1992 and certain financial statements of
each company; the absence of undisclosed liabilities or obligations; the absence
of any Material Adverse Effect (as defined in the Merger Agreement) since
December 31, 1993; the absence of material litigation involving either General
Signal or Reliance or their respective subsidiaries; compliance by each of
General Signal and Reliance and their respective subsidiaries with applicable
laws and agreements; the amendment of the General Signal Rights Agreement so
that the Merger does not trigger the Rights thereunder; and certain accounting
matters.
COVENANTS
The Merger Agreement obligates each of General Signal and Reliance and
their respective subsidiaries to conduct their respective businesses in the
ordinary course of business consistent with past practice including specific
covenants as to certain permissible activities.
NO SOLICITATION
Each of Reliance and General Signal has agreed that, prior to the Effective
Time, it shall not, and shall not authorize or permit any of its subsidiaries or
any of its subsidiaries' directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving Reliance or its
subsidiaries or General Signal or its subsidiaries or acquisition of any kind of
all or substantially all of the assets or capital stock of Reliance and its
subsidiaries taken as a whole or General Signal and its subsidiaries taken as a
whole (an "Acquisition Transaction") or negotiate, explore or otherwise
communicate in any way with any third party (other than General Signal or
Reliance, as the case may be) with respect to any Acquisition Transaction or
enter into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement; provided that General Signal or Reliance
may, in response to an unsolicited written proposal with respect to an
Acquisition Transaction from a financially capable third party that contains no
financing condition, (i) furnish or disclose non-public information to such
third party and (ii) negotiate, explore or otherwise communicate with such third
party, in each case only if the Board of Directors of such party determines in
good faith by a majority vote after consultation with its legal and financial
advisors, and after receipt of the written opinion of outside legal counsel of
such party that failing to take such action would constitute a breach of the
fiduciary duties of such Board of Directors, that taking such action is
reasonably likely to lead to an Acquisition Transaction that is
40
<PAGE> 50
more favorable to the stockholders of such party than the Merger and that
failing to take such action would constitute a breach of the Board's fiduciary
duties.
Each of Reliance and General Signal has agreed immediately to advise the
other in writing of the receipt of any inquiries or proposals relating to an
Acquisition Transaction and any actions taken pursuant to the preceding
paragraph.
CONDITIONS
The obligations of each party to effect the Merger are subject to, among
other things, the fulfillment or waiver of the following conditions: the
effectiveness of the Proxy Statement/Prospectus in accordance with the
provisions of the Securities Act; the requisite vote of the stockholders of
General Signal and Reliance necessary to consummate the Merger and the
transactions contemplated thereby; the obtaining of all necessary consents and
approvals and the expiration or termination of any waiting period applicable to
the consummation of the Merger under the HSR Act; the receipt of a letter from
the independent accountants of General Signal that the Merger will qualify for
pooling-of-interests accounting treatment; and the receipt of an opinion of
Cahill Gordon & Reindel that the Merger constitutes a tax-free reorganization.
The obligations of each of General Signal and Reliance to consummate the Merger
are further subject to the fulfillment or waiver of, among other things, the
following conditions: the representations and warranties of the other party
contained in the Merger Agreement shall be true and correct in all material
respects; the other party to the Merger Agreement shall have complied in all
material respects with all of its agreements required by the Merger Agreement;
no writ, order, decree or injunction of a court of competent jurisdiction or
governmental entity shall be in effect against either party, and no proceedings
therefor shall have been threatened or commenced by any governmental entity,
which prohibit or restrict the consummation of the Merger; and there shall not
have occurred since June 30, 1994 any material adverse change in the business,
operations, assets, financial condition or results of operations of the other
party.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Reliance or
General Signal: (a) by mutual consent of the Boards of Directors of General
Signal and Reliance; (b) by either General Signal or Reliance if, without fault
of such terminating party, the Merger shall not have been consummated on or
before March 31, 1995, which date may be extended by mutual consent of the
parties; (c) by either General Signal or Reliance, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and unappealable; provided that the party seeking to terminate
the Merger Agreement shall have used all commercially reasonable efforts to
remove or lift such order, decree or ruling; or (d) by either General Signal or
Reliance, if the requisite stockholder approvals of the stockholders of either
General Signal or Reliance are not obtained at the meeting of stockholders duly
called and held therefor.
The Merger Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of General Signal, at any time prior to the
Effective Time, before or after the approval by the stockholders of General
Signal or Reliance, if (a) Reliance shall have failed to comply in any material
respect with any of the covenants or agreements contained in certain articles of
the Merger Agreement to be complied with or performed by Reliance at or prior to
such date of termination, (b) there exists a breach or breaches of any
representation or warranty of Reliance contained in the Merger Agreement such
that the closing conditions in favor of General Signal would not be satisfied;
provided, however, that if such breach or breaches are capable of being cured
prior to the Effective Time, such breaches shall not have been cured within 30
days of delivery to Reliance of written notice of such breach or breaches, (c)
the Board of Directors of Reliance shall withdraw, modify or change its
recommendation of the Merger Agreement or the Merger in a manner adverse to
General Signal or shall have recommended any proposal in respect of an
Acquisition Transaction, or (d) the Board of Directors of Reliance shall furnish
or disclose non-public information or negotiate, explore
41
<PAGE> 51
or otherwise communicate in any way with a third party with respect to any
Acquisition Transaction, or shall have resolved to do any of the foregoing and
publicly disclosed such resolution.
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
stockholders of General Signal or Reliance, by action of the Board of the
Directors of Reliance, if (a) General Signal shall have failed to comply in any
material respect with any of the covenants or agreements contained in certain
articles of the Merger Agreement to be complied with or performed by General
Signal at or prior to such date of termination, (b) there exists a breach or
breaches of any representation or warranty of General Signal contained in the
Merger Agreement such that the closing conditions in favor of Reliance would not
be satisfied; provided, however, that if such breach or breaches are capable of
being cured prior to the Effective Time, such breaches shall not have been cured
within 30 days of delivery to General Signal of written notice of such breach or
breaches, (c) the Board of Directors of General Signal shall withdraw, modify or
change its recommendation of the Merger Agreement or the Merger in a manner
adverse to Reliance or shall have recommended any proposal in respect of an
Acquisition Transaction, or (d) the Board of Directors of General Signal shall
furnish or disclose non-public information or negotiate, explore or otherwise
communicate in any way with a third party with respect to any Acquisition
Transaction, or shall have resolved to do any of the foregoing and publicly
disclosed such resolution.
FEES AND EXPENSES
Except as set forth below, each of General Signal and Reliance shall bear
their respective expenses incurred in connection with the Merger except that
expenses incurred in printing, mailing and filing this Proxy
Statement/Prospectus shall be shared equally by General Signal and Reliance.
If the Merger Agreement is terminated (i) pursuant to the first paragraph
of "-- Termination" above (except clause (a)) and prior to such termination any
financially capable person shall have made a bona fide proposal concerning an
Acquisition Transaction to Reliance or its stockholders by public announcement
or written communication that is or becomes subject to public disclosure, or
(ii) by General Signal pursuant to clause (c) or (d) of the second paragraph of
"-- Termination" above, then, in any such case, Reliance shall within two
business days pay General Signal by wire transfer of immediately available funds
to an account specified by General Signal up to $2.5 million to reimburse
General Signal for its documented fees and expenses directly related to the
Merger Agreement and the transactions contemplated thereby and if terminated by
General Signal pursuant to clause (c) or (d), an additional fee of $50 million,
and if an additional fee has not already become payable and within twelve months
after the date of the Merger Agreement, Reliance or any of its subsidiaries
enters into a definitive agreement with either a person referred to in clause
(i) of this paragraph or a third party to which Reliance has provided non-public
information or with which it has negotiated, explored or in any way communicated
after the date of the Merger Agreement and prior to the termination of the
Merger Agreement in accordance with its terms with respect to an Acquisition
Transaction, then Reliance, prior to entering into any such definitive
agreement, shall pay General Signal by wire transfer of immediately available
funds to an account specified by General Signal, an additional fee of $50
million.
If the Merger Agreement is terminated (i) pursuant to the first paragraph
of "-- Termination" above (except clause (a)) and prior to such termination any
financially capable person shall have made a bona fide proposal concerning an
Acquisition Transaction to General Signal or its stockholders by public
announcement or written communication that is or becomes subject to public
disclosure, or (ii) by Reliance pursuant to clause (c) or (d) of the third
paragraph of "-- Termination" above then, in any such case, General Signal shall
within two business days pay Reliance by wire transfer of immediately available
funds to an account specified by Reliance up to $2.5 million to reimburse
Reliance for its documented fees and expenses directly related to the Merger
Agreement and the transactions contemplated thereby and if terminated by
Reliance pursuant to clause (c) or (d), an additional fee of $50 million, and if
an additional fee has not already become payable and within twelve months after
the date of the Merger Agreement, General Signal or any of its subsidiaries
enters into a definitive agreement with either a person referred to in clause
(i) of this paragraph or a third party to which General Signal has provided
non-public information or with which it has negotiated,
42
<PAGE> 52
explored or in any way communicated after the date of the Merger Agreement and
prior to the termination of the Merger Agreement in accordance with its terms
with respect to an Acquisition Transaction, then General Signal, prior to
entering into any such definitive agreement, shall pay Reliance by wire transfer
of immediately available funds to an account specified by Reliance, an
additional fee of $50 million.
So long as General Signal is not in breach or default under any covenant,
condition, representation or warranty in the Merger Agreement, in the event of a
termination of the Merger Agreement by General Signal pursuant to clause (a) or
(b) of the second paragraph of "-- Termination" above, then Reliance shall
promptly pay General Signal up to $2.5 million for all documented fees and
expenses incurred by General Signal (including the fees and expenses of counsel,
accountants, consultants and advisors) directly related to the Merger Agreement
and the transactions contemplated thereby. So long as Reliance is not in breach
or default under any covenant, condition, representation or warranty in the
Merger Agreement, in the event of a termination of the Merger Agreement by
Reliance pursuant to clause (a) or (b) of the third paragraph of
"-- Termination" above, then General Signal shall promptly pay Reliance up to
$2.5 million for all documented fees and expenses incurred by Reliance
(including the fees and expenses of counsel, accountants, consultants and
advisors) directly related to the Merger Agreement and the transactions
contemplated thereby.
INDEMNIFICATION; INSURANCE
The Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of Reliance and its
subsidiaries against all losses, claims, damages, expenses or liabilities
arising out of actions or omissions or alleged actions or omissions occurring at
or prior to the Effective Time to the same extent and on the same terms and
conditions (including with respect to advancement of expenses) provided for in
Reliance's Certificate of Incorporation and By-Laws and agreements in effect at
the date of the Merger Agreement (to the extent consistent with applicable law).
For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Reliance (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that the Surviving Corporation
shall not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 250% of the premiums paid as of the date of the
Merger Agreement by Reliance for such insurance.
AMENDMENT
Subject to applicable law, the Merger Agreement may be amended, modified or
supplemented only by written agreement of General Signal and Reliance at any
time prior to the Effective Time with respect to any of the terms contained
therein; provided, however, that, after the Merger Agreement is adopted by the
stockholders of either Reliance or General Signal, no such amendment or
modification shall change the amount or form of the consideration to be
delivered in respect of the Reliance Shares.
WAIVERS; CONSENTS
Any failure of General Signal or Reliance to comply with any obligation,
covenant, agreement or condition contained in the Merger Agreement may be waived
by Reliance or General Signal, respectively, only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever the Merger Agreement requires or permits consent by or on
behalf of any party to the Merger Agreement, such consent shall be given in
writing pursuant to the terms thereof.
43
<PAGE> 53
CERTAIN RELATED MATTERS
CSCL AGREEMENT
On August 29, 1994, General Signal entered into the CSCL Agreement. As of
that date, CSCL owned all of the 5,250,000 shares outstanding of Reliance Class
C Common Stock which are convertible into 14,217,000 shares of Reliance Class A
Common Stock. Pursuant to the terms of the CSCL Agreement, CSCL agreed in
connection with the Merger that among other things it will, (i) not exercise any
appraisal or dissenter's rights, (ii) execute an agreement not to sell, transfer
or otherwise dispose of any shares of Common Stock received by it in the Merger
for such time period as is necessary to preserve the accounting treatment of the
Merger as a pooling-of-interests, and (iii) not convert any of its shares of
Reliance Class C Common Stock into Reliance Class A Common Stock at any time on
or before the record date for the Reliance Special Meeting. General Signal
agreed among other things (i) to enter into a registration rights agreement with
CSCL to register with the Commission, upon the request of CSCL in certain
circumstances, the shares of Common Stock received by CSCL in the Merger; (ii)
to amend its charter to provide for two classes of common stock, including a
class of non-voting common stock with economic terms substantially equivalent to
the terms of the Reliance Class B Common Stock; (iii) that in connection with
the Merger, CSCL's Reliance Class C Common Stock would be converted into 4.9% of
General Signal Common Stock and the balance of its Reliance Class C Common Stock
would be converted into Class B Common Stock; and (iv) to enter into an
agreement with CSCL providing that for so long as CSCL (and its affiliates) owns
at least 10% (and in certain circumstances at least 5%) of the total outstanding
shares of General Signal's capital stock, General Signal shall use its best
efforts to have a CSCL nominee elected to its Board of Directors.
GENERAL SIGNAL RIGHTS AGREEMENT AMENDMENT
On August 29, 1994, the Board of Directors of General Signal adopted an
amendment (the "Amendment") to the General Signal Rights Agreement (the "Rights
Plan") dated as of March 7, 1986 between General Signal and the rights agent
named therein (as subsequently amended on June 21, 1990, and June 17, 1993). The
Amendment provided that pursuant to the transactions contemplated by the Merger
Agreement, Reliance is not an "Acquiring Person" (as defined in the Rights Plan)
and that no "Triggering Event," "Share Acquisition Date" or "Distribution Date"
(each as defined in the Rights Plan) has occurred or will occur. The Amendment
also provides that upon the issuance of any Class B Common Stock, an associated
common stock purchase right ("Class B Right") shall attach thereto. For a
description of the Rights Plan see "Description of Capital Stock."
RELIANCE RIGHTS AGREEMENT
On August 29, 1994, the Board of Directors of Reliance declared a dividend
of one preferred stock purchase right (a "Reliance Right") for each outstanding
share of Reliance Class A Common Stock, Reliance Class B Common Stock and
Reliance Class C Common Stock to purchase one one-hundredth of a share of a new
Series A, Series B or Series C Preferred Stock of Reliance, respectively. The
dividend was payable on September 15, 1994 to the stockholders of record on that
date. Each Reliance Right entitles the registered holders of Reliance Class A
Common Stock and Reliance Class B Common Stock to buy one one-hundredth of a
share of Series A and Series B Preferred Stock, respectively, at an exercise
price of $60.00, subject to adjustment, and holders of Reliance Class C Common
Stock to buy one one-hundredth of a share of Series C Preferred Stock at an
exercise price of $162.48, subject to adjustment. The description and terms of
the Reliance Rights are set forth in a Rights Agreement between Reliance and
Society National Bank, as rights agent.
The Reliance Rights are not exercisable until the earlier to occur of (i)
ten days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership of
10% or more of the outstanding shares of Reliance Class A Common Stock or (ii)
ten business days (or such later date as may be determined by action of the
Board of Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer, or exchange offer, the consummation of which would result in the
beneficial
44
<PAGE> 54
ownership by a person or group of 10% or more of Reliance Class A Common Stock.
The Reliance Rights will expire on the earliest of (i) the close of business on
August 29, 2004, (ii) the time at which the Reliance Rights are redeemed, (iii)
immediately prior to the Effective Time or (iv) the time at which such Reliance
Rights are exchanged.
In the event that Reliance is acquired in a merger or other business
combination transaction (other than the Merger), each holder of a Reliance Right
thereafter has the right to receive, upon the exercise thereof at the then
current exercise price of the Reliance Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Reliance Right. In the event
that any person or group of affiliated or associated persons becomes the
beneficial owner of 10% or more of Reliance Class A Common Stock (other than
pursuant to the Merger), each holder of a Reliance Right, other than Reliance
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon exercise that number of
shares of Reliance Class A Common Stock having a market value of two times the
exercise price of the Reliance Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of Reliance Class A
Common Stock and prior to the acquisition by such person or group of 50% or more
of Reliance Class A Common Stock, the Board of Directors may exchange the
Reliance Rights (other than Reliance Rights owned by such person or group which
have become void), in whole or in part, at an exchange ratio of one share of
Reliance Class A Common Stock, or one one-hundredth share of Preferred Stock (or
of a share of a class or series of Reliance's preferred stock having equivalent
rights, preferences and privileges), per Reliance Right (subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of Reliance Class A
Common Stock, the Board of Directors may redeem the Reliance Rights in whole,
but not in part, at a price of $.01 per Reliance Right.
RELIANCE EMPLOYEE BENEFIT PLANS
On August 28, 1994, Reliance's Board of Directors adopted a retention plan
which was added to its Severance/Separation Program for salaried and management
employees. The plan will provide certain approved employees, other than Reliance
employees covered by Reliance's Severance Plan described previously, with three
or four months severance pay in the event that their employment is terminated
under certain circumstances. General Signal has agreed not to amend the terms of
Reliance's Deferred Compensation Plan, the Reliance Special Retirement Program
for Officers or the Supplemental Executive Retirement Plan for two years
following the Merger. See "The Merger -- Interests of Certain Persons in the
Merger."
45
<PAGE> 55
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Merger of General Signal and Reliance as described more fully
in the accompanying notes to these financial statements. This pro forma
information has been prepared utilizing the historical consolidated financial
statements of General Signal and Reliance. This information should be read in
conjunction with the historical financial statements and notes thereto, which
are incorporated by reference into this Proxy Statement/Prospectus. The pro
forma financial data are provided for comparative purposes only and do not
purport to be indicative of the results that would have been obtained if the
Merger had been effected during the periods presented.
The pro forma financial information is based on the pooling-of-interests
method of accounting for the Merger as if the Merger had occurred at the
beginning of the earliest period presented. Pro forma adjustments are described
in the accompanying notes to the unaudited pro forma combined condensed
financial statements.
46
<PAGE> 56
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------
1994 1993 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.................... $1,646,170 $1,564,189 $3,137,906 $3,226,705 $3,131,432
Cost of sales................ 1,195,403 1,160,956 2,323,390 2,360,822 2,275,625
Selling, general and
administrative expenses.... 302,298 291,289 585,870 604,518 588,901
Transaction and consolidation
charge..................... -- -- 13,200 -- --
Dispositions of businesses
and restructuring:
Prior dispositions......... -- -- 19,600 -- --
Semiconductor and
restructuring........... -- (8,000) (7,100) 86,600 1,600
---------- ---------- ---------- ---------- ----------
1,497,701 1,444,245 2,934,960 3,051,940 2,866,126
---------- ---------- ---------- ---------- ----------
Operating earnings........... 148,469 119,944 202,946 174,765 265,306
Interest expense, net........ (17,551) (23,949) (42,848) (69,579) (111,855)
---------- ---------- ---------- ---------- ----------
Earnings from continuing
operations before
income taxes............... 130,918 95,995 160,098 105,186 153,451
Income taxes................. 51,240 37,083 61,002 45,421 55,494
---------- ---------- ---------- ---------- ----------
Earnings from continuing
operations................. $ 79,678 $ 58,912 $ 99,096 $ 59,765 $ 97,957
---------- ---------- ---------- ---------- ----------
Earnings per share from
continuing operations...... $ 0.94 $ 0.73 $ 1.20 $ 0.60 $ 1.25
---------- ---------- ---------- ---------- ----------
Weighted average shares and
equivalent shares.......... 84,848 80,707 82,646 73,850 63,145
---------- ---------- ---------- ---------- ----------
</TABLE>
47
<PAGE> 57
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1994
<TABLE>
<CAPTION>
GENERAL PRO FORMA
SIGNAL RELIANCE ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents............... $ 8,389 $ 37,400 $ 45,789
Accounts receivable..................... 280,023 241,900 521,923
Inventories............................. 229,516 353,200 582,716
Prepaid expenses and other current
assets................................ 51,780 23,800 $ (11,900)(5) 63,680
Deferred income taxes................... 59,263 -- 11,900 (5) 71,163
---------- ---------- ---------- ----------
Current assets.......................... 628,971 656,300 -- 1,285,271
Property, plant and equipment........... 293,185 308,200 601,385
Intangibles............................. 188,756 214,800 403,556
Other assets............................ 148,147 77,500 (27,400)(5) 198,247
Deferred income taxes................... 47,755 -- 27,400 (5) 75,155
---------- ---------- ---------- ----------
Total assets............................ $1,306,814 $1,256,800 -- $2,563,614
---------- ---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term borrowings and current
maturities of long-term debt.......... $ 9,247 $ 200 $ 9,447
Accounts payable........................ 149,230 73,900 223,130
Accrued expenses/other.................. 146,051 188,000 $ (42,800)(5) 291,251
Income taxes............................ 23,860 -- 42,800 (5) 66,660
---------- ---------- ---------- ----------
Current liabilities..................... 328,388 262,100 -- 590,488
---------- ---------- ---------- ----------
Long-term debt, less current
maturities............................ 250,740 360,700 611,440
Accrued postretirement and
postemployment obligations............ 163,404 -- 179,800 (5) 343,204
Other liabilities....................... 8,461 223,500 (179,800)(5) 52,161
---------- ---------- ---------- ----------
Long-term liabilities................... 422,605 584,200 -- 1,006,805
---------- ---------- ---------- ----------
Shareholders' equity.................... 555,821 410,500 966,321
---------- ---------- ---------- ----------
Total liabilities and shareholders'
equity................................ $1,306,814 $1,256,800 -- $2,563,614
---------- ---------- ---------- ----------
</TABLE>
- ---------------
48
<PAGE> 58
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(1) The pro forma combined condensed financial data reflect the assumed shares
outstanding and weighted average shares outstanding of General Signal Common
Stock, based on an exchange ratio of 0.739 shares of General Signal Common
Stock for each equivalent share of Reliance Class A Common Stock (assuming
that all shares of Reliance Class B Common Stock and Reliance Class C Common
Stock have been converted to shares of Reliance Class A Common Stock).
Options of Reliance are assumed to be converted at the Conversion Ratio to
Surviving Corporation options with terms the same as those offered under
Reliance option plans.
The following table sets forth the pro forma sales, earnings from
continuing operations and earnings per share from continuing operations for
the periods indicated as though the Merger had occurred at the beginning of
the earliest period presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER,
------------------------- ----------------------------------------
1994 1993 1993 1992 1991
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales
General Signal historical...................... $ 815,270 $ 763,689 $1,530,006 $1,674,205 $1,615,832
Reliance historical............................ 830,900 800,500 1,607,900 1,552,500 1,515,600
---------- ---------- ---------- ---------- ----------
Pro forma combined............................. $1,646,170 $1,564,189 $3,137,906 $3,226,705 $3,131,432
---------- ---------- ---------- ---------- ----------
Earnings from continuing operations
General Signal historical...................... $ 49,578 $ 37,412 $ 66,596 $ 12,465 $ 63,957
Reliance historical............................ 30,100 21,500 32,500 47,300 34,000
---------- ---------- ---------- ---------- ----------
Pro forma combined............................. $ 79,678 $ 58,912 $ 99,096 $ 59,765 $ 97,957
---------- ---------- ---------- ---------- ----------
Earnings per share from continuing operations
General Signal historical...................... $ 1.05 $ 0.87 $ 1.47 $ 0.30 $ 1.66
---------- ---------- ---------- ---------- ----------
Reliance historical............................ $ 0.59 $ 0.42 $ 0.64 $ 0.73 $ 0.44
---------- ---------- ---------- ---------- ----------
Pro forma combined............................. $ 0.94 $ 0.73 $ 1.20 $ 0.60 $ 1.25
---------- ---------- ---------- ---------- ----------
Weighted average shares and equivalent shares
outstanding
General Signal historical...................... 47,359 43,215 45,205 41,753 38,572
Shares assumed to be issued for
Reliance(a).................................. 37,489 37,492 37,441 32,097 24,573
---------- ---------- ---------- ---------- ----------
Pro forma combined............................. 84,848 80,707 82,646 73,850 63,145
---------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
(a) Shares assumed to be issued to Reliance stockholders are historical
weighted average Reliance shares outstanding of 50,729, 50,733, 50,664,
43,433 and 33,252, respectively, times the Conversion Ratio of 0.739.
(2) There were no material transactions between General Signal and Reliance
during any period presented.
(3) General Signal and Reliance estimate, on a preliminary basis, that they will
incur transaction costs of approximately $[ ] and combination and
integration costs ranging from $[ ] to $[ ] associated
with the Merger. The transaction costs include investment banker and
professional fees. The preliminary estimate of combination and integration
costs includes, among others, amounts for unit mergers, relocation of
certain key personnel, and severance related costs at both General Signal
and Reliance locations. The precise magnitude of the costs to be incurred is
presently under study and, therefore, such transaction, combination and
integration costs have not been reflected in the pro forma combined
condensed financial statements.
(4) General Signal and Reliance are presently studying accounting policies of
both companies and, therefore, no adjustments have been made to conform
accounting policies in the pro forma financial statements. The effect of
adjustments, if any, to conform accounting policies is not expected to be
material.
(5) Certain reclassifications were made to Reliance balance sheet
classifications to conform to the General Signal presentation format. For
the pro forma statements of earnings, Reliance categories entitled "option
cancellation expense," "pension settlement gain" and "other expense, net"
have been combined with selling, general and administrative expenses.
(6) Pro forma earnings per share from continuing operations have been determined
after deduction of $15.6 million and $19.3 million in 1992 and 1991,
respectively, representing Reliance preferred stock dividends and accretion.
49
<PAGE> 59
CERTAIN TAX CONSEQUENCES
GENERAL
The following discussion of certain federal income tax consequences of the
Merger is included for general information only and is not intended to be a
complete discussion of all potential tax effects that might be relevant to a
decision on whether to vote in favor of the Merger. The tax treatment of a
stockholder may vary depending upon his or her particular situation, and certain
stockholders (including insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, persons who are not citizens or residents of the
United States or who are foreign corporations, foreign partnerships or foreign
estates or trusts as to the United States and employees with respect to options
received in connection with their employment) may be subject to special rules
not discussed below. Moreover, neither the state, local and foreign tax
consequences to Reliance stockholders of the Merger nor the consequences of the
receipt of General Signal Common Stock by a holder of a warrant to acquire
shares of Reliance Common Stock are discussed below. This summary is based on
laws, regulations, rulings and judicial decisions in effect at the date of this
Proxy Statement/Prospectus; however, legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences described
herein to stockholders. No rulings have been or will be requested from the
Internal Revenue Service (the "IRS") with respect to any of the matters
discussed herein.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Based upon the advice of Cahill Gordon & Reindel, counsel to General
Signal, General Signal believes that for federal income tax purposes the Merger
will be treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and both General Signal
and Reliance will be a party to such reorganization within the meaning of
Section 368(b) of the Code, and accordingly (i) no gain or loss will be
recognized by Reliance upon the transfer of its assets to General Signal in the
merger; (ii) no gain or loss will be recognized by the stockholders of Reliance
on the exchange of their Reliance Shares for the Shares; (iii) the tax basis of
the Shares received by a stockholder of Reliance (including any fractional share
interest to which it may be entitled) will be the same as the tax basis of the
Reliance Shares surrendered in exchange therefor; (iv) the holding period of the
Shares received by a stockholder of Reliance in the exchange (including any
fractional share interest to which it may be entitled) will include the holding
period of the Reliance Shares to be surrendered in exchange therefor, provided
the Reliance Shares are held as capital assets in the hands of the stockholder
of Reliance at the Effective Time; (v) a Reliance stockholder who receives cash
in lieu of a fractional Share will be treated as if the fractional Share were
distributed as part of the exchange and then redeemed by the Surviving
Corporation, with the cash being received in full payment for the fractional
share resulting in the recognition of gain or loss for federal income tax
purposes measured by the difference between the cash received and the portion of
the tax basis of the Reliance Shares surrendered in the exchange allocable to
such fractional Share, provided that such redemption is not essentially
equivalent to a dividend (such gain or loss will be a capital gain or loss
provided the Reliance Shares were held as capital assets in the hands of the
Reliance stockholder at the Effective Time); (vi) the basis of the assets of
Reliance in the hands of General Signal will be the same as the basis of such
assets in the hands of Reliance immediately prior to the Merger; and (vii) the
holding period of the assets of Reliance to be received by General Signal will
include the holding period of those assets in the hands of Reliance immediately
prior to the Merger.
If for any reason the Merger should not be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
each Reliance stockholder would recognize gain or loss equal to the difference
between the fair market value at the Effective Time of the Shares received by
such Reliance stockholder and the tax basis of the Reliance Shares surrendered
by such Reliance stockholder. Such gain or loss would be long-term capital gain
or loss to the Reliance stockholder if the Reliance Shares were held by the
Reliance stockholder for more than one year and were capital assets in the hands
of such Reliance stockholder at the Effective Time.
50
<PAGE> 60
EXERCISE OF APPRAISAL RIGHTS
Cash received by a holder of Reliance Class B Common Stock which properly
exercises its appraisal rights under Delaware law will result in the recognition
of gain or loss for federal income tax purposes, measured by the difference
between the amount of cash received and the basis of the Reliance Shares
surrendered. Such gain or loss will be capital gain or loss, provided that such
Reliance Shares were held as capital assets at the time of surrender, and will
be long-term capital gain or loss if such Reliance Shares have been held for
more than one year.
THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT MAY BE RELEVANT TO RELIANCE
STOCKHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. RELIANCE STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE MERGER, THE OWNERSHIP AND DISPOSITION OF GENERAL
SIGNAL SHARES AND THE APPLICABILITY AND INAPPLICABILITY OF FEDERAL, STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS.
51
<PAGE> 61
BOARD OF DIRECTORS AND MANAGEMENT OF GENERAL SIGNAL
The Board of Directors of General Signal is divided into three classes with
the directors in each class serving for a term of three years. The term of
office of one class of directors expires each year in rotation so that one class
is elected at each Annual Meeting for a full three-year term. Directors elected
by the Board to fill a vacancy (including a vacancy created by an increase in
the number of directors) may be elected only for a term expiring at the next
Annual Meeting.
Regularly scheduled meetings of the Board of Directors are currently held
seven times each year, and additional special meetings are called whenever
necessary. In 1993 there were seven meetings of the Board. The Board's current
policy is to consider dividend action in March, June, September and December.
The Board of Directors has established an Audit Committee, an Employee
Benefits Committee, an Executive Committee, a Personnel and Compensation
Committee and a Committee on Directors. Except for Edmund M. Carpenter, who
serves on the Executive Committee, the directors serving on these committees are
non-employee directors.
The members of the Audit Committee are John R. Selby (Chairman), Van C.
Campbell, C. Robert Kidder and Richard J. Kogan. This Committee discusses audit
and financial reporting matters with both management and General Signal's
independent auditors. To ensure complete independence, the auditors meet with
the Audit Committee both with and without the presence of management
representatives. The Audit Committee met three times in 1993.
The members of the Employee Benefits Committee are John P. Horgan
(Chairman), Van C. Campbell, C. Robert Kidder, Nathan R. Owen and Roland W.
Schmitt. The Employee Benefits Committee provides guidance to the Corporate
Pension Board as requested and reviews the actions of the Corporate Pension
Board, which is an internal committee having overall responsibility for benefits
planning and administration. The Employee Benefits Committee met four times in
1993.
The members of the Executive Committee are Nathan R. Owen (Chairman), Ralph
E. Bailey, Edmund M. Carpenter, Ronald E. Ferguson, John P. Horgan and John R.
Selby. The Executive Committee has the authority to exercise in the interim
periods between meetings of the Board of Directors all of the rights, powers and
duties of the Board of Directors, except those that cannot lawfully be
delegated. The Executive Committee did not meet in 1993.
The members of the Personnel and Compensation Committee are Ronald E.
Ferguson (Chairman), Ralph E. Bailey, John P. Horgan, Richard J. Kogan and John
R. Selby. The Personnel and Compensation Committee assists the Board of
Directors in overseeing the compensation of the executive officers and, through
liaison with the Board, administers the executive compensation programs. The
Personnel and Compensation Committee met four times in 1993.
The members of the Committee on Directors are Ralph E. Bailey (Chairman),
Ronald E. Ferguson, and Roland W. Schmitt. The responsibilities of the Committee
on Directors include making recommendations to the Board with regard to
Committee structure, compensation and benefits for directors, the qualifications
of directors and candidates for election as directors. In addition, the
Committee on Directors is responsible for reviewing the performance and
succession of the Chief Executive Officer.
Any stockholder entitled to vote at a meeting may nominate persons for
election as directors if written notice of such intent is delivered or mailed,
postage prepaid, and received by the Secretary at the principal executive
offices of General Signal not less than 45 days nor more than 60 days prior to
such meeting. In the event less than 55 days prior public disclosure of the
meeting date is made to stockholders, or if the only public disclosure of the
meeting date is made by written notice, a stockholder's notice must be received
no later than the close of business on the tenth day following the day such
notice of the meeting date was mailed or public disclosure was made. The
stockholder notice must include the following information about the proposed
nominee: (a) name, age, and business and residence addresses; (b) principal
occupation or employment; (c) class and number of shares or securities of
General Signal beneficially owned; (d) any other information required to be
disclosed in solicitations of proxies pursuant to Regulation 14A of the Exchange
Act, including
52
<PAGE> 62
the proposed nominee's written consent to being named in the proxy and to serve
if elected. The notice must also include information on the stockholder making
the nomination, such as name and address as it appears on General Signal's books
and the class and number of shares of General Signal beneficially owned. The
nomination of any person not made in compliance with the foregoing procedures
shall be disregarded.
DIRECTORS' COMPENSATION
Employee directors of General Signal receive no fees or compensation for
services as members of the Board of Directors. Directors who are not employees
currently receive fees consisting of an annual retainer of $20,000 for Board
service and an annual retainer of $3,000 for each Board Committee of which the
director is Chairman. In addition, each non-employee director receives an
attendance fee of $1,200 for each Board meeting attended, $1,000 for each Board
Committee meeting attended and reimbursement for expenses incurred in connection
with such meetings.
Under General Signal's 1992 Stock Incentive Plan, each non-employee
director may elect to defer all or part of his cash compensation as a director
and to receive in lieu thereof restricted stock subject to a five-year
restriction period. In consideration for forgoing cash compensation, the value
of the restricted shares is 10% greater than the amount of the director's cash
compensation elected to be deferred. Four directors elected to defer
compensation for 1993 under this Plan.
General Signal has a Deferred Compensation Plan for Directors which permits
the deferral, at the election of the director, of all or part of the
compensation he receives for his services as a director. Compensation so
deferred may be denominated in dollar amounts or in units based on the value of
shares of Common Stock of General Signal. Share-denominated accounts are
credited with dividends when paid, and dollar amounts bear interest based on the
annual yield for long-term U.S. government bonds. Deferred amounts become
payable in cash in a lump sum in an amount equal to the value of the cash or
units then credited to the director's account or in installments over such
period and commencing at such time as the director may elect. One director
elected to defer compensation for 1993 under this Plan.
General Signal has a retirement plan for non-employee directors who retire
from the Board with one or more years of service as a non-employee director. The
annual benefits payable to a director for his lifetime on and after reaching age
65 are equal to 10% of the annual Board retainer (exclusive of any committee
compensation) in effect at the time of such director's retirement for each year
of service as a non-employee director, to a maximum of 100%.
General Signal pays the premiums on indemnity and liability insurance,
fiduciary insurance and business travel accident insurance policies which
provide coverage for the directors.
The directors are eligible to participate in General Signal's Matching
Gifts to Education Program. Under this program, a minimum of $25 up to a maximum
of $5,000 per eligible institution is matched. The maximum permissible annual
participation per director is $5,000.
General Signal has a Director's Charitable Award Program funded by life
insurance policies on directors as part of its overall program of charitable
giving. Beginning at the death of a director, General Signal will donate
$100,000 per year for ten years to the educational institutions recommended by
the director. To be eligible to receive a donation, a recommended institution
must be eligible to receive matching gifts under General Signal's Matching Gifts
to Education Program. During 1993, General Signal paid $358,825 in premiums for
these policies. A director may not personally benefit from any recommended
donation or use a donation in satisfaction of any currently outstanding or
future pledge or obligation of the director to the recommended institution. All
directors are eligible to participate in the program.
General Signal has a consulting agreement with Nathan R. Owen, who retired
from General Signal at normal retirement age on June 1, 1984, providing for a
consulting fee of $50,000 per year for the original seven-year term of the
agreement. This agreement was renewed for the period June 1, 1994 through May
31, 1995.
53
<PAGE> 63
Directors of General Signal
Whose Terms Expire in 1997
RONALD E. FERGUSON, 52, a Director of General Signal since 1986. Chairman
and Chief Executive Officer of General Re Corporation since 1987 and President
of General Re Corporation since 1983; previously held various other management
positions since joining General Re Corporation/General Reinsurance Corporation
in 1969. Also a director of Colgate-Palmolive Company.
C. ROBERT KIDDER, 50, a Director of General Signal since 1992. Chairman of
the Board and Chief Executive Officer of Duracell International, Inc. since
April 1992; Chairman of the Board, President and Chief Executive Officer of
Duracell International, Inc. from August 1991 until April 1992; President and
Chief Executive Officer of Duracell International, Inc. from June 1988 until
August 1991; and President, Duracell Inc., a subsidiary of Kraft Inc., from 1984
to June 1988. Also a director of Dean Witter, Discover & Co.
JOHN R. SELBY, 65, a Director of General Signal since 1986. Former Chairman
from 1986 to November 1993 and Chief Executive Officer from 1971 to November
1993 of SPS Technologies, Inc. Previously President and Chief Executive Officer
of SPS Technologies, Inc. from 1971 to 1986; President of U.S. Motors Division
of Emerson Electric Company from 1969 to 1971; Vice President Manufacturing of
Emerson Electric Company from 1968 to 1969; and Vice President European
Operations of The Trane Company from 1966 to 1968. Also a director of Berwind
Industries, Inc.
Directors of General Signal
Whose Terms Expire in 1996
RALPH E. BAILEY, 70, a Director of General Signal since 1982. Chairman of
United Meridian Corporation, a publicly traded company engaged in making equity
investments in the oil and gas industry, as well as Chairman and Chief Executive
Officer of American Bailey Corporation, a private holding company, since April
1987. Former Chairman and Chief Executive Officer of Conoco Inc. from 1979 to
March 1987 and Vice Chairman of E.I. du Pont de Nemours & Company from 1981 to
March 1987. Also a director of The Williams Companies, Inc.
ROLAND W. SCHMITT, 71, a Director of General Signal since 1987. President
Emeritus since July 1993 and President of Rensselaer Polytechnic Institute from
March 1988 to July 1993. Previously Senior Vice President-Science and Technology
of General Electric Company from 1986 to February 1988, Senior Vice President
for Corporate Research and Development from 1982 to 1986, Vice President for
Corporate Research and Development from 1978 to 1982 and previously held various
other management positions since joining General Electric Company in 1951. Also
a member and former Chairman of the National Science Board and former Councillor
of the National Academy of Engineering.
JOHN P. HORGAN, 70, a Director of General Signal since 1971. Private
investor since 1971. Previously a General Partner of J. H. Whitney & Co., a
private investment company, and also served as a director of General Signal from
1960 to 1967. Also a director of DTX Corporation.
Directors of General Signal
Whose Terms Expire in 1995
VAN C. CAMPBELL, 55, a Director of General Signal since 1992. Vice Chairman
for Finance and Administration since 1983 and a director of Corning
Incorporated. Previously Senior Vice President and General Manager-Consumer
Products Division from 1981 to 1983, Senior Vice President-Finance from 1980 to
1981, Vice President-Finance from 1975 to 1980, Vice President-Treasurer from
1972 to 1975 and previously held various management positions since joining
Corning Incorporated in 1965. Also a director of Armstrong World Industries,
Inc., Corning International Corporation and Dow Corning Corporation.
EDMUND M. CARPENTER, 52, a Director of General Signal since 1988. Chairman
and Chief Executive Officer of General Signal since May 1988. Previously
Director, President and Chief Operating Officer of ITT
54
<PAGE> 64
Corporation from 1985 to 1988 and Executive Vice President of ITT Corporation
from 1983 to 1985. Also a director of Campbell Soup Company, Dana Corporation
and Texaco Inc.
RICHARD J. KOGAN, 53, a Director of General Signal since 1992. President
and Chief Operating Officer since January 1986 and a director of Schering-Plough
Corporation. Previously Executive Vice President (Pharmaceutical Operations)
from 1982 to 1986. Also a director of National Westminster Bancorp, Inc.
NATHAN R. OWEN, 75, a Director of General Signal since 1960. Chairman of
the Executive Committee of General Signal since 1980. Previously Chairman and
Chief Executive Officer of General Signal from 1962 to April 1984.
EXECUTIVE COMPENSATION
The following disclosure and discussion of executive compensation is
intended to provide stockholders with an understanding of General Signal's
executive compensation program and actions affecting the compensation of the
Chairman and Chief Executive Officers. Included are:
(a) the Summary Compensation Table;
(b) the Option Grants Table;
(c) the Option Exercises and Year-End Value Table;
(d) the Pension Plan Table;
(e) the Performance Graph on Comparison of Five-Year Cumulative Total
Return among General Signal, S&P 500 Index and the S&P Cap Goods Index;
and
(f) the Report of the Personnel and Compensation Committee on Executive
Compensation.
55
<PAGE> 65
SUMMARY COMPENSATION TABLE
The following table shows compensation information for each of General
Signal's five highest paid executive officers for services in all capacities
during 1993, 1992 and 1991.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- ------------------------------
AWARDS PAYOUTS
----------------- ---------
OTHER LONG TERM
ANNUAL RESTRICTED INCENTIVE
TOTAL COMPEN- STOCK OPTION PLAN ALL OTHER
(SALARY & SATION AWARDS GRANTS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) BONUS)($) ($) ($)(2) (#)(3) ($)(4) ($)(5)
- ---------------------------- ----- -------- ----------- ---------- ------- ---------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Edmund M. Carpenter......... 1993 $733,654 $450,000 $1,183,654 -- -- 87,500 -- $17,511
Chairman of the Board 17,500
and Chief Executive
Officer 1992 $725,577 $420,000 $1,145,577 -- -- -- -- $ 9,154
1991 $650,000 $312,200 $ 962,200 -- -- 300,000 $187,800 $ 7,845
Joel S. Friedman............ 1993 $305,154 $181,000 $ 486,154 -- -- 27,500 -- $12,772
Senior Vice President- 1992 $300,481 $182,000 $ 482,481 -- -- -- -- $ 9,154
Operations 1991 $265,000 $122,000 $ 387,000 -- -- 120,000 $ 67,000 $ 7,845
Peter A. Laing.............. 1993 $291,769 $173,000 $ 464,769 -- -- 27,500 -- $12,628
Senior Vice President- 1992 $300,481 $182,000 $ 482,481 -- -- -- -- $ 9,154
Operations 1991 $265,000 $122,000 $ 387,000 -- -- 120,000 $ 67,000 $ 7,845
Stephen W. Nagy............. 1993 $281,365 $167,000 $ 448,365 -- -- 27,500 -- $12,503
Senior Vice President- 1992 $279,981 $170,000 $ 449,981 -- -- -- -- $ 9,154
Finance and Chief 1991 $252,173 $116,000 $ 368,173 -- -- 120,000 $ 67,000 $ 7,845
Financial Officer
Edgar J. Smith, Jr.......... 1993 $188,569 $ 84,000 $ 272,569 -- -- 6,750 -- $10,903
Vice President, General 1992 $186,335 $ 84,000 $ 270,335 -- -- -- -- $ 9,154
Counsel and Secretary 1991 $169,808 $ 58,500 $ 228,308 -- -- 40,000 $ 26,300 $ 7,845
</TABLE>
(1) The bonus represents the amounts paid under General Signal's Incentive
Compensation Plan for services rendered during the specified calendar year.
Such payments were made in the first quarter of the calendar year following
the year in which the compensation was earned, i.e., the amount reported for
1993 reflects the amount earned for 1993 but paid in 1994.
(2) During 1993, 1992 and 1991, an aggregate of 29,170 shares of restricted
stock was awarded to certain employees, including three current executive
officers not named in the Summary Compensation Table. The shares covered by
the restricted stock awards vest at a rate of 20% per year over a five-year
period. During the restricted period, the holders of restricted stock have
the right to vote the shares and to receive any cash dividends. At December
31, 1993, an aggregate of 2,720 shares of restricted stock was held by three
current executive officers not named in the Summary Compensation Table with
an aggregate value of $79,063. The figures in this footnote reflect the
two-for-one stock split on July 7, 1993.
(3) Of the stock options granted in 1991, only one-third of the shares subject
to the options is exercisable at a price equal to 100% of the fair market
value on the date of grant. The remaining two-thirds of the options are
exercisable at a premium (generally 15% above market value on the date of
grant for the second one-third of the shares and generally 35% above market
value on the date of grant for the remaining shares). These options are
generally subject to a five-year vesting schedule. The figures for the 1991
stock option grant reflect the two-for-one stock split on July 7, 1993.
Only one option was granted in 1992 to an executive officer not named in the
Summary Compensation Table.
The new stock options granted in 1993 are all exercisable at a price equal
to 100% of the fair market value on the date of grant. These options are
subject to a four-year vesting schedule. For further information regarding
the replacement option for Edmund M. Carpenter, see footnote (3) to the
Option Grant Table.
General Signal has never repriced stock options.
56
<PAGE> 66
The stock option agreements for the executive officers and certain other
corporate employees generally provide that immediately preceding a Change in
Control (as defined in the agreements), the stock options will be cancelled
and the optionee will be paid cash equal to the difference between the
option price and the Change in Control price. Payment for vested options
would be made on the date of the Change in Control. Payment for unvested
options would be made on the vesting schedule dates under the option
agreements; provided, however, that any unvested options would be paid out
in full upon Involuntary Termination, as defined in the agreements.
(4) These payouts represent the amounts paid under General Signal's Long Term
Incentive Plan for the three-year award period. Such payments were made in
the first quarter of the calendar year following the last year of the award
period in which the compensation was earned, i.e., the amount reported for
1991 reflects the amount earned for the 1989-1991 award period but paid in
1992.
(5) This represents General Signal's matching contributions under (a) the
Savings Plan which are invested in Common Stock of General Signal or (b)
General Signal's Deferred Compensation Plan which are invested in "phantom
stock units" (see "Stock Ownership Guidelines" below for a description of
this Plan). Under the Savings Plan, eligible employees may save between 3%
and 17% of their pay on a combined before-and after-tax basis subject to
varying limitations on contributions to ensure compliance with the Code.
Eligible employees must elect to contribute a minimum of 3% of pay to
participate. General Signal contributes an amount equal to 3% of the pay of
each employee who is actively participating in the Savings Plan after
completing one year of service. The 3% contribution rate for General
Signal's contributions is increased to 4% if employee before-tax
contributions of at least 3% of pay are invested in the fund primarily
invested in shares of Common Stock of General Signal.
57
<PAGE> 67
OPTION GRANTS TABLE
The following table shows the individual grants of options that were made
in 1993 to each of the executive officers named in the Summary Compensation
Table and the potential value at stock price appreciation rates of 0%, 5% and
10%, over the term of the options. The potential value of all outstanding shares
of Common Stock held by General Signal's stockholders as of December 31, 1993 at
the same appreciation rates is also shown. The 5% and 10% rates of appreciation
are required to be disclosed by the Commission and are not intended to forecast
possible future actual appreciation, if any, in General Signal's stock prices.
The actual value of the stock options to the executive officers will depend on
the future price of General Signal's Common Stock. The stock options will have
no value to the executive officers if the price of General Signal's Common Stock
does not increase above the exercise price of the option.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------------
NAME GRANTED(#)(1) 1993 ($/SH) DATE 0%($) 5%($) 10%($)
---- ------------- ------------ ----------- ---------- ----- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edmund M. Carpenter....... 87,500(2) 32.4% $32.25 9/14/03 $0 $ 1,774,662 $ 4,497,342
17,500(3) 6.4% $34.88 2/21/01 $ 262,169 $ 616,373
Joel S. Friedman.......... 27,500(2) 10.2% $32.25 9/14/03 $0 $ 557,751 $ 1,413,450
Peter A. Laing............ 27,500(2) 10.2% $32.25 9/14/03 $0 $ 557,751 $ 1,413,450
Stephen W. Nagy........... 27,500(2) 10.2% $32.25 9/14/03 $0 $ 557,751 $ 1,413,450
Edgar J. Smith, Jr........ 6,750(2) 2.5% $32.25 9/14/03 $0 $ 136,902 $ 346,938
All Stockholders.......... N/A N/A N/A N/A $0 $945,037,059(4) $2,394,909,453(4)
</TABLE>
- ---------------
(1) Options are exercisable at prices equal to 100% of the fair market value on
the date of grant.
(2) Options may be exercised during a period that begins one year after the date
of grant and ends ten years after the date of grant and are subject to a
four-year vesting schedule.
(3) This represents a replacement ("reload") option which is an option granted
when an optionee exercises a stock option by surrendering shares of Common
Stock which the optionee already owns in payment of the exercise price. The
replacement option covers the number of shares surrendered in the option
exercise (including shares for applicable taxes) and has an exercise price
equal to the market price on the date of exercise of the original option.
The expiration date of the replacement option is the same as the expiration
date of the option that was exercised. The replacement option becomes
exercisable one year from the date the original option was exercised;
provided, however, that the replacement option will be forfeited if the
shares acquired on the exercise of the original option are sold for cash
prior to holding them for at least one year.
(4) These amounts represent the growth in total stockholder value for a ten-year
period at 5% and 10% annually, using a base price of $32.25 and 47,342,753
shares of Common Stock outstanding as of December 31, 1993 (excluding
treasury shares). The percentage relationship of the potential realizable
value for all the executive officers named in the Summary Compensation Table
to that of all stockholders is .004%.
58
<PAGE> 68
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table summarizes 1993 information relating to exercised and
unexercised options for each executive officer named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
AGGREGATED OPTION NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT
EXERCISES IN 1993 UNDERLYING UNEXERCISED DECEMBER 31, 1993 ($)
-------------------------- OPTIONS HELD AT BASED ON $34.375 CLOSING PER
DECEMBER 31, 1993 SHARE STOCK PRICE(1)
VALUE --------------------------- ----------------------------
SHARES ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE(#) ($)(1) (#) (#) ($) ($)
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edmund M. Carpenter............ 22,787 $275,401 218,359 285,000 $2,203,235 $1,154,513
Joel S. Friedman............... 8,400 $ 76,950 94,380 99,500 $ 983,563 $ 449,438
Peter A. Laing................. 11,600 $120,130 91,456 99,500 $ 940,643 $ 449,438
Stephen W. Nagy................ -- -- 86,000 99,500 $ 825,930 $ 449,438
Edgar J. Smith, Jr. ........... 6,000 $ 77,370 34,308 30,750 $ 357,329 $ 144,674
</TABLE>
- ---------------
(1) Market value of shares of Common Stock at exercise or at December 31, 1993
minus the exercise price.
PENSION PLAN TABLE
The following table shows the estimated annual retirement benefits payable
based on the formula under the Corporate Retirement Plan of General Signal (the
"Corporate Retirement Plan") and the Benefit Equalization Plan. This table
assumes the normal retirement age of 65 for specified earnings and years of
service, and that the employee will elect a straight-life annuity rather than
one of the various survivor options. The annual retirement benefits payable
under any alternative survivor option will be lower than the amounts shown in
the table.
As permitted by the Code and the Employee Retirement Income Security Act of
1974, to the extent that benefits must be reduced under the Corporate Retirement
Plan due to limitations prescribed under Sections 401(a)(17)and 415 of the Code,
General Signal is authorized to pay retirement benefits out of the general funds
of General Signal under a nonqualified Benefit Equalization Plan. Benefits are
calculated to equal the reduction.
Amounts shown are the benefits based on the current Covered Compensation
amount of $22,800 applicable to 1993. Earnings covered by the Corporate
Retirement Plan and the Benefit Equalization Plan for the executive officers
named in the Summary Compensation Table substantially correspond with the total
(salary and bonus) column shown in the Summary Compensation Table. Benefits for
eligible employees are computed under a formula integrated with Social Security
based upon years of service and average earnings during the five consecutive
years of highest earnings during the employee's service with General Signal.
59
<PAGE> 69
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
AVERAGE TOTAL PROJECTED YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
- ---------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 28,860 45,790 62,720 79,650 96,580 111,580
400,000 58,860 93,290 127,720 162,150 196,580 226,580
600,000 88,860 140,790 192,720 244,650 296,580 341,580
800,000 118,860 188,290 257,720 327,150 396,580 456,580
1,000,000 148,860 235,790 322,720 409,650 496,580 571,580
1,200,000 178,860 283,290 387,720 492,150 596,580 686,580
1,400,000 208,860 330,790 452,720 574,650 696,580 801,580
1,600,000 238,860 378,290 517,720 657,150 796,580 916,580
</TABLE>
- ---------------
(1) As of December 31, 1993, the years of credited service for the executive
officers named in the Summary Compensation Table were as follows: 12.7 years
for Edmund M. Carpenter; 21.1 years for Joel S. Friedman; 18.3 years for
Peter A. Laing; 11.3 years for Stephen W. Nagy; and 33.9 years for Edgar J.
Smith, Jr. The foregoing years of credited service include seven additional
years of service recognized under employment agreements with Edmund M.
Carpenter and Stephen W. Nagy, and, in the case of Edmund M. Carpenter,
pension benefits from his previous employer will be an offset against the
pension benefits payable to him by General Signal.
General Signal has a Change in Control Severance Pay Plan for executive
officers providing for a lump sum payment equal to thirty-six months of
compensation in the event of Involuntary Termination within two years after a
Change in Control as such terms are defined in the Plan. In addition, the
executive officers will continue to receive all benefits applicable to active
salaried employees for a period of thirty-six months following Involuntary
Termination. This Plan also covers certain other key employees but at different
levels of benefits than the foregoing.
60
<PAGE> 70
PERFORMANCE GRAPH ON COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN AMONG
GENERAL SIGNAL, THE S&P 500 INDEX AND
THE S&P CAP GOODS INDEX
The following graph sets forth a five-year comparison of total cumulative
return for the Common Stock of General Signal, the S&P 500 Index and the S&P Cap
Goods Index. It assumes $100 invested on December 31, 1988 in the Common Stock
of General Signal, the S&P 500 and the S&P Cap Goods Index. Total return assumes
the reinvestment of dividends quarterly and a fiscal year ending December 31.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) GSX S&P CAP GOODS S&P 500
<S> <C> <C> <C>
1988 $100 $100.00 $100.00
1989 $105.21 $115.83 $131.57
1990 $ 86.13 $112.35 $127.61
1991 $125.23 $127.89 $166.06
1992 $148.60 $139.19 $178.66
1993 $172.11 $159.42 $196.79
</TABLE>
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
Introduction
The Personnel and Compensation Committee of the Board of Directors (the
"Committee") assists the Board of Directors in overseeing the compensation of
the executive officers and administers the executive compensation programs. The
Committee is composed of five independent, non-employee directors. The Committee
reviews the compensation of the executive officers and makes recommendations to
the Board of Directors with respect to the compensation of the Chairman and
Chief Executive Officer and the executive officers reporting to him. The
Committee meets in executive session to evaluate the performance of such
individuals and reports on that evaluation to the independent directors of the
Board. In addition, the Committee has available to it, and does employ, the
services of an independent consultant on compensation and benefit matters.
General Signal's compensation philosophy is based on the belief that
compensation of its executive officers and key employees should be linked with
business strategy and operating performance. The total compensation program is
designed to attract, retain and reward employees and to provide an appropriate
linkage between executive compensation and the creation of stockholder value. To
achieve this linkage, executive salaries and incentive bonuses are paid on the
basis of General Signal's performance.
In addition, the grant of stock options (some of which are both
"front-loaded" and "premium-priced" for senior executives) and restricted stock
awards provide an important incentive in building stockholders' wealth
61
<PAGE> 71
and aligning the interest of employees and stockholders. A "front-loaded" stock
option is a grant for a higher number of shares with a longer vesting period
than a normal grant but with the anticipation of no additional options to be
granted for a period of time. A "premium-priced" option is an option that is
granted at an exercise price higher than the market price at the time of the
grant.
In total, the combination of these elements of compensation provides
motivation for achieving short-term results, as well as building and enhancing
the long-term interests of General Signal and its stockholders.
Independent Compensation Consultant Review
The Committee periodically uses the services of an independent compensation
consultant to evaluate Mr. Carpenter's total compensation package and to measure
competitive status of General Signal's compensation programs.
In June 1992, the Committee's consultant was reengaged to update
compensation analyses which the consultant had previously performed in 1990. The
1992 report analyzed the 1991 total compensation packages of Mr. Carpenter and
the next four highest-paid executive officers and compared them with twenty-two
peer companies as reported in their proxy statements.
The twenty-two companies used for comparison represented organizations
that, individually and collectively, participated in the spectrum of industries
in which General Signal was involved at the time of the independent compensation
consultant's 1990 and 1992 studies. The specific group was comprised of
manufacturing companies which were of similar size, structure, product offerings
or location and were participants in national compensation databases that would
permit compensation comparisons on an ongoing basis. The individual companies
were chosen by the independent consultant after consultation with General
Signal's management and members of the Committee. Fifteen of the twenty-two
individual comparator companies were among those included in the S&P's Cap Goods
Index.
The final selection of the twenty-two companies was made by the independent
consultant. The consultant's findings, with which the Committee and Board
concurred, were that General Signal's compensation package and processes were
competitive and appropriate. Based on this review, base salary recommendations
for 1993 were developed.
Base Salary
The Committee annually establishes base salaries for General Signal's
senior executives by review of recommendations submitted by the Chief Executive
Officer and General Signal's senior Human Resources executive. The Committee
approves or modifies, as it deems appropriate, the base salary plan developed by
the Human Resources staff. This plan is based on industry, peer group, and
national compensation surveys.
General Signal maintains access to several national compensation databases
that are gathered, updated, and published annually by well known compensation
consulting firms. Most of the 102-company S&P Cap Goods Index, selected by
General Signal as an index utilized to illustrate the comparisons in the
five-year cumulative total return performance graph preceding this report, are
included in one or more of these national databases.
With the primary objective of creating and maintaining a compensation
program that attracts, retains and motivates the best executive talent
available, the Committee considers several sets of factors when determining base
salaries for General Signal's senior executives. It first reviews the data
provided from the surveys to determine the general midrange of salaries for
positions of similar responsibility in companies of like size, structure,
product offerings or location. From this basis the Committee considers the
perceived quality of the individual's performance as well as the complexity of
the position's individual responsibilities and accountabilities.
The attainment of the specific goal of planned earnings-per-share is the
factor most heavily weighed in the cases of the Chief Executive Officer and his
executive staff. The Committee also weighs the value of
62
<PAGE> 72
achievement of subjective factors such as demonstrated management ability,
initiative, and contributions towards General Signal's goal of leadership within
the industries in which it competes.
The Committee also weighs, when appropriate, the value of the individual's
actions during times when progress towards predetermined goals was hindered by
elements outside General Signal's and the executive's control. Such times
include economic downturns and other national or global phenomena that adversely
affect not only General Signal's performance but the industry overall. The
Committee recognizes that the operational challenges faced during unforeseen
times or events such as these are often valid reasons to modify what may
otherwise be a negative result to the base salary decision.
Finally, the Committee considers the individual executive's impact on those
elements that contribute to increased stockholder value. The Committee's
discretion ultimately determines the weighing of these various factors in its
final determination of base salary development or adjustment.
Incentive Compensation Plan
Under the Incentive Compensation Plan, key employees of General Signal
annually may be awarded bonuses determined by the Committee. Executive officers,
unit presidents and virtually all senior staff managers throughout General
Signal are eligible for participation in the Incentive Compensation Plan.
The purpose of the Incentive Compensation Plan is to recognize employees of
General Signal and its business units in significant positions who contribute
materially to the success of the business by their ability, ingenuity and
industry, and to reward such contributions. The Committee reviews the
administration of the overall Incentive Compensation Plan, recommends to the
Board of Directors the annual recommendations for executive officers, and
determines the appropriate reward to be recommended to the Board of Directors
for the Chairman.
Business unit performance is measured against goals for operating income,
return on capital and cash flow, while corporate performance is measured against
earnings per share goals. At the beginning of each year the Committee approves
corporate goals that provide the basis for the payment of awards. Utilizing
information from industry, peer group and national compensation surveys, each
participant has a competitive "target" percentage of total salary paid based on
the individual's salary grade level. At the end of the operating year, the
Committee reviews General Signal's performance against the goals. "Target"
awards for individuals are adjusted up or down to reflect the actual results of
General Signal or business unit and are further dependent upon the individual's
contribution during the year.
In 1993 most of General Signal's continuing operating units achieved or
exceeded individual measurement goals. Some units received no award based on
their failure to attain their goals. Overall, General Signal essentially
achieved its earnings-per-share goal from operations, and awards for corporate
executives were formulated on that basis. The Incentive Compensation Plan is
among the strongest linkages between individual performance and stockholder
value over the short term.
Stock Option/Restricted Stock
The Committee decided in 1991 to emphasize the grant of stock options to
Mr. Carpenter and the other executive officers as a long-term incentive program
in place of the cash incentive units. Therefore, General Signal discontinued the
cash awards under the Long Term Incentive Plan in 1991, and the period of
1989-1991 was the last award period under the Long Term Incentive Plan for which
cash payments were made.
The new program is intended to create long term incentives to increase
stockholder value. To increase equity and stockholder focus, the 1991 stock
option grant was larger than a normal grant (i.e., front-loaded) with generally
a five-year vesting schedule. The 1991 stock option grant replaced three years'
worth of normal annual stock option grants (1990, 1991 and 1992) and the cash
incentive units that would have been awarded under the Long Term Incentive Plan
for the 1990-1992 award period.
63
<PAGE> 73
Under the 1991 stock option grant to Mr. Carpenter, as well as the stock
option grants to the other executive officers, only one-third of the shares
subject to the option is exercisable at a price equal to 100% of the fair market
value on the date of grant. The remaining two-thirds of the options are
exercisable at a premium (generally 15% above market value on the date of grant
for the second one-third of the shares and generally 35% above market value on
the date of grant for the remaining shares). These options are generally subject
to a five-year vesting schedule.
As noted in the next section, the Committee also granted stock options in
1993 as part of the stock ownership guidelines for executives established by the
Committee in 1993.
During 1993, 1992 and 1991, an aggregate of 29,170 shares of restricted
stock were awarded to certain employees, including three current executive
officers not named in the Summary Compensation Table (see footnote 2 to the
Summary Compensation Table).
Stock Ownership Guidelines
In 1993, the Committee, based upon management recommendations and in
consultation with an independent compensation consultant, considered and acted
upon several matters relating to stock ownership guidelines for executive
officers and Unit Presidents.
The Committee established ownership guideline levels of General Signal
stock for executive officers and Unit Presidents. The guidelines are calculated
by reference to the value of General Signal's shares as a multiple of base
salary: four times for the Chairman and Chief Executive Officer, three times for
the Senior Vice Presidents, two times for Vice Presidents and one time for Unit
Presidents. Individuals are expected to have progressed at least halfway toward
the goal within three years, and if the target is not reached in five years,
incentive compensation bonuses will be paid in restricted stock until the
ownership level is achieved. The shares held by an individual in General
Signal's Savings Plan, in "phantom stock units" under the new Deferred
Compensation Plan discussed below, or outright, will be included. However,
unexercised stock options will not be included in meeting the ownership goal.
The Committee approved a single year stock option grant to executive
officers and Unit Presidents in 1993. The level of grants to executives was
determined in a manner similar to the method used for development of base
salary. Competitive data from industry, peer group and national surveys of long
term incentive plans were examined and implemented at the midrange of positions
of similar responsibility in companies of like size, structure, product
offerings or location.
In addition, the Committee approved the implementation of a replacement
("reload") provision for unexercised stock options to encourage the early
exercise and holding of stock option shares by executives subject to the
ownership guidelines. Under this feature, a replacement option is granted when
an optionee exercises a stock option by surrendering shares of Common Stock
which the optionee already owns in payment of the exercise price. The
replacement option covers the number of shares surrendered in the option
exercise (including shares for applicable taxes) and has an exercise price equal
to the market price on the date of exercise. The expiration date of the
replacement option is the same as the expiration date of the option that was
exercised. The replacement option becomes exercisable one year from the date the
original option was exercised; provided, however, that the replacement option
will be forfeited if the shares acquired on the exercise of the original option
are sold for cash prior to holding them for at least one year.
The Deferred Compensation Plan was also established in 1993. It offers the
choice for executives subject to the ownership guidelines to defer certain
compensation on a pre-tax basis to make up benefits (including matching
contributions) lost due to restrictions on the Savings Plan imposed by the Code.
The matching contributions will be forfeited in the event the employee leaves
the employ of General Signal for any reason, other than death or disability,
prior to one year from the date such matching contributions are allocated to the
employee's account. The compensation deferred will be credited in "phantom stock
units" of General Signal based on the value of shares of Common Stock of General
Signal, except at age 62 a participant may convert all or part of the "phantom
stock units" in this portion of the Plan into a Fixed Income Balance (which is
the investment equivalent of an investment in the Fixed Income Fund under the
Savings Plan).
64
<PAGE> 74
The Deferred Compensation Plan also permits the deferral of all or part of
the incentive compensation bonuses into "phantom stock units" with General
Signal contributing an amount equal to 10% of the deferral, also in "phantom
stock units", which deferral and 10% contribution will be forfeited in the event
the employee leaves the employ of General Signal for any reason, other than
death or disability, prior to one year from the date of the deferral. The value
of the "phantom stock units" at the time of distribution is payable in cash. The
"phantom stock units" under both portions of this Plan are subject to certain
restrictions and count toward the ownership guidelines.
The Committee believes that the various stock incentive programs
implemented (including the front-loaded options granted in 1991) as vehicles for
achieving meaningful executive stock ownership requirements provide a primary
means of relating the interests of executives to the interests of stockholders.
This results in substantial personal investment tied to the performance of
General Signal's shares so that the linkage of executives to stockholders is
significant.
Corporate Performance and CEO Compensation
Edmund M. Carpenter's salary was $733,654 and his incentive compensation
bonus was $450,000 for a total of $1,183,654 for 1993. As indicated in the prior
discussion of base salaries, Mr. Carpenter's base salary was determined on the
basis of individual performance and is a reflection of the substantial progress
made during his tenure in the repositioning of General Signal. The determination
of his 1993 incentive compensation bonus was based on the level of achievement
of the earnings-per-share goal from operations and the progress in carrying out
General Signal's objectives and strategies.
General Signal's net income for 1993 was impacted by the divestiture of the
semiconductor equipment operations as well as the impact of the increase in the
number of shares outstanding, the effects of General Signal recording a number
of one-time items in the fourth quarter of 1993, the adoption of Financial
Accounting Standards Board Statement No. 112, "Employer's Accounting for
Post-Employment Benefits" in the fourth quarter effective as of January 1, 1993
and the results which were achieved in less than favorable economic conditions.
The salary and incentive compensation levels of the other executive officers
were determined on the same principles.
With respect to the compensation expected to be paid to Mr. Carpenter in
1994, General Signal does not expect to be subject to the loss of any deduction
due to the $1 million deduction limit under the Code for compensation paid
during 1994.
Committee Conclusion
The Committee believes that the caliber and motivation of General Signal's
employees and the quality of their leadership make a significant difference in
long-term performance. The Committee further believes that it is in the
stockholders' interests to compensate executives well when performance meets or
exceeds high standards set by the Board, so long as there is an appropriate
downside risk to compensation when performance falls short of such high
standards. The Committee believes that General Signal's current compensation
program meets these requirements and is deserving of stockholders' support.
This report is respectfully submitted by the Committee, composed of:
Ronald E. Ferguson, Chairman
Ralph E. Bailey
John P. Horgan
Richard J. Kogan
John R. Selby
65
<PAGE> 75
DESCRIPTION OF GENERAL SIGNAL CAPITAL STOCK
The authorized capital stock of General Signal consists of 150,000,000
shares of Common Stock, and 10,000,000 shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock"). Upon filing the Certificate of
Incorporation immediately prior to the Effective Time as contemplated by the
Merger Agreement, the authorized capital stock of General Signal will consist of
250,000,000 shares of Common Stock, 26,500,000 shares of Class B Common Stock
and 10,000,000 shares of Preferred Stock. The Board of Directors of General
Signal is empowered to cause shares of Preferred Stock to be issued in one or
more series, with the number of shares in each series and the rights,
preferences and limitations of each series determined by it. As of the date of
this Proxy Statement/Prospectus, no shares of the Preferred Stock were
outstanding.
Common Stock. Subject to any limitations prescribed in connection with the
issuance of any outstanding shares of Preferred Stock, dividends, as determined
by the Board of Directors, may be declared and paid on the Common Stock from
time to time out of any funds legally available therefor. The holders of Common
Stock are entitled to one vote per share and do not have cumulative voting
rights or preemptive rights. The Common Stock is not subject to further calls
and all of the outstanding shares of Common Stock are fully paid and
non-assessable. Except as otherwise set forth under Section 630 of the NYBCL,
the ten largest stockholders of General Signal, as determined by the fair value
of their respective beneficial interests, may under certain circumstances be
held personally liable for certain debts of General Signal.
Class B Common Stock. Subject to any limitations prescribed in connection
with the issuance of any outstanding shares of Preferred Stock, dividends, as
determined by the Board of Directors, may be declared and paid on the Class B
Common Stock from time to time out of any funds legally available therefor;
provided that if dividends are declared which are payable in shares of Common
Stock or Class B Common Stock, dividends will be declared which are payable at
the same rate on each class of stock and the dividends payable in shares of
Common Stock will be payable to holders of Common Stock and the dividends
payable in shares of Class B Common Stock will be payable to holders of Class B
Common Stock. Except as otherwise required by law, the holders of Class B Common
Stock do not have voting rights. Each record holder of Class B Common Stock will
be entitled to convert any or all of the shares of such holder's Class B Common
Stock into the same number of shares of Common Stock.
In connection with any merger, consolidation, or recapitalization in which
holders of Common Stock generally receive, or are given the opportunity to
receive, consideration for their shares (a) all holders of Class B Common Stock
shall be given the opportunity to receive the same form of consideration for
their shares as is received by holders of the Common Stock and (b) holders of
Class B Common Stock shall be entitled to receive the same amount of
consideration per share as received by holders of the Common Stock.
Rights Plan. On March 7, 1986, the Board of Directors declared a dividend
distribution of one common stock purchase right (a "General Signal Right") for
each share of Common Stock outstanding on March 21, 1986. Shares issued
subsequent to March 21, 1986 automatically receive these General Signal Rights.
On August 29, 1994, the Board of Directors approved an Amendment to the Rights
Plan which provided that one common stock purchase right (a "Class B Right")
would attach to each share of Class B Common Stock subsequently issued. A more
detailed description of the terms of the General Signal Rights and the Class B
Rights is contained in the March 7, 1986 Form 8-K, the June 21, 1990 Form 8-K,
the June 17, 1993 Form 8-K and the Form 8A/A-3 dated [ ], 1994, each
of which is incorporated herein by reference.
The Board of Directors of General Signal is divided into three classes
having staggered three-year terms, so that the terms of approximately one-third
of the Directors will expire each year. General Signal's Certificate of
Incorporation requires the affirmative vote of two-thirds of all outstanding
shares entitled to vote to (1) remove Directors, (2) adopt, amend or repeal any
By-law, or any provision of the Certificate of Incorporation, relating to (i)
the number, classification and terms of office of Directors, (ii) the quorum of
Directors required for the transaction of business, (iii) the filling of newly
created directorships and vacancies occurring in the Board of Directors, (iv)
the removal of Directors, or (v) the power of the Board of Directors to adopt,
amend or repeal By-laws of General Signal or the vote of the Board of Directors
required for any such adoption, amendment or repeal or (3) amend or repeal the
section of its Certificate of Incorporation requiring such action.
The Transfer Agent and Registrar for the Common Stock is, and for the Class
B Common Stock will be, The Bank of New York.
66
<PAGE> 76
COMPARATIVE RIGHTS OF STOCKHOLDERS
The following is a summary of certain of the material differences between
the rights of holders of Common Stock and the rights of holders of Reliance
Shares. As General Signal is organized under the laws of New York and Reliance
is organized under the laws of Delaware, some of these differences arise from
differences between various provisions of the corporate laws of those states.
Others arise from differences in the provisions of the respective certificates
of incorporation and by-laws of General Signal and Reliance. The Shares issued
to stockholders of Reliance pursuant to the Merger Agreement will comprise
approximately 44% of the total number of shares of Common Stock issued and
outstanding (based on 47,298,081 shares of General Signal Common Stock issued
and outstanding and 32,917,039 shares of Reliance Class A Common Stock issued
and outstanding and 17,378,032 shares of Reliance Class A Common Stock issuable
upon conversion of Reliance Class B Common Stock and Reliance Class C Common
Stock, as of August 29, 1994).
AMENDMENTS TO CERTIFICATE OF INCORPORATION
Under New York law, except for certain specified matters, an amendment or
change to the General Signal Certificate of Incorporation must be authorized by
a vote of the General Signal Board of Directors, followed by a vote of the
holders of a majority of all outstanding shares entitled to vote thereon at a
meeting of stockholders.
Under Delaware Law, amendments to the Reliance Certificate of Incorporation
require the approval of stockholders holding a majority of the outstanding
shares entitled to vote on such amendment and a majority of the outstanding
stock of such class entitled to vote on such amendment as a class, unless a
greater proportion is specified in the certificate of incorporation or by the
provisions of the DGCL.
AMENDMENTS TO BY-LAWS
Under New York law, by-laws may be adopted, amended or repealed by a
majority vote of all stockholders entitled to vote in the election of directors.
When provided by the certificate of incorporation or a by-law adopted by the
stockholders, as is the case with General Signal, the board of directors may
also adopt, amend or repeal by-laws. Any by-law adopted by the board of
directors without stockholder approval, may be amended or repealed by a majority
of votes cast at a meeting of stockholders.
Delaware law provides that after a corporation has received any payment for
its stock, the power to adopt, amend or repeal by-laws resides with the
stockholders entitled to vote. A corporation may, however, grant to its board of
directors in its certificate of incorporation concurrent power to adopt, amend
or repeal by-laws. The Reliance Certificate of Incorporation expressly
authorizes the Reliance Board of Directors to make, alter or repeal the Reliance
By-Laws.
DIRECTORS
Under New York law, a corporation's board of directors must consist of at
least three directors, unless the shares of the corporation are beneficially
owned by less than three stockholders, in which case the number of directors
shall not be less than the number of stockholders. Under the General Signal
By-laws, the number of directors constituting the General Signal Board of
Directors shall be determined by the General Signal Board of Directors, but,
under the current By-laws, shall not be less than 9 or more than 15 (which
number shall be increased to 18 at the Effective Time). The General Signal Board
of Directors is classified into three classes of directors. Each class has a
three-year term expiring on the date of the third annual meeting of stockholders
succeeding their election.
Under Delaware law, a corporation's board of directors must consist of one
or more members, with the number fixed by the corporation's by-laws or the
certificate of incorporation. Under the Reliance By-laws, the Board of Directors
shall have a minimum of three and a maximum of 12 members, the number within
such limits to be fixed from time to time by resolution of the Board of
Directors adopted by the affirmative vote of a majority of the entire Board of
Directors.
Under New York law, directors, when taking action, including action which
may relate to a change in control of the corporation, are entitled to consider
both the long-term and the short-term interests of the corporation and its
stockholders and the effects that any such actions may have in the short-term or
the
67
<PAGE> 77
long-term on the corporation's prospects, current employees, customers and
creditors. Delaware has no comparable statutory provision.
REMOVAL OF DIRECTORS
Under New York law, any or all directors may be removed for cause by vote
of the stockholders. A director may be removed without cause by stockholder vote
only if the certificate of incorporation or the by-laws so provide. The General
Signal Certificate of Incorporation provides that directors may be removed for
cause only by the affirmative vote of two-thirds of all outstanding shares
entitled to vote. The General Signal Certificate of Incorporation and the
General Signal By-laws do not provide for the removal of directors without cause
by a stockholder vote.
Delaware law allows any director or the entire board of directors to be
removed, with or without cause, by the vote of the holders of a majority of the
shares entitled to vote. Directors of a corporation with a classified board of
directors, however, can be removed only for cause unless the certificate of
incorporation otherwise provides. The Reliance Certificate of Incorporation does
not provide for the removal of directors without cause by a stockholder vote.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Under New York law, newly created directorships resulting from an increase
in the number of directors and vacancies occurring for any reason, other than
the removal of a director without cause, may be filled by vote of the board of
directors. If the number of directors then in office is less than a quorum, any
vacancies may be filled by vote of a majority of the directors then in office.
Unless a provision of the certificate of incorporation or a by-law adopted by
the stockholders provides otherwise, vacancies occurring in the board of
directors through removal of directors without cause must be filled by a vote of
stockholders. The General Signal By-laws provide that newly created
directorships or vacancies resulting from any cause may be filled only by the
General Signal Board of Directors. If a quorum of directors is not then in
office, a majority of the directors then in office, or a sole remaining
director, may fill any vacancy. Pursuant to New York law, any director elected
by the vote of the General Signal Board of Directors is not assigned to a
particular class and will serve only until the next annual meeting of
stockholders.
Delaware law provides that unless otherwise provided in the certificate of
incorporation or by-laws, vacancies, including those due to removal without
cause, and newly created directorships may be filled by majority vote of the
directors then in office, even if the number of directors then in office is less
than a quorum. In addition, if, at the time of filling any vacancy or newly
created directorship the directors then in office constitute less than a
majority of the whole board, the Delaware Court of Chancery may, upon
application of stockholders holding at least 10% of the shares outstanding at
the time and entitled to vote, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office. Such elections are to be conducted in
accordance with the procedures provided by Delaware law for holding stockholder
meetings.
VOTE REQUIRED FOR CERTAIN TRANSACTIONS
New York law generally requires the authorization of a corporation's board
of directors and the affirmative vote of two-thirds of a corporation's
outstanding shares entitled to vote in order to effect a merger, a
consolidation, a share exchange or the sale, lease, or other disposition of all
or substantially all of a corporation's assets. Delaware law requires approval
of the board of directors and the affirmative vote of a majority of the
outstanding stock entitled to vote thereon to authorize any such action, except
that, unless required by its certificate of incorporation, no stockholder vote
is required of a corporation surviving a merger if (i) such corporation's
certificate of incorporation is not amended by the merger, (ii) each share of
stock of such corporation will be an identical share of the surviving
corporation after the merger and (iii) either no shares are to be issued by the
surviving corporation or the number of shares to be issued in the merger does
not exceed 20% of such corporation's outstanding common stock immediately prior
to the effective date of the merger. Both New York and Delaware law contain
provisions allowing mergers and consolidations of domestic
68
<PAGE> 78
with foreign corporations, so long as the other jurisdiction allows such a
combination and the domestic corporation follows the procedures applicable to
it.
Under New York law, a stockholder vote is required for a corporation to
redeem more than 10% of its stock from stockholders at a price above the market
price. Delaware does not have a comparable statutory provision.
BUSINESS COMBINATIONS
New York law regulates tender offers for the equity shares of New York
corporations having principal offices or significant business operations within
New York. The Security Takeover Disclosure Act (the "Takeover Act") applies to
offers with respect to which, after acquisition of the shares, the offeror would
be the owner of more than five percent of the target company's equity
securities. In such cases, no tender offer may be made unless the offeror files
with the New York attorney general at his New York City office a registration
statement containing information required by certain sections of the Takeover
Act. The Takeover Act also regulates tender offers not subject to the
requirements of Section 14(d) of the Exchange Act and sets forth, among other
things, the period of time within which shares may be deposited and withdrawn
pursuant to a takeover bid, the requirement that shares be purchased on a pro
rata basis and the requirement that when an offeror increases the consideration
offered in a takeover bid, the offeror must pay such increased consideration
with respect to all shares accepted. Delaware law does not contain any
comparable provision.
New York law also provides that a "resident domestic corporation" may not
engage in any business combination with any "interested stockholder" (defined as
the beneficial owner of 20% or more of a corporation's voting stock) for a
five-year period after the interested stockholder attains such status unless the
board of directors had approved either the business combination or the
transaction resulting in interested stock holder status prior to the date on
which the interested stockholder became a 20% holder. Resident domestic
corporations are those organized under New York law that meet various criteria
regarding the loci of offices, employees, or share ownership. After five years,
no resident domestic corporation may engage in a business combination with an
interested stockholder other than (i) a business combination or transaction that
had been approved by the board prior to the date the person became an interested
stockholder, (ii) a business combination approved by the affirmative vote of the
holders of a majority of the voting stock not beneficially owned by that
interested stockholder at a meeting called for such purpose or (iii) the
aggregate amount of cash and the market value, as of the consummation date, of
consideration to be received per share by holders of outstanding shares of
common stock in the business combination is at least equal to a certain "fair
price" as determined by various criteria set forth in the statute, subject to
certain exceptions. These provisions do not apply at all to certain corporations
or transactions. Among such exceptions is one for corporations who elect in
their certificates of incorporation not to be governed by these provisions.
General Signal has not presently made such an election. An amendment to the
General Signal Certificate of Incorporation would not be effective until
eighteen months following its adoption by majority vote of the shares of
non-interested stockholders and would not apply to those who were already
interested stockholders.
Delaware law prevents an "interested stockholder" (defined as a holder who
acquires 15% or more of a target company's stock) from entering into a business
combination within three years after the date it acquires such stock. However, a
business combination is permitted (i) if prior to the date the stockholder
became an interested stockholder, the board of directors of the target company
approved either the business combination or such acquisition of stock, (ii) if
at the time the interested stockholder acquired such 15% interest, it acquired
85% or more of the outstanding stock of the corporation, excluding shares held
by directors who are also officers and shares held under certain employee stock
plans or (iii) if the business combination is approved by the target company's
board of directors and two-thirds of the outstanding shares voting at an annual
or special meeting of stockholders, excluding shares held by the interested
stockholder. This provision applies automatically to Delaware corporations
except those corporations with less than 2,000 stockholders of record and
without voting stock listed on a national exchange or listed for quotation with
a registered national securities association. Additional exceptions allow
corporations, in certain instances, to adopt certificates of incorporation or
by-laws that elect not to be governed by these provisions. Reliance has not so
elected; any
69
<PAGE> 79
amendment to effect such an election would not be effective for 12 months and
would not apply to those who were already interested stockholders.
APPRAISAL RIGHTS
Under New York and Delaware law, holders of shares have the right, in
certain circumstances, to dissent from certain corporate reorganizations by
demanding payment in cash for their shares equal to the fair value (excluding
any appreciation or depreciation as a consequence or in expectation of the
transaction) of such shares, as determined by agreement with the corporation or
by an independent appraiser appointed by a court in an action timely brought by
the corporation or the dissenters.
New York law affords dissenters' rights of appraisal upon certain mergers,
consolidations, sales and other dispositions of assets requiring stockholder
approval and share exchanges. Delaware law grants dissenters' appraisal rights
only in the case of certain mergers and not in the case of a sale or transfer of
assets or a purchase of assets for stock regardless of the number of shares
being issued. Delaware law does not grant appraisal rights in a merger to
holders of shares listed on a national securities exchange or held of record by
more than 2,000 stockholders unless the plan of merger converts such shares into
anything other than stock of the surviving corporation or stock of another
corporation which is either listed on a national securities exchange or held of
record by more than 2,000 stockholders (or cash in lieu of fractional shares or
some combination of the above). New York has no exceptions to such rights
comparable to those afforded by Delaware law.
LIMITATION ON DIRECTORS' LIABILITY
Under New York law, a corporation's certificate of incorporation may
contain a provision limiting or eliminating the personal liability of directors
to the corporation or its stockholders for damages for breaches of duty in such
capacity. No such provision may eliminate or limit liability if a judgment or
other final adjudication establishes that the director's acts or omissions (i)
were in bad faith, (ii) involved intentional misconduct or a knowing violation
of law, (iii) involved financial profit or some other advantage to which the
director was not legally entitled or (iv) resulted in violation of a statute
prohibiting certain dividend declarations, certain payments to stockholders
after dissolution, and particular types of loans. In addition, no such provision
may eliminate or limit the liability of a director for acts occurring prior to
adoption of the limitation of liability. The General Signal Certificate of
Incorporation contains a provision limiting the liability of the directors
except to the extent that such exemption from liability is not permitted under
New York law.
Delaware law allows a corporation to limit or eliminate the personal
liability of directors to the corporation and its stockholders for monetary
damages for breaches of a director's fiduciary duty as a director. However, such
a limitation does not affect the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for intentional or negligent payment of unlawful
dividends or stock redemptions or (iv) for any transaction from which the
director derived an improper personal benefit. Additionally, the corporation may
not limit or eliminate liability for acts or omissions occurring prior to the
effective date of such a provision in the corporate certificate of
incorporation. The Reliance Certificate of Incorporation limits the liability of
Reliance's directors to the fullest extent permitted by Delaware law.
INDEMNIFICATION
Both New York and Delaware law contain provisions setting forth conditions
under which a corporation may indemnify its directors and officers. These
provisions are generally referred to as "statutory indemnification" provisions.
Both also permit corporations to adopt by-laws that provide for additional
indemnification of directors and officers. These non-exclusive provisions are
generally referred to as "non-statutory indemnification" provisions.
Non-statutory indemnification provisions are generally adopted to expand the
circumstances and liberalize the conditions under which indemnification will
occur. New York law contains specific
70
<PAGE> 80
restrictions on the kind of matters for which non-statutory indemnification will
be permitted; Delaware law does not contain any specific restrictions.
The General Signal By-laws require it to indemnify to the maximum extent
permissible under New York law its officers and directors for liability arising
out of their actions in such capacity. No indemnification is provided to a
director or officer who is finally adjudicated (i) to have committed acts in bad
faith or resulting from active and deliberate dishonesty, that, in either case,
were material to the cause of action adjudicated or (ii) to have personally
gained a financial profit or other advantage to which such director was not
legally entitled. Directors and officers are indemnified for acts occurring
prior to adoption of the General Signal By-laws.
The Reliance By-laws require it to indemnify to the maximum extent
permissible under Delaware law its officers and directors for liability arising
out of their actions in such capacity.
LOANS TO DIRECTORS AND OFFICERS
Under New York law, a corporation may make a loan to a director only after
authorization by the affirmative vote of shares other than those of the
director-borrower. Under Delaware law, a corporation may make loans to,
guarantee the obligations of, or otherwise assist, its officers or other
employees and those of its subsidiaries, including any officer or employee who
is a director of a corporation or any of its subsidiaries, when such action, in
the judgment of the corporation's directors, may reasonably be expected to
benefit the corporation.
SPECIAL MEETINGS
Under New York and Delaware law, special meetings of stockholders may be
called by the board of directors and by such other person or persons authorized
to do so by the corporation's certificate of incorporation or by-laws. In
addition, New York law provides that if, for a period of one month after the
date fixed by or under the by-laws for the annual meeting of stockholders, or if
no date has been fixed for a period of 13 months after the last annual meeting,
there is a failure to elect a sufficient number of directors to conduct the
business of the corporation, the board of directors may call a special meeting
for the election of directors. If the board fails to do so within 14 days of
expiration of that period of time, holders of 10% of the shares entitled to vote
in an election of directors may demand the call of a special meeting for the
election of directors. Under Delaware law, if an annual meeting is not held
within 30 days of the date designated for such a meeting, or is not held for a
period of 13 months after the last annual meeting, the Delaware Court of
Chancery may summarily order a meeting to be held upon the application of any
stockholder or director. In both New York and Delaware, the number of shares
represented at such meeting constitutes a quorum without regard to other
provisions of law.
The General Signal By-laws provide that a special meeting of stockholders
may be called only by the Board of Directors or the Chairman of the Board, and
shall be called by the Secretary upon the written request of stockholders owning
at least two-thirds of the outstanding shares of stock entitled to vote.
The Reliance By-laws provide that special meetings of stockholders may be
called at any time by the Chairman of the Board, the President, the Board of
Directors or by the holders of a majority of the outstanding shares of stock
entitled to vote at such meetings.
STOCKHOLDER ACTION
Under New York and Delaware law, unless the certificate of incorporation
provides otherwise, stockholder action is generally by majority vote, except
under New York law, directors are elected by a plurality vote. General Signal's
Certificate of Incorporation requires the affirmative vote of two-thirds of all
outstanding shares entitled to vote to (1) remove directors, (2) adopt, amend or
repeal any By-law, or any provision of the Certificate of Incorporation,
relating to (i) the number, classification and terms of office of directors,
(ii) the quorum of directors required for the transaction of business, (iii) the
filling of newly created directorships and vacancies occurring in the Board of
Directors, (iv) the removal of directors, or (v) the power of the Board of
71
<PAGE> 81
Directors to adopt, amend or repeal By-laws of General Signal or the vote of the
Board of Directors required for any such adoption, amendment or repeal or (3)
amend or repeal the section of its Certificate of Incorporation requiring such
action.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under New York law, any stockholder action required or permitted to be
taken by stockholder vote may be taken with the unanimous written consent of
stockholders. The certificate of incorporation may provide, to the extent it is
not inconsistent with New York law, that such stockholder action may be taken
upon the written consent of less than all outstanding shares. The General Signal
Certificate of Incorporation does not provide for written consent by less than
all of the stockholders.
Unless a certificate of incorporation provides otherwise, Delaware law
allows any action required to be taken, or which may be taken, at an annual or
special meeting of stockholders to be taken without prior notice and without a
vote so long as the written consent of not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted is delivered to the
corporation. The Reliance Certificate of Incorporation states that if any action
is to be taken by stockholders without a meeting such action must be authorized
by unanimous written consent signed by all of the holders of outstanding voting
stock.
PAYMENT OF DIVIDENDS
Under both New York and Delaware law, a corporation may generally pay
dividends out of surplus. New York requires a board of directors to make certain
disclosures when paying dividends out of any account other than earned surplus.
Delaware law also permits a corporation to pay dividends, if there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and/or for the preceding fiscal year. Dividends out of net profits may
not be paid when the capital of the corporation amounts to less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets.
RIGHTS OR OPTIONS
New York law requires the approval of the holders of a majority of the
outstanding shares entitled to vote for a plan to issue or the issuance of any
rights or options to directors, officers and employees as an incentive to
service or continued service with the corporation, a subsidiary or affiliate.
Such approval is not required for the issuance of any rights or options of a
corporation in substitution for rights or options issued by another corporation,
in connection with such other corporation's merger or consolidation with, or the
acquisition of its shares or all or part of its assets by, the corporation or
its subsidiary. Under Delaware law, rights or options to purchase shares of any
class of stock may be authorized by a corporation's board of directors. However,
various other legal requirements would generally make stockholder approval of
stock option plans or warrants desirable.
In addition, under both New York and Delaware law, a corporation may create
and issue rights or options entitling the holders thereof to purchase from the
corporation any shares of its capital stock on terms and conditions set by its
board of directors. New York law specifically permits a "resident domestic
corporation" to restrict the exercise, or transfer of any rights or options by a
beneficial owner of 20% or more of its outstanding voting stock. Delaware does
not have a comparable statutory provision but Delaware courts have upheld rights
or options which contain similar limitations.
PREEMPTIVE RIGHTS
Under New York law, unless a certificate of incorporation provides
otherwise, stockholders have certain preemptive rights. In general, these rights
allow stockholders whose unlimited dividend rights or voting rights would be
adversely affected by the issuance of new stock to purchase, on terms and
conditions set by the board of directors, that proportion of the new issue that
would preserve the relative dividend or voting rights of such stockholders.
However, the General Signal Certificate of Incorporation provides that its
stockholders do not
72
<PAGE> 82
possess such preemptive rights. Instead, the General Signal Board may dispose of
new issues to any persons, on such lawful terms, as it shall determine.
Delaware law states that, absent a provision in a corporation's certificate
of incorporation, a stockholder does not possess preemptive rights unless such
rights arose prior to July 3, 1967 and were not terminated subsequently by
appropriate action. The Reliance Certificate of Incorporation does not contain a
provision granting preemptive rights.
The foregoing summary does not purport to be a complete statement of the
rights of holders of Common Stock and Reliance Shares under, and is qualified in
its entirety by reference to, New York law and Delaware law, respectively, and
the General Signal and Reliance Certificates of Incorporation and By-laws.
LEGAL MATTERS
Certain legal matters in connection with the Shares being offered hereby
will be passed upon for General Signal by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedules of General Signal
Corporation at December 31, 1993 and 1992, and for the years then ended,
appearing or incorporated by reference in General Signal Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included or incorporated by reference therein and incorporated herein by
reference. Such financial statements are incorporated herein in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
The statements of earnings, shareholders' equity and cash flows and related
schedules of General Signal and consolidated subsidiaries for the year ended
December 31, 1991 (prior to the acquisition of Revco Scientific, Inc.) which
appear in the December 31, 1993 annual report on Form 10-K of General Signal,
incorporated herein by reference have been incorporated herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements, including financial statement
schedules, of Reliance and consolidated subsidiaries incorporated herein by
reference to the Annual Report on Form 10-K of Reliance for the year ended
December 31, 1993, have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given upon the authority of such firm
as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1995 Annual Meeting of
Stockholders to be eligible for inclusion in the Surviving Corporation's proxy
statement, they must be received by the Surviving Corporation at its principal
office in [ ] no later than November 22, 1994.
73
<PAGE> 83
ANNEX A
AGREEMENT AND PLAN
OF MERGER
BY AND BETWEEN
RELIANCE ELECTRIC COMPANY
AND
GENERAL SIGNAL CORPORATION
DATED AS OF AUGUST 30, 1994
<PAGE> 84
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
PAGE
----
<S> <C> <C>
THE MERGER
Section 1.01. The Merger....................................................... A-1
Section 1.02. Effective Time................................................... A-1
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation...................................................... A-2
Section 1.04. Directors and Officers of Surviving Corporation.................. A-2
Section 1.05. Further Assurances............................................... A-2
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Effect on Reliance Shares........................................ A-2
Section 2.02. Effect on Reliance Options....................................... A-4
Section 2.03. Exchange Procedures.............................................. A-4
Section 2.04. Fractional Shares................................................ A-4
Section 2.05. Transfers........................................................ A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 3.01. Organization..................................................... A-5
Section 3.02. Capitalization................................................... A-5
Section 3.03. Authority........................................................ A-6
Section 3.04. No Violations; Consents and Approvals............................ A-6
Section 3.05. SEC Documents; Financial Statements.............................. A-7
Section 3.06. Absence of Certain Changes....................................... A-8
Section 3.07. Legal Proceedings................................................ A-8
Section 3.08. Compliance with Laws and Agreements.............................. A-8
Section 3.09. Rights Agreement................................................. A-8
Section 3.10. Accounting Matters............................................... A-8
Section 3.11. Joint Proxy Statement/Prospectus, Registration Statement......... A-9
Section 3.12. State Antitakeover Statutes...................................... A-9
Section 3.13. Broker's Fees.................................................... A-9
Section 3.14. Fairness Opinions................................................ A-9
Section 3.15. Reliance Taxes................................................... A-9
ARTICLE IV
COVENANTS
Section 4.01. Conduct of Business of Reliance and General Signal............... A-10
Section 4.02. Acquisitions..................................................... A-11
Section 4.03. No Solicitation.................................................. A-11
Section 4.04. Access to Information............................................ A-11
Section 4.05. Registration Statement and Proxy Statement....................... A-12
Section 4.06. Stockholders' Meetings........................................... A-12
Section 4.07. Board of Directors of General Signal............................. A-13
Section 4.08. Reasonable Efforts; Other Actions................................ A-13
Section 4.09. Public Announcements............................................. A-13
Section 4.10. Notification of Certain Matters.................................. A-13
</TABLE>
i
<PAGE> 85
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.11. Indemnification.................................................. A-14
Section 4.12. Expenses......................................................... A-14
Section 4.13. Affiliates....................................................... A-14
Section 4.14. Stock Exchange Listings.......................................... A-14
Section 4.15. Reliance Rights Plan............................................. A-14
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL AND RELIANCE
Section 5.01. Registration Statement........................................... A-15
Section 5.02. Stockholder Approval............................................. A-15
Section 5.03. Consents and Approvals........................................... A-15
Section 5.04. Auditors' Letters................................................ A-15
Section 5.05. Accounting Treatment............................................. A-15
Section 5.06. Tax Matters...................................................... A-15
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL
Section 6.01. Representations and Warranties True.............................. A-15
Section 6.02. Performance...................................................... A-15
Section 6.03. Certificates..................................................... A-16
Section 6.04. Certain Proceedings.............................................. A-16
Section 6.05. Material Adverse Change.......................................... A-16
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RELIANCE
Section 7.01 Representations and Warranties True.............................. A-16
Section 7.02. Performance...................................................... A-16
Section 7.03. Certificates..................................................... A-16
Section 7.04. Certain Proceedings.............................................. A-16
Section 7.05. Material Adverse Change.......................................... A-16
Section 7.06. Listings......................................................... A-16
ARTICLE VIII
CLOSING
Section 8.01. Time and Place................................................... A-16
Section 8.02. Filings at the Closing........................................... A-17
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.01. Termination...................................................... A-17
Section 9.02. Termination by General Signal.................................... A-17
Section 9.03. Termination by Reliance.......................................... A-17
Section 9.04. Procedure for Termination........................................ A-18
Section 9.05. Effect of Termination and Abandonment............................ A-18
</TABLE>
ii
<PAGE> 86
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE X
DEFINITIONS
Section 10.01. Terms Defined in the Agreement................................... A-19
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment and Modification....................................... A-20
Section 11.02. Waiver of Compliance; Consents................................... A-20
Section 11.03. Survivability; Investigations.................................... A-20
Section 11.04. Reasonable Efforts............................................... A-21
Section 11.05. Notices.......................................................... A-21
Section 11.06. Assignment....................................................... A-21
Section 11.07. Governing Law.................................................... A-22
Section 11.08. Counterparts..................................................... A-22
Section 11.09. Severability..................................................... A-22
Section 11.10. Interpretation................................................... A-22
Section 11.11. Entire Agreement................................................. A-22
</TABLE>
SCHEDULES
Schedule 3.02(A) General Signal Plans
Schedule 3.02(B) Reliance Plans
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Citicorp Agreement
Exhibit B Form of Reliance Rights Plan
Exhibit C-1 Form of Restated Certificate of Incorporation of General Signal
Exhibit C-2 Form of General Signal Rights Agreement Amendment
Exhibit D-1 Form of Reliance Affiliate Letter
Exhibit D-2 Form of General Signal Affiliate Letter
Exhibit E Form of Tax Opinion of Cahill
Exhibit F Surviving Corporation By-law Provision
</TABLE>
iii
<PAGE> 87
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1994 (the
"Agreement"), by and between RELIANCE ELECTRIC COMPANY, a Delaware corporation
originally formed under the name Reliance Acquisition Corporation ("Reliance"),
and GENERAL SIGNAL CORPORATION, a New York corporation originally formed under
the name General Signal Railway Company ("General Signal"). Reliance and General
Signal are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Boards of Directors of Reliance and General Signal deem it
advisable and in the best interests of each corporation and its respective
stockholders that Reliance and General Signal combine in order to advance their
long-term business interests, all upon the terms and subject to the conditions
of this Agreement; and
WHEREAS, it is intended that the combination of Reliance and General Signal
be effected by a merger of Reliance with and into General Signal with General
Signal surviving, which shall be recorded for accounting purposes as a
pooling-of-interests, and for Federal income tax purposes as a tax-free
reorganization described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to General Signal's and Reliance's willingness to
enter into this Agreement, (A) Court Square Capital Limited ("CSCL"), a wholly
owned subsidiary of Citicorp ("Citicorp") and General Signal have entered into
an agreement (the "Citicorp Agreement") substantially in the form of Exhibit A,
(B) Reliance adopted a stockholder rights plan in the form of Exhibit B hereto
(the "Reliance Rights Plan") and (C) the Affiliates of Reliance have delivered
to General Signal executed copies of the letter required to be delivered
pursuant to Section 4.13 hereof;
WHEREAS, Reliance and General Signal desire to make certain
representations, warranties, covenants and agreements in connection with the
merger of Reliance and General Signal.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger. (a) In accordance with the provisions of this
Agreement and the New York Business Corporation Law ("NYBCL") and the General
Corporation Law of the State of Delaware ("DGCL"), at the Effective Time,
Reliance shall be merged (the "Merger") with and into General Signal, and
General Signal shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of New York. At the Effective Time the separate existence
of Reliance shall cease.
(b) The parties shall select, prior to the date on which the Joint Proxy
Statement/Prospectus is first mailed to stockholders, a name for the Surviving
Corporation which shall prominently include the name "Reliance" and shall be
approved by the Boards of Directors of Reliance and General Signal, after
consultation between the Chief Executive Officers of Reliance and General
Signal, and which shall be set forth in an amendment hereto approved by the
Board of Directors of each of the parties hereto.
(c) The Merger shall have the effects on Reliance and General Signal as
constituent corporations of the Merger as provided under the DGCL and the NYBCL.
Section 1.02 Effective Time. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger,
in the form required by and executed in accordance with the
A-1
<PAGE> 88
DGCL and the NYBCL, with the Secretary of State of the State of Delaware in
accordance with the provisions of Section 252 of the DGCL and by the Department
of State of the State of New York in accordance with the provisions of Section
904 of the NYBCL (the "Certificate of Merger"). The date and time when the
Merger shall become effective is herein referred to as the "Effective Time."
Section 1.03 Certificate of Incorporation and By-Laws of Surviving
Corporation. The Restated Certificate of Incorporation and By-Laws of General
Signal, as amended in accordance with this Agreement, shall be the Certificate
of Incorporation and By-Laws of the Surviving Corporation until thereafter
amended as provided by law.
Section 1.04 Directors and Officers of Surviving Corporation. (a) The
number of directors of the Surviving Corporation shall be eighteen until
otherwise determined pursuant to the By-Laws of the Surviving Corporation. The
directors of General Signal and, subject to the requisite vote of the
shareholders of General Signal, the persons specified in Section 4.06(ii) shall
be the directors of the Surviving Corporation and will hold office from and
after the Effective Time as described in the Joint Proxy Statement/Prospectus
until their respective successors are duly elected or appointed and qualify in
the manner provided in the Certificate of Incorporation and By-Laws of the
Surviving Corporation or as otherwise provided by law or their earlier
resignation or removal.
(b) The officers of the Surviving Corporation shall be determined by the
Board of Directors of the Surviving Corporation immediately after the Effective
Time, following consultation between the respective Chief Executive Officers of
the Constituent Corporations, except that Mr. Carpenter shall be the Chairman
and Chief Executive Officer of the Surviving Corporation and Mr. Morley shall be
the Vice Chairman of the Surviving Corporation, and will hold office from and
after the Effective Time until their respective successors are duly appointed
and qualify in the manner provided in the By-Laws of the Surviving Corporation
or as otherwise provided by law or their earlier resignation or removal. The
Vice Chairman shall be an executive officer of the Surviving Corporation with
the duties set forth in the By-Laws of the Surviving Corporation, which shall be
as reflected in the Surviving Corporation By-Law provision set forth on Exhibit
F.
Section 1.05 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.01 Effect on Reliance Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Each share of Reliance's Class A common stock, par value $.01 per
share ("Reliance Class A Common Stock"), issued and outstanding immediately
prior to the Effective Time (except for shares owned by Reliance or any of
its subsidiaries) shall be converted into the right to receive .739 shares
(the "Conversion Ratio") of Common Stock, par value $1.00 per share, of the
Surviving Corporation ("Survivor Common Stock"). Holders of Reliance Class
A Common Stock shall also have the right to receive together with each
share of Survivor Common Stock issued in the Merger pursuant to this
Section 2.01(a), an associated common stock purchase right ("Survivor
Common Stock Right") pursuant to the Rights Agreement dated as of March 7,
1986 between General Signal and the Rights
A-2
<PAGE> 89
Agent named therein (as amended through the date hereof, the "General
Signal Rights Agreement"). References herein to the Survivor Common Stock
issuable in the Merger shall be deemed to include associated Survivor
Common Stock Rights.
(b) Each share of Reliance's Class B common stock, par value $.01 per
share ("Reliance Class B Common Stock"), issued and outstanding immediately
prior to the Effective Time (except for shares owned by Reliance or any of
its subsidiaries and any Dissenting Shares) shall be converted into the
right to receive (i) .739 shares of Class B Common Stock, par value $1.00
per share, of the Surviving Corporation ("Survivor Class B Common Stock"
and, together with the Survivor Common Stock, the "Survivor Shares") or
(ii) if General Signal receives at least two business days prior to the
Closing Date a written notice from any holder of Reliance Class B Common
Stock that it elects to receive Survivor Common Stock in lieu of the
Survivor Class B Common Stock it would otherwise be entitled to receive
under this clause (b), .739 shares of Survivor Common Stock. Holders of
Reliance Class B Common Stock shall also have the right to receive together
with each share of Survivor Class B Common Stock issued in the Merger
pursuant to this Section 2.01(b), an associated Survivor Class B Common
Stock purchase right ("Survivor Class B Right" and, together with the
Survivor Common Stock Right, the "Survivor Rights") pursuant to the General
Signal Rights Agreement. References herein to the Survivor Class B Common
Stock issuable in the Merger shall be deemed to include associated Survivor
Class B Rights.
(c) Each share of Reliance's Class C common stock, par value $.01 per
share ("Reliance Class C Common Stock" and, together with Reliance Class A
Common Stock and Reliance Class B Common Stock, the "Reliance Shares"),
issued and outstanding immediately prior to the Effective Time (except for
shares owned by Reliance or any of its subsidiaries and any Dissenting
Shares) shall be converted into the right to receive (i) 2.001 shares of
Survivor Class B Common Stock, or (ii) if General Signal receives at least
two business days prior to the Closing Date a written notice from any
holder of Reliance Class C Common Stock that it elects to receive Survivor
Common Stock in lieu of all or a portion of the Survivor Class B Common
Stock it would otherwise be entitled to receive under this clause (c),
2.001 shares of Survivor Common Stock.
(d) Each share of Reliance Class A Common Stock, Reliance Class B
Common Stock and Reliance Class C Common Stock owned by Reliance as
treasury stock or owned by any subsidiary of Reliance shall be cancelled.
The status of all securities of General Signal, issued or reserved for
issuance (including, without limitation, shares of General Signal Common
Stock, and options, warrants and convertible debt securities to acquire
shares of General Signal Common Stock), shall remain unchanged.
(e) All Reliance Shares shall be cancelled and retired, and each
certificate representing any such Reliance Shares shall thereafter (i)
represent only the right to receive the Survivor Shares issuable in
exchange for such Reliance Shares upon the surrender of such certificate in
accordance with Section 2.03 (and any cash payable in respect of fractional
shares) and (ii) entitle the holder thereof to vote with respect to, and
receive dividends and distributions on, such number and class of whole
Survivor Shares which such holder is entitled to receive in exchange for
such certificates, provided that dividends shall be paid to such holder,
without interest, only upon surrender of certificates in accordance with
Section 2.03.
(f) Notwithstanding anything in this Agreement to the contrary, shares
of Reliance Class B Common Stock and Reliance Class C Common Stock which
are outstanding immediately prior to the Effective Time and which are held
by stockholders who (a) shall not have voted such shares in favor of the
Merger and (b) shall have delivered to Reliance a written demand for
appraisal of such shares in the manner provided in Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted as described in Section
2.01, but instead the holders thereof shall be entitled to payment of the
appraised value of such shares in accordance with the provisions of such
Section 262; provided, however, that (i) if any holder of Dissenting Shares
shall subsequently deliver a written withdrawal of its demand for appraisal
of such shares (with the written approval of the Surviving Corporation, if
such withdrawal is not tendered within 60 days after the Closing Date), or
(ii) if any holder fails to establish such holder's entitlement to
appraisal rights as provided in such Section 262, or (iii) if neither any
holder of Dissenting
A-3
<PAGE> 90
Shares nor the Surviving Corporation has filed a petition demanding a
determination of the value of all Dissenting Shares within the time
provided in such Section 262, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares and such shares shall
thereupon be deemed to have been converted into the right to receive, and
to have become exchangeable for, as of the Effective Time, Survivor Class B
Common Stock pursuant to Section 2.01(b) or Section 2.01(c).
Section 2.02 Effect on Reliance Options. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each option to purchase Reliance Class A Common Stock that is outstanding under
the Reliance Plans immediately prior to the Effective Time, whether or not
exercisable, shall be assumed by the Surviving Corporation in such manner that
each such option shall thereafter be exercisable upon the same terms and
conditions as under the applicable Reliance Plan and the applicable option
agreement issued thereunder, except that (i) each such option shall be
exercisable for that number of shares of Survivor Common Stock (rounded up to
the nearest whole share) into which the number of shares of Reliance Class A
Common Stock subject to such option immediately prior to the Effective Time
would be converted under Section 2.01 if such option were exercised prior to the
Effective Time, and (ii) the option price per share of Survivor Common Stock
shall be an amount equal to the option price per share of Reliance Class A
Common Stock subject to such option in effect immediately prior to the Effective
Time divided by the Conversion Ratio (rounded up to the nearest whole cent).
Section 2.03 Exchange Procedures. (a) Promptly after the Effective Time,
the Surviving Corporation shall mail or cause to be mailed to each record
holder, as of the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Reliance Shares (the
"Certificates") a form letter of transmittal which shall be mutually
satisfactory to the parties hereto (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Surviving Corporation) and instructions for
use in effecting the surrender of the Certificates for exchange therefor. Upon
surrender to the Surviving Corporation of a Certificate, together with such
letter of transmittal duly executed and any documents required thereby, the
holder of such Certificate shall be entitled to receive in exchange therefor
that number and class of whole Survivor Shares which such holder has the right
to receive under this Article II, and such Certificate shall forthwith be
cancelled. If any Survivor Shares are to be issued to a person other than the
person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of exchange that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall pay any transfer or other
taxes required by reason of the exchange to a person other than the registered
holder of the Certificate surrendered or such person shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable.
(b) The Surviving Corporation shall not be liable to any holder of Reliance
Shares with respect to any Survivor Shares delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(c) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the transfer
agent for the Survivor Shares, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
transfer agent for the Survivor Shares will issue in exchange for such lost,
stolen or destroyed Certificate the Survivor Shares and unpaid dividends and
distributions on Survivor Shares as provided pursuant to Sections 2.01 and 2.03
of this Agreement.
Section 2.04 Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of Reliance Shares who upon surrender of
Certificates therefor would be entitled to receive from the Surviving
Corporation a fraction of a Survivor Share shall not be entitled to receive
dividends on or vote such fractional share and shall receive, in lieu of such
fractional share, from the Surviving Corporation cash in an amount equal to such
fraction multiplied by the Market Value of the relevant Survivor Share. The
fractional share interests of each Reliance shareholder will be aggregated, and
no Reliance shareholder will receive cash in an amount equal to or greater than
the value of one full Survivor Share. "Market Value" shall mean, with respect
A-4
<PAGE> 91
to the Survivor Common Stock and Survivor Class B Common Stock issued to
previous holders of Reliance Shares, the mean between the high and low prices of
General Signal Common Stock on the New York Stock Exchange ("NYSE") on the date
immediately prior to the Effective Time. All references in this Agreement to
Survivor Shares shall be deemed to include any cash in lieu of fractional shares
payable pursuant to this Section 2.04.
Section 2.05 Transfers. From and after the Effective Time there shall be
no transfers on the stock transfer books of Reliance or the Surviving
Corporation of Reliance Shares. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
General Signal represents and warrants to Reliance and Reliance represents
and warrants to General Signal (each as to itself) as follows:
Section 3.01 Organization. It and each of its Significant Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation and it has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. It and each of its subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a material
adverse effect on the business, operations, assets, financial condition or
results of operations of, in the case of General Signal, General Signal and its
subsidiaries taken as a whole or, in the case of Reliance, Reliance and its
subsidiaries taken as a whole (a "Material Adverse Effect"). It owns directly
all of the outstanding capital stock of each of its Significant Subsidiaries. As
used in this Agreement a "Significant Subsidiary" means a corporation which is a
"significant subsidiary" of such party within the meaning of Rule 1-02 (v) of
Regulation S-X of the Securities and Exchange Commission ("SEC"). Set forth as
Exhibit C-1 is a copy of the Form of Restated Certificate of Incorporation of
General Signal to be delivered to the Department of State of the State of New
York as it will be in effect at the Effective Time, subject to the requisite
vote of the shareholders of General Signal, the form of which has been approved
by the Board of Directors of General Signal.
Section 3.02 Capitalization. (a) The authorized capital stock of General
Signal consists of 150,000,000 shares of common stock, par value $1.00 per share
("General Signal Common Stock"), and 10,000,000 shares of preferred stock, par
value $1.00 per share ("General Signal Preferred Stock"). As of the date hereof,
there are 47,329,742 shares of General Signal Common Stock issued and
outstanding, 16,258,615 shares held in General Signal's treasury, and no shares
of General Signal Preferred Stock outstanding. At the Effective Time, the
authorized capital stock of General Signal shall consist of 250,000,000 shares
of General Signal Common Stock and 26,500,000 shares of General Signal Class B
Common Stock, par value $1.00 per share ("General Signal Class B Common Stock")
and 10,000,000 shares of General Signal Preferred Stock. As of the date hereof
there were 3,241,437 shares of General Signal Common Stock reserved for issuance
upon the exercise of outstanding options and options which may be granted under
the stock option plans of General Signal, all of which are listed on Schedule
3.02(A) (the "General Signal Plans"), and 2,532,000 shares reserved for issuance
upon the conversion of the outstanding $100,000,000 aggregate principal amount
of 5 3/4% Convertible Subordinated Notes due 2002 of General Signal (the
"Convertible Notes"). Set forth as Exhibit C-2 is a form of Amendment to the
General Signal Rights Agreement which has been approved by the Board of
Directors of General Signal. Each share of General Signal Common Stock is, and
each Survivor Share will be, when issued, accompanied by one Common Stock
purchase right (the "Purchase Rights") or one Survivor Right. Except for the
Purchase Rights, the Convertible Notes and the options granted or to be granted
under the General Signal Plans, there are not now, and at the Effective Time
there will not be, any existing options, warrants, calls, subscriptions, or
other rights or other agreements or commitments obligating
A-5
<PAGE> 92
General Signal to issue, transfer or sell any shares of its capital stock or any
other securities convertible into or evidencing the right to subscribe for any
such shares. All issued and outstanding shares of General Signal Common Stock
are, and all shares of Survivor Common Stock and Survivor Class B Common Stock
to be issued at the Effective Time shall be, when issued, duly authorized and
validly issued, fully paid, non-assessable and free of preemptive rights with
respect thereto.
(b) The authorized capital stock of Reliance consists of 100,000,000 shares
of Reliance Class A Common Stock, 100,000,000 shares of Reliance Class B Common
Stock, 12,000,000 Shares of Reliance Class C Common Stock and 15,000,000 Shares
of preferred stock, par value $.10 per share ("Reliance Preferred Stock"). As of
the date hereof, there are 32,909,939 shares of Reliance Class A Common Stock,
3,161,032 shares of Reliance Class B Common Stock, 5,250,000 shares of Reliance
Class C Common Stock, no shares of Reliance Preferred Stock issued and
outstanding and no Reliance Shares held in Reliance's treasury. All of the
outstanding shares of Reliance Class A Common Stock are convertible into
Reliance Class B Common Stock and vice versa on a share for share basis. Each
share of Reliance Class C Common Stock is convertible into 2.708 shares of
Reliance Class A Common Stock under certain circumstances. As of the date
hereof, there were reserved under the stock option and long-term incentive plans
of Reliance, all of which are listed on Schedule 3.02(B) (the "Reliance Plans"),
1,259,365 shares of Reliance Class A Common Stock for issuance upon exercise of
outstanding options or options which may be granted upon achievement of certain
performance goals under Reliance's 1994 Executive Long-Term Incentive Plan (the
"LTIP"). Except for the conversion rights of holders of Reliance Shares with
respect to conversion of such shares into other classes of Reliance Shares, the
rights granted pursuant to the Reliance Rights Agreement, and options and rights
to receive Reliance Class A Common Stock under the Reliance Plans, there are not
now, and at the Effective Time there will not be, any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Reliance or any of its subsidiaries to issue, transfer or
sell any shares of capital stock of Reliance or any of its subsidiaries or any
other securities convertible into or evidencing the right to subscribe for any
such shares. All issued and outstanding Reliance Shares are duly authorized and
validly issued, fully paid, non-assessable and free of preemptive rights with
respect thereto.
Section 3.03 Authority. (a) It has full corporate power and authority to
execute and deliver this Agreement and, subject to the requisite approval of its
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by its
Board of Directors, and other than the requisite approval by its stockholders,
no other corporate proceedings are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by it and, assuming this Agreement
constitutes a legal, valid and binding agreement of the other party hereto, it
constitutes a legal, valid and binding agreement of it, enforceable against it
in accordance with its terms.
(b) General Signal's Board of Directors has taken all appropriate and
necessary action such that the provisions of Section 912 of the NYBCL will not
apply to the Merger. Reliance's Board of Directors has taken all appropriate and
necessary action such that the provision of Section 203 of the DGCL will not
apply to the Merger.
Section 3.04 No Violations; Consents and Approvals. (a) Neither the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby nor compliance by it with any of the provisions hereof will
(i) subject to obtaining the requisite approval of the holders of, with respect
to Reliance, a majority and, with respect to General Signal, two-thirds of the
outstanding stock entitled to vote thereon, violate any provision of its
certificate of incorporation or by-laws, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default, or give rise to any right of termination, cancellation or acceleration
or any right which becomes effective upon the occurrence of a merger,
consolidation or change in control, under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture or other instrument of
indebtedness for money borrowed to which it or any of its subsidiaries is a
party, or by which it or any of its subsidiaries or any of their respective
properties is bound other than, with respect to Reliance, the Competitive
Advance and Revolving Credit Facility Agreement, dated as of April 21, 1993
among Reliance and the Lenders named therein and Chemical Bank, as
A-6
<PAGE> 93
administrative agent, and, with respect to each of General Signal and Reliance,
any violations, defaults, breaches of or rights under notes, bonds, mortgages,
indentures or other instruments of indebtedness related to indebtedness for
borrowed money amounting in the aggregate to less than $20,000,000, or (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default, or give rise to any right of termination,
cancellation or acceleration or any right which becomes effective upon the
occurrence of a merger, consolidation or change in control, under, any of the
terms, conditions or provisions of any license, franchise, permit or agreement
(other than those covered by the preceding clause (ii)) to which it or any of
its subsidiaries is a party, or by which it or any of its subsidiaries or any of
their respective properties is bound, or (iv) violate any statute, rule,
regulation, order or decree of any public body or authority by which it or any
of its subsidiaries or any of its respective properties is bound, excluding from
the foregoing clauses (iii) and (iv) violations, breaches, defaults or rights
which, either individually or in the aggregate, would not have a Material
Adverse Effect or materially impair its ability to consummate the transactions
contemplated hereby or for which it has received or, prior to the Merger, shall
have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by it in connection
with the execution and delivery of this Agreement, or the consummation by it of
the transactions contemplated hereby, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) in connection, or in compliance, with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and by the Department of State of the State of New York, (iv) in the
case of General Signal, the filing of the Restated Certificate of Incorporation
of General Signal by the Department of State of the State of New York, (v) such
filings and consents as may be required under any environmental law pertaining
to any notification, disclosure or required approval triggered by the Merger or
the transactions contemplated by this Agreement, (vi) with respect to General
Signal, filings with, and approval of, the NYSE and the Pacific Stock Exchange
("PSE") in connection with obligations of General Signal under Section 4.14,
(vii) filing with, and approval of, the NYSE and the SEC with respect to the
delisting and deregistration of Reliance Class A Common Stock, (viii) such
consents, approvals, orders, authorizations, notifications, approvals,
registrations, declarations and filings as may be required under the
corporation, takeover or blue sky laws of various states and (ix) such other
consents, orders, authorizations, registrations, declarations and filings not
obtained prior to the Effective Time the failure of which to be obtained or made
would not, individually or in the aggregate, have a Material Adverse Effect, or
materially impair such party's ability to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Section 3.05 SEC Documents; Financial Statements. (a) It has made
available to the other party hereto copies of each registration statement,
report, proxy statement or information statement filed with the SEC by it since
January 1, 1992 (the "SEC Documents"). As of their respective dates, such
party's SEC Documents complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
none of such SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and its Board of Directors consists of the Directors
identified in its 1994 proxy statement.
(b) Neither it nor any of its subsidiaries, nor any of their respective
assets, businesses, or operations, is as of the date of this Agreement a party
to, or is bound or affected by, or receives benefits under any contract or
agreement or amendment thereto, that in each case would be required to be filed
as an exhibit to a Form 10-K as of the date of this Agreement that has not been
filed as an exhibit to an SEC Document filed prior to the date of this
Agreement.
(c) As of their respective dates, the consolidated financial statements
included in such party's SEC Documents complied as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented its consolidated financial position and that of
its
A-7
<PAGE> 94
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash flows for the periods then ended
(subject, in the case of unaudited statements, to the lack of footnotes thereto,
to normal year-end audit adjustments and to any other adjustments described
therein).
(d) The SEC Documents include (i) consolidated balance sheets as of
December 31, 1993 and June 30, 1994; and (ii) consolidated statements of income
for the year ended December 31, 1993, and the six month period ended June 30,
1994 for such party, as the case may be. Each of the foregoing consolidated
audited balance sheets as at December 31, 1993 is sometimes herein referred to
as the "Balance Sheet." Each of the foregoing consolidated unaudited balance
sheet as at June 30, 1994 is sometimes herein referred to as the "Interim
Balance Sheet."
(e) There are no liabilities or obligations (and no basis therefor) of such
party accrued, absolute, or contingent and whether due or to become due, other
than liabilities and obligations (i) reflected, or adequately reserved against,
in the Interim Balance Sheet or (ii) which, individually or in the aggregate,
would not have a Material Adverse Effect.
Section 3.06 Absence of Certain Changes. Except as reflected, or
adequately reserved against, in its Interim Balance Sheet, since December 31,
1993, it has not suffered (a) any event or occurrence which would have a
Material Adverse Effect or (b) any changes in accounting methods, principles or
practices except as required or permitted by generally accepted accounting
principles.
Section 3.07 Legal Proceedings. Except as disclosed in such party's SEC
Documents filed prior to the date hereof, or reflected or adequately reserved
against in its Balance Sheet, there is no (i) claim, action, suit or proceeding
pending or, to its best knowledge, threatened, against or relating to it or any
of its subsidiaries or any of their respective assets before any court or
governmental or regulatory authority or body or arbitration tribunal or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding, to which it or any of its subsidiaries is a party except any such
claim, action, suit or proceeding or judgment, order, writ, injunction, decree,
application, request or motion which, either individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
Section 3.08 Compliance with Laws and Agreements. Neither it nor any of
its subsidiaries is (i) in violation of or noncompliance with any statute, law,
ordinance, regulation, rule or order of any foreign, federal, state or local
government or any other governmental department or agency, or any judgment,
decree or order of any court, applicable to its business or operations or (ii)
in violation, breach or default (with or without due notice or lapse of time or
both) under any of the terms, conditions or provisions of any agreement to which
it is a party, or by which its properties are bound, except where any such
violations or failures to comply or breaches or defaults would not, individually
or in the aggregate, have a Material Adverse Effect. Such party and its
subsidiaries have all permits, licenses and franchises from governmental
agencies required to conduct their businesses as now being conducted, except for
such permits, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.09 Rights Agreement. The General Signal Rights Agreement,
subject to execution by the rights agent thereunder, has been amended to provide
that (i) Reliance will not become an "Acquiring Person" and that no "Triggering
Event", "Share Acquisition Date" or "Distribution Date" (as such terms are
defined in the General Signal Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby and (ii) holders of Reliance Class B Common
Stock and Reliance Class C Common Stock, in addition to the shares of Survivor
Class B Common Stock they are entitled to receive pursuant to the Merger, shall
receive associated Survivor Class B Rights under the General Signal Rights
Agreement. The Survivor Class B Rights shall contain the same terms and
conditions (including the same potential economic benefits) as the Purchase
Rights.
Section 3.10 Accounting Matters. Neither it nor, to its best knowledge,
any of its affiliates, has through the date hereof, taken or agreed to take any
action that would prevent the accounting of the business combination to be
effected by the Merger as a "pooling of interests" in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases issued pursuant
thereto, and the pronouncements of the SEC.
A-8
<PAGE> 95
Section 3.11 Joint Proxy Statement/Prospectus, Registration
Statement. None of the information to be supplied by such party for inclusion
or incorporation by reference in (i) the registration statement on Form S-4 (as
it may be amended or supplemented from time to time, the "Registration
Statement") relating to Survivor Shares to be issued in connection with the
Merger or (ii) the joint proxy statement to be distributed in connection with
the stockholders meetings of General Signal and Reliance contemplated by Section
4.06 (as it may be amended or supplemented from time to time, the "Proxy
Statement" and together with the prospectus to be included in the Registration
Statement, the "Joint Proxy Statement/Prospectus") will, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, and, in the case of the Proxy Statement, at the time of its mailing to
stockholders of General Signal and Reliance and at the time of their respective
stockholders meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. The Proxy Statement and, with
respect to General Signal, the Registration Statement will comply as to form in
all material respects with the applicable provisions of the Securities Act and
the Exchange Act.
Section 3.12 State Antitakeover Statutes. No "business combination,"
"moratorium," "control share" or other state antitakeover statute or regulation
(x) prohibits or restricts its ability to perform its obligations under this
Agreement or its ability to consummate the transactions contemplated hereby, (y)
would have the effect of invalidating or voiding this Agreement, or any
provision hereof, or (z) would subject the other party hereto to any material
impediment or condition in connection with the exercise of any of its rights
under this Agreement.
Section 3.13 Broker's Fees. Except for the engagement of Donaldson,
Lufkin & Jenrette Securities Corporation by General Signal and Goldman, Sachs &
Co. and Prudential Securities Incorporated by Reliance, neither Reliance,
General Signal nor any of their respective subsidiaries or any of their
respective directors or officers has employed any broker, finder or financial
advisor or incurred any liability for any broker's fees, commissions, or
financial advisory or finder's fees in connection with any of the transactions
contemplated by this Agreement.
Section 3.14 Fairness Opinions. General Signal has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation, to the effect that, as
of August 29, 1994, the consideration to be paid by the Surviving Corporation to
the stockholders of Reliance is fair to General Signal's stockholders from a
financial point of view and Reliance has received (i) the opinion of Prudential
Securities Corporation to the effect that, as of August 29, 1994, the Conversion
Ratio is fair to Reliance stockholders from a financial point of view and (ii)
the opinion of Goldman Sachs & Co. to the effect that as of August 29, 1994, the
Conversion Ratio is fair to the holders of Reliance Shares.
Section 3.15 Reliance Taxes. (a) Reliance hereby represents and warrants
that, in regard to Reliance's Overall Foreign Loss in existence immediately
before the Effective Time as computed here to date by Reliance, no material
portion of the Overall Foreign Loss attributable to interest expense or capital
losses will be allocated in accordance with Treasury Regulation Section
1.1502-9(c) to Reliance Parent at the Effective Time. Further, Reliance
represents that the Reliance Parent has not owned any foreign assets since its
incorporation in December of 1986.
(b) For purposes of Section 3.15(a) the following capitalized terms have
the meanings set forth below:
"Reliance's Overall Foreign Loss" means the balance in the consolidated
overall foreign loss account for the Reliance Consolidated Group as of the date
hereof, as determined pursuant to Treas. Reg. sec. 1.1502-9(b).
"Reliance Consolidated Group" means the affiliated group of corporations of
which Reliance Parent is the common parent, all within the meaning attributable
to such terms in section 1504(a) of the Code and the Treasury regulations
promulgated thereunder.
"Reliance Parent" means the common parent of the Reliance Consolidated
Group, within the meaning of section 1504(a) of the Code.
A-9
<PAGE> 96
ARTICLE IV
COVENANTS
Section 4.01 Conduct of Business of Reliance and General Signal. Except
as contemplated by this Agreement or as expressly agreed to in writing by
General Signal and Reliance, during the period from the date of this Agreement
to the Effective Time, each of General Signal and its subsidiaries and Reliance
and its subsidiaries will conduct its operations according to its ordinary
course of business consistent with past practice, and will use all commercially
reasonable efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, neither General Signal nor Reliance will nor will
they permit any of their respective subsidiaries to, without the prior written
consent of the other party:
(a) amend its certificate of incorporation or by-laws, except General
Signal may amend its certificate of incorporation and bylaws as required by
the terms of this Agreement;
(b) authorize for issuance, issue, sell, deliver, grant any options
for, or otherwise agree or commit to issue, sell or deliver any shares of
any class of its capital stock or any securities convertible into shares of
any class of its capital stock, except (i) pursuant to and in accordance
with the terms of the General Signal Rights Agreement, the Reliance Rights
Plan or currently outstanding convertible securities and options, and (ii)
options granted under the Reliance Plans or the General Signal Plans, in
the ordinary course of business consistent with past practice;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or any of its subsidiaries, except (i) the payment of
regular quarterly dividends consistent with past practice, (ii) purchase or
redemption of General Signal Common Stock pursuant to the previously
publicly announced General Signal stock repurchase plans or (iii) as
otherwise expressly provided in this Agreement;
(d) except in the ordinary course of business, consistent with past
practice (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except its wholly owned
subsidiaries in the ordinary course of business and consistent with past
practices; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person;
(e) except as otherwise expressly contemplated by this Agreement or in
the ordinary course of business, consistent with past practice, (i)
increase in any manner the compensation of any of its directors, officers
or other employees; (ii) pay or agree to pay any pension, retirement
allowance or other employee benefit not required, or enter into or agree to
enter into any agreement or arrangement with such director, officer or
employee, whether past or present, relating to any such pension, retirement
allowance or other employee benefit, except as required under currently
existing agreements, plans or arrangements; (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement
with any of its directors, officers or other employees; or (iv) except as
may be required to comply with applicable law, become obligated (other than
pursuant to any new or renewed collective bargaining agreement) under any
new pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, including any bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other benefit plan, agreement or
arrangement, or employment or consulting agreement with or for the benefit
of any person, and to amend any of such plans or any of such agreements in
existence on the date hereof;
A-10
<PAGE> 97
(f) except as otherwise expressly contemplated by this Agreement,
enter into any other agreements, commitments or contracts, except
agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business, consistent with past
practice;
(g) except in the ordinary course of business, consistent with past
practice, or as contemplated by this Agreement authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or
enter into any agreement in principle or an agreement with respect to, any
plan of liquidation or dissolution, any acquisition of a material amount of
assets or securities, any sale, transfer, lease, license, pledge, mortgage,
or other disposition or encumbrance of a material amount of assets or
securities or any material change in its capitalization, or any entry into
a material contract or any amendment or modification of any material
contract or any release or relinquishment of any material contract rights;
or
(h) agree to do any of the foregoing.
Section 4.02 Acquisitions. Prior to the Effective Time, General Signal
and Reliance shall keep each other advised of the status of all discussions and
negotiations concerning possible acquisitions and divestitures of any
corporations or businesses and each agrees that without the prior written
consent of the other it shall not make, or agree to make, any acquisition which
requires the issuance of shares of capital stock of General Signal or Reliance
or any security convertible into, exchangeable for or exercisable for shares of
such capital stock or any acquisition or acquisitions that, individually or in
the aggregate, would require the payment of more than $150 million in aggregate
consideration (including by assumption of borrowings); provided, however, that
this covenant shall not apply in any way to the acquisition for cash of
Fairbanks Morse Pump Corporation by General Signal. General Signal or Reliance
shall not undertake any acquisition that would require preparation of pro forma
financial statements in accordance with applicable rules and regulations of the
SEC or that might reasonably be expected to delay completion of the Merger.
Section 4.03 No Solicitation. (a) Each of Reliance and General Signal
agrees that, prior to the Effective Time, it shall not, and shall not authorize
or permit any of its subsidiaries or any of its or its subsidiaries' directors,
officers, employees, agents or representatives to, directly or indirectly,
solicit, initiate, facilitate or encourage (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to any merger, consolidation or other business combination
involving Reliance or its subsidiaries or General Signal or its subsidiaries or
acquisition of any kind of all or substantially all of the assets or capital
stock of Reliance and its subsidiaries taken as a whole or General Signal and
its subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate,
explore or otherwise communicate in any way with any third party (other than
General Signal or Reliance, as the case may be) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; provided that General Signal or
Reliance may, in response to an unsolicited written proposal with respect to an
Acquisition Transaction from a financially capable third party that contains no
financing condition, (i) furnish or disclose non-public information to such
third party and (ii) negotiate, explore or otherwise communicate with such third
party, in each case only if the Board of Directors of such party determines in
good faith by a majority vote, after consultation with its legal and financial
advisors, and after receipt of the written opinion of outside legal counsel of
such party that failing to take such action would constitute a breach of the
fiduciary duties of such Board of Directors, that taking such action is
reasonably likely to lead to an Acquisition Transaction that is more favorable
to the stockholders of such party than the Merger and that failing to take such
action would constitute a breach of the Board's fiduciary duties.
(b) Each of Reliance and General Signal shall immediately advise in writing
the other of the receipt of any inquiries or proposals relating to an
Acquisition Transaction and any actions taken pursuant to Section 4.03(a).
Section 4.04 Access to Information. (a) From the date of this Agreement
until the Effective Time, each of Reliance and General Signal will give the
other party and their authorized representatives (including counsel,
environmental and other consultants, accountants and auditors) full access
during normal business hours to all facilities, personnel and operations and to
all books and records of it and its subsidiaries, will permit the other party to
make such inspections as it may reasonably require and will cause its officers
and
A-11
<PAGE> 98
those of its subsidiaries to furnish the other party with such financial and
operating data and other information with respect to its business and properties
as such party may from time to time reasonably request.
(b) Each of the parties hereto will hold and will cause its consultants and
advisors to hold in strict confidence pursuant to the Confidentiality Agreement
dated April 13, 1994 between the parties (the "Confidentiality Agreement") all
documents and information furnished to the other in connection with the
transactions contemplated by this Agreement as if each such consultant or
advisor was a party thereto.
Section 4.05 Registration Statement and Proxy Statement. (a) General
Signal and Reliance shall file with the SEC as soon as is reasonably practicable
after the date hereof the Joint Proxy Statement/Prospectus and General Signal
shall file the Registration Statement in which the Joint Proxy
Statement/Prospectus shall be included. General Signal and Reliance shall use
all commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. General Signal shall also take
any action required to be taken under applicable state blue sky or securities
laws in connection with the issuance of Survivor Shares pursuant to this
Agreement. General Signal and Reliance shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with any action by any of them in connection with this Section
4.05(a).
(b) Each of General Signal and Reliance agrees that the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto at the time of
mailing thereof and at the time of the respective meetings of stockholders of
General Signal and Reliance, or in the case of the Registration Statement and
each amendment or supplement thereto, at the time it becomes effective, will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
either General Signal or Reliance, as the case may be, in reliance upon and in
conformity with written information concerning the other party furnished by such
other party specifically for use in the Joint Proxy Statement/Prospectus. Each
of General Signal and Reliance agrees that none of the information furnished in
writing to the other party specifically for use in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of stockholders of
General Signal and Reliance, or in the case of information furnished in writing
specifically for inclusion in the Registration Statement and each amendment or
supplement thereto, at the time it becomes effective, will include any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event shall occur which is required to be described in
the Proxy Statement or Registration Statement, such event shall be so described,
and an amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of General Signal and
Reliance; provided that no amendment or supplement to the Joint Proxy
Statement/Prospectus or the Registration Statement will be made by General
Signal or Reliance without the approval of the other party. To the extent
applicable, each of General Signal and Reliance will advise the other, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, the issuance
of any stop order, the suspension of the qualification of the Survivor Shares
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Joint Proxy Statement/Prospectus
or the Registration Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
(c) General Signal and Reliance shall each use all commercially reasonable
efforts to cause to be delivered to the other a comfort letter of its
independent auditors, dated a date within two business days of the effective
date of the Registration Statement, in form reasonably satisfactory to the other
party and customary in scope and substance for such letters in connection with
similar registration statements.
Section 4.06 Stockholders' Meetings. Reliance and General Signal each
shall call a meeting of its respective stockholders to be held as promptly as
practicable in accordance with applicable law for the purpose of voting upon (i)
the adoption of this Agreement and the transactions contemplated hereby
including, in the
A-12
<PAGE> 99
case of General Signal, amending the General Signal Certificate of Incorporation
to increase the authorized number of shares of General Signal Common Stock to
250,000,000 shares and to create the Survivor Class B Common Stock and to change
the name of General Signal as contemplated by this Agreement and (ii) the
election to the Board of Directors of the Surviving Corporation, effective as of
the Effective Time, of each of the persons who, as of the date of this Agreement
are directors of Reliance and the one individual designated by CSCL in
accordance with the Citicorp Agreement, with each such person to be elected to
the class of directors designated in writing by Reliance prior to the mailing of
the Joint Proxy Statement/Prospectus. Reliance and General Signal shall, through
their respective Boards of Directors, recommend to their respective stockholders
approval of such matters and will coordinate and cooperate with respect to the
timing of such meetings and shall use all commercially reasonable efforts to
hold such meetings on the same day and as soon as practicable after the date
hereof; provided, however, that the respective Boards of Directors may, in
response to an unsolicited written proposal with respect to an Acquisition
Transaction from a financially capable third party that contains no financing
condition, withdraw, modify or change its recommendation to its stockholders if
the Board of Directors determines in good faith by a majority vote, after
consultation with its legal and financial advisors, and after receipt of the
written opinion of outside legal counsel of such party that failing to take such
action would constitute a breach of the fiduciary duties of such Board of
Directors, that withdrawing, modifying or changing its recommendation is
reasonably likely to lead to an Acquisition Transaction that is more favorable
to the stockholders of such party than the Merger and that failing to take such
action would constitute a breach of the Board's fiduciary duties. Each party
shall use all commercially reasonable efforts to solicit from stockholders of
such party proxies in favor of such matters.
Section 4.07 Board of Directors of General Signal. (a) The General Signal
Board of Directors shall take such corporate action as may be necessary to cause
the number of directors comprising its full board to be increased at the
Effective Time to the size necessary to include, subject to the requisite vote
of the shareholders of General Signal, immediately after the Effective Time on
the Surviving Corporation Board of Directors the persons specified in Section
4.06(ii).
(b) Each standing committee of the General Signal Board of Directors in
existence immediately prior to the Effective Time shall be increased in size at
the Effective Time so that each such committee (i) with an even number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by an equal number of members and (ii) with an odd number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by such number of members minus one, and, in each case, such
newly-created vacancies shall be filled, subject to the requisite vote of the
stockholders of General Signal, immediately after the Effective Time by persons
specified in Section 4.06(ii).
Section 4.08 Reasonable Efforts; Other Actions. Subject to the terms and
conditions herein provided and applicable law, Reliance and General Signal shall
use all commercially reasonable efforts promptly to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, (i) the filing of Notification and Report Forms under the
HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") and using their
reasonable best efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division for additional information or
documentation, (ii) the taking of any actions required to qualify the Merger for
pooling-of-interests accounting treatment and as a tax-free reorganization
within the meaning of Section 368(a) of the Code, (iii) the obtaining of all
necessary consents, approvals or waivers under its material contracts, and (iv)
the lifting of any legal bar to the Merger.
Section 4.09 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the Merger, General
Signal and Reliance will consult with each other as to its form and substance
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law.
Section 4.10 Notification of Certain Matters. Each of Reliance and
General Signal shall give prompt notice to the other party of (i) any notice of,
or other communication relating to, a default or event which,
A-13
<PAGE> 100
with notice or lapse of time or both, would become a default, received by it or
any of its subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any contract material to the financial condition,
properties, businesses or results of operations of Reliance or General Signal,
as the case may be, and their respective subsidiaries taken as a whole to which
it or any of its subsidiaries is a party or is subject, or (ii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement.
Section 4.11 Indemnification. (a) The Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of Reliance and its subsidiaries against all losses,
claims, damages, expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time to the
same extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in Reliance's Certificate of Incorporation
and By-Laws and agreements in effect at the date hereof (to the extent
consistent with applicable law).
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Reliance
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that the Surviving
Corporation shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 250% of the premiums paid as of the
date hereof by Reliance for such insurance.
(c) The provisions of this Section 4.11 are intended to be for the benefit
of, and shall be enforceable by each indemnified party hereunder, his or her
heirs and his or her representatives.
Section 4.12 Expenses. Except as set forth in Section 9.05, General
Signal, and Reliance, shall bear their respective expenses incurred in
connection with the Merger, including, without limitation, the preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants, except that expenses incurred
in printing, mailing and filing (including without limitation, SEC filing fees
and stock exchange listing application fees) the Joint Proxy
Statement/Prospectus shall be shared equally by Reliance and General Signal.
Section 4.13 Affiliates. Each of Reliance and General Signal shall
deliver to the other a letter identifying all persons who, as of the date
hereof, may be deemed to be "affiliates" thereof for purposes of Rule 145 under
the Securities Act (the "Affiliates") and shall advise the other in writing of
any persons who become an Affiliate prior to the Effective Time. Reliance shall
cause each person who is so identified as an Affiliate to deliver to General
Signal, no later than the earlier of the date hereof or the date such person
becomes an Affiliate, a written agreement substantially in the form of Exhibit
D-1 hereto.
Section 4.14 Stock Exchange Listings. General Signal shall promptly
prepare and submit to the NYSE and the PSE a listing application covering the
shares of Survivor Common Stock (and associated Survivor Rights) issuable in the
Merger and upon conversion of any shares of Survivor Class B Common Stock
issuable in the Merger and upon exercise of Reliance Stock Options, and shall
use all commercially reasonable efforts to obtain, prior to the Effective Time,
approval for the listing of such Survivor Common Stock (and associated Survivor
Rights), subject to official notice of issuance.
Section 4.15 Reliance Rights Plan. On the date hereof, Reliance shall
adopt, subject to execution by a rights agent thereunder, the Reliance Rights
Plan, which Plan has been authorized by the Board of Directors of Reliance. The
Reliance Rights Plan shall expire immediately prior to the Effective Time.
Reliance shall not redeem the rights issued under the Reliance Rights Plan
(other than to delay any "distribution date" thereon or to render the rights
inapplicable to the Merger or any action permitted under this Agreement) or
terminate the Reliance Rights Plan prior to the earlier of (i) a vote by the
holders of Reliance Class A Common Stock at a meeting duly convened therefor
(including any adjournments thereof) which shall not have been
A-14
<PAGE> 101
sufficient to satisfy the requirements of Section 5.02, (ii) the termination of
this Agreement in accordance with its terms or (iii) the Effective Time unless
required to do so by a court of competent jurisdiction.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL AND RELIANCE
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
Section 5.01 Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and remain in effect. All necessary state securities
or blue sky authorizations shall have been received.
Section 5.02 Stockholder Approval. The requisite vote of the stockholders
of Reliance and General Signal necessary to consummate the transactions
contemplated by this Agreement shall have been obtained.
Section 5.03 Consents and Approvals. All necessary consents and approvals
of any United States or any other governmental authority or any other third
party required for the consummation of the transactions contemplated by this
Agreement shall have been obtained except for such consents and approvals the
failure to obtain which individually or in the aggregate would not have a
Material Adverse Effect and any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
Section 5.04 Auditors' Letters. Each of General Signal and Reliance shall
have received from its independent auditors a letter dated the Closing Date
reasonably satisfactory to each of them confirming in all material respects the
matters set forth in the letter contemplated by Section 4.05(c).
Section 5.05 Accounting Treatment. Each of General Signal and Reliance
shall have received a letter from Ernst & Young, reasonably satisfactory to each
of them in all respects, that the Merger will qualify for pooling-of-interests
accounting treatment.
Section 5.06 Tax Matters. Each of General Signal and Reliance shall have
received an opinion of Cahill Gordon & Reindel addressed to it dated the Closing
Date substantially in the form of Exhibit E hereto to the effect that the Merger
will constitute a tax-free reorganization within the meaning of Section 368(a)
of the Code and that General Signal and Reliance shall each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL
The obligation of General Signal to effect the Merger and to perform its
other obligations to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by General Signal:
Section 6.01 Representations and Warranties True. The representations and
warranties of Reliance contained herein (without regard to any materiality
exceptions contained therein) shall be true and correct on the date of this
Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such date, except for such untruths or
inaccuracies which would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 6.02 Performance. Reliance shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
A-15
<PAGE> 102
Section 6.03 Certificates. Reliance shall furnish such certificates of
its officers to evidence compliance with the conditions set forth in Sections
6.01 and 6.02 as may be reasonably requested by General Signal.
Section 6.04 Certain Proceedings. No writ, order, decree or injunction of
a court of competent jurisdiction or governmental entity shall be in effect
against General Signal or Reliance, and no proceedings therefor shall have been
threatened or commenced by any governmental entity, which prohibits or restricts
the consummation of the Merger or would otherwise restrict the Surviving
Corporation's exercise of full rights to own and operate the business of
Reliance and General Signal in a manner which would have a Material Adverse
Effect on Reliance or General Signal.
Section 6.05 Material Adverse Change. There shall not have occurred since
June 30, 1994 any material adverse change in the business, operations, assets,
financial condition or results of operations of Reliance and its subsidiaries
taken as a whole.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RELIANCE
The obligations of Reliance under this Agreement to effect the Merger shall
be subject to the fulfillment on or before the Closing Date of each of the
following additional conditions, any one or more of which may be waived by
Reliance:
Section 7.01 Representations and Warranties True. The representations and
warranties of General Signal contained herein (without regard to any materiality
exceptions contained therein) shall be true and correct on the date of this
Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such date, except for such untruths or
inaccuracies which would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 7.02 Performance. General Signal shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
Section 7.03 Certificates. General Signal shall furnish such certificates
of its respective officers to evidence compliance with the conditions set forth
in Sections 7.01 and 7.02 as may be reasonably requested by Reliance.
Section 7.04 Certain Proceedings. No writ, order, decree or injunction of
a court of competent jurisdiction or governmental entity shall be in effect
against General Signal or Reliance, and no proceedings therefor shall have been
threatened or commenced by any governmental entity, which prohibits or restricts
the consummation of the Merger or would otherwise restrict the Surviving
Corporation's exercise of full rights to own and operate the business of
Reliance and General Signal in a manner which would have a Material Adverse
Effect on Reliance or General Signal.
Section 7.05 Material Adverse Change. There shall not have occurred since
June 30, 1994 any material adverse change in the business, operations, assets,
financial condition or results of operations of General Signal and its
subsidiaries taken as a whole.
Section 7.06 Listings. The Survivor Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE and the PSE subject to
official notice of issuance.
ARTICLE VIII
CLOSING
Section 8.01 Time And Place. Subject to the provisions of Articles V, VI,
VII and IX, the closing of the Merger (the "Closing") shall take place at the
offices of Cahill Gordon & Reindel, as soon as practicable but in no event later
than 9:30 A.M., local time, on the first business day after the date on which
each of the conditions set forth in Articles V, VI and VII have been satisfied
or waived by the party or parties entitled to
A-16
<PAGE> 103
the benefit of such conditions; or at such other place, at such other time, or
on such other date as General Signal and Reliance may mutually agree. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date."
Section 8.02 Filings at the Closing. Subject to the provisions of
Articles V, VI, VII and IX hereof, Reliance and General Signal shall cause to be
executed and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the applicable
provisions of the DGCL and the NYBCL and shall take any and all other lawful
actions and do any and all other lawful things necessary to cause the Merger to
become effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Reliance or General Signal:
(a) by mutual consent of the Boards of Directors of General Signal and
Reliance;
(b) by either General Signal or Reliance if, without fault of such
terminating party, the Merger shall not have been consummated on or before March
31, 1995, which date may be extended by mutual written consent of the parties
hereto;
(c) by either General Signal or Reliance, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that the party seeking to
terminate this Agreement shall have used all commercially reasonable efforts to
remove or lift such order, decree or ruling; or
(d) by either General Signal or Reliance, if the requisite stockholder
approvals of the stockholders of either General Signal or Reliance are not
obtained at the meeting of stockholders duly called and held therefor.
Section 9.02 Termination by General Signal. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of General Signal, at any time prior to the Effective Time, before or after the
approval by the stockholders of General Signal or Reliance, if (a) Reliance
shall have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and IV of this Agreement to be complied
with or performed by Reliance at or prior to such date of termination, (b) there
exists a breach or breaches of any representation or warranty of Reliance
contained in this Agreement such that the closing condition set forth in Section
6.01 would not be satisfied; provided, however, that if such breach or breaches
are capable of being cured prior to the Effective Time, such breaches shall not
have been cured within 30 days of delivery to Reliance of written notice of such
breach or breaches, (c) the Board of Directors of Reliance shall withdraw,
modify or change its recommendation of this Agreement or the Merger in a manner
adverse to General Signal or shall have recommended any proposal in respect of
an Acquisition Transaction, or (d) the Board of Directors of Reliance shall
furnish or disclose non-public information or negotiate, explore or otherwise
communicate in any way with a third party with respect to any Acquisition
Transaction, or shall have resolved to do any of the foregoing and publicly
disclosed such resolution.
Section 9.03 Termination by Reliance. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the stockholders of General Signal or Reliance, by
action of the Board of the Directors of Reliance, if (a) General Signal shall
have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and IV of this Agreement to be complied
with or performed by General Signal at or prior to such date of termination, (b)
there exists a breach or breaches of any representation or warranty of General
Signal contained in this Agreement such that the closing condition set forth in
Section 7.01 would not be satisfied; provided, however,
A-17
<PAGE> 104
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not have been cured within 30 days of
delivery to General Signal of written notice of such breach or breaches, (c) the
Board of Directors of General Signal shall withdraw, modify or change its
recommendation of this Agreement or the Merger in a manner adverse to Reliance
or shall have recommended any proposal in respect of an Acquisition Transaction,
or (d) the Board of Directors of General Signal shall furnish or disclose non-
public information or negotiate, explore or otherwise communicate in any way
with a third party with respect to any Acquisition Transaction, or shall have
resolved to do any of the foregoing and publicly disclosed such resolution.
Section 9.04 Procedure for Termination. In the event of termination and
abandonment of the Merger by General Signal or Reliance pursuant to this Article
IX, written notice thereof shall forthwith be given to the other.
Section 9.05 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 9.05 and Section 4.04(b) hereof and except that nothing
herein shall relieve any party from liability for any breach of this Agreement.
(b) If this Agreement is terminated (i) pursuant to Section 9.01 (except
Section 9.01(a)) and prior to such termination any financially capable person
shall have made a bona fide proposal concerning an Acquisition Transaction to
Reliance or its stockholders by public announcement or written communication
that is or becomes subject to public disclosure (a "Reliance Bidder"), or (ii)
by General Signal pursuant to Section 9.02(c) or (d) then, in any such case
referred to in clause (i) or (ii) of this paragraph, Reliance shall within two
business days pay General Signal by wire transfer of immediately available funds
to an account specified by General Signal up to $2.5 million to reimburse
General Signal for its documented fees and expenses directly related to this
Agreement and the transactions contemplated hereby and if terminated by General
Signal pursuant to 9.02(c) or (d) an additional fee of $50 million, and if an
additional fee has not already become payable and within twelve months after the
date hereof Reliance or any of its subsidiaries enters into a definitive
agreement with either a Reliance Bidder or a third party to which Reliance has
provided non-public information or with which it has negotiated, explored or in
any way communicated after the date of this Agreement and prior to its
termination in accordance with its terms with respect to an Acquisition
Transaction, then Reliance, prior to entering into any such definitive
agreement, shall pay General Signal by wire transfer of immediately available
funds to an account specified by General Signal, an additional fee of $50
million.
(c) If this Agreement is terminated (i) pursuant to Section 9.01 (except
Section 9.01(a)) and prior to such termination any financially capable person
shall have made a bona fide proposal concerning an Acquisition Transaction to
General Signal or its stockholders by public announcement or written
communication that is or becomes subject to public disclosure (a "General Signal
Bidder"), or (ii) by Reliance pursuant to Section 9.03(c) or (d) then, in any
such case referred to in clause (i) or (ii) of this paragraph, General Signal
shall within two business days pay Reliance by wire transfer of immediately
available funds to an account specified by Reliance up to $2.5 million to
reimburse Reliance for its documented fees and expenses directly related to this
Agreement and the transactions contemplated hereby and if terminated by Reliance
pursuant to Section 9.03(c) or (d), an additional fee of $50 million, and if an
additional fee has not already become payable and within twelve months after the
date hereof General Signal or any of its subsidiaries enters into a definitive
agreement with either a General Signal Bidder or a third party to which General
Signal has provided non-public information or with which it has negotiated,
explored or in any way communicated after the date of this Agreement and prior
to its termination in accordance with its terms with respect to an Acquisition
Transaction, then General Signal, prior to entering into any such definitive
agreement, shall pay Reliance by wire transfer of immediately available funds to
an account specified by Reliance, an additional fee of $50 million.
(d) So long as General Signal is not in breach or default under any
covenant, condition, representation or warranty herein, in the event of a
termination of this Agreement by General Signal pursuant to Sec-
A-18
<PAGE> 105
tion 9.02(a) or (b), then Reliance shall promptly pay General Signal up to $2.5
million for all documented fees and expenses incurred by General Signal
(including the fees and expenses of counsel, accountants, consultants and
advisors) directly related to this Agreement and the transactions contemplated
hereby. So long as Reliance is not in breach or default under any covenant,
condition, representation or warranty herein, in the event of a termination of
this Agreement by Reliance pursuant to Section 9.03(a) or (b), then General
Signal shall promptly pay Reliance up to $2.5 million for all documented fees
and expenses incurred by Reliance (including the fees and expenses of counsel,
accountants, consultants and advisors) directly related to this Agreement and
the transactions contemplated hereby.
(e) No termination of this Agreement by one party shall affect the other
party's rights to benefits under Section 9.05(b) or (c), as the case may be, if
at the time of such termination a state of facts existed giving the other party
the right to terminate the Agreement and receive benefits under Section 9.05(b)
or (c) or to receive benefits upon the entry into of a definitive agreement as
set forth in Section 9.05(b) or (c), and such other party will be entitled to
receive the benefits to which it is entitled under Section 9.05(b) or (c) upon
notice to the terminating party delivered when such other party is entitled to
receive such benefits and in any event prior to the expiration of twelve months
after the date hereof.
ARTICLE X
DEFINITIONS
Section 10.01 Terms Defined in the Agreement. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
<TABLE>
<S> <C>
Acquisition Transaction 4.03
Affiliates 4.13
Balance Sheet 3.05
Certificate Of Merger 1.02
Certificates 2.03
Citicorp Recitals
Citicorp Agreement Recitals
Closing 8.01
Closing Date 8.01
Code Recitals
Confidentiality Agreement 4.04
Constituent Corporations Preamble
Conversion Ratio 2.01
Convertible Notes 3.02
CSCL Recitals
DGCL 1.01
Dissenting Shares 2.01
Effective Time 1.02
Environmental Laws 3.08
Exchange Act 3.04
General Signal Common Stock 3.02
General Signal Class B Common Stock 3.02
General Signal Plans 3.02
General Signal Preferred Stock 3.02
General Signal Rights Agreement 2.01
HSR Act 3.04
Interim Balance Sheet 3.05
Joint Proxy Statement/Prospectus 3.11
</TABLE>
A-19
<PAGE> 106
<TABLE>
<S> <C>
LTIP 3.02
Market Value 2.04
Material Adverse Effect 3.01
Merger 1.01
NYBCL 1.01
NYSE 2.04
person 11.10
PSE 3.04
Purchase Rights 3.02
Reliance Class A Common Stock 2.01
Reliance Class B Common Stock 2.01
Reliance Class C Common Stock 2.01
Reliance Plans 3.02
Reliance Preferred Stock 3.02
Reliance Rights Plan Recitals
Reliance Shares 2.01
Registration Statement 3.11
SEC 3.01
SEC Documents 3.05
Securities Act 3.04
Significant Subsidiary 3.01
subsidiary 11.10
Surviving Corporation 1.01
Survivor Class B Common Stock 2.01
Survivor Class B Right 2.01
Survivor Common Stock 2.01
Survivor Common Stock Right 2.01
Survivor Rights 2.01
Survivor Shares 2.01
</TABLE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
General Signal and Reliance at any time prior to the Effective Time with respect
to any of the terms contained herein; provided, however, that, after this
Agreement is adopted by the stockholders of either Reliance or General Signal,
no such amendment or modification shall change the amount or form of the
consideration to be delivered in respect of the Reliance Shares.
Section 11.02 Waiver of Compliance; Consents. Any failure of General
Signal or Reliance to comply with any obligation, covenant, agreement or
condition herein may be waived by Reliance or General Signal, respectively, only
by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 11.02.
Section 11.03 Survivability; Investigations. The respective
representations and warranties of General Signal and Reliance contained herein
or in any certificates or other documents delivered prior to or at the
A-20
<PAGE> 107
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto and shall not survive the Closing.
Section 11.04 Reasonable Efforts. Subject to the terms and conditions
herein provided, and applicable law, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
Section 11.05 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage prepaid, or telecopied with confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first class postage prepaid.
(a) if to Reliance, to
Reliance Electric Company
6065 Parkland Avenue
Cleveland, Ohio 44124
Telecopy: (216) 266-5852
Attention: Chairman
with a copy to
Calfee, Halter & Griswold
800 Superior Avenue
Suite 1800
Cleveland, Ohio 44114
Telecopy: (216) 241-0816
Attention: Michael L. Miller, Esq.
(b) if to General Signal, to
General Signal Corporation
One High Ridge Park
P. O. Box 10010
Stamford, CT 06904
Telecopy: (203) 329-4314
Attention: Chairman
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: W. Leslie Duffy, Esq.
Section 11.06 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties, nor
is this Agreement intended to confer any rights or remedies hereunder upon any
other person except the parties hereto and, with respect to Section 4.11, the
officers, directors and employees of Reliance.
A-21
<PAGE> 108
Section 11.07 Governing Law. Except as the laws of the State of Delaware
are by their terms applicable, this Agreement shall be governed by the laws of
the State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
Section 11.08 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.09 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 11.10 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; and (ii) the term "subsidiary" of any specified
corporation shall mean any corporation of which a majority of the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by such specified corporation or any
other person of which a majority of the equity interests therein are, directly
or indirectly, owned by such specified corporation.
Section 11.11 Entire Agreement. This Agreement, including the schedules
and exhibits hereto and the documents and instruments referred to herein and
therein, embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter, except for the Confidentiality Agreement, which shall remain in
full force and effect. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein and therein.
IN WITNESS WHEREOF, GENERAL SIGNAL and RELIANCE have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
GENERAL SIGNAL CORPORATION
By: /s/ EDMUND M. CARPENTER
------------------------------
Name: Edmund M. Carpenter
Title: Chairman and Chief
Executive Officer
RELIANCE ELECTRIC COMPANY
By: /s/ JOHN C. MORLEY
------------------------------
Name: John C. Morley
Title: President and Chief
Executive Officer
A-22
<PAGE> 109
ANNEX B
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
[ ]
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
------------------
WE, THE UNDERSIGNED, Edgar J. Smith, Jr. and Thomas A. Cunnane, being
respectively the Vice President and Assistant Secretary of [ ]
(the "Corporation") hereby certify:
1. The name of the Corporation is [ ], having been
changed from General Signal Corporation, such name having been changed from
General Railway Signal Company, the name under which the Corporation was
formed.
2. The Certificate of Incorporation was filed by the office of the
Department of State of the State of New York on the 13th day of June, 1904.
[recite history of restated certificates and amendments].
3. The text of the Certificate of Incorporation is amended heretofore
and is further amended in the manner specified below:
a. Article 1 is amended to change the name of the Corporation from
General Signal Corporation to [ ].
b. Article 3 is amended to increase the number of authorized shares
of capital stock of the Corporation from 160,000,000 to 286,500,000.
c. Article 3 is amended to change the number of authorized shares
of common stock, par value $1.00 per share, of the Corporation from
150,000,000 shares to 250,000,000 shares.
d. Article 3 is amended to authorize 26,500,000 shares of Class B
Common Stock, par value $1.00 per share, of the Corporation, which may
be converted into shares of common stock, par value $1.00 per share, of
the Corporation, at any time.
e. Article 3 is amended to set forth the rights, privileges and
voting powers or restrictions or qualifications of the shares of each
class of common stock. The former provisions of Article 3.B. have been
replaced.
4. The text of the Restated Certificate of Incorporation, as amended
heretofore, is hereby restated with such amendments or changes to read as
herein set forth in full:
<PAGE> 110
"RESTATED CERTIFICATE OF INCORPORATION
OF
[ ]
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
1. Name. The name of the Corporation shall be [ ].
2. Purposes.
A. To manufacture, process, construct, develop, assemble, and produce
in any way; to sell, lease, supply and distribute in any way; to purchase,
lease, mine, extract and acquire in any way; to own, operate, experiment
with, deal in, service, finance and use in any way equipment, apparatus,
appliances, devices, structures, materials, processes, information,
tangible and intangible property, services and systems of every kind,
nature and description:
(1) for any application or purpose, including but not limited to,
electrical and electronic, hydraulic and pneumatic devices and machinery
and controls, or in any way connected with or deriving from any such
application or purpose, and,
(2) for any other application or purpose, whatsoever, including but
not limited to industrial, utility, consumer, defense, governmental,
scientific, educational, cultural, financial, recreational,
agricultural, transportation, construction, mining, and communication
applications or purposes.
B. To acquire by purchase, subscription or other wise all or part of
any interest in the property, assets, business or good will of any
corporation, association, firm or individual, and to dispose of, or
otherwise deal with, such property, assets, business or good will.
C. To engage in any activity which may promote the interests of the
Corporation, or enhance the value of its property, to the fullest extent
permitted by law, and in furtherance of the foregoing purposes to exercise
all powers now or hereafter granted or permitted by law, including the
powers specified in the Business Corporation Law of New York.
3. Capital. The total number of shares that may be issued by the
Corporation is 286,500,000 of which 10,000,000 shares, par value of $1.00 per
share, shall be preferred ("Preferred Stock"), 250,000,000 shares, par value
$1.00 per share, shall be Common Stock ("Common Stock") and 26,500,000 shares,
par value $1.00 per share, shall be Class B Common Stock ("Class B Common
Stock") (the Common Stock and the Class B Common Stock shall be referred to
collectively as the "Stock").
The designations, preferences, privileges and voting powers or restrictions
or qualifications of the shares of each class shall be as follows:
A. Preferred Stock. The Preferred Stock may be issued from time to
time in one or more series, with such distinctive serial designations as
shall be stated and expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by the Board of
Directors, and in such resolution or resolutions providing for the initial
issue of the shares of each particular series, the Board of Directors is
expressly authorized to fix the annual rate or rates of dividends for the
particular series to determine whether or not said dividends shall be
cumulative, and if so, from what date; the dividend payment dates for the
particular series and the date, if any, from which dividends on all shares
of such series issued prior to the record date for the first dividend
payment date shall be cumulative; the redemption price or prices for the
particular series; the distributive amount or amounts per share on
liquidation for the particular series; the voting rights, if any; and the
right, if any, of holders of the stock of the particular series to convert
the same into stock of any other series or class of other securities of the
Corporation or of any other corporation, with any provisions for the
subsequent adjustment of such conversion rights. All shares of Preferred
Stock of any one series shall be identical with each other in all respects
except as to the dates, if any, from which dividends thereon shall be
cumulative.
B-2
<PAGE> 111
B. Common Stock and Class B Common Stock. Except as otherwise
provided herein, all shares of Stock will be identical and will entitle the
holders thereof to the same rights and privileges. Subject to any
limitations prescribed in accordance with Article 3.A. above, and not
otherwise, the holders of Stock will be entitled to:
(i) Dividends. Holders of Stock will be entitled to receive such
dividends as may be declared by the Board of Directors out of funds
legally available therefor; provided that if dividends are declared
which are payable in shares of Common Stock or Class B Common Stock,
dividends will be declared which are payable at the same rate on each
class of Stock and the dividends payable in shares of Common Stock will
be payable to holders of Common Stock and the dividends payable in
shares of Class B Common Stock will be payable to holders of Class B
Common Stock.
(ii) Conversion. Each record holder of Class B Common Stock will
be entitled to convert any or all of the shares of such holder's Class B
Common Stock into the same number of shares of Common Stock.
Each conversion of shares of Class B Common Stock into shares of
Common Stock will be effected by the surrender of the certificate or
certificates representing the shares of Class B Common Stock to be
converted at the principal office of the Corporation at any time during
normal business hours, together with a written notice by the holder of
such shares stating the number of shares that any such holder desires to
convert into Common Stock. Such conversion will be deemed to have been
effected as of the close of business on the date of which such
certificate or certificates have been surrendered and such notice has
been received by the Corporation, and at such time the rights of any
such holder with respect to the converted Class B Common Stock will
cease and the person or persons in whose name or names the certificate
or certificates for shares of the Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of
record of the shares of such Common Stock represented thereby.
Promptly after such surrender and the receipt by the Corporation of
the written notice from the holder hereinbefore referred to, the
Corporation will issue and deliver in accordance with the surrendering
holder's instructions the certificate or certificates for the Common
Stock issuable upon such conversion and a certificate representing any
shares of Class B Common Stock which were represented by the certificate
or certificates delivered to the Corporation in connection with such
conversion but which were not converted. The issuance of certificates
for the Common Stock upon conversion will be made without charge to the
holder or holders of such shares for any issuance tax (except stock
transfer taxes) in respect thereof or other cost incurred by the
Corporation in connection with such conversion.
(iii) Transfers. The Corporation will not close its books against
the transfer of any share of Stock, or of any share of Common Stock
issued or issuable upon conversion of shares of Class B Common Stock, in
any manner that would interfere with the timely conversion of such
shares of Class B Common Stock.
(iv) Subdivision and Combinations of Shares. If the Corporation
in any manner subdivides or combines the outstanding shares of any class
of Stock, the outstanding shares of the other classes of Stock will be
proportionately subdivided or combined.
(v) Reservation of Shares for Conversion. So long as any shares
of Class B Common Stock are outstanding, the Corporation will at all
times reserve and keep available out of its authorized but unissued
shares of Common Stock (or any shares of Common Stock which are held as
treasury shares), the number of shares sufficient for issuance upon
conversion of shares of Class B Common Stock.
(vi) Distribution of Assets. In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
holders of Stock will be entitled to receive all of the remaining assets
of the Corporation available for distribution to its stockholders after
all amounts to which the holders of Preferred Stock are entitled have
been paid or set aside in cash for payment.
B-3
<PAGE> 112
(vii) Voting Rights. The holders of Common Stock shall have the
general right to vote for all purposes, including the election of
directors, as provided by law. Each holder of Common Stock shall be
entitled to one vote for each share thereof held. Except as otherwise
required by law, the holders of Class B Common Stock shall have no
voting rights.
(viii) Merger, etc. In connection with any merger, consolidation,
or recapitalization in which holders of Common Stock generally receive,
or are given the opportunity to receive, consideration for their shares
(a) all holders of Class B Common Stock shall be given the opportunity
to receive the same form of consideration for their shares as is
received by holders of Common Stock and (b) holders of Class B Common
Stock shall be entitled to receive the same amount of consideration per
share as received by holders of Common Stock.
C. Preemptive Rights. No holder of shares of Preferred Stock or
Stock of the Corporation shall as such holder have any preemptive right to
purchase shares of any class of stock of the Corporation or shares or other
securities convertible into or exchangeable for or carrying rights or
options to purchase shares of any class of stock of the Corporation,
whether such class of stock, shares or other securities are now or
hereafter authorized, which at any time may be proposed to be issued by the
Corporation or subjected to rights or options to purchase granted by the
Corporation.
4. Office. The office of the Corporation in the State of New York is to
be located in the City of New York, County of New York, State of New York.
5. Designation of Secretary of State as Agent. The Secretary of State of
the State of New York is designated as the agent of the Corporation upon whom
process against it may be served, and the post office address to which the
Secretary of State shall mail a copy of any such process served upon him is: c/o
CT Corporation System, 1633 Broadway, New York, New York 10019.
6. Registered Agent. The Corporation designates CT Corporation System, a
foreign corporation authorized to do business in this State, having an office at
1633 Broadway, New York, New York 10019, its registered agent in this State upon
whom process against this Corporation may be served.
7. Director Liability. No person who is or was a director of the
Corporation shall have personal liability to the Corporation or its shareholders
for damages for any breach of duty in such capacity, provided that the foregoing
shall not eliminate or limit the liability of any director if a judgment or
other final adjudication adverse to him establishes that his acts or omissions
were in bad faith or involved intentional misconduct or a knowing violation of
law or that he personally gained in fact a financial profit or other advantage
to which he was not legally entitled or that his acts violated Section 719 of
the Business Corporation Law of New York. No amendment to or repeal of this
Article 7 shall apply to or have any effect on the liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. If the Business Corporation Law of
New York is amended hereafter to expand or limit the liability of a director,
then the liability of a director of the Corporation shall be expanded to the
extent required or limited to the extent permitted by the Business Corporation
Law of New York, as so amended.
8. Stockholder Vote Required. Any of the following actions may be taken
by the stockholders of the Corporation only by the affirmative vote of the
holders of two-thirds of all outstanding shares entitled to vote thereon: (a)
adoption, amendment or repeal of any By-Law, or any provision of this
Certificate of Incorporation, relating to (i) the number, classification and
terms of office of directors, (ii) the quorum of directors required for the
transaction of business, (iii) the filling of newly created directorships and
vacancies occurring in the Board of Directors, (iv) the removal of directors, or
(v) the power of the Board of Directors to adopt, amend or repeal By-Laws of the
Corporation or the vote of the Board of Directors required for any such
adoption, amendment or repeal; (b) the removal of directors; or (c) any
amendment or repeal of this Article 8. Nothing contained in this Article 8 shall
in any way limit the power of the Board of Directors to adopt, amend or repeal
By-Laws of the Corporation.
9. Duration. The Corporation's duration is to be perpetual."
B-4
<PAGE> 113
5. This restatement of the Restated Certificate of Incorporation was
authorized by the Board of Directors of the Corporation pursuant to Section
807(a) followed by the affirmative vote of the holders of a majority of all the
outstanding shares of the Corporation entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this certificate on the [ ] day of
[ ], 1994 and we affirm the statements contained herein as true under
penalties of perjury.
--------------------------------------
Edgar J. Smith, Jr.,
Vice President
--------------------------------------
Thomas A. Cunnane,
Assistant Secretary
B-5
<PAGE> 114
ANNEX C
GENERAL SIGNAL CORPORATION
------------
BY-LAWS
------------
AS AMENDED THROUGH [ ], 1994*
ARTICLE I
SHAREHOLDERS' MEETING
SECTION 1. Annual Meeting: The Annual Meeting of the shareholders of this
Corporation for the election of directors and the transaction of such other
business as may properly come before such meeting shall be held each year on
such date and at such time and place, whether within or without the State of New
York, as shall be determined by the Board of Directors.
SECTION 2. Special Meeting: A Special Meeting of the shareholders may be
held at any time upon the call of the Board of Directors or the Chairman of the
Board and shall be called by the Secretary at the written request of
shareholders owning at least two-thirds of the outstanding shares of stock
entitled to vote, which request shall specify the matters to be presented to
such meeting.
SECTION 3. Notice of Annual or Special Meeting: Written notice of the
holding of each Annual or Special Meeting of the shareholders shall be given by
the Secretary. Such notice shall state the place, date and hour of the meeting,
and the purpose or purposes for which the meeting is called, and shall be signed
by the Secretary, and shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting. A copy of such notice
shall be mailed, postage prepaid, not less than ten nor more than fifty days
before the date of the meeting, to each shareholder of record as of such record
date, not less than ten nor more than fifty days before the date of the meeting,
as may be fixed by the Board of Directors for determining the shareholders
entitled to notice of, or to vote at, the meeting. Such notice shall be directed
to the shareholder at his address as it appears on the record of shareholders,
or, if he shall have filed with the Secretary a written request that notices to
him be mailed to some other address, then directed to him at such other address.
If, at any meeting, action is proposed to be taken which would, if taken,
entitle certain shareholders to receive payment for their shares, the notice of
such meeting shall include a statement of that purpose and to that effect.
At any meeting of shareholders or any such adjourned meeting, only such
business shall be conducted as shall have been properly brought before such
meeting or any such adjourned meeting. To be properly brought before any meeting
of shareholders or any such adjourned meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before such meeting or
any such adjourned meeting by or at the direction of the Board of Directors, or
(c) otherwise properly brought before such meeting or any such adjourned meeting
by a shareholder. For business to be properly brought before any meeting of
shareholders or any such adjourned meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary. To be timely,
a shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than forty-five days nor
more than sixty days prior to such meeting; provided, however, that in the event
less than fifty-five days' prior public disclosure of the date of such meeting
is made to the shareholders or in the event the only public disclosure of the
date of the meeting is written notice in accordance with this Article I, Section
3, notice by such shareholder to be timely must be so received not later than
the close of business on the tenth day following the day on which such notice of
the date of such meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary
- ---------------
* Revisions to April 21, 1994 By-laws are underlined.
<PAGE> 115
shall set forth as to each matter the shareholder proposes to bring before such
meeting (a) a brief description of the business desired to be brought before
such meeting and the reasons for conducting such business at such meeting, (b)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business, (c) the class and number of shares of the
securities of the Corporation which are beneficially owned by such shareholder,
and (d) any material interest of such shareholder in such business.
No business shall be conducted at any meeting of shareholders or any such
adjourned meeting except in accordance with the procedures set forth in this
Article I, Section 3. In the event that a shareholder seeks to bring one or more
matters before a meeting of shareholders or any such adjourned meeting, the
Board of Directors shall establish a committee consisting of non-management
directors for the purpose of reviewing compliance with this Article I, Section
3; provided, however, that if the business to be brought before such meeting or
any such adjourned meeting by a shareholder relates to the removal, replacement
or election of one or more directors, the Secretary shall appoint two or more
inspectors, neither or whom shall be an affiliate of the Corporation, to act in
lieu of such committee to review compliance with this Article I, Section 3. If
the committee or the inspectors (as the case may be) shall determine that a
shareholder has not complied with this Article I, Section 3, the committee or
the inspectors (as the case may be) shall direct the chairman of such meeting to
declare to such meeting or any such adjourned meeting that such business was not
properly brought before such meeting or any such adjourned meeting in accordance
with the provisions of this Article I, Section 3; and the chairman shall so
declare to such meeting or any such adjourned meeting and any such business not
properly brought before such meeting or any such adjourned meeting shall not be
transacted.
Only individuals who are nominated in accordance with the procedures set
forth in this Article I, Section 3, shall be eligible for election as directors.
Nominations of individuals for election to the Board of Directors may be made at
a meeting of shareholders or any such adjourned meeting by or at the direction
of the Board of Directors or by any shareholder of the Corporation entitled to
vote for the election of directors at such meeting or any such adjourned meeting
who complies with the notice procedures set forth in this Article I, Section 3.
Such nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a shareholder's notice shall be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
forth-five days nor more than sixty days prior to such meeting; provided,
however, that in the event less than fifty-five days prior public disclosure of
the date of such meeting is made to the shareholders or in the event the only
public disclosure of the date of the meeting is written notice in accordance
with this Article I, Section 3, notice by such shareholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of such meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth (a) as to each
individual whom such shareholder proposes to nominate for election or
re-election as director, (i) the name, age, business address and residence
address of such individual, (ii) the principal occupation or employment of such
individual, (iii) the class and number of shares, or the amount of any
securities of the Corporation which are beneficially owned by such individual
and (iv) any other information relating to such individual that is required to
be disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
individual's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (b) as to the shareholder giving
the notice, (i) the name and address, as they appear on the Corporation's books,
of such shareholder and (ii) the class and number of shares of the securities of
the Corporation which are beneficially owned by such shareholder. At the request
of the Board of Directors, any individual nominated by the Board of Directors
for election as a director shall furnish to the Secretary that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee. No individual shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
this Article I, Section 3. In the event that a shareholder seeks to nominate one
or more directors, the Secretary shall appoint two inspectors, neither of whom
shall be an affiliate of the Corporation, to determine whether such shareholder
has complied with this Article I, Section 3. If the inspectors shall determine
that such shareholder has not complied with this Article I, Section 3, the
inspector shall direct the chairman of such meeting or any such
C-2
<PAGE> 116
adjourned meeting to declare to such meeting or any such adjourned meeting that
a nomination was not made in accordance with the prescribed procedures, and the
chairman shall so declare to such meeting or any such adjourned meeting and the
defective nomination shall be disregarded.
SECTION 4. Presiding Officer: At all meetings of shareholders the
Chairman of the Board shall preside, or in his absence, any Vice Chairman of the
Board, the Chairman of the Executive Committee, the President or any Vice
President may preside.
SECTION 5. Inspectors: Prior to each meeting of the shareholders, the
Board of Directors may appoint two Inspectors of Election and two or more
Alternate Inspectors, to serve at such meeting and any adjournment thereof. If
any Inspector refuses to serve, or shall not be present at the meeting of the
shareholders, the Alternate Inspectors shall act in the order of their
appointment.
SECTION 6. Voting and Method of: Except as other wise provided in the
Certificate of Incorporation, at all meetings of the shareholders, each
shareholder entitled to vote shall be entitled to one vote for every share
standing in his name on the record of shareholders, and all questions to be
decided by the shareholders, except the question of election of directors and
such other questions the manner of deciding which is specifically regulated by
statute, shall be decided by a majority of the votes cast at the meeting in
person or by proxy by the holders of shares entitled to vote thereon. All voting
shall be viva voce, except that any qualified voter may require a vote by ballot
on any question to be decided. In case of a vote by ballot, each ballot shall
state the name of the share holder voting and the number, class and series (if
any) of shares owned by him, and in addition, if such ballot be cast by a proxy,
the name of the proxy shall be stated.
SECTION 7. Quorum: Except as may be otherwise provided by law or by the
Certificate of Incorporation, at all meetings of the shareholders, the holders
of a majority of the shares entitled to vote thereat shall constitute a quorum
for the transaction of any business.
SECTION 8. Fiscal Year: The fiscal year of the Corporation shall close on
the 31st day of December in each year. The officers of the Corporation shall
prepare and cause to be submitted to the shareholders at the Annual Meeting a
detailed statement showing the financial condition of the Corporation.
ARTICLE II
DIRECTORS
SECTION 1. Directors, Election of:. The directors shall be classified
with respect to their terms of office by dividing them into three classes. All
classes shall be as nearly equal in number as possible, and no class shall
include less than three directors. Subject to such limitations, the size of each
class may be fixed by action of the shareholders or of the Board of Directors.
At each Annual Meeting of Shareholders, directors to replace those whose
terms expire at such Annual Meeting shall be elected to hold office until the
expiration of the term of whatever class they are assigned to, provided that no
director may be assigned to a class the term of which will expire later than the
Annual Meeting next succeeding the director's attaining age 72. NOTWITHSTANDING
THE FOREGOING, H. VIRGIL SHERRILL AND E. MANDELL DE WINDT SHALL BE PERMITTED TO
BE NOMINATED AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
[ ] FOR A TERM TO EXPIRE NO LATER THAN THE ANNUAL MEETING TO BE
HELD IN [1997 AND 1996, RESPECTIVELY].
Each director shall hold office until the expiration of the term for which
he is elected, and until his successor has been elected and qualified, provided,
however, that a director may be removed from office as a director, but only for
cause, by action of the shareholders or of the Board of Directors.
SECTION 2. Number of Directors: The number of the directors of the
Corporation shall be not less than 9 nor more than 18 as shall be determined
from time to time by the Board of Directors.
SECTION 3. Newly Created Directorships And Vacancies: Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board for any reason may be filled by the vote of a
majority of the directors then in office, although less than a quorum may exist.
A director elected to fill a newly created directorship or a vacancy shall be
elected to hold office until the next Annual
C-3
<PAGE> 117
Meeting of the shareholders, and (if he is to have a successor) until his
successor has been elected and qualified.
SECTION 4. Regular Meetings: Regular Meetings of the Board of Directors
shall be held at such times and places as may be fixed by the Board of Directors
provided that the Organization Meeting of the newly elected Board of Directors
shall be held on the same day as the Annual Meeting of the shareholders, at
which time the Executive Committee and other Committees of the Board and
Officers shall be elected or appointed. Unless otherwise required by appropriate
resolution of the Board of Directors, or by law, notice of any such meetings
need not be given.
SECTION 5. Special Meetings: Special Meetings of the Board of Directors
shall be called by the Secretary upon the order of the Chairman of the Board,
THE VICE CHAIRMAN OF THE BOARD, the President, or the Chairman of the Executive
Committee, or upon the written request of five (5) directors.
SECTION 6. Presiding Officer: At all meetings of the Board of Directors,
the Chairman of the Board of Directors shall preside, or in his absence, the
Chairman of the Executive Committee, the President or any Vice President who is
a member thereof may preside.
SECTION 7. Quorum: A majority of the directors then in office or half of
such number when the number of directors then in office is even, but not less
than one-third of the entire Board, shall constitute a quorum for the
transaction of business at all meetings of the Board.
SECTION 8. Notice: The Secretary shall mail to each director notice of
any Special Meeting, or of any Regular Meeting, if required, at least two days
before the meeting, or shall telegraph or telephone such notice not later than
the day before such meeting. Each director shall file with the Secretary a
designation of the address to which such notice to him shall be sent, and any
such notice to him thereafter shall be addressed in accordance with his latest
designation.
SECTION 9. Designation of Executive and Other Committees: The Board of
Directors shall by resolution adopted by a majority of the entire Board,
designate an Executive Committee of not less than three of its members of whom
the Chairman of the Board, the Chairman of the Executive Committee, WHO SHALL BE
THE VICE CHAIRMAN OF THE BOARD, and the President shall be ex officio members,
and said Executive Committee shall have authority to exercise and shall exercise
in the interim between the Regular and Special meetings of the Board of
Directors all of the rights, powers and duties of the Board of Directors, except
such as cannot be lawfully delegated.
The Board of Directors may, by resolution adopted by a majority of the
entire Board, designate one or more directors as alternate members of the
Executive Committee, who may replace any absent member or members of the
Executive Committee, at any meeting thereof, when required to constitute a
quorum.
Meetings of the Executive Committee may be called by the Secretary upon
order by the Chairman of the Executive Committee or in his absence by the
Chairman of the Board, the President, or upon written request of two (2) members
of the Executive Committee.
At all meetings of the Executive Committee, the Chairman of the Executive
Committee shall preside, or in his absence the Chairman of the Board, or the
President may preside.
At all meetings of the Executive Committee, a majority of the full
membership of the Executive Committee, including vacancies not filled or
eliminated, shall constitute a quorum for the transaction of business.
The Board of Directors may by resolution adopted by a majority of the
entire Board, designate other Committees, each consisting of three or more
directors, and delegate to them such powers and duties of the Board as may be
lawfully delegated and determined to be appropriate by the Board.
The Executive Committee and each other Committee designated pursuant to
this Section and each member or alternate member thereof, shall serve until the
next Annual Meeting of the shareholders and at the pleasure of the Board of
Directors. Vacancies in the Executive Committee or any other Committee,
occurring for any reason, may by resolution adopted by a majority of the entire
Board at any meeting of the Board of
C-4
<PAGE> 118
Directors, be filled or may be eliminated by reducing the number constituting
the membership of such Committee provided, however, that the membership of any
Committee shall not be reduced to less than three.
Notice of the time and place of any meeting of the Executive Committee
shall be given in the manner provided in Section 8 of this Article for the
giving of notice of meetings of the Board of Directors. Meetings of any other
Committee designated pursuant to this Section 9 shall be held in such manner,
and at such times and places, and upon such notice, if any, as shall be provided
in the resolution of the Board creating such Committee.
SECTION 10. Compensation: Each director who is not a full-time employee
of the Corporation or of any consolidated subsidiary shall be paid such
compensation for serving as a director as the Board of Directors may, from time
to time, determine.
SECTION 11. Action by Unanimous Written Consent: Any action required to
be or permitted to be taken by the Board of Directors or any Committee thereof
may be taken without a meeting if all members of the Board of Directors or the
Committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and written consents thereto by the members of the Board
of Directors or Committee shall be filed with the minutes of the proceedings of
the Board of Directors or Committee.
SECTION 12. Participation In Meetings By Means Of Conference
Telephone: Any one or more members of the Board of Directors or any Committee
thereof may participate in a meeting of the Board of Directors or Committee by
means of a conference telephone or similar communication equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. Executive Officers: The Officers of the Corporation shall
consist of a Chairman of the Board of Directors, a Vice-Chairman of the Board, a
President, a Vice President-Finance, one or more other Vice Presidents, one or
more of whom may also be designated Executive Vice President or Senior Vice
President, a Secretary, a Treasurer and a Controller, all of whom shall be
elected annually by the Board at a meeting following the Annual Meeting of the
shareholders. The Board may also elect one or more Assistant Treasurers and one
or more Assistant Secretaries and such subordinate officers and agents of the
Corporation as it may from time to time determine. The same person may hold two
or more offices, except that the Chairman of the Board and President shall not
hold the office of Secretary.
SECTION 2. Chairman Of The Board, Duties Of: The Chairman of the Board
shall be a director and shall be chief executive officer of the Corporation and,
subject to the direction of the Board, shall exercise general supervision over
the business and affairs of the Corporation and shall perform such other duties
as may be assigned to him from time to time by the Board. If the office of the
President is not independently established, he shall perform all duties of that
office. He shall preside at all meetings of the Board of Directors and shall
also preside at all meetings of the shareholders of the Corporation.
SECTION 3. DUTIES OF VICE CHAIRMAN OF THE BOARD: THE VICE CHAIRMAN SHALL
BE A DIRECTOR AND AN EXECUTIVE OFFICER OF THE CORPORATION AND SHALL SERVE AS
CHAIRMAN OF THE EXECUTIVE COMMITTEE. FOR A PERIOD OF TWELVE (12) MONTHS
FOLLOWING THE EFFECTIVE DATE OF THE AGREEMENT AND PLAN OF MERGER BETWEEN
RELIANCE ELECTRIC COMPANY AND THE CORPORATION DATED AS OF AUGUST 30, 1994, THE
VICE CHAIRMAN OF THE BOARD'S DUTIES SHALL BE FOCUSED PRIMARILY ON THE
DEVELOPMENT OF THE STRATEGY FOR AND IMPLEMENTATION OF THE TRANSITION OF THE
RELIANCE ELECTRIC COMPANY BUSINESS INTO THE BUSINESS OF THE CORPORATION UPON
CONSULTATION WITH AND UNDER THE DIRECTION OF THE CHAIRMAN OF THE BOARD.
NOTWITHSTANDING ARTICLE IV, SECTION 2, DURING THE ABOVE PERIOD, THE CHAIRMAN OF
THE BOARD, WITH THE ADVICE OF THE VICE CHAIRMAN OF THE BOARD, SHALL SELECT THE
PRESIDENT OF ANY SEGMENT OF THE CORPORATION'S BUSINESS OPERATED AS A DIVISION.
IN ADDITION, THE VICE CHAIRMAN OF THE BOARD SHALL HAVE SUCH OTHER DUTIES AS THE
CHAIRMAN OF THE BOARD AND THE VICE CHAIRMAN OF THE BOARD SHALL AGREE.
C-5
<PAGE> 119
SECTION 4. President, Duties of: The President shall be a director and
shall be the chief operating officer of the Corporation and, subject to the
direction of the Board of Directors and the Chairman of the Board, shall direct
and supervise the business operations of the Corporation and shall perform such
other duties as from time to time the Board of Directors may prescribe or the
Chairman of the Board may assign to him. The office of the President will
normally be vested in the Chairman of the Board, provided, however, that in the
discretion of the Board of Directors, the position of President may be
established independent of, but reporting to, the Chairman of the Board.
SECTION 5. Vice President-Finance, And Other Vice Presidents, Duties
Of: The Vice President-Finance shall serve as principal financial officer of
the Corporation and shall perform such other duties as shall from time to time
be prescribed by the Board of Directors or assigned to him by the Chairman of
the Board or by the President. Each other Vice President shall perform such
duties as from time to time may be prescribed by the Board of Directors or
assigned to him by the Chairman of the Board or the Officer to whom he reports.
SECTION 6. Treasurer and Controller, Duties Of: The Treasurer shall have
the care and custody of all the funds and securities of the Corporation and, in
general, shall perform all the duties incident to the office of Treasurer
including the appointment of depository and disbursement banks. The Controller
shall have charge of the books of account of the Corporation and, in general,
shall perform all the duties incident to the office of the Controller. The
Treasurer and the Controller shall also discharge such other duties as from time
to time the Board of Directors may prescribe or the Chairman of the Board, the
President, or the Vice President-Finance may assign.
SECTION 7. Secretary, Duties Of: The Secretary shall keep the minutes of
the meetings of the Board of Directors, of the Executive Committee and other
Committees of the Board and of the shareholders, and shall attend to the giving
and service of all notices for meetings of the Board of Directors, of the
Executive Committee and other Committees of the Board and of the shareholders
and otherwise whenever required, except to the extent, that such duties shall
have been specifically delegated to another officer by the Board of Directors or
by the Chairman of the Board. He shall have the custody of such books and papers
as the Board of Directors, the Chairman of the Board, or the President may
provide. He shall also discharge such other duties as from time to time the
Board of Directors may prescribe or the Chairman of the Board, or the President
may assign to him.
SECTION 8. Assistant Officers: The Board of Directors may elect one or
more Assistant Secretaries or one or more Assistant Treasurers. Each Assistant
Secretary, if any, and each Assistant Treasurer, if any, shall have such
authority and perform such duties as from time to time the Board of Directors
may prescribe or the Chairman of the Board or the President may assign.
SECTION 9. Subordinate Officers: The Board of Directors may elect such
subordinate officers as it may deem desirable. Each such officer shall have such
authority and perform such duties as the Board of Directors may prescribe. The
Board of Directors may, from time to time, authorize any officer to appoint and
remove subordinate officers and prescribe the powers and duties thereof.
SECTION 10. Surety Bonds of Officers: The Board of Directors may require
from any officer of the Corporation a bond in such amount as it may determine
for the faithful discharge of the duties of any such officer; such bond to be
approved by the Board and to be obtained at the expense of the Corporation.
SECTION 11. Compensation of Officers: The Chairman of the Board, with the
advice of the President of the Corporation, shall have power to fix the
compensation of all officers of the Corporation, except the Chairman of the
Board and the officers reporting directly to him. The Board of Directors shall
have power to fix the compensation of the Chairman of the Board and of the
officers reporting directly to him. The Board of Directors may authorize any
officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers.
SECTION 12. Vacancy: Any vacancy of an office occurring may be filled at
any Regular or Special Meeting of the Board of Directors.
C-6
<PAGE> 120
SECTION 13. Removal of Officers: Any officer of the Corporation may be
removed, with or without cause, by the vote of the Board of Directors at any
meeting thereof.
SECTION 14. Checks and Obligations: All notes and all checks, drafts, or
other orders for the payment of money, and all endorsements thereof, executed on
behalf of the Corporation shall be signed by any person or persons designated
for the purpose either by the Board or by an officer or officers of the
Corporation pursuant to authority delegated by the Board of Directors.
SECTION 15. Execution Of Contracts, Assignments, Deeds And Other
Documents: All contracts, agreements, assignments, transfers, guaranties,
deeds, stock powers or other instruments of the Corporation may be executed and
delivered by the Chairman of the Board, the President, or any Vice President or
by such other officer or officers, or agent or agents, of the Corporation as
shall be thereunto authorized from time to time either by the Board or by power
of attorney executed by the Chairman of the Board, the President, any Senior
Vice President, or by any person pursuant to authority granted by the Board; and
the Secretary or any Assistant Secretary, the Treasurer or any Assistant
Treasurer may affix the seal of the Corporation thereto and attest same.
SECTION 16. Execution of Proxies: The Chairman of the Board, the
President, or any Vice President or any other person designated by the Board of
Directors, may authorize from time to time the execution and issuance of proxies
to vote upon shares of stock of other corporations owned by the Corporation, or
authorize the execution of a consent to action taken or to be taken by such
other corporation. All such proxies or consents may be signed in the name of the
Corporation by any of the persons above-mentioned in this Section 16 or by any
other person or persons designated for the purpose either by the Board of
Directors or by power of attorney executed by any person pursuant to authority
granted by the Board.
SECTION 17. Facsimile Signatures: Any signature which is authorized by
Section 14, 15 or 16 of this Article may be facsimile, if so determined by the
Board of Directors, or by an officer or officers of the Corporation pursuant to
authority delegated by the Board of Directors.
ARTICLE IV
CREATION OF DIVISIONS
SECTION 1. Creation of Divisions: The Board of Directors may from time to
time create divisions and may set apart to such divisions such aspects or
portions of the business, affairs and properties of the Corporation as the Board
may from time to time determine. Each division of the Corporation shall be
organized and regulated as hereinafter provided in this Article IV. As used in
the succeeding Sections of this Article, the term "Company" shall refer to any
division of the Corporation.
SECTION 2. Executive Officers of Company: The Chairman of the Board of
the Corporation may appoint, with the advice of the President of the
Corporation, as Executive Officers of the Company, a President, one or more Vice
Presidents, appropriate Financial Officers and a Secretary and in his
discretion, one or more Assistant Secretaries and Assistant Financial Officers
and such subordinate officers as may from time to time be deemed desirable. Such
officers shall be appointed as soon as practicable following the creation of the
Company and thereafter shall hold office at the discretion of the Chairman of
the Board of the Corporation. The same person may hold two or more offices of
the Company, except the offices of President and Secretary of the Company, and
any person holding an office of the Company may also be elected by the Board as
an officer of the Corporation. Vacancies occurring in any office may be filled
at any time by the Chairman of the Board of the Corporation, with the advice of
the President of the Corporation. The Executive Officers and all other persons
who shall serve the Company in the capacities set forth in this Article are
hereby appointed agents of the Corporation with the powers and duties herein set
forth. However, the authority of said agents shall be limited to matters related
to the properties, business and affairs of the Company, and shall not extend to
any other portion of the properties, business and affairs of the Corporation nor
are such Executive Officers or other persons to be considered officers of the
Corporation.
C-7
<PAGE> 121
SECTION 3. Authority of the Executive Officers of Company: The President
of the Company shall be the Chief Executive Officer of the Company. He shall
exercise general supervision over the business, affairs and properties of the
Company and shall be directly responsible to, and shall perform such other
duties as may be assigned to him from time to time by, the Chairman of the Board
or the assigned Officer or other employee of the Corporation to whom the
President of the Company reports. All Executive Officers other than the
President of the Company, and any subordinate officers, shall be directly
responsible to the President of the Company and any Officer or other employee of
the Corporation as the Chairman of the Board or the assigned Officer of other
employee of the Corporation to whom the President of the Company reports shall
direct.
SECTION 4. Use of Divisional Names: In executing any document on behalf
of any division of the Corporation, the name of such division shall be followed
by the words "a division of General Signal Corporation." In any instance in
which a division of the Corporation shall use the name of the division followed
by the words, "a unit of General Signal," such words shall have the same meaning
as "a division of General Signal Corporation."
ARTICLE V
INDEMNIFICATION
SECTION 1. Indemnification: Except to the extent expressly prohibited by
the New York Business Corporation Law, the Corporation shall indemnify each
person made or threatened to be made a party to any action or proceeding,
whether civil or criminal, and whether by or in the right of the Corporation or
otherwise, by reason of the fact that such person or such person's testator or
intestate is or was a director or officer of the Corporation, or serves or
served at the request of the Corporation any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity
while he or she was such a director or officer (hereinafter referred to as
"Indemnified Person"), against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses, including attorneys' fees, incurred in
connection with such action or proceeding, or any appeal therein, provided that
no such indemnification shall be made if a judgment or other final adjudication
adverse to such Indemnified Person establishes that either (a) his or her acts
were committed in bad faith, or were the result of active and deliberate
dishonesty, and were material to the cause of action so adjudicated, or (b) that
he or she personally gained in fact a financial profit or other advantage to
which he or she was not legally entitled.
The Corporation shall advance or promptly reimburse upon request any
Indemnified Person for all expenses, including attorneys' fees, reasonably
incurred in defending any action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
Indemnified Person to repay such amount if such Indemnified Person is ultimately
found not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced or reimbursed exceed the amount
to which such Indemnified Person is entitled.
Nothing herein shall limit or affect any right of any Indemnified Person
otherwise than hereunder to indemnification or expenses, including attorneys'
fees, under any statute, rule, regulation, certificate of incorporation, by-law,
insurance policy, contract or otherwise.
Anything in these by-laws to the contrary notwithstanding, no elimination
of this by-law, and no amendment of this by-law adversely affecting the right of
any Indemnified Person to indemnification or advancement of expenses hereunder
shall be effective until the 60th day following notice to such Indemnified
Person of such action, and no elimination of or amendment to this by-law shall
thereafter deprive any Indemnified Person of his or her rights hereunder arising
out of alleged or actual occurrences, acts or failures to act prior to such 60th
day.
The Corporation shall not, except by elimination or amendment of this
by-law in a manner consistent with the preceding paragraph, take any corporate
action or enter into any agreement which prohibits, or otherwise limits the
right of any Indemnified Person to, indemnification in accordance with the
provisions of this by-law. The indemnification of any Indemnified Person
provided by this by-law shall be deemed to be a contract between the Corporation
and each Indemnified Person and shall continue after such Indemnified
C-8
<PAGE> 122
Person has ceased to be a director or officer of the Corporation and shall inure
to the benefit of such Indemnified Person's heirs, executors, administrators and
legal representatives. If the Corporation fails timely to make any payment
pursuant to the indemnification and advancement or reimbursement of expenses
provisions of this Article V and an Indemnified Person commences an action or
proceeding to recover such payment, the Corporation in addition shall advance or
reimburse such Indemnified Person for the legal fees and other expenses of such
action or proceeding.
The Corporation is authorized to enter into agreements with any of its
directors or officers extending rights to indemnification and advancement of
expenses to such Indemnified Person to the fullest extent permitted by
applicable law, but the failure to enter into any such agreement shall not
affect or limit the rights of such Indemnified Person pursuant to this by-law,
it being expressly recognized hereby that all directors or officers of the
Corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and that the Corporation is estopped to contend otherwise.
Persons who are not directors or officers of the Corporation shall be similarly
indemnified and entitled to advancement or reimbursement of expenses to the
extent authorized at any time by the Board of Directors.
In case any provision in this by-law shall be determined at any time to be
unenforceable in any respect, the other provisions shall not in any way be
affected or impaired thereby, and the affected provision shall be given the
fullest possible enforcement in the circumstances, it being the intention of the
Corporation to afford indemnification and advancement of expenses to its
directors or officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law whether arising from
alleged or actual occurrences, acts or failures to act occurring before or after
the adoption of this Article V.
For purposes of this by-law, the Corporation shall be deemed to have
requested an Indemnified Person to serve an employee benefit plan where the
performance by such Indemnified Person of his or her duties to the Corporation
also imposes duties on, or otherwise involves services by, such Indemnified
Person to the plan or participants or beneficiaries of the plan, and excise
taxes assessed on an Indemnified Person with respect to an employee benefit plan
pursuant to applicable law shall be considered indemnifiable fines. For purposes
of this by-law, the term "Corporation" shall include any legal successor to the
Corporation, including any corporation which acquires all or substantially all
of the assets of the Corporation in one or more transactions.
C-9
<PAGE> 123
ARTICLE VI
CAPITAL STOCK
SECTION 1. Certificates of Capital Stock: All certificates of stock of
the Corporation, both preferred and common, shall be separately numbered and the
facsimile signature of the Chairman of the Board or the President, or any Vice
Chairman of the Board, or a Vice President and the facsimile counter-signature
of the Treasurer, or an Assistant Treasurer, or the Secretary or an Assistant
Secretary and the facsimile seal of the Corporation shall appear thereon, all in
manner as authorized under the laws of the State of New York and approved by the
New York Stock Exchange.
SECTION 2. Transfer Agent and Registrar: All certificates of stock of the
Corporation shall be issued only through a Transfer Agent of the Corporation's
stock, consisting of a Bank or Trust Company, duly appointed by the Board of
Directors to act as Transfer Agent and bear the counter-signature of the
Registrar of the Corporation's stock duly appointed by the Board of Directors to
act as Registrar. Endorsement to the foregoing effect shall be made upon all
certificates issued.
SECTION 3. Transfer of Shares: Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or pursuant to a
power of attorney duly executed and filed with the Transfer Agent, upon the
surrender of the certificate representing the shares to be transferred, properly
endorsed. All certificates surrendered for transfer shall be cancelled by the
Transfer Agent.
SECTION 4. Lost, Destroyed or Stolen Certificates: No certificate for
shares of stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen, except on production of such
evidence of such loss, destruction or theft and on delivery to the Corporation,
if the Board of Directors shall so require, of a bond of indemnity upon such
terms and secured by such surety as the Board of Directors may in its discretion
determine to be satisfactory.
SECTION 5. Seal of Corporation: The seal of the Corporation shall be
circular in form and bear the words "GENERAL SIGNAL CORPORATION" next inside the
line of its circumference and the words "Incorporated June 13th, 1904" in the
center within the line of an inner circle.
ARTICLE VII
AMENDMENTS
SECTION 1. Amendments: Except as otherwise provided by the Certificate of
Incorporation, any provision or provisions of these By-Laws, including any
amendment thereof, regardless of the manner in which any such provision or
amendment may have been adopted, may be deleted or amended in any respect at any
Annual Meeting of the shareholders, or at any Special Meeting called for that
purpose, by a majority of the votes cast at such meeting in person or by proxy
by the holders of shares entitled to vote thereon, or with the exception of this
Section 1 of Article VII, by a majority of the Board of Directors then in office
at any meeting thereof.
ARTICLE VIII
WAIVER OF NOTICE
SECTION 1. Waiver of Notice: Any notice required by these By-Laws may be
waived in writing, either before or after the action requiring such notice is
taken.
C-10
<PAGE> 124
ANNEX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock which, at
the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on an national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 stockholders; and
further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of sec.251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation;
b. Shares of stock of any other corporation which at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000
stockholders;
c. Cash in lieu of fractional shares of the corporations described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
D-1
<PAGE> 125
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
D-2
<PAGE> 126
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
61,L. '93, eff. 7-1-93.)
D-3
<PAGE> 127
ANNEX E
A R T
August 29, 1994
The Board of Directors
General Signal Corporation
One High Ridge Park
Stamford, CT 06904
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of General Signal Corporation, a New York corporation
("General Signal" or the "Company"), of the consideration to be paid to the
shareholders of Reliance Electric Company, a Delaware corporation ("Reliance"),
pursuant to the terms of the Agreement and Plan of Merger, dated as of August
29, 1994 (the "Agreement"), by and between the Company and Reliance.
Pursuant to the terms and subject to the conditions of the Agreement,
Reliance will be merged with and into the Company (the "Merger") and each of the
outstanding shares of common stock of Reliance will be converted into shares of
common stock of General Signal as provided in the Agreement. Consummation of the
Merger is subject to the terms and conditions set forth in the Agreement. We
further understand that the Merger is intended to qualify as a non-taxable
transaction under Section 368 of the Internal Revenue Code of 1986, as amended,
and that, for accounting purposes, the Merger is intended to be treated as a
pooling of interests.
In arriving at our opinion, we have reviewed the Agreement. We have also
reviewed financial and other information that was publicly available or
furnished to us by the Company and reliance including information provided
during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of each of the Company and reliance for the 1994
and 1995 fiscal years prepared by the management of the Company and Reliance,
respectively. In addition, we have (i) examined the impact of the Merger on
earnings attributable to the Company's common stock given a range of possible
operating synergies resulting from the Merger; (ii) compared the relative
contribution of the Company's revenues, operating income, net income and other
measures to the merged entity with the Company's post-Merger pro forma ownership
of the merged entity; (iii) compared certain financial, security and other data
of Reliance with various other electrical equipment companies which we deemed to
be comparable to Reliance; (iv) reviewed the historical stock prices and trading
volumes of the common stock of the Company and Reliance as well as the relative
trading levels of those companies' common stocks; (v) reviewed prices and
premiums paid in certain other business combinations and compared those to the
premium proposed to be paid in the Merger; and (vi) conducted such other
financial studies, analysis and investigations as we deemed appropriate for
purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all the
financial and other information that was available to us from public sources,
that was provided to us by the Company and Reliance or their respective
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the managements of the Company and Reliance as to the
future operating and financial performance of the Company and Reliance. In
particular, we have relied upon, without independent
<PAGE> 128
investigation, the estimates of the Company and Reliance of the operating
synergies achievable as a result of the Merger. We did not make any independent
evaluation of the assets, liabilities or operations of the Company or Reliance,
nor did we verify any of the information reviewed by us. We have made no
independent investigation of any legal matters affecting the Company or
Reliance.
Our opinion is necessarily based upon economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion, except as expressly contemplated by the letter
agreement, dated August 16, 1994, by and between the Company and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"). We are expressing no opinion
herein as to the prices at which the Company's common stock, post-Merger, will
actually trade at any time. Our opinion does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger.
DLJ is a wholly-owned subsidiary of The Equitable Life Companies
Incorporated of the United States ("The Equitable"). DLJ, as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In the past two years, DLJ
has received an aggregate of $2.3 million in connection with various investment
banking services rendered to the Company. Alliance Capital Management L.P.
("Alliance"), a 65% owned affiliate company of The Equitable, owns approximately
75,000 shares of the Company (0.2% of the outstanding common shares) and
approximately 4.3 million shares of Reliance (8.6% of the outstanding common
shares). Although DLJ and Alliance share a common parent company in The
Equitable, DLJ disclaims any ability to influence the investment decisions made
by Alliance.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be paid by the Company to the
shareholders of Reliance pursuant to the Agreement is fair to the shareholders
of the Company from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------
Frederick C. Lane
Managing Director
<PAGE> 129
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V, Section 1, Paragraph 1 of the By-Laws of General Signal reads as
follows:
"SECTION 1: Except to the extent expressly prohibited by the New York
Business Corporation Law, the Corporation shall indemnify each person made
or threatened to be made a party to any action or proceeding, whether civil
or criminal, and whether by or in the right of the Corporation or
otherwise, by reason of the fact that such person or such person's testator
or intestate is or was a director or officer of the Corporation, or serves
or served at the request of the Corporation or any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity while he or she was such a director or officer
(hereinafter referred to as 'Indemnified Person'), against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorneys' fees, incurred in connection with such action or
proceeding, or any appeal therein, provided that no such indemnification
shall be made if a judgment or other final adjudication adverse to such
Indemnified Person establishes that either (a) his or her acts were
committed in bad faith, or were the result of active and deliberate
dishonesty, and were material to the cause of action so adjudicated, or (b)
that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled."
General Signal also has entered into individual contracts with its
directors, Chief Financial Officer and General Counsel providing for
indemnification similar to the indemnification provisions in General Signal's
By-Laws. A copy of General Signal's By-Laws has been filed with the Securities
and Exchange Commission as an exhibit to General Signal's Quarterly Report on
Form 10-Q/A for the three months ended March 31, 1994.
Sections 721 through 726 of the New York Business Corporation Law ("BCL")
contain provisions for indemnification by General Signal, under certain
circumstances, of officers and directors of General Signal for certain
liabilities which may be incurred by them in their capacities as such.
General Signal has purchased insurance to indemnify General Signal and all
of its directors, officers and certain other employees who hold management
positions in General Signal and its operating divisions and subsidiaries for
those liabilities in respect of which such indemnification insurance is
permitted under the laws of the State of New York.
Limitation on Directors' Liability. General Signal's Restated Certificate
of Incorporation includes a provision eliminating directors' liability to
General Signal and stockholders of General Signal in certain circumstances
authorized by New York law. This provision, which is authorized by Section
402(b) of the BCL, provides that a director shall not be personally liable to
General Signal or its stockholders for monetary damages for breach of duty as a
director unless the director's acts or omissions (a) were in bad faith, (b)
involved intentional misconduct or a knowing violation of law, (c) resulted in
the director deriving an improper personal benefit, or (d) resulted in the
paying of a dividend, the approval of a stock repurchase, the distribution of
corporate assets upon dissolution, or the making of a loan to a director in
violation of Section 714 of the BCL.
II-1
<PAGE> 130
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C> <C>
2 -- Agreement and Plan of Merger, dated as of August 30, 1994, by and between General
Signal and Reliance Electric Company (included in the Registration Statement as
Annex A).
3.1 -- Restated Certificate of Incorporation of General Signal, as amended through April
21, 1994, previously filed as Exhibit 3.1 to the Registrant's Form 10-Q/A for the
three months ended March 31, 1994 filed June 10, 1994.
3.2 -- Form of Restated Certificate of Incorporation of General Signal (included in the
Registration Statement as Annex B).
3.3** -- By-laws of General Signal, as amended through August 29, 1994.
3.4 -- Form of Restated By-Laws of General Signal (included in the Registration
Statement as Annex C).
4.1 -- Copies of the instruments with respect to the Registrant's long-term debt are
available from the Securities and Exchange Commission upon request.
4.2 -- Copies of the Credit Agreements among the Registrant and various Commercial
Banking Institutions, as amended through December 31, 1993, as described in the
Notes to the General Signal Financial Statements herein, are available from the
Securities and Exchange Commission upon request.
4.3** -- Specimen Class B Common Stock Certificate
5** -- Opinion of Cahill Gordon & Reindel regarding the legality of the securities being
registered.
8** -- Opinion of Cahill Gordon & Reindel regarding certain federal income tax
consequences.
12** -- Calculation of Ratios of Earnings to Fixed Charges.
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of KPMG Peat Marwick LLP.
23.3* -- Consent of Price Waterhouse LLP.
23.4** -- Consent of Cahill Gordon & Reindel (included in Exhibit 5).
23.5** -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
23.6** -- Consent of Goldman, Sachs & Co.
23.7** -- Consent of Prudential Securities Incorporated.
24 -- Powers of Attorney (see signature page).
99.1** -- Consents of Director Nominees.
99.2** -- Proxy Card.
(b) -- Financial Statement schedules and reports of independent auditors.
99.2** -- Reports of Independent Auditors.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration
II-2
<PAGE> 131
form with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(c) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) above, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) 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.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Stamford, State of Connecticut, on the
19th day of October, 1994.
GENERAL SIGNAL CORPORATION
By: /s/ EDGAR J. SMITH, JR.
Edgar J. Smith, Jr.
Vice President, General
Counsel and Secretary
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes Stephen W. Nagy and Edgar J. Smith, Jr. and each of them
singly, such person's true and lawful attorneys, each with full power of
substitution to sign for such person and in such person's name and capacity
indicated below, any and all amendments to this Registration Statement, and to
file the same with the Securities and Exchange Commission, hereby ratifying and
confirming such person's signature as it may be signed by said attorneys to any
and all amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ EDMUND M. CARPENTER Chairman and Chief Executive October 19, 1994
(Edmund M. Carpenter) Officer and Director
(Principal Executive
Officer)
/s/ STEPHEN W. NAGY Senior Vice President -- October 19, 1994
(Stephen W. Nagy) Finance and Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ TERRY J. MORTIMER Vice President and October 19, 1994
(Terry J. Mortimer) Controller (Principal
Accounting Officer)
/s/ RALPH E. BAILEY Director October 19, 199B
(Ralph E. Bailey)
/s/ VAN C. CAMPBELL Director October 19, 1994
(Van C. Campbell)
/s/ RONALD E. FERGUSON Director October 19, 1994
(Ronald E. Ferguson)
</TABLE>
II-4
<PAGE> 133
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ JOHN P. HORGAN Director October 19, 1994
- -------------------------------------
(John P. Horgan)
/s/ C. ROBERT KIDDER Director October 19, 1994
- -------------------------------------
(C. Robert Kidder)
/s/ RICHARD J. KOGAN Director October 19, 1994
- -------------------------------------
(Richard J. Kogan)
Director , 1994
- -------------------------------------
(Michael D. Lockhart)
/s/ NATHAN R. OWEN Director October 19, 1994
- -------------------------------------
(Nathan R. Owen)
/s/ ROLAND W. SCHMITT Director October 19, 1994
- -------------------------------------
(Roland W. Schmitt)
/s/ JOHN R. SELBY Director October 19, 1994
- -------------------------------------
(John R. Selby)
</TABLE>
II-5
<PAGE> 134
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NUMBER
- ----------- --------------------------------------------------------------------- -----------
<S> <C> <C> <C>
2 -- Agreement and Plan of Merger, dated as of August 30, 1994, by and
between General Signal and Reliance Electric Company (included in the
Registration Statement as Annex A).
3.1 -- Restated Certificate of Incorporation of General Signal, as amended
through April 21, 1994, previously filed as Exhibit 3.1 to the
Registrant's Form 10-Q/A for the three months ended March 31, 1994
filed June 10, 1994.
3.2 -- Form of Restated Certificate of Incorporation of General Signal
(included in the Registration Statement as Annex B).
3.3** -- By-laws of General Signal, as amended through August 29, 1994.
3.4 -- Form of Restated By-Laws of General Signal (included in the
Registration Statement as Annex C).
4.1 -- Copies of the instruments with respect to the Registrant's long-term
debt are available from the Securities and Exchange Commission upon
request.
4.2 -- Copies of the Credit Agreements among the Registrant and various
Commercial Banking Institutions, as amended through December 31,
1993, as described in the Notes to the General Signal Financial
Statements herein, are available from the Securities and Exchange
Commission upon request.
4.3** -- Specimen Class B Common Stock Certificate
5** -- Opinion of Cahill Gordon & Reindel regarding the legality of the
securities being registered.
8** -- Opinion of Cahill Gordon & Reindel regarding certain federal income
tax consequences.
12** -- Calculation of Ratios of Earnings to Fixed Charges.
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of KPMG Peat Marwick LLP.
23.3* -- Consent of Price Waterhouse LLP.
23.4** -- Consent of Cahill Gordon & Reindel (included in Exhibit 5).
23.5** -- Consent of Donaldson, Lufkin & Jenrette Securities Corporation.
23.6** -- Consent of Goldman, Sachs & Co.
23.7** -- Consent of Prudential Securities Incorporated.
24 -- Powers of Attorney (see signature page).
99.1** -- Consents of Director Nominees.
99.2** -- Proxy Card.
(b) -- Financial Statement schedules and reports of independent auditors.
99.2** -- Reports of Independent Auditors.
</TABLE>
- ---------------
* Filed herewith.
** To be filed by Amendment.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary";
"Conditions to the Merger"; "Termination"; "Accounting Treatment" and "Experts"
in the Registration Statement (Form S-4) and related Prospectus of General
Signal Corporation for the registration of its common stock and to the
Incorporation by reference therein of our reports (a) dated January 25, 1994,
with respect to the 1993 and 1992 financial statements of General Signal
Corporation and consolidated subsidiaries, and (b) dated March 18, 1994 with
respect to its 1993 and 1992 financial statement schedules, included or
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1993, filed with the Securities and Exchange Commission.
/s/ Ernst & Young L.L.P.
Stamford, Connecticut
October 19, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
General Signal Corporation
We consent to incorporation by reference in the registration statement on
Form S-4 of General Signal Corporation of our report dated January 24, 1992,
relating to the consolidated statements of earnings, shareholders' equity and
cash flows and related schedules for the year ended December 31, 1991 (prior to
the acquisition of Revco Scientific, Inc.), which report appears in the December
31, 1993 annual report on Form 10-K of General Signal Corporation.
We consent to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG Peat Marwick LLP
Stamford, Connecticut
October 19, 1994
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of General Signal
Corporation of our report dated February 3, 1994, which appears on page 1 of
Reliance Electric Company's Annual Report to Shareholders, as included at
Exhibit 99.4 to its Annual Report on Form 10-K for the year ended December 31,
1993. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page FS-2 of such Annual Report
on Form 10-K. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Cleveland, Ohio
October 19, 1994
