<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
1997 FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-996
GENERAL SIGNAL CORPORATION
BOX 10010 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904-2010
TELEPHONE NUMBER (203) 329-4100
IRS EMPLOYER IDENTIFICATION NO. 16-0445660
STATE OF INCORPORATION: NEW YORK
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
- -------------------------------------------------------------------------------
<S> <C>
Common Stock par value $1.00 New York Stock Exchange
(Par value reduced from $6.67 effective April 21, Pacific Stock Exchange
1969)
- -------------------------------------------------------------------------------
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates as of
February 13, 1998 was approximately $1.8 billion. As of February 13, 1998,
there were 47.0 million shares of General Signal Corporation common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE--PART III
Portions of the Proxy Statement for 1998 Annual Meeting of Shareholders
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<C> <S> <C>
1 Business........................................................... 3
2 Properties......................................................... 8
3 Legal Proceedings.................................................. 8
4 Submission of Matters to a Vote of Security Holders................ 8
5 Market for the Registrant's Common Stock and Related Shareholder
Matters........................................................... 9
6 Selected Financial Data............................................ 9
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 10
7A Quantitative and Qualitative Disclosures about Market Risk......... 15
8 Financial Statements and Supplementary Data........................ 15
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 15
10 Directors and Executive Officers................................... 16
11 Executive Compensation............................................. 16
12 Security Ownership of Certain Beneficial Owners and Management..... 16
13 Certain Relationships and Related Transactions..................... 16
14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.. 17
Signatures......................................................... 19
Index to Financial Statements, Schedule and Exhibits............... F-1
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENTS: General Signal Corporation (the company), incorporated
in New York in 1904, is a manufacturer of equipment for the Process Controls,
Electrical Controls and Industrial Technology industries. The company's key
Process industry products include mixers, valves for municipal water supply
and wastewater treatment, pulp, paper, food, pharmaceutical and chemical
manufacturing, ultra low-temperature freezers for life science research and
furnaces. In the Electrical industry, key products include uninterruptible
power supply equipment, power transformers and fire detection systems.
Products serving the Industrial Technology industry include auto and bicycle
components, data networking equipment and fare collection and vending
equipment.
During the last five years, the company invested approximately $394.4
million in cash and 4.4 million shares of common stock to acquire 12
businesses and/or product lines. The notes to the financial statements on page
F-21 of this 10-K provide additional information concerning significant
acquisitions during the last three years. Additionally, during the last five
years, the company disposed of four units, two of which were accounted for as
discontinued operations. Information regarding these dispositions is on pages
F-21 through F-22 of this 10-K. In September 1997, the company contributed the
net assets of the General Signal Electrical Group (GSEG) to the EGS Electrical
Group LLC (EGS), a joint venture with Emerson Electric's Appleton Electric
operations. See page F-10 of this 10-K for additional information.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS: Selected business segment
information for the last five fiscal years is summarized on page F-23 of this
10-K. Net sales from the uninterruptible power systems (UPS) class of product
accounted for 12.1%, 11.2% and 8.2% of consolidated net sales in 1997, 1996
and 1995, respectively.
A summary of information by geographic area for the last five fiscal years
is included on page F-24 of this 10-K.
NARRATIVE DESCRIPTION OF BUSINESS
MAJOR MARKETS AND PRODUCTS AND METHOD OF DISTRIBUTION: A description of the
registrant's business follows:
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET
- ------------------ -------------- ----------- -------------------------
PROCESS CONTROLS
<S> <C> <C> <C>
DEZURIK Industrial valves for Water supply and McWane; Tyco;
Sartell, Minnesota gases, liquids, slurries wastewater treatment AMRI
and dry solids
Pulp and paper Neles; Velan;
manufacturing Fisher
Chemical processing Fisher; Velan; Duriron;
Masonelian
- ---------------------------------------------------------------------------------------------------------
KAYEX Crystal growing furnaces Semiconductor wafer Ferrofluidics; Mitsubishi
Rochester, New York manufacturers Machine
- ---------------------------------------------------------------------------------------------------------
LIGHTNIN Industrial fluid mixers and Chemical process Robbins & Meyers
Rochester, New York agitators industries (Chemineer brand); Ekato;
Philadelphia Mixers
Water supply and Philadelphia Mixers;
wastewater treatment Robbins & Meyers
(Chemineer brand)
Minerals processing Philadelphia Mixers;
Robbins & Meyers
(Prochem brand); Ekato
- ---------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET
- ------------------ -------------- ----------- -------------------------
<S> <C> <C> <C>
GENERAL SIGNAL Ultra-low temperature Life science research Forma Scientific;
LABORATORY laboratory freezers laboratories Sanyo Scientific
EQUIPMENT, INC.
(formerly Revco) Specialty refrigerators Clinical laboratories Forma Scientific;
Asheville, Sanyo Scientific
North Carolina
CO2 incubators Industrial research Forma Scientific;
laboratories Nu Aire
Laboratory ovens Academic laboratories Precision Scientific;
Lab-Line
Laboratory furnaces Institutional laboratories Barnstead/Thermolyne
- -----------------------------------------------------------------------------------------------------------
LINDBERG Industrial furnaces, ovens Transportation and Surface Combustion;
Watertown, Wisconsin and environmental chambers electronics equipment Despatch
manufacturing and
Spare parts, technical service component manufacturers
and process support
- -----------------------------------------------------------------------------------------------------------
STOCK EQUIPMENT Coal feed systems Electrical utilities Merrick; Ramsey
COMPANY
Chagrin Falls, Ohio Paper manufacturers and Ramsey
industrial steam
generators
Feed systems and flow Waste supply and Wallace and Tiernan
measurement devices for wastewater treatment
water and wastewater
treatment
- -----------------------------------------------------------------------------------------------------------
ELECTRICAL CONTROLS
BEST POWER Uninterruptible power Midrange and mainframe Exide; Liebert;
Necedah, Wisconsin systems computers Merlin Gerlin
Industrial and electrical Exide; Liebert;
installations Merlin Gerlin
Personal American Power
computers/workstations and Conversion Corp.;
internetworking equipment Exide; Tripp Lite
Telecommunications American Power
Conversion Corp.;
Exide
- -----------------------------------------------------------------------------------------------------------
DIELECTRIC Radio frequency Television and FM Andrew Corp.;
COMMUNICATIONS transmission equipment and broadcasters Harris Corp.
Raymond, Maine broadcast antenna systems
Cable pressurization Telecommunications Puregas
equipment providers
- -----------------------------------------------------------------------------------------------------------
EDWARDS SYSTEMS Fire detection products, Commercial, industrial and Simplex; Cerberus;
TECHNOLOGY systems and services institutional facilities Pittway Corp.
Cheshire, Connecticut
- -----------------------------------------------------------------------------------------------------------
GS ELECTRIC Universal, blower and Floorcare appliance AMETEK/Lamb Electric
Carlisle, Pennsylvania permanent magnet manufacturers
fractional horsepower
electric motors Yard and garden MAMCO
appliance manufacturers
Fitness equipment United Technologies
manufacturers, tubs,
pools, spas
- -----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET
- ------------------ -------------- ----------- -------------------------
<S> <C> <C> <C>
WAUKESHA ELECTRIC Medium-power Investor-owned and public ABB
Waukesha, Wisconsin transformers and substations power utilities
Industrial and commercial ABB; GE/Prolec
sector
Transformer Investor-owned and Solomon; S.D. Meyers
remanufacturing and public power utilities
decommissioning services
- --------------------------------------------------------------------------------------------------------------
INDUSTRIAL TECHNOLOGY
GENERAL SIGNAL Wide-area network matrix Financial services, Dynatech; Cornet
NETWORKS switching systems common carriers,
Mount Laurel, business services
New Jersey
Host networking products Common carriers, IBM; CNT; Network
and fiber management financial services, Systems
systems transportation
Telecommunications Regional Bell operating Hekimian; ADA
distributed performance companies, long-distance
measurement systems carriers, international
telephone companies
- --------------------------------------------------------------------------------------------------------------
GFI GENFARE Automatic fare collection Bus and rail mass Cubic Corporation
Elk Grove Village, including electronic transit
Illinois fareboxes, faregates,
magnetic ticket processing U.S. Postal Service National Vendors;
systems and high-security Northrup/Grumman
vending equipment
Passenger processing,
information systems and
audio products for transit
market
Stamp vending machines
- --------------------------------------------------------------------------------------------------------------
METAL FORGE Cold-forged solid and Automotive OEM Thompson Products
Dublin, Ohio tubular metal components
and assemblies for Bicycle OEM
automobiles and bicycles
Automotive OEM service Arvin; Walker
- --------------------------------------------------------------------------------------------------------------
EQUITY INVESTMENT
EGS ELECTRICAL GROUP, Electrical hazardous and non- Commercial and industrial Crouse-Hinds; Thomas &
LLC (joint venture with hazardous location conduit construction, industrial Betts; Square D; Federal
Emerson Electric) fittings, accessories, lighting, automation and MRO Signal Corp.; Lithonia
Chicago, Illinois enclosures and controls,
power conditioning supplies,
transformers,
signaling/signage, heat trace
and fire stop equipment
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The company's products, except for EGS's products, are sold by its own sales
organization and through distributors and manufacturers' representatives.
5
<PAGE>
MATERIALS AND SUPPLIES: The company manufactures many of the components used
in its products. It also purchases a variety of basic materials and component
parts. The company believes that it will generally be able to obtain adequate
supplies of major items or reasonable substitutes.
PATENTS: The company holds many patents and has continued to secure other
patents that cover many of its products. While patents are important in the
aggregate to the company's competitive position, the loss of any single
patent, patent application or patent license agreement, or group thereof,
would not materially affect the conduct of its business as a whole. The
company is both a licensor and licensee of patents.
WORKING CAPITAL: A discussion of working capital is included on pages 13
through 14 of this 10-K.
BACKLOG: The amount of unfilled orders was approximately $363.1 million as
of December 31, 1997 and $444.6 million as of December 31, 1996. In the third
quarter of 1997, the company sold the General Signal Pump Group (GSPG) and
contributed the net assets of GSEG to EGS, resulting in a decrease in backlog
of approximately $64 million. Substantially all unfilled orders are expected
to be filled within the next year.
COMPETITION: Although the businesses of the company are highly competitive,
the competitive position cannot be determined accurately in the aggregate or
by segment since none of its competitors offer all of the same product lines
or serve all of the same markets, nor are reliable comparative figures
available for its competitors. In most product groups, competition comes from
numerous concerns, both large and small. The principal methods of competition
are price, service, product performance and technical innovation. These
methods vary with the type of product sold. The company believes that it can
compete effectively on the basis of each of these factors as they apply to the
various products offered.
RESEARCH AND DEVELOPMENT: Research and development information for the last
three years is included on page F-24 of this 10-K.
ENVIRONMENTAL MATTERS: The company is involved in various stages of
investigation and remediation relative to environmental protection matters,
arising from its own initiative, from indemnification of purchasers of
divested operations, or from legal or administrative proceedings, some of
which involve waste disposal sites. The company has a comprehensive
environmental compliance program which includes environmental audits conducted
by internal and outside independent environmental professionals and regular
communications with the company's operating units, regarding environmental
compliance requirements and anticipated regulations.
The company has been notified that it has been named as a potentially
responsible party or has received other notices of potential liability
pursuant to various federal and state environmental laws (including, without
limitation, the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and similar state legislation) at 69 multi-party sites
which are not present or former facilities of the company and for which the
company may be jointly and severally liable. It is alleged that the company
generated hazardous substances, pollutants or contaminants which are present
at those sites. The company has resolved its liability by entering into de
minimis settlements or other buyout agreements with governmental authorities
or other parties at 32 of these sites and believes that it has no liability
with respect to 17 of these sites. The company is of the opinion, based on
information currently available, that its aggregate probable remaining
liability at the other 20 sites is approximately $3 million.
The company is engaged in site investigation and/or remediation at the
following sites presently or formerly owned by the company and has accrued for
its expected future costs, as detailed below. It is the company's policy not
to offset expected insurance recoveries against expected obligations when
determining the amount of environmental accruals.
New York Air Brake Landfill/Kelsey Creek Site: In February 1990, the company
entered into a consent order with the New York State Department of
Environmental Conservation (NYSDEC) to conduct an investigation and
remediation at the company's discontinued New York Air Brake facility in
Watertown, New York. On March 30, 1994, NYSDEC issued a Record of Decision
with respect to site remediation. The remedial action consists of
consolidation of contamination in the existing industrial landfill, capping
the landfill, collecting contaminated groundwater downgradient of the
landfill, and the removal of certain sediments in Kelsey Creek. The future
cost estimated by the company for site remediation is approximately $11
million. The company has filed litigation against the City of Watertown to
challenge an increase in sewer discharge fees for leachate at the landfill and
believes that it will ultimately prevail in such litigation.
6
<PAGE>
Hevi-Duty Facility: The company is participating in a voluntary clean-up
program sponsored by the state of North Carolina and has entered into an
Administrative Order on Consent with the North Carolina Department of
Environmental Health and Natural Resources. The company currently believes
that the probable aggregate remaining liability for clean-up of this site will
be approximately $4.5 million.
Fairbanks Morse Facility: On December 2, 1994, the company acquired
Fairbanks Morse Pump Corporation (Fairbanks). Based on the company's pre-
acquisition environmental assessment and site testing performed at the
Fairbanks facility located in Kansas City, Kansas, the company determined that
there is soil and groundwater contamination at the site. The company has
entered into a Consent Order with the Kansas Department of Environment and
Health with respect to additional site investigation. The company believes
that up to $4.8 million could be required to investigate and remediate
contaminated soil and groundwater at the site. The accrual to cover the
expected costs was established at the time of acquisition.
The company is conducting investigations and remedial activities due to
contamination at six additional present or former facilities of the company.
Site contamination has been alleged with respect to two other former
facilities. Based on information currently available, the company believes
that the probable aggregate remaining liability for investigation and
remediation at these eight sites will not exceed $1.5 million.
The potential costs related to the matters described above and the possible
impact on future operations are uncertain due in part to the complexity of
government laws and regulations and their interpretations, the varying costs
and effectiveness of clean-up technologies, the uncertain level of insurance
or other types of recovery and the questionable level of the company's
responsibility. In management's opinion, after considering reserves
established for such purposes, remedial actions for compliance with the
present laws and regulations governing the protection of the environment are
not expected to have a material adverse impact on the company's results of
operations or financial position.
EMPLOYEES: At December 31, 1997, the company had approximately 9,900
employees. Approximately 1,400 employees are represented by 16 different
collective bargaining units. Approximately 42 percent of the labor force that
is covered by collective bargaining agreements have agreements that expire
within one year. The company has generally experienced satisfactory labor
relations at its various locations.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME, POSITION, AGE AT DECEMBER 31, 1997 AND OTHER INFORMATION AGE
- -------------------------------------------------------------- ---
<S> <C>
Michael D. Lockhart........................................................ 48
Chairman and Chief Executive Officer since October 19, 1995. Previously,
President and Chief Operating Officer since October 3, 1994. Prior to
joining the company, Vice President and General Manager of General
Electric's Commercial Engines and Services division, following several
other key executive positions at GE since 1981. Prior to joining GE,
served as Vice President and Director, The Boston Consulting Group.
Terence D. Martin.......................................................... 54
Executive Vice President and Chief Financial Officer since February 2,
1995 and Treasurer since January 1, 1998. Previously, Chief Financial
Officer of American Cyanamid Company since 1991 and Treasurer since 1988.
Ernest R. Verebelyi........................................................ 50
Executive Vice President--Operations since December 12, 1997. Previously,
Senior Vice President--Operations since November 1, 1996. Prior to
joining the Company, Executive Vice President of Special Products
Division of Emerson Electric since 1994, and Vice President of Operations
since 1991. Prior to joining Emerson, served in various executive and
management positions with Hussmann and General Electric.
Joanne L. Bober............................................................ 45
Senior Vice President, General Counsel, and Secretary since January 2,
1997. Previously, Partner at Jones, Day, Reavis & Pogue since 1989 and
associate from 1983 to 1988.
Elizabeth D. Conklyn....................................................... 50
Senior Vice President--Human Resources since December 14, 1995.
Previously, Senior Vice President, Human Resources and Organization for
Mobile Telecommunications Technologies since 1994. Served in various
human resource management positions with IBM from 1977 to 1994.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION, AGE AT DECEMBER 31, 1997 AND OTHER INFORMATION AGE
- -------------------------------------------------------------- ---
<S> <C>
Raymond L. Arthur........................................................... 38
Vice President and Controller since March 20, 1997. Formerly, Assistant
Vice President, Director of Compliance, following several other positions,
for American Home Products Corporation since 1994 and American Cyanamid
Company since 1986.
</TABLE>
<TABLE>
<S> <C>
Nino J. Fernandez........................................................... 56
Vice President--Investor Relations since May 1, 1987. Previously, Director
of Communications since April 1, 1974.
</TABLE>
<TABLE>
<S> <C>
Jeffrey M. Johnson......................................................... 40
Vice President--Sourcing since August 21, 1997. Previously, Director--
Supply Chain, following several other positions for Black & Decker since
1996 and Sterling Drug since 1984.
</TABLE>
<TABLE>
<S> <C>
Donald J. Noonan........................................................... 57
Vice President--Asia Pacific Development since September 11, 1996.
Formerly, Vice President and General Manager of Southern Pacific Aircraft
Engine Operations of General Electric Aircraft Engines since 1981.
</TABLE>
<TABLE>
<S> <C>
Lawrence J. Smith.......................................................... 54
Vice President--Engineering since December 12, 1997. Previously, Direc-
tor--Engineering since July 14, 1997. Prior to joining the company, Vice
President--Engineering, following several other positions, for Liebert
North America, a division of Liebert Corporation, owned by Emerson Elec-
tric from 1982 to 1997.
</TABLE>
The executive officers are elected annually by the Board of Directors.
There are no family relationships between any of the directors or executive
officers of the company.
ITEM 2. PROPERTIES
The following is a list of the company's principal properties, classified by
sector:
<TABLE>
<CAPTION>
APPROXIMATE
NO. OF SQUARE
LOCATION FACILITIES FOOTAGE PERCENT
-------- ---------- ------------- ------------
OWNED LEASED
----- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Process Controls
Sector................. 9 states and 8 foreign countries 21 2.0 87% 13%
Electrical Controls
Sector................. 10 states and 6 foreign countries 23 2.1 84% 16%
Industrial Technology
Sector................. 8 states 11 0.8 87% 13%
</TABLE>
In addition to manufacturing plants, the company as lessee occupies
executive offices in Stamford, Connecticut, and various sales and service
locations throughout the world. All of these properties, as well as the
related machinery and equipment, are considered to be well maintained and
suitable and adequate for their intended purposes. Assets subject to lien are
not significant.
ITEM 3. LEGAL PROCEEDINGS
The company and certain of its subsidiaries are defendants in legal
proceedings incidental to their businesses. Although the ultimate disposition
of these proceedings is not presently determinable, management does not expect
the outcome to have a material adverse impact on the company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The company's common stock is listed on the New York and Pacific stock
exchanges under the symbol "GSX." Information as to quarterly prices for the
last two years, and dividends paid, is included on page F-25 of this 10-K.
There were approximately 10,052 holders of record of the company's common
stock on February 13, 1998.
ITEM 6. SELECTED FINANCIAL DATA
SIX-YEAR FINANCIAL SUMMARY
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales............... $1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8
-------- -------- -------- -------- -------- --------
Cost of sales........... 1,378.5 1,435.7 1,308.0 1,109.5 959.0 1,070.2
Selling, general and
administrative
expenses............... 394.6 406.2 354.4 292.3 259.3 287.7
Other charges and
(credits).............. (72.7) (20.8) 20.1 (46.2) (19.8) 85.6
-------- -------- -------- -------- -------- --------
Total operating costs
and expenses........... 1,700.4 1,821.1 1,682.5 1,355.6 1,198.5 1,443.5
-------- -------- -------- -------- -------- --------
Operating earnings...... 254.2 243.9 180.7 172.1 155.7 34.3
Equity in earnings of
EGS.................... 11.8 -- -- -- -- --
Interest expense, net... 13.2 21.5 24.3 11.8 16.6 24.8
-------- -------- -------- -------- -------- --------
Earnings from continuing
operations before
income taxes........... 252.8 222.4 156.4 160.3 139.1 9.5
Income taxes............ 121.8 89.0 56.3 56.2 41.0 3.2
-------- -------- -------- -------- -------- --------
Earnings from continuing
operations............. 131.0 133.4 100.1 104.1 98.1 6.3
Earnings (loss) from
discontinued opera-
tions, net of income
taxes.................. -- -- -- 2.4 (31.5) 6.1
Earnings (loss) on dis-
posal of discontinued
operations, net
of income taxes........ 2.3 -- (64.0) (25.8) -- --
-------- -------- -------- -------- -------- --------
Earnings before extraor-
dinary charges and cu-
mulative effect of ac-
counting changes....... 133.3 133.4 36.1 80.7 66.6 12.4
Extraordinary charges... -- -- -- -- (6.6) (0.3)
Cumulative effect of ac-
counting changes....... (3.7) -- -- -- (25.3) (92.4)
-------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ 129.6 $ 133.4 $ 36.1 $ 80.7 $ 34.7 $ (80.3)
-------- -------- -------- -------- -------- --------
PER-SHARE DATA(/1/)
Basic earnings (loss)
per share of common
stock:
Continuing operations.. $ 2.61 $ 2.68 $ 2.04 $ 2.20 $ 2.17 $ 0.15
Discontinued opera-
tions................. 0.05 -- (1.30) (0.49) (0.70) 0.15
Extraordinary charges.. -- -- -- -- (0.14) (0.01)
Cumulative effect of
accounting changes.... (0.08) -- -- -- (0.56) (2.21)
-------- -------- -------- -------- -------- --------
Basic net earnings
(loss)................. $ 2.58 $ 2.68 $ 0.74 $ 1.71 $ 0.77 $ (1.92)
-------- -------- -------- -------- -------- --------
Diluted earnings (loss)
per share of common
stock:
Continuing operations.. $ 2.60 $ 2.62 $ 2.01 $ 2.16 $ 2.13 $ 0.15
Discontinued opera-
tions................. 0.05 -- (1.24) (0.47) (0.65) 0.14
Extraordinary charges.. -- -- -- -- (0.14) (0.01)
Cumulative effect of
accounting changes.... (0.07) -- -- -- (0.53) (2.19)
-------- -------- -------- -------- -------- --------
Diluted net earnings
(loss)................. $ 2.58 $ 2.62 $ 0.77 $ 1.69 $ 0.81 $ (1.91)
-------- -------- -------- -------- -------- --------
Cash dividends per
share.................. 1.035 0.975 0.96 0.915 0.90 0.90
Book value per share.... 13.37 14.47 11.71 11.64 11.09 8.90
-------- -------- -------- -------- -------- --------
SUMMARY OF FINANCIAL
POSITION
Working capital........ $ 191.6 $ 252.7 $ 289.3 $ 349.2 $ 268.8 $ 347.8
Property, plant and
equipment............. 240.7 310.0 312.7 280.5 263.4 246.9
Total assets........... 1,388.0 1,551.0 1,613.2 1,357.9 1,224.9 1,258.4
Total long-term liabil-
ities................. 381.8 368.0 603.0 442.0 373.9 537.7
Shareholders' equity... 629.7 743.8 578.1 547.9 525.2 374.8
-------- -------- -------- -------- -------- --------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS
Working capital to
sales.................... 9.8% 12.2% 15.5% 22.9% 19.8% 23.5%
Selling, general and ad-
ministrative expenses to
sales.................... 20.2% 19.7% 19.0% 19.1% 19.1% 19.5%
Operating margin.......... 13.0% 11.8% 9.7% 11.3% 11.5% 2.3%
After-tax return on net
sales.................... 6.7% 6.5% 5.4% 6.8% 7.2% 0.4%
Return on average share-
holders' equity.......... 18.9% 20.2% 6.3% 15.0% 7.7% (18.9%)
Current ratio............. 1.5 1.6 1.7 1.9 1.8 2.0
Total debt to capitaliza-
tion..................... 25.6% 21.8% 43.1% 33.1% 27.6% 49.7%
--------- --------- --------- --------- --------- ---------
SUPPLEMENTAL INFORMATION
Capital expenditures...... 56.5 59.3 49.0 74.8 55.1 49.9
Depreciation of property,
plant and equipment 50.7 52.6 50.3 41.7 35.4 40.6
Research and develop-
ment..................... 45.7 47.5 46.9 49.7 53.1 56.2
Common stock price range:
High.................... 53 44 1/2 42 1/2 38 37 7/8 32 5/8
Low..................... 36 1/8 32 28 30 1/8 30 25 7/8
Price-earnings ratio
range--continuing opera-
tions(/3/)............... 20.4-13.9 17.0-12.2 21.1-13.9 17.6-14.0 17.8-14.1 21.3-16.9(/2/)
Average common shares
outstanding.............. 50.2 49.7 49.2 47.3 45.2 41.8
Employees (in thou-
sands)................... 9.9 13.0 12.9 12.2 11.2 12.1
--------- --------- --------- --------- --------- ---------
</TABLE>
- -------
(1) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share. See pages F-8 and F-20 for further information.
(2) Excludes the impact of after-tax charges related to dispositions of
businesses.
(3) Price-earnings ratio range is based on diluted earnings per share.
See pages F-21 through F-22 of the notes to the consolidated financial
statements of this 10-K for information regarding the company's acquisition
and divestiture activities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA)
The following discussion should be read in conjunction with the company's
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
Overview
BUSINESS COMBINATIONS AND DIVESTITURES: During the last three years, the
company completed three significant business combinations and two
divestitures. In June 1995, the company acquired Best Power Technology, Inc.
(Best Power) for $206. In connection with this acquisition, the company
recorded pre-tax charges of $7 for severance and other consolidation costs. In
July 1995, the company acquired MagneTek Electric Inc. (Waukesha Electric) for
$74. In November 1995, the company merged with Data Switch Corporation (Data
Switch) and recorded a pre-tax charge of $13 for transaction costs, severance
and balance sheet valuation adjustments. See page F-21 for additional
information.
In August 1997, the company sold GSPG for approximately $200 and recognized
a pre-tax gain of $64. Income tax expense on the gain was $46 or 72 percent of
the pre-tax gain. The rate differs from the U.S. statutory tax rate due to a
difference in the book and tax basis of GSPG. In January 1996, the company
sold Kinney Vacuum Company (Kinney) for $29 and recorded a pre-tax gain of
$21. See pages F-21 through F-22 for additional information.
In September 1997, the company contributed the net assets of GSEG to EGS, a
joint venture with Emerson Electric's Appleton Electric operations. The
company accounts for its investment in EGS under the equity method of
accounting. See page F-10 for additional information.
10
<PAGE>
NONRECURRING GAINS AND EXPENSES: In the fourth quarter of 1997, the company
settled patent litigation and sold related patents for a gain of $10 (Patent
Income) and sold its equity interest in a company in Mexico for a gain of $9
(Mexico Gain). Income tax expense on the gains totaled $11. The effective tax
rate on the Mexico Gain differs from the U.S. statutory tax rate due to a
difference in the book and tax basis of the equity investment sold. The
company also recorded charges of $14 (Fourth Quarter 1997 Charges) for asset
valuations, lease termination costs and other individually insignificant
matters.
In September 1997, the company recorded charges for potentially excess and
obsolete inventory and potentially uncollectible accounts receivable, as well
as recorded professional fees in connection with the formation of EGS. The
company also wrote off assets related to a discontinued product line and
recorded a charge for cancellation of a facility lease due to a restructuring
plan for Best Power. Additionally, the company reversed a restructuring
reserve that was no longer needed due to the information of EGS. The net of
these charges totaled $14 (Third Quarter 1997 Charges).
In July 1996, the company negotiated a royalty settlement related to one of
its previously divested semiconductor businesses and received $4 in connection
with this agreement (the Royalty Income Amount). In May 1996, a fire at a
supplier facility destroyed certain assets of a business and in September
1996, the company received $2 in insurance proceeds (Insurance Proceeds), net
of related expenses, and recognized a gain on the involuntary conversion of
these assets.
In the first quarter of 1996, the company recorded charges totaling $20
(First Quarter 1996 Charges) for asset write-downs, lease termination costs,
severance, warranty repairs and environmental matters.
1997 COMPARED WITH 1996
REVENUES: Sales decreased 5.3 percent from 1996 levels primarily due to the
disposition of GSPG and the contribution of GSEG's net assets to EGS. Adjusted
for these transactions, net sales increased approximately 2 percent due
primarily to increased sales in the Electrical Controls sector as well as
higher volume of industrial oven and laboratory products. International sales
represented approximately 25 percent of total net sales in 1997 versus 23
percent in 1996. The overall decline in sales is the result of the following
factors (percentages are expressed in relation to 1996 sales): dispositions,
including EGS (6%); volume 2%; price (1%).
Process Controls sector sales decreased 10.7 percent to $672 primarily due
to the sale of GSPG, which recorded sales of $73 in the four months ended
December 31, 1996. Lower sales volume of crystal growing furnaces, as a result
of a cyclical downturn in the semiconductor equipment market, and lower mixer
volume, reflecting the impact of several significant projects in 1996, also
contributed to the decrease. Offsetting these decreases were increased sales
of industrial oven and laboratory products due in part to increased laboratory
construction and renovations.
Sales in the Electrical Controls sector decreased 3.6 percent to $911 due
primarily to the contribution of the GSEG business to EGS. Adjusted for the
contribution of GSEG, net sales increased approximately 6.2 percent. Out of
the five continuing business units, four experienced increased revenue over
the prior year. The largest sales improvements were noted in the medium-power
transformer, fire detection products and uninterruptible power systems
products.
Industrial Technology sales increased 1.2 percent to $372. Included in 1996
sales was the Royalty Income Amount referred to above. Excluding the Royalty
Income Amount from 1996 revenue, sales would have increased 2.4 percent.
Increased demand from North American automotive producers as well as strong
sales of General Signal Network's CD 9000(TM) Director contributed to the
growth.
COSTS AND EXPENSES: Cost of sales included $11 of Third Quarter 1997 Charges
in 1997 and $13 of First Quarter 1996 Charges in 1996. Adjusted for the items
referred to above and the Royalty Income Amount, 1997 gross profit as a
percentage of sales decreased from 31.0 percent to 30.0 percent. The decrease
was due to a shift in sales to lower margin products in certain businesses, as
well as the contribution of GSEG's net business assets to EGS, which carried a
high gross margin. Research and development spending was two percent of sales
in both years.
11
<PAGE>
Selling, general and administrative expenses in 1997 included $10 of Patent
Income, $14 of Fourth Quarter 1997 Charges and $3 of Third Quarter 1997
Charges. 1996 expenses included $7 of First Quarter 1996 Charges and $2 of
Insurance Proceeds. Excluding these items in both 1997 and 1996 as well as the
Royalty Income Amount, selling, general and administrative expenses as a
percentage of sales increased from 19.5 percent to 19.8 percent, as cost
reduction efforts did not match lower sales volume. 1996 operating expenses
were positively impacted by environmental insurance recoveries and the
collection of a previously written off receivable totaling $4. Also included
in selling, general and administrative expenses were pension credits of $15 in
1997 and $9 in 1996. These credits resulted from the company's overfunded
pension plans and favorable long-term investment results.
Net interest expense decreased 38.6 percent due to lower average debt
levels. Cash generated from operations and divestitures was used to partially
pay down debt.
The 1997 effective tax rate was 48.2 percent, which included $46 of income
taxes from the sale of GSPG and $7 on the Mexico Gain. The company anticipates
that its effective tax rate for 1998 will be 38.5 percent.
DISCONTINUED OPERATIONS: During 1995, the company recorded losses on the
divestitures of the Leeds & Northrup Company (L&N) and Dynapower/Stratopower
(Dynapower) and set up reserves to cover potential remaining obligations. In
September 1997, it was determined that $2 of this amount, net of tax, was no
longer required and accordingly, was reversed through discontinued operations.
1996 COMPARED WITH 1995
REVENUES: Sales increased 10.8 percent over 1995 levels, approximately half
of which was due to the acquisitions of Best Power and Waukesha Electric in
June and July of 1995, respectively. Adjusted for acquisitions and
dispositions, sales improved approximately five percent. International sales
in 1996 totaled approximately 23 percent of the company's net sales versus 22
percent in 1995. Price changes, volume changes, acquisitions, net of
dispositions, and new product introductions accounted for 2 percent, 50
percent, 47 percent and 1 percent of the revenue increase, respectively.
Process Controls sector sales improved 4.5 percent to $752 on strong second
half volume activity in pumps, mixers and crystal growing furnaces. These
increases were partially offset by the disposition of Kinney, sold in January
1996, which generated revenues of $25 in 1995.
Sales in the Electrical Controls sector increased 21.7 percent to $945. The
addition of Best Power and Waukesha Electric accounted for approximately 75
percent of the increase. A strong UPS market and North American market share
gains in GSEG's electrical fittings also contributed to the improvement.
Industrial Technology sector sales increased 0.2 percent to $367. Included
in 1996 sales was the Royalty Income Amount. Excluding the Royalty Income
Amount from 1996 revenue, sales would have decreased 0.5 percent. Sales from
new products introduced in the fourth quarter of 1996 as well as higher
product sales of matrix switch systems to the telecommunication and
datacommunication industries were offset by the completion of several large
farebox contracts in 1995.
COSTS AND EXPENSES: In 1996, cost of sales included $13 of First Quarter
1996 Charges. Adjusted for these items and the Royalty Income Amount, gross
profit as a percentage of sales increased from 29.8 percent to 31.0 percent.
Improved cost structures at several operating units were the primary reasons
for the increase. Margin improvements were strongest for mixer, coal feeder,
broadcast antenna, electrical fitting, power transformer and automotive
products. Gross profit in 1996 included $1.7 related to liquidations of LIFO
inventory quantities. Research and development spending ranged from two to
three percent in both years.
Selling, general and administrative expenses in 1996 included $7 of First
Quarter 1996 Charges offset by $2 of Insurance Proceeds. Excluding these items
from 1996 expenses and the Royalty Income Amount, selling, general and
administrative expenses increased from 19.0 percent to 19.5 percent. The
inclusion of a full year's operating expenses related to Best Power, which has
a higher rate of operating expenses than the rest of the company, as well as
lower credits in connection with the settlement of insured matters, were the
primary reasons for the increase. 1996 operating expenses were positively
impacted by environmental insurance recoveries and the collection of a
previously written off receivable totaling $4. 1995 operating expenses were
positively impacted by environmental insurance recoveries and gains on the
sale of assets of totaling $11. Also included in selling, general and
administrative expenses were pension credits of $9 in both 1996 and 1995.
These credits resulted from the company's overfunded pension plans and
favorable long-term investment results.
12
<PAGE>
Net interest expense decreased 11.5 percent due to lower average debt
levels. Cash generated from operations and divestitures was used to pay down
the debt incurred in connection with 1995 acquisitions.
The 1996 effective tax rate rose to 40 percent from 36 percent in 1995, due
largely to reductions in the deferred tax valuation allowance recorded in the
prior year.
DISCONTINUED OPERATIONS: The company adopted a plan to sell L&N and
Dynapower in November 1994. In 1995, the company recorded after-tax net losses
totaling $64 ($1.30 per share) in connection with the divestitures of these
businesses.
LIQUIDITY AND CAPITAL RESOURCES
The following information was derived from the Consolidated Financial
Statements:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Cash flow from operating activities............................ $109.0 $191.7
------ ------
Divestitures................................................... 216.9 94.4
Capital expenditures........................................... (56.5) (59.3)
Other investing activities..................................... (5.5) (2.8)
------ ------
Cash flow from investing activities............................ 154.9 32.3
------ ------
Debt repayments, net of borrowings............................. 52.4 (173.2)
Dividends paid................................................. (51.7) (47.6)
Purchase of common stock....................................... (240.4) (1.2)
Other financing activities..................................... 11.4 14.7
------ ------
Cash flow from financing activities............................ (228.3) (207.3)
------ ------
Effect of exchange rate changes on cash and cash equivalents... (3.3) --
------ ------
Net changes in cash and cash equivalents....................... $ 32.3 $ 16.7
====== ======
Total debt to capitalization................................... 25.6% 21.8%
====== ======
</TABLE>
1997 operating cash flow decreased due to lower earnings, after adjusting
for non-operating activities, lower accounts receivable collections and lower
accrued expenses due to the decrease in disposition and restructuring accruals
as well as payment of other non-operating accruals. Included in operating cash
flows for 1997 and 1996 were expenditures of $9 and $25, respectively, related
to previously divested operations and $8 and $6, respectively, for severance
pay.
1997 capital expenditures were primarily comprised of upgrades to
manufacturing facilities. The company anticipates capital expenditures in 1998
to be approximately one-and-a-half times depreciation.
1997 divestitures included $191 for the sale of GSPG, $19 for the sale of
the company's equity interest in a company in Mexico and $7 for other. 1996
dispositions included $65 related to discontinued operations and $29 on the
sale of Kinney.
On June 19, 1997, the Board of Directors approved a stock buy-back program
of up to $150 subject to the consummation of the GSPG divestiture. On
September 18, 1997, the Board of Directors approved an increase of this
program to $300. The program is expected to be completed by the end of 1998.
As of January 23, 1998, 3.4 million shares were repurchased under this program
for $145.
On December 12, 1996, the company called for the redemption of its $100 5.75
percent convertible subordinated notes. As of December 31, 1996, notes with a
face value of $57 had been converted into 1.5 million shares of the company's
common stock, with an additional $40 converted into 1.0 million shares on
January 2, 1997. The balance of the notes of $3 was redeemed for cash.
On December 12, 1996 the Board of Directors approved a stock buy-back
program of up to $100 to offset any shares issued as a result of the call for
the redemption of the 5.75 percent convertible subordinated notes. On April
17, 1997, the program was completed with the total of 2.5 million shares
repurchased for $100.
13
<PAGE>
Total debt to capitalization increased over the prior year due to lower
equity at year-end as a result of the stock buy-back programs.
At the end of 1997, the company had credit agreements of $605, consisting
primarily of committed revolving credit agreements of $180 and $360 that
expire in May 1998 and May 2002, respectively. The company also has a $300
financing program under a universal shelf registration with the Securities and
Exchange Commission, providing the flexibility to issue a broad variety of
securities from time to time. At December 31, 1997, $50 had been issued under
the shelf registration. The company expects to use available borrowing
facilities to finance, in whole or in part, its buy-back of common stock.
Other than the buy-back program, the company expects that cash provided from
operations will be sufficient to provide for the company's 1998 financing
needs.
At December 31, 1997, the company's balance sheet reflected deferred tax
assets of $155 that were reduced by deferred tax liabilities of $136 and a
valuation allowance of $17. The carrying amount of the net deferred tax asset
was based on management's assessment of the realizability of the net operating
loss and credit carry-forwards and deductible items through future taxable
earnings or alternative tax planning strategies.
In September 1997, the company announced its intention to explore the spin
off of its GS Networks unit and the possible disposition of three other units.
These four units accounted for approximately 19 percent of the company's 1997
net sales.
READINESS FOR YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.
Based on a recent assessment, the company determined that it will be
required to undertake projects to modify or replace significant portions of
its software so that its computer systems will properly utilize dates beyond
December 31, 1999. These projects will provide the company with numerous
benefits only one of which is becoming Year 2000 compliant. The implementation
or remediation plans are in various stages of completion. While total
expenditures related to these programs have not been finalized, the company
estimates, on a preliminary basis, that $8 will be charged to expense in 1998
related to these programs and a similar amount will be expensed in 1999. The
company presently believes that with these modifications, the Year 2000 issue
will not pose significant operational problems for its computer systems.
The company has started to communicate with its significant suppliers to
determine the extent to which the company's interface systems are vulnerable
to those third parties' failure to remediate their own Year 2000 issues. The
projects referred to in the previous paragraph address the impact of third
party Year 2000 issues based on presently available information. However,
there can be no guarantee that the systems of other companies on which the
company's systems rely will be timely converted and would not have an adverse
effect on the company's systems. The company is also exploring whether it has
any exposure to contingencies related to the Year 2000 issue for the products
it has sold.
The above information is based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the
continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
codes and similar uncertainties.
ENVIRONMENTAL MATTERS
The company is involved in various stages of investigation and remediation
relative to environmental protection matters. A more detailed discussion of
environmental matters appears on pages 6 through 7 of this 10-K.
14
<PAGE>
SAFE HARBOR; FORWARD-LOOKING STATEMENTS
This 10-K contains various forward-looking statements and includes
assumptions concerning the company's operations, future results and prospects.
The company's forward-looking statements are based on the company's current
expectations, which are subject to a number of risks and uncertainties that
could materially affect or reduce such operations and earnings. In connection
with the "safe harbor" provisions of the Private Securities Reform Act of
1995, the company provides the following cautionary statement identifying
important economic, political and technological factors, among others the
absence of which could cause the actual results to differ materially from
those set forth in or implied by the forward-looking statements and related
assumptions. Such factors include the failure of: (1) a continuation of the
increased order rate experienced during 1997, (2) productivity improvements
meeting or exceeding budget, (3) new products under development being produced
and accepted as anticipated, (4) stable governments and business conditions in
emerging economies and (5) stable exchange rates between currencies in which
the company is buying or selling materials and products. Further, since the
company is a producer of capital goods and equipment, its results can vary
with the relative strength of the economy. Demand for products in the Process
Controls sector follows the demand for capital goods orders. The Electrical
Controls sector depends upon several markets, principally the nonresidential
construction and computer equipment industries. The Industrial Technology
sector depends on several markets, primarily automotive, mass transportation,
and telecommunications equipment. Mass transportation depends upon continued
federal and local government spending, and telecommunications is dependent
upon continued research and development and the continued success of new
product introductions. While no one marketplace or industry has a major impact
on the company's operations or results, the inherent pace of technological
changes presents certain risks that the company monitors carefully.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company is exposed to market risk related to changes in interest rates
and foreign currency exchange rates, and selectively uses financial
instruments to manage these risks. The company does not enter into financial
instruments for speculation or trading purposes. The company has an interest
rate exchange agreement with a financial institution to limit exposure to
interest rate volatility. Additionally, the company enters into foreign
currency forward or option contracts to mitigate the risks of doing business
in foreign currencies. The company hedges currency exposures of firm
commitments and specific assets and liabilities denominated in non-functional
currencies to protect against the possibility of diminished cash flow and
adverse impact on earnings. The company's currency exposures vary, but are
primarily concentrated in the Canadian dollar, British pound, Australian
dollar, German mark, French franc and Singapore dollar. Translation exposures
generally are not hedged.
The value of market risk sensitive financial instruments is subject to
change as a result of movement in market rates and prices. Sensitivity
analysis is one technique used to evaluate the impact of such possible
movements on the valuation of these instruments. Based on a hypothetical one-
percentage point increase in interest rates or ten-percent weakening in the
U.S. dollar across all currencies, the potential losses in future earnings,
fair value and cash flows are immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report.
See page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
This information is incorporated herein by reference to the Board of
Directors Section of the Proxy Statement for the 1998 annual meeting of
shareholders. Also see pages 7 through 8 of this 10-K as to information
related to executive officers.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated herein by reference to the Executive
Compensation section of the Proxy Statement for the 1998 annual meeting of
shareholders, except for the Report of the Personnel and Compensation
Committee on Executive Compensation and the Performance Graph on Comparison of
Five-Year Cumulative Total Return, which are specifically not incorporated
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated herein by reference to the Security
Ownership of Certain Beneficial Holders and Security Ownership of Management
sections of the Proxy Statement for the 1998 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to these portions of Item 14 are submitted as a
separate section of this report. See page F-1.
All other schedules are omitted as the required information is not applicable
or the information is presented in the financial statements or related notes.
(3) Listing of Exhibits.
<TABLE>
<CAPTION>
<C> <S>
3.1 Restated Certificate of Incorporation of General Signal Corporation, as amended through
April 21, 1994 incorporated herein by reference to Exhibit 3.1 of the registrant's 1994
Form 10-K filed March 21, 1995.
3.2 By-laws of General Signal Corporation, as amended through March 19, 1998.
4.1 Copies of the instruments with respect to the company's long-term debt are available upon
request to the Securities and Exchange Commission.
10.1 Annual Incentive Compensation Plan for Corporate and Business Unit Management of General
Signal Corporation effective January 1, 1997.
10.2 General Signal Corporation Senior Executive Incentive Compensation Plan, as approved by
shareholders on April 20, 1995 incorporated herein by reference to Exhibit 10.2 of the
registrant's 1996 Form 10-K filed March 21, 1997.
10.3 General Signal Corporation 1997 Non-Employee Directors' Stock Option Plan incorporated
herein by reference to Exhibit 10.7 of the registrant's 1988 Form 10-K filed March 17,
1989.
10.4 General Signal Corporation Deferred Compensation Plan for Directors, as amended and
restated through December 12, 1996 incorporated herein by reference to Exhibit 10.4 of the
registrant's 1996 Form 10-K filed March 21, 1997.
10.5 General Signal Corporation Change in Control Severance Pay Plan, as amended and restated
through June 20, 1996 incorporated herein by reference to Exhibit 10.5 of the registrant's
1996 Form 10-K filed March 21, 1997.
10.6 General Signal Corporation Deferred Compensation Plan, as amended and restated January 1,
1997.
10.7 First Amendment to General Signal Corporation Deferred Compensation Plan, effective
November 19, 1997.
10.8 General Signal Corporation Benefit Equalization Plan, as amended and restated October 17,
1996.
10.9 General Signal Corporation 1996 Stock Incentive Plan as approved by shareholders on April
18, 1996 incorporated herein by reference to Exhibit 10.8 of the registrant's 1996 Form 10-
K filed March 21, 1997.
10.10 First Amendment to General Signal Corporation 1996 Stock Incentive Plan, effective November
19, 1997.
10.11 General Signal Corporation 1992 Stock Incentive Plan, as amended and restated July 7, 1993
incorporated herein by reference to Exhibit 10.6 of the registrant's 1993 Form 10-K filed
March 21, 1994.
10.12 First Amendment to General Signal Corporation 1992 Stock Incentive Plan, effective November
19, 1997.
10.13 General Signal Corporation 1989 Stock Option and Incentive Plan, as amended July 7, 1993
incorporated herein by reference to Exhibit 10.7 of the registrant's 1993 Form 10-K filed
March 21, 1994.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
10.14 First Amendment to General Signal Corporation 1989 Stock Option and Incentive Plan,
effective November 19, 1997.
10.15 General Signal Corporation 1985 Stock Option Plan as amended and restated July 7, 1993
incorporated herein by reference to Exhibit 10.8 of the registrant's 1993 Form 10-K filed
March 21, 1994.
10.16 First Amendment to General Signal Corporation 1985 Stock Option Plan, effective November
19, 1997.
10.17 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994
incorporated herein by reference to Exhibit 10.12 of the registrant's 1994 Form 10-K filed
March 21, 1995.
10.18 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995
incorporated herein by reference to Exhibit 10.13 of the registrant's 1994 Form 10-K filed
March 21, 1995.
10.19 Employment agreement between Joanne L. Bober and the registrant dated October 29, 1996
incorporated herein by reference to Exhibit 10.14 of the registrant's 1996 Form 10-K filed
March 21, 1997.
10.20 Employment agreement between Elizabeth D. Conklyn and the registrant dated November 2, 1995
incorporated herein by reference to Exhibit 10.15 of the registrant's 1996 Form 10-K filed
March 21, 1997.
10.21 Employment agreement between Ernest R. Verebelyi and the registrant dated September 12,
1996 incorporated herein by reference to Exhibit 10.16 of the registrant's 1996 Form 10-K
filed March 21, 1997.
10.22 Employment agreement between Donald J. Noonan and the registrant dated June 5, 1996
incorporated herein by reference to Exhibit 10.17 of the registrant's 1996 Form 10-K filed
March 21, 1997.
10.23 Employment agreement between Raymond L. Arthur and the registrant dated January 28, 1997
incorporated herein by reference to Exhibit 10.18 of the registrant's 1996 Form 10-K filed
March 21, 1997.
10.24 Employment agreement between Jeffrey M. Johnson and the registrant dated August 1, 1997.
10.25 Change-of-Control Employment Agreement between General Signal Corporation and Michael D.
Lockhart, dated as of February 2, 1998.
10.26 Form of Change-of-Control Employment Agreement between General Signal Corporation and each
of Terence D. Martin, Ernest R. Verebelyi, Joanne L. Bober, Elizabeth D. Conklyn and each
of the other executive officers of the registrant (5 persons), dated as of February 2,
1998.
10.27 Shareholder Rights Plan dated February 1, 1996 incorporated herein by reference to Exhibit
10.15 of the registrant's 1995 Form 10-K filed March 22, 1996.
10.28 Copies of the Credit Agreements among General Signal Corporation and Various Commercial
Banking Institutions, dated through May 29, 1997, as described in the Notes to Financial
Statements.
10.29 Amendment, effective December 12, 1996, to Retirement Plan for Directors of General Signal
Corporation.
12 Calculation of Ratio of Earnings to Fixed Charges. See page F-27 of this report.
21 Subsidiaries. See pages F-28 through F-30 of this report.
23 Consent of Ernst & Young LLP. See page F-31 of this report.
24 Power of attorney.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K filed in the fourth quarter of 1997
No reports were filed on Form 8-K.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate section of
this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate section of
this report.
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
General Signal Corporation
By: /s/ Michael D. Lockhart
________________________________________
(MICHAEL D. LOCKHART, CHAIRMAN)
MARCH 20, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON MARCH 20, 1998 BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Michael D. Lockhart Chairman and Director
____________________________________ (Principal Executive Officer)
(MICHAEL D. LOCKHART)
/s/ Terence D. Martin Executive Vice President,
____________________________________ Chief Financial Officer and
(TERENCE D. MARTIN) Treasurer
/s/ Raymond L. Arthur Vice President and Controller
____________________________________ (Chief Accounting Officer)
(RAYMOND L. ARTHUR)
* Director
____________________________________
(H. KENT BOWEN)
* Director
____________________________________
(VAN C. CAMPBELL)
* Director
____________________________________
(MICHAEL A. CARPENTER)
* Director
____________________________________
(URSULA F. FAIRBAIRN)
* Director
____________________________________
(JOHN R. SELBY)
*By /s/ Terence D. Martin
____________________________________
(TERENCE D. MARTIN)
ATTORNEY-IN-FACT
</TABLE>
19
<PAGE>
FORM 10-K--ITEMS 14(A)(1) AND (2)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
Management's Responsibility for Financial Statements...................... F-2
Report of Independent Auditors............................................ F-3
Statement of Earnings for the Years Ended December 31, 1997, 1996 and
1995..................................................................... F-4
Balance Sheet as of December 31, 1997 and 1996............................ F-5
Statement of Shareholders' Equity for the Years Ended December 31, 1997,
1996 and 1995............................................................ F-6
Statement of Cash Flow for the Years Ended December 31, 1997, 1996 and
1995..................................................................... F-7
Notes to the Financial Statements............................ F-8 through F-25
Schedule:
II--Valuation and Qualifying Accounts.................................. F-26
All other schedules required by Regulation S-X have been omitted because they
are not applicable or because the required information is included in the
financial statements or notes thereto.
Exhibits:
12--Calculations of Ratio of Earnings to Fixed Charges................. F-27
21--Subsidiaries of Registrant............................ F-28 through F-30
23--Consent of Ernst & Young LLP....................................... F-31
F-1
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation of the company's consolidated
financial statements and related information appearing in this 10-K.
Management considers that the consolidated financial statements fairly reflect
the form and substance of transactions and that the financial statements
reasonably present the company's financial position and results of operations
in conformity with generally accepted accounting principles. Management also
has included in the company's financial statements amounts that are based on
estimates and judgments which it views as reasonable under the circumstances.
The independent auditors perform an audit of the company's consolidated
financial statements in accordance with generally accepted auditing standards
and provide an objective, independent review of the fairness of reported
operating results and financial position.
The Board of Directors of the company has an Audit Committee composed of
four non-management Directors. The Committee meets at least three times
annually with financial management, the internal auditors and the independent
auditors to review accounting, control, auditing and financial reporting
matters.
/s/ Michael D. Lockhart
Michael D. Lockhart
Chairman and Chief Executive Officer
/s/ Terence D. Martin
Terence D. Martin
Executive Vice President, Chief Financial
Officer and Treasurer
/s/ Raymond L. Arthur
Raymond L. Arthur
Vice President and Controller
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
General Signal Corporation
We have audited the accompanying balance sheet of General Signal Corporation
and consolidated subsidiaries as of December 31, 1997 and 1996, and the
related statements of earnings, shareholders' equity, and cash flow for each
of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedule listed in Item 14(a). These
financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Signal Corporation
and consolidated subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flow for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects, the information set
forth therein.
As discussed in the notes to the financial statements, in 1997 the company
changed its method of accounting for business process reengineering costs.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 23, 1998
F-3
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS, EXCEPT PER-
SHARE DATA)
<S> <C> <C> <C>
Net sales....................................... $1,954.6 $2,065.0 $1,863.2
-------- -------- --------
Cost of sales................................... 1,378.5 1,435.7 1,308.0
Selling, general and administrative expenses.... 394.6 406.2 354.4
Gains on dispositions........................... (72.7) (20.8) --
Transaction and consolidation charges........... -- -- 20.1
-------- -------- --------
Total operating costs and expenses.............. 1,700.4 1,821.1 1,682.5
-------- -------- --------
Operating earnings.............................. 254.2 243.9 180.7
Equity in earnings of EGS....................... 11.8 -- --
Interest expense, net........................... (13.2) (21.5) (24.3)
-------- -------- --------
Earnings from continuing operations before in-
come taxes..................................... 252.8 222.4 156.4
Income taxes.................................... 121.8 89.0 56.3
-------- -------- --------
Earnings from continuing operations............. 131.0 133.4 100.1
Earnings (loss) from disposal of discontinued
operations, net of income taxes................ 2.3 -- (64.0)
-------- -------- --------
Earnings before cumulative effect of accounting
change......................................... 133.3 133.4 36.1
Cumulative effect of accounting change.......... (3.7) -- --
-------- -------- --------
Net earnings.................................... $ 129.6 $ 133.4 $ 36.1
======== ======== ========
Basic earnings (loss) per share of common stock:
Continuing operations......................... $ 2.61 $ 2.68 $ 2.04
Disposal of discontinued operations........... 0.05 -- (1.30)
Cumulative effect of accounting change........ (0.08) -- --
-------- -------- --------
Basic earnings per share........................ $ 2.58 $ 2.68 $ 0.74
======== ======== ========
Diluted earnings (loss) per share of common
stock:
Continuing operations......................... $ 2.60 $ 2.62 $ 2.01
Disposal of discontinued operations........... 0.05 -- (1.24)
Cumulative effect of accounting change........ (0.07) -- --
-------- -------- --------
Diluted earnings per share...................... $ 2.58 $ 2.62 $ 0.77
======== ======== ========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 50.0 $ 17.7
Accounts receivable..................................... 285.4 353.0
Inventories............................................. 156.8 240.6
Prepaid expenses and other current assets............... 23.2 24.7
Deferred income taxes................................... 52.7 55.9
-------- --------
Total current assets.................................. 568.1 691.9
Property, plant and equipment, net of accumulated depreci-
ation and amortization................................... 240.7 310.0
Intangibles, net of accumulated amortization.............. 264.3 381.3
Investment in EGS......................................... 133.1 --
Pension asset............................................. 127.5 104.9
Other assets.............................................. 54.3 62.9
-------- --------
Total assets.......................................... $1,388.0 $1,551.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-
term debt.............................................. $ 9.0 $ 5.6
Accounts payable........................................ 142.7 187.3
Accrued expenses........................................ 184.4 214.6
Income taxes............................................ 40.4 31.7
-------- --------
Total current liabilities............................. 376.5 439.2
Long-term debt, less current maturities................... 207.4 201.3
Accrued post-retirement and post-employment obligations... 112.4 133.2
Deferred income taxes..................................... 50.3 17.3
Other liabilities......................................... 11.7 16.2
-------- --------
Total long-term liabilities........................... 381.8 368.0
Shareholders' equity:
Common stock............................................ 78.5 78.2
Additional paid-in capital.............................. 367.2 337.1
Retained earnings....................................... 746.7 667.4
Cumulative translation adjustments and other............ (11.8) (1.4)
-------- --------
1,180.6 1,081.3
Common stock in treasury................................ (550.9) (337.5)
-------- --------
Total shareholders' equity............................ 629.7 743.8
-------- --------
Total liabilities and shareholders' equity............ $1,388.0 $1,551.0
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL TRANSLATION COMMON
COMMON PAID-IN RETAINED ADJUSTMENTS STOCK IN
STOCK CAPITAL EARNINGS AND OTHER TREASURY
------ ---------- -------- ----------- --------
(IN MILLIONS, EXCEPT PER-SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994... $77.4 $281.1 $620.5 $(12.1) $(419.0)
Restatement for Data Switch
merger...................... -- 4.8 (27.7) (0.1) 45.7
Net earnings................. -- -- 36.1 -- --
Dividends declared ($0.96 per
share)...................... -- -- (46.0) -- --
Purchase of common stock..... -- -- -- -- (18.0)
Exercise of stock options and
savings and stock ownership
plan funding................ 0.5 18.3 -- -- 8.3
Discontinued operations...... -- -- -- 7.4 --
Translation adjustments...... -- -- -- 0.9 --
----- ------ ------ ------ -------
Balance at December 31, 1995... 77.9 304.2 582.9 (3.9) (383.0)
Net earnings................. -- -- 133.4 -- --
Dividends declared ($0.975
per share).................. -- -- (48.9) -- --
Purchase of common stock..... -- -- -- -- (1.2)
Exercise of stock options and
savings and stock ownership
plan funding................ 0.3 12.4 -- -- 9.4
Conversion of 5.75 percent
convertible
subordinate notes........... -- 20.5 -- -- 37.3
Translation adjustments...... -- -- -- 2.5 --
----- ------ ------ ------ -------
Balance at December 31,1996.... 78.2 337.1 667.4 (1.4) (337.5)
Net earnings................. -- -- 129.6 -- --
Dividends declared ($1.035
per share).................. -- -- (50.3) -- --
Purchase of common stock..... -- -- -- -- (240.4)
Exercise of stock options and
savings and stock ownership
plan funding................ 0.3 16.1 -- -- 1.5
Conversion of 5.75 percent
convertible subordinate
notes....................... -- 14.0 -- -- 25.5
Minimum pension liability ad-
justment.................... -- -- -- (1.7) --
Translation adjustments...... -- -- -- (8.7) --
----- ------ ------ ------ -------
Balance at December 31, 1997... $78.5 $367.2 $746.7 $(11.8) $(550.9)
===== ====== ====== ====== =======
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
INCREASE (DECREASE)
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
------ ------------- ------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings..................................... $129.6 $133.4 $ 36.1
Adjustments to reconcile net earnings to net cash
from operating activities:
Cumulative effect of accounting change......... 3.7 -- --
(Earnings) loss on disposal of discontinued
operations.................................... (2.3) -- 64.0
Equity in earnings of EGS...................... (11.8) -- --
Gains on dispositions.......................... (72.7) (20.8) --
Asset write downs, transaction, consolidation
and other charges............................. 22.9 19.7 20.1
Deferred income taxes.......................... 22.2 43.7 32.0
Depreciation................................... 50.7 52.6 50.3
Amortization................................... 14.6 16.6 12.5
Pension credits................................ (14.7) (8.8) (9.3)
Other, net..................................... (2.7) 5.5 4.4
Changes in assets and liabilities, net of
effects from acquisitions and divestitures:
Accounts receivable.......................... (17.5) (30.8) (15.4)
Inventories.................................. 8.4 (10.4) 21.4
Prepaid expenses and other current assets.... 5.8 11.0 18.1
Accounts payable............................. (8.8) 28.8 (14.2)
Accrued expenses and other................... (27.7) (49.0) (71.6)
Income taxes................................. 9.3 0.2 12.3
------ ------ ------
Net cash from operating activities............... 109.0 191.7 160.7
------ ------ ------
CASH FLOW FROM INVESTING ACTIVITIES:
Divestitures..................................... 216.9 94.4 53.4
Capital expenditures............................. (56.5) (59.3) (49.0)
Acquisitions, net of cash acquired............... (11.0) -- (272.4)
Other, net....................................... 5.5 (2.8) 15.3
------ ------ ------
Net cash from investing activities............... 154.9 32.3 (252.7)
------ ------ ------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of long-term debt....................... 170.5 115.3 273.2
Redemption of long-term debt..................... (118.1) (288.5) (134.0)
Purchase of common stock......................... (240.4) (1.2) (18.0)
Issuance of common stock......................... 11.4 14.7 17.1
Dividends paid................................... (51.7) (47.6) (45.6)
------ ------ ------
Net cash from financing activities............... (228.3) (207.3) 92.7
------ ------ ------
Effect of exchange rate changes on cash and cash
equivalents..................................... (3.3) -- --
------ ------ ------
Net changes in cash and cash equivalents......... 32.3 16.7 0.7
------ ------ ------
Cash and cash equivalents at beginning of year... 17.7 1.0 0.3
------ ------ ------
Cash and cash equivalents at end of year......... $ 50.0 $ 17.7 $ 1.0
====== ====== ======
Interest paid.................................... $ 11.6 $ 25.7 $ 27.3
Income taxes paid................................ 87.0 44.0 15.7
Noncash investing and financing activities:
Conversion of convertible debt into common
stock......................................... $ 39.3 $ 57.4 $ --
Contribution of GSEG's net assets to EGS joint
venture....................................... 119.4 -- --
</TABLE>
See accompanying notes to the financial statements.
F-7
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
(Dollars in millions, except per-share data)
1. ACCOUNTING POLICIES
CONSOLIDATION: The financial statements include the accounts of General
Signal Corporation and consolidated subsidiaries after elimination of
intercompany accounts and transactions. Investments in unconsolidated
companies where management exercises significant influence are accounted for
using the equity method.
CASH EQUIVALENTS: The company considers its highly liquid money market
investments with original maturities of three months or less to be cash
equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost is
primarily determined using the first-in, first-out (FIFO) method. All other
inventories are valued using the last-in, first-out (LIFO) method.
PROPERTY: Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are provided
using the straight-line method over the estimated useful lives of assets,
which do not exceed 40 years for buildings and range from 3 to 10 years for
machinery and equipment. Leasehold improvements are amortized over the life of
the related asset or the life of the lease, whichever is shorter.
INTANGIBLES: Intangible assets (primarily the excess of purchase price over
the fair value of net assets acquired) are amortized on a straight-line basis
over periods not exceeding 40 years. Intangibles assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Impairment losses are recognized if
expected cash flows of the related assets are less than their carrying values.
REVENUE RECOGNITION: Revenues are primarily recognized as products are
shipped and services are rendered. The percentage-of-completion method of
accounting is followed for long-term contracts. Under this method, earnings
accrue as contracts progress toward completion, generally based on the
percentage of costs incurred or the units of product delivered.
FINANCIAL INSTRUMENTS: The company does not enter into financial instruments
for speculation or trading purposes. The net amount to be paid or received
under interest rate swap agreements is accrued over the life of the agreement
as a separate component of interest expense. Gains and losses related to
forward foreign exchange and option contracts that qualify for hedge
accounting treatment are deferred and offset against losses and gains when the
underlying transaction occurs. Gains or losses at the time of maturity,
termination, sale or repayment of a financial instrument contract designated
as a hedge are included in earnings. The fair values of interest rate swap
agreements and forward foreign exchange and option contracts are not
recognized in the financial statements.
ENVIRONMENTAL: The company's environmental accruals cover all anticipated
costs, including investigation, remediation, and operation and maintenance of
clean-up sites. Environmental obligations generally are not discounted and are
not reduced by anticipated insurance recoveries.
STOCK COMPENSATION: The company accounts for the options granted under its
stock incentive program by recognizing as compensation any excess of quoted
market price over exercise price at the date of grant.
ACCOUNTING CHANGES: In February 1997, the Financial Accounting Standards
Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share" (SFAS No. 128), which revises the methodology of
calculating earnings per share. The company adopted SFAS No. 128 in the fourth
quarter of 1997. Earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the SFAS No. 128
requirements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
(SFAS No. 130) and SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (SFAS No. 131). SFAS No. 130 and SFAS No. 131 are
effective for financial statements for fiscal years beginning after December
15, 1997. The company is studying the application of the new statement. The
adoption of these statements will have no impact on the company's consolidated
results of operations, financial position or cash flow.
F-8
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
In November 1997, the Emerging Issues Task Force (EITF) of the FASB issued
consensus 97-13, "Accounting for Costs Incurred in Connection with a
Consulting Engagement or an Internal Project that Combines Business Process
Reengineering and Information Technology Transformation" (EITF 97-13). EITF
97-13 requires all previously capitalized business process reengineering costs
to be expensed as a cumulative effect of a change in accounting principle. The
company recorded a charge of $3.7, net of tax, in connection with EITF 97-13
in the fourth quarter of 1997.
In December 1997, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" (SFAS No. 132), which
revises disclosure requirements for employers' pensions and other retiree
benefits. The statement is effective for financial statements for fiscal years
beginning after December 15, 1997. The company is studying the application of
the new statement. The adoption of this statement will have no impact on the
company's consolidated results of operations, financial position or cash flow.
USE OF ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain reclassifications were made to conform prior
years' data to the current presentation.
2.ACCOUNTS RECEIVABLE
Accounts receivable were net of allowances for doubtful accounts of $12.3
and $10.0 at December 31, 1997 and 1996, respectively.
3.INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Finished goods............................................. $ 43.9 $ 80.8
Work in process............................................ 38.3 63.2
Raw material and purchased parts........................... 87.3 117.1
------ ------
Total FIFO cost............................................ 169.5 261.1
Excess of FIFO cost over LIFO inventory value.............. (12.7) (20.5)
------ ------
$156.8 $240.6
====== ======
</TABLE>
Inventories valued using LIFO were approximately $48.6 and $61.9 at December
31, 1997 and 1996, respectively. In 1996, the company recorded a LIFO
liquidation, which increased net income by $1.0. In 1997, included in the gain
on sale of General Signal Pump Group (GSPG) was a LIFO liquidation of $2.0.
Additionally, $5.3 of the excess of FIFO cost over LIFO inventory value was
transferred from General Signal Electrical Group (GSEG) to the investment in
EGS Electrical Group LLC (EGS). In 1996, included in the gain on sale of the
Kinney Vacuum Company (Kinney) was a LIFO liquidation of approximately $1.1.
Progress payments, netted against work in process at year end, were $10.1 in
1997 and $11.0 in 1996.
4.CONTRACTS IN PROGRESS
Prepaid expenses and other current assets include contracts in progress of
$3.4 and $7.8 at December 31, 1997 and 1996, respectively. Contracts in
progress represent revenue recognized on a percentage-of-completion basis over
related progress billings of $60.5 and $36.0 at December 31, 1997 and 1996,
respectively. Substantially all contracts in progress at year end are billed
during the subsequent year.
F-9
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
5.PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Land..................................................... $ 9.5 $ 12.2
Buildings and leasehold improvements..................... 150.7 173.7
Machinery and equipment.................................. 416.1 561.4
------- -------
576.3 747.3
Accumulated depreciation and amortization................ (335.6) (437.3)
------- -------
$ 240.7 $ 310.0
======= =======
6.INTANGIBLES
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Excess of cost over net assets acquired.................. $ 298.0 $ 465.3
Other intangibles........................................ 34.3 40.4
------- -------
332.3 505.7
Accumulated amortization................................. (68.0) (124.4)
------- -------
$ 264.3 $ 381.3
======= =======
</TABLE>
In the third quarter of 1997, the company sold GSPG and contributed the net
assets of GSEG to EGS. As a result of these transactions, intangible assets
decreased by approximately $102.
7.EGS JOINT VENTURE
In the fourth quarter of 1997, the company and Emerson Electric Company
formed EGS, a joint venture combining Emerson Electric's Appleton Electric
operations and the company's GSEG. The company contributed substantially all
of the operating assets of GSEG in exchange for 47.5 percent of EGS. The
company accounts for its investment in EGS under the equity method of
accounting. EGS operates primarily in the United States, Canada and Mexico.
EGS's operations for the period from September 15, 1997 to December 31, 1997
were the following:
<TABLE>
<CAPTION>
EGS:
----
<S> <C>
Net sales........................................................... $162.0
Gross profit........................................................ 62.5
Net income.......................................................... 24.5
</TABLE>
The company's equity in earnings of EGS at December 31, 1997 was $11.8. The
company's investment in EGS is approximately $17 less than its equity in the
joint venture's net assets at December 31, 1997. This difference is being
amortized on a straight-line basis over an estimated economic life of 40
years.
Condensed balance sheet information of EGS as of December 31, 1997 is as
follows:
<TABLE>
<S> <C>
Current assets..................................................... $149.0
Noncurrent assets.................................................. 241.7
Current liabilities................................................ 59.4
Noncurrent liabilities............................................. 16.0
</TABLE>
F-10
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
8.ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
Payroll and compensation.................................... $ 53.5 $ 62.5
Environmental and legal..................................... 25.3 26.9
Dispositions and special items.............................. 9.2 23.0
Other....................................................... 96.4 102.2
------ ------
$184.4 $214.6
====== ======
</TABLE>
9.INCOME TAXES
For financial reporting purposes, earnings from continuing operations before
income taxes includes the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pretax income:
United States............................... $ 236.0 $ 205.6 $ 151.5
Foreign..................................... 16.8 16.8 4.9
------- ------- -------
$252.8 $ 222.4 $ 156.4
======= ======= =======
The reconciliation of income tax from continuing operations computed at the
U.S. federal statutory tax rate to the company's effective income tax rate is
as follows:
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate............ 35.0% 35.0% 35.0%
State and local income taxes, net of U.S. fed-
eral benefit................................. 5.3 4.2 5.5
Foreign sales corporation..................... (1.8) (1.3) (1.7)
Goodwill amortization......................... 1.6 1.9 2.1
Income from Puerto Rican operations........... (0.2) (0.2) (0.7)
Foreign rates and foreign dividends........... 0.6 0.4 (1.4)
Reduction in valuation allowance.............. (0.9) -- (4.5)
Disposition basis differences................. 8.6 -- --
Other......................................... -- -- 1.7
------- ------- -------
48.2% 40.0% 36.0%
======= ======= =======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal...................................... $ 74.3 $ 32.8 $ 14.2
Foreign...................................... 8.5 4.9 3.4
State........................................ 16.0 7.6 6.7
-------- ------- --------
Total current.............................. 98.8 45.3 24.3
-------- ------- --------
Deferred:
Federal...................................... 17.5 34.2 (6.5)
Foreign...................................... 0.5 1.9 (2.6)
State........................................ 4.2 7.6 5.2
-------- ------- --------
Total deferred............................. 22.2 43.7 (3.9)
-------- ------- --------
$121.0 $ 89.0 $ 20.4
======== ======= ========
</TABLE>
F-11
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense (income) is included in the financial statements as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ----- ------
<S> <C> <C> <C>
Continuing operations................................ $121.8 $89.0 $ 56.3
Discontinued operations.............................. 1.5 -- (35.9)
Cumulative effect of accounting change............... (2.3) -- --
------ ----- ------
Total income tax expense............................. $121.0 $89.0 $ 20.4
====== ===== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Acquired tax benefits and basis differences............. $ 21.0 $ 29.0
Other post-retirement and post-employment benefits...... 53.7 58.3
Losses on dispositions and restructuring................ 4.0 11.7
Inventories............................................. 16.2 14.8
NOL and credit carry-forwards........................... 21.2 32.9
Other................................................... 38.9 32.0
------ ------
Total deferred tax assets............................. 155.0 178.7
Valuation allowance..................................... (16.7) (30.0)
------ ------
Net deferred tax assets............................... 138.3 148.7
Deferred tax liabilities:
Accelerated depreciation................................ 27.9 35.7
Pension credits......................................... 49.1 39.0
Reliance gain........................................... 19.8 19.8
Basis difference in EGS................................. 23.2 --
Other................................................... 15.9 15.6
------ ------
Total deferred tax liabilities........................ 135.9 110.1
------ ------
$ 2.4 $ 38.6
====== ======
</TABLE>
Realization of deferred tax assets associated with the net operating loss
(NOL) and credit carry-forwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that there is a
risk that certain of these NOL and credit carry-forwards may expire unused
and, accordingly, has established a valuation allowance against them. Although
realization is not assured for the remaining deferred tax assets, management
believes it is more likely than not that the net deferred tax assets will be
realized through future taxable earnings or alternative tax strategies.
However, the net deferred tax assets could be reduced in the near term if
management's estimates of taxable income during the carry-forward period are
significantly reduced or alternative tax strategies are no longer viable. The
valuation allowance decreased in 1997 and 1996 by $13.3 and $3.6,
respectively.
At December 31, 1997, the following net federal operating loss and tax
credit carry-forwards were available:
<TABLE>
<CAPTION>
OPERATING TAX
EXPIRATION DATES LOSSES CREDITS
---------------- --------- -------
<S> <C> <C>
1998-1999............................................... $5.0 $8.7
2000-2001............................................... 2.1 --
2002-2003............................................... 0.6 --
</TABLE>
F-12
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Undistributed earnings of the company's foreign subsidiaries amounted to
approximately $62.3 at December 31, 1997. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes or foreign withholding taxes has been made. If these
earnings were distributed, the company would be subject to U.S. income taxes
(subject to a reduction for foreign tax credits) and withholding taxes payable
to the various foreign countries. Determination of the amount of unrecognized
deferred U.S. income tax liability is not practicable; however, unrecognized
foreign tax credit carry-overs would be available to reduce some portion of
the U.S. liability. Withholding taxes of approximately $4.0 would be payable
upon remittance of all previously unremitted earnings at December 31, 1997.
10.DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
5.75% Convertible Subordinated Notes....................... $ -- $ 42.6
Commercial paper: 1997 at 6.1% and 1996 at 5.6%............ 116.4 114.5
Medium-term Notes: $25 at 7.0% due 2000, $25 at 7.114% due
2002...................................................... 50.0 --
Industrial Revenue Bonds due 2000-2008;
no stipulated principal repayments prior to maturity
(primarily variable rate)................................. 32.5 36.0
Other long-term borrowings................................. 14.0 12.8
------ ------
212.9 205.9
Less current maturities.................................... 5.5 4.6
------ ------
$207.4 $201.3
====== ======
Short-term notes payable to banks.......................... $ 3.5 $ 1.0
====== ======
</TABLE>
On December 12, 1996, the company called for the redemption of its 5.75
percent convertible subordinated notes. Through December 31, 1996, notes with
a face value of $57.4 had been converted into 1.5 million shares of the
company's common stock, with an additional $39.3 converted into 1.0 million
shares on January 2, 1997. The balance of the notes of $3.3 was redeemed for
cash.
Long-term debt maturing during each of the four years after 1998 is $2.7,
$35.7, $3.6 and $144.2.
The company maintains credit arrangements with banks in the U.S. and abroad
which aggregated approximately $605 and $604 at December 31, 1997 and 1996,
respectively. At December 31, 1997, the company had a committed revolving
credit agreement of $180.0 that matures on May 28, 1998, and a committed
revolving credit agreement of $360.0 that matures on May 28, 2002. The
agreements permit domestic and Eurodollar borrowings at interest rates offered
to investment grade customers. The agreements also are convertible into one-
year term loans at maturity.
Commercial paper is classified as long-term debt as the company maintains
long-term committed credit agreements to support these borrowings and intends
to refinance them on a long-term basis, either through continued commercial
paper borrowings or the issuance of medium-term notes.
The company has a $300.0 financing program under a universal shelf
registration that permits the issuance of junior or senior debt, convertible
securities, equity warrants and preferred shares under one filing without
specifying any dollar amounts for any security. On April 30, 1996, the company
filed a prospectus supplement which allows the company to issue medium-term
senior notes or medium-term subordinated notes under the shelf registration.
As of December 31, 1997, $50.0 had been issued under the shelf registration.
The company has an interest rate exchange agreement, expiring in March 2000,
with a financial institution to limit exposure to interest rate volatility on
the commercial paper. The transaction has a notional principal amount of $25.0
at December 31, 1997 and 1996. The company monitors the risk of default by the
swap counterparty and does not anticipate non-performance. At December 31,
1997, termination of this agreement would result in a $1.5 loss.
F-13
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
11.FOREIGN EXCHANGE CONTRACTS
The company conducts its business in various foreign currencies.
Accordingly, the company is subject to the typical currency risks and
exposures that arise as a result of changes in the relative value of
currencies. The risks are often referred to as transactional, commitment,
translational and economic currency exposures. The company's policy stresses
risk reduction and specifically prohibits speculation. The policy's three
basic objectives are to reduce currency risk on a consolidated basis, to
protect the functional currency value of foreign currency-denominated cash
flows and to reduce the volatility that changes in foreign exchange rates may
present to operating income.
The company utilizes natural hedges and offsets to reduce exposures and also
combines positions to reduce the cost of hedging. The company entered into
forward foreign exchange contracts to hedge net consolidated currency
transaction exposure for periods consistent with the terms of the underlying
transactions, extending through September 17, 1998.
Foreign currency forward or option contracts are not used for trading
purposes, and these contracts do not subject the company to currency risk from
exchange rate movements. At December 31, 1997, the company had approximately
$15.1 of such contracts outstanding.
12.FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, short- and long-term debt, and foreign currency
contracts had fair values, based upon quoted prices or discounted cash flow
analyses, that approximated their carrying amounts. Financial guarantees and
letters of credit were issued by the company in the ordinary course of
business, and had a fair value of approximately $104.3 as of December 31,
1997. The fair values of financial guarantees and letters of credit were based
on the face value of the underlying instruments, after deducting the amount
related to those instruments that are recorded as liabilities, and the related
amounts accrued.
13.CONTINGENCIES AND COMMITMENTS
LITIGATION: The company and certain of its subsidiaries are defendants in
legal proceedings incidental to its business. Although the ultimate
disposition of these proceedings is not presently determinable, management
does not expect the outcome to have a material adverse impact on the company's
financial position or results of operations.
LEASES: The future minimum rental payments under leases with remaining
noncancelable terms in excess of one year are:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998.............................................................. $10.5
1999.............................................................. 8.2
2000.............................................................. 5.8
2001.............................................................. 2.6
2002.............................................................. 3.6
Subsequent to 2002................................................ 4.6
-----
Total minimum payments.......................................... $35.3
=====
</TABLE>
Total rent expense in 1997, 1996 and 1995 was $19.2, $20.3 and $21.1,
respectively.
F-14
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
14.ENVIRONMENTAL MATTERS
The company is involved in various stages of investigation and remediation
relative to environmental protection matters, arising from its own initiative,
from indemnification of purchasers of divested operations, or from legal or
administrative proceedings, some of which include waste disposal sites. In
certain instances, the company may be exposed to joint and several liability
for remedial action or damages. The company, along with several other
entities, has been named as a potentially responsible party for remedial costs
at certain third-party sites listed on the National Priorities List under
CERCLA and state counterpart statutes.
The potential costs related to such matters and the possible impact on
future operations are uncertain due in part to the complexity of government
laws and regulations and their interpretations, the varying costs and
effectiveness of clean-up technologies, the uncertain level of insurance or
other types of recovery, and the questionable level of the company's
responsibility. The company estimates that costs of investigation and
remediation will be approximately $25 and has included this amount in accrued
expenses in the accompanying balance sheet. It is at least reasonably
possible, however, that a change in this estimate will occur. In management's
opinion, after considering reserves established for such purposes, remedial
actions for compliance with the present laws and regulations governing the
protection of the environment are not expected to have a material adverse
impact on the company's results of operations or financial position.
15.CAPITAL STOCK
PREFERRED STOCK: 10 million shares of cumulative preferred stock, par value
$1.00 per share, are authorized but unissued.
COMMON STOCK: 150 million shares are authorized, with 65.0 million issued in
1997 and 64.6 million issued in 1996. The 1.96 million shares issued through
1969 have a par value of $6.67 per share. Shares issued since then have a par
value of $1.00 per share.
TREASURY STOCK:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
----------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Balance at beginning of year............................ 13.2 15.0 16.6
Restatement for Data Switch merger...................... -- -- (1.8)
Common stock reacquired................................. 5.8 -- 0.5
Common stock issued under the company's incentive com-
pensation and savings and stock ownership plans........ (0.1) (0.3) (0.3)
Conversion of convertible subordinated notes............ (1.0) (1.5) --
---- ---- ----
Balance at end of year.................................. 17.9 13.2 15.0
==== ==== ====
</TABLE>
On June 19, 1997, the Board of Directors approved a stock buy-back program
of up to $150.0 subject to the consummation of the GSPG divestiture. On
September 18, 1997, the Board of Directors approved an increase of this
program to $300.0. The program is expected to be completed by the end of 1998.
As of January 23, 1998, 3.4 million shares were repurchased under this program
for $145.1.
On December 12, 1996, the Board of Directors approved a stock buy-back
program of up to $100.0 to offset any shares issued as a result of the call
for the redemption of the 5.75 percent convertible subordinated notes. On
April 17, 1997, the program was completed with the total of 2.5 million shares
repurchased for $100.0.
F-15
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
In March 1994, the company's Board of Directors approved a program, which
concluded in March 1996, to repurchase up to 3.4 percent or 1.6 million shares
of the common stock outstanding at that time. These shares were purchased
systematically in open market transactions after the Board's approval and were
used to offset dilution from the increased exercise of employee stock options
arising from the company's executive stock ownership program. Approximately
1.1 million shares were repurchased under this program.
WARRANTS: In connection with the Data Switch merger, the company assumed
1,452 warrants that are redeemable at $34.83 per share and 14,357 warrants
that are redeemable at $16.54 per share. In 1997 and 1996, 718 and 13,639,
respectively, of these warrants were redeemed for shares of common stock.
SHAREHOLDER RIGHTS PLAN: On February 1, 1996, the Board of Directors
declared a dividend distribution of one common stock purchase right for each
share of common stock. The rights trade with the common stock and are not
currently exercisable. Each right entitles the shareholder to buy the
company's or the acquiring company's stock valued at $300 per share for a
price of $150 per share upon the occurrence of specific events. The company
may redeem the rights for 10 days (subject to a further 20-day extension) for
one cent per right, after a person or entity acquires 20 percent or more of
the common stock. The provisions do not apply to rights that are beneficially
owned by the acquirer.
16. EMPLOYEE BENEFIT PLANS
PENSION PLANS: The company's pension plans cover substantially all salaried
and hourly paid employees, including certain employees in foreign countries.
The plans generally provide benefit payments using a formula based on an
employee's compensation and length of service or, in some cases, stated
amounts for each year of service. The company funds United States pension
plans in amounts equal to the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, plus additional amounts that may be
approved from time to time. Substantially all plan assets are invested in cash
and short-term investments or listed stocks and bonds and real estate. Plan
assets and obligations of non-U.S. subsidiaries are not material. The periodic
net pension income related to continuing operations is comprised of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the
period......................................... $ 11.7 $ 14.6 $ 8.9
Interest cost on projected benefit obligation... 32.8 32.7 32.6
Actual return on assets......................... (89.5) (77.4) (45.7)
Net amortization and deferral................... 30.3 21.3 (5.1)
------ ------ ------
Net pension income............................ $(14.7) $ (8.8) $ (9.3)
====== ====== ======
The actuarial assumptions used were:
Discount rate................................... 7.60% 7.60% 7.00%
Rate of increase in compensation levels......... 5.00% 5.00% 5.00%
Expected long-term rate of return on assets..... 9.50% 9.50% 9.50%
</TABLE>
F-16
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
OVER UNDER OVER UNDER
FUNDED FUNDED FUNDED FUNDED
------- ------ ------- ------
<S> <C> <C> <C> <C>
Actuarial present value of obligations:
Vested benefit obligation.............. $(445.0) $(4.6) $(343.0) $(71.2)
------- ----- ------- ------
Accumulated benefit obligation......... (464.8) (5.0) (361.2) (73.7)
------- ----- ------- ------
Fair value of plan assets.............. 633.8 -- 522.9 62.4
Projected benefit obligation........... (483.6) (4.4) (377.7) (76.1)
------- ----- ------- ------
Plan assets in excess of (less than)
projected benefit obligation.......... 150.2 (4.4) 145.2 (13.7)
Unrecognized net (gain) loss........... (3.2) 2.2 (10.5) 4.0
Prior service cost not yet recognized
in net pension cost................... 4.9 1.1 6.0 3.1
Unrecognized net asset................. (19.4) 0.2 (24.5) (4.7)
Adjustment to recognize minimum liabil-
ity................................... -- (4.1) -- --
------- ----- ------- ------
Prepaid (accrued) pension.............. $ 132.5 $(5.0) $ 116.2 $(11.3)
======= ===== ======= ======
</TABLE>
A minimum pension liability adjustment is required when the actuarial
present value of accumulated benefits exceeds plan assets and accrued pension
liabilities. The minimum liability adjustment, less allowable intangible
assets, net of tax benefit, is reported as a reduction of shareholders'
equity. At December 31, 1997, the company recorded a minimum pension liability
adjustment, net of tax, of $1.7.
Under the Savings and Stock Ownership Plan and other supplemental plans, the
company matches employee contributions in cash and common stock equal to a
percentage of certain amounts contributed by employees. The company's
contributions under these plans amounted to $13.2 in 1997, $10.6 in 1996 and
$8.2 in 1995. Effective July 1, 1997, the contributions were invested in funds
based on employee direction. Prior to July, the contributions were invested in
shares of the company's common stock. At December 31, 1997, the plans held 2.4
million shares and 0.6 million shares were reserved for issuance.
NON-PENSION RETIREMENT BENEFITS: The company and its U.S. subsidiaries have
post-retirement plans that provide health and life insurance benefits for
retirees. Some of these plans require employee contributions at varying rates.
Not all employees are eligible to receive these benefits, with eligibility
governed by the plan(s) in effect at a particular location.
The accumulated post-retirement benefit obligation at December 31, 1997 was
determined using the terms of the company's various plans, together with
relevant actuarial assumptions and health care cost trend rates projected at
estimated annual rates ranging from 6.6 percent in 1997 and 6.4 percent in
1998, to 5.0 percent through the year 2006, and a weighted average discount
rate of 7.0 percent. Generally, where applicable, the discount rate and the
actuarial assumptions used for pension plans also apply to the non-pension
retirement plans. A one percent annual increase in these assumed cost trend
rates would increase the accumulated post-retirement benefit obligation by
approximately $0.9, and annual service costs by approximately $0.1. Certain of
the company's non-U.S. subsidiaries have similar plans for retirees. The
company's obligations for such plans are not material.
The net periodic post-retirement benefit cost related to continuing
operations is composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
Service cost for benefits attributed to service during
the period........................................... $0.4 $0.6 $ 0.4
Interest cost on the accumulated post-retirement
benefit obligation................................... 6.2 6.0 4.5
Net amortization and deferral......................... (4.3) (4.5) (5.5)
---- ---- -----
Net periodic post-retirement benefits............... $2.3 $2.1 $(0.6)
==== ==== =====
</TABLE>
F-17
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The following table shows the plans' funded status and amounts recognized in
the balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
--------------- ---------------
HEALTH LIFE HEALTH LIFE
------- ------ ------- ------
<S> <C> <C> <C> <C>
Accumulated post-retirement benefit
obligation:
Retirees............................ $ (58.9) $(16.2) $ (55.8) $(15.3)
Fully-eligible active plan
participants....................... (3.1) (1.2) (1.3) (0.2)
Other active plan participants...... (3.2) (1.4) (8.2) (3.1)
------- ------ ------- ------
Total............................. (65.2) (18.8) (65.3) (18.6)
Unrecognized net gain................. (13.8) (1.2) (20.4) (1.7)
Unrecognized prior service cost....... (12.6) -- (19.5) --
------- ------ ------- ------
Accrued post-retirement benefit cost.. (91.6) (20.0) (105.2) (20.3)
Less amounts classified as current.... 7.3 1.3 7.3 1.3
------- ------ ------- ------
$ (84.3) $(18.7) $ (97.9) $(19.0)
======= ====== ======= ======
</TABLE>
During 1997, the company's accrued post-retirement benefit cost was reduced
by curtailment gains and settlement gains of approximately $7.9 related to the
disposition of GSPG and the formation of EGS. The curtailment gain recognized
on the disposition of GSPG is included in the gain on sale amount. The
curtailment and settlement gains resulting from the formation of EGS were
included in the investment in EGS.
The unrecognized prior service cost at December 31, 1997 and 1996 represents
unamortized amounts for plan amendments, resulting from revisions to company-
sponsored health plans, which reduced benefit levels.
STOCK INCENTIVE PROGRAM: The company has a stock incentive program whereby
executive officers and designated employees have been or may be granted
restricted stock and options to purchase shares of company common stock.
Restricted stock awards were granted during 1997 and 1996 for 25,000 shares
and 11,568 shares of company common stock with a weighted-average price of
$43.50 per share and $40.31 per share, respectively. The restricted stock
awards granted in 1997 and 1996 vest at certain rates over a three-to-five-
year period. Non-employee directors may elect to defer all or part of their
cash compensation as directors and to receive in lieu thereof restricted
stock. No restricted stock awards granted in 1997 were received by non-
employee directors. In 1996, of the 11,568 shares granted, 3,068 shares of
company common stock were received by three non-employee directors, subject to
a five-year restriction period. Total compensation expense for restricted
stock for 1997 and 1996 was $1.0 and $1.2, respectively.
Options are exercisable during specified dates at prices at least equal to
100 percent of the fair market value on the date of grant. The exercise price
of General Signal stock options granted in 1997 and 1996 equaled the market
value on the date of grant. All options granted have 10-year terms, and vest
and become fully exercisable at the end of four years of continued employment,
except for options granted to non-employee directors which vest immediately.
In 1997, of the 532,000 shares granted, 14,000 shares of company common stock
were received by seven non-employee directors. No options were granted to non-
employee directors in 1996. As of December 31, 1997 and 1996, 4.3 million and
4.6 million shares, respectively, of company common stock were reserved for
issuance under the stock incentive program.
The company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the company's employee stock options equals the
market price of the underlying stock on the date of the grant, no compensation
expense has been recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No.
123), which also requires that the information be determined as if the company
had accounted for its employee stock options granted subsequent to December
31, 1994, under the fair-value method of SFAS No. 123. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following assumptions:
F-18
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate....................... 5.71% 4.77% 5.39%
Dividend yield................................ 2.40% 2.54% 2.76%
Expected volatility of market price of
company's common stock....................... 0.233 0.235 0.20
Expected option life.......................... 5 years 5 years 5 years
The risk-free interest rate is based on treasury bill rates. For the
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The company's pro forma
information is as follows:
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net income.......................... $128.0 $132.5 $35.7
Pro forma basic earnings per share............ $ 2.55 $ 2.67 $0.73
Pro forma diluted earnings per share.......... $ 2.55 $ 2.60 $0.76
</TABLE>
These pro forma effects may not be representative of the effects on future
years because of the prospective application required by SFAS No. 123, and the
fact that options vest over several years and new grants generally are made
each year.
OPTION ACTIVITY: The following table shows the option activity for the three
years ended December 31, 1997. Options granted and exercised by Data Switch
prior to the merger date are included in the 1995 activity.
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
OPTION PRICE EXERCISE
SHARES PER SHARE PRICE
------------- ------------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Options outstanding at December 31, 1994.. 2.2 $19.44-$37.25 $29.32
Restatement for Data Switch merger........ 0.2 13.94- 56.63 27.46
Options granted........................... 0.7 21.80- 38.25 35.82
Options exercised......................... (0.5) 13.94- 35.38 25.03
Options terminated........................ (0.2) 13.94- 53.98 32.71
---- ------------- ------
Options outstanding at December 31, 1995.. 2.4 $13.94-$56.63 $31.30
Options granted........................... 0.4 36.50- 42.63 41.26
Options exercised......................... (0.3) 13.94- 39.64 26.71
Options terminated........................ (0.1) 13.94- 53.98 31.42
---- ------------- ------
Options outstanding at December 31, 1996.. 2.4 $13.94-$56.63 $33.73
Options granted........................... 0.5 37.25- 51.00 43.09
Options exercised......................... (0.4) 13.94- 47.02 27.20
Options terminated........................ (0.1) 13.94- 56.63 36.81
---- ------------- ------
Options outstanding at December 31, 1997.. 2.4 $13.94-$53.98 $36.70
==== ============= ======
Options exercisable:
1997.................................... 1.3 $13.94-$53.98 $32.91
1996.................................... 1.4 13.94- 56.63 31.13
1995.................................... 1.1 13.94- 56.63 29.16
</TABLE>
The weighted-average fair value of options granted during 1997, 1996 and
1995 was $10.85 per share, $9.08 per share and $7.36 per share, respectively.
F-19
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- --------------------- ---
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- --------- ----------- ---------
(NUMBER OF SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
$10-$20....... 20 5.81 $16.23 18 $16.19
$20-$30....... 232 2.46 25.61 224 25.72
$30-$40....... 1,279 4.94 34.24 996 33.89
$40-$50....... 883 9.09 43.56 106 41.43
$50-$60....... 5 6.48 52.02 2 53.98
----- -----
2,419 1,346
===== =====
</TABLE>
17.EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share from continuing operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Numerator:
Numerator for basic earnings per share-earnings from
continuing
operations.......................................... $131.0 $133.4 $100.1
Effect of dilutive securities:
5.75 percent convertible subordinated notes........ 0.2 3.5 3.8
------ ------ ------
Numerator for diluted earnings per share-income
available to common shareholders after assumed
conversion........................................ $131.2 $136.9 $103.9
====== ====== ======
Denominator (shares in millions):
Denominator for basic earnings per share-weighted-av-
erage shares........................................ 50.2 49.7 49.2
Effect of dilutive securities:
Employee stock options............................. 0.2 0.2 0.1
5.75 percent convertible subordinated notes........ 0.1 2.5 2.5
Restricted stock compensation...................... (0.1) (0.1) (0.1)
Contingent restricted stock awards................. -- -- 0.1
------ ------ ------
Dilutive potential common shares..................... 0.2 2.6 2.6
------ ------ ------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions... 50.4 52.3 51.8
====== ====== ======
Basic earnings per share from continuing operations.... $ 2.61 $ 2.68 $ 2.04
====== ====== ======
Diluted earnings per share from continuing operations.. $ 2.60 $ 2.62 $ 2.01
====== ====== ======
</TABLE>
For additional disclosures regarding the 5.75 percent subordinated notes and
the employee stock options, see pages F-13 and F-18 through F-20.
F-20
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
18.BUSINESS COMBINATIONS
During the three-year period ended December 31, 1997, the company acquired
four entities for cash and common stock valued at $350.7 plus the assumption
of liabilities. The acquisitions, except Data Switch Corporation (Data
Switch), were accounted for as purchases, and, accordingly, the results of
operations of the acquired companies are included in the statement of earnings
for the periods during which they were owned by the company. Data Switch was
accounted for as pooling of interests. The following paragraphs discuss
significant mergers and acquisitions made during the three years ended
December 31, 1997.
On June 13, 1995, the company completed a cash-tender offer for Best Power
Technology, Inc. (Best Power). Best Power is a manufacturer of uninterruptible
power supply products, which provide backup power to protect computers,
information networks and other critical systems from power line disturbances.
The aggregate purchase price was $206.3, creating goodwill of $167.1. The
purchase price was financed through the issuance of commercial paper. The
company recorded a $7.4 before-tax charge ($4.8 after-tax) during the second
quarter of 1995, primarily for severance and other consolidation costs
relating to the combination of General Signal and Best Power locations.
On July 27, 1995, the company acquired MagneTek Electric Inc. (Waukesha
Electric) for $73.9, creating goodwill of $46.2. Waukesha Electric designs,
manufactures and installs medium-power transformers and related products. The
purchase price was financed through the issuance of commercial paper.
Unaudited pro forma data for the year ended December 31, 1995 giving effect
to the acquisitions of Best Power and Waukesha Electric as if they had been
acquired at the beginning of 1995 are shown below:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Net sales........................................................ $1,974.3
Net earnings..................................................... $ 36.2
Basic earnings per share......................................... $ 0.74
Diluted earnings per share....................................... $ 0.77
</TABLE>
On November 9, 1995, the company merged with Data Switch by exchanging 1.8
million shares of company common stock and 0.2 million rights to receive
company common stock for all of the outstanding common stock and related
options and warrants of Data Switch. Data Switch designs, develops,
manufactures, markets and services products for large-scale data center
networks. As a result of the merger, the company incurred transaction costs,
severance and balance sheet valuation adjustments of $12.7 ($8.1 after-tax).
The transaction costs included investment banker and other professional fees.
The consolidation costs included severance pay primarily for Data Switch and
asset valuation adjustments.
19.DISCONTINUED OPERATIONS
In November 1994, the company adopted a plan to sell Leeds & Northrup
Company (L&N), formerly a part of the Process Controls sector, and
Dynapower/Stratopower (Dynapower), formerly a part of the Industrial
Technology sector. These operations have been accounted for as discontinued
operations, and the consolidated financial statements have reported separately
their net assets and operating results. In the second and third quarters of
1995, the company recorded a total of $99.9 before-tax charges ($64.0 after-
tax) for additional expected losses relating to the disposal of L&N and
Dynapower. Through December 31, 1996, substantially all related assets were
sold. In September 1997, $3.8 of this amount ($2.3 after-tax) was no longer
required and accordingly, was reversed.
20.DISPOSITION OF BUSINESS AND OTHER SPECIAL ITEMS
In the fourth quarter of 1997, the company settled patent litigation and
sold related patents for a pre-tax gain of $10.0 and sold its equity interest
in a company in Mexico for a gain of $9.0. Income tax expense on the gains
totaled $10.6. The effective tax rate on the Mexico gain differs from the U.S.
statutory tax rate due to a difference in the book and tax basis of the equity
investment sold. Additionally in the fourth quarter of 1997, the company
recorded $13.8 of pre-tax charges in selling, general and administrative
expenses for asset valuations, lease termination costs and other individually
insignificant matters.
F-21
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
In August 1997, the company sold substantially all of the assets of GSPG, a
unit of the Process Controls sector, to Pentair, Inc. for approximately $200
and recognized a pre-tax gain of $63.7 ($17.2 after-tax). The effective tax
rate differs from the U.S. statutory tax rate due to a difference in the book
and tax basis of GSPG. Additionally, during the third quarter of 1997, the
company recorded charges for inventory and accounts receivable policy changes,
asset write-offs, professional fees and cancellation of a facility lease.
Additionally, the company reversed a restructuring reserve that was no longer
needed due to the formation of EGS. The net of these charges of $14.1 were
included in cost of sales ($11.1) and selling, general and administrative
expenses ($3.0), with an associated income tax benefit of $5.4.
In January 1996, the company sold Kinney, a unit of the Process Controls
sector, for $29.0 and recognized a pre-tax gain of $20.8. Included in the gain
were transaction costs of approximately $0.5. Also during the first quarter of
1996, the company recognized $19.7 of pre-tax charges for asset write-downs,
lease termination costs, severance, warranty repairs and environmental
matters. The charges were included in cost of sales ($13.0) and selling,
general and administrative expenses ($6.7), with an associated income tax
benefit of $7.9.
F-22
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
21.BUSINESS SECTOR INFORMATION
The company manufactures industrial products and components in the Process
Control, Electrical Control and Industrial Technology (primarily
transportation and telecommunication) industries. See pages 3 through 5 of
this 10-K for a description of major products and markets served.
<TABLE>
<CAPTION>
PRODUCT SECTORS 1997 1996 1995 1994 1993
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET SALES:
Process Controls........ $ 671.9 $ 752.4 $ 719.7 $ 606.4 $ 545.8
Electrical Controls..... 910.9 945.3 777.0 618.6 547.1
Industrial Technology... 371.8 367.3(/2/) 366.5 302.7 261.3
-------- -------- -------- -------- --------
$1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2
======== ======== ======== ======== ========
OPERATING EARNINGS:
Process Controls........ $ 149.9(/1/)$ 128.9(/3/)$ 92.0 $ 66.8(/5/) 45.1(/6/)
Electrical Controls..... 66.4(/1/) 86.4(/3/) 62.1(/4/) 30.7(/5/) 29.2(/6/)
Industrial Technology... 64.3(/1/) 62.5(/3/) 51.1(/4/) 47.4(/5/) 44.8
Other charges and cred-
its.................... -- -- -- 46.2 48.0(/7/)
-------- -------- -------- -------- --------
280.6 277.8 205.2 191.1 167.1
Equity income........... 11.8 1.1 0.9 1.0 0.2
Interest expense, net... (13.2) (21.5) (24.3) (11.8) (16.6)
Unallocated expenses.... (26.4)(/1/) (35.0) (25.4) (20.0) (11.6)
-------- -------- -------- -------- --------
Earnings from continuing
operations before in-
come taxes............. $ 252.8 $ 222.4 $ 156.4 $ 160.3 $ 139.1
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS:
Process Controls........ $ 299.7 $ 434.9 $ 420.9 $ 391.4 $ 474.3
Electrical Controls..... 532.5 700.7 692.0 399.4 326.5
Industrial Technology... 191.0 205.9 209.0 181.3 167.2
-------- -------- -------- -------- --------
1,023.2 1,341.5 1,321.9 972.1 968.0
General corporate as-
sets................... 220.2 183.1 210.3 211.8 213.1
Assets held for sale at
estimated realizable
value.................. -- 4.9 60.4 153.6 25.7
Investments in and ad-
vances to affiliates... 144.6 21.5 20.6 20.4 18.1
-------- -------- -------- -------- --------
Total assets............ $1,388.0 $1,551.0 $1,613.2 $1,357.9 $1,224.9
======== ======== ======== ======== ========
DEPRECIATION OF PROPER-
TY, PLANT AND EQUIP-
MENT(/8/):
Process Controls........ $ 17.2 $ 17.8 $ 17.9 $ 16.6 $ 12.4
Electrical Controls..... 20.3 22.1 19.0 14.5 13.0
Industrial Technology... 10.9 10.6 11.4 6.4 6.4
Corporate and other..... 2.3 2.1 2.0 4.2 3.6
CAPITAL EXPENDITURES(/8/):
Process Controls........ $ 18.8 $ 21.8 $ 15.0 $ 28.7 $ 23.1
Electrical Controls..... 20.9 25.1 21.1 21.8 22.3
Industrial Technology... 11.2 10.5 11.0 11.4 7.7
Corporate and other..... 5.6 1.9 1.9 12.9 2.0
</TABLE>
(1) Includes 1997 income in Process Controls ($63.7) and unallocated expenses
($19.0) for the gain on sale of GSPG, settlement of patent litigation and
sale of patents and gain on sale of equity interest in a company in
Mexico. Also recorded were charges in Process Controls ($2.8), Electrical
Controls ($16.7), Industrial Technology ($1.9) and unallocated expenses
($6.5) for asset valuations, restructuring charges, lease termination
costs and other matters.
(2) Includes $4.2 of royalty income.
(3) Includes 1996 income in Process Controls ($22.6) and Industrial Technology
($4.2) for the gain on sale of Kinney, insurance gain on the recovery of
destroyed assets and royalty income. Also recorded were charges in Process
Controls ($4.0), Electrical Controls ($11.1) and Industrial Technology
($4.6) for asset write-downs, lease termination costs, severance, warranty
repairs and environmental matters.
(4) Includes 1995 charges in Electrical Controls ($7.4) and Industrial
Technology ($12.7) for the acquisition of Best Power and merger with Data
Switch.
(5) Includes 1994 charges in Process Controls ($11.9), Electrical Controls
($19.2) and Industrial Technology ($9.9) for the consolidation of
operations, asset valuations, environmental and other.
(6) Includes 1993 charges in Process Controls ($22.1) and Electrical Controls
($10.5) for asset valuations, restructuring and transaction and
consolidation charges related to Revco.
(7) Represents credits for the divested semiconductor operations ($53.2) and
charges for the transportation businesses ($5.2).
(8) Excludes discontinued operations.
F-23
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
22.GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET SALES:
United States............... $1,764.3 $1,901.0 $1,699.8 $1,390.0 $1,218.9
Foreign..................... 273.0 274.6 239.9 180.7 173.7
Intergeographic............. (82.7) (110.6) (76.5) (43.0) (38.4)
-------- -------- -------- -------- --------
$1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2
======== ======== ======== ======== ========
OPERATING EARNINGS(/1/):
United States............... $ 193.5 $ 234.7 $ 212.0 $ 135.7 $ 113.4
Other charges and credits... 72.7 20.8 (20.1) 46.2 48.0
Foreign..................... 14.4 22.3 13.3 9.2 5.7
-------- -------- -------- -------- --------
$ 280.6 $ 277.8 $ 205.2 $ 191.1 $ 167.1
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS(/2/):
United States............... $ 866.4 $1,201.0 $1,175.6 $ 875.8 $ 822.5
Foreign..................... 156.8 140.5 146.3 96.3 145.5
-------- -------- -------- -------- --------
$1,023.2 $1,341.5 $1,321.9 $ 972.1 $ 968.0
======== ======== ======== ======== ========
Export sales to unaffiliated
customers(/3/)............. $ 176.8 $ 215.2 $ 199.1 $ 125.4 $ 110.9
</TABLE>
- -------
(1) Excludes equity income, net interest expense and unallocated expenses.
(2) Excludes general corporate assets and investments in affiliates.
(3) Included in United States sales.
23.SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1996 1995
----- ----- ------
<S> <C> <C> <C>
Liabilities assumed in conjunction with acquisitions:
Fair value of assets acquired............................. $11.0 $ -- $332.1
Cash paid................................................. 11.0 -- (280.2)
----- ----- ------
$ -- $ -- $ 51.9
===== ===== ======
Research and development.................................... $45.7 $47.5 $ 46.9
Advertising expense......................................... $16.1 $17.9 $ 14.1
</TABLE>
F-24
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
24. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
--------------- --------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996 1997 1996
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 505.6 $ 481.7 $ 539.6 $ 515.0 $ 475.7 $ 521.6 $ 433.7 $ 546.7
Gross profit............ 148.3 130.3 163.7 157.7 129.2 165.4 134.9 175.9
Earnings from continuing
operations............. 24.3 25.4(/3/) 34.4 31.6 36.0(/1/) 37.4 36.3(/2/) 39.0
Disposal of discontinued
operations............. -- -- -- -- 2.3 -- -- --
Cumulative effect of
accounting change...... -- -- -- -- -- -- (3.7) --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings............ $ 24.3 $ 25.4 $ 34.4 $ 31.6 $ 38.3 $ 37.4 $ 32.6 $ 39.0
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings (loss)
per share of common
stock(/4/):
Continuing
operations........... $ 0.47 $ 0.51 $ 0.68 $ 0.64 $ 0.71 $ 0.75 $ 0.75 $ 0.78
Disposal of
discontinued
operations........... -- -- -- -- 0.05 -- -- --
Cumulative effect of
accounting change.... -- -- -- -- -- -- (0.08) --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings.......... $ 0.47 $ 0.51 $ 0.68 $ 0.64 $ 0.76 $ 0.75 $ 0.67 $ 0.78
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss)
per share of common
stock(/4/):
Continuing
operations........... $ 0.47 $ 0.51 $ 0.68 $ 0.62 $ 0.71 $ 0.73 $ 0.75 $ 0.76
Disposal of
discontinued
operations........... -- -- -- -- 0.05 -- -- --
Cumulative effect of
accounting change.... -- -- -- -- -- -- (0.08) --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings.......... $ 0.47 $ 0.51 $ 0.68 $ 0.62 $ 0.76 $ 0.73 $ 0.67 $ 0.76
======= ======= ======= ======= ======= ======= ======= =======
Common stock price
range:
High.................. $46 3/4 $37 3/4 $46 3/4 $40 1/8 $ 53 $44 1/4 $44 7/8 $44 1/2
Low................... 38 1/2 32 36 1/8 35 1/4 37 3/16 36 1/4 36 5/8 39 3/4
Dividends declared per
share.................. $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.27 $ 0.255
Dividends paid per
share.................. $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24
</TABLE>
- -------
Earnings before cumulative effect of accounting change was $38.3 ($0.76 per
share) in the third quarter of 1997.
Note: The sum of the quarters' earnings per share may not equal the full year
per-share amounts.
(1) Included $63.7 gain on sale of GSPG. The company also recorded $14.1 of
special charges for asset valuations, restructuring charges and other
matters.
(2) Included $10.0 gain on settlement of a patent litigation and sale of
patents and $9.0 gain on sale of an investment in Mexico. The company also
recorded $13.8 of special charges for asset valuations, lease termination
costs and other matters.
(3) Included $20.8 gain on sale of Kinney and $6.0 related to a royalty
contract and an insurance gain. The company also recorded $19.7 of charges
for asset write-downs, lease termination costs, severance, warranty
repairs and environmental matters.
(4) The 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with SFAS No. 128.
F-25
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO COSTS BALANCE AT
BEGINNING AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1997
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $ 10.0 $ 8.6 $ (6.3)(/1/) $12.3
Dispositions and special
items:
Consolidation of oper-
ations and other..... $ 10.8 1.0 (6.7) 5.1
Acquisition related... 0.8 -- (0.6) 0.2
Semiconductor......... 0.6 -- (0.4) 0.2
Restructuring and
product repairs...... 6.0 -- (6.0) --
------ ----- ------ -----
$ 18.2 $ 1.0 $(13.7) $ 5.5
====== ===== ====== =====
1996
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $ 10.6 $ 2.1 $ (2.7) $10.0
Assets held for sale.. $ 67.9 -- (67.9)(/2/) $ --
Dispositions and special
items:
Consolidation of oper-
ations and other..... $ 24.7 -- (13.9)(/2/) 10.8
Acquisition related... 4.1 -- (3.3) 0.8
Semiconductor......... 3.2 -- (2.6) 0.6
Restructuring and
product repairs...... 0.7 7.9 (2.6) 6.0
------ ----- ------ -----
$ 32.7 $ 7.9 $(22.4) $18.2
====== ===== ====== =====
1995
Reserves deducted from
assets:
Allowance for doubtful
accounts............. $ 10.7(/6/) $ 4.9 $ (5.0)(/3/) $10.6
Assets held for sale.. $ 8.6 59.5 (0.2)(/4/) $67.9
Dispositions and special
items:
Consolidation of oper-
ations and other..... $ 15.9 40.4 (31.6)(/3/) 24.7
Acquisition related... 0.6 5.6 (2.1)(/5/) 4.1
Semiconductor......... 18.1 -- (14.9)(/5/) 3.2
Restructuring......... 2.5 -- (1.8)(/5/) 0.7
------ ----- ------ -----
$ 37.1 $46.0 $(50.4) $32.7
====== ===== ====== =====
</TABLE>
- -------
(1) Includes $1.9 due to the sale of GSPG and the contribution of GSEG's net
assets to EGS.
(2) Includes reclassification of $4.8 credit balance from assets held for sale
reserve to discontinued operations reserve.
(3) Write-off of bad debts, net of recoveries.
(4) Reflects reclassification to accruals.
(5) Charges to reserve for related costs incurred during the year.
(6) Includes $0.6 of reserves recorded by Data Switch which were consolidated
effective January 1, 1995.
F-26
<PAGE>
EXHIBIT (12)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings from continuing operations before
income taxes............................. $252.8 $222.4 $156.4 $160.3 $139.1
Fixed charges............................. 23.5 30.9 34.7 20.2 22.6
------ ------ ------ ------ ------
$276.3 $253.3 $191.1 $180.5 $161.7
Fixed charges:
Interest expense (gross).................. $ 17.1 $ 24.1 $ 27.7 $ 14.4 $ 18.0
One-third of rent expense................. 6.4 6.8 7.0 5.8 4.6
------ ------ ------ ------ ------
$ 23.5 $ 30.9 $ 34.7 $ 20.2 $ 22.6
------ ------ ------ ------ ------
Ratio....................................... 11.76 8.20 5.51 8.94 7.15
====== ====== ====== ====== ======
</TABLE>
F-27
<PAGE>
EXHIBIT (21)
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
1. CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
<S> <C> <C>
Aurora/Hydromatic Pumps, Inc........................... 100 Delaware
Best Power Technology AG............................... 100 Switzerland
Subsidiary of Best Power Technology AG:
Sola Electric GmbH.................................... 100 Germany
Borri Elettronica Industriale S.r.L.................... 100 Italy
DeZurik of Australia Proprietary Ltd................... 100 Australia
DeZurik Vertriebs GmbH................................. 100 Austria
Fairbanks Morse Pump Corporation....................... 100 Kansas
Subsidiary of Fairbanks Morse Pump Corporation:
Fairbanks Morse Limited (India)....................... 35 India
GCA International Corporation.......................... 100 New Jersey
GSR Merger Sub., Inc................................... 100 Delaware
G.S. Building Systems Corporation...................... 100 Connecticut
General Signal (China) Co., Ltd........................ 100 China
General Signal FSC, Inc................................ 100 Virgin Islands
General Signal Holdings Company........................ 100 Delaware
Subsidiary of General Signal Holdings Company:........
General Signal Networks, Inc.......................... 100 Delaware
Subsidiaries of General Signal Networks, Inc.:.......
Data Switch Intellectual Property, Inc............... 100 Delaware
Data Switch Subsidiary Stock Corporation............. 100 Delaware
Data Switch Collections, Inc......................... 100 Delaware
Data Switch (UK) Limited............................. 50 England
(balance of 50% held by Data Switch Subsidiary Stock
Corporation)
General Signal Networks Italia S.r.L................. 100 Italy
General Signal Networks Limited...................... 100 England
General Signal Technology Corporation................. 100 Delaware
Subsidiary of General Signal Technology Corporation:
General Farebox of Atlanta, Inc...................... 100 Delaware
General Signal International Corporation............... 100 Delaware
General Signal Limited................................. 100 Canada
General Signal Mauritius, Inc.......................... 100 Mauritius
General Signal S.E.G.--Asia, Ltd....................... 100 Hong Kong
General Signal Power Systems, Inc...................... 100 Wisconsin
Subsidiaries of General Signal Power Systems, Inc.:
Best Power Technology SARL (France)................... 100 France
Best Power Technology Mexico SA. de C.V............... 100 Mexico
Best Power Technology Limited......................... 100 Taiwan
Subsidiary of Best Power Technology Limited:
Best Power Taiwan Trading Co. Ltd.................... 100 Taiwan
Best Power Technology Pte. Limited.................... 100 Singapore
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
<S> <C> <C>
General Signal UK Limited.............................. 100 England
Subsidiaries of General Signal UK Limited:
Best Power Technology Limited......................... 100 England
Subsidiary of Best Power Technology Limited:.........
Sola (UK) Ltd........................................ 100 England
DeZurik International Limited......................... 100 England
GCA Limited........................................... 100 England
G.S. Iona Ltd......................................... 100 England
General Signal Europe Limited......................... 100 England
Subsidiaries of General Signal Europe Limited:
General Signal Verwaltaugsgesellschaft mbH........... 100 Germany
General Signal GmbH & Co. KG......................... 99 Germany
Subsidiaries of General Signal GmbH & Co. KG:
Best Power Technology GmbH.......................... 100 Germany
General Signal Networks GmbH........................ 100 Germany
Data Switch Elektronik GmbH......................... 100 Germany
General Signal SEG, Ltd............................... 100 England
Leeds & Northrup Limited.............................. 100 England
Lightnin (Europe) Limited............................. 100 England
Lightnin Mixers Limited............................... 100 England
Tau-Tron (UK) Limited................................. 100 England
Telenex Europe Limited................................ 100 England
Kayex China Holdings, Inc.............................. 100 Delaware
Subsidiary of Kayex China Holdings, Inc.:
Hangzhou Kayex Zheda Electromechanical Co., Ltd....... 53.3 China
Leeds & Northrup Company............................... 100 Delaware
Subsidiaries of Leeds & Northrup Company:
Leeds & Northrup GmbH................................. 100 Germany
Leeds & Northrup Mexicanna, S.A....................... 100 Mexico
Leeds & Northrup S.A.................................. 100 Spain
LDN, Ltd.............................................. 100 Delaware
Subsidiaries of LDN, Ltd.:
Leeds & Northrup S.A.R.L............................. 100 France
General Signal Ireland B.V........................... 100 Netherlands
Subsidiary of General Signal Ireland B.V.:..........
High Ridge Ireland Ltd.............................. 100 Ireland
Subsidiary of High Ridge Ireland Ltd.:
General Signal Enterprises......................... 99 Ireland
Leeds & Northrup Singapore, Pte., Ltd................ 100 Singapore
L&N Products Pty Ltd................................. 100 Australia
Subsidiary of L&N Products Pty Ltd.:
Leeds & Northrup (New Zealand) Ltd.................. 100 New Zealand
Leeds & Northrup Italy, S.p.A........................ 53 Italy
(Remaining 47% owned by Leeds & Northrup Company)
Lightnin Mixers Pty. Ltd............................. 60 Australia
(Remaining 40% owned by General Signal Ltd.)
Lightnin Private Limited............................. 100 Singapore
Metal Forge Company, Inc............................. 100 Delaware
Shenyang Stock Electric Power Equipment Company, Lim-
ited................................................ 50 China
Sola Australia, Limited.............................. 100 Australia
Stock Japan, Ltd..................................... 100 Japan
</TABLE>
F-29
<PAGE>
2. OTHER SUBSIDIARIES
EGS Electrical Group LLC, organized under the laws of Delaware, is 7.21
percent owned by G.S. Building Corporation, 40.29 percent owned by General
Signal Corporation and 52.5 percent owned by Emerson Electric. The
subsidiaries of EGS Electrical Group LLC are as follows:
<TABLE>
<CAPTION>
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
<S> <C> <C>
OZ Gedney LLC..................................... 100 Delaware
Dual-Lite Manufacturing, Inc...................... 100 Delaware
Teraski Nelson Ltd................................ 50 Japan
(Balance of 50% owned by Terasaki Co. of Japan)
</TABLE>
The following foreign subsidiaries and the investment of 50 percent or less
owned companies are carried at cost plus equity in undistributed earnings
since acquisition. These subsidiaries and companies are not material
individually or in the aggregate in relation to the financial statements.
<TABLE>
<CAPTION>
PERCENT ORGANIZED UNDER
OWNED THE LAWS OF
------- ---------------
<S> <C> <C>
Subsidiaries of General Signal Corporation:
DeZurik Japan Co., Ltd............................. 48 Japan
DeZurik Mexico, S.A. de C.V........................ 49 Mexico
HMS Ventures Ltd................................... 14 California
High Ridge Company, Limited........................ 100 Bermuda
Koyo Lindberg Ltd.................................. 50 Japan
</TABLE>
F-30
<PAGE>
EXHIBIT (23)
CONSENT OF ERNST & YOUNG LLP
The Board of Directors and Shareholders General Signal Corporation
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-33929) pertaining to the universal shelf registration dated
May, 1994, (Form S-8 No. 33-46613) pertaining to the General Signal
Corporation Savings and Stock Ownership Plan, (Form S-8 No. 33-05181)
pertaining to General Signal Corporation's stock incentive plans, (Form S-8 to
Form S-4 No. 33-62437-01) pertaining to stock options assumed as a result of
the merger with Data Switch Corporation (Form S-3 to Form S-4 No. 33-62437-02)
pertaining to the outstanding stock warrants as a result of the merger with
Data Switch Corporation and related prospectuses of our report dated January
23, 1998, with respect to the financial statements and schedules of General
Signal Corporation included in this Annual Report (Form 10-K) for the year
ended December 31, 1997.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 20, 1998
F-31
<PAGE>
EXHIBIT 3.2
GENERAL SIGNAL CORPORATION
__________
BY-LAWS
__________
As Amended Through March 19, 1998
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
<PAGE>
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 1,
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 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 1, 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 1, 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 of whom shall be an affiliate of the Corporation, to act in
lieu of such committee to review compliance with this Article 1, Section 3. If
the committee or the inspectors (as the case may be) shall determine that a
shareholder has not complied with this Article 1, Section 3, the committee or
the inspectors (as the case may be) shall direct the chairman of such meeting to
declare to
<PAGE>
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 1, 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 1, 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 1, 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
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 1, 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 1, 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 1, Section 3. If the inspectors
shall determine that such shareholder has not complied with this Article 1,
Section 3, the inspector shall direct the
<PAGE>
chairman of such meeting or any such 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, 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 otherwise 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 shareholder 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. Election of Directors: 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.
<PAGE>
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, Ralph E. Bailey, John P. Horgan and Roland W. Schmitt shall be
permitted to be nominated for a one-year term at the 1996 Annual Meeting of
Shareholders.
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 more than 15 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 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 President, or the Chairman of the Committee on Directors, 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 Committee on Directors, 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
<PAGE>
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, 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
<PAGE>
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 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.
<PAGE>
SECTION 2. Duties of Chairman of the Board: 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 President: 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 4. Duties of Vice President-Finance, and other Vice Presidents: 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 5. Duties of Treasurer and Controller: 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,
perform all the duties incident to the office of 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 6. Duties of Secretary: 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.
<PAGE>
SECTION 7. 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 8. 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 9. 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 10. 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, the president and the officers reporting directly to either of them. The
Board of Directors shall have power to fix the compensation of the Chairman of
the Board, the President and of the officers reporting directly to either of
them. 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. Notwithstanding the foregoing, the Board of
Directors may delegate to a Committee of the Board the responsibility of
determining the incentive compensation and stock awards of the Chairman of the
Board, the President and the officers reporting directly to either of them.
SECTION 11. Vacancy: Any vacancy of an office occurring may be filled at
--------
any Regular or Special Meeting of the Board of Directors.
SECTION 12. 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 13. 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 14. 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
<PAGE>
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 15. 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 15 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 16. Facsimile Signatures: Any signature which is authorized by
---------------------
Section 13, 14 or 15 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
<PAGE>
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.
SECTION 3. Authority of the Executive Officers of the 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 or 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
<PAGE>
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 rights 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 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
<PAGE>
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.
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 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
<PAGE>
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.
<PAGE>
EXHIBIT 10.1
ANNUAL INCENTIVE PLAN FOR CORPORATE AND BUSINESS UNIT MANAGEMENT
-----------------------------------------------------------------
OF GENERAL SIGNAL CORPORATION
-----------------------------
Effective January 1, 1997
1. PURPOSE
-------
The purpose of the Annual Incentive Plan (the "Plan") for Corporate and
Business Unit management of General Signal Corporation ("Corporation") is to
motivate and retain those key management personnel who are most responsible for
achieving annual business objectives. Certain capitalized terms used in the
Plan are defined in Section 11.
2. ELIGIBILITY AND PARTICIPATION
-----------------------------
The Chairman of the Board of Directors of the Corporation ("Chairman") will
designate key managers ("Participants") to participate in the Plan. Participants
are generally expected to be officers of the Corporation, key members of the
corporate staff, unit presidents, and key management reporting directly to unit
presidents.
3. TARGET AWARDS
-------------
The Chairman determines the size of the award opportunity, expressed as a
percentage of Base Salary ("Target Award") available to each Participant based
on market level compensation for the position that the Participant holds. The
Target Awards for officers of the Corporation are subject to the approval of the
Board of Directors (the "Board"). The Target Awards for unit presidents are
subject to the approval of the P&C Committee. At the beginning of the
Performance Period, each Participant will be notified that (i) he or she has
been granted the opportunity to earn a bonus under the Plan (a "Cash Award"),
(ii) the specific EVA Performance Target for the applicable business unit or for
the Corporation applicable to the Participant for the Performance Period, and
(iii) his or her Target Award, as determined by the Chairman.
<PAGE>
4. CHANGES TO TARGET AWARD
-----------------------
During the term of the Plan, the Target Award may be changed at the
discretion of the Chairman for Participants other than officers and presidents,
if a transfer, a promotion, or a significant increase or decrease in
responsibility is determined by the Chairman to warrant such a change. Changes
to the Target Award for officers of the Corporation are subject to the approval
of the Board. Changes to the Target Award for unit presidents are subject to the
approval of the P&C Committee. Notwithstanding the foregoing, no such change
that is adverse to Participants may be made at the request of a third party that
is seeking to effect a Change in Control or otherwise in connection with or in
anticipation of a Change in Control.
5. EVA PERFORMANCE TARGETS
-----------------------
The Cash Award paid to a Participant for a Performance Period will equal
(i) the Target Award, multiplied by (ii) the Performance Percentage, multiplied
by (iii) the Participant's Actual Base Salary for the Performance Period. The
"Performance Percentage" means 100% if 100% of the EVA Performance Target is
achieved. If the EVA Performance Target is exceeded, the "Performances
Percentage" means 100% plus three percentage points for each percentage point of
EVA achievement above the EVA Performance Target, but the Performance Percentage
shall not be more than 200%. If the EVA Performance Target is not met, the
"Performance Percentage" means 100% minus three percentage points for each
percentage point of EVA achievement under the EVA Performance Target (but not
less than 0%).
Once established, EVA Performance Targets will generally remain fixed
during the applicable Performance Period. However, the Chairman with the
approval of the P&C Committee may adjust EVA Performance Targets during, or at
the end of, the Performance Period. Reasons for such a change include, but are
not limited to, the following: a reconfiguration of one or more business units,
acquisitions or divestitures, and/or significant market changes.
Notwithstanding the foregoing, no such change that is adverse to Participants
may be made at the request of a third party that is seeking to effect a Change
in Control or otherwise in connection with or in anticipation of a Change in
Control.
-2-
<PAGE>
6. PAYMENT OF CASH AWARDS
-----------------------
Payment of Cash Awards will be made no later than the March 15th of the
year following the Performance Period. Cash Awards will be calculated on Actual
Base Salary paid for the time the Participant actually participated in the Plan
during the Performance Period.
Except in the event of a Change in Control, no vested interest in any
payment under the Plan will accrue during the Performance Period. Cash Awards
will not be paid to any Participant who resigns or whose employment is
terminated, with or without cause, prior to the end of the applicable
Performance Period, except to the extent approved by the Chairman, subject to
required approvals by the Board (in the case of Cash Awards to officers of the
Corporation) or by the P&C Committee (in the case of Cash Awards to unit
presidents).
Exceptions: Notwithstanding the foregoing, if a Participant terminates
----------
due to death, Disability, Retirement, transfer into a position which is
ineligible for participation, or for other circumstances approved by the
Chairman, the pro rata award amount earned through such event will be paid
following the Performance Period in accordance with the Actual Base Salary paid
up to the date of such event. If a Participant transfers to a position in
another business unit of the Corporation in which he or she remains eligible to
be a Participant, the Cash Award will be calculated based on the Participant's
Actual Base Salary and by prorating each business unit's EVA for the time the
Participant spent in each business unit during the Performance Period.
Participants may elect to defer receipt of Cash Awards, under the
Corporation's Deferred Compensation Plan or any successor thereto, to the extent
such a plan is in effect from time to time and the Participant is eligible to
participate therein under the terms of such plan.
7. CHANGE IN CONTROL
-----------------
If there is a Change in Control of the Corporation, each Participant will
become immediately vested in, and entitled to, payment of the Cash Award
calculated as (i) the Target Award, multiplied by (ii) the Performance
Percentage, as defined in Section 5 above, based upon the Participant's Target
Award as in effect immediately before the Change in
-3-
<PAGE>
Control and upon the actual EVA achievement relative to the EVA Performance
Target during the portion of the Performance Period ending at the end of the
fiscal month immediately preceding the date of the Change in Control, multiplied
by (iii) the aggregate amount of the Participant's Actual Base Salary for the
portion of the Performance Period ending on the day immediately preceding the
date of the Change in Control; provided, that the Performance Percentage may not
exceed 200%. Payment of Cash Awards will be made no later than 30 days after the
date of the Change in Control. Upon a Change in Control, a Participant's
election to defer receipt of Cash Awards shall remain in full force and effect.
8. ADMINISTRATION
--------------
Subject to the authority of the P&C Committee and the Board as specified in
this Plan, the Chairman has full authority to interpret the Plan, to establish
any rules or regulations relating to the Plan which he or she deems to be
appropriate, and to make any other determination which he or she believes
necessary or advisable for the proper administration of the Plan, including
termination of the Plan. Notwithstanding the foregoing, the Plan may not be
amended or terminated in any manner that adversely affects the rights of any
Participant without that Participant's consent following a Change in Control, at
the request of a third party that is seeking to effect a Change in Control or
otherwise in connection with or in anticipation of a Change in Control.
9. ADDITIONAL PROVISIONS
---------------------
(a) No Participant will have any right because he or she is a Participant
in the Plan to continue in the employ of the Corporation or any of its
subsidiaries for any period of time, or any right to continuation of
his or her present or any other rate of annual base salary. The rights
and powers of the Corporation which now exist or may exist in the
future to discharge any Participant from his or her employment or
change the assignment of any Participant are expressly reserved to the
Corporation.
(b) When any payment is made under the Plan, the Corporation is authorized
to withhold from such payment any amount necessary to satisfy income
tax and other withholding requirements.
-4-
<PAGE>
(c) Cash Awards may not be sold, transferred, pledged or assigned prior to
payment or forfeiture.
10. GOVERNING LAW
-------------
The validity, construction and effect of this Plan, any rules and
regulations relating to this Plan, and any Cash Awards payable under this Plan,
will be determined in accordance with the laws of the state of New York.
11. DEFINITIONS
-----------
(a) ACTUAL BASE SALARY. With respect to any specified period, the amount
of Base Salary earned by a Participant for such period, whether paid to
the Participant or deferred at the Participant's election pursuant to
any tax-qualified or nonqualified plan or arrangement of the
Corporation.
(b) BASE SALARY. The annual base salary payable to a Participant, at the
rates in effect from time to time.
(c) CHANGE IN CONTROL. Any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (a) the then
outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall
not constitute a Change in Control: (A) any acquisition directly from
the Corporation, (B) any acquisition by the Corporation, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or (d) any acquisition pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of this
Section 11(c); or
(ii) Individuals who, as of the date of this Plan, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date of this Plan whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a
-5-
<PAGE>
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Corporation or the acquisition of assets of another entity (a
"Corporate Transaction"), in each case, unless, following such
Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Corporate Transaction beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (B) no
Person (excluding any employee benefit plan (or related trust) of the
Corporation or such corporation resulting from such Corporate
Transaction) beneficially own, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Corporate Transaction and (C) at least a majority of the members
of the board of directors of the corporation resulting from such
Corporate Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) DISABILITY. "Disability" will mean a disability entitling a
Participant to long-term disability benefits under the applicable long-
term disability plan of the Corporation and its subsidiaries.
(e) EVA(R). As to a business unit or the Corporation, as applicable, the
Net Operating Profit After Tax of such entity, minus a charge on the
capital invested
-6-
<PAGE>
in such entity, and excluding non-cash reserve activity. EVA(R) is a
registered trademark of Stern Stewart & Co.
(f) EVA(R) PERFORMANCE TARGET. The budgeted percentage of EVA set by the
Chairman and approved by the P&C Committee for the applicable
Performance Period for a business unit or the Corporation, as
applicable.
(g) P&C COMMITTEE. The Personnel and Compensation Committee of the Board
of Directors of the Corporation.
(h) PERFORMANCE PERIOD. The "Performance Period" will be generally from
January 1 to December 31, unless otherwise established by the Chairman.
(i) RETIREMENT. "Retirement" means a Participant's early or normal
retirement under the applicable tax-qualified retirement plan of the
Corporation as in effect at the time.
-7-
<PAGE>
ANNUAL INCENTIVE PLAN - EXAMPLES
--------------------------------
1. THE COMPANY ACHIEVES ITS TARGET PERFORMANCE
Let's say that the unit has an EVA goal of $50 million for the year. At the end
of the year, the EVA is $50 million. So, the unit met the EVA goal and is said
to have achieved 100% of its EVA Performance Target.
Here's how to calculate your individual award when the unit achieves its EVA
Performance Target:
<TABLE>
<S> <C>
- - Determine your Actual Base Salary during the Performance Period, let's say $80,000
- - Multiply that figure by your Target Award. We'll use 20% x 20 %
- - This equals your AWARD AT TARGET PERFORMANCE (100%) $16,000
- - Now multiply the Target Award by the unit's EVA x 100%
- -The result is your Cash Award $16,000
-------
</TABLE>
2. THE COMPANY EXCEEDS ITS PERFORMANCE TARGET BY 10%
What would happen if the unit exceeds its goal? Let's say that the unit achieves
an EVA of $55 million for the year when its goal was $50 million. This would be
110% of the EVA Performance Target.
For every 1% the unit exceeds EVA Performance Target the individual's Cash Award
increases by 3 percentage points.
Here's how to calculate your Cash Award under these circumstances:
<TABLE>
<S> <C>
- - Determine your Actual Base Salary during the Performance Period, again let's use $80,000
- - Multiply that figure by your Target Award x 20%
- - Once again, this equals your AWARD AT TARGET PERFORMANCE (100%) $16,000
</TABLE>
<TABLE>
<CAPTION>
- - Because the unit EVA achievement is 10% above the EVA goal, the individual's Cash
Award is increased by 30% (3 x 10% = 30%) and results in an EVA Performance Target of
130% (100% + 30% = 130%)
x 130%
<S> <C>
- - The result is your Cash Award $20,800
-------
</TABLE>
3. THE COMPANY MISSES ITS PERFORMANCE TARGET BY 10%
What happens if the unit misses its goal? Let's say that the unit achieves an
EVA of $45 million for a year when the goal was $50 million. This would only be
90% of the EVA Performance Target.
For every 1% the unit misses its EVA Performance Target the individual's Cash
Award decreases by 3 percentage points.
Here's how to calculate your Cash Award under these circumstances:
<TABLE>
<S> <C>
- - Again we'll use example #1 as your Actual Base Salary during the Performance Period $80,000
- - Multiply that figure by your Target Award x 20%
- - This equals your AWARD AT TARGET PERFORMANCE (100%) $16,000
- - Because the Company missed its goal by 10% (100%-10%=90%) the individual's Cash Award is
decreased by 30% (3 x 10% = 30%) and results in a multiplier of 70% (100%-30% = 70%)
x 70%
- -The result is your Cash Award $11,200
-------
</TABLE>
-8-
<PAGE>
EXHIBIT 10.6
GENERAL SIGNAL CORPORATION
DEFERRED COMPENSATION PLAN
As Amended and Restated January 1, 1997
032497
<PAGE>
GENERAL SIGNAL CORPORATION
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I Purpose...................................... 1
ARTICLE II Definition................................... 1
ARTICLE III Eligibility.................................. 4
ARTICLE IV Savings Account Allocations.................. 4
ARTICLE V Deferred Incentive Account Allocations....... 5
ARTICLE VI Phantom Stock Units and Fixed Income Balances 5
ARTICLE VII Vesting...................................... 6
ARTICLE VIII Distributions and Withdrawals................ 7
ARTICLE IX Source of Payment of Benefits................ 9
ARTICLE X Designation of Beneficiaries................. 10
ARTICLE XI Administration of the Plan................... 10
ARTICLE XII Amendment and Termination.................... 11
ARTICLE XIII General Provisions........................... 11
<PAGE>
GENERAL SIGNAL CORPORATION
DEFERRED COMPENSATION PLAN
ARTICLE I
---------
Purpose
1.1 General Signal Corporation established this Deferred Compensation Plan
effective as of October 14, 1993 for the purposes of providing to its eligible
employees (a) benefits which would have been payable from the tax-exempt trust
under the tax-qualified benefit plan known as the General Signal Corporation
Savings and Stock Ownership Plan but for the limitations placed by the Internal
Revenue Code on contributions with respect to such employees under such plan and
(b) an opportunity to defer all or a portion of their compensation and to
receive in lieu thereof phantom stock units. This Plan constitutes an amendment
and continuation of the Plan in effect prior to this restatement.
The portions of the Plan providing (a) benefits without regard to the
limitation on "compensation" under Section 401(a)(17) of the Code, the
limitation applicable to the Savings Plan under Section 402(g) of the Code and
the limitations on contributions under the Savings Plan by reason of the actual
deferral percentage test of Section 401(k) of the Code and the average
contribution percentage test of Section 401(m) of the Code and (b) an
opportunity to defer all or a portion of an eligible employee's compensation,
constitute an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees. The portion of the Plan providing benefits above the limitations
prescribed under Section 415 of the Code constitutes an "excess benefit plan" as
defined in Section 3(36) of the Employee Retirement Income Security Act of 1974.
ARTICLE II
----------
Definitions
When used herein, the following terms shall have the following meanings:
2.1 "Account" means an Employee's Savings Account or Incentive Account
under the Plan.
2.2 "Act" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
1
<PAGE>
2.3 "Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Article X of the Plan to receive the amount, if any, payable
upon the death of an Employee who participates in the Plan.
2.4 "Benefit Limitations" means (a) the maximum aggregate amount of
"annual additions" which could have been made to an Employee's accounts under
the Savings Plan in accordance with Section 415 of the Code, (b) the limitation
prescribed under Section 401(a)(17) of the Code on the amount of annual
compensation that can be taken into account under the Savings Plan, (c) the
limitation applicable to the Savings Plan under Section 402(g) of the Code, (d)
the limitations applicable to highly compensated employees under the Savings
Plan with regard to the contribution rates for Tax Deferred Contributions, in
order to comply with the actual deferral percentage test under Section 401(k) of
the Code, and (e) the limitations applicable to highly compensated employees
under the Savings Plan with regard to Matching Contributions by reason of the
average contribution percentage test under Section 401(m) of the Code.
2.5 "Board of Directors" means the Board of Directors of the Company.
2.6 "Code" means the Internal Revenue Code, as amended from time to
time.
2.7 "Committee" means the Corporate Benefits Committee of General Signal
Corporation.
2.8 "Company" means General Signal Corporation , a New York corporation,
and its successors or assigns.
2.9 "Company Stock" means the Common Stock, par value of $1.00 per
share, of the Company.
2.10 "Compensation" means Compensation as defined in the Savings Plan but
determined without regard to the limitation prescribed under Section 401(a)(17)
of the Code on the amount of annual compensation that can be taken into account
under the Savings Plan and cash compensation paid under the Company's Long Term
Incentive Compensation Plan.
2.11 "Deferred Account" means an Employee's Account attributable to
allocations pursuant to Sections 5.1 and 5.2 as adjusted for dividend
equivalents and earnings equivalent pursuant to Article VI.
2.12 "Disability" means long term disability as determined under rules
and procedures that apply under the Company's Long Term Disability Plan.
2.13 "Employee" means any executive officer of the Company and any
President of a unit of the Company.
2
<PAGE>
2.14 "Employer" means the Company and each subsidiary thereof that
participates in the Savings Plan.
2.15 "Employment Requirement" means the requirement under the Savings
Plan that an employee complete a year of Continuous Employment in order to
receive Matching Contributions.
2.16 "Fixed Income Balance" means an Employee's Fixed Income Balance in
such person's Savings Account determined pursuant to Section 6.2.
2.17 "Human Resources Officer" means the chief human resources officer of
the Company.
2.18 "Investment Account" means an Employee's Account attributable to
allocations pursuant to Sections 5.1 and 5.2 as adjusted for dividend
equivalents and earnings equivalents pursuant to Article VI.
2.19 "Matching Contribution" means a Matching Contribution as defined in
the Savings Plan.
2.20 "Phantom Stock Unit" means a unit in an Account corresponding to a
share of Company Stock as described in Section 6.1.
2.21 "Plan" means the General Signal Corporation Deferred Compensation
Plan as set forth herein and as amended and restated from time to time.
2.22 "Savings Account" means an Employee's Account attributable to
allocations pursuant to Sections 4.1 and 4.2 as adjusted for dividend
equivalents and earnings equivalents pursuant to Article VI.
2.23 "Savings Plan" means the General Signal Corporation Savings and
Stock Ownership Plan, as amended and restated from time to time.
2.24 "Tax Deferred Contribution" means a Tax Deferred Contribution as
defined in the Savings Plan.
2.25 "Value" means, with respect to a share of Company Stock, the closing
price on the New York Stock Exchange - Composite Transactions on the business
day coincident with or immediately preceding the date as of which the
determination is made.
3
<PAGE>
ARTICLE III
-----------
Eligibility
3.1 Each Employee with respect to whom allocations of Tax Deferred
Contributions or Matching Contributions are reduced under the Savings Plan as a
result of the Benefit Limitations.
ARTICLE IV
----------
Savings Account Allocations
4.1 Each Employee who has made the maximum Tax Deferred Contributions
permitted under the Savings Plan and who is prevented from making additional Tax
Deferred Contributions to the Savings Plan by reason of the Benefit Limitations
may elect (a) to reduce such Employee's Compensation by an amount designated by
the Employee but not in excess of the difference, if any, between (i) the
maximum Tax Deferred Contributions that could have been made under the Savings
Plan on behalf of the Employee without regard to the Benefit Limitations, and
(ii) the maximum Tax Deferred Contributions actually made to the Savings Plan on
behalf of the Employee, and (b) to have such amount credited to such Employee's
Savings Account under the Plan. Any such election shall be in writing and must
be made no later than 15 days prior to the beginning of the calendar quarter in
which the Compensation is to be earned and may not be revoked or changed
thereafter except as to Compensation to be earned in subsequent calendar
quarters (subject to the same requirement of an irrevocable election at least 15
days prior to the beginning of the calendar quarter). If the 15th day preceding
the end of a calendar quarter is not a business day, the Employee will have an
additional business day to make such an election. Allocations pursuant to this
Section 4.1 shall be credited to the Savings Account as of the last business day
of the month in which the Compensation would otherwise have been paid.
4.2 With respect to each Employee, there shall be credited to the
Employee's Savings Account under the Plan the sum of (a) the additional Matching
Contributions that would have been allocated to the Employee's account under the
Savings Plan to match actual contributions made to the Savings Plan if the
Benefit Limitations were not applicable, and (b) if the Employee elects to
reduce such Employee's Compensation pursuant to Section 4.1, the Matching
Contributions that would have been made to the Employee's account under the
Savings Plan if the amounts allocated to such Employee's Savings Account
pursuant to Section 4.1 were Tax Deferred Contributions to the Savings Plan and
the Benefit Limitations and the Employment Requirement did not apply.
Allocations pursuant to this Section 4.2 shall be credited to the Savings
Account as of the last business day of the month in which the related
Compensation would otherwise have been paid.
4
<PAGE>
ARTICLE V
---------
Deferred Account Allocations
5.1 Each Employee who has made the maximum contributions permitted under
Section 4.1 may elect to reduce such Employee's salary, annual incentive
compensation award or long term incentive compensation cash award by an amount
equal to a percentage designated by the Employee in 1% increments.
Any such election to reduce an Employee's salary, annual incentive
compensation award or long term incentive compensation cash award shall be in
writing and must be made as follows: (a) in the case of salary no later than 15
days prior to the beginning of the calendar quarter in which the salary is to be
earned (if the 15th day preceding the end of a calendar quarter is not a
business day, the Employee will have an additional business day to make such an
election); (b) in the case of the annual incentive compensation award by
December 31 of the year prior to the scheduled payment of such award; and (c)
in the case of the long term incentive compensation cash award at least one year
before the end of the performance period for the applicable long term incentive
compensation cash award. Allocations pursuant to this Section shall be credited
to the Deferred Account as of the last business day of the month in which the
salary, the annual incentive compensation award or the long term incentive
compensation award would otherwise have been paid.
5.2 With respect to each Employee who elects to reduce the incentive
compensation award pursuant to Section 5.1 prior to January 1, 1997, an
additional allocation shall be credited to such Employee's Deferred Account in
an amount equal to 10% of the amount credited to such Employee's Deferred
Account pursuant to Section 5.1. Allocations pursuant to this Section 5.2 shall
be credited to the Deferred Account as of the same date as the related
allocation under Section 5.1.
ARTICLE VI
----------
Phantom Stock Units and Fixed Income Balances
6.1 Any amounts credited to an Employee's Savings Account pursuant to
Section 4.1 or 4.2 or to an Employee's Deferred Account pursuant to Section 5.1
or 5.2 shall be converted into a number of Phantom Stock Units determined by
dividing such amount by the Value of a share of Company Stock on the date such
amount is so credited. If any cash dividends are paid on shares of Company Stock
while Phantom Stock Units are held in the Employee's Savings Account or Deferred
Account, there shall be credited to such Employee's Savings Account or Deferred
Account, as the case may be, an additional number of Phantom Stock Units
determined by dividing (a) the amount of the dividends that such Employee would
have received if such Employee held the number of shares of Company Stock equal
to the number of Phantom Stock Units held in the
5
<PAGE>
Account immediately before the dividend is declared, by (b) the Value of a share
of Company Stock on the date the dividend is declared. Such credit shall be made
as of the date on which the dividend is declared.
If any dividends on shares of Company Stock are paid in the form of
Company Stock while Phantom Stock Units are held in an Employee's Savings
Account or Deferred Account, there shall be credited to such Employee's Savings
Account or Deferred Account, as the case may be, an additional number of Phantom
Stock Units equal to the number of shares of Company Stock such Employee would
have received as a dividend if such Employee held the number of shares of
Company Stock equal to the number of Phantom Stock Units held in the applicable
Account immediately before the dividend is declared. Such credit shall be made
as of the date on which the dividend is declared.
In the event of a stock split, combination of shares,
recapitalization, reorganization, merger, consolidation, rights offering, or any
other change in the corporate structure or shares of the Company, the Committee
shall make such adjustments, if any, as it deems appropriate in the number of
Phantom Stock Units and the shares to which they correspond.
6.2 An Employee who has attained age 62 may elect to convert any or all
of the Phantom Stock Units in such Employee's Savings Account (but not in such
Employee's Deferred Account) into a Fixed Income Balance as of the last day of
any calendar quarter on 15 days' written notice to the Company. If the 15th day
preceding the end of a calendar quarter is not a business day, the Employee will
have an additional business day to make such an election. In the event that an
Employee makes such an election, the number of Phantom Stock Units in such
Employee's Savings Account shall be reduced in accordance with such an
Employee's election, and such Employee's Fixed Income Balance shall initially be
(or, in the case of subsequent conversions, shall be increased by) an amount
equal to the product of the number of Phantom Stock Units so converted and the
Value of a share of Company Stock on the last day of the calendar quarter as of
which the conversion takes place. Thereafter, the Fixed Income Balance shall be
adjusted at the end of each calendar quarter in the same manner as if such
balance had been invested in the Fixed Income Fund under the Savings Plan.
6.3 An Employee's Savings Account and Deferred Account shall be
bookkeeping accounts maintained by the Company.
ARTICLE VII
-----------
Vesting
7.1 An Employee shall at all times be 100% vested in the Phantom Stock
Units and the portion of the Fixed Income Balance attributable to allocations
credited to such Employee's Savings Account pursuant to Section 4.1 (including
Phantom Stock Units and the portion of the Fixed Income Balance attributable to
dividend equivalents [as described in Section 6.1] and earnings equivalents [as
described in Section 6.2] resulting from such allocations).
6
<PAGE>
7.2 An Employee's rights to the Phantom Stock Units attributable to
allocations made pursuant to Sections 4.2 or 5.1 on and after January 1, 1997
(including any Phantom Stock Units resulting from dividend equivalents [as
described in Section 6.1] on those Phantom Stock Units) and the portion of the
Employee's Fixed Income Balance attributable to allocations made pursuant to
Section 4.2 (including any earnings equivalents [as described in Section 6.2] on
such portion), shall become nonforfeitable immediately.
7.3 An Employee's rights to the Phantom Stock Units attributable to
allocations made pursuant to Sections 4.2, 5.1 or 5.2 prior to January 1, 1997
(including any Phantom Stock Units resulting from dividend equivalents [as
described in Section 6.1] on those Phantom Stock Units) and the portion of the
Employee's Fixed Income Balance attributable to allocations made pursuant to
Section 4.2 (including any earnings equivalents [as described in Section 6.2] on
such portion], shall become nonforfeitable on the first to occur of:
(a) the date 12 months after each such allocation is credited
under Sections 4.2, 5.1 or 5.2 to an Employee's Account,
(b) the Employee's death, or
(c) the Employee's Disability.
7.4 Upon the termination of an Employee's employment for any reason,
other than death or Disability, such Employee shall forfeit the nonvested
portion of such Employee's Savings Account and of such Employee's Deferred
Account.
ARTICLE VIII
------------
Distributions and Withdrawals
8.1 At the time of filing an election to reduce Compensation pursuant to
Section 4.1 or to reduce any portion of salary, annual incentive compensation
award or long term incentive compensation award pursuant to Section 5.1, an
Employee shall also irrevocably elect the payment date for any Phantom Stock
Units and Fixed Income Balance attributable to the allocations made to such
Employee's Savings Account pursuant to Sections 4.1 and 4.2 or attributable to
the allocations made to such Employee's Incentive Account pursuant to Sections
5.1 and 5.2, as the case may be, as a result of such election, including any
Phantom Stock Units or Fixed Income Balance resulting from dividend equivalents
(as described in Section 6.1) and earnings equivalents (as described in Section
6.2) on such Phantom Stock Units and Fixed Income Balance. Such election may be
changed with respect to future allocations pursuant to Sections 4.1 and 4.2 in
accordance with the election procedures set forth in Section 4.1 and with
respect to future allocations pursuant to Sections 5.1 and 5.2 in accordance
with the election procedures set forth in Section 5.1 (subject in each case to
the same limitations on the right to revoke or change such election).
7
<PAGE>
The payment date elected by the Employee may be:
(a) a specified date no less than five years after the date of the
election;
(b) the date of the Employee's retirement on or after attainment of
age 55; or
(c) six months following termination for any reason other than
retirement after attainment of age 55.
Notwithstanding the foregoing, an Employee may irrevocably elect in
writing to change the commencement date of payment if:
(a) the election is made at least one year prior to the date the
payment is to commence and have a commencement date no earlier than the date
originally elected; or
(b) the Employee terminates for any reason other than retirement on
or after attainment of age 55.
If an Employee request a second election to redefer under Section 8, 1(a), the
commencement date shall not be earlier than three years after the date the
payment was scheduled to commence.
8.2 Payment of any Phantom Stock Units and Fixed Income Balance shall be
made in the form described in Section 8.3 as soon as administratively
practicable after the earlier of (a) the applicable payment date elected by the
Employee for such Phantom Stock Units and Fixed Income Balance, or (b) the date
of the Employee's death.
8.3 Except as hereinafter provided, payment shall be made in a cash lump
sum on the date determined pursuant to Section 8.2 in an amount equal to the sum
of (a) the number of vested Phantom Stock Units multiplied by the Value of a
share of Common Stock on the earlier of the dates specified in Section 8.2(a) or
(b), and (b) the value of the vested Fixed Income Balance as of the last day of
the calendar quarter next preceding the earlier of the dates specified in
Section 8.2(a) or (b).
Anything herein to the contrary notwithstanding, the Committee
reserves the right (a) to designate a form of payment other than a lump sum
payment or (b) to limit payments in any given year to such amount as would not
cause a loss of deductibility pursuant to Section 162(m) of the Code.
8.4 Distributions or withdrawals from an Employee's Savings Account or
Deferred Account shall not be permitted prior to the date of distribution
pursuant to Section 8.2, except that a withdrawal may be made from an Employee's
Savings Account (but not such Employee's Deferred Account) by reason of an
unforeseeable emergency. For this purpose, an unforeseeable emergency
8
<PAGE>
shall be an unanticipated emergency that is caused by an event beyond the
control of the Employee and that would result in severe financial hardship if
early withdrawal were not permitted. Any early withdrawal approved by the
Committee pursuant to this Section 8.4 shall be limited to the amount necessary
to meet the emergency.
ARTICLE IX
----------
Source of Payment of Benefits
9.1 All payments provided for under the Plan shall be paid in cash from
the general funds of the Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employee or such Employee's
dependents, beneficiaries or estate from any trust or special or separate fund
established by the Company to assure such payments. The Company shall not be
required to establish a special or separate fund or other segregation of assets
to assure such payments, and, if the Company shall make any investments to aid
it in meeting its obligations hereunder, a participant shall have no right,
title, or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. Nothing contained in this Plan, and no action taken pursuant
to its provisions, shall create or be construed to create a trust of any kind
between the Company and any participants. To the extent that any participant
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
9.2 The Company may, for administrative reasons, establish a grantor
trust for the benefit of participants in the Plan. The assets of said trust
will be held separate and apart from other Company funds and shall be used
exclusively for the purposes set forth in the Plan and the applicable trust
agreement, subject to the following conditions:
(a) the creation of said trust shall not cause the Plan to be
other than "unfunded" for purposes of Title I of the Act;
(b) the Company shall be treated as the "grantor" of said trust
for purposes of Sections 671 and 677 of the Code; and
(c) said trust agreement shall provide that its assets may be used
to satisfy claims of the Company's general creditors, provided
that the rights of such general creditors are enforceable
under federal and state law.
9
<PAGE>
ARTICLE X
---------
Designation of Beneficiaries
10.1 Unless an Employee who participates in the Plan otherwise files with
the Company a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Plan upon
such Employee's death, the Employee's beneficiary under the Savings Plan shall
be deemed to have been designated such Employee's Beneficiary for benefits under
this Plan. If the Committee is in doubt as to the right of any person to
receive such amount, the Company may retain such amount, without liability for
any interest thereon, until the rights thereto are determined, or the Company
may pay such amount into any court of appropriate jurisdiction, and such payment
shall be a complete discharge of the liability of the Plan and the Company
therefor.
ARTICLE XI
----------
Administration of the Plan
11.1 The Plan shall be administered by the Committee, which shall have
full power and authority to interpret, construe and administer the Plan, and
review claims for benefits under the Plan, and the Committee's interpretations
and constructions of the Plan and actions thereunder shall be binding and
conclusive on all persons and for all purposes.
11.2 If any claim for benefits under the Plan is wholly or partially
denied, the Committee shall give written notice by registered or certified mail
of such denial to the claimant within 90 days after receipt of the written claim
by the Committee. Notice must be written in a manner calculated to be
understood by the claimant, setting forth the specific reasons for such denial,
specific reference to pertinent Plan provisions on which the denial is based, a
description of any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is
necessary, and an explanation of the Plan's claim review procedure. The
Committee shall also advise the claimant that the claimant or the claimant's
duly authorized representative may request a review by the Committee of the
decision to deny the claim by filing with the Committee, within 65 days after
such notice has been received by the claimant, a written request for such
review. The claimant may review pertinent documents and submit issues and
comments in writing within the same 65 day period. If such request is so filed,
such review shall be made by the Committee with 60 days after receipt of such
request, unless special circumstances (including, but not limited to, a need to
hold a hearing) require an extension of time for processing, in which case a
decision shall be rendered not later than 120 days after receipt of the request
for review. The claimant shall be given written notice within such 60 day
period of the decision resulting from such review, which shall include specific
reasons for the
10
<PAGE>
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision was
based.
ARTICLE XII
-----------
Amendment and Termination
12.1 The Plan may be amended, suspended or terminated, in whole or in
part, by the Board of Directors, but no such action shall retroactively impair
or otherwise adversely affect the rights of any person to benefits under the
Plan which have accrued prior to the date of such action, as determined by the
Committee. The Human Resources Officer may adopt amendments to the Plan which
it deems necessary or appropriate to comply with applicable laws or government
regulations or which do not materially increase the annual cost of the Plan.
ARTICLE XIII
------------
General Provisions
13.1 This Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns and the Employee, and the designees and
the estate of the Employee. Nothing in this Plan shall preclude the Company
from consolidating or merging into or with, or transferring all or substantially
all of its assets to, another corporation which assumes this Plan and all
obligations of the Company hereunder. Upon such a consolidation, merger or
transfer of assets and assumption, the term "Company" shall refer to such other
corporation and this Plan shall continue in full force and effect.
13.2 Neither the Plan nor any action taken hereunder shall be construed
as giving to an Employee the right to be retained in the employ of the Employer
or as affecting the right of the Employer to dismiss any Employee.
13.3 The Company may withhold from any benefits payable under this Plan
all Federal, state, city or other taxes as shall be required pursuant to any law
or governmental regulation or ruling.
13.4 Except insofar as may otherwise be required by law, no amount
payable at any time under the Plan shall be subject in any manner to alienation
by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment,
charge or encumbrance of any kind nor in any manner be subject to the debts or
liabilities of any person and any attempt to so alienate or subject any such
amount, whether presently or thereafter payable, shall be void. If any person
shall attempt to, or shall alienate, sell, transfer, assign, pledge, attach,
charge or otherwise encumber any amount payable under the Plan, or any part
thereof, or if by reason of such person's bankruptcy or other event happening at
any such time such amount would be made subject to such person's debts or
liabilities or would otherwise not be enjoyed by such person, then the
Committee, if it so elects, may direct that such amount be withheld and that the
same or any part thereof be paid or applied to
11
<PAGE>
or for the benefit of such person, such person's spouse, children or other
dependents, or any of them, in such manner and proportion as the Committee may
deem proper.
13.5 If the Committee shall find that any person to whom any amount is or
was payable hereunder is unable to care for such person's affairs because of
illness or accident, or has died, then the Committee, if it so elects, may
direct that any payment due such person's or such person's estate (unless a
prior claim therefor has been made by a duly appointed legal representative) or
any part thereof be paid or applied for the benefit of such person or to or for
the benefit of such person's spouse, children or other dependents, an
institution maintaining or having custody of such person, any other person
deemed by the Committee to be a proper recipient on behalf of such person
otherwise entitled to payment, or any of them, in such manner and proportion as
the Committee may deem proper. Any such payment shall be in complete discharge
of the liability of the Company therefor.
13.6 All elections, designations, requests, notices, instructions, and
other communications from an Employee, Beneficiary or other person to the
Committee required or permitted under the Plan shall be in such form as is
prescribed from time to time by the Committee, shall be mailed by first-class
mail or delivered to such location as shall be specified by the Committee, and
shall be deemed to have been given and delivered only upon actual receipt
thereof at such location.
13.7 The benefits payable under this Plan shall be in addition to all
other benefits provided for Employees of the Company.
13.8 The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and in no way define or limit the
scope or intent of any provisions of the Plan.
13.9 This Plan shall be governed by the laws of the State of New York
from time to time in effect.
12
<PAGE>
EXHIBIT 10.7
FIRST AMENDMENT TO
GENERAL SIGNAL CORPORATION
DEFERRED COMPENSATION PLAN
The General Signal Corporation Deferred Compensation Plan (the "Plan") is
hereby amended effective as of November 19, 1997, as follows:
1. Article II of the Plan is hereby amended by adding the following
definitions after Section 2.5, and renumbering the definitions the remaining
definition in Article II accordingly:
2.5 "Change of Control" means:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then-outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(c); or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors;
or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the
<PAGE>
Company or the acquisition of assets of another entity (a "Corporate
Transaction"), in each case, unless, following such Corporate Transaction,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Voting Securities, as the
case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Corporate Transaction) beneficially own, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the then-outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Corporate
Transaction and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such
Corporate Transaction; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2.7 "Change of Control Price" means the higher of (a) the highest reported
sales price, regular way, of a share of Company Stock in any transaction
reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day
period prior to and including the date of a Change of Control or (b) if the
Change of Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Company Stock paid in
such tender or exchange offer or Corporate Transaction. To the extent that
the consideration paid in any such transaction described above consists all
or in part of securities or other noncash consideration, the value of such
securities or other noncash consideration shall be determined in the sole
discretion of the Board of Directors.
2. Article VI of the Plan is hereby amended by adding the following Section
6.3 after Section 6.2, and renumbering Section 6.3 to "6.4":
6.3 In the event of a Change of Control of the Company, an Employee
may elect, prior to the effective date of such Change of Control, to convert up
to 100% of the Phantom Stock Units in such Employee's Savings Account and
Deferred Account into a Fixed
-2-
<PAGE>
Income Balance. In the event an Employee makes such an election, the number of
Phantom Stock Units in such Employee's Savings Account and Deferred Account
shall be reduced in accordance with such Employee's election, and an Employee's
Fixed Income Balance shall be an amount equal to the product of the number of
Phantom Stock Units so converted and the Change in Control Price. Thereafter,
the Fixed Income Balance shall be adjusted at the end of each calendar quarter
in the same manner as if such balance had been invested in the Fixed Income Fund
under the Savings Plan. Notwithstanding anything contained herein to the
contrary, an Employee shall not have the rights granted under this Section 6.3,
and the definitions of "Change of Control" and "Change of Control Price"
contained in Sections 2.6 and 2.7 hereof shall not be effective, if, and to the
extent that, as a result of giving effect to any such provision, the Company
would be prevented from engaging in a transaction intended to be treated as a
pooling of interests for accounting purposes.
The Plan is in all other respects ratified and confirmed without amendment.
-3-
<PAGE>
EXHIBIT 10.8
GENERAL SIGNAL CORPORATION
BENEFIT EQUALIZATION PLAN
As Amended and Restated
October 17, 1996
<PAGE>
GENERAL SIGNAL CORPORATION
BENEFIT EQUALIZATION PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I Purpose..................... 1
ARTICLE II Definitions................. 1
ARTICLE III Eligibility................. 2
ARTICLE IV Pension Benefits............ 3
ARTICLE V Source of Payment........... 3
ARTICLE VI Designation of Beneficiaries 4
ARTICLE VII Administration of the Plan.. 4
ARTICLE VIII Amendment and Termination... 6
ARTICLE IX General Provisions.......... 6
</TABLE>
<PAGE>
GENERAL SIGNAL CORPORATION
BENEFIT EQUALIZATION PLAN
ARTICLE I
---------
Purpose
1.1 General Signal Corporation established this amended and restated
Benefit Equalization Plan effective as of October 14, 1993 solely for the
purpose of providing to its eligible employees benefits which would have been
payable from the tax-exempt trust under the tax-qualified pension benefit plan
known as the Corporate Retirement Plan of General Signal Corporation but for the
limitations placed by the Internal Revenue Code on benefits payable made with
respect to such employees under such plan. This Plan constitutes an amendment
and continuation of the Plan in effect prior to this restatement.
The portions of the Plan providing benefits without regard to the
limitation on compensation under Section 401(a)(17) of the Code ($150,000 for
1994), and taking into account deferrals under the General Signal Corporation
Deferred Compensation Plan, constitutes an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees. The portion of the Plan providing
benefits above the limitations prescribed under Section 415 of the Code
constitutes an "excess benefit plan" as defined in Section 3(36) of the Employee
Retirement Security Act of 1974.
ARTICLE II
----------
Definitions
When used herein, the following terms shall have the following meanings:
2.1 "Act" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
2.2 "Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Article VI of the Plan to receive the amount, if any, payable
upon the death of an Employee who participates in the Plan.
2.3 "Benefit Limitations" means (a) the maximum "annual benefit" payable
under the Corporate Retirement Plan in accordance with Section 415 of the Code,
and (b) the maximum amount of pension plan benefits that could have been
provided under the Corporate Retirement Plan without regard to the limitation
prescribed under Section 401(a)(17) of the Code on the
<PAGE>
amount of annual compensation that can be taken into account under the Corporate
Retirement Plan.
2.4 "Board of Directors" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code, as amended from time to
time.
2.6 "Company" means General Signal Corporation, a New York corporation,
and its successors or assigns.
2.7 "Corporate Benefits Committee" means the committee appointed to
administer and be the named fiduciary for administration of the Corporate
Retirement Plan.
2.8 "Corporate Retirement Plan" means the Corporate Retirement Plan of
General Signal Corporation, as amended and restated from time to time.
2.9 "Employee" means any person employed by an Employer who is eligible
to receive a benefit under the Corporate Retirement Plan.
2.10 "Employer" means the Company and each subsidiary thereof that
participates in the Corporate Retirement Plan.
2.11 "Human Resources Officer" means the chief human resources officer of
the Company.
2.12 Investment Committee means the committee appointed to be responsible
for all assets and be the named fiduciary for all assets of the Corporate
Retirement Plan.
2.13 "Pension Benefits" means the benefits described in Article IV of the
Plan.
2.14 "Plan" means the General Signal Corporation Benefit Equalization
Plan as set forth herein and as amended and restated from time to time.
ARTICLE III
-----------
Eligibility
3.1 Each Employee with respect to whom benefits are reduced under the
Corporate Retirement Plan as a result of any of the Benefit Limitations shall
participate in the Plan.
<PAGE>
ARTICLE IV
----------
Pension Benefits
4.1 The amount of Pension Benefits payable to or in respect of an
Employee shall be equal to the actuarial value of the difference between (a) the
amount of benefits which would have been payable to or in respect of the
Employee under the Corporate Retirement Plan without regard to the Benefit
Limitations and (b) the amount of benefits actually payable to or in respect of
the Employee thereunder.
In addition, the amount of Pension Benefits shall be increased in the
amount of additional benefits to which the Employee would have been entitled
under the Corporate Retirement Plan had the deferral of any compensation under
the General Signal Corporation Deferred Compensation Plan been included as part
of the Employee's earnings and paid to the Employee during the applicable
calendar year.
4.2 Subject to Section 4.3, Pension Benefits shall be payable in the
form of a life annuity for a single Employee and in the form of a 50% joint and
survivor annuity for a married Employee, beginning on the individual's
retirement date, unless the Corporate Benefits Committee authorizes another
manner or time of payment.
The Company reserves the right to limit payments in any given year to
such amount as would not cause a loss of deductibility pursuant to Section
162(m) of the Code.
4.3 In the event that the lump sum value of the Pension Benefits under
the Plan shall be $20,000 or less, such Pension Benefits shall be payable in a
lump sum settlement of Actuarially Equivalent (as defined in the Corporate
Retirement Plan) value in full discharge of all liability in respect of such
Pension Benefits. The lump sum payment shall be made as soon as
administratively practicable following the Employee's termination of service or
death. The Pension Benefits of any Employee who receives such a lump sum
payment and who subsequently accrues Pension Benefits under this Plan shall be
reduced by the Actuarial Equivalent of the Pension Benefits on which the lump
sum amount was so paid.
ARTICLE V
---------
Source of Payment
5.1 All payments provided for under the Plan shall be paid in cash from
the general funds of the Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employee or his or her
dependents, beneficiaries or estate from any trust or special or separate fund
established by the Company to assure such payments. The Company
<PAGE>
shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, a participant
shall have no right, title, or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind between the Company and any participants. To the extent that any
participant acquires a right to receive payments from the Company hereunder,
such right shall be no greater than the right of an unsecured creditor of the
Company.
5.2 The Investment Committee may, for financial reasons, establish a
grantor trust for the benefit of participants in the Plan. The assets of said
trust will be held separate and apart from other Company funds and shall be used
exclusively for the purposes set forth in the Plan and the applicable trust
agreement, subject to the following conditions:
(a) the creation of said trust shall not cause the Plan to be
other than "unfunded" for purposes of Title I of the Act:
(b) the Company shall be treated as the "grantor" of said trust
for purposes of Sections 671 and 677 of the Code; and
(c) said trust agreement shall provide that its assets may be
used to satisfy claims of the Company's general creditors,
provided that the rights of such general creditors are
enforceable under federal and state law.
ARTICLE VI
----------
Designation of Beneficiaries
6.1 Unless an Employee who participates in the Plan otherwise files with
the Corporate Benefits Committee a written designation of one or more persons as
the Beneficiary who shall be entitled to receive the amount, if any, payable
under the Plan upon such Employee's death, the Employee's beneficiary under the
Corporate Retirement Plan shall be deemed to have been designated the
Beneficiary for Pension Benefits. If the Corporate Benefits Committee is in
doubt as to the right of any person to receive such amount, the Corporate
Benefits Committee may retain such amount, without liability for any interest
thereon, until the rights thereto are determined, or the Corporate Benefits
Committee may pay such amount into any court of appropriate jurisdiction and
such payment shall be a complete discharge of the liability of the Plan and the
Company therefor.
<PAGE>
ARTICLE VII
-----------
Administration of the Plan
7.1 The Plan shall be administered by the Corporate Benefits Committee
which shall have full power and authority to interpret, construe and administer
the Plan, and review claims for benefits under the Plan, and the Corporate
Benefits Committee's interpretations and constructions of the Plan and actions
thereunder shall be binding and conclusive on all persons and for all purposes.
7.2 The members of the Corporate Benefits Committee shall be the named
fiduciaries of the Plan for administration of the Plan (including but not
limited to complying with reporting and disclosure requirements and establishing
and maintaining Plan records), and shall engage such certified public
accountants, who may be accountants for the Company, as it shall require or may
deem advisable for purposes of administration of the Plan. The Corporate
Benefits Committee may arrange for the engagement of such legal counsel, who may
be counsel for the Company, and make use of such agents and clerical or other
personnel as they each shall require or may deem advisable for purposes of the
Plan. The Corporate Benefits Committee may rely upon the written opinion of
such counsel and the accountants engaged by the Corporate Benefits Committee and
may delegate to any such agent or to any sub-committee or member of the
Corporate Benefits Committee its authority to perform any act hereunder,
including without limitation those matters involving the exercise of discretion,
provided that such delegation shall be subject to revocation at any time at the
discretion of the Corporate Benefits Committee.
7.3 To the maximum extent permitted by law, no member of the Corporate
Benefits Committee or Investment Committee shall be personally liable by reason
of any contract or other instrument executed by such member or on such member's
behalf in his or her capacity as a member of said Committees nor for any mistake
of judgment made in good faith, and the Company shall indemnify and hold
harmless, directly from its own assets (including the proceeds of any insurance
policy the premiums of which are paid from the Company's own assets), each
member of the Corporate Benefits Committee, Investment Committee and each other
officer, employee or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan, or to the management and
control of the assets of the Plan, may be delegated or allocated, against any
cost or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act in connection with the Plan unless arising out of such
person's own fraud or willful misconduct. Each Employer will pay such
proportion of any claim and/or expense as the Company directs.
7.4 If any claim for benefits under the Plan is wholly or partially
denied, the Corporate Benefits Committee shall give written notice by registered
or certified mail of such denial to the claimant within 90 days after receipt of
the written claim by the Corporate Benefits
<PAGE>
Committee. Notice must be written in a manner calculated to be understood by the
claimant, setting forth the specific reasons for such denial, specific reference
to pertinent Plan provisions on which the denial is based, a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary, and
an explanation of the Plan's claim review procedure. The Corporate Benefits
Committee shall also advise the claimant that the claimant or the claimant's
duly authorized representative may request a review by the Corporate Benefits
Committee of the decision to deny the claim by filing with the Corporate
Benefits Committee, within 65 days after such notice has been received by the
claimant, a written request for such review. The claimant may review pertinent
documents and submit issues and comments in writing within the same 65 day
period. If such request is so filed, such review shall be made by the Corporate
Benefits Committee with 60 days after receipt of such request, unless special
circumstances (including, but not limited to, a need to hold a hearing) require
an extension of time for processing, in which case a decision shall be rendered
not later than 120 days after receipt of the request for review. The claimant
shall be given written notice within such 60 day period of the decision
resulting from such review, which shall include specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision was
based.
ARTICLE VIII
------------
Amendment and Termination
8.1 The Company expects and intends to maintain the Plan in force
indefinitely, but the Company, by action of the Board of Directors, may change,
suspend or terminate the Plan at any time. The Human Resources Officer may
adopt amendments to the Plan which it deems necessary or appropriate to comply
with applicable laws or government regulations or which do not materially
increase the annual cost of the Plan. Notwithstanding the foregoing, no such
action shall retroactively impair or otherwise adversely affect the rights of
any person to benefits under the Plan which have accrued prior to the date of
any such action, as determined by the Corporate Benefits Committee.
ARTICLE IX
----------
General Provisions
9.1 This Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns and the Employee and the designees and
the estate of the Employee. Nothing in this Plan shall preclude the Company
from consolidating or merging into or with, or transferring all or substantially
all of its assets to, another corporation which assumes this Plan and all
obligations of the Company hereunder. Upon such a consolidation, merger or
transfer of assets and assumption, the term "Company" shall refer to such other
corporation and this Plan shall continue in full force and effect.
<PAGE>
9.2 Neither the Plan nor any action taken hereunder shall be construed
as giving to an Employee the right to be retained in the employ of the Employer
or as affecting the right of the Employer to dismiss any Employee.
9.3 The Company may withhold from any benefits payable under this Plan
all Federal, state, city or other taxes as shall be required pursuant to any law
or governmental regulation or ruling.
9.4 Except insofar as may otherwise be required by law, no amount
payable at any time under the Plan and the Fund shall be subject in any manner
to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind nor in any manner be subject to
the debts or liabilities of any person and any attempt to so alienate or subject
any such amount, whether presently or thereafter payable, shall be void. If any
person shall attempt to, or shall alienate, sell, transfer, assign, pledge,
attach, charge or otherwise encumber any amount payable under the Plan and Fund,
or any part thereof, or if by reason of such person's bankruptcy or other event
happening at any such time such amount would be made subject to such person's
debts or liabilities or would otherwise not be enjoyed by the such person, then
the Corporate Benefits Committee, if it so elects, may direct that such amount
be withheld and that the same or any part thereof be paid or applied to or for
the benefit of such person, such person's spouse, children or other dependents,
or any of them, in such manner and proportion as the Corporate Benefits
Committee may deem proper.
9.5 If the Corporate Benefits Committee shall find that any person to
whom any amount is or was payable hereunder is unable to care for such person's
affairs because of illness or accident, or has died, then the Company, if it so
elects, may direct that any payment due such person or such person's estate
(unless a prior claim therefor has been made by a duly appointed legal
representative) or any part thereof be paid or applied for the benefit of such
person or to or for the benefit of such person's spouse, children or other
dependents, an institution maintaining or having custody of such person, any
other person deemed by the Corporate Benefits Committee to be a proper recipient
on behalf of such person otherwise entitled to payment, or any of them, in such
manner and proportion as the Company may deem proper. Any such payment shall be
in complete discharge of the liability of the Corporate Benefits Committee
therefor.
9.6 Whenever, under this Plan, it is necessary to determine whether one
benefit is less than, equal to, or larger than another, whether or not such
benefits are provided under this Plan, such determination shall be made by the
Company's independent consulting actuary, using mortality, interest and any
other assumptions normally used at the time by such actuary in determining
actuarial equivalents under the Corporate Retirement Plan.
9.7 All elections, designations, requests, notices, instructions, and
other communications from an Employee, Beneficiary or other person to the
Corporate Benefits Committee required or permitted under the Plan shall be in
such form as is prescribed from time to
<PAGE>
time by the Corporate Benefits Committee, shall be mailed by first-class mail or
delivered to such location as shall be specified by the Corporate Benefits
Committee, and shall be deemed to have been given and delivered only upon actual
receipt thereof at such location.
9.8 The benefits payable under this Plan shall be in addition to all
other benefits provided for Employees of the Company.
9.9 The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and in no way define or limit the
scope or intent of any provisions of the Plan.
9.10 This Plan shall be governed by the laws of the State of New York
from time to time in effect.
<PAGE>
EXHIBIT 10.10
FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION
1996 STOCK INCENTIVE PLAN
The General Signal Corporation 1996 Stock Incentive Plan (the "Plan")
is hereby amended, effective as of November 19, 1997, as follows:
1. The last paragraph of the subsection entitled "Form of Option" in
Section 5 of the Plan is hereby deleted in its entirety.
2. The last paragraph of the subsection entitled "Restrictions and
Conditions" in Section 6 of the Plan is hereby deleted in its entirety.
3. The last paragraph of the subsection entitled "Forfeiture" in
Section 7 of the Plan is hereby deleted in its entirety.
4. The following Section 8 is hereby added after Section 7 of the
Plan, and Sections 8, 9, 10, 11 and 12 are renumbered as Sections 9, 10, 11, 12
and 13, respectively.
8. CHANGE OF CONTROL
(a) Impact of Event. Except as provided in subsection (e) of this Section
8, in the event of a Change of Control:
(i) Any options outstanding as of the date such Change of Control is
determined to have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of the
original grant, without regard to the second paragraph of the subsection
entitled "Option Prices" in Section 5.
(ii) The restrictions, performance goals and deferral limitations
applicable to restricted stock (other than restricted stock credited to an
Eligible Director) shall lapse, and such restricted stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
(iii) All performance shares and performance units shall be
considered to be earned and payable in full, and any deferral or other
restriction shall lapse and such
<PAGE>
performance units shall be settled in cash as promptly as is practicable.
(b) Change of Control Cash-Out. Except as provided in subsection (e) of
this Section 8, during the 60-day period from and after a Change of Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the time
of grant, an Optionee shall have the right, whether or not the option is fully
exercisable and in lieu of the payment of the purchase price for the shares of
Common Stock being purchased under the option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part of
the option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change of Control Price
per share of Common Stock on the date of such election shall exceed the purchase
price per share of Common Stock under the option (the "Spread") multiplied by
the number of shares of Common Stock granted under the option as to which the
right granted under this Section 8(b) shall have been exercised; provided,
however, that if the Change of Control is within six months of the date of grant
of a particular option held by an optionee who is an officer or director of the
Corporation and is subject to Section 16(b) of the Exchange Act, such election
may not be made by such optionee with respect to such option at any time until
the date that is six months and one day after the date of grant of such option.
Notwithstanding the foregoing, if any right granted pursuant to Section
8(a)(iii) and this Section 8(b) would make a Change of Control transaction
ineligible for pooling-of-interests accounting under APB No. 16 that but for the
nature of such grant would otherwise be eligible for such accounting treatment,
the Committee shall have the ability to substitute for the cash payable pursuant
to such right Common Stock or other securities with a fair market value equal to
the cash that would otherwise be payable hereunder.
(c) Definition of Change of Control. For purposes of the Plan, a "Change
of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of common stock of
the Corporation (the "Outstanding Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that
-2-
<PAGE>
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Corporation, (B) any acquisition by the Corporation, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (D) any
acquisition pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 8(c); or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors;
or
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation or the acquisition of
assets of another entity (a "Corporate Transaction"), in each case, unless,
following such Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior
to such Corporate Transaction of the Outstanding Common Stock and
Outstanding Voting Securities, as the case may be, (B) no Person (excluding
any employee
-3-
<PAGE>
benefit plan (or related trust) of the Corporation or such corporation
resulting from such Corporate Transaction) beneficially own, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Corporate Transaction
or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to
the Corporate Transaction and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board of
Directors, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) Definition of Change of Control Price. For purposes of the Plan
"Change of Control Price" means the higher of (i) the highest reported sales
price, regular way, of a share of Common Stock in any transaction reported on
the New York Stock Exchange Composite Tape or other national exchange on which
such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change of Control or (ii) if the Change of Control is
the result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of Common Stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that (x) in the case of a option which
(A) is held by an optionee who is an officer or director of the Corporation and
is subject to Section 16(b) of the Exchange Act and (B) was granted within 240
days of the Change of Control, then the Change of Control Price for such option
shall be the fair market value of the Common Stock on the date such option is
exercised or deemed exercised and (y) in the case of incentive stock options,
the Change of Control Price shall be in all cases the fair market value of the
Common Stock on the date such incentive stock option is exercised. To the
extent that the consideration paid in any such transaction described above
consists all or in part of securities or other noncash consideration, the value
of such securities or other noncash consideration shall be determined in the
sole discretion of the Board of Directors.
(e) Effectiveness. Notwithstanding anything contained herein to the
contrary, a participant shall not have the rights granted under subsections (a)
and (b) of this Section 8, and the definition of "Change of Control" contained
in Section 8(c) hereof shall not be effective, if, and to the extent that, as a
result of giving effect to any such provision, the Corporation
-4-
<PAGE>
would be prevented from engaging in a transaction intended to be treated as a
pooling of interests for accounting purposes. In addition, the rights granted
under subsection (b) hereof shall not apply to incentive stock options (intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended) granted prior to the effective date of this First Amendment.
5. The Plan is in all other respects ratified and confirmed without
amendment.
-5-
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION
1992 STOCK INCENTIVE PLAN
The General Signal Corporation 1992 Stock Incentive Plan (the "Plan")
is hereby amended, effective as of November 19, 1997, as follows:
1. The last paragraph of the subsection entitled "Form of Option" in
Section 5 of the Plan is hereby deleted in its entirety.
2. The last paragraph of the subsection entitled "Restrictions and
Conditions" in Section 6 of the Plan is hereby deleted in its entirety.
3. The following Section 10 is hereby added after Section 9 of the
Plan.
10. CHANGE OF CONTROL
(a) Impact of Event. Except as provided in subsection (e) of this Section
10, in the event of a Change of Control:
(i) Any options outstanding as of the date such Change of Control is
determined to have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions, performance goals and deferral limitations
applicable to restricted stock (other than restricted stock credited to an
Eligible Director) shall lapse, and such restricted stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
(b) Change of Control Cash-Out. Except as provided in subsection (e) of
this Section 10, during the 60-day period from and after a Change of Control
(the "Exercise Period"), unless the Committee shall determine otherwise at the
time of grant, an Optionee shall have the right, whether or not the option is
fully exercisable and in lieu of the payment of the purchase price for the
shares of Common Stock being purchased under the option and by giving notice to
the Corporation, to elect (within the Exercise Period) to surrender all or part
of the option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change of
<PAGE>
Control Price per share of Common Stock on the date of such election shall
exceed the purchase price per share of Common Stock under the option (the
"Spread") multiplied by the number of shares of Common Stock granted under the
option as to which the right granted under this Section 10(b) shall have been
exercised. Notwithstanding the foregoing, if any right granted pursuant to this
Section 10(b) would make a Change of Control transaction ineligible for pooling-
of-interests accounting under APB No. 16 that but for the nature of such grant
would otherwise be eligible for such accounting treatment, the Committee shall
have the ability to substitute for the cash payable pursuant to such right
Common Stock or other securities with a fair market value equal to the cash that
would otherwise be payable hereunder.
(c) Definition of Change of Control. For purposes of the Plan, a "Change
of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of common stock of
the Corporation (the "Outstanding Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of Control: (A)
any acquisition directly from the Corporation, (B) any acquisition by the
Corporation, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (D) any acquisition pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 10(c); or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose
-2-
<PAGE>
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors; or
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation or the acquisition of
assets of another entity (a "Corporate Transaction"), in each case, unless,
following such Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior
to such Corporate Transaction of the Outstanding Common Stock and
Outstanding Voting Securities, as the case may be, (B) no Person (excluding
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Corporate Transaction) beneficially own,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Corporate Transaction and (C) at least a majority of
the members of the board of directors of the corporation resulting from
such Corporate Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board of
Directors, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) Definition of Change of Control Price. For purposes of the Plan
"Change of Control Price" means the higher of (i) the highest reported sales
price, regular way, of a share of Common
-3-
<PAGE>
Stock in any transaction reported on the New York Stock Exchange Composite Tape
or other national exchange on which such shares are listed or on NASDAQ during
the 60-day period prior to and including the date of a Change of Control or (ii)
if the Change of Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Common Stock paid in such
tender or exchange offer or Corporate Transaction; provided, however, that in
the case of incentive stock options, the Change of Control Price shall be in all
cases the fair market value of the Common Stock on the date such incentive stock
option is exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board of
Directors.
(e) Effectiveness. Notwithstanding anything contained herein to the
contrary, a participant shall not have the rights granted under subsections (a)
and (b) of this Section 10, and the definition of "Change of Control" contained
in Section 10(c) hereof shall not be effective, if, and to the extent that, as a
result of giving effect to any such provision, the Corporation would be
prevented from engaging in a transaction intended to be treated as a pooling of
interests for accounting purposes. In addition, the rights granted under
subsection (b) of this Section 10 shall not apply to incentive stock options
(intended to meet the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended) granted prior to the effective date of this First
Amendment.
4. The Plan is in all other respects ratified and confirmed without
amendment.
-4-
<PAGE>
EXHIBIT 10.14
FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION
1989 STOCK OPTION AND INCENTIVE PLAN
The General Signal Corporation 1989 Stock Option and Incentive Plan
(the "Plan") is hereby amended, effective as of November 19, 1997, as follows:
The following Section 9 is hereby added after Section 8 of the Plan.
9. Change of Control
(a) Impact of Event. Except as provided in subsection (e) of this Section
9, in the event of a Change of Control:
(i) Any options outstanding as of the date such Change of Control is
determined to have occurred, and which are not then exercisable and vested,
shall become fully exercisable and vested to the full extent of the
original grant.
(ii) The restrictions, performance goals and deferral limitations
applicable to any restricted stock shall lapse, and such restricted stock
shall become free of all restrictions and become fully vested and
transferable to the full extent of the original grant.
(b) Change of Control Cash-Out. Except as provided in subsection (e) of
this Section 9, during the 60-day period from and after a Change of Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the time
of grant, an Optionee shall have the right, whether or not the option is fully
exercisable and in lieu of the payment of the purchase price for the shares of
Common Stock being purchased under the option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part of
the option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change of Control Price
per share of Common Stock on the date of such election shall exceed the purchase
price per share of Common Stock under the option (the "Spread") multiplied by
the number of shares of Common Stock granted under the option as to which the
right granted under this Section 9(b) shall have been exercised.
Notwithstanding the foregoing, if any right granted pursuant to this Section
9(b) would make a Change of Control transaction ineligible for pooling-of-
interests accounting under APB No. 16 that but for the nature of such grant
would otherwise
<PAGE>
be eligible for such accounting treatment, the Committee shall have the ability
to substitute for the cash payable pursuant to such right Common Stock or other
securities with a fair market value equal to the cash that would otherwise be
payable hereunder.
(c) Definition of Change of Control. For purposes of the Plan, a "Change
of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of common stock of
the Corporation (the "Outstanding Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of Control: (A)
any acquisition directly from the Corporation, (B) any acquisition by the
Corporation, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (D) any acquisition pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 9(c); or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors;
or
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets
-2-
<PAGE>
of the Corporation or the acquisition of assets of another entity (a
"Corporate Transaction"), in each case, unless, following such Corporate
Transaction, (A) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Common
Stock and Outstanding Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Corporation or such corporation
resulting from such Corporate Transaction) beneficially own, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Corporate Transaction
or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to
the Corporate Transaction and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board of
Directors, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) Definition of Change of Control Price. For purposes of the Plan
"Change of Control Price" means the higher of (i) the highest reported sales
price, regular way, of a share of Common Stock in any transaction reported on
the New York Stock Exchange Composite Tape or other national exchange on which
such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change of Control or (ii) if the Change of Control is
the result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of Common Stock paid in such tender or exchange offer or
Corporate Transaction; provided, however, that in the case of incentive stock
options, the Change of Control Price shall be in all cases
-3-
<PAGE>
the fair market value of the Common Stock on the date such incentive stock
option is exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board of
Directors.
(e) Effectiveness. Notwithstanding anything contained herein to the
contrary, a participant shall not have the rights granted under subsections (a)
and (b) of this Section 9, and the definition of "Change of Control" contained
in Section 9(c) hereof shall not be effective, if, and to the extent that, as a
result of giving effect to any such provision, the Corporation would be
prevented from engaging in a transaction intended to be treated as a pooling of
interests for accounting purposes. In addition, the rights granted under
subsection (b) of this Section 9 shall not apply to incentive stock options
(intended to meet the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended) granted prior to the effective date of this First
Amendment.
The Plan is in all other respects ratified and confirmed without amendment.
-4-
<PAGE>
EXHIBIT 10.16
FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION
1985 STOCK OPTION PLAN
The General Signal Corporation 1985 Stock Option Plan (the "Plan") is
hereby amended, effective as of November 19, 1997, as follows:
The following Section 11 is hereby added after Section 10 of the Plan.
11. CHANGE OF CONTROL
(a) Impact of Event. Except as provided in subsection (e) of this
Section 11, in the event of a Change of Control, any options outstanding as
of the date such Change of Control is determined to have occurred, and
which are not then exercisable and vested, shall become fully exercisable
and vested to the full extent of the original grant.
(b) Change of Control Cash-Out. Except as provided in subsection (e)
of this Section 11, during the 60-day period from and after a Change of
Control (the "Exercise Period"), unless the Committee shall determine
otherwise at the time of grant, an optionee shall have the right, whether
or not the option is fully exercisable and in lieu of the payment of the
purchase price for the shares of Common Stock being purchased under the
option and by giving notice to the Corporation, to elect (within the
Exercise Period) to surrender all or part of the option to the Corporation
and to receive cash, within 30 days of such notice, in an amount equal to
the amount by which the Change of Control Price per share of Common Stock
on the date of such election shall exceed the purchase price per share of
Common Stock under the option (the "Spread") multiplied by the number of
shares of Common Stock granted under the option as to which the right
granted under this Section 11(b) shall have been exercised.
Notwithstanding the foregoing, if any right granted pursuant to this
Section 11(b) would make a Change of Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of
such grant would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute for the cash payable
pursuant to such right Common Stock or other securities with a fair market
value equal to the cash that would otherwise be payable hereunder.
<PAGE>
(c) Definition of Change of Control. For purposes of the Plan, a
"Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (a) the then outstanding shares of common stock of
the Corporation (the "Outstanding Common Stock") or (b) the combined voting
power of the then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of Control: (A)
any acquisition directly from the Corporation, (B) any acquisition by the
Corporation, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (D) any acquisition pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 11(c); or
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors;
or
(iii) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation or the acquisition of
assets of another entity (a "Corporate Transaction"), in each case, unless,
following such Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately
-2-
<PAGE>
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately prior
to such Corporate Transaction of the Outstanding Common Stock and
Outstanding Voting Securities, as the case may be, (B) no Person (excluding
any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Corporate Transaction) beneficially own,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Corporate Transaction and (C) at least a majority of
the members of the board of directors of the corporation resulting from
such Corporate Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board of
Directors, providing for such Corporate Transaction; or
(iv) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(d) Definition of Change of Control Price. For purposes of the Plan
"Change of Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Common Stock in any transaction
reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day
period prior to and including the date of a Change of Control or (ii) if
the Change of Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Common Stock paid in
such tender or exchange offer or Corporate Transaction; provided, however,
that in the case of incentive stock options, the Change of Control Price
shall be in all cases the fair market value of the Common Stock on the date
such incentive stock option is exercised. To the extent that the
consideration paid in any such transaction described above consists all or
in part of securities or other noncash consideration, the value of such
securities or
-3-
<PAGE>
other noncash consideration shall be determined in the sole discretion of
the Board of Directors.
(e) Effectiveness. Notwithstanding anything contained herein to the
contrary, an optionee shall not have the rights granted under subsections (a)
and (b) of this Section 11, and the definition of "Change of Control" contained
in Section 11(c) hereof shall not be effective, if, and to the extent that, as a
result of giving effect to any such provision, the Corporation would be
prevented from engaging in a transaction intended to be treated as a pooling of
interests for accounting purposes. In addition, the rights granted under
subsection (b) of this Section 11 shall not apply to incentive stock options
(intended to meet the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended) granted prior to the effective date of this First
Amendment.
The Plan is in all other respects ratified and confirmed without amendment.
-4-
<PAGE>
EXHIBIT 10.24
August 1, 1997
Mr. Jeffrey Johnson
3241 Somerset
Ft. Lauderdale, FL 33332
Dear Jeff:
I am pleased to confirm our offer of Vice President Sourcing at an annual
salary of $165,000, paid bi-weekly.
You will participate in General Signal's Incentive Compensation Plan with a
target award of 35% of base salary and a cap of 200% of target. Your award
payable in the first quarter of 1998 will be pro-rated based on the total number
of months worked in 1997. Subsequent awards will depend on performance and the
judgment of the Personnel and Compensation Committee.
You will be granted a one-time payment of $30,000 shortly after you begin
employment.
Subject to Board approval, you will be eligible to receive an annual non-
qualified option grant which currently would be in the area of 12,000 shares for
your position.
Also subject to Board approval, you will be granted 1,000 shares of
restricted stock at the December Board meeting. This stock will vest at the
rate of 50% at the end of three years and 100% at the end of five years.
However, you will be entitled to receive dividends on the stock during the
restriction period.
You are eligible for the following relocation benefits if you relocate to the
Stamford area within 12 months:
. Two househunting trips with your family
. Packing, shipping and unloading of your household goods
. Up to sixty days temporary housing
. Closing costs associated with the purchase of your new home
. Prudential Relocation Smart Start/Market Value Driven Services to
facilitate the sale of your current home
. We will pay for two appraisals of your Ft. Lauderdale home to
establish market price with a 120 day marketing parameter. We will
reimburse you for any potential amount between the selling price of
your home and lessor of the appraised market price or $308,000.
. You will receive an additional payment of $30,000 in your first month
of employment to help defray the cost of purchasing a home in
Connecticut.
You will be eligible for four weeks vacation and a company car. Financial
Planning assistance reimbursement will be made up to $8,000 in your first year
of employment and up to $6,000 in subsequent years.
<PAGE>
Page 2
You will be a participant in the GS Salaried Pension Plan; any benefits
exceeding the government imposed limits will be paid from the GS Benefits
Equalization Program on a non-qualified basis. You will be vested in this
benefit when you complete five years of service.
You will be eligible to participate in the Officers and Presidents Deferred
Compensation Program that supplements the General Signal 401(K) with investment
opportunities that partially restore benefits lost due to restrictions imposed
on qualified plans by governmental regulations.
You will be reimbursed for 80% of a health club membership up to $1,000 per
year; 80% of health club initiation fees up to $1,000; and 100% of a personal
trainer's fees for up to three months.
In support of a Drug Free Workplace, this offer is contingent on the
successful completion of a substance abuse screen. Please call Carolyn Jordan
at 203-329-4204 to schedule this test.
General Signal does not offer, nor ask for, employment commitments for a set
period of time. This offer of employment is not considered a contract.
Assuming that the foregoing is acceptable to you, please sign and return the
attached copy of this letter by August 9, 1997.
We look forward to your joining General Signal. If you have any questions
regarding this offer, please do not hesitate to call.
Sincerely,
ALW:cj /s/ Anita Wheeler
cc: E. R. Verebelyi
Accepted by: /s/ Jeffrey Johnson Date: August 3, 1997
-------------------
<PAGE>
EXHIBIT 10.25
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between General Signal Corporation, a New York corporation
(the "Company"), and Michael D. Lockhart (the "Executive"), dated as of the 2nd
day of Februaury, 1998.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
-------------------
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anni-
<PAGE>
versary of such date (such date and each annual anniversary thereof shall be
hereinafter referred to as the "Renewal Date"), unless previously terminated,
the Change of Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of Control
Period shall not be so extended.
(c) The "Multiple" means the lesser of (i) three and (ii) the
number of years and fractions thereof from the Date of Termination (as defined
in Section 5(e) below) through the date the Executive would have become entitled
to full retirement benefits under the Company's Corporate Retirement Plan or any
successor thereto, as in effect immediately before the Change of Control or, if
sooner, as in effect immediately before the Date of Termination, in each case if
the Executive had remained in the employ of the Company.
2. Change of Control. For the purpose of this Agreement, a
-----------------
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent
2
<PAGE>
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing
3
<PAGE>
on the Effective Date and ending on the third anniversary of such date (the
"Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location not more than 50 miles
from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
------------ -----------
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereaf-
4
<PAGE>
ter at least annually. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's target bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for the fiscal year
during which occurs the Effective Date or, if no target bonus had been
established for such fiscal year as of the Effective Date, for the most recently
completed fiscal year before the Effective Date (annualized in the event that
the Executive was not employed by the Company for the whole of such fiscal year)
(the "Recent Target Bonus"). Each such Annual Bonus shall be paid no later than
the end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies
5
<PAGE>
(including, without limitation, medical, prescription, dental, disability,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to administrative assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies at any time during the 120-day pe- riod
immediately preceding the Effective Date or, if more favor-able to the
Executive, as provided generally at any time after the Effective Date with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
--------
shall be entitled to paid vacation in accordance with
6
<PAGE>
the most favorable plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful"
7
<PAGE>
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by
-----------
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially
8
<PAGE>
greater extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
---------------------
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination. (a) Good Reason;
------------------------------------------- -----------
Other Than for Cause, Death or Disability. If, dur-
- -----------------------------------------
9
<PAGE>
ing the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the excess of (A) the product of (x) the higher of (I)
the Recent Target Bonus and (II) the Executive's target annual
bonus for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to
as the "Highest Target Bonus") and (y) a fraction, the numerator
of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365, over (B) any Annual Bonus amount for such fiscal year that
has previously been paid to the Executive and (3) any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) the Multiple and
(2) the sum of (x) the Executive's Annual Base Salary and (y) the
Highest Target Bonus; and
C. an amount, calculated in accordance with Appendix A
hereto, equal to the excess of (i) the present value of the
pension benefits the Executive would have been entitled to
receive, if the Executive had remained in the employ of the
Company for a number of years following the Date of Termination
equal to the Multiple, under the terms of the Company's
Corporate Retirement Plan and any successor qualified defined
benefit pension plan (the "Corporate Retirement Plan"), the
Company's Benefit Equalization Plan and any successor
nonqualified defined benefit pension plan (the "BEP") and any
individual contract, agreement, letter or other arrangement to
which the Executive is a party (collectively, the "Individual
Pension") (taking into account, without limitation, any
additional age and/or service credit that would have been earned
thereunder), all whether or not vested thereunder, over (ii) the
present value of the pension benefits the Executive is actually
entitled to receive
10
<PAGE>
under or pursuant to the Corporate Retirement Plan, the BEP and
any Individual Pension as of the Date of Termination; and
D. an amount equal to the present value (determined by
using the Pension Benefit Guaranty Corporation interest rate for
immediate annuities as in effect on the Date of Termination) of
the aggregate matching and other employer contributions that
would have been made by the Company under the terms of the
Company's Savings and Stock Ownership Plan and the Company's
Deferred Compensation Plan or any successor thereto
(collectively, the "Savings Plans") as in effect on the day
before the Effective Date or, if more favorable to the
Executive, as in effect immediately before the Date of
Termination, if the Employee had continued, for a number of
years after the Date of Termination equal to the Multiple, to be
employed and to participate in the Savings Plans, to the same
extent as the Executive participated therein for the plan year
during which the Date of Termination occurs.
(ii) for a number of years after the Executive's Date of
Termination equal to the Multiple, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or
policy, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the Executive
becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until three
years after the Date of Termination and to have retired on the last day
of such period;
(iii) the Company shall, at its sole expense, provide the
Executive with outplacement services through the pro-
11
<PAGE>
vider of the Company's choice, the scope of which shall be chosen by the
Executive in his sole discretion, but at a cost not to exceed 15 percent
of the sum of the Annual Base Salary and the Highest Target Bonus;
(iv) upon the Date of Termination, the Executive shall have the
right and option to purchase at "fair market value", in accordance with
the Company's automobile purchase policy as in effect immediately prior
to the Change of Control, the automobile which the Company was providing
to the Executive immediately prior to the Date of Termination;
(v) for one year after the Date of Termination, the Company shall
continue to provide the Executive with financial counselling on terms
and conditions no less favorable than those in effect immediately before
the Change of Control or, if more favorable to the Executive, those in
effect immediately before the Date of Termination;
(vi) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits"); and
(vii) to the extent not theretofore paid or provided, the total
amount of the deferred compensation payable upon the Executive's
attainment of age 62, in accordance with item six of the letter
agreement between the Executive and the Company dated September 23,
1994, shall become immediately and fully vested, but such amount shall
continue to be deferred with payment commencing upon the Executive's
attainment of age 62.
(b) Death. If the Executive's employment is terminated by
-----
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least
12
<PAGE>
equal to the most favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of the Company and
such affiliated companies under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
---------------------------------
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
13
<PAGE>
7. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(g), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"); provided, however, that the Company shall not
-------- -------
be required to pay any such legal fees or expenses if there is a determination
by a court or other fact-finder having jurisdiction of the claim that the
Executive's claim was frivolous.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) (i) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company or its affiliates to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Sec-
14
<PAGE>
tion 9) (a "Payment") would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing, if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(ii) Notwithstanding the provisions of Section 9(a)(i), if the
payment of the Gross-Up Payment as provided in Section 9(a)(i) would make a
transaction entered into in connection with a Change of Control that would
otherwise be eligible for pooling-of-interests accounting treatment under APB
No. 16 ineligible for such treatment, then the following conditions shall apply:
(A) no Gross-Up Payment shall be made unless it shall be determined that a
Gross-Up Payment would have been payable pursuant to the preceding sentence
(without regard to this sentence) if the Executive had not received any Payments
that are considered to be "parachute payments" as defined in Section 280G of the
Code that consist of, or relate to, common stock or other equity interest in the
Company or any of its affiliated companies ("Equity Payments"); and (B) if a
Gross-Up Payment is permitted to be made after application of clause (A) of this
sentence, the amount of such Gross-Up Payment shall be only that amount
necessary so that after payment of all taxes (including any interest or
penalties imposed with respect to such taxes), by the Executive with respect to
Payments other than the Equity Payments, including without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment (as computed in accordance with
this clause (B)), the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments other than the Equity Payments. In
determining the Gross-Up Amount pursuant to clause (B) of the preceding
sentence, the rules for allocation of the "base amount" set forth in Question
and Answer 38 of Proposed Treasury Regulation 1.280G-1, or any successor
15
<PAGE>
provision in any proposed, temporary or final regulations that may hereinafter
be promulgated, shall be applied.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
16
<PAGE>
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Ex-
17
<PAGE>
ecutive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
10. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive
----------
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had
18
<PAGE>
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Michael D. Lockhart
43 Harbor Drive #503
Stamford, CT 06902
If to the Company:
-----------------
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, CT 06904
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may
19
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have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) This Agreement may not be amended, modified or terminated
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. Notwithstanding the foregoing,
subject to Section 1(a) hereof, the Company shall have the right, at any time
prior to the Effective Date, to amend, modify or terminate this Agreement upon a
change in the Executive's employment position.
(g) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Michael D. Lockhart
-------------------------------
Michael D. Lockhart
GENERAL SIGNAL CORPORATION
By /s/ Elizabeth D. Conklyn
----------------------------
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APPENDIX A
The amount payable under Section 6(a)(i)(C) of the Agreement
shall be calculated so as to be not less than the excess, if any, of the "Gross
Amount" (calculated as set forth in (a) below), over the "Offset" (calculated as
set forth in (b) below). For an Executive who has an Individual Pension, the
amount payable under Section 6(a)(i)(C) of the Agreement shall be subject to the
provisions of (c) below. Definitions and rules of general application are set
forth in (d) below.
(i) The Gross Amount is determined as follows:
(i) Determine the retirement benefit, payable as a life
annuity from normal retirement date, that the Executive would become
entitled to receive, assuming that all accrued benefits were vested,
under the terms of the Corporate Retirement Plan, the Benefit
Equalization Plan and any pension benefit specified by an Individual
Pension, all as in effect on the day immediately preceding the Effective
Date, if the Executive were to continue his or her employment with the
Company for the number of years following the Date of Termination equal
to the Multiple plus any additional service credit provided under an
Individual Pension. For this purpose, it shall be assumed that the
Social Security Taxable Wage Base and any other factor used to calculate
retirement benefits remains constant after the Date of Termination.
(ii) Determine the retirement benefit, payable as a life
annuity commencing at Adjusted Early Retirement Date (as defined in
(d)(i) below), based on the life annuity calculated in (i) above and
using the Corporate Retirement Plan's early retirement factors as in
effect on the day immediately preceding the Effective Date.
(iii) Determine, as of the Adjusted Severance Date (as defined
in (d)(i) below), the present value of (ii) above, using the interest
rate and mortality table assumptions applicable under the Corporate
Retirement Plan to employees receiving lump sums on immediate retirement
on the first day of the month coincident with or next following the Date
of Termination, based on the provisions of the Corporate Retirement Plan
as it existed on the day immediately preceding the Effective Date.
(iv) Determine the present value of the gross benefit by
discounting the value determined in (iii) above to the
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Date of Termination at the interest rate determined in (iii) above and
without reduction for mortality.
(ii) The Offset is determined as follows:
(i) Determine the vested retirement benefit, payable as a
life annuity from normal retirement date, to which the Executive is
entitled at the Date of Termination, under the terms of the Corporate
Retirement Plan, the Benefit Equalization Plan and any Individual
Pension, all as in effect on the day preceding the Date of Termination.
(ii) Determine the retirement benefit, payable as a life
annuity commencing at the earliest retirement date on or after the Date
of Termination, based on the life annuity calculated in (i) above and
using the Corporate Retirement Plan's early retirement factors as of the
Date of Termination.
(iii) Determine, as of the Date of Termination, the present
value of the Offset by calculating the lump sum equivalent to (ii) above
under the provisions of the Corporate Retirement Plan, but using the
interest rate and mortality table assumptions applicable to employees
receiving lump sums on immediate retirement (regardless of whether a
lump sum is actually permissible under said Plan).
(iii) Notwithstanding the foregoing, for any Executive who has
a pension benefit specified by an Individual Pension, the following provisions
shall apply:
(i) To determine the value of any benefit payable from a
prior employer's plan, the early retirement factors of the prior
employer's plan shall be used to determine the early retirement benefit
payable at the earliest retirement date, subsequent to the Date of
Termination, under the prior employer's plan, and the methods and
factors of (b)(ii) and (b)(iii) above shall be used, as applicable, to
determine the present value of such annuity at the Date of Termination.
(ii) In no event shall the benefit payable pursuant to Section
6(a)(i)(C) of the Agreement be less than the benefit that would have
been payable from such section of the Agreement in the absence of the
Individual Pension.
(iv) The calculations of this Appendix A are subject to the
following definitions and rules of general application:
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(i) The "Adjusted Severance Date" shall be the first day of
the month coincident with or next following the end of the period of
years equal to the Multiple plus any additional service credit provided
under an Individual Pension. The "Adjusted Early Retirement Date" shall
be the first date on or after the Adjusted Severance Date on which the
Executive could choose to retire under the terms of the Corporate
Retirement Plan as it existed on the day immediately preceding the
Effective Date.
(ii) Final average compensation, where applicable, shall be
determined using the procedures followed by the Administrator of the
Corporate Retirement Plan immediately prior to the Effective Date.
Actual compensation shall be used through the Date of Termination. The
Executive's Annual Base Salary shall be deemed to be earned ratably
throughout the period equal to the Multiple. The Highest Target Bonus
shall be deemed paid on the historical anniversary of the date on which
bonus compensation was last actually paid.
(iii) In the absence of specific guidance to the contrary as
contained herein, the procedures of the Plan Administrator used to
calculate benefits under the Corporate Retirement Plan and the Benefit
Equalization Plan, as in effect immediately prior to the Effective Date,
will be followed for purposes of calculating the benefits payable under
Section 6(a)(i)(C) of the Agreement.
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EXHIBIT 10.26
FORM OF
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between General Signal Corporation, a New York
corporation (the "Company"), and _____________ _____________ (the "Executive"),
dated as of the 2nd day of February, 1998.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
-------------------
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
<PAGE>
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
(c) The "Multiple" means the lesser of (i) three and (ii) the
number of years and fractions thereof from the Date of Termination (as defined
in Section 5(e) below) through the date the Executive would have become entitled
to full retirement benefits under the Company's Corporate Retirement Plan or any
successor thereto, as in effect immediately before the Change of Control or, if
sooner, as in effect immediately before the Date of Termination, in each case if
the Executive had remained in the employ of the Company.
2. Change of Control. For the purpose of this Agreement, a
-----------------
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof
2
<PAGE>
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3
<PAGE>
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location not more than 50 miles
from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
------------ -----------
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immedi-
4
<PAGE>
ately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's target bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for the fiscal year
during which occurs the Effective Date or, if no target bonus had been
established for such fiscal year as of the Effective Date, for the most recently
completed fiscal year before the Effective Date (annualized in the event that
the Executive was not employed by the Company for the whole of such fiscal year)
(the "Recent Target Bonus"). Each such Annual Bonus shall be paid no later than
the end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
---------------------------------------
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
5
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(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
--------
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to administrative assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company and its affiliated companies at any time during the 120-day pe- riod
immediately preceding the Effective Date or, if more favor-able to the
Executive, as provided generally at any time after the
6
<PAGE>
Effective Date with respect to other peer executives of the Company and its
affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
--------
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that the
Executive has not substantially performed the Executive's duties, or
7
<PAGE>
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by
-----------
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
8
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(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination
of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
---------------------
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disabil-
9
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ity, the Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason;
------------------------------------------- -----------
Other Than for Cause, Death or Disability. If, during the Employment Period, the
- -----------------------------------------
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the excess of (A) the product of (x) the higher of (I)
the Recent Target Bonus and (II) the Executive's target annual
bonus for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to
as the "Highest Target Bonus") and (y) a fraction, the numerator
of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is
365, over (B) any Annual Bonus amount for such fiscal year that
has previously been paid to the Executive and (3) any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued Obligations");
and
B. the amount equal to the product of (1) the Multiple
and (2) the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Target Bonus; and
C. an amount, calculated in accordance with Appendix A
hereto, equal to the excess of (i) the present value of the
pension benefits the Executive would have been entitled to
receive, if the Executive had remained in the employ of the
Company for a number of years following the Date of Termination
equal to the Multiple, under the terms of the Company's
Corporate Retirement Plan and any successor qualified defined
benefit pension plan (the "Corporate Retirement Plan"), the
Company's Benefit Equalization Plan and any successor
nonqualified defined benefit pension plan (the "BEP") and any
individual contract, agreement, letter or other arrangement to
which the Executive is a party (collectively, the "Individual
Pen-
10
<PAGE>
sion") (taking into account, without limitation, any additional
age and/or service credit that would have been earned
thereunder), all whether or not vested thereunder, over (ii) the
present value of the pension benefits the Executive is actually
entitled to receive under or pursuant to the Corporate
Retirement Plan, the BEP and any Individual Pension as of the
Date of Termination; and
D. an amount equal to the present value (determined by
using the Pension Benefit Guaranty Corporation interest rate for
immediate annuities as in effect on the Date of Termination) of
the aggregate matching and other employer contributions that
would have been made by the Company under the terms of the
Company's Savings and Stock Ownership Plan and the Company's
Deferred Compensation Plan or any successor thereto
(collectively, the "Savings Plans") as in effect on the day
before the Effective Date or, if more favorable to the
Executive, as in effect immediately before the Date of
Termination, if the Employee had continued, for a number of
years after the Date of Termination equal to the Multiple, to be
employed and to participate in the Savings Plans, to the same
extent as the Executive participated therein for the plan year
during which the Date of Termination occurs.
(ii) for a number of years after the Executive's Date of
Termination equal to the Multiple, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or
policy, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the Executive
becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until
11
<PAGE>
three years after the Date of Termination and to have retired on the
last day of such period;
(iii) the Company shall, at its sole expense, provide the
Executive with outplacement services through the provider of the
Company's choice, the scope of which shall be chosen by the Executive in
his sole discretion, but at a cost not to exceed 15 percent of the sum
of the Annual Base Salary and the Highest Target Bonus;
(iv) upon the Date of Termination, the Executive shall have the
right and option to purchase at "fair market value", in accordance with
the Company's automobile purchase policy as in effect immediately prior
to the Change of Control, the automobile which the Company was providing
to the Executive immediately prior to the Date of Termination; and
(v) for one year after the Date of Termination, the Company shall
continue to provide the Executive with financial counselling on terms
and conditions no less favorable than those in effect immediately before
the Change of Control or, if more favorable to the Executive, those in
effect immediately before the Date of Termination;
(vi) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. if the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death bene-
12
<PAGE>
fits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
---------------------------------
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which
13
<PAGE>
the Executive may qualify, nor, subject to Section 12(g), shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"); provided, however, that the Company shall not
be required to pay any such legal fees or expenses if there is a determination
by a court or other fact-finder having jurisdiction of the claim that the
Executive's claim was frivolous.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) (i) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company or its affiliates to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are
14
<PAGE>
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing, if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed
110% of the greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(ii) Notwithstanding the provisions of Section 9(a)(i), if the
payment of the Gross-Up Payment as provided in Section 9(a)(i) would make a
transaction entered into in connection with a Change of Control that would
otherwise be eligible for pooling-of-interests accounting treatment under APB
No. 16 ineligible for such treatment, then the following conditions shall apply:
(A) no Gross-Up Payment shall be made unless it shall be determined that a
Gross-Up Payment would have been payable pursuant to the preceding sentence
(without regard to this sentence) if the Executive had not received any Payments
that are considered to be "parachute payments" as defined in Section 280G of the
Code that consist of, or relate to, common stock or other equity interest in the
Company or any of its affiliated companies ("Equity Payments"); and (B) if a
Gross-Up Payment is permitted to be made after application of clause (A) of this
sentence, the amount of such Gross-Up Payment shall be only that amount
necessary so that after payment of all taxes (including any interest or
penalties imposed with respect to such taxes), by the Executive with respect to
Payments other than the Equity Payments, including without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment (as computed in accordance with
this clause (B)), the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments other than the Equity Payments. In
determining the Gross-Up Amount pursuant to clause (B) of the preceding
sentence, the rules for allocation of the "base amount" set forth in Question
and Answer 38 of Proposed Treasury Regulation 1.280G-1, or any successor
provision in any proposed, temporary or final regulations that may hereinafter
be promulgated, shall be applied.
15
<PAGE>
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writ-
16
<PAGE>
ing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the re-
17
<PAGE>
quirements of Section 9(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive
----------
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business
18
<PAGE>
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
If to the Company:
-----------------
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, CT 06904
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
19
<PAGE>
a waiver of such provision or right or any other provision or right of this
Agreement.
(f) This Agreement may not be amended, modified or terminated
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives. Notwithstanding the foregoing,
subject to Section 1(a) hereof, the Company shall have the right, at any time
prior to the Effective Date, to amend, modify or terminate this Agreement upon a
change in the Executive's employment position.
(g) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-------------------------------
EXECUTIVE
GENERAL SIGNAL CORPORATION
By
-------------------------------
20
<PAGE>
APPENDIX A
The amount payable under Section 6(a)(i)(C) of the Agreement
shall be calculated so as to be not less than the excess, if any, of the "Gross
Amount" (calculated as set forth in (a) below), over the "Offset" (calculated as
set forth in (b) below). For an Executive who has an Individual Pension, the
amount payable under Section 6(a)(i)(C) of the Agreement shall be subject to the
provisions of (c) below. Definitions and rules of general application are set
forth in (d) below.
(i) The Gross Amount is determined as follows:
(i) Determine the retirement benefit, payable as a life annuity
from normal retirement date, that the Executive would become entitled to
receive, assuming that all accrued benefits were vested, under the terms
of the Corporate Retirement Plan, the Benefit Equalization Plan and any
pension benefit specified by an Individual Pension, all as in effect on
the day immediately preceding the Effective Date, if the Executive were
to continue his or her employment with the Company for the number of
years following the Date of Termination equal to the Multiple plus any
additional service credit provided under an Individual Pension. For this
purpose, it shall be assumed that the Social Security Taxable Wage Base
and any other factor used to calculate retirement benefits remains
constant after the Date of Termination.
(ii) Determine the retirement benefit, payable as a life annuity
commencing at Adjusted Early Retirement Date (as defined in (d)(i)
below), based on the life annuity calculated in (i) above and using the
Corporate Retirement Plan's early retirement factors as in effect on the
day immediately preceding the Effective Date.
(iii) Determine, as of the Adjusted Severance Date (as defined in
(d)(i) below), the present value of (ii) above, using the interest rate
and mortality table assumptions applicable under the Corporate
Retirement Plan to employees receiving lump sums on immediate retirement
on the first day of the month coincident with or next following the Date
of Termination, based on the provisions of the Corporate Retirement Plan
as it existed on the day immediately preceding the Effective Date.
(iv) Determine the present value of the gross benefit by
discounting the value determined in (iii) above to the
21
<PAGE>
Date of Termination at the interest rate determined in (iii) above and
without reduction for mortality.
(ii) The Offset is determined as follows:
(i) Determine the vested retirement benefit, payable as a life
annuity from normal retirement date, to which the Executive is entitled
at the Date of Termination, under the terms of the Corporate Retirement
Plan, the Benefit Equalization Plan and any Individual Pension, all as
in effect on the day preceding the Date of Termination.
(ii) Determine the retirement benefit, payable as a life annuity
commencing at the earliest retirement date on or after the Date of
Termination, based on the life annuity calculated in (i) above and using
the Corporate Retirement Plan's early retirement factors as of the Date
of Termination.
(iii) Determine, as of the Date of Termination, the present value
of the Offset by calculating the lump sum equivalent to (ii) above under
the provisions of the Corporate Retirement Plan, but using the interest
rate and mortality table assumptions applicable to employees receiving
lump sums on immediate retirement (regardless of whether a lump sum is
actually permissible under said Plan).
(iii) Notwithstanding the foregoing, for any Executive who has a
pension benefit specified by an Individual Pension, the following provisions
shall apply:
(i) To determine the value of any benefit payable from a prior
employer's plan, the early retirement factors of the prior employer's
plan shall be used to determine the early retirement benefit payable at
the earliest retirement date, subsequent to the Date of Termination,
under the prior employer's plan, and the methods and factors of (b)(ii)
and (b)(iii) above shall be used, as applicable, to determine the
present value of such annuity at the Date of Termination.
(ii) In no event shall the benefit payable pursuant to Section
6(a)(i)(C) of the Agreement be less than the benefit that would have
been payable from such section of the Agreement in the absence of the
Individual Pension.
(iv) The calculations of this Appendix A are subject to the
following definitions and rules of general application:
22
<PAGE>
(i) The "Adjusted Severance Date" shall be the first day of the
month coincident with or next following the end of the period of years
equal to the Multiple plus any additional service credit provided under
an Individual Pension. The "Adjusted Early Retirement Date" shall be the
first date on or after the Adjusted Severance Date on which the
Executive could choose to retire under the terms of the Corporate
Retirement Plan as it existed on the day immediately preceding the
Effective Date.
(ii) Final average compensation, where applicable, shall be
determined using the procedures followed by the Administrator of the
Corporate Retirement Plan immediately prior to the Effective Date.
Actual compensation shall be used through the Date of Termination. The
Executive's Annual Base Salary shall be deemed to be earned ratably
throughout the period equal to the Multiple. The Highest Target Bonus
shall be deemed paid on the historical anniversary of the date on which
bonus compensation was last actually paid.
(iii) In the absence of specific guidance to the contrary as
contained herein, the procedures of the Plan Administrator used to
calculate benefits under the Corporate Retirement Plan and the Benefit
Equalization Plan, as in effect immediately prior to the Effective Date,
will be followed for purposes of calculating the benefits payable under
Section 6(a)(i)(C) of the Agreement.
23
<PAGE>
EXHIBIT 10.28
364 Day Credit Agreement
AMENDMENT NO. 2
THIS AMENDMENT NO. 2, (this "Amendment"), dated as of May 29, 1997, among
GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial
banking institutions (herein collectively "Banks").
WITNESSETH:
WHEREAS, the Company and the Banks are parties to a certain 364 Day Credit
Agreement, dated as of June 1, 1995 as amended as of May 31, 1996 (the "364 Day
Credit Agreement"); and
WHEREAS, the parties desire to amend further certain terms of the 364 Day
Credit Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto hereby agree as follows:
1. Except as otherwise defined herein, the capitalized terms used herein
shall have the meanings respectively ascribed to them in the 364 Day Credit
Agreement.
2. Each Bank's Commitment shall be the amount set forth opposite its
signature hereto, as such amount may be reduced or increased from time to time
pursuant to Sections 1.1.6, 1.1.7 and 1.1.8 or Section 13.5 of the 364 Day
Credit Agreement.
3. The "Revolver Expiration Date" is hereby amended to mean the earlier of
May 28, 1998 or the date of termination in whole of the Commitments. All
references to the "364 Day Credit Agreement" shall be deemed to refer to the
364 Day Credit Agreement as hereby amended.
4. The table in Section 3.1.8, Applicable Margin, is hereby deleted and
replaced with the following:
<TABLE>
<CAPTION>
Public Debt Rating Eurodollar Margin CD Margin
- ------------------ ----------------- ---------
<S> <C> <C>
Level 1: .185% .310%
AA-/Aa3 or higher
Level 2: .200% .325%
A-/A3 or higher, but
less than Level 1
Level 3: .350% .475%
BBB-/Baa3 or higher,
but less than Level 2
Level 4: .500% .625%
Less than BBB-/Baa3
</TABLE>
<PAGE>
5. The table in Section 3.2, Facility Fee, is hereby deleted and replaced
with the following:
<TABLE>
<CAPTION>
Public Debt Rating Facility Fee Percentage
- ------------------ -----------------------
<S> <C>
Level 1: .040 %
AA-/Aa3 or higher
Level 2: .060 %
A-/A3 or higher, but
less than Level 1
Level 3: .100%
BBB-/Baa3 or higher,
but less than Level 2
Level 4: .150 %
Less than BBB-/Baa3
</TABLE>
6. Except as set forth in this Amendment, all terms and conditions of the 364
Day Agreement shall remain unchanged.
IN WITNESS WHEREOF, the Company and each Bank have caused this Amendment to be
executed, as of the day and year first above written, by one of its officers
thereunto duly authorized.
GENERAL SIGNAL CORPORATION
/s/ Terry J. Mortimer
By: ________________________________
Vice President and Treasurer
One High Ridge Park
Stamford, CT 06904
Attention: Treasurer
Telecopier No.: (203) 329-4365
2
<PAGE>
Four Year Credit Agreement
AMENDMENT NO. 3
THIS AMENDMENT NO. 3, (this "Amendment"), dated as of May 29, 1997, among
GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial
banking institutions (herein collectively "Banks").
WITNESSETH:
WHEREAS, the Company and the Banks are parties to a certain Four Year
Credit Agreement, dated as of January 12, 1994, as amended as of January 12,
1995 and May 31, 1996 (the "Four Year Credit Agreement"); and
WHEREAS, the parties desire to amend further certain terms of the Four
Year Credit Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereto hereby agree as follows:
1. Except as otherwise defined herein, the capitalized terms used herein
shall have the meanings respectively ascribed to them in the Four Year Credit
Agreement.
2. Each Bank's Commitment shall be the amount set forth opposite its
signature hereto, as such amount may be reduced or increased from time to time
pursuant to Sections 1.1.6, 1.1.7 and 1.1.8 or Section 13.5 of the Four Year
Credit Agreement.
3. The "Revolver Expiration Date" is hereby amended to mean the earlier of
May 28, 1998 or the date of termination in whole of the Commitments.
4. The term "Agreement" is hereby amended to mean this "Five Year Credit
Agreement" and all references to the "Five Year Credit Agreement" shall be
deemed to refer to the Four Year Credit Agreement as hereby amended.
5. The table in Section 3.1.8, Applicable Margin, is hereby deleted and
replaced with the following:
<TABLE>
<CAPTION>
Public Debt Rating Eurodollar Margin CD Margin
- ------------------ ----------------- ---------
<S> <C> <C>
Level 1: .165% .290%
AA-/Aa3 or higher
Level 2: .180% .305%
A-/A3 or higher, but
less than Level 1
Level 3: .300% .425%
BBB-/Baa3 or higher,
but less than Level 2
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Level 4: .400% .525%
Less than BBB-/Baa3
</TABLE>
6. The table in Section 3.2, Facility Fee, is hereby deleted and replaced
with the following:
<TABLE>
<CAPTION>
Public Debt Rating Facility Fee Percentage
- ------------------ -----------------------
<S> <C>
Level 1: .060%
AA-/Aa3 or higher
Level 2: .080%
A-/A3 or higher, but
less than Level 1
Level 3: .150%
BBB-/Baa3 or higher,
but less than Level 2
Level 4: .250 %
Less than BBB-/Baa3
</TABLE>
6. Except as set forth in this Amendment, all terms and conditions of the Four
Year Credit Agreement shall remain unchanged.
IN WITNESS WHEREOF, the Company and each Bank have caused this Amendment to be
executed, as of the day and year first above written, by one of its officers
thereunto duly authorized.
GENERAL SIGNAL CORPORATION
/s/ Terry J. Mortimer
By: ________________________________
Vice President and Treasurer
One High Ridge Park
Stamford, CT 06904
Attention: Treasurer
Telecopier No.: (203) 329-4365
2
<PAGE>
EXHIBIT 10.29
Amendment to
Retirement Plan For Directors
of General Signal Corporation
The Retirement Plan for Directors of General Signal Corporation (the
"Plan") is hereby amended, effective as of December 12, 1996, by adding a new
section 11 at the end thereof, reading in its entirety as follows:
11. Termination of Plan
-------------------
Notwithstanding any other provision of this plan, no benefits
shall accrue for any director pursuant to section 4 above with
respect to any period after December 31, 1996. The benefits
hereunder of any director who has retired on or before December
31, 1996 shall continue to be paid in accordance with the terms
hereof, unless such director and the corporation have previously
agreed that such benefits shall be paid in a lump sum payment in
full discharge of such director's benefits under this plan. the
benefits hereunder of any individual who is a director as of
December 31, 1996 (a "current director") shall be payable solely
as follows. The lump sum value (the "lump sum amount") of the
accrued benefits under this plan hereto (the "accrued benefit")
of each current director as of April 30, 1996 is set forth on
schedule I hereto. Schedule I also indicates whether or not each
such current director has elected irrevocably to have his or her
lump sum amount transferred to an account under the corporation's
deferred compensation plan for directors. No amounts shall be
payable pursuant to this plan to or with respect to current
directors who have so elected. The accrued benefit of each
current director who has not so elected shall be payable pursuant
to this plan, in quarterly installments during such current
director's lifetime, beginning as soon as practicable after the
later of the date such current director ceases to be a member of
the board and such current director's 65th birthday; provided,
that if such current director dies while a member of the board or
after ceasing to be a member of the board but before reaching age
65, such current director shall not be entitled to receive any
payment with respect to his or her accrued benefit.
The plan is in all other respects ratified and confirmed without
amendment.
<PAGE>
Exhibit (24)
POWER OF ATTORNEY
The undersigned members of the Board of Directors of General Signal
Corporation, a New York corporation, with principal offices at 1 High Ridge
Park, Stamford, Connecticut 06904, hereby appoint Terence D. Martin as their
Attorney-in-Fact for the purpose of signing General Signal Corporation's
Securities and Exchange Commission Form 10-K (and any and all amendments
thereto) for the fiscal year ended December 31, 1997.
Dated: February 5, 1998.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Van C. Campbell DIRECTOR
- -------------------------------------------------------
Van C. Campbell
/s/ John R. Selby
- -------------------------------------------------------
John R. Selby DIRECTOR
/s/ Ursula Fairbairn
- -------------------------------------------------------
Ursula Fairbairn DIRECTOR
/s/ H. Kent Bowen
- -------------------------------------------------------
H. Kent Bowen DIRECTOR
/s/ Michael A. Carpenter
- -------------------------------------------------------
Michael A. Carpenter DIRECTOR
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 50,000
<SECURITIES> 0
<RECEIVABLES> 300,500
<ALLOWANCES> 15,100
<INVENTORY> 156,800
<CURRENT-ASSETS> 568,100
<PP&E> 576,300
<DEPRECIATION> 335,600
<TOTAL-ASSETS> 1,388,000
<CURRENT-LIABILITIES> 376,500
<BONDS> 207,400
0
0
<COMMON> 78,500
<OTHER-SE> 551,200
<TOTAL-LIABILITY-AND-EQUITY> 1,388,000
<SALES> 1,954,600
<TOTAL-REVENUES> 1,954,600
<CGS> 1,378,500
<TOTAL-COSTS> 1,700,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,600
<INTEREST-EXPENSE> 13,200
<INCOME-PRETAX> 252,800
<INCOME-TAX> 121,800
<INCOME-CONTINUING> 131,000
<DISCONTINUED> 2,300
<EXTRAORDINARY> 0
<CHANGES> (3,700)
<NET-INCOME> 129,600
<EPS-PRIMARY> 2.58
<EPS-DILUTED> 2.58
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 17,700
<SECURITIES> 90
<RECEIVABLES> 368,300
<ALLOWANCES> 15,300
<INVENTORY> 240,600
<CURRENT-ASSETS> 691,900
<PP&E> 747,300
<DEPRECIATION> 437,300
<TOTAL-ASSETS> 1,551,000
<CURRENT-LIABILITIES> 439,200
<BONDS> 201,300
0
0
<COMMON> 78,200
<OTHER-SE> 665,600
<TOTAL-LIABILITY-AND-EQUITY> 1,551,000
<SALES> 2,065,000
<TOTAL-REVENUES> 2,065,000
<CGS> 1,435,700
<TOTAL-COSTS> 1,821,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,100
<INTEREST-EXPENSE> 21,500
<INCOME-PRETAX> 222,400
<INCOME-TAX> 89,000
<INCOME-CONTINUING> 133,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,400
<EPS-PRIMARY> 2.68
<EPS-DILUTED> 2.62
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1
<SECURITIES> 1
<RECEIVABLES> 339
<ALLOWANCES> 16
<INVENTORY> 235
<CURRENT-ASSETS> 721
<PP&E> 718
<DEPRECIATION> 405
<TOTAL-ASSETS> 1,613
<CURRENT-LIABILITIES> 432
<BONDS> 429
0
0
<COMMON> 78
<OTHER-SE> 578
<TOTAL-LIABILITY-AND-EQUITY> 1,613
<SALES> 1,863
<TOTAL-REVENUES> 1,863
<CGS> 1,308
<TOTAL-COSTS> 1,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 156
<INCOME-TAX> 56
<INCOME-CONTINUING> 100
<DISCONTINUED> (64)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.77
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 40,000
<SECURITIES> 90
<RECEIVABLES> 367,800
<ALLOWANCES> 15,000
<INVENTORY> 247,100
<CURRENT-ASSETS> 718,000
<PP&E> 753,700
<DEPRECIATION> 448,400
<TOTAL-ASSETS> 1,565,800
<CURRENT-LIABILITIES> 422,600
<BONDS> 241,800
0
0
<COMMON> 78,400
<OTHER-SE> 653,400
<TOTAL-LIABILITY-AND-EQUITY> 1,565,800
<SALES> 505,600
<TOTAL-REVENUES> 505,600
<CGS> 357,300
<TOTAL-COSTS> 461,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 823
<INTEREST-EXPENSE> 3,400
<INCOME-PRETAX> 40,500
<INCOME-TAX> 16,200
<INCOME-CONTINUING> 24,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,300
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 24,300
<SECURITIES> 90
<RECEIVABLES> 378,300
<ALLOWANCES> 15,900
<INVENTORY> 242,600
<CURRENT-ASSETS> 703,300
<PP&E> 767,100
<DEPRECIATION> 461,300
<TOTAL-ASSETS> 1,549,900
<CURRENT-LIABILITIES> 411,300
<BONDS> 243,200
0
0
<COMMON> 78,400
<OTHER-SE> 644,000
<TOTAL-LIABILITY-AND-EQUITY> 1,549,900
<SALES> 1,045,200
<TOTAL-REVENUES> 1,045,200
<CGS> 733,200
<TOTAL-COSTS> 939,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,764
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> 97,900
<INCOME-TAX> 39,200
<INCOME-CONTINUING> 58,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,700
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.14
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 82,800
<SECURITIES> 90
<RECEIVABLES> 297,500
<ALLOWANCES> 15,300
<INVENTORY> 160,200
<CURRENT-ASSETS> 602,800
<PP&E> 597,600
<DEPRECIATION> 357,100
<TOTAL-ASSETS> 1,429,700
<CURRENT-LIABILITIES> 403,800
<BONDS> 89,800
0
0
<COMMON> 78,500
<OTHER-SE> 673,600
<TOTAL-LIABILITY-AND-EQUITY> 1,429,700
<SALES> 1,520,900
<TOTAL-REVENUES> 1,520,900
<CGS> 1,079,700
<TOTAL-COSTS> 1,319,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,900
<INTEREST-EXPENSE> 11,300
<INCOME-PRETAX> 189,800
<INCOME-TAX> 95,000
<INCOME-CONTINUING> 94,800
<DISCONTINUED> 2,300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,100
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.90
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 16
<SECURITIES> 1
<RECEIVABLES> 335
<ALLOWANCES> 16
<INVENTORY> 243
<CURRENT-ASSETS> 691
<PP&E> 703
<DEPRECIATION> 400
<TOTAL-ASSETS> 1,568
<CURRENT-LIABILITIES> 449
<BONDS> 349
0
0
<COMMON> 78
<OTHER-SE> 520
<TOTAL-LIABILITY-AND-EQUITY> 1,568
<SALES> 482
<TOTAL-REVENUES> 482
<CGS> 351
<TOTAL-COSTS> 433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 42
<INCOME-TAX> 17
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE-CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 13981
<SECURITIES> 90
<RECEIVABLES> 352604
<ALLOWANCES> 16867
<INVENTORY> 245181
<CURRENT-ASSETS> 699512
<PP&E> 714124
<DEPRECIATION> 408608
<TOTAL-ASSETS> 1565313
<CURRENT-LIABILITIES> 444247
<BONDS> 329511
0
0
<COMMON> 77977
<OTHER-SE> 547339
<TOTAL-LIABILITY-AND-EQUITY> 1565313
<SALES> 996732
<TOTAL-REVENUES> 996732
<CGS> 708722
<TOTAL-COSTS> 889345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12372
<INCOME-PRETAX> 95015
<INCOME-TAX> 38007
<INCOME-CONTINUING> 57008
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57008
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.13
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE-CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 24400
<SECURITIES> 90
<RECEIVABLES> 366339
<ALLOWANCES> 17667
<INVENTORY> 237900
<CURRENT-ASSETS> 707600
<PP&E> 737055
<DEPRECIATION> 428726
<TOTAL-ASSETS> 1572800
<CURRENT-LIABILITIES> 434800
<BONDS> 306200
0
0
<COMMON> 78100
<OTHER-SE> 577100
<TOTAL-LIABILITY-AND-EQUITY> 1572800
<SALES> 1518300
<TOTAL-REVENUES> 1518300
<CGS> 1064900
<TOTAL-COSTS> 1343000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17900
<INCOME-PRETAX> 157400
<INCOME-TAX> 63000
<INCOME-CONTINUING> 94400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94400
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.86
</TABLE>
