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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-46381
PROSPECTUS
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
ECHLIN INC.
FOR
$12.00 NET PER SHARE IN CASH
AND
0.4796 SHARE OF COMMON STOCK
OF
SPX CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON MAY 28, 1998 UNLESS EXTENDED. SHARES WHICH ARE TENDERED PURSUANT TO THE
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER.
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF SHARES IN CONNECTION WITH THE OFFER.
SPX Corporation, a Delaware corporation ("SPX"), hereby offers, upon the
terms and subject to the conditions set forth herein and in the related Letter
of Transmittal (collectively, the "Offer"), to exchange the amount of $12.00 net
in cash and 0.4796 share of common stock, par value $10.00 per share ("SPX
Common Stock"), of SPX (the "Consideration"), for each outstanding share of
common stock, par value $1.00 per share (each a "Share" and, collectively, the
"Shares"), of Echlin Inc., a Connecticut corporation (the "Company") (including
the associated preferred share purchase rights (the "Rights") issued pursuant to
the Rights Agreement, dated as of June 21, 1989, as amended (the "Rights
Agreement"), between the Company and The Connecticut Bank and Trust Company,
N.A., as Rights Agent), validly tendered on or prior to the Expiration Date (as
hereinafter defined) and not properly withdrawn. The 0.4796 figure is sometimes
referred to herein as the "Exchange Ratio." Unless the context otherwise
requires, all references to Shares shall include the associated Rights, and all
references to Rights shall include all benefits that may inure to holders of the
Rights pursuant to the Rights Agreement. Unless the context otherwise requires,
all references to shares of SPX Common Stock shall include the associated
preferred stock purchase rights (the "SPX Rights") issued pursuant to the Rights
Agreement dated June 25, 1996, as amended (the "SPX Rights Agreement"), between
SPX and The Bank of New York as Rights Agent, and all references to SPX Rights
shall include all benefits that may inure to holders of the SPX Rights pursuant
to the SPX Rights Agreement.
On February 13, 1998, the last trading date preceding the date of the
public announcement of SPX's proposal for a strategic business combination of
the Company with SPX (the "Proposed Business Combination"), the closing price of
a Share on the New York Stock Exchange, Inc. (the "NYSE") Composite Tape was
$38 7/8. Based on the closing price of a share of SPX Common Stock on the NYSE
Composite Tape on the same date ($75 1/16), the value of the SPX Common Stock
offered pursuant to the Offer was $36.00 per Share and the Consideration had a
total value of $48.00. On April 28, 1998, the date of this Prospectus, the value
of the SPX Common Stock offered pursuant to the Offer was $34.56 per Share and
the Consideration had a total value of $46.56, based upon the closing price of a
share of SPX Common Stock on the NYSE Composite Tape on that date ($72 1/16). At
the time the Offer is consummated, the Consideration may have a market value
that is greater or lesser than either of those two amounts depending upon the
market price of a share of SPX Common Stock at such time.
SPX intends, as promptly as practicable following consummation of the
Offer, to cause a wholly owned subsidiary of SPX to be merged into the Company
(the "Merger"), in which each Share then outstanding will be converted into the
right to receive the Consideration. Immediately following consummation of the
Merger and after giving effect to the issuance of the SPX Common Stock in the
transaction, the shareholders of the Company (other than SPX) would own
approximately 70% of the then outstanding shares of SPX Common Stock.
(Continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE OFFER MADE HEREBY DO NOT CONSTITUTE A SOLICITATION
OF ANY PROXIES. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO SEPARATE
PROXY SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934.
------------------------
THE DEALER MANAGER FOR THE OFFER IS
CIBC OPPENHEIMER CORP.
The date of this Prospectus is April 28, 1998
------------------------
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SPX'S OBLIGATION TO EXCHANGE SHARES OF SPX COMMON STOCK FOR SHARES PURSUANT
TO THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION OF THE OFFER AND NOT WITHDRAWN A NUMBER OF
SHARES WHICH WILL CONSTITUTE AT LEAST 66 2/3% OF THE TOTAL OUTSTANDING SHARES ON
A FULLY DILUTED BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR EXCHANGE BY SPX
(THE "MINIMUM TENDER CONDITION"); (B) APPROVAL BY THE STOCKHOLDERS OF SPX OF THE
ISSUANCE OF SHARES OF COMMON STOCK OF SPX PURSUANT TO THE OFFER AND THE MERGER
(THE "SPX STOCKHOLDER APPROVAL CONDITION"); (C) THE REDEMPTION OF THE RIGHTS BY
THE BOARD OF DIRECTORS OF THE COMPANY OR SPX BEING OTHERWISE SATISFIED THAT THE
RIGHTS WILL NOT BE APPLICABLE TO THE ACQUISITION OF THE SHARES PURSUANT TO THE
OFFER OR THE MERGER (THE "RIGHTS PLAN CONDITION"); (D) SPX BEING SATISFIED THAT
SECTIONS 841 AND 844 OF THE CONNECTICUT BUSINESS CORPORATION ACT (THE
"CONNECTICUT BUSINESS ACT") WILL NOT BE APPLICABLE TO THE OFFER AND THE MERGER
(THE "BUSINESS COMBINATION STATUTES CONDITION"); AND (E) SPX HAVING OBTAINED
SUFFICIENT FINANCING FOR THE CONSUMMATION OF THE OFFER AND THE MERGER (THE
"FINANCING CONDITION"). THE MINIMUM TENDER CONDITION, THE SPX STOCKHOLDER
APPROVAL CONDITION, THE RIGHTS PLAN CONDITION, THE BUSINESS COMBINATION STATUTES
CONDITION, THE FINANCING CONDITION AND THE OTHER CONDITIONS SET FORTH UNDER THE
CAPTION "THE OFFER -- CONDITIONS OF THE OFFER" ARE REFERRED TO COLLECTIVELY AS
THE "OFFER CONDITIONS."
------------------------
IMPORTANT
SHAREHOLDERS WILL BE REQUIRED TO TENDER ONE RIGHT FOR EACH SHARE TENDERED
IN ORDER TO EFFECT A VALID TENDER OF SHARES, UNLESS THE RIGHTS PLAN CONDITION
HAS BEEN SATISFIED OR WAIVED. UNLESS THE DISTRIBUTION DATE (AS HEREINAFTER
DEFINED) OCCURS, A TENDER OF SHARES WILL CONSTITUTE A TENDER OF THE ASSOCIATED
RIGHTS.
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF HIS OR HER SHARES
AND THE ASSOCIATED RIGHTS SHOULD EITHER (A) COMPLETE AND SIGN THE LETTER OF
TRANSMITTAL OR A FACSIMILE COPY THEREOF IN ACCORDANCE WITH THE INSTRUCTIONS IN
THE LETTER OF TRANSMITTAL, MAIL OR DELIVER THE LETTER OF TRANSMITTAL OR SUCH
FACSIMILE AND ANY OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT (AS HEREINAFTER
DEFINED), AND EITHER DELIVER THE CERTIFICATES FOR SUCH SHARES AND, IF SEPARATE,
CERTIFICATES FOR THE RIGHTS TO THE EXCHANGE AGENT ALONG WITH THE LETTER OF
TRANSMITTAL, DELIVER SUCH SHARES AND RIGHTS PURSUANT TO THE PROCEDURES FOR
BOOK-ENTRY TRANSFER SET FORTH HEREIN (IN THE CASE OF RIGHTS, ONLY IF SUCH
PROCEDURES ARE AVAILABLE) OR COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES SET
FORTH HEREIN OR (B) REQUEST HIS OR HER BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR HIM OR HER. A SHAREHOLDER
HAVING SHARES AND RIGHTS REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF HE OR SHE DESIRES TO TENDER
SUCH SHARES AND RIGHTS.
ANY SHAREHOLDER THAT DESIRES TO TENDER HIS OR HER SHARES AND WHOSE
CERTIFICATES FOR SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY
WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, OR WHO CANNOT
DELIVER ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE, MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT (AS HEREINAFTER DEFINED) OR TO THE DEALER MANAGER AT THEIR RESPECTIVE
ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS PROSPECTUS.
REQUESTS FOR ADDITIONAL COPIES OF THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
MAY BE DIRECTED TO THE INFORMATION AGENT OR TO BROKERS, DEALERS, COMMERCIAL
BANKS OR TRUST COMPANIES.
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<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 2
COMPANY INFORMATION......................................... 3
FORWARD-LOOKING STATEMENTS.................................. 4
PROSPECTUS SUMMARY.......................................... 5
SPX....................................................... 5
The Company............................................... 5
Reasons for the Offer..................................... 6
Background of the Offer................................... 6
Risk Factors.............................................. 8
The Offer................................................. 8
Certain Federal Income Tax Consequences................... 10
Effect of Offer on Market for Shares...................... 10
Dissenters' Rights........................................ 11
Comparison of Rights of Holders of Shares and SPX Common
Stock.................................................. 11
Description of SPX Capital Stock.......................... 11
The Exchange Agent........................................ 11
Requests for Assistance and Additional Copies............. 11
Market Prices and Dividends............................... 12
Comparative Per Share Data................................ 13
Selected Historical Financial Data of SPX................. 15
Selected Historical Financial Data of the Company......... 19
Selected Pro Forma Condensed Combined Financial Data of
SPX and the Company.................................... 21
RISK FACTORS................................................ 24
REASONS FOR THE OFFER....................................... 26
BACKGROUND OF THE OFFER..................................... 27
LITIGATION.................................................. 29
THE SPECIAL MEETING......................................... 30
THE OFFER................................................... 31
General................................................... 31
The Rights................................................ 32
Timing of the Offer....................................... 32
Extension, Termination and Amendment...................... 33
Exchange of Shares; Delivery of SPX Common Stock and Cash
Consideration.......................................... 34
Cash in Lieu of Fractional Shares of SPX Common Stock..... 34
Withdrawal Rights......................................... 34
Procedure for Tendering................................... 35
Federal Income Tax Withholding and Backup Withholding..... 38
Certain Federal Income Tax Consequences................... 38
Rights.................................................... 41
Effect of Offer on Market for Shares; Registration under
the Exchange Act....................................... 41
Purpose of the Offer; the Merger.......................... 42
</TABLE>
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<TABLE>
<S> <C>
Conditions of the Offer................................... 42
Source and Amount of Funds................................ 47
Debt Instruments of the Company........................... 47
Relationships with the Company............................ 48
Fees and Expenses......................................... 49
Accounting Treatment...................................... 50
Stock Exchange Listing.................................... 50
THE MERGER.................................................. 50
General................................................... 50
Dissenters' Rights........................................ 50
BUSINESSES OF SPX AND THE COMPANY........................... 51
SPX....................................................... 51
The Company............................................... 51
DESCRIPTION OF SPX CAPITAL STOCK............................ 52
COMPARISON OF RIGHTS OF HOLDERS OF SHARES AND SPX COMMON
STOCK..................................................... 53
MARKET PRICES AND DIVIDENDS................................. 63
COMPARATIVE PER SHARE DATA.................................. 64
SELECTED HISTORICAL FINANCIAL DATA OF SPX................... 66
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY........... 70
PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF SPX AND THE
COMPANY................................................... 74
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF SPX......... 81
VALIDITY OF SPX COMMON STOCK................................ 83
EXPERTS..................................................... 83
</TABLE>
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AVAILABLE INFORMATION
SPX and the Company are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by SPX or the Company with the Commission
may be inspected and copied at the Commission's public reference room located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the public reference facilities in the Commission's regional offices located
at: 7 World Trade Center, 13th Floor, New York, New York 10048, and 500 West
Madison Street, Suite 400, Chicago, Illinois 60661. Copies of such material may
be obtained at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. SPX and the Company are
electronic filers with the Commission, which maintains a website containing
reports, proxy and other information statements at the following location:
http://www.sec.gov. The Shares are listed on the NYSE, the Pacific Exchange,
Inc. (the "PE") and the International Stock Exchange in London under the symbol
"ECH". The shares of SPX Common Stock are listed on the NYSE and the PE under
the symbol "SPW". The periodic reports, proxy statements and other information
filed by SPX and the Company with the Commission may be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005, and at the offices of
the PE at 301 Pine Street, San Francisco, California 94104.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-4 (the "Registration Statement") covering the
SPX Common Stock offered hereby which has been filed with the Commission.
Reference is hereby made to the Registration Statement for further information
with respect to SPX, the Company and the securities offered hereby. Statements
contained herein concerning certain documents are not necessarily complete and,
in each instance, reference is made to the copies of such documents filed as
exhibits to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
Not later than the date of commencement of the Offer, SPX will file with
the Commission a statement on Schedule 14D-1 pursuant to Rule 14d-3 under the
Exchange Act furnishing certain information with respect to the Offer. Such
schedule and any amendments thereto should be available for inspection and
copying as set forth above (except that such schedule and any amendments thereto
will not be available at the regional offices of the Commission).
Pursuant to Rule 409 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), and Rule 12b-21 promulgated under the Exchange
Act, SPX has requested that the Company and its independent public accountants
provide to SPX the information required for complete disclosure concerning the
business, operations, financial condition and management of the Company. SPX
will provide any and all information which it receives from the Company prior to
the expiration of the Offer and which SPX deems material, reliable and
appropriate in a subsequently prepared amendment or supplement thereto and will
extend the Offer, in the manner set forth below under "The Offer-- Extension,
Termination and Amendment," to ensure that five business days remain for
shareholders to determine whether to tender their Shares in the Offer subsequent
to the date of such amendment or supplement. An audit report has been issued on
the Company's year-end financial statements and is included in the Company's
public filings with the Commission. SPX has used its best efforts to obtain the
consent of the Company's independent public accountants to the inclusion herein
of the report of such independent public accountants on the financial statements
of the Company that are included or incorporated by reference herein. SPX has
not been successful to date. In the event such consent is obtained, SPX will
promptly file such consent as an exhibit to the Registration Statement, of which
this Prospectus is a part.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (not including exhibits to such
documents which are not specifically incorporated by reference to such
documents) are available without charge upon request to: Corporate Secretary,
SPX Corporation, 700 Terrace Point Drive, Muskegon, MI 49443. Requests may be
directed to SPX's Secretary at (616) 724-5000. In order to ensure timely
delivery of such documents, any request for documents should be submitted no
later than five business days prior to the expiration date of the Offer.
The following documents filed with the Commission by SPX (File No. 1-6948)
are incorporated herein by reference:
(i) SPX's Annual Report on Form 10-K for the year ended December 31,
1997 ("SPX's 1997 Form 10-K");
(ii) SPX's Quarterly Report on Form 10-Q for the period ended June 30,
1997 ("SPX's 1997 Second Quarter Form 10-Q");
(iii) SPX's Current Report on Form 8-K, dated February 21, 1997;
(iv) SPX's Solicitation Statement on Schedule 14A, dated March 6,
1998, to the shareholders of the Company and all subsequent filings of
solicitation materials in connection with the solicitation of written
demands to call a special meeting of the shareholders of the Company; and
(v) SPX's Proxy Statement for its Annual Meeting of Stockholders to be
held on May 20, 1998 ("SPX's 1998 Annual Meeting Proxy Statement").
The following documents filed with the Commission by the Company (File No.
1-4651) are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997 (the "Company's 1997 Form 10-K") (except for the report of
the Company's independent accountants contained therein which is not
incorporated herein by reference because the consent of the Company's
independent accountants has not yet been obtained);
(ii) the Company's Proxy Statement for the Annual Meeting of
Shareholders held on December 17, 1997 (the "Company's 1997 Annual Meeting
Proxy Statement");
(iii) the Company's Quarterly Reports on Form 10-Q for the periods
ended November 30, 1997 and February 28, 1998 (the "Company's 1998 First
Quarter Form 10-Q" and the "Company's 1998 Second Quarter Form 10-Q,"
respectively); and
(iv) the Company's Revocation Solicitation Statement on Schedule 14A,
dated March 13, 1998, and all subsequent filings of solicitation materials
in connection with the solicitation of revocations of written demands to
call a special meeting of the shareholders of the Company.
All documents filed by either SPX or the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to or contemporaneous with the
date hereof and prior to the date the Shares are accepted for exchange or the
Offer is terminated shall be deemed to be incorporated herein by reference and
to be a part hereof from the date of such filing. See "Available Information."
Any statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any such
statement so modified shall not be deemed to constitute a part hereof, except as
so modified, and any statement so superseded shall not be deemed to constitute a
part hereof.
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COMPANY INFORMATION
While SPX has included information concerning the Company insofar as it is
known or reasonably available to SPX, the Company is not affiliated with SPX and
the Company has not to date permitted access by SPX to the Company's books and
records for the purpose of preparing this Prospectus. Therefore, information
concerning the Company which has not been made public was not available to SPX
for the purpose of preparing this Prospectus. Although SPX has no knowledge that
would indicate that statements relating to the Company contained or incorporated
by reference in this Prospectus in reliance upon publicly available information
are inaccurate or incomplete, SPX was not involved in the preparation of such
information and statements and, for the foregoing reasons, is not in a position
to verify any such information or statements.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY SPX OR BY THE DEALER MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
A SOLICITATION TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH
THE MAKING OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION. HOWEVER, SPX MAY, IN ITS SOLE DISCRETION, TAKE SUCH ACTION AS
IT MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF SPX OR THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS
FURNISHED OR THE DATE HEREOF.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE
THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED
TO BE MADE ON BEHALF OF SPX BY CIBC OPPENHEIMER CORP. ("CIBC OPPENHEIMER"), AS
DEALER MANAGER, OR ONE OR MORE OTHER REGISTERED BROKERS OR DEALERS LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
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FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "REASONS FOR THE
OFFER," AND "BACKGROUND OF THE OFFER," IN ADDITION TO CERTAIN STATEMENTS
CONTAINED ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE, THAT
ARE NOT STATEMENTS OF HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS AND ARE
THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION,
STATEMENTS REGARDING SPX'S OR THE COMPANY'S FUTURE FINANCIAL POSITION, RESULTS
OF OPERATIONS, BUSINESS STRATEGY (INCLUDING FUTURE DISPOSITIONS OF ASSETS AND
RESTRUCTURING OF OPERATIONS), BUDGETS, EXPECTED COST SAVINGS, PLANS AS TO
DIVIDENDS, AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE INFORMATION SET FORTH
IN ANY FORWARD-LOOKING STATEMENTS ARE DISCLOSED UNDER "RISK FACTORS"
("CAUTIONARY STATEMENTS"). ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO SPX OR TO PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. SPX WAS NOT INVOLVED
IN THE PREPARATION OF ANY FORWARD-LOOKING STATEMENTS RELATING TO THE COMPANY
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND IS NOT IN A POSITION TO VERIFY
SUCH STATEMENTS AND TAKES NO RESPONSIBILITY THEREFOR.
IN THE FEBRUARY 17, 1998 PRESS RELEASE ANNOUNCING THE PROPOSED BUSINESS
COMBINATION AND IN CERTAIN SLIDES UTILIZED BY SPX REGARDING THE PROPOSED
BUSINESS COMBINATION, CERTAIN CAUTIONS WERE GIVEN REGARDING THE FORWARD-LOOKING
STATEMENTS CONTAINED THEREIN. TO THE EXTENT THESE MATERIALS WERE DEEMED ISSUED
IN CONNECTION WITH THE OFFER, IT SHOULD BE NOTED THAT THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 DO NOT APPLY TO TENDER
OR EXCHANGE OFFERS.
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PROSPECTUS SUMMARY
The information below is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus,
including the documents incorporated in this Prospectus by reference.
Shareholders are urged to read this Prospectus and the attachments hereto, and
the documents incorporated herein by reference, in their entirety. As used in
this Prospectus, the terms "SPX" and the "Company" refer to SPX Corporation and
Echlin Inc., respectively, and, unless the context otherwise requires, their
subsidiaries.
SPX
SPX is a global provider of Vehicle Service Solutions to franchised dealers
of motor vehicle manufacturers and independent service locations, Service
Support to vehicle manufacturers, and Vehicle Components to the worldwide motor
vehicle industry.
SPX is comprised of two business segments. The Service Solutions segment
includes operations that primarily design, manufacture and market a wide range
of specialty service tools, equipment and services to the global motor vehicle
industry. Major customers are franchised dealers of motor vehicle manufacturers,
aftermarket vehicle service facilities and independent distributors. Vehicle
Components includes operations that primarily design, manufacture and market
transmission and steering components for light- and heavy-duty vehicle markets,
principally in North America and Europe. Major customers of this segment include
vehicle manufacturers, other component manufacturers and the aftermarket.
SPX was organized in 1911 under the laws of Michigan and reincorporated in
Delaware in 1968. SPX was known as The Piston Ring Company until 1931, when it
changed its name to Sealed Power Corporation. In 1988, it changed its name again
to SPX Corporation. Today SPX is a multinational corporation with operations in
14 countries. SPX's corporate headquarters are located at 700 Terrace Point
Drive, Muskegon, MI 49443-3301, telephone number (616) 724-5000.
On April 21, 1998, SPX announced its first quarter 1998 results. Revenues
were $230.4 million in the first quarter of 1998 compared to $236.7 million in
the first quarter of 1997. The first quarter of 1997 included $23.5 million of
revenues of the Sealed Power division which was sold on February 7, 1997. First
quarter 1998 revenues were up 8% over the first quarter 1997 revenues if the
revenues of the Sealed Power division are excluded. First quarter 1998 earnings
per share were $1.54 and included a $0.66 per share unrealized gain on the
investment in Shares, net of transaction costs associated with the Proposed
Business Combination. First quarter 1997 earnings per share were $1.68 and
included a $2.14 per share gain on the sale of the Sealed Power division, a
$0.28 per share charge associated with certain litigation, and a $0.71 per share
charge related to debt retirement. All per share information is presented on a
diluted basis.
THE COMPANY
The following information concerning the Company is excerpted from the
Company's 1997 Form 10-K. See "Company Information."
The Company was incorporated in the State of Connecticut in 1959 and is
engaged in only one business segment, as a worldwide supplier of products to
maintain or improve the efficiency and safety of motor vehicles. The Company's
principal products can be classified into the following categories: brake
system, engine system, other vehicle parts and non-vehicular products.
The Company's products are sold primarily as replacement products for use
by professional technicians and by car and truck owners. Sales are made to
automotive warehouse distributors, heavy-duty distributors, retailers, other
parts manufacturers and parts remanufacturers. The Company also sells its
products to original equipment manufacturers in both the automotive and
heavy-duty markets.
The Company's corporate headquarters are located at 100 Double Beach Road,
Branford, CT 06405, telephone number (203) 481-5751.
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REASONS FOR THE OFFER
On February 17, 1998, SPX delivered a letter to the Board of Directors of
the Company proposing to enter into the Proposed Business Combination pursuant
to which shareholders of the Company would receive for each Share the
Consideration in the amount of $12.00 net in cash and 0.4796 share of SPX Common
Stock. The Consideration had a total value of $48.00 based on the $75 1/16
closing price of a share of SPX Common Stock on the NYSE Composite Tape on
February 13, 1998, the last trading date preceding the date of the first public
announcement of the Proposed Business Combination, and a total value of $46.56
based on the $72 1/16 closing price on the NYSE Composite Tape of a share of SPX
Common Stock on April 28, 1998, the date of this Prospectus. At the time the
Offer is consummated, the Consideration may have a market value that is greater
or less than either of those two amounts depending upon the market price of a
share of SPX Common Stock at such time. At a total value of $46.56, the
Consideration represents a 20% premium over the $38 7/8 price at which a Share
closed on the NYSE on February 13, 1998 and a 28% premium over the average
trading price at which a Share closed on the NYSE during the 30 trading days
preceding February 17, 1998. Immediately following consummation of the Proposed
Business Combination and after giving effect to the issuance of the SPX Common
Stock in the transaction, the shareholders of the Company (other than SPX) would
own approximately 70% of the then outstanding shares of SPX Common Stock.
With its letter to the Board of Directors of the Company, SPX delivered a
proposed merger agreement to the Company in contemplation of arriving at a
negotiated transaction. That agreement provides for a single-step "cash
election" merger of the Company into a subsidiary of SPX in which each
outstanding Share would be converted into the right to receive the Consideration
(with shareholders able to elect to receive instead all cash, in the amount of
$48.00 per Share, or all stock, in the amount of 0.6395 share of SPX Common
Stock per Share, subject to proration) in a partially tax-free reorganization.
However, because of the Company's negative responses to SPX's approaches over
the several months prior to February 17, 1998 (see "Background of the Offer"),
SPX also filed a Registration Statement, of which this Prospectus is part, with
the Commission, so that the Proposed Business Combination may be effected by
means of the Offer, to be followed by the Merger in which each Share not
purchased in the Offer would be converted into the right to receive the
Consideration. The exchange of Shares for the Consideration in the Offer and the
Merger will be a taxable transaction. See "The Offer -- Certain Federal Income
Tax Consequences."
If the Merger is consummated, the Company will become a wholly owned
subsidiary of SPX. If the Minimum Tender Condition is satisfied and the other
Offer Conditions are satisfied or waived and the Offer is consummated, SPX will
own at least 66 2/3% of the outstanding Shares, and will have sufficient voting
power in the Company to approve the Merger independently of the votes of any
other shareholders of the Company.
SPX believes that the Offer is in the best interests of the Company's
shareholders because, among other things, the Consideration will allow
shareholders of the Company to realize a substantial premium for their Shares in
cash immediately, while continuing, through their ownership of SPX Common Stock,
to participate in the future growth of the combined company. See "Reasons for
the Offer."
BACKGROUND OF THE OFFER
In February 1997, John B. Blystone, Chairman and Chief Executive Officer of
SPX, met with Trevor O. Jones, then Chairman and interim President and Chief
Executive Officer of the Company, to propose that the two companies explore a
business combination. Mr. Jones did not follow up on this meeting. In November
1997, Mr. Blystone met for several hours with Larry W. McCurdy, who had
succeeded Mr. Jones as President and Chief Executive Officer of the Company, to
discuss a strategic merger between the two companies, and on November 24, 1997,
Patrick J. O'Leary, SPX's Vice President -- Finance and Chief Financial Officer,
met with Robert Tobey, the Company's Vice President -- Corporate Development.
These discussions were not fruitful, and SPX was informed that the Company had
no interest in a business combination with SPX.
On December 12, 1997, Mr. Blystone wrote a letter to Mr. McCurdy setting
out the strategic rationale of a business combination of the two companies and
the benefits to the Company's shareholders of the transaction. Although the
letter stated that SPX anticipated a price in the $40's range, Mr. Blystone
advised
6
<PAGE> 11
Mr. McCurdy that SPX would be willing to revise its thinking if the Company
could identify greater value in the transaction. Mr. Blystone, in his letter,
further suggested that the letter be shared with the Company's Board of
Directors and offered to meet with and make a presentation to the Board about
any and all aspects of the proposed transaction.
On December 17, 1997, Mr. Blystone received a letter from Mr. McCurdy
stating that Mr. McCurdy had shared Mr. Blystone's views with the Company's
Board of Directors, and that the Company's and the Board's position remained
that the Company had no interest in further discussions with SPX.
On December 18, 1997, Mr. Blystone sent a letter to each member of the
Company's Board enclosing a copy of his December 12 letter and reiterating the
merits of a strategic combination. Mr. Blystone once again offered to meet
personally with and make a presentation to the Company's Board of Directors.
On December 23, 1997, Mr. Blystone received a letter from Mr. McCurdy
advising that the Company's Board of Directors was of the unanimous view that
the Company did not have an interest in pursuing discussions with SPX.
On January 6, 1998, SPX notified the Company that it was that day filing a
Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), seeking to acquire up to 100%
of the voting securities of the Company (the "HSR Filing").
On January 8, 1998, Mr. McCurdy wrote to Mr. Blystone acknowledging receipt
of notice of the HSR Filing and advising SPX that the Company and its advisors
stood ready to aggressively defend its shareholders' interests.
On February 17, 1998, SPX sent the Board of Directors of the Company a
letter setting forth the Proposed Business Combination and its merits and
reaffirming its desire to enter into a negotiated transaction.
On the same day, SPX filed a Registration Statement, of which this
Prospectus is part, with the Commission. Concurrently, SPX filed preliminary
solicitation materials with the Commission for use in soliciting written demands
("Demands") from the shareholders of the Company that a special meeting of
shareholders (the "Special Meeting") be called and held for the purpose of
removing the Board of Directors of the Company and replacing them with SPX's
nominees. Under the Connecticut Business Act, holders of outstanding Shares
representing in the aggregate at least 35% of all the votes entitled to be cast
on any issue proposed to be considered at the Special Meeting have the right to
demand that the Special Meeting be called and held. On February 17, 1998, SPX
also delivered to the Company its Demand that the Special Meeting be called and
held.
On March 6, 1998, SPX filed definitive solicitation materials with the
Commission and commenced its solicitation of Demands to call the Special
Meeting, and, on March 25, 1998, SPX delivered to the Company Demands by holders
of an aggregate of 28,253,762 Shares, representing (together with the Shares
owned by SPX with respect to which a Demand had previously been delivered)
approximately 45.8% of the outstanding Shares, which action SPX believes
satisfies those provisions of the Connecticut Business Act and the Company's
By-Laws setting forth the requirements for shareholders to call the Special
Meeting. Assuming that valid Demands were delivered (see "Litigation"), under
the Connecticut Business Act and the Company's By-Laws, the Special Meeting must
have been called by April 24, 1998 and must be held by June 23, 1998. At various
times through April 14, 1998, SPX delivered to the Company Demands by holders of
an aggregate of 3,001,542 additional Shares, totaling (together with the Shares
with respect to which Demands had previously been delivered) approximately 50.5%
of the outstanding Shares.
On March 24, 1998, SPX delivered a binding agreement to the Members of the
Connecticut General Assembly that, for a term of at least three years following
completion of the acquisition by SPX of all the outstanding stock of the
Company, SPX would maintain at least the same aggregate number of employees as
were employed on March 24, 1998 at the Company's Branford, Connecticut
manufacturing facility (the "Branford Facility"), if the acquisition of the
Company is completed in accordance with the terms of the Proposed Business
Combination and within the timeframe contemplated under current Connecticut law,
and if the State of Connecticut did not enact legislation impeding SPX's ability
to acquire the Company.
7
<PAGE> 12
On March 25, 1998, SPX signed an agreement with the United Auto Workers
("UAW") in which SPX agreed with the UAW, among other things, that, if SPX is
successful in completing a transaction to acquire the Company, and, thereafter,
the UAW seeks to unionize the Branford Facility, neither party would, among
other things, (a) attack the other party by impugning the other party's motives,
integrity or character, (b) engage in threats, misrepresentations or delaying
tactics to frustrate the desires of Company employees, or (c) commit an unfair
labor practice.
SPX does not anticipate any significant impact on its estimated cost
savings or the pro forma operating results attributable to either the agreement
to the Members of the Connecticut General Assembly or the agreement with the
UAW. The former agreement covers approximately 800 employees in Connecticut,
representing less than 3% of the Company's total workforce. The latter agreement
prescribes a course of conduct by the parties and does not entail costs.
On March 27, 1998, SPX announced that its Annual Meeting of Shareholders
would be held on May 20, 1998, and that, at that meeting, SPX's shareholders
would vote on approving the issuance of shares of SPX Common Stock in connection
with the Proposed Business Combination, which approval would cause the SPX
Stockholder Approval Condition to be satisfied.
On April 6, 1998, the Company brought an action in Federal District Court
in Connecticut alleging that most of the Demands which SPX had delivered on
March 25, 1998 were invalid and stating that the Company did not intend to call
the Special Meeting. SPX believes that the Demands are valid and that the
lawsuit is without merit, and has filed counterclaims against the Company in the
lawsuit. See "Litigation."
RISK FACTORS
See "Risk Factors" beginning on page 24 for a discussion of certain factors
that should be considered by shareholders in deciding whether to tender their
Shares to SPX pursuant to the Offer.
THE OFFER
General. SPX hereby offers, upon the terms and subject to the conditions
set forth herein and in the related Letter of Transmittal, to exchange the
Consideration for each outstanding Share validly tendered on or prior to the
Expiration Date and not withdrawn. The Consideration consists of $12.00 in cash
and 0.4796 share of SPX Common Stock. The term "Expiration Date" shall mean
12:00 midnight, New York City time, on May 28, 1998, unless and until SPX
extends the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by SPX, shall expire. See "The Offer -- General."
Rights. Shareholders will be required to tender one Right for each Share
tendered in order to effect a valid tender of Shares, unless the Rights Plan
Condition has been satisfied or waived. Unless the Distribution Date occurs, a
tender of Shares will constitute a tender of the associated Rights.
Conditions of the Offer. SPX's obligation to exchange cash and shares of
SPX Common Stock for Shares pursuant to the Offer is conditioned upon, among
other things, the satisfaction or, where permissible, waiver of each of the
Offer Conditions. See "The Offer -- Conditions of the Offer."
Subject to the applicable rules and regulations of the Commission, SPX
expressly reserves the right, in its sole discretion, at any time or from time
to time, to delay acceptance for exchange of, or, regardless of whether such
Shares were theretofore accepted for exchange, exchange any Shares pursuant to
the Offer or to amend or terminate the Offer and not to accept for exchange or
exchange any Shares not theretofore accepted for exchange or exchanged upon the
failure of any of the Offer Conditions to be satisfied. SPX reserves the
absolute right to waive any defect or irregularity in the tender of any
securities and to waive any of the Offer Conditions (other than the SPX
Stockholder Approval Condition and the condition related to the effectiveness of
the Registration Statement). Although SPX reserves the right to do so, SPX does
not currently intend to waive the Minimum Tender Condition, the Rights Plan
Condition or the Business Combination Statutes Condition. See "The
Offer -- Conditions of the Offer." Waiver or amendment of certain conditions of
the Offer may require an extension of the Offer.
8
<PAGE> 13
Regulatory Approvals. The acquisition of Shares by SPX pursuant to the
Offer is subject to the HSR Act and the rules that have been promulgated
thereunder. On January 6, 1998, SPX made the HSR Filing with the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC"). At 11:59 p.m. on February 5, 1998, the waiting
period expired with respect to the HSR Filing.
Timing of the Offer. The Offer is currently scheduled to expire at 12:00
midnight New York City time on May 28, 1998; however, it is SPX's current
intention to extend the Offer from time to time as necessary until all
conditions to the Offer have been satisfied or waived. See "The
Offer -- Extension, Termination and Amendment" and "-- Conditions of the Offer."
SPX has received a "highly confident" letter from Canadian Imperial Bank of
Commerce ("CIBC") and its affiliate, CIBC Oppenheimer, dated February 13, 1998,
in which the two entities state that they are highly confident of their ability
to raise financing in the credit markets in an amount sufficient to consummate
the acquisition of the Company, including the refinancing of existing debt of
SPX and the Company, the payment of related fees and expenses, and the provision
of working capital for SPX and its subsidiaries (the "Financing"). SPX believes
that it is highly unlikely that it will not have obtained the Financing prior to
five business days before the Expiration Date; however, in this unlikely event,
SPX currently intends to extend the Offer to ensure that five business days
remain for shareholders to tender their Shares in the Offer subsequent to SPX's
obtaining the Financing. See "The Offer -- Source and Amount of Funds."
In connection with the Offer, SPX solicited Demands and, on March 25, 1998,
delivered to the Company the requisite number of Demands from the shareholders
of the Company that a Special Meeting be called and held for the purpose of,
among other things, removing the Board of Directors of the Company and electing
five nominees of SPX (the "SPX Nominees") in their place. The Company disputes
the validity of most of the Demands delivered by SPX and has filed suit in
connection therewith. SPX believes the Demands delivered were valid and has
brought various counterclaims against the Company. See "Litigation." Assuming
SPX prevails in this dispute, under the Connecticut Business Act and the
Company's By-Laws, the Special Meeting must have been called by April 24, 1998
and must be held by June 23, 1998. SPX expects that if the SPX Nominees are
elected, they will take all action, subject to their fiduciary and statutory
duties as Directors of the Company, to cause the Rights Plan Condition and the
Business Combination Statutes Condition to be satisfied. At SPX's 1998 Annual
Meeting of Shareholders to be held on May 20, 1998, SPX's shareholders will vote
on approving the issuance of shares of SPX Common Stock in connection with the
Proposed Business Combination, which approval would satisfy the SPX Stockholder
Approval Condition.
Extension, Termination and Amendment. SPX expressly reserves the right
(but will not be obligated), in its sole discretion, at any time or from time to
time, and regardless of whether any of the events set forth in "The
Offer -- Conditions of the Offer" shall have occurred or shall have been
determined by SPX to have occurred, (a) to extend the period of time during
which the Offer is to remain open by giving oral or written notice of such
extension to the Exchange Agent, which extension will be announced no later than
9:00 a.m., Eastern Time, on the next business day after the previously scheduled
Expiration Date, and (b) to amend the Offer in any respect (including, without
limitation, by decreasing or increasing the consideration offered in the Offer
to holders of Shares and/or by increasing or decreasing the number of Shares
being sought in the Offer) by giving oral or written notice of such amendment to
the Exchange Agent. The rights reserved by SPX in this paragraph are in addition
to SPX's right to terminate the Offer as described in "The Offer -- Extension,
Termination and Amendment." There can be no assurance that SPX will exercise its
right to extend the Offer. However, it is SPX's current intention to extend the
Offer until all Offer Conditions have been satisfied or waived. See "The
Offer -- Extension, Termination and Amendment." During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering shareholder to withdraw his or her Shares.
See "The Offer -- Withdrawal Rights."
Exchange of Shares; Delivery of SPX Common Stock and Cash
Consideration. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
such extension or amendment), SPX will accept for exchange, and will exchange,
Shares validly tendered and not properly withdrawn as promptly as practicable
following the Expiration Date. See "The Offer -- Exchange of Shares; Delivery of
SPX Common Stock and Cash Consideration."
9
<PAGE> 14
Withdrawal Rights. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date, and, unless theretofore accepted for
exchange and exchanged by SPX for the Consideration pursuant to the Offer, may
also be withdrawn at any time after June 26, 1998. See "The Offer -- Withdrawal
Rights."
Procedure for Tendering Shares. For a Shareholder validly to tender Shares
pursuant to the Offer, (i) a properly completed and duly executed Letter of
Transmittal (or manually executed facsimile thereof), together with any required
signature guarantees, or an Agent's Message (as defined herein) in connection
with a book-entry transfer, and any other required documents, must be
transmitted to and received by the Exchange Agent at one of its addresses set
forth on the back cover of this Prospectus, and either certificates for tendered
Shares must be received by the Exchange Agent at such address or such Shares
must be tendered pursuant to the procedures for book-entry transfer set forth
under "The Offer -- Procedure for Tendering" (and a confirmation of receipt of
such tender received), in each case, prior to the Expiration Date, or (ii) such
shareholder must comply with the guaranteed delivery procedure set forth under
"The Offer -- Procedure for Tendering."
Shareholders will be required to tender one Right for each Share tendered
in order to effect a valid tender of Shares, unless the Rights Plan Condition
has been satisfied or waived. Unless the Distribution Date occurs, a tender of
Shares will constitute a tender of the associated Rights.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES (AND RIGHTS CERTIFICATES, IF
APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of Shares for SPX Common Stock and cash pursuant to the Offer
and the Merger will be a taxable transaction for U.S. federal income tax
purposes and may also be taxable under applicable state, local and foreign tax
laws. If the Board of Directors of the Company agrees to discuss a business
combination with SPX, the Offer and the Merger may be restructured to be a
partially tax-free merger for U.S. federal income tax purposes.
All Company shareholders should carefully read the summary of the federal
income tax consequences of the Offer and the Merger under "The Offer -- Certain
Federal Income Tax Consequences" and are urged to consult with their own tax
advisors as to the federal, state, local and foreign tax consequences in their
particular circumstances.
EFFECT OF OFFER ON MARKET FOR SHARES
The exchange of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
The Shares are listed on the NYSE, the PE and the International Stock
Exchange in London. Depending on the number of Shares acquired pursuant to the
Offer, following consummation of the Offer, the Shares may no longer meet the
requirements of the American exchanges for continued listing, and the Shares may
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations, in which event the Shares could no longer be used as
collateral for margin loans made by brokers. See "The Offer -- Effect of Offer
on Market for Shares; Registration under the Exchange Act."
10
<PAGE> 15
DISSENTERS' RIGHTS
Holders of Shares do not have dissenters' rights as a result of the Offer.
In the event the Merger is consummated, holders of Shares will have dissenters'
rights with respect to their Shares under Section 33-856 of the Connecticut
Business Act assuming they comply with the procedural requirements of the
Connecticut Business Act. See "The Merger -- Dissenters' Rights."
COMPARISON OF RIGHTS OF HOLDERS OF SHARES AND SPX COMMON STOCK
As a consequence of the exchange of Shares for shares of SPX Common Stock
in the Offer and the Merger, shareholders of the Company, a corporation
incorporated under the laws of Connecticut, would become shareholders of SPX, a
Delaware corporation. Such holders would have certain rights as shareholders of
SPX that are different from the rights they currently have in the Company, both
because of the differences between SPX's Restated Certificate of Incorporation,
as amended ("SPX's Certificate of Incorporation"), and By-Laws, on the one hand,
and the Company's Certificate of Incorporation, as amended (the "Company's
Certificate of Incorporation"), and By-Laws, on the other hand, and because of
differences between Connecticut and Delaware corporation law. For a comparison
of the Certificate of Incorporation and By-Law provisions of SPX and the Company
and of Connecticut and Delaware law, see "Comparison of the Rights of Holders of
Shares and SPX Common Stock."
DESCRIPTION OF SPX CAPITAL STOCK
The authorized capital of SPX consists of (i) 3,000,000 shares of preferred
stock, without par value, issuable in series, of which, as of February 6, 1998,
500,000 shares have been designated as Series A Junior Participating Preferred
Stock ("SPX Series A Preferred Stock") but no shares were issued and
outstanding, and (ii) 50,000,000 shares of SPX Common Stock, of which, as of
April 10, 1998, 12,647,727 shares were issued and outstanding. Each outstanding
share of SPX Common Stock carries with it a right to purchase, upon the
occurrence of certain specified events, one one-thousandth of a share of SPX
Series A Preferred Stock. See "Comparison of Rights of Holders of Shares and SPX
Common Stock -- SPX's Rights Plan."
For information relating to ownership of Common Stock by certain beneficial
owners and directors and executive officers of SPX as a group, see SPX's 1998
Annual Meeting Proxy Statement. As of March 16, 1998, SPX's directors and
executive officers as a group beneficially owned 583,954 shares, or
approximately 4.6% of the then outstanding shares, of SPX Common Stock.
Immediately following consummation of the Proposed Business Combination and
after giving effect to the issuance of the SPX Common Stock in the transaction,
shareholders of the Company (other than SPX) would own approximately 70% of the
outstanding shares of SPX Common Stock, and SPX's present directors, executive
officers and their affiliates as a group would own approximately 1.4% of the
then outstanding shares of SPX Common Stock.
For additional information concerning the capital stock of SPX, see
"Description of SPX Capital Stock."
THE EXCHANGE AGENT
The Bank of New York has been appointed exchange agent (the "Exchange
Agent") in connection with the Offer. The Letter of Transmittal (or facsimile
copies thereof) and certificates for Shares should be sent by each tendering
shareholder of Shares or his or her broker, dealer, bank or other nominee to the
Exchange Agent at one of the addresses set forth on the back cover of this
Prospectus.
REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES
Requests for information or assistance concerning the Offer may be directed
to the Dealer Manager or the Information Agent at their respective addresses set
forth on the back cover of this Prospectus. Requests for additional copies of
this Prospectus and the Letter of Transmittal should be directed to the
Information Agent.
11
<PAGE> 16
MARKET PRICES AND DIVIDENDS
SPX Common Stock is listed and principally traded on the NYSE (under the
symbol "SPW") and is also listed on the PE. The Shares are listed and
principally traded on the NYSE (under the symbol "ECH"), the PE and the
International Stock Exchange in London. The following table sets forth, for the
periods indicated, the high and low sale prices per share of SPX Common Stock
and per Share as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
SPX COMMON STOCK COMPANY SHARES
------------------------ ------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............................. $17 3/8 $14 1/4 $.10 $38 1/2 $29 7/8 $0.190
Second Quarter............................ 15 1/8 10 3/4 .10 38 3/4 34 0.205
Third Quarter............................. 16 11 1/8 .10 39 5/8 33 7/8 0.205
Fourth Quarter............................ 17 14 1/8 .10 39 1/2 33 7/8 0.205
1996
First Quarter............................. 18 1/8 13 5/8 .10 38 3/4 32 5/8 0.205
Second Quarter............................ 27 1/8 18 .10 37 7/8 33 3/8 0.220
Third Quarter............................. 31 5/8 21 5/8 .10 37 5/8 29 3/4 0.220
Fourth Quarter............................ 40 1/2 26 7/8 .10 34 1/4 30 1/4 0.220
1997
First Quarter............................. 49 3/4 37 3/8 .10 35 1/4 29 1/2 0.220
Second Quarter............................ 70 5/8 41 7/8 -- 36 1/2 31 1/8 0.225
Third Quarter............................. 65 3/4 49 -- 38 9/16 33 5/8 0.225
Fourth Quarter............................ 70 3/8 58 7/16 -- 36 5/8 29 13/16 0.225
1998
First Quarter............................. 79 1/4 65 3/16 -- 52 3/4 34 1/2 0.225
Second Quarter
(through April 28, 1998)............... 77 15/16 70 5/8 -- 52 5/8 47 1/16 0.225
</TABLE>
On February 13, 1998, the last full trading day prior to the first public
announcement by SPX of the Proposed Business Combination, the reported high and
low sale prices and closing price per share of SPX Common Stock and per Share on
the NYSE Composite Tape and per Share on an equivalent share basis based on the
Consideration of $12.00 in cash and 0.4796 share of SPX Common Stock were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
-------------------- --------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX............................................ 75 5/8 74 3/4 75 1/16 -- -- --
The Company.................................... 39 1/4 38 1/2 38 7/8 48 1/4 47 13/16 48
</TABLE>
On April 28, 1998, the date of this Prospectus, the reported high and low
sale prices and closing price per share of SPX Common Stock and per Share on the
NYSE Composite Tape and per Share on an equivalent share basis based on the
Consideration of $12.00 in cash and 0.4796 share of SPX Common Stock were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
-------------------- --------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX............................................ 72 1/2 71 5/16 72 1/16 -- -- --
The Company.................................... 48 1/2 47 1/16 47 3/4 46 3/4 46 3/16 46 9/16
</TABLE>
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES OF
SPX COMMON STOCK AND FOR THE SHARES.
12
<PAGE> 17
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table presents historical and pro forma per share data of
SPX, historical per share data of the Company and pro forma combined per share
data as if the Proposed Business Combination had occurred as of September 1,
1996, assuming an Exchange Ratio of 0.4796. The table also presents the
Company's pro forma equivalent per share data. See "Selected Historical
Financial Data of SPX," "Selected Historical Financial Data of the Company," and
"Selected Pro Forma Condensed Combined Financial Data of SPX and the Company"
included elsewhere herein for additional information regarding this pro forma
information. The pro forma combined per share data are intended for information
purposes, and do not purport to represent what the combined entity's results of
continuing operations would actually have been had the transaction in fact
occurred at an earlier date, or project the results for any future date or
period. Upon consummation of the Proposed Business Combination, the actual
financial position and results of operations of the combined company will
differ, perhaps significantly, from the pro forma amounts reflected herein due
to a variety of factors, including changes in operating results between the date
of the pro forma financial information and the date on which the Proposed
Business Combination is consummated and thereafter, as well as the factors
discussed under "Risk Factors."
The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs that could result from the combination of the
companies. Any integration and rationalization of the operations of the Company
may include certain costs that in turn would result in a charge to earnings of
the combined company. Such a charge, which cannot now be quantified fully, may
be material and would be recognized in the period in which such a restructuring
occurs. These costs may include severance and related employee benefit costs,
costs to consolidate manufacturing and distribution facilities, facility
rearrangement costs, relocation and moving costs, training costs, debt
extinguishment costs, and costs associated with change of control agreements,
among others. To date, SPX's access to information related to the Company has
been limited to publicly available information. In addition, publicly available
information does not contain sufficient details related to the Company's
severance plans, employee benefit agreements, change of control costs or debt
extinguishment provisions to enable SPX to quantify the costs associated with
business integration and rationalization actions that may be considered by SPX.
Nonetheless, based on assumptions related to headcount reductions and average
annual salaries used to compute the annualized expense savings and assuming a
severance policy that would result in an average severance term of six months,
the estimated pre-tax costs of the severance (excluding any change in control
costs) would be approximately $60.0 million.
The pro forma condensed combined financial data do not give effect to any
costs savings that could result from the combination of the companies. SPX
management estimates that the combined company can achieve approximately $125.0
million of annualized cost savings in the first full year following the
acquisition, and $175.0 million of annualized cost savings in the second full
year following the acquisition. These costs savings include three categories of
estimated annual savings in the second full year: savings associated with
headcount reductions of $120.0 million, reduction in duplicative corporate costs
of $20.0 million, and manufacturing, distribution and sourcing rationalization
of $35.0 million. These savings estimates are based upon assumptions made by SPX
management using available public information of the Company, certain
comparative peer group information of the Company, and SPX's own internal
information. The savings associated with head count reductions were estimated by
multiplying a 10% reduction in the Company's employees, or approximately 3,000
employees, by $40 thousand per employee. The savings per employee were based on
SPX's salary data and assumptions related to the Company's salary structure. SPX
believes that the head count reductions are possible given its own experience
over the past two years and the Company's head count levels compared to various
peer companies. The savings to reduce duplicative corporate costs approximate
SPX's own corporate office expenses. Duplicative corporate costs would include
duplicative executive positions, facilities, overlap of other corporate
functions, and various external fees and costs. Savings from manufacturing,
distribution and sourcing were based upon material cost reductions of 2.5% on an
estimated $1.4 billion of material purchases by the Company. SPX estimated the
Company's material purchases at 50% of the Company's cost of goods sold in the
fiscal year ended August 31, 1997. The 2.5% material cost reduction was based
upon the savings realized by SPX in its own sourcing program over the past two
years.
13
<PAGE> 18
<TABLE>
<CAPTION>
THE COMPANY
THE COMPANY PRO FORMA PRO FORMA
SPX(A) HISTORICAL COMBINED(B) EQUIVALENT(C)
------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Income (loss) per common share from
continuing operations (d)(e):
Basic
Six months ended February 28, 1998........ $(4.20) $ 0.94 $(0.72) $(0.35)
Year ended August 31, 1997................ (3.65) (0.75) (3.99) (1.91)
Diluted
Six months ended February 28, 1998........ (4.20) 0.93 (0.72) (0.35)
Year ended August 31, 1997................ (3.65) (0.75) (3.99) (1.91)
Dividends per common share(f):
Six months ended February 28, 1998........ -- 0.45 -- --
Year ended August 31, 1997................ 0.30 0.89 0.30 0.14
Book value per common share:
February 28, 1998......................... (3.46) 14.90 26.41 12.67
August 31, 1997........................... 1.89 14.48 25.56 12.26
</TABLE>
- ---------------
(a) The six-month and twelve-month information for SPX represents SPX's
historical information as of and for the six months ended December 31, 1997
and SPX's pro forma adjusted historical information as of and for the twelve
months ended June 30, 1997, respectively, but is presented as of November
30, 1997 and August 31, 1997, respectively, to conform to the Company's
reporting. See "Selected Pro Forma Adjusted Historical Financial Data of
SPX."
(b) See "Selected Pro Forma Condensed Combined Financial Data of SPX and the
Company."
(c) The Company's pro forma equivalent per share information represents the pro
forma combined per share information multiplied by an Exchange Ratio of
0.4796.
(d) The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs, nor to any cost savings, that could
result from the combination of the companies.
The comparative per share data have been affected by various special charges
and gains recorded by SPX and the Company during the periods presented.
The pro forma condensed combined financial data of SPX and the Company for
the six months ended February 28, 1998 include special charges of $110.0
million recorded by SPX primarily to combine two divisions and to recognize
the reduced carrying value of certain assets resulting from the decision to
combine the divisions and exit certain product lines. See "Selected
Historical Financial Data of SPX."
The pro forma condensed combined financial data of SPX and the Company for
the year ended August 31, 1997 include special charges and gains of $307.2
million. The special charges and gains included a $7.4 million special
charge recorded by SPX related to the combination of five divisions into two
divisions, a $6.5 million special charge recorded by SPX of anticipated
future legal costs associated with the ongoing litigation with Snap-on
Incorporated, a $67.8 million write-off of goodwill recorded by SPX related
to the acquisitions of Bear Automotive and Allen Testproducts, $254.1
million of repositioning and other special charges recorded by the Company
related to facility realignments and rationalizations and other actions, and
$28.6 million of gains from the sale of two divisions by the Company. See
"Selected Historical Financial Data of SPX" and "Selected Historical
Financial Data of the Company."
(e) For purposes of this presentation, the Company's reported primary loss per
share has been assumed to be equivalent to basic and diluted loss per share
for the year ended August 31, 1997.
(f) In April 1997, SPX eliminated its quarterly cash dividend and stated that
future distributions to shareholders would be in the form of open market
purchases of SPX Common Stock when deemed appropriate by management.
14
<PAGE> 19
SELECTED HISTORICAL FINANCIAL DATA OF SPX
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents the selected historical statement of income
and other financial data of SPX. The financial data as of and for the fiscal
years ended December 31 have been derived from the audited financial statements
of SPX. SPX's selected historical financial data should be read in conjunction
with, and are qualified in their entirety by reference to, the historical
financial statements (and related notes) of SPX which are incorporated by
reference herein. See "Available Information" and "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997(A) 1996(B) 1995 1994(C) 1993(D,E)
------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................... $ 922.3 $1,109.4 $1,098.1 $1,079.9 $ 747.2
Cost of products sold.................. 669.0 850.1 853.5 821.5 508.0
Selling, general and administrative.... 175.3 186.5 194.5 198.0 204.1
Other operating expenses, net(f)....... 3.9 1.9 8.3 2.9 53.4(c)
Special charges(g)..................... 116.5(h) 87.9(i) 10.7(i) -- 27.5(j)
------- -------- -------- -------- --------
Operating income (loss)................ (42.4) (17.0) 31.1 57.5 (45.8)
Other expense (income), net............ (74.2)(a) (0.7) (3.0) 0.1 (102.9)(e)
Interest expense, net.................. 13.9 31.8 35.7 35.2 15.9
------- -------- -------- -------- --------
Income (loss) before income taxes...... 17.9 (48.1) (1.6) 22.2 41.2
Income taxes........................... 21.3 7.6 (0.2) 9.1 28.1
------- -------- -------- -------- --------
Income (loss) from continuing
operations........................... (3.4) (55.7) (1.4) 13.1 13.1
Discontinued operation(k).............. -- -- (2.8) 1.0 2.1
Cumulative effect of accounting
changes(l)........................... -- -- -- -- (31.8)
Extraordinary items(m)................. (10.3) (6.6) (1.1) -- (24.0)
------- -------- -------- -------- --------
Net income (loss)...................... $ (13.7) $ (62.3) $ (5.3) $ 14.1 $ (40.6)
======= ======== ======== ======== ========
Income (loss) per share from continuing
operations:
Basic................................ $ (0.27) $ (4.04) $ (0.10) $ 1.02 $ 1.04
Diluted.............................. (0.27) (4.04) (0.10) 1.02 1.04
Weighted average number of common
shares outstanding:
Basic................................ 12.754(n) 13.785 13.173 12.805 12.604
Diluted.............................. 12.754(n) 13.785 13.173 12.805 12.604
Dividends per share.................... $ 0.10(n) $ 0.40 $ 0.40 $ 0.40 $ 0.40
OTHER FINANCIAL DATA:
Total assets........................... $ 583.8 $ 616.0 $ 831.4 $ 929.0 $1,024.4
Total debt............................. 205.3 229.3 319.8 415.2 430.2
Shareholders' equity (deficit)......... (43.4) 105.9 162.2 158.7 145.4
Capital expenditures................... 22.6 20.2 31.0 48.5 15.1
Depreciation and amortization.......... 25.0 40.8 43.5 38.5 24.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
financial data.
15
<PAGE> 20
NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF SPX
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) During 1997, SPX sold its Sealed Power division for $223.0 in gross cash
proceeds. SPX recorded a pretax gain of $71.9, or $31.2 after-tax. Annual
1996 revenues of this division were approximately $230.0. See "Pro Forma
Adjusted Historical Financial Data of SPX."
(b) During 1996, SPX sold its Hy-Lift division for approximately $15.0. Annual
1995 revenues of this division were approximately $45.0. See "Pro Forma
Adjusted Historical Financial Data of SPX."
(c) Effective December 31, 1993, SPX acquired the balance of Sealed Power
Technologies ("SPT") for $39.0. SPX previously owned 49% of SPT and
accounted for its investment using the equity method. SPT's 1993 revenues
were $392.0. As a result of this acquisition, SPX was required to recognize
its share of SPT's losses, $26.9, in 1993. Also in 1993, SPX initiated
consolidation of Sealed Power Europe Limited Partnership which required
recognition of cumulative losses of the partnership since its inception,
resulting in a charge of $21.5. These charges have been included in other
operating expenses, net.
(d) During 1993, SPX acquired Allen Testproducts and its related leasing
company for $102.0. Annual 1992 revenues of this acquisition were
approximately $83.0.
(e) During 1993, SPX divested its Sealed Power Replacement and Truth divisions
for a gain of $105.4 ($64.2 after-tax). Annual 1992 revenues of these
divisions were approximately $247.0.
(f) Other operating expenses, net, include goodwill/intangible amortization,
minority interest, and earnings from equity interests.
(g) Special charges include certain legal costs, restructuring charges, and
write-off of goodwill.
(h) These charges included a $99.0 restructuring charge, a $4.1 charge for five
corporate executive staff reductions, and $13.4 of costs associated with
various legal matters, including $6.5 of anticipated future legal costs
associated with the ongoing litigation with Snap-on Incorporated, legal
costs associated with a settled case in California, and certain other
matters.
SPX recorded the $99.0 restructuring charge to combine two divisions within
the Service Solution segment and to recognize reduced carrying value of
certain assets resulting from the decision to combine the divisions and
exit certain manufactured diagnostic equipment product lines. The
restructuring of the two Service Solutions businesses was in response to
changing market dynamics and changing needs of customers. SPX decided to
combine its OE Tool and Equipment business with its Aftermarket Tool and
Equipment business to provide a single business focused on the combined
market and customer needs. Additionally, SPX decided to exit certain
products to focus upon new generation products that will better meet
customer needs. The decision results in a reduction of workforce and
closing of certain facilities. The components of the charge have been
computed based on management's estimate of the realizable value of the
affected tangible and intangible assets and estimated exit costs including
severance and other employee benefits based on existing severance policies
and local laws.
The $99.0 charge included $63.7 of restructuring costs, $25.8 of reduced
inventory value and $9.5 of reduced value of other tangible and intangible
assets related to exiting certain product lines. These restructuring costs
included $13.7 of severance related costs for approximately 800 people,
$20.3 for incremental repossession and distribution exit costs (including
the termination of lease financing and distributor agreements), $21.2 for
incremental service and software update obligations resulting from SPX's
decision to maintain adequate service capabilities and appropriate software
updates of the exited products for customers who have previously purchased
the exited products, and $8.5 of costs associated with idled facilities.
The implementation of this restructuring is expected to be substantially
complete by the end of 1998.
Of the total special charges of $116.5, the components of the charge that
will require the future payment of cash are $80.9. Cash payments in 1997
related to the special charges were $1.5. The expected future cash payments
include an estimated $49.0 in 1998 with the remainder, principally
repossession costs and service and software update obligations, over the
following two years. As there is some uncertainty associated with the
timing of the cash payments, the remaining accrual at December 31, 1997 of
$79.4
16
<PAGE> 21
has been classified in other current accrued liabilities. Management
estimates that savings from the restructuring will increase operating
income by $3.0 in 1998 and $10.0 in 1999. The savings result primarily from
the reduction in headcount and facilities.
(i) During the fourth quarter of 1995, management authorized and committed SPX
to undertake two significant restructuring plans. The first plan
consolidated five Service Solutions divisions into two divisions. The
second plan closed Sealed Power division's German foundry operation and
transferred certain piston ring operations to other facilities. In 1996,
three additional restructuring actions were initiated including an early
retirement program at the Service Solutions divisions, a cost reduction
initiative at several Service Solutions international locations, and an
early retirement program at the Sealed Power division. A summary of these
restructurings follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Service Solutions -- Five divisions consolidated into
two divisions...................................... $11.2 $ 7.0
Service Solutions -- Early retirement................ 1.1 --
Service Solutions -- International................... 3.5 --
SPD -- Closing foundry at SP Europe.................. -- 3.7
SPD early retirement................................. 4.2 --
----- -----
Total...................................... $20.0 $10.7
===== =====
</TABLE>
Service Solutions Restructuring -- In order to improve customer service,
reduce costs and improve productivity and asset utilization, SPX decided to
consolidate five existing Service Solutions divisions into two. This
restructuring plan involved closing two SPX owned manufacturing facilities,
an SPX owned distribution facility, several leased service centers and a
leased sales facility in France. The plan also included combining sales,
engineering and administrative functions, and was completed at the end of
1996. The plan included the termination of approximately 570 employees
resulting in a net reduction of approximately 310 employee positions after
considering staffing requirements at remaining facilities.
SPX recorded a $7.0 charge in 1995 and an $11.2 charge in 1996 to complete
this restructuring. These charges recognized severance and benefits for
employees to be terminated, holding costs of vacated facilities, the
adjustment to fair market value of one manufacturing facility to be closed,
and other costs to complete the consolidation of the divisions. The
distribution facility was sold during the fourth quarter of 1996 and the
manufacturing facilities were sold during 1997.
Service Solutions -- Early Retirement -- Closely associated with the
consolidation of five divisions into two, an early retirement program was
accepted by approximately 60 people and SPX recorded a $1.1 charge in the
first quarter of 1996.
Service Solutions -- International -- During the second quarter of 1996,
SPX recorded a $3.5 restructuring charge principally to recognize severance
associated with the termination of 113 international employees and related
operating downsizing costs.
SPD -- Closing Foundry at SP Europe -- SPX closed its unprofitable foundry
operations at SP Europe and transferred certain piston ring operations to
other facilities. This closing resulted in the elimination of approximately
200 positions and was completed at the end of the third quarter of 1996. In
1995, SPX recorded a $3.7 restructuring charge to accrue severance that was
paid to these employees.
Sealed Power Division Early Retirement -- During the second quarter of
1996, SPX recorded a $4.2 restructuring charge for the early retirement of
94 employees at the Sealed Power division.
The actual savings associated with the 1995 and 1996 restructuring actions
relate primarily to the Service Solutions restructuring actions. The actual
savings achieved in 1996 and 1997 have been consistent with the estimated
full year savings of $23.0 by the year 1998. The actions increased
operating income by an estimated $7.0 in 1996 and an estimated $12.0 in
1997.
17
<PAGE> 22
These charges were recorded in the appropriate periods in accordance with
the requirements of Emerging Issues Task Force Pronouncement 94-3. Certain
costs incurred in connection with management's planned actions not
qualifying for accrual in 1995 were recorded in 1996, based on employee
acceptance of voluntary termination benefits and the satisfaction of other
requirements to recognize these costs. At December 31, 1997, the
restructuring actions initiated in 1995 and 1996 were complete and the
actual costs to implement the actions did not differ materially from the
estimates used to record these accruals.
At December 31, 1996, SPX recognized a $67.8 goodwill write-off ($83.0
gross and $15.2 of accumulated amortization), with no associated tax
benefit. The goodwill was related to the 1988 acquisition of Bear
Automotive Company and the 1993 acquisition of Allen Testproducts,
collectively referred to as Automotive Diagnostics. This goodwill
represented SPX's intangible business investment in PC based engine
diagnostic equipment, wheel service equipment and gas emissions testing
equipment. At December 31, 1995, management's analysis of this business
projected that the cost savings, market synergies and other factors which,
in part, would be realized from the Bear Automotive and Allen Testproducts
combination in 1995 and various subsequent restructuring actions would
result in non-discounted operating income sufficient to exceed goodwill
amortization. The decision to write off the goodwill resulted from
conclusions drawn from SPX's strategic review process that was completed in
December of 1996. The strategic review found accelerating technological
changes had significantly reduced the remaining life of PC based diagnostic
equipment. The process also found significant uncertainties about the
future opportunities related to gas emissions testing equipment, and a
decline in SPX's wheel service equipment market share. Management's
analysis of this business at December 31, 1996 projected significant
differences in business conditions from its December 31, 1995 analysis
including declining revenues and margins of diagnostic and wheel service
equipment and reduced revenues related to the emissions testing equipment
due to the uncertainties about the future status of the state emissions
programs. This analysis indicated that the businesses, as originally
acquired, would not be able to generate operating income sufficient to
offset the annual goodwill amortization. Assessing the impact of these
factors on the businesses, as originally acquired, management concluded
that Automotive Diagnostics' goodwill was impaired.
(j) During 1993, SPX recognized a $27.5 ($18.5 after-tax) special charge to
combine its Bear Automotive operation with Allen Testproducts.
(k) During 1995, SPX sold SPX Credit Corporation and recorded a pretax loss of
$4.8 ($3.0 after-tax). The financial results of this operation are included
as a discontinued operation through the date of divestiture.
(l) During 1993, SPX adopted a new accounting methodology for its ESOP and
reflected its 49% share of SPT's adoption of SFAS No. 106 regarding
accounting for postretirement benefits other than pensions.
(m) During 1997, SPX tendered for substantially all ($126.7) of its outstanding
11 3/4% senior subordinated notes. SPX recorded an extraordinary item, net
of taxes, of $10.3 for the costs to purchase the notes. During 1996, SPX
purchased $99.9 of these notes and recorded an extraordinary item, net of
taxes, of $6.6 for the costs to purchase the notes. During 1995, SPX
purchased $31.7 of these notes and recorded an extraordinary item, net of
taxes, of $1.1 for the costs to purchase the notes. During 1993, SPX
recorded the costs associated with prepayment of certain SPX and SPT
indebtedness totaling $24.0, net of taxes, as an extraordinary item.
(n) During 1997, SPX purchased 2.147 shares of SPX Common Stock through a Dutch
Auction self-tender offer for $56.00 per share. As of December 31, 1997,
SPX had purchased an additional 0.390 shares through open market purchases.
Also, concurrent with the Dutch Auction, SPX announced the elimination of
quarterly cash dividends and stated that future distributions to
shareholders would be in the form of open market purchases of SPX Common
Stock, when deemed appropriate by management.
18
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents selected historical statement of income and
other financial data of the Company. The financial data as of and for the six
months ended February 28, 1998 and February 28, 1997 have been derived from the
unaudited financial statements of the Company contained in the Company's 1998
Second Quarter Form 10-Q. The financial data as of and for the fiscal years
ended August 31 have been derived from the audited financial statements of the
Company and selected financial data contained in the Company's 1997 Form 10-K.
The operating results for the six months ended February 28, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ending August 31, 1998. The Company's selected historical financial data should
be read in conjunction with, and are qualified in their entirety by reference
to, the historical financial statements (and related notes) of the Company which
are incorporated by reference herein (except for the report of the Company's
independent accountants contained in the Company's 1997 Form 10-K which is not
incorporated herein by reference because the consent of the Company's
independent accountants has not yet been obtained). See "Available Information"
and "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR
SIX MONTHS ENDED
FEBRUARY 28, AS OF AND FOR THE FISCAL YEAR ENDED AUGUST 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales............................... $1,725.2 $1,693.1 $3,568.6 $3,128.7 $2,717.9 $2,229.5 $1,944.5
Cost of goods sold...................... 1,303.3 1,280.4 2,707.1 2,309.0 1,932.5 1,571.3 1,378.0
Selling and administrative expense...... 312.5 301.1 640.1 574.6 531.3 468.5 420.4
Repositioning and other special
charges(a)............................ -- -- 254.1 -- -- -- --
Gain on sales of businesses(b).......... -- -- (28.6) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations........... 109.4 111.6 (4.1) 245.1 254.1 189.7 146.1
Interest expense, net................... 19.2 16.7 40.6 32.9 23.6 11.7 8.5
-------- -------- -------- -------- -------- -------- --------
Income (loss) before taxes.............. 90.2 94.9 (44.7) 212.2 230.5 178.0 137.6
Provision for taxes..................... 30.7 33.2 2.2 70.0 76.1 56.9 44.0
-------- -------- -------- -------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change.................. 59.5 61.7 (46.9) 142.2 154.4 121.1 93.6
Cumulative effect of accounting
change(c)............................. -- -- -- -- -- 2.6 --
-------- -------- -------- -------- -------- -------- --------
Net Income (loss)....................... $ 59.5 $ 61.7 $ (46.9) $ 142.2 $ 154.4 $ 123.7 $ 93.6
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Primary(d)............................ $ -- $ -- $ (0.75) $ 2.30 $ 2.60 $ 2.10 $ 1.60
Basic................................. 0.94 0.99 -- -- -- -- --
Diluted............................... 0.93 0.98 -- -- -- -- --
Average shares outstanding:
Primary............................... -- -- 62.601 61.919 59.476 58.996 58.560
Basic................................. 63.194 62.377 -- -- -- -- --
Diluted............................... 63.670 63.225 -- -- -- -- --
Dividends per share..................... $ 0.45 $ 0.44 $ 0.89 $ 0.85 $ 0.79 $ 0.73 $ 0.70
OTHER FINANCIAL DATA:
Total assets............................ $2,381.9 $2,466.8 $2,374.2 $2,130.8 $1,961.0 $1,577.4 $1,263.3
Total debt(e)........................... 801.8 847.2 757.9 495.9 507.1 308.3 164.2
Shareholders' equity.................... 945.5 1,046.7 913.7 1,008.9 909.3 799.0 713.8
Capital expenditures.................... 66.4 68.9 149.2 104.4 103.9 73.8 41.5
Depreciation and amortization........... 58.2 56.4 113.9 90.9 76.6 64.2 59.7
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
financial data.
19
<PAGE> 24
NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) During fiscal 1997, the Company recorded repositioning and other special
charges of $254.1, pretax. The repositioning charge included expenses
related to facility realignments and rationalizations, and the write-down to
net realizable value of businesses to be disposed. In addition, goodwill
associated with brand names no longer in use was written off, inventory
related to discontinued and rationalized product lines was written down,
property, plant and equipment idled by facility closures and product line
rationalizations were reduced, and other investments and deferred customer
acquisition costs were written off.
(b) During fiscal 1997, the Company sold two divisions for gross proceeds of
$75.9. The Company reported a pretax gain of $28.6.
(c) During fiscal 1994, the Company adopted a new accounting methodology for
income taxes.
(d) The Company indicates that pro forma diluted loss per share under FAS 128
would have been less than the reported loss per share for the year ended
August 31, 1997.
(e) During February 1998, the Company signed a definitive agreement to sell its
Midland-Grau heavy duty brake operations to The Haldex Group of Sweden. The
transaction was completed on April 3, 1998. The sales price, which is
subject to completion of the closing date balance sheet, was approximately
$150.0. Any gain from this transaction will be included in the results of
operations for the third quarter. The Company will use the proceeds from the
sale to pay down existing bank debt.
20
<PAGE> 25
SELECTED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents selected pro forma condensed combined
statement of income and other financial data of SPX and the Company. The
information is presented as if the Offer and the Merger of SPX and the Company
occurred on September 1, 1996 for statement of income and related data and on
February 28, 1998 for balance sheet data. The pro forma data assume that the
Offer and the Merger are effected by the exchange of shares of SPX Common Stock
and cash for Shares. The pro forma data assume SPX will exchange 0.4796 share of
SPX Common Stock and $12.00 cash for each Share, whereby 30.268 shares of SPX
Common Stock and $757.3 of cash are issued in exchange for all outstanding
Shares and equivalent Shares, other than those owned by SPX. The Offer and the
Merger will be accounted for as a reverse acquisition, as the shareholders of
the Company will own a majority of the outstanding shares of SPX Common Stock
upon completion of the transaction. Accordingly, for accounting purposes, SPX is
treated as the acquired company and the Company is considered to be the
acquiring company. The purchase price will be allocated to the assets and
liabilities assumed of SPX based on their estimated fair market values at the
acquisition date. Under reverse acquisition accounting, the purchase price of
SPX is based on the fair market value of SPX Common Stock at the date of
acquisition. The cash portion of the Consideration will be accounted for as a
dividend by the combined company. SPX's financial position and results of
operations will not be included in the Company's consolidated financial
statements prior to the date the Merger is consummated. See "Pro Forma Condensed
Combined Financial Data of SPX and the Company" included elsewhere herein for
additional information regarding this pro forma information.
Under reverse acquisition accounting, the purchase price of SPX is based on
the fair market value of SPX Common Stock. For purposes of this pro forma
information, the fair market value of SPX Common Stock is assumed to be $76 1/16
per share, which reflects the closing price of SPX Common Stock on April 16,
1998. The Consideration includes 0.4796 share of SPX Common Stock. This is a
fixed exchange ratio and will not be adjusted in the event of any increase or
decrease in the market price of SPX Common Stock. Consequently, changes in the
market price of SPX Common Stock will not impact these pro forma financial
statements other than to increase or decrease the purchase price of SPX and the
related amount of goodwill and amortization thereof. The measurement date for
determining the fair market value of SPX Common Stock will be the date that the
Minimum Tender Condition is satisfied or waived or the date that SPX has entered
into a definitive agreement or announced an agreement in principle with the
Company providing for a merger or business combination with the Company. If the
market value of SPX Common Stock used in these pro forma financial statements
were assumed to change by $1.00 per share, the impact would be to increase or
decrease annual goodwill amortization and net income by $0.3 million ($0.01 per
share).
The selected pro forma condensed combined financial data are intended for
information purposes, and do not purport to represent what the combined entity's
results of continuing operations or financial position would actually have been
had the transaction in fact occurred at an earlier date, or project the results
for any future date or period. Upon consummation of the Offer, the actual
financial position and results of operations of the combined company will
differ, perhaps significantly, from the pro forma amounts reflected herein due
to a variety of factors, including changes in operating results between the date
of the pro forma condensed combined financial data and the date on which the
Offer is consummated and thereafter, as well as the factors discussed under
"Risk Factors."
The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs that could result from the combination of the
companies. Any integration and rationalization of the operations of the Company
may include certain costs that in turn would result in a charge to earnings of
the combined company. Such a charge, which cannot now be quantified fully, may
be material and would be recognized in the period in which such a restructuring
occurs. These costs may include severance and related employee benefit costs,
costs to consolidate manufacturing and distribution facilities, facility
rearrangement costs, relocation and moving costs, training costs, debt
extinguishment costs, and costs associated with change of control agreements,
among others. To date, SPX's access to information related to the Company has
been limited to publicly available information. In addition, publicly available
information does not contain sufficient details related to the Company's
severance plans, employee benefit agreements, change of control costs or debt
21
<PAGE> 26
extinguishment provisions to enable SPX to quantify the costs associated with
business integration and rationalization actions that may be considered by SPX.
Nonetheless, based on assumptions related to headcount reductions and average
annual salaries used to compute the annualized expense savings and assuming a
severance policy that would result in an average severance term of six months,
the estimated pre-tax costs of the severance (excluding any change in control
costs) would be approximately $60.0.
The pro forma condensed combined financial data also do not give effect to
any costs savings that could result from the combination of the companies. SPX
management estimates that the combined company can achieve approximately $125.0
of annualized cost savings in the first full year following the acquisition, and
$175.0 of annualized cost savings in the second full year following the
acquisition. These costs savings include three categories of estimated annual
savings in the second full year; savings associated with headcount reductions of
$120.0, reduction in duplicative corporate costs of $20.0, and manufacturing,
distribution and sourcing rationalization of $35.0. These savings estimates are
based upon assumptions made by SPX management using available public information
of the Company, certain comparative peer group information of the Company, and
SPX's own internal information. The savings associated with head count
reductions were estimated by multiplying a 10% reduction in the Company's
employees, or approximately 3,000 employees, by $40 thousand per employee. The
savings per employee were based on SPX's salary data and assumptions related to
the Company's salary structure. SPX believes that the head count reductions are
possible given its own experience over the past two years and the Company's head
count levels compared to various peer companies. The savings to reduce
duplicative corporate costs approximate SPX's own corporate office expenses.
Duplicative corporate costs would include duplicative executive positions,
facilities, overlap of other corporate functions, and various external fees and
costs. Savings from manufacturing, distribution and sourcing were based upon
material cost reductions of 2.5% on an estimated $1.4 billion of material
purchases by the Company. SPX estimated the Company's material purchases at 50%
of the Company's cost of goods sold in the fiscal year ended August 31, 1997.
The 2.5% material cost reduction was based upon the savings realized by SPX in
its own sourcing program over the past two years.
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998(A) AUGUST 31, 1997(B)
-------------------- ------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................................. $2,180.6 $4,394.0
Cost of products sold.................................... 1,633.8 3,306.1
Selling, general and administrative expense.............. 402.4 812.1
Other operating expenses, net............................ 13.0 26.1
Special charges and gains(c)............................. 110.0 307.2
-------- --------
Operating income (loss).................................. 21.4 (57.5)
Other expense (income), net.............................. (1.5) (2.3)
Interest expense, net.................................... 68.3 138.0
-------- --------
Income (loss) before income taxes........................ (45.4) (193.2)
Provision (benefit) for income taxes..................... (15.2) (20.2)
-------- --------
Income (loss) before extraordinary item.................. $ (30.2) $ (173.0)
======== ========
Income (loss) per share:
Basic.................................................. $ (0.72) $ (3.99)
Diluted................................................ (0.72) (3.99)
Weighted average number of common shares outstanding..... 41.718 43.317
Dividends per share(d)................................... $ -- $ 0.30
OTHER FINANCIAL DATA:
Total assets............................................. $4,071.6 $3,978.7
Total debt............................................... 1,845.0 1,808.1
Shareholders' equity..................................... 1,134.8 1,103.0
Capital expenditures..................................... 78.4 166.7
Depreciation and amortization............................ 83.5 166.1
</TABLE>
Note: The accompanying notes are an integral part of the selected pro forma
combined financial data.
22
<PAGE> 27
NOTES TO SELECTED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) Pro forma information as of and for the six months ended February 28, 1998
includes the actual historical results of SPX as of and for the six months
ended December 31, 1997 (the most current fiscal quarter end of SPX within
93 days of February 28, 1998) and the actual historical results of the
Company as of and for the six months ended February 28, 1998.
(b) Pro forma information for the year ended August 31, 1997 includes the pro
forma adjusted historical results of SPX for the twelve months ended June
30, 1997 (the most current fiscal twelve month period of SPX within 93 days
of August 31, 1997) and the actual historical results of the Company for the
year ended August 31, 1997. The pro forma adjusted historical results of SPX
for the twelve months ended June 30, 1997 reflect SPX's February 1997
disposition of the Sealed Power division and its November 1996 disposition
of the Hy-Lift division, as if such dispositions occurred on July 1, 1996.
See "Pro Forma Adjusted Historical Financial Data of SPX," presented
elsewhere herein.
(c) The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs, nor to any cost savings, that could
result from the combination of the companies.
The pro forma condensed combined financial data of SPX and the Company for
the six months ended February 28, 1998 include special charges of $110.0
recorded by SPX primarily to combine two divisions and to recognize reduced
carrying value of certain assets resulting from the decision to combine the
divisions and exit certain product lines. See "Selected Historical Financial
Data of SPX."
The pro forma condensed combined financial data of SPX and the Company for
the year ended August 31, 1997 include special charges and gains of $307.2.
The special charges and gains included a $7.4 special charge recorded by SPX
related to the combination of five divisions into two divisions, a $6.5
special charge recorded by SPX of anticipated future legal costs associated
with the ongoing litigation with Snap-on Incorporated, a $67.8 write-off of
goodwill recorded by SPX related to the acquisitions of Bear Automotive and
Allen Testproducts, $254.1 of repositioning and other special charges
recorded by the Company related to facility realignments and
rationalizations and other actions, and $28.6 of gains from the sale of two
divisions by the Company. See "Selected Historical Financial Data of SPX,"
and "Selected Historical Financial Data of the Company."
(d) Represents the historical quarterly cash dividend per share of SPX for the
periods presented. In April 1997, SPX eliminated its quarterly cash dividend
and stated that future distributions to shareholders would be in the form of
open market purchases of SPX Common Stock when deemed appropriate by
management.
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<PAGE> 28
RISK FACTORS
In addition to the other information in this Prospectus, the following are
certain factors that should be considered by holders of Shares in evaluating the
Offer and an investment in SPX Common Stock.
FIXED EXCHANGE RATIO DESPITE CHANGE IN RELATIVE STOCK PRICES
The Consideration includes 0.4796 share of SPX Common Stock. This is a
fixed exchange ratio and will not be adjusted in the event of any increase or
decrease in the market price of either SPX Common Stock or the Shares between
the date hereof and the Expiration Date. The price of SPX Common Stock on the
Expiration Date may be higher or lower than its price on the date of this
Prospectus. Such variations may be the result of changes in the business,
operations or prospects of SPX or the Company, market assessments of the
likelihood that the Offer will be consummated and the timing thereof, general
market and economic conditions or other factors. The Expiration Date will occur
as soon as practicable following the satisfaction or waiver (where permissible)
of the conditions to the Offer. Tendering shareholders of the Company are urged
to obtain current market quotations for SPX Common Stock and the Shares. See
"The Offer -- Conditions of the Offer" and "Market Prices and Dividends."
LEVERAGE
After consummation of the Offer and the Merger, SPX will be more highly
leveraged than are either SPX or the Company, or both of the companies combined,
at present, with substantial debt service obligations, including principal and
interest obligations, with respect to indebtedness of as much as $2.4 billion.
As such, SPX may be particularly susceptible to adverse changes in its industry,
the economy and the financial markets generally. Moreover, SPX's conduct of its
business may be more circumscribed, and its ability to incur additional debt may
be more limited, than at present by restrictive covenants which will be
contained in agreements evidencing the Financing. In particular, any debt
incurrence restrictions may limit SPX's ability to service its existing debt
obligations through additional debt financing if cash flow from operations is
insufficient to service such obligations. The Financing will bear interest at
floating rates, and an increase in interest rates could adversely affect SPX's
ability to service its debt obligations.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND ACHIEVING COST SAVINGS
The success of the Proposed Business Combination will in large part be
dependent on the ability of SPX, following the consummation of the Proposed
Business Combination, to realize cost savings and, to a lesser extent, to
consolidate operations and integrate processes. The businesses are strategically
complementary (in that the combined company would be able to provide products
and services that would integrate the entire vehicle life cycle, from original
equipment vehicle components, to specialty repair tools and service, to
replacement parts), but largely operate in diverse markets with different
distribution systems. While SPX believes that it can obtain cost savings of at
least $125.0 million in the first full year following the acquisition, the
realization of savings is dependent to a large extent on the planned reduction
of headcount at the Company. There can be no assurance that the timing and
magnitude of headcount reductions will occur as planned. The integration of
businesses, moreover, involves a number of risks, including the diversion of
management's attention to the assimilation of the operations from other business
concerns, delays or difficulties in the actual integration of operations or
systems, and challenges in retaining customers and key personnel of the acquired
company. There can be no assurance that future consolidated results will improve
as a result of the Proposed Business Combination, or that the timing or extent
to which cost savings and efficiencies anticipated by SPX will be achieved. The
pro forma financial statements contained in this Prospectus do not include the
impact, positive or negative, of any cost savings or efficiencies related to
anticipated future actions. The anticipated cost savings have been developed
solely by the management of SPX and are based on SPX's best judgments and
knowledge of the Company's operations derived from publicly available
information, and in reliance on that information being accurate and complete,
together with SPX's knowledge and experience in the vehicle components industry.
If the Proposed Business Combination is consummated, there exists a
likelihood that one or more significant charges to operations will be required
as a result of rationalizing and integrating operations. These costs may include
severance and related employee benefit costs, costs to consolidate manufacturing
and distribution facilities, facility rearrangement costs, relocation and moving
costs, training costs, debt extinguish-
24
<PAGE> 29
ment costs, and costs associated with change of control agreements, among
others. To date, management's access to information related to the Company has
been limited to only publicly available information. In addition, publicly
available information does not contain sufficient details related to existing
severance plans, employee benefit agreements, change of control costs or debt
extinguishment provisions to enable management to quantify the costs associated
with business integration and rationalization actions that may be considered by
SPX. Nonetheless, based on assumptions related to headcount reductions and
average annual salaries used to compute the annualized expense savings and
assuming a severance policy that would result in an average severance term of
six months, the estimated costs of the severance (excluding any change of
control costs) would be approximately $60.0 million. Over the past five years,
SPX has recorded several special charges to its results of operations associated
with cost reductions and to achieve operating efficiencies. SPX management
believes its actions have been required to improve its operations and will, if
necessary, record future charges as appropriate to address cost and operational
efficiencies at the combined company.
DEPENDENCE ON KEY PERSONNEL
SPX is dependent on the continued services of its management team,
including John B. Blystone, Chairman of the Board, President and Chief Executive
Officer. Although SPX believes it could replace key employees in an orderly
fashion should the need arise, the loss of such personnel could have a material
adverse effect on SPX.
DIVIDENDS
The Company recently paid its 156th consecutive dividend. In April 1997,
SPX eliminated its quarterly cash dividend and stated that future distributions
to shareholders would be in the form of open market purchases of SPX Common
Stock when deemed appropriate by management and SPX does not anticipate that
this policy will change. There can be no assurance that distributions to
shareholders will be permitted under SPX's new credit and other debt agreements.
RELIANCE ON MAJOR CUSTOMERS OF SPX
Sales to GM, Ford and Chrysler accounted for approximately 25%, 15%, and
3%, respectively, of SPX's revenues for the year ended December 31, 1997. The
loss of GM, Ford or Chrysler or of any of SPX's other significant customers
could have a material adverse effect on SPX. There is substantial and continuing
pressure from the major OEMs to reduce costs, including the cost of products and
services purchased from outside suppliers such as SPX. If in the future SPX were
unable to generate sufficient cost savings to offset price reductions, SPX's
gross margins could be adversely affected.
LOSS OF THE COMPANY'S CUSTOMERS
The success of the combined company will depend in part on its ability to
retain the Company's customers. Although SPX can see no reason as to why SPX
would lose any of the Company's customers as a result of the Proposed Business
Combination, there can be no assurance that all of the Company's customers would
continue to do business with SPX following the acquisition. According to the
Company's 1997 Form 10-K, the Company does not have any one customer that
represents 10% or more of the Company's consolidated net sales.
YEAR 2000 ISSUE
SPX utilizes software and related computer technologies essential to its
operations and to certain products that use two digits rather than four to
specify the year, which could result in a date recognition problem with the
transition to the year 2000. SPX has established a plan, utilizing both internal
and external resources, to assess the potential impact of the year 2000 problem
on SPX's systems and operations and to implement solutions to address this
issue. SPX is presently in the assessment phase of its year 2000 plan which
includes conducting an inventory of potentially date-sensitive systems and is
also surveying its suppliers and service providers for year 2000 compliance.
SPX's goal for correction of critical systems is December 31, 1998 and its plan
is to conduct testing of corrected systems in 1999. Third party compliance and
other factors could
25
<PAGE> 30
adversely affect these goals. SPX does not believe that the costs to remediate
software and computer technologies for the year 2000 problem will exceed $5
million over the next two years, which does not include the costs to replace
certain existing systems. SPX is in the process of implementing a new enterprise
resource planning system across its Service Solutions business. Management
estimates that it will spend approximately $10 million to acquire and install
this new system over the next two years. As SPX is presently in the assessment
phase of its year 2000 plan, there can be no assurances that the costs of
remediation will not be material. Moreover, there can be no assurances that SPX
will not experience material unanticipated costs and/or business interruption
due to year 2000 problems in its internal systems, its supply chain or from
customer product migration issues.
In the Company's 1998 Second Quarter Form 10-Q, the Company reported that
it is currently engaged in an assessment of its technology systems to determine
the impact of the year 2000, and that, based upon work completed through
February 28, 1998, the Company expects that costs incurred to remediate year
2000 problems will not have a material adverse impact on its future financial
results.
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
Certain provisions of SPX's Certificate of Incorporation and By-Laws may
inhibit changes in control of SPX not approved by the SPX's Board of Directors.
These provisions include: (i) a staggered Board of Directors; (ii) a prohibition
on stockholder action through written consents; (iii) a requirement that special
meetings of stockholders be called only by SPX's Board of Directors; (iv)
advance notice requirements for stockholder proposals and nominations; (v)
limitations on the ability of stockholders to amend, alter or repeal the
By-Laws; and (vi) the authority of SPX's Board of Directors to issue, without
shareholder approval, preferred stock with such terms as SPX's Board of
Directors may determine. SPX will also be afforded the protections of Section
203 of the Delaware General Corporation Law, which could have similar effects.
See "Comparison of Rights of Holders of Shares and SPX Common Stock."
REASONS FOR THE OFFER
On February 17, 1998, SPX delivered a letter to the Board of Directors of
the Company proposing to enter into the Proposed Business Combination pursuant
to which shareholders of the Company would receive for each Share the
Consideration in the amount of $12.00 net in cash and 0.4796 share of SPX Common
Stock. The Consideration had a total value of $48.00, based on the $75 1/16
closing price of a share of SPX Common Stock on the NYSE Composite Tape on
February 13, 1998, the last trading date preceding the date of the first public
announcement of the Proposed Business Combination, and a total value of $46.56,
based on the $72 1/16 closing price of a share of SPX Common Stock on the NYSE
Composite Tape on April 28, 1998, the date of this Prospectus. At the time the
Offer is consummated, the Consideration may have a market value that is greater
or less than either of those two amounts depending upon the market price of a
share of SPX Common Stock. At a total value of $46.56, the Consideration
represents a 20% premium over the $38 7/8 price at which a Share closed on the
NYSE on February 13, 1998 and a 28% premium over the average trading price at
which a Share closed on the NYSE during the 30 trading days preceding February
17, 1998, the date of the public announcement of the Proposed Business
Combination. Immediately following consummation of the Proposed Business
Combination and after giving effect to the issuance of the SPX Common Stock in
the transaction, the shareholders of the Company (other than SPX) would own
approximately 70% of the then outstanding shares of SPX Common Stock.
With its letter to the Board of Directors of the Company, SPX delivered a
proposed merger agreement to the Company in contemplation of arriving at a
negotiated transaction. That agreement provides for a single-step "cash
election" merger of the Company into a subsidiary of SPX in which each
outstanding Share would be converted into the right to receive the Consideration
(with shareholders able to elect to receive instead all cash, in the amount of
$48.00 per Share, or all stock, in the amount of 0.6395 share of SPX Common
Stock per Share, subject to proration) in a partially tax-free reorganization.
However, because of the Company's negative responses to SPX's approaches over
the several months prior to February 17, 1998 (see "Background
26
<PAGE> 31
of the Offer"), SPX also filed a Registration Statement, of which this
Prospectus is part, with the Commission, so that the Proposed Business
Combination may be effected by means of the Offer, to be followed by the Merger
in which each Share not purchased in the Offer would be converted into the right
to receive the Consideration. The exchange of Shares for the Consideration in
the Offer and the Merger will be a taxable transaction. See "The
Offer -- Certain Federal Income Tax Consequences."
If the Merger is consummated, the Company will become a wholly owned
subsidiary of SPX. If the Minimum Tender Condition is satisfied and the other
Offer Conditions are satisfied or waived and the Offer is consummated, SPX will
own at least 66 2/3% of the outstanding Shares, and SPX will have sufficient
voting power in the Company to approve the Merger independent of the votes of
any other shareholders of the Company.
SPX believes that the Offer is in the best interests of the Company's
shareholders because, among other things, the Consideration will allow
shareholders of the Company to realize a substantial premium for their Shares in
cash immediately, while continuing, through their ownership of SPX Common Stock,
to participate in the future growth of the combined company.
BACKGROUND OF THE OFFER
In February 1997, John B. Blystone, Chairman and Chief Executive Officer of
SPX, met with Trevor O. Jones, then Chairman and interim President and Chief
Executive Officer of the Company, to propose that the two companies explore a
business combination. Mr. Jones did not follow up on this meeting. In November
1997, Mr. Blystone met for several hours with Larry W. McCurdy, who had
succeeded Mr. Jones as President and Chief Executive Officer of the Company, to
discuss a strategic merger between the two companies, and on November 24, 1997,
Patrick J. O'Leary, SPX's Vice President -- Finance and Chief Financial Officer,
met with Robert Tobey, the Company's Vice President -- Corporate Development.
These discussions were not fruitful, and SPX was informed that the Company had
no interest in a business combination with SPX.
On December 12, 1997, Mr. Blystone wrote a letter to Mr. McCurdy setting
out the strategic rationale of a business combination of the two companies and
the benefits to the Company's shareholders of the transaction. Although the
letter stated that SPX anticipated a price in the $40's range, Mr. Blystone
advised Mr. McCurdy that SPX would be willing to revise its thinking if the
Company could identify greater value in the transaction. Mr. Blystone, in his
letter, further suggested that the letter be shared with the Company's Board of
Directors and offered to meet with and make a presentation to the Board about
any and all aspects of the proposed transaction.
On December 17, 1997, Mr. Blystone received a letter from Mr. McCurdy
stating that Mr. McCurdy had shared Mr. Blystone's views with the Company's
Board of Directors, and that the Company's and the Board's position remained
that the Company had no interest in further discussions with SPX.
On December 18, 1997, Mr. Blystone sent a letter to each member of the
Company's Board enclosing a copy of his December 12 letter and reiterating the
merits of a strategic combination. Mr. Blystone once again offered to meet
personally with and make a presentation to the Company's Board of Directors.
On December 23, 1997, Mr. Blystone received a letter from Mr. McCurdy
advising that the Company's Board of Directors was of the unanimous view that
the Company did not have an interest in pursuing discussions with SPX.
On January 6, 1998, SPX notified the Company that it was that day making an
HSR Filing under the HSR Act seeking to acquire up to 100% of the voting
securities of the Company.
On January 8, 1998, Mr. McCurdy wrote to Mr. Blystone acknowledging receipt
of notice of the HSR Filing and advising SPX that the Company and its advisors
stood ready to aggressively defend its shareholders' interests.
On February 17, 1998, SPX sent the Board of Directors of the Company a
letter setting forth the Proposed Business Combination and its merits and
reaffirming its desire to enter into a negotiated transaction.
27
<PAGE> 32
On the same day, SPX filed a Registration Statement, of which this
Prospectus is part, with the Commission. Concurrently, SPX filed preliminary
solicitation materials with the Commission for use in soliciting Demands from
the shareholders of the Company that a Special Meeting be called and held for
the purpose of removing the Board of Directors of the Company and replacing them
with the SPX Nominees. Under the Connecticut Business Act, holders of
outstanding Shares representing in the aggregate at least 35% of all the votes
entitled to be cast on any issue proposed to be considered at the Special
Meeting have the right to demand that the Special Meeting be called and held. On
February 17, 1998, SPX also delivered to the Company its Demand that the Special
Meeting be called and held.
On March 6, 1998, SPX filed definitive solicitation materials with the
Commission and commenced its solicitation of Demands to call the Special
Meeting, and, on March 25, 1998, SPX delivered to the Company. Demands by
holders of an aggregate of 28,253,762 Shares, representing (together with the
Shares owned by SPX with respect to which a Demand had previously been
delivered) approximately 45.8% of the outstanding Shares, which action SPX
believes satisfies those provisions of the Connecticut Business Act and the
Company's By-Laws setting forth the requirements for shareholders to call the
Special Meeting. Assuming that valid Demands were delivered (see "Litigation"),
under the Connecticut Business Act and the Company's By-Laws, the Special
Meeting must have been called by April 24, 1998 and must be held by June 23,
1998. At various times through April 14, 1998, SPX delivered to the Company
Demands by holders of an aggregate of 3,001,542 additional Shares, totaling
(together with the Shares with respect to which Demands had previously been
delivered) approximately 50.5% of the outstanding Shares.
On March 24, 1998, SPX delivered a binding agreement to the Members of the
Connecticut General Assembly that, for a term of at least three years following
completion of the acquisition by SPX of all the outstanding stock of the
Company, SPX would maintain at least the same aggregate number of employees as
were employed on March 24, 1998 at the Branford Facility, if the acquisition of
the Company is completed in accordance with the terms of the Proposed Business
Combination and within the timeframe contemplated under current Connecticut law,
and if the State of Connecticut did not enact legislation impeding SPX's ability
to acquire the Company.
On March 25, 1998, SPX signed an agreement with the UAW in which SPX agreed
with the UAW, among other things, that, if SPX is successful in completing a
transaction to acquire the Company, and, thereafter, the UAW seeks to unionize
the Branford Facility, neither party would, among other things, (a) attack the
other party by impugning the other party's motives, integrity or character, (b)
engage in threats, misrepresentations or delaying tactics to frustrate the
desires of Company employees, or (c) commit an unfair labor practice.
SPX does not anticipate any significant impact on its estimated cost
savings or the pro forma operating results attributable to either the agreement
to the Members of the Connecticut General Assembly or the agreement with the
UAW. The former agreement covers approximately 800 employees in Connecticut,
representing less than 3% of the Company's total workforce. The latter agreement
prescribes a course of conduct by the parties and does not entail costs.
On March 27, 1998, SPX announced that its Annual Meeting of Shareholders
would be held on May 20, 1998, and that, at that meeting, SPX's shareholders
would vote on approving the issuance of shares of SPX Common Stock in connection
with the Proposed Business Combination, which approval would cause the SPX
Stockholder Approval Condition to be satisfied.
On April 6, 1998, the Company brought an action in Federal District Court
in Connecticut alleging that most of the Demands which SPX had delivered on
March 25, 1998 were invalid and stating that the Company did not intend to call
the Special Meeting. SPX believes that the Demands are valid and that the
lawsuit is without merit, and has filed counterclaims against the Company in the
lawsuit. See "Litigation."
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<PAGE> 33
LITIGATION
LITIGATION RELATING TO THE PROPOSED BUSINESS COMBINATION
On April 6, 1998, the Company commenced an action, entitled Echlin Inc. v.
SPX Corporation, against SPX in the United States District Court for the
District of Connecticut. The complaint alleges that SPX has made misleading
statements in public announcements and filings regarding its solicitation and
delivery of Demands for the Special Meeting. In particular, SPX announced on
March 24, 1998, that it had received and was delivering to the Company Demands
sufficient to require the Company to call the Special Meeting. The Company
disputes the validity of most of those Demands on the grounds that (1) they were
submitted on behalf of purported beneficial holders of the Shares without a
supporting omnibus proxy from the record holder of such Shares, Cede & Co., and
(2) the Demands delivered by SPX were solicited as of February 18, 1998, despite
the fact that SPX repeatedly affirmed the record date to be February 17, 1998.
The Company further contends that SPX's announcements, beginning on March 24,
1998, that the Company has received Demands sufficient to require that the
Company call the Special Meeting has tainted the integrity of the solicitation
process because it effectively discourages holders of the Shares who have
already issued Demands from submitting revocations in response to the Company's
solicitation materials. In addition, the Company also alleges that SPX's
announcements, beginning on March 24, 1998, have furthered SPX's scheme of
causing the transfer of Shares from long-term holders of the Shares to
arbitrageurs who may be more receptive to an SPX offer. Based on these
contentions, the Company seeks (i) a declaratory judgment that certain of SPX's
public statements regarding the validity of the Demands are false and
misleading; (ii) a declaratory judgment that SPX's statements regarding the
validity of the Demands were in violation of the Exchange Act and preliminary
and permanent injunctive relief to enjoin SPX from continuing its proxy
solicitation for Demands; and (iii) to recover certain costs.
On April 13, 1998, SPX filed its answer, affirmative defenses,
counterclaims and a motion for preliminary injunctive relief seeking (i) an
order directing the Company to call the Special Meeting by April 24, 1998, to be
held within 60 days of April 24, 1998, or, alternatively, an order by the Court
scheduling the Special Meeting on June 1, 1998; and (ii) to enjoin the Company
from making any further false or misleading statements concerning SPX's
solicitation of Demands or the validity of the Demands.
Based on the Company's contention that SPX's announcement that it delivered
the required number of Demands is false and misleading for the reasons stated in
its complaint, as set forth above, on April 14, 1998, the Company filed a motion
for a preliminary injunction seeking to preliminarily enjoin SPX from continuing
its solicitation of Demands and from taking any further action based on such
solicitation. SPX believes that the Company's motion is without merit because
the Demands SPX delivered on March 25, 1998 from holders of over 35% of the
Shares were valid and that the Special Meeting must be called and held, as
required by the Connecticut Business Act and the Company's By-Laws, on or before
June 23, 1998. A hearing on the parties' respective motions is scheduled for May
7, 1998. The Court's Scheduling Order provides: "In order that SPX not be
prejudiced by the establishment of this schedule, should SPX prevail on its
preliminary injunction application and the Court order Echlin to call and hold a
special meeting, the special meeting shall be held no later than June 23, 1998
(90 days from March 25, 1998)."
OTHER LITIGATION
SPX has two significant legal cases pending. The following describes each
case:
On April 11, 1996, SPX was named as a defendant in an action filed in
United States District Court for the Northern District of Illinois entitled
Snap-on Incorporated, Snap-on Tools Company and Snap-on Technologies, Inc. v.
Ronald J. Ortiz and SPX Corporation. The complaint contained seventeen counts,
fifteen of which were directed to SPX. Of the fifteen counts directed to SPX,
seven were related to the hiring in 1992 of a former officer of Sun Electric
Corporation, five contained allegations of patent infringement and three sought
a declaration of invalidity of patents owned by SPX. On June 28, 1996, SPX filed
an eight count counterclaim, containing three counts of patent infringement and
five counts for declaration of invalidity of patents held by the plaintiffs.
These patents pertain to certain features related to performance test equipment
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manufactured by Sun, Snap-on and SPX. At that time, SPX also filed a motion to
dismiss five of the counts of the complaint related to the hiring of the former
Sun executive. On October 23, 1996, four of those counts were dismissed, three
with prejudice and one with leave to amend. Since that time, a further motion to
dismiss one of those counts was filed and granted. Document discovery has
proceeded and depositions have been initiated. Neither the complaint nor the
counterclaim contain specific allegations of damages; however, the products
affected by the patents at issue are significant for Sun, Snap-on and SPX.
Management expects that the value of the claims against SPX and those brought by
SPX could be in the multiple millions of dollars. SPX believes it has
meritorious defenses to the allegations directed against it and intends to
vigorously prosecute the claims it has raised. It is not, however, possible to
assess the ultimate outcome of the claims at this point. The resolution of this
matter is expected no sooner than 1999 in view of the complexity of the case and
the typical length of time involved in similar types of proceedings. Management
is of the opinion that this litigation will not have a material adverse effect
on the results of operations, financial condition or cash flows of SPX.
In 1993, SPX terminated a business relationship with Robert Metzler and his
company, Allstate's of America, Inc. In October 1993, plaintiffs Metzler and
Allstate's commenced an action entitled Metzler v. SPX Corporation, et al. in
the United States District Court for the Southern District of Florida against
SPX and others alleging breach of contract, intentional infliction of emotional
distress, and certain federal and state law antitrust actions. Several of
plaintiffs' claims have been dismissed or disposed of by summary judgment, with
the plaintiffs' surviving claims consisting of federal and state antitrust and
related tortious interference counts. SPX has moved for summary judgment on each
of the remaining antitrust and related tortious interference counts. Those
motions for summary judgment are currently pending before the magistrate. The
case currently is not set for trial. The complaint does not specifically assert
the amount of damages; however, the value of the claims asserted against SPX, if
proven, could be in the multiple millions of dollars. SPX vigorously contests
plaintiffs' claims both as a matter of law and fact, and believes that it has
meritorious defenses against plaintiffs' claims. On the issue of potential
damages, SPX's damages expert has opined that, even if liability is assumed,
plaintiffs' damages are significantly lower than those projected by plaintiffs.
It is not, however, possible to assess the ultimate outcome of the claims at
this point. The resolution of this matter could occur during 1998. Management is
of the opinion that this litigation will not have a material adverse effect on
the results of operations, financial condition or cash flows of SPX.
THE SPECIAL MEETING
On February 17, 1998, SPX filed preliminary solicitation materials with the
Commission to solicit Demands for the Company to call and hold a Special
Meeting, and delivered its Demand to the Company. Along with its Demand, SPX
presented four proposals for consideration at the Special Meeting: (i) to repeal
any provision of the Company's By-Laws or amendment to the Company's By-Laws
adopted by the Board of Directors of the Company or any Committee thereof at any
time after April 3, 1997 (the date of the last set of By-Laws publicly filed by
the Company) and before the effectiveness of the last of the proposals to be
voted on at the Special Meeting; (ii) to vote upon a proposal to remove all of
the members of the Board of Directors of the Company; (iii) to vote upon a
proposal to amend the By-Laws of the Company to fix the number of directors of
the Company at five; and (iv) to elect the five SPX Nominees to the Board of
Directors of the Company.
SPX has been attempting to negotiate a transaction with the Company for
over a year. The Company, however, in past meetings and correspondence with SPX
has consistently informed SPX that the Company and its Board of Directors have
no interest in pursuing discussions with SPX.
Moreover, the Rights Agreement effectively prevents SPX from consummating
the Offer and the Merger without the approval of the Company's Board of
Directors. Likewise, the Connecticut Business Act presents certain obstacles to
the consummation of the Offer and the Merger absent Board approval. See "The
Offer -- The Rights" and "-- Conditions to the Offer" and "Comparison of Rights
of Holders of Shares and SPX Common Stock."
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SPX expects that if the SPX Nominees are elected, they will act to
facilitate the consummation of the Proposed Business Combination, subject to
their fiduciary and statutory duties as Directors of the Company. More
specifically, SPX expects that the SPX Nominees will, subject to their fiduciary
and statutory duties as Directors of the Company, amend the Rights Agreement so
that the Rights Agreement will not be applicable to the Offer or, if the Rights
Agreement can no longer be amended, cause the redemption of the Rights, thereby
causing the Rights Plan Condition to be satisfied. Likewise, SPX expects that
the SPX Nominees will, subject to their fiduciary and statutory duties as
Directors of the Company, approve the Offer and the Merger or take such other
actions so that the restrictions contained in the Business Combination Statutes
will not be applicable thereto, thereby causing the Business Combination
Statutes Condition to be satisfied.
Under the Connecticut Business Act and the Company's By-Laws, a special
meeting of the Company's shareholders may be called by one or more holders of
Shares representing in the aggregate at least 35% of all the votes entitled to
be cast on any issue proposed to be considered at the Special Meeting. On March
6, 1998, SPX filed definitive solicitation materials with the Commission and
commenced its solicitation of Demands to call the Special Meeting, and, on March
25, 1998, SPX delivered to the Company Demands by holders of an aggregate of
28,253,762 Shares, representing (together with the Shares owned by SPX with
respect to which a Demand had previously been delivered) approximately 45.8% of
the outstanding Shares, which action SPX believes satisfies those provisions of
the Connecticut Business Act and the Company's By-Laws setting forth the
requirements for shareholders to call the Special Meeting. Assuming that valid
Demands were delivered (see "Litigation"), under the Connecticut Business Act
and the Company's By-Laws, the Special Meeting must have been called by April
24, 1998 and must be held by June 23, 1998. At various times through April 14,
1998, SPX delivered to the Company Demands by holders of an aggregate of
3,001,542 additional Shares, totaling (together with the Shares with respect to
which Demands had previously been delivered) approximately 50.5% of the
outstanding Shares.
THE OFFER
GENERAL
SPX hereby offers, upon the terms and subject to the conditions set forth
herein and in the related Letter of Transmittal, to exchange the Consideration,
in the amount of $12.00 in cash and 0.4796 of a share of SPX Common Stock, for
each outstanding Share validly tendered on or prior to the Expiration Date and
not withdrawn.
Tendering shareholders will not be obligated to pay any charges or expenses
of the Exchange Agent or any brokerage commissions. Except as set forth in the
Instructions to the Letter of Transmittal, transfer taxes on the exchange of
Shares pursuant to the Offer will be paid by or on behalf of SPX.
The purpose of the Offer is to enable SPX to obtain control of, and
ultimately the entire equity interest in, the Company. SPX presently intends, as
soon as practicable after consummation of the Offer, to seek to have the Company
effect the Merger. In the Merger, each outstanding Share (other than Shares
owned by SPX or any of its affiliates, Shares held in the Company's treasury or
by any subsidiary of the Company and Shares owned by the Company's shareholders
who perfect dissenters' rights under Connecticut law) would be converted into
the right to receive the Consideration. See "The Merger."
SPX's obligation to exchange the Consideration for Shares pursuant to the
Offer is conditioned on the satisfaction of the Minimum Tender Condition, the
SPX Stockholder Approval Condition, the Rights Plan Condition, the Business
Combination Statutes Condition, the Financing Condition and the other conditions
as set forth under "-- Conditions of the Offer."
According to the Company's 1998 Second Quarter Form 10-Q, as of March 31,
1998, there were 63,594,700 Shares outstanding. SPX owns 1,150,150 Shares. In
the event that SPX acquires all of the Shares pursuant to the Offer and the
Merger, then immediately following consummation of the Merger, and after giving
effect to the issuance of SPX Common Stock in the Offer and the Merger,
shareholders of the Company (other than SPX) would own approximately 70% of the
then outstanding shares of SPX Common Stock. If 66 2/3% of the Shares are
purchased in the Offer, such ownership percentage would be approximately
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61% immediately following consummation of the Offer and after giving effect to
the issuance of SPX Common Stock in the Offer.
SPX has requested use of the Company's shareholder list and security
position listings for the purpose of communications with shareholders and
disseminating the Offer to holders of Shares. This Prospectus and the related
Letter of Transmittal and other relevant materials will be mailed to record
holders of Shares, and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE RIGHTS
No separate payment will be made by SPX for the Rights pursuant to the
Offer. Shareholders will be required to tender one Right for each Share tendered
in order to effect a valid tender of Shares. The Rights are currently evidenced
by the certificates for the Shares and the tender by a shareholder of his or her
Shares prior to the Distribution Date will also constitute a tender of the
associated Rights. The "Distribution Date" is defined as the earlier of the
following dates: (i) the close of business on the tenth day following a public
announcement that a person has acquired beneficial ownership of 20% or more of
the outstanding Shares (an "Acquiring Person") or (ii) the close of business on
the tenth business day (or such later date as the Board may determine prior to
such time as any person becomes an Acquiring Person) following the commencement
of a tender offer or exchange offer which would result in the person making the
offer becoming an Acquiring Person. As soon as practicable after the Company has
notified the Rights Agent of the occurrence of the Distribution Date, the Rights
Agent will mail separate certificates evidencing the Rights to holders of record
of the Shares as of the close of business on the Distribution Date and such
separate Rights certificates alone will evidence the Rights. The Distribution
Date will occur on the tenth business day following the commencement by SPX of
the Offer unless prior to such date the Board of Directors of the Company
determines to extend the Distribution Date to a later date.
If the Distribution Date occurs and separate certificates representing the
Rights are distributed by the Company or the Rights Agent to holders of Shares
prior to the time that a holder's Shares are tendered pursuant to the Offer,
certificates representing a number of Rights equal to the number of Shares
tendered must be delivered to the Exchange Agent, or, if available, a Book-Entry
Confirmation (as defined in "-- Procedure for Tendering" below) must be received
by the Exchange Agent with respect thereto, in order for such Shares to be
validly tendered. If a Distribution Date occurs and separate certificates
representing the Rights are not distributed prior to the time Shares are
tendered pursuant to the Offer, Rights may be tendered prior to the shareholder
receiving the certificates for Rights by use of the guaranteed delivery
procedure described under "-- Procedure for Tendering" below.
TIMING OF THE OFFER
The Offer is currently scheduled to expire at 12:00 midnight New York City
time on May 28, 1998; however, it is SPX's current intention to extend the Offer
from time to time as necessary until all conditions to the Offer have been
satisfied or waived. See "-- Extension, Termination and Amendment." SPX has
received a highly confident letter from CIBC and its affiliate, CIBC
Oppenheimer, in which they state that they are highly confident of their ability
to raise the Financing. When information as to the material terms of the
Financing becomes available, SPX will communicate such information to the
Company's shareholders and the public at large by issuing a release containing
such information to Dow Jones News Service. SPX believes it is highly unlikely
that it will not have obtained the Financing prior to five business days before
the Expiration Date; however, in this unlikely event, SPX currently intends to
extend the Offer in the manner set forth below under "-- Extension, Termination
and Amendment" to ensure that five business days remain for shareholders to
tender their Shares in the Offer subsequent to obtaining financing.
In connection with the Offer, SPX solicited Demands and, on March 25, 1998,
delivered to the Company the requisite number of Demands, from the shareholders
of the Company that a Special Meeting be called and held for the purpose of,
among other things, removing the Board of Directors of the Company and electing
the
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SPX Nominees in their place. The Company disputes the validity of most of the
Demands delivered by SPX and has filed suit in connection therewith. SPX
believes the Demands delivered were valid and has brought various counterclaims
against the Company. See "Litigation." Assuming SPX prevails in this dispute,
under the Connecticut Business Act and the Company's By-Laws, the Special
Meeting must have been called by April 24, 1998 and must be held by June 23,
1998. SPX expects that if the SPX Nominees are elected, they will take all
action, subject to their fiduciary and statutory duties as Directors of the
Company, to cause the Rights Plan Condition and the Business Combination
Statutes Condition to be satisfied. At SPX's 1998 Annual Meeting of Shareholders
to be held on May 20, 1998, SPX's shareholders will vote on approving the
issuance of shares of SPX Common Stock in connection with the Proposed Business
Combination, which approval would satisfy the SPX Stockholder Approval
Condition.
EXTENSION, TERMINATION AND AMENDMENT
SPX expressly reserves the right (but will not be obligated), in its sole
discretion, at any time or from time to time, and regardless of whether any of
the events set forth in "-- Conditions of the Offer" shall have occurred or
shall have been determined by SPX to have occurred, to extend the period of time
during which the Offer is to remain open by giving oral or written notice of
such extension to the Exchange Agent, which extension will be announced no later
than 9:00 a.m., Eastern Time, on the next business day after the previously
scheduled Expiration Date. There can be no assurance that SPX will exercise its
right to extend the Offer. However, it is SPX's current intention to extend the
Offer until all conditions to the Offer have been satisfied or waived. During
any such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the right of a tendering shareholder to
withdraw his or her Shares. See "-- Withdrawal Rights."
Subject to the applicable rules and regulations of the Commission, SPX also
reserves the right, in its sole discretion, at any time or from time to time,
(i) to delay acceptance for exchange of, or, regardless of whether such Shares
were theretofore accepted for exchange, exchange of any Shares pursuant to the
Offer, or to terminate the Offer and not accept for exchange or exchange any
Shares not theretofore accepted for exchange, or exchanged, upon the failure of
any of the conditions of the Offer to be satisfied, and (ii) to waive any
condition (other than the SPX Stockholder Approval Condition and the condition
relating to the effectiveness of the Registration Statement) or otherwise amend
the Offer in any respect, by giving oral or written notice of such delay,
termination or amendment to the Exchange Agent and by making a public
announcement thereof. Any such extension, termination, amendment or delay will
be followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
Eastern time, on the next business day after the previously scheduled Expiration
Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to shareholders in connection with the Offer be
promptly disseminated to shareholders in a manner reasonably designed to inform
shareholders of such change) and without limiting the manner in which SPX may
choose to make any public announcement, SPX shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
SPX confirms that if it makes a material change in the terms of the Offer
or the information concerning the Offer, or if it waives a material condition of
the Offer, SPX will extend the Offer to the extent required under the Exchange
Act. If, prior to the Expiration Date, SPX shall increase or decrease the
percentage of Shares being sought or the consideration offered to holders of
Shares, such increase or decrease will be applicable to all holders whose Shares
are accepted for exchange pursuant to the Offer, and, if at the time notice of
any such increase or decrease is first published, sent or given to holders of
Shares, the Offer is scheduled to expire at any time earlier than the tenth
business day from and including the date that such notice is first so published,
sent or given, the Offer will be extended until the expiration of such ten
business day period. For purposes of the Offer, "business day" means any day
other than a Saturday, Sunday or a federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, Eastern time.
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EXCHANGE OF SHARES; DELIVERY OF SPX COMMON STOCK AND CASH CONSIDERATION
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), SPX will accept for exchange, and will exchange, Shares validly
tendered and not properly withdrawn as promptly as practicable following the
Expiration Date. In addition, subject to applicable rules of the Commission, SPX
expressly reserves the right to delay acceptance for exchange or the exchange of
Shares in order to comply with any applicable law. In all cases, exchange of
Shares tendered and accepted for exchange pursuant to the Offer will be made
only after timely receipt by the Exchange Agent of certificates for such Shares
(or a confirmation of a book-entry transfer of such Shares in the Exchange
Agent's account at The Depository Trust Company (the "Book-Entry Transfer
Facility")), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents.
For purposes of the Offer, SPX will be deemed to have accepted for exchange
Shares validly tendered and not withdrawn as, if and when SPX gives oral or
written notice to the Exchange Agent of its acceptance of the tenders of such
Shares pursuant to the Offer. Delivery of the Consideration in exchange for
Shares pursuant to the Offer, and cash in lieu of fractional shares of SPX
Common Stock, will be made by the Exchange Agent as soon as practicable after
receipt of such notice. The Exchange Agent will act as agent for tendering
shareholders for the purpose of receiving the Consideration and cash to be paid
in lieu of fractional shares of SPX Common Stock from SPX and transmitting the
Consideration and cash to tendering shareholders. Under no circumstances will
interest with respect to fractional shares be paid by SPX by reason of any delay
in making such exchange.
If any tendered Shares are not accepted for exchange pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered or are exchanged, certificates for such
unexchanged Shares will be returned without expense to the tendering shareholder
or, in the case of Shares tendered by book-entry transfer of such Shares into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth below under "-- Procedure for Tendering," such Shares will
be credited to an account maintained within the Book-Entry Transfer Facility as
soon as practicable following expiration or termination of the Offer.
CASH IN LIEU OF FRACTIONAL SHARES OF SPX COMMON STOCK
No certificates representing fractional shares of SPX Common Stock will be
issued pursuant to the Offer. In lieu thereof, each tendering shareholder who
would otherwise be entitled to a fractional share of SPX Common Stock will
receive cash in an amount equal to such fraction (expressed as a decimal and
rounded to the nearest 0.01 of a share) times the closing price for shares of
SPX Common Stock on the NYSE Composite Tape on the date such shareholder's
Shares are accepted for exchange by SPX.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth below at any time prior to the Expiration Date, and, unless
theretofore accepted for exchange and exchanged by SPX for the Consideration
pursuant to the Offer, may also be withdrawn at any time after June 26, 1998.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Prospectus, and must specify the name of the person having tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares.
The signature(s) on the notice of withdrawal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (an "Eligible Institution") unless such
Shares have been tendered for the
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account of any Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry tender as set forth below under "-- Procedure for
Tendering," any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and must otherwise comply with the Book-Entry Transfer Facility's
procedures. If certificates have been delivered or otherwise identified to the
Exchange Agent, the name of the registered holder and the serial numbers of the
particular certificates evidencing the Shares withdrawn must also be furnished
to the Exchange Agent as aforesaid prior to the physical release of such
certificates.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by SPX, in its sole discretion,
which determination shall be final and binding. Neither SPX, the Exchange Agent,
the Information Agent, the Dealer Manager nor any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or will incur any liability for failure to give any such
notification. Any Shares properly withdrawn will be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by following one of the procedures described under "-- Procedure for
Tendering" at any time prior to the Expiration Date.
A withdrawal of Shares shall also constitute a withdrawal of the associated
Rights. Rights may not be withdrawn unless the associated Shares are also
withdrawn.
PROCEDURE FOR TENDERING
For a shareholder validly to tender Shares pursuant to the Offer, (i) a
properly completed and duly exercised Letter of Transmittal (or manually
executed facsimile thereof), together with any required signature guarantees, or
an Agent's Message (as defined below) in connection with a book-entry transfer,
and any other required documents, must be transmitted to and received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Prospectus and either certificates for tendered Shares must be received by the
Exchange Agent at such address or such Shares must be tendered pursuant to the
procedures for book-entry transfer set forth below (and a confirmation of
receipt of such tender received (such confirmation, a "Book-Entry
Confirmation")), in each case prior to the Expiration Date, or (ii) the
tendering shareholder must comply with the guaranteed delivery procedure set
forth below.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent, and forming a part of
a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that SPX may enforce such agreement
against such participant.
Shareholders will be required to tender one Right for each Share tendered
in order to effect a valid tender of Shares, unless the Rights Plan Condition
has been satisfied or waived. Unless the Distribution Date occurs, a tender of
Shares will constitute a tender of the associated Rights. If the Distribution
Date occurs and separate certificates representing the Rights are distributed by
the Company or the Rights Agent to holders of Shares prior to the time a
holder's Shares are tendered pursuant to the Offer, certificates representing a
number of Rights equal to the number of Shares tendered must be delivered to the
Exchange Agent, or, if available, a Book-Entry Confirmation received by the
Exchange Agent with respect thereto, in order for such Shares to be validly
tendered. If the Distribution Date occurs and separate certificates representing
the Rights are not distributed prior to the time Shares are tendered pursuant to
the Offer, Rights may be tendered prior to a shareholder receiving the
certificates for Rights by use of the guaranteed delivery procedure described
below. If Rights certificates are distributed but are not available to a
shareholder prior to the time Shares are tendered pursuant to the Offer, a
tender of Shares constitutes an agreement by the tendering shareholder to
deliver to the Exchange Agent pursuant to the guaranteed delivery procedure
described below, prior to the expiration of the period to be specified in the
Notice of Guaranteed Delivery and the related Letter of Transmittal for delivery
of Rights certificates or a Book-Entry Confirmation for Rights (the "Rights
Delivery Period"), Rights certificates representing a number of Rights equal to
the number of Shares tendered. If Rights certificates are distributed, SPX will
distribute a separate letter of transmittal for such Rights
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certificates. If Rights certificates are tendered separately from Shares, then a
properly completed letter of transmittal for Rights certificates (or manually
executed facsimile thereof) must be submitted with respect to such Rights. SPX
reserves the right to require that it receive such Rights certificates (or a
Book-Entry Confirmation with respect to such Rights) prior to accepting Shares
for exchange.
Nevertheless, SPX will be entitled to accept for exchange Shares tendered
by a shareholder prior to receipt of the Rights certificates required to be
tendered with such Shares or a Book-Entry Confirmation for such Rights and
either (i) subject to complying with applicable rules and regulations of the
Commission, withhold payment for such Shares pending receipt of the Rights
certificates or a Book-Entry Confirmation for such Rights or (ii) exchange
Shares accepted for exchange pending receipt of the Rights certificates or a
Book-Entry Confirmation for such Rights in reliance upon the guaranteed delivery
procedure described below. In addition, after expiration of the Rights Delivery
Period, SPX may instead elect to reject as invalid a tender of Shares with
respect to which Rights certificates or a Book-Entry Confirmation for an equal
number of Rights have not been received by the Exchange Agent. Any determination
by SPX to make payment for Shares in reliance upon such guaranteed delivery
procedure or, after expiration of the Rights Delivery Period, to reject a tender
as invalid, shall be made, subject to applicable law, in the sole and absolute
discretion of SPX.
The Exchange Agent will establish an account with respect to the Shares at
the Book-Entry Transfer Facility for purposes of the Offer within two business
days after the date of the mailing of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of the Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Exchange Agent's account in accordance
with the Book-Entry Transfer Facility's procedure for such transfer. However,
although delivery of Shares may be effected through book-entry at the Book-Entry
Transfer Facility, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one or more of its
addresses set forth on the back cover of this Prospectus prior to the Expiration
Date, or the guaranteed delivery procedure described below must be complied
with. No assurance can be given, however, that book-entry delivery of Rights
will be available. If book-entry delivery is not available, a tendering
shareholder will be required to tender Rights by means of delivery of Rights
certificates or pursuant to the guaranteed delivery procedure set forth below.
Signatures on all Letters of Transmittal must be guaranteed by an Eligible
Institution, except in cases in which Shares are tendered (i) by a registered
holder of Shares (including any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) who
has not completed either the box entitled "Special Payment Instructions" or the
box entitled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution.
If the certificates for Shares or Rights (if any) are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
certificates for unexchanged Shares or Rights (if any) are to be issued to a
person other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signature(s) on the certificates or stock powers guaranteed as aforesaid.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's certificates are not immediately available or such shareholder
cannot deliver the certificates and all other required documents to the Exchange
Agent prior to the Expiration Date or such shareholder cannot complete the
procedure for book-
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entry transfer on a timely basis, such Shares may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by SPX, is received by the
Exchange Agent as provided below on or prior to the Expiration Date;
and
(c) the certificates for all tendered Shares (or a confirmation of a
book-entry transfer of such securities into the Exchange Agent's
account at the Book-Entry Transfer Facility as described above), in
proper form for transfer, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three
NYSE trading days after the date of execution of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Exchange Agent and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice.
In all cases, exchanges of Shares tendered and accepted for exchange
pursuant to the Offer will be made only after timely receipt by the Exchange
Agent of certificates for Shares (or timely confirmation of a book-entry
transfer of such securities into the Exchange Agent's account at the Book-Entry
Transfer Facility as described above), properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), or an Agent's Message in
connection with a book-entry transfer, and any other required documents.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or confirmations of book-entry transfers of
such Shares are actually received by the Exchange Agent.
By executing a Letter of Transmittal as set forth above, the tendering
shareholder irrevocably appoints designees of SPX as such shareholder's
attorneys-in-fact and proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for exchange by SPX and with respect to any and all
other Shares and other securities issued or issuable in respect of the Shares
from and after the date of this Prospectus. Such appointment is effective, and
voting rights will be effected, when and only to the extent that SPX deposits
the Consideration for Shares tendered by such shareholder with the Exchange
Agent. All such proxies shall be considered coupled with an interest in the
tendered Shares and therefore shall not be revocable. Upon the effectiveness of
such appointment, all prior proxies given by such shareholder will be revoked,
and no subsequent proxies may be given (and, if given, will not be deemed
effective). SPX's designees will, with respect to the Shares for which the
appointment is effective, be empowered, among other things, to exercise all
voting and other rights of such shareholder as they, in their sole discretion,
deem proper at any annual, special or adjourned meeting of Company shareholders,
by written consent in lieu of any such meeting or otherwise. SPX reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon SPX's exchange of such Shares, SPX must be able to exercise
full voting rights with respect to such Shares.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Shares will be determined
by SPX, in its sole discretion, which determination shall be final and binding.
SPX reserves the absolute right to reject any and all tenders of Shares
determined by it not to be in proper form or the acceptance of or exchange for
which may, in the opinion of SPX's counsel, be unlawful. SPX also reserves the
absolute right to waive any of the conditions of the Offer (other than the SPX
Stockholder Approval Condition and the condition relating to the effectiveness
of the Registration Statement), or any defect or irregularity in the tender of
any Shares. No tender of Shares will be deemed to have been validly made until
all defects and irregularities in such tender have been cured or waived. Neither
SPX, the Exchange Agent, the Information Agent, the Dealer Manager nor any other
person will be under any duty to give notification of any defects or
irregularities in the tender of any Shares or will incur any liability for
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failure to give any such notification. SPX's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and instructions
thereto) will be final and binding.
The tender of Shares pursuant to any of the procedures described above will
constitute a binding agreement between the tendering Company shareholder and SPX
upon the terms and subject to the conditions of the Offer.
FEDERAL INCOME TAX WITHHOLDING AND BACKUP WITHHOLDING
To prevent backup U.S. federal income tax withholding equal to 31% of the
gross proceeds (i.e., SPX Common Stock and cash) payable pursuant to the Offer
and the Merger, each shareholder who does not otherwise establish an exemption
from backup withholding must notify the Exchange Agent of such shareholder's
correct taxpayer identification number (or certify that such taxpayer is
awaiting a taxpayer identification number) and provide certain other information
by completing, under penalties of perjury, a Substitute Form W-9 included in the
Letter of Transmittal. Noncorporate foreign shareholders should generally
complete and sign a form W-8, Certificate of Foreign Status, a copy of which may
be obtained from the Exchange Agent, in order to avoid backup withholding. As
more fully described below, in the case of a foreign shareholder, even if such
shareholder has provided the required certification to avoid backup withholding,
the Exchange Agent will withhold 30% of certain cash payments made pursuant to
the Offer and the Merger unless a reduced rate of withholding or an exemption
from withholding is applicable.
The Exchange Agent will withhold U.S. federal income taxes equal to 30% of
the SPX Cash (as defined below in "-- Certain Federal Income Tax
Consequences -- Shareholders Owning Both Shares and SPX Common Stock") payable
to foreign shareholders in the Offer and the Merger unless SPX and the Exchange
Agent determine that (i) a reduced rate of withholding is available pursuant to
a tax treaty or (ii) an exemption from withholding is applicable because such
gross cash proceeds are effectively connected with the conduct of a trade or
business within the United States. For these purposes, a foreign shareholder is
any shareholder other than a United States Person (as defined below in "--
Certain Federal Income Tax Consequences"). In order to obtain a reduced rate of
withholding pursuant to a tax treaty, a foreign shareholder must deliver to the
Exchange Agent before any payment a properly completed and executed IRS Form
1001. In order to obtain an exemption from withholding on the grounds that the
gross cash proceeds received from SPX pursuant to the Offer and the Merger are
effectively connected with the conduct of a trade or business within the United
States, a foreign shareholder must deliver to the Exchange Agent before any
payment a properly completed and executed IRS Form 4224. SPX and the Exchange
Agent will determine a shareholder's status as a foreign shareholder and
eligibility for a reduced rate of, or exemption from, withholding by reference
to any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form
4224) unless facts and circumstances indicate that such reliance thereon is not
warranted. A foreign shareholder may be eligible to obtain a refund of all or a
portion of any tax withheld if such shareholder meets the "substantially
disproportionate" or "meaningful reduction" tests of Section 302 of the Internal
Revenue Code of 1986, as amended (the "Code"), as modified and applied under
Section 304 of the Code (see "-- Certain Federal Income Tax
Consequences -- Shareholders Owning Both Shares and SPX Common Stock"), or such
shareholder is otherwise able to establish that no tax or a reduced amount of
tax is due. Backup withholding generally will not apply to amounts subject to
the 30% or a treaty-reduced rate of withholding.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material anticipated U.S. federal
income tax consequences of the Offer and the Merger. This discussion does not
address all aspects of U.S. federal income taxation that may be relevant to a
particular investor in light of the investor's particular circumstances, and may
not apply to Company shareholders in special tax situations (such as insurance
companies, regulated investment companies, financial institutions, dealers in
securities, tax exempt organizations, persons who hold Shares as part of a
"straddle," "hedging" or "conversion" transaction or persons whose functional
currency (as defined in Section 985 of the Code) is not the United States
dollar) or to shareholders who acquired their Shares pursuant to the exercise of
employee stock options or warrants, or otherwise as compensation. The summary
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also does not discuss the tax consequences to holders of Company warrants or
stock options, nor to persons who exercise dissenters' rights in the Merger. The
discussion below applies only to shareholders who hold their Shares as capital
assets, within the meaning of Section 1221 of the Code. This discussion is based
upon laws, regulations, rulings, administrative pronouncements and decisions,
all as in effect as of the date hereof and all of which are subject to change
(possibly with retroactive effect), and no ruling has been or will be requested
from the Internal Revenue Service on the tax consequences of the Offer and the
Merger.
The discussion below applies only to a United States Person. As used
herein, the term United States Person means (a) a citizen or resident of the
United States, (b) a corporation, partnership, or other entity created or
organized in or under the laws of the United States, any State or any political
subdivision thereof, (c) an estate the income of which is subject to U.S.
federal income taxation regardless of its source or (d) a trust, if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States Persons have the
authority to control all substantial decisions of the trust.
Tax Treatment of the Offer and the Merger. The exchange of Shares for cash
and SPX Common Stock pursuant to the Offer or the Merger (or both) will be a
taxable transaction for U.S. federal income tax purposes, and may also be
taxable under applicable state, local and foreign tax laws. Although, as
described below, the exchange of Shares in the Offer and the Merger is likely to
be governed in part by Section 304 of the Code, in general (subject to the
discussion below with respect to shareholders owning, directly or
constructively, stock in both the Company and SPX other than the SPX Common
Stock received in the Offer or the Merger (see "-- Shareholders Owning Both
Shares and SPX Common Stock," below)), for U.S. federal income tax purposes,
each shareholder will recognize capital gain or loss equal to the difference
between (x) the amount of cash and the fair market value of the shares of SPX
Common Stock received and (y) the shareholder's adjusted tax basis in the Shares
exchanged therefor. Calculation of gain or loss must be made separately for each
block of Shares exchanged by a shareholder. Any gain recognized will (in the
case of individual shareholders) be subject to reduced rates of taxation if the
shareholder's holding period for the Shares exceeds 12 months, subject to
further reduction in the case of Shares held for more than 18 months. The
shareholder will have a tax basis in the SPX Common Stock received equal to the
fair market value thereof, and the shareholder's holding period for the SPX
Common Stock will begin on the day following the date of the exchange.
Shareholders Owning Both Shares and SPX Common Stock. If, as is believed
likely, the Offer and the Merger are treated as a single integrated transaction
for U.S. federal income tax purposes, the portion of a shareholder's Shares
exchanged for cash attributable to SPX (the "SPX Cash") should be treated as a
deemed distribution in redemption of SPX Common Stock it owns or is considered
to own pursuant to Section 304 of the Code. SPX Cash is equal to the cash
exchanged in the Offer and the Merger, minus the sum of any such cash
attributable to cash held by the Company immediately prior to the Merger plus
any increase in indebtedness of the Company arising by virtue of the Merger. As
a result, a shareholder who immediately prior to exchanging Shares in the Offer
or Merger owns SPX Common Stock (either directly or pursuant to certain
constructive ownership rules which are described below and not including SPX
Common Stock received in the Offer or the Merger) may have different tax
treatment than that discussed above under the heading "-- Tax Treatment of the
Offer and the Merger." Such shareholders will recognize capital gain or loss on
the portion of their Shares exchanged for SPX Common Stock and cash that is not
SPX Cash ("Company Cash"), in an amount equal to the difference between (x) the
sum of the Company Cash and the fair market value of the SPX Common Stock
received and (y) the shareholder's tax basis in the Shares deemed exchanged
therefor. Any such gain will be taxed as described above under the heading "--
Tax Treatment of the Offer and the Merger." However, such shareholders will
recognize capital gain or loss with respect to the portion of their Shares
exchanged for SPX Cash only if, after giving effect to the constructive
ownership rules of Section 318 of the Code (as modified for purposes of Section
304), the receipt of such cash either is (a) "substantially disproportionate"
with respect to that shareholder or (b) is "not essentially equivalent to a
dividend" with respect to that shareholder within the meaning of Section 302 of
the Code (collectively, the "Section 302 Tests"). Both of these tests, and
Section 318, are described below.
If either of the Section 302 Tests is satisfied with respect to a
shareholder, that shareholder will recognize capital gain or loss equal to the
difference between the amount of SPX Cash received pursuant to the Offer or
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Merger (or both) and that shareholder's basis for the Shares exchanged therefor.
Any such gain will be taxed as described above under the heading "-- Tax
Treatment of the Offer and the Merger."
If neither of the Section 302 Tests is satisfied with respect to a
shareholder, that shareholder will be treated as having received a dividend
(taxable as ordinary income) in an amount equal to the SPX Cash (or, if less,
equal to that shareholder's allocable portion of the Company's and SPX's current
and accumulated earnings and profits ("E&P")). Any SPX Cash received in excess
of such allocable portion of E&P will be treated, first, as a non-taxable return
of capital to the extent of the shareholder's basis in the SPX Common Stock
treated as redeemed, and thereafter as capital gain to the extent it exceeds
such basis. Proper adjustment will be made to such shareholder's basis for his
SPX Shares, if any, to reflect any unutilized basis for the stock treated as
redeemed. Corporate holders of Shares who are deemed to receive a dividend
pursuant to the Offer or the Merger will be subject to special rules described
under "-- Treatment of Dividends to Corporate Shareholders" below.
A deemed redemption of SPX Common Stock from a shareholder will be
"substantially disproportionate" with respect to that shareholder if (a) the
percentage of the outstanding Shares constructively owned by the shareholder
immediately following the Merger is less than (b) 80% of the percentage of the
outstanding Shares actually and constructively owned by that shareholder
immediately before the purchase of Shares pursuant to the Offer and the Merger.
A shareholder who fails to satisfy the "substantially disproportionate"
test may nevertheless satisfy the "not essentially equivalent to a dividend"
test if such shareholder's disposition of Shares pursuant to the Offer or the
Merger results in a "meaningful reduction" in his proportionate interest in the
Company. Whether the receipt of cash by a shareholder will be "not essentially
equivalent to a dividend" depends on the particular shareholder's facts and
circumstances. The IRS has indicated in published rulings that even a small
reduction in the proportionate interest of a small minority shareholder in a
publicly held corporation who exercises no control over corporate affairs may
constitute such a "meaningful reduction."
In determining whether either of the Section 302 Tests is satisfied, a
shareholder must take into account not only stock of the Company which he
actually owns, but also stock of the Company which he constructively owns
pursuant to Section 318 of the Code as modified for purpose of Section 304 of
the Code. Under Section 318 of the Code as modified, (i) a stockholder of SPX
(no matter how small its ownership interest in SPX) will be treated as
constructively owning a proportionate part of the stock of the Company owned by
SPX after consummation of the Offer and Merger, and (ii) certain modified rules
will apply in determining the extent to which a corporation will be treated as
owning stock actually or constructively owned by its stockholders. In addition,
a shareholder may constructively own stock of the Company and of SPX (a)
actually owned, and in some cases constructively owned, by certain related
individuals and entities, and (b) which the shareholder has the right to acquire
by exercise of an option or a conversion privilege (including, perhaps, the
Rights).
Treatment of Dividends to Corporate Shareholders. To the extent that SPX
Cash received in exchange for Shares is treated as a dividend to a corporate
shareholder, such holder will be (i) eligible for a dividends received deduction
(subject to applicable limitations) and (ii) subject to the "extraordinary
dividend" provisions of the Code. Under recently enacted legislation, any SPX
Cash which is treated as a dividend to a corporate shareholder will constitute
an extraordinary dividend, except as otherwise provided in Treasury regulations
which have yet to be promulgated. Consequently, the nontaxed portion of the
dividend would reduce a corporate holder's adjusted tax basis in the Shares
exchanged for SPX Cash, but not below zero, and would thereafter be taxable as a
capital gain from the sale or exchange of the Shares exchanged for SPX Cash.
Tax Treatment if Offer and Merger Are Not Integrated. In the unlikely
event that the Offer and the Merger were not treated as a single integrated
transaction for U.S. federal income tax purposes, both the Offer and the Merger
would be taxable transactions. The cash received in the Offer would be subject
to Section 304 of the Code, and the tax consequences to an individual
shareholder would depend on the application of the Section 302 Tests (as
described above) to such shareholder based on such shareholder's particular
facts and circumstances. The cash received in the Merger might also in part be
subject to Section 304 of the Code. However, any shareholder who tenders all of
its Shares in the Offer and does not, actually or by attribution,
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own any shares of SPX Common Stock immediately prior to the effectuation of the
Offer, should recognize capital gain or loss.
RIGHTS
Because there is no specific binding authority dealing with securities such
as the Rights, it is unclear what the U.S. federal income tax consequences are
of the Rights becoming separately transferable apart from the Shares, the
redemption of the Rights, or the acquisition by SPX of the Rights. Company
shareholders should consult their own tax advisors as to the tax consequences of
transactions with respect to the Rights.
THE FOREGOING DISCUSSION RELATES TO THE MATERIAL ANTICIPATED U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER. THE ANALYSIS CONTAINED
HEREIN DOES NOT ADDRESS STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES OF THE OFFER
AND THE MERGER, OR ANY OTHER UNITED STATES TAX CONSEQUENCE OTHER THAN INCOME TAX
CONSEQUENCES (E.G., ESTATE OR GIFT TAX CONSEQUENCES), AND DOES NOT CONSTITUTE
TAX ADVICE TO ANY PARTICULAR COMPANY SHAREHOLDER. COMPANY SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER
AND THE MERGER.
See "-- Federal Income Tax Withholding and Backup Withholding" for
information regarding the application of U.S. federal income tax withholding and
backup withholding.
EFFECT OF OFFER ON MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT
The exchange of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
The Shares are listed and principally traded on the NYSE and are also
listed on the PE and the International Stock Exchange in London. Depending upon
the number of Shares acquired pursuant to the Offer, following consummation of
the Offer the Shares may no longer meet the requirements of such securities
exchanges for continued listing. For example, published guidelines of the NYSE
indicate that the NYSE would consider delisting the outstanding Shares if, among
other things, (i) the number of publicly held Shares (exclusive of holdings of
officers, directors and members of their immediate families and other
concentrated holdings of 10% or more) should fall below 600,000, (ii) the number
of record holders of 100 or more Shares should fall below 1,200 or (iii) the
aggregate market value of publicly held Shares should fall below $5 million.
According to the Company's 1998 Second Quarter Form 10-Q, there were
outstanding, as of March 31, 1998, 63,594,700 Shares, and according to the
Company's 1997 Form 10-K, as of December 31, 1997, there were outstanding
options to acquire 2,044,284 Shares, and, as of November 5, 1997, 3,295 record
holders of Shares.
If the NYSE were to delist the Shares, the market therefor could be
adversely affected. It is possible that the Shares would be traded on other
securities exchanges or in the over-the-counter market, and that price
quotations would be reported by such exchanges, through NASDAQ or by other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon the number of holders and/or the
aggregate market value of the Shares remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are presently "margin securities" under the regulations of the
Federal Reserve Board, which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending on factors
similar to those described above with respect to listing and market quotations,
following consummation of the Offer the Shares may no longer constitute "margin
securities" for the purposes of the Federal Reserve Board's margin regulations,
in which event the Shares would be ineligible as collateral for margin loans
made by brokers. The Shares are currently registered under the Exchange Act.
Such registration may be terminated by the Company upon application to the
Commission if the outstanding Shares are not listed on a national securities
exchange and if there are fewer than 300 holders of record of Shares.
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Termination of registration of the Shares under the Exchange Act would reduce
the information required to be furnished by the Company to its shareholders and
to the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the requirement
of furnishing a proxy statement in connection with shareholders' meetings
pursuant to Section 14(a) and the related requirement of furnishing an annual
report to shareholders, no longer applicable with respect to the Shares.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 under the Securities Act may be impaired or eliminated. If registration
of the Shares under the Exchange Act were terminated, the Shares would no longer
be eligible for Nasdaq reporting or for continued inclusion on the Federal
Reserve Board's list of "margin securities."
The Rights are registered under the Exchange Act and are listed on the
NYSE, but currently are attached to the outstanding Shares and are not
separately transferable. The Rights may become transferable apart from the
Shares, unless previously redeemed or unless the Rights Agreement is amended so
as to make the Offer not applicable to the Rights. If the Rights are not
redeemed and the Rights Agreement is not so amended so as to make the Offer
inapplicable to the Rights and SPX waives the Rights Plan Condition, then the
foregoing discussion with respect to the effect of the Offer on the Shares would
be similarly applicable to the Rights (although the continued listing criteria
are different).
PURPOSE OF THE OFFER; THE MERGER
The purpose of the Offer is to enable SPX to obtain control of, and
ultimately the entire equity interest in, the Company.
The Offer, as the first step in the acquisition by SPX, is intended to
facilitate the acquisition of all of the Shares. SPX presently intends,
following consummation of the Offer, to propose and seek to have the Company
effect the Merger. In the Merger, each outstanding share (other than Shares
owned by SPX or any of its affiliates, Shares held in the treasury of the
Company or by any subsidiary of the Company and Shares owned by the Company's
shareholders who perfect dissenters' rights under Connecticut law) would be
converted into the right to receive the Consideration. Assuming the Minimum
Tender Condition and the other Offer Conditions are satisfied (or waived, as
applicable) and SPX consummates the Offer, SPX would be able to consummate the
Merger without any additional vote of the holders of SPX Common Stock or the
vote of any other shareholders of the Company.
It is SPX's current intention to consummate the Offer as soon as the
conditions to the Offer are satisfied and to consummate the Merger as soon as
possible after successful completion of the Offer.
SPX reserves the right to change the structure of the Merger to provide for
the merger of a subsidiary of SPX into the Company or for a merger of the
Company into SPX in the context of a negotiated transaction with the Company.
CONDITIONS OF THE OFFER
Minimum Tender Condition. The Offer is conditioned upon, among other
things, there being validly tendered and not withdrawn prior to the Expiration
Date a number of Shares which, together with Shares owned by SPX and its
affiliates, will constitute at least 66 2/3% of the total number of outstanding
Shares on a fully diluted basis (as though all options or other securities
convertible into or exercisable or exchangeable for Shares, other than the
Rights, had been so converted, exercised or exchanged) as of the date the Shares
are accepted for exchange by SPX pursuant to the Offer. According to the
Company's 1998 Second Quarter Form 10-Q, as of March 31, 1998, there were
63,594,700 Shares outstanding, and according to the Company's 1997 Form 10-K, as
of December 31, 1997, options covering an aggregate of 2,044,284 Shares had been
granted. As of the date of this Prospectus, SPX owned 1,150,150 Shares, or
approximately 1.8% of the outstanding Shares. Based on the foregoing and
assuming no additional Shares have been or will be issued after March 31, 1998
(other than Shares issued pursuant to the exercise of the stock options referred
to above), and no options, warrants or rights exercisable for, or securities
convertible into, Shares have been or will be issued after December 31, 1997,
the Minimum Tender Condition would be satisfied if at least 42,609,173 Shares
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were validly tendered into and not withdrawn from the Offer. SPX reserves the
right (but shall not be obligated), subject to the rules and regulations of the
Commission, to waive or amend the Minimum Tender Condition and to exchange fewer
than such number of Shares as would satisfy the Minimum Tender Condition
pursuant to the Offer; provided, however, that, in the event of such waiver or
amendment, the Offer will expire no sooner than ten business days from the date
of such waiver or amendment.
SPX Stockholder Approval Condition. The Offer is conditioned upon, among
other things, the satisfaction of the SPX Stockholder Approval Condition.
Pursuant to the rules of the NYSE (on which the SPX Common Stock is listed),
because the number of shares of SPX Common Stock to be issued in the Offer and
the Merger will exceed 20% of the shares outstanding prior to such issuance, the
issuance must be approved by the holders of a majority of the shares of SPX
Common Stock, voted at a meeting of such holders at which the total number of
votes cast represents over 50% in interest of all shares of SPX Common Stock
outstanding on the applicable record date. Under the Delaware General
Corporation Law and the NYSE rules, approval by a majority of the votes entitled
to be cast by the holders of SPX Common Stock that are present or represented by
proxy is required to effect the amendment. SPX will seek such approval at the
SPX Annual Meeting of Shareholders to be held on May 20, 1998.
Rights Plan Condition. The Offer is conditioned upon, among other things,
the satisfaction of the Rights Plan Condition. The Rights Plan Condition may be
satisfied in several ways, including by the Company's Board of Directors (a)
amending the Rights Agreement so that the Rights would not be triggered by the
Offer and the Merger or (b) redeeming the Rights. As noted above, if the SPX
Nominees are elected to the Board of Directors of the Company, it is expected
that they will take all action required to cause the Rights Plan Condition to be
satisfied, subject to their fiduciary and statutory duties as Directors of the
Company.
For additional information concerning the Rights Agreement, see "The
Offer -- The Rights" and "Comparison of Rights of Holders of Shares and SPX
Common Stock."
Business Combination Statutes Condition. The Offer is conditioned upon,
among other things, SPX being satisfied, in its sole judgment, that the
provisions of Sections 841 and 844 of the Connecticut Business Combination
Statutes are inapplicable to SPX, the Offer and the Merger and that (i) the only
approval necessary by the shareholders of the Company to approve the Merger is
the affirmative vote of 66 2/3% of the outstanding Shares (and, in such vote,
that the Shares held by SPX or any affiliate of SPX will have full voting
rights) and (ii) the Connecticut Business Combination Statutes will not prohibit
for any period of time the consummation of the Merger or any other "business
combination" (as defined in such statutes) involving SPX or any affiliate or
associate of SPX.
Section 844 of the Connecticut Business Combination Statutes provides that
a corporation may not engage in any business combination with an "Interested
Shareholder" (defined as the beneficial owner of 10% or more of the voting power
of a company) for five years following the date on which the Interested
Shareholder became such unless the acquisition which resulted in the Interested
Shareholder becoming such (the "10% Acquisition"), or the business combination,
is approved by the board of directors and by a majority of the non-employee
directors, of which there shall be at least two, before the date of the 10%
Acquisition.
Sections 841 and 842 of the Connecticut Business Combination Statutes
provide that any business combination with an Interested Shareholder that was
not approved by the board of directors prior to the 10% Acquisition must be
approved by the board of directors, 80% of the voting power of the outstanding
shares of the voting stock of the corporation and two-thirds of the voting power
not controlled by the Interested Shareholder or meet certain conditions
regarding minimum price and type of consideration.
As noted above, if the SPX Nominees are elected to the Board of Directors
of the Company, it is expected that they will take all action required to cause
the Business Combination Statutes Condition to be satisfied, subject to their
fiduciary and statutory duties as Directors of the Company.
For additional information concerning the Connecticut Business Combination
Statutes, see "Comparison of Rights of Holders of Shares and SPX Common Stock."
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Financing Condition. The Offer is conditioned upon, among other things,
SPX obtaining, prior to the expiration of the Offer, on terms and conditions
satisfactory to SPX in its sole discretion, sufficient Financing to enable
consummation of the Offer and the Merger (the "Financing Condition"). SPX
estimates that the total amount of financing that will be required to pay the
cash component of the Consideration in the Proposed Business Combination, to
refinance outstanding debt of SPX and of the Company, to pay fees and expenses
related to the Proposed Business Combination and to provide working capital will
be approximately $2.4 billion. SPX has received a highly confident letter from
CIBC and its affiliate, CIBC Oppenheimer, dated February 13, 1998, in which the
two entities have stated that they are highly confident of their ability to
raise the Financing, subject to certain conditions set forth therein, including
without limitation (i) acceptance by the Company of SPX's proposal and execution
of the definitive documentation; (ii) satisfactory completion of financial,
business and legal due diligence by CIBC and CIBC Oppenheimer regarding the
Company; (iii) agreement among SPX, CIBC and CIBC Oppenheimer upon a mutually
acceptable set of terms and conditions upon which a lending commitment could be
issued; (iv) the absence of any material adverse change in the business,
condition (financial or otherwise), results of operations, assets, liabilities
or prospects of SPX or the Company; (v) no material disruption or adverse change
in CIBC or CIBC Oppenheimer's opinion in the financial, banking or capital
markets; and (vi) the receipt of all necessary governmental, regulatory and
third-party approvals and consents in connection with the transaction.
Regulatory Approval Condition. The Offer is conditioned upon, among other
things, any regulatory approvals required to consummate the Offer (the
"Requisite Regulatory Approvals") having been obtained and remaining in full
force and effect, all statutory waiting periods in respect thereof having
expired and no such approval containing any conditions or restrictions which the
Board of Directors of SPX determines will or reasonably could be expected to
materially impair the strategic and financial benefits expected to result from
the Offer (the "Regulatory Approval Condition"). Based on the Company's public
filings, these approvals may include the approval of certain foreign
governmental agencies. SPX will use its reasonable best efforts to obtain the
Requisite Regulatory Approvals. The Offer cannot proceed in the absence of any
Requisite Regulatory Approvals. Although no assurances can be given, SPX
anticipates that it will receive any Requisite Regulatory Approvals on a timely
basis.
Under the HSR Act and the rules and regulations that have been promulgated
thereunder, certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division and the FTC and
certain waiting period requirements have been satisfied. On January 6, 1998, SPX
filed with the Antitrust Division and the FTC its HSR Filing seeking to acquire
up to 100% of the outstanding Shares. At 11:59 p.m. on February 5, 1998 the
waiting period expired with respect to SPX's HSR Filing. Accordingly,
satisfaction of the premerger notification and waiting period requirements of
the HSR Act is not a condition of the Offer.
Certain stockholders of the Company may be required to make separate
filings with the Antitrust Division and the FTC under the HSR Act and the rules
and regulations that have been promulgated thereunder in conjunction with the
receipt of shares of SPX Common Stock. Such shareholders will then be required
to observe applicable waiting periods under the HSR Act and the rules and
regulations promulgated thereunder before receiving shares of SPX Common Stock.
If any shareholder is obligated to make such a filing, SPX will deposit the
shares of SPX Common Stock to be exchanged, pursuant to the rules and
regulations promulgated under the HSR Act, pending expiration or early
termination of the waiting period.
Except as set forth above, based upon an examination of publicly available
information filed by the Company with the Commission and other publicly
available information with respect to the Company, SPX is not aware of (a) any
license or regulatory permit which appears to be material to the business of the
Company and its subsidiaries taken as a whole, and which is likely to be
adversely affected by SPX's acquisition of Shares pursuant to the Offer or (b)
any approval or other action by a state, federal or foreign governmental,
administrative or regulatory agency or authority (each, a "Governmental Entity")
that would be required prior to the acquisition of Shares pursuant to the Offer.
SPX presently intends to take such actions with respect to any approvals as will
enable it to consummate the Offer. In this regard, SPX expressly reserves the
right to challenge the validity and applicability of any state, foreign or other
statutes or regulations purporting to require approval of the consummation of
the Offer.
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There can be no assurance that any license, permit, approval or other
action, if needed, would be obtained, or would be obtained without substantial
conditions, or, if so obtained, when it would be obtained, or that adverse
consequences might not result to the Company, SPX or their respective businesses
in the event of adverse regulatory action or inaction.
Certain Other Conditions of the Offer. Notwithstanding any other provision
of the Offer and subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to SPX's
obligation to exchange or return tendered Shares promptly after the termination
or withdrawal of the Offer), SPX shall not be required to accept for exchange or
exchange any Shares, may postpone the acceptance for exchange or exchange for
tendered Shares and may, in its sole discretion, terminate or amend the Offer as
to any Shares not then exchanged if, at the Expiration Date, the Minimum Tender
Condition, the SPX Stockholder Approval Condition, the Rights Plan Condition,
the Business Combination Statutes Condition, the Financing Condition, and the
Regulatory Approval Condition shall not have been satisfied or, if legally
permissible, waived, or if on or after the date of this Prospectus and on or
prior to the Expiration Date:
(x) either of the following events shall not have occurred:
(a) The shares of SPX Common Stock (and the accompanying SPX Rights)
which shall be issued to the shareholders of the Company in the
Offer and the Merger shall have been authorized for listing on the
NYSE, subject to official notice of issuance; or
(b) The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the Commission; or
(y) any of the following conditions shall exist:
(a) there shall have been threatened or be pending any action or
proceeding before any court or Governmental Entity, (i)
challenging or seeking to restrain or prohibit, or seeking to
impose voting, procedural, price or other requirements, in
addition to those required by federal securities laws and the
Connecticut Business Act (each as in effect on the date of this
Offer), in connection with, the making of the Offer, the
acceptance for exchange of, or exchange for, any Shares by SPX or
any affiliate of SPX or the consummation by SPX or any affiliate
of SPX of the Merger or other business combination with the
Company, or seeking to obtain material damages in connection
therewith; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, SPX or any of their
subsidiaries of any material portion of the business or assets of
the Company, SPX or any of their subsidiaries, or to compel the
Company, SPX or any of their subsidiaries to dispose of or hold
separate any material portion of the business or assets of the
Company, SPX or any of their subsidiaries; (iii) seeking to impose
limitations on the ability of SPX or any affiliate of SPX to
exercise effectively full rights of ownership of any Shares
(including the Rights associated with Shares), including, without
limitation, the right to vote any Shares acquired by SPX pursuant
to the Offer or otherwise on all matters previously presented to
the Company's shareholders; (iv) seeking to require divestiture by
SPX or any of SPX's affiliates of any Shares; (v) seeking any
material diminution in the benefits expected to be derived by SPX
or any affiliates of SPX as a result of the transactions
contemplated by the Offer or the Merger or any other similar
business combination with the Company; (vi) otherwise directly or
indirectly relating to the Offer or which otherwise, in the
reasonable judgment of SPX, might materially adversely affect the
Company or any of its subsidiaries or SPX or any affiliate of SPX
or the value of the Shares; or (vii) which otherwise, in the
reasonable judgment of SPX, is reasonably likely to have a
material adverse effect on the business, operations (including,
without limitation, result of operations), condition (financial or
otherwise), assets, liabilities or prospects of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect") or
on SPX;
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(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, or deemed applicable to (i)
SPX, the Company or any affiliate of SPX or the Company or (ii)
the Offer or the Merger or other business combination by SPX or
any affiliate of SPX with the Company, by any legislative body,
court, or Governmental Entity, which, in the reasonable judgment
of SPX, is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clauses (i) through (vii)
of paragraph (y)(a) above;
(c) there shall have occurred any change, condition, event or
development which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect or SPX shall
have become aware of any fact of which SPX had no actual or
constructive knowledge as of the date of this Offer which,
individually or in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national
securities exchange or in the over-the-counter market in the
United States, (ii) any significant adverse change in interest
rates, the financial markets or major stock exchange indices in
the United States or abroad or in the market price of Shares,
including without limitation any decline, measured from the close
of business on the day preceding the date of this Prospectus, in
the Standard & Poor's 500 Index by an amount in excess of 10%,
(iii) any change in the general political, market, economic,
regulatory or financial condition in the United States or abroad
that could, in the reasonable business judgment of SPX, have a
Material Adverse Effect, (iv) any material adverse change in
United States currency exchange rates or a suspension of, or
limitation on, currency exchange markets, (v) a declaration of a
banking moratorium or any suspension of payments in respect of
banks in the United States, (vi) any limitation (whether or not
mandatory) by any government or Governmental Entity on, or other
event that, in the reasonable judgment of SPX, might affect the
extension of credit by banks or other lending institutions, (vii)
a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States or (viii) in the case of any of the foregoing existing on
the date of this Prospectus a material acceleration or worsening
thereof;
(e) The Company or any of its affiliates shall have, directly or
indirectly, (i) split, combined or otherwise changed, or
authorized or proposed a split, combination or other change of,
the Shares or its capitalization (other than by redemption of the
Rights in accordance with their terms as such terms have been
publicly disclosed prior to the date of this Offer), (ii) acquired
or otherwise caused a reduction in the number of, or authorized or
proposed the acquisition or other reduction in the number of,
outstanding Shares or other securities (other than as aforesaid),
(iii) issued or sold, or authorized or proposed the issuance,
distribution or sale of, additional Shares (other than the
issuance of Shares under options granted prior to the date of this
Offer, in accordance with the terms of such options as such terms
have been publicly disclosed prior to the date of this Offer),
shares of any other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants
or options, conditional or otherwise, to acquire, any of the
foregoing, (iv) declared or paid, or proposed to declare or pay,
any dividend or other distribution, whether payable in cash,
securities or other property, on or with respect to any shares of
capital stock of the Company (other than (A) a regular cash
quarterly dividend not in excess of $0.225 per Share, having
customary and usual record and payment dates and (B) in the event
the Rights are redeemed, the price of redemption thereof), (v)
altered or proposed to alter any material term of any outstanding
security (including the Rights) other than to amend the Rights
Agreement to make the Rights inapplicable to the Offer and the
Merger, (vi) incurred any debt other than in the ordinary course
of business or any debt containing burdensome covenants, (vii)
authorized, recommended, proposed or entered into an agreement,
arrangement or understanding with respect to any merger,
consolidation, liquidation, dissolution, business combination,
acquisition of assets, disposition of assets,
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release or relinquishment of any material contractual or other right
of the Company or any of its subsidiaries or any comparable event not
in the ordinary course of business, (viii) authorized, recommended,
proposed or entered into, or announced its intention to authorize,
recommend, propose or enter into, any agreement, arrangement or
understanding with any person or group that in the reasonable judgment
of SPX could adversely affect either the value of the Company or any
of its subsidiaries or other affiliates or the value of the Shares to
SPX or any affiliate of SPX, (ix) entered into or amended any
employment, change in control, severance, executive compensation or
similar agreement, arrangement or plan with or for the benefit of any
of its employees, consultants or directors, or made grants or awards
thereunder, other than in the ordinary course of business or entered
into or amended any agreements, arrangements or plans so as to provide
for increased or accelerated benefits to any such person, (x) except
as may be required by law, taken any action to terminate or amend any
employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) of the Company or
any of its subsidiaries, (xi) amended or authorized or proposed any
amendment to the Company's Certificate of Incorporation or By-Laws, or
(xii) SPX shall have become aware that the Company or any of its
subsidiaries shall have taken any of the foregoing actions that was
not disclosed in publicly available filings prior to the date of this
Offer;
(f) SPX shall have reached an agreement or understanding with the
Company providing for termination of the Offer, or SPX or any
affiliate of SPX shall have entered into a definitive agreement or
announced an agreement in principle with the Company providing for
a merger or other business combination with the Company or the
purchase of stock or assets of the Company;
which, in the reasonable judgment of SPX in any such case, and regardless
of the circumstances (including any action or inaction by SPX or any of its
affiliates) giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment.
The foregoing conditions are for the sole benefit of SPX and may be
asserted by SPX regardless of the circumstances giving rise to any such
condition or may be waived by SPX in whole or in part at any time and from time
to time. The determination as to whether any condition has been satisfied shall
be in the reasonable judgment of SPX and will be final and binding on all
parties. The failure by SPX at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right; the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Notwithstanding the fact that SPX reserves the right to assert the failure of a
condition following acceptance for exchange but prior to exchange in order to
delay exchange or cancel its obligation to exchange properly tendered Shares,
SPX will either promptly exchange such Shares or promptly return such Shares.
SOURCE AND AMOUNT OF FUNDS
SPX estimates that the total amount of funds that will be required to pay
the cash component of the Consideration in the Proposed Business Combination, to
refinance outstanding debt of SPX and of the Company, to pay fees and expenses
related to the Proposed Business Combination and to provide working capital will
be approximately $2.4 billion. See "-- Fees and Expenses." SPX plans to obtain
the necessary Financing pursuant to credit facilities to be arranged by CIBC and
CIBC Oppenheimer. SPX has received a letter from those two entities, dated
February 13, 1998, in which CIBC and CIBC Oppenheimer have stated that they are
highly confident of their ability to raise the Financing. See "-- Conditions of
the Offer -- Financing Condition."
DEBT INSTRUMENTS OF THE COMPANY
SPX has not had access to, and therefore has not been able to review, any
of the documents governing any indebtedness of the Company. Some or all of these
documents may contain provisions for acceleration of the Company's indebtedness
upon a change in control of the Company. In arranging for receipt of the "highly
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confident" letter with respect to the financing necessary to effect the
transaction, SPX has assumed that all of the indebtedness of the Company would
need to be refinanced.
RELATIONSHIPS WITH THE COMPANY
Except as set forth herein under the captions "Prospectus
Summary -- Background of the Offer" and "Background of the Offer," neither SPX
nor, to the best of its knowledge, any of its directors or executive officers
nor any associate or majority-owned subsidiary of any of the foregoing,
beneficially owns or has a right to acquire any equity securities of the
Company. Neither SPX nor, to the best of its knowledge, any of the persons or
entities referred to above, nor any director, executive officer or subsidiary of
any of the foregoing, has effected any transaction in equity securities of the
Company during the last 60 days.
Except as described in this Prospectus, neither SPX nor, to the best of its
knowledge, any of its directors or executive officers has (i) any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies; (ii) had any contacts or negotiations with the Company or its
affiliates concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets; or (iii) has had any transaction with
the Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission applicable
to the Offer.
Pursuant to the Company's Change in Control Severance Policy, if an event
constituting a "Change in Control" (as defined below) of the Company occurs and
the Board of Directors of the Company declares that such event qualifies or will
qualify as a Change in Control, employees of the Company will have contractual
rights against the Company or its successor to receive certain severance
benefits upon a "Qualifying Termination" (as defined below) of their employment
following such Change in Control. Benefits under the Change in Control Severance
Policy include the following: (i) a lump sum equal to one week of annual base
salary and one week of annual executive bonus for each year of service, but not
less than between 7.5 and 36 months of pay (depending upon the level of
responsibility of the employee); (ii) continued insurance coverage; and (iii) in
lieu of outplacement services, between 5% and 15% (depending upon the level of
responsibility of the employee) of annual base salary. The Change in Control
Severance Policy contains a "gross-up" provision to reimburse an employee in the
event that a payment triggers an excise tax pursuant to Section 4999 of the Code
(or similar tax). The Company has also agreed to pay all reasonable legal fees
and disbursements of an employee in enforcing his or her rights under the Change
in Control Severance Policy. The consummation of the transactions contemplated
by the Offer, the Merger and SPX's Demand Solicitation will each constitute a
Change in Control if the Company's Board of Directors declares it to be so. A
"Qualifying Termination" of an employee is defined as either of the following
during the two years following the Change in Control: (i) layoff or involuntary
termination by the Company or its successor other than for cause or by reason of
death or disability, or (ii) termination by the employee for "Good Reason."
"Good Reason" is defined as including, for employees who are corporate officers
or assistant corporate officers of the Company on the date of the Change in
Control, termination by the employee for any reason during the thirty-day period
commencing one year after the date of the Change in Control. The Company has
reported in the Company's 1997 Annual Meeting Proxy Statement that approximately
350 of its employees participate in the Change in Control Severance Policy,
including all salaried employees on the corporate staff of the Company.
A Change in Control of the Company would also affect certain other of the
publicly available employee benefit and compensation plans of the Company, as
follows: Under the Company's 1992 Stock Option Plan, options granted under the
plan (and certain incentive stock options granted prior to the plan's effective
date) would be deemed to have associated stock appreciation rights. Upon
exercise, these rights would be paid in cash, with the number of rights
exercised serving to reduce the number of shares underlying the options. Under
the Company's Performance Unit Plan, outstanding performance units would
immediately vest at a value equal to 100% of the value of the performance units
multiplied by a fraction representing the elapsed portion of the performance
period. The performance units would be required to be paid in cash within ninety
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days following the Change in Control. Under the Company's Supplemental Senior
Executive Retirement Plan and Supplemental Executive Retirement Plan, the
Company would be required to fully fund trusts established for the payment of
plan benefits, and, in addition, upon termination of a participant's employment
within the two years following the Change in Control (i) by the Company other
than for cause or by reason of death or disability or (ii) by the participant
with "Good Reason," the participant would become vested in his or her plan
benefit. ("Good Reason" for purposes of these plans does not include the right
of a participant to terminate his or her employment for any reason during the
thirty-day period commencing one year after the date of the Change in Control.)
Under the Company's 1996 Non-Employee Director Stock Option Plan, all
outstanding options would immediately vest and remain exercisable through their
expiration dates (but not more than ten years from date of grant). Under all
these plans, the consummation of the transactions contemplated by the Offer, the
Merger and SPX's Demand Solicitation will each constitute a Change in Control if
the Company's Board of Directors declares it to be so.
In the Company's 1997 Annual Meeting Proxy Statement, the Company also
reports that, with respect to its defined benefit pension plan, a Change in
Control would result in (i) the immediate vesting of accrued but unvested
benefits and (ii) the grant of service credit on the same basis as the grant of
benefits under the Change in Control Severance Policy (i.e., one week of service
credit for each year of service, but not less than 7.5 months of service credit
and not more than 36 months of service credit (depending on the level of
responsibility of the employee)).
FEES AND EXPENSES
SPX has retained D.F. King & Co., Inc. to act as Information Agent in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interviews and may request
brokers, dealers and other nominee shareholders to forward the Offer materials
to beneficial owners of Shares. The Information Agent will be paid reasonable
and customary compensation for such services, plus reimbursement of
out-of-pocket expenses, and SPX will indemnify the Information Agent against
certain liabilities and expenses in connection with the Offer, including
liabilities under federal securities laws.
CIBC Oppenheimer is acting as financial advisor to SPX in connection with
the Proposed Business Combination, and as Dealer Manager of the Offer, for which
services SPX has paid a fee of $500,000 and has agreed to pay additional fees,
up to a maximum of $8.5 million in the aggregate (in addition to any fees which
may be paid to CIBC Oppenheimer in connection with arranging or participating in
the financing of the transaction), a substantial portion of which is contingent
upon the consummation of the Proposed Business Combination. SPX has also agreed
to reimburse CIBC Oppenheimer for its reasonable out-of-pocket expenses,
including reasonable attorneys' fees up to a specified maximum, and has agreed
to indemnify CIBC Oppenheimer and certain related persons and entities against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws. In connection with CIBC
Oppenheimer's engagement as financial advisor, officers and employees of CIBC
Oppenheimer may communicate in person, by telephone or otherwise with a limited
number of institutions, brokers or other persons who are shareholders of the
Company. CIBC Oppenheimer will not receive any fee for or in connection with
such solicitation activities by its officers and employees apart from the fees
it is otherwise entitled to receive as described above. CIBC Oppenheimer (or its
predecessor) has in the past rendered financial advisory services to SPX for
which it received customary compensation, and may in the future render services
to SPX for which it will receive fees.
SPX will pay the Exchange Agent reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Exchange Agent against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws.
SPX will not pay any fees or commissions to any broker or dealer or other
person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will be reimbursed by SPX for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
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ACCOUNTING TREATMENT
The Offer and the Merger will be accounted for as a reverse acquisition as
the shareholders of the Company will own a majority of the shares of SPX upon
completion of the Merger. Accordingly, for accounting purposes, SPX is treated
as the acquired company and the Company is considered to be the acquiring
company. The purchase price will be allocated to the assets and liabilities
assumed of SPX based on their estimated fair market values at the acquisition
date. Under reverse acquisition accounting, the purchase price is based on the
market value of the SPX Common Stock at the date of acquisition. The cash
portion of the Consideration will be accounted for as a dividend by the combined
company. SPX's financial position and results of operations will not be included
in the Company's consolidated accounts prior to the date the Merger is
consummated.
STOCK EXCHANGE LISTING
The SPX Common Stock is listed on the NYSE and the PE. Application will be
made to list the SPX Common Stock to be issued pursuant to the Offer and the
Merger on the NYSE. As described above under "The Offer -- Conditions of the
Offer -- SPX Stockholder Approval Condition," pursuant to the rules of the NYSE,
assuming there is a quorum present at the shareholders meeting at which the
matter is being considered (consisting of over 50% of the stock issued and
outstanding and entitled to be voted at the shareholders meeting), the issuance
of the additional shares must be approved by a majority of the votes entitled to
be cast by the holders of SPX Common Stock that are present or represented by
proxy at the stockholders meeting. SPX will seek such approval at the SPX Annual
Meeting of Shareholders to be held on May 20, 1998.
THE MERGER
GENERAL
With its letter to the Board of Directors of the Company, SPX delivered a
proposed merger agreement to the Company in contemplation of arriving at a
negotiated transaction. That agreement provides for a single-step "cash
election" merger of the Company into a subsidiary of SPX in which each
outstanding Share would be converted into the right to receive the Consideration
(with shareholders able to elect to receive instead all cash, in the amount of
$48.00 per Share, or all stock, in the amount of 0.6395 share of SPX Common
Stock per Share, subject to proration) in a partially tax-free reorganization.
DISSENTERS' RIGHTS
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the Connecticut Business Act and is qualified in its
entirety by the full text of Part XIII (Sections 33-855 through 33-872) of that
Act.
Holders of Shares do not have dissenters' rights as a result of the Offer.
However, in connection with the Merger, holders of Shares, by complying with the
provisions of Part XIII of the Connecticut Business Act, have certain rights to
dissent and to require the surviving company in the Merger to purchase their
Shares for fair value. In general, a holder of Shares will be entitled to
exercise "dissenters' rights" under the Connecticut Business Act only if such
holder of Shares (i) delivers to the Company prior to the time the vote is taken
with respect to the Merger, written notice of his or her intent to demand
payment for his or her Shares if the Merger is effectuated and (ii) does not
vote his or her Shares in favor of the Merger. If the statutory procedures
relating to dissenters' rights are complied with, such rights could result in a
judicial determination of the fair value of the Shares. The "fair value" would
be determined based on the value of the Shares immediately before the Merger,
excluding any appreciation or depreciation in anticipation of the Merger. The
value so determined could be more or less than the Consideration.
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BUSINESSES OF SPX AND THE COMPANY
SPX
SPX is a global provider of Vehicle Service Solutions to franchised dealers
of motor vehicle manufacturers and independent service locations, Service
Support to vehicle manufacturers and Vehicle Components to the worldwide motor
vehicle industry.
SPX is comprised of two business segments. The Service Solutions segment
includes operations that primarily design, manufacture and market a wide range
of specialty service tools, equipment and services to the global motor vehicle
industry. Major customers are franchised dealers of motor vehicle manufacturers,
aftermarket vehicle service facilities and independent distributors. Vehicle
Components includes operations that primarily design, manufacture and market
transmission and steering components for light- and heavy-duty vehicle markets,
principally in North America and Europe. Major customers of this segment include
vehicle manufacturers, other component manufacturers and the aftermarket.
SPX was organized in 1911 under the laws of Michigan and reincorporated in
Delaware in 1968. SPX was known as The Piston Ring Company until 1931, when it
changed its name to Sealed Power Corporation. In 1988, it changed its name again
to SPX Corporation. Today SPX is a multinational corporation with operations in
14 countries. SPX's corporate headquarters are located at 700 Terrace Point
Drive, Muskegon, MI 49443-3301, telephone number (616) 724-5000.
On April 21, 1998, SPX announced its first quarter 1998 results. Revenues
were $230.4 million in the first quarter of 1998 compared to $236.7 million in
the first quarter of 1997. The first quarter of 1997 included $23.5 million of
revenues of the Sealed Power division which was sold on February 7, 1997. First
quarter 1998 revenues were up 8% over the first quarter 1997 revenues if the
revenues of Sealed Power division are excluded. First quarter 1998 earnings per
share were $1.54 and included a $0.66 per share unrealized gain on the
investment in Shares, net of transaction costs associated with the Proposed
Business Combination. First quarter 1997 earnings per share were $1.68 and
included a $2.14 per share gain on the sale of the Sealed Power division, a
$0.28 per share charge associated with certain litigation, and a $0.71 per share
charge related to debt retirement. All per share information is presented on a
diluted basis.
THE COMPANY
The following information concerning the Company is excerpted from the
Company's 1997 Form 10-K and other publicly available information. See "Company
Information."
The Company was incorporated in the State of Connecticut in 1959 and is
engaged in only one business segment as a worldwide supplier of products to
maintain or improve the efficiency and safety of motor vehicles. During the past
fiscal year, the Company continued to conduct its business in a manner
consistent with prior years.
The Company's principal products can be classified into the following
categories: brake system parts, engine system parts, other vehicle parts and
non-vehicular products. Brake system parts include hydraulic brake master
cylinders, brake shoes, drums, brake cables, hardware and wheel cylinders for
drum brake systems, disc pads, rotors and calipers for disc brake systems, hoses
and electric brake controllers and antilock brake systems. In addition, wheel
oil seals, compressors, air dryers, valves, power boosters, pressure converters,
airbrake actuating products, spring brakes, brake block, remanufactured brake
shoes, hose assemblies, pneumatic and electrical connectors, slack adjusters,
gladhands, hubs and trailer draw bars are manufactured for the heavy-duty brake
market. Engine system parts include condensers, contacts, complete distributors,
distributor caps, ignition coils, rotors, control modules, sensors, actuators,
electron voltage regulators, wire and cable products, carburetor and emission
control parts, fuel pumps, lines and rails, water pumps, oil pumps, filters,
gaskets, heating and air-conditioning coupled hose assemblies, oil coolers,
electronic fuel injection systems, oxygen sensors, EGR and PCV valves. Other
vehicle parts include power steering pumps, power steering coupled hose
assemblies, new and remanufactured clutches, slave cylinders, bell housings,
transmission oil cooler, timing gears and chains, universal joints, drive
shafts, engine mounts, airhorns, air suspension
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system components, heavy duty windshield wiper systems, shifters and linkage,
shock absorbers, ball pins, track rod ends, king pins, tie-rods, rubber bushings
and mounts, louvers, lug nuts, wheel and chrome accessories, HVAC controls,
window lift systems, mirrors, lights, trailer hitches, electrical connectors,
body paints and finishes and cleaners for the high performance market.
Non-vehicular products include marine and power equipment parts.
The Company's products are sold primarily as replacement products for use
by professional technicians and by car and truck owners. Sales are made to
automotive warehouse distributors, heavy-duty distributors, retailers, other
parts manufacturers and parts remanufacturers. The Company also sells its
products to original equipment manufacturers in both the automotive and
heavy-duty markets.
DESCRIPTION OF SPX CAPITAL STOCK
The authorized capital of SPX consists of 3,000,000 shares of SPX Preferred
Stock, without par value, issuable in series, of which, as of February 6, 1998,
500,000 shares have been designated as SPX Series A Preferred Stock and none is
issued or outstanding, and 50,000,000 shares of SPX Common Stock, par value
$10.00 per share, of which, as of April 10, 1998, 12,647,727 shares were issued
and outstanding. All of the outstanding shares of capital stock of SPX are fully
paid and nonassessable. Holders of SPX's capital stock have no preemptive
rights.
The holders of SPX Common Stock are entitled to have dividends declared in
cash, property, or other securities of SPX out of any net profits or net assets
of SPX legally available therefor as and when declared by SPX's Board of
Directors. In the event of the liquidation or dissolution of SPX's business, the
holders of SPX Common Stock will be entitled to receive ratably the balance of
SPX's net assets available for distribution after payment of any liquidation or
distribution preference payable with respect to any then outstanding shares of
SPX Preferred Stock. Each share of SPX Common Stock is entitled to one vote with
respect to matters brought before the stockholders, except for the election of
any Directors who may be elected by vote of any outstanding shares of SPX
Preferred Stock voting as a class.
The rights and privileges of SPX Common Stock are subordinate to the rights
and preferences of any SPX Preferred Stock. The Board of Directors is authorized
to fix by resolution the designation of each series of SPX Preferred Stock, and,
with respect to each series, the stated value of the shares, the dividend rate
and the dates and other provisions respecting the payment of dividends, the
provisions, if any, for a sinking fund, the preferences of the shares in the
event of the liquidation or dissolution of SPX, the provisions, if any,
respecting the redemption of the shares, subject to applicable law, the voting
rights (except that such shares shall not have more than one vote per share),
the terms, if any, upon which the shares would be convertible into or
exchangeable for any other shares of SPX, and any other relative, participating,
optional or other special rights, qualifications, limitations or restrictions.
All shares of any series of SPX Preferred Stock, as between themselves, rank
equally and are identical; and all series of SPX Preferred Stock, as between
themselves, rank equally and are identical except as set forth in resolutions of
the Board of Directors authorizing the issuance of a particular series.
SPX has designated a series of SPX Preferred Stock, SPX Series A Preferred
Stock, which is issuable in certain circumstances, and issued the SPX Rights to
purchase SPX Series A Preferred Stock to holders of shares of SPX Common Stock.
The SPX Rights are exercisable only in the event of certain events described
more fully below under the caption "Comparison of Rights of Holders of Shares
and SPX Common Stock -- SPX's Rights Plan."
SPX's Certificate of Incorporation requires the approval by the holders of
80% of the voting power of SPX's shares as a condition for certain Business
Combinations of SPX with any holder of more than 10% of such voting power unless
certain minimum price and procedural requirements or certain other conditions
are met. The term "Business Combination" is defined to include certain mergers,
dispositions of assets, issuances of securities and similar transactions. See
"Comparison of Rights of Holders of Shares and SPX Common Stock -- Business
Combinations with Substantial Stockholders."
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COMPARISON OF RIGHTS OF HOLDERS
OF SHARES AND SPX COMMON STOCK
Pursuant to the Offer, shareholders of the Company whose Shares are
purchased in the Offer will receive SPX Common Stock in exchange for their
Shares and will become stockholders of SPX. Differences between the laws of
Delaware, the state of incorporation of SPX, and those of Connecticut, the state
of incorporation of the Company, and between SPX's Certificate of Incorporation
and By-Laws, on the one hand, and the Company's Certificate of Incorporation and
By-Laws, on the other hand, will result in several changes in the rights of
shareholders of the Company who elect to exchange their shares for those of SPX.
A summary of the more significant changes is set forth below.
The following summary does not purport to be a complete statement of the
rights of stockholders under SPX's Certificate of Incorporation, By-Laws and
other governing instruments and applicable law, as compared with the rights of
the Company's shareholders under the Company's Certificate of Incorporation,
By-Laws and other governing instruments and applicable law, or a complete
description of the specific provisions referred to herein. The summary is
qualified in its entirety by reference to the governing corporate instruments of
SPX and the Company and to the laws of Delaware and Connecticut, respectively,
to which shareholders are referred. For information as to how these corporate
instruments may be obtained, see "Available Information."
SPECIAL MEETINGS OF STOCKHOLDERS. Under Delaware law, special meetings of
the stockholders may be called by the board of directors or such other persons
as may be authorized by the certificate of incorporation or by-laws. Under SPX's
Certificate of Incorporation and By-Laws, special meetings of the stockholders
may be called only by the Chairman, the President or the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
Under Connecticut law, special meetings of the shareholders may be called
by the board of directors or such other persons as may be authorized by the
certificate of incorporation or by-laws. Under Connecticut law, a corporation
that has a class of voting stock registered pursuant to Section 12 of the
Exchange Act is required to call a special meeting of shareholders upon the
written request of the holders of not less than 35 percent of the voting power
of all shares entitled to vote on the matter at the meeting. If notice of the
special meeting is not given within 30 days after the date the demand is
delivered to the corporation's secretary or if the special meeting is not held
in accordance with the notice, the superior court for the judicial district
where the corporation's principal office is located may summarily order a
meeting to be held. The Company's By-Laws provide that the Chairman of the
Board, the President, or the Board of Directors may, and, upon the written
request of at least 35 percent of the voting power of all shares entitled to
vote at the meeting, the President shall, call a special meeting of shareholders
for such purposes as may be designated in the notice thereof.
NUMBER OF DIRECTORS. Under Delaware law, a board of directors shall
consist of one or more directors, with the number fixed by or in the manner
provided in the by-laws, unless the certificate of incorporation fixes the
number of directors, in which case a change in the number of directors shall be
made only by amendment to the certificate of incorporation. SPX's Certificate of
Incorporation provides that the number of Directors shall be fixed from time to
time by or pursuant to the By-Laws. SPX's By-Laws provide that except as
otherwise fixed pursuant to the provisions of SPX's Certificate of Incorporation
relating to the rights of the holders of any preferred stock, the number of
Directors shall be fixed from time to time by the Board of Directors but shall
not be less than three. At present, the Board of Directors of SPX has nine
members.
Under Connecticut law, a board of directors shall consist of one or more
individuals, with the number specified in or fixed in accordance with the
certificate of incorporation or by-laws. The Company's By-Laws provide that the
Board shall consist of not less than three nor more than twelve members, the
number to be as the Directors shall from time to time direct, provided, however,
that if the Directors fail to fix the number of Directors, the number to be
elected will be the same aggregate number as elected at the preceding annual
meeting of shareholders at which Directors were elected and at any intervening
meeting for the election of Directors. Based on currently available information,
the Board of Directors of the Company presently has nine members.
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CLASSIFICATION OF DIRECTORS. Under Delaware law, the directors of a
corporation may, by the certificate of incorporation or by an initial by-law, or
by a by-law adopted by a vote of the stockholders, be divided into one, two or
three classes. SPX's Certificate of Incorporation provides that the Directors,
other than those who may be elected by the holders of Preferred Stock, will be
classified into three classes, as nearly equal in number as possible.
Under Connecticut law, the certificate of incorporation may provide for
staggering the terms of Directors by dividing the total number of Directors into
up to five groups, with each group containing approximately the same percentage
of the total. The Company's Certificate of Incorporation does not provide for a
staggered Board.
REMOVAL OF DIRECTORS. Under Delaware law, generally any director or the
entire board of directors may be removed, with or without cause, by the holders
of a majority of the shares then entitled to vote at an election of directors.
However, in the case of a corporation with a classified board, stockholders may
effect such removal only for cause, unless the certificate of incorporation
otherwise provides. SPX's Certificate of Incorporation and By-Laws provide that,
subject to certain rights of holders of SPX Preferred Stock, any Director may be
removed from office only for cause, and only by the affirmative vote of the
holders of 80% of the combined voting power of the outstanding shares of stock
entitled to vote in the election of Directors, voting together as a single
class.
Under Connecticut law, unless the certificate of incorporation provides
that directors may be removed only for cause, the shareholders may remove one or
more directors with or without cause only at a meeting called for that purpose.
Under Connecticut law, assuming a quorum is present, a director can be removed
if the number of votes in favor of removal is greater than the number of votes
against removal. In addition, the superior court for the judicial district where
a corporation's principal office is located may, in certain circumstances,
remove a director in a proceeding commenced either by the corporation or by its
shareholders holding at least ten percent of the outstanding shares. The
Company's Certificate of Incorporation is silent on the issue of removal of
Directors.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under Delaware law, the
procedure for filling vacancies may be determined by a provision in the
certificate of incorporation. If, at any time, a corporation should have no
directors, Delaware law provides certain mechanisms to call a special meeting to
elect directors. SPX's Certificate of Incorporation and By-Laws provide that any
vacancies on the Board, including those resulting from any increase in the
number of Directors, shall be filled by the majority of the remaining Directors
then in office, even though less than a quorum.
Under Connecticut law, unless the certificate of incorporation provides
otherwise, vacancies may be filled by the shareholders or the board of
directors, even though less than a quorum. The Company's By-Laws provide that
the shareholders may at any time elect Directors to fill any vacancy not filled
by the Directors, and may elect additional Directors at a meeting at which an
amendment of the By-Laws is approved authorizing an increase in the number of
Directors.
PREEMPTIVE RIGHTS. Under Delaware law, preemptive rights are not available
to stockholders unless specifically authorized by the certificate of
incorporation. SPX's Certificate of Incorporation provides that holders of its
shares shall not have any preemptive rights.
Under Connecticut law, the holders of common stock of a corporation which
was incorporated under the laws of Connecticut prior to January 1, 1997 have
preemptive rights unless the certificate of incorporation expressly provides
otherwise. The Company's Certificate of Incorporation provides that holders of
its shares shall not have any preemptive rights.
CORPORATE ACTION WITHOUT A SHAREHOLDERS' MEETING. Under Delaware law,
unless prohibited by the certificate of incorporation, corporate actions may be
authorized without a meeting by written consent of holders of voting shares
sufficient to approve the action at a meeting where all holders of voting shares
were present and voted. However, under SPX's Certificate of Incorporation,
corporate actions may not be effected by any consent in writing by stockholders.
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Under Connecticut law, actions which would otherwise require shareholder
approval at a meeting of shareholders may be taken without a shareholder meeting
(1) by written consent of all persons entitled to vote on the action, or (2) if
the certificate of incorporation so provides, and the action to be taken is not
an election of directors, by the written consent of persons holding shares
sufficient under the certificate of incorporation to approve the action (but in
no case less than a majority of all shares entitled to vote). The Company's
Certificate of Incorporation does not provide for action by written consent. The
Company's By-Laws provide that any action which may be taken at a meeting of
shareholders may be taken without a meeting by consent in writing, setting forth
the action so taken or to be taken, signed by all the persons who would be
entitled to vote upon such action at a meeting.
DIVIDENDS. Under Delaware law, a corporation may, unless otherwise
restricted by its certificate of incorporation, declare and pay dividends out of
surplus, or, if no surplus exists, out of net profits for the current or
preceding fiscal year, provided that the amount of the capital following the
declaration and payment of the dividend is not less than the aggregate amount of
capital represented by the issued and outstanding stock of all classes having a
preference upon the distribution of the assets of the corporation.
Under Connecticut law, a corporation may make distributions subject to
restriction by the certificate of incorporation. Further, under Connecticut law,
no distribution may be made if, after giving effect thereto, the corporation
would not be able to pay its debts as they become due in the usual course of
business, or the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution.
AMENDMENT OF CERTIFICATE OF INCORPORATION. Under Delaware law, a
corporation may amend its certificate of incorporation if, among other things,
such amendment is approved by a majority of the outstanding stock entitled to
vote; however, whenever the certificate of incorporation shall require for
action by the board of directors or by the stockholders an affirmative vote
greater than that normally provided for by Delaware law, such provision of the
certificate of incorporation may not be amended or repealed without such greater
vote. SPX's Certificate of Incorporation provides that Articles Eighth (number,
classification and power of Directors), Ninth (stockholder meetings), and
Fifteenth (business combinations) of the Certificate of Incorporation may only
be altered or amended by the affirmative vote of the holders of at least 80% of
the voting power of all shares of SPX; however, Article Fifteenth may be amended
or altered by a majority of the outstanding stock entitled to vote, if such
amendment or alteration has been approved by at least two-thirds of the
Continuing Directors (see "-- Business Combinations with Substantial
Stockholders" below).
Under Connecticut law, with limited exceptions, for an amendment to the
certificate of incorporation to be adopted, the board must recommend the
amendment to the shareholders, and the shareholders must approve the amendment
by a majority of the votes entitled to be cast on the amendment.
AMENDMENT OF BY-LAWS. Under Delaware law, the power to adopt, amend or
repeal by-laws is vested in the stockholders unless the certificate of
incorporation confers the power to adopt, amend or repeal by-laws upon the
directors as well. SPX's Certificate of Incorporation provides that, with
limited exceptions, the Board is expressly authorized to adopt, amend and repeal
SPX's By-Laws. SPX's By-Laws provide that, subject to the provisions of the
Certificate of Incorporation, the By-Laws may be altered by a majority vote of
the shares represented and entitled to vote at a meeting, or by the Board of
Directors through a majority vote of those Directors present at any meeting at
which a quorum is present.
Under Connecticut law, a board of directors may generally amend or repeal
the corporation's by-laws and a corporation's shareholders may amend or repeal
the corporation's by-laws even though the by-laws may also be amended or
repealed by its board of directors. The Company's By-Laws provide that the
By-Laws may be adopted, amended or repealed by the shareholders or Directors.
STOCKHOLDER PROPOSAL PROCEDURES. Under SPX's By-Laws, for a matter to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of SPX not less
than 120 days nor more than 150 days prior to the anniversary date of the
immediately preceding annual meeting. A stockholder's notice must state as to
each matter the stockholder
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proposes to bring before the annual meeting: (1) a brief description of the
matter desired to be brought, (2) the name and address of the stockholder
proposing such action, (3) the class and number of shares of the corporation
which are beneficially owned by the stockholder, and (4) any material interest
of the stockholder in such matter.
Under the Company's By-Laws, for a matter to be properly brought before an
annual meeting by a shareholder, the shareholder must be a shareholder of record
on the date of the giving of the notice described below and on the record date
for the determination of shareholders entitled to vote at such annual meeting.
The shareholder must give timely notice thereof in writing to the Secretary of
the Company not less than 120 days prior to the anniversary date of the
immediately preceding annual meeting. However, if the annual meeting is called
for a date that is not within 30 days before or after such anniversary date,
notice must be received not later than the tenth day following the day on which
such notice of the date of the annual meeting is mailed or publicized, whichever
first occurs. A shareholder's notice must state as to each matter the
shareholder proposes to bring before the annual meeting: (1) a brief description
of the matter desired to be brought and the reasons for conducting such business
at the annual meeting, (2) the name and record address of the shareholder, (3)
the class and number of shares of the corporation which are owned beneficially
or of record by the shareholder, (4) any material interest of the shareholder in
such business and a description of all arrangements or understandings between
such shareholder and any other person in connection with the proposal or in
connection with the acquisition, holding, voting or disposing of the Company's
shares, and (5) a representation that the shareholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS. Under SPX's
By-Laws, nominations for the election of Directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the elections of Directors, generally. However,
any stockholder entitled to vote in the election of Directors may nominate one
or more persons for election as Directors at a meeting only if written notice of
such stockholder's intent to make such nomination has been given to the
Secretary of SPX not later than (a) with respect to an election to be held at an
annual meeting of stockholders, 120 days prior to the anniversary date of the
immediately preceding annual meeting, and (b) with respect to an election to be
held at a special meeting of stockholders, the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. Each such notice must set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person to be
nominated, (b) a representation that the stockholder is a holder of record of
stock entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice,
(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person pursuant to which the nomination is to be
made by the stockholder, (d) such other information regarding each nominee as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Commission, and (e) the consent of each nominee to serve as a
Director if elected.
Under the Company's By-Laws, nominations of persons for election to the
Board of Directors may be made at any annual meeting by or at the direction of
the Board of Directors (or any duly authorized committee thereof) or by any
shareholder who is a shareholder of record on the date of the giving of the
notice described below and on the record date for the determination of
shareholders entitled to vote at such annual meeting. Shareholders may nominate
one or more persons for election as Directors at a meeting only if written
notice of such shareholder's intent to make such nomination has been given to
the Secretary of the Company not later than 120 days prior to the anniversary
date of the immediately preceding annual meeting. However, if the annual meeting
is called for a date that is not within 30 days before or after such anniversary
date, notice must be received not later than the tenth day following the day on
which such notice of the date of the annual meeting was mailed or publicized,
whichever first occurs. Each such notice must set forth: (a) the name, age, and
business and residence addresses of the person to be nominated, and the name and
address of the shareholder making the nomination, (b) the shares of stock of the
Company which are owned beneficially or of record by the nominee and the
shareholder making the nomination, (c) the principal occupation or employment of
the nominee, (d) a representation that the shareholder intends to appear in
person or by proxy
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at the meeting to nominate the person, (e) a description of all arrangements or
understandings between the shareholder and each nominee and any other person
pursuant to which the nomination is to be made by the shareholder, (f) such
other information regarding each nominee or shareholder making the nomination as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Commission, and (g) the consent of each nominee to serve as a
Director if elected.
INDEMNIFICATION. Under Delaware law, a corporation has the power to
indemnify directors, officers, employees and agents for actions taken in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. Delaware law provides that a corporation may advance expenses of
defense (upon receipt of a written undertaking from the person seeking the
advance to reimburse the corporation if indemnification is not appropriate) and
must reimburse a successful defendant for expenses, including attorneys' fees,
actually and reasonably incurred, and permits a corporation to purchase and
maintain liability insurance for its directors and officers. Under Delaware law,
no indemnification may be made for any claim, issue or matter as to which a
person has been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable to the corporation, unless and only to
the extent that a court determines that the person is entitled to indemnity for
such expenses as the court deems proper.
SPX's Certificate of Incorporation provides that Directors and officers of
SPX and those serving at the request of SPX as a Director, officer, employee or
agent of another corporation or entity will be indemnified by SPX to the fullest
extent authorized by Delaware law. The indemnification right includes the right
to be paid by SPX the expenses incurred in defending any proceeding in advance
of its final disposition. SPX's Certificate of Incorporation provides that the
indemnification rights conferred by SPX's Certificate of Incorporation are not
exclusive of any other right to which persons seeking indemnification may be
entitled under any law, by-law, agreement, vote of stockholders or disinterested
Directors or otherwise. SPX is authorized by SPX's Certificate of Incorporation
to purchase and maintain insurance on behalf of its Directors and officers.
Under Connecticut law, unless the certificate of incorporation provides
otherwise, a corporation formed prior to January 1, 1997 shall indemnify its
directors, officers, employees and agents for actions taken in good faith and,
in the case of conduct in his or her official capacity, in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. Connecticut law also
provides that a corporation may advance reasonable expenses of defense (upon
receipt of a written undertaking from the person seeking the advance to
reimburse the corporation if indemnification is not appropriate and a written
affirmation of his good faith belief that he or she has met the relevant
standard of conduct or where liability for such conduct has been eliminated in
the certificate of incorporation) and must, unless limited by the certificate of
incorporation, reimburse a successful defendant for expenses, including
attorneys' fees, actually and reasonably incurred, and permits a corporation to
purchase and maintain liability insurance for its directors, officers, employees
and agents. Unless the certificate of incorporation provides otherwise, a
corporation must also provide indemnification and the advancement of expenses if
a court, upon application, determines, among other things, that it is fair and
reasonable to indemnify and make such advances to such person.
The Company's Certificate of Incorporation is silent on these issues. The
Company's By-Laws state that the Company will provide for the indemnification
and advancement of expenses of Directors and others to the extent properly
permitted by law.
LIMITATION OF LIABILITY. In recent years both Delaware and Connecticut
adopted similar though not identical statutes permitting a corporation to limit
the personal liability of its directors by including appropriate language in the
corporation's certificate of incorporation.
Delaware law allows a corporation to include in its certificate of
incorporation a provision limiting personal liability for a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision does not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (b) for acts or
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omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware law concerning unlawful
dividends and stock repurchases and redemptions, or (d) for any transaction from
which the director derived an improper personal benefit. Such provision does not
eliminate or limit the liability of a director for any act or omission occurring
prior to the date when such provision becomes effective.
SPX's Certificate of Incorporation has such a provision. SPX's Certificate
of Incorporation also provides that any repeal or modification of this provision
by the stockholders of SPX will not adversely affect any right or protection of
a Director of SPX existing at the time of such repeal or modification.
Under Connecticut law, a corporation can include in its certificate of
incorporation a provision limiting personal liability for a director to the
corporation or its shareholders for monetary damages for breach of duty as a
director to an amount that is not less than the compensation received by the
director for serving the corporation during the year of the violation if such
breach did not (a) involve a knowing and culpable violation of law by the
director, (b) enable the director or an associate to receive an improper
personal economic gain, (c) show a lack of good faith and a conscious disregard
for the duty of the director to the corporation under circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk of
serious injury to the corporation, (d) constitute a sustained and unexcused
pattern of inattention that amounted to an abdication of the director's duty to
the corporation, or (e) create liability under Section 33-757 of the Connecticut
Business Act concerning improper distributions and other improper actions. Such
provision does not limit or preclude the liability of a director for any act or
omission occurring prior to the effective date of such provision.
The Company's Certificate of Incorporation contains such a provision.
BUSINESS COMBINATIONS WITH SUBSTANTIAL STOCKHOLDERS. SPX's Certificate of
Incorporation requires the approval of a supermajority of SPX's stockholders for
certain business combinations with Substantial Stockholders (as defined below).
Notwithstanding any lesser percentage permitted by law, except as provided
below, 80% of the voting power of SPX's stockholders, voting together as a
single class, must approve any of the following Business Combinations:
(a) Any merger of SPX or any of its subsidiaries with (i) any
Substantial Stockholder or (ii) any other corporation which is, or after
such merger or consolidation would be, an Affiliate or Associate of a
Substantial Stockholder; or
(b) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any Substantial Stockholder, its Affiliate or
Associate of (i) any assets of SPX or (ii) any of its subsidiaries, in each
case having an aggregate Fair Market Value of $10,000,000 or more; or
(c) The issuance or transfer by SPX or any of its subsidiaries of any
securities of SPX or any of its subsidiaries to any Substantial Stockholder
or its Affiliate or Associate in exchange for cash, securities or other
consideration having an aggregate Fair Market Value of $10,000,000 or more;
or
(d) The adoption of any plan or proposal for the liquidation or
dissolution of SPX proposed by or on behalf of any Substantial Stockholder
or its Affiliate or Associate; or
(e) Any reclassification of securities (including any reverse stock
split), or recapitalization of SPX, or any merger or consolidation of SPX
with any of its subsidiaries, or any other transaction (whether or not with
or into or otherwise involving a Substantial Stockholder) which has the
effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of
SPX or any of its subsidiaries which is directly or indirectly owned by any
Substantial Stockholder or its Affiliate or Associate.
The 80% requirement does not apply (i) to Business Combinations where SPX's
stockholders do not receive any cash or other consideration, solely in their
capacities as stockholders, and the Business Combination has been approved by
two-thirds of the Continuing Directors then in office, or (ii) to all other
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Business Combinations which have been approved by two-thirds of the Continuing
Directors then in office and which satisfy all of the following conditions:
(a) The aggregate amount of cash and the Fair Market Value as of the
date of the consummation of the Business Combination (the "Consummation
Date") of the consideration other than cash to be received per share by
holders of SPX Common Stock in such Business Combination is at least equal
to the highest of the following:
(A) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid in order
to acquire any shares of SPX Common Stock beneficially owned by the
Substantial Stockholder which were acquired (1) within the two-year
period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or (2) in
the transaction in which it became a Substantial Stockholder, whichever
is higher, plus interest compounded annually from the date on which the
Substantial Stockholder became a Substantial Stockholder through the
Consummation Date at the prime rate of interest of Harris Trust and
Savings Bank from time to time in effect in Chicago, less the aggregate
amount of any cash dividends paid, and the Fair Market Value of any
non-cash dividends paid, per share of SPX Common Stock from the date on
which the Substantial Stockholder became a Substantial Stockholder
through the Consummation Date in an amount up to but not exceeding the
amount of such interest; or
(B) the Fair Market Value per share of SPX Common Stock on the
Announcement Date or on the date on which the Substantial Stockholder
became a Substantial Stockholder, whichever is higher; or
(C) the higher of the two numbers referred to in clause (B) above,
multiplied by a fraction, the numerator of which is the highest per
share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to acquire any shares of SPX
Common Stock beneficially owned by the Substantial Stockholder which
were acquired within the two-year period immediately prior to the
Announcement Date, and the denominator of which is the Fair Market Value
per share of SPX Common Stock on the first day in such two-year period
on which the Substantial Stockholder beneficially owned any shares of
SPX Common Stock.
(b) The consideration to be received by stockholders is to be in cash
or in the same form as the Substantial Stockholder has previously paid for
shares of the same stock. If multiple forms of consideration have been used
by the Substantial Stockholder, then the form of consideration for the
Business Combination will be cash or the form used to acquire the largest
number of shares previously acquired by the Substantial Stockholder.
(c) Except as approved by at least two-thirds of the Continuing
Directors then in office, between the time that a Substantial Stockholder
becomes such and the Business Combination is consummated, there shall have
been (i) no failure to declare and pay periodic dividends with respect to
any shares of preferred stock outstanding and (ii) no reduction in the
annual rate of dividends paid on SPX Common Stock (with certain
exceptions).
(d) After becoming such, the Substantial Stockholder shall not have
received any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages from SPX or any of
its subsidiaries whether in anticipation of or in connection with such
Business Combination or otherwise.
(e) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Exchange Act shall
have been mailed to public shareholders of the Company at least 30 days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to the
Exchange Act).
"Continuing Director" is defined in SPX's Certificate of Incorporation as
any member of SPX's Board of Directors who is unaffiliated with and not a
representative of the Substantial Stockholder and was a member
59
<PAGE> 64
of the Board prior to the time that the Substantial Stockholder became a
Substantial Stockholder, and any successor of a Continuing Director who is
unaffiliated with and not a representative of the Substantial Stockholder and is
recommended to succeed a Continuing Director by at least two-thirds of the
Continuing Directors then on the Board.
"Fair Market Value" is defined in SPX's Certificate of Incorporation, in
the case of stock, as the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such stock on the
principal United States securities exchange on which such stock is listed, and,
in the case of property other than stock or stock for which no quotation is
available, the value of the property as determined in good faith by at least
two-thirds of the Continuing Directors.
"Substantial Stockholder" is defined in SPX's Certificate of Incorporation
as any person (other than SPX or any of its subsidiaries) who or which:
(i) is the beneficial owner, directly or indirectly, or more than ten
percent of the voting power of the outstanding voting stock of SPX; or
(ii) is an Affiliate of SPX and at any time within the two-year period
immediately prior to the date in question was the beneficial owner,
directly or indirectly, of ten percent or more of the voting power of
the then outstanding voting stock of SPX; or
(iii) is an assignee of or has otherwise succeeded to any shares of the
voting stock of SPX which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Substantial Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
The Company's Certificate of Incorporation does not have a comparable
provision.
BUSINESS COMBINATION STATUTES. Under Delaware law, a corporation is
prohibited from engaging in any business combination with any Interested
Stockholder (defined as the beneficial owner of 15% or more of the voting power
of a company) for a period of three years following the date that such
stockholder became an Interested Stockholder, unless:
(a) 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
(b) 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, or
(c) 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 two-thirds of the outstanding voting stock which is now
owned by the Interested Stockholder.
Under Delaware law, a corporation has the option to opt out of the above
business combination statute. Neither SPX's Certificate of Incorporation nor its
By-Laws excludes SPX from the restrictions imposed thereunder.
Under Connecticut law, a corporation may not engage in any business
combination with any Interested Shareholder (defined as the beneficial owner of
10% or more of the voting power of a corporation) for a period of five years
following the date that such stockholder became an Interested Shareholder (the
"Stock Acquisition Date"), unless, prior to the Stock Acquisition Date, the
board of directors of the corporation and a majority of the non-employee
directors (of which there shall be at least two) approved either the business
combination or the transaction which resulted in the shareholder becoming an
Interested Shareholder. A corporation may opt out of the above provision through
an amendment to the corporation's certificate of incorporation or by-laws
approved through the affirmative vote of the holders of two-thirds of the voting
power of the outstanding voting stock excluding Interested Shareholders and
their affiliates and associates. However,
60
<PAGE> 65
no such amendment shall be effective until 18 months after such shareholder vote
and shall not apply to any business combination with an Interested Shareholder
whose Stock Acquisition Date is on or prior to the effective date of such
amendment.
Neither Company's Certificate of Incorporation nor its By-Laws exclude the
Company from the restrictions imposed thereunder.
Connecticut law also provides that any business combination with an
Interested Shareholder that was not approved by the board of directors prior to
the Stock Acquisition Date, must be approved by the board of directors, 80% of
the voting power and two-thirds of the voting power not controlled by the
Interested Stockholder or meet certain conditions regarding minimum price and
type of consideration.
SPX'S RIGHTS PLAN. SPX entered into the SPX Rights Agreement with The Bank
of New York, as rights agent, on June 25, 1996, as amended October 22, 1997.
Under the SPX Rights Agreement, SPX's Board declared a dividend of one SPX Right
for each outstanding share of SPX Common Stock held of record on June 25, 1996.
Each SPX Right entitles its holder to purchase, upon the occurrence of certain
specified events, one one-thousandth of a share of SPX Series A Preferred Stock,
at an exercise price of $200, subject to adjustment. At no time do the SPX
Rights have any voting rights. The SPX Rights will no longer be exercisable
after the earlier of (i) June 25, 2006, (ii) the redemption of the SPX Rights or
(iii) the exchange of the SPX Rights for SPX Common Stock. The description and
terms of the SPX Rights are set forth in the SPX Rights Agreement.
In general, pursuant to the SPX Rights Agreement, upon the occurrence of
specified triggering events, such as the acquisition by any person (other than
SPX or any of its subsidiaries) of the beneficial ownership of securities
representing 20% or more of the outstanding SPX Common Stock without the prior
approval of SPX's Board, each holder of a SPX Right will have the right to
receive, upon exercise of the SPX Right, that amount of SPX Common Stock having
a market value equal to two times the exercise price of the SPX Right. The SPX
Rights Agreement further provides that if SPX is acquired in a merger or other
business combination or SPX sells more than 50% of its assets and such
transaction is not approved by SPX's Board, SPX's stockholders will have the
right to receive, with respect to each SPX Right, common stock of the acquiring
company having a value equal to two times the exercise price of the SPX Right.
Under certain circumstances, SPX may redeem the SPX Rights for a redemption
price of $.01 per SPX Right.
THE COMPANY'S RIGHTS PLAN. The Company entered into the Rights Agreement
with The Connecticut Bank and Trust Company, N.A., as rights agent, on June 21,
1989. The Company has reserved 600,000 shares of Preferred Stock, without par
value, for issuance under the Rights Agreement.
Under the Rights Agreement, the Company's Board declared a dividend of one
Right for each outstanding Share held of record on June 30, 1989. Each Right
entitles its holder to purchase, upon the occurrence of certain specified
events, one one-hundredth of a share of the Company's Series A Cumulative
Participating Preferred Stock, no par value (the "Series A Preferred Stock"), at
an exercise price of $65 per one one-thousandth share, subject to adjustment. At
no time do the Rights have any voting rights. The Rights will no longer be
exercisable after the earlier of (i) June 25, 1999, (ii) the redemption of the
Rights or (iii) the exchange of the Rights for Shares. The description and terms
of the Rights are set forth in the Rights Agreement.
In general, pursuant to the Rights Agreement, upon the occurrence of
specified triggering events, such as the acquisition by any person (other than
the Company or any of its subsidiaries) of the beneficial ownership of
securities representing 20% or more of the Company's outstanding Common Stock
without the prior approval of the Company's Board, each holder of a Right will
have the right to receive, upon exercise of the Right, that amount of the
Company's Common Stock having a market value equal to two times the exercise
price of the Right. The Rights Agreement further provides that if the Company is
acquired in a merger or other business combination or the Company sells more
than 50% of its assets and such transaction is not approved by the Company's
Board, the Company's shareholders will have the right to receive, with respect
to
61
<PAGE> 66
each Right, common stock of the acquiring company having a market value equal to
two times the exercise price of the Right.
Under certain circumstances, the Company may redeem the Rights for a
redemption price of $.01 per Right.
CONSIDERATION OF NON-STOCKHOLDER CONSTITUENCIES. Under Delaware law, a
board of directors may consider the impact of its decisions on constituencies
other than stockholders. Such constituencies may include creditors, customers,
employees, and perhaps the community generally. However, the interests of other
constituencies may be considered only if there are rationally related benefits
accruing to the stockholders or there is some reasonable relationship to general
stockholder interests.
SPX's Certificate of Incorporation also provides that in determining
whether an Acquisition Proposal is in the best interests of SPX and its
stockholders, the Board shall consider all factors it deems relevant, including
the consideration being offered in the Proposal, not only in relation to the
then current market price, but also in relation to the then current value of SPX
in a freely negotiated transaction and in relation to the Board's estimate of
the future value of SPX as an independent entity; and the social, legal and
economic effects upon employees, suppliers, customers and on the communities in
which SPX is located, as well as on the long term business prospects of SPX.
Under Connecticut law, a director of a corporation must consider, in
determining what he or she reasonably believes to be in the best interests of
the corporation in connection with, among other things, a plan of merger or
share exchange, (1) the long-term as well as the short-term interests of the
corporation, (2) the interests of the shareholders, long-term as well as
short-term, including the possibility that those interests may be best served by
the continued independence of the corporation, (3) the interests of the
corporation's employees, customers, creditors and suppliers, and (4) community
and societal considerations including those of any community in which any office
or other facility of the corporation is located. A director may also consider
any other factors he or she reasonably considers appropriate in determining what
he or she reasonably believes to be in the best interests of the corporation.
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<PAGE> 67
MARKET PRICES AND DIVIDENDS
SPX Common Stock is listed and principally traded on the NYSE (under the
symbol "SPW") and is also listed on the PE. The Shares are listed and
principally traded on the NYSE (under the symbol "ECH"), the PE and the
International Stock Exchange in London. The following table sets forth, for the
periods indicated, the high and low sale prices per share of SPX Common Stock
and per Share as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
SPX COMMON STOCK COMPANY SHARES
------------------------ ------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............................... $17 3/8 $14 1/4 $.10 $38 1/2 $29 7/8 $0.190
Second Quarter.............................. 15 1/8 10 3/4 .10 38 3/4 34 0.205
Third Quarter............................... 16 11 1/8 .10 39 5/8 33 7/8 0.205
Fourth Quarter.............................. 17 14 1/8 .10 39 1/2 33 7/8 0.205
1996
First Quarter............................... 18 1/8 13 5/8 .10 38 3/4 32 5/8 0.205
Second Quarter.............................. 27 1/8 18 .10 37 7/8 33 3/8 0.220
Third Quarter............................... 31 5/8 21 5/8 .10 37 5/8 29 3/4 0.220
Fourth Quarter.............................. 40 1/2 26 7/8 .10 34 1/4 30 1/4 0.220
1997
First Quarter............................... 49 3/4 37 3/8 .10 35 1/4 29 1/2 0.220
Second Quarter.............................. 70 5/8 41 7/8 -- 36 1/2 31 1/8 0.225
Third Quarter............................... 65 3/4 49 -- 38 9/16 33 5/8 0.225
Fourth Quarter.............................. 70 3/8 58 7/16 -- 36 5/8 29 13/16 0.225
1998
First Quarter............................... 79 1/4 65 3/16 -- 52 3/4 34 1/2 0.225
Second Quarter
(through April 28, 1998)................. 77 5/16 70 5/8 -- 52 5/8 47 1/16 0.225
</TABLE>
On February 13, 1998, the last full trading day prior to the first public
announcement by SPX of the Proposed Business Combination, the reported high and
low sale prices and closing price per share of SPX Common Stock and per Share on
the NYSE Composite Tape and per Share on an equivalent share basis based on the
Consideration of $12.00 in cash and 0.4796 share of SPX Common Stock were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
-------------------- --------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX............................................ 75 5/8 74 3/4 75 1/16 -- -- --
The Company.................................... 39 1/4 38 1/2 38 7/8 48 1/4 47 13/16 48
</TABLE>
On April 28, 1998, the date of this Prospectus, the reported high and low
sale prices and closing price per share of SPX Common Stock and per Share on the
NYSE Composite Tape and per Share on an equivalent share basis based on the
Consideration of $12.00 in cash and 0.4796 share of SPX Common Stock were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
-------------------- --------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX............................................ 72 1/2 71 5/16 72 1/16 -- -- --
The Company.................................... 48 1/2 47 1/16 47 3/4 46 3/4 46 3/16 46 9/16
</TABLE>
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES OF
SPX COMMON STOCK AND FOR THE SHARES.
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<PAGE> 68
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table presents historical and pro forma per share data of
SPX, historical per share data of Company and pro forma combined per share data
as if the Proposed Business Combination had occurred as of September 1, 1996,
assuming an Exchange Ratio of 0.4796. The table also presents the Company's pro
forma equivalent per share data. See "Selected Historical Financial Data of
SPX," "Selected Historical Financial Data of the Company," and "Pro Forma
Condensed Combined Financial Data of SPX and the Company" included elsewhere
herein for additional information regarding this pro forma information. The pro
forma combined per share data are intended for information purposes, and do not
purport to represent what the combined entity's results of continuing operations
would actually have been had the transaction in fact occurred at an earlier
date, or project the results for any future date or period. Upon consummation of
the Proposed Business Combination, the actual financial position and results of
operations of the combined company will differ, perhaps significantly, from the
pro forma amounts reflected herein due to a variety of factors, including
changes in operating results between the date of the pro forma financial
information and the date on which the Proposed Business Combination is
consummated and thereafter, as well as the factors discussed under "Risk
Factors."
The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs that could result from the combination of the
companies. Any integration and rationalization of the operations of the Company
may include certain costs that in turn would result in a charge to earnings of
the combined company. Such a charge, which cannot now be quantified fully, may
be material and would be recognized in the period in which such a restructuring
occurs. These costs may include severance and related employee benefit costs,
costs to consolidate manufacturing and distribution facilities, facility
rearrangement costs, relocation and moving costs, training costs, debt
extinguishment costs, and costs associated with change of control agreements,
among others. To date, SPX's access to information related to the Company has
been limited to publicly available information. In addition, publicly available
information does not contain sufficient details related to the Company's
severance plans, employee benefit agreements, change of control costs or debt
extinguishment provisions to enable SPX to quantify the costs associated with
business integration and rationalization actions that may be considered by SPX.
Nonetheless, based on assumptions related to head count reductions and average
annual salaries used to compute the annualized expense savings and assuming a
severance policy that would result in an average severance term of six months,
the estimated pre-tax costs of the severance (excluding any change in control
costs) would be approximately $60.0 million.
The pro forma condensed combined financial data also do not give effect to
any costs savings that could result from the combination of the companies. SPX
management estimates that the combined company can achieve approximately $125.0
million of annualized cost savings in the first full year following the
acquisition, and $175.0 million of annualized cost savings in the second full
year following the acquisition. These costs savings include three categories of
estimated annual savings in the second full year: savings associated with head
count reductions of $120.0 million, reduction in duplicative corporate costs of
$20.0 million, and manufacturing, distribution and sourcing rationalization of
$35.0 million. These savings estimates are based upon assumptions made by SPX
management using available public information of the Company, certain
comparative peer group information of the Company, and SPX's own internal
information. The savings associated with head count reductions were estimated by
multiplying a 10% reduction in the Company's employees, or approximately 3,000
employees, by $40 thousand per employee. The savings per employee were based on
SPX's salary data and assumptions related to the Company's salary structure. SPX
believes that the head count reductions are possible given its own experience
over the past two years and the Company's head count levels compared to various
peer companies. The savings to reduce duplicative corporate costs approximate
SPX's own corporate office expenses. Duplicative corporate costs would include
duplicative executive positions, facilities, overlap of other corporate
functions, and various external fees and costs. Savings from manufacturing,
distribution and sourcing were based upon material cost reductions of 2.5% on an
estimated $1.4 billion of material purchases by the Company. SPX estimated the
Company's material purchases at 50% of the Company's cost of goods sold in the
fiscal year ended August 31, 1997. The 2.5% material cost reduction was based
upon the savings realized by SPX in its own sourcing program over the past two
years.
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<PAGE> 69
<TABLE>
<CAPTION>
THE COMPANY
THE COMPANY PRO FORMA PRO FORMA
SPX(A) HISTORICAL COMBINED(B) EQUIVALENT(C)
------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Income (loss) per common share from
continuing operations(d)(e):
Basic
Six months ended February 28, 1998........ $(4.20) $ 0.94 $(0.72) $(0.35)
Year ended August 31, 1997................ (3.65) (0.75) (3.99) (1.91)
Diluted
Six months ended February 28, 1998........ (4.20) 0.93 (0.72) (0.35)
Year ended August 31, 1997................ (3.65) (0.75) (3.99) (1.91)
Dividends per common share(f):
Six months ended February 28, 1998........ -- 0.45 -- --
Year ended August 31, 1997................ 0.30 0.89 0.30 0.14
Book value per common share:
February 28, 1998......................... (3.46) 14.90 26.41 12.67
August 31, 1997........................... 1.89 14.48 25.56 12.26
</TABLE>
- ---------------
(a) The six-month and twelve-month information for SPX represents SPX's
historical information as of and for the six months ended December 31, 1997
and SPX's pro forma adjusted historical information as of and for the
twelve months ended June 30, 1997, respectively, but is presented as of
February 28, 1998 and August 31, 1997, respectively, to conform to the
Company's reporting. See "Pro Forma Adjusted Historical Financial Data of
SPX."
(b) See "Pro Forma Condensed Combined Financial Data of SPX and the Company."
(c) The Company's pro forma equivalent per share information represents the pro
forma combined per share information multiplied by an Exchange Ratio of
0.4796.
(d) The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs, nor to any cost savings, that could
result from the combination of the companies.
The comparative per share data have been affected by various special
charges and gains recorded by SPX and the Company during the periods
presented.
The pro forma condensed combined financial data of SPX and the Company for
the six months ended February 28, 1998 include special charges of $110.0
million recorded by SPX primarily to combine two divisions and to recognize
the reduced carrying value of certain assets resulting from the decision to
combine the divisions and exit certain product lines. See "Selected
Historical Financial Data of SPX."
The pro forma condensed combined financial data of SPX and the Company for
the year ended August 31, 1997 include special charges and gains of $307.2
million. The special charges and gains included a $4.2 million special
charge recorded by SPX related to the combination of five divisions into
two divisions, a $7.4 million special charge recorded by SPX of anticipated
future legal costs associated with the ongoing litigation with Snap-on
Incorporated, a $67.8 million write-off of goodwill recorded by SPX related
to the acquisitions of Bear Automotive and Allen Testproducts, $254.1
million of repositioning and other special charges recorded by the Company
related to facility realignments and rationalizations and other actions,
and $28.6 million of gains from the sale of two divisions by the Company.
See "Selected Historical Financial Data of SPX" and "Selected Historical
Financial Data of the Company."
(e) For purposes of this presentation, the Company's reported primary loss per
share has been assumed to be equivalent to basic and diluted loss per share
for the year ended August 31, 1997.
(f) In April 1997, SPX eliminated its quarterly cash dividend and stated that
future distributions to shareholders would be in the form of open market
purchases of SPX Common Stock when deemed appropriate by management.
65
<PAGE> 70
SELECTED HISTORICAL FINANCIAL DATA OF SPX
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents the selected historical statement of income
and other financial data of SPX. The financial data as of and for the fiscal
years ended December 31 have been derived from the audited financial statements
of SPX. SPX's selected historical financial data should be read in conjunction
with, and are qualified in their entirety by reference to, the historical
financial statements (and related notes) of SPX which are incorporated by
reference herein. See "Available Information" and "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1997(A) 1996(B) 1995 1994(C) 1993(D,E)
------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................... $922.3 $1,109.4 $1,098.1 $1,079.9 $ 747.2
Cost of products sold........ 669.0 850.1 853.5 821.5 508.0
Selling, general and
administrative............. 175.3 186.5 194.5 198.0 204.1
Other operating expenses,
net(f)..................... 3.9 1.9 8.3 2.9 53.4(c)
Special charges(g)........... 116.5(h) 87.9(i) 10.7(i) -- 27.5(j)
------ -------- -------- -------- --------
Operating income (loss)...... (42.4) (17.0) 31.1 57.5 (45.8)
Other expense (income),
net........................ (74.2)(a) (0.7) (3.0) 0.1 (102.9)(e)
Interest expense, net........ 13.9 31.8 35.7 35.2 15.9
------ -------- -------- -------- --------
Income (loss) before income
taxes...................... 17.9 (48.1) (1.6) 22.2 41.2
Income taxes................. 21.3 7.6 (0.2) 9.1 28.1
------ -------- -------- -------- --------
Income (loss) from continuing
operations................. (3.4) (55.7) (1.4) 13.1 13.1
Discontinued operation(k).... -- -- (2.8) 1.0 2.1
Cumulative effect of
accounting changes(l)...... -- -- -- -- (31.8)
Extraordinary items(m)....... (10.3) (6.6) (1.1) -- (24.0)
------ -------- -------- -------- --------
Net income (loss)............ $(13.7) $ (62.3) $ (5.3) $ 14.1 $ (40.6)
====== ======== ======== ======== ========
Income (loss) per share from
continuing operations:
Basic...................... $(0.27) $ (4.04) $ (0.10) $ 1.02 $ 1.04
Diluted.................... (0.27) (4.04) (0.10) 1.02 1.04
Weighted average number of
common shares outstanding:
Basic...................... 12.754(n) 13.785 13.173 12.805 12.604
Diluted.................... 12.754(n) 13.785 13.173 12.805 12.604
Dividends per share.......... $ 0.10(n) $ 0.40 $ 0.40 $ 0.40 $ 0.40
OTHER FINANCIAL DATA:
Total assets................. $583.8 $ 616.0 $ 831.4 $ 929.0 $1,024.4
Total debt................... 205.3 229.3 319.8 415.2 430.2
Shareholders' equity
(deficit).................. (43.4) 105.9 162.2 158.7 145.4
Capital expenditures......... 22.6 20.2 31.0 48.5 15.1
Depreciation and
amortization............... 25.0 40.8 43.5 38.5 24.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
financial data.
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<PAGE> 71
NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF SPX
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) During 1997, SPX sold its Sealed Power division for $223.0 in gross cash
proceeds. SPX recorded a pretax gain of $71.9, or $31.2 after-tax. Annual
1996 revenues of this division were approximately $230.0. See "Pro Forma
Adjusted Historical Financial Data of SPX."
(b) During 1996, SPX sold its Hy-Lift division for approximately $15.0. Annual
1995 revenues of this division were approximately $45.0. See "Pro Forma
Adjusted Historical Financial Data of SPX."
(c) Effective December 31, 1993, SPX acquired the balance of Sealed Power
Technologies ("SPT") for $39.0. SPX previously owned 49% of SPT and
accounted for its investment using the equity method. SPT's 1993 revenues
were $392.0. As a result of this acquisition, SPX was required to recognize
its share of SPT's losses, $26.9, in 1993. Also in 1993, SPX initiated
consolidation of Sealed Power Europe Limited Partnership which required
recognition of cumulative losses of the partnership since its inception,
resulting in a charge of $21.5. These charges have been included in other
operating expenses, net.
(d) During 1993, SPX acquired Allen Testproducts and its related leasing
company for $102.0. Annual 1992 revenues of this acquisition were
approximately $83.0.
(e) During 1993, SPX divested its Sealed Power Replacement and Truth divisions
for a gain of $105.4 ($64.2 after-tax). Annual 1992 revenues of these
divisions were approximately $247.0.
(f) Other operating expenses, net, include goodwill/intangible amortization,
minority interest, and earnings from equity interests.
(g) Special charges include certain legal costs, restructuring charges, and
write-off of goodwill.
(h) These charges included a $99.0 restructuring charge, a $4.1 charge for five
corporate executive staff reductions, and $13.4 of costs associated with
various legal matters, including $6.5 of anticipated future legal costs
associated with the ongoing litigation with Snap-on Incorporated, legal
costs associated with a settled case in California, and certain other
matters.
SPX recorded the $99.0 restructuring charge to combine two divisions within
the Service Solution segment and to recognize reduced carrying value of
certain assets resulting from the decision to combine the divisions and
exit certain manufactured diagnostic equipment product lines. The
restructuring of the two Service Solutions businesses was in response to
changing market dynamics and changing needs of customers. SPX decided to
combine its OE Tool and Equipment business with its Aftermarket Tool and
Equipment business to provide a single business focused on the combined
market and customer needs. Additionally, SPX decided to exit certain
products to focus upon new generation products that will better meet
customer needs. The decision results in a reduction of workforce and
closing of certain facilities. The components of the charge have been
computed based on management's estimate of the realizable value of the
affected tangible and intangible assets and estimated exit costs including
severance and other employee benefits based on existing severance policies
and local laws.
The $99.0 charge included $63.7 of restructuring costs, $25.8 of reduced
inventory value and $9.5 of reduced value of other tangible and intangible
assets related to exiting certain product lines. These restructuring costs
included $13.7 of severance related costs for approximately 800 people,
$20.3 for incremental repossession and distribution exit costs (including
the termination of lease financing and distributor agreements), $21.2 for
incremental service and software update obligations resulting from SPX's
decision to maintain adequate service capabilities and appropriate software
updates of the exited products for customers who have previously purchased
the exited products, and $8.5 of costs associated with idled facilities.
The implementation of this restructuring is expected to be substantially
complete by the end of 1998.
Of the total special charges of $116.5, the components of the charge that
will require the future payment of cash are $80.9. Cash payments in 1997
related to the special charges were $1.5. The expected future
67
<PAGE> 72
cash payments include an estimated $49.0 in 1998 with the remainder,
principally repossession costs and service and software update obligations,
over the following two years. As there is some uncertainty associated with
the timing of the cash payments, the remaining accrual at December 31, 1997
of $79.4 has been classified in other current accrued liabilities.
Management estimates that savings from the restructuring will increase
operating income by $3.0 in 1998 and $10.0 in 1999. The savings result
primarily from the reduction in headcount and facilities.
(i) During the fourth quarter of 1995, management authorized and committed SPX
to undertake two significant restructuring plans. The first plan
consolidated five Service Solutions divisions into two divisions. The
second plan closed Sealed Power division's German foundry operation and
transferred certain piston ring operations to other facilities. In 1996,
three additional restructuring actions were initiated including an early
retirement program at the Service Solutions divisions, a cost reduction
initiative at several Service Solutions international locations, and an
early retirement program at the Sealed Power division. A summary of these
restructurings follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Service Solutions -- Five divisions consolidated into
two divisions...................................... $11.2 $ 7.0
Service Solutions -- Early retirement................ 1.1 --
Service Solutions -- International................... 3.5 --
SPD -- Closing foundry at SP Europe.................. -- 3.7
SPD early retirement................................. 4.2 --
----- -----
Total...................................... $20.0 $10.7
===== =====
</TABLE>
Service Solutions Restructuring -- In order to improve customer service,
reduce costs and improve productivity and asset utilization, SPX decided to
consolidate five existing Service Solutions divisions into two. This
restructuring plan involved closing two SPX owned manufacturing facilities,
an SPX owned distribution facility, several leased service centers and a
leased sales facility in France. The plan also included combining sales,
engineering and administrative functions, and was completed at the end of
1996. The plan included the termination of approximately 570 employees
resulting in a net reduction of approximately 310 employee positions after
considering staffing requirements at remaining facilities.
SPX recorded a $7.0 charge in 1995 and an $11.2 charge in 1996 to complete
this restructuring. These charges recognized severance and benefits for
employees to be terminated, holding costs of vacated facilities, the
adjustment to fair market value of one manufacturing facility to be closed,
and other costs to complete the consolidation of the divisions. The
distribution facility was sold during the fourth quarter of 1996 and the
manufacturing facilities were sold during 1997.
Service Solutions -- Early Retirement -- Closely associated with the
consolidation of five divisions into two, an early retirement program was
accepted by approximately 60 people and SPX recorded a $1.1 charge in the
first quarter of 1996.
Service Solutions -- International -- During the second quarter of 1996,
SPX recorded a $3.5 restructuring charge principally to recognize severance
associated with the termination of 113 international employees and related
operating downsizing costs.
SPD -- Closing Foundry at SP Europe -- SPX closed its unprofitable foundry
operations at SP Europe and transferred certain piston ring operations to
other facilities. This closing resulted in the elimination of approximately
200 positions and was completed at the end of the third quarter of 1996. In
1995, SPX recorded a $3.7 restructuring charge to accrue severance that was
paid to these employees.
Sealed Power Division Early Retirement -- During the second quarter of
1996, SPX recorded a $4.2 restructuring charge for the early retirement of
94 employees at the Sealed Power division.
The actual savings associated with the 1995 and 1996 restructuring actions
relate primarily to the Service Solutions restructuring actions. The actual
savings achieved in 1996 and 1997 have been
68
<PAGE> 73
consistent with the estimated full year savings of $23.0 by the year 1998.
The actions increased operating income by an estimated $7.0 in 1996 and an
estimated $12.0 in 1997.
These charges were recorded in the appropriate periods in accordance with
the requirements of Emerging Issues Task Force Pronouncement 94-3. Certain
costs incurred in connection with management's planned actions not
qualifying for accrual in 1995 were recorded in 1996, based on employee
acceptance of voluntary termination benefits and the satisfaction of other
requirements to recognize these costs. At December 31, 1997, the
restructuring actions initiated in 1995 and 1996 were complete and the
actual costs to implement the actions did not differ materially from the
estimates used to record these accruals.
At December 31, 1996, SPX recognized a $67.8 goodwill write-off ($83.0
gross and $15.2 of accumulated amortization), with no associated tax
benefit. The goodwill was related to the 1988 acquisition of Bear
Automotive Company and the 1993 acquisition of Allen Testproducts,
collectively referred to as Automotive Diagnostics. This goodwill
represented SPX's intangible business investment in PC based engine
diagnostic equipment, wheel service equipment and gas emissions testing
equipment. At December 31, 1995, management's analysis of this business
projected that the cost savings, market synergies and other factors which,
in part, would be realized from the Bear Automotive and Allen Testproducts
combination in 1995 and various subsequent restructuring actions would
result in non-discounted operating income sufficient to exceed goodwill
amortization. The decision to write off the goodwill resulted from
conclusions drawn from SPX's strategic review process that was completed in
December of 1996. The strategic review found accelerating technological
changes had significantly reduced the remaining life of PC based diagnostic
equipment. The process also found significant uncertainties about the
future opportunities related to gas emissions testing equipment, and a
decline in SPX's wheel service equipment market share. Management's
analysis of this business at December 31, 1996 projected significant
differences in business conditions from its December 31, 1995 analysis
including declining revenues and margins of diagnostic and wheel service
equipment and reduced revenues related to the emissions testing equipment
due to the uncertainties about the future status of the state emissions
programs. This analysis indicated that the businesses, as originally
acquired, would not be able to generate operating income sufficient to
offset the annual goodwill amortization. Assessing the impact of these
factors on the businesses, as originally acquired, management concluded
that Automotive Diagnostics' goodwill was impaired.
(j) During 1993, SPX recognized a $27.5 ($18.5 after-tax) special charge to
combine its Bear Automotive operation with Allen Testproducts.
(k) During 1995, SPX sold SPX Credit Corporation and recorded a pretax loss of
$4.8 ($3.0 after-tax). The financial results of this operation are included
as a discontinued operation through the date of divestiture.
(l) During 1993, SPX adopted a new accounting methodology for its ESOP and
reflected its 49% share of SPT's adoption of SFAS No. 106 regarding
accounting for postretirement benefits other than pensions.
(m) During 1997, SPX tendered for substantially all ($126.7) of its outstanding
11 3/4% senior subordinated notes. SPX recorded an extraordinary item, net
of taxes, of $10.3 for the costs to purchase the notes. During 1996, SPX
purchased $99.9 of these notes and recorded an extraordinary item, net of
taxes, of $6.6 for the costs to purchase the notes. During 1995, SPX
purchased $31.7 of these notes and recorded an extraordinary item, net of
taxes, of $1.1 for the costs to purchase the notes. During 1993, SPX
recorded the costs associated with prepayment of certain SPX and SPT
indebtedness totaling $24.0, net of taxes, as an extraordinary item.
(n) During 1997, SPX purchased 2.147 shares of SPX Common Stock through a Dutch
Auction self-tender offer for $56.00 per share. As of December 31, 1997,
SPX had purchased an additional 0.390 shares through open market purchases.
Also, concurrent with the Dutch Auction, SPX announced the elimination of
quarterly cash dividends and stated that future distributions to
shareholders would be in the form of open market purchases of common stock,
when deemed appropriate by management.
69
<PAGE> 74
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table presents selected historical statement of income and
other financial data of the Company. The financial data as of and for the six
months ended February 28, 1998 and February 28, 1997 have been derived from the
unaudited financial statements of the Company contained in the Company's 1998
Second Quarter Form 10-Q. The financial data as of and for the fiscal years
ended August 31 have been derived from the audited financial statements of the
Company and selected financial data contained in the Company's 1997 Form 10-K.
The operating results for the six months ended February 28, 1998 are not
necessarily indicative of the results that may be expected for the fiscal year
ended August 31, 1998. The Company's selected historical financial data should
be read in conjunction with, and are qualified in their entirety by reference
to, the historical financial statements (and related notes) of the Company which
are incorporated by reference herein (except for the report of the Company's
independent accountants contained in the Company's 1997 Form 10-K which is not
incorporated herein by reference because the consent of the Company's
independent accountants has not yet been obtained). See "Available Information"
and "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR SIX
MONTHS ENDED
FEBRUARY 28, AS OF AND FOR THE FISCAL YEAR ENDED AUGUST 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................ $1,725.2 $1,693.1 $3,568.6 $3,128.7 $2,717.9 $2,229.5 $1,944.5
Cost of goods sold............... 1,303.3 1,280.4 2,707.1 2,309.0 1,932.5 1,571.3 1,378.0
Selling and administrative
expenses....................... 312.5 301.1 640.1 574.6 531.3 468.5 420.4
Repositioning and other special
charges(a)..................... -- -- 254.1 -- -- -- --
Gain on sales of businesses(b)... -- -- (28.6) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations.... 109.4 111.6 (4.1) 245.1 254.1 189.7 146.1
Interest expense, net............ 19.2 16.7 40.6 32.9 23.6 11.7 8.5
-------- -------- -------- -------- -------- -------- --------
Income (loss) before taxes....... 90.2 94.9 (44.7) 212.2 230.5 178.0 137.6
Provisions for taxes............. 30.7 33.2 2.2 70.0 76.1 56.9 44.0
-------- -------- -------- -------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change.... $ 59.5 $ 61.7 (46.9) 142.2 154.4 121.1 93.6
Cumulative effect of accounting
change(c)...................... -- -- -- -- -- 2.6 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................ $ 59.5 $ 61.7 $ (46.9) $ 142.2 $ 154.4 $ 123.7 $ 93.6
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Primary(d)..................... $ -- $ -- $ (0.75) $ 2.30 $ 2.60 $ 2.10 $ 1.60
Basic.......................... 0.94 0.99 -- -- -- -- --
Diluted........................ 0.93 0.98 -- -- -- -- --
Average shares outstanding:
Primary........................ -- -- 62.601 61.919 59.476 58.996 58.560
Basic.......................... 63.194 62.377 -- -- -- -- --
Diluted........................ 63.670 63.225 -- -- -- -- --
Dividends per share.............. $ 0.45 $ 0.44 $ 0.89 $ 0.85 $ 0.79 $ 0.73 $ 0.70
OTHER FINANCIAL DATA:
Total assets..................... $2,381.9 $2,466.8 $2,374.2 $2,130.8 $1,961.0 $1,577.4 $1,263.3
Total debt....................... 801.8 847.2 757.9 495.9 507.1 308.3 164.2
Shareholders' equity............. 945.5 1,046.7 913.7 1,008.9 909.3 799.0 713.8
Capital expenditures............. 66.4 68.9 149.2 104.4 103.9 73.8 41.5
Depreciation and amortization.... 58.2 56.4 113.9 90.9 76.6 64.2 59.7
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
financial data.
70
<PAGE> 75
NOTES TO SELECTED HISTORICAL FINANCIAL
DATA OF THE COMPANY
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) During fiscal 1997, the Company recorded repositioning and other special
charges of $254.1, pretax. The repositioning charge included expenses
related to facility realignments and rationalizations, and the write-down to
net realizable value of businesses to be disposed. In addition, goodwill
associated with brand names no longer in use was written off, inventory
related to discontinued and rationalized product lines was written down,
property, plant and equipment idled by facility closures and product line
rationalizations were reduced, and other investments and deferred customer
acquisition costs were written off.
(b) During fiscal 1997, the Company sold two divisions for gross proceeds of
$75.9. The Company reported a pretax gain of $28.6.
(c) During fiscal 1994, the Company adopted a new accounting methodology for
income taxes.
(d) The Company indicates that pro forma diluted loss per share under FAS 128
would have been less than the reported loss per share for the year ended
August 31, 1997.
(e) During February 1998, the Company signed a definitive agreement to sell its
Midland-Grau heavy duty brake operations to the Haldex Group of Sweden. The
transaction was completed on April 3, 1998. The sales price, which is
subject to completion of the closing date balance sheet, was approximately
$150.0. Any gain from this transaction will be included in the results of
operations for the third quarter. The Company will use the proceeds from the
sale to pay down existing bank debt.
71
<PAGE> 76
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following information is presented as if the Offer and the Merger of
SPX and the Company occurred on September 1, 1996 for statement of income and
related data and on February 28, 1998 for balance sheet data. The pro forma data
assume that the Offer and the Merger are effected by the exchange of shares of
SPX Common Stock and cash for Shares. The pro forma data assume SPX will
exchange 0.4796 share of SPX Common Stock and $12.00 cash for each Share,
whereby 30.268 shares of SPX Common Stock and $757.3 of cash are issued in
exchange for all outstanding Shares and equivalent Shares, other than those
owned by SPX. The Offer and the Merger will be accounted for as a reverse
acquisition, as the shareholders of the Company will own a majority of the
outstanding shares of SPX Common Stock upon completion of the transaction.
Accordingly, for accounting purposes, SPX is treated as the acquired company and
the Company is considered to be the acquiring company. The purchase price will
be allocated to the assets and liabilities assumed of SPX based on their
estimated fair market values at the acquisition date. Under reverse acquisition
accounting, the purchase price of SPX is based on the fair market value of SPX
Common Stock at the date of acquisition. The cash portion of the Consideration
will be accounted for as a dividend by the combined company. SPX's financial
position and results of operations will not be included in the Company's
consolidated financial statements prior to the date the Merger is consummated.
Under reverse acquisition accounting, the purchase price of SPX is based on
the fair market value of SPX Common Stock. For purposes of this pro forma
information, the fair market value of SPX Common Stock is assumed to be $76 1/16
per share, which reflects the closing price of SPX Common Stock on April 16,
1998. The Consideration includes 0.4796 share of SPX Common Stock. This is a
fixed exchange ratio and will not be adjusted in the event of any increase or
decrease in the market price of SPX Common Stock. Consequently, changes in the
market price of SPX Common Stock will not impact these pro forma financial
statements other than to increase or decrease the purchase price of SPX and the
related amount of goodwill and amortization thereof. The measurement date for
determining the fair market value of SPX Common Stock will be the date that the
Minimum Tender Condition is satisfied or waived or the date that SPX has entered
into a definitive agreement or announced an agreement in principle with the
Company providing for a merger or business combination with the Company. If the
market value of SPX Common Stock used in these pro forma financial statements
were assumed to change by $1.00 per share, the impact would be to increase or
decrease annual goodwill amortization and net income by $0.3 million ($0.01 per
share).
The pro forma condensed combined financial data are intended for
information purposes, and do not purport to represent what the combined entity's
results of continuing operations or financial position would actually have been
had the transaction in fact occurred at an earlier date, or project the results
for any future date or period. Upon consummation of the Offer, the actual
financial position and results of operations of the combined company will
differ, perhaps significantly, from the pro forma amounts reflected herein due
to a variety of factors, including changes in operating results between the date
of the pro forma condensed combined financial data and the date on which the
Offer is consummated and thereafter, as well as the factors discussed under
"Risk Factors."
The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs that could result from the combination of the
companies. Any integration and rationalization of the operations of the Company
may include certain costs that in turn would result in a charge to earnings of
the combined company. Such a charge, which cannot now be quantified fully, may
be material and would be recognized in the period in which such a restructuring
occurs. These costs may include severance and related employee benefit costs,
costs to consolidate manufacturing and distribution facilities, facility
rearrangement costs, relocation and moving costs, training costs, debt
extinguishment costs, and costs associated with change of control agreements,
among others. To date, SPX's access to information related to the Company has
been limited to publicly available information. In addition, publicly available
information does not contain sufficient details related to the Company's
severance plans, employee benefit agreements, change of control costs or debt
extinguishment provisions to enable SPX to quantify the costs associated with
business integration and
72
<PAGE> 77
rationalization actions that may be considered by SPX. Nonetheless, based on
assumptions related to head count reductions and average annual salaries used to
compute the annualized expense savings and assuming a severance policy that
would result in an average severance term of six months, the estimated pre-tax
costs of the severance (excluding any change in control costs) would be
approximately $60.0.
The pro forma condensed combined financial data also do not give effect to
any costs savings that could result from the combination of the companies. SPX
management estimates that the combined company can achieve approximately $125.0
of annualized cost savings in the first full year following the acquisition, and
$175.0 of annualized cost savings in the second full year following the
acquisition. These costs savings include three categories of estimated annual
savings in the second full year: savings associated with head count reductions
of $120.0, reduction in duplicative corporate costs of $20.0, and manufacturing,
distribution and sourcing rationalization of $35.0. These savings estimates are
based upon assumptions made by SPX management using available public information
of the Company, certain comparative peer group information of the Company, and
SPX's own internal information. The savings associated with head count
reductions were estimated by multiplying a 10% reduction in the Company's
employees, or approximately 3,000 employees, by $40 thousand per employee. SPX's
average cost per employee was approximately $47 thousand in 1997. SPX believes
that the head count reductions are possible given its own experience over the
past two years and the Company's head count levels compared to various peer
companies. The savings to reduce duplicative corporate costs approximate SPX's
own corporate office expenses. Duplicative corporate costs would include
duplicative executive positions, facilities, overlap of other corporate
functions, and various external fees and costs. Savings from manufacturing,
distribution and sourcing were based upon sourcing savings of 2.5% of material
cost reductions on an estimated $1.4 billion of material purchases by the
Company. The Company's estimated material purchases represent 50% of its cost of
goods sold in the fiscal year ended August 31, 1997.
In the pro forma condensed combined financial data, the Company's
information was derived from the Company's 1997 Form 10-K and the Company's 1998
Second Quarter Form 10-Q. For SPX's pro forma adjusted historical financial
data, see "Pro Forma Adjusted Historical Financial Data of SPX," presented
elsewhere herein.
The pro forma condensed combined financial data should be read in
conjunction with the financial statements and notes thereto included in SPX's
1997 Form 10-K, SPX's 1997 Third Quarter Form 10-Q, the Company's 1997 Form 10-K
and the Company's 1998 Second Quarter Form 10-Q.
73
<PAGE> 78
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE
SPX COMPANY PRO FORMA
HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................................... $455.4 $1,725.2 $ -- $2,180.6
Cost of products sold....................... 328.8 1,303.3 1.7(d) 1,633.8
Selling, general and administrative
expense................................... 88.2 312.5 1.7(d) 402.4
Other operating expenses, net............... 1.9 -- 11.1(d) 13.0
Special charges(l).......................... 110.0 -- -- 110.0
------ -------- ------ --------
Operating income (loss)..................... (73.5) 109.4 (14.5) 21.4
Other expense (income), net................. (1.5) -- -- (1.5)
Interest expense, net....................... 6.6 19.2 42.5(f) 68.3
------ -------- ------ --------
Income (loss) before income taxes........... (78.6) 90.2 (57.0) (45.4)
Provision (benefit) for income taxes........ (28.5) 30.7 (17.4)(g) (15.2)
------ -------- ------ --------
Income (loss)............................... $(50.1) $ 59.5 $(39.6) $ (30.2)
====== ======== ====== ========
Income (loss) per share:
Basic..................................... $(4.20) $ (0.72)
Diluted................................... (4.20) (0.72)
Weighted average number of common shares
outstanding............................... 11.937 29.781(h) 41.718
Dividends per share(m)...................... $ -- $ --
OTHER FINANCIAL DATA:
Capital expenditures........................ $ 12.0 $ 66.4 $ -- $ 78.4
Depreciation and amortization............... 11.7 58.2 13.6 83.5
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined financial data.
74
<PAGE> 79
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
FOR THE YEAR ENDED AUGUST 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SPX
PRO FORMA THE
ADJUSTED COMPANY PRO FORMA
HISTORICAL(B) HISTORICAL(B) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................................... $825.4 $3,568.6 $ -- $4,394.0
Cost of products sold....................... 595.7 2,707.1 3.3(d) 3,306.1
Selling, general and administrative
expense................................... 168.7 640.1 3.3(d) 812.1
Other operating expenses, net............... 3.9 -- 22.2(d) 26.1
Special charges and gains(k,1).............. 81.7 225.5 -- 307.2
------ -------- ------- --------
Operating income (loss)..................... (24.6) (4.1) (28.8) (57.5)
Other expense (income), net................. (2.3) -- -- (2.3)
Interest expense, net....................... 17.8 40.6 79.6(f) 138.0
------ -------- ------- --------
Income (loss) before income taxes........... (40.1) (44.7) (108.4) (193.2)
Provision (benefit) for income taxes........ 10.4 2.2 (32.8)(g) (20.2)
------ -------- ------- --------
Income (loss)(c)............................ $(50.5) $ (46.9) $ (75.6) $ (173.0)
====== ======== ======= ========
Income (loss) per share:
Basic..................................... $(3.65) $ (3.99)
Diluted................................... (3.65) (3.99)
Weighted average number of common shares
outstanding............................... 13.845 29.472(h) 43.317
Dividends per share(m)...................... $ 0.30 $ 0.30
OTHER FINANCIAL DATA:
Capital expenditures........................ $ 17.5 $ 149.2 $ -- $ 166.7
Depreciation and amortization............... 25.0 113.9 27.2 166.1
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined financial data.
75
<PAGE> 80
PRO FORMA CONDENSED COMBINED
BALANCE SHEET OF SPX AND THE COMPANY
AS OF FEBRUARY 28, 1998
(UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
THE
SPX COMPANY PRO FORMA
HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current assets................................. $383.5 $1,207.0 $ 10.3(i) $1,585.9
(14.9)(i)
Property, plant and equipment, net............. 122.1 730.2 40.0(i) 892.3
Marketable securities.......................... -- 80.4 -- 80.4
Intangible assets.............................. -- 318.6 -- 318.6
Goodwill....................................... 60.2 -- (60.2)(i) 1,006.7
1,006.7(i)
Other assets................................... 18.0 45.7 37.5(e) 187.7
87.3(i)
(0.8)(i)
------ -------- -------- --------
Total assets......................... $583.8 $2,381.9 $1,105.9 $4,071.6
====== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes payable and current maturities of
long-term debt............................... $ 2.8 $ 59.6 $ -- $ 62.4
Other current liabilities...................... 283.8 557.7 -- 841.5
Total long-term liabilities.................... 138.1 76.9 (19.4)(i) 250.3
54.7(i)
Long-term debt................................. 202.5 742.2 809.8(e) 1,782.6
28.1(n)
Total shareholders' equity (deficit)........... (43.4) 945.5 999.6(j) 1,134.8
(757.3)(j)
(14.9)(i)
(28.1)(n)
(43.4)(j)
(10.0)(i)
------ -------- -------- --------
Total liabilities and shareholders'
equity............................. $583.8 $2,381.9 $1,105.9 $4,071.6
====== ======== ======== ========
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined balance sheet.
76
<PAGE> 81
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND THE COMPANY
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
(a) Pro forma information as of and for the six months ended February 28, 1998
includes the actual historical results of SPX as of and for the six months
ended December 31, 1997 (the most current fiscal quarter end of SPX within
93 days of February 28, 1998) and the actual historical results of the
Company as of and for the six months ended February 28, 1998.
(b) Pro forma information for the year ended August 31, 1997 includes the pro
forma adjusted historical results of SPX for the twelve months ended June
30, 1997 (the most current fiscal twelve month period of SPX within 93 days
of August 31, 1997) and the actual historical results of the Company for
the year ended August 31, 1997. The pro forma adjusted historical results
of SPX for the twelve months ended June 30, 1997 reflect SPX's February
1997 disposition of the Sealed Power division and its November 1996
disposition of the Hy-Lift division, as if such dispositions occurred on
July 1, 1996. See "Pro Forma Adjusted Historical Financial Data of SPX,"
presented elsewhere herein.
(c) The pro forma condensed combined financial data reflect only results from
continuing operations. SPX recorded a $16.4 extraordinary item, net of
taxes, in the twelve months ended June 30, 1997. The extraordinary item
related to SPX's purchase of its 11 3/4% senior subordinated notes.
(d) These pro forma adjustments reflect the impact of the allocation of the
purchase price to the assets and liabilities of SPX on the pro forma
condensed combined statement of income and other financial data. The
ultimate allocation of the purchase price to the net assets acquired,
goodwill and other intangible assets, liabilities assumed and incomplete
technology of SPX is subject to final determination of their respective
fair values, and as a result, these adjustments could change. The following
table reflects the pro forma condensed combined statement of income impact
of the purchase accounting adjustments:
<TABLE>
<CAPTION>
COST OF SELLING, OTHER
PRODUCTS GENERAL AND OPERATING
SOLD ADMINISTRATIVE EXPENSES TOTAL
-------- -------------- --------- -----
<S> <C> <C> <C> <C>
Additional depreciation.................. $2.5 $2.5 $ -- $ 5.0
Pension expense adjustment............... 0.3 0.3 -- 0.6
Amortization of previously recorded
goodwill............................... -- -- (3.0) (3.0)
Goodwill and intangible amortization on
transaction............................ -- -- 25.2 25.2
Postretirement expense adjustment........ 0.5 0.5 -- 1.0
---- ---- ----- -----
Year ended August 31, 1997............... $3.3 $3.3 $22.2 $28.8
==== ==== ===== =====
Six months ended February 28, 1998....... $1.7 $1.7 $11.1 $14.5
==== ==== ===== =====
</TABLE>
Upon consummation of the transaction, an estimated $10.0 charge for
incomplete technology will occur, however, this charge is not reflected in
the pro forma data as the charge is non-recurring and has no continuing
impact.
(e) This pro forma adjustment reflects the borrowings for the cash portion of
the Consideration, debt issuance costs for new financing, and other
estimated transaction fees of $15.0. The cash portion of the Consideration
is $757.3, which represents $12.00 per Share multiplied by 63.111 Shares
and Share equivalents outstanding.
The outstanding and equivalent Shares include Shares outstanding at
February 28, 1998 and Shares issuable (treasury stock method) upon exercise
of the Company's options, less 1.150 Shares held by SPX as of February 28,
1998. The debt issuance costs are estimated at $37.5 to obtain a new seven
year $2,400 financing to effect the Proposed Business Combination, to
refinance existing debt of both SPX and the Company and to provide working
capital.
77
<PAGE> 82
(f) These pro forma adjustments reflect the interest expense associated with
the incremental borrowings ($837.9) to effect the Proposed Business
Combination including the debt incurred to purchase Shares described in
note (n), as if the incremental borrowings had occurred at September 1,
1996. The pro forma interest expense adjustment also reflects the
refinancing of existing debt under a new seven year $2,400 financing as of
September 1, 1996. The interest expense has been computed on an assumption
that borrowings under the new credit facility will bear interest at a rate
of LIBOR plus 2 1/4% (8% was used in these pro forma financial statements)
and that debt issuance costs are amortized over seven years. If the
interest rate used in the pro forma financial data were assumed to increase
by 1/8%, the impact would be to increase net loss by $0.7 ($0.02 per
share) and by $1.4 ($0.03 per share) for the six months ended February 28,
1998 and for the year ended August 31, 1997, respectively. Average
historical outstanding debt of SPX and the Company, as used in this pro
forma presentation, was $973.3 and $973.5 for the six months ended February
28, 1998 and for the year ended August 31, 1997, respectively.
(g) These adjustments represent the estimated income tax effect of the pro
forma adjustments, excluding goodwill expense which will not be deductible
for tax purposes, using an effective income tax rate of 38%.
(h) These pro forma adjustments reflect the additional shares of SPX Common
Stock to be issued in the transaction. The additional shares to be issued
are calculated assuming that the stock component of the Consideration is
0.4796 share of SPX Common Stock, which converts weighted average
outstanding Shares to weighted average outstanding shares of SPX Common
Stock. The Shares used in these calculations include reported weighted
average outstanding Shares, less 1.150 Shares held by SPX as of February
28, 1998.
(i) These pro forma adjustments reflect the allocation to the assets and
liabilities of SPX of the difference between the market value of SPX and
SPX's book value (the "excess purchase price"). The market value of SPX is
assumed to be the sum of the fair market value of the outstanding SPX
Common Stock (less unallocated SPX Common Stock held by SPX's KSOP and
restricted SPX Common Stock) and the fair value of SPX's outstanding
options. SPX's book value is assumed to be its shareholders' deficit
adjusted by estimated transaction fees of $15.0 which are assumed to have
been incurred by SPX prior to the combination.
<TABLE>
<S> <C> <C>
Market Value of SPX:
Shares of SPX Common Stock outstanding.............. 12.531
Unallocated SPX Common Stock held in KSOP and
Restricted SPX Common Stock...................... $ (0.658)
---------
Adjusted SPX Common Stock outstanding............... 11.873
Market price per share of SPX Common Stock.......... 76.0625
---------
Market value of SPX Common Stock outstanding........ $ 903.1
Market value of outstanding options................. 96.5
---------
Market value of SPX................................. $ 999.6
SPX's Book Value:
December 31, 1997 shareholders' deficit............. $ (43.4)
Assumed transaction fees............................ (15.0)
---------
SPX's Book Value.................................... $ (58.4)
--------
Excess Purchase Price............................... $1,058.0
========
</TABLE>
78
<PAGE> 83
This excess purchase price has been allocated to the assets and liabilities
of SPX as follows:
<TABLE>
<S> <C>
Inventory................................................... $ 10.3
Property, plant & equipment................................. 40.0
Prepaid pension (other assets).............................. 87.3
Deferred financing fees (other assets)...................... (0.8)
Goodwill -- previously recorded............................. (60.2)
Goodwill and intangible assets.............................. 1,006.7
Incomplete technology....................................... 10.0
Postretirement health and life insurance liability.......... 19.4
Deferred tax liability...................................... (54.7)
--------
$1,058.0
========
</TABLE>
The preliminary allocations of the excess purchase price are based upon
current estimates and information available to SPX. Property, plant and
equipment reflect the adjustment to estimated fair market values of these
assets. Prepaid pension reflects the adjustment to the fair market value of
the plan assets less the projected benefit obligation. Goodwill, previously
recorded, reflects the elimination of goodwill that is included in SPX's
historical balance sheet. Goodwill and intangible assets reflects the
amount of excess purchase price remaining after allocations to all other
assets and liabilities. Incomplete technology represents the estimated fair
market value of in process product development costs. Postretirement health
and life insurance liability reflects the adjustment of the liability to
the accumulated benefit obligation. The deferred tax liability reflects the
deferred tax liabilities related to these allocations.
The goodwill recorded as a result of these allocations will be amortized
over a 40 year life. In determining the estimated useful life, management
considered the nature, competitive position, life cycle position, and
historical and expected future operating income of SPX, as well as
management's commitment to support SPX through continued investment in
capital expenditures, operational improvements, and research and
development. After the transaction, the combined company will continually
review whether subsequent events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable.
If events and circumstances indicate that goodwill related to a particular
business should be reviewed for possible impairment, the combined company
will use projections to assess whether future operating income on a
non-discounted basis (before goodwill amortization) of the unit is likely
to exceed the goodwill amortization over the remaining life of the
goodwill, to determine whether a write-down of goodwill to recoverable
value is appropriate.
The ultimate allocation of the purchase price to the net assets acquired,
goodwill, other intangible assets, liabilities assumed and incomplete
technology is subject to final determination of their respective fair
values. This final allocation will be based upon the results of a
professional appraisal that will be performed upon the consummation of the
transaction. SPX management believes the above preliminary allocations of
the purchase price are reasonable and will not materially change upon
completion of the appraisal.
The pro forma adjustments include the elimination of SPX's $14.9 investment
in the 0.416 Shares (included in current assets). As of December 31, 1997,
SPX had recorded an investment of $14.9 in the common stock of the Company.
This investment represents 0.416 Shares, or approximately 0.7% ownership of
the Company. As discussed, for accounting purposes, SPX will not be
considered the acquiring company. An objective of acquiring the common
stock of the Company is to minimize the costs associated with pursuing the
offer to purchase the Company by the expected short-term appreciation in
the Company's stock price. Consequently, the Shares are considered to be
trading securities and are carried on the consolidated balance sheet in
prepaid and other current assets at market value. The unrealized gain
related to this investment in the six months ended December 31, 1997 was
79
<PAGE> 84
immaterial. As of February 28, 1998, there were no other intercorporate
transactions that required elimination.
(j) These pro forma adjustments reflect the effect of reverse acquisition
accounting by adding the market value of SPX ($999.6), subtracting SPX's
December 31, 1997 shareholder deficit ($43.4), and subtracting the cash
payout ($757.3) which is treated as a dividend by the combined company.
(k) Reflects a reclassification to special charges of $6.5 of legal costs that
were previously classified as other expense (income), net in SPX's 1997
Third Quarter Form 10-Q.
(l) The pro forma condensed combined financial data do not give effect to any
integration or restructuring costs, nor to any cost savings, that could
result from the combination of the companies.
The pro forma condensed combined financial data of SPX and the Company for
the six months ended February 28, 1998 include special charges of $110.0
recorded by SPX primarily to combine two divisions and to recognize reduced
carrying value of certain assets resulting from the decision to combine the
divisions and exit certain product lines. See "Selected Historical
Financial Data of SPX."
The pro forma condensed combined financial data of SPX and the Company for
the year ended August 31, 1997 include special charges and gains of $307.2.
The special charges and gains included a $7.4 special charge recorded by
SPX related to the combination of five divisions into two divisions, a $6.5
special charge recorded by SPX of anticipated future legal costs associated
with the ongoing litigation with Snap-on Incorporated, a $67.8 write-off of
goodwill recorded by SPX related to the acquisitions of Bear Automotive and
Allen Test products, $254.1 of repositioning and other special charges
recorded by the Company related to facility realignments and
rationalizations and other actions, and $28.6 of gains from the sale of two
divisions by the Company. See "Selected Historical Financial Data of SPX"
and "Selected Historical Financial Data of the Company."
(m) Represents the historical quarterly cash dividend per share of SPX for the
periods presented. In April 1997, SPX eliminated its quarterly cash dividend
and stated that future share repurchases would be used, when appropriate,
for distributions to shareholders.
(n) Represents the debt incurred by SPX to purchase an additional 0.734 Shares
in February 1998.
80
<PAGE> 85
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF SPX
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
On February 7, 1997, SPX completed the sale of substantially all of the
assets and rights used in the manufacture and distribution of piston rings and
cylinder liners, known as the Sealed Power division ("SPD"). The gross cash
sales proceeds were $223.0. Additionally, effective November 1, 1996, SPX sold
its Hy-Lift division to W.A. Thomas Company. Hy-Lift manufactures and
distributes engine valve train components to both the original equipment market
and the aftermarket. The gross cash sales proceeds were $15.0.
The following historical financial data include the results of SPD through
February 7, 1997, and the results of Hy-Lift through November 1, 1996, their
dates of disposition. The following unaudited pro forma adjusted historical
financial data for the twelve months ended June 30, 1997 reflect the disposition
of these divisions as if they had occurred as of July 1, 1996. The pro forma
adjusted historical financial data do not purport to represent what SPX's
results of continuing operations would actually have been had the transactions
in fact occurred as of July 1, 1996, or project the results for any future
period.
The pro forma adjusted historical financial data should be read in
conjunction with the financial statements and notes thereto included in SPX's
1997 Form 10-K, SPX's Current Report on Form 8-K, dated February 21, 1997, and
SPX's 1997 Second Quarter Form 10-Q.
81
<PAGE> 86
PRO FORMA ADJUSTED HISTORICAL
FINANCIAL DATA OF SPX
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------
HISTORICAL DIVEST(A) OTHER PRO FORMA
---------- --------- ------ ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues....................................... $973.4 $(148.0) $ -- $ 825.4
Cost of products sold.......................... 726.2 (130.5) -- 595.7
Selling, general & administrative.............. 176.8 (8.1) -- 168.7
Other operating expenses, net.................. 2.7 1.2 -- 3.9
Special charges(e)............................. 81.7 -- -- 81.7
------ ------- ------ ---------
Operating income (loss)........................ (14.0) (10.6) (24.6)
Other (income) expense......................... (74.2) -- 71.9(b) (2.3)
Interest expense, net.......................... 22.1 -- (4.3)(c) 17.8
------ ------- ------ ---------
Income (loss) before income taxes.............. 38.1 (10.6) (67.6) (40.1)
Provision for income taxes..................... 53.4 (3.8) (39.2)(d) 10.4
------ ------- ------ ---------
Income (loss)(f)............................... $(15.3) $ (6.8) $(28.4) $ (50.5)
====== ======= ====== =========
Income (loss) per share:
Basic........................................ $(1.11) $ (3.65)
Diluted...................................... (1.11) (3.65)
Weighted average number of shares.............. 13.845 13.845
OTHER FINANCIAL DATA:
Capital expenditures........................... $ 23.0 $ (5.5) $ 17.5
Depreciation and amortization.................. 32.6 (7.6) 25.0
</TABLE>
- ---------------
(a) This column reflects the operating results of SPD and Hy-Lift through their
dates of disposition, February 7, 1997 and November 1, 1996, respectively.
(b) Adjustment to exclude the gain on the sale of SPD. SPX's gain on the sale of
Hy-Lift was immaterial.
(c) Adjustment to interest expense, net, assuming the use of net proceeds to
reduce revolving credit and other debt.
(d) Adjustment to income tax expense to reflect the tax effect of the
adjustments.
(e) Reflects a reclassification to special charges of $6.5 of legal costs to
special charges that were previously classified as other expense (income),
net in SPX's 1997 Second Quarter Form 10-Q.
(f) Income excludes extraordinary item of $16.4, net of taxes.
82
<PAGE> 87
VALIDITY OF SPX COMMON STOCK
The validity of the shares of SPX Common Stock offered hereby has been
passed upon for SPX by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), One New York Plaza, New York, New York
10004.
EXPERTS
The audited consolidated financial statements of SPX included in SPX's 1997
Form 10-K incorporated by reference in this Prospectus and elsewhere in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
83
<PAGE> 88
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and Rights and any
other required documents should be sent or delivered by each holder of Shares or
his or her broker, dealer, commercial bank, trust company or other nominee to
the Exchange Agent at one of its addresses set forth below.
THE EXCHANGE AGENT
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight Courier:
Tender & Exchange (For Eligible Institutions Tender & Exchange
Department Only) Department
P.O. Box 11248 212-815-6213 101 Barclay Street
Church Street Station For Information Telephone Receive and Deliver Window
New York, New York 800-507-9357 New York, New York
10286-1248 10286
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. Any requests for additional copies of this Prospectus, the Letter
of Transmittal and the Notice of Guaranteed Delivery may be directed to the
Information Agent. You may also contact your local broker, commercial bank,
trust company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
Bankers and brokers call collect: 212-269-5550
All others call toll free:
800-758-5378
THE DEALER MANAGER FOR THE OFFER IS:
CIBC OPPENHEIMER CORP.
200 WEST MADISON
SUITE #2300
CHICAGO, IL 60606
(312) 750-8749
