<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
GENERAL SIGNAL CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
1997
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
<PAGE>
[LOGO]
March 21, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held on Thursday, April 17, 1997 at 10:00 A.M. at the Corporation's
headquarters, One High Ridge Park, Stamford, Connecticut 06904.
The Notice of Annual Meeting and Proxy Statement accompany this letter and
provide an outline of the business to be conducted at the meeting. Also, I will
report on the progress of the Corporation during the past year and answer
shareholder questions.
It is important that your shares be represented at the Annual Meeting. If
you are unable 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,
[LOGO]
<PAGE>
GENERAL SIGNAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 17, 1997
-------------------
The Annual Meeting of Shareholders of General Signal Corporation (the
"Corporation") will be held at the Corporation's headquarters, One High Ridge
Park, Stamford, Connecticut 06904, on Thursday, April 17, 1997, at 10:00 A.M.
for the following purposes:
1. To elect three directors;
2. To approve the General Signal Corporation 1997 Non-Employee Directors'
Stock Option Plan as described in the accompanying Proxy Statement and
set forth in Exhibit A thereto;
3. To approve the appointment of Ernst & Young LLP to serve as the
Corporation's independent auditors for the year 1997; and
4. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 6, 1997, will
be entitled to vote at the meeting. A copy of the Corporation's Annual Report to
Shareholders for the year 1996 has been provided to each shareholder of record.
By Order of the Board of Directors
JOANNE L. BOBER
Senior Vice President, General Counsel
and Secretary
March 21, 1997
-------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
-------------------
<PAGE>
PROXY STATEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- - ----------------------------------------------------------------------------------------------------------- -----
<S> <C>
VOTING PROCEDURES AND SECURITY OWNERSHIP................................................................... 1
- Voting of Proxies...................................................................................... 1
- Confidential Voting.................................................................................... 1
- Security Ownership of Certain Beneficial Holders....................................................... 2
- Security Ownership of Management....................................................................... 3
BOARD OF DIRECTORS......................................................................................... 5
- General Board Information.............................................................................. 5
- Directors' Compensation................................................................................ 6
PROPOSAL 1--ELECTION OF DIRECTORS.......................................................................... 8
EXECUTIVE COMPENSATION..................................................................................... 11
- SUMMARY COMPENSATION TABLE............................................................................. 12
- OPTION GRANTS TABLE.................................................................................... 15
- OPTION EXERCISES AND YEAR-END VALUE TABLE.............................................................. 16
- PENSION PLAN TABLE..................................................................................... 17
- PERFORMANCE GRAPH ON COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG GENERAL SIGNAL CORPORATION,
THE S&P 500 INDEX AND THE S&P CAP GOODS INDEX.......................................................... 19
- REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION........................... 20
PROPOSAL 2--APPROVAL OF THE GENERAL SIGNAL CORPORATION 1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN...... 23
PROPOSAL 3--AUTHORIZATION OF APPOINTMENT OF INDEPENDENT AUDITORS........................................... 24
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.......................................................... 25
OTHER MATTERS.............................................................................................. 25
SHAREHOLDER PROPOSALS...................................................................................... 25
EXHIBIT A--GENERAL SIGNAL CORPORATION 1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN....................... A-1
</TABLE>
<PAGE>
PROXY STATEMENT
GENERAL SIGNAL CORPORATION
ONE HIGH RIDGE PARK
P.O. BOX 10010
STAMFORD, CT 06904
VOTING PROCEDURES AND SECURITY OWNERSHIP
VOTING OF PROXIES
Your proxy in the form enclosed is solicited by the Board of Directors of
the Corporation for use at the Annual Meeting of Shareholders to be held on
April 17, 1997, and all valid proxies will be voted. Except to the extent that
contrary instructions are given by shareholders in the places provided in the
proxy, it is the intention of the persons named in the proxy to vote for the
nominees for the Board of Directors, for the approval of the General Signal
Corporation 1997 Non-Employee Directors' Stock Option Plan and for the approval
of the appointment of Ernst & Young LLP as independent auditors. Proxies marked
as abstaining (including proxies containing broker non-votes) on any matter to
be acted upon by shareholders will be treated as present at the meeting for the
purpose of determining a quorum, but will not be counted as votes cast on such
matters. A proxy may be revoked at any time prior to its use. Such revocation
may be made in person at the Annual Meeting, by a notice in writing delivered to
the Secretary of the Corporation or by a proxy bearing a later date. Only
shareholders of record at the close of business on March 6, 1997 will be
entitled to vote at the Annual Meeting. There were 52,228,491 shares of Common
Stock issued and outstanding on the record date (excluding treasury shares),
each of which is entitled to one vote on each matter voted upon at the meeting.
This Proxy Statement and the enclosed form of proxy were first sent to
shareholders on or about March 21, 1997.
The expense of proxy solicitation will be borne by the Corporation.
Depending upon the response to the initial solicitation by mail, proxies may be
solicited in person or by telephone or telegraph by officers or regular
employees of the Corporation. D.F. King & Co., Inc., 77 Water Street, New York,
New York 10005, has been retained by the Corporation to assist in such
solicitation at a total estimated cost of $10,000.
CONFIDENTIAL VOTING
If a shareholder requests confidentiality on the proxy card or ballot, the
shareholder meeting proxies, ballots and voting tabulations that identify the
particular vote of the shareholder will be held permanently confidential except
as necessary to meet applicable legal requirements. The tabulators and
inspectors of election for the meeting are employees of First Chicago Trust
Company of New York and are, therefore, independent. The Corporation has an
agreement with the tabulators and inspectors of election requiring them to
comply with the Corporation's confidential voting policy.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth information based upon the Corporation's
records and Securities and Exchange Commission filings with respect to each
person known to be the beneficial owner of more than 5% of the Common Stock of
the Corporation as of December 31, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
<S> <C> <C>
Putnam Investments, Inc. 5,159,228 shares(1) 10.03%
One Post Office Square
Boston, MA 02109
American Express Company 4,994,814 shares(2) 9.72%
American Express Tower
200 Vesey Street
New York, NY 10285
and
American Express Financial Corp.
IDS Tower 10
Minneapolis, MN 55440
General Signal Corporation Savings 2,572,296 shares(3) 5.00%
and Stock Ownership Plan (the
Savings Plan) the trustee of
which is
The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, NY 11245
</TABLE>
- - ------------
NOTES:
(1) The Schedule 13G filed by Putnam Investments, Inc. disclosed that Putnam
Investments, Inc. and related corporations: Marsh & McLennan Companies,
Inc., Putnam Investment Management, Inc., an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, and The Putnam
Advisory Company, Inc., an investment advisor registered under Section 203
of the Investment Advisors Act of 1940, are considered "beneficial owners"
in the aggregate of 5,159,228 shares, or 10.03% of shares outstanding, of
the Corporation's voting Common Stock. Putnam Investments, Inc. has shared
voting power with respect to 47,577 shares and shared dispositive power with
respect to 5,159,228 shares.
(2) The Schedule 13G filed jointly by American Express Company and American
Express Financial Corporation, an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, disclosed that they are
considered registered "beneficial owners" in the aggregate of 4,994,814
shares, or 9.72% of shares outstanding, of the Corporation's voting Common
Stock. American Express Company and American Express Financial Corporation
have shared voting power with respect to 1,206,514 shares and shared
dispositive power with respect to 4,994,814 shares.
(3) The Chase Manhattan Bank, as trustee of the Savings Plan, will vote the
shares as instructed by participants, and shares for which no instructions
have been received will be voted by the trustee in the same proportion as
the share for which instructions have been received.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of March 1, 1997 beneficial ownership of shares
of Common Stock of the Corporation and "stock units" with the value equivalent
to the value of the Common Stock (unless otherwise noted) by each director, each
executive officer named in the Summary Compensation Table and by all directors
and executive officers as a group. All directors and executive officers as a
group owned 0.99% of the outstanding Common Stock as of that date.
<TABLE>
<CAPTION>
SHARES STOCK
NAME OWNED(1) UNITS(2)
<S> <C> <C>
Ralph E. Bailey 5,221 3,507
H. Kent Bowen -- 928
Van C. Campbell 4,017(3) 1,406
Michael A. Carpenter 2,000 --
Elizabeth D. Conklyn 6,445(4) 1,090
Ursula F. Fairbairn 512 1,764
Ronald E. Ferguson 2,585 10,562
John P. Horgan 10,899(3) --
Robert D. Kennedy 1,000 97
Michael D. Lockhart 202,539(4) 11,725
Terence D. Martin 52,097(4) 7,019
Roland W. Schmitt 1,592(3) --
John R. Selby 6,254(3) 4,229
Edgar J. Smith, Jr. 69,038(4) --
Julian B. Twombly 25,007(4) 873
All directors and executive officers as a
group (22 persons) 515,984(4) 49,334
</TABLE>
(FOOTNOTES ON NEXT PAGE)
3
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)
- - ---------------
NOTES:
(1) The figures shown include the interest of executive officers of the
Corporation in an aggregate of 43,306 shares of Common Stock held by the
trustee under the Corporation's Savings and Stock Ownership Plan (the
"Savings Plan") as of December 31, 1996 and include the following shares of
Common Stock which the persons listed have the right to acquire as of March
1, 1997 or within 60 days after that date through the exercise of stock
options: Michael D. Lockhart (97,000); Terence D. Martin (27,000); Edgar J.
Smith, Jr. (57,625); Julian B. Twombly (16,396); Elizabeth D. Conklyn
(1,250); and all directors and executive officers as a group (269,892).
(2) For the executive officers, the "stock units" represent compensation
deferred and credited as "phantom stock units" under the Corporation's
Deferred Compensation Plan. For Ralph E. Bailey, H. Kent Bowen, Van C.
Campbell, Ursula F. Fairbairn, Ronald E. Ferguson, Robert D. Kennedy and
John R. Selby, the "stock units" represent either (a) director fees deferred
to their share-denominated accounts or (b) accrued retirement benefits
transferred from the terminated retirement plan for non-employee directors
to the Corporation's Deferred Compensation Plan for Directors. Under both
Plans, the value of the "stock units" at the time of distribution will be
the then market value of the Corporation's Common Stock, but the deferred
amounts will be paid in cash.
(3) Van C. Campbell, John P. Horgan, Roland W. Schmitt, and John R. Selby have
elected to defer all or part of their cash compensation as directors for
1996 or prior thereto and to receive in lieu thereof restricted stock under
the Corporation's stock incentive plans. The figures shown include the
shares of stock which are currently restricted with respect to which the
holders have sole voting power, but no investment power, during the
restricted period as follows: Mr. Campbell (3,217); and Mr. Selby (5,654).
(4) Includes shares of restricted stock held by: Michael D. Lockhart (81,000);
Terence D. Martin (10,000); Julian B. Twombly (4,614); and Elizabeth D.
Conklyn (5,000) and six current executive officers not named in the Summary
Compensation Table (14,068) with respect to which the holders have sole
voting power, but no investment power, during the restricted period.
4
<PAGE>
BOARD OF DIRECTORS
GENERAL BOARD INFORMATION
The Corporation's Board of Directors 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 1996 there were nine meetings of the Board, and each of the
directors attended at least 75% of the aggregate of the meetings of the Board
and Committees of the Board of which they are members. The average attendance of
all directors at such meetings was 95%.
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, a Committee on
Directors, an Executive Committee, a Finance Committee and a Personnel and
Compensation Committee. Except for Michael D. Lockhart, who serves on the
Executive Committee, the directors serving on these committees are non-employee
directors.
The members of the Audit Committee are Ursula F. Fairbairn (Chairman), Ralph
E. Bailey, H. Kent Bowen, Van C. Campbell and Robert D. Kennedy. This Committee
discusses audit and financial reporting matters with both management and the
Corporation's independent auditors. Its duties include reviewing the
Corporation's accounting and financial systems and internal controls, reviewing
the Corporation's internal controls and procedures to assure adherence to proper
standards of business conduct and evaluating and making recommendations
concerning the appointment of the independent auditors. The Audit Committee met
three times in 1996.
The members of the Committee on Directors are Ronald E. Ferguson (Chairman),
Michael A. Carpenter, John P. Horgan, Roland W. Schmitt and John R. Selby. The
responsibilities of the Committee on Directors include making recommendations to
the Board with regard to Committee structure, compensation and benefits for
directors, and the qualifications of candidates for election as directors. In
addition, the Committee on Directors is responsible for reviewing the
Corporation's corporate governance policies. The Committee on Directors
recommended that the Board nominate the three persons whose names and
biographical summaries appear on succeeding pages for election as directors. The
Committee on Directors met four times in 1996.
The members of the Executive Committee are Van C. Campbell, Ursula F.
Fairbairn, Ronald E. Ferguson, Michael D. Lockhart 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 met one time in 1996.
The members of the Finance Committee are Van C. Campbell (Chairman), H. Kent
Bowen, Michael A. Carpenter, John P. Horgan and Roland W. Schmitt. The Finance
Committee reviews policies and practices of the Corporation affecting its
financial structure and position, including debt-to-capital ratio,
5
<PAGE>
valuation methodology for acquisitions, divestitures and other capital
appropriations, financing strategy, dividend policy and budgets. In addition,
the Committee reviews the discharging of management's fiduciary duties for asset
management of employee benefit plans. The Finance Committee met one time in
1996.
The members of the Personnel and Compensation Committee are John R. Selby
(Chairman), Ralph E. Bailey, Ursula F. Fairbairn, Ronald E. Ferguson and Robert
D. Kennedy. The Personnel and Compensation Committee reviews the performance of
the Chief Executive Officer and makes recommendations to the Board with respect
to the compensation of the Chief Executive Officer and the officers reporting to
him. The Committee oversees the Corporation's executive succession plans. The
Committee administers the incentive compensation and the stock incentive plans
applicable to key executives of the Corporation. It reviews amendments to
employee benefit plans and new employee benefit plans that require Board
approval. The Committee also reviews the discharging of management's fiduciary
duties for the administration of employee benefit plans. The Personnel and
Compensation Committee met four times in 1996.
In October 1996, the Board discontinued the Employee Benefits Committee and
reallocated its functions to the newly formed Finance Committee and the
Personnel and Compensation Committee. The members of the Employee Benefits
Committee in 1996 were John P. Horgan (Chairman), Van C. Campbell, Ursula F.
Fairbairn and Roland W. Schmitt. The Employee Benefits Committee met three times
in 1996.
Any shareholder 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 of the Corporation at the
principal executive offices of the Corporation 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 shareholders, or if the only public
disclosure of the meeting date is made by written notice, a shareholder'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 shareholder 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 the Corporation beneficially owned; and (d) any other information required to
be disclosed in solicitations of proxies pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended, including the proposed nominee's
written consent to being named in the proxy and to serving if elected. The
notice must also include information on the shareholder making the nomination,
such as name and address as it appears on the Corporation's books and the class
and number of shares of the Corporation beneficially owned. The nomination of
any person not made in compliance with the foregoing procedures shall be
disregarded.
DIRECTORS' COMPENSATION
Employee directors 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 $25,000 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,
as well as reimbursement for expenses incurred in connection with such meetings.
6
<PAGE>
Under the Corporation's stock incentive plans, each non-employee director
may elect to defer all or part of his or her cash compensation as a director and
to receive in lieu thereof restricted stock subject to a five-year restriction
period. In consideration for foregoing cash compensation, the value of the
restricted shares is 10% greater than the deferred amount of the director's cash
compensation. Three current directors elected to defer compensation for 1996. On
December 12, 1996, the Board of Directors suspended the right of each
non-employee director to elect to receive restricted stock with a 10% premium in
lieu of cash compensation under such plans.
The Corporation has a Deferred Compensation Plan for Directors which permits
the voluntary deferral of all or part of the compensation received for 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 the Corporation.
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. Four directors elected to defer compensation for 1996 under this Plan.
The Corporation had 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 retired director for his or her lifetime on and
after reaching age 65 are equal to 10% of the annual Board retainer in effect at
the time of such director's retirement for each year of service. The maximum
annual benefit is 100% of the Board retainer exclusive of committee compensation
and meeting fees. This plan was terminated effective December 31, 1996. Each
director was given an opportunity to transfer the actuarial equivalent value of
his or her accrued benefit as of December 31, 1996 to the Deferred Compensation
Plan for Directors, or to receive such benefit as a quarterly annuity upon
retirement.
The Corporation 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 the Corporation's Matching
Gifts Program. Under this program, a minimum of $25 and a maximum of $5,000 per
eligible educational institution or health and human service organization is
matched. The maximum permissible annual participation per director is $5,000.
As part of the Corporation's overall support for charitable institutions and
to preserve its ability to attract and retain directors of the highest caliber,
the Corporation maintains a Directors' Charitable Award Program that permits
each director to recommend charitable institutions which would share in a
contribution of $100,000 per year for ten years following the director's death.
To be eligible to receive a donation, a recommended institution must qualify to
receive tax-deductible donations under the Internal Revenue Code, be eligible to
receive matching gifts under the Corporation's Matching Gifts Program, and be
approved by the Committee on Directors. The program has been funded in part by
life insurance policies for which the Corporation paid an aggregate of $416,769
in premiums during 1996. The insurance proceeds and charitable deductions accrue
solely to the benefit of the Corporation.
7
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
At the meeting, three directors are to be elected to hold office until the
Annual Meeting of Shareholders to be held in the year 2000. All of the nominees
are currently directors. Ralph E. Bailey (director since 1982), John P. Horgan
(director since 1971) and Roland W. Schmitt (director since 1987), whose terms
will expire at the Annual Meeting, are not standing for re-election. The
Corporation thanks them for their contributions to the development and success
of the Corporation. There is no cumulative voting, and directors will be elected
by a plurality of the votes cast at the Annual Meeting either in person or by
proxy. The remaining directors of the Corporation will continue to serve in
accordance with their previous election.
Unless authority is withheld by the shareholders, it is the intention of the
persons named in the enclosed proxy to vote for the nominees listed and, in the
event any nominees are unable or decline to serve, to vote for the balance of
the nominees and for substitutes selected by the Board of Directors. The name,
principal occupation and other information concerning each director are set
forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES.
NOMINEES FOR WHOM PROXIES
WILL BE VOTED
NOMINEES FOR DIRECTORS FOR
TERMS TO EXPIRE IN 2000
<TABLE>
<S> <C>
VAN C. CAMPBELL
Director Since: 1992
Age: 58
Vice Chairman, Chief Financial and Administrative Officer 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, Covance, Inc., Dow Corning Corporation and
Quest Diagnostics, Incorporated.
MICHAEL A. CARPENTER
Director Since: September 1996
Age: 50
Chairman, President and Chief Executive Officer of Travelers Life and
Annuity Company since 1995. He also serves as Executive Vice President
of Travelers Group, Inc. Previously held various management positions
with General Electric Company from 1986 to 1994, including Chairman of
the Board, President and Chief Executive Officer of the Kidder, Peabody
Group, Inc., Executive Vice President of GE Capital, and Vice
President--Business Development of General Electric Company. Previously
a Vice President of The Boston Consulting Group.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
ROBERT D. KENNEDY
Director Since: October 1996
Age: 64
Former Chairman and Chief Executive Officer from 1986 to 1995 of Union
Carbide Corporation. Previously President of Union Carbide Corporation,
responsible for the Chemicals and Plastics Group from 1985 to 1986; and
previously held various other management positions since joining Union
Carbide Corporation in 1955. Also a director of Birmingham Steel
Corporation, Kmart Corporation, Sun Company, Inc., UCAR International
Inc., Union Carbide Corporation and Union Camp Corporation.
</TABLE>
DIRECTORS WHOSE TERMS OF OFFICE
DO NOT EXPIRE AT THIS MEETING
CONTINUING DIRECTORS WHOSE
TERMS EXPIRE IN 1999
<TABLE>
<S> <C>
URSULA F. FAIRBAIRN
Director Since: 1995
Age: 54
Executive Vice President of Human Resources and Quality of American
Express Company since December 1996. Previously Senior Vice President of
Human Resources from 1990 to 1996 of Union Pacific Corporation; and
previously IBM Director of Education and Management Development of IBM
Corporation from 1987 to 1990; and held various other management
positions, including Vice President Marketing Operations, since joining
IBM Corporation in 1966. Also a director of VF Corporation.
RONALD E. FERGUSON
Director Since: 1986
Age: 55
Chairman and Chief Executive Officer of General Re Corporation since
1987; and previously held various other management positions since
joining General Re Corporation/General Reinsurance Corporation in 1969.
Also a director of Colgate-Palmolive Company.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
JOHN R. SELBY
Director Since: 1986
Age: 67
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.
</TABLE>
CONTINUING DIRECTORS WHOSE
TERMS EXPIRE IN 1998
<TABLE>
<S> <C>
H. KENT BOWEN
Director Since: March 1996
Age: 55
Professor of Technology and Operations Management, Harvard University,
Graduate School of Business Administration since July 1992 and was
appointed the William Barclay Harding Professor of Business
Administration in 1993. Previously, from 1970 to 1992, Dr. Bowen was a
member of the faculty of the Massachusetts Institute of Technology. Also
a director of Ceramics Process Systems Corporation.
MICHAEL D. LOCKHART
Director Since: 1994
Age: 47
Chairman and Chief Executive Officer since October 1995, President and
Chief Operating Officer and director of the Corporation from October
1994 to October 1995. Previously Vice President and General Manager from
1992 to 1994 of Commercial Engines and Services, a business of General
Electric Company that manufactures and services commercial aircraft
engines; Vice President and General Manager of Transportation Systems
from 1989 to 1992; Vice President, Finance and Business Development, GE
Aircraft Engines from 1987 to 1989; and previously held various other
management positions since joining General Electric Company in 1981.
Previously a Vice President and director of The Boston Consulting Group.
</TABLE>
10
<PAGE>
EXECUTIVE COMPENSATION
The following disclosure and discussion of executive compensation is
intended to provide shareholders with an understanding of the Corporation's
executive compensation program and actions affecting the compensation of the
Chairman and Chief Executive Officer. Included are:
- the Summary Compensation Table;
- the Options Grants Table;
- the Option Exercises and Year-End Value Table;
- the Pension Plan Table;
- the Performance Graph on Comparison of Five-Year Cumulative Total Return
among General Signal Corporation, the Standard & Poors ("S&P") 500 Index
and the S&P Cap Goods Index; and
- the Report of the Personnel and Compensation Committee on Executive
Compensation.
11
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows compensation information for the Corporation's
Chief Executive Officer during 1996 and the four other highest paid executive
officers for services in all capacities during 1996, 1995 and 1994.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
OTHER RESTRICTED
ANNUAL STOCK
NAME AND PRINCIPAL BONUS COMPEN- SATION AWARDS OPTION
POSITION YEAR SALARY ($) ($)(1) ($) ($)(2) GRANTS (#)
<S> <C> <C> <C> <C> <C> <C>
Michael D. Lockhart 1996 $ 652,308 $ 636,000 -- -- 100,000(3)
Chairman of the Board and
Chief Executive Officer 1995 $ 610,000 $ 300,000 -- $4,015,625 100,000(3)
1994 $ 150,000 $ 300,000 -- -- 180,000(3)
Terence D. Martin 1996 $ 451,000 $ 351,800 -- -- 50,000(3)
Executive Vice President 1995 $ 373,731 $ 246,000 -- $ 335,000 78,000(3)
and Chief Financial Officer 1994 -- -- -- -- --
Edgar J. Smith, Jr. 1996 $ 215,000 $ 125,800 -- -- --
Vice President, General
Counsel and Secretary 1995 $ 212,000 $ 63,900 -- -- 10,000(3)
10,428(4)
1994 $ 197,958 $ 106,000 -- $ 95,625 9,000(3)
19,288(4)
Julian B. Twombly 1996 $ 202,247 $ 118,400 -- -- 12,000(3)
Vice President and
Treasurer 1995 $ 186,000 $ 49,800 -- -- 10,000(3)
1994 $ 168,000 $ 85,000 -- $ 31,875 9,000(3)
Elizabeth D. Conklyn 1996 $ 191,154 $ 111,900 -- -- 12,000(3)
Senior Vice President - 1995 $ 29,231 -- -- $ 163,750 5,000(3)
Human Resources 1994 -- -- -- -- --
<CAPTION>
<S> <C>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($)
<S> <C>
Michael D. Lockhart $ 6,000(5)
Chairman of the Board and $ 29,692(6)
Chief Executive Officer $ 36,400(6)
--
Terence D. Martin $ 27,880(6)
Executive Vice President $ 12,615(6)
and Chief Financial Officer --
Edgar J. Smith, Jr. $ 6,000(5)
Vice President, General $ 5,156(6)
Counsel and Secretary $ 6,000(5)
$ 6,720(6)
$ 6,000(5)
$ 5,282(6)
Julian B. Twombly $ 6,000(5)
Vice President and $ 4,082(6)
Treasurer $ 6,000(5)
$ 4,840(6)
$ 6,000(5)
$ 3,102(6)
Elizabeth D. Conklyn $ 7,646(6)
Senior Vice President - --
Human Resources --
</TABLE>
(FOOTNOTES ON NEXT PAGE)
12
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
- - ------------------------------
NOTES:
(1) The bonus represents the amount paid for services rendered during the
specified calendar year. Such payments are made in the first quarter of the
calendar year following the year in which the compensation was earned.
(2) During 1996, 1995 and 1994, an aggregate of 201,303 shares of restricted
stock was awarded to certain employees, including 125,000 shares to Mr.
Lockhart in connection with his employment; 10,000 shares to Mr. Martin;
3,000 shares to Mr. Smith; 1,000 shares to Mr. Twombly; 5,000 shares to Ms.
Conklyn; and 10,000 shares to five current executive officers not named in
the Summary Compensation Table and other employees (including former
executive officers and employees). The awards granted in 1996, 1995 and 1994
vest at certain rates over three-, four- or five-year periods except for Mr.
Lockhart's restricted stock grant which vests based on certain Corporation
performance criteria and the lapse of time (26,000 shares on September 1,
1995; 18,000 shares on September 1, 1996; 13,000 shares on September 1,
1999; and 68,000 shares on March 25, 2014). During the restricted period,
the holders of restricted stock have the right to vote the shares and to
receive any cash dividends. The aggregate number of restricted shares held
and their value as of December 31, 1996 were as follows: Mr. Lockhart,
81,000 shares/$3,462,750; Mr. Martin, 10,000 shares/$427,500; Mr. Twombly
614 shares/ $26,249; Ms. Conklyn 5,000 shares/$213,750 and five current
executive officers not named in the Summary Compensation Table and other
employees, 43,260 shares/$1,849,365.
The restricted stock agreements for the executive officers and certain other
corporate employees generally provide that immediately preceding a Change in
Control (as defined in such agreements), the unvested restricted stock will
be forfeited, and the holder will be paid cash equal to the product of the
number of shares of unvested restricted stock and the Change in Control
price. Payment on the unvested stock will be made on the earlier of the
vesting schedule dates under the restricted stock agreements or immediately
in the event of Involuntary Termination, as defined in the agreements.
(3) During 1996, 1995 and 1994, an aggregate of 1,425,700 shares subject to
"new" stock options was granted to executive officers and other employees.
All are exercisable at a price equal to 100% of the fair market value on the
date of grant and are subject to four- or five-year vesting schedules.
The Corporation has never repriced stock options, and the Corporation's 1996
Stock Incentive Plan prohibits the repricing of stock options.
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 such 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
will be made on the date of the Change in Control. Payment for unvested
options will be made on the earlier of the vesting schedule dates under the
option agreements or immediately in the event of Involuntary Termination, as
defined in the agreements.
(4) During 1996, 1995 and 1994, an aggregate of 256,347 shares subject to
"replacement" stock options was granted to executive officers. A
"replacement" ("reload") option 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 subject
to forfeiture if the shares acquired on the exercise of the original option
are sold for cash prior to holding them for at least one year.
(FOOTNOTES CONTINUED ON NEXT PAGE)
13
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
- - ------------------------
(5) This represents the Corporation's matching contributions under the Savings
Plan which are invested in Common Stock of the Corporation. 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 Internal Revenue Code of 1986,
as amended, (the "Code"). Eligible employees must elect to contribute a
minimum of 3% of pay to participate. The Corporation contributes an amount
equal to 3% of the pay of each employee, which is increased to 4% if
employee before-tax contributions of at least 3% of pay are invested in
shares of Common Stock of the Corporation.
(6) This represents the Corporation's matching contributions under the
Corporation's Deferred Compensation Plan. The Deferred Compensation Plan
offers key executives the choice to defer cash 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. If an executive defers
all or part of the incentive compensation bonus into "phantom stock units",
the Corporation contributes an amount equal to 10% of the deferral, also in
"phantom stock units", which deferral and 10% contribution are forfeitable
if the employee leaves the Corporation for any reason, other than death or
disability, prior to one year from the date of the deferral.
14
<PAGE>
OPTION GRANTS TABLE
The following table shows the individual grants of options that were made in
1996 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 the Corporation's shareholders as of December 31, 1996 at the same
appreciation rates is also shown. The 5% and 10% rates of appreciation are
required to be disclosed by the Securities and Exchange Commission and are not
intended to forecast possible future actual appreciation, if any, in the
Corporation's stock prices. The actual value of the stock options to the
executive officers will depend on the future price of the Corporation's Common
Stock. The stock options will have no value to the executive officers if the
price of the Corporation's Common Stock does not increase above the exercise
price of the option.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
NUMBER % OF TOTAL
OF SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) 1996 ($/SH) DATE 0%($)
<S> <C> <C> <C> <C> <C>
Michael D. Lockhart 100,000 21.9% 41.25 9-19-06 $ 0
Terence D. Martin 50,000 10.9% 41.25 9-19-06 $ 0
Edgar J. Smith, Jr. 0 0 -- -- $ 0
Julian B. Twombly 12,000 2.6% 41.25 9-19-06 $ 0
Elizabeth D. Conklyn 12,000 2.6% 41.25 9-19-06 $ 0
All Shareholders N/A N/A N/A N/A $ 0
<CAPTION>
NAME 5%($) 10%($)
<S> <C> <C>
Michael D. Lockhart $ 2,594,190 $ 6,574,188
Terence D. Martin $ 1,297,095 $ 3,287,094
Edgar J. Smith, Jr. $ 0 $ 0
Julian B. Twombly $ 311,303 $ 788,903
Elizabeth D. Conklyn $ 311,303 $ 788,903
All Shareholders $ 1,382,244,261(2) $ 3,502,878,343(2)
</TABLE>
- - ------------
NOTES:
(1) Options are exercisable at prices equal to 100% of the fair market value on
the date of grant. The "new" options granted in 1996 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.
(2) These amounts represent the growth in total shareholder value for a ten-year
period at 5% and 10% annually, using a base price of $42.75 and 51,412,745
shares of Common Stock outstanding as of December 31, 1996 (excluding
treasury shares). The percentage relationship of the potential realizable
value for all the executive officers named in the Summary Compensation Table
to that of all shareholders is .34%.
15
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table summarizes 1996 information relating to exercised and
unexercised options for each executive officer named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT DECEMBER 31, 1996 ($)
AGGREGATED OPTION EXERCISES OPTIONS HELD AT BASED ON $42.75 CLOSING
IN 1996 DECEMBER 31, 1996 PER SHARE STOCK PRICE (1)
VALUE
SHARES ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE (#) ($)(1) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Michael D. Lockhart -- -- 97,000 283,000 $ 703,140 $1,463,460
Terence D. Martin -- -- 19,500 108,500 $ 123,375 $ 445,125
Edgar J. Smith, Jr. 1,838 $ 8,721 57,625 13,688 $ 580,540 $ 100,389
Julian B. Twombly 11,666 $ 127,576 16,396 25,688 $ 164,241 $ 118,389
Elizabeth D. Conklyn -- -- 1,250 15,750 $ 12,500 $ 55,500
</TABLE>
- - ------------
NOTE:
(1) Market value of shares of Common Stock at exercise or at December 31, 1996
minus the exercise price.
16
<PAGE>
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
Corporation (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, as amended, 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, the Corporation is authorized to pay retirement
benefits out of the general funds of the Corporation under a non-qualified
Benefit Equalization Plan. Benefits are calculated to equal the reduction.
Amounts shown are the benefits based on the current Covered Compensation
amount of $27,600 applicable to 1996. Earnings covered by the Corporate
Retirement Plan and the Benefit Equalization Plan for the executive officers
named in the Summary Compensation Table correspond with the combination of
salary and bonus shown in the Summary Compensation Table. Benefits for eligible
employees are computed under a formula integrated with Social Security based
upon years of service and average earnings during the five consecutive years of
highest earnings during the employee's service with the Corporation.
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
AVERAGE TOTAL PROJECTED YEARS OF SERVICE
ANNUAL ----------------------------------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
200$,000...... 28,620 45,430 62,640 79,050 95,860 110,860
400,000...... 58,620 92,930 127,240 161,550 195,860 225,860
600,000...... 88,620 140,430 192,240 244,050 295,860 340,860
800,000...... 118,620 187,930 257,240 326,550 395,860 455,860
1,000,000.... 148,620 235,430 322,240 409,050 495,860 570,860
1,200,000.... 178,620 282,930 387,240 491,550 595,860 685,860
1,400,000.... 208,620 330,430 452,240 574,050 695,860 800,860
1,600,000.... 238,620 377,930 517,240 656,550 795,860 915,860
</TABLE>
- - ------------
NOTE:
(1) As of December 31, 1996, the years of credited service for the executive
officers named in the Summary Compensation Table were as follows: 3.250
years for Michael D. Lockhart; 3.667 years for Terence D. Martin; 36.917
years for Edgar J. Smith, Jr.; 5.000 years for Julian B. Twombly; and 1.583
years for Elizabeth D. Conklyn. The foregoing years of credited service
include additional years of service recognized under employment agreements
with Michael D. Lockhart and Elizabeth D. Conklyn (1.5 years for each year
of employment), Terence D. Martin (2.0 years for each year of employment),
and, in the case of Michael D. Lockhart, pension benefits from his previous
employer will be offset against the pension benefits payable to him by the
Corporation.
17
<PAGE>
The Corporation 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.
The Corporation has an agreement with Michael D. Lockhart, who became
President and Chief Operating Officer of the Corporation and a member of the
Board of Directors on October 3, 1994. Subsequently, he became Chairman of the
Board and Chief Executive Officer on October 19, 1995. In connection with his
employment, the Corporation established an unfunded deferred compensation
account in the amount of $711,900 on January 2, 1995, designed to yield
$2,100,000 at age 62 (year 2011) calculated at a 7% rate. After seven years, 10%
of the principal will vest each year, and a full payment of the principal and
interest will be available at age 62. If Mr. Lockhart is involuntarily
terminated, other than for cause, prior to October 3, 1997 (three years from his
date of employment), he will be entitled to be treated as if he were an
"employee" until October 3, 1997 for purposes of salary, bonus, stock options
and restricted stock awards, pension and other employee benefits.
The Corporation has an agreement with Edgar J. Smith, Jr., who retired on
December 31, 1996, to provide certain consulting services for the Corporation
until December 31, 1998 for an aggregate fee of $100,000 payable bi-weekly
during such period. Under such agreement, the Corporation's matching
contributions under the Deferred Compensation Plan for deferrals made prior to
December 31, 1996 were paid to him, and his company automobile with a value of
$23,674 was transferred to him in January 1997. With respect to the restricted
stock awarded him in 1994, such agreement also provided for the payment of
$42,500 which represents the value of the remaining one-third of the award that
was not vested at year end.
18
<PAGE>
PERFORMANCE GRAPH ON COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN AMONG
GENERAL SIGNAL CORPORATION, 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 the Corporation ("GSX"), the S&P 500 ("S&P 500")
Index and the S&P Cap Goods Index ("S&P CAP GOODS"). It assumes $100.00 invested
on December 31, 1991 in the Common Stock of the Corporation, the S&P 500 Index
and the S&P Cap Goods Index. Total return assumes the reinvestment of dividends
quarterly and a fiscal year ending December 31.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GSX S&P 500 S&P CAP GOODS
<S> <C> <C> <C>
1991 100 100 100
1992 118.65 107.63 102.43
1993 137.43 118.43 116.2
1994 130.92 119.93 125.05
1995 136.79 164.96 167.55
1996 184.89 203.14 220.68
</TABLE>
19
<PAGE>
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
INTRODUCTION
The Personnel and Compensation Committee of the Board of Directors (the
"Committee") administers the incentive compensation and stock incentive plans
applicable to key executives of the Corporation. The Committee is composed
solely of five independent directors. The Committee reviews the compensation of
the Corporation's executive officers and recommends to the Board of Directors
the compensation of the Chief Executive Officer and the executive officers
reporting to him. In addition, the Committee reviews and approves the
compensation of unit presidents.
The Corporation's compensation philosophy is based on the belief that
compensation 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 link between executive compensation and
the creation of shareholder value. In addition, the grant of stock options and
restricted stock awards provides an important incentive in aligning the
interests of employees and shareholders.
COMPENSATION REVIEW
The Committee periodically uses the services of independent compensation
consultants to evaluate the total compensation package of the Chief Executive
Officer and other senior executives and to measure the competitiveness of the
Corporation's compensation programs. The companies used for comparison are
comparable in size, structure, product offerings, or location and participate in
national compensation databases which permit comparisons on an ongoing basis.
These companies are generally represented in the S&P Cap Goods Index with the
exception of certain organizations whose activities the Committee believes are
particularly relevant for comparison to the Corporation.
After review of these and other compensation resources, the Committee and
Board concluded that the Corporation's compensation package and processes were
competitive and appropriate. Based on this review and with recommendations for
officers and unit presidents submitted by the Chief Executive Officer and the
senior Human Resources executive, base salary recommendations for 1996 were
developed.
The attainment of planned earnings per share for the prior year heavily
influenced the 1996 salary changes in the cases of the Chief Executive Officer
and the executive staff. The Committee also weighed factors such as demonstrated
management ability, initiative and strategic contributions.
SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN AND THE INCENTIVE COMPENSATION PLAN
The Chief Executive Officer and other individuals who are named in the
Summary Compensation Table are eligible to participate in the shareholder
approved Senior Executive Compensation Plan. Awards under this Plan are based
solely on the achievement of financial objectives and will be treated as
performance-based compensation within the meaning of Section 162(m) of the Code,
thereby qualifying for exclusion under the $1 million limitation on
deductibility of executive compensation.
Under this Plan, each participant will be eligible to receive a share of an
incentive compensation pool; however, the Committee will have full discretion to
reduce or eliminate the share for any participant for any plan year.
20
<PAGE>
The incentive compensation pool for any plan year will equal 5% of operating
earnings of the Corporation for that plan year, and will be based on reported
operating earnings in the Corporation's financial statements included in the
Corporation's Annual Report to Shareholders. The incentive compensation pool for
1996 was $12.2 million. The actual awards determined by the Committee for 1996
under this Plan were limited to the actual awards that were determined under the
Corporation's Incentive Compensation Plan.
Under the Corporation's Incentive Compensation Plan, key employees of the
Corporation may be awarded bonuses determined annually by the Committee.
Executive officers, unit presidents and senior staff managers throughout the
Corporation are eligible for participation in the Incentive Compensation Plan.
The Committee sets target awards using information from peer group and
national compensation surveys, approves corporate and business unit performance
goals, and recommends to the Board of Directors the annual awards for executive
officers, including the Chief Executive Officer. Each participant is assigned a
competitive "target" percentage of base salary based on the individual's salary
grade level.
The bases for award payments in 1996 were corporate and business unit
performance as measured by economic value added ("EVA"), which equals the dollar
amount arrived at by taking net operating profit after tax, adjusting for
certain noncash elements included therein, and subtracting a charge for the use
of capital needed to generate that profit. The bonuses awarded to the executive
officers reflect the achievement of consolidated unit and corporate performance
goals, and the bonuses awarded to unit presidents reflect the performance of
their individual units.
In 1996, most of the Corporation's continuing operating units achieved or
exceeded individual measurement goals. Some units received no award based on
their failure to attain their goals. Consolidated EVA for 1996 was favorably
affected by improved operating results, royalty income, an involuntary
conversion insurance gain and lower than anticipated cash expense. Overall, the
Corporation exceeded its EVA goal, and corporate executives were paid incentive
awards on that basis.
STOCK OPTION/RESTRICTED STOCK
The granting of stock options and restricted stock is intended to create
long-term incentives to increase shareholder value. The Committee also grants
restricted stock selectively to attract new management and to recognize
important individual contributions.
The Committee approved stock option grants to executive officers, unit
presidents and other key executives in 1996. To determine grant levels,
competitive data from industry, peer group and national surveys of long-term
incentive plans were examined. The Committee also awarded an aggregate of 8,500
shares of restricted stock to key executives in 1996.
STOCK OWNERSHIP GUIDELINES
In 1993, the Committee established ownership guideline levels of the
Corporation's stock for executive officers and unit presidents. The guidelines
are calculated by reference to the value of the Corporation's shares as a
multiple of base salary: five times for the Chief Executive Officer, three times
for Executive Vice Presidents and one or two times for other senior executives.
Individuals are expected to have progressed at least halfway toward the goal
within three years, and if the target is not reached in five
21
<PAGE>
years, incentive compensation bonuses will be paid in restricted stock until the
ownership level is achieved. Shares held by an individual directly, shares held
indirectly in the Corporation's Savings Plan and "phantom stock units" held
under the Deferred Compensation Plan are included in meeting the ownership goal.
The Committee has also authorized a replacement ("reload") provision for
unexercised stock options to encourage the early exercise and holding of stock
option shares by executives subject to ownership guidelines. However, shares
subject to unexercised stock options are not included in meeting the ownership
goal.
CEO COMPENSATION
The Committee reviewed the performance of Michael D. Lockhart, Chairman and
Chief Executive Officer for 1996, and recommended to the Board of Directors his
salary and incentive compensation. His salary was increased 4.1% (annualized) to
$652,308. Mr. Lockhart's incentive compensation was $636,000 which was
determined on the basis of achievement of consolidated EVA. His total
compensation was $1,288,308 for 1996. Mr. Lockhart's salary was determined on
the basis of the factors previously outlined on page 20; in addition, the
Committee took into account the Corporation's improvements in operating margin,
productivity, inventory turnover and management processes.
In 1996, the Committee also granted Mr. Lockhart an option to purchase
100,000 shares of Common Stock at a price equal to 100% of the fair market price
on the date of grant and subject to a four-year vesting schedule.
INTERNAL REVENUE CODE SECTION 162(M)--IMPLICATIONS FOR EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to any of
the executive officers named in the Summary Compensation Table. Qualifying
performance-based compensation is not subject to the deduction limit if certain
requirements are met. The Corporation's policy is to maximize the deductibility
of executive compensation so long as deductibility is compatible with the more
important objective of maintaining competitive compensation programs and
motivating increasing shareholder wealth. To this end, on April 20, 1995, the
shareholders approved a performance-based incentive compensation plan for senior
executives which governs the payments of the incentive compensation.
COMMITTEE CONCLUSION
The Committee believes that the caliber and motivation of the Corporation's
employees and the quality of the Corporation's leadership determine the
Corporation's long-term performance. The Committee further believes that it is
in the shareholders' interests to compensate executives well when performance
meets or exceeds the 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 was pleased with the Corporation's performance for
1996 and believes that the compensation paid was consistent with the
Corporation's philosophy of linking executive compensation with the creation of
shareholder value.
This report is respectfully submitted by the Committee, composed of:
<TABLE>
<S> <C>
John R. Selby, Chairman Ronald E. Ferguson
Ralph E. Bailey Robert D. Kennedy
Ursula F. Fairbairn
</TABLE>
22
<PAGE>
PROPOSAL 2--APPROVAL OF
THE GENERAL SIGNAL CORPORATION
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
INTRODUCTION
To further align the interests of non-employee directors with other
shareholders, on February 6, 1997, the Board of Directors adopted, subject to
shareholder approval, the 1997 Non-Employee Directors' Stock Option Plan (the
"Plan"). It is proposed that the aggregate number of shares of Common Stock
available for issuance under the Plan be 125,000 shares (subject to adjustment
in the event of certain changes in the capitalization of the Corporation). Such
shares, which would constitute approximately 0.24% of currently outstanding
shares, may be either authorized but unissued shares or issued shares reacquired
by the Corporation.
SUMMARY OF THE PLAN
The full text of the Plan is set forth in Exhibit A to this Proxy Statement.
The following summary of certain of its provisions is qualified in its entirety
by reference to the Plan.
The Board of Directors may amend or modify the Plan without shareholder
approval, except to increase the maximum number of shares which may be issued
under the Plan (other than adjustments to reflect future stock dividends and
other relevant capitalization changes), to permit the granting of options at
less than 100% of fair market value at time of grant, to change the class of
persons eligible to participate in the Plan or to make any other amendment for
which shareholder approval is required.
The Plan will be administered by the Committee on Directors (the
"Committee") of the Board of Directors. Awards of options under the Plan may be
granted only to a director of the Corporation who is not also an officer or
other employee of the Corporation or of one of its subsidiaries, and who has
been elected, re-elected or is continuing as a member of the Board following the
applicable Annual Meeting of Shareholders of the Corporation ("Eligible
Director").
Each year, as of the date of the Annual Meeting of Shareholders of the
Corporation, each Eligible Director will be eligible to receive a non-qualified
stock option to purchase shares of Common Stock of the Corporation. Subject to
shareholder approval, each Eligible Director will receive an option to purchase
2,000 shares on the date of the 1997 Annual Meeting of Shareholders. On each
successive Annual Meeting of Shareholders, each Eligible Director will be
granted an additional option to purchase shares in an amount as determined by
the Committee. The purchase price of the Common Stock under each option will be
equal to 100% of the fair market value of the stock on the date the option is
granted and will vest and be exercisable on the date of the grant.
NEW PLAN BENEFITS UNDER THE PLAN
Subject to shareholder approval and election by shareholders of the three
nominees, Mr. Bowen, Mr. Campbell, Mr. Carpenter, Ms. Fairbairn, Mr. Ferguson,
Mr. Kennedy and Mr. Selby will receive a non-qualified option to purchase 2,000
shares on the date of the 1997 Annual Meeting of Shareholders and the purchase
price will be 100% of the fair market value of the stock on such date. On March
17, 1997, the closing price of the Corporation's Common Stock was $40.875.
23
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The stock options granted under the Plan will be non-qualified options for
tax purposes. The grant of options will not result in taxable income to the
director or a tax deduction for the Corporation. The exercise of an option will
result in taxable ordinary income to the director and a corresponding deduction
to the Corporation, in each case equal to the difference between the fair market
value of shares on the date the option was granted and their fair market value
on the date the option was exercised. Participants are responsible for the
payment of all federal, state and local taxes in respect of grants under the
Plan.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO APPROVE THE GENERAL
SIGNAL CORPORATION 1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN WILL BE IN THE
BEST OF INTERESTS OF THE CORPORATION AND ITS SHAREHOLDERS AND RECOMMENDS THAT
YOU VOTE FOR THE PROPOSAL. A favorable vote of a majority of all the votes cast
at the meeting in person or by proxy is required for approval of the General
Signal Corporation 1997 Non-Employee Directors' Stock Option Plan.
PROPOSAL 3--AUTHORIZATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors recommends that Ernst & Young LLP be appointed as
independent auditors for 1997. Submission of the selection to shareholders is
not required. The Board of Directors will reconsider the selection if it is not
approved by a majority of all the votes cast at the meeting in person or by
proxy.
Ernst & Young LLP has served as the Corporation's independent auditors since
1992. It is expected that representatives of Ernst & Young LLP will be present
at the Annual Meeting with the opportunity to make a statement, if they desire
to do so, and will be available to respond to appropriate questions.
During 1996, Ernst & Young LLP performed various professional services in
connection with its audit of the financial statements of the Corporation and its
consolidated subsidiaries, including assistance and consultation in connection
with filings with the Securities and Exchange Commission, audits of certain
employee benefit plan financial statements, attendance at Audit Committee
meetings and consultation in connection with various business, accounting and
tax matters.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO APPOINT ERNST & YOUNG LLP TO
SERVE AS INDEPENDENT AUDITORS FOR 1997.
24
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors and persons who own more than 10%
of a registered class of the Corporation's equity securities to file initial
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange. Such officers, directors and
shareholders are required by the SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file. Based solely on a review of the
copies of such forms furnished to the Corporation and written representations
from the Corporation's executive officers and directors, all persons subject to
the reporting requirements of Section 16(a) filed the required reports on a
timely basis.
OTHER MATTERS
The management is not aware that any matters other than those set forth
herein will be presented for action at the Annual Meeting. However, if any other
matter should properly come before the meeting, the persons authorized by the
accompanying proxy will vote and act with respect thereto according to their
best judgment in the interests of the Corporation.
SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1998 Annual Meeting of
Shareholders to be eligible for inclusion in the Corporation's proxy statement,
they must be received by the Corporation at its principal office in Stamford,
Connecticut, no later than November 21, 1997.
25
<PAGE>
EXHIBIT A
GENERAL SIGNAL CORPORATION
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to align further the interests of non-employee
directors with other shareholders of General Signal Corporation (the
"Corporation").
2. ADMINISTRATION
The Plan shall be administered by the Committee on Directors (the
"Committee") of the Board of Directors. The Committee shall act by a majority
vote or by a written statement signed by all of the members. Subject to the
express provisions of this Plan, the Committee shall grant stock options to non-
employee directors, and determine the number of shares to be subject to each
grant and the terms and conditions thereof.
3. STOCK SUBJECT TO PLAN
The shares to be issued under this Plan shall be made available, at the
discretion of the Board of Directors or the Committee, either from the
authorized but unissued shares of Common Stock of the Corporation or from shares
of Common Stock reacquired by the Corporation, including shares purchased in the
open market.
Subject to adjustment as provided in the last paragraph of this Section 3:
(a) the aggregate number of shares of Common Stock reserved and available
for issuance under this Plan, subject to Section 3(b) below, shall be
125,000 shares; and
(b) the shares available for granting awards in any year shall be increased
by any shares represented by options that expire unexercised for any
reason.
In the event that the number of outstanding shares of Common Stock of the
Corporation shall be changed by reason of any split-up, combination of shares,
recapitalization, stock dividend or equity distribution, the Board of Directors
shall appropriately adjust the number of shares for which awards may thereafter
be granted under this Plan either in the aggregate or to any single participant,
the number of shares then subject to awards granted previously under this Plan,
and the price per share payable upon exercise of such awards. Awards may also
contain provisions for their continuation or for other equitable adjustments
after changes in shares of Common Stock resulting from reorganization, sale,
merger, consolidation or similar occurrence.
4. ELIGIBILITY AND PARTICIPATION
Awards under this Plan may be granted only to a director of the Corporation
who is not also an officer or other employee of the Corporation or of one of its
subsidiaries, and who has been elected, re-elected or is continuing as a member
of the Board following the applicable Annual Meeting of Shareholders of the
Corporation ("Eligible Director").
A-1
<PAGE>
5. STOCK OPTIONS
GRANT
Each year, as of the date of the Annual Meeting of Shareholders of the
Corporation, each Eligible Director shall be eligible to receive a non-qualified
stock option to purchase shares of Common Stock of the Corporation. Subject to
shareholder approval, each Eligible Director shall receive an option to purchase
2,000 shares on the date of the 1997 Annual Meeting of Shareholders. On each
successive Annual Meeting of Shareholders, each Eligible Director may be granted
an additional option to purchase shares in an amount as determined by the
Committee.
OPTION PRICES
The purchase price of the Common Stock under each option shall be equal to
100% of the fair market value of the stock on the date the option is granted.
The purchase price is to be paid in full upon the exercise of the option, and
payment shall be made in cash, or by check, bank draft or money order payable to
the order of the Corporation, or by delivering shares of Common Stock of the
Corporation of equivalent fair market value on the day before the option is
exercised. Fair market value shall be the closing price on the New York Stock
Exchange or, in the event that no sale shall have taken place, the mean between
the closing bid and asked prices.
FORM OF OPTION
Options granted pursuant to this Plan to Eligible Directors shall be
evidenced by Stock Option Agreements in such form as the Committee shall from
time to time adopt.
OPTION PERIOD
The options granted hereunder shall expire on a date which is ten years
after the date of grant of the options.
VESTING
Each option granted to an Eligible Director shall vest and be exercisable on
the date of the grant.
TERMINATION OF OPTIONS
If an Eligible Director ceases to serve on the Board of Directors for any
reason other than death, disability or retirement, any outstanding options not
yet exercised at the time the Eligible Director so ceases to serve may be
exercised within one week following the date the Eligible Director so ceases to
serve, but in no event later than the expiration date of the option.
In the event of the death or disability of an Eligible Director while a
member of the Board of Directors, any outstanding options may be exercised (in
the case of death by the optionee's personal representative, heir or legatee)
during the period ending one year after the date of such death or disability,
but in no event later than the expiration date of the option. In the event of
retirement, any outstanding options may be exercised during the period ending
five years after the date of such retirement, but in no event later than the
expiration date of the option. In the event of a retired Director's death during
the fifth
A-2
<PAGE>
year after retirement, his or her heirs or estate may exercise any outstanding
options during the period ending one year after such death, but in no event
later than the expiration date of the option.
NON-TRANSFERABILITY OF OPTION
No option granted under this Plan to an Eligible Director shall be
transferable otherwise than by will or the laws of descent and distribution, and
an option may be exercised during the lifetime of the Eligible Director thereof,
only by him or her; provided, however, that the Committee may permit limited
transferability in conformance with rules promulgated by the Securities and
Exchange Commission, and provided further, however, that following retirement of
an Eligible Director, the options held by such Eligible Director may be
transferred by gift.
6. GOVERNING LAW
The validity, construction and effect of this Plan, any rules and
regulations relating to this Plan, and any awards under this Plan, shall be
determined in accordance with the laws of New York without giving effect to
principles of conflict of laws.
7. EFFECTIVE PERIOD OF PLAN
This Plan shall become effective upon the date of its approval by the
shareholders of the Corporation. Unless terminated earlier by the Board of
Directors, this Plan shall terminate on April 17, 2002; provided, however, that
any such termination shall not affect awards granted prior thereto.
8. AMENDMENT OF PLAN
The Board of Directors of the Corporation may from time to time make such
amendments of this Plan as it shall deem advisable; provided, however, that the
Board of Directors may not, without further approval of the holders of a
majority of all outstanding shares of the Corporation entitled to vote thereon,
(i) increase the maximum number of shares as to which awards may be granted
under this Plan (except as otherwise provided in Section 3), (ii) permit the
granting of options at less than 100% of fair market value at time of grant,
(iii) change the class of persons eligible to receive awards under this Plan, or
(iv) make any other amendment for which shareholder approval is required. No
amendment of this Plan may, without the consent of the holder of an existing
award, adversely affect such holder's rights thereunder.
A-3
<PAGE>
[LOGO]
One High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904
203-329-4100
<PAGE>
PROXY
GENERAL SIGNAL CORPORATION
ONE HIGH RIDGE PARK, P.O. BOX 10010, STAMFORD, CONNECTICUT 06904
PROXY/VOTING INSTRUCTION CARD
ANNUAL MEETING -- APRIL 17, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder hereby appoints MICHAEL D. LOCKHART, TERENCE D.
MARTIN and JOANNE L. BOBER, and each of them, the proxies and attorneys of the
undersigned to vote all shares of Common Stock which the undersigned is entitled
to vote at the 1997 Annual Meeting of Shareholders of General Signal
Corporation, or any adjournment thereof, upon the matters described in the
accompanying Notice of Annual Meeting and Proxy Statement, as set forth on the
reverse hereof, and in their discretion on such other business as may properly
come before the meeting or any adjournment. THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
For Participants in the General Signal Corporation Savings and Stock Ownership
Plan or the General Signal Limited Savings and Stock Ownership Plan (the
"Plans"): As to those shares of Common Stock, if any, that are held for me in
such Plans, I instruct the Trustee of the applicable Plan to sign a proxy for me
in substantially the form set forth above and on the reverse side. THE TRUSTEE
SHALL MARK THE PROXY AS I SPECIFY. WHERE I DO NOT SPECIFY A CHOICE, MY SHARES
WILL BE VOTED IN THE SAME PROPORTION AS THE TRUSTEE VOTES THE SHARES FOR WHICH
IT RECEIVES INSTRUCTIONS. YOUR VOTING INSTRUCTIONS WILL BE HELD IN STRICTEST
CONFIDENCE.
(CONTINUED, AND TO BE DATED AND SIGNED, ON REVERSE SIDE)
<PAGE>
Please mark your 6142
/x/ votes as in this
example
- - --------------------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
- - --------------------------------------------------------------------------------
FOR WITHHOLD
1. Election of / / / /
Directors.
For, except vote withheld from the following nominee(s)
- - ------------------------------------------------------
NOMINEES: Van C. Campbell, Michael A. Carpenter and Robert D. Kennedy
FOR AGAINST ABSTAIN
2. Approval of the General Signal / / / / / /
Corporation 1997 Non-Employee
Directors' Stock Option Plan.
3. Approval of the appointment of Ernst
& Young LLP as the Independent
Auditors of the Corporation.
4. In accordance with their discretion on
any other matters or proposals which
may properly come before the Meeting.
YES NO
Please check box if you want your / / / /
voting instructions to be confidential
pursuant to the Corporation's confidential
voting policy described in the 1997
Proxy Statement.
Please check box if you plan to attend Annual Meeting.
SIGNATURE(S) DATE
- - --------------------------------------------------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as shown. Sign, date and return the
Proxy Card promptly using the enclosed envelope.
