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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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RELIANCE ELECTRIC COMPANY
(NAME OF SUBJECT COMPANY)
RELIANCE ELECTRIC COMPANY
(NAME OF PERSON(S) FILING STATEMENT)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE,
INCLUDING THE ASSOCIATED SERIES A PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS OF SECURITIES)
759458102
(CUSIP NUMBER OF CLASS OF SECURITIES)
WILLIAM R. NORTON, ESQ.
Vice President, General Counsel and Secretary
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, Ohio 44124
(216) 266-5800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
MICHAEL L. MILLER, ESQ.
Calfee, Halter & Griswold
800 Superior Avenue, Suite 1800
Cleveland, Ohio 44114
(216) 622-8200
JOSEPH B. FRUMKIN, ESQ.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
(212) 558-4000
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This Statement on Schedule 14D-9 (this "Statement") relates to the tender
offer by ROK Acquisition Corporation ("ROK"), a Delaware corporation and a
wholly-owned subsidiary of Rockwell International Corporation, a Delaware
corporation ("Rockwell"), to purchase (i) all outstanding shares of Class A
Common Stock, par value $.01 per share (the "Class A Shares"), of Reliance
Electric Company, a Delaware corporation (the "Company"), and the associated
Series A preferred stock purchase rights (the "Class A Rights") issued pursuant
to the Rights Agreement, dated as of August 29, 1994 (the "Rights Agreement"),
between the Company and Society National Bank, as Rights Agent (the "Rights
Agent"), at a purchase price of $30 per Class A Share and associated Class A
Right, net to the seller in cash, without interest thereon, (ii) all outstanding
shares of Class B Common Stock, par value $.01 per share (the "Class B Shares"),
of the Company, and the associated Series B preferred stock purchase rights (the
"Class B Rights") issued pursuant to the Rights Agreement at a purchase price of
$30 per Class B Share and associated Class B Right, net to the seller in cash,
without interest thereon and (iii) all outstanding shares of Class C Common
Stock, par value $.01 per share (the "Class C Shares," and together with the
Class A Shares and the Class B Shares, the "Shares"), of the Company, and the
associated Series C preferred stock purchase rights (the "Class C Rights," and
together with the Class A Rights and the Class B Rights, the "Rights") issued
pursuant to the Rights Agreement at a purchase price of $81.24 per Class C Share
and associated Class C Right, net to the seller in cash, without interest
thereon, in each case upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated October 21, 1994 (the "Offer to Purchase"), and the
related Letters of Transmittal with respect to each of the Class A Shares, the
Class B Shares and the Class C Shares (such Letters of Transmittal, together
with the Offer to Purchase, constitute the "Offer") filed as exhibits to the
Statement on Schedule 14D-1, dated October 21, 1994 (the "Schedule 14D-1"),
filed by ROK and Rockwell with the Securities and Exchange Commission (the
"Commission"). The description in this Statement of any agreement, instrument,
document or portion thereof filed as an exhibit to this Statement is qualified
in its entirety by reference to the copy of such agreement, instrument, document
or portion thereof filed as such exhibit hereto.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Reliance Electric Company and the
address of its principal executive offices is 6065 Parkland Boulevard,
Cleveland, Ohio 44124. The equity securities to which this Statement relates are
the Class A Shares and the associated Class A Rights which are the only classes
of equity securities of the Company registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer for the Class A Shares and
associated Class A Rights by ROK and Rockwell pursuant to the Offer.
The Schedule 14D-1 states that the principal executive offices of ROK and
Rockwell are located at 2201 Seal Beach Boulevard, Seal Beach, California
90740-8250.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described under the sections entitled "Executive
Compensation," "Adoption of 1994 Outside Directors Stock Option Plan" and
"Adoption of 1994 Executive Long Term Incentive Plan" at pages 9-13 and 21-26 of
the Company's Proxy Statement, dated March 10, 1994 (the "Proxy Statement"),
mailed to stockholders in connection with the Annual Meeting of Stockholders of
the Company held on April 21, 1994 (the "Annual Meeting"). A copy of the
relevant portions of the Proxy Statement is filed as Exhibit 1 hereto and is
incorporated by reference herein. The Company 1994 Outside Directors Stock
Option Plan (the "1994 ODSOP") and the Company 1994 Executive Long Term
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Incentive Plan (the "1994 LTIP") were each approved by the stockholders of the
Company at the Annual Meeting and copies of each of the 1994 ODSOP and the 1994
LTIP are filed as Exhibits 2 and 3, respectively, hereto and are incorporated by
reference herein.
The Company's executive officers presently have an aggregate of 61,500
unvested options to purchase Class A Shares which were granted pursuant to the
Company 1990 Key Employee Stock Option Plan (the "1990 KESOP") at an exercise
price of $17.25 per share. Pursuant to the terms of the 1990 KESOP, such options
would become fully vested upon a Change in Control (as defined in the 1990 KESOP
to include the acquisition of beneficial ownership of 30% of the Company's
shares by a person or group of persons under common control unless such
acquisition is approved by the Board of Directors). A copy of the 1990 KESOP is
filed as Exhibit 4 hereto and incorporated by reference herein.
Pursuant to Severance Agreements (the "Severance Agreements"), certain
executive officers of the Company, including John C. Morley, President, Chief
Executive Officer and a director of the Company, and Dudley P. Sheffler, Vice
President and a director of the Company, would receive two years' salary in
certain instances involving a change in control of the Company. A form of the
Severance Agreements is filed as Exhibit 5 hereto and incorporated by reference
herein.
In connection with the Proposed Reliance-General Signal Merger (as defined
below), in lieu of severance benefits provided under the Severance Agreements,
on August 29, 1994, the Company's Board of Directors adopted the Company Change
in Control Severance Pay Plan (the "Severance Plan"). The Severance Plan
provides severance benefits to each of the Company's executive officers, and
certain other executives, if their employment is terminated within two years of
the consummation of the transaction contemplated by the Reliance-General Signal
Merger Agreement (as defined in Item 8 below). Under the Severance Plan, the
participants would be entitled to a lump sum payment of between one and three
years' salary and the continuation of certain other benefits, depending on the
level of the participant's position with the Company. The executive officers of
the Company would receive three years' salary and the continuation of certain
other benefits under the Severance Plan if terminated within two years of the
consummation of the Proposed Reliance-General Signal Merger. A copy of the
Severance Plan is filed as Exhibit 6 hereto and is incorporated by reference
herein.
Also on August 29, 1994, the Company's Board of Directors adopted an
amendment to the 1994 LTIP (the "LTIP Amendment," the 1994 LTIP as amended by
the LTIP Amendment being hereinafter referred to as the "Amended LTIP")
providing that an Award Payout (as defined in the Amended LTIP) would become
payable 30 days following the effective date of a Change in Control (as defined
in the Amended LTIP to include the acquisition of beneficial ownership of 30% of
the Company's shares by a person or group of persons under common control
whether or not such acquisition is approved by the Board of Directors) as if the
Performance Goals (as defined in the Amended LTIP) thereunder had been fully
achieved and reducing the amount of the Award Payout pro rata based upon the
period of time the Performance Units (as defined in the Amended LTIP) are
outstanding prior to the consummation of any event constituting a Change in
Control. A copy of the LTIP Amendment is filed as Exhibit 7 hereto and is
incorporated by reference herein.
The Company maintains a non-qualified Deferred Compensation Plan (the
"Deferred Compensation Plan"), pursuant to which the Board of Directors may make
deferred compensation awards to designated employees, including executive
officers. The amount credited to a participant's account under the Deferred
Compensation Plan would be distributed to a participant upon his attainment of
age 65 or earlier with the approval of the Board of Directors. Upon a Change in
Control (as defined in the Deferred Compensation Plan to include the acquisition
of beneficial ownership of 30% of the Company's shares by a person or group of
persons under common control whether or not such acquisition is approved by the
Board of Directors), each participant may elect to receive a single lump sum
payment of the amount credited to his account in lieu of all future amounts
payable to him under the Deferred Compensation Plan. A copy of the Deferred
Compensation Plan is filed as Exhibit 8 hereto and is incorporated by reference
herein.
As more fully described in Item 8 below, the Reliance-General Signal Merger
Agreement contains certain agreements with respect to the directors and officers
of the Company, including an agreement that each present member of the Company's
Board of Directors will become a member of the Board of Directors of
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the surviving corporation (the "Surviving Corporation") in the strategic merger
(the "Proposed Reliance-General Signal Merger") contemplated by the
Reliance-General Signal Merger Agreement and certain agreements with respect to
the indemnification of, and the provision of continued liability insurance
coverage for, the directors and officers of the Company.
Except as set forth in this Item 3 and in Item 8 below, there are no
material contracts, agreements, arrangements or understandings or any actual or
potential conflict of interest between the Company or its affiliates and: (1)
the Company's executive officers, directors or affiliates; or (2) Rockwell, ROK,
Rockwell's or ROK's executive officers or directors, or Rockwell's or ROK's
affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a)-(b) Recommendation, Reasons for the Recommendation and Background. The
Board of Directors of the Company has unanimously determined, for the reasons
set forth below, that it is unable to take a position with respect to the Offer
and is making no recommendation at this time with respect to the Offer. The
reasons for this determination include the following:
(1) The Board of Directors continues to believe that the Proposed
Reliance-General Signal Merger represents an attractive transaction for
holders of Shares, consistent with the Company's long-range plan, and with
significant strategic benefits and synergy opportunities that will create
the potential for value appreciation in the common stock of the combined
Reliance-General Signal entity. The Board of Directors has made no decision
to sell the Company. In light of the conditionality of the Offer and the
other factors discussed below, the Board of Directors believes its
continued support of the Proposed Reliance-General Signal Merger remains in
the best interests of the Company and its stockholders.
(2) There are significant uncertainties and contingencies associated
with the Offer. For example, there is no assurance that Rockwell will
complete a second step merger if it purchases Shares pursuant to the Offer
and no assurance from Rockwell as to its willingness to take actions
necessary to resolve any antitrust or other regulatory impediments to the
Offer that may arise. In addition, the Offer is highly conditional
generally and includes, among other conditions, a requirement that the
Reliance-General Signal Merger Agreement be terminated. The
Reliance-General Signal Merger Agreement has not been terminated and,
absent General Signal's consent or the occurrence of certain events outside
of the Company's control, may not be terminated by the Company until the
earlier of (x) a failure of the Company or General Signal stockholders to
approve the Proposed Reliance-General Signal Merger and related matters at
the respective meetings called to consider them and (y) March 31, 1995.
(3) At the present time, the Board of Directors has not been able to
fully assess the relative merits of the Offer as compared to the strategic
business combination with General Signal because of the significant
uncertainties associated with the Offer, as well as the uncertainty as to
the terms that ultimately may be available to the Company's stockholders.
(4) The Board of Directors considered as weighing against a
recommendation with respect to the Offer the terms of the Reliance-General
Signal Merger Agreement, particularly the provisions that state that either
party has a right to terminate the Reliance-General Signal Merger Agreement
and collect up to $2.5 million in expenses and a $50 million termination
fee in the event the other party recommends an Acquisition Transaction (as
defined in the Reliance-General Signal Merger Agreement). The
conditionality of the Rockwell Offer weighs against any action by the
Company in response to the Rockwell Offer that would trigger the right of
General Signal to terminate the Reliance-General Signal Merger Agreement
and collect expenses and the termination payment referred to above.
In 1991, prior to the Company's initial public offering in May 1992, the
Company engaged in discussions with several third parties concerning a possible
sale of the Company. At that time, Rockwell expressed a strong interest in
acquiring the Company and signed a confidentiality and standstill agreement with
the Company in connection with the receipt of confidential information
concerning the Company. Following its review of confidential information, in
late September 1991 Rockwell advised the Company that it would not pursue an
acquisition of the Company.
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Beginning in late 1992 or early 1993 Rockwell and the Company began
discussions for the purpose of evaluating, planning and facilitating commercial
transactions between the Company and the Allen-Bradley subsidiary of Rockwell.
Thereafter, executives of Allen-Bradley met with executives of the Company from
time to time to pursue these discussions.
In March 1994, Edmund M. Carpenter, Chief Executive Officer of General
Signal Corporation, a New York corporation ("General Signal"), met with H.
Virgil Sherrill, Chairman of the Board of Directors of the Company, to discuss
the possibility of a strategic combination of the Company and General Signal.
Thereafter, Mr. Carpenter met with John C. Morley, President and Chief Executive
Officer of the Company, to discuss a strategic combination of their respective
companies and on April 13, 1994 the Company and General Signal executed a
confidentiality agreement and began an exchange of non-public information. By
mid-July 1994, the Chief Executive Officers of the two companies agreed to enter
into negotiations regarding a merger of the Company and General Signal and to
accelerate their respective due diligence reviews. Such negotiations culminated
on August 29, 1994 when the respective Boards of Directors of the Company and
General Signal each met and approved the terms and conditions set forth in the
Reliance-General Signal Merger Agreement. On August 30, 1994, the Company and
General Signal entered into and publicly announced the Reliance-General Signal
Merger Agreement.
During the pendency of the discussions with General Signal, Rockwell began
to express interest in acquiring the Company. On May 12, 1994, Don H. Davis,
Jr., Executive Vice President and Chief Operating Officer of Rockwell, advised
Mr. Morley that Rockwell was interested in the Company. On July 12, 1994, Mr.
Davis and Donald R. Beall, Chairman of the Board and Chief Executive Officer of
Rockwell, met with Mr. Morley and confirmed that Rockwell was interested in the
Company. Mr. Morley relayed Rockwell's interest to the Company's Board of
Directors. After discussion and consultation with its financial advisors, the
Board of Directors concluded that it was in the best interests of the Company
and its stockholders to continue to seek to negotiate a strategic combination
with General Signal rather than departing from the Company's existing business
plan by commencing discussions with Rockwell.
On October 20, 1994, Rockwell sent and publicly released a copy of a letter
to the Company (the "Rockwell Proposal Letter"). A copy of the Rockwell Proposal
Letter is filed as Exhibit 9 hereto and is incorporated by reference herein. In
the Rockwell Proposal Letter, Rockwell informed the Company, among other things,
of its intention to seek to acquire the Company through a cash tender offer of
$30 per share for all Class A Shares and Class B Shares and an equivalent price,
based on the conversion ratio, for the Company's Class C Shares. Rockwell also
advised the Company that Rockwell's offer was not subject to any financing
contingencies.
On October 21, 1994, Rockwell and ROK filed the Schedule 14D-1 and
commenced the Offer.
The Offer is subject to a number of conditions including (i) Shares
representing at least a majority of the total number of outstanding Class A
Shares on a fully diluted basis (assuming conversion of all outstanding Class B
Shares and Class C Shares into Class A Shares and the exercise of all
outstanding options for Shares) being validly tendered and not withdrawn prior
to the expiration of the Offer, (ii) the Reliance-General Signal Merger
Agreement having been terminated without any payments by or penalties to the
Company (other than any applicable payments pursuant to Section 9.05(b) of the
Reliance-General Signal Merger Agreement) and the Company not having entered
into or effectuated any new or amended agreements with General Signal or any
other person or entity having the effect of impairing the ability of ROK to
acquire the Company or otherwise diminishing the expected economic value to ROK
of the acquisition of the Company, (iii) the Rights having been redeemed by the
Board of Directors of the Company or ROK being satisfied, in its sole
discretion, that the Rights have been invalidated or otherwise are inapplicable
to the Offer and the subsequent proposed merger or similar business combination
of the Company with ROK (the "Proposed Rockwell Merger") and (iv) ROK being
satisfied, in its sole discretion, that Section 203 of the Delaware General
Corporation Law has been complied with in connection with ROK's acquisition of
the Company or is invalid or otherwise inapplicable to ROK in connection with
the Offer and the Proposed Rockwell Merger.
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Since the announcement by Rockwell of its intention to commence the Offer,
the Board of Directors of the Company has met on October 20, October 26, October
28, November 1 and November 3, 1994. At each of such meetings the members of the
Company's Board of Directors have, among other things, discussed amongst
themselves and with their legal and financial advisors, as appropriate (i) their
fiduciary duties with respect to the stockholders of the Company, (ii) the terms
and conditions of the Reliance-General Signal Merger Agreement, including the
provisions of Section 9.05(b) thereof that, if triggered, provides that General
Signal may terminate such agreement and require the Company to pay General
Signal up to $2.5 million for documented fees and expenses related to the
Reliance-General Signal Merger Agreement and a $50 million termination fee,
(iii) the terms and conditions of the Offer, (iv) the potential strategic
benefits of the transactions contemplated by the Reliance-General Signal Merger
Agreement, (v) certain financial analyses with respect to the transactions
contemplated by the Offer, the Proposed Rockwell Merger and the Proposed
Reliance-General Signal Merger, (vi) in light of the Offer, the likelihood that
holders of Class A Shares would vote to approve the Reliance-General Signal
Merger Agreement at a meeting of stockholders of the Company held therefor and
(vii) in light of the number and type of conditions to the Offer, the likelihood
that Rockwell would consummate the Offer and the Proposed Rockwell Merger.
As more fully described in Item 8 below, at its meeting on November 1,
1994, the Board of Directors of the Company resolved that the Distribution Date
(as defined in the Rights Agreement) shall not occur until the earlier of the
date on which an Acquiring Person (as defined in the Rights Agreement) becomes
such and such date as may be determined by action of the Board of Directors of
the Company in accordance with the terms of the Rights Agreement.
In addition to the matters set forth above, at its meeting on November 3,
1994, the Board of Directors approved the content and filing of this Statement
as well as the content of a letter to be sent to stockholders (the "Stockholder
Letter") and a press release (the "Press Release"), each dated November 3, 1994,
describing the position of the Board of Directors of the Company set forth
herein. Copies of the Stockholder Letter and the Press Release are filed as
Exhibits 10 and 11, respectively, hereto and are incorporated by reference
herein.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained MacKenzie Partners, Inc. ("MacKenzie Partners") to
assist the Company in connection with its communications with stockholders with
respect to, and to provide other services to the Company in connection with, the
Offer and the Reliance-General Signal Merger Agreement. The Company will pay
MacKenzie Partners reasonable and customary compensation for their services and
will reimburse MacKenzie Partners for their reasonable out-of-pocket expenses
incurred in connection therewith. The Company has agreed to indemnify MacKenzie
Partners against certain liabilities and expenses in connection with the Offer
and the Reliance-General Signal Merger Agreement, including certain liabilities
under the federal securities laws.
Pursuant to separate letter agreements, each dated July 5, 1994, as amended
November 3, 1994 (as so amended, the "Engagement Letters"), the Company retained
Goldman, Sachs & Co. ("Goldman Sachs") and Prudential Securities Incorporated
("Prudential Securities") to explore and evaluate a strategic combination with
General Signal and to assist the Company in responding to any acquisition
proposals it receives or any other attempts to acquire control of the Company by
way of merger, tender offer, purchase of all or portion of the assets or stock,
any contested solicitation of proxies or otherwise and as its financial advisor
in connection with any such acquisition proposals or other attempts to acquire
control of the Company. Pursuant to the terms of the Engagement Letters, the
Company agreed to pay each of Goldman Sachs and Prudential Securities (i) a
retainer fee of $200,000 which became payable on July 5, 1994, (ii) an
additional fee of $200,000 which became payable on the execution of the
Reliance-General Signal Merger Agreement and (iii) a transaction fee of .3125%
of the equity value of the Company, less the retainer fee and additional fee
referred to in (i) and (ii) above, upon the consummation of any sale or merger
of the Company in one or a series of transactions, including through private or
open market purchases of stock, a tender offer, a merger or a sale by the
Company of all or a substantial portion of its stock or assets. For purposes of
the Engagement Letters, equity value means the total consideration paid for the
Company's Shares. If any portion of the
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aggregate consideration is paid in the form of securities, the value of such
securities, for purposes of calculating the transaction fee, will be determined
by the average of the last sales prices for such securities on the five trading
days ending five business days prior to the consummation of the transaction. If
such securities do not have an existing public trading market, the value of the
securities shall be the mutually agreed upon fair market value on the day prior
to the consummation of the transaction.
Pursuant to the Engagement Letters, a transaction fee in connection with a
tender offer or other purchase or sale of stock will become payable by the
Company when control of 50% or more of the voting power of the Company's
outstanding common stock generally entitled to vote in the election of directors
("Voting Stock") is acquired by a purchaser or group of affiliated purchasers.
In that event, such transaction fee will be calculated under the above
definition of aggregate consideration as though 100% of the Voting Stock on a
fully diluted basis had been acquired for the same per share amount paid in the
transaction in which control is acquired.
The Company also has agreed to reimburse each of Goldman Sachs and
Prudential Securities for their reasonable out-of-pocket expenses, including
fees and disbursements of their attorneys, plus any sales, use or similar taxes
arising in connection with their engagements, and to indemnify them against
certain liabilities, including liabilities under the federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to holders of Shares with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Other than normal periodic purchases under the Company's Savings and
Investment Plan for Company employees, no transactions in Shares have been
effected during the past 60 days by the Company, or, to the best knowledge of
the Company, by any executive officer, director, affiliate or subsidiary of the
Company.
(b) To the best knowledge of the Company, none of its executive officers,
directors, affiliates or subsidiaries has determined whether, with respect to
any Shares held of record or beneficially owned by such persons, they intend to
tender to ROK and Rockwell, sell or hold such Shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except for discussions with General Signal regarding the performance of
the Reliance-General Signal Merger Agreement and the terms and conditions
thereof, no negotiation is being undertaken or is underway by the Company in
response to the Offer which relates to or would result in:
(1) An extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) A purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) A tender offer for or other acquisition of securities by or of the
Company; or
(4) Any material change in the present capitalization or dividend
policy of the Company.
(b) Except as set forth in this Item 7, the Company has not entered into
any transaction, board resolution, agreement in principle or signed contract in
response to the Offer which relates to or would result in one or more of the
enumerated matters referred to in Item 7(a)(1), (2), (3) or (4).
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Reliance-General Signal Merger Agreement.
(i) On August 30, 1994, the Company announced that it had entered into
an Agreement and Plan of Merger by and between the Company and General
Signal (the "Reliance-General Signal Merger Agreement"). The
Reliance-General Signal Merger Agreement is filed as Exhibit 12 hereto and
is incorporated by reference herein. The Reliance-General Signal Merger
Agreement provides, subject to the conditions set forth therein (including
approval by the stockholders of General Signal and the Company), for the
Proposed Reliance-General Signal Merger in which each Class A Share would
be converted into the right to receive 0.739 of a share of Common Stock,
par value $1.00 per share ("Surviving Corporation Common Stock") of the
Surviving Corporation, each Class B Share would be converted into the right
to receive 0.739 of a share of Class B Common Stock, par value $1.00 per
share ("Surviving Corporation Class B Common Stock"), of the Surviving
Corporation (or, at the election of the holder of Class B Shares, into
0.739 of a share of Surviving Corporation Common Stock) and each Class C
Share would be converted into the right to receive 2.001 shares of
Surviving Corporation Class B Common Stock (or at the election of the
holder of Class C Shares, into 2.001 shares of Surviving Corporation Common
Stock). The Reliance-General Signal Merger Agreement also provides that for
each share of Surviving Corporation Common Stock or Surviving Corporation
Class B Common Stock issued in the Proposed Reliance-General Signal Merger,
one Surviving Corporation Common Stock purchase right or one Surviving
Corporation Class B Common Stock purchase right (as applicable) would be
issued pursuant to the Rights Agreement, dated as of March 7, 1986, between
General Signal and the Rights Agent named therein.
(ii) The Reliance-General Signal Merger Agreement provides that, among
other things, the Company and its subsidiaries, and their directors,
officers, employees, agents and representatives, will not solicit,
facilitate or encourage (including by way of furnishing non-public
information) any inquiry or proposal with respect to an Acquisition
Transaction (as defined in the Reliance-General Signal Merger Agreement) or
communicate with any third party with respect to any Acquisition
Transaction or enter into any agreement requiring the Company to abandon
the Proposed Reliance-General Signal Merger; provided that, in response to
an unsolicited written proposal with respect to an Acquisition Transaction
from a financially capable third party that contains no financing
condition, the Company may furnish non-public information and negotiate or
otherwise communicate with such third party if the Company's Board of
Directors determines that taking such action is reasonably likely to lead
to an Acquisition Transaction more favorable to the stockholders of the
Company than the Proposed Reliance-General Signal Merger and determines
(and the Company's outside counsel opines in writing) that failing to take
such action would constitute a breach of its fiduciary duties. In addition,
the Reliance-General Signal Merger Agreement provides that the Company
shall not redeem the rights issued under the Rights Agreement (other than
to delay any "distribution date" thereon or to render the rights
inapplicable to the Proposed Reliance-General Signal Merger or any action
permitted under the Reliance-General Signal Merger Agreement) or terminate
the Rights Agreement prior to the earlier of (a) a vote by the holders of
Class A Shares at a meeting duly convened therefor (including adjournments
thereof) which shall not have been sufficient to satisfy the stockholder
approval condition to the closing of the Proposed Reliance-General Signal
Merger, (b) the termination of the Reliance-General Signal Merger Agreement
in accordance with its terms or (c) the effective time of the Proposed
Reliance-General Signal Merger (the "Effective Time") unless required to do
so by a court of competent jurisdiction.
(iii) The Reliance-General Signal Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval
by the stockholders of the Company or General Signal: (a) by mutual consent
of the Boards of Directors of General Signal and the Company; (b) by either
General Signal or the Company if, without fault of such terminating party,
the Proposed Reliance-General Signal Merger shall not have been consummated
on or before March 31, 1995, which date may be extended by mutual consent
of the parties; (c) by either General Signal or the Company, if any court
of competent jurisdiction in the United States or other governmental body
in the United States shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action
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restraining, enjoining or otherwise prohibiting the Proposed
Reliance-General Signal Merger, and such order, decree, ruling or other
action shall have become final and unappealable; provided that the party
seeking to terminate the Reliance-General Signal Merger Agreement shall
have used all commercially reasonable efforts to remove or lift such order,
decree or ruling; or (d) by either General Signal or the Company, if the
requisite stockholder approvals of the stockholders of either General
Signal or the Company are not obtained at the meetings of stockholders duly
called and held therefor.
(iv) The Reliance-General Signal Merger Agreement may be terminated
and the Proposed Reliance-General Signal Merger may be abandoned by action
of the Board of Directors of General Signal, at any time prior to the
Effective Time, before or after the approval by the stockholders of General
Signal or the Company, if (a) the Company shall have failed to comply in
any material respect with any of the covenants or agreements contained in
certain articles of the Reliance-General Signal Merger Agreement to be
complied with or performed by the Company at or prior to such date of
termination, (b) there exists a breach or breaches of any representation or
warranty of the Company contained in the Reliance-General Signal Merger
Agreement such that the closing conditions in favor of General Signal would
not be satisfied; PROVIDED, HOWEVER, that if such breach or breaches are
capable of being cured prior to the Effective Time, such breaches shall not
have been cured within 30 days of delivery to the Company of written notice
of such breach or breaches, (c) the Board of Directors of the Company shall
withdraw, modify or change its recommendation of the Reliance-General
Signal Merger Agreement or the Proposed Reliance-General Signal Merger in a
manner adverse to General Signal or shall have recommended any proposal in
respect of an Acquisition Transaction, or (d) the Board of Directors of the
Company shall furnish or disclose non-public information or negotiate,
explore or otherwise communicate in any way with a third party with respect
to any Acquisition Transaction, or shall have resolved to do any of the
foregoing and publicly disclosed such resolution.
(v) The Reliance-General Signal Merger Agreement may be terminated and
the Proposed Reliance-General Signal Merger may be abandoned at any time
prior to the Effective Time, before or after the approval by the
stockholders of General Signal or the Company, by action of the Board of
Directors of the Company, if (a) General Signal shall have failed to comply
in any material respect with any of the covenants or agreements contained
in certain articles of the Reliance-General Signal Merger Agreement to be
complied with or performed by General Signal at or prior to such date of
termination, (b) there exists a breach or breaches of any representation or
warranty of General Signal contained in the Reliance-General Signal Merger
Agreement such that the closing conditions in favor of the Company would
not be satisfied; PROVIDED, HOWEVER, that if such breach or breaches are
capable of being cured prior to the Effective Time, such breaches shall not
have been cured within 30 days of delivery to General Signal of written
notice of such breach or breaches, (c) the Board of Directors of General
Signal shall withdraw, modify or change its recommendation of the
Reliance-General Signal Merger Agreement or the Proposed Reliance-General
Signal Merger in a manner adverse to the Company or shall have recommended
any proposal in respect of an Acquisition Transaction, or (d) the Board of
Directors of General Signal shall furnish or disclose non-public
information or negotiate, explore or otherwise communicate in any way with
a third party with respect to any Acquisition Transaction, or shall have
resolved to do any of the foregoing and publicly disclosed such resolution.
(vi) Section 9.05(b) of the Reliance-General Signal Merger Agreement
provides that, if the Reliance-General Signal Merger Agreement is
terminated (A) pursuant to the provisions described in paragraph (iii)
above (except clause (a)) and prior to such termination any financially
capable person shall have made a bona fide proposal concerning an
Acquisition Transaction to the Company or its stockholders by public
announcement or written communication that is or becomes subject to public
disclosure, or (B) by General Signal pursuant to the provisions described
in clause (c) or (d) of paragraph (iv) above, then, in any such case, the
Company shall within two business days pay General Signal by wire transfer
of immediately available funds to any account specified by General Signal
up to $2.5 million to reimburse General Signal for its documented fees and
expenses directly related to the Reliance-General Signal Merger Agreement
and the transactions contemplated thereby and if terminated by General
Signal pursuant to the provisions described in clause (c) or (d) of
paragraph (iv) above, an
8
<PAGE> 10
additional fee of $50 million, and if an additional fee has not already
become payable and within twelve months after the date of the
Reliance-General Signal Merger Agreement, the Company or any of its
subsidiaries enters into a definitive agreement with either a person
referred to in clause (A) of this paragraph or a third party to which the
Company has provided non-public information or with which it has
negotiated, explored or in any way communicated after the date of the
Reliance-General Signal Merger Agreement and prior to the termination of
the Reliance-General Signal Merger Agreement in accordance with its terms
with respect to an Acquisition Transaction, then the Company, prior to
entering into any such definitive agreement, shall pay General Signal by
wire transfer of immediately available funds to an account specified by
General Signal, such additional fee of $50 million.
(vii) Section 9.05(c) of the Reliance-General Signal Merger Agreement
provides that, if the Reliance-General Signal Merger Agreement is
terminated (A) pursuant to the provisions described in paragraph (iii)
above (except clause (a)) and prior to such termination any financially
capable person shall have made a bona fide proposal concerning an
Acquisition Transaction to General Signal or its stockholders by public
announcement or written communication that is or becomes subject to public
disclosure, or (B) by the Company pursuant to the provisions described in
clause (c) or (d) of paragraph (v) above then, in any such case, General
Signal shall within two business days pay the Company by wire transfer of
immediately available funds to an account specified by the Company up to
$2.5 million to reimburse the Company for its documented fees and expenses
directly related to the Reliance-General Signal Merger Agreement and the
transactions contemplated thereby and if terminated by the Company pursuant
to the provisions described in clauses (c) or (d) of paragraph (v) above,
an additional fee of $50 million, and if an additional fee has not already
become payable and within twelve months after the date of the
Reliance-General Signal Merger Agreement, General Signal or any of its
subsidiaries enters into a definitive agreement with either a person
referred to in clause (A) of this paragraph or a third party to which
General Signal has provided non-public information or with which it has
negotiated, explored or in any way communicated after the date of the
Reliance-General Signal Merger Agreement and prior to the termination of
the Reliance-General Signal Merger Agreement in accordance with its terms
with respect to an Acquisition Transaction, then General Signal, prior to
entering into any such definitive agreement, shall pay the Company by wire
transfer of immediately available funds to an account specified by the
Company, such additional fee of $50 million.
(viii) So long as General Signal is not in breach or default under any
covenant, condition, representation or warranty in the Reliance-General
Signal Merger Agreement, in the event of a termination of the
Reliance-General Signal Merger Agreement by General Signal pursuant to the
provisions described in clause (a) or (b) of paragraph (iv) above, then the
Company shall promptly pay General Signal up to $2.5 million for all
documented fees and expenses incurred by General Signal (including the fees
and expenses of counsel, accountants, consultants and advisors) directly
related to the Reliance-General Signal Merger Agreement and the
transactions contemplated thereby. So long as the Company is not in breach
or default under any covenant, condition, representation or warranty in the
Reliance-General Signal Merger Agreement, in the event of a termination of
the Reliance-General Signal Merger Agreement by the Company pursuant to the
provisions described in clause (a) or (b) of paragraph (v) above, then
General Signal shall promptly pay the Company up to $2.5 million for all
documented fees and expenses incurred by the Company (including the fees
and expenses of counsel, accountants, consultants and advisors) directly
related to the Reliance-General Signal Merger Agreement and the
transactions contemplated thereby.
(ix) The Reliance-General Signal Merger Agreement provides that the
surviving corporation in the Proposed Reliance-General Signal Merger shall
indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its subsidiaries against
all losses, claims, damages, expenses or liabilities arising out of actions
or omissions or alleged actions or omissions occurring at or prior to the
Effective Time to the same extent and on the same terms and conditions
(including with respect to advancement of expenses) provided for in the
Company's Certificate of Incorporation and By-Laws and agreements in effect
at the date of the Reliance-General Signal Merger Agreement (to the extent
consistent with applicable law).
9
<PAGE> 11
(x) The Reliance-General Signal Merger Agreement provides that for a
period of six years after the Effective Time, the Surviving Corporation
shall cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by the Company (provided that
the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; PROVIDED, HOWEVER, that the Surviving
Corporation shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 250% of the premiums paid as
of the date of the Reliance-General Signal Merger Agreement by the Company
for such insurance.
(b) THE RIGHTS AGREEMENT. On August 29, 1994, the Board of Directors of the
Company declared a dividend distribution of one Right for each outstanding Class
A Share, Class B Share and Class C Share to purchase one one-hundredth of a
share of a new Series A, Series B or Series C Preferred Stock, respectively. The
Distribution was paid on September 15, 1994 to stockholders of record on that
date. Each Right entitles the registered holder of Class A Shares or Class B
Shares to purchase from the Company one one-hundredth of a share of Series A or
Series B Preferred Stock, respectively, at an exercise price of $60.00, subject
to adjustment, and the registered holder of Class C Shares to purchase from the
Company one one-hundredth of a share of Series C Preferred Stock at an exercise
price of $162.48, subject to adjustment. Until the close of business on the
Distribution Date (which will occur on the earlier of (i) the tenth day
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Class A
Shares or (ii) the tenth business day (or such later date as may be determined
by action of the Company's Board of Directors prior to the time any person or
group becomes an Acquiring Person) after the commencement of, or announcement of
intention to make, a tender offer or exchange offer which would result in the
beneficial ownership by a person or group of 10% or more of the outstanding
Class A Shares), the Rights will be evidenced by and transferred with, and only
with, the associated Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Share certificates will contain a legend
incorporating the Rights Agreement by reference, and the surrender for transfer
of any Share certificate representing Shares outstanding on September 15, 1994
will also constitute the transfer of the Rights associated with the Shares
represented by such Share certificate. As soon as practicable following the
Distribution Date, separate Rights certificates will be mailed to holders of
record of the Shares as of the close of business on the Distribution Date, and
thereafter the separate Rights certificates alone will evidence the Rights.
At its meeting on November 1, 1994, the Board of Directors of the Company
resolved that the Distribution Date shall not occur until the earlier of the
date on which an Acquiring Person becomes such and such date as may be
determined by action of the Board of Directors of the Company prior to the time
any person or group becomes an Acquiring Person.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the earliest of (i) the close of business on August 29, 2004, (ii) the
time at which the Rights are redeemed by the Company as described below, (iii)
immediately prior to the Effective Time of the Proposed Reliance-General Signal
Merger or (iv) the time at which such Rights are exchanged.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.
In the event that any person or group becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Shares (of the
same class as the series of preferred stock associated with such Right) having a
market value of two times the exercise price of the Right.
10
<PAGE> 12
At any time until the time a person or group becomes an Acquiring Person,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right, subject to adjustment (the "Redemption
Price"). Immediately upon the action of the Board of Directors of the Company
ordering redemption of the Rights, the right to exercise the Rights will
terminate, and the holders of Rights will only be entitled to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after such time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights. The Rights
Agreement is filed as Exhibit 13 hereto and is incorporated by reference herein.
(c) SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. In general,
Section 203 of the Delaware General Corporation Law ("Section 203") provides
that a Delaware corporation such as the Company may not engage in any Business
Combination (defined to include a variety of transactions, including a merger)
with any Interested Stockholder (defined generally as a person that, directly or
indirectly, owns 15% or more of the corporation's outstanding voting stock), or
any affiliate of an Interested Stockholder, for three years after the date on
which the Interested Stockholder becomes an Interested Stockholder. Section 203
provides that an "owner" of voting stock includes any person who, individually
or together with any of its affiliates or associates, beneficially owns such
stock directly or indirectly, or has (i) the right to acquire voting stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, warrants or options or
otherwise, (ii) the right to vote such stock pursuant to any agreement,
arrangement or understanding, or (iii) any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of such
stock with any other person that beneficially owns, directly or indirectly, such
stock. Section 203 of the Delaware General Corporation Law is filed as Exhibit
14 hereto and is incorporated by reference herein. The three-year prohibition on
Business Combinations with Interested Stockholders (the "Business Combination
Prohibition") does not apply if certain conditions, described below, are
satisfied.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approved
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares held
by (x) persons who are directors and also officers of the corporation and (y)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to the date
the stockholder becomes an Interested Stockholder, the Business Combination is
(a) approved by the board of directors of the corporation and (b) authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation which is not owned by
the Interested Stockholder.
Section 203(b)(6) of the Delaware General Corporation Law provides that the
restrictions contained in Section 203 do not apply to a Business Combination
that is proposed prior to the consummation or abandonment of and following the
announcement or notification of one of certain extraordinary transactions
(including a merger) involving the corporation which transaction (i) is with or
by a person who either was not an Interested Stockholder during the previous
three years or who became an Interested Stockholder with the approval of the
corporation's board of directors and (ii) has been approved or has not been
opposed by a majority of the members of the board of directors then in office
who were directors prior to any person becoming an Interested Stockholder during
the previous three years or were recommended for election or elected to succeed
such directors by a majority of such directors. The Company has been advised by
its
11
<PAGE> 13
Delaware counsel that the express language of the exception provided by Section
203(b)(6) to the restrictions on Business Combinations imposed by Section 203
may be subject to differing interpretations and that therefore the applicability
to the Proposed Rockwell Merger of the exception provided by Section 203(b)(6)
is not free from doubt.
(d) AGREEMENT OF COURT SQUARE CAPITAL LIMITED. On August 29, 1994, General
Signal entered into an agreement (the "CSCL Agreement") with Court Square
Capital Limited ("CSCL"), a wholly-owned subsidiary of Citicorp. Pursuant to the
terms of the CSCL Agreement, CSCL agreed in connection with the Proposed
Reliance-General Signal Merger that among other things it will, (i) not exercise
any appraisal or dissenter's rights, (ii) execute an agreement not to sell,
transfer or otherwise dispose of any shares of Surviving Corporation Common
Stock received by it in the Proposed Reliance-General Signal Merger for such
time period as is necessary to preserve the accounting treatment of the Proposed
Reliance-General Signal Merger as a pooling-of-interests, (iii) not convert any
of its Class C Shares into Class A Shares at any time on or before the record
date for the special meeting of the Company's stockholders to be held in
connection with the Proposed Reliance-General Signal Merger pursuant to the
Reliance-General Signal Merger Agreement, and (iv) not directly or indirectly,
solicit or respond to any inquiries or the making of any proposal by any person
or entity (other than General Signal) with respect to any sale, transfer or
disposition of CSCL's shares of stock in the Company, and not to sell, transfer
or dispose of the stock it owns in the Company, in each case until the earlier
of the Effective Date or the termination of the Reliance-General Signal Merger
Agreement. General Signal agreed among other things (i) to enter into a
registration rights agreement with CSCL to register with the Commission, upon
the request of CSCL in certain circumstances, the shares of Surviving
Corporation Common Stock received by CSCL in the Proposed Reliance-General
Signal Merger; (ii) to amend its charter to provide for two classes of common
stock, including a class of non-voting common stock with economic terms
substantially equivalent to the terms of the Class B Shares; (iii) that in
connection with the Proposed Reliance-General Signal Merger, 4.9% of CSCL's
Class C Shares would be converted into Surviving Corporation Common Stock and
the balance of its Class C Shares would be converted into Surviving Corporation
Class B Common Stock; and (iv) to enter into an agreement with CSCL providing
that for so long as CSCL (and its affiliates) owns at least 10% (and in certain
circumstances at least 5%) of the total outstanding shares of the Surviving
Corporation's capital stock, General Signal shall use its best efforts to have a
CSCL nominee elected to its Board of Directors. The CSCL Agreement is filed as
Exhibit 15 hereto and is incorporated by reference herein.
(e) LITIGATION. On October 21, 1994, a complaint entitled NANCY S.
FRIEDMAN, IRA v. MORLEY, C.A. No. 13823 (the "Friedman Complaint") and a
complaint entitled KEIM v. MORLEY, C.A. No. 13827 (the "Keim Complaint") were
each filed in the Court of Chancery of the State of Delaware in and for New
Castle County. The Friedman Complaint and the Keim Complaint both alleged, among
other things, that the directors of the Company have breached their fiduciary
duties to the stockholders of the Company by (i) depriving the stockholders of
the Company of the opportunity to obtain the best available price for their
Shares, (ii) attempting to entrench themselves in management positions and
prevent a fair auction of the Company and (iii) prior to announcing the Proposed
Reliance-General Signal Merger, failing to undertake an adequate evaluation of
the Company's worth as a potential merger or acquisition candidate. The Friedman
Complaint and the Keim Complaint are filed as Exhibits 16 and 17, respectively,
hereto and are incorporated by reference herein.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 -- Pages 9-13 and 21-26 of the Company's Proxy Statement, dated March 10, 1994,
in connection with the Annual Meeting of Stockholders of the Company held on
April 21, 1994
Exhibit 2 -- The Company 1994 Outside Directors Stock Option Plan
Exhibit 3 -- The Company 1994 Executive Long Term Incentive Plan
Exhibit 4 -- The Company 1990 Key Employee Stock Option Plan
Exhibit 5 -- Form of Severance Agreements of the Company
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C>
Exhibit 6 -- The Company Change in Control Severance Pay Plan
Exhibit 7 -- Amendment to the Company 1994 Executive Long Term Incentive Plan
Exhibit 8 -- The Company Deferred Compensation Plan
Exhibit 9 -- Letter, dated October 20, 1994, from Rockwell to the Company
Exhibit 10 -- Letter, dated November 3, 1994, from the Company to holders of Shares*
Exhibit 11 -- Press Release, dated November 3, 1994, of the Company
Exhibit 12 -- Agreement and Plan of Merger, dated as of August 30, 1994, by and between the
Company and General Signal
Exhibit 13 -- Rights Agreement, dated as of August 29, 1994, between the Company and Society
National Bank, as Rights Agent
Exhibit 14 -- Section 203 of the Delaware General Corporation Law
Exhibit 15 -- Agreement, dated August 29, 1994, between Court Square Capital Limited and
General Signal
Exhibit 16 -- NANCY S. FRIEDMAN, IRA V. MORLEY. Complaint, dated October 21, 1994, C.A. No.
13823, filed in the Court of Chancery of the State of Delaware in and for New
Castle County
Exhibit 17 -- KEIM V. MORLEY. Complaint, dated October 21, 1994, C.A. No. 13827, filed in
the Court of Chancery of the State of Delaware in and for New Castle County
</TABLE>
- ---------------
* Included in copies mailed to stockholders of the Company
13
<PAGE> 15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 3, 1994
RELIANCE ELECTRIC COMPANY
By: /s/ JOHN C. MORLEY
---------------------
Name: John C. Morley
Title: President and Chief Executive
Officer
14
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- -------------- --------------------------------------------------------------------------- -----------
<S> <C> <C>
Exhibit 1 -- Pages 9-13 and 21-26 of the Company's Proxy Statement, dated March 10,
1994, in connection with the Annual Meeting of Stockholders of the Company
held on April 21, 1994
Exhibit 2 -- The Company 1994 Outside Directors Stock Option Plan
Exhibit 3 -- The Company 1994 Executive Long Term Incentive Plan
Exhibit 4 -- The Company 1990 Key Employee Stock Option Plan
Exhibit 5 -- Form of Severance Agreements of the Company
Exhibit 6 -- The Company Change in Control Severance Pay Plan
Exhibit 7 -- Amendment to the Company 1994 Executive Long Term Incentive Plan
Exhibit 8 -- The Company Deferred Compensation Plan
Exhibit 9 -- Letter, dated October 20, 1994, from Rockwell to the Company
Exhibit 10 -- Letter, dated November 3, 1994, from the Company to holders of Shares*
Exhibit 11 -- Press Release, dated November 3, 1994, of the Company
Exhibit 12 -- Agreement and Plan of Merger, dated as of August 30, 1994, by and between
the Company and General Signal
Exhibit 13 -- Rights Agreement, dated as of August 29, 1994, between the Company and
Society National Bank, as Rights Agent
Exhibit 14 -- Section 203 of the Delaware General Corporation Law
Exhibit 15 -- Agreement, dated August 29, 1994, between Court Square Capital Limited and
General Signal
Exhibit 16 -- NANCY S. FRIEDMAN, IRA V. MORLEY. Complaint, dated October 21, 1994, C.A.
No. 13823, filed in the Court of Chancery of the State of Delaware in and
for New Castle County
Exhibit 17 -- KEIM V. MORLEY. Complaint, dated October 21, 1994, C.A. No. 13827, filed in
the Court of Chancery of the State of Delaware in and for New Castle County
</TABLE>
- ---------------
* Included in copies mailed to stockholders of the Company
15
<PAGE> 1
Exhibit 1
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1993, 1992 and 1991, of those persons who were, at December
31, 1993: (i) the chief executive officer; and (ii) the other four most highly
compensated executive officers of the Company. The Chief Executive Officer and
such other executive officers are hereinafter referred to collectively as the
"Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------------------ AWARDS
OTHER ------------
ANNUAL SECURITIES ALL OTHER
NAME AND COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) OPTIONS SATION(6)
- -------------------- ----- -------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley 1993 $567,000 $260,000 $52,104(2) 15,000(4) $ 357,870(7)
President and 1992 545,000 325,000 54,649(3) 60,000(5) 364,520(8)
Chief Executive 1991 515,000 274,000 -- -- --
Officer
Peter J. Tsivitse 1993 288,000 175,500 -- -- 30,864(9)
Vice President 1992 277,000 195,000 -- 30,000(5) 48,171(10)
1991 263,000 192,000 -- -- --
Dudley P. Sheffler 1993 262,000 130,000 -- 7,500(4) 76,785(11)
Vice President 1992 247,000 145,000 -- 30,000(5) 86,502(12)
1991 233,000 120,000 -- -- --
E. Scott Dalton 1993 188,000 100,000 -- 6,000(4) 77,558(13)
Vice President 1992 181,000 110,000 -- 24,000(5) 86,932(14)
1991 171,000 105,000 -- -- --
Joseph D. Swann 1993 183,000 95,000 -- 6,000(4) 6,216(15)
Vice President 1992 170,700 85,000 -- 9,000(5) 9,225(16)
1991 163,320 76,000 -- -- --
</TABLE>
- ---------------
(1) Unless otherwise indicated, no executive officer named in the Summary
Compensation Table received personal benefits or perquisites in excess of
the lesser of $50,000 or 10% of his aggregate salary and bonus. Pursuant to
Commission transition rules, only 1992 and 1993 information is required to
be shown.
(2) Annual compensation related to incremental costs to the Company of,
including among other things (i) personal use under Company policy of the
Company airplane for personal security reasons ($22,464); (ii) group term
life insurance ($18,041); (iii) financial and tax services; (iv) use of a
Company car; and (v) reimbursement of club dues, all of which are reported
for personal income tax purposes.
(3) Annual compensation related to incremental costs to the Company of,
including among other things (i) personal use under Company policy of the
Company airplane for personal security reasons ($28,565); (ii) group term
life insurance ($13,127); (iii) financial and tax services; (iv) use of a
Company car; and (v) reimbursement of club dues, all of which are reported
for personal income tax purposes.
(4) These options were granted on December 16, 1993 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option becomes exercisable on December 16, 1995, while the remaining 50%
becomes exercisable on December 16, 1996.
9
<PAGE> 2
(5) These options were granted on March 6, 1992 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option became exercisable on September 6, 1993, while the remaining 50%
becomes exercisable on September 6, 1994.
(6) This column includes benefits provided to the Named Executive Officers
under (i) the Reliance Electric Company Savings and Investment Plan (the "S
& I Plan") and (ii) the Reliance Electric Company Deferred Compensation
Plan with respect to the S & I Plan (the "Deferred Compensation Plan").
This column also includes contingent amounts which may be payable under the
nonqualified Special Retirement Program for Elected Officers (the
"Retirement Program"). Pursuant to Commission transition rules, only 1992
and 1993 information is required to be shown.
(7) Includes benefits provided to Mr. Morley under (i) the S & I Plan ($4,497),
(ii) the Deferred Compensation Plan ($15,687) and (iii) the Retirement
Program ($337,686).
(8) Includes benefits provided to Mr. Morley under (i) the S & I Plan ($4,364),
(ii) the Deferred Compensation Plan ($26,782) and (iii) the Retirement
Program ($333,374).
(9) Includes benefits provided to Dr. Tsivitse under (i) the S & I Plan
($4,497), (ii) the Deferred Compensation Plan ($5,385) and (iii) the
Retirement Program ($20,982).
(10) Includes benefits provided to Dr. Tsivitse under (i) the S & I Plan
($4,436), (ii) the Deferred Compensation Plan ($14,314) and (iii) the
Retirement Program ($29,421).
(11) Includes benefits provided to Mr. Sheffler under (i) the S & I Plan
($4,497), (ii) the Deferred Compensation Plan ($4,833) and (iii) the
Retirement Program ($67,455).
(12) Includes benefits provided to Mr. Sheffler under (i) the S & I Plan
($4,364), (ii) the Deferred Compensation Plan ($9,526) and (iii) the
Retirement Program ($72,612).
(13) Includes benefits provided to Mr. Dalton under (i) the S & I Plan ($4,497),
(ii) the Deferred Compensation Plan ($1,923) and (iii) the Retirement
Program ($71,138).
(14) Includes benefits provided to Mr. Dalton under (i) the S & I Plan ($4,364),
(ii) the Deferred Compensation Plan ($6,736) and (iii) the Retirement
Program ($75,832).
(15) Includes benefits provided to Mr. Swann under (i) the S & I Plan ($4,497)
and (ii) the Deferred Compensation Plan ($1,719).
(16) Includes benefits provided to Mr. Swann under (i) the S & I Plan ($4,364)
and (ii) the Deferred Compensation Plan ($4,861).
10
<PAGE> 3
OPTION GRANTS
Shown below is information on grants of stock options pursuant to the
Company's 1990 Key Employee Stock Option Plan during the fiscal year ended
December 31, 1993 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERMS
OPTIONS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(1)(2) YEAR (PER SHARE)(3) DATE 5% 10%
- --------------------------- ------------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley 15,000 6.4% $17.25 12/16/2003 $ 162,726 $ 412,381
President and Chief
Executive Officer
Peter J. Tsivitse(4) -- -- -- -- -- --
Vice President
Dudley P. Sheffler 7,500 3.2 17.25 12/16/2003 81,368 206,190
Vice President
E. Scott Dalton 6,000 2.6 17.25 12/16/2003 65,091 164,952
Vice President
Joseph D. Swann 6,000 2.6 17.25 12/16/2003 65,091 164,952
Vice President
</TABLE>
- ---------------
(1) These options were granted on December 16, 1993 pursuant to the 1990 Key
Employee Stock Option Plan. Fifty percent of the shares subject to the
option becomes exercisable on December 16, 1995, while the remaining 50%
becomes exercisable on December 16, 1996.
(2) In general, an optionee's rights under an option shall cease upon his or her
termination of employment. In the event of a "change of control" an option
will become immediately exercisable for all shares subject to the option.
Change of control means either (a) the purchase of at least 30% of the
Company's Class A Common Stock by a person or group of persons under common
control which is not approved by the Company's Board of Directors or (b) a
change in the membership of the Company's Board of Directors of a magnitude
of at least 30% but only if such change in the membership of the Board of
Directors is not approved by at least three-quarters of the Directors
sitting prior to such change.
(3) Based on the closing price of the Class A Common Stock of $17.25 on the New
York Stock Exchange on December 16, 1993.
(4) Dr. Tsivitse, who is 64 years old, was not granted options in 1993 because
such options, pursuant to the terms of the 1990 Key Employee Stock Option
Plan, would not vest prior to his required retirement age.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to unexercised stock options at
December 31, 1993 to purchase the Company's Class A Common Stock by the Named
Executive Officers. No named Executive Officer exercised any stock options to
purchase the Company's Class A Common Stock during the fiscal year ended
December 31, 1993.
11
<PAGE> 4
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND DECEMBER 31, 1993 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1993 AT DECEMBER 31, 1993(1)
ON VALUE ----------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ---------- ---------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John C. Morley -- -- 30,000 45,000 -- --
President and Chief
Executive Officer
Peter J. Tsivitse -- -- 15,000 15,000 -- --
Vice President
Dudley P. Sheffler -- -- 15,000 22,500 -- --
Vice President
E. Scott Dalton -- -- 12,000 18,000 -- --
Vice President
Joseph D. Swann -- -- 4,500 10,500 -- --
Vice President
</TABLE>
- ---------------
(1) Based on the closing price of the Class A Common Stock of $16.875 on the New
York Stock Exchange on December 31, 1993. As a result, all unexercised
options were not "in-the-money" options as of that date.
SEVERANCE AGREEMENTS
The Company has entered into Amended and Restated Severance Agreements with
the Named Executive Officers of the Company (collectively, the "Current
Severance Agreements"). Pursuant to the Current Severance Agreements, in the
event of the Named Executive Officer's involuntary termination of employment
without cause, or as a result of disability or death, the Named Executive
Officer will be paid (i) an amount equal to two years' salary at the Named
Executive Officer's base salary rate in effect on the date of his termination of
employment and (ii) an amount equal to twice the amount of the bonus paid or
payable to the Named Executive Officer for the Company's fiscal year immediately
preceding the date of his termination of employment. In addition, certain other
benefits of the Company, including the ability to exercise stock options, will
continue for a period of two years from the date of his termination. No
severance benefits are payable due to a Named Executive Officer's involuntary
termination of employment for cause or his voluntary termination of employment.
The Current Severance Agreements terminate in April 1994. Effective as of April
1994 the Company will enter into new Severance Agreements with the executive
officers of the Company (the "New Severance Agreements"). The New Severance
Agreements are substantially similar to the Current Severance Agreements, except
that the New Severance Agreements do not provide for severance benefits in the
event of an executive's disability or death. The New Severance Agreements will
terminate in April 1996.
GOLDEN PARACHUTE EXCISE TAX AGREEMENT
The Company has entered into an Agreement Relating to Golden Parachute
Excise Tax (the "Excise Tax Agreement") with the executive officers of the
Company. Under the Excise Tax Agreement, the Company agreed to pay each
executive officer, under certain circumstances, an amount or amounts
("gross-ups") equal to any excise tax payable by such executive officer under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision, with respect to certain payments received by the
executive officer from the Company. The Company's obligation to make payments
under the Excise Tax Agreement arises only under those circumstances in which
the executive officer's shares of Class A Common Stock or non-qualified
12
<PAGE> 5
stock options or both are sold or exchanged, in whole or in part, contingent on
a "change of ownership or control" (as defined under Section 4999 of the Code,
or any successor provision) and the payment of any amount with respect to, or
the receipt of any securities or options in exchange for such shares or options
gives rise, directly or indirectly, to the imposition of the excise tax.
DEFINED BENEFIT PENSION PLANS
The following table shows the estimated annual retirement benefit payable
to participating employees, including executive officers, in the earnings and
years of service classifications indicated under the Company's defined pension
benefit plans.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
AVERAGE FOR YEARS OF SERVICE INDICATED
ANNUAL ------------------------------------------------------------
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 125,000 $33,700 $45,500 $49,400 $53,400 $57,300
150,000 40,900 55,200 60,100 64,900 69,800
175,000 48,100 64,900 70,700 76,500 82,300
200,000 55,300 74,500 81,300 88,100 94,800
300,000 84,000 113,300 123,800 134,300 144,800
400,000 112,800 152,000 166,300 180,600 194,800
500,000 141,500 190,800 208,800 226,800 244,800
600,000 170,300 229,500 251,300 273,100 294,800
700,000 199,000 268,300 293,800 319,300 344,800
800,000 227,800 307,000 336,300 365,600 394,800
900,000 256,500 345,800 378,800 411,800 444,800
1,000,000 285,300 384,500 421,300 458,100 494,800
</TABLE>
The compensation covered consists of salary and bonus set forth in the
Summary Compensation Table. The calculation of retirement benefits under the
plans is based upon average earnings for the highest 60 consecutive months
within the 120 months preceding termination of employment.
Sections 401(a)(17) and 415 of the Code limit the annual benefits which may
be paid from a tax-qualified retirement plan. As permitted by the Employee
Retirement Income Security Act of 1974, the Company has supplemental plans which
authorize the payment out of general funds of the Company of any benefits
calculated under provisions of the applicable plan which may be above the limits
under these sections.
The credited years of service for Messrs. Morley, Tsivitse, Sheffler,
Dalton and Swann are 7, 42, 24, 17 and 24, respectively.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
In connection with the Company's organization in December 1986, the Board
of Directors established the Compensation Committee to review and make
recommendations regarding the Company's compensation programs. The following
report of the Compensation Committee describes the philosophy, objectives and
components of the Company's executive compensation programs for 1993 and
discusses the determinations concerning the compensation for the President and
Chief Executive Officer of the Company for 1993.
The members of the Compensation Committee are H. Virgil Sherrill, Chairman,
Anthony C. Howkins, Alfred M. Rankin, Jr. and E. Mandell de Windt. Each of
Messrs. Sherrill, Howkins, Rankin and de Windt are non-employee Directors of the
Company.
13
<PAGE> 6
The tax basis of such shares to such Eligible Employee will be equal to
the option price paid plus the amount includable in the Eligible Employee's
gross income, and the Eligible Employee's holding period for such shares will
commence on the day on which the Eligible Employee recognized taxable income in
respect of such shares. Subject to applicable provisions of the Code and
regulations thereunder, the Company generally will be entitled to a federal
income tax deduction in respect of non-qualified options in an amount equal to
the ordinary compensation income recognized by the Eligible Employee. Any
compensation includable in the gross income of an Eligible Employee in respect
to a non-qualified option will be subject to appropriate withholding for
federal income and employment taxes.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of options or the
Company or to describe tax consequences based on particular circumstances. It is
based on United States federal income tax law and interpretational authorities
as of the date of this Proxy Statement, which are subject to change at any time.
The discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are not subject to taxation in the United
States.
ADOPTION OF 1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
BACKGROUND
The stockholders will be asked at the meeting to vote on a proposal to
approve the adoption of the 1994 Reliance Electric Company Outside Directors
Stock Option Plan (the "1994 Outside Directors Plan" or the "Plan"). The 1994
Outside Directors Plan was adopted by the Board of Directors in February 1994,
subject to stockholder approval.
The purpose of the Plan is to provide each of the Company's non-employee
Directors an added incentive to continue in the service of the Company and a
more direct interest in the future success of the Company's operations. The Plan
also will help the Company attract outstanding individuals to become Directors
of the Company. Furthermore, the Company's previous Outside Directors Stock
Option Plan has expired. For these reasons, the Board adopted the 1994 Outside
Directors Plan. Accordingly, the Board of Directors and management believe that
approval of the Plan is in the best interests of the Company and recommend that
stockholders vote in favor of the proposal.
The affirmative vote of the holders of a majority of the outstanding shares
of Class A Common Stock entitled to vote present in person or by proxy at the
meeting is required for the adoption of the 1994 Outside Directors Plan. Thus,
stockholders who vote to abstain will in effect be voting against the proposal.
Brokers who hold shares of Class A Common Stock as nominees will have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners by the tenth day before the meeting,
provided that this Proxy Statement is transmitted to the beneficial owners at
least 15 days before the meeting. Broker non-votes, however, are not counted as
present for determining whether this proposal has been approved and have no
effect on its outcome.
The following is a summary of the material features of the 1994 Outside
Directors Plan and is qualified in its entirety by reference to it. A copy of
the Plan is attached hereto as Exhibit B.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1994 RELIANCE ELECTRIC
COMPANY OUTSIDE DIRECTORS STOCK OPTION PLAN.
21
<PAGE> 7
GENERAL
The 1994 Outside Directors Plan provides for the issuance of options to
purchase a maximum of an aggregate of 50,000 shares of the Company's Class A
Common Stock, which constitutes approximately 0.15% of the Company's outstanding
shares of Class A Common Stock, to Directors who are not also employees of the
Company or any subsidiary ("Outside Directors"). There are presently four
eligible Outside Directors. The Plan will terminate on April 21, 1998, unless
earlier terminated by resolution of the Board of Directors.
GRANTS OF OPTIONS
On the date of stockholders' approval of the Plan, each Outside Director
will be granted an option to purchase 1,000 shares of Class A Common Stock at
the then fair market value calculated by reference to the closing price of the
Class A Common Stock on the New York Stock Exchange. On each anniversary date
thereafter through 1998, each Outside Director then serving in such capacity
will receive an automatic grant of an option to purchase 1,000 shares of Class A
Common Stock at the then fair market value.
EXERCISE OF OPTIONS
Each option granted under the 1994 Outside Directors Plan will expire on
the tenth anniversary of the date the option was granted. Except as otherwise
provided in the event of an Outside Director's death, only the Outside Director
may exercise an option, provided that a guardian or other legal representative
who has been duly appointed for such Outside Director may exercise an option on
behalf of the Eligible Employee. Upon satisfaction of all conditions, the option
may be exercised in whole or in part at any time until expiration of the right
to exercise the option, but this right of exercise is limited to whole shares.
Options may be exercised by the Outside Director giving written notice to the
Company of the Outside Director's exercise of the option accompanied by full
payment of the purchase price in cash or its equivalent. The Plan also allows
cashless exercises as permitted under the Federal Reserve Board's Regulation T.
Each option granted under the Plan will become exercisable for equal
one-third increments of the shares of Class A Common Stock subject to the option
on each of the first three anniversary dates of the grant. In the event of a
Change in Control, as defined in the 1994 Outside Directors Plan, an Outside
Director may exercise his option with respect to all shares of Class A Common
Stock which are covered by the option.
SECURITIES SUBJECT TO THE 1994 OUTSIDE DIRECTORS PLAN
Not more than 50,000 shares of the Class A Common Stock of the Company may
be issued pursuant to the 1994 Outside Directors Plan in the aggregate and not
more than 5,000 shares of Class A Common Stock may be issued to any one Outside
Director, except that in the event of stock splits, stock dividends,
combinations, exchanges of shares or similar capital adjustments, an appropriate
adjustment in the stock subject to the Plan will be made. If any option expires
without having been fully exercised, the shares with respect to which such
option has not been exercised will be available for further options.
22
<PAGE> 8
TERMINATION OF DIRECTORSHIP
If an Outside Director ceases to be a Director of the Company because of
death or disability, the option may be exercised until the earlier to occur of
either (i) the first anniversary of the Outside Director's termination of
directorship or (ii) the expiration of the option, but only to the extent the
option was exercisable at the date of the Outside Director's termination of
directorship. If any option is exercisable following the Outside Director's
death, then that option may be exercisable by the Outside Director's estate, the
person as shall have been named as the Outside Director's beneficiary, the
person designated in the Outside Director's Last Will and Testament, or the
person to whom the option was transferred by the applicable laws of descent and
distribution.
If an Outside Director ceases to be a Director of the Company after the
attainment of age 65, the Outside Director may exercise the option until the
earlier to occur of either (i) the third anniversary of the Outside Director's
termination of directorship or (ii) the expiration of the option, but only to
the extent the option was exercisable at the Outside Director's termination of
directorship.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Outside Directors and
the Company of options granted under the 1994 Outside Directors Plan generally
should be as set forth in the following summary. The summary only addresses
income tax consequences for Outside Directors and the Company.
The options granted under the Plan shall be non-qualified options for
federal income tax purposes. An Outside Director to whom an option is granted
will not recognize income at the time of grant of such option. When such Outside
Director exercises such non-qualified option, the Outside Director will
recognize ordinary compensation income equal to the difference, if any, between
the option price paid and the fair market value, as of the date of option
exercise, of the shares the Outside Director receives. The tax basis of such
shares to such Outside Director will be equal to the option price paid, and the
Outside Director's holding period for such shares will commence on the day on
which the Outside Director recognized taxable income in respect of such shares.
Subject to applicable provisions of the Code and regulations thereunder, Company
will generally be entitled to a federal income tax deduction in respect of
non-qualified options in an amount equal to the ordinary compensation income
recognized by the Outside Director.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of options or the
Company or to describe tax consequences based on particular circumstances. It is
based on United States federal income tax law and interpretational authorities
as of the date of this Proxy Statement, which are subject to change at any time.
The discussion does not address state or local income tax consequences or income
tax consequences for taxpayers who are not subject to taxation in the United
States.
ADOPTION OF 1994 EXECUTIVE LONG TERM INCENTIVE PLAN
BACKGROUND
The stockholders will be asked at the meeting to vote on a proposal to
approve the adoption of the 1994 Reliance Electric Company Executive Long Term
Incentive Plan (the "1994 Incentive Plan" or the "Plan"). The 1994 Incentive
Plan was adopted by the Board of Directors in February 1994,
23
<PAGE> 9
subject to stockholder approval. It is anticipated that Performance Awards (as
hereinafter defined) will be granted prior to December 31, 1994. However, the
recipients and the amount of Performance Awards to be granted have not yet been
determined.
The Plan is designed to promote the interests of the Company and its
stockholders by attracting and retaining officers and key employees of the
Company and its subsidiaries; motivating such employees by reason of
performance-related incentives to achieve longer term performance goals; and
enabling such employees to participate in the long-term growth and financial
success of the Company. Accordingly, the Board of Directors and management
believe that approval of the 1994 Incentive Plan is in the best interests of the
Company and recommend that stockholders vote in favor of the proposal.
The affirmative vote of the holders of a majority of the outstanding shares
of Class A Common Stock entitled to vote present in person or by proxy at the
meeting is required for the adoption of the 1994 Incentive Plan. Thus,
stockholders who vote to abstain will in effect be voting against the proposal.
Brokers who hold shares of Class A Common Stock as nominees will have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners by the tenth day before the meeting,
provided that this Proxy Statement is transmitted to the beneficial owners at
least 15 days before the meeting. Broker non-votes, however, are not counted as
present for determining whether this proposal has been approved and have no
effect on its outcome.
The following is a summary of the material features of the 1994 Incentive
Plan and is qualified in its entirety by reference to it. A copy of the Plan is
attached hereto as Exhibit C.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE 1994 RELIANCE ELECTRIC
COMPANY EXECUTIVE LONG TERM INCENTIVE PLAN.
GENERAL
The Plan provides for the granting of performance awards (the "Performance
Awards"). The final value, if any, of a Performance Award is determined by the
degree to which specified Company performance objectives ("Performance
Objectives") are achieved during a specified performance period ("Performance
Period"). Awards may be granted to officers and other employees of the Company
and its subsidiaries who, in the judgment of the Committee (as hereinafter
defined), are in a position to contribute significantly to the Company's success
("Eligible Employees"). Performance Awards shall be paid in shares of Class A
Common Stock ("Shares") and cash through Share Equivalents (as hereinafter
defined). There are presently approximately 35 Eligible Employees (including ten
executive officers).
DURATION AND ADMINISTRATION OF THE 1994 LONG TERM INCENTIVE PLAN
The Plan will terminate on December 31, 1998, unless earlier terminated by
resolution of the Board of Directors. Initially, the Plan will be administered
by the Company's Compensation Committee (the "Committee"). The Committee must
consist of at least two members who are non-employee Directors, and the present
members of the Committee are H. Virgil Sherrill, Anthony C. Howkins, Alfred M.
Rankin, Jr. and E. Mandell de Windt, each of whom is a non-employee Director of
the Company. The members of the Committee are appointed by the Board of
Directors and serve at its discretion. Each member of the Committee acts as an
administrative manager of the Plan and
24
<PAGE> 10
is a "disinterested person" within the meaning of Rule 16b-3 promulgated under
the Exchange Act. A majority of the Committee constitutes a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members, are acts of the
Committee. Subject to the terms and conditions of the Plan, the Committee has
full and final authority in its absolute discretion: (i) to determine the size
and type of Performance Award and Performance Award payout; (ii) to determine
the performance goals, performance periods and other applicable terms and
conditions of the Performance Awards and Performance Award payouts; (iii) to
construe and interpret the Plan and any agreement or instrument entered into
thereunder; (iv) to establish, amend or waive the rules and regulations for the
Plan's administration; and (v) to amend the terms and conditions of any
outstanding Performance Award to the extent such terms and conditions may be
amended within the discretion of the Committee. Any decision made or action
taken by the Committee in connection with the administration, interpretation and
implementation of the 1994 Incentive Plan and of its rules and regulations will
be, to the extent permitted by law, conclusive and binding upon all Eligible
Employees and upon any person claiming under or through any Eligible Employees.
Neither the Committee nor any of its members is liable for any act taken by the
Committee pursuant to the 1994 Incentive Plan. No member of the Committee is
liable for the act of any other member.
PERFORMANCE AWARDS
The final value, if any, of a Performance Award is determined by the degree
to which specified Performance Objectives are achieved during a specified
Performance Period. Pursuant to the terms of the Plan, specific Performance
Objectives shall be determined by the Committee using the measures of return on
capital employed and earnings growth. A Performance Period shall be three years
or such shorter period of time as determined by the Committee.
Performance Awards are to be made by the Committee after the applicable
Performance Objective and Performance Period are determined and will be based on
a percentage of an Eligible Employee's annual base salary as in effect on the
last day of the Performance Period. Performance Award payouts will be made in
Shares and cash through Share Equivalents (as hereinafter defined). Not less
than 50% of the total Performance Award (based on the value of a share of Class
A Common Stock on the payment date) shall be paid in cash. Generally, all Shares
issued pursuant to a Performance Award payout shall not be transferable for two
years from the date of issuance.
SECURITIES SUBJECT TO THE PLAN
The total number of shares of Class A Common Stock available for
Performance Award payouts when combined with the total number of Share
Equivalents shall be 500,000. The maximum number of shares of Class A Common
Stock available for Performance Award payouts shall be 250,000, constituting
approximately 0.8% of the Company's outstanding shares of Class A Common Stock.
"Share Equivalents" represent the cash paid by the Company as a Performance
Award payout divided by the fair market value of a share of Class A Common Stock
on the date of such payout. No individual may receive more than a combined total
of 75,000 shares of Class A Common Stock and Share Equivalents pursuant to a
Performance Award. No Performance Award payout will be made after the total of
all Performance Award payouts equals 500,000 Shares and Share Equivalents,
except that in the event of stock splits, stock dividends, combinations,
exchanges of shares or similar capital adjustments, the Committee must make an
appropriate adjustment in the stock subject to the 1994 Incentive Plan. If any
Performance Award expires without having been paid out,
25
<PAGE> 11
the shares of Class A Common Stock and the Share Equivalents which could have
been paid out with respect to such expired Performance Award will be available
for future Performance Awards.
TERMINATION OF EMPLOYMENT
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries because of death, disability or retirement during a Performance
Period, the Performance Award shall be prorated and be paid based upon the
length of time that the Eligible Employee held the Performance Award during the
Performance Period and the achievement of the Performance Objectives during the
Performance Period. If a Performance Award is payable following the Eligible
Employee's death, then the Performance Award payout is payable to the Eligible
Employee's estate, the person as shall have been named as the Eligible
Employee's beneficiary, the person designated in the Eligible Employee's Last
Will and Testament, or the person to whom the Performance Award was transferred
by the applicable laws of descent and distribution.
If an Eligible Employee ceases to be an employee of the Company and all
subsidiaries for any other reason, any Performance Award shall be canceled as of
the date of termination.
The Committee may waive any restrictions or conditions set forth in an
agreement concerning an Eligible Employee's right to the Performance Award.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Eligible Employees and
the Company of Performance Awards granted under the 1994 Incentive Plan should
generally be as set forth in the following summary. The summary only addresses
income tax consequences for Eligible Employees and the Company.
An Eligible Employee to whom a Performance Award is granted will not
recognize income at the time of grant of such Performance Award. When such
Eligible Employee receives the Performance Award payout, the Eligible Employee
will recognize ordinary compensation income equal to the fair market value of
any shares of Class A Common Stock received plus the amount, in cash, of any
Share Equivalents received. Subject to applicable provisions of the Code and
regulations thereunder, the Company will generally be entitled to a federal
income tax deduction in respect of Performance Award payouts in an amount equal
to the ordinary compensation income recognized by the Eligible Employee. Any
compensation includable in the gross income of an Eligible Employee in respect
to a Performance Award payout will be subject to appropriate withholding for
federal income and employment taxes.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of Performance Awards
or the Company or to describe tax consequences based on particular
circumstances. It is based on United States federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change at any time. The discussion does not address state or local
income tax consequences or income tax consequences for taxpayers who are not
subject to taxation in the United States.
26
<PAGE> 1
Exhibit 2
1994 RELIANCE ELECTRIC COMPANY
OUTSIDE DIRECTORS STOCK OPTION PLAN
EFFECTIVE APRIL 21, 1994
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1. Definitions................................................................ 1
Article 2. Establishment, Purpose, and Duration....................................... 2
Article 3. Shares Subject to the Plan................................................. 2
Article 4. Grant of Options........................................................... 3
Article 5. Beneficiary Designation.................................................... 5
Article 6. Change In Control.......................................................... 5
Article 7. Amendment, Modification, and Termination................................... 5
Article 8. Withholding................................................................ 6
Article 9. Indemnification............................................................ 6
Article 10. Successors................................................................. 6
Article 11. Miscellaneous.............................................................. 6
</TABLE>
<PAGE> 3
1994 RELIANCE ELECTRIC COMPANY
OUTSIDE DIRECTORS STOCK OPTION PLAN
ARTICLE 1. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" shall be deemed to have occurred upon:
(i) The acquisition of beneficial ownership of thirty percent (30%)
of the Company's Shares by a person or group of persons under common
control unless such acquisition is approved by the Board; or
(ii) A change in the membership of the Board at any time during any
twelve (12) month period such that, following such change, at least
thirty percent (30%) of the members of the Board were not members of the
Board at the start of such twelve (12) month period but only if the
election of such new members of the Board was not approved by at least
three-quarters ( 3/4) of the Directors who were either sitting at the
beginning of such twelve (12) month period or elected to the Board
during such twelve (12) month period with the approval of three-quarters
( 3/4) of the Directors who were sitting at the beginning of such twelve
(12) month period.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Company" means Reliance Electric Company, a Delaware corporation,
or any successor thereto.
(e) "Director" means a member of the Board.
(f) "Disability" means a Participant's inability, due to a physical or
mental condition, to continue to serve as a member of the Board, as
determined by the Board pursuant to written certification of such
Disability from a physician acceptable to the Board.
(g) "Effective Date" means April 21, 1994, subject to ratification by
an affirmative vote of a majority of Shares entitled to vote thereon.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor thereto.
(i) "Fair Market Value" means (a) if the Shares are listed on a
nationally recognized stock exchange or the NASDAQ National Market System,
the closing price of the Shares on the date the fair market value of the
Shares is being determined, or (b) in all other circumstances, the value
determined by the Board after obtaining an appraisal by one or more
independent appraisers meeting the requirements of regulations issued under
Section 170(a)(1) of the Code.
(j) "Option" means an option to purchase Shares granted under Article
4 herein.
(k) "Option Agreement" means an agreement, in the form of Exhibit A
attached hereto, setting forth the terms and provisions applicable to an
Option.
<PAGE> 4
(l) "Option Price" shall be equal to one hundred percent (100%) of the
Fair Market Value of a Share at the close of the date the Option is
granted.
(m) "Outside Director" means a Director who is not employed by the
Company or a Subsidiary.
(n) "Participant" means an Outside Director who has been granted an
Option.
(o) "Plan" means the 1994 Reliance Electric Company Outside Directors
Stock Option Plan.
(p) "Shares" means the shares of the $.01 par value Class A common
stock of the Company.
(q) "Subsidiary" means any corporation, at least fifty percent (50%)
of the common stock of which is owned directly or indirectly by the
Company.
ARTICLE 2. ESTABLISHMENT, PURPOSE, AND DURATION
2.1 Establishment of the Plan. The Company hereby establishes the Plan as
set forth herein.
2.2 Purpose of the Plan. The purpose of the Plan is to provide the
Outside Directors with greater incentive to serve and promote the interests of
the Company and its shareholders. The premise of the Plan is that, if such
Outside Directors acquire a proprietary interest in the Company or increase such
proprietary interest as they may already hold, then the incentive of such
Outside Directors to work toward the Company's continued success will be
commensurately increased. Accordingly, the Company will, from time to time
during the effective period of the Plan, grant to the Outside Directors Options
on the terms and subject to the conditions set forth in the Plan.
2.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect until the date the last Shares have been purchased
pursuant to the exercise of an Option or the last Option has expired. In no
event shall the Company grant any Option after April 21, 1998.
ARTICLE 3. SHARES SUBJECT TO THE PLAN
3.1 Number of Shares. Subject to adjustment as provided in Section 3.3
herein, the total number of Shares available for grant under the Plan shall be
Fifty Thousand (50,000). These Shares may be either authorized but unissued or
reacquired Shares. The grant of an Option shall reduce the Shares available for
grant under the Plan by the number of Shares subject to such Option. To the
extent that an Option is settled in cash rather than in Shares, the authorized
Share pool shall be reduced by the appropriate number of Shares represented by
the cash settlement of the Option, as determined by the Board (subject to the
limitation set forth in Section 3.2 herein).
3.2 Lapsed Options. If any Option granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares subject to such Option
again shall be available for the grant of an Option under the Plan. However, in
the event that prior to the Option's cancellation, termination, expiration, or
lapse, the holder of the Option at any time received one or more "benefits of
ownership" pursuant to such Option (as defined by the Securities and Exchange
Commission, pursuant to any rule or interpretation promulgated under Section 16
of the Exchange Act), the Shares subject to such Option shall not be made
available for regrant under the Plan.
2
<PAGE> 5
3.3 Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made in
the number and class of Shares which may be granted under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Options
granted under the Plan, as may be determined to be appropriate and equitable by
the Board, in its sole discretion, to prevent dilution or enlargement of rights;
and provided that the number of Shares attributable to any Option shall always
be a whole number.
ARTICLE 4. GRANT OF OPTIONS
4.1 Grant of Options to Outside Directors. On the Effective Date and on
each anniversary of the Effective Date through and including April 21, 1998,
each Outside Director shall be granted an Option to purchase One Thousand
(1,000) Shares at the Option Price. The terms of each such Option shall be set
forth in an Option Agreement which shall be executed by the Outside Director and
the Company.
4.2 Duration of Options. Each Option shall expire on the tenth (10th)
anniversary date of its grant.
4.3 Exercise of Options. Options granted under the Plan shall be
exercisable as follows:
<TABLE>
<CAPTION>
PERCENT OF SHARES CUMULATIVE PERCENT
ANNIVERSARY OF UNDER OPTION WHICH OF EXERCISABLE SHARES
GRANT DATE BECOME EXERCISABLE UNDER OPTION
- -------------- ------------------ ---------------------
<S> <C> <C>
1st................................... 33 1/3% 33 1/3%
2nd................................... 33 1/3% 66 2/3%
3rd................................... 33 1/3% 100%
</TABLE>
Options shall be exercised by the delivery of a written notice of exercise
to the Company, setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares.
4.4 Payment. The Option Price upon exercise of any Option shall be
payable to the Company in full in cash or its equivalent. The Board also may
allow cashless exercise as permitted under Federal Reserve Board's Regulation T,
subject to applicable securities law restrictions, or by any other means which
the Board determines to be consistent with the Plan's purpose and applicable
law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
4.5 Restrictions on Share Transferability. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as shall be required under applicable Federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and under any blue sky or state securities laws applicable
to such Shares.
3
<PAGE> 6
4.6 Ceasing to be a Director Due to Death, Disability, or After Attainment
of Age 65.
(a) Death. In the event a Participant ceases to be a Director by
reason of death, all vested Options held by the Participant shall remain
exercisable at any time prior to their expiration date, or for one (1) year
after the date of death, whichever period is shorter, by such person or
persons as shall have been named as the Participant's beneficiary, or by
such persons that have acquired the Participant's rights under the Option
by will or by the laws of descent and distribution. Options which are not
vested as of the date of death shall be forfeited.
(b) Disability. In the event a Participant ceases to be a Director by
reason of Disability prior to attaining age sixty-five (65), all vested
Options held by the Participant shall remain exercisable at any time prior
to their expiration date, or for one (1) year after the date that the Board
determines the definition of Disability to have been satisfied, whichever
period is shorter. Options which are not vested as of the date the Board
determines the definition of Disability to have been satisfied shall be
forfeited.
(c) After Attainment of Age 65. In the event a Participant ceases to
be a Director after his attainment of age sixty-five (65) for some reason
other than death, all vested Options held by the Participant shall remain
exercisable at any time prior to their expiration date, or for three (3)
years after the effective date of Retirement, whichever period is shorter.
Options which are not vested as of the date a Participant ceases to be a
Director pursuant to the preceding sentence shall be forfeited.
(d) Death After Ceasing to be a Director. In the event that a
Participant ceases to be a Director by reason of Disability or after
attainment of age sixty-five (65), and within the exercise period following
such termination the Participant dies, then the remaining exercise period
under outstanding Options shall equal the longer of (i) one (1) year
following death; or (ii) the remaining portion of the exercise period which
was triggered by his ceasing to be a Director; provided, however, the
remaining exercise period shall in no event extend beyond the expiration
date of such Options. Such Options shall be exercisable by such person or
persons who shall have been named as the Participant's beneficiary, or by
such persons who have acquired the Participant's rights under the Option by
will or by the laws of descent and distribution.
4.7 Ceasing to be a Director for Other Reasons. If a Participant ceases
to be a Director for any reason other than the reasons set forth in Section 4.6,
all Options held by the Participant which are not vested as of the date he
ceases to be a Director shall immediately be forfeited to the Company.
Options which are vested as of the date a Participant ceases to be a
Director for any reason other than the reasons set forth in Section 4.6 may be
exercised within the period beginning on the date the Participant ceases to be a
Director, and ending thirty (30) days after such date. In the event the
Participant dies within such thirty (30) day period, then any outstanding
Options may be exercised within six (6) months after the date of such
Participant's death by such person or persons who shall have been named as such
Participant's beneficiary or by such person who has acquired the Participant's
rights under the Options by will or by the laws of descent and distribution;
provided, however, the remaining exercise period shall in no event extend beyond
the expiration date of such Options.
4
<PAGE> 7
4.8 Nontransferability of Options. No Option may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated by a Participant or
any other person, voluntarily or involuntarily, other than (i) by will or by the
laws of descent and distribution or (ii) pursuant to a Qualified Domestic
Relations Order as provided for in Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974, as amended. Further, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
ARTICLE 5. BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) who will succeed
to the Participant's rights hereunder in the event of the Participant's death.
Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 6. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 11.5 herein:
(a) Any and all Options granted hereunder shall become immediately
exercisable; and
(b) Subject to Article 7 herein, the Board shall have the authority to
make any modifications to the Options as determined by the Board to be
appropriate before the effective date of the Change in Control.
ARTICLE 7. AMENDMENT, MODIFICATION, AND TERMINATION
7.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that the Plan shall not be amended more than once every six
(6) months, other than to conform it to changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder; and
provided, further that no amendment which requires shareholder approval in order
for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of shareholders of the Company entitled
to vote thereon.
7.2 Options Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant holding
such Option.
5
<PAGE> 8
ARTICLE 8. WITHHOLDING
The Company shall have the power and the right to deduct and withhold from
any other compensation due the Participant from the Company, or require a
Participant to remit to the Company in such form as requested by the Company, an
amount sufficient to satisfy Federal, state, and local taxes required by law to
be withheld with respect to any taxable event arising from or as a result of
this Plan.
ARTICLE 9. INDEMNIFICATION
Each person who is or shall have been a member of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by such
person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such person in settlement thereof,
with the Company's approval or paid by such person in satisfaction of any
judgment in any such action, suit, or proceeding against such person, provided
such persons shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend it
on such person's own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
ARTICLE 10. SUCCESSORS
All obligations of the Company under the Plan with respect to Options shall
be binding on any successor to the company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.
ARTICLE 11. MISCELLANEOUS
11.1 No Right to Continue as a Director. Nothing in this Plan or in any
Option Agreement shall confer upon any Outside Director any right to continue as
a Director, or to be entitled to receive any remuneration or benefits not set
forth in the Plan or such Option Agreement, or to interfere with or limit the
right of the shareholders of the Company to remove him as a Director with or
without cause.
11.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
11.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
11.4 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. Notwithstanding any
6
<PAGE> 9
other provision set forth in the Plan, if required by the then-current Section
16 of the Exchange Act, any "derivative security" or "equity security" granted
pursuant to the Plan to any Outside Director may not be sold or transferred for
at least six (6) months after the date of grant of such Option. The terms
"equity security" and "derivative security" shall have the meanings ascribed to
them in the then-current Rule 16(a) under the Exchange Act.
11.5 Securities Law Compliance. Transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the Exchange Act. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
11.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
11.7 Time for Taking Action. Any action that may be taken in respect of
the Plan within a certain number of days shall be taken within that number of
calendar days; provided, however, that if the last day for taking any such
action falls on a weekend or a holiday, the period during which such action may
be taken shall be extended until the next business day. If any action in respect
of the Plan is required to be taken on a day which falls on a weekend or a
holiday, such action shall be taken on the next business day.
11.8 Nonqualified Options. All Options granted under the Plan shall, for
purposes of the federal income tax, be nonqualified stock options.
7
<PAGE> 1
Exhibit 3
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE LONG TERM INCENTIVE PLAN
EFFECTIVE JANUARY 1, 1994
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1. Definitions................................................................ 1
Article 2. Establishment, Purpose and Duration........................................ 2
Article 3. Administration............................................................. 3
Article 4. Maximum Award Payouts...................................................... 3
Article 5. Eligibility and Participation.............................................. 4
Article 6. Grant of Awards............................................................ 4
Article 7. Beneficiary Designation.................................................... 5
Article 8. Change in Control.......................................................... 6
Article 9. Amendment, Modification, and Termination................................... 6
Article 10. Withholding................................................................ 6
Article 11. Indemnification............................................................ 6
Article 12. Successors................................................................. 7
Article 13. Miscellaneous.............................................................. 7
</TABLE>
LIST OF APPENDICES
Appendix A -- Performance Goals
<PAGE> 3
1994 RELIANCE ELECTRIC COMPANY
EXECUTIVE LONG TERM INCENTIVE PLAN
ARTICLE 1. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" means the right to receive an Award Payout upon
achievement of the applicable Performance Goals during the applicable
Performance Period.
(b) "Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions
applicable to an Award.
(c) "Award Payout" means payment of an amount equal to a percentage
(as determined by the Committee) of Participant's base salary on the last
day of the applicable Performance Period.
(d) "Board of Directors" means the Board of Directors of the Company.
(e) "Change in Control" shall be deemed to have occurred upon:
(i) The acquisition of beneficial ownership of thirty percent (30%)
of the Company's Shares by a person or group of persons under common
control unless such acquisition is approved by the Board of Directors;
or
(ii) A change in the membership of the Board of Directors at any
time during any twelve (12) month period such that, following such
change, at least thirty percent (30%) of the members of the Board of
Directors were not members of the Board of Directors at the start of
such twelve (12) month period but only if the election of such new
members of the Board of Directors was not approved by at least
three-quarters ( 3/4) of the Directors who were either sitting at the
beginning of such twelve (12) month period or elected to the Board of
Directors during such twelve (12) month period with the approval of
three-quarters ( 3/4) of the Directors who were sitting at the beginning
of such twelve (12) month period.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee designated to administer the Plan
in accordance with Article 3 herein.
(h) "Company" means Reliance Electric Company, a Delaware corporation,
or any successor thereto.
(i) "Director" means any individual who is a member of the Board of
Directors.
(j) "Disability" shall have the meaning ascribed to such term in the
Reliance Electric Company Long Term Disability Plan.
(k) "Effective Date" shall mean January 1, 1994, subject to
ratification by an affirmative vote of a majority of Shares entitled to
vote thereon.
(l) "Employee" means any person who is employed by the Company or any
of the Company's Subsidiaries. Directors who are otherwise employed by the
Company or a Subsidi-
<PAGE> 4
ary of the Company shall be considered Employees under this Plan. Directors
who are not otherwise employed by the Company shall not be considered
Employees under this Plan.
(m) "Exchange Act"' means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(n) "Fair Market Value" shall mean (a) if the Shares are listed on a
nationally recognized stock exchange or the NASDAQ National Market System,
the closing price of the Shares on the date the fair market value of the
Shares is being determined, or (b) in all other circumstances, the value
determined by the Committee after obtaining an appraisal by one or more
independent appraisers meeting the requirements of regulations issued under
Section 170(a)(1) of the Code.
(o) "Insider" shall mean an Employee who is, on the relevant date,
subject to Section 16, or any successor thereto, of the Exchange Act.
(p) "Participant" means an Employee who has been granted an Award.
(q) "Performance Goals" means the levels of performance of the Company
that must be met during the Performance Period to trigger an Award Payout,
as determined by the Committee prior to commencement of the applicable
Performance Period (except for the Performance Goals for the initial
Performance Period which shall be determined by the Committee prior to
April 1, 1994). The material terms of the Performance Goals set forth in
Appendix A, attached hereto and incorporated herein, are for the initial
Performance Period and all subsequent Performance Periods unless changed by
the Committee as provided under Section 3.2 herein.
(r) "Performance Period" means a three (3) year period of time (or
such other period of time as determined by the Committee provided that with
respect to Insiders the period may not be less than six (6) months) during
which the Performance Goals shall be measured. The initial Performance
Period shall be January 1, 1994 through December 31, 1996.
(s) "Plan" means the Reliance Electric Company Executive Long Term
Incentive Plan.
(t) "Retirement" shall mean a Participant's retirement under either
the early retirement or normal retirement provisions of the Reliance
Electric Company Retirement Plan, or any successor thereto.
(u) "Shares" means the shares of the $.01 par value Class A common
stock of the Company.
(v) "Share Equivalent" means the cash paid by the Company as an Award
Payout divided by the Fair Market Value of a Share on the date of such
Award Payout.
(w) "Subsidiary" means any corporation, at least fifty percent (50%)
of the common stock of which is owned directly or indirectly by the
Company.
ARTICLE 2. ESTABLISHMENT, PURPOSE, AND DURATION
2.1 Establishment of the Plan. The Company hereby establishes the Plan as
set forth herein.
2
<PAGE> 5
2.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by more closely linking the
personal interests of Participants to those of Company shareholders, and by
providing Participants with an incentive for outstanding performance. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Participants upon whose judgment,
interest, and special effort the successful conduct of its operation largely is
dependent.
2.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect until the later of December 31, 1998 or the date the
last Award Payout is made by the Company. In no event shall the Company grant
any Award(s) after December 31, 1998.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board of Directors consisting of not less than three (3)
Directors, including but not limited to the Compensation Committee of the Board
of Directors. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors. The Committee
shall be comprised solely of Directors who qualify as "outside directors" under
Section 162(m) of the Code and who are eligible to administer the Plan pursuant
to Rule 16b-3(c)(2), or any successor thereto, under the Exchange Act. If for
any reason the Committee does not meet the requirements of Section 162(m) of the
Code or Rule 16b-3(c)(2) of the Exchange Act, the Board of Directors may appoint
a new Committee so as to comply with such requirements.
3.2 Authority of the Committee. The Committee shall have full power,
except as limited by law or by the Certificate of Incorporation or Bylaws of the
Company and subject to the provisions herein, to determine the size and types of
Awards and Award Payouts; to determine the Performance Goals, Performance
Periods and other applicable terms and conditions of such Awards and Award
Payouts in a manner consistent with the Plan; to construe and interpret the Plan
and any agreement or instrument entered into under the Plan; to establish,
amend, or waive rules and regulations for the Plan's administration; and to
amend the terms and conditions of any outstanding Awards to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. To the extent the Committee changes a material term of the Performance
Goals after such Performance Goals have been approved by the shareholders, such
material terms of the Performance Goals must be disclosed and reapproved by the
shareholders no later than the first shareholder meeting that occurs in the
fifth year following the year in which the shareholders previously approved the
Performance Goals. Further, the Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authorities as identified
hereunder.
3.3 Decisions Binding. Subject to the provisions of the Plan, all
determinations and decisions made by the Committee and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its stockholders, Employees, Participants,
and their estates and beneficiaries.
ARTICLE 4. MAXIMUM AWARD PAYOUTS
4.1 Shares and Share Equivalents. Subject to adjustment as provided in
Section 4.2 herein, the maximum number of Shares and Share Equivalents used for
Award Payouts shall not exceed
3
<PAGE> 6
five-hundred thousand (500,000). The maximum number of Shares available is two
hundred fifty thousand (250,000), constituting approximately eight-tenths of a
percent (0.8%) of the Company's outstanding Shares as of the Effective Date.
These Shares may be either authorized but unissued or reacquired Shares.
Notwithstanding any other provision of the Plan, no Award Payout will be made
after the total of all Award Payouts equals 500,000 Shares and Share
Equivalents.
4.2 Adjustments to Maximum Shares and Share Equivalents. In the event of
any merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or other change in the
corporate structure of the Company affecting the Shares, such adjustment shall
be made in the maximum number of Shares and Share Equivalents available for
Award Payouts under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; and provided that the number of Shares attributable to
any Award Payout shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. All full-time, active management-exempt (as determined
in accordance with the Company's compensation classification system) Employees
are eligible to be selected by the Committee to receive Awards under the Plan.
No Employee shall have a right to be selected to receive an Award, or, having
been so selected, to be selected to receive future Awards.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. GRANT OF AWARDS
6.1 Grant of Awards. An Award may be granted to any eligible Employee at
anytime and from time to time, as shall be determined by the Committee prior to
commencement of the applicable Performance Period (except for Awards applicable
to the initial Performance Period which shall be granted by the Committee not
later than April 1, 1994, subject to shareholder ratification of the Plan). The
Committee shall have complete discretion in determining the nature and amount of
each Award, as well as those eligible Employees who are selected to receive an
Award; provided, however, that the maximum number of Shares and Share
Equivalents which may be paid or payable to a single Participant during the term
of the Plan is seventy-five thousand (75,000), representing fifteen percent
(15%) of the total of Shares and Share Equivalents available under the Plan as
of the Effective Date.
6.2 Award Agreement. Each Award shall be evidenced by an Award Agreement
that shall specify the Award Payout, the Performance Period, the Performance
Goals and such other provisions as the Committee shall determine.
6.3 Earning of Award Payout. After the applicable Performance Period has
ended, a Participant shall be entitled to receive the Award Payout to the extent
the Performance Goals have been met.
6.4 Form and Timing of Award Payout. Within sixty (60) calendar days
following the close of the applicable Performance Period, the Committee shall
certify in writing whether the Performance Goals for the applicable Performance
Period have been met. The Award Payout, if any, resulting
4
<PAGE> 7
from the achievement of the Performance Goals during such Performance Period
shall be made by the Company to a Participant within thirty (30) calendar days
following the date of such written certification by the Committee. Not less than
fifty percent (50%) of the value of the Award Payout shall be paid in cash. The
remaining fifty percent (50%) of the value of the Award Payout may be paid in
cash or Shares, in the sole discretion of the Committee.
6.5 Restrictions on Transfers of Shares. All Shares issued to a
Participant under this Plan shall not be transferable by the Participant for two
(2) years from the date of issuance. Notwithstanding the preceding sentence, a
Participant may, at any time during the two (2) year restriction period,
transfer such Shares to a trust for the benefit of a Participant or his spouse,
children or grandchildren, provided the Shares transferred to such trust shall
continue to be subject to the restrictions on transfer set forth in this Section
6.5. Further, a Participant may, at any time during the two (2) year restriction
period, request in writing that the Committee authorize the lapse of
restrictions on transfer of the Shares if (i) the Participant's employment with
the Company or any Subsidiary of the Company has been voluntarily or
involuntarily terminated, or (ii) the Participant has an unusual financial
hardship. The Committee may, in its sole discretion, agree to allow a lapse of
the restrictions for all or any portion of the Shares held by the Participant.
6.6 Termination of Employment Due to Death, Disability, or Retirement. In
the event the employment of a Participant is terminated by reason of death,
Disability or Retirement during a Performance Period, the Participant shall
receive a prorated Award Payout. The prorated Award Payout shall be based upon
the length of time that the Participant held the Award during the Performance
Period, and the achievement of the Performance Goals during the Performance
Period.
Any Award Payout pursuant to this Section 6.6 shall be made at the same
time as all other Award Payouts are made to Participants who did not terminate
employment during the applicable Performance Period.
6.7 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 6.6 above, any outstanding Award shall be cancelled as of the
date of termination. For purposes of the Plan, transfer of employment of a
Participant between the Company and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
6.8 Nontransferability. Any Award or Award Payout may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated by a
Participant or any other person, voluntarily or involuntarily, other than (i) by
will or by the laws of descent and distribution, or (ii) pursuant to a Qualified
Domestic Relations Order as provided for in Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974, as amended. Further, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
ARTICLE 7. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) who
will succeed to the Participant's rights hereunder in the event of the
Participant's death. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by the Company, and will
be
5
<PAGE> 8
effective only when filed by the Participant in writing with the Company during
the Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.
ARTICLE 8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 13 herein:
(a) The Award Payout attainable under any outstanding Award shall be
deemed to have been fully earned for the entire Performance Period as of
the effective date of the Change in Control, and there shall be paid out in
cash to Participants within thirty (30) days following the effective date
of the Change in Control the full amount of such Award Payout as would have
been paid if the Performance Period had elapsed as of such effective date
of the Change in Control and the Performance Goals had been achieved; and
(b) Subject to Article 9 herein, the Committee shall have the
authority to make any modifications to the Awards deemed by the Committee
to be appropriate before the effective date of the Change in Control.
ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION
9.1 Amendment, Modification, and Termination. The Board of Directors may
at any time and from time to time, alter, amend, suspend or terminate the Plan
in whole or in part; provided, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
9.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
ARTICLE 10. WITHHOLDING
The Company shall have the power and the right to deduct and withhold from
the Award Payouts or any other compensation due the Participant from the
Company, or require a Participant to remit to the Company in such form as
requested by the Company, an amount sufficient to satisfy Federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising or as a result of this Plan.
ARTICLE 11. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board of Directors, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such person in connection with or resulting from any
claim, action, suit, or proceeding to which such person may be a party or
6
<PAGE> 9
in which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by such person
in settlement thereof, with the Company's approval or paid by such person in
satisfaction of any judgment in any such action, suit, or proceeding against
such person provided such person shall give the Company an opportunity, at its
own expense, to handle and defend the same before such person undertakes to
handle and defend it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 13. MISCELLANEOUS
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
13.2 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
13.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.4 Requirements of Law. The granting of Awards, the payment of Award
Payouts and the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations and to such approvals by any
governmental agencies or national securities exchanges as may be required.
Notwithstanding any other provision set forth in the Plan, if required by the
then-current Section 16 of the Exchange Act any "derivative security" or "equity
security" granted pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
13.5 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Delaware.
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<PAGE> 10
APPENDIX A
The Performance Goals for the Performance Periods shall be based on the
measures return on capital employed and earnings growth.
8
<PAGE> 1
Exhibit 4
RELIANCE ELECTRIC COMPANY
KEY EMPLOYEE STOCK OPTION PLAN
------------------------------
Effective January 1, 1990, Reliance Electric Company hereby adopts a
stock option plan for the benefit of certain persons and subject to the terms
and provisions set forth below.
1. DEFINITIONS. The following terms shall have the meanings set forth
below whenever used in this instrument:
(a) The word "Board" shall mean the duly elected Board of
Directors of the Company.
(b) The word "Cause" shall mean with respect to any Optionee
(i) his commission of either a felony or any crime
against the Company or a Subsidiary; or
(ii) his disclosure of the trade secrets of the
Company or any Subsidiary; or
(iii) his taking any action that would aid a competitor
of the Company or a Subsidiary; or
(iv) his habitual failure, for reasons other than any
physical or mental ailment, to attend to his
duties as an employee of the Company or a
Subsidiary, but only after the Optionee has been
given written notice by an officer of the Company
or a Subsidiary of the pattern of behavior deemed
by such officer to constitute such habitual
failure and has failed to cure or take all
reasonable steps to cure such pattern of behavior
within thirty (30) days of receipt of that
notice; or
(v) his failure to comply with the conflict of
interest or business ethics policies established
by the Company.
(c) The words "Change in Control" shall mean either
(i) the acquisition of beneficial ownership of thirty
percent (30%) of the Company's shares of Common
Stock by a person or group of persons under
common control unless such acquisition is
approved by the Board; or
<PAGE> 2
(ii) a change in the membership of the Board at any
time during any twelve (12) month period such
that, following such change, at least thirty
percent (30%) of the members of the Board were
not members of the Board at the start of such
twelve (12) month period but only if the election
of such new members of the Board was not approved
of at least three-quarters (3/4) of the Directors
who were either sitting at the beginning of such
twelve (12) month period or elected to the Board
during such twelve (12) month period with the
approval of three-quarters (3/4) of the Directors
who were sitting at the beginning of such twelve
(12) month period.
(d) The word "Code" shall mean the United States Internal
Revenue Code (Title 26 of the United States Code).
(e) The word "Committee" shall mean the Compensation
Committee appointed by the Board.
(f) The words "Common Stock" shall mean shares of the $.01
par value CLASS A common stock of the Company.
(g) The word "Company" shall mean Reliance Electric Company,
a Delaware corporation, and any successor thereto which
shall maintain this Plan.
(h) The word "Disability" shall mean an Optionee's disa-
bility as defined under terms of the Company's long-term
disability benefits plan.
(i) The words "Fair Market Value" shall mean with respect to
the shares of Common Stock
(i) if the shares are publicly traded on a national
securities exchange, the closing price on the
date the fair market value of the shares is being
determined; or
(ii) if the shares are publicly traded over the
counter, the average of the closing bid and ask
prices on the day the fair market value of the
shares is being determined; or
(iii) if the shares are not publicly traded, the value
determined by an independent appraiser chosen by
the Committee as of the later of either the
December 31 coinciding with or immediately
preceding the date an option is granted pursuant to
the Plan or such later date as such an appraisal
shall have been performed.
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<PAGE> 3
(i) The words "Key Employee" shall mean any person who is a
high-level executive officer or other valuable
managerial or technical employee of either the Company
or any Subsidiary.
(j) The word "Optionee" shall mean any Key Employee to whom
a stock option has been granted pursuant to this Plan.
(k) The word "Plan" shall mean this instrument, the Reliance
Electric Company Key Employee Stock Option Plan, as it
is originally adopted and as it may be amended here-
after.
(l) The word "Retirement" shall mean an Optionee's retire-
ment under either the early retirement or normal
retirement provisions of the Company's defined benefit
pension plan for salaried employees.
(m) The word "Subsidiary" shall mean any corporation at
least 50% of the common stock of which is owned directly
or indirectly by the Company.
2. PURPOSE OF THE PLAN. The Plan is established to assist in
providing the Key Employees with compensation arrangements which are
competitive with those offered by similarly situated employers and to thereby
provide the Key Employees with greater incentive to continue in the employ of
the Company and its Subsidiaries and to serve and promote the interests of the
Company and its shareholders. The premise of the Plan is that, if the Key
Employees acquire a proprietary interest in the business of the Company or
increase such proprietary interest as they may already hold, then the incentive
of the Key Employees to work toward the Company's continued success will be
commensurately increased. Accordingly, the Company will, from time to time
during the effective period of the Plan, grant to those Key Employees as may be
selected to participate in the Plan options to purchase Common Stock on the
terms and subject to the conditions set forth in the Plan.
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective on
January 1, 1990, subject to approval (whether before or on or after
<PAGE> 4
January 1, 1990) by holders of a majority of the outstanding shares of voting
capital stock of the Company, provided, however, that if the Plan is not so
approved within twelve (12) months after the date the Plan is adopted, the Plan
and any options granted hereunder shall be null and void. If, however, the
Plan is so approved, subject to the provisions of Section 8, no further
shareholder approval shall be required with respect to the granting of any
options pursuant to the Plan.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall consist of no fewer than two (2) members, who
shall be designated by the Board. Each member of the Committee shall be a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 or any amendment of or successor to such rule
as may be in effect from time to time. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members, shall be acts of the Committee. Subject to the terms and conditions
of the Plan, the Committee shall have full and final authority in its absolute
discretion:
(a) To select the Key Employees to whom options will be
granted;
(b) To determine the number of shares of Common Stock
subject to any option;
(c) To determine the time when options will be granted;
(d) To prescribe the form of the option agreements governing
the options which are granted under the Plan and to set
the provisions of such option agreements as the Commit-
tee may deem necessary or desirable, provided, such
provisions are not contrary to the terms and conditions
of the Plan;
(e) To adopt, amend and rescind such rules and regulations
as, in the Committee's opinion, may be advisable in the
administration of the Plan; and
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<PAGE> 5
(f) To construe and interpret the Plan, the rules and regula-
tions and the instruments evidencing options granted
under the Plan and to make all other determinations
deemed necessary or advisable for the administration of
the Plan.
Any decision made or action taken by the Committee in connection with the
administration, interpretation, and implementation of the Plan and of its rules
and regulations shall, to the extent permitted by law, be conclusive and binding
upon all Optionees and upon any person claiming under or through any Optionee.
Neither the Committee nor any of its members shall be liable for any act taken
by the Committee pursuant to the Plan. No member of the Committee shall be
liable for the act of any other member.
5. PERSONS ELIGIBLE FOR OPTIONS. Subject to the restrictions herein
contained, options may be granted from time to time in the discretion of the
Committee only to such Key Employees, as designated by the Committee, whose
initiative and efforts contribute or may be expected to contribute to the
continued growth and future success of the Company and/or its Subsidiaries.
Notwithstanding the preceding sentence, a Key Employee who renounces in writing
any right he may have to receive stock options under the Plan shall not be
eligible to receive any stock options under the Plan. The Committee may grant
more than one option to the same Key Employee.
6. SHARES SUBJECT TO THE PLAN. Subject to the provisions of the next
succeeding paragraph of this Section 6, the aggregate number of shares of
Common Stock for which options may be granted under the Plan shall be six
hundred thousand (600,000) shares of Common Stock. Either authorized and
unissued shares of Common Stock or shares of Common Stock that are "treasury
stock," or both, in such amounts, within the maximum limits of the Plan, as the
Committee shall from time to time determine,
- 5 -
<PAGE> 6
may be so issued. All shares of Common Stock which are the subject of any
lapsed, expired or terminated options may be made available for reoffering
under the Plan to any Key Employee.
In the event that subsequent to the date of adoption of the Plan by the
Board, the outstanding shares of Common Stock are, as a result of a stock
split, stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization, spin-off, split-off, split-up or other such
change (including, without limitation, any transaction described in Section
425(a) of the Code) or a special dividend or other distribution to the
Company's shareholders, increased or decreased or changed into or exchanged for
a different number or kind of shares of stock or other securities of the
Company, then (i) there shall automatically be substituted for each share of
Common Stock subject to an unexercised option granted under the Plan and each
share of Common Stock available for additional grants of options under the Plan
the number and kind of shares of stock or other securities into which each
outstanding share of Common Stock shall be exchanged, (ii) the option price per
share of Common Stock or unit of securities shall be increased or decreased
proportionately so that the aggregate purchase price for the securities subject
to the option shall remain the same as immediately prior to such event, and
(iii) the Committee shall make such other adjustments to the securities subject
to options, the provisions of the Plan, and option agreements as may be
appropriate, and equitable, and any such adjustment shall be final, binding and
conclusive as to each Optionee. Any such adjustment may, in the discretion of
the Committee, provide for the elimination of fractional shares.
- 6 -
<PAGE> 7
7. OPTION PROVISIONS.
(a) OPTION PRICE. The option price per share of Common Stock
under each option granted pursuant to the Plan shall be the Fair Market Value
of such a share at the time of grant. The date on which the Committee approves
the granting of an option shall be deemed for all purposes hereunder the date
on which the option is granted.
(b) PERIOD OF OPTION. Subject to all of the terms of the Plan,
each option granted under the Plan shall be exercisable through the tenth
(10th) anniversary of the date the option was granted.
(c) LIMITATION ON EXERCISE AND TRANSFER OF OPTION. Except as
otherwise provided in the event of an Optionee's death, only the Optionee may
exercise an option, provided that a guardian or other legal representative who
has been duly appointed for such Optionee may exercise an option on behalf of
the Optionee. No option granted hereunder shall be transferable other than by
the Last Will and Testament of the Optionee or, if the Optionee dies intestate,
by the applicable laws of descent and distribution. No option granted
hereunder may be pledged or hypothecated, nor shall any such option be subject
to execution, attachment or similar process.
(d) CONDITIONS GOVERNING EXERCISE OF OPTION. An option granted
under the Plan shall become exercisable for fifty percent (50%) of the shares
of Common Stock which are subject to the option only if the Optionee shall have
continued to be employed by the Company and/or a Subsidiary for a period of
two (2) years following the date of grant. The option shall become exercisable
with respect to the remaining shares of Common Stock which are subject to the
option only if the Optionee shall
- 7 -
<PAGE> 8
have continued to be employed by the Company and/or a Subsidiary for a period
of three (3) years following the date of grant.
In the event of a Change in Control, an Optionee may exercise
his option with respect to all shares of Common Stock which are covered by the
option.
In the event of either (i) a dissolution or liquidation of the
Company (but only if the distributee of substantially all of the Company's
assets upon the liquidation of the Company was not, immediately prior to the
liquidation, under common control with the Company) or (ii) a merger or
consolidation in which the Company is not the surviving corporation (but only
if the corporation which is the surviving corporation was not, immediately
prior to the merger or consolidation, under common control with the Company)
immediately following which the surviving corporation fails to maintain the
Plan, all options granted under the Plan shall terminate unless the surviving
corporation in any such merger or consolidation assumes the option. The Company
shall notify each Optionee of any such dissolution, liquidation or merger at
least thirty (30) days before the occurrence of such event and the option shall
become fully exercisable at such time.
Upon satisfaction of any such conditions, the option may be
exercised in whole or in part at any time until expiration of the right to
exercise the option, but this right of exercise shall be limited to whole
shares, unless the Committee shall otherwise provide. Options shall be
exercised by the Optionee giving written notice to the Company of the
Optionee's exercise of the option accompanied by full payment of the purchase
price either in cash or, with the consent of the Committee, in
- 8 -
<PAGE> 9
other consideration (including shares of Common Stock) having a fair market
value on the date the option is exercised equal to that portion of the purchase
price for which payment in cash is not made.
(e) TERMINATION OF EMPLOYMENT, ETC. If an Optionee ceases to
be an employee of the Company and all Subsidiaries because of death,
Disability, or Retirement, the Optionee may exercise the option until the
earlier to occur of either
(i) the first anniversary of the Optionee's termination of
employment, or
(ii) the expiration of the option,
but only to the extent the option was exercisable at the date of the Optionee's
termination of employment.
If an Optionee ceases to be an employee of the Company and all
Subsidiaries at the behest of his employer and without Cause, the Optionee may
exercise his option until the earlier to occur of either
(iii) the thirtieth (30th) day following the Optionee's
termination of employment, or
(iv) the expiration date of the option,
but only to the extent the option was exercisable at the date of the Optionee's
termination of employment.
If an Optionee ceases to be an employee of the Company and all
Subsidiaries because of his voluntary resignation or because he is discharged
by his employer for Cause, his option shall be cancelled to the extent not
exercised at the time of his termination of employment.
If any option is exercisable following the Optionee's death,
then such option shall be exercisable by the Optionee's estate, or
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<PAGE> 10
the person designated in the Optionee's Last Will and Testament, or the person
to whom the option was transferred by the applicable laws of descent and
distribution.
(g) WAIVER BY COMMITTEE OF CONDITIONS GOVERNING EXERCISE OF
OPTION. The Committee may, in its discretion, waive any restrictions or
conditions set forth in an option agreement concerning an Optionee's right to
exercise any option and/or the time and method of exercise; provided, however,
that in no event may the Committee permit an Optionee to exercise an option
unless the Optionee shall have been in the employ of the Company and/or a
Subsidiary for a period of at least one (1) year following the date of grant of
the option.
8. AMENDMENTS TO THE PLAN. The Committee is authorized to interpret
the Plan and from time to time adopt any rules and regulations for carrying out
the Plan that it may deem advisable. Subject to the approval of the Board, the
Committee may at any time amend, modify, suspend or terminate the Plan. In no
event, however, without the approval of the Company's shareholders, shall any
action of the Committee or the Board result in:
(a) Amending, modifying or altering the eligibility requirements
provided in Section 5 hereof;
(b) Increasing or decreasing, except as provided in Section 6
hereof, the maximum number of shares for which options may be
granted;
(c) Decreasing the minimum option price per share at which
options may be granted under the Plan, as provided in
Section 7(a) hereof;
(d) Extending either the maximum period during which an
option is exercisable as provided in Section 7(b) hereof or
the date on which the Plan shall terminate as provided in
Section 11 hereof;
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<PAGE> 11
(e) Changing the requirements relating to the Committee;
except as necessary to conform the Plan and the option
agreements to changes in governing law.
9. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Committee
may condition its grant of any option hereunder upon receipt of an investment
representation from the Optionee which shall be substantially similar to the
following:
"Optionee agrees that any shares of common stock of Reliance
Electric Company which he may acquire by virtue of the exercise of
this option shall be acquired for investment purposes only and not
with a view to distribution or resale; provided, however, that this
restriction shall become inoperative in the event the shares of
common stock of Reliance Electric Company which are subject to this
option shall be registered under the Securities Act of 1933, as
amended, or in the event Reliance Electric Company is otherwise
satisfied that the offer or sale of the shares of common stock of
Reliance Electric Company which are subject to this option may
lawfully be made without registration under the Securities Act
of 1933, as amended".
The Company shall not be required to issue any certificates for shares of
Common Stock upon the exercise of an option under the Plan prior to (i)
obtaining any approval from any governmental agency which the Committee shall,
in its sole discretion, determine to be necessary or advisable, (ii) the
admission of such shares to listing on any national securities exchange on
which the shares of Common Stock may be listed, (iii) completion of any
registration or other qualification of the shares of Common Stock under any
state or federal law or ruling or regulations of any governmental body which
the Committee shall, in its sole discretion, determine to be necessary or
advisable, or the determination by the Committee, in its sole discretion, that
any registration or other qualification of the shares of Common Stock is not
necessary or advisable,
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<PAGE> 12
and (iv) obtaining an investment representation from the Optionee in the form
set forth above or in such other form as the Committee, in its sole discretion,
shall determine to be adequate.
10. GENERAL PROVISIONS.
(a) OPTION AGREEMENTS NEED NOT BE IDENTICAL. The form and
substance of option agreements, whether granted at the same or different times,
need not be identical.
(b) NO RIGHT TO BE EMPLOYED, ETC. Nothing in the Plan or in any
option agreement shall confer upon any Optionee any right to continue in the
employ of the Company or a Subsidiary, or to serve as a member of the Board, or
to be entitled to receive any remuneration or benefits not set forth in the
Plan or such option agreement, or to interfere with or limit either the right
of the Company or a Subsidiary to terminate his employment at any time or the
right of the shareholders of the Company to remove him as a member of the Board
with or without cause.
(c) OPTIONEE DOES NOT HAVE RIGHTS OF SHAREHOLDER. Nothing
contained in the Plan or in any option agreement shall be construed as
entitling any Optionee to any rights of a shareholder as a result of the grant
of an option until such time as shares of Common Stock are actually issued to
such Optionee pursuant to the exercise of an option or stock appreciation
right.
(d) SUCCESSORS IN INTEREST. Except as otherwise provided herein,
the Plan shall be binding upon the successors and assigns of the Company.
(e) NO LIABILITY UPON DISTRIBUTION OF SHARES. The liability of
the Company under the Plan and any distribution of shares of Common Stock made
hereunder is limited to the obligations set forth herein with
- 12 -
<PAGE> 13
respect to such distribution and no term or provision of the Plan shall be
construed to impose any liability on the Company or the Committee in favor of
any person with respect to any loss, cost or expense which the person may incur
in connection with or arising out of any transaction in connection with the
Plan.
(f) USE OF PROCEEDS. The cash proceeds received by the Company
from the issuance of shares of Common Stock pursuant to the Plan will be used
for general corporate purposes.
(g) EXPENSES. The expenses of administering the Plan shall be
borne by the Company.
(h) CAPTIONS. The captions and section numbers appearing in the
Plan are inserted only as a matter of convenience. They do not define, limit,
construe or describe the scope or intent of the provisions of the Plan.
(i) NUMBER. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the
context may require.
(j) GENDER. The use of the feminine, masculine or neuter pronoun
shall not be restrictive as to gender and shall be interpreted in all cases as
the context may require.
11. TERMINATION OF THE PLAN. The Plan shall terminate on December 31,
1994, and thereafter no options shall be granted under the Plan. All options
outstanding at the time of termination of the Plan shall continue in full force
and effect according to the terms of the option agreements governing such
options and the terms and conditions of the Plan.
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<PAGE> 14
12. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its choice
of law provisions, and any applicable federal law.
IN WITNESS WHEREOF, RELIANCE ELECTRIC COMPANY, by its appropriate
officers duly authorized, has executed this instrument this ____ day of
_______________.
RELIANCE ELECTRIC COMPANY
By: ___________________________
And: __________________________
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<PAGE> 1
Exhibit 5
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into this 1st day of April, 1994 by and between
RELIANCE ELECTRIC COMPANY, a Delaware corporation (the "Company"), and
, (the "Executive"). This Agreement provides protection to the
Executive in the event of termination of his employment relationship with the
Company in certain circumstancea as set forth herein.
RECITALS
--------
The Board of Directors of the Company has determined that it is appropriate
and in the best interests of the Company to provide to the Executive protection
in the event of termination of the Executive's employment relationship with the
Company and the Executive desires to have such protection;
NOW THEREFORE, the Company and the Executive agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall be
defined as set forth in this Section 1.
1.1. "Board of Directors" shall mean the Board of Directors of the
Company.
1.2. "Disability" shall mean any physical or mental ailment that
prevents the Executive from performing the duties incident to his
employment with the Company, that has continued for a period of one
hundred and twenty days and that is expected to be of permanent
duration.
1.3. "For Cause" shall mean for any of the following reasons:
(a) the Executive's conviction of a felony;
(b) the Executive's refusal to submit to a medical examination if
directed to do so by the Board of Directors to determine whether
the Executive is disabled; or
(c) the Executive's habitual failure, for reasons other than any
physical or mental ailment, to attend to his duties as an
executive officer of the Company, except that such habitual
failure shall not be a reason for termination For Cause unless
the Executive has been given written notice by the Board of
Directors of the pattern of behavior deemed by the Board of
Directors to constitute such habitual failure and has failed
to cure or to take all reasonable steps to cure that pattern of
behavior within 30 days of receipt of that notice.
1.4. "Involuntary termination" shall mean:
<PAGE> 2
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(a) the termination of the Executive's employment at the initiative
of the Company; or
(b) the termination of the Executive's employment at the initiative
of the Executive as a result of action by the Company, without
the Executive's consent, to reduce the Executive's base salary
rate by more than twenty percent from the rate of base salary
in effect immediately prior to the reduction unless the
reduction is made in connection with a general reduction
applicable equally to all senior executives of the Company.
1.5. "Voluntary termination" shall mean the Executive's termination of
employment with the Company, for any reason other than his
involuntary termination (as defined in Section 1.4), his disability
(as defined in Section 1.2), or his death.
2. SEVERANCE BENEFITS UPON INVOLUNTARY TERMINATION OTHER THAN FOR
CAUSE. If the Executive's employment with the Company is terminated as the
result of an involuntary termination other than For Cause, the Executive
shall be eligible for severance benefits under this Section 2 and the
Company shall pay and provide to the Executive the severance benefits
specified in Sections 2.1 through 2.4 hereof.
2.1. TWO YEARS' BASE SALARY. If the Executive is eligible for severence
benefits under Section 2, the Company shall pay to the Executive an
amount equal to two years' salary at the rate of salary in effect at
the date of involuntary termination. The Company shall pay this
amount to the Executive in twenty-four equal monthly installments,
commencing on the first day of the month next following the date of
termination of the Executive's employment and continuing on the
first day of each succeeding month until all twenty-four payments
have been made.
2.2. TWO YEARS' BONUS. If the Executive is eligible for severance
benefits under Section 2, the Company shall pay to the
executive an amount equal to twice the amount of the bonus paid
or payable to the Executive for the Company's last complete
fiscal year ended before the date of termination of the
Executive's employment. The Company shall pay this amount to
the Executive in twenty-four equal monthly installments,
commencing on the first day of the month next following the
date of termination of the Executive's employment and
continuing on the first day of each succeeding month until all
twenty-four payments have been made.
2.3. HEALTH AND LIFE INSURANCE. If the Executive is eligible for
severance benefits under Section 2, the Company shall provide
to the Executive, for a period
<PAGE> 3
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of at least two years after the date of termination of the
Executive's employment, health insurance and life insurance benefits
at least equivalent to the Executive's health insurance benefits
under the Company's applicable health and life insurance benefit
plan(s) as in effect on the date of involuntary termination. If the
Executive becomes employed by another employer during the two year
period during which benefits are to be continued under this Section
2.3 and the new employer provides health insurance benefits to the
Executive that are at least equal to the health insurance benefits
to be provided hereunder, then the health insurance benefits under
this Section 2.3 shall cease. If however, the level of health
insurance benefits from the new employer is lower than that to be
provided under this Section 2.3, then the Company shall provide
sufficient health insurance benefits (or the cash equivalent, as
provided in Section 8.3) so that, in the aggregate, the level of
health insurance benefits provided to the Executive is the same as
the level of health insurance benefits to which he would be entitled
under this Agreement absent his new employment.
2.4. EXERCISE OF STOCK OPTIONS. If the Executive is eligible for
severance benefits under Section 2, the Executive will be permitted
to exercise, during the two year period following the date of
termination of the Executive's employment, the stock options, if any,
held by him that were granted under any employee stock option plan
maintained by the Company, in the same manner as if his employment
with the Company had continued through that two year period, except
that this provision will not extend the maximum term of any such
option and except that this provision shall not apply to any option
granted to the Executive under the Employee Stock Purchase Plan
adopted April 8, 1987, as amended.
3. DEATH OF EXECUTIVE AFTER SEVERANCE. If the Executive dies after becoming
entitled to severance payments and benefits under Section 2 or 3 hereof and
before all such severance payments and benefits have been paid and
provided, the Company shall continue: (a) to make any remaining severance
payments to the Executive's beneficiary or beneficiaries (designated as
set forth in Exhibit A); (b) to provide health insurance benefits to the
Executive's family; and (c) to allow the Executive's estate (or
beneficiary, if so provided in the relevant stock option plan) to exercise
the stock options held by the Executive at his death, all in the same
manner and to the same extent as if the Executive had survived for at
least two years following the termination of his employment with the
Company.
4. NOTICE OF TERMINATION OF EMPLOYMENT. The Executive shall give 30 days
prior written notice to the Company of his voluntary termination of
employment or of his involuntary termination of employment initiated by the
Executive as a result of actions by the Company described in Section 1.4
hereof. Failure of the Executive to provide such notice in the case of any
such involuntary termination
<PAGE> 4
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of employment shall not relieve the Company of its obligation to pay and
provide severance payments and benefits to the Executive following the
involuntary termination. The Company shall give Executive 30 days prior
written notice of the involuntary termination of the Executive's employment
at the initiative of the Company except that, at the Company's option, the
Executive may be relieved of his duties and authorities immediately upon
the Company's giving the Executive such notice of the involuntary
termination of his employment.
5. NO SEVERANCE BENEFITS FOLLOWING TERMINATION FOR CAUSE OR
VOLUNTARY TERMINATION. If Executive's employment is terminated by the
Company For Cause or by the Executive's voluntary termination, no severance
payments or benefits or death benefits shall be payable under this
Agreement either upon that termination or at any time thereafter.
6. RELATIONSHIP TO OTHER BENEFITS.
6.1. NO FORFEITURE OF CERTAIN PAYMENTS AND BENEFITS. Neither the
eligibility for, nor the receipt of, benefits under this Agreement,
nor the termination of Employee's employment under circumstances
described in Section 7, shall be deemed to affect the rights of the
Executive upon his termination of employment, whether voluntary or
involuntary and whether or not For Cause, to all accrued but unpaid
amounts of salary, bonus, deferred compensation, vacation pay, and
benefits all of which will be paid to the date of termination of
employment, nor shall it affect any calculable amounts of
supplemental pension retirement benefits and amounts payable under
other future unfunded benefit progrems.
6.2. BENEFITS HEREUNDER TREATED AS MINIMUMS. The payments and benefits
under this Agreement are intended to be minimum protections for the
Executive and are not intended to duplicate other benefits provided
for the Executive.
6.3. PAYMENT OF CASH EQUIVALENT IN CERTAIN INSTANCES. If continued health
benefits covarage for the Executive or his family would jeopardize
the tax benefits of any health benefits plan or arrangement for any
other employees of the Company, or for the Company itself, the
Company may, in its discretion, either provide the health benefits on
an individual basis or provide cash compensation equivalent to the
benefit that otherwise would have been provided so that the Executive
and his family shall suffer no financial loss whatsoever (whether from
extra taxes or otherwise) due to the substitution. If continued life
insurance coverage or ability to exercise stock options similarly
jeopardizes the tax benefits of other employees or the Company with
respect to life insurance or stock options, the Company shall have the
same option to provide to the Executive, his family, and his
<PAGE> 5
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beneficiaries, as the case may be, cash compensation that will put the
Executive, his family, and his beneficiaries, in at least as good an
after tax position financially as if the substitution had not been
made.
7. MISCELLANEOUS.
7.1. NO ASSIGNMENT WITHOUT CONSENT OF COMPANY. Except as set forth herein,
no rights of any kind under this Agreement shall, without the written
consent of the Company, be transferable or assignable by the
Executive, his spouse or any other person, or be subject to
alienation, encumbrance, garnishment, attachment, execution, or levy
of any kind, voluntary or involuntary. This Agreement shall be
binding upon and shall inure to the benefit of the Company and its
successors and assigns.
7.2. SAVINGS CLAIM. If any provision or part of a provision of this
Agreement is held to be void or not enforceable for any reason, the
remainder of the provision not so held void and all other provisions
of this Agreement shall remain in full force and effect to the
fullest extent possible.
7.3. NO RIGHTS IN ANY PROPERTY OF COMPANY. The undertakings of the Company
herein constitute merely the unsecured promise of the Company to make
the payments as provided for herein. No property of the Company is or
shall, by reason of this Agreement, be held in trust for the
Executive, his spouse, or any other person, and neither the Executive
nor his spouse or any other person shall have, by reason of this
Agreement, any rights, title, or interest of any kind in or to any
property of the Company.
7.4. GOVERNING LAW. This Agreement is executed in and shall be construed in
accordance with and governed by the laws of the State of Ohio.
7.5. EMPLOYMENT OF EXECUTIVE BY THE COMPANY. Nothing herein shall be
construed as an offer or commitment by the Company to continue the
Executive's employment with the Company for any period of time.
7.6. FACILITY OF PAYMENT. If the Company shall find that any person to
whom any amount is payable hereunder is unable to care for his or her
affairs, any payment due (unless a prior claim therefor shall have
been made by a duly appointed guardian, committee, or other legal
representative) may be paid to any person deemed by the Company to
have incurred expense for such person otherwise entitled to payment,
in such manner and proportions as the Company may determine.
7.7. MERGER OR CONSOLIDATION. Notwithstanding anything contained in this
Agreement to the contrary, in the event of a disposition of all or
<PAGE> 6
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substantially all of the assets of the Company or the dissolution of
the Company, or a merger or consolidation in which the Company is not
the surviving corporation, unless the Company's obligations under this
Agreement are assumed by the purchaser of such assets or the surviving
corporation of such merger or consolidation, an amount equal to the
largest amount that could become payable in the future hereunder shall
become immediately due and payable five days prior to such
disposition, dissolution, merger, or consolidation.
7.8. GENDER. A pronoun in the masculine, feminine, or neuter gender
shall be deemed, where appropriate, to include also the masculine,
feminine, or neuter gender.
7.9. AMENDMENT. This Agreement may only be amended in a writing signed by
the Executive and the Company.
7.10. EXPIRATION DATE; TERMINATION. This Agreement shall continue in
effect until April 1, 1996. No benefits shall be payable hereunder
due to any termination of employment that occurs after termination of
this Agreement. If, however, any termination of employment occurs
on or prior to the date this Agreement terminates, benefits hereunder
shall not cease due merely to the subsequent termination of this
Agreement.
7.11 LEGAL EXPENSES OF EXECUTIVE. In the event of litigation between the
Company and the Executive concerning any issue relating to the
Executive's entitlement to any benefit or benefits hereunder, the
Executive shall be entitled to reimbursement from the Company for all
costs and attorney fees incurred by the Executive in connection
therewith in the event such litigation is finally decided in, or
settled in the Executive's favor.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the
Executive have executed this Severance Agreement on the day and year first
above written.
RELIANCE ELECTRIC COMPANY
By
--------------------------
Its
-------------------------
----------------------------
The "Executive"
<PAGE> 1
Exhibit 6
RELIANCE ELECTRIC COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
Adopted: August 29, 1994
<PAGE> 2
<TABLE>
RELIANCE ELECTRIC COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
Table of Contents
-----------------
<CAPTION>
Section Page
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<S> <C> <C>
1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6 Litigation Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7 Amendment, Suspension, or Termination
of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
SECTION 1. PURPOSE
The purpose of the Reliance Electric Company Change in Control
Severance Pay Plan is to encourage Employees to make and continue careers with
Reliance Electric Company by providing eligible Employees with certain
severance pay benefits upon such Employees' Involuntary Termination of
employment following the Change in Control, as set forth herein.
SECTION 2. DEFINITIONS
When used herein the following terms shall have the following meanings:
2.1 "Board of Directors" means the Board of Directors of the
Corporation.
2.2 "Change in Control" means consummation of the transaction
contemplated by that certain Agreement and Plan of Merger by and between
Reliance Electric Company and General Signal Corporation, which was approved by
the Board of Directors on August 29, 1994, as it may later be amended.
2.3 "Code" means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended.
2.4 "Committee" means a committee of not less than three (3)
directors designated by the Board of Directors to administer this Plan.
2.5 "Corporation" means Reliance Electric Company, a Delaware
corporation, and its successors and assigns.
2.6 "Employee" means any common law employee of the Corporation or
any Subsidiary who is listed on Exhibit A, or B, or C attached hereto.
<PAGE> 4
2.7 "Involuntary Termination" shall mean any termination of an
Employee's employment by the Corporation, or by one of its Subsidiaries, within
two years after the Change in Control; provided, however, such term shall not
include a termination by the Corporation or any of its Subsidiaries for (i)
serious, willful misconduct in respect of the Employee's obligations to the
Corporation or its Subsidiaries, which has caused demonstrable and serious
injury to the Corporation, monetary or otherwise, as evidenced by a
determination in a binding and final judgment, order or decree of a court or
administrative agency of competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative; or (ii) conviction of a felony,
which has caused demonstrable and serious injury to the Corporation, monetary
or otherwise, as evidenced by binding and final judgment, order, or decree of a
court of competent jurisdiction, in effect after exhaustion or lapse of all
rights of appeal.
In addition to actual termination of employment, as and when so
declared to be by the Employee the following shall be deemed an Involuntary
Termination: (i) a reduction or change in an Employee's responsibilities,
duties, authority, powers, functions, title, working conditions or status from
those in effect immediately prior to the Change in Control; or (ii) a
reassignment to another geographic location more than 50 miles from the
Employee's place of employment immediately prior to the Change in Control; or
(iii) a reduction in base salary and incentive
2
<PAGE> 5
compensation, if any, from those in effect immediately prior to the Change in
Control. For purposes of the preceding sentence, a reduction in incentive
compensation will be deemed to have occurred if and only if the percentage of
salary paid as incentive compensation under the Corporation's Executive
Performance Award Program (the "EPAP") and any other applicable bonus plans for
any calendar year is less than the average percentage of salary paid to the
Employee as incentive compensation under the EPAP for the three calendar years
preceding the Change in Control.
Notwithstanding the foregoing, an Employee's failure to object in
writing to the changes listed in subsections (i), (ii) and (iii) within 180
days of any such change shall constitute a waiver of such change being deemed
an Involuntary Termination.
2.8 "Plan" means the Reliance Electric Company Change in Control
Severance Pay Plan, as set forth in this document, and as it may be amended
from time to time.
2.9 "Severance Agreement" shall mean, with respect to each
Employee who is listed on Exhibit A, that certain Severance Agreement executed
by and between the Corporation and the Employee on the date set forth opposite
his name on Exhibit A.
2.10 "Subsidiary" means a "subsidiary corporation" of the
Corporation as defined in Section 424(f) of the Code.
3
<PAGE> 6
SECTION 3. BENEFITS
3.1 In the event of Involuntary Termination of any Employee who is
listed on Exhibit A hereto, the Corporation shall pay such Employee three times
his Compensation.
3.2 In the event of Involuntary Termination of any Employee who is
listed on Exhibit B hereto, the Corporation shall pay such Employee two times
his Compensation.
3.3 In the event of Involuntary Termination of any Employee who is
listed on Exhibit C hereto, the Corporation shall pay such Employee the amount
of the Employee's annual base salary in effect immediately prior to the date of
Involuntary Termination.
3.4 For purposes of this Section, Compensation is calculated using
the Employee's annual base salary in effect immediately prior to the date of
Involuntary Termination plus the average of the three highest payments made to
the Employee under the Corporation's Executive Performance Award Program and
any other applicable bonus plans in the five calendar years preceding the
calendar year of Involuntary Termination.
3.5 Any payments pursuant to Sections 3.1, 3.2 or 3.3 of this Plan
shall be paid in a lump sum within thirty (30) days following Involuntary
Termination and such payments shall be reduced by the amount paid to the
Employee pursuant to any other severance pay policy of the Corporation.
3.6 Within thirty (30) days following Involuntary Termination, the
Corporation shall pay to an Employee described in Sections 3.1 or 3.2 a lump
sum cash amount equal to the present
4
<PAGE> 7
value of the retirement benefit the Employee would have been entitled to
receive under the terms of:
(a) the Reliance Electric Company Retirement Plan as in
effect on the day preceding the Change in Control
(without regard to vesting thereunder), and
(b) any unfunded deferred compensation arrangements which
have a defined benefit format and are maintained by
the Corporation as in effect on the day preceding the
Change in Control (without regard to vesting
thereunder),
had the Employee accumulated additional service equal to the period for which
the Employee is paid under Sections 3.1 or 3.2 of this Plan. For purposes of
calculating the lump sum cash payments provided by this Section, the present
value shall be determined by using interest rate and other factors prescribed
by the Pension Benefit Guaranty Corporation for determining immediate annuities
on the date of Involuntary Termination.
3.7 Within thirty (30) days following Involuntary Termination, the
Corporation shall pay to an Employee described in Sections 3.1 or 3.2 a lump
sum cash amount equal to the present value of the:
(a) the aggregate Matching Employer Contributions that
would have been made by the Corporation under the
terms of the Reliance Electric Company Savings and
Investment Plan (without regard to vesting
thereunder) as in effect on the day preceding the
Change in Control, and
5
<PAGE> 8
(b) the amount which would have been credited to the
Employee's account under the Reliance Electric
Company Deferred Compensation Plan as in effect on
the day preceding the Change in Control, without
regard to vesting thereunder and consistent with the
Corporation's past practices, because of limitations
on the amount of such Matching Employer Contributions
relating to legal limitations on the amount of the
Employee's Basic Salary Reduction Contributions under
such Savings and Investment Plan,
if, during the period for which the Employee is paid under Sections 3.1 or 3.2
of this Plan, the Employee had continued to be employed and to participate in
such Savings and Investment Plan (or another tax-qualified retirement plan
allowing contributions under Section 401(k) of the Code) to the same extent as
he participated in the year of such Involuntary Termination. For purposes of
calculating the lump sum cash payments provided by this Section, the present
value shall be determined by using the Pension Benefit Guaranty Corporation
interest rate for immediate annuities on the date of Involuntary Termination.
3.8 During the period for which an Employee is paid under Sections
3.1 or 3.2 of this Plan, the Employee shall be deemed to be on layoff status
and continue to be entitled to all benefits and service credit for benefits
under medical, insurance, and other welfare benefit plans, programs and
arrangements of the Corporation as if he were actively employed during such
period (including
6
<PAGE> 9
meeting any age and service requirements for post retirement benefits). With
respect to such welfare benefit plans, an Employee shall be entitled to
purchase continued coverage for himself and all covered family members and the
Corporation shall arrange for, and make available, such coverage as of his
Involuntary Termination. Such coverage shall be no less in scope than that
provided to the covered Employee (and covered family members) at the time of
Change in Control. The cost of such coverage shall be shared by the
Corporation and the Employee in the same proportion as exists at the time of
Change in Control. With respect to medical (including HMO) and dental
coverage, such coverage shall be in lieu of the Corporation's practice of
affording health care continuation coverage to terminating employees and
covered family members pursuant to the Consolidated Omnibus Reconciliation
Budget Act of 1986, as amended, ("COBRA"), to the extent that the availability
of such coverage to such Employee (and covered family members) satisfies the
Corporation's legal obligations under COBRA.
3.9 If, by reason of the requirements for tax qualification or any
other reason, benefits or service credits under any welfare benefit plan shall
not be payable or provided under any such plan to the Employee or his
dependents, beneficiaries or estate despite the provisions of Section 3.8
above, the Corporation itself shall, to the extent necessary, pay or provide
for payment of such benefits and service credit for such benefits to the
Employee or his dependents, beneficiaries or estate.
3.10 Notwithstanding any other provisions of this Plan:
7
<PAGE> 10
(a) No amount shall be paid to any person under this Plan
to the extent that the payment would either be or
cause any other amount payable under this Plan to be
an "excess parachute payment" as defined in Section
280G of the Code. If any person receives an amount
described in the preceding sentence, he shall have no
right to such amount and shall promptly repay such
amount to the Corporation.
(b) No Employee listed on Exhibit A shall be entitled to
receive any amount under this Plan unless, within 30
days following the Change in Control, he renounces,
in a writing in form reasonably acceptable to the
Committee, his right to receive any benefits under
his Severance Agreement.
(c) No Employee shall be entitled to receive any amount
under this Plan unless, within 30 days following the
Change in Control, he agrees, in a writing in form
reasonably acceptable to the Committee, not to assert
any claim against the Corporation with respect to his
participation under the 1994 Reliance Electric
Company Executive Long Term Incentive Plan (the
"LTIP") other than seeking payment of any amounts
payable to him under terms of the LTIP giving effect
to Amendment No. 1 to the LTIP which was adopted by
the Corporation on August 29, 1994.
8
<PAGE> 11
3.11 In the event that an Employee becomes entitled to receive any
payment pursuant to this Plan and the Employee dies before receiving such
payment, such payment shall be made to the Employee's beneficiary designated
hereunder. Each Employee may prepare, execute, and file with the Secretary of
the Corporation a copy of the Designation of Beneficiary Form attached to this
Agreement as Exhibit D. The Employee shall thereafter be free to amend, alter
or change such form; provided, however, that any such amendment, alteration or
change shall be made by filing a new Designation of Beneficiary form with the
Secretary of the Corporation. In the event an Employee fails to designate a
beneficiary, following the death of the Employee all payments of the amounts
specified by this Agreement which would have been paid to the Employee's
designated beneficiary shall instead be paid to the Employee's spouse, if any,
if she survives the Employee or, if there is no spouse or she does not survive
the Employee, to the Employee's estate.
SECTION 4. PAYMENTS
4.1 All severance payments shall be made from the general assets
of the Corporation; provided, however, that such payments shall be reduced by
the amount of any payments made to an Employee from any trust or special or
separate fund established by the Corporation to assure such payments. The
Corporation shall not be required to establish a special or separate fund or
other segregation of assets to assure such payments, and, if the Corporation
shall make any investments to aid it in meeting its
9
<PAGE> 12
obligations hereunder, Employees 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
Corporation and any Employees. To the extent that any Employee acquires a
right to receive payments from the Corporation hereunder, such right shall be
no greater than the right of an unsecured creditor of the Corporation.
4.2 The Corporation may deduct from severance payments any
Federal, state or local withholding or other taxes or charges which it is
required to deduct under applicable laws.
SECTION 5. ADMINISTRATION OF THE PLAN
5.1 The Committee shall have general responsibility for the
administration and interpretation of the Plan.
5.2 The Committee may arrange for the engagement of such legal
counsel, who may be counsel for the Corporation, and make use of such agents
and clerical or other personnel as it shall require or may deem advisable for
purposes of the Plan. The Committee may rely upon the written opinions of such
counsel, may delegate to any agent or to any sub-committee or member of the
Committee its authority to perform any act, including without limitation those
matters involving the exercise of a discretion; provided, however, that such
delegation shall be subject to revocation at any time at the discretion of the
Committee.
10
<PAGE> 13
5.3 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 he or his
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 within 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
11
<PAGE> 14
by the claimant, and specific references to the pertinent Plan provisions on
which the decision was based.
SECTION 6. EXPENSES
6.1 In the event of any litigation or other proceeding between the
Corporation and the Employee with respect to the subject matter of this Plan
and the enforcement of his rights hereunder, the Corporation shall reimburse
the Employee for all of his reasonable costs and expenses relating to such
litigation or other proceeding, including his reasonable attorneys' fees and
expenses, provided that such litigation or proceeding results in any (a)
settlement requiring the Corporation to make a payment to the Employee, or (b)
judgment or order in whole or in part in favor of the Employee, regardless of
whether such judgment or order is subsequently reversed on appeal or in a
collateral proceeding. In no event shall the Employee be required to reimburse
the Corporation for any of the costs and expenses relating to such litigation
or other proceeding. The obligation of the Corporation under this section
shall survive the termination for any reason of this Plan.
SECTION 7. AMENDMENT, SUSPENSION, OR
TERMINATION OF THE PLAN
7.1 At any time prior to the Change in Control, the Board of
Directors shall have the power to amend, suspend or terminate the Plan in whole
or in part and for any reason.
12
<PAGE> 15
7.2 For at least two years after the occurrence of a Change in
Control, the Plan may not be amended, suspended or terminated in respect of any
Employee without the written consent of the Employee.
SECTION 8. MISCELLANEOUS
8.1 Nothing contained in the Plan shall give any Employee the
right to be retained in the employment of the Corporation or any of its
affiliated or associated corporations or affect the right of any such employer
to dismiss any Employee.
8.2 If the Committee shall find that any person to whom any amount
is payable under the Plan is unable to care for his or her affairs because of
illness or accident, or is a minor, or has died, then any payment due him or
her or his or her estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Committee so elects, be paid to his
or her spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Plan
therefor.
8.3 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 or in any manner be subject to the debts or
liabilities of any person and any attempt so to alienate or subject any such
amount,
13
<PAGE> 16
whether at the time 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 his or her bankruptcy or other occurrence at any time such
amount would be made subject to his debts or liabilities or would otherwise not
be enjoyed by him or her, then the Committee, if it so elects, may direct that
such amount be withheld and that the same amount or any part thereof be paid or
applied to or for the benefit of such person, in such manner and proportion as
the Committee may deem proper.
8.4 This Plan shall insure to the benefit of and the obligations
hereunder shall be binding upon the Employees and the Corporation and, as
applicable, upon their respective legal representatives, designated
beneficiaries, and successors and assigns.
8.5 The captions preceding the Sections of the Plan 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.
8.6 The use of the feminine, masculine or neuter pronoun herein
shall not be restrictive as to gender and shall be interpreted in all cases as
the context may require. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
may require.
8.7 Any action required to be taken under this Plan within a
certain number of days shall be taken within that number of
14
<PAGE> 17
calendar days; PROVIDED, however, that if the last day for taking such action
falls on a weekend or a holiday, the period during which such action may be
taken shall be automatically extended to the next business day.
8.8 The Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, RELIANCE ELECTRIC COMPANY, by its duly authorized
officer, has executed this document on this 29th day of August, 1994.
ATTEST: RELIANCE ELECTRIC COMPANY
(the "Corporation")
_________________________ By_________________________________
Its________________________________
091/10226EDD.60K
15
<PAGE> 1
Exhibit 7
AMENDMENT NO. 1
TO
1994 RELIANCE ELECTRIC COMPANY EXECUTIVE
LONG TERM INCENTIVE PLAN
This is an Amendment to the 1994 RELIANCE ELECTRIC COMPANY EXECUTIVE LONG
TERM INCENTIVE PLAN (the "Plan").
WHEREAS, it has been determined that the definition of "Change in Control"
provided in Article 1, Section (e)(i) of the Plan should be amended so that the
acquisition of thirty percent (30%) of the Company's shares of $.01 par value
Class A Common Stock by a person or group of persons under common control is a
"Change in Control," even if the acquisition is approved by the Board;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. AMENDMENT OF ARTICLE 1, SECTION (e)(i)
--------------------------------------
Article 1, Section (e)(i) is hereby deleted in its entirety and the following
substituted therefor:
"(i) the acquisition of beneficial ownership of thirty percent (30%) of the
Company's Shares by a person or group of persons under common control;
or"
WHEREAS, it has been determined that in the event of a Change in Control,
Article 8 of the Plan should be amended so that any Award Payouts made as the
result of a Change in Control are appropriately prorated to reflect the fact
that the applicable Performance Period ended on the effective date of the
Change in Control;
2. AMENDMENT OF ARTICLE 8
----------------------
Article 8 is hereby deleted in its entirety and the following substituted
therefor:
"ARTICLE 8. CHANGE IN CONTROL
Subject to article 9 herein, the Committee shall have the authority to
make any modifications in the Awards deemed by the Committee to be appropriate
before the effective date of the Change in Control. Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited by the terms of
Section 13 herein:
(a) all Performance Periods shall be deemed to have ended on the effective
date of the Change in Control;
(b) the Performance Goals for any such Performance Period shall be deemed
to have been fully satisfied at the highest award level;
<PAGE> 2
(c) the Award Payout to a Participant shall be an amount equal to (i)
multiplied by (ii) where:
(i) equals the percentage (as previously determined by the
Committee) of the Participant's base salary on the last day of
the Performance Period; multiplied by
(ii) a fraction, the numerator of which equals the number of
days in the Performance Period ending on the effective date of
the Change in Control, and the denominator of which equals the
number of days which would have been in the Performance Period
had the Change in Control not occurred; and
(d) the amounts determined under (c) above shall be paid in cash to the
Participant within thirty (30) days following the effective date of
the Change in Control."
Except as specifically amended by this Agreement, the Plan continues in force
in its present form.
This Amendment No. 1 is effective on and after August, 29, 1994.
431\10226AIB.490
2
<PAGE> 1
Exhibit 8
RELIANCE ELECTRIC COMPANY
DEFERRED COMPENSATION PLAN
(As Amended Effective September 6, 1991)
Effective September 6, 1991, Reliance Electric Company, a Delaware
corporation (the "Company"), adopts this Plan for the benefit of certain
persons and subject to the terms and provisions set forth below.
1. A "Key Employee" for the purposes of this Plan is a person who is either (i)
an elected officer of the Company or (ii) an employee of the Company or an
affiliate of the Company who is designated as a "Key Employee" for purposes
of this Plan by the Company's Board of Directors or a duly-constituted Board
Committee (hereinafter, either the Board of Directors or such a Committee
shall be referred to as the "Board").
2. Annually, the Board shall determine which Key Employees, if any, shall
receive a deferred compensation award and the amount thereof under this, the
Company's Deferred Compensation Plan, as amended (the "Plan"). All such
amounts determined for any Key Employee shall be credited to an account
maintained for such Key Employee on the books of the Company.
3. In addition to any amounts credited to the accounts of any Key Employees
pursuant to Section 2 above, the Company shall credit to the account of any
employee of the Company or an affiliate of the Company (including both Key
Employees and
<PAGE> 2
employees who are not Key Employees) an amount equal to the difference, if any,
between (a) the amount contributed by the Company for the employee as an
employer matching contribution or otherwise pursuant to Article IV of the
Reliance Electric Company Savings and Investment Plan (the "S&I Plan") with
respect to any period but ignoring any additional Company contribution which is
premised upon the employee's election to invest any part of the Company's
contributions in Company stock; and (b) the amount that would have been
contributed by the Company for the employee if the Company's contribution was
determined without regard to any limitations on contributions specifically
required by any provision of the federal laws as set forth in the S&I Plan but
ignoring any additional Company contribution which is premised upon the
employee's election to invest any part of the Company's contributions in
Company stock. Such amounts shall be credited to the accounts of the affected
employees periodically at such times as the Company, acting through one of its
officers, shall direct (but not less frequently than annually) and, to the
extent such amounts are credited to the accounts after such amounts would have
been contributed to the S&I Plan in the absence of such limitations, the
Company, acting through one of its officers, shall direct that additional
interest, as determined by the Company, be credited to the accounts to reflect
the timing difference. The provisions of this Section 3 shall generally be
effective with respect to amounts contributed to the S&I Plan for periods
occuring on and after January 1, 1991;
2
<PAGE> 3
PROVIDED, however, that with respect to elected officers holding office on
the effective date of this Plan the provisions of this Section 3 shall be
effective with respect to amounts contributed to the S&I Plan for periods
occuring on and after January 1, 1987.
4. Each account shall be credited on a quarterly basis with interest at a rate
to be determined on whatever basis the Board shall from time to time
specify. Until the Board may otherwise specify, the interest to be credited
to the accounts shall be determined quarterly on the basis of an annual rate
equivalent to the weighted average prime lending rate of Citibank N.A., New
York, New York, for the three months ending on the last day of the quarter
upon the average daily balance in each account during such quarter.
5. The Company shall keep a detailed record of the accounts, and promptly
after the end of each calendar year shall deliver to each person for whom an
account is maintained a statement setting forth the amount credited to his
account at the end of the year and the transactions in such account during
that calendar year.
6. The amounts credited to an employee's account shall become distributable to
him at his normal retirement age (as defined in and determined under the
Company's Retirement Plan, as
3
<PAGE> 4
amended) or earlier with the approval of the Board; PROVIDED, however, that
except as otherwise provided in the next sentence, any single distribution
or the first in a series of distributions permitted or required under this
Plan shall be made in the month of January of the year following the year
in which the event that requires or permits such distribution occurs. If,
however, normal retirement age is reached during the month of December in
any year, or if the event is an early retirement which, pursuant to approval
of the Board, causes the amount credited to the employees's account to
become subject to distribution in the month of December of any year, such
single distribution or first distribution in a series of distributions shall
be made in the month of January of the second year thereafter. In the sole
and exclusive discretion of the Board, all amounts credited to an employee's
account shall be distributed to the employee in a single distribution or in
a series of approximately equal distributions over a period not to exceed 10
years, subject to appropriate tax withholding.
7. In the event of the death of an employee before commencement or completion
of the distribution of the amount credited to his account, the amount then
credited to his account shall be ditributed to the person entitled thereto
under the provisions of any written designation previously filed with the
Board, or, in the absence of any such designation, to the spouse (if
surviving) of the employee, or otherwise to the
4
<PAGE> 5
employee's estate. Such distribution may take the form of a
single distribution or a series of distributions, as provided for
above, as determined by the Board; provided, however, that if the
employee's death occurred after the commencement and before the
completion of a series of distributions and the Board determines to
distribute the remaining account balance in series, the distribution
shall take the form of a continuation of the same series of
distributions originally determined by the Board.
8. Except as otherwise provided in this Section 8, no additional amounts
may be credited to the account of a Key Employee under Section
2 after such Key Employee reaches normal retirement age, or retires, or
otherwise ceases to be an employee for any reason, including death. The
foregoing shall not apply, however, in any case in which the event
involved is either the attainment of normal retirement age in the month
of December of any year or actual retirement effective on the first day
of the month of January in the year in which the deferred compensation
award is made.
9. In the event of the liquidation of the Company, or the sale of
substantially all its assests, or its merger or consolidation,
the Board may take any alterations in the provisions for distributing
the amounts credited to the accounts which are appropriate and
equitable under all the circumstances and which are consistent with the
spirit and purposes of the Plan.
5
<PAGE> 6
10. Notwithstanding Section 9 above, in the event of a Change of Control
(as hereinafter defined), the Company shall notify each
employee and each other person entitled to payments under the Plan as
promptly as practicable after the occurrence of such event of the
person's right to elect to receive, in lieu of all future amounts
payable to him under the Plan, a single lump sum payment of the amount
then credited to his account. The Company shall make the required
payment to each who elected to receive a distribution no later than
thirty (30) days after the occurrence of such event. For purposes of
the Plan, the term "Change of Control" shall mean:
(i) the acquisition of beneficial ownership totalling thirty
percent (30%) or more of the Company's shares of Class A
common stock (assuming, in each instance, the
conversion of Class B and C common stock to Class A common
stock) by a person or group of persons under common control; or
(ii) a change in the membership of the Company's Board of Directors
at any time during any twelve (12) month period such
that, following such change, at least thirty percent (30%) of
the members of the Board of Directors were not members of the
Board of Directors at the start of such twelve (12) month
period but only if the election of such new members of the
Board of Directors was not approved by at least three-quarters
(3/4) of the Directors who
6
<PAGE> 7
were either sitting at the beginning of such twelve (12) month
period or elected to the Board of Directors during such twelve (12)
month period with the approval of three-quarters (3/4) of the Directors
who were sitting at the beginning of such twelve (12) month period.
11. In the event the Company shall fail to make any payment provided for in
Section 10 above that is actually due following the occurrence
of a Change of Control, the affected person shall be entitled to
receive such payment due together with interest from the due date of
such payment until such payment is made at a rate equal to the prime
rate as publicly announced by Citibank, N.A., New York, New York, PLUS
seven (7) percentage points.
12. Nothing in this Plan shall be interpreted to limit or otherwise
preclude any person from enforcing his right to receive any
payment provided under Section 10 above. In the event that the Company
shall fail to make any such payment that is actually due following the
occurrence of a Change of Control, all professional fees reasonably
incurred by the affected person in connection with enforcing his right
to receive any such payment (including, for example, fees of
accountants and attorneys) shall be paid by the Company and,
7
<PAGE> 8
if any such fee payments by the Company generate taxable income to such
person, the Company shall pay such additional amounts to such person to make
him whole on an after-tax basis.
13. Any notices required under the Plan shall be in writing and effective
when received by the person to whom the notice is sent. Notices to an employee
or the successor-in-interest of a deceased employee shall be addressed to such
person at his then current mailing address on file at the Company. Notices to
the Company shall be addressed to the President of the Company at the Company's
headquarters.
14. In construing any provisions of the Plan, the masculine gender shall
include the feminine or neuter, and the singular number shall include the
plural, and VICE VERSA, as the context may require.
15. All questions of interpretation and application of these provisions
shall be decided by the Board, whose decisions thereon shall be final and
binding on all parties.
16. In the absence of bad faith, neither any member or former member of the
Board nor any other person administering the Plan shall have any liability to
the Company or to any other person, firm or corporation based on or arising out
of the Plan.
8
<PAGE> 9
17. The right of any person to payments under this Plan shall be that of a
general, unsecured creditor of the Company only, and no person
shall have any legal or equitable interest in, charge against, or lien
on any assets of the Company to secure any such payments.
18. This Plan, or any provision hereof, may at any time be changed or
discontinued by the Board; provided, however, that no change or
discontinuance shall either relieve the Company of its obligations,
under and in accordance with the provisions of this Plan, to make
payments to any person then entitled to payments under the Plan or
reduce any existing account balance.
19. Except for amounts payable in respect of a deceased employee, an
employee may not assign his right to receive any amounts under
the Plan without the prior written consent of the Company.
IN WITNESS WHEREOF, RELIANCE ELECTRIC COMPANY, by its
appropriate officers duly authorized, has executed this document this 19th day
of November, 1991.
RELIANCE ELECTRIC COMPANY
By:
---------------------------------------
And:
---------------------------------------
9
<PAGE> 1
Exhibit 9
Following is the complete text of Mr. Beall's letter to
Messrs. Sherrill and Morley:
Mr. H. Virgil Sherrill
Chairman of the Board
and
Mr. John C. Morley
President and Chief Executive Officer
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, Ohio 44124
Gentlemen:
As you know, Rockwell and Reliance Electric over the years
have worked together closely and cordially on a number of projects
and, during this time, have discussed a business combination of
our two companies. As recently as this past July, Rockwell
expressed its interest in acquiring Reliance Electric, and we urged
you, John, to communicate our interest to the Reliance Electric
board, which you indicated you would do. We were therefore surprised
and disappointed that Rockwell was not afforded an opportunity to
further pursue those discussions before Reliance Electric and
General Signal Corporation announced a definitive merger agreement
at the end of August.
After an intensive strategic review, including a detailed evaluation
of publicly available information concerning Reliance Electric, we
have concluded that the strategic and financial advantages of
combining our two companies are too compelling to ignore.
Accordingly, I am writing to inform you of our intention to
acquire Reliance Electric through a cash tender offer of $30 per
share for all shares of Reliance Electric's Class A common stock
and an equivalent price for its convertible shares. This represents
and exceptionally attractive opportunity for your shareowners --
specifically, an all cash offer at a premium of 22.4% over
yesterday's closing market price of $24.50 per Class A share
and 50.9% over the closing market price on August 29, the day before
Reliance Electric's merger agreement with General Signal was
announced.
<PAGE> 2
The transaction we propose also represents a particularly attractive
opportunity to build a combined enterprise uniquely positioned for continued
leadership in both the control and power segments of the industrial automation
business, in North America and around the world.
Combining the operations of our Allen-Bradley automation business and Reliance
Electric will establish a global industrial automation enterprise with combined
annual sales of about $3.5 billion. It will have a broad range of man-machine
interface, sensor, control logic, mechanical transmission, motor and motor
controller products, drive systems capabilities, and global support services.
As such, the combined business can better capitalize on an important, long-term
technological trend in industrial automation: the convergence of the control
and power functions in increasingly intelligent automation products.
We have enormous respect for Reliance Electric, a major manufacturer of
industrial products and telecommunications equipment. As you know,
Allen-Bradley, which we acquired in 1985 as part of our continuing strategic
program to grow the commercial side of our company, has established Rockwell as
a leading worldwide manufacturer of automation control products. Since the
acquisition, Allen-Bradley has more than doubled its sales, and expects to
report sales of more than $2.1 billion for fiscal 1994.
Allen-Bradley has many strengths in control logic, man-machine interfaces and
sensors. Reliance Electric has complementary strengths in motors and drives.
Supported by Rockwell's financial resources and advanced technology, the
combined entity will be a formidable U.S.-based global industrial automation
enterprise, well-positioned to compete with its international competitors.
Our offer is not subject to any financing contingencies. In addition, we are
advised by our legal counsel that there are no significant antitrust or other
issues associated with a combination of our two companies.
<PAGE> 3
While Rockwell is and will continue to be actively
engaged in various telecommunications markets, we have
determined to sell Reliance Electric's
telecommunications operations because they do not fit
into Rockwell's strategic plans.
We are convinced that a combination of Allen-Bradley and Reliance
Electric makes compelling strategic and financial sense for both our companies
and our respective constituents. I stand ready to meet with your board to
present our plans.
Sincerely,
/signed/
Donald R. Beall
cc: Members of the Board of Directors
of Reliance Electric Company
<PAGE> 1
Exhibit 10
[RELIANCE LETTERHEAD]
November 3, 1994
Dear Reliance Electric Stockholder:
On October 21, 1994, Rockwell International Corporation launched an
unsolicited $30 per share cash tender offer for all of the Class A common stock
of Reliance Electric Company. This tender offer is inconsistent with Reliance's
planned merger with General Signal Corporation in which each share of Reliance
Class A common stock would be converted into .739 shares of General Signal
common stock.
Your Board of Directors has unanimously determined at this time to take no
position with respect to the Rockwell tender offer. The reasons for this
decision are set forth in Item 4 of the enclosed Schedule 14D-9. This decision
is based upon the many uncertainties and conditions associated with the Rockwell
tender offer as well as the terms of our merger agreement with General Signal
which includes provisions that could, under certain circumstances, give General
Signal a right to terminate the merger agreement and receive a $50 million
termination fee from Reliance.
The combination of the General Signal merger agreement and the Rockwell
tender offer makes for a complex situation. The Board continues to believe that
the merger with General Signal is an attractive transaction with significant
benefits for Reliance stockholders. The Board continues to support the merger
with General Signal while closely monitoring developments concerning the
Rockwell tender offer. We will keep you advised of future developments and we
thank you for your continued support.
Very truly yours,
John C. Morley
President and Chief Executive Officer
<PAGE> 1
Exhibit 11
News Release RELIANCE
ELECTRIC LOGO
For More NOTE TO EDITORS
Information Stephen A. Van Oss For further information regarding
Contact: the content of this news release,
please contact:
News Release No. 94-13 Stephen A. Van Oss
Release Date: 216-266-5809
- --------------------------------------------------------------------------------
RELIANCE BOARD RESPONDS TO ROCKWELL TENDER OFFER
Cleveland, Ohio -- November 3, 1994 -- John C. Morley, President and Chief
Executive Officer of Reliance Electric Company (NYSE:REE), announced today that
Reliance's Board of Directors unanimously determined that "the Company is unable
to take a position with respect to the tender offer by Rockwell and is making no
recommendation at this time with respect to the offer." On October 21, 1994, ROK
Acquisition Corporation (a wholly owned subsidiary of Rockwell International
Corporation) initiated a cash tender offer of $30 per share for all shares of
Reliance's Class A common stock and an equivalent price for the convertible
shares.
In a letter to Reliance stockholders Mr. Morley explained that the decision to
take no position with respect to the Rockwell tender offer was based upon the
many uncertainties and conditions associated with the Rockwell tender offer as
well as the terms of Reliance's merger agreement with General Signal which
includes provisions that could, under certain circumstances, give General Signal
a right to terminate the merger agreement and receive a $50 million termination
fee from Reliance.
The Reliance Board of Directors continues to believe that the proposed merger
with General Signal, which was announced on August 30, 1994, represents an
attractive transaction, with significant benefits for Reliance stockholders.
The planned merger with General Signal Corporation, which the Board continues
to support, would result in each share of Reliance Class A common stock being
converted into .739 shares of General Signal Corporation (NYSE: GSX).
<PAGE> 1
Exhibit 12
AGREEMENT AND PLAN
OF MERGER
BY AND BETWEEN
RELIANCE ELECTRIC COMPANY
AND
GENERAL SIGNAL CORPORATION
DATED AS OF AUGUST 30, 1994
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
PAGE
----
<S> <C> <C>
THE MERGER
Section 1.01. The Merger....................................................... 1
Section 1.02. Effective Time................................................... 1
Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation...................................................... 2
Section 1.04. Directors and Officers of Surviving Corporation.................. 2
Section 1.05. Further Assurances............................................... 2
ARTICLE II
CONVERSION OF SHARES
Section 2.01. Effect on Reliance Shares........................................ 2
Section 2.02. Effect on Reliance Options....................................... 4
Section 2.03. Exchange Procedures.............................................. 4
Section 2.04. Fractional Shares................................................ 4
Section 2.05. Transfers........................................................ 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 3.01. Organization..................................................... 5
Section 3.02. Capitalization................................................... 5
Section 3.03. Authority........................................................ 6
Section 3.04. No Violations; Consents and Approvals............................ 6
Section 3.05. SEC Documents; Financial Statements.............................. 7
Section 3.06. Absence of Certain Changes....................................... 8
Section 3.07. Legal Proceedings................................................ 8
Section 3.08. Compliance with Laws and Agreements.............................. 8
Section 3.09. Rights Agreement................................................. 8
Section 3.10. Accounting Matters............................................... 8
Section 3.11. Joint Proxy Statement/Prospectus, Registration Statement......... 9
Section 3.12. State Antitakeover Statutes...................................... 9
Section 3.13. Broker's Fees.................................................... 9
Section 3.14. Fairness Opinions................................................ 9
Section 3.15. Reliance Taxes................................................... 9
ARTICLE IV
COVENANTS
Section 4.01. Conduct of Business of Reliance and General Signal............... 10
Section 4.02. Acquisitions..................................................... 11
Section 4.03. No Solicitation.................................................. 11
Section 4.04. Access to Information............................................ 11
Section 4.05. Registration Statement and Proxy Statement....................... 12
Section 4.06. Stockholders' Meetings........................................... 12
Section 4.07. Board of Directors of General Signal............................. 13
Section 4.08. Reasonable Efforts; Other Actions................................ 13
Section 4.09. Public Announcements............................................. 13
Section 4.10. Notification of Certain Matters.................................. 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.11. Indemnification.................................................. 14
Section 4.12. Expenses......................................................... 14
Section 4.13. Affiliates....................................................... 14
Section 4.14. Stock Exchange Listings.......................................... 14
Section 4.15. Reliance Rights Plan............................................. 14
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL AND RELIANCE
Section 5.01. Registration Statement........................................... 15
Section 5.02. Stockholder Approval............................................. 15
Section 5.03. Consents and Approvals........................................... 15
Section 5.04. Auditors' Letters................................................ 15
Section 5.05. Accounting Treatment............................................. 15
Section 5.06. Tax Matters...................................................... 15
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL
Section 6.01. Representations and Warranties True.............................. 15
Section 6.02. Performance...................................................... 15
Section 6.03. Certificates..................................................... 16
Section 6.04. Certain Proceedings.............................................. 16
Section 6.05. Material Adverse Change.......................................... 16
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RELIANCE
Section 7.01 Representations and Warranties True.............................. 16
Section 7.02. Performance...................................................... 16
Section 7.03. Certificates..................................................... 16
Section 7.04. Certain Proceedings.............................................. 16
Section 7.05. Material Adverse Change.......................................... 16
Section 7.06. Listings......................................................... 16
ARTICLE VIII
CLOSING
Section 8.01. Time and Place................................................... 16
Section 8.02. Filings at the Closing........................................... 17
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.01. Termination...................................................... 17
Section 9.02. Termination by General Signal.................................... 17
Section 9.03. Termination by Reliance.......................................... 17
Section 9.04. Procedure for Termination........................................ 18
Section 9.05. Effect of Termination and Abandonment............................ 18
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE X
DEFINITIONS
Section 10.01. Terms Defined in the Agreement................................... 19
ARTICLE XI
MISCELLANEOUS
Section 11.01. Amendment and Modification....................................... 20
Section 11.02. Waiver of Compliance; Consents................................... 20
Section 11.03. Survivability; Investigations.................................... 20
Section 11.04. Reasonable Efforts............................................... 21
Section 11.05. Notices.......................................................... 21
Section 11.06. Assignment....................................................... 21
Section 11.07. Governing Law.................................................... 22
Section 11.08. Counterparts..................................................... 22
Section 11.09. Severability..................................................... 22
Section 11.10. Interpretation................................................... 22
Section 11.11. Entire Agreement................................................. 22
</TABLE>
SCHEDULES
Schedule 3.02(A) General Signal Plans
Schedule 3.02(B) Reliance Plans
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Citicorp Agreement
Exhibit B Form of Reliance Rights Plan
Exhibit C-1 Form of Restated Certificate of Incorporation of General Signal
Exhibit C-2 Form of General Signal Rights Agreement Amendment
Exhibit D-1 Form of Reliance Affiliate Letter
Exhibit D-2 Form of General Signal Affiliate Letter
Exhibit E Form of Tax Opinion of Cahill
Exhibit F Surviving Corporation By-law Provision
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 30, 1994 (the
"Agreement"), by and between RELIANCE ELECTRIC COMPANY, a Delaware corporation
originally formed under the name Reliance Acquisition Corporation ("Reliance"),
and GENERAL SIGNAL CORPORATION, a New York corporation originally formed under
the name General Signal Railway Company ("General Signal"). Reliance and General
Signal are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Boards of Directors of Reliance and General Signal deem it
advisable and in the best interests of each corporation and its respective
stockholders that Reliance and General Signal combine in order to advance their
long-term business interests, all upon the terms and subject to the conditions
of this Agreement; and
WHEREAS, it is intended that the combination of Reliance and General Signal
be effected by a merger of Reliance with and into General Signal with General
Signal surviving, which shall be recorded for accounting purposes as a
pooling-of-interests, and for Federal income tax purposes as a tax-free
reorganization described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to General Signal's and Reliance's willingness to
enter into this Agreement, (A) Court Square Capital Limited ("CSCL"), a wholly
owned subsidiary of Citicorp ("Citicorp") and General Signal have entered into
an agreement (the "Citicorp Agreement") substantially in the form of Exhibit A,
(B) Reliance adopted a stockholder rights plan in the form of Exhibit B hereto
(the "Reliance Rights Plan") and (C) the Affiliates of Reliance have delivered
to General Signal executed copies of the letter required to be delivered
pursuant to Section 4.13 hereof;
WHEREAS, Reliance and General Signal desire to make certain
representations, warranties, covenants and agreements in connection with the
merger of Reliance and General Signal.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger. (a) In accordance with the provisions of this
Agreement and the New York Business Corporation Law ("NYBCL") and the General
Corporation Law of the State of Delaware ("DGCL"), at the Effective Time,
Reliance shall be merged (the "Merger") with and into General Signal, and
General Signal shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of New York. At the Effective Time the separate existence
of Reliance shall cease.
(b) The parties shall select, prior to the date on which the Joint Proxy
Statement/Prospectus is first mailed to stockholders, a name for the Surviving
Corporation which shall prominently include the name "Reliance" and shall be
approved by the Boards of Directors of Reliance and General Signal, after
consultation between the Chief Executive Officers of Reliance and General
Signal, and which shall be set forth in an amendment hereto approved by the
Board of Directors of each of the parties hereto.
(c) The Merger shall have the effects on Reliance and General Signal as
constituent corporations of the Merger as provided under the DGCL and the NYBCL.
Section 1.02 Effective Time. The Merger shall become effective at the
time of filing of, or at such later time specified in, a certificate of merger,
in the form required by and executed in accordance with the
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DGCL and the NYBCL, with the Secretary of State of the State of Delaware in
accordance with the provisions of Section 252 of the DGCL and by the Department
of State of the State of New York in accordance with the provisions of Section
904 of the NYBCL (the "Certificate of Merger"). The date and time when the
Merger shall become effective is herein referred to as the "Effective Time."
Section 1.03 Certificate of Incorporation and By-Laws of Surviving
Corporation. The Restated Certificate of Incorporation and By-Laws of General
Signal, as amended in accordance with this Agreement, shall be the Certificate
of Incorporation and By-Laws of the Surviving Corporation until thereafter
amended as provided by law.
Section 1.04 Directors and Officers of Surviving Corporation. (a) The
number of directors of the Surviving Corporation shall be eighteen until
otherwise determined pursuant to the By-Laws of the Surviving Corporation. The
directors of General Signal and, subject to the requisite vote of the
shareholders of General Signal, the persons specified in Section 4.06(ii) shall
be the directors of the Surviving Corporation and will hold office from and
after the Effective Time as described in the Joint Proxy Statement/Prospectus
until their respective successors are duly elected or appointed and qualify in
the manner provided in the Certificate of Incorporation and By-Laws of the
Surviving Corporation or as otherwise provided by law or their earlier
resignation or removal.
(b) The officers of the Surviving Corporation shall be determined by the
Board of Directors of the Surviving Corporation immediately after the Effective
Time, following consultation between the respective Chief Executive Officers of
the Constituent Corporations, except that Mr. Carpenter shall be the Chairman
and Chief Executive Officer of the Surviving Corporation and Mr. Morley shall be
the Vice Chairman of the Surviving Corporation, and will hold office from and
after the Effective Time until their respective successors are duly appointed
and qualify in the manner provided in the By-Laws of the Surviving Corporation
or as otherwise provided by law or their earlier resignation or removal. The
Vice Chairman shall be an executive officer of the Surviving Corporation with
the duties set forth in the By-Laws of the Surviving Corporation, which shall be
as reflected in the Surviving Corporation By-Law provision set forth on Exhibit
F.
Section 1.05 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.01 Effect on Reliance Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Each share of Reliance's Class A common stock, par value $.01 per
share ("Reliance Class A Common Stock"), issued and outstanding immediately
prior to the Effective Time (except for shares owned by Reliance or any of
its subsidiaries) shall be converted into the right to receive .739 shares
(the "Conversion Ratio") of Common Stock, par value $1.00 per share, of the
Surviving Corporation ("Survivor Common Stock"). Holders of Reliance Class
A Common Stock shall also have the right to receive together with each
share of Survivor Common Stock issued in the Merger pursuant to this
Section 2.01(a), an associated common stock purchase right ("Survivor
Common Stock Right") pursuant to the Rights Agreement dated as of March 7,
1986 between General Signal and the Rights
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Agent named therein (as amended through the date hereof, the "General
Signal Rights Agreement"). References herein to the Survivor Common Stock
issuable in the Merger shall be deemed to include associated Survivor
Common Stock Rights.
(b) Each share of Reliance's Class B common stock, par value $.01 per
share ("Reliance Class B Common Stock"), issued and outstanding immediately
prior to the Effective Time (except for shares owned by Reliance or any of
its subsidiaries and any Dissenting Shares) shall be converted into the
right to receive (i) .739 shares of Class B Common Stock, par value $1.00
per share, of the Surviving Corporation ("Survivor Class B Common Stock"
and, together with the Survivor Common Stock, the "Survivor Shares") or
(ii) if General Signal receives at least two business days prior to the
Closing Date a written notice from any holder of Reliance Class B Common
Stock that it elects to receive Survivor Common Stock in lieu of the
Survivor Class B Common Stock it would otherwise be entitled to receive
under this clause (b), .739 shares of Survivor Common Stock. Holders of
Reliance Class B Common Stock shall also have the right to receive together
with each share of Survivor Class B Common Stock issued in the Merger
pursuant to this Section 2.01(b), an associated Survivor Class B Common
Stock purchase right ("Survivor Class B Right" and, together with the
Survivor Common Stock Right, the "Survivor Rights") pursuant to the General
Signal Rights Agreement. References herein to the Survivor Class B Common
Stock issuable in the Merger shall be deemed to include associated Survivor
Class B Rights.
(c) Each share of Reliance's Class C common stock, par value $.01 per
share ("Reliance Class C Common Stock" and, together with Reliance Class A
Common Stock and Reliance Class B Common Stock, the "Reliance Shares"),
issued and outstanding immediately prior to the Effective Time (except for
shares owned by Reliance or any of its subsidiaries and any Dissenting
Shares) shall be converted into the right to receive (i) 2.001 shares of
Survivor Class B Common Stock, or (ii) if General Signal receives at least
two business days prior to the Closing Date a written notice from any
holder of Reliance Class C Common Stock that it elects to receive Survivor
Common Stock in lieu of all or a portion of the Survivor Class B Common
Stock it would otherwise be entitled to receive under this clause (c),
2.001 shares of Survivor Common Stock.
(d) Each share of Reliance Class A Common Stock, Reliance Class B
Common Stock and Reliance Class C Common Stock owned by Reliance as
treasury stock or owned by any subsidiary of Reliance shall be cancelled.
The status of all securities of General Signal, issued or reserved for
issuance (including, without limitation, shares of General Signal Common
Stock, and options, warrants and convertible debt securities to acquire
shares of General Signal Common Stock), shall remain unchanged.
(e) All Reliance Shares shall be cancelled and retired, and each
certificate representing any such Reliance Shares shall thereafter (i)
represent only the right to receive the Survivor Shares issuable in
exchange for such Reliance Shares upon the surrender of such certificate in
accordance with Section 2.03 (and any cash payable in respect of fractional
shares) and (ii) entitle the holder thereof to vote with respect to, and
receive dividends and distributions on, such number and class of whole
Survivor Shares which such holder is entitled to receive in exchange for
such certificates, provided that dividends shall be paid to such holder,
without interest, only upon surrender of certificates in accordance with
Section 2.03.
(f) Notwithstanding anything in this Agreement to the contrary, shares
of Reliance Class B Common Stock and Reliance Class C Common Stock which
are outstanding immediately prior to the Effective Time and which are held
by stockholders who (a) shall not have voted such shares in favor of the
Merger and (b) shall have delivered to Reliance a written demand for
appraisal of such shares in the manner provided in Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted as described in Section
2.01, but instead the holders thereof shall be entitled to payment of the
appraised value of such shares in accordance with the provisions of such
Section 262; provided, however, that (i) if any holder of Dissenting Shares
shall subsequently deliver a written withdrawal of its demand for appraisal
of such shares (with the written approval of the Surviving Corporation, if
such withdrawal is not tendered within 60 days after the Closing Date), or
(ii) if any holder fails to establish such holder's entitlement to
appraisal rights as provided in such Section 262, or (iii) if neither any
holder of Dissenting
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Shares nor the Surviving Corporation has filed a petition demanding a
determination of the value of all Dissenting Shares within the time
provided in such Section 262, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such shares and such shares shall
thereupon be deemed to have been converted into the right to receive, and
to have become exchangeable for, as of the Effective Time, Survivor Class B
Common Stock pursuant to Section 2.01(b) or Section 2.01(c).
Section 2.02 Effect on Reliance Options. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
each option to purchase Reliance Class A Common Stock that is outstanding under
the Reliance Plans immediately prior to the Effective Time, whether or not
exercisable, shall be assumed by the Surviving Corporation in such manner that
each such option shall thereafter be exercisable upon the same terms and
conditions as under the applicable Reliance Plan and the applicable option
agreement issued thereunder, except that (i) each such option shall be
exercisable for that number of shares of Survivor Common Stock (rounded up to
the nearest whole share) into which the number of shares of Reliance Class A
Common Stock subject to such option immediately prior to the Effective Time
would be converted under Section 2.01 if such option were exercised prior to the
Effective Time, and (ii) the option price per share of Survivor Common Stock
shall be an amount equal to the option price per share of Reliance Class A
Common Stock subject to such option in effect immediately prior to the Effective
Time divided by the Conversion Ratio (rounded up to the nearest whole cent).
Section 2.03 Exchange Procedures. (a) Promptly after the Effective Time,
the Surviving Corporation shall mail or cause to be mailed to each record
holder, as of the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Reliance Shares (the
"Certificates") a form letter of transmittal which shall be mutually
satisfactory to the parties hereto (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Surviving Corporation) and instructions for
use in effecting the surrender of the Certificates for exchange therefor. Upon
surrender to the Surviving Corporation of a Certificate, together with such
letter of transmittal duly executed and any documents required thereby, the
holder of such Certificate shall be entitled to receive in exchange therefor
that number and class of whole Survivor Shares which such holder has the right
to receive under this Article II, and such Certificate shall forthwith be
cancelled. If any Survivor Shares are to be issued to a person other than the
person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of exchange that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall pay any transfer or other
taxes required by reason of the exchange to a person other than the registered
holder of the Certificate surrendered or such person shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable.
(b) The Surviving Corporation shall not be liable to any holder of Reliance
Shares with respect to any Survivor Shares delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(c) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the transfer
agent for the Survivor Shares, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
transfer agent for the Survivor Shares will issue in exchange for such lost,
stolen or destroyed Certificate the Survivor Shares and unpaid dividends and
distributions on Survivor Shares as provided pursuant to Sections 2.01 and 2.03
of this Agreement.
Section 2.04 Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of Reliance Shares who upon surrender of
Certificates therefor would be entitled to receive from the Surviving
Corporation a fraction of a Survivor Share shall not be entitled to receive
dividends on or vote such fractional share and shall receive, in lieu of such
fractional share, from the Surviving Corporation cash in an amount equal to such
fraction multiplied by the Market Value of the relevant Survivor Share. The
fractional share interests of each Reliance shareholder will be aggregated, and
no Reliance shareholder will receive cash in an amount equal to or greater than
the value of one full Survivor Share. "Market Value" shall mean, with respect
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to the Survivor Common Stock and Survivor Class B Common Stock issued to
previous holders of Reliance Shares, the mean between the high and low prices of
General Signal Common Stock on the New York Stock Exchange ("NYSE") on the date
immediately prior to the Effective Time. All references in this Agreement to
Survivor Shares shall be deemed to include any cash in lieu of fractional shares
payable pursuant to this Section 2.04.
Section 2.05 Transfers. From and after the Effective Time there shall be
no transfers on the stock transfer books of Reliance or the Surviving
Corporation of Reliance Shares. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
General Signal represents and warrants to Reliance and Reliance represents
and warrants to General Signal (each as to itself) as follows:
Section 3.01 Organization. It and each of its Significant Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation and it has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. It and each of its subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a material
adverse effect on the business, operations, assets, financial condition or
results of operations of, in the case of General Signal, General Signal and its
subsidiaries taken as a whole or, in the case of Reliance, Reliance and its
subsidiaries taken as a whole (a "Material Adverse Effect"). It owns directly
all of the outstanding capital stock of each of its Significant Subsidiaries. As
used in this Agreement a "Significant Subsidiary" means a corporation which is a
"significant subsidiary" of such party within the meaning of Rule 1-02 (v) of
Regulation S-X of the Securities and Exchange Commission ("SEC"). Set forth as
Exhibit C-1 is a copy of the Form of Restated Certificate of Incorporation of
General Signal to be delivered to the Department of State of the State of New
York as it will be in effect at the Effective Time, subject to the requisite
vote of the shareholders of General Signal, the form of which has been approved
by the Board of Directors of General Signal.
Section 3.02 Capitalization. (a) The authorized capital stock of General
Signal consists of 150,000,000 shares of common stock, par value $1.00 per share
("General Signal Common Stock"), and 10,000,000 shares of preferred stock, par
value $1.00 per share ("General Signal Preferred Stock"). As of the date hereof,
there are 47,329,742 shares of General Signal Common Stock issued and
outstanding, 16,258,615 shares held in General Signal's treasury, and no shares
of General Signal Preferred Stock outstanding. At the Effective Time, the
authorized capital stock of General Signal shall consist of 250,000,000 shares
of General Signal Common Stock and 26,500,000 shares of General Signal Class B
Common Stock, par value $1.00 per share ("General Signal Class B Common Stock")
and 10,000,000 shares of General Signal Preferred Stock. As of the date hereof
there were 3,241,437 shares of General Signal Common Stock reserved for issuance
upon the exercise of outstanding options and options which may be granted under
the stock option plans of General Signal, all of which are listed on Schedule
3.02(A) (the "General Signal Plans"), and 2,532,000 shares reserved for issuance
upon the conversion of the outstanding $100,000,000 aggregate principal amount
of 5 3/4% Convertible Subordinated Notes due 2002 of General Signal (the
"Convertible Notes"). Set forth as Exhibit C-2 is a form of Amendment to the
General Signal Rights Agreement which has been approved by the Board of
Directors of General Signal. Each share of General Signal Common Stock is, and
each Survivor Share will be, when issued, accompanied by one Common Stock
purchase right (the "Purchase Rights") or one Survivor Right. Except for the
Purchase Rights, the Convertible Notes and the options granted or to be granted
under the General Signal Plans, there are not now, and at the Effective Time
there will not be, any existing options, warrants, calls, subscriptions, or
other rights or other agreements or commitments obligating
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General Signal to issue, transfer or sell any shares of its capital stock or any
other securities convertible into or evidencing the right to subscribe for any
such shares. All issued and outstanding shares of General Signal Common Stock
are, and all shares of Survivor Common Stock and Survivor Class B Common Stock
to be issued at the Effective Time shall be, when issued, duly authorized and
validly issued, fully paid, non-assessable and free of preemptive rights with
respect thereto.
(b) The authorized capital stock of Reliance consists of 100,000,000 shares
of Reliance Class A Common Stock, 100,000,000 shares of Reliance Class B Common
Stock, 12,000,000 Shares of Reliance Class C Common Stock and 15,000,000 Shares
of preferred stock, par value $.10 per share ("Reliance Preferred Stock"). As of
the date hereof, there are 32,909,939 shares of Reliance Class A Common Stock,
3,161,032 shares of Reliance Class B Common Stock, 5,250,000 shares of Reliance
Class C Common Stock, no shares of Reliance Preferred Stock issued and
outstanding and no Reliance Shares held in Reliance's treasury. All of the
outstanding shares of Reliance Class A Common Stock are convertible into
Reliance Class B Common Stock and vice versa on a share for share basis. Each
share of Reliance Class C Common Stock is convertible into 2.708 shares of
Reliance Class A Common Stock under certain circumstances. As of the date
hereof, there were reserved under the stock option and long-term incentive plans
of Reliance, all of which are listed on Schedule 3.02(B) (the "Reliance Plans"),
1,259,365 shares of Reliance Class A Common Stock for issuance upon exercise of
outstanding options or options which may be granted upon achievement of certain
performance goals under Reliance's 1994 Executive Long-Term Incentive Plan (the
"LTIP"). Except for the conversion rights of holders of Reliance Shares with
respect to conversion of such shares into other classes of Reliance Shares, the
rights granted pursuant to the Reliance Rights Agreement, and options and rights
to receive Reliance Class A Common Stock under the Reliance Plans, there are not
now, and at the Effective Time there will not be, any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Reliance or any of its subsidiaries to issue, transfer or
sell any shares of capital stock of Reliance or any of its subsidiaries or any
other securities convertible into or evidencing the right to subscribe for any
such shares. All issued and outstanding Reliance Shares are duly authorized and
validly issued, fully paid, non-assessable and free of preemptive rights with
respect thereto.
Section 3.03 Authority. (a) It has full corporate power and authority to
execute and deliver this Agreement and, subject to the requisite approval of its
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by its
Board of Directors, and other than the requisite approval by its stockholders,
no other corporate proceedings are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by it and, assuming this Agreement
constitutes a legal, valid and binding agreement of the other party hereto, it
constitutes a legal, valid and binding agreement of it, enforceable against it
in accordance with its terms.
(b) General Signal's Board of Directors has taken all appropriate and
necessary action such that the provisions of Section 912 of the NYBCL will not
apply to the Merger. Reliance's Board of Directors has taken all appropriate and
necessary action such that the provision of Section 203 of the DGCL will not
apply to the Merger.
Section 3.04 No Violations; Consents and Approvals. (a) Neither the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby nor compliance by it with any of the provisions hereof will
(i) subject to obtaining the requisite approval of the holders of, with respect
to Reliance, a majority and, with respect to General Signal, two-thirds of the
outstanding stock entitled to vote thereon, violate any provision of its
certificate of incorporation or by-laws, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default, or give rise to any right of termination, cancellation or acceleration
or any right which becomes effective upon the occurrence of a merger,
consolidation or change in control, under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture or other instrument of
indebtedness for money borrowed to which it or any of its subsidiaries is a
party, or by which it or any of its subsidiaries or any of their respective
properties is bound other than, with respect to Reliance, the Competitive
Advance and Revolving Credit Facility Agreement, dated as of April 21, 1993
among Reliance and the Lenders named therein and Chemical Bank, as
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administrative agent, and, with respect to each of General Signal and Reliance,
any violations, defaults, breaches of or rights under notes, bonds, mortgages,
indentures or other instruments of indebtedness related to indebtedness for
borrowed money amounting in the aggregate to less than $20,000,000, or (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default, or give rise to any right of termination,
cancellation or acceleration or any right which becomes effective upon the
occurrence of a merger, consolidation or change in control, under, any of the
terms, conditions or provisions of any license, franchise, permit or agreement
(other than those covered by the preceding clause (ii)) to which it or any of
its subsidiaries is a party, or by which it or any of its subsidiaries or any of
their respective properties is bound, or (iv) violate any statute, rule,
regulation, order or decree of any public body or authority by which it or any
of its subsidiaries or any of its respective properties is bound, excluding from
the foregoing clauses (iii) and (iv) violations, breaches, defaults or rights
which, either individually or in the aggregate, would not have a Material
Adverse Effect or materially impair its ability to consummate the transactions
contemplated hereby or for which it has received or, prior to the Merger, shall
have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by it in connection
with the execution and delivery of this Agreement, or the consummation by it of
the transactions contemplated hereby, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) in connection, or in compliance, with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and by the Department of State of the State of New York, (iv) in the
case of General Signal, the filing of the Restated Certificate of Incorporation
of General Signal by the Department of State of the State of New York, (v) such
filings and consents as may be required under any environmental law pertaining
to any notification, disclosure or required approval triggered by the Merger or
the transactions contemplated by this Agreement, (vi) with respect to General
Signal, filings with, and approval of, the NYSE and the Pacific Stock Exchange
("PSE") in connection with obligations of General Signal under Section 4.14,
(vii) filing with, and approval of, the NYSE and the SEC with respect to the
delisting and deregistration of Reliance Class A Common Stock, (viii) such
consents, approvals, orders, authorizations, notifications, approvals,
registrations, declarations and filings as may be required under the
corporation, takeover or blue sky laws of various states and (ix) such other
consents, orders, authorizations, registrations, declarations and filings not
obtained prior to the Effective Time the failure of which to be obtained or made
would not, individually or in the aggregate, have a Material Adverse Effect, or
materially impair such party's ability to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Section 3.05 SEC Documents; Financial Statements. (a) It has made
available to the other party hereto copies of each registration statement,
report, proxy statement or information statement filed with the SEC by it since
January 1, 1992 (the "SEC Documents"). As of their respective dates, such
party's SEC Documents complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
none of such SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and its Board of Directors consists of the Directors
identified in its 1994 proxy statement.
(b) Neither it nor any of its subsidiaries, nor any of their respective
assets, businesses, or operations, is as of the date of this Agreement a party
to, or is bound or affected by, or receives benefits under any contract or
agreement or amendment thereto, that in each case would be required to be filed
as an exhibit to a Form 10-K as of the date of this Agreement that has not been
filed as an exhibit to an SEC Document filed prior to the date of this
Agreement.
(c) As of their respective dates, the consolidated financial statements
included in such party's SEC Documents complied as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented its consolidated financial position and that of
its
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consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash flows for the periods then ended
(subject, in the case of unaudited statements, to the lack of footnotes thereto,
to normal year-end audit adjustments and to any other adjustments described
therein).
(d) The SEC Documents include (i) consolidated balance sheets as of
December 31, 1993 and June 30, 1994; and (ii) consolidated statements of income
for the year ended December 31, 1993, and the six month period ended June 30,
1994 for such party, as the case may be. Each of the foregoing consolidated
audited balance sheets as at December 31, 1993 is sometimes herein referred to
as the "Balance Sheet." Each of the foregoing consolidated unaudited balance
sheet as at June 30, 1994 is sometimes herein referred to as the "Interim
Balance Sheet."
(e) There are no liabilities or obligations (and no basis therefor) of such
party accrued, absolute, or contingent and whether due or to become due, other
than liabilities and obligations (i) reflected, or adequately reserved against,
in the Interim Balance Sheet or (ii) which, individually or in the aggregate,
would not have a Material Adverse Effect.
Section 3.06 Absence of Certain Changes. Except as reflected, or
adequately reserved against, in its Interim Balance Sheet, since December 31,
1993, it has not suffered (a) any event or occurrence which would have a
Material Adverse Effect or (b) any changes in accounting methods, principles or
practices except as required or permitted by generally accepted accounting
principles.
Section 3.07 Legal Proceedings. Except as disclosed in such party's SEC
Documents filed prior to the date hereof, or reflected or adequately reserved
against in its Balance Sheet, there is no (i) claim, action, suit or proceeding
pending or, to its best knowledge, threatened, against or relating to it or any
of its subsidiaries or any of their respective assets before any court or
governmental or regulatory authority or body or arbitration tribunal or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding, to which it or any of its subsidiaries is a party except any such
claim, action, suit or proceeding or judgment, order, writ, injunction, decree,
application, request or motion which, either individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
Section 3.08 Compliance with Laws and Agreements. Neither it nor any of
its subsidiaries is (i) in violation of or noncompliance with any statute, law,
ordinance, regulation, rule or order of any foreign, federal, state or local
government or any other governmental department or agency, or any judgment,
decree or order of any court, applicable to its business or operations or (ii)
in violation, breach or default (with or without due notice or lapse of time or
both) under any of the terms, conditions or provisions of any agreement to which
it is a party, or by which its properties are bound, except where any such
violations or failures to comply or breaches or defaults would not, individually
or in the aggregate, have a Material Adverse Effect. Such party and its
subsidiaries have all permits, licenses and franchises from governmental
agencies required to conduct their businesses as now being conducted, except for
such permits, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.09 Rights Agreement. The General Signal Rights Agreement,
subject to execution by the rights agent thereunder, has been amended to provide
that (i) Reliance will not become an "Acquiring Person" and that no "Triggering
Event", "Share Acquisition Date" or "Distribution Date" (as such terms are
defined in the General Signal Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby and (ii) holders of Reliance Class B Common
Stock and Reliance Class C Common Stock, in addition to the shares of Survivor
Class B Common Stock they are entitled to receive pursuant to the Merger, shall
receive associated Survivor Class B Rights under the General Signal Rights
Agreement. The Survivor Class B Rights shall contain the same terms and
conditions (including the same potential economic benefits) as the Purchase
Rights.
Section 3.10 Accounting Matters. Neither it nor, to its best knowledge,
any of its affiliates, has through the date hereof, taken or agreed to take any
action that would prevent the accounting of the business combination to be
effected by the Merger as a "pooling of interests" in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases issued pursuant
thereto, and the pronouncements of the SEC.
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Section 3.11 Joint Proxy Statement/Prospectus, Registration
Statement. None of the information to be supplied by such party for inclusion
or incorporation by reference in (i) the registration statement on Form S-4 (as
it may be amended or supplemented from time to time, the "Registration
Statement") relating to Survivor Shares to be issued in connection with the
Merger or (ii) the joint proxy statement to be distributed in connection with
the stockholders meetings of General Signal and Reliance contemplated by Section
4.06 (as it may be amended or supplemented from time to time, the "Proxy
Statement" and together with the prospectus to be included in the Registration
Statement, the "Joint Proxy Statement/Prospectus") will, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, and, in the case of the Proxy Statement, at the time of its mailing to
stockholders of General Signal and Reliance and at the time of their respective
stockholders meetings, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. The Proxy Statement and, with
respect to General Signal, the Registration Statement will comply as to form in
all material respects with the applicable provisions of the Securities Act and
the Exchange Act.
Section 3.12 State Antitakeover Statutes. No "business combination,"
"moratorium," "control share" or other state antitakeover statute or regulation
(x) prohibits or restricts its ability to perform its obligations under this
Agreement or its ability to consummate the transactions contemplated hereby, (y)
would have the effect of invalidating or voiding this Agreement, or any
provision hereof, or (z) would subject the other party hereto to any material
impediment or condition in connection with the exercise of any of its rights
under this Agreement.
Section 3.13 Broker's Fees. Except for the engagement of Donaldson,
Lufkin & Jenrette Securities Corporation by General Signal and Goldman, Sachs &
Co. and Prudential Securities Incorporated by Reliance, neither Reliance,
General Signal nor any of their respective subsidiaries or any of their
respective directors or officers has employed any broker, finder or financial
advisor or incurred any liability for any broker's fees, commissions, or
financial advisory or finder's fees in connection with any of the transactions
contemplated by this Agreement.
Section 3.14 Fairness Opinions. General Signal has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation, to the effect that, as
of August 29, 1994, the consideration to be paid by the Surviving Corporation to
the stockholders of Reliance is fair to General Signal's stockholders from a
financial point of view and Reliance has received (i) the opinion of Prudential
Securities Corporation to the effect that, as of August 29, 1994, the Conversion
Ratio is fair to Reliance stockholders from a financial point of view and (ii)
the opinion of Goldman Sachs & Co. to the effect that as of August 29, 1994, the
Conversion Ratio is fair to the holders of Reliance Shares.
Section 3.15 Reliance Taxes. (a) Reliance hereby represents and warrants
that, in regard to Reliance's Overall Foreign Loss in existence immediately
before the Effective Time as computed here to date by Reliance, no material
portion of the Overall Foreign Loss attributable to interest expense or capital
losses will be allocated in accordance with Treasury Regulation Section
1.1502-9(c) to Reliance Parent at the Effective Time. Further, Reliance
represents that the Reliance Parent has not owned any foreign assets since its
incorporation in December of 1986.
(b) For purposes of Section 3.15(a) the following capitalized terms have
the meanings set forth below:
"Reliance's Overall Foreign Loss" means the balance in the consolidated
overall foreign loss account for the Reliance Consolidated Group as of the date
hereof, as determined pursuant to Treas. Reg. sec. 1.1502-9(b).
"Reliance Consolidated Group" means the affiliated group of corporations of
which Reliance Parent is the common parent, all within the meaning attributable
to such terms in section 1504(a) of the Code and the Treasury regulations
promulgated thereunder.
"Reliance Parent" means the common parent of the Reliance Consolidated
Group, within the meaning of section 1504(a) of the Code.
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ARTICLE IV
COVENANTS
Section 4.01 Conduct of Business of Reliance and General Signal. Except
as contemplated by this Agreement or as expressly agreed to in writing by
General Signal and Reliance, during the period from the date of this Agreement
to the Effective Time, each of General Signal and its subsidiaries and Reliance
and its subsidiaries will conduct its operations according to its ordinary
course of business consistent with past practice, and will use all commercially
reasonable efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
materially adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, neither General Signal nor Reliance will nor will
they permit any of their respective subsidiaries to, without the prior written
consent of the other party:
(a) amend its certificate of incorporation or by-laws, except General
Signal may amend its certificate of incorporation and bylaws as required by
the terms of this Agreement;
(b) authorize for issuance, issue, sell, deliver, grant any options
for, or otherwise agree or commit to issue, sell or deliver any shares of
any class of its capital stock or any securities convertible into shares of
any class of its capital stock, except (i) pursuant to and in accordance
with the terms of the General Signal Rights Agreement, the Reliance Rights
Plan or currently outstanding convertible securities and options, and (ii)
options granted under the Reliance Plans or the General Signal Plans, in
the ordinary course of business consistent with past practice;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or any of its subsidiaries, except (i) the payment of
regular quarterly dividends consistent with past practice, (ii) purchase or
redemption of General Signal Common Stock pursuant to the previously
publicly announced General Signal stock repurchase plans or (iii) as
otherwise expressly provided in this Agreement;
(d) except in the ordinary course of business, consistent with past
practice (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except its wholly owned
subsidiaries in the ordinary course of business and consistent with past
practices; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person;
(e) except as otherwise expressly contemplated by this Agreement or in
the ordinary course of business, consistent with past practice, (i)
increase in any manner the compensation of any of its directors, officers
or other employees; (ii) pay or agree to pay any pension, retirement
allowance or other employee benefit not required, or enter into or agree to
enter into any agreement or arrangement with such director, officer or
employee, whether past or present, relating to any such pension, retirement
allowance or other employee benefit, except as required under currently
existing agreements, plans or arrangements; (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement
with any of its directors, officers or other employees; or (iv) except as
may be required to comply with applicable law, become obligated (other than
pursuant to any new or renewed collective bargaining agreement) under any
new pension plan, welfare plan, multiemployer plan, employee benefit plan,
benefit arrangement, or similar plan or arrangement, which was not in
existence on the date hereof, including any bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other benefit plan, agreement or
arrangement, or employment or consulting agreement with or for the benefit
of any person, and to amend any of such plans or any of such agreements in
existence on the date hereof;
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(f) except as otherwise expressly contemplated by this Agreement,
enter into any other agreements, commitments or contracts, except
agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business, consistent with past
practice;
(g) except in the ordinary course of business, consistent with past
practice, or as contemplated by this Agreement authorize, recommend,
propose or announce an intention to authorize, recommend or propose, or
enter into any agreement in principle or an agreement with respect to, any
plan of liquidation or dissolution, any acquisition of a material amount of
assets or securities, any sale, transfer, lease, license, pledge, mortgage,
or other disposition or encumbrance of a material amount of assets or
securities or any material change in its capitalization, or any entry into
a material contract or any amendment or modification of any material
contract or any release or relinquishment of any material contract rights;
or
(h) agree to do any of the foregoing.
Section 4.02 Acquisitions. Prior to the Effective Time, General Signal
and Reliance shall keep each other advised of the status of all discussions and
negotiations concerning possible acquisitions and divestitures of any
corporations or businesses and each agrees that without the prior written
consent of the other it shall not make, or agree to make, any acquisition which
requires the issuance of shares of capital stock of General Signal or Reliance
or any security convertible into, exchangeable for or exercisable for shares of
such capital stock or any acquisition or acquisitions that, individually or in
the aggregate, would require the payment of more than $150 million in aggregate
consideration (including by assumption of borrowings); provided, however, that
this covenant shall not apply in any way to the acquisition for cash of
Fairbanks Morse Pump Corporation by General Signal. General Signal or Reliance
shall not undertake any acquisition that would require preparation of pro forma
financial statements in accordance with applicable rules and regulations of the
SEC or that might reasonably be expected to delay completion of the Merger.
Section 4.03 No Solicitation. (a) Each of Reliance and General Signal
agrees that, prior to the Effective Time, it shall not, and shall not authorize
or permit any of its subsidiaries or any of its or its subsidiaries' directors,
officers, employees, agents or representatives to, directly or indirectly,
solicit, initiate, facilitate or encourage (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to any merger, consolidation or other business combination
involving Reliance or its subsidiaries or General Signal or its subsidiaries or
acquisition of any kind of all or substantially all of the assets or capital
stock of Reliance and its subsidiaries taken as a whole or General Signal and
its subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate,
explore or otherwise communicate in any way with any third party (other than
General Signal or Reliance, as the case may be) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; provided that General Signal or
Reliance may, in response to an unsolicited written proposal with respect to an
Acquisition Transaction from a financially capable third party that contains no
financing condition, (i) furnish or disclose non-public information to such
third party and (ii) negotiate, explore or otherwise communicate with such third
party, in each case only if the Board of Directors of such party determines in
good faith by a majority vote, after consultation with its legal and financial
advisors, and after receipt of the written opinion of outside legal counsel of
such party that failing to take such action would constitute a breach of the
fiduciary duties of such Board of Directors, that taking such action is
reasonably likely to lead to an Acquisition Transaction that is more favorable
to the stockholders of such party than the Merger and that failing to take such
action would constitute a breach of the Board's fiduciary duties.
(b) Each of Reliance and General Signal shall immediately advise in writing
the other of the receipt of any inquiries or proposals relating to an
Acquisition Transaction and any actions taken pursuant to Section 4.03(a).
Section 4.04 Access to Information. (a) From the date of this Agreement
until the Effective Time, each of Reliance and General Signal will give the
other party and their authorized representatives (including counsel,
environmental and other consultants, accountants and auditors) full access
during normal business hours to all facilities, personnel and operations and to
all books and records of it and its subsidiaries, will permit the other party to
make such inspections as it may reasonably require and will cause its officers
and
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those of its subsidiaries to furnish the other party with such financial and
operating data and other information with respect to its business and properties
as such party may from time to time reasonably request.
(b) Each of the parties hereto will hold and will cause its consultants and
advisors to hold in strict confidence pursuant to the Confidentiality Agreement
dated April 13, 1994 between the parties (the "Confidentiality Agreement") all
documents and information furnished to the other in connection with the
transactions contemplated by this Agreement as if each such consultant or
advisor was a party thereto.
Section 4.05 Registration Statement and Proxy Statement. (a) General
Signal and Reliance shall file with the SEC as soon as is reasonably practicable
after the date hereof the Joint Proxy Statement/Prospectus and General Signal
shall file the Registration Statement in which the Joint Proxy
Statement/Prospectus shall be included. General Signal and Reliance shall use
all commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. General Signal shall also take
any action required to be taken under applicable state blue sky or securities
laws in connection with the issuance of Survivor Shares pursuant to this
Agreement. General Signal and Reliance shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with any action by any of them in connection with this Section
4.05(a).
(b) Each of General Signal and Reliance agrees that the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto at the time of
mailing thereof and at the time of the respective meetings of stockholders of
General Signal and Reliance, or in the case of the Registration Statement and
each amendment or supplement thereto, at the time it becomes effective, will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
either General Signal or Reliance, as the case may be, in reliance upon and in
conformity with written information concerning the other party furnished by such
other party specifically for use in the Joint Proxy Statement/Prospectus. Each
of General Signal and Reliance agrees that none of the information furnished in
writing to the other party specifically for use in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of stockholders of
General Signal and Reliance, or in the case of information furnished in writing
specifically for inclusion in the Registration Statement and each amendment or
supplement thereto, at the time it becomes effective, will include any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Effective Time any event shall occur which is required to be described in
the Proxy Statement or Registration Statement, such event shall be so described,
and an amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of General Signal and
Reliance; provided that no amendment or supplement to the Joint Proxy
Statement/Prospectus or the Registration Statement will be made by General
Signal or Reliance without the approval of the other party. To the extent
applicable, each of General Signal and Reliance will advise the other, promptly
after it receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, the issuance
of any stop order, the suspension of the qualification of the Survivor Shares
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Joint Proxy Statement/Prospectus
or the Registration Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
(c) General Signal and Reliance shall each use all commercially reasonable
efforts to cause to be delivered to the other a comfort letter of its
independent auditors, dated a date within two business days of the effective
date of the Registration Statement, in form reasonably satisfactory to the other
party and customary in scope and substance for such letters in connection with
similar registration statements.
Section 4.06 Stockholders' Meetings. Reliance and General Signal each
shall call a meeting of its respective stockholders to be held as promptly as
practicable in accordance with applicable law for the purpose of voting upon (i)
the adoption of this Agreement and the transactions contemplated hereby
including, in the
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case of General Signal, amending the General Signal Certificate of Incorporation
to increase the authorized number of shares of General Signal Common Stock to
250,000,000 shares and to create the Survivor Class B Common Stock and to change
the name of General Signal as contemplated by this Agreement and (ii) the
election to the Board of Directors of the Surviving Corporation, effective as of
the Effective Time, of each of the persons who, as of the date of this Agreement
are directors of Reliance and the one individual designated by CSCL in
accordance with the Citicorp Agreement, with each such person to be elected to
the class of directors designated in writing by Reliance prior to the mailing of
the Joint Proxy Statement/Prospectus. Reliance and General Signal shall, through
their respective Boards of Directors, recommend to their respective stockholders
approval of such matters and will coordinate and cooperate with respect to the
timing of such meetings and shall use all commercially reasonable efforts to
hold such meetings on the same day and as soon as practicable after the date
hereof; provided, however, that the respective Boards of Directors may, in
response to an unsolicited written proposal with respect to an Acquisition
Transaction from a financially capable third party that contains no financing
condition, withdraw, modify or change its recommendation to its stockholders if
the Board of Directors determines in good faith by a majority vote, after
consultation with its legal and financial advisors, and after receipt of the
written opinion of outside legal counsel of such party that failing to take such
action would constitute a breach of the fiduciary duties of such Board of
Directors, that withdrawing, modifying or changing its recommendation is
reasonably likely to lead to an Acquisition Transaction that is more favorable
to the stockholders of such party than the Merger and that failing to take such
action would constitute a breach of the Board's fiduciary duties. Each party
shall use all commercially reasonable efforts to solicit from stockholders of
such party proxies in favor of such matters.
Section 4.07 Board of Directors of General Signal. (a) The General Signal
Board of Directors shall take such corporate action as may be necessary to cause
the number of directors comprising its full board to be increased at the
Effective Time to the size necessary to include, subject to the requisite vote
of the shareholders of General Signal, immediately after the Effective Time on
the Surviving Corporation Board of Directors the persons specified in Section
4.06(ii).
(b) Each standing committee of the General Signal Board of Directors in
existence immediately prior to the Effective Time shall be increased in size at
the Effective Time so that each such committee (i) with an even number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by an equal number of members and (ii) with an odd number of
members immediately prior to the Effective Time shall be increased in size at
the Effective Time by such number of members minus one, and, in each case, such
newly-created vacancies shall be filled, subject to the requisite vote of the
stockholders of General Signal, immediately after the Effective Time by persons
specified in Section 4.06(ii).
Section 4.08 Reasonable Efforts; Other Actions. Subject to the terms and
conditions herein provided and applicable law, Reliance and General Signal shall
use all commercially reasonable efforts promptly to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, (i) the filing of Notification and Report Forms under the
HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") and using their
reasonable best efforts to respond as promptly as practicable to all inquiries
received from the FTC or the Antitrust Division for additional information or
documentation, (ii) the taking of any actions required to qualify the Merger for
pooling-of-interests accounting treatment and as a tax-free reorganization
within the meaning of Section 368(a) of the Code, (iii) the obtaining of all
necessary consents, approvals or waivers under its material contracts, and (iv)
the lifting of any legal bar to the Merger.
Section 4.09 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the Merger, General
Signal and Reliance will consult with each other as to its form and substance
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law.
Section 4.10 Notification of Certain Matters. Each of Reliance and
General Signal shall give prompt notice to the other party of (i) any notice of,
or other communication relating to, a default or event which,
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with notice or lapse of time or both, would become a default, received by it or
any of its subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any contract material to the financial condition,
properties, businesses or results of operations of Reliance or General Signal,
as the case may be, and their respective subsidiaries taken as a whole to which
it or any of its subsidiaries is a party or is subject, or (ii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement.
Section 4.11 Indemnification. (a) The Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of Reliance and its subsidiaries against all losses,
claims, damages, expenses or liabilities arising out of actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time to the
same extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in Reliance's Certificate of Incorporation
and By-Laws and agreements in effect at the date hereof (to the extent
consistent with applicable law).
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Reliance
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that the Surviving
Corporation shall not be obligated to make annual premium payments for such
insurance to the extent such premiums exceed 250% of the premiums paid as of the
date hereof by Reliance for such insurance.
(c) The provisions of this Section 4.11 are intended to be for the benefit
of, and shall be enforceable by each indemnified party hereunder, his or her
heirs and his or her representatives.
Section 4.12 Expenses. Except as set forth in Section 9.05, General
Signal, and Reliance, shall bear their respective expenses incurred in
connection with the Merger, including, without limitation, the preparation,
execution and performance of this Agreement and the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants, except that expenses incurred
in printing, mailing and filing (including without limitation, SEC filing fees
and stock exchange listing application fees) the Joint Proxy
Statement/Prospectus shall be shared equally by Reliance and General Signal.
Section 4.13 Affiliates. Each of Reliance and General Signal shall
deliver to the other a letter identifying all persons who, as of the date
hereof, may be deemed to be "affiliates" thereof for purposes of Rule 145 under
the Securities Act (the "Affiliates") and shall advise the other in writing of
any persons who become an Affiliate prior to the Effective Time. Reliance shall
cause each person who is so identified as an Affiliate to deliver to General
Signal, no later than the earlier of the date hereof or the date such person
becomes an Affiliate, a written agreement substantially in the form of Exhibit
D-1 hereto.
Section 4.14 Stock Exchange Listings. General Signal shall promptly
prepare and submit to the NYSE and the PSE a listing application covering the
shares of Survivor Common Stock (and associated Survivor Rights) issuable in the
Merger and upon conversion of any shares of Survivor Class B Common Stock
issuable in the Merger and upon exercise of Reliance Stock Options, and shall
use all commercially reasonable efforts to obtain, prior to the Effective Time,
approval for the listing of such Survivor Common Stock (and associated Survivor
Rights), subject to official notice of issuance.
Section 4.15 Reliance Rights Plan. On the date hereof, Reliance shall
adopt, subject to execution by a rights agent thereunder, the Reliance Rights
Plan, which Plan has been authorized by the Board of Directors of Reliance. The
Reliance Rights Plan shall expire immediately prior to the Effective Time.
Reliance shall not redeem the rights issued under the Reliance Rights Plan
(other than to delay any "distribution date" thereon or to render the rights
inapplicable to the Merger or any action permitted under this Agreement) or
terminate the Reliance Rights Plan prior to the earlier of (i) a vote by the
holders of Reliance Class A Common Stock at a meeting duly convened therefor
(including any adjournments thereof) which shall not have been
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sufficient to satisfy the requirements of Section 5.02, (ii) the termination of
this Agreement in accordance with its terms or (iii) the Effective Time unless
required to do so by a court of competent jurisdiction.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL AND RELIANCE
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
Section 5.01 Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and remain in effect. All necessary state securities
or blue sky authorizations shall have been received.
Section 5.02 Stockholder Approval. The requisite vote of the stockholders
of Reliance and General Signal necessary to consummate the transactions
contemplated by this Agreement shall have been obtained.
Section 5.03 Consents and Approvals. All necessary consents and approvals
of any United States or any other governmental authority or any other third
party required for the consummation of the transactions contemplated by this
Agreement shall have been obtained except for such consents and approvals the
failure to obtain which individually or in the aggregate would not have a
Material Adverse Effect and any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
Section 5.04 Auditors' Letters. Each of General Signal and Reliance shall
have received from its independent auditors a letter dated the Closing Date
reasonably satisfactory to each of them confirming in all material respects the
matters set forth in the letter contemplated by Section 4.05(c).
Section 5.05 Accounting Treatment. Each of General Signal and Reliance
shall have received a letter from Ernst & Young, reasonably satisfactory to each
of them in all respects, that the Merger will qualify for pooling-of-interests
accounting treatment.
Section 5.06 Tax Matters. Each of General Signal and Reliance shall have
received an opinion of Cahill Gordon & Reindel addressed to it dated the Closing
Date substantially in the form of Exhibit E hereto to the effect that the Merger
will constitute a tax-free reorganization within the meaning of Section 368(a)
of the Code and that General Signal and Reliance shall each be a party to that
reorganization within the meaning of Section 368(b) of the Code.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF GENERAL SIGNAL
The obligation of General Signal to effect the Merger and to perform its
other obligations to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by General Signal:
Section 6.01 Representations and Warranties True. The representations and
warranties of Reliance contained herein (without regard to any materiality
exceptions contained therein) shall be true and correct on the date of this
Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such date, except for such untruths or
inaccuracies which would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 6.02 Performance. Reliance shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
15
<PAGE> 20
Section 6.03 Certificates. Reliance shall furnish such certificates of
its officers to evidence compliance with the conditions set forth in Sections
6.01 and 6.02 as may be reasonably requested by General Signal.
Section 6.04 Certain Proceedings. No writ, order, decree or injunction of
a court of competent jurisdiction or governmental entity shall be in effect
against General Signal or Reliance, and no proceedings therefor shall have been
threatened or commenced by any governmental entity, which prohibits or restricts
the consummation of the Merger or would otherwise restrict the Surviving
Corporation's exercise of full rights to own and operate the business of
Reliance and General Signal in a manner which would have a Material Adverse
Effect on Reliance or General Signal.
Section 6.05 Material Adverse Change. There shall not have occurred since
June 30, 1994 any material adverse change in the business, operations, assets,
financial condition or results of operations of Reliance and its subsidiaries
taken as a whole.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RELIANCE
The obligations of Reliance under this Agreement to effect the Merger shall
be subject to the fulfillment on or before the Closing Date of each of the
following additional conditions, any one or more of which may be waived by
Reliance:
Section 7.01 Representations and Warranties True. The representations and
warranties of General Signal contained herein (without regard to any materiality
exceptions contained therein) shall be true and correct on the date of this
Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such date, except for such untruths or
inaccuracies which would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 7.02 Performance. General Signal shall have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
Section 7.03 Certificates. General Signal shall furnish such certificates
of its respective officers to evidence compliance with the conditions set forth
in Sections 7.01 and 7.02 as may be reasonably requested by Reliance.
Section 7.04 Certain Proceedings. No writ, order, decree or injunction of
a court of competent jurisdiction or governmental entity shall be in effect
against General Signal or Reliance, and no proceedings therefor shall have been
threatened or commenced by any governmental entity, which prohibits or restricts
the consummation of the Merger or would otherwise restrict the Surviving
Corporation's exercise of full rights to own and operate the business of
Reliance and General Signal in a manner which would have a Material Adverse
Effect on Reliance or General Signal.
Section 7.05 Material Adverse Change. There shall not have occurred since
June 30, 1994 any material adverse change in the business, operations, assets,
financial condition or results of operations of General Signal and its
subsidiaries taken as a whole.
Section 7.06 Listings. The Survivor Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE and the PSE subject to
official notice of issuance.
ARTICLE VIII
CLOSING
Section 8.01 Time And Place. Subject to the provisions of Articles V, VI,
VII and IX, the closing of the Merger (the "Closing") shall take place at the
offices of Cahill Gordon & Reindel, as soon as practicable but in no event later
than 9:30 A.M., local time, on the first business day after the date on which
each of the conditions set forth in Articles V, VI and VII have been satisfied
or waived by the party or parties entitled to
16
<PAGE> 21
the benefit of such conditions; or at such other place, at such other time, or
on such other date as General Signal and Reliance may mutually agree. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date."
Section 8.02 Filings at the Closing. Subject to the provisions of
Articles V, VI, VII and IX hereof, Reliance and General Signal shall cause to be
executed and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the applicable
provisions of the DGCL and the NYBCL and shall take any and all other lawful
actions and do any and all other lawful things necessary to cause the Merger to
become effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Reliance or General Signal:
(a) by mutual consent of the Boards of Directors of General Signal and
Reliance;
(b) by either General Signal or Reliance if, without fault of such
terminating party, the Merger shall not have been consummated on or before March
31, 1995, which date may be extended by mutual written consent of the parties
hereto;
(c) by either General Signal or Reliance, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that the party seeking to
terminate this Agreement shall have used all commercially reasonable efforts to
remove or lift such order, decree or ruling; or
(d) by either General Signal or Reliance, if the requisite stockholder
approvals of the stockholders of either General Signal or Reliance are not
obtained at the meeting of stockholders duly called and held therefor.
Section 9.02 Termination by General Signal. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of General Signal, at any time prior to the Effective Time, before or after the
approval by the stockholders of General Signal or Reliance, if (a) Reliance
shall have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and IV of this Agreement to be complied
with or performed by Reliance at or prior to such date of termination, (b) there
exists a breach or breaches of any representation or warranty of Reliance
contained in this Agreement such that the closing condition set forth in Section
6.01 would not be satisfied; provided, however, that if such breach or breaches
are capable of being cured prior to the Effective Time, such breaches shall not
have been cured within 30 days of delivery to Reliance of written notice of such
breach or breaches, (c) the Board of Directors of Reliance shall withdraw,
modify or change its recommendation of this Agreement or the Merger in a manner
adverse to General Signal or shall have recommended any proposal in respect of
an Acquisition Transaction, or (d) the Board of Directors of Reliance shall
furnish or disclose non-public information or negotiate, explore or otherwise
communicate in any way with a third party with respect to any Acquisition
Transaction, or shall have resolved to do any of the foregoing and publicly
disclosed such resolution.
Section 9.03 Termination by Reliance. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the stockholders of General Signal or Reliance, by
action of the Board of the Directors of Reliance, if (a) General Signal shall
have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and IV of this Agreement to be complied
with or performed by General Signal at or prior to such date of termination, (b)
there exists a breach or breaches of any representation or warranty of General
Signal contained in this Agreement such that the closing condition set forth in
Section 7.01 would not be satisfied; provided, however,
17
<PAGE> 22
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not have been cured within 30 days of
delivery to General Signal of written notice of such breach or breaches, (c) the
Board of Directors of General Signal shall withdraw, modify or change its
recommendation of this Agreement or the Merger in a manner adverse to Reliance
or shall have recommended any proposal in respect of an Acquisition Transaction,
or (d) the Board of Directors of General Signal shall furnish or disclose non-
public information or negotiate, explore or otherwise communicate in any way
with a third party with respect to any Acquisition Transaction, or shall have
resolved to do any of the foregoing and publicly disclosed such resolution.
Section 9.04 Procedure for Termination. In the event of termination and
abandonment of the Merger by General Signal or Reliance pursuant to this Article
IX, written notice thereof shall forthwith be given to the other.
Section 9.05 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 9.05 and Section 4.04(b) hereof and except that nothing
herein shall relieve any party from liability for any breach of this Agreement.
(b) If this Agreement is terminated (i) pursuant to Section 9.01 (except
Section 9.01(a)) and prior to such termination any financially capable person
shall have made a bona fide proposal concerning an Acquisition Transaction to
Reliance or its stockholders by public announcement or written communication
that is or becomes subject to public disclosure (a "Reliance Bidder"), or (ii)
by General Signal pursuant to Section 9.02(c) or (d) then, in any such case
referred to in clause (i) or (ii) of this paragraph, Reliance shall within two
business days pay General Signal by wire transfer of immediately available funds
to an account specified by General Signal up to $2.5 million to reimburse
General Signal for its documented fees and expenses directly related to this
Agreement and the transactions contemplated hereby and if terminated by General
Signal pursuant to 9.02(c) or (d) an additional fee of $50 million, and if an
additional fee has not already become payable and within twelve months after the
date hereof Reliance or any of its subsidiaries enters into a definitive
agreement with either a Reliance Bidder or a third party to which Reliance has
provided non-public information or with which it has negotiated, explored or in
any way communicated after the date of this Agreement and prior to its
termination in accordance with its terms with respect to an Acquisition
Transaction, then Reliance, prior to entering into any such definitive
agreement, shall pay General Signal by wire transfer of immediately available
funds to an account specified by General Signal, an additional fee of $50
million.
(c) If this Agreement is terminated (i) pursuant to Section 9.01 (except
Section 9.01(a)) and prior to such termination any financially capable person
shall have made a bona fide proposal concerning an Acquisition Transaction to
General Signal or its stockholders by public announcement or written
communication that is or becomes subject to public disclosure (a "General Signal
Bidder"), or (ii) by Reliance pursuant to Section 9.03(c) or (d) then, in any
such case referred to in clause (i) or (ii) of this paragraph, General Signal
shall within two business days pay Reliance by wire transfer of immediately
available funds to an account specified by Reliance up to $2.5 million to
reimburse Reliance for its documented fees and expenses directly related to this
Agreement and the transactions contemplated hereby and if terminated by Reliance
pursuant to Section 9.03(c) or (d), an additional fee of $50 million, and if an
additional fee has not already become payable and within twelve months after the
date hereof General Signal or any of its subsidiaries enters into a definitive
agreement with either a General Signal Bidder or a third party to which General
Signal has provided non-public information or with which it has negotiated,
explored or in any way communicated after the date of this Agreement and prior
to its termination in accordance with its terms with respect to an Acquisition
Transaction, then General Signal, prior to entering into any such definitive
agreement, shall pay Reliance by wire transfer of immediately available funds to
an account specified by Reliance, an additional fee of $50 million.
(d) So long as General Signal is not in breach or default under any
covenant, condition, representation or warranty herein, in the event of a
termination of this Agreement by General Signal pursuant to Sec-
18
<PAGE> 23
tion 9.02(a) or (b), then Reliance shall promptly pay General Signal up to $2.5
million for all documented fees and expenses incurred by General Signal
(including the fees and expenses of counsel, accountants, consultants and
advisors) directly related to this Agreement and the transactions contemplated
hereby. So long as Reliance is not in breach or default under any covenant,
condition, representation or warranty herein, in the event of a termination of
this Agreement by Reliance pursuant to Section 9.03(a) or (b), then General
Signal shall promptly pay Reliance up to $2.5 million for all documented fees
and expenses incurred by Reliance (including the fees and expenses of counsel,
accountants, consultants and advisors) directly related to this Agreement and
the transactions contemplated hereby.
(e) No termination of this Agreement by one party shall affect the other
party's rights to benefits under Section 9.05(b) or (c), as the case may be, if
at the time of such termination a state of facts existed giving the other party
the right to terminate the Agreement and receive benefits under Section 9.05(b)
or (c) or to receive benefits upon the entry into of a definitive agreement as
set forth in Section 9.05(b) or (c), and such other party will be entitled to
receive the benefits to which it is entitled under Section 9.05(b) or (c) upon
notice to the terminating party delivered when such other party is entitled to
receive such benefits and in any event prior to the expiration of twelve months
after the date hereof.
ARTICLE X
DEFINITIONS
Section 10.01 Terms Defined in the Agreement. The following capitalized
terms used herein shall have the meanings ascribed in the indicated sections.
<TABLE>
<S> <C>
Acquisition Transaction 4.03
Affiliates 4.13
Balance Sheet 3.05
Certificate Of Merger 1.02
Certificates 2.03
Citicorp Recitals
Citicorp Agreement Recitals
Closing 8.01
Closing Date 8.01
Code Recitals
Confidentiality Agreement 4.04
Constituent Corporations Preamble
Conversion Ratio 2.01
Convertible Notes 3.02
CSCL Recitals
DGCL 1.01
Dissenting Shares 2.01
Effective Time 1.02
Environmental Laws 3.08
Exchange Act 3.04
General Signal Common Stock 3.02
General Signal Class B Common Stock 3.02
General Signal Plans 3.02
General Signal Preferred Stock 3.02
General Signal Rights Agreement 2.01
HSR Act 3.04
Interim Balance Sheet 3.05
Joint Proxy Statement/Prospectus 3.11
</TABLE>
19
<PAGE> 24
<TABLE>
<S> <C>
LTIP 3.02
Market Value 2.04
Material Adverse Effect 3.01
Merger 1.01
NYBCL 1.01
NYSE 2.04
person 11.10
PSE 3.04
Purchase Rights 3.02
Reliance Class A Common Stock 2.01
Reliance Class B Common Stock 2.01
Reliance Class C Common Stock 2.01
Reliance Plans 3.02
Reliance Preferred Stock 3.02
Reliance Rights Plan Recitals
Reliance Shares 2.01
Registration Statement 3.11
SEC 3.01
SEC Documents 3.05
Securities Act 3.04
Significant Subsidiary 3.01
subsidiary 11.10
Surviving Corporation 1.01
Survivor Class B Common Stock 2.01
Survivor Class B Right 2.01
Survivor Common Stock 2.01
Survivor Common Stock Right 2.01
Survivor Rights 2.01
Survivor Shares 2.01
</TABLE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
General Signal and Reliance at any time prior to the Effective Time with respect
to any of the terms contained herein; provided, however, that, after this
Agreement is adopted by the stockholders of either Reliance or General Signal,
no such amendment or modification shall change the amount or form of the
consideration to be delivered in respect of the Reliance Shares.
Section 11.02 Waiver of Compliance; Consents. Any failure of General
Signal or Reliance to comply with any obligation, covenant, agreement or
condition herein may be waived by Reliance or General Signal, respectively, only
by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 11.02.
Section 11.03 Survivability; Investigations. The respective
representations and warranties of General Signal and Reliance contained herein
or in any certificates or other documents delivered prior to or at the
20
<PAGE> 25
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto and shall not survive the Closing.
Section 11.04 Reasonable Efforts. Subject to the terms and conditions
herein provided, and applicable law, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
Section 11.05 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally, by next-day courier or
mailed by registered or certified mail (return receipt requested), first class
postage prepaid, or telecopied with confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, one day after delivery to a
courier for next-day delivery, or three days after mailing, if deposited in the
U.S. mail, first class postage prepaid.
(a) if to Reliance, to
Reliance Electric Company
6065 Parkland Avenue
Cleveland, Ohio 44124
Telecopy: (216) 266-5852
Attention: Chairman
with a copy to
Calfee, Halter & Griswold
800 Superior Avenue
Suite 1800
Cleveland, Ohio 44114
Telecopy: (216) 241-0816
Attention: Michael L. Miller, Esq.
(b) if to General Signal, to
General Signal Corporation
One High Ridge Park
P. O. Box 10010
Stamford, CT 06904
Telecopy: (203) 329-4314
Attention: Chairman
with a copy to
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: W. Leslie Duffy, Esq.
Section 11.06 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties, nor
is this Agreement intended to confer any rights or remedies hereunder upon any
other person except the parties hereto and, with respect to Section 4.11, the
officers, directors and employees of Reliance.
21
<PAGE> 26
Section 11.07 Governing Law. Except as the laws of the State of Delaware
are by their terms applicable, this Agreement shall be governed by the laws of
the State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
Section 11.08 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.09 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 11.10 Interpretation. The article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof; and (ii) the term "subsidiary" of any specified
corporation shall mean any corporation of which a majority of the outstanding
securities having ordinary voting power to elect a majority of the board of
directors are directly or indirectly owned by such specified corporation or any
other person of which a majority of the equity interests therein are, directly
or indirectly, owned by such specified corporation.
Section 11.11 Entire Agreement. This Agreement, including the schedules
and exhibits hereto and the documents and instruments referred to herein and
therein, embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements and the understandings between the parties with respect to such
subject matter, except for the Confidentiality Agreement, which shall remain in
full force and effect. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein and therein.
IN WITNESS WHEREOF, GENERAL SIGNAL and RELIANCE have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
GENERAL SIGNAL CORPORATION
By: /s/ EDMUND M. CARPENTER
------------------------------
Name: Edmund M. Carpenter
Title: Chairman and Chief
Executive Officer
RELIANCE ELECTRIC COMPANY
By: /s/ JOHN C. MORLEY
------------------------------
Name: John C. Morley
Title: President and Chief
Executive Officer
22
<PAGE> 1
Exhibit 13
- --------------------------------------------------------------------------------
RELIANCE ELECTRIC COMPANY
and
SOCIETY NATIONAL BANK
Rights Agent
Rights Agreement
Dated as of August 29, 1994
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates . . . . . . . . . . . . . . . . 12
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. Cancellation and Destruction of Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9. Availability of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . 19
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power . . . . . . . . . . . . . . . . . . . . . 33
Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . 35
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 17. Right Certificate Holder Not Deemed a
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 19. Merger or Consolidation or Change of Name
of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . 45
Section 22. Issuance of New Right Certificates . . . . . . . . . . . 47
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . 47
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . 52
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . 54
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . 55
Section 29. Benefits of this Agreement . . . . . . . . . . . . . . . 55
Section 30. Severability . . . . . . . . . . . . . . . . . . . . . . 55
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . 55
Section 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . 56
Section 33. Descriptive Headings . . . . . . . . . . . . . . . . . . 56
</TABLE>
<PAGE> 4
RIGHTS AGREEMENT
----------------
Agreement, dated as of August 29, 1994, between Reliance
Electric Company, a Delaware corporation (the "Company"), and Society National
Bank, a national banking association, as rights agent (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred stock purchase right (a "Right")
designated as a Class A, Class B or Class C Right, as the case may be, for each
share of Class A, Class B and Class C Common Stock (as hereinafter defined),
respectively, of the Company outstanding on September 15, 1994 (the "Record
Date"), each Right related to the Class A, Class B and Class C Common Stock of
the Company representing the right to purchase one one-hundredth of a share of
Series A, Series B or Series C Preferred Stock (as hereinafter defined),
respectively, upon the terms and subject to the conditions herein set forth,
and has further authorized and directed the issuance of one Right with respect
to each share of Common Stock that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms have the meanings indicated:
<PAGE> 5
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 10% or more of the
shares of Class A Common Stock of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter defined) of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding shares of Class A Common Stock for or pursuant
to the terms of any such plan. Notwithstanding the foregoing, (a) the term
"Acquiring Person" shall not include any Person who is the Beneficial Owner of
10% or more of the outstanding shares of Class A Common Stock on the date of
this Agreement and (b) no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Class A Common Stock by the Company
which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 10% or more
of the shares of Class A Common Stock of the Company then outstanding until
such time hereafter or thereafter as such Person shall become the Beneficial
Owner (other than by means of a stock dividend or a stock split or in
connection with an employee or director stock option program) of any additional
shares of Class A Common Stock. The term "Acquiring Person" also shall not
include any Person who inadvertently acquired Beneficial Ownership of 10% or
more of the outstanding shares of Class A Common Stock or otherwise acquired
2
<PAGE> 6
Beneficial Ownership of shares of Class A Common Stock without any plan or
intention to seek control of the Company and without knowledge that such
acquisition would make such Person an Acquiring Person, if, in either case,
such Person promptly divests (without exercising or retaining any power,
including voting, with respect to such shares) a sufficient number of shares of
Class A Common Stock (or securities convertible into Common Stock) so that such
Person ceases to be the Beneficial Owner of a number of shares of Class A
Common Stock equal to the number of shares of Class A Common Stock as to which
Beneficial Ownership was inadvertently acquired in excess of the amount that
would otherwise cause such Person to be an Acquiring Person, after notice by
the Company that such Person will be deemed by the Company to be an Acquiring
Person unless it makes such divestitures.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly;
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<PAGE> 7
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and
between underwriters and selling group members with respect to
a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other
than these Rights), warrants or options, or otherwise;
PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; PROVIDED, HOWEVER,
that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security if the agreement,
arrangement or understanding to vote such security arises
solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act; or
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(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any
of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition
of Beneficial Ownership to the contrary, the phrase "then
outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean
the number of such securities then issued and outstanding
together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to
own beneficially hereunder.
(d) "Business Day" shall mean any day other than a
Saturday, a Sunday, or a day on which banking institutions in the State of Ohio
are authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
P.M., Cleveland, Ohio time, on such date; PROVIDED, HOWEVER, that if such date
is not a Business Day it shall mean 5:00 P.M., Cleveland, Ohio time, on the
next succeeding Business Day.
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(f) "Common Stock" when used with reference to the
Company shall mean the shares of Class A, Class B and Class C Common Stock, par
value $.01 per share, of the Company. "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first mentioned Person.
(g) "Distribution Date" shall have the meaning set forth
in Section 3 hereof.
(h) "Final Expiration Date" shall have the meaning set
forth in Section 7 hereof.
(i) "Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
(j) "Preferred Stock" shall mean shares of Series A,
Series B and Series C Junior Participating Preferred Stock, par value $.01 per
share, of the Company having the rights and preferences set forth in the
Certificate of Designation for the Series A, Series B and Series C Junior
Participating Preferred Stock of the Company attached to this Agreement as
Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(l) "Shares Acquisition Date" shall mean the first date
of public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
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(m) "Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
(n) A "Trigger Event" shall be deemed to have occurred
upon any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
entity holding shares of Class A Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becoming an Acquiring Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the shares of Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the
earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the
tenth business day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any
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<PAGE> 11
Subsidiary of the Company or any entity holding shares of Class A Common Stock
for or pursuant to the terms of any such plan) of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Class A Common Stock
for or pursuant to the terms of any such plan) to commence, a tender or
exchange offer the consummation of which would result in any Person becoming an
Acquiring Person (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights; the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for shares of Common Stock registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of
shares of Common Stock. The Company shall promptly notify the Rights Agent in
writing of each Distribution Date. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of shares of Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the records of
the Company, a Right
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<PAGE> 12
Certificate, in substantially the form of Exhibit B-1, B-2 and/or B-3 hereto (a
"Right Certificate"), evidencing one Class A, Class B or Class C Right,
respectively, for each share of Class A, Class B or Class C Common Stock so
held, respectively. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Stock, in substantially the form of Exhibit C hereto (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of shares
of Common Stock as of the close of business on the Record Date, at the address
of such holder shown on the records of the Company. With respect to
certificates for shares of Common Stock outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates
registered in the names of the holders thereof together with a copy of the
Summary of Rights attached thereto. Until the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), the surrender for
transfer of any certificate for shares of Common Stock outstanding on the
Record Date, with or without a copy of the Summary of Rights attached thereto,
shall also constitute the transfer of the Rights associated with the shares of
Common Stock represented thereby.
(c) Certificates for shares of Common Stock which become
outstanding (including, without limitation, reacquired shares of Common Stock
referred to in the last sentence of this paragraph
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<PAGE> 13
(c)) after the Record Date but prior to the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
Reliance Electric Company and Society National Bank, dated as
of August 29, 1994 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of
Reliance Electric Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be
evidenced by this certificate. Reliance Electric Company will
mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request
therefor. Under certain circumstances, as set forth in the
Rights Agreement, Rights issued to any Person who becomes an
Acquiring Person (as defined in the Rights Agreement) may
become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute
the transfer of the Rights associated with the shares of Common Stock
represented thereby. In the event that the Company purchases or acquires any
shares of Common Stock after the Record Date but prior to the Distribution
Date, any Rights associated with such shares of Common Stock shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with the shares of Common Stock which are no longer
outstanding.
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<PAGE> 14
Section 4. FORM OF RIGHT CERTIFICATES. The Right
Certificates (and the forms of election to purchase shares of Preferred Stock
and of assignment to be printed on the reverse thereof) shall be substantially
the same as Exhibit B-1, B-2 and B-3, as appropriate, hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a share of
such series of Preferred Stock as shall be set forth therein at the price per
one one-hundredth of a share of such series of Preferred Stock set forth
therein (the "Purchase Price"), but the number of such one one-hundredths of a
share of Preferred Stock and the Purchase Price shall be subject to adjustment
as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, any of its Vice Presidents,
or its Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
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<PAGE> 15
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as
though the person who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, books for registration and transfer
of the Right Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right Certificates and the date
of each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
Subject to the provisions of Section 14 hereof, at any time after the close of
business on the Distribution Date, and
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<PAGE> 16
at or prior to the close of business on the earlier of the Redemption Date or
the Final Expiration Date, any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another like
Right Certificate or Right Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a share of the same series of
Preferred Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon
the Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably
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<PAGE> 17
satisfactory to them, and, at the Company's request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS. (a) The registered holder of any Right Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for each one
one-hundredth of a share of Preferred Stock as to which the Rights are
exercised, at or prior to the earliest of (i) the close of business on August
29, 2004 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date"), (iii)
immediately prior to the effective time of the Merger of the Company with and
into General Signal Corporation, a New York corporation, pursuant to the
Agreement and Plan of Merger, to be dated as of August 30, 1994, between the
Company and General Signal Corporation, as such agreement may be amended from
time to time or (iv) the time at which such Rights are exchanged as provided in
Section 24 hereof.
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(b) The Purchase Price for each one one-hundredth of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
$60.00 for the Series A and Series B Preferred Stock and 2.708 times such
amount for the Series C Preferred Stock, shall be subject to adjustment from
time to time as provided in Sections 11 and 13 hereof and shall be payable in
lawful money of the United States of America in accordance with paragraph (c)
below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof by
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock certificates for the number of shares of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from
the depositary agent depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional
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shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt, deliver such cash to or upon the order of the
registered holder of such Right Certificate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause
to be reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any shares of Preferred Stock held in its treasury, the
number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with this Section 7.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT
CERTIFICATES. All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no
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Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. AVAILABILITY OF PREFERRED STOCK. The Company
covenants and agrees that it will take all such action as may be necessary to
ensure that all shares of Preferred Stock delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares of Preferred
Stock (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any shares of Preferred Stock upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for
the Preferred Stock in a name other than that of, the
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registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts for
Preferred Stock upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Right Certificate
at the time of surrender) or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each person in
whose name any certificate for shares of Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of the shares of Preferred Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such stock on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Stock transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled to any rights of a
holder of Preferred Stock for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any
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notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number of shares of Preferred Stock
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding shares of
Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a
smaller number of shares of Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, the holder would have owned upon
such exercise
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<PAGE> 23
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in
the event a Trigger Event shall have occurred, each holder of a Right shall
thereafter have a right to receive, upon exercise thereof at a price equal to
the then current Purchase Price multiplied by the number of one one-hundredths
of a share of Preferred Stock for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of shares of Common Stock of the same class as the series of
Preferred Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right is then exercisable and
dividing that product by (y) 50% of the then current per share market price of
the Company's Class A Common Stock (determined pursuant to Section 11(d)
hereof) on the date of the occurrence of the earlier of the events described in
clauses (A) and (B) above. In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended to
be afforded by the Rights.
From and after the occurrence of the Trigger Event, any Rights
that are or were acquired or beneficially owned by any
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<PAGE> 24
Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall
be void and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement. No Right
Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant
to the preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Company shall take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exercise of the Rights. Notwithstanding the foregoing, whenever the Company
shall become obligated to issue shares of Class A, Class B or Class C Common
Stock, the Company may, at its option, substitute therefor shares of Series A,
Series B or Series C Preferred Stock, respectively, at a ratio of one
one-hundredth of a share of Preferred Stock of the appropriate
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<PAGE> 25
series for each share of Common Stock so issuable and shall promptly notify
the Rights Agent in writing of such substitution.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase shares of Preferred Stock (or shares having
the same rights, privileges and preferences as the shares of Preferred Stock
("equivalent preferred stock")) or securities convertible into Preferred Stock
or equivalent preferred stock at a price per share of Preferred Stock or
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the then current per share market price of the Preferred Stock (as defined
in Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent shares of preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date plus the
number of additional shares of
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Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); PROVIDED, HOWEVER, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. Preferred Stock owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Stock (including any
such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to
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<PAGE> 27
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price of the
Preferred Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion
of the assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one share of Preferred Stock and
the denominator of which shall be such current per share market price of the
Preferred Stock; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder,
the "current per share market price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the average
of the daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, HOWEVER, that in the event that the current per share market
price
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of the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security and
prior to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or,
25
<PAGE> 29
if on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of any computation hereunder,
the "current per share market price" of the Preferred Stock shall be determined
in accordance with the method set forth in Section 11(d)(i). If the Preferred
Stock is not publicly traded, the "current per share market price" of the
Preferred Stock shall be conclusively deemed to be the current per share market
price of the Class A Common Stock as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred for the
Series A and Series B Preferred Stock and 270.8 for the Series C Preferred
Stock. If neither the Common Stock nor the Preferred Stock is publicly held or
so listed or traded, "current per share market price" shall mean the fair value
per share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
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(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
one-millionth of a share of Preferred Stock or one ten-thousandth of any other
share or security, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the
Preferred Stock shall apply on like terms to any such other shares.
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<PAGE> 31
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-hundredths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest one
one-millionth of a share of Preferred Stock) obtained by (i) multiplying (x)
the number of one one-hundredths of a share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-hundredths of a share
of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one
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<PAGE> 32
one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right
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<PAGE> 33
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price
and the number of one one-hundredths of a share of Preferred Stock which were
expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below one one-hundredth of the then par
value, if any, of the shares of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Preferred Stock at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date of the Preferred Stock and other capital stock or securities of the
Company, if any, issuable
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<PAGE> 34
upon such exercise over and above the Preferred Stock and other capital stock
or securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER,
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Stock, issuance wholly for cash of any Preferred Stock at less than the current
market price, issuance wholly for cash of Preferred Stock or securities which
by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Stock payable in Preferred Stock or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Stock payable in shares of Common Stock or (ii)
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise
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<PAGE> 35
than by payment of dividends in shares of Common Stock into a greater or lesser
number of shares of Common Stock, then in any such case (i) the number of one
one-hundredths of a share of Preferred Stock purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number of
one one-hundredths of a share of Preferred Stock so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately before such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (ii) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it that number
of Rights which each share of Common Stock outstanding immediately prior to
such event had issued with respect to it. The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is declared
or paid or such a subdivision, combination or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES. Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Stock or the Preferred Stock a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof.
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Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER. In the event, directly or indirectly, (a) the Company
shall consolidate with, or merge with and into, any other Person, (b) any
Person shall consolidate with the Company, or merge with and into the Company
and the Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Stock shall be
changed into or exchanged for stock or other securities of any other Person (or
the Company) or cash or any other property, or (c) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or one or more of
its wholly-owned Subsidiaries, then, and in each such case, proper provision
shall be made so that (i) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof
at a price equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a share of Preferred Stock for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of shares of Common Stock of such other Person
(including the Company as successor thereto or as the surviving corporation) as
shall equal the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-hundredths of a share of Preferred
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<PAGE> 37
Stock for which a Right is then exercisable and dividing that product by (B)
50% of the then current per share market price of the Class A Common Stock of
such other Person (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the issuer
of such Common Stock shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall
take such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Stock thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this
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Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. Such cash amount shall be delivered by the Company to
the Rights Agent who shall forward the cash by check in the appropriate amounts
to the registered holders of the Right Certificates. For the purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the
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<PAGE> 39
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions which are integral multiples
of one one-hundredth of a share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth
of a share of Preferred Stock). Fractions of shares of Preferred Stock in
integral multiples of one one-hundredth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional
36
<PAGE> 40
shares of Preferred Stock that are not integral multiples of one one-hundredth
of a share of Preferred Stock, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
share of Preferred Stock. For the purposes of this Section 14(b), the current
market value of a share of Preferred Stock shall be the closing price of a
share of Preferred Stock (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in
respect of this Agreement, excepting the rights of action given to the Rights
Agent under Section 18 hereof, are vested in the respective registered holders
of the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his
37
<PAGE> 41
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this
Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated
Common Stock
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<PAGE> 42
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. The Company agrees
to pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
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<PAGE> 43
for, and to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Stock or Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT. Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
40
<PAGE> 44
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
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Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad faith or willful
misconduct.
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(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Section 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such change or
adjustment is required); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will,
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<PAGE> 47
when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for written advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
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Rights Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock or
Preferred Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or
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incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of the State of Ohio
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of Ohio), in
good standing, having an office in the State of Ohio, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $10,000,000 (or a combined capital and surplus in excess of $1,000,000
and the obligations of which, whether now in existence or hereafter incurred,
are fully and unconditionally guaranteed by a corporation organized and doing
business under the laws of the United States, and State or Territory thereof or
of the District of Columbia (the "Guarantor"), which Guarantor has a combined
capital and surplus of at least $50,000,000). After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
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<PAGE> 50
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
Section 23. REDEMPTION. (a) The Board of Directors of the
Company may, at its option, at any time prior to such time as any Person
becomes an Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock
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<PAGE> 51
dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights by the Board of Directors may be made effective at
such time on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights pursuant to paragraph (a)
of this Section 23, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. The Company
shall promptly give public notice of any such redemption; PROVIDED, HOWEVER,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption. Within 10 days after such action of the Board
of Directors ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates
or Associates may redeem, acquire or purchase for value
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<PAGE> 52
any Rights at any time in any manner other than that specifically set forth in
this Section 23 or in Section 24 hereof, and other than in connection with the
purchase of Common Stock prior to the Distribution Date.
Section 24. EXCHANGE. (a) The Board of Directors of the
Company may, at its option, at any time after the occurrence of a Trigger
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Stock at an exchange ratio
of one share of Class A, Class B or Class C Common Stock per Class A, Class B
or Class C Right, respectively, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding shares of Class A Common Stock for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
shares of Class A Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 and without any
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<PAGE> 53
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; PROVIDED, HOWEVER, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute shares of Series A, Series B, and Series
C Preferred Stock (or, equivalent shares of preferred stock, as such term is
defined in Section 11(b) hereof) for Class A, Class B and Class C Common Stock,
respectively, exchangeable for Rights, at the initial rate of one one-hundredth
of a share of Preferred Stock (or equivalent preferred share) of
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<PAGE> 54
the appropriate series for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock, if
any, pursuant to the terms thereof, so that the fraction of a share of
Preferred Stock delivered in lieu of each share of Common Stock shall have the
same voting rights as one share of such share of Common Stock.
(d) In the event that there shall not be sufficient
Common Stock or Preferred Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional Common Stock or Preferred Stock for issuance upon exchange
of the Rights.
(e) The Company shall not be required to issue fractions
of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Class A Common Stock for a Right
Certificate related to the Class A and Class B Common Stock and 2.708 times
such amount for a Right Certificate related to the Class C Common Stock. For
the purposes of this paragraph (e), the current market value of a whole share
of Common Stock shall be the closing price of a share of Class A Common Stock
(as determined
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pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the
Company shall propose (i) to pay any dividend payable in stock of any class to
the holders of its Preferred Stock or to make any other distribution to the
holders of its Preferred Stock (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of stock of any class or any other securities, rights or options, (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), (iv) to effect any consolidation or merger into or with, or
to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or
pay any dividend on the Common Stock payable in shares of Common Stock or to
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock), then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of such
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<PAGE> 56
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock and/or Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of the Preferred Stock for purposes of such
action, and in the case of any such other action, at least 10 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Stock and/or Preferred Stock, whichever shall be
the earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then the Company shall as soon as practicable
thereafter give to each holder of a Right Certificate, in accordance with
Section 26 hereof, a notice of the occurrence of such event, which notice shall
describe such event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof.
Section 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage
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prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Reliance Electric Company
6065 Parkland Boulevard
Cleveland, Ohio 44124-6106
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Society National Bank
Corporate Trust Division
127 Public Square, 15th Floor
Cleveland, Ohio 44114-1306
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. The Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
any such
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supplement or amendment to be evidenced by a writing signed by the Company and
the Rights Agent; PROVIDED, HOWEVER, that from and after such time as any
Person becomes an Acquiring Person, this Agreement shall not be amended in any
manner which would adversely affect the interests of the holders of Rights.
Section 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Stock) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Stock).
Section 30. SEVERABILITY. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. GOVERNING LAW. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract
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<PAGE> 59
made under the laws of the State of Delaware and shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, except that the rights,
duties and obligations of the Rights Agent shall be governed by and construed
in accordance with Ohio law.
Section 32. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of
the several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
RELIANCE ELECTRIC COMPANY
Attest:
By /s/ J. E. Murryn By /s/ William R. Norton
------------------------ ---------------------------
Title: Assistant Secretary Title: Vice President
SOCIETY NATIONAL BANK, AS
RIGHTS AGENT
Attest:
By /s/ Patricia Jonke By /s/ Victor W. LaTessa
------------------------ ---------------------------
Title: Trust Associate Title: Vice President
044\10226FEG.EVE
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Exhibit A
---------
FORM OF CERTIFICATE OF DESIGNATION AND TERMS
OF SERIES A, SERIES B AND SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK OF RELIANCE ELECTRIC COMPANY
-------------------------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------
We, the undersigned, John C. Morley and William R. Norton, the President and
Chief Executive Officer, and the Vice President, General Counsel and Secretary,
respectively, of Reliance Electric Company, a Delaware corporation (the
"Corporation"), do hereby certify as follows:
Pursuant to authority granted by Article FOURTH of the Restated Certificate
of Incorporation of the Corporation and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation has adopted the following resolutions fixing
the designation and certain terms, powers, preferences and other rights of
three new series of the Corporation's Junior Participating Preferred Stock, par
value $.10 per share, and certain qualifications, limitations and restrictions
thereon:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
- ---------------------------------------------
RESOLVED, that there be and hereby is created the Series A Junior
Participating Preferred Stock designated as "Series A Preferred Stock," for
issuance upon exercise of the Class A Rights consisting of 1,000,000 shares,
$.10 par value, having such powers, designations, preferences, and relative,
participating, optional and others rights, and subject to the qualifications,
limitations and restrictions as are set forth below, subject to such changes,
modification and additions as may be approved by the Board prior to the
issuance of such shares.
<PAGE> 61
Section 1. AMOUNT. Each share of this Series A Preferred Stock shall be
identical in all respects with the other shares of this Series A
Preferred Stock except as to the dates from and after which dividends thereon
shall be cumulative. The number of shares in this Series A Preferred Stock
shall initially be 1,000,000, which number may from time to time be increased
or decreased (but not below the number then outstanding) by the Board of
Directors.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of the Corporation of
any series or class ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of shares of Common Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on such
day (to be designated from time to time by the Board of Directors, or if not so
designated, then the fifteenth day) during the months of March, June,
September, and December in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date") after the first issuance of a share of
Series A Preferred Stock or fraction thereof, in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in Common Stock or a subdivision of the
outstanding Common Stock (by reclassification or otherwise), declared on the
Class A Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any shares of Series A Preferred Stock or fraction thereof.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Class A Common Stock (assuming
full conversion of all outstanding shares of Class B and Class C Common Stock)
outstanding immediately after such event and the
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<PAGE> 62
denominator of which is the number of shares of Class A Common Stock (assuming
full conversion of all outstanding shares of Class B and Class C Common Stock)
that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (a) of this Section 2 immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the
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Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the number of votes per share to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction, the numerator of which is
the number of shares of Class A Common Stock (assuming full conversion of all
outstanding shares of Class B and Class C Common Stock) outstanding immediately
after such event and the denominator of which is the number of shares of Class
A Common Stock (assuming full conversion of all outstanding shares of Class B
and Class C Common Stock) that were outstanding immediately prior to such
event.
(b) Except as otherwise provided in the Corporation's Certificate of
Incorporation or required by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Class A Common Stock and any other shares of
the Corporation of any class having general voting rights shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) Except as otherwise provided in the Corporation's Certificate of
Incorporation or as required by law, holders of shares of Series A Preferred
Stock shall have no special voting rights and their approval shall not be
required (except to the extent they are entitled to vote with holders of shares
of Class A Common Stock and any other shares of the Corporation of any class
having general voting rights as herein provided) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever (i) quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, or (ii) the full dividends on the Series A Preferred Stock for the
then current dividend period shall not have been paid, or declared and a sum
sufficient for the payment thereof set apart, then and thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on all
shares of Series A Preferred Stock outstanding shall have been paid in full,
and the full dividends thereon for the then current dividend period shall have
been paid, or declared and a sum sufficient for the payment thereof set apart
the Corporation shall not:
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<PAGE> 64
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) except as permitted in Section 4(a)(iv) below, redeem
or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
A Preferred Stock (other than parity stock that is
the Series B Preferred Stock or Series C Preferred
Stock which can be exchanged for the same security
being received by the holders of the Series A
Preferred Stock); or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred
Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and classes, shall determine in
good faith will result in fair and equitable
treatment among the respective series or classes.
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<PAGE> 65
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
the Corporation unless the Corporation could, under paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued subject to the conditions and
restrictions on issuance set forth in this Certificate of Incorporation, or in
any resolution or resolutions adopted by the Board of Directors which provide
for the issue of a series of preferred stock of the Corporation of any class,
or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of Common Stock unless, prior thereto,
the holders of shares of Series A Preferred Stock shall have received $100 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that
the holders of shares of Series A Preferred Stock shall be entitled to receive
an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Class A Common Stock. In the
event that the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Class A Common Stock
(assuming full conversion of all outstanding shares of Class B and Class C
Common Stock) outstanding immediately after such event and the denominator of
which is the number of shares of Class A Common Stock (assuming full conversion
of all outstanding shares of Class B and Class C Common Stock) that were
outstanding immediately prior to such event. For purposes of this Section 6,
the consolidation or
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<PAGE> 66
merger of, or binding share exchange by, the Corporation with any other
corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Class A Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Class A Common Stock (assuming full conversion of all
outstanding shares of Class B and Class C Common Stock) outstanding immediately
after such event and the denominator of which is the number of shares of Class
A Common Stock (assuming full conversion of all outstanding shares of Class B
and Class C Common Stock) that were outstanding immediately prior to such
event.
Section 8. NO REDEMPTION. The Series A Preferred Stock shall not be
redeemable.
Section 9. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least a majority of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
Section 10. RANKING. The Series A, Series B and Series C Preferred
Stock shall rank on a parity with each other but junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
7
<PAGE> 67
distribution of assets, unless the terms of any such series shall provide
otherwise.
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
- ---------------------------------------------
RESOLVED, that there be and hereby is created the Series B
Junior Participating Preferred Stock designated as "Series B Preferred
Stock," for issuance upon exercise of the Class B Rights consisting of
1,000,000 shares, $.10 par value, having such powers, designations,
preferences, and relative, participating, optional and other rights,
and subject to the qualifications, limitations and restrictions as are
set forth below, subject to such changes, modifications and additions
as may be approved by the Board prior to the issuance of such shares.
Section 1. AMOUNT. Each share of this Series B Preferred Stock shall
be identical in all respects with the other shares of this Series B Preferred
Stock except as to the dates from and after which dividends thereon shall be
cumulative. The number of shares in this Series B Preferred Stock shall
initially be 1,000,000, which number may from time to time be increased or
decreased (but not below the number then outstanding) by the Board of
Directors.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of the
Corporation of any series or class ranking prior and superior to the Series B
Preferred Stock with respect to dividends, the holders of shares of Series B
Preferred Stock, in preference to the holders of shares of Common Stock, shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, quarterly dividends payable in cash
on such day (to be designated from time to time by the Board of Directors, or
if not so designated, then the fifteenth day) during the months of March, June,
September, and December in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date") after the first issuance of a share of
Series B Preferred Stock or fraction thereof, in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in Common Stock or a subdivision of the
outstanding Common Stock (by reclassification or otherwise), declared on the
Class A Common Stock since the immediately preceding Quarterly
8
<PAGE> 68
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any shares of Series B Preferred Stock or
fraction thereof. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series B Preferred Stock
were entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Class A Common Stock
(assuming full conversion of all outstanding shares of Class B and Class C
Common Stock) outstanding immediately after such event and the denominator of
which is the number of shares of Class A Common Stock (assuming full conversion
of all outstanding shares of Class B and Class C Common Stock) that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series B Preferred Stock as provided in paragraph (a) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on
the Series B Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders shares of Series B Preferred Stock entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series B Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
9
<PAGE> 69
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series B Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. VOTING RIGHTS. Except as otherwise required by law, the
holders of shares of Series B Preferred Stock shall have no voting rights.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever (i) quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in Section 2
are in arrears, or (ii) the full dividends on the Series B Preferred Stock for
the then current dividend period shall not have been paid, or declared and a
sum sufficient for the payment thereof set apart, then and thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
all shares of Series B Preferred Stock outstanding shall have been paid in
full, and the full dividends thereon for the then current dividend period shall
have been paid, or declared and a sum sufficient for the payment thereof set
apart the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the
Series B Preferred Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) except as permitted in Section 4(a)(iv) below, redeem
or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding
10
<PAGE> 70
up) with the Series B Preferred Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
B Preferred Stock (other than parity stock that is
the Series A Preferred Stock or Series C Preferred
Stock which can be exchanged for the same security
being received by the holders of the Series B
Preferred Stock); or
(iv) purchase or otherwise acquire for consideration any
shares of Series B Preferred Stock, or any shares of
stock ranking on a parity with the Series B Preferred
Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and classes, shall determine in
good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
the Corporation unless the Corporation could, under paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. REACQUIRED SHARES. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued subject to the conditions and
restrictions on issuance set forth in this Certificate of Incorporation, or in
any resolution or resolutions adopted by the Board of Directors which provide
for the issue of a series of preferred stock of the Corporation of any class,
or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the
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<PAGE> 71
Corporation, no distribution shall be made to the holders of shares of Common
Stock unless, prior thereto, the holders of shares of Series B Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series B Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of Class A
Common Stock. In the event that the Corporation shall at any time declare or
pay any dividend on the shares of Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under the proviso in the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Class A Common Stock (assuming full conversion
of all outstanding shares of Class B and Class C Common Stock) outstanding
immediately after such event and the denominator of which is the number of
shares of Class A Common Stock (assuming full conversion of all outstanding
shares of Class B and Class C Common Stock) that were outstanding immediately
prior to such event. For purposes of this Section 6, the consolidation or
merger of, or binding share exchange by, the Corporation with any other
corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Class A Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the shares of Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a
12
<PAGE> 72
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series B Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Class A Common Stock (assuming full conversion of all outstanding shares of
Class B and Class C Common Stock) outstanding immediately after such event and
the denominator of which is the number of shares of Class A Common Stock
(assuming full conversion of all outstanding shares of Class B and Class C
Common Stock) that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The Series B Preferred Stock shall not be
redeemable.
Section 9. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least a majority of the outstanding shares of Series B Preferred
Stock, voting together as a single class.
Section 10. RANKING. The Series A, Series B and Series C Preferred
Stock shall rank on a parity with each other but junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
- ---------------------------------------------
RESOLVED, that there be and hereby is created the Series C
Junior Participating Preferred Stock designated as "Series C Preferred
Stock," for issuance upon exercise of the Class C Rights consisting of
120,000 shares, $.10 par value, having such powers, designations,
preferences, and relative, participating, optional and other rights,
and subject to the qualifications, limitations and restrictions as are
set forth below, subject to such changes, modifications and additions
as may be approved by the Board prior to the issuance of such shares.
Section 1. AMOUNT. Each share of this Series C Preferred Stock shall
be identical in all respects with the other shares of this Series C Preferred
Stock except as to the dates from and after which dividends thereon shall be
cumulative. The number of shares in this Series C Preferred Stock shall
initially be 120,000, which number may from time
13
<PAGE> 73
to time be increased or decreased (but not below the number then outstanding)
by the Board of Directors.
(a) Subject to the rights of the holders of any shares of the
Corporation of any series or class ranking prior and superior to the Series C
Preferred Stock with respect to dividends, the holders of Series C Preferred
Stock, in preference to the holders of Common Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on such
day (to be designated from time to time by the Board of Directors, or if not so
designated, then the fifteenth day) during the months of March, June,
September, and December in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date") after the first issuance of a share of
Series C Preferred Stock or fraction thereof, in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $2.708 or (ii) subject to the
provision for adjustment hereinafter set forth, 270.8 times the aggregate per
share amount of all cash dividends, and 270.8 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions,
other than a dividend payable in Common Stock or a subdivision of the
outstanding Common Stock (by reclassification or otherwise), declared on the
Class A Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any shares of Series C Preferred Stock or fraction thereof.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Class A Common Stock (assuming
full conversion of all outstanding shares of Class B and Class C Common Stock)
outstanding immediately after such event and the denominator of which is the
number of shares of Class A Common Stock (assuming full conversion of all
outstanding shares of Class B and Class C Common Stock) that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series C Preferred Stock as provided in paragraph (a) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
14
<PAGE> 74
(other than a dividend payable in shares of Common Stock); provided that in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $2.708 per share on
the Series C Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series C
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series C Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. Except as otherwise required by law, the
holders of shares of Series C Preferred Stock shall have no voting rights.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever (i) quarterly dividends or other dividends or
distributions payable on the Series C Preferred Stock as provided in Section 2
are in arrears, or (ii) the full dividends on the Series C Preferred Stock for
the then current dividend period shall not have been paid, or declared and a
sum sufficient for the payment thereof set apart, then and thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
all shares of Series C Preferred Stock outstanding shall have been paid in
full, and the full dividends thereon for the then current dividend period shall
have been paid, or
15
<PAGE> 75
declared and a sum sufficient for the payment thereof set apart the Corporation
shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C
Preferred Stock, except dividends paid ratably on the
Series C Preferred Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) except as permitted in Section 4(a)(iv) below, redeem
or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding
up) with the Series C Preferred Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series
C Preferred Stock (other than parity stock that is
the Series A Preferred Stock or Series B Preferred
Stock which can be exchanged for the same security
being received by the holders of the Series C
Preferred Stock); or
(iv) purchase or otherwise acquire for consideration any
shares of Series C Preferred Stock, or any shares of
stock ranking on a parity with the Series C Preferred
Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and
16
<PAGE> 76
classes, shall determine in good faith will result in
fair and equitable treatment among the respective
series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
the Corporation unless the Corporation could, under paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued subject to the conditions and
restrictions on issuance set forth in this Certificate of Incorporation, or in
any resolution or resolutions adopted by the Board of Directors which provide
for the issue of a series of preferred stock of the Corporation of any class,
or as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made to the holders of shares of Common Stock unless, prior thereto,
the holders of shares of Series C Preferred Stock shall have received $270.80
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series C Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 270.8 times the aggregate amount to
be distributed per share to holders of shares of Class A Common Stock. In the
event that the Corporation shall at any time declare or pay any dividend on the
shares of Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such event under
the proviso in the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Class A
Common Stock (assuming full conversion of all outstanding shares of Class B and
Class C Common Stock) outstanding immediately after such event and the
denominator of which is the number
17
<PAGE> 77
of shares of Class A Common Stock (assuming full conversion of all outstanding
shares of Class B and Class C Common Stock) that were outstanding immediately
prior to such event. For purposes of this Section 6, the consolidation or
merger of, or binding share exchange by, the Corporation with any other
corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the Corporation.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series C Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 270.8 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Class A Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series C Preferred Stock shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Class A Common Stock (assuming full conversion of all
outstanding shares of Class B and Class C Common Stock) outstanding immediately
after such event and the denominator of which is the number of shares of Class
A Common Stock (assuming full conversion of all outstanding shares of Class B
and Class C Common Stock) that were outstanding immediately prior to such
event.
Section 8. NO REDEMPTION. The Series C Preferred Stock shall not be
redeemable.
Section 9. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series C Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least a majority of the outstanding shares of Series C Preferred
Stock, voting together as a single class.
18
<PAGE> 78
Section 10. RANKING. The Series A, Series B and Series C Preferred
Stock shall rank on a parity with each other but junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
19
<PAGE> 79
IN WITNESS WHEREOF, the undersigned have signed and attested this
certificate on the 15th day of September, 1994.
/s/ John C. Morley
---------------------------------
John C. Morley, President and
Chief Executive Officer
Attest:
/s/ William R. Norton
- -------------------------------------
William R. Norton, Vice President,
General Counsel and Secretary
431/10226BDB.490
20
<PAGE> 80
EXHIBIT B-1
[Form of Class A Rights Certificate]
Certificate No. W- _______ Class A Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF
THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF
THE FOREGOING WILL BE VOID.
Class A Rights Certificate
RELIANCE ELECTRIC COMPANY
This certifies that ____________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Reliance Electric Company Rights Plan, dated as of August 29,
1994 (as amended from time to time, the "Rights Agreement"), between Reliance
Electric Company, a Delaware corporation (the "Company"), and Society National
Bank, a national banking association, as Rights Agent (the "Rights Agent,"
which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to the close
of business on August 29, 2004, one one-hundredth of a fully paid share of
Series A Preferred Stock, par value $.10 per share (the "Series A Preferred
Stock"), of the Company (subject to adjustment as provided in the Rights
Agreement) at the Purchase Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise duly
executed at the principal office of the Rights Agent in the City of Cleveland,
Ohio. The Purchase Price shall initially be $60.00 per Right and shall be
subject to adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities or assets of the
Company other than the Series A Preferred Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated
<PAGE> 81
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates. Copies of the Rights
Agreement are on file at the principal office of the Company and are available
without cost upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of
Rights evidenced by the Rights Certificate or Rights Certificates surrendered.
If this Rights Certificate shall be exercised in part, the registered holder
shall be entitled to receive, upon surrender hereof, another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right evidenced by
this Certificate may be (a) redeemed by the Company under certain circumstances
at its option at a redemption price of $.01 per Right or (b) exchanged by the
Company under certain circumstances at its option for one share of Class A
Common Stock or one one-hundredth of a share of Series A Preferred Stock per
Right (or, in certain cases, other securities or assets of the Company),
subject in each case to adjustment in certain events as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
2
<PAGE> 82
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Date: ____________
ATTEST: RELIANCE ELECTRIC COMPANY
___________________________ By______________________
Secretary President
Countersigned:
SOCIETY NATIONAL BANK
By____________________________
Authorized Signature
3
<PAGE> 83
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby
sells, assigns and transfers unto ___________________
(Please print name
_____________________________________________________
and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must
correspond to name as
written upon the face of
this Rights Certificate
in every particular,
without alteration or
enlargement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE> 84
- -------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
2
<PAGE> 85
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: RELIANCE ELECTRIC COMPANY
The undersigned hereby irrevocably elects to exercise
_______________________ whole Rights represented by the attached Rights
Certificate to purchase the shares of Series A Preferred Stock issuable upon
the exercise of such Rights and requests that certificates for such shares be
issued in the name of:
-------------------------------------------
Address:
-------------------------------------------
-------------------------------------------
Social Security or Other Taxpayer
Identification Number:
-------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
-------------------------------------------
Address:
-------------------------------------------
-------------------------------------------
Social Security or Other Taxpayer
Identification Number:
-------------------------------------------
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must correspond
to name as written upon the
face of the attached Rights
Certificate in every
particular, without alteration
or enlargement or any change
whatsoever)
<PAGE> 86
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- -------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and shares of Common Stock, that the Rights evidenced by the attached Rights
Certificate are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported exercise, the Company will deem the Beneficial
Owner of the Rights evidenced by the attached Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
2
<PAGE> 87
EXHIBIT B-2
-----------
[Form of Class B Rights Certificate]
Certificate No. W- _______ Class B Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF
THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF
THE FOREGOING WILL BE VOID.
Class B Rights Certificate
RELIANCE ELECTRIC COMPANY
This certifies that ____________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Reliance Electric Company Rights Plan, dated as of August 29,
1994 (as amended from time to time, the "Rights Agreement"), between Reliance
Electric Company, a Delaware corporation (the "Company"), and Society National
Bank, a national banking association, as Rights Agent (the "Rights Agent,"
which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to the close
of business on August 29, 2004, one one-hundredth of a fully paid share of
Series B Preferred Stock, par value $.10 per share (the "Series B Preferred
Stock"), of the Company (subject to adjustment as provided in the Rights
Agreement) at the Purchase Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise duly
executed at the principal office of the Rights Agent in the City of Cleveland,
Ohio. The Purchase Price shall initially be $60.00 per Right and shall be
subject to adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities or assets of the
Company other than the Series B Preferred Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights
<PAGE> 88
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the principal office of the Company and
are available without cost upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of
Rights evidenced by the Rights Certificate or Rights Certificates surrendered.
If this Rights Certificate shall be exercised in part, the registered holder
shall be entitled to receive, upon surrender hereof, another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right evidenced by
this Certificate may be (a) redeemed by the Company under certain circumstances
at its option at a redemption price of $.01 per Right or (b) exchanged by the
Company under certain circumstances at its option for one share of Class B
Common Stock or one one-hundredth of a share of Series B Preferred Stock per
Right (or, in certain cases, other securities or assets of the Company),
subject in each case to adjustment in certain events as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
2
<PAGE> 89
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Date: ____________
ATTEST: RELIANCE ELECTRIC COMPANY
___________________________ By______________________
Secretary President
Countersigned:
SOCIETY NATIONAL BANK
By____________________________
Authorized Signature
3
<PAGE> 90
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby
sells, assigns and transfers unto ___________________
(Please print name
_____________________________________________________
and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must correspond
to name as written upon the
face of this Rights
Certificate in every
particular, without alteration
or enlargement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE> 91
- -------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
2
<PAGE> 92
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: RELIANCE ELECTRIC COMPANY
The undersigned hereby irrevocably elects to exercise
_______________________ whole Rights represented by the attached Rights
Certificate to purchase the shares of Series B Preferred Stock issuable upon
the exercise of such Rights and requests that certificates for such shares be
issued in the name of:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
Social Security or Other Taxpayer
Identification Number:
---------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
---------------------------------------
Address:
---------------------------------------
---------------------------------------
Social Security or Other Taxpayer
Identification Number:
---------------------------------------
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must correspond to
name as written upon the face
of the attached Rights
Certificate in every
particular, without alteration
or enlargement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE> 93
- -------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and shares of Common Stock, that the Rights evidenced by the attached Rights
Certificate are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported exercise, the Company will deem the Beneficial
Owner of the Rights evidenced by the attached Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
2
<PAGE> 94
EXHIBIT B-3
-----------
[Form of Class C Rights Certificate]
Certificate No. W- _______ Class C Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF
THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF
THE FOREGOING WILL BE VOID.
Class C Rights Certificate
RELIANCE ELECTRIC COMPANY
This certifies that ____________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Reliance Electric Company Rights Plan, dated as of August 29,
1994 (as amended from time to time, the "Rights Agreement"), between Reliance
Electric Company, a Delaware corporation (the "Company"), and Society National
Bank, a national banking association, as Rights Agent (the "Rights Agent,"
which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to the close
of business on August 29, 2004, one one-hundredth of a fully paid share of
Series C Preferred Stock, par value $.10 per share (the "Series C Preferred
Stock"), of the Company (subject to adjustment as provided in the Rights
Agreement) at the Purchase Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise duly
executed at the principal office of the Rights Agent in the City of Cleveland,
Ohio. The Purchase Price shall initially be $162.48 per Right and shall be
subject to adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase
securities of an entity other than the Company or securities or assets of the
Company other than the Series C Preferred Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights
<PAGE> 95
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the principal office of the
Company and are available without cost upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of
Rights evidenced by the Rights Certificate or Rights Certificates surrendered.
If this Rights Certificate shall be exercised in part, the registered holder
shall be entitled to receive, upon surrender hereof, another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, each Right evidenced by
this Certificate may be (a) redeemed by the Company under certain circumstances
at its option at a redemption price of $.01 per Right or (b) exchanged by the
Company under certain circumstances at its option for one share of Class C
Common Stock or one one-hundredth of a share of Series C Preferred Stock per
Right (or, in certain cases, other securities or assets of the Company),
subject in each case to adjustment in certain events as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised or exchanged as provided in
the Rights Agreement.
2
<PAGE> 96
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Date: ____________
ATTEST: RELIANCE ELECTRIC COMPANY
___________________________ By______________________
Secretary President
Countersigned:
SOCIETY NATIONAL BANK
By____________________________
Authorized Signature
3
<PAGE> 97
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate.)
FOR VALUE RECEIVED ________________________ hereby
sells, assigns and transfers unto ___________________
(Please print name
_____________________________________________________
and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must correspond
to name as written upon the
face of this Rights Certificate
in every particular, without
alteration or enlargement or
any change whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE> 98
- -------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported assignment, the Company will deem the Beneficial
Owner of the Rights evidenced by the enclosed Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
2
<PAGE> 99
[To be attached to each Rights Certificate]
FORM OF ELECTION TO EXERCISE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate.)
TO: RELIANCE ELECTRIC COMPANY
The undersigned hereby irrevocably elects to exercise
_______________________ whole Rights represented by the attached Rights
Certificate to purchase the shares of Series C Preferred Stock issuable upon
the exercise of such Rights and requests that certificates for such shares be
issued in the name of:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
Social Security or Other Taxpayer
Identification Number:
----------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
Social Security or Other Taxpayer
Identification Number:
----------------------------------------
Dated: _______________, ____
Signature Guaranteed: _________________________
Signature
(Signature must correspond
to name as written upon the
face of the attached Rights
Certificate in every
particular, without alteration
or enlargement or any change
whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE> 100
- --------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights
and shares of Common Stock, that the Rights evidenced by the attached Rights
Certificate are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement).
_________________________
Signature
- --------------------------------------------------------------------------------
NOTICE
------
In the event the certification set forth above is not completed in
connection with a purported exercise, the Company will deem the Beneficial
Owner of the Rights evidenced by the attached Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) or a transferee of any of the foregoing and accordingly will deem
the Rights evidenced by such Rights Certificate to be void and not transferable
or exercisable.
431/10226BGB.490
2
<PAGE> 101
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
SERIES A, SERIES B AND SERIES C
PREFERRED STOCK
On August 29, 1994, the Board of Directors of Reliance Electric Company (the
"Company") declared a dividend of one preferred stock purchase right (a
"Right") for each outstanding share of Class A, Class B and Class C Common
Stock of the Company to purchase one one-hundredth of a share of a new Series
A, Series B or Series C Preferred Stock, respectively. The dividend is payable
on September 15, 1994 (the "Record Date") to the stockholders of record on that
date. Each Right entitles the registered holders of Class A and Class B Common
Stock to buy one one-hundredth of a share of Series A and Series B Preferred
Stock, respectively, at an exercise price of $60.00, subject to adjustment, and
holders of Class C Common Stock to buy one one-hundredth of a share of Series C
Preferred Stock at an exercise price of $162.48, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and Society National Bank, as Rights
Agent (the "Rights Agent").
Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 10% or more of the outstanding
shares of Class A Common Stock or (ii) ten business days (or such later date as
may be determined by action of the Board of Directors prior to such time as any
person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 10% or more of the Company's outstanding Class A Common Stock (the
earlier of such dates being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificates outstanding as
of the Record Date, by such Common Stock certificate with a copy of this
Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the shares of Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of shares of Common Stock will contain a legend incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock, outstanding as of the Record Date,
even without such legend or a copy of this Summary of Rights being attached
<PAGE> 102
thereto, will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of the Common Stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on the earliest of (i) the close of business on August 29, 2004 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed, (iii)
immediately prior to the effective time of the merger of the Company into
General Signal Corporation, or (iv) the time at which such Rights are
exchanged.
The purchase price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights, options or warrants to subscribe for or purchase Preferred
Stock at a price, or securities convertible into Preferred Stock with a
conversion price, less than the then current market price of the Preferred
Stock or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in Preferred
Stock) or of subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of one one-hundredths of
Preferred Stock issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share ($2.708 per share
for the Series C Preferred Stock) but will be entitled to an aggregate dividend
of 100 times (270.8 times for the Series C Preferred Stock) the dividend
declared on the Class A Common Stock. In the event of liquidation, the holders
of the new Series A and Series B Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1.00 per share ($2.708 per share for the
Series C Preferred Stock) but will be entitled to an aggregate payment of 100
times the payment (270.8 times for the Series C Preferred Stock) made per share
of Class A Common Stock. Each share of Series A Preferred Stock will have 100
votes, voting together with the Common Stock. The Series B and
2
<PAGE> 103
Series C Preferred Stock will be non-voting. Finally, in the event of any
merger, consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Series A and Series B Preferred Stock will be entitled
to receive 100 times (270.8 times for the Series C Preferred Stock) the amount
received per Common Stock. These rights are protected by customary
antidilution provisions.
Because of the nature of the Preferred Stock dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that
any person or group of affiliated or associated persons becomes the beneficial
owner of 10% or more of the outstanding Common Stock, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter have the
right to receive upon exercise that number of shares of Common Stock having a
market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of the outstanding
Class A Common Stock and prior to the acquisition by such person or group of
50% or more of the outstanding Class A Common Stock, the Board of Directors of
the Company may exchange the Rights (other than Rights owned by such person or
group which have become void), in whole or in part, at an exchange ratio of one
share of Common Stock, or one one-hundredth of a share of Preferred Stock (or
of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right (subject to
adjustment).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
such purchase price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
3
<PAGE> 104
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 10% or more of the outstanding
Common Stock, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the rights may be made effective at such time on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after such time as any person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
A copy of the Rights Agreements has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A to be
dated September 15, 1994. A copy of the Rights Agreement is available free of
charge from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.
431/10226AXC.490
4
<PAGE> 1
Exhibit 14
SECTION 203. BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
(a) Notwithstanding any other provisions of this chapter, a corporation
shall not engage in any business combination with any interested stockholder
for a period of 3 years following the date that such stockholder became an
interested stockholder, unless (1) prior to such date the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, or (2)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (i) by persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (3) on or subsequent
to such date the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66-2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) the corporation's original certificate of incorporation contains
a provision expressly electing not to be governed by this section;
(2) the corporation, by action of its board of directors, adopts an
amendment to its by-laws within 90 days of the effective date of this
section, expressly electing not to be governed by this section, which
amendment shall not be further amended by the board of directors;
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SEC. 203 DELAWARE CORPORATION LAW ANNOTATED
_______________________________________________________________________________
(3) the corporation, by action of its stockholders, adopts an amendment to
its certificate of incorporation or by-laws expressly electing not to be
governed by this section, providing that, in addition to any other vote
required by law, such amendment to the certificate of incorporation or by-laws
must be approved by the affirmative vote of a majority of the shares entitled
to vote. An amendment adopted pursuant to this paragraph shall not be effective
until 12 months after the adoption of such amendment and shall not apply to any
business combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption. A
by-law amendment adopted pursuant to this paragraph shall not be further
amended by the board of directors;
(4) the corporation does not have a class of voting stock that is (i)
listed on a national securities exchange, (ii) authorized for quotation on an
inter-dealer quotation system of a registered national securities association
or (iii) held of record by more than 2,000 stockholders, unless any of the
foregoing results from action taken, directly or indirectly, by an interested
stockholder or from a transaction in which a person becomes an interested
stockholder;
(5) a stockholder becomes an interested stockholder inadvertently and (i)
as soon as practicable divests sufficient shares so that the stockholder ceases
to be an interested stockholder and (ii) would not, at any time within the
3-year period immediately prior to a business combination between the
corporation and such stockholder, have been an interested stockholder but for
the inadvertent acquisition; or
(6) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or the
notice required hereunder of a proposed transaction which (i) constitutes one
of the transactions described in the second sentence of this paragraph; (ii) is
with or by a person who either was not an interested stockholder during the
previous 3 years or who became an interested stockholder with the approval of
the corporation's board of directors; and (iii) is approved or not opposed by a
majority of the members of the board of directors then in office (but not less
than (1) who were directors prior to any person becoming an interested
stockholder during the previous 3 years or were recommended for election or
elected to succeed such directors by a majority of such directors. The proposed
transactions referred to in the preceding sentence are limited to (x) a merger
or consolidation of the corporation (except for a merger in respect of which,
pursuant to section 251(f) of the chapter, no vote of the stockholders of the
corporation is required); (y) a sale, lease, exchange, mortgage, pledge,
transfer or other
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DELAWARE CORPORATION LAW ANNOTATED SEC. 203
________________________________________________________________________________
dispostion (in one transaction or a series of transactions), whether as part of
a dissolution or otherwise, of assets of the corporation or of any direct or
indirect majority-owned subsidiary of the corporation (other than to any direct
or indirect wholly-owned subsidiary or to the corporation) having an aggregate
market value equal to 50% or more of either that aggregate market value of all
of the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; or (z)
a proposed tender or exchange offer for 50% or more of the outstanding voting
stock of the corporation. The corporation shall give not less than 20 days
notice to all interested stockholders prior to the consummation of any of the
transactions described in clauses (x) or (y) of the second sentence of this
paragraph. Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection,
a corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section, provided
that any such amendment to the certificate of incorporation shall not apply to
restrict a business combination between the corporation and an interested
stockholder of the corporation if the interested stockholder became such prior
to the effective date of the amendment.
(c) As used in this section only, the term:
(1) "affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, another person.
(2) "associate," when used to indicate a relationship with any person,
means (i) any corporation or organization of which such person is a director,
officer or partner or is, directly or indirectly, the owner of 20% or more of
any class of voting stock, (ii) any trust or other estate in which such person
has at least a 20% beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of
such person, or any relative of such spouse, who has the same residence as such
person.
(3) "business combination," when used in reference to any corporation and
any interested stockholder of such corporation means:
(i) any merger or consoldiation of the corporation or any direct or
indirect majority-owned subsidiary of the corporation with (A) the
interested stockholder, or (B) with any other corporation if the merger
or consolidation is caused by the interested stockholder and as a result
of such merger or consolidation subsec-
<PAGE> 4
SEC. 203 DELAWARE CORPORATION LAW ANNOTATED
________________________________________________________________________________
tion (a) of this section is not applicable to the surviving corporation;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of such corporation, to or with the
interested stockholder, whether as part of a dissolution or otherwise, of
assets or the corporation or of any direct or indirect majority-owned
subsidiary of the corporation which assets have an aggregate market value
equal to 10% or more of either the aggregate market value of all the
assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation;
(iii) any transaction which results in the issuance or transfer by
the corporation or by any direct or indirect majority-owned subsidiary of
the corporation of any stock of the corporation or of such subsidiary to
the interested stockholder, except (A) pursuant to the exercise, exchange
or conversion of securities exercisable for, exchangeable for or covertible
into stock of such corporation or any such subsidiary which securities were
outstanding prior to the time that the interested stockholder became such,
(B) pursuant to a dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for, exchangeable for or
convertible into stock of such corporation or any such subsidiary which
security is distributed, pro rata to all holders of a class or series of
stock of such corporation subsequent to the time the interested
stockholder became such, (C) pursuant to an exchange offer by the
corporation to purchase stock made on the same terms to all holders of
said stock, or (D) any issuance or transfer of stock by the corporation,
provided however, that in no case under (B)-(D) above shall there be an
increase in the interested stockholder's proportionate share of the stock
of any class or series of the corporation or of the voting stock of the
corporation;
(iv) any transaction involving the corporation or any direct or
indirect majority-owned subsidiary of the corporation which has the effect,
directly or indirectly, or increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of
any class or series, of the corporation or of any such subsidiary which is
owned by the interested stockholder,
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DELAWARE CORPORATION LAW ANNOTATED SEC. 203
________________________________________________________________________________
except as a result of immaterial changes due to fractional share
adjustment or as a result of any purchase or redemption of any shares of
stock not caused, directly or indirectly, by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit,
directly or indirectly (except proportionately as a stockholder of such
corporation) of any loans, advances, guarantees, pledges, or other
financial benefits (other than those expressly permitted in subparagraphs
(i)-(iv) above) provided by or through the corporation or any direct of
indirect majority owned subsidiary.
(4) "control," including the terms "controlling," "controlled by" and
"under common control with," means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting stock, by contract, or
otherwise. A person who is the owner of 20% or more of a corporation's
outstanding voting stock shall be presumed to have control of such corporation,
in the absence of proof by a preponderance of the evidence to the contrary.
Notwithstanding the foregoing, a presumption of control shall not apply where
such person holds voting stock, in good faith and not for the purpose of
circumventing this section, as an agent, bank, broker, nominee, custodian or
trustee for one or more owners who do not individually or as a group have
control of such corporation.
(5) "interested stockholder" means any person (other than the corporation
and any direct or indirect majority-owned subsidiary of the corporation) and
(i) is the owner of 15% or more of the outstanding voting stock of the
corporation, or (ii) is an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on whch it
is sought to be determined whether such person is an interested stockholder;
and the affiliates and associates of such person; provided, however, that the
term "interested stockholder" shall not include (x) any person who (A) owned
shares in excess of the 15% limitation set forth herein as of, or acquired such
shares pursuant to a tender offer commenced prior to, December 23, 1987 or
pursuant to an exchange offer announced prior to the aforesaid date and
commenced within 90 days thereafter and continued to own shares in excess of
such 15% limitation or would have but for action by the corporation or (B)
acquired said shares from a person described in (A) above by gift, inheritance
or in a transaction in which no consideration was exchanged; or (y) any person
whose ownership of shares in
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SEC. 203 DELAWARE CORPORATION LAW ANNOTATED
________________________________________________________________________________
excess of the 15% limitation set forth herein is the result of action taken
solely by the corporation provided that such person shall be an interested
stockholder if thereafter he acquires additional shares of voting stock of the
corporation, except as a result of further corporate action not caused,
directly or indirectly, by such person. For the purpose of determining whether
a person is an interested stockholder, the voting stock of the corporation
deemed to be outstanding shall include stock deemed to be owned by the person
through application of paragraph (8) of this subsection but shall not include
any other unissued stock of such corporation which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(6) "person" means any individual, corporation, partnership,
unincorporated association or other entity.
(7) "voting stock" means stock of any class or series entitled to vote
generally in the election of directors.
(8) "owner" including the terms "own" and "owned" when used with respect
to any stock means a person that individually or with or through any of its
affilates or associates;
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed the owner of stock tendered
pursuant to a tender or exchange offer made by such person or any of such
person's affiliates or associates until such tendered stock is accepted
for purchase or exchange; or (B) the right to vote such stock pursuant to
any agreement, arrangement or understanding; provided, however, that a
person shall not be deemed the owner of any stock because of such person's
right to vote such stock arises solely from a revocable proxy or consent
given in resonse to a proxy or consent solicitation made to 10 or more
persons; or
(iii) has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent as described in item (B) of clause (ii) of this paragraph), or
disposing of such stock with any other person
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DELAWARE CORPORATION LAW ANNOTATED SEC. 203
________________________________________________________________________________
that beneficially owns, or whose affiliates or associates beneficially
own, directly or indirectly, such stock.
(d) No provision of a certificate of incorporation or by-law shall
require, for any vote of stockholders required by this section a greater vote
of stockholders than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determined all matters with respect to this section.
(As added by Ch. 204, Laws of 1988).
<PAGE> 1
Exhibit 15
STOCKHOLDER AGREEMENT
---------------------
This is an Agreement dated August 29, 1994 (the "Agreement") by and
between Court Square Capital Limited, a Delaware corporation ("CSCL") and
General Signal Corp., a New York corporation ("General").
Background
----------
A. Simultaneously with the execution of this Agreement, General is
entering into an Agreement and Plan of Merger dated the date hereof (the
"Merger Agreement") with Reliance Electric Company, a Delaware corporation
("Reliance") pursuant to which Recharge will merge with and into General, with
General as the surviving corporation (the "Merger"). The Merger is structured
to be a tax-free reorganization under Section 368 of the Internal Revenue Code
and is intended to be accounted for as a pooling of interests.
B. CSCL currently owns beneficially and of record, 5,250,000 shares of
the Reliance Class C Common Stock, par value $.01 per share, (the "Class C
Stock") which are convertible into 14,217,000 shares of the Reliance Class A
Common Stock, par value $.01 per share, (the "Class A Stock").
C. General and CSCL wish to set forth certain understandings regarding
their relationship prior to and after the Merger.
Terms
-----
Therefore, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
agree as follows:
1. Agreements of CSCL.
-------------------
1.1. DISSENTERS RIGHTS. CSCL agrees that in connection with the
Merger it will not exercise any appraisal or dissenters rights under Section
262 of the General Corporation Law of the State of Delaware.
1.2. POOLING OF INTERESTS. As soon as practicable after the date
hereof and in no event later than the date on which the joint proxy statement
is first mailed to stockholders of General or Reliance, CSCL will execute an
agreement not to
<PAGE> 2
sell, transfer or otherwise dispose of any shares of common stock of General
received by it in the Merger for such time period as is necessary to preserve
the accounting treatment of the Merger as a pooling of interests. General and
CSCL currently contemplate that this restriction will prohibit sales,
dispositions or other transfers by CSCL until such time as results covering at
least 30 days of combined operations of General and Reliance have been
published by General, in the form of a quarterly earnings report, an effective
registration statement filed with the Securities and Exchange Commission or a
report to the Securities and Exchange Commission on Form 10-K, 10-Q or 8-K, or
any public filing or announcement which includes such combined results of
operation.
1.3. CONVERSION OF STOCK. CSCL will not convert any of its
shares of Class C Stock into Class A Stock at any time on or before the record
date for the special meeting of Reliance stockholders called for the Reliance
stockholders to vote on and approve the Merger and Merger Agreement.
1.4. NO SOLICITATION. (a) Until the earlier of the effective
date of the Merger or the termination of the Merger Agreement in accordance
with its terms, CSCL shall not, directly or indirectly, solicit or respond to
any inquiries or the making of any proposal by any person or entity (other than
General) with respect to any sale, transfer, disposition of CSCL's shares of
stock in Reliance, and CSCL shall not sell, transfer or dispose of the stock it
owns in Reliance.
(b) Until the earlier of the effective date of the
Merger or the termination of the Merger Agreement in accordance with its terms,
CSCL shall not, directly or indirectly, solicit or respond to any inquiries or
the making of any proposal by any person or entity (other than General) with
respect to any acquisition or purchase of a substantial amount of assets of
Reliance or any merger, consolidation, business combination, sale of
substantially all assets or similar transaction involving Reliance.
1.5. RESTRICTIONS ON TRANSFER. CSCL and General agree that CSCL
may only transfer its shares of General common stock and General Non-Voting
Stock, in connection with one of the following events: (i) a widely-dispersed
public offering or a private placement where no more than 2% of the
fully-diluted (or converted) voting securities of General may be sold to any
one ultimate buyer; (ii) redemption of such securities by General; (iii) sale
to a person (or group, as defined for purposes of Section 13(d) of the
Securities Exchange Act of 1934) who has obtained or is obtaining majority
control from other sources;
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<PAGE> 3
(iv) sales arranged by other shareholders and made on the same terms arranged
by such other shareholders and on a pro rata basis with such other
shareholders; (v) sales consented to in writing by a majority of the other
shareholders; (vi) a merger, consolidation or similar transaciton, if the
transaction has been approved by the board of directors of General; or (vii)
exercise of a right of first refusal by any other shareholder.
2. Agreements of General.
----------------------
2.1. REGISTRATION RIGHTS. As soon as practicable after the date
hereof and in no event later than the date on which General and CSCL enter into
the agreement contemplated by Section 1.2 hereof, General shall enter into a
registration rights agreement with CSCL with regard to the shares of stock of
General that CSCL will receive in the Merger. The registration rights agreement
will provide for registration rights substantially equivalent to those provided
to CSCL in the Registration Rights Agreement dated April 29, 1992 between
Reliance, CSCL and Prudential Private Placement Funding, Inc. The registration
rights agreement shall also provide for the registration of shares of common
stock of General that can be acquired upon the exchange or conversion of a
security of CSCL or its affiliates that is convertible or exchangeable into
shares of General common stock should CSCL or an affiliate issue such a
security; provided, however, that in connection with any such registration
General shall not be required to incur any liability under the Securities Act
of 1933, as amended, as a "registrant" or "seller" of any security of CSCL or
its affiliates.
2.2. AMENDMENT OF CHARTER. In connection with the Merger,
General will amend its charter to provide for two classes of common stock,
including a class of non-voting common stock with terms substantially
equivalent to the terms of the Class B Common Stock, par value $1.00, set forth
on Exhibit C-1 to the Merger Agreement (the "General Non-Voting Stock"). In
connection with the Merger, CSCL shall receive that number of shares of voting
common stock of General as is equal to 4.9% of all the shares of General voting
common stock outstanding and shall receive the balance of the shares that it is
entitled to receive in the Merger in shares of the General Non-Voting Stock.
2.3. REPRESENTATION ON BOARD. As soon as practicable after the
date hereof and in no event later than the date on which General and CSCL enter
into the agreement contemplated by Section 1.2 hereof, General shall enter into
an agreement with CSCL providing that for so long as CSCL (and its affiliates)
own five percent (5%) or more of the total outstanding shares of common stock
of General, General shall
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<PAGE> 4
nominate a designee of CSCL to serve on the board of directors of General and
General shall use its best efforts to have the CSCL designee elected as a
director of General; PROVIDED, HOWEVER, that if (a) CSCL (or its affiliates)
sell shares of General common stock to the extent that CSCL (and its
affiliates) own less than ten percent (10%) of the total outstanding shares of
common stock of General, or (b) if CSCL (or its affiliates) sell any shares of
General common stock at any time where, before giving effect to such sale, CSCL
(and its affiliates) own less than ten percent (10%) of the total outstanding
shares of common stock of General, then General shall no longer be obligated to
nominate a designee of CSCL to serve on General's board of directors. Such
agreement shall also provide that if CSCL elects for whatever reason not to
designate a nominee for election as a director of General when it is entitled
to so designate a nominee, CSCL shall have the right to designate an observer
who shall have the right to attend all General board meetings and the right to
receive all notices and materials sent to the General board. For purposes of
this Section 2.3 of this Agreement, (i) any shares of common stock of General
issuable upon conversion or exchange of securities of CSCL or its affiliates
convertible or exchangeable into common stock of General shall not be
considered owned by CSCL, and (ii) any shares of General Non-Voting Stock shall
be considered shares of "common stock" of General.
3. Representations and Warranties.
-------------------------------
3.1. CSCL is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being conducted.
CSCL has the requisite corporate power and other authority to enter into this
Agreement and consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by CSCL and the consummation of the transactions
contemplated hereby have been duly autorized by all necessary corporate action
on the part of CSCL. This Agreement has been duly executed and delivered by
CSCL and constitutes a valid and binding obligation of CSCL, enforceable
against it in accordance with its terms.
3.2. General is duly organized, validly existing and in good
standing under the laws of the State of New York and has the requisite
corporate power and authority to carry on its business as now being conducted.
General has the requisite corporate power and other authority to enter into
this Agreement and consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by General and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of
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<PAGE> 5
General. This Agreement has been duly executed and delivered by General and
constitutes a valid and binding obligation of General, enforceable against it
in accordance with its terms.
4. TERMINATION. This Agreement shall terminate upon the earlier of (a)
termination of the Merger Agreement in accordance with its terms, (b) the date
of any amendment, modification or waiver to the Merger Agreement which could
have a material adverse effect on CSCL, and (c) the date on which CSCL (and its
affiliates) ceases to own of record at least five percent (5%) of the total
outstanding shares of common stock of General.
5. GOVERNING LAW. All questions concerning the validity or meaning of
this Agreement or relating to the rights and obligations of the parties with
respect to performance under this Agreement shall be construed and resolved
under the laws of the State of New York.
6. COMPLETE AGREEMENT. This Agreement contains the entire agreement
among the parties and supersedes all prior or contemporaneous discussions,
negotiations, representations, or agreements relating to the subject matter of
this Agreement. No changes to this Agreement shall be made or be binding on any
Party unless made in writing and signed by each Party.
7. SUCCESSORS. No party may assign this agreement or any of its rights
or obligations hereunder without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the respective
successors and assigns of each party.
8. INJUNCTIVE RELIEF. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date above written.
COURT SQUARE CAPITAL LIMITED
By: /s/ Stephan Sherrill
-------------------------------
Name: Stephan Sherrill
Title: Managing Director
GENERAL SIGNAL CORP.
By:
-------------------------------
Name:
Title:
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date above written.
COURT SQUARE CAPITAL LIMITED
By:
-------------------------------
Name:
Title:
GENERAL SIGNAL CORP.
By: /s/ Edgar J. Smith, Jr.
-------------------------------
Name: Edgar J. Smith, Jr.
Title: Vice President, General
Counsel, and Secretary
- 6 -
<PAGE> 1
Exhibit 16
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------X
NANCY S. FRIEDMAN, IRA, |
|
Plaintiff, |
|
V. | C.A. No. 13823
| --------
JOHN C. MORLEY, H. VIRGIL |
SHERRILL, ANTHONY C. HOWKINS, |
ALFRED M. RANKIN, JR., |
DUDLEY P. SHEFFLER, E. MANDELL |
DEWINDT and RELIANCE ELECTRIC |
COMPANY, |
|
Defendants. |
- -------------------------------------X
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by her attorneys, for her complaint alleges, upon
information and belief, except as to the allegations contained in paragraph 2,
which plaintiff alleges upon knowledge, as follows:
NATURE OF ACTION
----------------
1. Plaintiff brings this class action on behalf of herself and all
other shareholders of defendant Reliance Electric Company ("Reliance" or the
"Company") similarly situated (the "Class") to enjoin defendants from effecting
an unfair merger with General Signal Corporation ("General Signal"), designed
to force the exchange of shareholders' equity interest in Reliance at a grossly
inadequate and unfair price through an exchange of each of their Reliance
shares for .739 shares of a newly formed combined holding
1
<PAGE> 2
company. As detailed herein, defendants agreed to this merger despite the fact
that Rockwell International Corporation ("Rockwell") had offered to purchase
the outstanding shares of Reliance for $30 per share in cash, representing a
premium of 22.4% over the closing price of Reliance common stock on October 19,
as well as 50.9% above its closing price on August 29, the day before the
merger with General Signal was announced.
PARTIES
-------
2. At all times relevant hereto, plaintiff owned shares of Reliance
common stock.
3. Defendant Reliance is a Delaware corporation with principal
executive offices located at 6065 Parkland Boulevard, Cleveland, Ohio 44124.
Reliance manufactures mechanical power transmission products and systems,
generators, transformers, and industrial motors and related controls, as well
as telecommunications equipment. As of June 30, 1994, the Company had
41,305,221 shares of common stock outstanding. For the fiscal year ended
December 31, 1993, the Company reported net earnings of $25 million, or $0.50
per share, on revenues exceeding $1.6 billion. At the close of fiscal 1993,
Reliance reported assets of $1.195 billion against liabilities of $814 million.
4. At all relevant times hereto, defendant John C. Morley ("Morley")
was President and Chief Executive Officer of the Company, as well as a member
of its Board of Directors (the "Board"), and the Board's executive committee.
For the fiscal
2
<PAGE> 3
year ended December 31, 1993, Morley received cash compensation totalling
$827,000.
5. At all relevant times herein, defendant Dudley P. Sheffler
("Sheffler") was Vice President of the Company, as well as a member of the
Board. For the fiscal year ended December 31, 1993, Sheffler received cash
compensation totalling $392,000.
6. At all relevant times herein, defendant H. Virgil Sherrill
("Sherrill") was Chairman of the Board and a member of the Board's executive,
compensation, and nominating committees.
7. At all relevant times herein, defendant Anthony C. Howkins
("Howkins") was a member of the Board, as well as its audit, compensation and
nominating committees.
8. At all relevant times herein, defendant Alfred M. Rankin, Jr.,
("Rankin") was a member of the Board, as well as its audit and compensation
committees.
9. At all relevant times herein, defendant E. Mandell Dewindt was a
member of the Board, as well as its audit, compensation and nominating
committees.
CLASS ACTION ALLEGATIONS
------------------------
10. Plaintiff brings this action pursuant to Rule 23 of the Rules of
the Court of Chancery, for declaratory, injunctive and other relief on her own
behalf and as a class action, on behalf of all common stockholders of Reliance
(except defendants herein and any person, firm, trust, corporation or other
entity related to or affiliated with any of the defendants) and their
successors
3
<PAGE> 4
in interest, who are being deprived of their equity interest in Reliance and
the opportunity to maximize the value of their Reliance shares by the wrongful
acts of the defendants described herein.
11. This action is properly maintainable as a class action for the
following reasons:
(a) The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of June 30, 1994, Reliance had approximately 32.9 million Class A shares, 3.2
million Class B shares, and 5.3 million Class C shares of common stock, duly
issued and outstanding, which traded on the New York Stock Exchange and were
owned by thousands of shareholders. Members of the Class are scattered
throughout the United States.
(b) There are questions of law and fact which are common to the
members of the Class and which predominate over any questions affecting any
individual members. The common questions include, inter alia, the following:
(i) whether the defendants, in bad faith and for improper
motives have impeded or erected barriers to other offers for the
Company, including Rockwell's all-cash tender offer at $30 per
share;
(ii) whether the defendants have engaged in conduct
constituting unfair dealing to the detriment of the public
stockholders of Reliance;
4
<PAGE> 5
(iii) whether the proposed merger of Reliance and General
Signal at the proposed exchange ratio is unfair to the public
stockholders of Reliance because it does not constitute a fair
price for the shares of the Company; and
(iv) whether the defendants have breached their fiduciary
and common law duties owed by them to plaintiff and the other
members of the Class.
(c) The claims of plaintiff are typical of the claims of the
other members of the Class, and plaintiff has no interests that are adverse or
antagonistic to the interests of the Class.
(d) Plaintiff is committed to the vigorous prosecution of this
action and has retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiff is an adequate representative of the Class and
will fairly and adequately protect the interests of the Class.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for the party opposing the Class.
(f) Defendants have acted and are about to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
or corresponding declaratory relief with respect to the Class as a whole.
5
<PAGE> 6
(g) Plaintiff anticipates that there will be no difficulty in the
management of this litigation. A class action is superior to other available
methods for the fair and efficient adjudication of this controversy.
CLAIM FOR RELIEF
----------------
12. Reliance designs, manufactures, sells, and services a broad range
of industrial and telecommunications equipment. Through its industrial segment,
Reliance manufactures, sells, and services a range of industrial motors and
related controls, generators, transformers, and mechanical power transmission
products and systems. The industrial segment accounted for 73% of the Company's
net sales in fiscal 1993, and is organized into groups that allow Reliance to
provide a comprehensive line of products and systems to meet its customers'
industrial needs. The remainder of the Company's 1993 sales were derived from
Reliance's telecommunications division, which produces power connection,
protection and distribution devices, along with transmission products and
systems.
13. In July 1994, Rockwell approached Reliance, through defendant
Morley, to propose an acquisition of Reliance by Rockwell. Rockwell is a
leading worldwide manufacturer of automation control products which, through
its Allen-Bradley division, is expected to account for sales in excess of $2.1
billion during fiscal 1994. Rockwell viewed Reliance's strengths in
manufacturing motors and drives as complimentary to Allen-
6
<PAGE> 7
Bradley's strengths in control-logic, man-machine interfaces and sensors. By
acquiring Reliance, Rockwell could combine the Company with Allen-Bradley,
thereby creating a global industrial automation enterprise likely to produce
annual sales in excess of $3.5 billion. Although defendant Morley promised to
communicate Rockwell's proposal to the Reliance Board, the Company never
formally responded to this acquisition offer.
14. On or about August 30, 1994, Reliance announced that it had
entered into a definitive merger agreement with General Signal, a manufacturer
of electrical conduits, fire detection systems, and radio frequency
transmission equipment. Pursuant to the terms of this agreement, each Reliance
shareholder would receive .739 shares of common stock in the new combined
holding company in exchange for each Reliance share held. The merger agreement
also provided that General Signal's Chairman and Chief Executive Officer,
Edmund Carpenter, would remain as Chairman of the combined entity, while
defendant Morley would assume the post of vice-chairman. In a statement
accompanying the announcement, Carpenter noted that "the combination solidifies
out long-term commitment to focusing on [the telecommunications] markets as a
leading supplier -- with even greater presence." Similarly, BLOOMBERG NEWS
SERVICE reported, on the day of the merger announcement, that "the acquisition
allows [General Signal] to take advantage of Reliance's emerging broadband
technology division, seen as an important part of the information
superhighway." Based on the closing price of General Signal
7
<PAGE> 8
common stock on August 30, 1994 - the date of the merger announcement --
Reliance shareholders would receive consideration valued at approximately
$26.23 per share.
15. On or about August 29, 1994, the day before Reliance announced its
agreement to be acquired by General Signal, the Company adopted a "Rights Plan"
designed to discourage unsolicited acquisition proposals. According to the
terms of the Rights Plan, each Reliance shareholder would gain the right to
receive, upon exercise, additional shares of Reliance common stock having a
market value of two times the exercise price of each Right held. The
acquisition of Reliance by General Signal was excluded as a triggering event
under the Rights Plan.
16. Although the Company disclosed its adoption of the Rights Plan in
connection with its announcement of the proposed acquisition by General Signal,
the Company never revealed that it had been approached by Rockwell to enter
into a business combination as recently as July 1994.
17. On or about October 20, 1994, Rockwell announced that it would
commence a tender offer for all outstanding shares of Reliance common stock for
$30 per share in cash, representing a premium of approximately 14% above the
value of General Signal's offer on the date of the merger announcement, and
50.9% above the closing price of Reliance common stock on the day before the
merger agreement was announced. In a letter sent to the Board of Reliance,
Donald E. Beall, Rockwell's Chairman and Chief Executive Officer, noted that
Rockwell was "surprised and
8
<PAGE> 9
disappointed that [it] was not afforded an opportunity to further pursue [the
earlier merger] discussions before Reliance and General Signal announced a
definitive merger agreement at the end of August."
18. Beall's letter to the Reliance Board also stressed the advantages
of an acquisition by Rockwell rather than General Signal. Specifically, the
letter noted that the all-cash tender offer was not subject to any financing
contingencies, and that a combination "represents a particularly attractive
opportunity to build a combined enterprise uniquely positioned for continued
leadership in both the control and power segment of the industrial automation
business . . . around the world." Beall also reminded the Reliance board that
Rockwell had acquired its Allen-Bradley division in 1985 to establish Rockwell
"as a leading worldwide manufacturer of automation control products," and that
this division's annual sales had doubled to a level in excess of $2.1 billion
under Rockwell ownership.
19. Although Rockwell has requested a meeting with the Board of
Reliance to discuss its offer and the possibility of an acquisition, no
response from the Company has been forthcoming.
20. By virtue of the acts and conduct alleged herein, the defendants
are carrying out a preconceived plan to merge Reliance and General Signal
pursuant to a merger ratio that is grossly inadequate and intrinsically unfair
to Reliance common stockholders. As a result, the public common stockholders of
9
<PAGE> 10
Reliance will be wrongfully deprived of the opportunity to obtain the best
available price for their Reliance stock.
21. The defendants' conduct constitutes an improper and unlawful
attempt to entrench themselves in management positions and to prevent a fair
auction of the Company to an outside bidder such as Rockwell. Indeed, by
adopting a restrictive Rights Plan, defendants have acted in a manner to
prevent the shareholders of Reliance from availing themselves of higher offers
for their stock.
22. In light of the foregoing, the consideration to be paid to the
Reliance stockholders through the proposed offer from General Signal is grossly
unfair, inadequate, and substantially below fair value of the Company, as
reflected by the substantially greater offer submitted by Rockwell.
23. The defendants have committed further breaches of their fiduciary
duties to the public shareholders of Reliance. Specifically, prior to
announcing the merger with General Signal, the Individual Defendants failed to
(i) undertake an adequate evaluation of Reliance's worth as a potential merger
or acquisition candidate; (ii) give adequate consideration to the competing
offer for Reliance submitted by Rockwell; and/or (iii) act so that the
interests of the public stockholders of Reliance were protected.
24. Unless enjoined by this Court, defendants will continue to breach
fiduciary duties owed to plaintiff and the other members of the Class, and aid
and abet such breaches, and will succeed in consummating an unfair transaction
by virtue to the unfair delaying complained of herein, all to the irreparable
harm of the Class.
10
<PAGE> 11
25. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment against defendants, as follows:
A. Declaring that this action be certified as a proper class
action and certifying plaintiff as class representative;
B. Declaring that the defendants and each of them have breached
their fiduciary duties to plaintiff and other members of the Class;
C. Ordering that the defendants take appropriate measures to
assure that an open and vigorous auction for the Company is conducted to
maximize shareholder value;
D. In the event the merger proposal is consummated, rescinding it
and setting it aside;
E. Preliminarily and permanently enjoining defendants from
issuing any rights to purchase stock pursuant to the Rights Plan adopted by
Reliance on or about August 29, 1994;
F. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in concert with, or
for them, from proceeding with, consummating or closing the proposed merger
with General Signal;
G. Awarding compensatory and/or rescissory damages in an amount
to be determined upon the proof submitted to the Courts;
H. Awarding the costs and disbursements of this action,
including, inter alia, plaintiff's counsel and expert fees; and
I. Awarding such other and further relief which the Court may
deem just and proper.
11
<PAGE> 12
Dated: October 21, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
-------------------------------------
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LITOWITZ BERGER
& GROSSMAN
Vincent R. Cappucci
Robert S. Gans
1285 Avenue of the Americas
New York, NY 10019
(212) 551-1400
12
<PAGE> 1
Exhibit 17
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ---------------------------------|
HANS KEIM, on behalf of himself |
and others similarly situated, |
|
Plaintiff, |
|
v. | C.A. No. 13827
|
JOHN C. MORLEY, H. VIRGIL |
SHERRILL, ANTHONY C. HOWKINS, |
ALFRED M. RANKIN, JR., |
DUDLEY P. SHEFFLER, E. MANDELL |
DEWINDT and RELIANCE ELECTRIC |
COMPANY, |
|
Defendents. |
- ---------------------------------|
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges, upon information and belief, except
as to the allegations contained in paragraph 2, which plaintiff alleges upon
knowledge, as follows:
NATURE OF ACTION
----------------
1. Plaintiff brings this class action on behalf of himself and all other
shareholders of defendent Reliance Electric Company ("Reliance" or the
"Company") similarly situated (the "Class") to enjoin defendents from effecting
an unfair merger with General Signal Corporation ("General Signal"), announced
on August 30, 1994, designed to force the exchange of shareholders' equity
interest in Reliance at a grossly inadequate and unfair price through an
exchange of each of their Reliance shares for .739 shares of a newly formed
combined holding company. As detailed herein, defendents agreed to this merger
despite the fact that the
<PAGE> 2
Company had much greater value. On October 20, 1994, Rockwell International
Corporation ("Rockwell") had tendered an offer to purchase the outstanding
shares of Reliance for $30 per share, a $5.50/share premium over the closing
price on the previous day, and a $10/share premium above the price on the days
before the merger with General Signal was announced. Nonetheless, defendents
have not attempted to rescind the General Signal merger.
THE PARTIES
-----------
2. Plaintiff Hans Keim owns 300 shares of Reliance stock, and has owned
those shares at all relevant times.
3. Defendent Reliance is a Delaware corporation with principal offices
located in Cleveland, Ohio. Reliance manufactures mechanical power transmission
products and telephone communications equipment. As of June 30, 1994, the
Company had 41,305,221 shares of common stock outstanding. In 1993, the
Company's reported net earnings exceeded $25 million, on revenues exceeding
$1.6 billion.
4. Defendant John C. Morley ("Morley") is President and Chief Executive
Officer of the Company, as well as a member of its Board of Directors (the
"Board"), and the Board's executive committee. In 1993, Morley received cash
compensation totalling $827,000.
5. Defendant Dudley P. Sheffler ("Sheffler") is Vice President of the
Company, as well as a member of the Board. For
-2-
<PAGE> 3
the fiscal year ended December 31, 1993, Sheffler received cash compensation
totalling $392,000.
6. Defendant H. Virgil Sherrill ("Sherrill") is Chairman of the Board and
a member of the Board's executive, compensation, and nominating committee.
7. Defendant Anthony Howkins ("Howkins") is a member of the Board, as well
as its audit, compensation and nominating committees.
8. Defendant Alfred M. Rankin, Jr. ("Rankin") is a member of the Board, as
well as its audit and compensation committees.
9. Defendant E. Mandell DeWindt ("DeWindt") is a member of the Board, as
well as its audit, compensation and nominating committees.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiff brings this action pursuant to Rule 23 of the Rules of the
Court of Chancery, for declaratory, injunctive and other relief on his own
behalf and as a class action, on behalf of all common stockholders of Reliance
(except defendants herein and any person, firm, trust, corporation, or other
entity related to or affiliated with any of the defendants) and their
successors in interest.
10. This action is properly maintainable as a class action for the
following reasons:
(a) The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all class members
-3-
<PAGE> 4
is impracticable. As of June 30, 1994, Reliance had over 40,000,000 shares
outstanding;
(b) Questions of law and fact which are common to the class
predominate over questions affecting any individual class members. The common
questions include, inter alia, the following:
i) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the class members;
ii) whether the defendants have engaged in conduct unfairly
favoring General Signal over Rockwell in merger negotiations, to the
detriment of class members;
iii) whether the proposed merger of Reliance and General Signal
at the proposed exchange ratio is unfair to the public stockholders
of Reliance because it does not constitute a fair price for the
shares of the Company; and
iv) whether the defendants have breached their fiduciary and
common law duties owed by them to the members of the class.
(c) The claims of plaintiff are typical of the claims of the other
members of the Class. Plaintiff has no interests that are adverse or
antagonistic to the interests of the class. Accordingly, plaintiff is an
adequate representative of the Class and will fairly and adequately protect the
interests of the Class.
(d) The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying
-4-
<PAGE> 5
adjudications with respect to individual members of the Class, which would
establish incompatible standards of conduct for the parties opposing the Class.
(e) Defendants have acted and are about to act on grounds generally
applicable to the Class with respect to the matters complained of herein,
thereby making appropriate final injunctive or corresponding declaratory relief
with respect to the Class as a whole.
(f) Plaintiff anticipates that there will be no difficulty in the
management of this litigation. A class action is superior to other available
methods for the fair and efficient adjudication of this controversy.
CLAIM FOR RELIEF
----------------
10. In July 1994, Rockwell approached Reliance, through defendant Morley,
to propose an acquisition of Reliance by Rockwell, which had business lines
which fit well with those of Rockwell. Reliance never responded to this
acquisition offer.
11. On or about August 30, 1994, Reliance announced that it had entered
into a definitive merger agreement with General Signal, a manufacturer of
electrical conduits, fire detection systems, and radio frequency transmission
equipment. Pursuant to the terms of the agreement, each Reliance stockholder
would receive .739 shares of common stock in the new combined holding company
in exchange for each Reliance share held. The merger agreement also provided
that defendant Morley would assume the post of Vice-Chairman of the
-5-
<PAGE> 6
combined entity. Based on the closing price of General Signal common stock on
August 30, 1994 -- the date of the merger announcement -- Reliance shareholders
would receive consideration valued at approximately $26.23 per share.
12. On or about August 29, 1994, the day before Reliance announced its
agreement to be acquired by General Signal, the Company adopted a "Rights Plan"
designed to discourage unsolicited acquisition proposals. According to the
terms of the Rights Plan, each Reliance shareholder would gain the right to
receive, upon exercise, additional shares of Reliance common stock having a
market value of two times the exercise price of each Right held. The
acquisition of Reliance by General Signal was excluded as a triggering event
under the Rights Plan.
13. When it announced the General Signal Merger and the Rights Plan, the
Company failed to disclose that it had been approached by Rockwell to enter
into a business combination as recently as July 1994.
14. On or about October 30, 1994, Rockwell announced that it would
commence a tender offer for all outstanding shares of Reliance common stock for
$30 per share in cash, representing a premium of approximately $3.77 above the
value of General Signal's offer on the date of the merger announcement, and
$10/share above the closing price of Reliance common stock on the day before
the merger agreement was announced. However, this offer contained no guarantee
of employment for defendant Morley. In a letter sent to the Board of Reliance,
Donald R. Beall, Rockwell's Chairman and
-6-
<PAGE> 7
Chief Executive Officer, noted that Rockwell was "surprised and dissapointed
that [it] was not afforded an opportunity to further pursue [the earlier
merger] discussions before Reliance and General Signal announced a definitive
merger agreement at the end of August."
15. Rockwell's offer was not subject to any financing contingencies, and
Rockwell stated that it anticipated no antitrust or other legal impediments in
consummating the merger.
16. Reliance has not yet responded to Rockwell's offer.
17. The defendants are carrying out a preconceived plan to merge Reliance
and General Signal pursuant to a merger ratio that is grossly inadequate and
intrinsically unfair to Reliance common stockholders, as evidenced by the
clearly superior Rockwell offer. As a result, the public common stockholders of
Reliance will be wrongfully deprived of the opportunity to obtain the best
available price for their Reliance stock.
18. The defendents' conduct constitutes an improper and unlawful attempt
to entrench themselves in management positions and to prevent a fair auction of
the Company to an outside bidder such as Rockwell. By adopting a restrictive
Rights Plan, defendants attempted to prevent the shareholders of Reliance from
taking advantage of higher offers for their stock.
19. The consideration to be paid to the Reliance stockholders through the
proposed offer from General Signal is grossly unfair, inadequate, and
substantially below fair value of the Company, as reflected by the
substantially greater offer submitted by Rockwell.
-7-
<PAGE> 8
20. Prior to announcing the merger with General Signal, the Individual
Defendants failed to (i) undertake an adequate evaluation of Reliance's worth
as a potential merger or acquisition candidate; (ii) adequately consider the
competing offer for Reliance submitted by Rockwell; and/or (iii) act so that
the interests of the public stockholders of Reliance were protected.
21. Unless enjoined by this Court, defendants will succeed in consummating
an unfair transaction and preserving defendant Morley's position by virtue of
the unfair dealing complained of herein, to the irreparable harm of the Class.
22. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff demands judgment as follows:
(1) Declaring that this action be certified as a proper class action
and certifying plaintiff as class representative;
(2) Declaring that the defendants and each of them have breached
their fiduciary duties to the members of the Class;
(3) Permanently enjoining defendants from issuing any rights to
purchase stock pursuant to the Rights Plan adopted by Reliance on or about
August 29, 1994;
(4) Preliminary and permanently enjoining defendants from
consummating or closing the proposed merger with General Signal;
(5) In the event the proposed merger with General Signal is
consummated, rescinding it;
-8-
<PAGE> 9
(6) Awarding compensatory and/or rescissory damages in an amount to
be determined upon the proof submitted to the Court;
(7) Awarding the costs and disbursements of this action, including
fees and expenses for plaintiff's counsel and experts; and
(8) Awarding such other and further relief which the Court may deem
just and proper.
Dated: October 21, 1994
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By /s/ J. A. Monhait
------------------------------
First Federal Plaza
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERGER & MONTAGUE, P.C.
Sherrie R. Savett
Arthur Stock
1622 Locust Street
Philadelphia, PA 19103
-9-
