<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1998
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SPX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3429 38-1016240
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------------
700 TERRACE POINT DRIVE
MUSKEGON, MICHIGAN 49443-3301
(616) 724-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
CHRISTOPHER J. KEARNEY, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
SPX CORPORATION
700 TERRACE POINT DRIVE
MUSKEGON, MICHIGAN 49443-3301
(616) 724-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
AVIVA DIAMANT, ESQ. JOANNE L. BOBER, ESQ. ERIC S. ROBINSON, ESQ.
FRIED, FRANK, HARRIS, SHRIVER SENIOR VICE PRESIDENT, GENERAL COUNSEL WACHTELL, LIPTON, ROSEN &
& JACOBSON AND SECRETARY KATZ
ONE NEW YORK PLAZA GENERAL SIGNAL CORPORATION 51 WEST 52ND STREET
NEW YORK, NEW YORK 10004 ONE HIGH RIDGE PARK, P.O. BOX 10010 NEW YORK, NEW YORK 10019
(212) 859-8000 STAMFORD, CONNECTICUT 06904 (212) 403-1000
(203) 329-4100
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of General Signal Corporation ("General
Signal") with and into SAC Corp., pursuant to the Agreement and Plan of Merger,
dated as of July 19, 1998, among those two parties and SPX Corporation ("SPX"),
described in the enclosed Joint Proxy Statement/Prospectus, have been satisfied
or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE OFFERING PRICE AMOUNT OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $10.00, of SPX 18,227,270(1)(2) N/A $900,804,212(2) $265,737.24(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Rights to Purchase Preferred Stock(3) 18,227,270 N/A N/A N/A
====================================================================================================================================
</TABLE>
(1) Represents 43,543,406 shares of common stock of General Signal (the
"General Signal Common Stock") outstanding on July 13, 1998 (exclusive of
unvested restricted shares to be exchanged for a cash payment by General
Signal immediately prior to the Merger), multiplied by the exchange ratio
of 0.4186.
(2) Pursuant to Rules 457(f)(1) and (3) and 457(c) of the Securities Act of
1933, as amended (the "Securities Act"), and solely for purposes of
calculating the registration fee, the registration fee was computed on the
basis of the average of the high and low prices of General Signal Common
Stock as reported on the New York Stock Exchange, Inc. Composite Tape on
August 5, 1998 less the amount of cash to be paid by SPX in connection with
the Merger.
(3) Associated with the Common Stock of SPX are rights to purchase Series A
Junior Participating Preferred Stock of SPX that will not be exercisable or
evidenced separately from the Common Stock of SPX prior to the occurrence
of certain events.
- -------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED AUGUST 6, 1998
[SPX CORPORATION LETTERHEAD]
[_________], 1998
Fellow Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
SPX Corporation on [date], 1998, at 10:00 a.m. (Eastern Time), at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, 27th Floor, New
York, New York.
On July 19, 1998, SPX and General Signal Corporation entered into an
Agreement and Plan of Merger providing for SPX to acquire General Signal. The
acquisition will be accomplished by the merger of General Signal into a wholly
owned subsidiary of SPX. In the Merger, stockholders of General Signal will
receive, for each of their General Signal shares, at their election, either (i)
0.6977 of a share of SPX Common Stock or (ii) $45.00 in cash, without interest,
or (iii) 0.4186 of a share of SPX Common Stock and $18.00 in cash, without
interest, subject to proration to ensure that 60% of the outstanding General
Signal shares are exchanged for SPX Common Stock and 40% of the outstanding
General Signal shares are exchanged for cash. Immediately after the Merger,
stockholders of General Signal will own approximately 60% and stockholders of
SPX will own approximately 40% of SPX.
The proposal which you and the other stockholders of SPX are being asked to
vote on at the Special Meeting is the approval of the issuance by SPX of shares
of its Common Stock in the Merger. THE SPX BOARD OF DIRECTORS, BY UNANIMOUS VOTE
OF THOSE PRESENT (ONE DIRECTOR HAVING BEEN UNABLE TO ATTEND THE BOARD MEETING),
APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE PROPOSAL. Approval of the proposal requires the affirmative vote of
the holders of a majority of the outstanding shares present in person or
represented by proxy at the Special Meeting and entitled to vote.
I am pleased you have chosen to invest in SPX Corporation. I urge you to
vote, sign and date the enclosed proxy card and return it in the enclosed
business reply envelope, even if you plan to attend the Special Meeting. No
postage is required if mailed in the United States. Your vote is important, and
voting by proxy will ensure your representation at the Special Meeting even if
you cannot attend in person.
The Merger, the Merger Agreement and the proposal you are voting on are
more fully described in the accompanying Joint Proxy Statement/Prospectus, which
you should read carefully. If you have any questions or require additional
information about the Special Meeting or the Merger, please call D.F. King &
Co., Inc., our proxy solicitor/information agent, at (800) 628-8510.
Sincerely,
JOHN B. BLYSTONE
Chairman, President and
Chief Executive Officer
<PAGE> 3
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED AUGUST 6, 1998
[SPX CORPORATION LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
, 1998
To the Stockholders of
SPX Corporation:
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of SPX Corporation, a Delaware corporation ("SPX"), will be held on
[date], 1998, at 10:00 a.m. (Eastern Time) at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, 27th Floor, New York, New York,
to consider and vote upon approval of the issuance of shares of common stock,
par value $10.00 per share, of SPX (the "SPX Common Stock") in the merger (the
"Merger") of General Signal Corporation ("General Signal") with and into SAC
Corp., a wholly owned subsidiary of SPX ("MergerSub"), in accordance with the
Agreement and Plan of Merger, dated as of July 19, 1998 (the "Merger
Agreement"), among SPX, MergerSub and General Signal (the "SPX Proposal").
Stockholders of SPX of record at the close of business on [ ], 1998 are
entitled to notice of, and to vote at, the Special Meeting and at any and all
adjournments or postponements thereof. Reference is made to the attached Joint
Proxy Statement/Prospectus for a more complete description of the Merger
Agreement and the transactions contemplated thereby, including the Merger. A
complete list of the holders of record of SPX Common Stock entitled to vote at
the Special Meeting will be open to examination, during ordinary business hours,
at SPX's corporate headquarters, for the ten days preceding the Special Meeting,
and at the Special Meeting, by any stockholder for any purpose germane to the
Special Meeting.
It is important that your shares of SPX Common Stock be represented at the
Special Meeting, regardless of the number of shares you hold. You are urged to
specify your voting preference by completing, dating and signing the enclosed
proxy card and returning it in the enclosed business reply envelope. No postage
is required if mailed in the United States. If you wish to vote in accordance
with the recommendation of the Board of Directors of SPX, all you need to do is
date and sign the proxy card and return it in the enclosed envelope. If you
receive more than one form of proxy, it is an indication that your shares are
registered in more than one account. All proxy forms received by you should be
signed and returned promptly to ensure that all of your shares are voted.
If your shares are not registered in your own name and you plan to attend
the Special Meeting and vote your shares in person, you will need to ask the
broker, trust company, bank or other nominee that holds your shares to provide
you with evidence of your share ownership on [ ], 1998 and bring that
evidence to the Special Meeting. Please complete, sign and return your proxy
card whether or not you plan to attend the Special Meeting.
By order of the Board of Directors,
Christopher J. Kearney
Vice President, Secretary and General Counsel
[ ], 1998
YOUR BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF THOSE PRESENT (ONE DIRECTOR
HAVING BEEN UNABLE TO ATTEND THE BOARD MEETING), RECOMMENDS THAT YOU VOTE TO
APPROVE THE SPX PROPOSAL, WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT
PROXY STATEMENT/PROSPECTUS. YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE SHARES OF SPX COMMON STOCK PRESENT IN PERSON OR
REPRESENTED BY PROXY AT THE SPECIAL MEETING AND ENTITLED TO VOTE IS REQUIRED TO
APPROVE THE SPX PROPOSAL. YOU ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU
MAY, IF YOU WISH, REVOKE ANY PREVIOUSLY SUBMITTED PROXY CARD AND VOTE IN PERSON.
<PAGE> 4
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED AUGUST 6, 1998
[GSX LOGO] [ ], 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
General Signal Corporation to be held on [date], 1998 at [time] at General
Signal's headquarters, One High Ridge Park, Stamford, Connecticut.
At the Special Meeting, you will be asked to consider and vote upon the
proposed merger of General Signal into a subsidiary of SPX Corporation pursuant
to a Merger Agreement that General Signal entered into on July 19, 1998. SPX is
a diversified servicer and manufacturer of tools, equipment and components for
the global motor vehicle industry, and has an excellent record of enhancing
stockholder value in recent years.
In the Merger, each of your shares of General Signal Common Stock will be
exchanged for, at your election, either (1) 0.6977 of a share of SPX Common
Stock or (2) $45.00 in cash, without interest, or (3) 0.4186 of a share of SPX
Common Stock and $18.00 in cash, without interest, and subject to proration to
ensure that 60% of the outstanding General Signal shares are exchanged for SPX
Common Stock and 40% of the outstanding General Signal shares are exchanged for
cash. Immediately after the Merger, stockholders of General Signal will own
approximately 60% and stockholders of SPX will own approximately 40% of SPX.
After careful consideration, the Board of Directors has unanimously
determined that the Merger is advisable, fair to, and in the best interests of,
General Signal and its stockholders. ACCORDINGLY, THE BOARD HAS APPROVED THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF GENERAL SIGNAL
VOTE "FOR" ITS APPROVAL AND ADOPTION AT THE SPECIAL MEETING.
Enclosed is a Joint Proxy Statement/Prospectus which contains historical
and pro forma financial information concerning General Signal and SPX, a
detailed description of the Merger and the background of the transaction, and a
complete copy of the Merger Agreement. I urge you to review these materials
carefully.
Because of the significance of the proposed Merger to the future of General
Signal, your participation in the Special Meeting, in person or by proxy, is
especially important. IF YOU ABSTAIN OR FAIL TO VOTE AT THE SPECIAL MEETING, IT
WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER. ACCORDINGLY, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD PROMPTLY AND MAIL IT IN THE
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL
MEETING. Returning the proxy card does not deprive you of your right to attend
the meeting and vote your shares in person.
Sincerely,
Michael D. Lockhart
Chairman, President
and Chief Executive Officer
<PAGE> 5
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED AUGUST 6, 1998
GENERAL SIGNAL CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
, 1998
To the Stockholders of General Signal Corporation:
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of General Signal Corporation, a New York corporation ("General
Signal"), will be held on [date], 1998 at [time] at General Signal's
headquarters, One High Ridge Park, Stamford, Connecticut for the purpose of
considering and voting upon approval and adoption of an Agreement and Plan of
Merger, dated as of July 19, 1998 (the "Merger Agreement"), by and among SPX
Corporation ("SPX"), SAC Corp., a wholly owned subsidiary of SPX ("MergerSub"),
and General Signal, pursuant to which General Signal will be merged with and
into MergerSub (the "Merger"), and the separate corporate existence of General
Signal will cease.
Enclosed with this Notice of Special Meeting is a Joint Proxy
Statement/Prospectus containing a more complete description of the Merger
Agreement and the transactions contemplated thereby, including the Merger.
Stockholders are urged to read the Joint Proxy Statement/Prospectus carefully.
Only stockholders of record at the close of business on [ ], 1998
are entitled to notice of, and to vote at, the Special Meeting and at any and
all adjournments or postponements thereof. The affirmative vote of holders of
two-thirds of the shares of General Signal Common Stock outstanding and entitled
to vote is required for approval and adoption of the Merger Agreement.
It is important that your shares be represented at the Special Meeting,
regardless of the number of shares you hold. IF YOU ABSTAIN OR FAIL TO VOTE AT
THE SPECIAL MEETING, IT WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER
AGREEMENT. ACCORDINGLY, YOU ARE URGED TO SPECIFY YOUR VOTING PREFERENCE BY
COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE
ENCLOSED BUSINESS REPLY ENVELOPE. No postage is required if mailed in the United
States. If you wish to vote in accordance with the recommendation of the General
Signal Board of Directors, all you need to do is date and sign the proxy card
and return it in the enclosed envelope. If you receive more than one form of
proxy, it is an indication that your shares are registered in more than one
account. All proxy forms received by you should be signed and returned promptly
to ensure that all of your shares are voted. Returning the proxy card does not
deprive you of your right to attend the Special Meeting and vote your shares in
person.
If your shares are not registered in your own name and you plan to attend
the Special Meeting and vote your shares in person, you will need to ask the
broker, trust company, bank or other nominee that holds your shares to provide
you with evidence of your share ownership on [ ], 1998 and bring that
evidence to the Special Meeting.
Please complete and return your proxy card whether or not you plan to
attend the Special Meeting.
ELECTION OF MERGER CONSIDERATION. Pursuant to the Merger Agreement, each
General Signal stockholder will be entitled to receive, at his or her election
but subject to the limitations and proration procedures set forth in the Merger
Agreement and described in the Joint Proxy Statement/Prospectus, for each share
of common stock of General Signal, either (i) 0.6977 of a share of common stock,
par value $10.00 per share, of SPX ("SPX Common Stock"); or (ii) $45.00 in cash,
without interest; or (iii) 0.4186 of a share of SPX Common Stock and $18.00 in
cash, without interest. A [yellow] form of election (the "Form of Election") for
specifying the form of consideration you would like to receive in exchange for
your shares is enclosed with this Notice of Special
<PAGE> 6
Meeting, together with a [blue] letter of transmittal and instructions
(collectively, the "Letter of Transmittal") for transmitting stock certificates
representing your General Signal shares. Elections may be made by delivering the
Form of Election together with the Letter of Transmittal and other required
material set forth in the Letter of Transmittal (as more fully described in the
accompanying Joint Proxy Statement/Prospectus) for receipt by SPX's Exchange
Agent no later than 5:00 p.m. (Eastern Time) on [date], 1998 (the day before the
Special Meeting). BECAUSE ELECTIONS MUST BE MADE PRIOR TO THE SPECIAL MEETING,
REGARDLESS OF HOW YOU INTEND TO VOTE WITH RESPECT TO THE MERGER AGREEMENT, YOU
ARE URGED TO COMPLETE AND SIGN THE FORM OF ELECTION AND LETTER OF TRANSMITTAL
AND RETURN THEM AND THE OTHER REQUIRED MATERIAL SET FORTH IN THE LETTER OF
TRANSMITTAL AS PROMPTLY AS POSSIBLE.
By order of the Board of Directors,
Joanne L. Bober
Senior Vice President,
General Counsel and Secretary
[ ], 1998
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE AND
ADOPT THE MERGER AGREEMENT, WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS. YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE
OF TWO-THIRDS OF THE SHARES OF GENERAL SIGNAL COMMON STOCK OUTSTANDING AND
ENTITLED TO VOTE IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT. YOU ARE
URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY, IF YOU WISH, REVOKE ANY
PREVIOUSLY SUBMITTED PROXY CARD AND VOTE IN PERSON.
<PAGE> 7
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED AUGUST 6, 1998
SPX CORPORATION
AND
GENERAL SIGNAL CORPORATION
JOINT PROXY STATEMENT
FOR
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD [ ], 1998
---------------------
SPX CORPORATION
PROSPECTUS
----------------------
This Joint Proxy Statement/Prospectus constitutes the proxy statement of
each of SPX Corporation, a Delaware corporation ("SPX"), and General Signal
Corporation, a New York corporation ("General Signal"), relating to the
solicitation of proxies for use at the special meetings of stockholders of each
of SPX and General Signal scheduled to be held on [ ], 1998, and at any
adjournments or postponements thereof (respectively, the "SPX Special Meeting"
and the "General Signal Special Meeting" and, collectively, the "Special
Meetings"). This Joint Proxy Statement/Prospectus relates to the Agreement and
Plan of Merger, dated as of July 19, 1998 (the "Merger Agreement"), by and among
SPX, SAC Corp., a wholly owned subsidiary of SPX ("MergerSub"), and General
Signal, pursuant to which General Signal will merge with and into MergerSub (the
"Merger"), with MergerSub surviving as a wholly owned subsidiary of SPX (that
company after the Merger is sometimes referred to herein as the "Surviving
Corporation").
In the Merger, each General Signal stockholder will be entitled to receive,
at his or her election but subject to the limitations and proration procedures
described in this Joint Proxy Statement/Prospectus and as set forth in the
Merger Agreement, for each share of common stock, par value $1.00 per share, of
General Signal ("General Signal Common Stock") held by such stockholder, EITHER
(i) 0.6977 of a share of common stock, par value $10.00 per share, of SPX ("SPX
Common Stock"); OR (ii) $45.00 in cash, without interest; OR (iii) 0.4186 of a
share of SPX Common Stock and $18.00 in cash, without interest (the "Merger
Consideration"), provided that no more than 40% of the outstanding shares of
General Signal Common Stock will be exchanged for cash and no more than 60% of
the outstanding shares of General Signal Common Stock will be exchanged for
shares of SPX Common Stock. Cash will be paid in lieu of any fractional share of
SPX Common Stock. Unless the context otherwise requires, all references to
General Signal Common Stock include the associated General Signal Rights
(continued on following page)
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of each of SPX and General Signal on or
about [ ], 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY STOCKHOLDERS OF EACH OF SPX AND GENERAL SIGNAL IN
CONNECTION WITH THE MERGER.
------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The date of this Joint Proxy Statement/Prospectus is ___________, 1998.
<PAGE> 8
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 9
(as hereinafter defined) and all references to SPX Common Stock include the
associated SPX Rights (as hereinafter defined). The SPX Common Stock and the
General Signal Common Stock are each listed for trading on the New York Stock
Exchange, Inc. (the "NYSE") and the Pacific Exchange, Inc. (the "PE"). The SPX
Common Stock is listed under the symbol "SPW" and the General Signal Common
Stock is listed under the symbol "GSX." On July 17, 1998, the last trading day
before public announcement of the Merger Agreement, the closing price of a share
of SPX Common Stock on the NYSE Composite Tape was $64.50, and the closing price
of a share of General Signal Common Stock on the NYSE Composite Tape was
$37.625. On [________], 1998, the last trading day before the date of this Joint
Proxy Statement/Prospectus, the closing price of a share of SPX Common Stock on
the NYSE Composite Tape was $[_____]. Stockholders of SPX and General Signal are
urged to obtain current market information with respect to SPX Common Stock and
General Signal Common Stock.
As a result of and immediately following the issuance of SPX Common Stock
in connection with the Merger, the General Signal stockholders will hold
approximately 60%, and the SPX stockholders immediately prior to the Merger will
hold approximately 40%, of the shares of SPX Common Stock outstanding
immediately following the Merger. The shares of SPX Common Stock to be issued in
the Merger will be authorized for listing, subject to official notice of
issuance, on the NYSE and the PE.
A [yellow] form of election (the "Form of Election") and a [blue] letter of
transmittal and instructions (collectively, the "Letter of Transmittal") for
making the election and transmitting stock certificates representing shares of
General Signal Common Stock accompany the copies of this Joint Proxy
Statement/Prospectus sent to the General Signal stockholders. THE GENERAL SIGNAL
STOCKHOLDERS ARE URGED TO COMPLETE AND SIGN THE FORM OF ELECTION AND LETTER OF
TRANSMITTAL AND RETURN THEM AND THE OTHER REQUIRED MATERIAL SET FORTH IN THE
LETTER OF TRANSMITTAL FOR RECEIPT NO LATER THAN 5:00 P.M. (EASTERN TIME) ON
, 1998 (THE "ELECTION DEADLINE"). General Signal stockholders who fail
to return a Form of Election prior to the Election Deadline will not be
entitled to elect from among the alternative forms of Merger Consideration and
will receive cash, SPX Common Stock, or a combination of cash and SPX Common
Stock as determined in accordance with the Merger Agreement. See "The Merger
Agreement--Elections."
The consummation of the Merger is subject to (i) the approval of the
issuance by SPX of shares of SPX Common Stock in the Merger in accordance with
the terms of the Merger Agreement (the "SPX Proposal ") by the affirmative vote
of the holders of a majority of the shares of SPX Common Stock present in person
or represented by proxy and entitled to vote on the matter at the SPX Special
Meeting; (ii) the approval and adoption of the Merger Agreement (the "General
Signal Proposal") by the affirmative vote of the holders of two-thirds of the
outstanding shares of General Signal Common Stock; and (iii) certain other
conditions. See "The Merger Agreement--Conditions." A copy of the Merger
Agreement is attached hereto as Appendix A.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
SPX with respect to the SPX Common Stock to be issued to the General
Signal stockholders in the Merger. A registration statement on Form S-4 (the
"Registration Statement") has been filed by SPX with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to these shares of SPX Common
Stock. Based on the 43,543,406 shares of General Signal Common Stock currently
outstanding (exclusive of Restricted Shares (as defined herein)), which will be
canceled in exchange for a cash payment of $45.00 per share immediately prior
to the Merger) and the exchange ratio of 0.4186 (or 60% of 0.6977) pursuant to
the Merger Agreement, SPX will issue approximately 18,227,270 shares of SPX
Common Stock in the aggregate to the General Signal stockholders in the Merger.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE BY THIS JOINT PROXY STATEMENT/PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY SPX OR GENERAL SIGNAL. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION.
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION.............................................................................................1
INCORPORATION OF DOCUMENTS BY REFERENCE...........................................................................2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.....................................................2
SUMMARY...........................................................................................................3
The Companies..................................................................................................3
Special Meetings...............................................................................................4
Date, Time and Place........................................................................................4
Purpose of the Special Meetings.............................................................................4
Record Dates; Shares Entitled to Vote.......................................................................4
Quorum; Vote Required.......................................................................................4
Security Ownership of Management............................................................................5
The Merger and the Merger Agreement............................................................................5
General.....................................................................................................5
Treatment of General Signal Options and Restricted Stock....................................................5
Reasons for the Merger; Recommendations of the Boards.......................................................5
Opinion of SPX's Financial Advisor..........................................................................6
Opinion of General Signal's Investment Banker...............................................................6
Accounting Treatment........................................................................................6
Federal Income Tax Consequences.............................................................................6
Governance Following the Merger.............................................................................7
Interests of Certain Persons in the Merger..................................................................7
Conditions; Effective Time of the Merger....................................................................7
Form of Merger Consideration; Election Procedures...........................................................7
No Dissenters' Rights.......................................................................................9
No Solicitation.............................................................................................9
Termination of the Merger Agreement.........................................................................9
Termination Fee; Reimbursement of Expenses.................................................................10
Regulatory Approval........................................................................................10
Comparative Stockholder Rights.............................................................................10
Merger Financing...........................................................................................10
Risk Factors...............................................................................................11
Market Price and Dividend Information.........................................................................12
Comparative Per Share Data....................................................................................13
Selected Historical Consolidated Financial Data of SPX........................................................14
Selected Historical Consolidated Financial Data of General Signal.............................................18
Summary Selected Pro Forma Condensed Combined Financial Data of SPX and General Signal........................21
RISK FACTORS.....................................................................................................24
Fixed Exchange Ratio Despite Change in Relative Stock Prices..................................................24
Federal Income Tax Consequences...............................................................................24
Leverage......................................................................................................24
Uncertainties in Integrating Business Operations and Achieving Cost Savings; Potential Charges to Earnings....25
Dependence on Key Personnel...................................................................................26
Reliance on Major Customers of SPX............................................................................26
Cyclical Nature of Automotive Industry........................................................................26
Significance of Goodwill......................................................................................26
Equity Dilution of Current SPX Stockholders...................................................................26
Absence of Dividends..........................................................................................27
Year 2000 Costs...............................................................................................27
Environmental Liabilities.....................................................................................28
Anti-Takeover Effects of Certain Charter, By-Law and Statutory Provisions.....................................28
THE SPECIAL MEETINGS.............................................................................................30
General.......................................................................................................30
Record Date; Quorum and Required Vote.........................................................................30
</TABLE>
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<PAGE> 11
<TABLE>
<S> <C>
Proxies....................................................................................................... 31
Solicitation of Proxies....................................................................................... 32
No Dissenters' Rights......................................................................................... 32
THE COMPANIES.................................................................................................... 33
THE MERGER....................................................................................................... 34
General....................................................................................................... 34
Background of the Merger...................................................................................... 34
Reasons for the Merger; Recommendations of the Boards......................................................... 36
Opinion of SPX's Financial Advisor............................................................................ 39
Opinion of General Signal's Investment Banker................................................................. 43
Accounting Treatment.......................................................................................... 47
Board and Management Following the Merger..................................................................... 48
Regulatory Approvals.......................................................................................... 48
Interests of Certain Persons in the Merger.................................................................... 48
No Dissenters' Rights......................................................................................... 50
Stock Exchange Listings....................................................................................... 50
Delisting and Deregistration of the General Signal Common Stock............................................... 50
Treatment of General Signal Stock Certificates................................................................ 50
Amendment of General Signal Rights Agreement.................................................................. 50
Merger Financing.............................................................................................. 50
THE MERGER AGREEMENT............................................................................................. 52
The Merger.................................................................................................... 52
Conversion of Securities...................................................................................... 52
Elections..................................................................................................... 52
Election Procedure............................................................................................ 54
Corporate Organization and Governance......................................................................... 57
Representations and Warranties................................................................................ 57
Certain Covenants............................................................................................. 57
Conditions.................................................................................................... 60
Termination................................................................................................... 61
Termination Fee; Reimbursement of Expenses.................................................................... 61
Expenses...................................................................................................... 62
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER............................................................ 63
COMPARISON OF RIGHTS OF STOCKHOLDERS OF SPX AND GENERAL SIGNAL................................................... 67
MARKET PRICE AND DIVIDEND INFORMATION............................................................................ 78
BENEFICIAL OWNERSHIP OF SPX COMMON STOCK......................................................................... 79
BENEFICIAL OWNERSHIP OF GENERAL SIGNAL COMMON STOCK.............................................................. 81
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPX........................................................... 84
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GENERAL SIGNAL................................................ 88
PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF SPX AND GENERAL SIGNAL............................................ 91
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF SPX..............................................................100
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF GENERAL SIGNAL...................................................102
EXPERTS..........................................................................................................104
LEGAL MATTERS....................................................................................................104
STOCKHOLDER PROPOSALS............................................................................................104
APPENDICES:
A--Merger Agreement
B--Opinion of Stern Stewart & Co.
C--Opinion of Lazard Freres & Co. LLC
</TABLE>
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<PAGE> 12
AVAILABLE INFORMATION
SPX and General Signal 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 Commission. The reports, proxy statements and other information filed by SPX
or General Signal 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 General Signal 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 of SPX Common Stock are listed on the NYSE and the PE under the symbol
"SPW." The shares of General Signal Common Stock are listed on the NYSE and the
PE under the symbol "GSX." The periodic reports, proxy statements and other
information filed by SPX and General Signal 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 Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement filed with the Commission by
SPX, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is hereby made to the Registration
Statement and the exhibits thereto for further information. Exhibits to the
Registration Statement that are omitted from this Joint Proxy
Statement/Prospectus may also be obtained at the Commission's World Wide Web
site described above. Statements contained or incorporated by reference herein
concerning the provisions of any agreement or other document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and readers are referred to the copy so filed for more
detailed information, each such statement being qualified in its entirety by
such reference.
Each of SPX and General Signal has supplied all information contained or
incorporated by reference in this Joint Proxy Statement/Prospectus relating to
SPX and General Signal, respectively, and SPX has supplied all information
contained in this Joint Proxy Statement/Prospectus relating to MergerSub.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(OTHER THAN EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER OF SHARES OF SPX COMMON STOCK OR GENERAL SIGNAL COMMON STOCK TO
WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS SENT, UPON WRITTEN OR ORAL REQUEST
TO, IN THE CASE OF DOCUMENTS RELATING TO SPX, CHRISTOPHER J. KEARNEY, VICE
PRESIDENT, SECRETARY AND GENERAL COUNSEL, 700 TERRACE POINT DRIVE, MUSKEGON,
MICHIGAN 49443, TELEPHONE (616) 724-5000, AND, IN THE CASE OF DOCUMENTS RELATING
TO GENERAL SIGNAL, JOANNE L. BOBER, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY, P.O. BOX 10010, ONE HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904,
TELEPHONE (203) 329-4100. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
ANY REQUEST SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE DATE OF
THE APPROPRIATE SPECIAL MEETING.
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<PAGE> 13
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant to
the Exchange Act are incorporated herein by reference and shall be deemed a part
hereof:
SPX COMMISSION FILINGS (FILE NO. 1-06948)
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1997
("SPX's 1997 Form 10-K");
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998 (the latter, "SPX's Second Quarter Form 10-Q");
3. Current Report on Form 8-K dated July 20, 1998;
4. Definitive Proxy Statement on Schedule 14A dated April 24, 1998; and
5. The description of SPX's capital stock (and the SPX Rights) contained in
SPX's Registration Statements pursuant to Section 12 of the Exchange Act
and any amendments or reports filed for the purpose of updating any such
descriptions.
GENERAL SIGNAL COMMISSION FILINGS (FILE NO. 1-00996)
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1997
("General Signal's 1997 Form 10-K");
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998 (the latter, "General Signal's Second Quarter Form 10-Q");
3. Current Report on Form 8-K dated July 23, 1998;
4. Registration Statement on Form 8-A/A, Amendment No.1 dated July 23, 1998;
and
5. Definitive Proxy Statement on Schedule 14A dated March 23, 1998.
All reports and other documents filed by either SPX or General Signal
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Joint Proxy Statement/Prospectus and prior to the date of the
Special Meetings shall be deemed to be incorporated by reference herein and to
be a part hereof from the dates of filing of such reports and documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
herein, or in any other subsequently filed document that also is incorporated or
deemed to be incorporated by reference herein, modifies or supersedes the
earlier statement. Any statement so modified shall not be deemed, except as so
modified, to constitute a part of this Joint Proxy Statement/Prospectus, and any
statement so superseded shall not be deemed to constitute a part of this Joint
Proxy Statement/Prospectus.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains or incorporates by reference
forward-looking statements, including information concerning possible or assumed
future results of operations of SPX and General Signal, that are subject to
risks and uncertainties. Such forward-looking statements are necessarily
dependent upon assumptions, estimates and dates that may be incorrect or
imprecise and involve known and unknown risks, uncertainties and other factors,
including those set forth under "Risk Factors," "The Merger--Background of the
Merger," "The Merger--Reasons for the Merger; Recommendations of the Boards"
"The Merger--Opinion of SPX's Financial Advisor" and "The Merger--Opinion of
General Signal's Investment Banker," and those preceded by, followed by or that
include the words "believes," "expects," "anticipates" or similar expressions.
The following important factors, in addition to those discussed elsewhere in
this Joint Proxy Statement/Prospectus and in the documents which are
incorporated herein by reference, could affect the future results of the
industries in which SPX and General Signal operate in general, and SPX and/or
General Signal in particular, and could cause future results to differ
materially from those expressed in the forward-looking statements contained in
this Joint Proxy Statement/Prospectus: the speed of integration of General
Signal's and SPX's businesses; continued competitive pressures; success of
current operating plans, research and development efforts and strategic
initiatives; the effect of existing and future regulatory actions; changes in
prevailing interest rates and the availability of and terms of financing to fund
the anticipated growth of SPX's business; inflation; changes in costs of goods
and services; economic conditions in general and in SPX's and General Signal's
specific market areas; changes in federal, state, local or foreign government
regulation; liability and other claims asserted against SPX or General Signal;
changes in operating strategy or development plans; the ability to attract and
retain qualified personnel; potential labor disturbances; changes in acquisition
and capital expenditure plans; and other factors referenced herein, or a
significant delay in the expected closing of the Merger.
----------------------
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<PAGE> 14
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
or incorporated by reference in this Joint Proxy Statement/Prospectus and in the
appendices hereto including, but not limited to, the Merger Agreement set forth
as Appendix A hereto. Unless otherwise defined, capitalized terms used in this
summary have the respective meanings ascribed to them elsewhere in this Joint
Proxy Statement/Prospectus. Stockholders of SPX and General Signal are urged to
read carefully this Joint Proxy Statement/Prospectus and the appendices hereto,
and the documents incorporated by reference herein, in their entirety.
THE COMPANIES
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, Michigan 49443-3301, telephone number (616) 724-5000. Its stock is
traded on the NYSE and the PE under the symbol "SPW".
General Signal. General Signal, incorporated in New York in 1904, is a
manufacturer of equipment for the Process Controls, Electrical Controls and
Industrial Technology industries. General Signal's key Process Controls industry
products include mixers, valves for municipal water supply and wastewater
treatment, pulp, paper, food, pharmaceutical and chemical manufacturing, ultra
low-temperature freezers for life science research and furnaces. In the
Electrical Controls industry, key products include uninterruptible power supply
equipment, power transformers and fire detection systems. Products serving the
Industrial Technology industry include auto and bicycle components, data
networking equipment and fare collection and vending equipment
General Signal's principal executive offices are located at One High Ridge
Park, Stamford, Connecticut 06904-2010, telephone number (203) 329-4100. Its
stock is traded on the NYSE and the PE under the symbol "GSX".
MergerSub. MergerSub is a wholly owned subsidiary of SPX, incorporated in
Delaware in 1998 for the sole purpose of effecting transactions such as the one
contemplated by the Merger Agreement. MergerSub has no assets or liabilities
other than those arising out of the Merger Agreement. Prior to the consummation
of the Merger, MergerSub will not engage in any activity other than activities
related to the transactions contemplated by the Merger Agreement. MergerSub's
principal executive offices are located at 700 Terrace Point Drive, Muskegon,
Michigan 49443-3301, telephone number (616) 724-5000.
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<PAGE> 15
SPECIAL MEETINGS
DATE, TIME AND PLACE
SPX. The SPX Special Meeting will be held on [date], 1998, at 10:00 a.m.
(Eastern Time), at the offices of Fried, Frank, Harris, Shriver & Jacobson, One
New York Plaza, 27th Floor, New York, New York. See "The Special
Meetings--General."
General Signal. The General Signal Special Meeting will be held on [date],
1998, at 10:00 a.m. (Eastern Time), at General Signal's headquarters, One High
Ridge Park, Stamford, Connecticut. See "The Special Meetings--General."
PURPOSE OF THE SPECIAL MEETINGS
SPX. The purpose of the SPX Special Meeting is to consider and vote upon
the SPX Proposal, namely, the proposal to approve the issuance of SPX Common
Stock to the General Signal stockholders in the Merger in accordance with the
terms of the Merger Agreement. See "The Special Meetings--General."
General Signal. The purpose of the General Signal Special Meeting is to
consider and vote upon the General Signal Proposal, namely, the proposal to
approve and adopt the Merger Agreement. See "The Special Meetings--General."
RECORD DATES; SHARES ENTITLED TO VOTE
SPX. Only holders of record of shares of SPX Common Stock at the close of
business on [ ], 1998 (the "SPX Record Date") are entitled to notice
of, and to vote at, the SPX Special Meeting. On such date, there were [ ]
shares of SPX Common Stock outstanding. Each share of SPX Common Stock will be
entitled to one vote on each matter to be acted upon at the SPX Special
Meeting. See "The Special Meetings--Record Date; Quorum and Required Vote."
General Signal. Only holders of record of shares of General Signal Common
Stock at the close of business on [ ], 1998 (the "General Signal Record
Date") are entitled to notice of, and to vote at, the General Signal Special
Meeting. On such date, there were [ ] shares of General Signal Common
Stock outstanding. Each share of General Signal Common Stock will be entitled
to one vote on each matter to be acted upon at the General Signal Special
Meeting. See "The Special Meetings--Record Date; Quorum and Required Vote."
QUORUM; VOTE REQUIRED
SPX. Pursuant to the rules of the NYSE, on which the SPX Common Stock is
listed, the presence in person or by proxy of a majority of the shares of SPX
Common Stock entitled to vote on the SPX Proposal is necessary to constitute a
quorum for purposes of approving the SPX Proposal. The affirmative vote of the
holders of a majority of the shares of SPX Common Stock present in person or
represented by proxy at the SPX Special Meeting and entitled to vote is required
to approve the SPX Proposal, provided that there is a quorum. An abstention with
respect to the SPX Proposal will have the same effect as a vote cast against the
SPX proposal. Brokers who hold shares of SPX Common Stock as nominees will not
have discretionary authority to vote such shares in the absence of instructions
from the beneficial owners thereof. Broker non-votes or any other failure to
vote on the SPX Proposal will have no effect on the outcome of the vote on the
SPX Proposal. See "The Special Meetings--Record Date; Quorum and Required Vote"
and "The Special Meetings--Proxies."
General Signal. The presence in person or by proxy of holders of a majority
of the total number of outstanding shares of General Signal Common Stock will
constitute a quorum for the transaction of business at the General Signal
Special Meeting. The affirmative vote of the holders of two-thirds of all votes
entitled to be cast by the holders of General Signal Common Stock is required to
approve and adopt the Merger Agreement. Brokers who hold shares of General
Signal Common Stock as nominees will not have discretionary authority to vote
such shares in the absence of instructions from the beneficial owners thereof.
Abstentions, broker non-votes or any other failure to vote on the General Signal
Proposal will have the same effect as a vote cast against the General Signal
Proposal. See "The Special Meetings--Record Date; Quorum and Required Vote" and
"The Special Meetings--Proxies."
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<PAGE> 16
SECURITY OWNERSHIP OF MANAGEMENT
As of the SPX Record Date, the directors and executive officers of SPX and
their affiliates owned an aggregate of approximately [ ]% of the outstanding
shares of SPX Common Stock. As of the General Signal Record Date, the directors
and executive officers of General Signal and their affiliates owned an aggregate
of approximately [ ]% of the outstanding shares of General Signal Common Stock.
Each of the directors and executive officers of SPX and General Signal has
advised the respective companies that he or she plans to vote or to direct the
vote of all shares of SPX Common Stock or General Signal Common Stock, as the
case may be, owned by him or her and entitled to vote in favor of the SPX
Proposal, in the case of SPX, and in favor of the General Signal Proposal, in
the case of General Signal.
THE MERGER AND THE MERGER AGREEMENT
GENERAL
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware (the "Delaware Certificate
of Merger") and a certificate of merger with the Department of State of the
State of New York (the "New York Certificate of Merger" and, together with the
Delaware Certificate of Merger, the "Certificates of Merger"). The filing of the
Certificates of Merger will occur as soon as practicable following the
satisfaction (or waiver, where legally permissible) of the conditions set forth
in the Merger Agreement, including receipt of requisite regulatory and
stockholder approvals. See "The Merger Agreement--Conditions." In the Merger
Agreement and herein, the time at which the Merger becomes effective is called
the "Effective Time."
At the Effective Time, General Signal will be merged with and into
MergerSub, with MergerSub surviving the Merger as a wholly owned subsidiary of
SPX. In the Merger, each share of General Signal Common Stock issued and
outstanding immediately prior to the Effective Time, without any action on the
part of the holder thereof, will be converted into the right to receive, at the
election of the stockholder but subject to the limitations and proration
procedures described in this Joint Proxy Statement/Prospectus and as set forth
in the Merger Agreement, EITHER (i) 0.6977 of a share of SPX Common Stock, OR
(ii) $45.00 in cash, without interest, OR (iii) 0.4186 of a share of SPX Common
Stock and $18.00 in cash, without interest. Cash will be paid in lieu of any
fractional share of SPX Common Stock. See "The Merger Agreement--Conversion of
Securities."
The shares of SPX Common Stock issued to the General Signal stockholders in
the Merger will constitute approximately 60% of the SPX Common Stock outstanding
immediately following the Merger, and the SPX stockholders immediately prior to
the Merger will hold approximately 40% of the shares of SPX Common Stock
outstanding immediately following the Merger.
TREATMENT OF GENERAL SIGNAL OPTIONS AND RESTRICTED STOCK
Subject to the consent of the holders thereof, where required, immediately
prior to the Effective Time, (i) all outstanding options to purchase shares of
General Signal Common Stock (the "General Signal Options") granted on or prior
to the date of the Merger Agreement pursuant to any of General Signal's stock
option plans, whether or not vested or exercisable, will be canceled and, in
lieu thereof, the holders thereof will receive a cash payment from General
Signal equal to the product of (x) the total number of shares of General Signal
Common Stock previously subject to the General Signal Options, whether or not
vested or exercisable, and (y) the excess of $45.00 over the exercise price per
share subject to the General Signal Options; and (ii) all outstanding restricted
shares of General Signal Common Stock granted on or prior to the date of the
Merger Agreement pursuant to any of General Signal's stock option plans that,
but for the effect on such shares of the General Signal Proposal, would be
unvested as of the Effective Time ("Restricted Shares") will be canceled and, in
lieu thereof, each holder thereof will receive a cash payment from General
Signal equal to the product of (x) $45.00 and (y) the number of Restricted
Shares held by such holder immediately prior to the Effective Time.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
SPX. THE BOARD OF DIRECTORS OF SPX (THE "SPX BOARD") BELIEVES THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF SPX AND THE SPX STOCKHOLDERS
AND, ACCORDINGLY, BY UNANIMOUS VOTE OF THOSE PRESENT (ONE DIRECTOR HAVING BEEN
UNABLE TO ATTEND THE BOARD MEETING) APPROVED THE MERGER AGREEMENT AND RESOLVED
TO RECOMMEND THAT THE
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<PAGE> 17
STOCKHOLDERS OF SPX VOTE "FOR" APPROVAL OF THE SPX PROPOSAL. For a detailed
discussion of the matters and factors considered by the SPX Board in arriving at
its conclusions, see "The Merger--Background of the Merger" and "The
Merger--Reasons for the Merger; Recommendations of the Boards."
General Signal. THE BOARD OF DIRECTORS OF GENERAL SIGNAL (THE "GENERAL
SIGNAL BOARD") UNANIMOUSLY HAS DETERMINED THAT THE MERGER IS ADVISABLE, FAIR TO,
AND IN THE BEST INTERESTS OF, GENERAL SIGNAL AND THE GENERAL SIGNAL
STOCKHOLDERS. ACCORDINGLY, THE GENERAL SIGNAL BOARD HAS APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF GENERAL SIGNAL VOTE
"FOR" ITS APPROVAL AND ADOPTION AT THE GENERAL SIGNAL SPECIAL MEETING. For a
detailed discussion of the matters and factors considered by the General Signal
Board in arriving at its conclusions, see "The Merger--Background of the Merger"
and "The Merger--Reasons for the Merger; Recommendations of the Boards."
OPINION OF SPX'S FINANCIAL ADVISOR
In determining whether to approve the Merger, the SPX Board considered an
opinion from its financial advisor, Stern Stewart & Co. ("Stern Stewart"), as to
the fairness to SPX of the aggregate consideration to be paid by SPX in the
Merger. Stern Stewart is the originator of EVA(R) (a performance measure
calculated as net operating profit after tax minus a charge for the cost of
capital ("EVA")) as a financial management technique and had acted as consultant
to senior management of SPX in introducing and implementing an EVA-based program
at SPX. The Board of Directors of SPX received an oral opinion, subsequently
confirmed in writing (the "Stern Stewart Opinion"), from Stern Stewart to the
effect that, as of the date of such opinion, the aggregate consideration to be
paid by SPX in the Merger was fair to SPX from a financial point of view. The
Stern Stewart Opinion is attached as Appendix B to this Joint Proxy
Statement/Prospectus. Stockholders are encouraged to read the Stern Stewart
Opinion. See "The Merger--Opinion of SPX's Financial Advisor."
OPINION OF GENERAL SIGNAL'S INVESTMENT BANKER
In determining whether to approve the Merger, the General Signal Board
considered an opinion from its investment banker, Lazard Freres & Co. LLC
("Lazard Freres"), as to the fairness to the stockholders of General Signal of
the aggregate consideration to be received by them in the Merger. The General
Signal Board received an oral opinion, subsequently confirmed in writing (the
"Lazard Freres Opinion"), from Lazard Freres to the effect that, as of the date
of such opinion, the aggregate consideration to be received by them in the
Merger was fair to the General Signal stockholders from a financial point of
view. The Lazard Freres Opinion is attached as Appendix C to this Joint Proxy
Statement/Prospectus. Stockholders are encouraged to read the Lazard Freres
Opinion. See "The Merger--Opinion of General Signal's Investment Banker."
ACCOUNTING TREATMENT
The Merger will be treated as a reverse acquisition for accounting
purposes. See "The Merger--Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
The parties intend that the Merger be treated for federal income tax
purposes as a reorganization pursuant to Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the obligation of General Signal and
SPX to consummate the Merger is conditioned (which condition SPX and General
Signal have agreed will not be waived) on the receipt of opinions of their
respective legal counsel, in each case dated as of the date the Merger is
consummated, to the effect that the Merger will be treated as such. Assuming
that the Merger constitutes such a reorganization, none of General Signal, SPX,
or MergerSub will recognize any gain or loss as a result of the Merger. In
addition, holders of shares of General Signal Common Stock who exchange their
shares solely for shares of SPX Common Stock will not (other than with respect
to the receipt of cash, if any, in lieu of fractional shares) recognize gain or
loss in the Merger, and holders of shares of General Signal Common Stock who
exchange their shares for cash or for SPX Common Stock and cash will recognize
gain, if any, but not in excess of the amount of cash received, which may or may
not qualify for capital gains treatment. See "Risk Factors" and "Certain Federal
Income Tax Consequences of the Merger."
- 6 -
<PAGE> 18
GOVERNANCE FOLLOWING THE MERGER
At the Effective Time, the directors and officers of MergerSub immediately
prior to the Effective Time will become the directors and officers,
respectively, of the Surviving Corporation. See "The Merger--Board and
Management Following the Merger."
Under the Merger Agreement, the SPX Board is required to take all action
necessary to elect the following persons, who are currently serving on the
General Signal Board, to the SPX Board as of the Effective Time: (i) Emerson U.
Fullwood, who will be assigned to the class of directors whose term of office
expires at SPX's first annual meeting of stockholders after the Effective Time,
and (ii) H. Kent Bowen, who will be assigned to the class of directors whose
term of office expires at SPX's second annual meeting of stockholders after the
Effective Time. See "The Merger--Board and Management Following the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the General Signal Board with respect
to the Merger Agreement and the transactions contemplated thereby, the General
Signal stockholders should be aware that certain members of the management of
General Signal and the General Signal Board have certain interests in the Merger
that are in addition to the interests of stockholders of General Signal
generally. See "The Merger--Interests of Certain Persons in the Merger" and "The
Merger Agreement--Certain Covenants--Indemnification and Insurance."
CONDITIONS; EFFECTIVE TIME OF THE MERGER
The obligations of SPX and General Signal to consummate the Merger are
subject to the satisfaction of certain conditions, including, among others, (i)
obtaining requisite stockholder approvals; (ii) the listing on the NYSE, subject
only to official notice of issuance, of the shares of SPX Common Stock to be
issued in the Merger; (iii) the receipt of regulatory approvals required to
consummate the transactions contemplated by the Merger Agreement and the
expiration or termination of any statutory waiting period applicable to the
consummation of the Merger; (iv) the absence of any Law or Decree (each term as
defined in the Merger Agreement) promulgated by any Governmental Authority (as
defined in the Merger Agreement) prohibiting or making illegal consummation of
the Merger or the transactions contemplated by the Merger Agreement; (v) the
absence of any breaches of any representations or warranties made in the Merger
Agreement which in the aggregate have a Material Adverse Effect (as defined in
the Merger Agreement) on General Signal or SPX; and (vi) the receipt of certain
legal opinions with respect to the federal income tax consequences of the
Merger. See "The Merger Agreement--Conditions" and "Certain Federal Income Tax
Consequences of the Merger."
Subject to the satisfaction (or waiver, where legally permissible) of the
conditions to the obligations of SPX and General Signal to consummate the
Merger, it is currently expected that the Merger will be consummated immediately
following the Special Meetings or as soon thereafter as all such conditions are
satisfied (or waived, where legally permissible).
FORM OF MERGER CONSIDERATION; ELECTION PROCEDURES
Subject to the limitations and proration procedures set forth below and
elsewhere in this Joint Proxy Statement/Prospectus and in the Merger Agreement,
each holder of shares of General Signal Common Stock immediately prior to the
Effective Time will be entitled to elect to receive in respect of each of his or
her shares of General Signal Common Stock (each, an "Election") EITHER (i)
0.6977 of a share of SPX Common Stock (a "Stock Election"), OR (ii) $45.00 in
cash, without interest (a "Cash Election"), OR (iii) 0.4186 of a share of SPX
Common Stock and $18.00 in cash, without interest (a "Mixed Election"), or to
indicate that such holder has no preference as to the receipt of cash, SPX
Common Stock or the combination thereof with respect to his or her shares of
General Signal Common Stock (a "Non-Election"). All Elections must be made on
the Form of Election, a copy of which is enclosed with the copies of this Joint
Proxy Statement/Prospectus being sent to the General Signal stockholders.
Non-Elections may be made on the Form of Election, and will be deemed to have
been made if the Form of Election and other documents are not timely returned.
See "The Merger Agreement--Elections." Holders of record of shares of General
Signal Common Stock who hold their shares of General Signal Common Stock in a
representative capacity may submit multiple Forms of Election, provided that
such representative certifies that each such Form of Election covers all shares
of General Signal Common Stock held by such representative for a particular
beneficial owner.
- 7 -
<PAGE> 19
In order to make an Election with respect to the form of Merger
Consideration to be received in the Merger, a holder of record of shares of
General Signal Common Stock (or the beneficial owner thereof through the
nominee) must return to The Bank of New York, which has been retained by SPX to
act as Exchange Agent, for receipt by the Exchange Agent no later than 5:00 p.m.
(Eastern Time) on _____, 1998, the last business day prior to the General Signal
Special Meeting (the "Election Deadline"), a Form of Election and a Letter of
Transmittal fully completed and signed, and accompanied by the stock
certificates representing the shares of General Signal Common Stock for which
the Election is being made. If the stock certificates are not available at the
time the Form of Election is sent to the Exchange Agent, the General Signal
stockholder may instead provide a guarantee of delivery from a qualified
financial institution (which in effect guarantees to SPX that the stock
certificates will be delivered to the Exchange Agent) (a "Guaranty of Delivery")
and must, within three NYSE trading days thereafter, deliver to the Exchange
Agent the stock certificates representing the shares in respect of which an
Election is being made. Any General Signal stockholder who fails to deliver a
completed and signed Form of Election and Letter of Transmittal and his or her
stock certificates within the requisite period of time will be deemed to have
made a Non-Election.
General Signal's stockholders should consider that stockholders receiving
shares of SPX Common Stock in the Merger will receive, subject to the
limitations and the proration procedures described in this Joint Proxy
Statement/Prospectus, a number of shares of SPX Common Stock determined
utilizing an exchange ratio of 0.6977 (in the case of stockholders making a
Stock Election) and utilizing an exchange ratio of 0.4186 (in the case of
stockholders making a Mixed Election) of a share of SPX Common Stock for each
share of General Signal Common Stock. Because these exchange ratios were fixed
based on a trading price per share of SPX Common Stock of $64.50 (the trading
price on the last trading day prior to the public announcement of the
transaction) and because the trading price of the SPX Common Stock is subject to
fluctuation, the value of the shares of SPX Common Stock that holders of shares
of General Signal Common Stock may receive in the Merger in respect of their
shares of General Signal Common Stock, together with any cash they may receive,
may be less than, greater than or equal to $45.00 per share.
Under the terms of the Merger Agreement, no more than 40% of the
outstanding shares of General Signal Common Stock will be exchanged for cash
(the "Aggregate Cash Consideration"), and no more than 60% of the outstanding
shares of General Signal Common Stock will be exchanged for SPX Common Stock
(the "Aggregate Stock Consideration"). The Merger Agreement provides for
proration if either of the foregoing limitations is exceeded. Thus, if, as a
result of the number of Cash Elections and Mixed Elections made, SPX would be
required to exchange more than 40% of the outstanding shares of General Signal
Common Stock for cash, then (i) every General Signal stockholder who made a
Stock Election would receive 0.6977 of a share of SPX Common Stock per share for
all of his or her shares of General Signal Common Stock, (ii) every stockholder
who made (or is deemed to have made) a Non-Election will be treated as though he
or she had made a Stock Election, (iii) each stockholder who made a Mixed
Election would be treated as though he or she had made a Stock Election, and
would receive 0.6977 of a share of SPX Common Stock per share, with respect to
60% of his or her shares, and would be treated as though he or she had made a
Cash Election with respect to 40% of his or her shares, and (iv) each
stockholder who made a Cash Election and each stockholder who made a Mixed
Election, with respect to 40% of his or her shares, would receive a pro rata
portion of the Aggregate Cash Consideration and a pro rata portion of the
balance of the Aggregate Stock Consideration remaining after the distributions
of SPX Common Stock described in clauses (i) through (iii) above. Similarly, if,
as a result of the number of Stock Elections and Mixed Elections made, SPX would
be required to exchange more than 60% of the outstanding shares of General
Signal Common Stock for SPX Common Stock, then (i) every General Signal
stockholder who made a Cash Election would receive $45.00 in cash per share for
all of his or her shares of General Signal Common Stock, (ii) every stockholder
who made (or is deemed to have made) a Non-Election will be treated as though he
or she had made a Cash Election, (iii) each stockholder who made a Mixed
Election would be treated as though he or she had made a Cash Election, and
would receive $45.00 per share, with respect to 40% of his or her shares, and
would be treated as though he or she had made a Stock Election with respect to
60% of his or her shares, and (iv) each stockholder who made a Stock Election
and each stockholder who made a Mixed Election, with respect to 60% of his or
her shares, would receive a pro rata portion of the Aggregate Stock
Consideration and a pro rata portion of the balance of the Aggregate Cash
Consideration remaining after the distributions of cash described in clauses (i)
through (iii) above.
If neither the cash nor the stock limitation is exceeded, but not every
stockholder of General Signal has timely made an Election, then each General
Signal stockholder who did make a timely Election will have his or
- 8 -
<PAGE> 20
her Election honored, and the balance of the stockholders will share in the
Aggregate Cash Consideration and Aggregate Stock Consideration remaining on a
pro rata basis.
Stockholders of General Signal should send their stock certificates or an
appropriate Guarantee of Delivery of such stock certificates as set forth in the
Form of Election, together with a properly completed and signed Letter of
Transmittal and Form of Election, to the Exchange Agent. Shares for which a Form
of Election and other required documents are not properly completed and returned
to the Exchange Agent prior to the Election Deadline will be deemed to be shares
with respect to which a Non-Election has been made, and the form of Merger
Consideration which holders of such shares will be entitled to receive will be
determined by the provisions of the Merger Agreement.
After the consummation of the Merger, the Exchange Agent will mail a Letter
of Transmittal (with instructions) to the holders of record of General Signal
Common Stock as of the Effective Time who did not previously make a valid
Election, for use in surrendering their stock certificates in exchange for the
Merger Consideration to which they are entitled. See "The Merger
Agreement--Exchange Procedures."
NO DISSENTERS' RIGHTS
Holders of SPX Common Stock and General Signal Common Stock are not
entitled to dissenters' rights in connection with the Merger.
NO SOLICITATION
General Signal. General Signal has agreed that it will not, and will not
permit any of its subsidiaries or its or its subsidiaries' directors, officers,
employees, agents or representatives, directly or indirectly, to solicit,
initiate, or furnish non-public information in furtherance of, any inquiries or
the making of any proposal with respect to certain business combinations or
certain other transactions involving General Signal, except that, at any time
prior to the approval of the Merger by the General Signal stockholders, General
Signal may furnish information to, and engage in discussions with, a third party
with respect thereto if, but only if, the General Signal Board determines in
good faith by a majority vote, after consultation with and receipt of advice
from its outside legal counsel, that failing to take such action would
constitute a breach of the fiduciary duties of the General Signal Board under
applicable law and reasonably determines, after consulting with its independent
financial advisors, that such a proposal could reasonably be expected to lead to
a "Superior Transaction" (as defined in the Merger Agreement). See "The Merger
Agreement--Certain Covenants--No Solicitation of Transactions."
SPX. SPX has also agreed that it will not, and will not permit any of its
subsidiaries or any of its subsidiaries' directors, officers, employees, agents
or representatives, directly or indirectly, to solicit or initiate any inquiries
or the making of any proposal with respect to certain business combinations or
certain other transactions involving SPX. See "The Merger--Certain Covenants--No
Solicitation of Transactions."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any approval of the
General Signal Proposal by the General Signal stockholders or any approval of
the SPX Proposal by the SPX stockholders): (i) by mutual written consent of SPX
and General Signal, (ii) by either SPX or General Signal if the Merger has not
been consummated by December 31, 1998 (but this right will not be available to
any party whose failure to perform under the Merger Agreement resulted in the
failure of the Merger to occur by that date), (iii) by SPX if the General Signal
Board withdraws its recommendation of the Merger or changes it in a manner
adverse to SPX, refuses to affirm its recommendation as promptly as practicable
(but in any case within ten business days) after receipt of any written request
from SPX which request is made on a reasonable basis, or recommends that General
Signal enter into certain proposed business combinations, (iv) by General Signal
if the SPX Board withdraws its recommendation of the Merger or changes it in a
manner adverse to General Signal, refuses to affirm its recommendation as
promptly as practicable (but in any case within ten business days) after receipt
of any written request from General Signal which request is made on a reasonable
basis, or recommends that SPX enter into certain proposed business combinations,
(v) by SPX or General Signal if at the General Signal Special Meeting the
requisite vote of the General Signal stockholders to approve the General Signal
Proposal is not obtained, (vi) by SPX or General Signal if at the SPX Special
Meeting the requisite vote of the SPX stockholders to approve the SPX Proposal
is not obtained; (vii) by SPX or General Signal if any Law or
- 9 -
<PAGE> 21
Decree prohibits or makes illegal the consummation of the Merger, or if any
final non-appealable Decree enjoining SPX or General Signal from consummating
the Merger is entered, (viii) by SPX or General Signal if there is a material
breach by the other party of its representations, warranties, covenants or
agreements in the Merger Agreement, which breach would result in the failure to
satisfy any of the conditions set forth in the Merger Agreement and which breach
is not cured within 30 days after written notice thereof to the breaching party,
and (ix) by General Signal, in order to enter into a Superior Transaction,
provided it has complied with the applicable provisions of the Merger Agreement
and has paid any applicable fees and expenses. See "The Merger
Agreement--Termination" and " The Merger Agreement--Termination Fee;
Reimbursement of Expenses."
TERMINATION FEE; REIMBURSEMENT OF EXPENSES
In connection with certain of the termination rights discussed above,
General Signal may be obligated to pay to SPX a termination fee of $60.0
million, or to pay $5.0 million in reimbursement of SPX's expenses, and to
compensate SPX for fees incurred by SPX in connection with obtaining commitments
for the financing of the Merger. In connection with other termination rights
discussed above, SPX may be obligated to pay General Signal a termination fee of
$25.0 million or to pay $5.0 million in reimbursement of General Signal's
expenses. See "The Merger Agreement--Termination Fee; Reimbursement of
Expenses."
REGULATORY APPROVAL
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder (the "HSR Act"), certain
merger transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and certain applicable
waiting periods have expired. The Merger is subject to the requirements of the
HSR Act. Pursuant to the requirements of the HSR Act, SPX and General Signal
filed Notification and Report Forms with respect to the Merger with the
Antitrust Division and the FTC. The waiting period applicable to the Merger will
expire at 11:59 p.m. on September 4, 1998, unless earlier terminated, provided
that no so-called "second request" from the FTC for additional information and
documentary material is received by SPX and General Signal within such waiting
period. SPX or General Signal may also be required to notify or obtain the
consent of regulatory authorities in various foreign countries.
COMPARATIVE STOCKHOLDER RIGHTS
The rights of holders of General Signal Common Stock are currently governed
by New York law, General Signal's Certificate of Incorporation and General
Signal's By-Laws. If the Merger is consummated and becomes effective pursuant to
the terms of the Merger Agreement, the rights of former General Signal
stockholders who become stockholders of SPX pursuant to the Merger will be
governed by Delaware law, SPX's Certificate of Incorporation and SPX's By-Laws.
The rights of SPX stockholders differ in certain respects from those of the
General Signal stockholders. See "Comparison of Rights of Stockholders of SPX
and General Signal."
MERGER FINANCING
The total amount of cash and borrowings required to consummate the
transactions contemplated by the Merger Agreement, including payment of the
cash component of the aggregate consideration to be paid in the Merger,
payments in respect of the General Signal Options and Restricted Shares,
refinancing of existing indebtedness of SPX and General Signal, and transaction
fees and expenses is estimated to be approximately $1.5 billion. Pursuant to
commitment letters dated July 19, 1998 (the "Commitment Letters"), financing
for the transactions contemplated by the Merger (the "Merger Financing") will be
provided by The Chase Manhattan Bank ("Chase") and Chase Securities Inc.
("CSI") which will underwrite and syndicate a total of $1.7 billion of senior
and subordinated debt as follows: (a) $1.4 billion of senior credit
facilities (the "Senior Facilities"), consisting of term loan facilities
aggregating $1.2 billion (the "Term Loans") and a $200.0 million revolving
credit facility (the "Revolving Credit Facility"), fully underwritten by Chase,
and (b) a $300.0 million subordinated facility (the "Subordinated Facility"),
fully underwritten by Chase. SPX expects to issue senior subordinated unsecured
notes aggregating $300.0 million (the "Subordinated Notes") in a public
offering or Rule 144A private placement in lieu of obtaining financing under
the Subordinated Facility. See "The Merger Agreement--Merger Financing."
The Senior Facilities will be jointly and severally guaranteed by each of
SPX's direct and indirect material domestic subsidiaries, subject to certain
exceptions to be agreed upon, and will also be secured by a pledge of all of
- 10 -
<PAGE> 22
the capital stock of SPX's direct and indirect material subsidiaries, subject
to certain limitations for foreign subsidiaries and certain exceptions to be
agreed upon. Receipt of the Merger Financing is not a condition to SPX's
obligation to consummate the Merger.
RISK FACTORS
STOCKHOLDERS OF SPX AND GENERAL SIGNAL SHOULD CONSIDER CAREFULLY THE
FACTORS DISCUSSED UNDER "RISK FACTORS" ON PAGE 24 IN EVALUATING THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
- 11 -
<PAGE> 23
MARKET PRICE AND DIVIDEND INFORMATION
The SPX Common Stock is listed and principally traded on the NYSE (under
the symbol "SPW") and is also listed on the PE. The General Signal Common Stock
is listed and principally traded on the NYSE (under the symbol "GSX") and is
also listed on the PE. The following table sets forth the high and low trading
prices per share of each of the SPX Common Stock and General Signal Common Stock
for the periods indicated as reported on the NYSE Composite Tape, and the
dividends declared per common share for such periods by SPX and General Signal:
<TABLE>
<CAPTION>
SPX COMMON STOCK GENERAL SIGNAL COMMON STOCK
-------------------------------- ---------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter................. $ 17-3/8 $ 14-1/4 $ .10 $ 36-3/8 $ 31 $ .24
Second Quarter................ 15-1/8 10-3/4 .10 40 35-1/8 .24
Third Quarter................. 16 11-1/8 .10 42-1/2 28 .24
Fourth Quarter................ 17 14-1/8 .10 33-7/8 28 .24
1996
First Quarter................. 18-1/8 13-5/8 .10 37-3/4 32 .24
Second Quarter................ 27-1/8 18 .10 40-1/8 35-1/4 .24
Third Quarter................. 31-5/8 21-5/8 .10 44-1/4 36-1/4 .24
Fourth Quarter................ 40-1/2 26-7/8 .10 44-1/2 39-3/4 .255
1997
First Quarter................. 49-3/4 37-3/8 .10 46-3/4 38-1/2 .255
Second Quarter................ 70-5/8 41-7/8 -- 46-3/4 36-1/8 .255
Third Quarter................. 65-3/4 49 -- 53 37-3/16 .255
Fourth Quarter................ 70-3/8 58-7/16 -- 44-7/8 36-5/8 .27
1998
First Quarter................. 79-1/4 65-3/16 -- 47-1/4 37-3/4 .27
Second Quarter................ 77-15/16 63-5/8 -- 46-15/16 35-13/16 .27
Third Quarter
(through [ ], 1998)......... [ ] [ ] -- [ ] [ ] --*
</TABLE>
- -----------------
* General Signal has agreed in the Merger Agreement not to pay any further
dividends prior to the Effective Time.
On July 17, 1998, the last full trading day prior to the public
announcement by SPX and General Signal of the execution of the Merger Agreement,
the reported high and low sale prices and closing price per share of SPX Common
Stock and General Signal Common Stock on the NYSE Composite Tape were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
------------------------------- -------------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX..................................... $ 65-1/2 $ 64-7/16 $ 64-1/2 $ - $ - $ -
General Signal.......................... 38-3/8 36-1/4 37-5/8 45-7/16 45 45
</TABLE>
On [ ], 1998, the last full trading day prior to the date of this Joint
Proxy Statement/Prospectus, the reported closing price per share of SPX Common
Stock and General Signal Common Stock on the NYSE Composite Tape were $ __
and $ __, respectively. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR SHARES OF SPX COMMON STOCK AND GENERAL SIGNAL COMMON STOCK.
- 12 -
<PAGE> 24
COMPARATIVE PER SHARE DATA
(unaudited)
The following table presents historical and pro forma adjusted historical
per share data of SPX, historical and pro forma adjusted historical per share
data of General Signal and pro forma combined per share data as if the Merger
had occurred as of January 1, 1997, assuming an exchange ratio of 0.4186 for all
outstanding shares of General Signal Common Stock. The table also presents
General Signal's pro forma equivalent per share data. See "Selected Historical
Financial Data of SPX," "Selected Historical Financial Data of General Signal,"
and "Selected Pro Forma Condensed Combined Financial Data of SPX and General
Signal" 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 Merger, 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 Merger is consummated and
thereafter, as well as the factors discussed under "Risk Factors."
<TABLE>
<CAPTION>
GENERAL SIGNAL
PRO FORMA PRO FORMA
SPX (A) GENERAL SIGNAL(A) COMBINED (B) EQUIVALENT(C)
-------- ----------------- ------------ --------------
<S> <C> <C> <C> <C>
Income (loss) per common share from
continuing operations:
Basic
Six months ended June 30, 1998........ $ 2.40 $ 1.20 $ 1.50 $ 0.63
Year ended December 31, 1997.......... (2.80) 2.22 0.19 0.08
Diluted
Six months ended June 30, 1998........ 2.33 1.19 1.48 0.62
Year ended December 31, 1997.......... (2.80) 2.21 0.18 0.08
Dividends per common share (d):
Six months ended June 30, 1998........ -- 0.54 -- --
Year ended December 31, 1997.......... 0.10 1.035 .10 0.04
Book value per common share:
June 30, 1998......................... (3.27) 11.23 14.41 6.03
December 31, 1997..................... (3.63) 13.37 18.08 7.57
</TABLE>
- ------------
(a) The six-month and twelve-month information for SPX and General Signal
represents SPX's and General Signal's historical information as of and for
the six months ended June 30, 1998 and SPX's and General Signal's pro forma
adjusted historical information as of and for the year ended December 31,
1997, respectively. See "Pro Forma Adjusted Historical Financial Data of
SPX" and "Pro Forma Adjusted Historical Financial Data of General Signal."
(b) See "Pro Forma Condensed Combined Financial Data of SPX and General
Signal."
(c) General Signal's pro forma equivalent per share information represents the
pro forma combined per share information multiplied by an exchange ratio of
0.4186.
(d) In April 1997, SPX eliminated its quarterly cash dividend and stated that
future distributions to stockholders would be in the form of open market
purchases of SPX Common Stock when deemed appropriate by management.
- 13 -
<PAGE> 25
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPX
(unaudited)
(in millions, except per share data)
The following table sets forth selected historical consolidated financial
data for SPX for each of the five years in the period ended December 31, 1997
and for the six-month periods ended June 30, 1998 and 1997. Such data have been
derived from, and should be read in conjunction with, the audited consolidated
annual financial statements and other financial information contained in SPX's
1997 Form 10-K and the unaudited consolidated interim financial information
contained in SPX's Second Quarter Form 10-Q, including the notes thereto,
incorporated by reference herein. The operating results for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1998. The selected historical financial data are
qualified in their entirety by reference to the historical financial statements
(and related notes) which are incorporated by reference herein. See "Available
Information" and "Incorporation of Documents by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------
1998(a) 1997(b) 1997(b) 1996(c) 1995 1994(d) 1993(e,f)
------- ------- ------- ------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $ 462.0 $ 466.9 $ 922.3 $1,109.4 $1,098.1 $1,079.9 $ 747.2
Cost of products sold........... 332.7 340.2 669.0 850.1 853.5 821.5 508.0
Selling, general and
administrative............... 83.4 87.2 175.3 186.5 194.5 198.0 204.1
Other operating expenses,
net(g)....................... 1.7 1.9 3.9 1.9 8.3 2.9 53.4(d)
Special charges and
(gains)(h)................... (7.1)(i) 6.5(j) 116.5(j) 87.9(k) 10.7(k) -- 27.5(l)
------- ------- ------- -------- -------- -------- --------
Operating income (loss)......... 51.3 31.1 (42.4) (17.0) 31.1 57.5 (45.8)
Other expense (income), net..... (1.4) (72.7)(b) (74.2)(b) (0.7) (3.0) 0.1 (102.9)(f)
Interest expense, net........... 7.9 7.3 13.9 31.8 35.7 35.2 15.9
------- ------- ------- -------- -------- -------- --------
Income (loss) before income
taxes........................ 44.8 96.5 17.9 (48.1) (1.6) 22.2 41.2
Income taxes.................... 16.1 49.8 21.3 7.6 (0.2) 9.1 28.1
------- ------- ------- -------- -------- -------- --------
Income (loss) from
continuing operations......... 28.7 46.7 (3.4) (55.7) (1.4) 13.1 13.1
Discontinued operation (m)...... -- -- -- -- (2.8) 1.0 2.1
Cumulative effect of
accounting changes (n)........ -- -- -- -- -- -- (31.8)
Extraordinary items (o)......... -- (10.3) (10.3) (6.6) (1.1) -- (24.0)
------- ------- ------- -------- -------- -------- --------
Net income (loss)............... $ 28.7 $ 36.4 $ (13.7) $ (62.3) $ (5.3) $ 14.1 $ (40.6)
======= ======= ======= ======== ======== ======== ========
Income (loss) per share
from continuing operations:
Basic......................... $ 2.40 $ 3.44 $ (0.27) $ (4.04) $ (0.10) $ 1.02 $ 1.04
Diluted....................... 2.33 3.33 (0.27) (4.04) (0.10) 1.02 1.04
Weighted average number of
common shares outstanding:
Basic......................... 11.972(p) 13.571(p) 12.754(p) 13.785 13.173 12.805 12.604
Diluted....................... 12.342(p) 14.040(p) 12.754(p) 13.785 13.173 12.805 12.604
Dividends per share............. $ --(p) $ 0.10(p) $ 0.10(p) $ 0.40 $ 0.40 $ 0.40 $ 0.40
OTHER FINANCIAL DATA:
Total assets.................... $ 642.9 $ 551.5 $ 583.8 $ 616.0 $ 831.4 $ 929.0 $1,024.4
Total debt...................... 262.0 197.4 205.3 229.3 319.8 415.2 430.2
Stockholders' equity
(deficit).................... (38.4) 24.4 (43.4) 105.9 162.2 158.7 145.4
Capital expenditures............ 14.6 10.6 22.6 20.2 31.0 48.5 15.1
Depreciation and
amortization................. 12.0 13.3 25.0 40.8 43.5 38.5 24.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
consolidated financial data.
- 14 -
<PAGE> 26
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPX
(unaudited)
(in millions, except per share data)
(a) Late in the second quarter of 1998, SPX acquired 89% of Tecnotest S.r.l.,
an Italian company, and 100% of The Valley Forge Group for a combined
purchase price of $59.0 in cash and assumed debt. Annual revenues of these
unrelated businesses are approximately $55.0. Had these acquisitions taken
place on January 1, 1997, consolidated revenues and income would not have
been significantly different from reported 1997 results.
(b) 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" presented elsewhere herein.
(c) During 1996, SPX sold its Hy-Lift division for approximately $15.0. Annual
1995 revenues of this division were approximately $45.0.
(d) 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.
(e) During 1993, SPX acquired Allen Testproducts and its related leasing
company for $102.0. Annual 1992 revenues of the businesses acquired were
approximately $83.0.
(f) 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.
(g) Other operating expenses, net, include goodwill/intangible amortization,
minority interest, and earnings from equity interests.
(h) Special charges and gains include certain legal costs, restructuring
charges, write-off of goodwill, and liquidation of certain investments.
(i) The first six months of 1998 included a $l3.7 realized gain on SPX's
investment in Echlin Inc., which was liquidated during the second quarter,
and $6.6 of expenses associated with SPX's offer to acquire Echlin Inc.
(j) 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 Solutions 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. The $63.7 of 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
- 15 -
<PAGE> 27
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 through
June 1998 related to the special charges were $16.5. The expected future
cash payments include an estimated $34.0 over the balance of 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
June 30, 1998 of $64.2 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.
(k) 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.
SPD 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 cost savings associated with the 1995 and 1996 restructuring actions,
described above, 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. These
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
- 16 -
<PAGE> 28
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.
Also during 1996, SPX recognized a $67.8 goodwill write-off, with no
related 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 goodwill amortization. Assessing the impact of these factors on
the businesses, as originally acquired, management concluded that
Automotive Diagnostics' goodwill was impaired.
(l) During 1993, SPX recognized a $27.5 ($18.5 after-tax) special charge to
combine its Bear Automotive operation with Allen Testproducts.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
During the first six months of 1998, SPX purchased an additional 0.398
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 stockholders would be in the form of
open market purchases of SPX Common Stock, when deemed appropriate by
management.
- 17 -
<PAGE> 29
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
The following table sets forth selected historical consolidated financial
data for General Signal for each of the five years in the period ended December
31, 1997 and for the six-month periods ended June 30, 1998 and 1997. Such data
have been derived from, and should be read in conjunction with, the audited
consolidated annual financial statements and other financial information
contained in General Signal's 1997 Form 10-K and the unaudited consolidated
interim financial information contained in General Signal's Second Quarter Form
10-Q, including the notes thereto, incorporated by reference herein. The
operating results for the six months ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. The selected historical financial data are qualified in their entirety by
reference to the historical financial statements (and related notes) which are
incorporated by reference herein. See "Available Information" and "Incorporation
of Documents by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------
1998 1997(b)(c) 1997(b)(c) 1996(d) 1995(e) 1994(f) 1993(g)
---- ---------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales....................... $776.1 $1,045.2 $1,954.6 $2,065.0(k) $1,863.2 $1,527.7 $1,354.2
Cost of sales (a)............... 505.7 699.2 1,313.6(i) 1,369.7(k) 1,246.9 1,064.8(m) 902.6
Selling, general and
administrative (a)............ 186.6 232.5 444.9(i) 455.6(k) 403.0 331.2(m) 307.3
Other operating expenses,
net(a)........................ 7.3 7.6 14.6 16.6 12.5 5.8 8.4
Special charges and
(gains)(a).................... -- -- -- -- 20.1(l) -- (19.8)(o)
Operating income................ 76.5 105.9 181.5 223.1 180.7 125.9 155.7
-------- -------- -------- -------- -------- -------- --------
Other expense (income) (a)...... -- -- (72.7)(b) (20.8)(d) -- (46.2)(n) --
Equity in earnings of EGS (c)... (20.0) -- (11.8) -- -- -- --
Interest expense, net........... 8.6 8.0 13.2 21.5 24.3 11.8 16.6
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes......................... 87.9 97.9 252.8 222.4 156.4 160.3 139.1
Income taxes.................... 33.8 39.2 121.8 89.0 56.3 56.2(m) 41.0
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations.................... 54.1 58.7 131.0 133.4 100.1 104.1 98.1
Discontinued operations (f)..... -- -- 2.3 -- (64.0) (23.4) (31.5)
Cumulative effect of
accounting changes............ -- -- (3.7)(j) -- -- -- (25.3)(p)
Extraordinary items............. -- -- -- -- -- -- (6.6)(q)
-------- -------- -------- -------- -------- -------- --------
Net income...................... $54.1 $58.7 $129.6 $133.4 $36.1 $80.7 $34.7
======== ======== ======== ======== ======== ======== ========
Income per share from
continuing operations:
Basic......................... $1.20 $1.15 $2.61 $2.68 $2.04 $2.20 $2.17
Diluted....................... 1.19 1.14 2.60 2.62 2.01 2.16 2.13
Weighted average number of
common shares outstanding:
Basic......................... 45.2(h) 51.2(h) 50.2(h) 49.7 49.2 47.3 45.2
Diluted....................... 45.6(h) 51.5(h) 50.4(h) 52.3 51.8 50.1 48.0
Dividends per share............. $0.54 $0.51 $1.035 $0.975 $0.96 $0.915 $0.90
OTHER FINANCIAL DATA:
Total assets.................... $1,376.3 $1,549.9 $1,388.0 $1,551.0 $1,613.2 $1,357.9 $1,224.9
Total debt...................... 374.0 252.3 216.4 206.9 437.6 271.3 200.7
Stockholders' equity............ 489.7 722.4 629.7 743.8 578.1 547.9 525.2
Capital expenditures............ 24.6 26.3 56.5 59.3 49.0 74.8 55.1
Depreciation and amortization... 29.3 35.6 65.3 69.2 62.8 48.4 46.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
consolidated financial data.
- 18 -
<PAGE> 30
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
(a) Certain reclassifications to General Signal's previously reported income
data have been made to conform with the presentation of the combined
company. These reclassifications include: (1) classifying certain
engineering and research and development costs as selling, general and
administrative expense rather than as cost of sales, (2) classifying
goodwill and other intangible amortization as other operating expenses
rather than selling, general and administrative expense, and, (3)
classifying gains on the sales of business units and breakup fees as other
expenses (income) rather than other charges and credits. These
reclassifications do not affect previously reported earnings from
continuing operations before income taxes.
(b) During 1997, General Signal sold General Signal Pump Group ("GSPG") to
Pentair Inc. for approximately $200.0. General Signal recorded a pre-tax
gain of $63.7, or $17.2 after-tax. The effective tax rate on the sale of
GSPG differs from the statutory rate due to a difference in book and tax
basis of GSPG. Annual 1996 sales of this business were approximately
$201.0. See "Pro Forma Adjusted Historical Financial Data of General
Signal" presented elsewhere herein. General Signal also sold its equity
interest in a Mexican company for a $9.0 pre-tax gain, or $2.3 after-tax.
(c) During 1997, General Signal and Emerson Electric Co. ("Emerson") formed EGS
Electrical Group LLC ("EGS"), a joint venture combining General Signal
Electrical Group ("GSEG") with Emerson's Appleton Electric Operations.
General Signal contributed substantially all of the operating assets of
GSEG to EGS, in exchange for a 47.5% ownership in EGS. Annual 1996 sales of
this business were approximately $294.0. General Signal records its
investment in EGS under the equity method of accounting on a three month
lag basis, effective January 1, 1998. See "Pro Forma Adjusted Historical
Financial Data of General Signal" presented elsewhere herein.
Pursuant to a letter agreement dated July 19, 1998, General Signal and
Emerson have agreed that General Signal will acquire all of the assets and
assume all of the liabilities of the Dual-Lite and Edwards divisions of EGS
immediately prior to the consummation of the Merger. These divisions had
been contributed to EGS by General Signal at the time of the formation of
EGS. In exchange for these businesses, General Signal's interest in EGS
will be reduced from 47.5% to 44.5%. This transaction will not occur if the
Merger Agreement is terminated. Had this transaction taken place on January
1, 1997, consolidated net sales and net income would not be significantly
different from reported results.
(d) In 1996, General Signal sold Kinney for $29.0 and recognized a pre-tax gain
of $20.8. Annual 1995 sales of this business were approximately $25.0.
(e) During 1995, General Signal made three significant acquisitions. In June,
General Signal completed a cash tender offer for Best Power Technology,
Inc. ("Best Power") for $206.3. In July, General Signal acquired Waukesha
Electric Inc. ("Waukesha Electric") for $73.9. The acquisitions of Best
Power and Waukesha Electric were recorded under the purchase method of
accounting. In November, General Signal merged in a pooling of interests
with Data Switch Corporation ("Data Switch") by exchanging 1.8 shares of
General Signal Common Stock and 0.2 rights to receive General Signal Common
Stock for all outstanding common stock and related options and warrants of
Data Switch. Combined annual 1994 sales of these unrelated businesses were
approximately $336.0.
(f) Late in 1994, General Signal adopted a plan to sell Leeds & Northrup
Company ("L&N") and Dynapower/Stratopower ("Dynopower") and recorded a
charge of $25.8 after-tax on the disposal of these operations. Income from
these discontinued operations in 1994 was $2.4 after-tax. As of December
31, 1996, substantially all related assets were sold. In 1995, General
Signal recorded total charges of $64.0 after-tax for additional expected
losses related to the disposal of these businesses. In 1997, due to less
than expected losses, $2.3 after-tax of these charges were reversed into
income. The financial results of these operations are included as
discontinued operations through the date of divestiture. Annual 1993 sales
of these businesses were approximately $176.0. The loss from these
discontinued operations was $31.5 after-tax in 1993.
(g) In 1993, General Signal merged in a pooling of interests with Revco
Scientific, Inc. ("Revco") by exchanging 2.6 shares of common stock for all
of the outstanding common stock of Revco. Annual 1992 sales of this
business were approximately $56.0.
(h) In December 1996, General Signal called for the redemption of its 5.75%
convertible subordinated notes. General Signal also initiated a share
buy-back program of up to $100.0 to offset any shares issued as a result of
the redemption. By April 1997, the program was completed with a total of
2.5 shares repurchased for $100.0. In June 1997, General Signal
- 19 -
<PAGE> 31
initiated another share buy-back program of up to $150.0, subject to the
consummation of the GSPG divestiture. In September 1997, this program was
increased to $300.0. During 1997, 3.3 shares were purchased for $140.4 and
during 1998, 3.5 shares were purchased for $159.6 to complete this program.
(i) During the second half of 1997, General Signal recorded a pretax gain of
$10.0 on the settlement of patent litigation and sale of related patents.
General Signal also recorded pretax charges of $27.9 for asset valuations,
restructuring charges, lease termination costs and other matters. These
charges and gains were recorded in cost of sales ($11.l) and in selling,
general and administrative expense ($6.8).
(j) In 1997, General Signal expensed all previously capitalized business
process reengineering costs as a cumulative effect of a change in
accounting principle of $3.7, net of income tax. This change was in
accordance with Emerging Issues Task Force of the Financial Accounting
Standards Board consensus 97-13, "Accounting for Costs Incurred in
Connection with a Consulting Engagement or an Internal Project that
Combines Business Process Reengineering and Information Technology
Transformation."
(k) During 1996, General Signal recorded $4.2 in net sales for a royalty
settlement. General Signal also recorded pretax charges of $17.9 for asset
write-downs, lease termination costs, severance, warranty repairs and
environmental matters, net of an insurance gain on the recovery of
destroyed assets. These charges were recorded in cost of sales ($13.0) and
in selling, general and administrative expense ($4.9).
(l) In 1995, a charge of $7.4 was recorded for severance and other
consolidation costs relating to the combination of Best Power and existing
General Signal facilities and a charge of $12.7 was recorded for
transaction costs, severance and balance sheet valuation adjustments
related to the merger with Data Switch.
(m) During 1994, General Signal recorded $46.2 of pretax charges for
consolidation of operations, asset valuations, environmental matters, and
other issues. The charges were recorded in cost of sales ($27.7), selling,
general and administrative expense ($16.1), and income tax expense ($2.4).
(n) In 1994, General Signal negotiated an agreement to merge with Reliance
Electric Company ("Reliance"). Subsequent to the consummation of the
agreement, Reliance was acquired by another company in a cash tender offer.
Under the terms of the merger agreement, General Signal received $50.0 for
break-up fees and $5.2 for partial reimbursement of expenses. General
Signal incurred $9.0 of transaction costs in connection with the merger.
(o) During 1993, General Signal substantially completed the divestiture of
Semiconductor Equipment Operations with higher than expected proceeds from
the sale of these units and lower than expected severance costs. As a
result, $53.2 of excess reserves were returned to operating income. General
Signal also recognized a $5.2 charge related to previously divested
businesses and recorded a $15.0 charge primarily for factory and
administrative consolidation and rearrangement as well as product
restructuring and realignment. Additionally, transaction and consolidation
costs of $13.2 related to the pooling of interests merger with Revco were
expensed.
(p) In 1993, General Signal adopted the accrual method ("FAS 112") of
accounting for postemployment benefits, primarily severance and long-term
disability. The cumulative effect at January 1, 1993 of adopting FAS 112,
$25.3, net of income taxes, was recorded as a cumulative effect of
accounting change.
(q) In 1993, General Signal recorded an extraordinary charge of $10.7 ($6.6
after-tax) for early extinguishment of higher-rate debt and swap
agreements.
- 20 -
<PAGE> 32
SUMMARY SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
OF SPX AND GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
The following table presents summary selected pro forma condensed combined
statement of income and other financial data of SPX and General Signal. The
information is presented as if the Merger had occurred on January 1, 1997 for
statement of income and related data and on June 30, 1998 for balance sheet
data. The pro forma data assume that the Merger is effected by the exchange of
shares of SPX Common Stock and cash for shares of General Signal Common Stock
and that SPX will exchange 0.4186 of a share of SPX Common Stock and $18.00 in
cash for each share of General Signal Common Stock, whereby an aggregate of
18.227 shares of SPX Common Stock are issued and $783.8 in cash is paid in
exchange for all outstanding shares of General Signal Common Stock. Because the
General Signal stockholders will own a majority of the outstanding shares of SPX
Common Stock upon completion of the transaction, the Merger will be accounted
for as a reverse acquisition. Accordingly, for accounting purposes, SPX is
treated as the acquired company and General Signal 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 that the
Merger Agreement was signed. The cash portion of the Merger 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 General Signal's consolidated
financial statements prior to the date the Merger is consummated. See "Pro Forma
Condensed Combined Financial Data of SPX and General Signal" 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 accounting for this
business combination, the fair market value of SPX Common Stock is $64.50 per
share, which reflects the closing price of SPX Common Stock on July 17, 1998,
the last trading date prior to the date the Merger Agreement was signed. The
Merger Consideration includes 0.4186 of a share of SPX Common Stock for each
share of General Signal Common Stock. This is a fixed exchange ratio and will
not be adjusted in the event of any increase or decrease in the current market
price of SPX Common Stock. Consequently, changes in the market price of SPX
Common Stock will not impact these pro forma financial statements.
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 Merger, 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
Merger is consummated and thereafter, as well as the factors discussed under
"Risk Factors."
The pro forma condensed combined balance sheet reflects the estimated costs
associated with change of control agreements and other costs associated with
closing the corporate office of General Signal. Certain other change of control
agreement costs which are triggered by the Merger and are attributable to
General Signal employees who are not affected by the corporate office closing
are also reflected in the pro forma condensed combined balance sheet. The pro
forma condensed combined income statement does not reflect a charge for these
costs as they are non-recurring and have no continuing impact. Following the
Effective Time, SPX will be finalizing its strategic review of the combined
company and its plans to integrate the operations of General Signal. The pro
forma condensed combined financial data do not give effect to any additional
integration or restructuring costs that could result from that review and the
finalization of those plans. Any additional integration and rationalization of
the operations of General Signal 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 charge occurs. The costs may include severance and
related employee benefits costs, costs to consolidate manufacturing and
distribution facilities, facility rearrangement costs, relocation and moving
costs, training costs, and gains or losses on business divestitures, among
others.
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<PAGE> 33
The pro forma condensed combined financial data do not give effect to any
cost savings that could result from the combination of the companies. SPX's and
General Signal's management estimate that the combined company can achieve
approximately $55.0 to $60.0 of annualized cost savings in the first full year
following the acquisition. These cost savings include estimated annual savings
of $35.0 associated with duplicative corporate office costs, $10.0 to $15.0
associated with combining material sourcing of the combined company, and $10.0
to $15.0 of cost reductions at the General Signal business units.
In the pro forma condensed combined financial data, SPX's and General
Signal's historical information for the six months ended June 30, 1998 were
derived from SPX's Second Quarter Form 10-Q and General Signal's Second Quarter
Form 10-Q, respectively. For SPX's and General Signal's pro forma adjusted
historical financial data for the year ended December 31, 1997, see "Pro Forma
Adjusted Historical Financial Data of SPX" and "Pro Forma Adjusted Historical
Financial Data of General Signal," respectively, presented elsewhere herein, and
wherein certain divestitures by the respective companies are reflected as having
occurred as of January 1, 1997.
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997(a)(b)
----------------- -----------------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................................. $ 1,238.1 $ 2,500.3
Cost of products sold.................................... 840.1 1,719.0
Selling, general and administrative expense.............. 271.7 554.5
Other operating expenses, net............................ 18.0 34.2
Special charges and (gains) (c).......................... (7.1) 116.5
---------- ----------
Operating income......................................... 115.4 76.1
Other expense (income), net.............................. (1.4) (11.3)
Equity earnings of EGS................................... (20.0) (38.8)
Interest expense, net.................................... 57.5 97.6
---------- ----------
Income before income taxes............................... 79.3 28.6
Provision for income taxes............................... 33.0 22.3
---------- ----------
Income from continuing operations (d).................... $ 46.3 $ 6.3
========== ==========
Income per share:
Basic.................................................. $ 1.50 $ 0.19
Diluted................................................ 1.48 0.18
Weighted average number of
common shares outstanding:
Basic.................................................. 30.893 33.768
Diluted................................................ 31.263 34.319
Dividends per share (e).................................. $ -- $ 0.10
OTHER FINANCIAL DATA:
Total assets............................................. $ 2,917.1 $ 2,874.6
Total debt............................................... 1,519.7 1,305.4
Stockholders' equity..................................... 432.5 572.5
Capital expenditures..................................... 39.2 69.9
Depreciation and amortization............................ 52.8 102.6
</TABLE>
Note: The accompanying notes are an integral part of the summary selected pro
forma condensed combined financial data.
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<PAGE> 34
NOTES TO SUMMARY SELECTED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
(a) Pro forma information for the year ended December 31, 1997 includes the pro
forma adjusted historical results of SPX for the year then ended which
reflects SPX's February 1997 disposition of the Sealed Power division as if
such disposition occurred on January 1, 1997. See "Pro Forma Adjusted
Historical Financial Data of SPX," presented elsewhere herein.
(b) Pro forma information for the year ended December 31, 1997 includes the pro
forma adjusted historical results of General Signal for the year then ended
which reflects General Signal's August 1997 disposition of GSPG and General
Signal's September 1997 contribution of GSEG to a 47.5% owned joint venture
as if such transactions occurred on January 1, 1997. See "Pro Forma
Adjusted Historical Financial Data of General Signal," presented elsewhere
herein.
(c) The pro forma condensed combined financial data of SPX and General Signal
for the six months ended June 30, 1998 include SPX's special gain of $13.7
realized on SPX's investment in Echlin Inc. which was liquidated during the
second quarter of 1998 and $6.6 of expenses associated with SPX's offer to
acquire Echlin Inc.
The pro forma condensed combined financial data of SPX and General Signal
for the year ended December 31, 1997 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 and a $6.5 special charge recorded
by SPX of anticipated future legal costs associated with the ongoing
litigation with Snap-on Incorporated. See "Selected Historical Financial
Data of SPX."
(d) The pro forma condensed combined financial data of SPX and General Signal
reflect only results from continuing operations. SPX recorded a $10.3
extraordinary item in the year ended December 31, 1997. General Signal
recorded earnings from discontinued operations of $2.3 and a charge for the
cumulative effect of accounting change of $3.7 in the year ended December
31, 1997.
(e) 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 stockholders would be in
the form of open market purchases of SPX Common Stock, when deemed
appropriate by management.
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<PAGE> 35
RISK FACTORS
In considering whether to vote in favor of the SPX Proposal, the
stockholders of SPX should consider, and in considering whether to vote in favor
of the General Signal Proposal and in determining which form of Merger
Consideration to elect, the stockholders of General Signal should consider, in
conjunction with the other information included in this Joint Proxy
Statement/Prospectus, the following matters:
FIXED EXCHANGE RATIO DESPITE CHANGE IN RELATIVE STOCK PRICES
The relative stock prices of the SPX Common Stock and the General
Signal Common Stock at the Effective Time of the Merger may vary significantly
from the prices as of the date of execution of the Merger Agreement, the date of
this Joint Proxy Statement/Prospectus and the date on which the SPX stockholders
and the General Signal stockholders vote on the SPX Proposal and the General
Signal Proposal, respectively, due to changes in the business, operations and
prospects of SPX or General Signal, market assessments of the likelihood that
the Merger will be consummated and the timing thereof, regulatory
considerations, general market and economic conditions and other factors.
The exchange ratios of 0.6977 (for stockholders who elect to receive
all stock) or 0.4186 (for stockholders who elect to receive 60% of the Merger
Consideration in stock and 40% in cash) were fixed at the time of execution of
the Merger Agreement by the parties and are not subject to adjustment (except as
may result from the proration procedures under the Merger Agreement). Any
increase or decrease in the market price of the SPX Common Stock will
correspondingly increase or decrease the value of the Merger Consideration to be
received by the General Signal stockholders in the Merger. Moreover, because the
Effective Time may occur on a date later than the Special Meetings, there can be
no assurance that the price of the SPX Common Stock on the date of the Special
Meetings will be indicative of its price at the Effective Time. Stockholders of
SPX and General Signal are urged to obtain current market quotations for the SPX
Common Stock and the General Signal Common Stock, respectively.
FEDERAL INCOME TAX CONSEQUENCES
As conditions to the Merger (which SPX and General Signal have agreed
will not be waived), SPX must receive an opinion from its counsel, Fried, Frank,
Harris, Shriver & Jacobson, and General Signal must receive an opinion from its
counsel, Wachtell, Lipton, Rosen & Katz, that, subject to certain assumptions
set forth herein, the Merger will qualify as a reorganization pursuant to
Section 368(a) of the Code. Assuming that the Merger is a reorganization, (i) a
General Signal stockholder receiving solely SPX Common Stock in exchange for his
or her General Signal Common Stock will recognize no gain or loss as a result of
the Merger (except with respect to the receipt of cash, if any, in lieu of
fractional shares) and (ii) a General Signal stockholder receiving all cash or
cash and SPX Common Stock in exchange for his or her General Signal Common Stock
will recognize gain (but not loss) in the Merger, but not in excess of the
amount of cash received by such stockholder.
Any gain recognized with respect to cash received by a General Signal
stockholder may be taxed as a dividend if such stockholder does not qualify for
"sale or exchange" treatment under Section 302 of the Code, as such provision is
applied under these circumstances. See "Certain Federal Income Tax Consequences
of the Merger," for a detailed discussion of the application of these rules to a
General Signal stockholder. Under the proration procedures described herein, a
General Signal stockholder may receive cash in the Merger even if such
stockholder elects to receive solely stock, or may receive a greater or lesser
proportion of cash than such stockholder elects to receive, and under some
circumstances, any such cash received may be taxed as a dividend.
LEVERAGE
After consummation of the Merger, SPX will be more highly leveraged
than is either SPX or General Signal at present, with substantial debt service
obligations, including principal and interest obligations, with respect to
indebtedness of as much as $1.7 billion. As such, SPX may be particularly
susceptible to adverse changes in its industry, the economy and the financial
markets generally. The level of SPX's indebtedness could:
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<PAGE> 36
(i) limit cash flow available for general corporate purposes, such as
acquisitions and capital expenditures, because a substantial portion of SPX's
cash flow from operations must be dedicated to debt service; (ii) limit SPX's
ability to obtain (or obtain on favorable terms) additional debt financing in
the future for working capital, capital expenditures or acquisitions; (iii)
limit SPX's flexibility in reacting to competitive and other changes in the
industry and economic conditions generally; (iv) expose SPX to a risk that a
substantial decrease in net operating cash flows could make it difficult to meet
debt service requirements; and (v) expose SPX to risks inherent in interest rate
fluctuations because certain of the borrowings will be at variable rates of
interest, which could result in higher interest expense in the event of
increases in interest rates. Moreover, SPX's conduct of its business may be more
restricted, and its ability to incur additional debt may be more limited, than
at present by restrictive covenants which will be contained in the agreements
evidencing the Merger 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. Although the definitive terms of the Merger Financing
have not been finalized, SPX expects that such terms will include additional
operating and financial restrictions, such as limitations on SPX's ability to
incur indebtedness, create liens, sell assets, engage in mergers or other
business combinations, make investments and pay dividends, and will require SPX
to maintain certain financial ratios, including interest coverage and leverage
ratios.
SPX's ability to make scheduled payments of principal of, to pay
interest on, or to refinance, its indebtedness and to satisfy its other debt
obligations will depend upon the future operating performance of SPX, which will
be affected by general economic, financial, competitive, legislative,
regulatory, business and other factors beyond its control.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND ACHIEVING COST SAVINGS;
POTENTIAL CHARGES TO EARNINGS
SPX intends to employ an aggressive stockholder-focused EVA approach to
General Signal's businesses, similar to that utilized at SPX, focusing on cost
structure, use of capital, productivity enhancements, selective divestitures and
compensation based on EVA. EVA, or Economic Value Added, is a performance
measure calculated as net operating profit after tax minus a charge for the cost
of capital. The success of the proposed business combination of SPX and General
Signal will in large part be dependent on the ability of SPX, following the
consummation of the Merger, to realize cost savings and, to a lesser extent, to
consolidate operations and integrate processes. 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 business combination of SPX and General Signal, or that the timing
or extent of the cost savings and efficiencies that are anticipated by SPX will
be achieved. The pro forma financial statements contained in this Joint Proxy
Statement/Prospectus do not include the impact, positive or negative, of any
cost savings or efficiencies related to anticipated future actions.
Following the Effective Time, SPX will be finalizing its strategic
review of the combined company and its plans to integrate the operations of
General Signal. Certain portions of that review and plan have been completed and
SPX has already identified an estimated $72.4 million of pre-tax costs which it
expects the combined company to incur upon or due to the Merger. These costs are
reflected in the pro forma condensed combined financial data presented herein.
See "Pro Forma Condensed Combined Financial Data of SPX and General Signal."
Additional integration and rationalization of the operations of General Signal
pursuant to finalization of such review and plans 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 charge occurs. They may include
severance and related employee benefits costs, costs to consolidate
manufacturing and distribution facilities, facility rearrangement costs,
relocation and moving costs, training costs, and gains or losses on business
divestitures, among others. 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 believes that its actions have been
required to improve its operations and, as described above, will, if necessary,
record future charges as appropriate to address costs and operational
efficiencies at the combined company.
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<PAGE> 37
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.
In addition, all of the unit presidents at General Signal are covered
by a change of control severance policy which provides for severance and other
payments should their employment terminate under certain circumstances after a
change in control of General Signal. See "The Merger--Interests of Certain
Persons in the Merger." If all or a substantial number of these people were to
leave within a short time of one another, such action could have a material
adverse effect on SPX.
RELIANCE ON MAJOR CUSTOMERS OF SPX
Sales to GM, Ford and Chrysler accounted for approximately 22%, 12%,
and 3%, respectively, of SPX's revenues for the year ended December 31, 1997.
Although they will represent a significantly smaller percentage of revenues of
the combined company following the Merger, 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.
CYCLICAL NATURE OF AUTOMOTIVE INDUSTRY
Nearly all of SPX's operations are, and after the Merger is consummated
nearly one-half of SPX's operations will be, directly related to domestic and
foreign automotive vehicle production and vehicle service. The automotive
industry's sales and production are cyclical and can be affected by the strength
of a country's general economy. In addition, automotive production and sales can
be affected by labor relations issues, regulatory requirements, trade agreements
and other factors. A decline in automotive sales and production would likely
affect not only sales of components, tools and services to vehicle manufacturers
and their dealerships, but also sales of components, tools, and services to
aftermarket customers, and could result in a decline in SPX's results of
operations or a deterioration in SPX's financial condition. If demand changes
and SPX fails to respond accordingly, its results of operations could be
adversely affected in any given quarter.
SIGNIFICANCE OF GOODWILL
SPX will have goodwill of approximately $1.1 billion and stockholders'
equity of approximately $432.5 million at the consummation of the Merger. SPX
amortizes its goodwill on a straight-line method over the estimated periods
benefited, not to exceed 40 years. In determining the estimated useful life,
management considers the nature, competitive position, life cycle position, and
historical and expected future operating income of each acquired company, as
well as SPX's commitment to support these acquired companies through continued
investment in capital expenditures, operational improvements, and research and
development. After an acquisition, SPX continually reviews 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, SPX uses 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.
There can be no assurance that circumstances will not change in the future that
will affect the useful life or carrying value of goodwill.
EQUITY DILUTION OF CURRENT SPX STOCKHOLDERS
Following the consummation of the Merger, the General Signal
stockholders immediately prior to the Effective Time will own approximately 60%
of the outstanding SPX Common Stock and the SPX stockholders
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<PAGE> 38
immediately prior to the Effective Time will own approximately 40% of the
outstanding SPX Common Stock. SPX believes that, while the Merger will cause a
reduction of the present equity interest of the SPX stockholders in SPX as
presently constituted, it will also result in SPX stockholders' owning shares in
a much larger company with increased value-creation opportunities.
ABSENCE OF DIVIDENDS
General Signal historically has paid a regular quarterly dividend.
Pursuant to the Merger Agreement, General Signal has agreed not to pay dividends
prior to the Effective Time. In April 1997, SPX eliminated its quarterly cash
dividend and stated that future distributions to stockholders 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 stockholders will be permitted under SPX's
new credit and other debt agreements.
YEAR 2000 COSTS
SPX. 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. In 1997, SPX 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 has essentially completed the assessment phase of its year 2000
plan, and is continuing to survey its suppliers and service providers for year
2000 compliance. SPX's target completion date 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 adversely affect these
goals. SPX does not believe that the costs to remediate software and computer
technologies for the year 2000 problem will exceed $5.0 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. SPX estimates that it will spend
approximately $10.0 million to acquire and install this new system over the next
two years. There can be no assurances that the costs of remediation and testing
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.
General Signal. Based on a recent assessment, General Signal determined
that it will be required to undertake projects to modify or replace significant
portions of its software so that its computer systems will properly utilize
dates beyond December 31, 1999. These projects will provide General Signal with
numerous benefits only one of which is becoming year 2000 compliant. The
implementation or remediation plans are in various stages of completion. While
total expenditures related to these programs have not been finalized, General
Signal estimates, on a preliminary basis, that $8.0 million will be charged to
expense in 1998 related to these programs and a similar amount will be expensed
in 1999. General Signal presently believes that with these modifications, the
year 2000 issue will not pose significant operational problems for its computer
systems. General Signal has started to communicate with its significant
suppliers to determine the extent to which its interface systems are vulnerable
to those third parties' failure to remediate their own year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
General Signal's systems rely will be timely converted and would not have an
adverse effect on General Signal's systems. General Signal is also exploring
whether it has any exposure to contingencies related to the year 2000 issue for
the products it has sold. The above information is based on best estimates of
General Signal's management, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties.
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<PAGE> 39
ENVIRONMENTAL LIABILITIES
SPX. SPX's operations and properties are subject to federal, state,
local, and foreign regulatory requirements relating to environmental protection.
It is SPX's policy to comply fully with applicable environmental requirements.
SPX established an ongoing environmental compliance auditing program in 1989.
Based on current information, SPX believes that its operations are in
substantial compliance with applicable environmental laws and regulations, and
SPX is not aware of any violation that will have a material adverse effect on
its business, financial condition, or results of operations. There can be no
assurance, however, that currently unknown matters, new laws and regulations, or
stricter interpretations of existing laws and regulations will not materially
affect SPX's business or operations in the future.
General Signal. General Signal is involved in various stages of
investigation and remediation relative to environmental matters at properties
currently or formerly owned or operated by General Signal or at third-party
owned waste disposal sites arising in connection with internal investigations,
legal or administrative proceedings or the purchase or sale of facilities or
operations. General Signal has a comprehensive environmental compliance program
which includes environmental audits conducted by internal and outside
independent environmental professionals and regular communications with General
Signal's operating units regarding environmental compliance requirements and
anticipated regulations.
General Signal has been notified that it is a potentially responsible
party and has received other notices of potential liability pursuant to various
federal and state environmental laws (including, without limitation, the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980 and
similar state laws) at approximately 70 third-party owned sites. Such laws may
impose liability on certain classes or persons that are considered jointly and
severally liable for the costs of investigation and remediation of hazardous
substances present at such sites, regardless of fault or the legality of the
original disposal. These persons include the present or former owner or operator
of a facility and companies that generated, disposed of, or arranged for the
disposal of, such hazardous substances. General Signal has resolved its
liability by entering into de minimis settlements or other buyout agreements
with governmental authorities or other parties at 32 of these sites and believes
that it has no liability with respect to 16 of these sites. General Signal
believes, based on information currently available, that its aggregate probable
remaining liability at the 22 other sites is less than $3.0 million and has
reserved approximately that amount on its books. In addition to the
aforementioned third-party owned sites, General Signal is engaged in
investigation and/or remedial activities at, and has received notice of alleged
contamination with respect to, various of its currently or formerly owned sites
and has reserved approximately $19.0 million in connection therewith.
The potential costs related to the matters described above and the
possible impact on future operations are uncertain due in part to the complexity
of government laws and regulations and their interpretations, the varying costs
and effectiveness of clean-up technologies, the uncertain level of insurance or
other types of recovery and the degree of General Signal's responsibility.
Accordingly, there can be no assurance that General Signal will not incur
expenditures in excess of the amounts reserved for such matters.
In addition to the foregoing, certain of the current or former
facilities of General Signal have been in operation for several decades and,
over such time, have used or generated and disposed of substances that are or
may be considered hazardous. Certain of these facilities are located on
properties that had been used for various industrial purposes prior to General
Signal's occupancy. As a result of the Merger, additional subsurface
investigations will be required following the Merger in order to assess the
nature and scope of potential soil and groundwater conditions at certain of
these facilities. It is possible that such investigations will identify
additional soil and groundwater contamination which, if present, could be
material.
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 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 stockholders
- 28 -
<PAGE> 40
proposals and nominations; (v) limitations on the ability of stockholders to
amend, alter or repeal the By-Laws; (vi) enhanced voting requirements for
certain business combinations involving substantial stockholders; and (vii) the
authority of SPX's Board of Directors to issue, without stockholder approval,
preferred stock with such terms as SPX's Board of Directors may determine. SPX
is also afforded the protections of Section 203 of the Delaware General
Corporation Law, which could have similar effects. See "Comparison of Rights of
Stockholders of SPX and General Signal."
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<PAGE> 41
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is furnished in connection with
the solicitation by the Board of Directors of each of SPX and General Signal of
proxies to be used at their respective Special Meetings and at any and all
adjournments of the Special Meetings.
SPX. The SPX Special Meeting will be held on [date], 1998, at 10:00
a.m. (Eastern time), at the offices of Fried, Frank, Harris, Shriver & Jacobson,
One New York Plaza, 27th Floor, New York, New York. The purpose of the SPX
Special Meeting is to consider and vote upon the SPX Proposal, namely to approve
the issuance of SPX Common Stock to the General Signal stockholders in exchange
for their shares of General Signal Common Stock in the Merger. On [July 13,]
1998, there were [43,543,406] shares of General Signal Common Stock issued and
outstanding (exclusive of Restricted Shares). Assuming no additional issuances
of General Signal Common Stock prior to the Effective Time, the number of shares
of SPX Common Stock issuable upon consummation of the Merger is approximately
[18,227,270].
General Signal. The General Signal Special Meeting will be held on
[date], 1998, at 10:00 a.m. (Eastern time), at General Signal's headquarters,
One High Ridge Park, Stamford, Connecticut. The purpose of the General Signal
Special Meeting is to consider and vote upon the General Signal Proposal, namely
to approve and adopt the Merger Agreement.
RECORD DATE; QUORUM AND REQUIRED VOTE
SPX. Only those persons who are holders of record of shares of SPX
Common Stock at the close of business on [ ], 1998, the SPX Record Date, are
entitled to vote at the SPX Special Meeting. At the close of business on the SPX
Record Date, there were [ ] shares of SPX Common Stock outstanding. Each share
of SPX Common Stock is entitled to one vote. Generally, under SPX's By-Laws, the
holders of one-third of the total shares issued and outstanding, whether present
in person or represented by proxy, will constitute a quorum for the transaction
of business at the Special Meeting. However, pursuant to the rules of the NYSE,
on which the SPX Common Stock is listed, the presence in person or by proxy of a
majority of the shares of SPX Common Stock entitled to vote on the SPX Proposal
is necessary to constitute a quorum for purposes of approving the SPX Proposal.
The affirmative vote of the holders of a majority of the SPX Common Stock
present in person or represented by proxy at the SPX Special Meeting and
entitled to vote is required to approve the SPX Proposal, provided there is a
quorum. An abstention with respect to the SPX Proposal will have the same effect
as a vote cast against the SPX Proposal. Brokers who hold shares of SPX Common
Stock as nominees will not have discretionary authority to vote such shares in
the absence of instructions from the beneficial owners thereof. "Broker
non-votes" or any other failure to vote on the SPX Proposal will have no effect
on the outcome of the vote on the SPX Proposal. See "The Special
Meetings--Proxies."
As of the SPX Record Date, the directors and executive officers of SPX
and their affiliates owned an aggregate of approximately [ ]% of the outstanding
shares of SPX Common Stock. Each of the directors and executive officers of SPX
has advised SPX that he or she plans to vote or to direct the vote of all shares
of SPX Common Stock owned by him or her in favor of the SPX Proposal.
General Signal. Only those persons who are holders of record of shares
of General Signal Common Stock at the close of business on [ ], 1998, the
General Signal Record Date, are entitled to vote at the General Signal Special
Meeting. At the close of business on the General Signal Record Date, there were
[ ] shares of General Signal Common Stock outstanding. Each share of General
Signal Common Stock is entitled to one vote. The presence, whether in person or
by proxy, of holders of a majority of the total number of outstanding shares of
General Signal Common Stock will constitute a quorum for the transaction of
business at the General Signal Special Meeting. The affirmative vote of the
holders of two-thirds of all votes entitled to be cast by the holders of General
Signal Common Stock is required to approve the General Signal Proposal. Brokers
who hold shares of General Signal Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof. Abstentions, broker non-votes or any other
failure
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<PAGE> 42
to vote on the General Signal Proposal will have the same effect as a vote cast
against the General Signal Proposal. See "The Special Meetings--Proxies."
As of the General Signal Record Date, the directors and executive
officers of General Signal and their affiliates owned an aggregate of
approximately [ ]% of the outstanding shares of General Signal Common Stock.
Each of the directors and executive officers of General Signal has advised
General Signal that he or she plans to vote or to direct the vote of all shares
of General Signal Common Stock owned by him or her in favor of the General
Signal Proposal.
PROXIES
All shares of SPX Common Stock represented by properly executed proxies
received prior to or at the SPX Special Meeting, and not duly and timely
revoked, and all shares of General Signal Common Stock represented by properly
executed proxies received prior to or at the General Signal Special Meeting, and
not duly and timely revoked, will be voted in accordance with the instructions
indicated on such proxies. If no instructions are indicated on a properly
executed returned proxy, such proxy will be voted "FOR" the approval of the SPX
Proposal or the General Signal Proposal, as the case may be.
A properly executed proxy marked "ABSTAIN," although counted for
purposes of determining whether there is a quorum and for purposes of
determining the aggregate voting power and number of shares that are present and
entitled to vote at the applicable Special Meeting, will not be voted.
Accordingly, since the affirmative vote of the holders of a majority of shares
present in person or represented by proxy and entitled to vote on the SPX
Proposal at the SPX Special Meeting is required for approval of the SPX
Proposal, a proxy marked "ABSTAIN" will have the effect of a vote against the
SPX Proposal. Similarly, since the affirmative vote of two-thirds of all shares
of General Signal Common Stock outstanding and entitled to vote is required for
approval of the General Signal Proposal, a proxy marked "ABSTAIN" will have the
effect of a vote against the General Signal Proposal. IN ACCORDANCE WITH NYSE
RULES, BROKERS AND NOMINEES WHO HOLD SHARES OF STOCK IN THEIR NAMES BUT ARE NOT
THE BENEFICIAL OWNERS OF SUCH SHARES ARE PRECLUDED FROM EXERCISING THEIR VOTING
DISCRETION WITH RESPECT TO SUCH SHARES. THUS, BROKERS AND NOMINEES ARE NOT
EMPOWERED TO VOTE SHARES OF SPX COMMON STOCK OR GENERAL SIGNAL COMMON STOCK HELD
BY THEM WITH RESPECT TO THE APPROVAL OF THE SPX PROPOSAL OR THE GENERAL SIGNAL
PROPOSAL, AS THE CASE MAY BE, ABSENT SPECIFIC INSTRUCTIONS FROM THE BENEFICIAL
OWNERS OF SUCH SHARES. Shares represented by "broker non-votes" are not
considered shares "entitled to vote," and, accordingly, "broker non-votes" will
have no effect on the outcome of the SPX Proposal, but, because such shares are
outstanding, "broker non-votes" will have the effect of a vote against the
General Signal Proposal. A failure to return a properly executed proxy will have
no effect on the outcome of the SPX Proposal but will have the effect of a vote
against the General Signal Proposal (unless the stockholder attends the Special
Meeting and votes his or her shares in person in favor of the General Signal
Proposal).
Any person executing a proxy card may revoke it prior to its exercise
by filing with the Secretary of SPX or General Signal, as the case may be, prior
to the applicable Special Meeting at the address specified in the last paragraph
of "Available Information" or at the applicable Special Meeting, either an
instrument revoking the proxy or a duly executed proxy bearing a later date.
Attendance at the SPX Special Meeting or the General Signal Special Meeting will
not in and of itself constitute revocation of a proxy.
Neither the SPX Board nor the General Signal Board are currently aware
of any business to be transacted at the SPX Special Meeting and the General
Signal Special Meeting, respectively, other than as described herein. If,
however, other matters are properly brought before the SPX Special Meeting or
the General Signal Special Meeting, or any adjournments or postponements
thereof, the persons respectively appointed as proxies will have discretion to
vote or act thereon according to their judgment. Such adjournments may be for
the purpose of soliciting additional proxies. Shares represented by proxies
voting against the approval of the SPX Proposal or General Signal Proposal will
be voted against a proposal to adjourn the respective Special Meeting for the
purpose of soliciting additional proxies.
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<PAGE> 43
SOLICITATION OF PROXIES
In addition to the use of the mail, arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxy
material to the beneficial owners of stock held of record by such persons, and
SPX and General Signal will, upon request, reimburse their respective
stockholders for their reasonable expenses in so doing. SPX and General Signal
each have retained D.F. King & Co., Inc. to aid in the solicitation of proxies
and to verify certain records related to the solicitation at a fee of $7,500
and $15,000, respectively, plus out-of-pocket costs and expenses. To the extent
necessary in order to ensure sufficient representation at its Special Meeting,
SPX or General Signal may request by telephone, facsimile or telegram the
return of proxy cards. The extent to which this will be necessary depends upon
how promptly proxy cards are returned. Stockholders are urged to send in their
proxies without delay. Employees of SPX and General Signal may solicit proxies
for which no additional compensation will be paid.
NO DISSENTERS' RIGHTS
No holder of SPX Common Stock or General Signal Common Stock will have
any dissenters' rights in connection with, or as a result of, the matters to be
acted upon at the Special Meetings.
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<PAGE> 44
THE COMPANIES
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. The Vehicle Components segment 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, Michigan 49443-3301, telephone number (616) 724-5000.
General Signal. General Signal, incorporated in New York in 1904, is a
manufacturer of equipment for the Process Controls, Electrical Controls and
Industrial Technology industries. General Signal's key Process Controls
industry products include mixers; valves for municipal water supply and
wastewater treatment, and pulp, paper, food, pharmaceutical and chemical
manufacturing; ultra low-temperature freezers for life science research and
furnaces. In the Electrical Controls industry, key products include
uninterruptible power supply equipment, power transformers and fire detection
systems. Products serving the Industrial Technology industry include auto and
bicycle components, data networking equipment and fare collection and vending
equipment.
During the last five years, General Signal invested approximately
$394.4 million in cash and 4.4 million shares of General Signal Common Stock to
acquire 12 businesses and/or product lines. Additionally, during the last five
years, General Signal disposed of four units, two of which were accounted for as
discontinued operations. In September 1997, General Signal contributed the net
assets of GSEG to EGS, a joint venture with Emerson's Appleton Electric
operations.
General Signal's corporate headquarters are located at One High Ridge
Park, Stamford, Connecticut 06904-2010, telephone number (203) 329-4100.
MergerSub. MergerSub is a wholly owned subsidiary of SPX, incorporated
in Delaware in 1998 for the sole purpose of effecting transactions such as
those contemplated by the Merger Agreement. MergerSub has no assets or
liabilities other than those arising out of the Merger Agreement. Prior to the
consummation of the Merger, MergerSub will not engage in any activity other
than activities related to the transactions contemplated by the Merger
Agreement. MergerSub's principal executive offices are located at 700 Terrace
Point Drive, Muskegon, Michigan 49443-3301, telephone number (616) 724-5000.
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<PAGE> 45
THE MERGER
GENERAL
At the Effective Time, General Signal will be merged with and into
MergerSub and thereby become a wholly owned subsidiary of SPX. In the Merger,
each share of General Signal Common Stock issued and outstanding immediately
prior to the Effective Time, without any action on the part of the holder
thereof, will be converted into the right to receive, at the election of the
stockholder but subject to the limitations and proration procedures described in
this Joint Proxy Statement/Prospectus and as set forth in the Merger Agreement,
EITHER (i) 0.6977 of a share of SPX Common Stock, OR (ii) $45.00 in cash,
without interest, OR (iii) 0.4186 of a share of SPX Common Stock and $18.00 in
cash, without interest. Each share of SPX Common Stock issued to holders of
General Signal Common Stock in the Merger will be issued together with the
associated SPX Right. See "Comparison of Rights of Stockholders of SPX and
General Signal--Stockholder Rights Plans" for a description of the SPX Rights.
Cash will be paid in lieu of fractional shares of SPX Common Stock. The Merger
will become effective at the Effective Time when the Certificates of Merger have
been filed with the Secretary of State of the State of Delaware and the
Department of State of the State of New York or at such later time as may be
agreed upon by SPX and General Signal and specified in the Certificates of
Merger.
The shares of SPX Common Stock to be issued to the General Signal
stockholders in the Merger will constitute approximately 60% of the SPX Common
Stock outstanding immediately following the Merger, and the SPX stockholders
immediately prior to the Merger will hold approximately 40% of the SPX Common
Stock outstanding immediately following the Merger.
BACKGROUND OF THE MERGER
In connection with its annual strategic review, during the fall of 1997
General Signal's management took steps to improve General Signal's strategic
positioning and to explore its strategic alternatives. These steps included the
announcement of an effort to focus management attention on certain operational
core competencies and the streamlining of General Signal's portfolio of units by
retaining businesses for which those core competencies would have the most
benefit. In addition, General Signal retained Lazard Freres, as its investment
banker, to contact a select group of strategic and financial parties to explore
the possibility and feasibility of entering into a business combination
transaction which would enhance stockholder value. After preliminary discussions
with several parties, General Signal determined that no such transactions were
likely with the selected group and terminated the process by the end of
November. After receiving unsolicited inquiries in the spring of 1998 regarding
possible business combination transactions, General Signal again held
preliminary discussions with a limited number of other potential strategic
partners regarding a business combination, but none of such discussions advanced
past the preliminary stages.
On June 11, 1998, members of SPX's senior management and Lazard Freres
met at SPX's corporate offices, where they discussed, among other things, the
possibility of a potential business combination between SPX and General Signal.
Based on this discussion, a meeting was arranged on June 24 among John B.
Blystone, Chairman, President and Chief Executive Officer of SPX, Patrick
O'Leary, Vice President - Finance, Treasurer and Chief Financial Officer of SPX,
and Michael D. Lockhart, Chairman, President and Chief Executive Officer of
General Signal, at which, with representatives of Lazard Freres in attendance,
Messrs. Blystone and Lockhart discussed their respective businesses and the
possible benefits to stockholder value that could be produced by combining the
two companies. The parties executed customary non-disclosure agreements, dated
as of June 24, 1998, allowing for the exchange of confidential information
between the companies, and commenced due diligence.
On June 30, 1998, members of General Signal's senior management met
with members of SPX's senior management to exchange operational and financial
information and to continue their respective due diligence investigations of one
another. The respective due diligence investigations continued through July 19.
On July 7, Messrs. Lockhart and Blystone met to discuss the financial terms and
other aspects of a proposed transaction, though no definitive agreements were
reached.
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<PAGE> 46
On July 8, 1998, the General Signal Board held a special meeting at
which Mr. Lockhart updated the directors on the status of the discussions and
meetings with SPX. Following discussion of the strategic rationale of a business
combination with SPX and General Signal's strategic alternatives, the General
Signal Board authorized management to continue its negotiations with and due
diligence of SPX. At about that time, Mr. Blystone started acquainting the
members of the SPX Board with the opportunity of the potential acquisition and
gained consensus that the management of SPX should continue to evaluate a
possible combination with General Signal on an expedited basis. On July 8, 1998,
SPX retained Stern Stewart to perform a detailed valuation analysis and, if
needed, to provide a fairness opinion with respect to a potential business
combination of SPX with General Signal.
On July 13, 1998, members of the respective senior managements of
General Signal and SPX met, together with Lazard Freres and the two companies'
respective accounting and legal advisors, to make due diligence presentations to
one another, to exchange additional financial and business information, and to
discuss certain issues relevant to determining the appropriate structure of a
proposed combination. From July 13 through July 19, General Signal, SPX and
their respective advisors continued their due diligence investigations of the
other party. Also during this period, General Signal's and SPX's legal
representatives drafted and negotiated the Merger Agreement, and representatives
of the respective senior managements of General Signal and SPX negotiated the
financial terms of the Merger.
On July 17, 1998, the General Signal Board held a special meeting to
review the proposed transaction with SPX. Representatives of General Signal's
senior management and General Signal's legal advisors and investment banker held
discussions and made presentations regarding the business and strategic
rationales for the proposed transaction, the proposed terms of the transaction,
certain legal considerations and an update on the status of the negotiations
with SPX. On July 19, the General Signal Board held a special meeting to
consider and vote upon the proposed Merger. At this meeting, representatives of
General Signal's senior management and General Signal's legal advisors and
investment banker reviewed, among other things, the matters set forth under
"Reasons for the Merger--Recommendations of the Boards," including the terms of
the proposed Merger and the provisions contained in the draft Merger Agreement.
In addition, at this meeting, Lazard Freres rendered its oral opinion,
subsequently confirmed in writing, that, as of July 19, 1998, the aggregate
consideration to be received by the General Signal stockholders in the Merger is
fair to the General Signal stockholders from a financial point of view.
Following further discussion and consideration, the General Signal Board
unanimously approved and authorized the execution of the Merger Agreement.
On July 17, 1998, the SPX Board held a special meeting, in the course
of which the SPX Board received an update on the status of negotiations,
reviewed the strategic and financial implications of the possible transaction
with General Signal, and heard a presentation by Stern Stewart as to their
preliminary findings that the transaction was fair to SPX and the methodologies
used by them in arriving at that conclusion. On July 19, 1998, the SPX Board
held a special meeting. At that meeting, senior management of SPX reviewed the
strategic and operational synergies of the transaction, SPX's legal advisors
reviewed the terms of the definitive Merger Agreement with the SPX Board, and
Stern Stewart rendered its oral opinion, subsequently confirmed in writing,
that, as of July 19, 1998, the aggregate consideration to be paid by SPX in the
Merger was fair to SPX from a financial point of view.
On July 19, 1998, following final approval by the General Signal Board
and the SPX Board, each company executed and delivered the Merger Agreement. On
July 20, 1998, the parties issued a joint press release announcing the Merger.
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<PAGE> 47
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
Reasons for the Merger - SPX
At a telephonic meeting on July 19, 1998, the SPX Board, by unanimous
vote of those present (one director having been unable to attend the Board
meeting), approved the Merger Agreement and the transactions contemplated
thereby, including the Merger, and resolved to recommend that the SPX
stockholders approve the SPX Proposal.
In reaching its determination, the SPX Board consulted with SPX's
management, as well as its financial and legal advisors, and considered the
following material factors:
The SPX Board considered that the addition of General Signal's businesses
to SPX would result in a balance of industrial and vehicle solutions businesses
and would provide SPX with a new growth platform from which to increase
stockholder value. The SPX Board viewed General Signal as a strong candidate for
application of SPX's EVA-based management techniques that have contributed to
significantly increased stockholder value at SPX since January 1996. The SPX
Board believed that General Signal's businesses, many of which are first or
second in their markets or strong niche players, are strategically positioned
for operational improvement and growth, much like the operational improvement
and growth that has taken place in SPX's businesses since January 1996.
The SPX Board believed that the SPX EVA-based management approach and the
historical success at SPX of business reorganizations, operational improvements,
strategic acquisitions and divestitures, organic growth and financial strategies
since January 1996 would be equally successful in generating value in General
Signal's businesses. The SPX Board considered the following:
* the potential cost savings that could be created by combining the
respective businesses of SPX and General Signal, as well as the
operational improvements resulting from business reorganization
and reengineering and the sharing of best practices between
businesses;
* the potential for margin improvement, improved operating capital
utilization, and EVA improvement resulting from a full
implementation of an EVA-based management and incentive system in
a fashion similar to the implementation of EVA at SPX that began
in January 1996 and that currently includes approximately 80% of
SPX employees;
* the prospects for driving both organic growth and growth
through acquisition by developing focused global growth
strategies for General Signal's core businesses in a similar
fashion to SPX's growth from the recent acquisitions of IBS
Filtran, Jatek, A.R. Brasch Marketing, The Valley Forge Group,
Tecnotest and Toledo Trans-Kit;
* the potential for more efficient financial capital utilization
through the implementation of SPX's EVA-disciplined financial
policies to target an optimal capital structure and to eliminate
cash dividends; and
* the potential for creating stockholder value through strategic
divestitures of General Signal businesses similar to the
methodology used by SPX in its divestiture of Hy-Lift in 1996 and
Sealed Power in early 1997.
In addition to the foregoing, the SPX Board considered the results of
financial analyses as to the effect of the Merger on SPX's earnings and EVA.
The Board further considered the presentations of Stern Stewart, which
was the originator of EVA as a financial management technique and which had
acted as consultant to senior management of SPX in introducing and implementing
an EVA-based program at SPX, and Stern Stewart's opinion that the aggregate
consideration to be paid by SPX in the Merger was fair to SPX from a financial
point of view.
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<PAGE> 48
The foregoing discussion sets forth the material information and
factors considered and given weight by the SPX Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the SPX
Board did not find it practicable or necessary to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of the SPX Board may have
given different weights to different factors.
THE SPX BOARD BY UNANIMOUS VOTE OF THOSE PRESENT (ONE DIRECTOR HAVING
BEEN UNABLE TO ATTEND THE BOARD MEETING) HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, ARE
FAIR TO AND IN THE BEST INTERESTS OF SPX AND ITS STOCKHOLDERS. ACCORDINGLY, THE
SPX BOARD RECOMMENDS THAT STOCKHOLDERS OF SPX VOTE "FOR" APPROVAL OF THE SPX
PROPOSAL.
Reasons for the Merger--General Signal
The General Signal Board has unanimously determined that the Merger is
advisable, fair to, and in the best interests of, General Signal and its
stockholders and has approved the Merger Agreement. In particular, the General
Signal Board believes that the Merger provides the General Signal stockholders
with an opportunity to receive for their shares of General Signal Common Stock a
substantial premium over the prevailing pre-announcement trading price of
General Signal Common Stock as well as over the values that a stand-alone
strategy could reasonably be expected to produce. In addition, the form of the
Merger Consideration in the aggregate provides the General Signal stockholders
with immediate cash value for a portion of their shares while also providing
them the opportunity to participate, as holders of SPX Common Stock, in a
larger, more diversified company with strong prospects for stockholder value
enhancement in the future. In this regard, the General Signal Board considered
that each General Signal stockholder will have the opportunity to select a form
of Merger Consideration most closely aligned with his or her investment
objectives from among three alternatives: all cash, all SPX Common Stock, or a
combination of cash and SPX Common Stock, subject to the proration procedures
described elsewhere in this Joint Proxy Statement/Prospectus.
In addition to the foregoing, in reaching its decision to approve the
Merger Agreement and to recommend that the General Signal stockholders vote to
approve and adopt the Merger Agreement, the General Signal Board considered the
following material factors:
(i) the General Signal Board's expectation of SPX's financial
performance following the Merger, taking into account, among other things:
- the business, operations, financial condition, operating
results and prospects of General Signal and of SPX,
- the potential for cost saving that could be created by
combining the respective businesses of SPX and General Signal,
and the potential initial costs that could be incurred by SPX
to achieve such cost savings, and
- SPX's expected post-Merger capital structure and the
accounting treatment of the Merger;
(ii) the historical trading prices of the General Signal Common
Stock, on the one hand, and the SPX Common Stock, on the other, including the
significant price appreciation of the SPX Common Stock since Mr. Blystone became
Chairman, President and Chief Executive Officer of SPX;
(iii) the fact that the per share consideration to be received by
the General Signal stockholders in the Merger represented, as of July 19, 1998,
a substantial premium over the market prices of the General Signal Common Stock
prevailing prior to the announcement of the signing of the Merger Agreement;
(iv) the form of the Merger Consideration, which (1) in the
aggregate provides the General Signal stockholders with immediate cash value for
a portion of their shares while also providing them the opportunity to
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<PAGE> 49
participate, as holders of SPX Common Stock, in a larger, more diversified
company of which General Signal would become a significant part, and (2) permits
individual stockholders to elect from among cash, SPX Common Stock, or a
combination thereof (subject, in all cases, to proration) as the form of the
consideration to be received for their shares of General Signal Common Stock;
(v) the potential stockholder value that could be expected to be
generated from the various strategic alternatives available to General Signal,
including the alternative of remaining independent (with or without selling,
spinning-off or otherwise disposing of one or more of its business units), as
well as the results of the contacts and preliminary discussions held by General
Signal's senior management from time to time with third parties regarding
possible business combinations;
(vi) the presentation by Lazard Freres with respect to the Merger
and the opinion of Lazard Freres as to the fairness, from a financial point of
view, of the aggregate Merger Consideration to be received by the General Signal
stockholders in the Merger (see "The Merger--Opinion of General Signal's
Investment Banker");
(vii) the terms of the Merger Agreement, all of which were the
products of extensive arm's length negotiations, including, without limitation,
the following:
- the form and amount of the Merger Consideration,
- the representations and warranties made by SPX with respect to
its business, operations and financial condition,
- the expense reimbursement and termination fee provisions
requiring General Signal or SPX, as the case may be, to
compensate the other party in certain circumstances in the
event the Merger Agreement is terminated, and
- the nature and relatively limited number of conditions to the
obligations of SPX to consummate the Merger (including, in
particular, the absence of a financing condition), which the
General Signal Board believes increases the likelihood that
the Merger will be consummated if approved by stockholders;
(viii) the absence of any significant regulatory impediments and the
corresponding likelihood that the Merger will be consummated; and
(ix) the fact that the portion of the aggregate Merger
Consideration to be received by the General Signal stockholders in the form of
SPX Common Stock would not be taxable for United States federal income tax
purposes to the stockholders receiving such consideration.
The foregoing discussion addresses all of the material information and
factors considered by the General Signal Board in its consideration of the
Merger. In view of the variety of factors and the amount of information
considered, the General Signal Board did not find it practicable to and did not
make specific assessments of, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. The determination
was made after consideration of all of the factors as a whole. In addition,
individual members of the General Signal Board may have given different weights
to different factors. For a discussion of the interests of certain members of
General Signal's management and the General Signal Board in the Merger, see "The
Merger--Interests of Certain Persons in the Merger."
THE GENERAL SIGNAL BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF, GENERAL SIGNAL AND ITS
STOCKHOLDERS AND HAS APPROVED THE MERGER AGREEMENT. ACCORDINGLY, THE GENERAL
SIGNAL BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF GENERAL SIGNAL VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE GENERAL SIGNAL
SPECIAL MEETING.
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<PAGE> 50
OPINION OF SPX'S FINANCIAL ADVISOR
Stern Stewart has acted as financial advisor to SPX in connection with
the Merger. At the July 19, 1998 meeting of the SPX Board, Stern Stewart
delivered its oral opinion to the SPX Board, subsequently confirmed in a written
opinion dated July 19, 1998, to the effect that based upon and subject to
various considerations set forth in such opinion, as of July 19, 1998, the
aggregate Merger Consideration to be paid in the acquisition of General Signal
is fair to SPX from a financial point of view.
THE FULL TEXT OF THE STERN STEWART OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, LIMITATIONS ON AND
SCOPE OF THE REVIEW BY STERN STEWART IN RENDERING THE STERN STEWART OPINION, IS
ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX B AND IS
INCORPORATED BY REFERENCE HEREIN. THE STERN STEWART OPINION IS DIRECTED ONLY TO
THE FAIRNESS OF THE CONSIDERATION TO BE PAID BY SPX CORPORATION FROM A FINANCIAL
POINT OF VIEW, HAS BEEN PROVIDED TO THE SPX BOARD IN CONNECTION WITH ITS
EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SPX COMMON STOCK AS TO HOW
TO VOTE AT THE SPX SPECIAL MEETING. THE SUMMARY OF THE STERN STEWART OPINION SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. HOLDERS OF SPX COMMON STOCK ARE
URGED TO READ THE STERN STEWART OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with its opinion, Stern Stewart: (i) reviewed certain
publicly available financial statements and other information of General Signal
and SPX, (ii) reviewed certain financial projections for General Signal and SPX,
including estimates of certain potential benefits of the proposed business
combination, prepared by the management of SPX, in consultation with General
Signal (the "SPX Management Projections"), (iii) discussed the past and current
operations, financial condition and prospects of General Signal and SPX with
management of SPX, (iv) reviewed the reported prices and historical trading
activity of the General Signal Common Stock and the SPX Common Stock, (v)
compared the financial performance and condition of General Signal and SPX and
the reported prices and trading activity of the General Signal Common Stock and
the SPX Common Stock with those of certain other comparable publicly traded
companies; (vi) reviewed publicly available information regarding the financial
terms of certain comparable transactions, in whole or in part, to the Merger;
(vii) reviewed the Merger Agreement; and (viii) performed such other analyses as
Stern Stewart deemed appropriate for purposes of arriving at and preparing the
Stern Stewart Opinion.
Stern Stewart relied, without independent verification, upon the
accuracy and completeness of all of the financial and other information that was
furnished or otherwise communicated to Stern Stewart by SPX. With respect to
financial forecasts and projections provided by SPX, Stern Stewart assumed that
such financial forecasts and projections were reasonably prepared on bases
reflecting the best available estimates and good faith judgment of SPX's
management as to the future financial and other performance of General Signal
and SPX, as applicable. Stern Stewart expresses no view as to, and assumes no
responsibility for, such projections or the assumptions on which they are based.
Stern Stewart further assumed that obtaining any necessary regulatory or
third-party approvals for the transactions contemplated by the Merger Agreement
will not have an adverse effect on General Signal or SPX, as applicable. Stern
Stewart did not make an independent evaluation or appraisal of the assets and
liabilities of General Signal or SPX or any of their respective subsidiaries and
Stern Stewart was not furnished with any such evaluation or appraisal. The Stern
Stewart Opinion was necessarily prepared and delivered based on economic, market
and other conditions as in effect on, and the information made available to
Stern Stewart as of, July 19, 1998. Although subsequent developments may affect
the Stern Stewart Opinion, Stern Stewart does not have any obligation to update,
revise, or reaffirm its opinion. Stern Stewart did not express any opinion as to
what the value of the SPX Common Stock actually will be when issued to the
General Signal stockholders pursuant to the Merger or the prices at which the
SPX Common Stock will trade after the Merger.
The forecasts or projections furnished to Stern Stewart for General
Signal and SPX were prepared by the management of SPX, in consultation with
General Signal. As a matter of policy, SPX and General Signal do not
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publicly disclose internal management forecasts, projections, or estimates of
the type furnished to Stern Stewart in connection with its analysis of the
Merger, and such forecasts, projections and estimates were not prepared with a
view towards public disclosure. These forecasts, projections, and estimates were
based on numerous variables and assumptions which are inherently uncertain and
which may not be within the control of the management of General Signal and SPX,
including, without limitation, general economic, regulatory and competitive
conditions. Accordingly, actual results could vary materially from those set
forth in such forecasts, projections, and estimates.
The following is a summary of certain of the financial analyses used by
Stern Stewart believed by it to be material in connection with providing its
oral opinion (subsequently confirmed in writing) to the SPX Board on July 19,
1998.
Historical Stock Trading Analysis. Stern Stewart reviewed the
historical trading prices for the General Signal Common Stock, the SPX Common
Stock, and the relationship between movements of the General Signal Common Stock
and the SPX Common Stock and movements in the common stock of selected peers in
the electrical equipment industry (the "Peer Companies") and in the S&P 500
Index. The Peer Companies used in the analysis were Cooper Industries, Inc.,
Emerson, Honeywell Inc., Hubbell Incorporated, Magnetek, Inc., and Rockwell
International Corporation. The analysis indicated that for the prior year, five
years, and ten years ended July 10, 1998, the total return to the General Signal
stockholders, including dividends, significantly underperformed both the
portfolio of Peer Companies and the S&P 500. The total return to the General
Signal stockholders, including dividends, for the prior year through July 10,
1998 was -24.6%, whereas the Peer Companies returned 7.5% to their stockholders
and the S&P 500 appreciated 30.3%. The compound annual return to the General
Signal stockholders, including dividends, for the prior five years through July
10, 1998 was 4.9%, whereas the compound annual returns of the Peer Companies and
the S&P 500 were 16.5% and 24.0%, respectively. The compound annual return to
the General Signal stockholders, including dividends, for the prior ten years
through July 10, 1998 was 6.5%, whereas the compound annual returns of the Peer
Companies and the S&P 500 were 16.7% and 18.9%, respectively.
Stern Stewart also compared the implied price per share to be paid
pursuant to the Merger Agreement of $45.00 ("Implied Price Per Share") with the
closing stock price of the General Signal Common Stock on July 17, 1998 (the
last trading day before the public announcement of the Merger Agreement) of
$37.63. The Implied Price Per Share to be paid pursuant to the Merger Agreement
represented a 19.6% premium to the closing price of the General Signal Common
Stock on July 17, 1998. Stern Stewart also compared the Implied Price Per Share
to be paid for the General Signal Common Stock pursuant to the Merger Agreement
of $45.00, and the closing price of the General Signal Common Stock on July 17,
1998 of $37.63, with the 52 week high of $53.00 and the 52 week low of $35.69
per share of General Signal Common Stock. Stern Stewart also compared the
closing stock price of the SPX Common Stock on July 17, 1998 of $64.50 with the
52 week high of $79.06 and the 52 week low of $49.50 per share of SPX Common
Stock. Stern Stewart reviewed analyst and market expectations for General
Signal's predicted stock price performance over the next twelve months. The
median expected twelve month stock price increase according to research analyst
reports was $10.00.
Peer Companies Analysis. Stern Stewart reviewed and compared certain
actual and estimated financial information relating to General Signal to
corresponding financial information, ratios, and public market multiples for the
Peer Companies. The selected Peer Companies were chosen because they are
publicly traded companies with operations that, for the purposes of this
analysis, may be considered similar to those of General Signal. Stern Stewart
calculated and compared various financial multiples and ratios for General
Signal and each of the Peer Companies. The multiples and ratios of the Peer
Companies were calculated using closing market prices on July 10, 1998, publicly
reported financial results, and publicly available information and estimates.
Stern Stewart considered for the Peer Companies the total enterprise
value (defined as equity value (share price times latest reported total shares
outstanding) plus debt, preferred stock, and minority interests) ("Enterprise
Value") as a multiple of last reported book value (defined as book value of
equity plus book value of debt) ("Book Value"), latest twelve months ("LTM")
sales, LTM earnings before interest and taxes ("EBIT"), and LTM earnings before
interest, taxes, depreciation, and amortization ("EBITDA"). Stern Stewart's
analysis for the Peer Companies indicated multiples of Enterprise Value to Book
Value which ranged from 1.9x to 3.6x, with a median
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of 2.6x, compared to 2.1x for General Signal; multiples of Enterprise Value to
LTM sales which ranged from 0.6x to 2.3x, with a median of 1.6x, compared to
1.0x for General Signal; multiples of Enterprise Value to LTM EBIT which ranged
from 9.0x to 14.4x, with a median of 13.2x, compared to 9.3x for General Signal;
and multiples of Enterprise Value to LTM EBITDA which ranged from 6.0x to 11.6x,
with a median of 9.5x, compared to 7.1x for General Signal. Stern Stewart also
considered for the Peer Companies the total market capitalization (defined as
share price times latest reported total shares outstanding) as a multiple of LTM
earnings ("Price to Earnings"). Stern Stewart's analysis for the Peer Companies
indicated a range of Price to Earnings multiples of 15.8x to 23.4x, with a
median of 20.6x, compared to 12.9x for General Signal.
Stern Stewart then applied the median multiples of the Peer Companies
to the SPX Management Projections for General Signal for fiscal year 1998 to
arrive at a range of imputed equity values per share. Stern Stewart also
calculated the aforementioned multiples based upon the total consideration
contemplated for General Signal (calculated as (i) the Implied Price Per Share
times the number of General Signal shares outstanding plus (ii) total assumed
debt) ("Total Consideration"), and determined that the multiples were below the
median of Peer Companies.
Stern Stewart calculated Net Operating Profit After Tax ("NOPAT") for
the Peer Companies and General Signal on an LTM basis. Stern Stewart calculated
the LTM EVA (defined as (i) NOPAT less (ii) average capital times the cost of
capital) for the Peer Companies and General Signal, and estimated the market's
expectation of future growth in EVA ("Growth Value") inherent in stock prices as
of July 10, 1998. Stern Stewart then analyzed Growth Value as a percentage of
Enterprise Value ("Growth Value Percentage") for the Peer Companies, and
compared it to General Signal's Growth Value Percentage. The Growth Value
Percentage for the Peer Companies ranged from 24.6% to 59.5% with a median of
46.5%, as compared to General Signal's Growth Value Percentage of 24.6%. Stern
Stewart then analyzed the Growth Value Percentage of General Signal based on the
Total Consideration, and determined that the implied Growth Value Percentage was
also considerably below the Peer Company median of 46.5%.
Cost of Capital. In estimating the weighted average cost of capital
("WACC"), Stern Stewart performed analyses consistent with the Capital Asset
Pricing Model. Stern Stewart performed regressions of the Peer Companies, other
selected companies, and General Signal's stock against the S&P 500 index to
arrive at a peer portfolio beta ("Peer Beta"). The Peer Beta was unlevered
according to the industry average debt to market value (defined as (i) total
debt divided by (ii) total debt plus market value of equity), and relevered for
the pro-forma leverage of the proposed combined entity following the Merger to
arrive at an estimate of General Signal's beta ("General Signal's Beta"). Stern
Stewart's estimate of General Signal's Beta was compared with, and found to be
comparable to, other publicly available estimates. Stern Stewart's estimate of
General Signal's Beta was multiplied by market risk premiums ("MRP") of 5.0% to
6.0%, representing the long-term average return of equities over risk-free
assets. At an MRP of 5.0%, General Signal's cost of equity capital was estimated
to be 11.5%; at an MRP of 6.0%, General Signal's cost of equity capital was
estimated to be 12.7%. Based on General Signal's current Standard & Poor's bond
rating of "A", and a pro forma analysis of leverage and coverage ratios of the
combined entity, the cost of debt capital was estimated. The WACC was then
calculated as an average of the cost of equity capital and the cost of debt
capital, weighted according to their respective market values. At an MRP of
5.0%, the WACC was estimated to be 8.9%; at an MRP of 6.0%, the WACC was
estimated to be 9.6%.
Comparison of Historical Performance and SPX Management Projections.
Stern Stewart analyzed General Signal's historical financial performance for the
fiscal years 1988 through 1997, and compared historical performance to financial
performance as predicted in the SPX Management Projections for fiscal years 1998
through 2007. Stern Stewart analyzed EBIT and EBITDA margins, accounts
receivable days-on-hand, inventory days-on-hand, accounts payable and accrued
expenses days-on-hand, and property, plant and equipment turns, of General
Signal historically from fiscal years 1988 through 1997, and compared them with
the SPX Management Projections for General Signal for the fiscal years 1998
through 2007. Stern Stewart also compared General Signal's historical income
statements (expressed as a percentage of total sales) and balance sheets
(expressed as a percentage of total assets) for fiscal years 1988 through 1997
with those statements based on the SPX Management Projections for fiscal years
1998 through 2007.
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EVA and Discounted Cash Flow Valuations. Stern Stewart used its
proprietary EVA framework in performing discounted EVA and discounted EVA
improvement valuations of the General Signal Common Stock based on the SPX
Management Projections. Stern Stewart also performed a discounted cash flow
("DCF") valuation of the General Signal Common Stock based on the SPX Management
Projections. In performing its EVA and DCF analyses, Stern Stewart considered
various assumptions that it deemed appropriate based on a review with the
management of SPX of General Signal's prospects and risks. Stern Stewart
believed it appropriate to utilize various discount rates ranging from 8.9% to
9.6%, and terminal value inflation rates of 0% to 3% to apply to fiscal year
2007 forecasted EVA and free cash flow.
Based on the foregoing, Stern Stewart performed analyses, without
giving effect to any cost savings or synergies as a result of the Merger, which
yielded a range of net present values. Stern Stewart also discussed and reviewed
with SPX's management potential cost savings and synergies as a result of the
Merger, and valued such cost savings and synergies, which were based on SPX
Management Projections. Including such cost savings and synergies in the EVA and
DCF valuations, Stern Stewart estimated a range of values for the General Signal
Common Stock. Based on the SPX Management Projections, Stern Stewart also
performed EVA and DCF valuations of SPX on a stand-alone basis and of the
proposed combined entity.
In its EVA improvement valuation, Stern Stewart calculated current
operations value (defined as (i) current EVA divided by cost of capital plus
(ii) total EVA capital) ("Current Operations Value"), Growth Value, and
Enterprise Value (calculated here as Current Operations Value plus Growth Value)
of General Signal based on the SPX Management Projections both with and without
projected cost savings and synergies. Stern Stewart then calculated the Growth
Value Percentages implicit in the SPX Management Projections with and without
projected synergies and cost savings to be 37.4% and 45.0%, respectively. The
Growth Value Percentages implicit in the SPX Management Projections were below
the Peer Companies median of 46.5%. Stern Stewart performed similar Growth Value
analyses of SPX on a stand-alone basis and of the proposed combined entity.
Selected Transactions Analysis. Stern Stewart analyzed certain
information relating to seven comparable merger and acquisition transactions in
the electrical equipment industry from April 1996 to February 1998 ("Comparable
Transactions"). The analyses indicated, among other things, that the multiples
of transaction value to LTM sales ranged from 1.0 to 3.1, with a median of 1.3;
the multiples of transaction value to LTM EBIT ranged from 11.3 to 70.8, with a
median of 13.3; and the multiples of transaction value to LTM EBITDA ranged from
8.4 to 23.6, with a median of 10.0. At the Total Consideration, multiples of the
transaction value to LTM sales, LTM EBIT, and LTM EBITDA of General Signal were
below the median for the Comparable Transactions.
Company and Industry Research. Stern Stewart reviewed recent research
analyst reports and other publicly available information on General Signal, SPX,
and the electrical equipment and automotive components industries. Stern Stewart
reviewed analyst and market expectations for General Signal's predicted stock
price performance over the next twelve months, for earnings per share ("EPS")
and net income for fiscal years 1998 and 1999. The median expected twelve month
stock price increase according to research analyst reports was $10.00. Stern
Stewart also compared the analyst expectations for EPS growth of General Signal
in fiscal years 1998 and 1999 with EPS growth calculated according to the SPX
Management Projections. The median expected growth in EPS through the fiscal
year 1999 was 12% according to analyst forecasts, which compared to 12% growth
in EPS according to the SPX Management Projections.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying the Stern Stewart Opinion. In arriving at its fairness determination,
Stern Stewart considered the results of all such analyses, taken as a whole.
Furthermore, in arriving at its fairness opinion, Stern Stewart did not
attribute any particular weight to any analysis or factor considered by it;
rather, Stern Stewart made its determination as to fairness on the basis of
qualitative judgments as to the significance and relevance of the financial and
comparative analyses and factors described above, taken as a whole. No company
or transaction used in the above analyses as a comparison is identical to
General Signal or SPX or the contemplated transaction. The analyses were
prepared solely for purposes of Stern Stewart in providing its opinion to the
SPX Board as to the fairness of the aggregate
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consideration to be paid in the Merger, from a financial point of view, to SPX
and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be bought or sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of SPX, General Signal, Stern Stewart or any
other person assumes responsibility if future results are materially different
from those forecast.
As described above, Stern Stewart's opinion to the SPX Board was one of
many factors taken into consideration by the SPX Board in making its
determination to approve the Merger Agreement. Although Stern Stewart evaluated
the fairness to SPX of the aggregate consideration to be paid by SPX in the
Merger, the specific consideration was determined by SPX and General Signal
through arm's-length negotiation. The foregoing summary does not purport to be a
complete description of the analyses performed by Stern Stewart and is qualified
by reference to the written opinion of Stern Stewart set forth in Appendix B
hereto.
As part of its financial advisory consulting practice, Stern Stewart is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, divestitures, valuations,
restructurings and recapitalizations. Stern Stewart was selected by SPX as its
financial advisor based on its reputation, experience, and expertise. In the
past, Stern Stewart has provided financial consulting services to SPX for which
services Stern Stewart has received customary fees. In addition, Mr. Blystone,
Chairman, President and Chief Executive Officer of SPX, is a member of the Board
of Advisors of Stern Stewart's EVA Institute.
Pursuant to the terms of a letter agreement dated July 8, 1998 (the
"Stern Stewart Engagement Letter"), Stern Stewart was retained by SPX as its
financial advisor and to render an opinion to the SPX Board with respect to the
Merger. Under the Stern Stewart Engagement Letter, SPX agreed to pay Stern
Stewart a fee of $750,000, payable upon the delivery of the Stern Stewart
Opinion and the execution of the Merger Agreement; provided, however, that in
the event that the Merger Agreement had not been executed, SPX would have been
obligated to pay Stern Stewart a fee of $250,000, payable at such time as the
negotiations between SPX and General Signal to effect the transaction were
terminated. In addition, SPX has agreed to reimburse Stern Stewart for its
reasonable out-of-pocket expenses incurred in connection with the engagement and
to indemnify Stern Stewart and certain related persons and entities for certain
losses, claims, damages or liabilities relating to or arising out of, among
other things, its engagement as financial advisor.
OPINION OF GENERAL SIGNAL'S INVESTMENT BANKER
General Signal retained Lazard Freres to act as its investment banker
in connection with the Merger based on its expertise and reputation and its
familiarity with General Signal. At the July 19 meeting of the General Signal
Board, Lazard Freres rendered its oral opinion to the General Signal Board,
subsequently confirmed in writing, to the effect that, as of July 19, 1998, the
aggregate Merger Consideration is fair to the holders of shares of General
Signal Common Stock from a financial point of view.
A copy of the full text of the written opinion of Lazard Freres, dated
July 19, 1998, which sets forth the assumptions made, matters considered and
limits on the review undertaken, is attached hereto as Appendix C and is
incorporated herein by reference. General Signal stockholders are urged to read
this opinion in its entirety. This summary of the opinion of Lazard Freres is
qualified in its entirety by reference to the full text of the opinion. The
engagement of Lazard Freres and its opinion are for the benefit of the General
Signal Board in connection with its consideration of the Merger. Lazard Freres's
opinion is directed only to the fairness of the aggregate Merger Consideration
to the holders of General Signal Common Stock from a financial point of view and
does not address any other aspect of the Merger. The opinion is not intended to
and does not constitute a recommendation to any holder of General Signal Common
Stock as to whether such stockholder should vote for the Merger or with regard
to any election of alternative forms of Merger Consideration.
In connection with rendering its opinion to the General Signal Board,
Lazard Freres, among other things: (i) reviewed the financial terms and
conditions of the Merger Agreement; (ii) analyzed certain historical business
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and financial information relating to General Signal and SPX; (iii) reviewed
various financial forecasts and other data provided by General Signal and SPX
relating to their respective businesses; (iv) held discussions with members of
the senior managements of General Signal and SPX with respect to the businesses
and prospects of General Signal and SPX, respectively, the strategic objectives
of each, and the possible benefits which might be realized following the Merger;
(v) reviewed public information with respect to certain other companies in lines
of businesses believed by Lazard Freres to be generally comparable to the
businesses of General Signal and SPX; (vi) reviewed the financial terms of
certain business combinations involving companies in lines of businesses
believed by Lazard Freres to be generally comparable to those of General Signal
and SPX, and in other industries generally; (vii) reviewed the historical stock
prices and trading volumes of the General Signal Common Stock and the SPX Common
Stock; and (viii) conducted such other financial studies, analyses and
investigations as Lazard Freres deemed appropriate.
Lazard Freres relied upon the accuracy and completeness of the
financial and other information reviewed by it for the purpose of its opinion
and did not assume any responsibility for any independent verification of such
information or any independent valuation or appraisal of any of the assets or
liabilities of General Signal or SPX, or concerning the solvency of, or other
related solvency issues with respect to, either of the foregoing entities.
Lazard Freres assumed that the financial forecasts provided to it, including the
potential benefits projected to be realized following the Merger, were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of General Signal and SPX as to the future
financial performance of General Signal and SPX, respectively. Lazard Freres
assumed no responsibility for, and expressed no view as to, such forecasts or
the assumptions on which they were based, and there cannot be any assurance that
the actual results of General Signal and SPX will not differ materially from
those reflected in the forecasts. In addition, Lazard Freres did not express any
opinion as to the prices at which the SPX Common Stock may trade following the
date of its opinion. Lazard Freres's opinion also was necessarily based on
accounting standards, economic, monetary, market and other conditions as in
effect on, and information made available to Lazard Freres as of, the date of
its opinion. In rendering its opinion, Lazard Freres assumed that the Merger
would be consummated on the terms described in the Merger Agreement, without any
waiver of any material terms or conditions by General Signal, that the Merger
would be accounted for as a reverse acquisition, and that obtaining the
necessary regulatory approvals for the Merger would not have an adverse effect
on General Signal or SPX.
The following is a summary of certain of the analyses performed by
Lazard Freres in connection with rendering its opinion dated July 19, 1998 as to
the fairness of the aggregate Merger Consideration to be received by the holders
of General Signal Common Stock from a financial point of view and discussed with
the General Signal Board in connection with rendering such opinion.
Comparable Publicly Traded Companies Analyses. Lazard Freres reviewed
and compared certain publicly available actual and projected financial,
operating and stock market information of companies in lines of business
believed to be comparable to those of General Signal and SPX. Lazard Freres
noted that, although there were no public companies with precisely the same mix
of businesses and financial conditions as General Signal or SPX, Lazard Freres
believed the most relevant comparable companies to General Signal to include
Aeroquip-Vickers Inc., Crane Co., Eaton Corporation, Mark IV, Pentair Inc.,
United Dominion Industries and U.S. Industries (the "General Signal Comparable
Companies") and to SPX to include After-Market Technology, Cooper Tire & Rubber,
Exide Corporation, Federal Mogul, Goodyear Tire & Rubber, Snap-On Inc., Standard
Motors Products and Stanley Works (the "SPX Comparable Companies" and, together
with the General Signal Comparable Companies, the "Comparable Companies").
This analysis indicated that for the General Signal Comparable
Companies (i) market capitalization (a) as a multiple of LTM EBITDA ranged from
6.6x to 9.7x, as compared to 8.9x for General Signal in the Merger (based upon
the closing price per share of SPX Common Stock of $64.50 as of July 17, 1998,
the last trading day prior to the public announcement of the Merger); and (b) as
a multiple of projected 1998 EBITDA ranged from 6.1x to 8.2x, as compared to a
multiple for General Signal in the Merger that was slightly above such range and
(ii) price to earnings ("P/E") multiples (a) based on LTM EPS ranged from 11.7x
to 19.3x, as compared to 17.5 for General Signal in the Merger; and (b) based on
projected 1998 EPS ranged from 11.1x to 17.5x, as compared to a multiple for
General Signal in the Merger that was within such range.
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This analysis also indicated that for the SPX Comparable Companies (i)
market capitalization (a) as a multiple of LTM EBITDA ranged from 5.9x to 15.8x,
as compared to 10.2x for SPX; and (b) as a multiple of projected 1998 EBITDA
ranged from 5.6x to 9.8x, as compared to 9.0x for SPX; and (ii) P/E multiples
(a) based on LTM EPS ranged from 12.5x to 29.4x, as compared to 17.3x for SPX;
and (b) based on projected 1998 EPS ranged from 10.6x to 26.1x, as compared to
16.3x for SPX.
As noted above, no company used in the public market valuation analysis
is identical to General Signal or SPX. Accordingly, any analysis of the value of
the General Signal Common Stock and the SPX Common Stock based on the Comparable
Companies involves complex considerations and judgments concerning differences
in potential financial and operating characteristics of the Comparable Companies
and other factors in relation to the trading and acquisition values of the
Comparable Companies.
Selected Precedent Transactions Analysis. Lazard Freres reviewed and
analyzed certain selected publicly available financial, operating and stock
market information relating to certain acquisition transactions involving
diversified industrial companies (the "Diversified Selected Transactions") and
to certain acquisition transactions involving automotive components and after
market companies (the "Automotive Selected Transactions" and together with the
Diversified Selected Transactions, the "Selected Transactions"). Lazard Freres
noted that the reasons for, and the circumstances surrounding, each of the
transactions analyzed were diverse and the characteristics of the companies
involved were not directly comparable to General Signal, SPX or the Merger.
Lazard Freres performed an analysis that indicated for the Diversified
Selected Transactions that (i) the ratio of the enterprise value to LTM EBITDA
ranged from 6.5x to 10.0x, as compared to 8.9x for the Merger; (ii) the ratio of
the enterprise value to LTM EBIT ranged from 8.9x to 16.3x, as compared to 11.5x
for the Merger; (iii) the ratio of price paid for each share of the acquired
business to LTM EPS ranged from 9.1x to 20.5x, as compared to 17.5x for the
Merger; and (iv) the premium paid for the acquired business to its share price
on the date one month prior to the date of announcement of the relevant
transaction ranged from 12.9% to 26.1% (excluding one transaction at 165.4%), as
compared to 24.8% for the Merger. The value to be received in the Merger
represented a premium of 24.8% over the closing price per share of General
Signal Common Stock on July 16, 1998. Lazard Freres also performed an analysis
of premiums paid in transactions announced since January 1, 1998 with a value in
excess of $1 billion. Such analysis indicated a mean and median premium paid of
31.5% and 22.7%, respectively, over the market price on the trading day
immediately prior to the date of the public announcement of the relevant
transaction.
This analysis also indicated for the Automotive Selected Transactions
that (i) the ratio of the transaction value to LTM EBITDA ranged from 7.4x to
19.9x; (ii) the ratio of the transaction value to LTM EBIT ranged from 11.1x to
19.5x; and (iii) the ratio of price paid for each share of the acquired business
to LTM EPS ranged from 15.0x to 39.2x.
Discounted Cash Flow Analysis. Lazard Freres analyzed the present value
of General Signal's projected cash flow for the years 1999 through 2003,
inclusive, and the projected 2003 terminal values based upon a range of
multiples of projected 2003 EBITDA and upon a range of free cash flow perpetual
growth rates. Lazard Freres performed such analysis based on General Signal's
management projections for both a management case (the "Management Case") and a
case that assumed a constant EBITDA margin (the "Acquiror's Case"). Lazard
Freres applied discount rates ranging from 10.0% to 11.0%, terminal multiples of
EBITDA ranging from 6.5x to 7.5x and free cash flow perpetual growth rates of
approximately 3.0%.
Lazard Freres also analyzed the present value of SPX's projected cash
flow for the years 1999 through 2003, inclusive, and the projected 2003 terminal
values based upon a range of multiples of projected 2003 EBITDA and upon a range
of free cash flow perpetual growth rates. Lazard Freres performed such analysis
based on SPX management's projections for the years 1999 and 2000 and
extrapolations therefrom for the years 2001 through 2003. Lazard Freres applied
discount rates ranging from 10.0% to 11.0%, terminal multiples of EBITDA ranging
from 7.5x to 8.5x and free cash flow perpetual growth rates of approximately
3.5%.
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Leveraged Buy-Out Analysis. Lazard Freres prepared an analysis based on
projections provided to them by General Signal's management and on the
then-current economic and market conditions as to the consideration a leveraged
buy-out purchaser might be able to pay to acquire General Signal. A range of
possible acquisition prices was derived by reviewing the estimated return on
equity investment that would result from a leveraged buy-out based upon various
assumptions, including the financial ratios required by the bank financing and
high yield debt markets, interest rates, and certain cost savings.
Leveraged Share Repurchase Analysis. Lazard Freres considered possible
pre-tax values which might result if General Signal were to pursue a leveraged
recapitalization without the investment of any additional equity by new
investors or otherwise. Based upon General Signal management projections and
employing assumptions regarding the credit markets similar to those used in the
leveraged buy-out analysis above, a repurchase of General Signal Common Stock at
a cash price of $44 per share of General Signal Common Stock financed by new
debt was reviewed. This methodology indicated that between approximately 37% and
48% of the outstanding General Signal Common Stock might be repurchased
depending upon the level of leverage following such repurchase. Lazard Freres
performed this analysis assuming the remaining shares of General Signal Common
Stock were valued using multiples ranging from 6.5x to 7.5x of General Signal's
EBITDA, assuming a share of General Signal Common Stock received a pro rata
portion of the cash, and taking into account the additional debt resulting from
the share repurchase.
Historical Stock Price Review. Lazard Freres reviewed information
regarding historical price and trading volume for the General Signal Common
Stock. As part of this review, the forward P/E multiple for the General Signal
Common Stock was compared to that for the Standard & Poor's 400 Index based on
daily closing prices from October 2, 1995 through July 16, 1998. This review
showed that the multiple applied to the General Signal Common Stock was
significantly lower than that of the S&P 400 Index, with the current P/E
multiple for the General Signal Common Stock being approximately 13.3x and the
current P/E multiple for the S&P 400 Index being approximately 28.9x. Lazard
Freres noted that while the P/E multiple for General Signal ranged from
approximately 13.0x to 15.0x during this period, the P/E multiple for the S&P
400 Index rose from approximately 17.0x to 29.0x during the same period. Lazard
Freres also reviewed the historical stock prices of the General Signal Common
Stock and compared such prices to those for the S&P 400 Index. Such comparison
indicated that the General Signal Common Stock significantly underperformed the
S&P 400 Index over the one-year period prior to the public announcement of the
Merger. It also was noted that (i) the 26-week trading range for General Signal
Common Stock was from a closing low of $35.875 per share of General Signal
Common Stock on July 2, 1998 to a closing high of $46.875 per share of General
Signal Common Stock on March 30, 1998; and (ii) the 52-week trading range for
General Signal Common Stock was from a closing low of $35.875 per share of
General Signal Common Stock on July 2, 1998 to a closing high of $52.375 per
share of General Signal Common Stock on July 17, 1997.
Pro Forma Has/Gets Analysis. Lazard Freres calculated the effect that
the Merger could have on the forecast earnings per share of General Signal
Common Stock in General Signal on a stand-alone basis before the Merger as
compared to the forecast earnings per share of General Signal Common Stock in
the pro forma combined company following the Merger. This analysis was based on
projections provided by the respective managements of General Signal and SPX and
on the assumptions described above, including the realization of the potential
benefits following the Merger.
This analysis indicated that the Merger would result in accretion to
pro forma earnings per share of General Signal Common Stock and pro forma
earnings per share of SPX Common Stock in 1999 and significant accretion to pro
forma earnings per share of General Signal Common Stock and pro forma earnings
per share of SPX Common Stock thereafter. In this analysis, Lazard Freres
assumed that both General Signal and SPX would perform in accordance with the
forecasts provided to Lazard Freres by General Signal's and SPX's managements.
The actual results achieved by the combined company following the Merger may
vary from projected results and the variations may be material.
Special Considerations. The preparation of a fairness opinion is a
complex process and not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or the summary set forth
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above, without considering the analyses as a whole, could create an incomplete
or a misleading view of the process underlying the opinion of Lazard Freres. No
company or transaction used in the analyses as a comparison is identical to
General Signal or SPX or the transaction contemplated by the Merger Agreement.
The analyses were prepared solely for the purpose of Lazard Freres providing its
opinion to the General Signal Board in connection with its consideration of the
Merger and do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold, which may be significantly more
or less favorable than as set forth in the analyses. Similarly, any estimate of
values or forecast of future results contained in the analyses is not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses.
In performing its analyses, Lazard Freres made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of General Signal
or SPX or their respective advisors, none of General Signal, SPX, Lazard Freres
or any other person assumes responsibility if future results or actual values
are materially different from those forecasts or estimates contained in the
analyses. Although, in connection with the delivery of its opinion, Lazard
Freres also analyzed SPX, Lazard Freres's opinion is not a valuation of SPX and
does not represent Lazard Freres's view as to what the value of the SPX Common
Stock will be upon consummation of the Merger. As described above, Lazard
Freres's opinion to the General Signal Board was one of many factors taken into
consideration by the General Signal Board in making its determination to approve
the Merger Agreement. The foregoing summary does not purport to be a complete
description of the analyses performed by Lazard Freres and is qualified by
reference to the written opinion of Lazard Freres set forth in Appendix C
hereto.
Lazard Freres is an internationally recognized investment banking firm
and is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for estate, corporate and other purposes. Lazard Freres
was selected to act as investment banker to the General Signal Board because of
its expertise and its reputation in investment banking and mergers and
acquisitions and its familiarity with General Signal.
In connection with Lazard Freres's services as investment banker to the
General Signal Board, including its rendering of the opinion summarized above,
General Signal paid Lazard Freres an initial fee of $2.0 million upon the
execution of the Merger Agreement. General Signal has also agreed to pay Lazard
Freres a transaction fee equal to .35% of the aggregate consideration to be paid
in the Merger (against which the initial $2.0 million fee will be credited)
upon, and subject to, consummation of the Merger. Whether or not the Merger is
consummated, General Signal has agreed to reimburse Lazard Freres for its
out-of-pocket expenses, including reasonable fees and expenses of its legal
counsel, and to indemnify Lazard Freres and certain related parties against
certain liabilities, including liabilities arising under U.S. securities laws.
Lazard Freres has in the past provided, and is currently providing,
investment banking services to General Signal for which it has received, and
anticipates receiving, customary fees. In the ordinary course of business,
Lazard Freres and its affiliates may actively trade in securities of General
Signal for their own account and for the account of their customers and,
accordingly, may at any time hold long or short positions in such securities.
ACCOUNTING TREATMENT
The Merger will be accounted for as a reverse acquisition as the
stockholders of General Signal will own 60% of the shares of the combined
company upon completion of the Merger. Accordingly, for accounting purposes, SPX
will be treated as the acquired company and General Signal will be considered to
be the acquiring company. The purchase price will be allocated to the assets and
liabilities of SPX based on their estimated fair market values at the date of
acquisition. Under reverse acquisition accounting, the purchase price is based
on the fair market value of the SPX Common Stock at the date that the Merger
Agreement was signed. The cash portion of the Merger Consideration will be
accounted for as a dividend by the combined company. SPX's financial
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position and results of operations will not be included in the combined
company's consolidated accounts prior to the date the Merger is consummated.
BOARD AND MANAGEMENT FOLLOWING THE MERGER
The directors of MergerSub immediately prior to the Effective Time will
be the directors of the Surviving Corporation and the officers of MergerSub
immediately prior to the Effective Time will be the officers of the Surviving
Corporation.
Under the Merger Agreement, the SPX Board is required to take all
action necessary to elect the following persons, who are currently serving on
the General Signal Board, to the SPX Board as of the Effective Time: (i) Emerson
U. Fullwood, who will be assigned to the class of directors whose term of office
expires at SPX's first annual meeting of stockholders after the Effective Time,
and (ii) H. Kent Bowen, who will be assigned to the class of directors whose
term of office expires at SPX's second annual meeting of stockholders after the
Effective Time.
REGULATORY APPROVALS
Under the HSR Act, the Merger may not be consummated until Notification
and Report Forms (the "HSR Forms") have been submitted and certain information
has been furnished by each of SPX and General Signal to the FTC and the
Antitrust Division, and required waiting periods have expired or been
terminated. The initial waiting period is 30 days from the date the last of the
two HSR Forms are submitted, but is extended if the FTC or the Antitrust
Division issues a so-called "second request" for further information, until 20
days after the "second request" is "substantially complied with" (as such term
is defined in the HSR Act). SPX and General Signal each filed HSR Forms with the
FTC and the Antitrust Division. The initial statutory waiting period will expire
for SPX and General Signal at 11:59 p.m. on September 4, 1998, unless a "second
request" is issued.
As a result of the Merger, SPX or General Signal may be required to
notify or obtain the consent of regulatory authorities in certain foreign
countries where SPX or General Signal conducts business pursuant to antitrust or
foreign investment laws. In addition, the transfer of the businesses from EGS to
General Signal, discussed in Note (c) to the "Selected Historical Consolidated
Financial Data of General Signal," will necessitate a filing by General Signal
and EGS under the HSR Act, which the parties expect to make shortly.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the General Signal Board with
respect to the Merger Agreement and the transactions contemplated thereby, the
General Signal stockholders should be aware that certain members of the
management of General Signal and of the General Signal Board have certain
interests in the Merger that are in addition to the interests of stockholders of
General Signal generally.
Severance Payments. General Signal has change-of-control employment
agreements (each, an "Employment Agreement") with 12 individuals (each, an
"Executive"), including 11 executive officers, which entitle each such Executive
to benefits upon a termination of employment following a change of control. The
Merger would constitute a "change of control" under the Employment Agreements.
If the Executive's employment is terminated by SPX or the Surviving
Corporation (other than for Cause, Death or Disability, each as defined in the
applicable Employment Agreement) or by the Executive for Good Reason (as defined
in the applicable Employment Agreement) within three years following the Merger
(the "Change of Control Period"), the Executive will receive a lump sum cash
payment within 30 days after the date of termination equal to (a) the
Executive's accrued salary and prorated annual target bonus for the current
fiscal year (to the extent not already paid to the Executive) plus (b) three
times the sum of (i) the Executive's salary and (ii) the higher of the
Executive's annual target bonus for the current fiscal year and the Executive's
annual target bonus for the previous fiscal year. Each Executive will also
receive a lump sum payment equal to the present value of (x) the benefits the
Executive would have been entitled to receive during the Change of Control
Period under General Signal's Corporate Retirement Plan, Benefit Equalization
Plan and any other pension plan under which the Executive is entitled to
benefits and (y) the aggregate matching or other employer contributions that
would have
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been made during the Change of Control Period by General Signal under the terms
of its Savings and Stock Ownership Plan and its Deferred Compensation Plan
(calculated as if the Executive participated in these plans to the same extent
as in the fiscal year prior to the date of termination of the Executive's
employment). During the Change of Control Period, SPX or the Surviving
Corporation is also required to provide each Executive with all benefits under
medical, prescription, dental, disability, life and other welfare benefit plans
in effect during the 120 day period prior to the change of control (or, if more
favorable to the Executive, those benefits offered to peer executives). Each
Executive will also be entitled to outplacement services (the cost of which may
not exceed 15% of the Executive's annual base salary and target bonus) and one
year of continued financial counseling, and will have the right to purchase, at
fair market value, the automobile General Signal was providing to the Executive
prior to the date of termination of the Executive's employment. To the extent
any of the above payments to any Executive would give rise to an excise tax
under Section 4999 of the Code, an additional payment would be made so that the
total payments actually retained by the Executive after payment of the excise
tax equals the amount he or she would have received absent the excise tax.
General Signal also has three separate change of control severance
policies (collectively, the "Severance Policies") affecting employees of General
Signal and its subsidiaries other than the Executives: the Change of Control
Severance Policy for Unit Presidents (affecting fourteen unit presidents), the
Change of Control Severance Policy for Key Corporate Employees (affecting twelve
key corporate employees) and the Change of Control Severance Policy for
Corporate Employees (affecting corporate headquarters employees of General
Signal who are not covered by one of the aforementioned Severance Policies
and are not a party to an Employment Agreement). Benefits under the
Severance Policies are triggered, under certain circumstances, following
termination of employment during the three-year period following a change of
control, in the case of unit presidents and key corporate employees, and during
the two-year period following a change of control in the case of other corporate
employees. Unit presidents and key corporate employees would be entitled to
receive benefits substantially similar to those included in the Employment
Agreements, except that the benefits would be based on a two-year severance
period rather than a three-year severance period. Other corporate employees
would be entitled to receive a lump sum payment ranging from four weeks' salary
to two years' salary (depending on the number of years employed by General
Signal and its subsidiaries) and outplacement services, the cost of which may
not exceed 15% of the employee's base salary. Insurance benefits for other
corporate employees will continue for not more than 90 days following
termination. Payments made pursuant to any Severance Policy that are subject to
an excise tax under Section 4999 of the Code will not be "grossed up," but will
be reduced to the extent such reduction will provide the recipient with a
greater after-tax benefit.
General Signal Options and Restricted Shares. The Merger Agreement
provides that, subject to the consent of the holders thereof where required,
immediately prior to the Effective Time, holders of Restricted Shares or
General Signal Options will be entitled to receive a cash payment of $45.00 per
underlying share in exchange for their Restricted Shares and General Signal
Options (less, in the case of General Signal Options, the applicable per share
exercise price of such option). General Signal's executive officers and
directors collectively hold 138,205 Restricted Shares and General Signal
Options to purchase 1,041,901 shares of General Signal Common Stock. General
Signal expects to make an aggregate cash payment of approximately $12.1 million
in exchange for the Restricted Shares and General Signal Options held by the
executive officers and directors of General Signal.
SPX Directorships. Under the Merger Agreement, the SPX Board is
required to take all action necessary to elect Messrs. H. Kent Bowen and Emerson
U. Fullwood to the SPX Board as of the Effective Time. As directors of SPX,
Messrs. Bowen and Fullwood will be eligible to receive the compensation and
benefits available to all of SPX's non-employee directors.
Indemnification and Insurance. Pursuant to the Merger Agreement, SPX is
required, for a period of six years following the Effective Time, to indemnify
and hold harmless each of the current or former directors and officers of
General Signal or any of its subsidiaries for acts or omissions occurring at or
prior to the Effective Time to the fullest extent permitted by applicable law.
SPX is also required to use its reasonable best efforts during this period to
maintain General Signal's current directors' and officers' liability insurance,
subject to certain limitations. See "The Merger Agreement--Certain
Covenants--Indemnification and Insurance."
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NO DISSENTERS' RIGHTS
No holder of SPX Common Stock or General Signal Common Stock will have
any dissenters' rights in connection with, or as a result of, the matters to be
acted upon at the Special Meetings.
STOCK EXCHANGE LISTINGS
It is a condition to the Merger that, upon consummation of the Merger,
the shares of SPX Common Stock to be issued by SPX in connection with the Merger
be authorized for listing on the NYSE, and such other stock exchanges as may be
agreed upon by SPX and General Signal, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF THE GENERAL SIGNAL COMMON STOCK
If the Merger is consummated, the General Signal Common Stock will be
delisted from the NYSE and the PE and deregistered under the Exchange Act.
TREATMENT OF GENERAL SIGNAL STOCK CERTIFICATES
Upon consummation of the Merger, each holder of a stock certificate
representing shares of General Signal Common Stock outstanding immediately
prior to the Merger (a "Stock Certificate") will, upon the surrender thereof
(duly endorsed, if required) to The Bank of New York (the "Exchange Agent"), be
entitled to receive the Merger Consideration into which such shares of General
Signal Common Stock will have been automatically converted as a result of the
Merger. Accompanying copies of this Joint Proxy Statement/Prospectus being sent
to the General Signal stockholders are a [yellow] Form of Election and a [blue]
Letter of Transmittal. In order to make a valid Election with respect to
the type of Merger Consideration to be received in the Merger, a holder of
record of shares of General Signal Common Stock (or the beneficial owner
thereof through the nominee) will have to return to the Exchange Agent, for
receipt by the Exchange Agent no later than 5:00 p.m. (Eastern time) on
________, 1998, the Election Deadline, a Form of Election and a Letter of
Transmittal fully completed and signed, accompanied by the Stock Certificates
representing the shares of General Signal Common Stock for which an Election is
being made or a Guarantee of Delivery. After the consummation of the Merger,
the Exchange Agent will mail a Letter of Transmittal with instructions to any
holders of record of General Signal Common Stock as of the Effective Time who
did not make a valid Election before the Election Deadline for use in
surrendering their Stock Certificates in exchange for the Merger Consideration.
STOCK CERTIFICATES THAT WERE NOT SURRENDERED WITH AN ELECTION FORM AND LETTER
OF TRANSMITTAL PRIOR TO THE ELECTION DEADLINE SHOULD NOT BE SURRENDERED AFTER
THE ELECTION DEADLINE UNTIL A NEW LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE
RECEIVED. See "The Merger Agreement--Exchange of Certificates."
AMENDMENT OF GENERAL SIGNAL RIGHTS AGREEMENT
In connection with its approval of the Merger Agreement, the General
Signal Board amended the General Signal Rights Agreement with the result that
neither the entering into of the Merger Agreement by General Signal, SPX and
Merger Sub, nor consummation of the transactions contemplated thereby, will
cause the General Signal Rights to separate from the shares of General Signal
Common Stock, entitle or permit the holders of the General Signal Rights to
exercise the General Signal Rights or otherwise trigger any effect under the
General Signal Rights Agreement. See "Comparison of Rights of Stockholders of
SPX and General Signal--Stockholder Rights Plans."
MERGER FINANCING
The total amount of the Merger Financing, i.e., the amount of cash and
borrowings required to consummate the transactions contemplated by the Merger
Agreement, including payment of the cash component of the aggregate
consideration to be paid in the Merger, payments in respect of General Signal
Options and Restricted Shares, refinancing of existing indebtedness of SPX and
General Signal, and transaction fees and expenses, is estimated to be
approximately $1.5 billion. Pursuant to the Commitment Letters, the Merger
Financing will be provided by Chase and CSI which will underwrite and syndicate
a total of $1.7 billion of senior and subordinated debt as follows: (a) $1.4
billion of Senior Facilities, consisting of Term Loan facilities aggregating
$1.2 billion and a $200.0 million Revolving Credit Facility, fully underwritten
by Chase and (b) a $300.0 million Subordinated
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Facility, fully underwritten by Chase. SPX expects to issue $300.0 million of
Subordinated Notes in a public offering or Rule 144A private placement in lieu
of obtaining financing under the Subordinated Facility.
The Term Loans will consist of: (a) $600.0 million of Tranche A Term
Loans maturing six years after the Effective Time; (b) $300.0 million of Tranche
B Term Loans maturing seven years after the Effective Time; and (c) $300.0
million of Tranche C Term Loans maturing eight years after the Effective Time.
The Revolving Credit Facility will mature six years after the Effective Time. If
drawn upon, the Subordinated Facility will consist of $300.0 million of initial
loans maturing 12 months after the Effective Time. Any initial loans not repaid
or replaced by Subordinated Notes on or prior to maturity will, at the election
of the holder: (i) be exchanged for "Exchange Notes" maturing 10 years after the
Effective Time, or (ii) have their maturity extended to 10 years after the
Effective Time.
The Senior Facilities will be jointly and severally guaranteed by each
of SPX's direct and indirect material domestic subsidiaries, subject to certain
exceptions to be agreed upon and will also be secured by a pledge of all of the
capital stock of SPX's direct and indirect material subsidiaries, subject to
certain limitations for foreign subsidiaries and certain exceptions to be agreed
upon.
Interest on the Senior Facilities and the Subordinated Facility will be
determined pursuant to pricing grids set forth in the Commitment Letters. Chase
and CSI will receive fees customary for facilities of the types described above,
including agent's fees, underwriting and commitment fees and certain termination
fees, all of which are non-refundable.
The Merger Financing is subject to the satisfaction of certain closing
conditions, including customary corporate and document delivery requirements and
consummation of the Merger. The definitive documentation with respect to the
Merger Financing is subject to further negotiation between SPX, on the one hand,
and Chase and CSI on the other hand, and is expected to contain customary
representations and warranties, covenants, on-going conditions, and events of
default. Receipt of the Merger Financing is not a condition to SPX's obligation
to consummate the Merger.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
Capitalized terms that are used in this section and are not defined have the
respective meanings given to them in the Merger Agreement.
THE MERGER
Pursuant to the Merger Agreement, upon the satisfaction (or waiver,
where legally permissible) of the conditions that are contained in the Merger
Agreement (see "The Merger Agreement--Conditions"), General Signal will be
merged with and into MergerSub, with MergerSub continuing as the Surviving
Corporation. The parties will cause the Merger to be accomplished by filing the
Delaware Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the Delaware General
Corporation Law ("DGCL"), and the New York Certificate of Merger with the
Department of State of the State of New York in accordance with the relevant
provisions of the New York Business Corporation Law ("NYBCL"). The Merger will
become effective at the time the Certificates of Merger have been filed with
both the Secretary of State of the State of Delaware and the Department of State
of the State of New York or at such later time as may be agreed upon by SPX and
General Signal and specified in the Certificates of Merger.
CONVERSION OF SECURITIES
As a result of the Merger and without any action on the part of
MergerSub, General Signal or their stockholders, at the Effective Time each
share of General Signal Common Stock issued and outstanding immediately prior to
the Effective Time will be converted into the right to receive, at his or her
election but subject to the limitations and proration procedures described in
this Joint Proxy Statement/Prospectus and as set forth in the Merger Agreement,
EITHER (i) 0.6977 of a share of SPX Common Stock OR (ii) $45.00 in cash, without
interest, OR (iii) 0.4186 of a share of SPX Common Stock and $18.00 in cash,
without interest. Each share of General Signal Common Stock held in the treasury
of General Signal and each share of General Signal Common Stock owned by SPX or
any of the parties' subsidiaries immediately prior to the Effective Time will be
canceled and extinguished without any conversion thereof and no payment will be
made with respect thereto. Each share of MergerSub issued and outstanding
immediately prior to the Effective Time will be converted into one share of
common stock of the Surviving Corporation.
Subject to the consent of each holder thereof where required,
immediately prior to the Effective Time, (i) each General Signal Option then
outstanding will be canceled and holders of such options will receive a cash
payment equal to the number of shares of General Signal Common Stock previously
subject to the General Signal Options multiplied by the excess of $45.00 over
the exercise price per share of General Signal Common Stock subject to the
General Signal Options, and (ii) each Restricted Share will be canceled and
holders of such shares will receive a cash payment equal to $45.00 multiplied by
the number of such shares held by such holder prior to the Effective Time.
ELECTIONS
General. Subject to the limitations discussed below in "The Merger
Agreement--Elections--Limitations," each holder of shares of General Signal
Common Stock immediately prior to the Effective Time will be entitled EITHER (i)
to make a Cash Election, i.e., to elect to receive $45.00 for each of his or her
shares, OR (ii) to make a Stock Election, i.e., to elect to receive 0.6977 of a
share of SPX Common Stock for each such share, OR (iii) to make a Mixed
Election, i.e., to elect to receive 60% of 0.6977 (or 0.4186) of a share of SPX
Common Stock and 40% of $45.00 (or $18.00) for each such share OR (iv) to make a
Non-Election, i.e., to indicate that such holder has no preference as to the
receipt of cash, SPX Common Stock or the combination thereof with respect to
such holder's General Signal shares. Any stockholder who does not make a valid
Election before the Election Deadline will be deemed to have made a
Non-Election. All Elections must be made on the Form of Election. If more than
one Stock Certificate is surrendered for the account of the same holder, the
number of shares of SPX Common Stock, if any, to be issued to such holder in
exchange for the Stock Certificates which have been surrendered
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will be computed on the basis of the aggregate number of shares represented by
all of the Stock Certificates surrendered for the account of such holder.
Holders of record of shares of General Signal Common Stock who hold such shares
in a representative capacity may submit multiple Forms of Election, provided
that such representative certifies that each such Form of Election covers all
shares of General Signal Common Stock held by such representative for a
particular beneficial owner.
The holders of shares of General Signal Common Stock should carefully
consider the tax consequences of making a Stock Election, a Cash Election or a
Mixed Election. See "Certain Federal Income Tax Consequences of the Merger." The
General Signal stockholders are urged to consult with their advisors to
determine the tax consequences to them of the Merger.
Limitations. Under the terms of the Merger Agreement, no more than 40%
of the outstanding shares of General Signal Common Stock may be converted into
the right to receive cash in the Merger, and no more than 60% of the outstanding
shares of General Signal Common Stock may be converted into the right to receive
SPX Common Stock in the Merger. The Merger Agreement provides for proration if
either of the foregoing limitations is exceeded, as follows:
Cash Oversubscription. If the sum of (i) the aggregate number of shares
of General Signal Common Stock with respect to which Cash Elections have been
made plus (ii) 40% of the aggregate number of shares of General Signal Common
Stock with respect to which Mixed Elections have been made exceeds the aggregate
number of shares of General Signal Common Stock which may be converted into the
right to receive cash in the Merger, then (a) each share of General Signal
Common Stock with respect to which a Stock Election has been made will be
converted into the right to receive 0.6977 of a share of SPX Common Stock; (b)
each share of General Signal Common Stock with respect to which a Non-Election
has been made (or is deemed to have been made) will be treated as though a Stock
Election had been made with respect thereto and will be converted into the right
to receive 0.6977 of a share of SPX Common Stock; (c) each share of General
Signal Common Stock with respect to which a Cash Election has been made will be
converted into the right to receive:
(1) the amount in cash, without interest, equal to the product of
$45.00 and a fraction (the "Cash Fraction"), the numerator of
which is the aggregate number of shares of General Signal
Common Stock which may be converted into the right to receive
cash in the Merger, and the denominator of which is the sum of
the aggregate number of shares of General Signal Common Stock
with respect to which Cash Elections have been made plus 40%
of the aggregate number of shares of General Signal Common
Stock with respect to which Mixed Elections have been made,
plus
(2) the number of shares of SPX Common Stock equal to 0.6977 of
a share of SPX Common Stock multiplied by a fraction
equal to one minus the Cash Fraction;
and (d) each share of General Signal Common Stock with respect to which a Mixed
Election has been made will be converted into the right to receive 0.4196 of a
share of SPX Common Stock plus 40% of the amount of cash specified in the
foregoing clause (1) and 40% of the number of shares of SPX Common Stock
specified in the foregoing clause (2).
Stock Oversubscription. If the sum of (i) the aggregate number of
shares of General Signal Common Stock with respect to which Stock Elections have
been made plus (ii) 60% of the aggregate number of shares of General Signal
Common Stock with respect to which Mixed Elections have been made exceeds the
aggregate number of shares of General Signal Common Stock which may be converted
into the right to receive SPX Common Stock in the Merger, then (a) each share of
General Signal Common Stock with respect to which a Cash Election has been made
will be converted into the right to receive $45.00, without interest; (b) each
share of General Signal Common Stock with respect to which a Non-Election has
been made (or is deemed to have been made) will be treated as though a Cash
Election had been made with respect thereto and will be converted into the right
to receive $45.00, without interest; and (c) each share of General Signal Common
Stock with respect to which a Stock Election has been made will be converted
into the right to receive:
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(1) the number of shares of SPX Common Stock equal to the product
of 0.6977 of a share of SPX Common Stock and a fraction (the
"Stock Fraction"), the numerator of which is the aggregate
number of shares which may be converted into the right to
receive SPX Common Stock in the Merger, and the denominator of
which is the sum of the aggregate number of shares of General
Signal Common Stock with respect to which Stock Elections have
been made plus 60% of the aggregate number of shares of
General Signal Common Stock with respect to which Mixed
Elections have been made, plus
(2) the amount in cash, without interest, equal to $45.00
multiplied by a fraction equal to one minus the Stock
Fraction;
and (d) each share of General Signal Common Stock with respect to which a Mixed
Election has been made will be converted into the right to receive $18.00
without interest plus 60% of the number of shares of SPX Common Stock specified
in the foregoing clause (1) and 60% of the amount of cash specified in the
foregoing clause (2).
Elections Undersubscribed. If neither of the foregoing limitations has
been exceeded, but not every stockholder has timely made an Election, then (a)
each share of General Signal Common Stock with respect to which a Cash Election
has been made will be converted into the right to receive $45.00 without
interest; (b) each share of General Signal Common Stock with respect to which a
Stock Election has been made will be converted into the right to receive 0.6977
of a share of SPX Common Stock; (c) each share of General Signal Common Stock
with respect to which a Mixed Election has been made will be converted into the
right to receive $18.00 without interest, and 0.4186 of a share of SPX Common
Stock; and (d) each share of General Signal Common Stock with respect to which a
Non-Election has been made (or is deemed to have been made) will be converted
into the right to receive:
(1) the amount in cash, without interest, equal to the product of
(i) $45.00 and (ii) a fraction (the "Non-Election Fraction"),
the numerator of which is the excess of the aggregate number
of shares of General Signal Common Stock which may be
converted into the right to receive cash in the Merger over
the sum of the aggregate number of shares of General Signal
Common Stock with respect to which a Cash Election has been
made plus 40% of the aggregate number of shares of General
Signal Common Stock with respect to which Mixed Elections have
been made, and the denominator of which is the excess of the
aggregate number of shares of General Signal Common Stock
outstanding immediately prior to the Effective Time over the
sum of the aggregate number of shares with respect to which
Cash Elections, Stock Elections and Mixed Elections have been
made, plus
(2) the number of shares of SPX Common Stock equal to the
product of 0.6977 of a share of SPX Common Stock and a
fraction equal to one minus the Non-Election Fraction.
ELECTION PROCEDURE
Accompanying copies of the Joint Proxy Statement/Prospectus sent to the
General Signal stockholders are a Form of Election and a Letter of Transmittal
(which includes instructions). In order to make a valid Election, a holder of
record of shares of General Signal Common Stock (or the beneficial owner thereof
through the nominee) must return to The Bank of New York, which has been
retained by SPX to act as Exchange Agent, for receipt by the Exchange Agent by
the Election Deadline, i.e., no later than 5:00 p.m. (Eastern Time) on
_________, 1998, the last business day prior to the General Signal Special
Meeting, a Form of Election and a Letter of Transmittal fully completed and
signed, and accompanied by the Stock Certificates representing the shares of
General Signal Common Stock for which the Election is being made. If the Stock
Certificates are not available at the time the Form of Election is sent to the
Exchange Agent, the stockholder may instead provide a Guarantee of Delivery from
a qualified financial institution (which in effect guarantees to SPX that the
Stock Certificates will be delivered to the Exchange Agent) and must, within
three NYSE trading days thereafter, deliver to the Exchange Agent the Stock
Certificates representing the shares in respect of which an Election is being
made. Any stockholder who
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fails to deliver a completed and signed Form of Election and his or her Stock
Certificates within the requisite period of time will be treated as though he or
she had made a Non-Election.
Any Guarantee of Delivery of Stock Certificates must be from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States, and the Stock
Certificates covered by any Guarantee of Delivery must in fact be delivered to
the Exchange Agent within three NYSE trading days after the date of execution of
the Guarantee of Delivery. Failure to deliver such Stock Certificates within
such three day period will be deemed to invalidate any otherwise properly made
Cash Election, Stock Election or Mixed Election. SPX will have the discretion,
which it may delegate in whole or in part to the Exchange Agent, to determine
whether Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The good faith
decision of SPX (or the Exchange Agent) in these matters will be conclusive and
binding. Neither SPX nor the Exchange Agent will be under any obligation to
notify any person of any defect in a Form of Election submitted to the Exchange
Agent. The Exchange Agent will also make all computations contemplated by the
proration procedures discussed above under "--Limitations," and all such
computations will be conclusive and binding on the holders of shares of General
Signal Common Stock in the absence of manifest error. Any Form of Election may
be changed or revoked prior to the Election Deadline. In the event a Form of
Election is revoked prior to the Election Deadline, SPX will, or will cause the
Exchange Agent to, cause the Stock Certificates representing the shares of
General Signal Common Stock covered by such Form of Election to be promptly
returned without charge to the person submitting the Form of Election upon
written request to that effect from such person.
A holder of shares of General Signal Common Stock who does not submit a
Form of Election which is received by the Exchange Agent prior to the Election
Deadline (including a holder who submits and then revokes his or her Form of
Election and does not resubmit a Form of Election which is timely received by
the Exchange Agent), or who submits a Form of Election without the corresponding
Stock Certificates or a Guarantee of Delivery, will be deemed to have made a
Non-Election. If a Form of Election is defective in any manner that the Exchange
Agent cannot reasonably determine the election preference of the stockholder
submitting such Form of Election, then the purported Election set forth therein
will be deemed to be of no force and effect and the stockholder will be deemed
to have made a Non-Election.
Both SPX and General Signal have agreed to use their reasonable best
efforts to mail or otherwise make available the Form of Election and a Letter of
Transmittal to all persons who become holders of shares of General Signal Common
Stock during the period between the General Signal Record Date and the Election
Deadline. Copies of the Election Form and the Letter of Transmittal may also be
obtained from the Exchange Agent at (800) 507-9357.
THE FORM OF ELECTION AND LETTER OF TRANSMITTAL ARE INCLUDED WITH COPIES
OF THIS JOINT PROXY STATEMENT/PROSPECTUS BEING SENT TO GENERAL SIGNAL'S
STOCKHOLDERS AND SHOULD BE PROPERLY COMPLETED IN ACCORDANCE WITH THEIR
INSTRUCTIONS AND RETURNED TO THE EXCHANGE AGENT PRIOR TO THE ELECTION DEADLINE.
YOU SHOULD INCLUDE YOUR STOCK CERTIFICATES OR AN APPROPRIATE GUARANTEE OF
DELIVERY OF YOUR STOCK CERTIFICATES AS SET FORTH IN THE FORM OF ELECTION. IF A
FORM OF ELECTION IS NOT PROPERLY COMPLETED AND RETURNED TO THE EXCHANGE AGENT
PRIOR TO THE ELECTION DEADLINE OR IF YOU DO NOT SEND IN YOUR STOCK CERTIFICATES
ON TIME, YOU WILL BE DEEMED TO HAVE MADE A NON-ELECTION WITH RESPECT TO YOUR
SHARES, AND THE FORM OF MERGER CONSIDERATION WHICH YOU WILL BE ENTITLED TO
RECEIVE WILL BE DETERMINED BY THE PROVISIONS OF THE MERGER AGREEMENT.
Exchange of Certificates. As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each person who was, at the
Effective Time, a holder of record of shares of General Signal Common Stock and
who did not submit an effective Form of Election prior to the Election Deadline,
a Letter of Transmittal
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to be used by the holder in effecting the surrender of his or her Stock
Certificates in exchange for the Merger Consideration.
Upon the later of the Effective Time and the surrender to the Exchange
Agent of his or her Stock Certificate for cancellation, together with a duly
executed Letter of Transmittal and any other required documents, the holder of
the Stock Certificate will be entitled to receive the Merger Consideration in
respect of the surrendered shares of General Signal Common Stock, to which such
holder is entitled under the Merger Agreement.
No fractional shares of SPX Common Stock will be issued and any holder
of shares of General Signal Common Stock entitled under the Merger Agreement to
receive a fractional share will receive a cash payment (without interest) in
lieu of the fractional share, in an amount equal to the value (determined with
reference to the closing price of a share of SPX Common Stock as reported on the
NYSE Composite Tape on the trading day immediately prior to the Effective Time)
of such fractional interest. If more than one Stock Certificate is surrendered
by the same stockholder, the number of shares represented by all of the Stock
Certificates surrendered will be aggregated for purposes of calculating how many
shares of SPX Common Stock will be issued in exchange for such certificates.
Any portion of the SPX Common Stock issuable or cash payable pursuant
to the Merger Agreement which remains undistributed to holders of shares of
General Signal Common Stock six months after the Effective Time will be
delivered to SPX, upon demand, and any General Signal stockholder who has not
complied with the exchange procedures in the Merger Agreement by that time will
thereafter have to look to SPX for payment of his or her claim for the Merger
Consideration and any cash in lieu of fractional shares of SPX Common Stock.
None of SPX, General Signal, MergerSub or the Exchange Agent will be liable to
any person in respect of shares of SPX Common Stock or cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
If any Stock Certificates are not surrendered within seven years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration and any cash payable in lieu of fractional shares would
otherwise escheat to or become the property of any governmental body or
authority), any such Merger Consideration or cash in lieu of fractional shares
that would otherwise be payable in respect of such Stock Certificate will, to
the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
SPX and MergerSub will be entitled to deduct and withhold from the
consideration otherwise payable under the Merger Agreement to any holder of
shares of General Signal Common Stock such amounts as SPX or MergerSub is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by SPX or MergerSub, such withheld amounts will be
treated for all purposes of the Merger Agreement as having been paid to the
holder of the shares of General Signal Common Stock in respect of which such
deduction and withholding was made by SPX or MergerSub. To prevent backup U.S.
federal income tax withholding with respect to the consideration received by the
General Signal stockholders in the Merger, each stockholder who does not
otherwise establish an exemption from backup withholding must notify the
Exchange Agent of such stockholder's correct taxpayer identification number (or
certify that such stockholder 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
stockholders 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.
If any Stock Certificates are lost, stolen or destroyed, then, upon the
making of an affidavit of that fact by the person claiming such stock
certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by that person of an indemnity bond in such reasonable
amount as the Surviving Corporation may direct, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Stock Certificate the Merger
Consideration and cash in lieu of fractional shares, as described above.
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If the Merger Agreement is terminated without the Merger having
occurred, SPX will, or will cause the Exchange Agent to, return promptly any
Stock Certificates submitted or delivered to SPX or the Exchange Agent without
charge to the person who submitted such Stock Certificates.
There will be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of General Signal
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Stock Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they will be canceled and
exchanged as provided in the Merger Agreement, except as otherwise provided by
law.
CORPORATE ORGANIZATION AND GOVERNANCE
Certificate of Incorporation and By-Laws of the Surviving Corporation.
The Certificate of Incorporation of MergerSub, in the form attached as Exhibit A
to the Merger Agreement, will continue to be the Certificate of Incorporation of
the Surviving Corporation. The By-Laws of MergerSub, as in effect immediately
prior to the Effective Time will be the By-Laws of the Surviving Corporation.
Board of Directors and Officers. The directors and officers of
MergerSub at the Effective Time will continue to be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
Under the Merger Agreement, the SPX Board is required to take all
action necessary to elect the following persons to the SPX Board as of the
Effective Time: (i) Emerson U. Fullwood, who will be assigned to the class of
directors whose term of office expires at SPX's first annual meeting of
stockholders after the Effective Time and (ii) H. Kent Bowen, who will be
assigned to the class of directors whose term of office expires at SPX's second
annual meeting of stockholders after the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
SPX, General Signal and MergerSub relating, among other things, to the
following: (i) due organization, existence, good standing, corporate power and
similar corporate matters, (ii) capitalization, (iii) authorization, execution,
delivery and enforceability of the Merger Agreement, (iv) the absence of any
conflicts, violations and defaults under SPX's and General Signal's respective
Certificates of Incorporation and By-Laws and certain other agreements and
documents, and the absence of any need for third-party consents by reason of the
execution of the Merger Agreement, (v) the timely filing of reports and other
documents with the Commission and the accuracy and completeness of the financial
and other information contained therein, (vi) the absence of undisclosed
liabilities or obligations of any nature which would have a Material Adverse
Effect (as defined in the Merger Agreement) on SPX or General Signal, (vii)
compliance with Law, (viii) environmental matters, (ix) employee benefit
matters, (x) the absence of certain material changes or events since December
31, 1997, (xi) the absence of pending or threatened litigation, (xii) material
contracts, (xiii) labor matters, (xiv) certain tax matters, including the
absence of facts inconsistent with the Merger's qualification as a
reorganization under Section 368(a) of the Code, (xv) the receipt of fairness
opinions from financial advisors, (xvi) the taking of all action necessary to
exempt the Merger Agreement from certain anti-takeover laws and the Rights
Agreements of General Signal and SPX, (xvii) the required vote of stockholders,
and (xviii) finders or brokers. SPX and MergerSub made an additional
representation and warranty as to the receipt by SPX of written commitments to
obtain the funds necessary for the consummation of transactions contemplated by
the Merger Agreement. All representations and warranties of SPX, General Signal
and MergerSub will expire at the Effective Time.
CERTAIN COVENANTS
Conduct of Business. General Signal has agreed, among other things, that during
the period between the signing of the Merger Agreement and the Effective Time,
except as may otherwise be consented to in writing by the other parties to the
Merger Agreement or as may be expressly permitted pursuant to the Merger
Agreement, it will, and will cause each of its subsidiaries to, conduct its
operations in the ordinary course and use its reasonable
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best efforts to preserve intact its business organization and goodwill in all
material respects, keep available the services of its officers and employees as
a group, subject to changes in the ordinary course, and maintain its existing
relationships with customers, suppliers and other third parties. The Merger
Agreement places restrictions on the ability of General Signal and its
subsidiaries to (i) authorize, declare or pay dividends on or make distributions
with respect to its shares of stock, (ii) enter into or amend employment,
severance or similar arrangements or increase the compensation or benefits
provided to employees, except in the ordinary course of business consistent with
past practice, (iii) publicly announce an intention to authorize or enter into
an agreement or take any action to consummate an agreement with respect to any
(a) merger, consolidation, or business combination, (b) liquidation or other
reorganization, or (c) acquisition or disposition of a material amount of assets
or securities or any release or relinquishment of any material rights under any
material contracts, (iv) propose or adopt amendments to its Certificate of
Incorporation, By-Laws or Rights Agreement or take action with respect to its
Rights Agreement, (v) dispose of or encumber capital stock owned by it in any of
its subsidiaries or any interest in EGS, (vi) issue, sell or permit to become
outstanding any shares of its capital stock, change its equity capitalization,
or acquire shares of its capital stock, (vii) grant rights to acquire any shares
of its capital stock or enter into any arrangements relating to its capital
stock, (viii) amend the terms of any employee compensation or benefit plan or
adopt any such new plan, (ix) incur indebtedness for borrowed money, (x)
encumber any material asset or material amount of assets, (xi) take actions
which could reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code, (xii) commit to certain capital
expenditures, or (xiii) adopt changes in its accounting principles.
SPX has agreed, among other things, that during the period between the
signing of the Merger Agreement and the Effective Time, it will, and will cause
each of its subsidiaries to, conduct its operations in the ordinary course and
use its reasonable best efforts to preserve intact its business organization and
goodwill in all material respects, keep available the services of its officers
and employees as a group, subject to changes in the ordinary course, and
maintain satisfactory relationships with customers, suppliers and other third
parties. The Merger Agreement places restrictions on the ability of SPX (and in
certain cases, of its subsidiaries) to (i) authorize, declare or pay dividends
or make distributions with respect to its shares of stock, (ii) publicly
announce an intention to authorize or enter into an agreement with respect to
any (a) merger, consolidation, or business combination involving aggregate
consideration in excess of $75.0 million, or (b) liquidation or reorganization,
(iii) propose or adopt amendments to its Certificate of Incorporation or By-Laws
that would adversely affect the rights of holders of SPX Common Stock, (iv) take
action with respect to its Rights Agreement, (v) take actions which could
reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the Code, (vi) issue shares of its
capital stock, (vii) acquire shares of SPX Common Stock other than transactions
of up to 200,000 shares, (viii) grant options or other rights to acquire any
shares of capital stock of SPX or its subsidiaries or enter into arrangements
relating to such capital stock, (ix) adopt changes in its accounting principles
or (x) commit to capital expenditures in excess of $40.0 million.
Investigation. SPX and General Signal have agreed to afford to one another
and to one another's officers, employees and other authorized representatives
reasonable access to its and its subsidiaries' (a) plants, properties,
contracts, books and records, (b) documents filed or received by it pursuant to
the requirements of federal or state securities law, and (c) any other
information concerning its business, properties and personnel as may be
reasonably requested. SPX and General Signal agree that each of them will treat
any such information in accordance with the applicable confidentiality agreement
between SPX and General Signal.
Filings. SPX and General Signal have each agreed that none of the
information they supplied for inclusion in the Registration Statement, this
Joint Proxy Statement/Prospectus and certain other documents filed with the
Commission will contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein not
misleading. SPX and General Signal have further agreed to cooperate with one
another in connection with obtaining certain tax opinions from each party's
counsel. SPX has further agreed that, prior to the Effective Time, it will use
its reasonable best efforts to cause the shares of SPX Common Stock issuable in
the Merger to be approved for listing on the NYSE and such other stock exchanges
as may be agreed upon.
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No Solicitation of Transactions. General Signal has agreed, except as agreed
by SPX, that it will not, and will not permit any of its subsidiaries or its
subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate, encourage or facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving General Signal, or any
acquisition of 10% or more of the outstanding capital stock of General Signal
(other than upon exercise of certain General Signal Options and warrants) or any
of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of
the Commission) or 15% or more of the assets of General Signal and its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or any combination of the foregoing (each, a "Competing
Transaction"), or negotiate or otherwise engage in discussions with any person
with respect to any Competing Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement, and will immediately cease all existing activities, discussions and
negotiations with any parties conducted with respect to any proposal for a
Competing Transaction. The Merger Agreement provides, however, that, at any time
prior to the approval of the Merger by the General Signal stockholders, General
Signal may furnish information to, and negotiate or otherwise engage in
discussions with, any third party who delivers a bona fide written proposal for
a Competing Transaction which was not solicited or encouraged after the date of
the Merger Agreement and enters into an appropriate confidentiality agreement
with the third party if, but only if, the General Signal Board determines in
good faith by a majority vote, after consultation with and receipt of advice
from its outside legal counsel, that failing to take such action would
constitute a breach of the fiduciary duties of the General Signal Board under
applicable Law and reasonably determines, after consulting with its independent
financial advisors, that such a proposal could reasonably be expected to lead to
a "Superior Transaction." A "Superior Transaction" is defined in the Merger
Agreement as a Competing Transaction which the General Signal Board reasonably
determines is more favorable to General Signal and its stockholders than the
transactions contemplated by the Merger Agreement and which is not subject to
any financing condition.
The Merger Agreement provides that, from and after the execution of the
Merger Agreement, General Signal will promptly advise SPX in writing of the
receipt, directly or indirectly, of any inquiries or proposals relating to a
Competing Transaction, and will keep SPX reasonably informed of the status of
any inquiries or proposals, of the furnishing of information to a third party,
and of any negotiations or discussions relating thereto.
If, prior to the approval of the Merger by the General Signal stockholders,
the General Signal Board determines in good faith by a majority vote, with
respect to any written proposal from a third party for a Competing Transaction
received after the date of the Merger Agreement that was not solicited,
initiated, encouraged or facilitated by General Signal, directly or indirectly,
after the date of the Merger Agreement, that such Competing Transaction is a
Superior Transaction and that failure to enter into such Competing Transaction
would constitute a breach of the fiduciary duties of the General Signal Board
under applicable Law, and the General Signal Board has received (i) a written
opinion from General Signal's independent financial advisors that the Competing
Transaction is a Superior Transaction and (ii) the advice of its legal counsel
that failure to enter into the Competing Transaction would constitute a breach
of the General Signal's Board's fiduciary duties, then General Signal may
terminate the Merger Agreement and enter into an acquisition agreement for the
Superior Transaction, provided General Signal (i) provides SPX two business
days' written notice of its intention to do so, identifying the Superior
Transaction and the parties thereto and delivering an accurate description of
all material terms of the Superior Transaction to be entered into, and (ii) on
the date of termination, delivers to SPX a written notice of termination of the
Merger Agreement, a wire transfer of immediately available funds in the amount
of the Termination Fee and Commitment Expenses (defined below under "The Merger
Agreement--Termination Fee; Reimbursement of Expenses"), and a written
acknowledgment from General Signal and each other party to the Superior
Transaction that they will not contest the payment of the Termination Fee and
Commitment Expenses.
SPX has also agreed that it will not, and will not permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit or initiate any
inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination as a result of which the SPX
stockholders would hold less than 50% of the voting securities outstanding
following that transaction, or the acquisition of 50% or more of the outstanding
capital stock of SPX or of the assets of SPX
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and its subsidiaries, taken as a whole (including capital stock of any
subsidiary) (an "SPX Business Combination"), provided that nothing prohibits
SPX from responding to unsolicited inquiries or proposals, including by
furnishing non-public information.
Indemnification and Insurance. SPX and MergerSub have agreed that all rights
to exculpation and indemnification for acts or omissions occurring at or prior
to the Effective Time now existing in favor of the current or former directors
or officers of General Signal or any of its subsidiaries as provided in its
Certificate of Incorporation or By-Laws or in any agreement will survive the
Merger and continue in full force and effect. SPX has agreed that for six years
from the Effective Time, SPX will indemnify such persons to the fullest extent
permitted by applicable Law and will use its reasonable best efforts to obtain
and maintain in effect, or cause the Surviving Corporation to obtain and
maintain in effect, General Signal's current directors' and officers' liability
insurance covering those persons who are currently covered by General Signal's
insurance policy, provided that SPX will not be required to pay an annual
premium for such insurance in excess of 200% of the annual premiums currently
paid by General Signal, but in that case must purchase as much coverage as
possible for that amount.
Benefit Plans. SPX has agreed, from and after the Effective Time, to cause
the Surviving Corporation and its subsidiaries to honor the obligations of
General Signal and its subsidiaries under all existing General Signal employee
benefit plans. Further, SPX has agreed that, for at least one year from the
Effective Time, the Surviving Corporation and its subsidiaries will provide
employee benefits to individuals who are employees of General Signal as of the
Effective Time that are, in the aggregate, comparable to those currently
provided by General Signal and its subsidiaries to their employees (excluding
any stock option or other equity-based compensation plan and any individual
employment, severance or similar agreement currently in effect).
After the Effective Time, SPX will grant, and will cause the Surviving
Corporation to grant, to all individuals who are, as of the Effective Time,
employees of General Signal or its subsidiaries credit for all service with
General Signal or its subsidiaries or affiliates prior to the Effective Time for
purposes of eligibility and vesting (but not benefit accrual), to the extent
that prior service with SPX or its subsidiaries is recognized in respect of
SPX's employees. SPX has generally agreed that any benefit plan providing
medical, dental or life insurance benefits after the Effective Time to General
Signal employees or their dependents shall waive any waiting periods and any
pre-existing conditions and actively-at-work exclusions to the extent waived
under General Signal's present policy and to take into account expenses incurred
prior to the Effective Time for purposes of satisfying applicable deductible or
coinsurance provisions to the extent taken into account under General Signal's
present policy.
General Signal is required to amend all trusts and other funding
arrangements to provide that no event which occurs in connection with the
transactions contemplated by the Merger Agreement will require General Signal,
the Surviving Corporation or any of their affiliates to make any payment of cash
or other property to any such trust or funding arrangement.
Certain Other Covenants. The Merger Agreement contains certain other
covenants and agreements, including covenants and agreements relating to (i)
reasonable best efforts to effect the transactions contemplated by the Merger
Agreement, (ii) the avoidance of actions that would cause the transactions
contemplated by the Merger Agreement to be subject to certain takeover laws,
(iii) public announcements relating to the Merger, the Merger Agreement and the
transactions contemplated thereby, and (iv) notification of facts, events or
circumstances that are reasonably likely to result in a Material Adverse Effect
with respect to SPX or General Signal or that would cause a material breach of
provisions of the Merger Agreement.
CONDITIONS
The obligations of SPX, General Signal and MergerSub to effect the Merger
are subject, among other things, to the satisfaction (or waiver, where legally
permissible) of certain conditions, including, without limitation: (i) approval
of the Merger Agreement by the requisite vote of the General Signal stockholders
and approval of the issuance of shares of SPX Common Stock by the requisite vote
of the SPX stockholders; (ii) the listing on the NYSE, subject only to official
notice of issuance, of the shares of SPX Common Stock to be issued in
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the Merger; (iii) the receipt of all regulatory approvals required to consummate
the transactions contemplated by the Merger Agreement, and the expiration or
termination of all statutory waiting periods (except for such regulatory
approvals the failure to obtain which are not reasonably likely to result in any
Material Adverse Effect); (iv) the absence of any Law or Decree prohibiting or
making illegal the consummation of any of the transactions contemplated by the
Merger Agreement; (v) the absence of any breaches of any representations or
warranties made in the Merger Agreement which in the aggregate have a Material
Adverse Effect on General Signal or SPX; and (vi) the receipt by General Signal
from Wachtell, Lipton, Rosen & Katz, and by SPX from Fried, Frank, Harris,
Shriver & Jacobson, of opinions that the Merger will be treated as a
reorganization under Section 368(a) of the Code, which latter condition SPX and
General Signal have agreed not to waive.
The obligations of General Signal to effect the Merger are subject to the
fulfillment of certain additional conditions, including (i) with respect to the
continued accuracy of the representations and warranties of SPX and the
performance of the obligations and covenants of SPX contained in the Merger
Agreement, and (ii) the delivery by SPX to General Signal of a certificate,
dated the date the Merger is consummated and signed by the Chief Executive
Officer or a Vice President of SPX, certifying the satisfaction of the
foregoing.
The obligations of SPX to effect the Merger are subject to the fulfillment
of certain additional conditions, including (i) with respect to the continued
accuracy of the representations and warranties of General Signal and the
performance of the obligations and covenants of General Signal contained in the
Merger Agreement, and (ii) the delivery by General Signal to SPX of a
certificate, dated the date the Merger is consummated and signed by the Chief
Executive Officer or a Vice President of General Signal, certifying the
satisfaction of the foregoing.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any approval of the Merger
Agreement by the General Signal stockholders or any approval by the SPX
stockholders of the SPX Proposal): (i) by mutual written consent of SPX and
General Signal, (ii) by either SPX or General Signal if the Merger has not been
consummated by December 31, 1998 (but this right will not be available to any
party whose failure to perform under the Merger Agreement resulted in the
failure of the Merger to occur by that date), (iii) by SPX if the General Signal
Board withdraws its recommendation of the Merger or changes it in a manner
adverse to SPX, refuses to affirm its recommendation as promptly as practicable
(but in any case within ten business days) after receipt of any written request
from SPX which request is made on a reasonable basis, or recommends that General
Signal enter into a General Signal Business Combination (as defined below), (iv)
by General Signal if the SPX Board withdraws its recommendation of the Merger or
changes it in a manner adverse to General Signal, refuses to affirm its
recommendation as promptly as practicable (but in any case within ten business
days) after receipt of any written request from General Signal which request is
made on a reasonable basis, or recommends that SPX enter into an SPX Business
Combination, (v) by SPX or General Signal if at the General Signal Special
Meeting the requisite vote of the General Signal stockholders to approve the
Merger Agreement is not obtained, (vi) by SPX or General Signal if at the SPX
Special Meeting the requisite vote of the SPX stockholders to approve the SPX
Proposal is not obtained, (vii) by SPX or General Signal if any Law or Decree
prohibits or makes illegal the consummation of the Merger, or if any final
non-appealable Decree enjoining SPX or General Signal from consummating the
Merger is entered, (viii) by SPX or General Signal if there is a material breach
by the other party of its representations, warranties, covenants or agreements
in the Merger Agreement, which breach would result in the failure to satisfy
conditions set forth in the Merger Agreement, and which breach is not cured
within 30 days after written notice thereof, and (ix) by General Signal, in
order to enter into a Competing Transaction, provided it has complied with the
applicable provisions of the Merger Agreement and has paid the Termination Fee
and the Commitment Fees.
TERMINATION FEE; REIMBURSEMENT OF EXPENSES
SPX is entitled to receive a termination fee of $60.0 million (less any
Expense Fee, as defined below, previously received by it), in the event that the
Merger Agreement is terminated under any of the following circumstances: (i) SPX
terminates the Merger Agreement pursuant to clause (iii) under "--Termination";
(ii) SPX or General Signal terminates the Merger Agreement because the General
Signal stockholders fail to approve the Merger, and at the time there is a
publicly proposed or announced General Signal Business Combination and,
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within 12 months after termination of the Merger Agreement, General Signal or
any of its subsidiaries enters into or consummates a General Signal Business
Combination; (iii) General Signal terminates the Merger Agreement pursuant to
clause (ix) under "--Termination"; or (iv) SPX or General Signal terminates the
Merger Agreement because the General Signal stockholders fail to approve the
Merger or SPX terminates the Agreement because General Signal has committed a
material breach of the Merger Agreement which breach arises out of its bad faith
or willful misconduct, and a General Signal Business Combination is entered into
or consummated by General Signal within three months following such termination
of the Merger Agreement.
General Signal is entitled to receive a termination fee of $25.0 million
(less any Expense Fee previously received by it) in the event that the Merger
Agreement is terminated under any of the following circumstances: (i) General
Signal terminates the Merger Agreement pursuant to clause (iv) under
"--Termination," or (ii) SPX or General Signal terminates the Merger Agreement
because the SPX stockholders fail to approve the SPX Proposal, and at the time
there is a publicly proposed or announced SPX Business Combination with a third
party and, within 12 months after termination of the Merger Agreement, SPX or
any of its subsidiaries enters into or consummates an SPX Business Combination
with such third party or an affiliate thereof.
If SPX or General Signal terminates the Merger Agreement because the General
Signal stockholders fail to approve the General Signal Proposal, then General
Signal will pay to SPX, and if SPX or General Signal terminates the Merger
Agreement because the SPX stockholders fail to approve the SPX Proposal, then
SPX will pay to General Signal, an expense fee of $5.0 million (the "Expense
Fee"). Further, if SPX terminates the Merger Agreement pursuant to clauses
(iii), (v), or (viii) under "--Termination," or if General Signal terminates the
Merger Agreement pursuant to clauses (v) or (ix) under "--Termination," then
General Signal also will pay to SPX all amounts incurred by SPX or MergerSub in
respect of fees and payments to obtain the financing commitments for the Merger
Financing, up to the amounts set forth in the fee letter dated July 19, 1998,
and related expenses of the lenders (the "Commitment Expenses"). If the Merger
Agreement is terminated by SPX or General Signal pursuant to clause (ii) or
(vii) under "--Termination," then General Signal will pay to SPX the lesser of
one-half of the Commitment Expenses or $5.0 million.
If either SPX or General Signal fails to pay promptly any fee payable by it
under the termination and expense reimbursement provisions of the Merger
Agreement, then the party owing the fee will pay to the party owed the fee the
latter's costs and expenses in connection with any lawsuit to collect the fee,
along with interest on the amount of the fee at the prime or base rate of The
Chase Manhattan Bank.
EXPENSES
Subject to the provisions of the Merger Agreement relating to termination
fees and expenses, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses, except that the expenses incurred in connection with
filing, printing and mailing the Registration Statement and this Joint Proxy
Statement/Prospectus (including registration and filing fees related thereto)
will be shared equally by SPX and General Signal, and if the Merger is
consummated, all transfer taxes will be paid by General Signal.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of certain material federal income tax
consequences of the Merger to SPX, General Signal and the holders of General
Signal Common Stock who are citizens or residents of the United States or who
are domestic corporations. This discussion is for general information only and
does not purport to address all tax consequences of the Merger. The summary may
not apply to General Signal stockholders in special situations (such as dealers
in securities or currencies, traders in securities, financial institutions,
tax-exempt organizations, insurance companies, persons holding shares of General
Signal Common Stock as part of a hedging, "straddle," conversion or other
integrated transaction, non-United States persons, persons whose functional
currency is not the United States dollar or persons who acquired their shares of
General Signal Common Stock pursuant to the exercise of employee stock options
or warrants, or otherwise as compensation). The discussion assumes that the
shares of General Signal Common Stock are held as capital assets. In addition,
no information is provided herein with respect to the tax consequences of the
Merger under applicable foreign, state or local laws.
Neither General Signal nor SPX has requested a ruling from the Internal
Revenue Service ("IRS") with regard to any of the federal income tax
consequences of the Merger, and the opinions of counsel to General Signal and
counsel to SPX as to the federal income tax consequences of the Merger to be
delivered as conditions to the Merger will not be binding on the IRS.
Tax Opinion. As conditions to the Merger (which conditions SPX and General
Signal have agreed may not be waived), SPX must receive an opinion of Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), special counsel to SPX, and General Signal must receive an
opinion of Wachtell, Lipton, Rosen & Katz, special counsel to General Signal,
subject to the assumptions set forth below, to the effect that, based upon
present federal income tax law, the Merger will constitute a reorganization
pursuant to Section 368(a) of the Code. Assuming that the Merger is a
reorganization, (i) none of SPX, General Signal or MergerSub will recognize gain
or loss as a result of the Merger, (ii) the General Signal stockholders that
exchange their shares of General Signal Common Stock solely for shares of SPX
Common Stock will not recognize gain or loss in the Merger, and (iii) the
General Signal stockholders that exchange their shares of General Signal Common
Stock for shares of SPX Common Stock and cash will recognize gain, if any, in
the Merger but not in excess of the amount of cash received.
Such opinions will be based on (i) certain representations and statements of
SPX, General Signal and MergerSub, (ii) the assumption that such representations
and statements will be complete and accurate as of the Effective Time, and (iii)
the assumption that the Merger and related transactions will take place in
accordance with all of the terms of the Merger Agreement and as described in
this Joint Proxy Statement/Prospectus.
The following discussion addresses certain federal income tax consequences
of the Merger to a General Signal stockholder, assuming that the Merger will
qualify as a reorganization.
Only Shares of SPX Common Stock Received.
Except as discussed below with respect to cash received in lieu of a
fractional share of SPX Common Stock, a General Signal stockholder that receives
only shares of SPX Common Stock in exchange for such holder's shares of General
Signal Common Stock will not recognize gain or loss. The tax basis of the shares
of SPX Common Stock received in the Merger will be the same as the tax basis of
the shares of General Signal Common Stock exchanged therefor. The holding period
of the shares of SPX Common Stock received will include the holding period of
shares of General Signal Common Stock exchanged therefor.
Only Cash Received.
A General Signal stockholder that receives solely cash in the Merger in
exchange for such stockholder's shares of General Signal Common Stock generally
will recognize capital gain or loss measured by the difference between the
amount of cash received with respect to each share of General Signal Common
Stock and the tax basis of each such share of General Signal Common Stock
exchanged therefor. If, however, any such stockholder
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actually or constructively owns shares of SPX Common Stock after the Merger (as
the result of constructive ownership of shares of General Signal Common Stock
that are exchanged for shares of SPX Common Stock in the Merger, prior, actual
or constructive ownership of shares of SPX Common Stock, or otherwise), the cash
received by such stockholder may, in certain circumstances, be taxed as a
dividend. The circumstances under which dividend treatment may apply and the
consequences thereof are similar to those discussed under "--Shares of SPX
Common Stock and Cash Received--Treatment of Gain Recognized," except that the
amount treated as a dividend would not be limited to the amount of such
stockholder's gain recognized in the transaction, and it is possible that there
would be some variation in the manner in which the 302 Tests, as defined below,
would be applied. See also "--Effect of Overlapping or Constructive Ownership,"
for a general discussion of the effect of a stockholder's overlapping ownership
on the dividend/capital gain issue.
Shares of SPX Common Stock and Cash Received.
General. Except as discussed below with respect to cash received in lieu of
a fractional share of SPX Common Stock, a General Signal stockholder that
receives both shares of SPX Common Stock and cash in the exchange for shares of
General Signal Common Stock will not recognize loss in such exchange. However,
under Section 356(a)(1) of the Code, the stockholder will recognize gain (if
any) with respect to each share of General Signal Common Stock exchanged
(measured by the sum of the fair market value of the portion of a share of SPX
Common Stock received for such share of General Signal Common Stock, plus the
amount of any cash received for such share of General Signal Common Stock, minus
the tax basis of such share of General Signal Common Stock) but only to the
extent of the amount of any cash received in exchange for such share of General
Signal Common Stock. A General Signal stockholder may receive both shares of SPX
Common Stock and cash as the result of (i) making a Mixed Election, (ii) making
a Stock Election and being prorated (if the Stock Election is oversubscribed),
(iii) making a Cash Election and being prorated (if the Cash Election is
oversubscribed) or (iv) failing to make any Election.
Treatment of Gain Recognized. Under applicable Supreme Court precedent, any
such gain recognized will be taxed as either gain from the sale or exchange of
stock (i.e., capital gain) or as a dividend (to the extent of the stockholder's
ratable share of earnings and profits), based upon whether, in the transaction
described in the next sentence, such stockholder's interest in SPX was reduced
sufficiently so that the cash received was not "essentially equivalent to a
dividend" under Section 302 of the Code. For purposes of this determination, a
General Signal stockholder will be treated as if such stockholder had engaged in
a hypothetical transaction in which such stockholder and all other General
Signal stockholders (i) received solely shares of SPX Common Stock in exchange
for all of their shares of General Signal Common Stock, and (ii) thereafter had
a portion of such shares of SPX Common Stock redeemed for the cash portion of
the Merger Consideration. A General Signal stockholder's hypothetical interest
in SPX after step (i) is compared to such stockholder's interest in SPX
subsequent to the deemed redemption in step (ii). In each case, subject to
limited exceptions, shares of SPX Common Stock actually or constructively owned
(under the constructive ownership rules described in "--Effect of Overlapping or
Constructive Ownership" below) by such stockholder will be considered owned for
purposes of applying this test, even if such shares of SPX Common Stock were not
received or deemed received in the Merger.
Under Section 302(b) of the Code, a distribution in redemption of stock will
not be "essentially equivalent to a dividend" if, insofar as is here pertinent,
(i) such stockholder's interest in SPX is completely terminated as a result of
the transaction, (ii) a stockholder's percentage interest in SPX is reduced more
than 20% in the redemption described above (the "20% safe harbor"), or (iii)
such stockholder's interest was "meaningfully reduced" by virtue of such
redemption (such tests, the "302 Tests"). While prong (iii) of the 302 Tests
requires a determination based on a stockholder's particular facts and
circumstances, the IRS has indicated in published rulings that a distribution
that results in any actual reduction in interest of an extremely small, minority
stockholder in a publicly held corporation will meaningfully reduce the
stockholder's interest in the corporation if the stockholder exercises no
control with respect to corporate affairs.
Application of 302 Tests - General. The discussion which follows considers
the application of the 302 Tests to a stockholder that receives a combination of
cash and SPX Common Stock as the result of making (i) a Mixed Election or (ii) a
Cash Election or Stock Election which is oversubscribed (and hence subject to
proration).
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The application of the 302 Tests in these cases will depend upon, in addition to
the type of Election made by the stockholder, the extent to which (i) the cash
or stock portion of the Merger Consideration is oversubscribed, (ii) the
stockholder actually or constructively owns after the Merger any shares of SPX
Common Stock which such stockholder did not receive, actually or constructively,
in the Merger (e.g., shares of SPX Common Stock which it owned actually or
constructively before the Merger) and (iii) the stockholder constructively owns
shares of General Signal Common Stock immediately prior to the Effective Time.
The discussions, under "--Cash Elections," "--Mixed Elections" and "--Stock
Elections," below, do not consider the effect of such constructive or
overlapping ownership, which is, however, discussed below in "--Effect of
Overlapping or Constructive Ownership." Moreover, the statements below relating
to the extent of a stockholder's reduction in interest in SPX under the 302
Tests are based upon certain mathematical assumptions as to the relative values
of the cash portion of the Merger Consideration and the stock portion of the
Merger Consideration, which assumptions may not be completely accurate as of the
Effective Time. Therefore, the General Signal stockholders should consult their
own tax advisors as to the risk of dividend characterization with respect to any
cash received in the Merger.
- Cash Elections. If the cash portion of the Merger Consideration is
oversubscribed (and therefore a portion of the consideration received under a
Cash Election is SPX Common Stock), a General Signal stockholder making a Cash
Election will have its interest in SPX reduced for purposes of the 302 Tests,
although if the Cash Election is heavily oversubscribed the reduction may not
qualify for the 20% safe harbor. The treatment of General Signal stockholders
making Cash Elections where the cash portion of the Merger Consideration is not
oversubscribed is addressed above in "--Only Cash Received."
- Mixed Elections. A General Signal stockholder that makes a Mixed Election
will, for purposes of the 302 Tests (i) if the stock portion of the Merger
Consideration is oversubscribed, have its interest reduced but by an amount
which may or may not qualify under the 20% safe harbor, (ii) if neither the
stock portion nor the cash portion of the Merger Consideration is
oversubscribed, have its interest in SPX reduced but by an amount which will
generally be less than that necessary to qualify under the 20% safe harbor and
(iii) if the cash portion of the Merger Consideration is oversubscribed,
generally not qualify under the 20% safe harbor, and if it is substantially
oversubscribed may not have any reduction in its interest in SPX and as a result
be subject to dividend treatment.
- Stock Elections. If the stock portion of the Merger Consideration is
oversubscribed (and therefore a portion of the consideration received under a
Stock Election is Cash), a General Signal stockholder that makes a Stock
Election will be subject to dividend treatment if the stock portion of the
Merger Consideration is oversubscribed, unless the extent of such
oversubscription is very substantial. The treatment of General Signal
stockholders making Stock Elections where the stock portion of the Merger
Consideration is not oversubscribed is addressed above in "--Only Shares of SPX
Common Stock Received."
Effect of Overlapping or Constructive Ownership. A General Signal
stockholder that (i) actually or constructively owns after the Merger any shares
of SPX Common Stock which such stockholder did not receive, actually or
constructively in the Merger (e.g. shares of SPX Common Stock which such
stockholder owned actually or constructively before the Merger), or (ii)
constructively owns shares of General Signal Common Stock immediately prior to
the Effective Time or shares of SPX Common Stock immediately after the Effective
Time, will be required to take such shares into account for purposes of applying
the 302 Tests. Under the applicable constructive ownership rules of Section 318
of the Code, a stockholder will, in general, be treated as owning shares owned
by certain family members and other related entities, or that are subject to
options owned or deemed owned by such person. The actual or constructive
ownership of such shares of General Signal Common Stock may, in some
circumstances, have the effect of causing a General Signal stockholder that
would otherwise qualify for capital gain treatment under the 302 Tests to fail
to so qualify and subject such stockholder to dividend treatment on the cash
portion of the Merger Consideration (to the extent of the stockholder's ratable
share of earnings and profits), even if such stockholder receives solely cash in
the Merger. Therefore, General Signal stockholders who (i) constructively own
shares of General Signal Common Stock or (ii) actually or constructively own
shares of SPX Common Stock should consult their tax advisors as to the tax
consequences of receiving cash, whether such stockholder intends to make a Cash
Election, Stock Election or Mixed Election.
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Treatment of Dividends to Corporate Stockholders. To the extent that cash
received in exchange for shares of General Signal Common Stock is treated as a
dividend to a corporate stockholder, such stockholder 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 cash which is treated as a dividend to a corporate
stockholder will constitute an extraordinary dividend, except as otherwise
provided in Treasury regulations which have yet to be promulgated. Consequently,
the non-taxed portion of any such dividend would reduce a corporate
stockholder's adjusted tax basis in the shares of SPX Common Stock received in
the Merger, but not below zero, and would thereafter be taxable as capital gain.
Tax Basis and Holding Period of Shares of SPX Common Stock Received in the
Merger. The tax basis of each share of SPX Common Stock received in the Merger
will be the same as the tax basis of the shares of General Signal Common Stock
exchanged therefor, increased by the amount of gain recognized on the exchange
with respect to such shares of General Signal Common Stock (including any such
gain that is treated as a dividend), decreased by any portion of such shares of
General Signal Common Stock which are converted into cash in lieu of receipt of
a fractional share of SPX Common Stock, and further decreased by the amount of
cash received with respect to such shares of General Signal Common Stock (other
than cash received in lieu of a fractional share interest). As discussed above,
corporate stockholders are subject to special adjustments with respect to the
portion of any cash received in the Merger which is taxable as a dividend. See
"--Treatment of Dividends to Corporate Stockholders." The holding period of the
shares of SPX Common Stock received will include the holding period of the
shares of General Signal Common Stock exchanged therefor.
Fractional Shares.
If a General Signal stockholder receives cash in lieu of a fractional
share of SPX Common Stock in the Merger, such cash amount will be treated as
received in exchange for the fractional share of SPX Common Stock. Gain or loss
recognized as a result of that exchange will be equal to the cash amount
received for the fractional share of SPX Common Stock reduced by the proportion
of the stockholder's tax basis in shares of General Signal Common Stock
exchanged and allocable to the fractional share of SPX Common Stock.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS,
GENERAL SIGNAL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL,
AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
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COMPARISON OF RIGHTS OF
STOCKHOLDERS OF SPX AND GENERAL SIGNAL
Pursuant to the Merger, holders of General Signal Common Stock (other than
holders who elect, and receive, only cash in respect of their shares) will
become stockholders of SPX and the rights of all such former General Signal
stockholders will thereafter be governed by SPX's Certificate of Incorporation
and By-Laws and the DGCL. The rights of the holders of General Signal Common
Stock are currently governed by General Signal's Certificate of Incorporation
and By-Laws and the NYBCL. Differences between the laws of Delaware, the state
of incorporation of SPX, and those of New York, the state of incorporation of
General Signal, and between SPX's Certificate of Incorporation and By-Laws, on
the one hand, and General Signal's Certificate of Incorporation and By-Laws, on
the other hand, will result in several changes in the rights of stockholders of
General Signal. 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
General Signal's stockholders under General Signal'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 General Signal and to the laws of Delaware and New York,
respectively, to which stockholders 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 SPX Board pursuant to a resolution
approved by a majority of the entire SPX Board.
Under New York 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. In addition, if, for a period of one
month after the date fixed by the by-laws for the annual meeting of
stockholders, there is a failure to elect a sufficient number of directors to
conduct the business of the corporation, the board of directors must call a
special meeting of stockholders for the election of directors. If the board of
directors fails to do so, the holders of ten percent of the votes of the shares
entitled to vote in an election of directors may demand the call of a special
meeting for the election of directors. General Signal's By-Laws provide that the
General Signal Board or the Chairman of the Board may, and, upon the written
request of stockholders owning at least two-thirds of the outstanding shares
entitled to vote at the meeting, the Secretary shall, call a special meeting of
stockholders 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 may 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 SPX Board but shall not be less than three. At present, the SPX
Board has eight members.
Under New York law, a board of directors shall consist of one or more
individuals, with the number specified in or fixed in accordance with the
by-laws or by action of the stockholders or of the board of directors under the
specific provisions of a by-law adopted by the stockholders. General Signal's
By-Laws provide that the
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General Signal Board shall consist of not more than fifteen members, the number
to be as the directors shall from time to time direct. At present, the General
Signal Board has nine members.
CLASSIFICATION OF DIRECTORS
Under Delaware law, the directors of a corporation may, by the certificate
of incorporation or by an initial bylaw, or by a bylaw 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 New York law, the certificate of incorporation or the provisions of a
by-law adopted by the stockholders may provide that the directors be divided
into either two, three or four classes, with all classes being as nearly equal
in number as possible. General Signal's By-Laws provide that the directors will
be classified into three classes, all classes being as nearly equal in number as
possible, and no class including less than three directors.
REMOVAL OF DIRECTORS
Under Delaware law, in general 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 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 New York law, the directors may be removed for cause by vote of the
stockholders or, if the certificate of incorporation or the provisions of a
by-law adopted by the stockholders so provide, by action of the board of
directors. Directors may be removed without cause by vote of the stockholders if
the certificate of incorporation or the by-laws so provide. Under New York law,
an action to procure a judgment removing a director for cause may be brought by
the attorney-general or by the holders of ten percent of the outstanding shares.
General Signal's Certificate of Incorporation provides that a director may be
removed only by the affirmative vote of the holders of two-thirds of all
outstanding shares.
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 SPX 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 New York law, vacancies occurring in the board for any reason other
than the removal of directors without cause may be filled by vote of the board
of directors. Vacancies occurring by reason of the removal of directors without
cause may be filled only by vote of the stockholders, unless the certificate of
incorporation or the provisions of a by-law adopted by the stockholders provide
otherwise. General Signal's By-Laws provide that all vacancies may be filled by
the vote of a majority of the directors then in office, although less than a
quorum.
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.
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Under New York law, with respect to corporations incorporated prior to
February 22, 1998, except as otherwise provided in the certificate of
incorporation, the holders of equity shares of any class of stock, in case of
the proposed issuance by the corporation of or the proposed granting by the
corporation of rights or options to purchase its equity shares of any class,
shall, if such proposed issuance or grant adversely affects the unlimited
dividend rights of such holders, have the right during a reasonable time and on
reasonable conditions to purchase such shares or other securities in proportions
as determined under the NYBCL. General Signal's Certificate of Incorporation
explicitly states that holders of its shares shall not have any preemptive
rights.
CORPORATE ACTION WITHOUT A STOCKHOLDERS' 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. SPX's Certificate of
Incorporation prohibits stockholders from acting by written consent in lieu of a
meeting.
Under New York law, whenever stockholders are required or permitted to take
any action by vote, such action may be taken without a stockholder meeting (i)
by written consent of all persons entitled to vote on the action, or (ii) if the
certificate of incorporation so provides, by the written consent of holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. General Signal's Certificate of
Incorporation is silent on the issue.
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 New York law, dividends may be declared and paid and other
distributions may be made out of surplus only, so that the net assets of the
corporation remaining after such declaration, payment or distribution must at
least equal the amount of its stated capital. Further, under New York law, a
corporation may not declare and pay dividends or make other distributions if the
corporation is insolvent or would otherwise be made insolvent, or when the
declaration, payment or distribution would be contrary to any restrictions
contained in the certificate of incorporation.
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 (business combinations) 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 (as defined in the Certificate of Incorporation). See
"Comparison of Rights of Stockholders of SPX and General Signal--Business
Combinations with Substantial Stockholders."
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Under New York law, with limited exceptions, for an amendment to the
certificate of incorporation to be adopted, the amendment must be authorized by
vote of the board of directors, and the stockholders must approve the amendment
by a majority of all outstanding shares entitled to vote on the amendment,
unless the certificate of incorporation requires a greater vote. Article 8 of
General Signal's Certificate of Incorporation provides that the adoption,
amendment or repeal of any provision of the Certificate of Incorporation
relating to (i) the number, classification and terms of office of directors,
(ii) the quorum of directors required for the transaction of business, (iii) the
filling of newly created directorships and vacancies occurring in the Board of
Directors, (iv) the removal of directors, (v) the power of the Board of
Directors to adopt, amend or repeal By-Laws of General Signal or the vote of the
Board of Directors required for such adoption, amendment or repeal, or (vi) any
amendment or repeal of Article 8 of the Certificate of Incorporation, requires
the affirmative vote of the holders of two-thirds of all outstanding shares
entitled to vote thereon.
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 SPX Board is expressly
authorized to adopt, amend and repeal the 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 SPX Board through a majority vote of those directors
present at any meeting at which a quorum is present.
Under New York law, the by-laws of a corporation may be amended or repealed
by a majority of the votes of the shares entitled to vote in the election of any
directors, or by the board of directors, when so provided in the certificate of
incorporation or a by-law adopted by the stockholders. General Signal's
Certificate of Incorporation provides that the adoption, amendment or repeal of
any By-Law relating to (i) the number, classification and terms of office of
directors, (ii) the quorum of directors required for the transaction of
business, (iii) the filling of newly created directorships and vacancies
occurring in the Board of Directors, (iv) the removal of directors, or (v) the
power of the Board of Directors to adopt, amend or repeal By-Laws of General
Signal or the vote of the Board of Directors required for such adoption,
amendment or repeal, requires the affirmative vote of the holders of two-thirds
of all outstanding shares entitled to vote thereon. General Signal's By-Laws
provide that, except as provided in the Certificate of Incorporation, any By-Law
may be deleted or amended in any respect, at an annual or special meeting, by a
majority of the votes cast by the holders of shares entitled to vote thereon, or
by a majority of the General Signal Board then in office.
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 proposes to
bring before the annual meeting: (i) a brief description of the matter desired
to be brought, (ii) the name and address of the stockholder proposing such
action, (iii) the class and number of shares of SPX Common Stock which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such matter.
Under General Signal's By-Laws, for a matter to be properly brought before a
meeting by a stockholder, the stockholder must give timely notice thereof in
writing to the Secretary of General Signal not less than 45 days nor more than
60 days prior to such meeting; however, in the event less than 55 days prior
public disclosure of the date of such meeting is made to the stockholders or the
only public disclosure of the date of the meeting is written notice, notice must
be received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. A stockholder's notice must state as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought and the reasons for conducting such
business at the meeting, (ii) the name and address of the stockholder, (iii) the
class and number of shares of General Signal Common Stock which are owned
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beneficially by the stockholder, and (iv) any material interest of the
stockholder in such business. Compliance with this procedure is determined by a
committee of the General Signal Board consisting of non-management directors,
unless the matter concerns the removal, replacement or election of directors, in
which case compliance is determined by inspectors appointed by the Secretary.
ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS
Under SPX's By-Laws, nominations for the election of directors may be made
by the SPX Board or a committee appointed by the SPX Board 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 (i) 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 (ii) 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: (i) the name and address of the
stockholder who intends to make the nomination and of the person to be
nominated, (ii) 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,
(iii) 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, (iv) 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 (v) the consent of each
nominee to serve as a director if elected.
Under General Signal's By-Laws, nominations of persons for election to the
General Signal Board may be made at any meeting by or at the direction of the
General Signal Board or by any stockholder entitled to vote for the election of
directors at such meeting. Stockholders 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 General Signal
not less than 45 days nor more than 60 days prior to such meeting; however, in
the event less than 55 days prior public disclosure of the date of such meeting
is made to the stockholders or the only public disclosure of the date of the
meeting is written notice, notice must be received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Each such notice must
set forth: (i) the name, age, and business and residence addresses of the person
to be nominated, and the name and address of the stockholder making the
nomination, (ii) the class and number of shares of General Signal Common Stock
which are owned beneficially by the nominee and the stockholder making the
nomination, (iii) the principal occupation or employment of the nominee, and
(iv) such other information regarding each nominee or stockholder making the
nomination as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Commission. Compliance with this procedure
will be determined by two inspectors appointed by the Secretary.
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.
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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 New York law, a corporation may indemnify its directors and officers
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 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. New
York 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). In
the case of a stockholder derivative suit, no indemnification may be made in
respect of (i) a threatened action, or a pending action which is settled or
otherwise disposed of, or (ii) any claim, issue or matter as to which such
person has been adjudged to be liable to the corporation, unless a court of
competent jurisdiction determines upon application that, in view of the
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such portion of the settlement amount and expenses as the court
deems proper. A person who has been successful in defense of a civil or criminal
action shall be entitled to indemnification. New York law permits a corporation
to purchase and maintain liability insurance for its directors and officers,
unless the officer or director personally gained a financial profit or advantage
to which he was not legally entitled, or a judgment adverse to the director or
officer establishes that his acts of active and deliberate dishonesty were
material to the cause of action.
General Signal's By-Laws provide officers and directors a broad
indemnification right, similar in scope to that permitted under New York law.
The indemnification right includes the right to be paid by General Signal the
expenses incurred in defending any proceeding in advance of its final
disposition. The indemnification rights conferred by General Signal's By-Laws
are not exclusive of any other right to which persons seeking indemnification
may be entitled under any law, By-Law, Certificate of Incorporation or
otherwise. General Signal's By-Laws also prevent General Signal from taking any
corporate action or entering into any agreement which prohibits the rights of
officers and directors to indemnification. Further, the indemnification provided
by General Signal's By-Laws is deemed to be a contract between General Signal
and each party entitled to indemnification, continues after such party ceases to
be a director or officer and inures to the benefit of such party's heirs and
executors.
LIMITATION OF LIABILITY
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 (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL concerning unlawful dividends and stock
repurchases and redemptions, or (iv) 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 SPX stockholders will not adversely affect any right or protection of a
director of SPX existing at the time of such repeal or modification.
Under New York law, a corporation can 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 duty as a
director, provided that such provision does not eliminate or limit the liability
of a director (i) if a judgment or other
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final adjudication adverse to such director establishes that such director's
acts or omissions were in bad faith, or involved intentional misconduct or a
knowing violation of law, or that the director personally gained in fact a
financial profit or other advantage to which such director was not legally
entitled or that the director's acts violated certain provisions of the NYBCL or
(ii) for any act or omission prior to the adoption of such a provision in the
certificate of incorporation.
General Signal'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 the SPX 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 the SPX 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
(each term as defined in the Certificate of Incorporation) of (i) any assets
of SPX or (ii) any of its subsidiaries, in each case having an aggregate Fair
Market Value (as defined below) 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 the
SPX 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 (as defined below) then in office, or
(ii) to all other 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
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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 the SPX 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 stockholders of SPX 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 the SPX Board who is unaffiliated with and not a representative of
the Substantial Stockholder and was a member of the SPX 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 SPX 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
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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, of 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.
General Signal'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 not 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 New York law, a corporation may not engage in any business combination
with any Interested Stockholder (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 Stockholder (the "Stock
Acquisition Date"), unless, prior to the Stock Acquisition 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
before the Stock Acquisition Date. Even after five years, such a business
combination is permitted only if: (i) it is approved by a majority of the shares
not owned by, or by an affiliate of, the Interested Stockholder, or (ii) certain
statutory fair price requirements are met.
Under New York law, a corporation has the option to opt-out of the above
business combination statute. Neither General Signal's Certificate of
Incorporation nor its By-Laws exclude it from the restrictions imposed
thereunder.
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STOCKHOLDER RIGHTS PLANS
SPX. SPX entered into a Rights Agreement with The Bank of New York, as
rights agent, on June 25, 1996, as amended October 22, 1997 (the "SPX Rights
Agreement"). Under the SPX Rights Agreement, the SPX Board declared a dividend
of one right (an "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 Junior Participating Preferred Stock, at an exercise price of
$200, subject to adjustment. At no time do the holders of 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 the SPX Board, each holder of an 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 the SPX Board, the SPX 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.
General Signal. General Signal entered into a Rights Agreement with First
Chicago Trust Company of New York, N.A., as rights agent, on February 1, 1996
(as amended, the "General Signal Rights Agreement"). Under the General Signal
Rights Agreement, the General Signal Board declared a dividend of one right (a
"General Signal Right") for each outstanding share of General Signal Common
Stock held of record on March 21, 1996. Each General Signal Right entitles its
holder to purchase, upon the occurrence of certain specified events, one share
of General Signal Common Stock at an exercise price of $150, subject to
adjustment. The General Signal Rights will no longer be exercisable after the
earlier of (i) March 21, 2006, (ii) the redemption of the General Signal Rights
or (iii) the exchange of the General Signal Rights for shares of General Signal
Common Stock. The description and terms of the General Signal Rights are set
forth in the General Signal Rights Agreement.
In general, pursuant to the General Signal Rights Agreement, upon the
occurrence of specified triggering events, such as the acquisition by any person
(other than General Signal or any of its subsidiaries) of the beneficial
ownership of securities representing 20% or more of the outstanding General
Signal Common Stock without the prior approval of the General Signal Board, each
holder of a General Signal Right will have the right to receive, upon exercise
of the General Signal Right, that amount of General Signal Common Stock having a
market value equal to two times the exercise price of the General Signal Right.
The General Signal Rights Agreement further provides that if General Signal is
acquired in a merger or other business combination or General Signal sells more
than 50% of its assets and such transaction is not approved by the General
Signal Board, the General Signal stockholders will have the right to receive,
with respect to each General Signal Right, common stock of the acquiring company
having a market value equal to two times the exercise price of the General
Signal Right. Under certain circumstances, General Signal may redeem the General
Signal Rights for a redemption price of $.01 per General Signal Right.
In connection with its approval of the Merger Agreement, the General Signal
Board amended the General Signal Rights Agreement with the result that neither
the entering into of the Merger Agreement by General Signal, SPX and MergerSub,
nor consummation of the transactions contemplated thereby, will cause the
General Signal Rights to separate from the shares of General Signal Common
Stock, entitle or permit the holders of the General Signal Rights to exercise
the General Signal Rights or otherwise trigger any effect under the General
Signal Rights Agreement. See "The Merger--Amendment of General Signal Rights
Agreement."
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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 SPX 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 SPX 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 New York law, in taking action which may involve or relate to a change
in control of the corporation, a director of a corporation is entitled to
consider (i) the long-term as well as the short-term interests of the
corporation and its stockholders, and (ii) the effects that the corporation's
actions may have in the short-term or in the long-term upon (a) the prospects
for potential growth, development, productivity and profitability of the
corporation, (b) the corporation's current employees, (c) the corporation's
retired employees and other beneficiaries entitled to receive certain benefits
from the corporation, (d) the corporation's customers and creditors, and (e) the
ability of the corporation to provide, as a going concern, goods, services,
employment opportunities and employment benefits and otherwise to contribute to
the communities in which it does business.
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MARKET PRICE AND DIVIDEND INFORMATION
The SPX Common Stock is listed and principally traded on the NYSE
(under the symbol "SPW") and is also listed on the PE. The General Signal Common
Stock is listed and principally traded on the NYSE (under the symbol "GSX") and
is also listed on the PE. The following table sets forth the high and low
trading prices per share of each of the SPX Common Stock and General Signal
Common Stock on the NYSE for the periods indicated as reported on the NYSE
Composite Tape, and the dividends declared per common share for such periods by
SPX and General Signal:
<TABLE>
<CAPTION>
SPX COMMON STOCK GENERAL SIGNAL COMMON STOCK
---------------- ---------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter................... $ 17-3/8 $ 14-1/4 $ .10 $ 36-3/8 $ 31 $ .24
Second Quarter.................. 15-1/8 10-3/4 .10 40 35-1/8 .24
Third Quarter................... 16 11-1/8 .10 42-1/2 28 .24
Fourth Quarter.................. 17 14-1/8 .10 33-7/8 28 .24
1996
First Quarter................. 18-1/8 13-5/8 .10 37-3/4 32 .24
Second Quarter.................. 27-1/8 18 .10 40-1/8 35-1/4 .24
Third Quarter................... 31-5/8 21-5/8 .10 44-1/4 36-1/4 .24
Fourth Quarter.................. 40-1/2 26-7/8 .10 44-1/2 39-3/4 .255
1997
First Quarter................... 49-3/4 37-3/8 .10 46-3/4 38-1/2 .255
Second Quarter.................. 70-5/8 41-7/8 -- 46-3/4 36-1/8 .255
Third Quarter................... 65-3/4 49 -- 53 37-3/16 .255
Fourth Quarter.................. 70-3/8 58-7/16 -- 44-7/8 36-5/8 .27
1998
First Quarter................... 79-1/4 65-3/16 -- 47-1/4 37-3/4 .27
Second Quarter.................. 77-15/16 63-5/8 -- 46-15/16 35-13/16 .27
Third Quarter
(through [ ], 1998)...... [ ] [ ] -- [ ] [ ] --*
</TABLE>
- -----------------
* General Signal has agreed in the Merger Agreement not to pay any further
dividends prior to the Effective Time .
On July 17, 1998, the last full trading day prior to the public announcement
by SPX and General Signal of the execution of the Merger Agreement, the reported
high and low sale prices per share and closing price per share of SPX Common
Stock and General Signal Common Stock on the NYSE Composite Tape were as
follows:
<TABLE>
<CAPTION>
PER SHARE PER EQUIVALENT SHARE
------------------------------------ -------------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C>
SPX........................... $ 65-1/2 $ 64-7/16 $ 64-1/2 $ - $ - $ -
General Signal................ 38-3/8 36-1/4 37-5/8 45-7/16 45 45
</TABLE>
On [ ], 1998, the last full trading day prior to the date of this Joint
Proxy Statement/Prospectus, the reported closing price per share of SPX Common
Stock and General Signal Common Stock on the NYSE Composite Tape were $ _______
and $ ________, respectively. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR SHARES OF SPX COMMON STOCK AND GENERAL SIGNAL COMMON STOCK.
- 78 -
<PAGE> 90
BENEFICIAL OWNERSHIP OF SPX COMMON STOCK
The following table sets forth information (as of the respective dates
indicated) about the only known beneficial owners of more than 5% of the
outstanding shares of SPX Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- ----------------
<S> <C> <C>
FMR Corp. (Fidelity Investments)
82 Devonshire Street
Boston, MA 02109............................................ 1,666,800 (1) 13.19%
Harris Associates L.P.
Two North LaSalle Street, Suite 500
Chicago, IL 60602............................................ 1,590,200 (1) 12.58%
Fidelity Management Trust Company
82 Devonshire Street
Boston, MA 02109............................................. 1,140,270 (2) 9.02%
Merrill Lynch Asset Management
800 Sudders Mill Road
Plainsboro, NJ 08536......................................... 1,035,650 (1) 8.19%
</TABLE>
- --------------------
(1) Form 13F filed with the Commission on March 31, 1998.
(2) Fidelity Management Trust Company is the Trustee of the SPX Corporation
Retirement Savings and Stock Ownership Plan and, as of March 31, 1998,
owned such number of shares pursuant to such plan.
- 79 -
<PAGE> 91
The following table sets forth the amount and percentage of SPX Common Stock
beneficially owned as of June 30, 1998 by each director of SPX, by the Chief
Executive Officer and each of the four other most highly compensated executive
officers of SPX and by all directors and executive officers of SPX as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act, and does not necessarily bear on the economic incidents of
ownership or the right to transfer such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------------------------------------
VESTED OPTIONS
SHARES OF COMMON EXERCISABLE WITHIN
NAME OF INDIVIDUAL STOCK(1)(2) 60 DAYS TOTAL PERCENT OF CLASS
- ------------------ ---------------- ------------------ ----- ----------------
<S> <C> <C> <C> <C>
John B. Blystone ............. 201,326(3) 71,890 273,216 1.6%
J. Kermit Campbell............ 1,617 7,900 9,517 *
Sarah R. Coffin............... 1,196 6,600 7,796 *
Frank A. Ehmann............... 2,658 12,200 14,858 *
Charles E. Johnson II......... 66,145 6,962 73,107 *
Christopher J. Kearney........ 2,292 0 2,292 *
Ronald L. Kerber.............. 3,804 4,409 8,213 *
Stephen A. Lison.............. 32,055 25,936 57,991 *
Peter H. Merlin............... 4,236 10,600 14,836 *
Patrick J. O'Leary............ 17,167 5,000 22,167 *
Thomas J. Riordan............. 11,910 2,868 14,778 *
David P. Williams............. 3,527 7,273 10,800 *
All directors and executive
officers as a group
(15 persons) including the
above named................ 355,416 179,088 534,504 4.2%
</TABLE>
- --------------------
(1) Included for Messrs. Blystone, Kearney, O'Leary and Riordan and all
executive officers as a group are their respective allocated shares held in
the SPX Corporation Retirement Savings and Stock Ownership Plan.
(2) Except as otherwise indicated, each director and executive officer has sole
voting and investment power over the shares he or she beneficially owns.
(3) Includes 75,000 shares of restricted stock granted to Mr. Blystone as part
of his initial employment contract with the Company that have not yet
vested. These shares vest ratably based on continued employment to the
vesting date at the rate of 25,000 shares per year beginning December 1,
1998. Mr. Blystone will receive all dividends on, and has the right to
vote, these shares. Does not include 250 shares held by The Blystone
Foundation of which Mr. Blystone and his wife along with Mr. Kearney and
James M. Sheridan are directors and as to which Mr. Blystone disclaims any
beneficial interest.
(4) Includes 20,548 shares owned by Mr. Johnson's wife.
- 80 -
<PAGE> 92
BENEFICIAL OWNERSHIP OF GENERAL SIGNAL COMMON STOCK
The following table reflects the holdings of the only persons known to
General Signal to own beneficially 5% or more of General Signal Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS*
- ------------------------------------ ---------------- -----------------
<S> <C> <C>
College Retirement Equities Fund
730 Third Avenue
New York, NY 10017.................................. 3,292,400(1) 7.5%
Harris Associates, Inc.
Two North LaSalle Street
Suite 500
Chicago, IL 60602................................... 2,805,900(2) 6.4%
Iridian Asset Management LLC; David L. Cohen; and Harold
J. Levy
c/o Iridian Asset Management LLC
276 Post Road West
Westport, CT 06880.................................. 2,699,000(3) 6.2%
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109.................................... 2,454,873(4) 5.6%
General Signal Corporation Savings and Stock Ownership
Plan (the "Savings Plan") the trustee of which
is The Chase Manhattan Bank
Chase MetroTech Center
Brooklyn, NY 11245.................................. 2,408,918(5) 5.5%
</TABLE>
- --------------------
* Based upon the number of shares of General Signal Common Stock
outstanding as of July 13, 1998.
(1) A Schedule 13G filing disclosed that the Board of Trustees of College
Retirement Equities Fund ("CREF"), an investment company, has sole voting
power with respect to such shares and shared dispositive power with respect
to such shares with TIAA-CREF Investment Management, LLC, CREF's registered
investment adviser ("TIAA-CREF").
(2) A Schedule 13G filing by Harris Associates, Inc., the general partner of
Harris Associate L.P., a registered investment adviser, disclosed that
Harris Associates L.P. has shared voting power with respect to all such
shares with investment clients for whom it serves as an investment adviser.
The filing further disclosed that Harris Associates L.P. has sole
dispositive power with respect to 2,047,900 such shares and shared
dispositive power with respect to 758,000 such shares.
(3) A Schedule 13G filing disclosed that Iridian Asset Management LLC
("Iridian"), a registered investment adviser, has sole voting and
dispositive power with respect to 2,553,100 of such shares; LC Capital
Management, LLC ("LC Capital") is a member owning 69.6% of Iridian and may
therefore be deemed to have beneficial ownership of the shares held by
Iridian and indirect sole voting and dispositive power with respect
thereto; CL Investors, Inc. ("CL Investors") is a member owning 96% of LC
Capital and may therefore be deemed to have beneficial ownership of the
shares held by Iridian and indirect sole voting and dispositive power with
respect thereto; each of David L. Cohen and Harold J. Levy owns 50% of CL
Investors, and each may therefore be deemed to have beneficial ownership of
the shares held by Iridian and indirect shared voting and dispositive power
with respect thereto; and each of Messrs. Cohen and Levy is employed by
Arnhold & S. Bleichroeder Advisers, Inc., which serves as an adviser to
First Eagle Fund of America, Inc., a mutual fund holding, according to such
filing, 146,800 of such shares, as to which shares each of Messrs. Cohen
and Levy disclaims deemed beneficial ownership and as to which shares none
of Iridian, LC Capital nor CL Investors has voting or dispositive power.
- 81 -
<PAGE> 93
(4) A Schedule 13G filing disclosed that Putnam Investments, Inc. ("Putnam
Investments"), a wholly owned subsidiary of Marsh & McLennan Companies,
Inc., has shared dispositive power with respect to all such shares and
shared voting power with respect to 14,400 such shares; the Putnam Advisory
Company, Inc. ("Putnam Advisory"), a registered investment adviser and
wholly owned subsidiary of Putnam Investments, has shared voting power with
respect to 14,400 such shares and shared dispositive power with respect to
799,200 such shares; Putnam Investment Management, Inc. ("Putnam
Management"), a registered investment adviser and wholly owned subsidiary
of Putnam Investments, has shared dispositive power with respect to
1,655,673 such shares; and that Putnam Advisory is the investment adviser
to the Putnam family of mutual funds and Putnam Management is the
investment adviser to institutional clients of Putnam Investments.
(5) The Chase Manhattan Bank, as trustee of the Savings Plan, will vote the
shares as instructed by participants, and shares for which no instructions
have been received will be voted by the trustee in the same proportion as
the shares for which instructions have been received.
- 82 -
<PAGE> 94
The following table sets forth the amount and percentage of General Signal
Common Stock beneficially owned as of June 30, 1998 by each director of General
Signal, by the Chief Executive Officer and each of the four other most highly
compensated executive officers of General Signal and by all directors and
executive officers of General Signal as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Exchange Act, and does not
necessarily bear on the economic incidents of ownership or the right to transfer
such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
OF SHARES OF CAPITAL STOCK
NAME OF INDIVIDUAL STOCK(1) PERCENT OF CLASS UNITS(2)
- ------------------------------------------- ---------- ------------------ --------
<S> <C> <C> <C>
Joanne L. Bober........................ 12,621(3) * 449
H. Kent Bowen.......................... 6,615 * 2,615
Van C. Campbell........................ 10,435(4) * 3,218
Michael A. Carpenter................... 4,000 * --
Elizabeth D. Conklyn................... 20,800(3) * 2,844
Ursula F. Fairbairn.................... 7,582 * 3,582
Ronald E. Ferguson..................... 16,579 * 12,579
Emerson U. Fullwood.................... -- * --
Robert D. Kennedy...................... 4,100 * 100
Michael D. Lockhart.................... 418,450(3) * 18,927
John Selby............................. 15,716(4) * 6,062
Ernest R. Verebelyi.................... 14,217(3) * 887
Richard F. Zannino..................... 8,211(3) * --
All directors and executive officers as
a group (18 persons)................. 671,327(3) 1.5% 60,956
</TABLE>
- --------------------
* Less than 1%.
(1) The figures shown include the interest of executive officers of General
Signal in an aggregate of 23,459 shares of General Signal Common Stock held
by the trustee under the Savings Plan as June 30, 1998 and include the
following shares of General Signal Common Stock which the persons listed
have the right to acquire as of June 30, 1998 or within 60 days after such
date through the exercise of General Signal Options: Michael D. Lockhart
(273,000); Ernest R. Verebelyi (8,250); Joanne L. Bober (7,000); Elizabeth
D. Conklyn (12,500); and all current directors and executive officers as a
group (430,040).
(2) For the executive officers, the "stock units" represent compensation
deferred and credited as "phantom stock units" under General Signal's
Deferred Compensation Plan. For H. Kent Bowen, Van C. Campbell, Ursula F.
Fairbairn, Ronald E. Ferguson, Robert D. Kennedy and John R. Selby, the
"stock units" represent either (a) director fees deferred to their
share-denominated accounts or (b) accrued retirement benefits transferred
from a terminated retirement plan for non-employee directors to the General
Signal's Deferred Compensation Plan for Directors. Under both plans, the
value of the "stock units" at the time of distribution will be the then
market value of the General Signal Common Stock, but the deferred amounts
will be paid in cash.
(3) Includes Restricted Shares held by: Michael D. Lockhart (91,000); Richard
F. Zannino (8,000); Ernest R. Verebelyi (3,334); Joanne L. Bober (5,000);
Elizabeth D. Conklyn (5,000); and five other executive officers (13,000)
with respect to which the holders have sole voting power, but no
dispositive power, during the restricted period.
(4) Van C. Campbell and John R. Selby elected to defer all or part of their
cash compensation as directors for 1996 or prior thereto and to receive in
lieu thereof restricted stock under General Signal's stock incentive plans
as then in effect. The figures shown include the shares of stock which are
currently restricted with respect to which the holders have sole voting
power, but no dispositive power, during the restricted period as follows:
Mr. Campbell (3,217); and Mr. Selby (5,654).
- 83 -
<PAGE> 95
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF SPX
(unaudited)
(in millions, except per share data)
The following table sets forth selected historical consolidated
financial data for SPX for each of the five years in the period ended December
31, 1997 and for the six-month periods ended June 30, 1998 and 1997. Such data
have been derived from, and should be read in conjunction with, the audited
consolidated annual financial statements and other financial information
contained in SPX's 1997 Form 10-K and the unaudited consolidated interim
financial information contained in SPX's Second Quarter Form 10-Q, including the
notes thereto, incorporated by reference herein. The operating results for the
six months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. The selected
historical financial data are qualified in their entirety by reference to the
historical financial statements (and related notes) which are incorporated by
reference herein. See "Available Information" and "Incorporation of Documents by
Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------------
1998(A) 1997(B) 1997(B) 1996(C) 1995 1994(D) 1993(E,F)
------- ------- ------- ------- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $ 462.0 $ 466.9 $ 922.3 $1,109.4 $1,098.1 $1,079.9 $ 747.2
Cost of products sold........... 332.7 340.2 669.0 850.1 853.5 821.5 508.0
Selling, general and
administrative............... 83.4 87.2 175.3 186.5 194.5 198.0 204.1
Other operating expenses,
net (g)...................... 1.7 1.9 3.9 1.9 8.3 2.9 53.4(d)
Special charges and
(gains) (h).................. (7.1)(i) 6.5(j) 116.5(j) 87.9(k) 10.7(k) -- 27.5(l)
----------- ---------- ---------- ----------- ----------- -------- ------------
Operating income (loss)......... 51.3 31.1 (42.4) (17.0) 31.1 57.5 (45.8)
Other expense (income), net..... (1.4) (72.7)(b) (74.2)(b) (0.7) (3.0) 0.1 (102.9)(f)
Interest expense, net........... 7.9 7.3 13.9 31.8 35.7 35.2 15.9
----------- ---------- ---------- ----------- ----------- -------- ------------
Income (loss) before income
taxes........................ 44.8 96.5 17.9 (48.1) (1.6) 22.2 41.2
Income taxes.................... 16.1 49.8 21.3 7.6 (0.2) 9.1 28.1
----------- ---------- ---------- ----------- ----------- -------- ------------
Income (loss) from
continuing operations......... 28.7 46.7 (3.4) (55.7) (1.4) 13.1 13.1
Discontinued operation (m)...... -- -- -- -- (2.8) 1.0 2.1
Cumulative effect of
accounting changes (n)........ -- -- -- -- -- -- (31.8)
Extraordinary items (o)......... -- (10.3) (10.3) (6.6) (1.1) -- (24.0)
----------- ---------- ---------- ----------- ----------- -------- ------------
Net income (loss)............... $ 28.7 $ 36.4 $ (13.7) $ (62.3) $ (5.3) $ 14.1 $ (40.6)
=========== ========== ========== =========== =========== ======== ============
Income (loss) per share
from continuing operations:
Basic......................... $ 2.40 $ 3.44 $ (0.27) $ (4.04) $ (0.10) $ 1.02 $ 1.04
Diluted....................... 2.33 3.33 (0.27) (4.04) (0.10) 1.02 1.04
Weighted average number of
common shares outstanding:
Basic......................... 11.972(p) 13.571(p) 12.754(p) 13.785 13.173 12.805 12.604
Diluted....................... 12.342(p) 14.040(p) 12.754(p) 13.785 13.173 12.805 12.604
Dividends per share............. $ --(p) $ 0.10(p) $ 0.10(p) $ 0.40 $ 0.40 $ 0.40 $ 0.40
OTHER FINANCIAL DATA:
Total assets.................... $ 642.9 $ 551.5 $ 583.8 $ 616.0 $ 831.4 $ 929.0 $ 1,024.4
Total debt...................... 262.0 197.4 205.3 229.3 319.8 415.2 430.2
Stockholders' equity
(deficit)....................... (38.4) 24.4 (43.4) 105.9 162.2 158.7 145.4
Capital expenditures............ 14.6 10.6 22.6 20.2 31.0 48.5 15.1
Depreciation and amortization... 12.0 13.3 25.0 40.8 43.5 38.5 24.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
consolidated financial data.
- 84-
<PAGE> 96
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPX
(unaudited)
(in millions, except per share data)
(a) Late in the second quarter of 1998, SPX acquired 89% of Tecnotest S.r.l.,
an Italian company, and 100% of The Valley Forge Group for a combined
purchase price of $59.0 in cash and assumed debt. Annual revenues of these
unrelated businesses are approximately $55.0. Had these acquisitions taken
place on January 1, 1997, consolidated revenues and income would not have
been significantly different from reported 1997 results.
(b) 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" presented elsewhere herein.
(c) During 1996, SPX sold its Hy-Lift division for approximately $15.0.
Annual 1995 revenues of this division were approximately $45.0.
(d) Effective December 31, 1993, SPX acquired the balance of 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.
(e) During 1993, SPX acquired Allen Testproducts and its related leasing
company for $102.0. Annual 1992 revenues of the businesses acquired were
approximately $83.0.
(f) 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.
(g) Other operating expenses, net, include goodwill/intangible amortization,
minority interest, and earnings from equity interests.
(h) Special charges and gains include certain legal costs, restructuring
charges, write-off of goodwill, and liquidation of certain investments.
(i) The first six months of 1998 included a $l3.7 realized gain on SPX's
investment in Echlin Inc., which was liquidated during the second quarter,
and $6.6 of expenses associated with SPX's offer to acquire Echlin Inc.
(j) 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 Solutions 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. The $63.7 of 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
- 85 -
<PAGE> 97
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 through
June 1998 related to the special charges were $16.5. The expected future
cash payments include an estimated $34.0 over the balance of 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
June 30, 1998 of $64.2 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.
(k) 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.
SPD 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 cost savings associated with the 1995 and 1996 restructuring actions,
described above, 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. These
actions increased operating income by an estimated $7.0 in 1996 and an
estimated $12.0 in 1997.
- 86 -
<PAGE> 98
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.
Also during 1996, SPX recognized a $67.8 goodwill write-off, with no
related 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 goodwill amortization. Assessing the impact of these factors on
the businesses, as originally acquired, management concluded that
Automotive Diagnostics' goodwill was impaired.
(l) During 1993, SPX recognized a $27.5 ($18.5 after-tax) special charge to
combine its Bear Automotive operation with Allen Testproducts.
(m) 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.
(n) 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.
(o) 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.
(p) 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.
During the first six months of 1998, SPX purchased an additional 0.398
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 stockholders would be in the form of
open market purchases of SPX Common Stock, when deemed appropriate by
management.
- 87 -
<PAGE> 99
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
The following table sets forth selected historical consolidated
financial data for General Signal for each of the five years in the period ended
December 31, 1997 and for the six-month periods ended June 30, 1998 and 1997.
Such data have been derived from, and should be read in conjunction with, the
audited consolidated annual financial statements and other financial information
contained in General Signal's 1997 Form 10-K and the unaudited consolidated
interim financial information contained in General Signal's Second Quarter Form
10-Q, including the notes thereto, incorporated by reference herein. The
operating results for the six months ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. The selected historical financial data are qualified in their entirety by
reference to the historical financial statements (and related notes) which are
incorporated by reference herein. See "Available Information" and "Incorporation
of Documents by Reference."
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------------------------------
1998 1997(B)(C) 1997(B)(C) 1996(D) 1995(E) 1994(F) 1993(G)
---- ---------- ---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales....................... $ 776.1 $1,045.2 $1,954.6 $2,065.0(k) $1,863.2 $1,527.7 $1,354.2
Cost of sales (a)............... 505.7 699.2 1,313.6(i) 1,369.7(k) 1,246.9 1,064.8(m) 902.6
Selling, general and
administrative (a)............ 186.6 232.5 444.9(i) 455.6(k) 403.0 331.2(m) 307.3
Other operating expenses,
net(a)........................ 7.3 7.6 14.6 16.6 12.5 5.8 8.4
Special charges and
(gains)(a).................... -- -- -- -- 20.1(l) -- (19.8)(o)
----------- ----------- ------------ ------------ --------- ----------- -----------
Operating income................ 76.5 105.9 181.5 223.1 180.7 125.9 155.7
Other expense (income) (a)...... -- -- (72.7)(b) (20.8)(d) -- (46.2)(n) --
Equity in earnings
of EGS (c).................... (20.0) -- (11.8) -- -- -- --
Interest expense, net........... 8.6 8.0 13.2 21.5 24.3 11.8 16.6
----------- ----------- ------------ ------------ --------- ----------- -----------
Income from continuing
operations before income
taxes......................... 87.9 97.9 252.8 222.4 156.4 160.3 139.1
Income taxes.................... 33.8 39.2 121.8 89.0 56.3 56.2(m) 41.0
----------- ----------- ------------ ------------ --------- ----------- -----------
Income from continuing
operations.................... 54.1 58.7 131.0 133.4 100.1 104.1 98.1
Discontinued operations (f)..... -- -- 2.3 -- (64.0) (23.4) (31.5)
Cumulative effect of
accounting changes............ -- -- (3.7)(j) -- -- -- (25.3)(p)
Extraordinary items............. -- -- -- -- -- -- (6.6)(q)
----------- ----------- ------------ ------------ --------- ----------- -----------
Net income...................... $ 54.1 $ 58.7 $ 129.6 $ 133.4 $ 36.1 $ 80.7 $ 34.7
=========== =========== ============ ============ ========== =========== ===========
Income per share from
continuing operations:
Basic......................... $ 1.20 $ 1.15 $ 2.61 $ 2.68 $ 2.04 $ 2.20 $ 2.17
Diluted....................... 1.19 1.14 2.60 2.62 2.01 2.16 2.13
Weighted average number of
common shares outstanding:
Basic......................... 45.2(h) 51.2(h) 50.2(h) 49.7 49.2 47.3 45.2
Diluted....................... 45.6(h) 51.5(h) 50.4(h) 52.3 51.8 50.1 48.0
Dividends per share............. $ 0.54 $ 0.51 $ 1.035 $ 0.975 $ 0.96 $ 0.915 $ 0.90
OTHER FINANCIAL DATA:
Total assets.................... $1,376.3 $1,549.9 $1,388.0 $1,551.0 $1,613.2 $1,357.9 $1,224.9
Total debt...................... 374.0 252.3 216.4 206.9 437.6 271.3 200.7
Stockholders' equity............ 489.7 722.4 629.7 743.8 578.1 547.9 525.2
Capital expenditures............ 24.6 26.3 56.5 59.3 49.0 74.8 55.1
Depreciation and amortization... 29.3 35.6 65.3 69.2 62.8 48.4 46.4
</TABLE>
Note: The accompanying notes are an integral part of the selected historical
consolidated financial data.
- 88 -
<PAGE> 100
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
(a) Certain reclassifications to General Signal's previously reported income
data have been made to conform with the presentation of the combined
company. These reclassifications include: (1) classifying certain
engineering and research and development costs as selling, general and
administrative expense rather than as cost of sales, (2) classifying
goodwill and other intangible amortization as other operating expenses
rather than selling, general and administrative expense, and, (3)
classifying gains on the sales of business units and breakup fees as other
expenses (income) rather than other charges and credits. These
reclassifications do not affect previously reported earnings from
continuing operations before income taxes.
(b) During 1997, General Signal sold GSPG to Pentair Inc. for approximately
$200.0. General Signal recorded a pre-tax gain of $63.7, or $17.2
after-tax. The effective tax rate on the sale of GSPG differs from the
statutory rate due to a difference in book and tax basis of GSPG. Annual
1996 sales of this business were approximately $201.0. See "Pro Forma
Adjusted Historical Financial Data of General Signal" presented elsewhere
herein. General Signal also sold its equity interest in a Mexican company
for a $9.0 pre-tax gain, or $2.3 after-tax.
(c) During 1997, General Signal and Emerson formed EGS, a joint venture
combining GSEG with Emerson's Appleton Electric Operations. General Signal
contributed substantially all of the operating assets of GSEG to EGS, in
exchange for a 47.5% ownership in EGS. Annual 1996 sales of this business
were approximately $294.0. General Signal records its investment in EGS
under the equity method of accounting on a three month lag basis, effective
January 1, 1998. See "Pro Forma Adjusted Historical Financial Data of
General Signal" presented elsewhere herein.
Pursuant to a letter agreement dated July 19, 1998, General Signal and
Emerson have agreed that General Signal will acquire all of the assets and
assume all of the liabilities of the Dual-Lite and Edwards divisions of EGS
immediately prior to the consummation of the Merger. These divisions had
been contributed to EGS by General Signal at the time of the formation of
EGS. In exchange for these businesses, General Signal's interest in EGS
will be reduced from 47.5% to 44.5%. This transaction will not occur if the
Merger Agreement is terminated. Had this transaction taken place on January
1, 1997, consolidated net sales and net income would not be significantly
different from reported results.
(d) In 1996, General Signal sold Kinney for $29.0 and recognized a pre-tax gain
of $20.8. Annual 1995 sales of this business were approximately $25.0.
(e) During 1995, General Signal made three significant acquisitions. In June,
General Signal completed a cash tender offer for Best Power for $206.3. In
July, General Signal acquired Waukesha Electric for $73.9. The acquisitions
of Best Power and Waukesha Electric were recorded under the purchase method
of accounting. In November, General Signal merged in a pooling of interests
with Data Switch by exchanging 1.8 shares of General Signal Common Stock
and 0.2 rights to receive General Signal Common Stock for all outstanding
common stock and related options and warrants of Data Switch. Combined
annual 1994 sales of these unrelated businesses were approximately $336.0.
(f) Late in 1994, General Signal adopted a plan to sell L&N and Dynopower and
recorded a charge of $25.8 after-tax on the disposal of these operations.
Income from these discontinued operations in 1994 was $2.4 after-tax. As of
December 31, 1996, substantially all related assets were sold. In 1995,
General Signal recorded total charges of $64.0 after-tax for additional
expected losses related to the disposal of these businesses. In 1997, due
to less than expected losses, $2.3 after-tax of these charges were reversed
into income. The financial results of these operations are included as
discontinued operations through the date of divestiture. Annual 1993 sales
of these businesses were approximately $176.0. The loss from these
discontinued operations was $31.5 after-tax in 1993.
(g) In 1993, General Signal merged in a pooling of interests with Revco by
exchanging 2.6 shares of common stock for all of the outstanding common
stock of Revco. Annual 1992 sales of this business were approximately
$56.0.
(h) In December 1996, General Signal called for the redemption of its 5.75%
convertible subordinated notes. General Signal also initiated a share
buy-back program of up to $100.0 to offset any shares issued as a result of
the redemption. By April 1997, the program was completed with a total of
2.5 shares repurchased for $100.0. In June 1997, General Signal initiated
another share buy-back program of up to $150.0, subject to the consummation
of the GSPG divestiture. In September 1997, this program was increased to
$300.0. During 1997, 3.3 shares were purchased for $140.4 and during 1998,
3.5 shares were purchased for $159.6 to complete this program.
- 89 -
<PAGE> 101
(i) During the second half of 1997, General Signal recorded a pretax gain of
$10.0 on the settlement of patent litigation and sale of related patents.
General Signal also recorded pretax charges of $27.9 for asset valuations,
restructuring charges, lease termination costs and other matters. These
charges and gains were recorded in cost of sales ($11.l) and in selling,
general and administrative expense ($6.8).
(j) In 1997, General Signal expensed all previously capitalized business
process reengineering costs as a cumulative effect of a change in
accounting principle of $3.7, net of income tax. This change was in
accordance with Emerging Issues Task Force of the Financial Accounting
Standards Board consensus 97-13, "Accounting for Costs Incurred in
Connection with a Consulting Engagement or an Internal Project that
Combines Business Process Reengineering and Information Technology
Transformation."
(k) During 1996, General Signal recorded $4.2 in net sales for a royalty
settlement. General Signal also recorded pretax charges of $17.9 for asset
write-downs, lease termination costs, severance, warranty repairs and
environmental matters, net of an insurance gain on the recovery of
destroyed assets. These charges were recorded in cost of sales ($13.0) and
in selling, general and administrative expense ($4.9).
(l) In 1995, a charge of $7.4 was recorded for severance and other
consolidation costs relating to the combination of Best Power and existing
General Signal facilities and a charge of $12.7 was recorded for
transaction costs, severance and balance sheet valuation adjustments
related to the merger with Data Switch.
(m) During 1994, General Signal recorded $46.2 of pretax charges for
consolidation of operations, asset valuations, environmental matters, and
other issues. The charges were recorded in cost of sales ($27.7), selling,
general and administrative expense ($16.1), and income tax expense ($2.4).
(n) In 1994, General Signal negotiated an agreement to merge with Reliance.
Subsequent to the consummation of the agreement, Reliance was acquired by
another company in a cash tender offer. Under the terms of the merger
agreement, General Signal received $50.0 for break-up fees and $5.2 for
partial reimbursement of expenses. General Signal incurred $9.0 of
transaction costs in connection with the merger.
(o) During 1993, General Signal substantially completed the divestiture of
Semiconductor Equipment Operations with higher than expected proceeds from
the sale of these units and lower than expected severance costs. As a
result, $53.2 of excess reserves were returned to operating income. General
Signal also recognized a $5.2 charge related to previously divested
businesses and recorded a $15.0 charge primarily for factory and
administrative consolidation and rearrangement as well as product
restructuring and realignment. Additionally, transaction and consolidation
costs of $13.2 related to the pooling of interests merger with Revco were
expensed.
(p) In 1993, General Signal adopted FAS 112 for accounting for postemployment
benefits, primarily severance and long-term disability. The cumulative
effect at January 1, 1993 of adopting FAS 112, $25.3, net of income taxes,
was recorded as a cumulative effect of accounting change.
(q) In 1993, General Signal recorded an extraordinary charge of $10.7 ($6.6
after-tax) for early extinguishment of higher-rate debt and swap
agreements.
- 90 -
<PAGE> 102
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND GENERAL SIGNAL
(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 General Signal. The information is
presented as if the Merger had occurred on January 1, 1997 for statement of
income and related data and on June 30, 1998 for balance sheet data. The pro
forma data assumes that the Merger is effected by the exchange of shares of SPX
Common Stock and cash for shares of General Signal Common Stock and that SPX
will exchange 0.4186 of a share of SPX Common Stock and $18.00 in cash for each
share of General Signal Common Stock, whereby an aggregate of 18.227 shares of
SPX Common Stock are issued and $783.8 in cash is paid in exchange for all
outstanding shares of General Signal Common Stock. Because the General Signal
stockholders will own a majority of the outstanding shares of SPX Common Stock
upon completion of the transaction, the Merger will be accounted for as a
reverse acquisition. Accordingly, for accounting purposes, SPX is treated as the
acquired company and General Signal 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 that the Merger Agreement was
signed. The cash portion of the Merger 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 General Signal'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 accounting for this
business combination, the fair market value of SPX Common Stock is $64.50 per
share, which reflects the closing price of SPX Common Stock on July 17, 1998,
the last trading date prior to the date the Merger Agreement was signed. The
Merger Consideration includes 0.4186 of a share of SPX Common Stock for each
share of General Signal Common Stock. This is a fixed exchange ratio and will
not be adjusted in the event of any increase or decrease in the current market
price of SPX Common Stock. Consequently, changes in the market price of SPX
Common Stock will not impact these pro forma financial statements.
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 Merger, 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 Merger is
consummated and thereafter, as well as the factors discussed under "Risk
Factors."
The pro forma condensed combined balance sheet reflects the estimated costs
associated with change of control agreements and other costs associated with
closing the corporate office of General Signal. Certain other change of control
agreement costs which are triggered by the Merger and are attributable to
General Signal employees who are not affected by the corporate office closing
are also reflected in the pro forma condensed combined balance sheet. The pro
forma condensed combined income statement does not reflect a charge for these
costs as they are non-recurring and have no continuing impact. Following the
Effective Time, SPX will be finalizing its strategic review of the combined
company and its plans to integrate the operations of General Signal. The pro
forma condensed combined financial data do not give effect to any additional
integration or restructuring costs that could result from that review and the
finalization of those plans. Any additional integration and rationalization of
the operations of General Signal 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 charge occurs. The costs may include severance and
related employee benefits costs, costs to consolidate manufacturing and
distribution facilities, facility rearrangement costs, relocation and moving
costs, training costs, and gains or losses on business divestitures, among
others.
The pro forma condensed combined financial data do not give effect to any
cost savings that could result from the combination of the companies. SPX's and
General Signal's management estimate that the combined
- 91 -
<PAGE> 103
company can achieve approximately $55.0 to $60.0 of annualized cost savings in
the first full year following the acquisition. These cost savings include
estimated annual savings of $35.0 associated with duplicative corporate office
costs, $10.0 to $15.0 associated with combining material sourcing of the
combined company, and $10.0 to $15.0 of cost reductions at the General Signal
business units.
In the pro forma condensed combined financial data, SPX's and General
Signal's historical information for the six months ended June 30, 1998 were
derived from SPX's Second Quarter Form 10-Q and General Signal's Second Quarter
Form 10-Q, respectively. For SPX's and General Signal's pro forma adjusted
historical financial data for the year ended December 31, 1997, see "Pro Forma
Adjusted Historical Financial Data of SPX" and "Pro Forma Adjusted Historical
Financial Data of General Signal," respectively, presented elsewhere herein, and
wherein certain divestitures by the respective companies are reflected as having
occurred as of January 1, 1997.
- 92 -
<PAGE> 104
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND GENERAL SIGNAL
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(unaudited)
(in millions, except per share data)
<TABLE>
<CAPTION>
SPX GENERAL SIGNAL PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:.....................
Revenues...................................... $ 462.0 $ 776.1 $ -- $1,238.1
Cost of products sold......................... 332.7 505.7 1.7(d) 840.1
Selling, general and administrative expense... 83.4 186.6 1.7(d) 271.7
Other operating expenses, net................. 1.7 7.3 9.0(d) 18.0
Special charges and (gains)(k)................ (7.1) -- -- (7.1)
-------- --------- -------- --------
Operating income.............................. 51.3 76.5 (12.4) 115.4
Other expense (income), net................... (1.4) -- -- (1.4)
Equity earnings of EGS........................ -- (20.0) -- (20.0)
Interest expense, net......................... 7.9 8.6 41.0(f) 57.5
-------- --------- -------- --------
Income before income taxes.................... 44.8 87.9 (53.4) 79.3
Provision for income taxes.................... 16.1 33.8 (16.9)(g) 33.0
-------- --------- -------- --------
Income from continuing operations............. $ 28.7 $ 54.1 $ (36.5) $ 46.3
======== ========= ======== ========
Income per share:
Basic...................................... $ 2.40 $ 1.50
Diluted.................................... 2.33 1.48
Weighted average number of
common shares outstanding:
Basic...................................... 11.972 18.921(h) 30.893
Diluted.................................... 12.342 18.921(h) 31.263
Dividends per share (l)....................... $ -- $ --
OTHER FINANCIAL DATA:
Capital expenditures.......................... $ 14.6 $ 24.6 $ -- $ 39.2
Depreciation and amortization................. 12.0 29.3 11.5 52.8
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined financial data.
- 93 -
<PAGE> 105
PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND GENERAL SIGNAL
FOR THE YEAR ENDED DECEMBER 31, 1997
(unaudited)
(in millions, except per share data)
<TABLE>
<CAPTION>
GENERAL
SPX SIGNAL PRO
PRO FORMA FORMA
ADJUSTED ADJUSTED PRO FORMA
HISTORICAL (A) HISTORICAL (B) ADJUSTMENTS PRO FORMA
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................................... $ 898.8 $ 1,601.5 $ -- $ 2,500.3
Cost of products sold......................... 649.4 1,066.3 3.3(d) 1,719.0
Selling, general and administrative expense... 174.3 376.9 3.3(d) 554.5
Other operating expenses, net................. 3.7 12.5 18.0(d) 34.2
Special charges and (gains) (k)............... 116.5 -- -- 116.5
---------- ---------- ---------- ----------
Operating income (loss)....................... (45.1) 145.8 (24.6) 76.1
Other expense (income), net................... (2.3) (9.0) -- (11.3)
Equity earnings of EGS........................ -- (38.8) -- (38.8)
Interest expense, net......................... 12.9 8.2 76.5(f) 97.6
---------- ---------- ---------- ----------
Income (loss) before income taxes............. (55.7) 185.4 (101.1) 28.6
Provision (benefit) for income taxes.......... (20.0) 73.9 (31.6)(g) 22.3
----------- ---------- ----------- ----------
Income (loss) from continuing operations (c).. $ (35.7) $ 111.5 $ (69.5) $ 6.3
========== ========== =========== ==========
Income (loss) per share:
Basic...................................... $ (2.80) $ 0.19
Diluted.................................... (2.80) 0.18
Weighted average number of
common shares outstanding:
Basic...................................... 12.754 21.014(h) 33.768
Diluted.................................... 12.754 21.565(h) 34.319
Dividends per share (m)....................... $ 0.10 $ 0.10
OTHER FINANCIAL DATA:
Capital expenditures.......................... $ 21.6 $ 48.3 $ -- $ 69.9
Depreciation and amortization................. 23.8 55.8 23.0 102.6
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined financial data.
- 94 -
<PAGE> 106
PRO FORMA CONDENSED COMBINED
BALANCE SHEET OF SPX AND GENERAL SIGNAL
AS OF JUNE 30, 1998
(unaudited)
(in millions)
<TABLE>
<CAPTION>
GENERAL
SPX SIGNAL PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Current assets............................... $ 392.1 $ 543.2 $ 10.5 (i) $ 945.8
Property, plant and equipment, net........... 132.9 237.9 40.1 (i) 410.9
Goodwill and intangible assets............... 96.1 258.1 (96.1)(i) 1,096.3
838.2 (i)
Other assets................................. 21.8 337.1 25.5 (e) 464.1
80.3 (i)
(0.6)(i)
-------- --------- -------- ---------
Total assets............................ $ 642.9 $ 1,376.3 $ 897.9 $ 2,917.1
======== ========= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable and current maturities
of long-term debt....................... $ 3.2 $ 9.2 $ -- $ 12.4
Other current liabilities.................... 279.8 336.7 -- 616.5
Total long-term liabilities, excluding
long-term debt.......................... 139.5 175.9 (19.4)(i) 348.4
52.4 (i)
Long-term debt............................... 258.8 364.8 883.7 (e) 1,507.3
Total stockholders' equity (deficit)......... (38.4) 489.7 794.0 (j) 432.5
(783.8)(j)
(57.4)(m)
38.4 (j)
(10.0)(i)
-------- --------- -------- ---------
Total liabilities and stockholders'
equity................................ $ 642.9 $ 1,376.3 $ 897.9 $ 2,917.1
======== ========= ======== =========
</TABLE>
Note: The accompanying notes are an integral part of the pro forma condensed
combined balance sheet.
- 95 -
<PAGE> 107
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF SPX AND GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
(a) Pro forma information for the year ended December 31, 1997 includes the pro
forma adjusted historical results of SPX for the year then ended which
reflects SPX's February 1997 disposition of the Sealed Power division as if
such disposition occurred on January 1, 1997. See "Pro Forma Adjusted
Historical Financial Data of SPX," presented elsewhere herein.
(b) Pro forma information for the year ended December 31, 1997 includes the pro
forma adjusted historical results of General Signal for the year then ended
which reflects General Signal's August 1997 disposition of GSPG and General
Signal's September 1997 contribution of GSEG to a 47.5% owned joint venture
as if such transactions occurred on January 1, 1997. See "Pro Forma
Adjusted Historical Financial Data of General Signal," presented elsewhere
herein.
(c) The pro forma condensed combined financial data of SPX and General Signal
reflect only results from continuing operations. SPX recorded a $10.3
extraordinary item in the year ended December 31, 1997. General Signal
recorded earnings from discontinued operations of $2.3 and a charge for the
cumulative effect of accounting change of $3.7 in the year ended December
31, 1997.
(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 OPERATING
SOLD & ADMIN. 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 -- -- 21.0 21.0
transaction...................................
Postretirement expense adjustment............... 0.5 0.5 -- 1.0
--------- --------- ---------- ---------
Year ended December 31, 1997.................... $ 3.3 $ 3.3 $ 18.0 $ 24.6
======= ======== ========== =========
Six months ended June 30, 1998.................. $ 1.7 $ 1.7 $ 9.0 $ 12.4
======= ======== ========== =========
</TABLE>
Upon consummation of the transaction, an estimated $10.0 charge for in
process technology will occur, however, this charge is not reflected in the
pro forma data as the charge is non-recurring and has no significant
continuing impact.
(e) This pro forma adjustment reflects the borrowings for the cash portion of
the Merger Consideration, payments of change of control agreements and
other costs associated with closing the corporate office of General Signal
of $57.4, debt issuance costs for the Merger Financing, and other estimated
transaction fees of $17.0. The cash portion of the Merger Consideration is
$783.8, which represents $18.00 per share of General Signal Common Stock
multiplied by 43.543 shares of General Signal Common Stock to be exchanged.
The debt issuance costs are estimated at $25.5 to obtain a new $1,700
financing to effect the Merger, to refinance existing debt of both SPX and
General Signal and to provide working capital.
(f) These pro forma adjustments reflect the interest expense associated with
the incremental borrowings ($883.7) to effect the Merger, as if the
incremental borrowings had occurred at January 1, 1997. The pro forma
interest expense adjustment also reflects the refinancing of existing debt
under a new $1,700 financing as of January 1, 1997. 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
- 96 -
<PAGE> 108
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 decrease earnings by $0.5 ($0.02 per share) and by $0.9
($0.03 per share) for the six months ended June 30, 1998 and for the year
ended December 31, 1997, respectively. Average historical outstanding debt
of SPX and General Signal, as used in this pro forma presentation, was
$507.9 and $290.3 for the six months ended June 30, 1998 and for the year
ended December 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 Merger
Consideration is 0.4186 of a share of SPX Common Stock, which converts
weighted average outstanding shares of General Signal Common Stock to
weighted average outstanding shares of SPX Common Stock. The shares of
General Signal Common Stock used in these calculations include reported
weighted average outstanding shares of General Signal Common Stock.
Additionally, the pro forma adjustment for diluted weighted average number
of common shares outstanding for the year ended December 31, 1997 includes
0.551 equivalent shares of SPX Common Stock related to SPX stock options.
These equivalent shares of SPX Common Stock are not included in the SPX Pro
Forma Adjusted Historical diluted loss per share calculation as their
effect was antidilutive.
(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 stockholders' deficit
adjusted by estimated transaction fees of $25.0 which are assumed to have
been incurred by SPX and General Signal prior to the combination.
<TABLE>
<S> <C>
Market Value of SPX:
Shares of SPX Common Stock outstanding.............. 12.311
Unallocated SPX Common Stock held in KSOP and
Restricted SPX Common Stock................... (0.621)
-----------
Adjusted SPX Common Stock outstanding............... 11.690
Market price per share of SPX Common Stock.......... 64.50
Market value of SPX Common Stock outstanding........ $ 754.0
Market value of outstanding options................. 40.0
Market value of SPX................................. $ 794.0
SPX's Book Value:
June 30, 1998 stockholders' deficit................. $ (38.4)
Assumed transaction fees............................ (17.0)
SPX's Book Value.................................... (55.4)
----------
Excess Purchase Price............................... $ 849.4
==========
</TABLE>
- 97 -
<PAGE> 109
This excess purchase price has been allocated to the assets and liabilities
of SPX as follows:
<TABLE>
<S> <C>
Inventories...................................................... $ 10.5
Property, plant and equipment.................................... 40.1
Prepaid pension (other assets)................................... 80.3
Deferred financing fees (other assets)........................... (0.6)
Goodwill - previously recorded................................... (96.1)
Goodwill and intangible assets................................... 838.2
In process technology............................................ 10.0
Postretirement health and life insurance liability............... 19.4
Deferred tax liability........................................... (52.4)
------
$849.4
======
</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. In process 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 in process
technology is subject to final determination of their respective fair
values. This final allocation will be based upon the results of appraisals
and other studies that will be performed upon the consummation of the
transaction. SPX's management believes the above preliminary allocations of
the purchase price are reasonable and will not materially change upon
completion of the appraisals and other studies.
As of June 30, 1998, there were no intercompany transactions that required
elimination.
(j) These pro forma adjustments reflect the effect of reverse acquisition
accounting by adding the market value of SPX ($794.0), subtracting SPX's
June 30, 1998 stockholder deficit ($38.4), and subtracting the cash payout
($783.8) which is treated as a dividend by the combined company.
(k) The pro forma condensed combined financial data of SPX and General Signal
for the six months ended June 30, 1998 include SPX's special gain of $13.7
realized on SPX's investment in Echlin Inc. which was liquidated during the
second quarter of 1998 and $6.6 of expenses associated with SPX's offer to
acquire Echlin Inc.
The pro forma condensed combined financial data of SPX and General Signal
for the year ended December 31, 1997 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 and a $6.5 special charge recorded
by SPX of anticipated future legal costs associated with the ongoing
litigation with Snap-on Incorporated. See "Selected Historical Financial
Data of SPX."
- 98 -
<PAGE> 110
(l) 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 stockholders would be in
the form of open market purchases of SPX Common Stock when deemed
appropriate by management.
(m) Represents estimated charge of $72.4 ($57.4 after-tax) that will be
recorded by the combined company at the Effective Time for costs associated
with change of control agreements and the closing of the General Signal
corporate office. Included in this pretax amount are $23.7 of payments
representing the difference between the exercise price and $45.00 (the per
share deemed value of the General Signal Common Stock for purposes of the
Merger) to cancel outstanding vested and unvested stock options of General
Signal, $11.3 of payments representing $45.00 multiplied by the number of
outstanding Restricted Shares, $35.4 for salary continuation, financial
planning and health care for General Signal's affected employees, and $2.0
for holding costs associated with the vacated General Signal's corporate
office building. It is possible that certain of General Signal's corporate
office employees will relocate to other operations of the combined company
and the associated salary continuation amounts included in the disclosures
above will not be paid. This aggregate charge is not reflected in the pro
forma statement of income data as the charge is non-recurring and has no
continuing impact. The charge does not include a pretax amount of $15.5
related to salary continuation benefits available under change of control
agreements with General Signal's divisional presidents. It is SPX's
intention that these individuals will continue in their positions after the
Merger is consummated.
- 99 -
<PAGE> 111
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF SPX
(unaudited)
(in millions, except per share data)
In February 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.
The following historical financial data include the results of SPD
through February 7, 1997, its date of disposition. The following unaudited pro
forma adjusted historical financial data for the year ended December 31, 1997
reflect the disposition of this division as if it had occurred as of January 1,
1997. 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 transaction in fact occurred as of January 1, 1997, or project the
results for any future period.
The pro forma adjusted historical financial data of SPX should be read
in conjunction with the financial statements and notes thereto included in SPX's
1997 Form 10-K.
- 100 -
<PAGE> 112
PRO FORMA ADJUSTED HISTORICAL
FINANCIAL DATA OF SPX
FOR THE YEAR ENDED DECEMBER 31, 1997
(unaudited)
(in millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Historical Divest (a) Other Pro Forma Adjusted
---------- ---------- ----- ------------------
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C>
Revenues................................... $ 922.3 $ (23.5) $ -- $ 898.8
Cost of products sold...................... 669.0 (19.6) -- 649.4
Selling, general and administrative........ 175.3 (1.0) -- 174.3
Other operating expenses, net.............. 3.9 (0.2) -- 3.7
Special charges (e)........................ 116.5 -- -- 116.5
------------- ------------- ------------ ------------
Operating income (loss).................... (42.4) (2.7) -- (45.1)
Other (income) expense..................... (74.2) -- 71.9 (b) (2.3)
Interest expense, net...................... 13.9 -- (1.0)(c) 12.9
------------- ------------- ------------ ------------
Income (loss) before income taxes.......... 17.9 (2.7) (70.9) (55.7)
Provision (benefit) for income taxes....... 21.3 (1.0) (40.3)(d) (20.0)
------------- ------------- ------------ ------------
Income (loss) from continuing
operations (f).......................... $ (3.4) $ (1.7) $ (30.6) $ (35.7)
============= ============= ============ ============
Income (loss) per share:
Basic................................... $ (0.27) $ (2.80)
Diluted................................. (0.27) (2.80)
Weighted average number of common
shares outstanding:
Basic................................... 12.754 12.754
Diluted................................. 12.754 12.754
OTHER FINANCIAL DATA:
Capital expenditures....................... $ 22.6 $ (1.0) $ 21.6
Depreciation and amortization.............. 25.0 (1.2) 23.8
</TABLE>
- ---------------------
(a) This column removes the operating results of SPD for the period January 1,
1997 to February 7, 1997, its date of disposition.
(b) Adjustment to exclude the gain on the sale of SPD.
(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 Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
(f) Income excludes extraordinary item of $10.3, net of taxes.
- 101 -
<PAGE> 113
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF GENERAL SIGNAL
(unaudited)
(in millions, except per share data)
In August 1997, General Signal sold substantially all of the assets of
General Signal Pump Group, a unit of the Process Controls sector. The gross cash
proceeds were approximately $200.0.
In September 1997, General Signal and Emerson formed EGS, a joint
venture combining Emerson's Appleton Electric operations and General Signal
Electrical Group's operations. General Signal contributed substantially all of
the operating assets of GSEG in exchange for 47.5 percent of EGS.
The following historical financial data include the results of GSPG
through August 23, 1997 (its date of disposition) and the results of GSEG
through September 15, 1997 (the date of contribution of the operations to the
joint venture). The following unaudited pro forma adjusted historical financial
data for the year ended December 31, 1997 reflect these transactions as if they
had occurred as of January 1, 1997. The pro forma adjusted historical financial
data do not purport to represent what General Signal's results of continuing
operations would actually have been had the transactions in fact occurred as of
January 1, 1997, or project the results of any future period.
The pro forma adjusted historical financial data should be read in
conjunction with the financial statements and notes thereto included in General
Signal's 1997 Form 10-K.
- 102 -
<PAGE> 114
PRO FORMA ADJUSTED HISTORICAL
FINANCIAL DATA OF GENERAL SIGNAL
FOR THE YEAR ENDED DECEMBER 31, 1997
(unaudited)
(in millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Historical Divest (a) Other Pro Forma Adjusted
---------- ---------- ----- ------------------
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C>
Net sales ........................................... $ 1,954.6 $ (353.1) $ -- $ 1,601.5
Cost of sales ....................................... 1,313.6 (247.3) -- 1,066.3
Selling, general and administrative ................. 444.9 (68.0) -- 376.9
Other operating expenses, net ....................... 14.6 (2.1) -- 12.5
----------- --------- ------ ----------
Operating earnings .................................. 181.5 (35.7) -- 145.8
Other expense (income) .............................. (72.7) -- 63.7 (b) (9.0)
Equity in earnings of EGS ........................... (11.8) -- (27.0)(c) (38.8)
Interest expense, net ............................... 13.2 -- (5.0)(d) 8.2
----------- ------- ------ ----------
Earnings from continuing operations before
income taxes ..................................... 252.8 (35.7) (31.7) 185.4
Income taxes ........................................ 121.8 (13.7) (34.2)(e) 73.9
----------- --------- ------ ----------
Earnings from continuing operations (f) ............. $ 131.0 $ (22.0) $ 2.5 $ 111.5
=========== ========= ====== ==========
Income per share:
Basic ............................................ $ 2.61 $ 2.22
Diluted .......................................... 2.60 2.21
Weighted average number of common shares outstanding:
Basic ............................................ 50.2 50.2
Diluted .......................................... 50.4 50.4
OTHER FINANCIAL DATA:
Capital expenditures ................................ $ 56.5 $ (8.2) -- $ 48.3
Depreciation and amortization ....................... 65.3 (9.5) -- 55.8
</TABLE>
- -----------------
(a) This column removes the operating results of GSPG for the period January 1,
1997 to August 23, 1997, the date of disposition. This column also removes
the operating results of GSEG for the period January 1, 1997 to September
15, 1997, the date of contribution to EGS.
(b) Adjustment to exclude the gain on GSPG. No gain or loss was recorded on the
contribution of GSEG to EGS.
(c) Adjustment to recognize General Signal's estimated share of EGS' pro forma
earnings from January 1, 1997 to September 15, 1997.
(d) Adjustment to interest expense, net, assuming the use of net proceeds to
reduce debt.
(e) Adjustment to income tax expense to reflect the tax effect of the
adjustments.
(f) Earnings from continuing operations excludes earnings from discontinued
operations of $2.3, and a charge for the cumulative effect of accounting
changes of $3.7.
- 103 -
<PAGE> 115
EXPERTS
The audited consolidated financial statements of SPX included in SPX's
1997 Form 10-K incorporated by reference in this Joint Proxy
Statement/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 is incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements and schedule of General Signal
appearing in General Signal's 1997 Form 10-K have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the SPX Common Stock to be issued by SPX pursuant to
the Merger will be passed upon by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations). Certain United States federal
income tax consequences of the Merger will be passed upon by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional corporations)
on behalf of SPX and by Wachtell, Lipton, Rosen & Katz on behalf of General
Signal.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in SPX's proxy
statement relating to the 1999 Annual Meeting must be received at SPX's
principal executive offices (please address to the attention of the Corporate
Secretary) not later than November 25, 1998.
General Signal will hold an annual meeting of stockholders in 1999 if
the Merger is not consummated. In the event that a stockholder desires to have a
proposal included in the proxy statement and form of proxy for the 1999 Annual
Meeting of Stockholders, the proposal must be received by General Signal at its
principal office in Stamford, Connecticut, no later than November 19, 1998.
- 104 -
<PAGE> 116
APPENDIX A
- ------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
SPX CORPORATION,
SAC CORP.
and
GENERAL SIGNAL CORPORATION
Dated as of July 19, 1998
- ------------------------------------------------------------------------------
<PAGE> 117
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.1. The Merger.....................................................1
Section 1.2. Closing........................................................1
Section 1.3. Effective Time.................................................2
Section 1.4. Effects of the Merger..........................................2
Section 1.5. Certificate of Incorporation and Bylaws........................2
Section 1.6. Directors; Officers............................................2
Section 1.7. Change in Merger Structure.....................................3
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1. Conversion of Securities.......................................3
Section 2.2. Exchange of Certificates.......................................9
Section 2.3. Stock Transfer Books..........................................12
Section 2.4. Company Options and Restricted Shares.........................12
Section 2.5. Appraisal Rights..............................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization, Qualification, Etc..............................13
Section 3.2. Capital Stock.................................................15
Section 3.3. Corporate Authority; No Violation.............................15
Section 3.4. Reports and Financial Statements..............................17
Section 3.5. No Undisclosed Liabilities....................................17
Section 3.6. Compliance with Laws..........................................18
Section 3.7. Environmental Laws............................................18
Section 3.8. Employee Benefit Plans........................................19
Section 3.9. Absence of Certain Changes or Events..........................21
Section 3.10. Litigation....................................................21
Section 3.11. Material Contracts............................................21
Section 3.12. Labor Matters.................................................22
Section 3.13. Tax Matters...................................................22
Section 3.14. Opinion of Financial Advisor..................................23
Section 3.15. Takeover Laws; Company Rights Agreement.......................23
Section 3.16. Required Vote of the Company Shareholders.....................24
Section 3.17. Finders or Brokers............................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1. Organization, Qualification, Etc..............................24
Section 4.2. Capital Stock.................................................26
Section 4.3. Corporate Authority; No Violation.............................26
Section 4.4. Reports and Financial Statements..............................27
Section 4.5. No Undisclosed Liabilities....................................28
Section 4.6. Compliance with Laws..........................................28
Section 4.7. Environmental Laws............................................29
Section 4.8. Employee Benefit Plans........................................29
Section 4.9. Absence of Certain Changes or Events..........................31
Section 4.10. Litigation....................................................31
Section 4.11. Material Contracts............................................31
Section 4.12. Labor Matters.................................................32
Section 4.13. Tax Matters...................................................32
Section 4.14. Opinion of Financial Advisor..................................33
Section 4.15. Takeover Laws; Parent Rights Agreement........................33
Section 4.16. Required Vote of Parent Stockholders..........................33
Section 4.17. Finders or Brokers............................................34
Section 4.18. Financing.....................................................34
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by the Company and Parent.................34
Section 5.2. Investigation.................................................37
Section 5.3. Stockholder Approval; Filings.................................37
Section 5.4. Additional Reports............................................39
Section 5.5. Reasonable Best Efforts.......................................40
Section 5.6. Accountants' "Comfort" Letters................................40
Section 5.7. Takeover Statutes.............................................40
Section 5.8. No Solicitation...............................................41
Section 5.9. Public Announcements..........................................43
Section 5.10. Indemnification and Insurance.................................43
Section 5.11. Notification of Certain Matters...............................44
Section 5.12. Board of Directors and Officers of Parent.....................44
<PAGE> 118
Section 5.13. Employee Plans and Benefit Arrangements.......................44
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger....45
Section 6.2. Conditions to Obligations of the Company to Effect the Merger.46
Section 6.3. Conditions to Obligations of Parent to Effect the Merger......47
ARTICLE VII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 7.1. Termination or Abandonment....................................47
Section 7.2. Effect of Termination.........................................49
Section 7.3. Termination Payments..........................................49
ARTICLE VIII
MISCELLANEOUS
Section 8.1. No Survival of Representations and Warranties.................52
Section 8.2. Expenses......................................................52
Section 8.3. Counterparts; Effectiveness...................................52
Section 8.4. Governing Law.................................................53
Section 8.5. Notices.......................................................53
Section 8.6. Assignment; Binding Effect....................................54
Section 8.7. Severability..................................................54
Section 8.8. Enforcement of Agreement......................................54
Section 8.9. Miscellaneous.................................................54
Section 8.10. Headings......................................................55
Section 8.11. Certain Definitions...........................................55
Section 8.12. Knowledge.....................................................55
EXHIBITS
Exhibit A Form of Certificate of Incorporation of Merger Sub
Exhibit B Form of Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit C Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson
<PAGE> 119
Index of Defined Terms
----------------------
TERM SECTION
affiliates....................................................8.11
Agreement.....................................................Preamble
Alternative Legal Opinions....................................5.3(f)
Alternative Transaction.......................................1.7
Cash Election.................................................2.1(f)
Cash Fraction.................................................2.1(g)(C)(1)(ii)
Closing.......................................................1.2
Closing Date..................................................1.2
Code..........................................................Recitals
Commitment Expenses...........................................7.3(c)(ii)
Company.......................................................Preamble
Company Affiliated Group......................................5.13(c)
Company Board Recommendation..................................3.3(a)
Company Business Combination..................................7.3(e)
Company Compensation and Benefit Plans........................3.8(a)
Company Competing Transaction.................................5.8(a)
Company Contracts.............................................3.3(b)
Company Disclosure Letter.....................................Article III
Company ERISA Affiliate.......................................3.8(d)
Company Meeting...............................................5.3(a)(i)
Company Options...............................................3.2(a)(ii)
Company Pension Plan..........................................3.8(c)
Company Plans.................................................3.2(a)(ii)
Company Preferred Stock.......................................3.2(a)
Company Rights Agreement......................................3.2(a)(i)
Company Rights................................................3.2(a)(i)
Company SEC Reports...........................................3.4
Company Shareholder Approval..................................3.16
Company Termination Fee.......................................7.3(a)
Company Third Party...........................................5.8(a)
Company Triggering Event......................................7.3(a)
Company Warrants..............................................3.2(a)(iii)
Company's 1997 Form 10-K......................................3.1(a)
Confidentiality Agreements....................................5.2
Contracts.....................................................3.3(b)
Decrees.......................................................3.6(a)
Delaware Certificate of Merger................................1.3
Delaware Secretary of State...................................1.3
DGCL..........................................................1.1
Effective Time................................................1.3
Election Deadline.............................................2.1(j)
Encumbrances..................................................3.1(b)
Environmental Decrees.........................................3.7
Environmental Laws............................................3.7
ERISA.........................................................3.8(c)
Exchange Act..................................................3.3(c)
Exchange Agent................................................2.1(j)
Exchange Fund.................................................2.2(a)
Expense Fee...................................................7.3(c)(i)
Financing Commitments.........................................4.18
Financing Funds...............................................4.18
Form of Election..............................................2.1(f)
GAAP..........................................................3.4
Governmental Entity...........................................3.3(c)
Guarantee of Delivery.........................................2.1(j)
Hazardous Substances..........................................3.7
Holco.........................................................1.7
HSR Act.......................................................3.3(c)
Indemnified Parties...........................................5.10(a)
Joint Proxy Statement.........................................5.3(b)
Laws..........................................................3.6(a)
Lazard........................................................3.14
Letter of Transmittal.........................................2.2(b)
Litigation....................................................3.7
Material Adverse Effect.......................................3.1(a)
Merger........................................................Recitals
Merger Consideration..........................................2.2(c)
Merger Sub....................................................Preamble
Mixed Election................................................2.1(f)
Multiemployer Plan............................................3.8(b)
New York Certificate of Merger................................1.3
New York Department of State..................................1.3
Non-Election Fraction.........................................2.1(i)(D)(1)(ii)
Non-Election..................................................2.1(f)
NYBCL.........................................................1.1
NYSE..........................................................2.1(j)
Parent........................................................Preamble
Parent Board Recommendation...................................4.3(a)
Parent Business Combination...................................7.3(f)
Parent Change in Control Event................................4.8(h)
Parent Common Stock...........................................2.1(c)
Parent Compensation and Benefit Plans.........................4.8(a)
Parent Contracts..............................................4.3(b)
<PAGE> 120
Parent Disclosure Letter......................................Article IV
Parent ERISA Affiliate........................................4.8(d)
Parent Meeting................................................5.3(a)(ii)
Parent Pension Plan...........................................4.8(c)
Parent Preferred Stock........................................4.2
Parent Rights Agreement.......................................4.2(i)
Parent Rights.................................................4.2(i)
Parent's 1997 Form 10-K.......................................4.1(a)
Parent SEC Reports............................................4.4
Parent Stockholder Approval...................................4.16
Parent Stockholder Proposal...................................5.3(a)(ii)
Parent Termination Fee........................................7.3(b)
Parent Triggering Event.......................................7.3(b)
Pension Plan..................................................3.8(c)
Per Share Cash Amount.........................................2.1(c)
Per Share Mixed Consideration.................................2.1(c)
Per Share Stock Amount........................................2.1(c)
person........................................................8.11
Registration Statement........................................5.3(b)
Representative................................................2.1(f)
Restricted Shares.............................................3.2(a)(iv)
SEC...........................................................3.1(b)
Securities Act................................................3.3(c)
Share.........................................................1.7
Share Arrangements............................................3.1(b)
Significant Subsidiary........................................3.1(b)
Stock Certificates............................................2.1(c)
Stock Election................................................2.1(f)
Stock Fraction................................................2.1(h)(C)(1)
Subsidiaries..................................................8.11
Superior Transaction..........................................5.8(d)
Surviving Corporation.........................................1.1
Takeover Laws.................................................3.15(a)
Taxes.........................................................3.13(b)(i)
Tax Return....................................................3.13(b)(ii)
U.S. Company Compensation and Benefit Plans...................3.8(a)
U.S. Parent Compensation and Benefit Plans....................4.8(a)
U.S. Subsidiary...............................................8.11
Unvested Restricted Shares....................................2.4(b)
<PAGE> 121
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 19, 1998 (this
"Agreement"), is among SPX Corporation, a Delaware corporation ("Parent"), SAC
Corp., a Delaware corporation ("Merger Sub"), and General Signal Corporation, a
New York corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved and have declared advisable the merger of the Company
with and into Merger Sub (the "Merger"), upon the terms and subject to the
conditions set forth herein, and have determined that the Merger and the other
transactions contemplated hereby are in the best interests of their respective
companies and shareholders;
WHEREAS, the parties intend that the Merger constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the New York Business
Corporation Law (the "NYBCL") and the Delaware General Corporation Law (the
"DGCL"), the Company shall be merged with and into Merger Sub at the Effective
Time (as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of the Company shall cease and Merger Sub shall be the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of the Company in accordance with the
NYBCL and the DGCL.
Section 1.2. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., local time, at the offices of Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York 10004 on a date to be
specified by the parties (the "Closing Date"), which shall be no later than the
second business day after the first date that all of the conditions set forth in
Sections 6.1 (a) through (e) have been satisfied or waived, unless another
place, time or date is agreed to by the parties hereto.
Section 1.3. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties (i)
shall file with the Department of State for the State of New York (the "New York
Department of State") a certificate of merger or other appropriate documents (in
any such case, the "New York Certificate of Merger") executed in accordance with
the relevant provisions of the NYBCL and (ii) shall file with the Secretary of
State for the State of Delaware (the "Delaware Secretary of State") a
certificate of merger or other appropriate documents (in any such case, the
"Delaware Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and (iii) shall make all other filings or recordings
required under the NYBCL and the DGCL, in each case necessary to effect the
Merger. The Merger shall become effective at the time of the filing of the New
York Certificate of Merger with the New York Department of State in accordance
with the NYBCL and the Delaware Certificate of Merger with the Delaware
Secretary of State in accordance with the DGCL, or at such subsequent date or
time as Parent and the Company shall agree and specify in the New York
Certificate of Merger and the Delaware Certificate of Merger (the time the
Merger becomes effective being hereinafter referred to as the "Effective Time").
Section 1.4. Effects of the Merger. The Merger shall have the effects
set forth in Section 906 of the NYBCL and Section 259 of the DGCL.
Section 1.5. Certificate of Incorporation and Bylaws. (a) The
certificate of incorporation of Merger Sub, in the form attached hereto as
Exhibit A, shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, which shall contain indemnification provisions no less favorable
to directors and officers of the Company than the corresponding provisions in
the Company's bylaws as of the date hereof, until thereafter changed or amended,
shall be the bylaws of the Surviving Corporation.
Section 1.6. Directors; Officers. The directors and officers of Merger
Sub at the Effective Time shall be the directors and officers, respectively, of
the Surviving Corporation until their respective successors are duly elected and
qualified.
Section 1.7. Change in Merger Structure. By mutual agreement, the
<PAGE> 122
Company and Parent may at any time change the method and determine a new method
of effectuating the combination with the Company (an "Alternative Transaction")
(including without limitation changing the provisions of this Article I) if and
to the extent they determine the change would be desirable; provided that either
of the following Alternative Transactions (so long as it satisfies the
provisions of the next-to-last sentence of this Section 1.7) shall be deemed
agreed to by the parties, and may be implemented at Parent's election (which
election shall be made as promptly as practicable after the date of this
Agreement and in any event prior to the mailing of the Joint Proxy Statement (as
defined in Section 5.3(b)) and provided that if such Alternative Transaction
would result in a Parent Change in Control Event (as defined in Section 4.8)
after giving effect to any amendments to the Parent Compensation and Benefit
Plans (as defined in Section 4.8), such Alternative Transaction shall require
the consent of the Company, which consent shall not be unreasonably withheld):
(i) a merger of the Company with and into Parent in which Parent is the
surviving corporation or (ii) a structure in which a holding company ("Holco")
would be formed, a subsidiary of Holco would merge into Parent in which merger
each stockholder of Parent would receive one share of common stock of Holco in
respect of each share of Parent Common Stock (as defined in Section 2.1(c)) held
by such stockholder immediately prior to such merger, and a separate subsidiary
of Holco would merge into the Company in which merger each shareholder of the
Company would receive cash and/or common stock of Holco in respect of each share
of common stock, par value $6.67 per share issued through 1969, par value $1.00
per share issued subsequent to 1969 of the Company (each, a "Share") held by
such shareholder immediately prior to such merger in the same amounts as are
provided for in Section 2.1(c). No Alternative Transaction (including either of
the Alternative Transactions specified in the preceding sentence) shall (x)
alter or change the amount or kind of consideration to be issued to holders of
Shares as provided herein, (y) materially delay the consummation of the
transactions contemplated hereby, or (z) cause an inability to satisfy any of
the closing conditions set forth in Article VI. The parties agree to use their
reasonable best efforts to determine promptly after the date hereof whether any
Alternative Transaction is desirable.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) Each Share held in the treasury of the Company and each Share owned
by Parent or any direct or indirect wholly owned Subsidiary (as defined in
Section 8.11) of Parent or of the Company immediately prior to the Effective
Time (together with the associated Company Right (as defined in Section 3.2;
unless the context requires otherwise, all references herein to Shares include
the associated Company Rights)) shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(b) Each issued and outstanding share of common stock, par value $.01
per share, of Merger Sub immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation, and the Surviving Corporation shall be a
wholly owned subsidiary of Parent.
(c) Subject to the other provisions of this Section 2.1, each Share
that is issued and outstanding immediately prior to the Effective Time
(excluding any Shares canceled pursuant to Section 2.1(a)) shall be converted
into either (i) the right to receive 0.6977 shares of common stock, par value
$10.00 per share, of Parent ("Parent Common Stock"), together with the
associated Parent Right (as defined in Section 4.2; unless the context otherwise
requires, all references herein to Parent Common Stock include the associated
Parent Rights) (the "Per Share Stock Amount"), or (ii) the right to receive
$45.00 in cash, without interest (the "Per Share Cash Amount"), or (iii) the
right to receive 0.4186 shares of Parent Common Stock and $18.00 in cash,
without interest (the "Per Share Mixed Consideration") or (iv) a combination of
shares of Parent Common Stock and cash, each as determined in accordance with
Section 2.1(g), Section 2.1(h) or Section 2.1(i). All such Shares shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each stock certificate previously evidencing Shares ("Stock
Certificates") immediately prior to the Effective Time shall thereafter
represent the right to receive the Per Share Stock Amount, the Per Share Cash
Amount, the Per Share Mixed Consideration or a combination of cash and Parent
Common Stock, each in accordance with this Article II. The holders of Stock
Certificates shall cease to have any rights with respect to the Shares evidenced
thereby except as otherwise provided herein or by Law (as defined in Section
3.6). Such Stock Certificates shall be exchanged for certificates evidencing
whole shares of Parent Common Stock and/or cash, in accordance with this Article
II. No fractional shares of Parent Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.2(e).
(d) If between the date of this Agreement and the Effective Time
<PAGE> 123
the outstanding shares of Parent Common Stock shall have been changed into a
different number of shares, by reason of any stock dividend, subdivision, split
or combination of shares, the Per Share Stock Amount and the Parent Common Stock
component of the Per Share Mixed Consideration, or of the amount of Parent
Common Stock determined pursuant to clause (iv) of Section 2.1(c) shall be
correspondingly adjusted to reflect such stock dividend, subdivision, split or
combination of shares.
(e) The aggregate number of Shares which may be converted into the
right to receive cash in the Merger shall be equal to 40% of the number of
Shares outstanding immediately prior to the Effective Time (other than Shares
owned by Parent or any direct or indirect wholly owned Subsidiary of Parent or
of the Company). The aggregate number of Shares which may be converted into the
right to receive Parent Common Stock in the Merger shall be equal to 60% of the
number of Shares outstanding immediately prior to the Effective Time (other than
Shares owned by Parent or any direct or indirect wholly owned Subsidiary of
Parent or of the Company).
(f) Subject to the allocation and election procedures set forth in this
Section 2.1, each record holder (or beneficial owner through appropriate and
customary documentation and instructions) immediately prior to the Effective
Time of Shares shall be entitled either (i) to elect to receive the Per Share
Cash Amount for each such Share (a "Cash Election"), or (ii) to elect to receive
the Per Share Stock Amount for each such Share (a "Stock Election"), or (iii) to
elect to receive 60% of the Per Share Stock Amount and 40% of the Per Share Cash
Amount for each such Share (a "Mixed Election") or (iv) to indicate that such
record holder has no preference as to the receipt of cash, Parent Common Stock
or a combination thereof with respect to such holder's Shares (a
"Non-Election"). All such elections shall be made on a form furnished by Parent
for that purpose (a "Form of Election") and reasonably satisfactory to the
Company. If more than one Stock Certificate shall be surrendered for the account
of the same holder, the number of shares of Parent Common Stock, if any, to be
issued to such holder in exchange for the Stock Certificates which have been
surrendered shall be computed on the basis of the aggregate number of Shares
represented by all of the Stock Certificates surrendered for the account of such
holder. Holders of record of Shares who hold such Shares as nominees, trustees
or in other representative capacities (each, a "Representative") may submit
multiple Forms of Election, provided that such Representative certifies that
each such Form of Election covers all Shares held by such Representative for a
particular beneficial owner.
(g) If the sum of (x) the aggregate number of Shares with respect to
which Cash Elections have been made plus (y) 40% of the aggregate number of
Shares with respect to which Mixed Elections have been made exceeds the
aggregate number of Shares which may be converted into the right to receive cash
in the Merger, then:
A. Each Share with respect to which a Stock Election shall have been
made shall be converted into the right to receive the Per Share
Stock Amount;
B. Each Share with respect to which a Non-Election shall have been
made (or deemed to have been made) shall be converted into the
right to receive the Per Share Stock Amount;
C. Each Share with respect to which a Cash Election shall have been
made shall be converted into the right to receive:
(1) the amount in cash, without interest, equal to the product of
(i) the Per Share Cash Amount and (ii) a fraction (the "Cash
Fraction"), the numerator of which shall be the aggregate
number of Shares which may be converted into the right to
receive cash in the Merger, and the denominator of which
shall be the sum of (x) the aggregate number of Shares with
respect to which Cash Elections shall have been made plus (y)
40% of the aggregate number of Shares with respect to which
Mixed Elections shall have been made, and
(2) the number of shares of Parent Common Stock equal to the
product of (x) the Per Share Stock Amount and (y) a fraction
equal to one minus the Cash Fraction; and
D. Each Share with respect to which a Mixed Election shall have been
made shall be converted into the right to receive (i) 60% of the
Per Share Stock Amount plus (ii) 40% of the amount of cash
specified in clause (C)(1) of this Section 2.1(g) and 40% of the
number of shares of Parent Common Stock specified in clause (C)(2)
of this Section 2.1(g).
(h) If the sum of (x) the aggregate number of Shares with respect to
which Stock Elections have been made plus (y) 60% of the aggregate number of
Shares with respect to which Mixed Elections have been made exceeds the
aggregate number of Shares which may be converted into the right to receive
Parent Common Stock in the Merger, then:
A. Each Share with respect to which a Cash Election shall have been
made shall be converted into the right to receive the
<PAGE> 124
Per Share Cash Amount;
B. Each Share with respect to which a Non-Election shall have been
made (or deemed to have been made) shall be converted into the
right to receive the Per Share Cash Amount;
C. Each Share with respect to which a Stock Election shall have been
made shall be converted into the right to receive:
(1) the number of shares of Parent Common Stock equal to the
product of (i) the Per Share Stock Amount and (ii) a fraction
(the "Stock Fraction"), the numerator of which shall be the
aggregate number of Shares which may be converted into the
right to receive Parent Common Stock in the Merger, and the
denominator of which shall be the sum of (x) the aggregate
number of Shares with respect to which Stock Elections shall
have been made plus (y) 60% of the aggregate number of Shares
with respect to which Mixed Elections shall have been made,
and
(2) the amount in cash, without interest, equal to the product of
(x) the Per Share Cash Amount and (y) a fraction equal to one
minus the Stock Fraction; and
D. Each Share with respect to which a Mixed Election shall have been
made shall be converted into the right to receive (i) 40% of the
Per Share Cash Amount plus (ii) 60% of the number of shares of
Parent Common Stock specified in clause (C)(1) of this Section
2.1(h) and 60% of the amount of cash specified in clause (C)(2) of
this Section 2.1(h).
(i) In the event that neither Section 2.1(g) nor Section 2.1(h) above
is applicable, then:
A. Each Share with respect to which a Cash Election shall have been
made shall be converted into the right to receive the Per Share
Cash Amount;
B. Each Share with respect to which a Stock Election shall have been
made (or deemed to have been made) shall be converted into the
right to receive the Per Share Stock Amount;
C. Each Share with respect to which a Mixed Election shall have been
made shall be converted into the right to receive 40% of the Per
Share Cash Amount and 60% of the Per Share Stock Amount; and
D. Each Share with respect to which a Non-Election shall have been
made (or deemed to have been made), if any, shall be converted
into the right to receive:
(1) the amount in cash, without interest, equal to the product of
(i) the Per Share Cash Amount and (ii) a fraction (the
"Non-Election Fraction"), the numerator of which shall be the
excess of the (A) aggregate number of Shares which may be
converted into the right to receive cash in the Merger over
(B) the sum of the aggregate number of Shares with respect to
which a Cash Election shall have been made plus 40% of the
aggregate number of Shares with respect to which Mixed
Elections shall have been made, and the denominator of which
shall be the excess of (A) the aggregate number of Shares
outstanding immediately prior to the Effective Time (other
than Shares owned by Parent or any direct or indirect wholly
owned Subsidiary of Parent or of the Company) over (B) the
sum of the aggregate number of Shares with respect to which a
Cash Election, a Stock Election or a Mixed Election shall
have been made, and
(2) the number of shares of Parent Common Stock equal to the
product of (x) the Per Share Stock Amount and (y) a fraction
equal to one minus the Non-Election Fraction.
(j) Elections shall be made by holders of Shares by delivering the Form
of Election to The Bank of New York, or such other bank or trust company
designated by Parent and who is reasonably satisfactory to the Company (the
"Exchange Agent"). To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent by 5:00 p.m. (New York
City time) on the last business day prior to the date of the Company Meeting
(or, if applicable, the later of the Company Meeting or the Parent Meeting) or
such other time and date as Parent and the Company may mutually agree (the
"Election Deadline"), and accompanied by (1)(x) the Stock Certificates
representing the Shares as to which the election is being made or (y) an
appropriate guarantee of delivery of such Stock Certificates as set forth in
such Form of Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided
<PAGE> 125
such Stock Certificates are in fact delivered to the Exchange Agent within three
New York Stock Exchange ("NYSE") trading days after the date of execution of
such guarantee of delivery (a "Guarantee of Delivery") and (2) a properly
completed and signed Letter of Transmittal (as defined in Section 2.2(b)).
Failure to deliver Stock Certificates covered by any Guarantee of Delivery
within three NYSE trading days after the date of execution of such Guarantee of
Delivery shall be deemed to invalidate any otherwise properly made Cash
Election, Stock Election or Mixed Election. Parent will have the discretion,
which it may delegate in whole or in part to the Exchange Agent, to determine
whether Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The good faith
decision of Parent (or the Exchange Agent) in such matters shall be conclusive
and binding. Neither Parent nor the Exchange Agent will be under any obligation
to notify any person of any defect in a Form of Election submitted to the
Exchange Agent. The Exchange Agent shall also make all computations contemplated
by this Section 2.1 and all such computations shall be conclusive and binding on
the holders of Shares in the absence of manifest error. Any Form of Election may
be changed or revoked prior to the Election Deadline. In the event a Form of
Election is revoked prior to the Election Deadline, Parent shall, or shall cause
the Exchange Agent to, cause the Stock Certificates representing the Shares
covered by such Form of Election to be promptly returned without charge to the
person submitting the Form of Election upon written request to that effect from
such person.
(k) For the purposes hereof, a holder of Shares who does not submit a
Form of Election which is received by the Exchange Agent prior to the Election
Deadline (including a holder who submits and then revokes his or her Form of
Election and does not resubmit a Form of Election which is timely received by
the Exchange Agent), or who submits a Form of Election without the corresponding
Stock Certificates or a Guarantee of Delivery, shall be deemed to have made a
Non-Election. If any Form of Election is defective in any manner that the
Exchange Agent cannot reasonably determine the election preference of the
shareholder submitting such Form of Election, the purported Cash Election, Stock
Election or Mixed Election set forth therein shall be deemed to be of no force
and effect and the shareholder making such purported Cash Election, Stock
Election or Mixed Election shall, for purposes hereof, be deemed to have made a
Non-Election.
(l) A Form of Election and a Letter of Transmittal shall be included
with each copy of the Joint Proxy Statement (as defined in Section 5.3) mailed
to shareholders of the Company in connection with the Company Meeting (as
defined in Section 5.3). Parent and the Company shall each use its reasonable
best efforts to mail or otherwise make available the Form of Election and a
Letter of Transmittal to all persons who become holders of Shares during the
period between the record date for the Company Meeting and the Election
Deadline.
Section 2.2. Exchange of Certificates. (a) At or prior to the Effective
Time, Parent shall deposit, or shall cause to be deposited, with the Exchange
Agent for the benefit of the holders of Shares for exchange in accordance with
this Article II, through the Exchange Agent, (i) certificates evidencing such
number of shares of Parent Common Stock equal to (x) the Per Share Stock Amount
multiplied by (y) the aggregate number of Shares which may be converted into the
right to receive Parent Common Stock in the Merger, and (ii) (1) cash in an
amount equal to (x) the Per Share Cash Amount multiplied by (y) the aggregate
number of Shares which may be converted into the right to receive cash in the
Merger, and (2) any cash necessary to pay amounts due pursuant to Section 2.2(e)
(such certificates for shares of Parent Common Stock and such cash being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions in accordance with this Article II, deliver
the Parent Common Stock and cash contemplated to be issued pursuant to Section
2.1 out of the Exchange Fund. The Exchange Fund shall not be used for any other
purpose. The Exchange Agent shall invest any cash included in the Exchange Fund,
as directed by Parent, on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent.
(b) Parent will instruct the Exchange Agent to mail to each holder of
record of Stock Certificates who has not previously surrendered his or her Stock
Certificates with a validly executed Form of Election and Letter of Transmittal
as soon as reasonably practicable after the Effective Time, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such holder's Stock Certificates shall pass, only upon proper
delivery of the Stock Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Stock Certificates in
exchange for certificates evidencing shares of Parent Common Stock and/or cash
(collectively, the "Letter of Transmittal").
(c) Upon the later of the Effective Time and the surrender of a Stock
Certificate for cancellation (or the affidavits and indemnification regarding
the loss or destruction of such certificates reasonably acceptable to Parent) to
the Exchange Agent together with the Letter of Transmittal, duly executed, and
such other customary documents as may be required pursuant thereto, the holder
of such Stock Certificate shall be entitled to receive in exchange therefor, and
the Exchange Agent shall
<PAGE> 126
deliver in accordance with the Letter of Transmittal: (A) certificates
evidencing that number of whole shares of Parent Common Stock or cash, or a
combination thereof, which such holder has the right to receive in respect of
the Shares formerly evidenced by such Stock Certificate in accordance with
Section 2.1 and (B) cash in lieu of fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.2(e) (the shares of Parent
Common Stock and cash described in clause (A) being collectively referred to as
the "Merger Consideration"), and the Stock Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, a certificate
evidencing the proper number of shares of Parent Common Stock and/or cash may be
issued and/or paid in accordance with this Article II to a transferee if the
Stock Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by Section 2.1(j) or this Section 2.2, each Stock
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender the Merger Consideration together
with any dividends or other distributions paid on shares of Parent Common Stock
after the Effective Time.
(d) All shares of Parent Common Stock issued and cash paid upon the
surrender for exchange of Stock Certificates in accordance with the terms of
this Article II shall be deemed to have been issued and paid, respectively, in
full satisfaction of all rights pertaining to the Shares theretofore represented
by such Stock Certificates.
(e) (i) No certificates or scrip evidencing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Stock
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In lieu of any such
fractional shares, each holder of Shares upon surrender of a Stock Certificate
for exchange pursuant to this Section 2.2 shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying (x)
the per share closing price on the NYSE of Parent Common Stock on the trading
day immediately prior to the Effective Time by (y) the fractional interest to
which such holder would otherwise be entitled (after taking into account all
Shares then held of record by such holder).
(ii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Shares with respect to any fractional
share interests, the Exchange Agent shall promptly pay such amounts to such
holders of Shares subject to and in accordance with the terms of Section 2.2(c).
Any payment received by a holder of Shares with respect to fractional share
interests is merely intended to provide a mechanical rounding off of, and is not
separately bargained for, consideration. If more than one Stock Certificate
shall be surrendered for the account of the same holder, the number of shares of
Parent Common Stock to be issued to such holder in exchange for the Stock
Certificates which have been surrendered shall be computed on the basis of the
aggregate number of shares represented by all of the Stock Certificates
surrendered for the account of such holder.
(f) Any portion of the Exchange Fund which remains undistributed to the
holders of the Stock Certificates for six months after the Effective Time shall
be delivered to Parent, upon demand, and any holders of Stock Certificates who
have not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their claim for the Merger Consideration and any cash in
lieu of fractional shares of Parent Common Stock.
(g) None of Parent, the Company, Merger Sub or the Exchange Agent shall
be liable to any person in respect of any shares of Parent Common Stock or cash
from the Exchange Fund in each case delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Stock
Certificate shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration and any cash payable to the holder of such Stock Certificate
pursuant to Section 2.2(e) would otherwise escheat to or become the property of
any governmental body or authority), any such Merger Consideration and any cash
in lieu of fractional shares of Parent Common Stock shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(h) Parent and Merger Sub shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent or Merger Sub is required to deduct and withhold
with respect to the making of such payment under the Code or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent or Merger Sub, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by Parent or Merger Sub.
(i) If any Stock Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
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claiming such Stock Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Stock Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Stock Certificate the Merger Consideration and any cash in lieu of fractional
shares, pursuant to this Article II.
(j) In the event this Agreement is terminated without the occurrence of
the Effective Time, Parent shall, or shall cause the Exchange Agent to, return
promptly any Stock Certificates theretofore submitted or delivered to Parent or
the Exchange Agent without charge to the person who submitted such Stock
Certificates.
Section 2.3. Stock Transfer Books. There shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates are presented
to the Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by Law.
Section 2.4. Company Options and Restricted Shares. (a) Immediately
prior to the Effective Time, all outstanding Company Options (as defined in
Section 3.2), whether or not vested or exercisable, shall be canceled and, in
lieu thereof, immediately prior to the Effective Time, the holders thereof shall
receive a cash payment from the Company equal to the product of (i) the total
number of Shares previously subject to such Company Options, whether or not
vested or exercisable, and (ii) the excess of the Per Share Cash Amount over the
exercise price per Share subject to such Company Options, subject to any
required withholding of taxes.
(b) Immediately prior to the Effective Time, Restricted Shares (as
defined in Section 3.2) that, but for the effect on such Restricted Shares of
the Company Shareholder Approval (as defined in Section 3.18), would be unvested
as of the Effective Time ("Unvested Restricted Shares"), shall be canceled and,
in lieu thereof, immediately prior to the Effective Time, each holder of an
Unvested Restricted Shares shall receive a cash payment from the Company equal
to the product of (i) the Per Share Cash Amount and (ii) the number of Unvested
Restricted Shares held by such holder immediately prior to the Effective Time,
subject to any required withholding of taxes.
(c) Prior to the Effective Time, the Company shall (i) use its
reasonable best efforts to obtain any consents from holders of Company Options
and Restricted Shares to the cancellation thereof in exchange for the payment
provided for in Section 2.4(a) or (b) in the form reasonably agreed upon by
Parent and the Company as promptly as practicable after the date of this
Agreement and (ii) make any amendments to the terms of the Company Plans (as
defined in Section 3.2) that are necessary to give effect to the transactions
contemplated by Sections 2.4(a) and (b). Notwithstanding any other provision of
this Section 2.4, payment may be withheld in respect of any Company Option or
Restricted Shares (if applicable) until any such consents are obtained.
Section 2.5. Appraisal Rights. In accordance with Section 910 of the
NYBCL, no appraisal rights shall be available to holders of Shares in connection
with the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that
except as set forth in the corresponding sections or subsections of the
Disclosure Letter delivered to Parent by the Company concurrently with entering
into this Agreement (the "Company Disclosure Letter"):
Section 3.1. Organization, Qualification, Etc. (a) The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation and has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its assets or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing does not, individually or in the
aggregate, have a Material Adverse Effect on the Company (as hereinafter
defined). As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to the
"Company" or "Parent," as the case may be, means such state of facts, event,
change or effect that (i) has had, or would reasonably be expected to have, a
material adverse effect on the business, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole, or Parent and
its Subsidiaries, taken as a whole, as the case may be, or (ii) would reasonably
be expected to prevent or substantially delay consummation of the transactions
contemplated by this Agreement. The copies of the Company's certificate of
incorporation and bylaws filed or incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended
<PAGE> 128
December 31, 1997 (the "Company's 1997 Form 10-K") are complete and correct and
in full force and effect on the date hereof.
(b) Each of the Company's Subsidiaries is an entity duly organized,
validly existing and in good standing (where applicable) under the Laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its assets or the conduct of its business
requires such qualification, except where the failure to be so organized,
existing, qualified or in good standing does not, individually or in the
aggregate, have a Material Adverse Effect on the Company. All the outstanding
shares of capital stock of, or other ownership interests in, the Company's
Significant Subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X
of the Securities and Exchange Commission (the "SEC") (each such Subsidiary, a
"Significant Subsidiary")) are validly issued, fully paid and non-assessable
and, other than directors' qualifying shares, are owned by the Company, directly
or indirectly, free and clear of all liens, claims, charges or encumbrances
("Encumbrances"), except for Encumbrances which individually or in the aggregate
do not have a Material Adverse Effect on the Company. There are no existing
options, rights of first refusal, conversion rights, preemptive rights, calls,
commitments, arrangements or obligations of any character ("Share Arrangements")
relating to the issued or unissued capital stock or other securities of, or
other ownership interests in, any Significant Subsidiary of the Company, other
than directors' qualifying shares. None of the certificates of incorporation or
bylaws or other organizational documents of any of the Company's Significant
Subsidiaries purport to grant rights to any person other than (1) customary
rights given to all shareholders pro rata in accordance with their holdings and
(2) customary rights with respect to corporate governance (including rights to
notices) and rights of indemnification of directors and officers. The Company
has delivered to Parent complete and correct copies of the certificate of
incorporation and bylaws or other organizational documents of each of the
Company's Significant Subsidiaries which is not wholly owned by the Company
and/or another of its wholly owned Subsidiaries (ignoring for this purpose
directors' qualifying shares).
A complete listing of the Company's Subsidiaries is set forth in
Section 3.1(b) of the Company Disclosure Letter. Except for the Company's
Subsidiaries listed in Section 3.1(b) of the Company Disclosure Letter, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity that directly or indirectly conducts any activity
which is material to the Company and its Subsidiaries taken as a whole.
Section 3.2. Capital Stock. (a) The authorized stock of the Company
consists of 150,000,000 Shares and 10,000,000 shares of preferred stock, par
value $1.00 per share (the "Company Preferred Stock"). As of July 13, 1998,
43,703,528 Shares and no shares of the Company Preferred Stock were issued and
outstanding and 21,366,682 Shares were held in treasury. All of the outstanding
Shares have been validly issued and are fully paid and non-assessable. As of
July 13, 1998, there were no outstanding Share Arrangements to which the Company
is a party relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, the Company, other than:
(i) rights ("Company Rights") to acquire shares of the Company
Preferred Stock pursuant to the Rights Agreement, dated as of February 1, 1996,
between the Company and First Chicago Trust Company of New York, as Rights Agent
(the "Company Rights Agreement");
(ii) options to purchase 2,633,419 Shares granted on or prior to
the date hereof pursuant to the Company's 1985 Stock Option Plan, 1989 Stock
Option and Incentive Plan, 1992 Stock Incentive Plan, 1996 Stock Option Plan and
the 1997 Non-Employee Directors' Stock Option Plan (such plans being referred to
collectively as the "Company Plans", and options that have been or may be issued
under any of the Company Plans being referred to collectively as the "Company
Options");
(iii) warrants ("Company Warrants") to purchase an aggregate of
1,452 Shares at $34.83 per Share issued pursuant to the Warrant Agreement, dated
as of March 1, 1990, as amended by Amendment No. 1, dated as of January 8, 1995,
between Data Switch Corporation and First Chicago Trust Company of New York, as
successor Warrant Agent; and
(iv) 160,122 restricted Shares granted on or prior to the date
hereof pursuant to one or more of the Company Plans ("Restricted Shares").
(b) Since July 13, 1998, there have been no increases to any of the
amounts set forth in Section 3.2(a), other than by reason of issuances of Shares
upon exercise of any of the Company Options or Company Warrants enumerated in
clauses (ii) and (iii) of Section 3.2(a) which events have reduced the
applicable number in clauses (ii) through (iv) of Section 3.2(a) by a
corresponding amount, nor has the Company modified, amended or entered into new
Share Arrangements.
<PAGE> 129
Section 3.3. Corporate Authority; No Violation. (a) The Company has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder have been duly and
validly authorized by the Board of Directors of the Company and, except for the
approval of its shareholders of this Agreement, no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or the
transactions contemplated hereby. The Board of Directors of the Company, at a
meeting duly called and held at which a quorum was present throughout, has
unanimously determined that the transactions contemplated by this Agreement are
in the best interest of the Company and its shareholders and to recommend to
such shareholders that they vote in favor of this Agreement and the Merger (the
"Company Board Recommendation"). This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes a
valid and binding agreement of the other parties hereto, constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
(b) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the other
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, or the creation of any rights in favor of
any party under, the certificate of incorporation or bylaws of the Company or
the comparable governing instruments of any of its Subsidiaries, (ii) a breach
or violation of, or a default under, or an acceleration of any obligations
under, or the creation of a lien, pledge, security interest or other encumbrance
on the assets of the Company or any of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to, any agreement, lease, contract, note,
mortgage, indenture, arrangement, nongovernmental permit or license, order,
decree, or other obligation ("Contracts") binding upon the Company or any of its
Subsidiaries ("Company Contracts") or (provided, as to consummation, the filings
and notices are made, and approvals are obtained, as referred to in Section
3.3(c)) any applicable Law or Decree (as defined in Section 3.6) or governmental
permit or license to which the Company or any of its Subsidiaries is subject, or
(iii) any change in the rights or obligations of any party under any of the
Company Contracts, except for any breach, violation, default, acceleration,
creation or change that does not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
and the securities or blue sky Laws of the various states and other than the
filing of the Delaware Certificate of Merger with the Delaware Secretary of
State and the New York Certificate of Merger with the New York Department of
State, no authorization, consent or approval of, or filing with, any
governmental, administrative or regulatory body or authority ("Governmental
Entity") is necessary for the consummation by the Company of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings that, if not obtained or made, would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
Section 3.4. Reports and Financial Statements. The Company has timely
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1995 under the Securities Act or
the Exchange Act (such documents, as supplemented or amended since the time of
filing, the "Company SEC Reports"). As of their respective dates, the Company
SEC Reports, including without limitation, any financial statements or schedules
included or incorporated by reference therein, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (i) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included or incorporated by
reference in the Company SEC Reports (including any related notes and schedules)
fairly present, in all material respects, the financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the results of
their operations and their cash flows for the periods set forth therein, in each
case in accordance with past practice and generally accepted accounting
principles in the United States ("GAAP") consistently applied during the periods
involved (except as otherwise disclosed in the notes thereto and subject, where
appropriate, to normal year-end adjustments that would not be material in amount
or effect).
<PAGE> 130
Section 3.5. No Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, except (a) liabilities or obligations
disclosed or reserved against in the unaudited consolidated interim financial
statements of the Company as of and for the three months ended March 31, 1998
included in the Company SEC Reports or disclosed in the footnotes thereto or in
the footnotes to the audited consolidated financial statements of the Company as
of and for the fiscal year ended December 31, 1997 included in the Company SEC
Reports or otherwise disclosed in the Company's 1997 Form 10-K or in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
and (b) liabilities or obligations which do not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.6. Compliance with Laws. The Company and each of its
Subsidiaries each:
(a) in the conduct of its businesses, is in compliance with all
federal, state, local and foreign statutes and laws, and all regulations,
ordinances and rules promulgated thereunder (collectively, "Laws"), and all
judgments, orders, rulings, injunctions or decrees of Governmental Entities
(collectively, "Decrees"), applicable thereto or to the employees conducting
such businesses;
(b) has all permits, licenses, authorizations, orders and approvals of,
and have made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to conduct its businesses
substantially as presently conducted; all such permits, licenses,
authorizations, orders and approvals are in full force and effect and, to the
best of the Company's knowledge, no suspension or cancellation of any of them is
threatened; and
(c) has received, since December 31, 1995, no notification or
communication from any Governmental Entity (i) asserting that it is not in
compliance with any of the Laws or Decrees which such Governmental Entity
enforces or (ii) threatening to revoke any permit, license, authorization, order
or approval;
except where the failure of any of the foregoing to be true does not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Section 3.7. Environmental Laws. (a) To the Company's knowledge,
neither the Company nor any of its Subsidiaries is the subject of any pending or
threatened actions, causes of action, claims, investigations, or proceedings
("Litigation") (whether civil, criminal, administrative or arbitral) by any
Governmental Entity or other person alleging liability or damages under or
non-compliance with any Environmental Law (as defined below) which, individually
or in the aggregate, has a Material Adverse Effect on the Company; (b) neither
the conduct nor the operation of the Company or its Subsidiaries violates or has
in the past violated any applicable Environmental Law or applicable
Environmental Decree (as defined below) except as does not, individually or in
the aggregate, have a Material Adverse Effect on the Company; and (c) to the
knowledge of the Company, there is not now on, in or under any property owned,
leased or operated by the Company or any of its Subsidiaries any of the
following: (1) underground storage tanks or surface impoundments, (2)
asbestos-containing materials, (3) polychlorinated biphenyls, or (4) other
"Hazardous Substances" (as such term is defined under the Comprehensive
Environmental, Response, Compensation and Liability Act of 1980, 42 U.S.C. ss.
9601, et seq., as amended as of the date hereof) ("Hazardous Substances") or
petroleum products, in each case which would reasonably be expected to form the
basis of liability or other obligation of the Company or any of its Subsidiaries
under any applicable Environmental Laws, except for such liabilities or
obligations which do not, individually or in the aggregate, have a Material
Adverse Effect on the Company. As used herein, the term "Environmental Laws"
means any Laws, and the term "Environmental Decrees" means any Decrees, in each
case, relating to pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), natural resources or occupational health and safety (including, without
limitation, those relating to the use, storage, treatment, disposal or transport
of Hazardous Substances, petroleum products, pollutants, contaminants or solid
or hazardous wastes or odors).
Section 3.8. Employee Benefit Plans. (a) Section 3.8 of the Company
Disclosure Schedule contains a complete list of all material written bonus,
vacation, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, employment or severance contracts, medical, dental,
disability, health and life insurance plans, and other employee benefit and
fringe benefit plans or other Contracts maintained or contributed to by the
Company or any of its Subsidiaries for the benefit of officers, former officers,
employees, former employees, directors, former directors, or the beneficiaries
of any of the foregoing, or pursuant to which the Company or any of its
Subsidiaries may have any liability (collectively (whether or not material), the
"Company Compensation and Benefit Plans") that are Contracts with, or plans
maintained primarily for the benefit of, individuals
<PAGE> 131
employed or rendering services in the United States and are not multiemployer
plans within the meaning of Section 4001(a)(3) of ERISA (as defined in Section
3.8(c)) (the "U.S. Company Compensation and Benefit Plans").
(b) The Company has used its reasonable best efforts to have provided
or made available to Parent copies of all Company Compensation and Benefit Plans
listed on Section 3.8 of the Company Disclosure Schedule (excluding, however,
multiemployer plans within the meaning of Section 4001(a)(3) of ERISA
("Multiemployer Plans") and Company Compensation and Benefit Plans which have
been filed with or incorporated by reference into the Company's 1997 Form 10-K),
including, but not limited to, all amendments thereto, and all of such copies
that have been delivered are true and correct.
(c) Each of the Company Compensation and Benefit Plans has been and is
being administered in accordance with the terms thereof and all applicable Law
except where the failure to do so does not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Each "employee pension benefit
plan" within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (each such plan, a "Pension Plan")
included in the U.S. Company Compensation and Benefit Plans (a "Company Pension
Plan") which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service, and
the Company is not aware of any circumstances which could result in the
revocation or denial of any such favorable determination letter. To the
Company's knowledge, no material "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any U.S. Company Compensation and Benefit Plan. There is no pending or, to the
Company's knowledge, threatened Litigation relating to any of the Company
Compensation and Benefit Plans which, individually or in the aggregate, has a
Material Adverse Effect on the Company.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by the Company or any of its Subsidiaries or
any entity which is considered one employer with the Company under Section
4001(a)(15) of ERISA or Section 414 of the Code (any such entity, a "Company
ERISA Affiliate"), other than such liabilities that have previously been
satisfied. No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived has
been required to be filed for any Company Pension Plan or by any Company ERISA
Affiliate within the past 12 months.
(e) All contributions, premiums and payments required to be made under
the terms of any Company Compensation and Benefit Plan have been made, except
where the failure to do so does not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither any Company Pension Plan nor any
single-employer plan of a Company ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Company nor any of its Subsidiaries
has provided, or is required to provide, security to any Company Pension Plan or
to any single-employer plan of a Company ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(f) Under each Company Pension Plan which is a defined benefit plan, as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Company Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Company Pension Plan, and there has been no adverse change in the financial
condition of such Company Pension Plan (with respect to either assets or
benefits) since the last day of the most recent plan year.
(g) Neither the Company nor any of its Subsidiaries contributes to or
is required to contribute to any Multiemployer Plan. Neither the Company nor any
of its Subsidiaries has incurred any material withdrawal liability (within the
meaning of Section 4201 of ERISA) under any Multiemployer Plan within the past 5
years that has not been satisfied, nor could any such material withdrawal
liability reasonably be expected to be incurred.
(h) Except as set forth in the Company Compensation and Benefit Plans
listed in Section 3.8 of the Company Disclosure Schedule or filed with or
incorporated by reference into the Company's 1997 Form 10-K, the execution of,
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events) (i)
constitute an event under any Company Compensation and Benefit Plan, trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any officers
and directors of the Company or (ii) result in any payment or benefit that will
or may be made by the Company, any of its Subsidiaries, Parent or any of their
respective affiliates that will be characterized as an "excess parachute
payment,"
<PAGE> 132
within the meaning of Section 280G(b)(1) of the Code.
(i) The contributions of the Company and any of its Subsidiaries to any
trust described in Section 501(c)(9) of the Code have complied with Section 419A
of the Code.
Section 3.9. Absence of Certain Changes or Events. Since December 31,
1997 the businesses of the Company and its Subsidiaries have been conducted in
all material respects in the ordinary course consistent with past practice, the
Company and its Subsidiaries have not engaged in any transaction or series of
related transactions material to the Company and its Subsidiaries taken as a
whole other than in the ordinary course consistent with past practice, and there
has not been any event, occurrence or development, alone or taken together with
all other existing facts, that, individually or in the aggregate, has a Material
Adverse Effect on the Company.
Section 3.10. Litigation. There is no Litigation pending (or, to the
Company's knowledge, threatened) against the Company or any of its Subsidiaries
or any of their respective properties which, individually or in the aggregate,
has a Material Adverse Effect on the Company. The Company is not subject to any
Decree that, individually or in the aggregate, has a Material Adverse Effect on
the Company.
Section 3.11. Material Contracts. All of the Company Contracts that are
required to be described in the Company SEC Reports or to be filed as exhibits
thereto are described in the Company SEC Reports or filed as exhibits thereto.
Neither the Company nor any of its Subsidiaries nor any other party is in breach
of or in default under any Company Contract except for such breaches and
defaults which do not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 3.12. Labor Matters. As of the date of this Agreement, the
Company and its U.S. Subsidiaries (as defined in Section 8.11) do not have any
collective bargaining agreements with any persons employed by the Company or any
of its U.S. Subsidiaries or any persons otherwise performing services primarily
for the Company or any of its U.S. Subsidiaries, nor is the Company or any of
its U.S. Subsidiaries in the process of negotiating any such agreement. There is
no labor strike, dispute or stoppage pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries which,
individually or in the aggregate, has a Material Adverse Effect on the Company.
None of the Company or its Subsidiaries is the subject to a proceeding asserting
that it has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel it to bargain with any labor
organization as to wages and conditions of employment which proceeding,
individually or in the aggregate, has a Material Adverse Effect on the Company.
As of the date of this Agreement there are, to the knowledge of the Company, no
organizational efforts currently being made involving any of the employees of
the Company or any of its Subsidiaries.
Section 3.13. Tax Matters. (a) The Company and each of its Subsidiaries
have (i) filed all federal, state, local and foreign Tax Returns (as defined
below) required to be filed by them (taking into account extensions), (ii) paid
or accrued all Taxes (as defined below) shown to be due on such Returns or which
are otherwise due and payable and (iii) paid or accrued all Taxes for which a
notice of assessment or collection has been received, except in the case of
clause (i), (ii) or (iii) for any such filings, payments or accruals which do
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. Neither the Internal Revenue Service nor any other taxing authority has
asserted in writing any claim for Taxes, or to the knowledge of the Company, is
threatening to assert any claims for Taxes, against the Company or any of its
Subsidiaries which claims, if determined adversely to the Company or such
Subsidiary, would, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company and each of its Subsidiaries have withheld or
collected and paid over to the appropriate Governmental Entities (or are
properly holding for such payment) all Taxes required by Law to be withheld or
collected, except for amounts which do not, individually or in the aggregate,
have a Material Adverse Effect on the Company. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any material Tax Return of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has made an election under Section 341(f) of
the Code. There are no liens for Taxes upon the assets of the Company or any of
its Subsidiaries (other than liens for Taxes that are not yet due), except for
liens which do not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries (i) has
any liability under Treasury Regulation Section 1.1502-6 or analogous state,
local, or foreign law provision, except to the extent any such liabilities,
individually or in the aggregate, do not have a Material Adverse Effect on the
Company, or (ii) is a party to a Tax sharing or Tax indemnity agreement or any
other agreement of a similar nature with any entity other than the Company or
any of its Subsidiaries that remains in effect and under which the Company or
any such Subsidiary could have any material liability for Taxes. No claim has
been made in writing by a taxing authority in a jurisdiction where the Company
or any of its Subsidiaries does not file Tax Returns that the Company or any of
its Subsidiaries is or may be subject to taxation by that jurisdiction where
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such claim, if determined adversely to the Company or such Subsidiary, would,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries is the subject of any currently
ongoing audit or examination with respect to a material amount of Taxes, nor, to
the knowledge of the Company, has any such audit been threatened or proposed, by
any taxing authority.
(b) The Company does not know of any fact with respect to the Company
and its Subsidiaries that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth, and taxes or other charges in the nature of excise, withholding,
ad valorem or value added, and includes, without limitation, any liability for
Taxes of another person, as a transferee or successor, under Treas. Reg. ss.
1.1502-6 or analogous provision of Law or otherwise; and (ii) "Tax Return" means
any return, report or similar statement (including the attached schedules)
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 3.14. Opinion of Financial Advisor. The Board of Directors of
the Company has received, on the date of this Agreement, the oral opinion of
Lazard Freres & Co. LLC ("Lazard"), to be confirmed in writing, to the effect
that, as of such date, the aggregate Merger Consideration to be received by the
Company's shareholders in the Merger is fair to the Company's shareholders from
a financial point of view. A copy of the written opinion of Lazard will be
delivered to Parent as soon as practicable after the date of this Agreement.
Section 3.15. Takeover Laws; Company Rights Agreement. (a) The Company
has taken all action required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from, and this Agreement is
exempt from, the requirements of all applicable "moratorium", "control share",
"fair price" and other anti-takeover Laws and regulations (collectively,
"Takeover Laws") of (i) the State of New York, including, without limitation,
Section 912 of the NYBCL and (ii) the State of Connecticut, including, without
limitation, Section 33-841 through Section 33-844 of the Connecticut Business
Corporation Act.
(b) The Company has (i) duly entered into an appropriate amendment to
the Company Rights Agreement, a true and complete copy of which amendment has
been provided to Parent, and (ii) taken all other action necessary or
appropriate so that the entering into of this Agreement and the consummation of
the transactions contemplated hereby (including the Merger) do not and will not
result in the ability of any person to exercise any Company Rights under the
Company Rights Agreement or enable or require the Company Rights to separate
from the Shares to which they are attached or to be triggered or become
exercisable, and the Company Rights Agreement, as so amended, has not been
further amended or modified except in accordance herewith.
(c) No "Distribution Date" or "Shares Acquisition Date" (as such terms
are defined in the Company Rights Agreement) has occurred.
Section 3.16. Required Vote of the Company Shareholders. The
affirmative vote of the holders of two-thirds of the Shares outstanding and
entitled to vote at the Company Meeting (the "Company Shareholder Approval") is
required to approve this Agreement and the Merger. No other vote of the
shareholders of the Company is required by Law, the certificate of incorporation
or bylaws of the Company or otherwise in order for the Company to consummate the
Merger and the other transactions contemplated hereby.
Section 3.17. Finders or Brokers. Except for Lazard, a true and
complete copy of whose engagement agreement has been provided to Parent, neither
the Company nor any of its Subsidiaries has employed any investment banker,
broker, finder or intermediary who might be entitled to any fee or any
commission in connection with or upon consummation of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent and Merger Sub represent and warrant to the Company that except
as set forth in the corresponding sections or subsections of the Disclosure
Letter delivered to the Company by Parent concurrently with entering into this
Agreement (the "Parent Disclosure Letter"):
Section 4.1. Organization, Qualification, Etc. (a) Parent is a
corporation duly organized, validly existing and in good standing under the
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Laws of the jurisdiction of its incorporation and has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its assets or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing does not, individually or in the
aggregate, have a Material Adverse Effect on Parent. The copies of Parent's
certificate of incorporation and bylaws filed or incorporated by reference in
Parent's Annual Report on Form 10-K for the year ended December 31, 1997
("Parent's 1997 Form 10-K") are complete and correct and in full force and
effect on the date hereof.
(b) Each of Parent's Subsidiaries is an entity duly organized, validly
existing and in good standing (where applicable) under the Laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its assets or the conduct of its business
requires such qualification, except where the failure to be so organized,
existing, qualified or in good standing does not, individually or in the
aggregate, have a Material Adverse Effect on Parent. All the outstanding shares
of capital stock of, or other ownership interests in, Parent's Significant
Subsidiaries are validly issued, fully paid and non-assessable and, other than
directors' qualifying shares, are owned by Parent, directly or indirectly, free
and clear of all Encumbrances, except for Encumbrances which individually or in
the aggregate do not have a Material Adverse Effect on Parent. There are no
existing Share Arrangements relating to the issued or unissued capital stock or
other securities of, or other ownership interests in, any Significant Subsidiary
of Parent, other than directors' qualifying shares. None of the certificates of
incorporation or bylaws or other organizational documents of any of Parent's
Significant Subsidiaries purport to grant rights to any person other than (1)
customary rights given to all stockholders pro rata in accordance with their
holdings and (2) customary rights with respect to corporate governance
(including rights to notices) and rights of indemnification of directors and
officers. Parent has delivered to the Company complete and correct copies of the
certificate of incorporation and bylaws or other organizational documents of
each of Parent's Significant Subsidiaries which is not wholly owned by Parent
and/or another of its wholly owned Subsidiaries (ignoring for this purpose
directors' qualifying shares).
A complete listing of Parent's Subsidiaries is set forth in Section
4.1(b) of the Parent Disclosure Letter. Except for Parent's Subsidiaries listed
in Section 4.1(b) of the Parent Disclosure Letter, Parent does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity
that directly or indirectly conducts any activity which is material to Parent
and its Subsidiaries taken as a whole.
Neither Parent nor any of its Subsidiaries is the beneficial owner of
any Shares.
Section 4.2. Capital Stock. The authorized stock of Parent consists of
100,000,000 shares of Parent Common Stock, and 3,000,000 shares of preferred
stock, no par value ("Parent Preferred Stock"). The shares of Parent Common
Stock to be issued in the Merger will, when issued, be validly issued fully paid
and non-assessable. As of June 30, 1998, 12,324,240 shares of Parent Common
Stock and no shares of Parent Preferred Stock were issued and outstanding and
4,553,723 shares of Parent Common Stock were held in treasury. All of the
outstanding shares of Parent Common Stock have been validly issued and are fully
paid and non-assessable. As of June 30, 1998, there were no outstanding Share
Arrangements to which Parent is a party relating to the issued or unissued
capital stock or other securities of, or other ownership interests in Parent
other than:
(i) rights ("Parent Rights") to acquire shares of Parent Preferred
Stock pursuant to the Rights Agreement, dated as of June 25, 1996, as amended,
between Parent and The Bank of New York (the "Parent Rights Agreement"); and
(ii) options and other rights to receive or acquire 2,296,410
shares of Parent Common Stock granted on or prior to June 30, 1998 pursuant to
employee incentive or benefit plans, programs and arrangements and non-employee
director plans.
(b) Since June 30, 1998, there have been no increases to any of the
amounts set forth in Section 4.2(a), other than by reason of issuances of shares
of Parent Common Stock upon exercise of any of the options or rights enumerated
in clause (ii) of Section 4.2(a), which issuances have reduced the applicable
number in clause (ii) of Section 4.2(a) by a corresponding amount, nor has
Parent modified, amended or entered into new Share Arrangements.
Section 4.3. Corporate Authority; No Violation. (a) Parent has the
corporate power and authority to enter into this Agreement and to carry
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out its obligations hereunder. The execution and delivery of this Agreement and
the performance by Parent of its obligations hereunder have been duly and
validly authorized by the Board of Directors of Parent and, except for the
Parent Stockholder Approval (as defined in Section 4.16), no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
the transactions contemplated hereby. The Board of Directors of Parent, at a
meeting duly called and held at which a quorum was present throughout, has
unanimously determined that the transactions contemplated by this Agreement are
in the best interest of Parent and its stockholders and to recommend to such
stockholders that they vote in favor of the Parent Stockholder Proposal (as
defined in Section 5.3) (the "Parent Board Recommendation"). This Agreement has
been duly and validly executed and delivered by Parent and, assuming this
Agreement constitutes a valid and binding agreement of the other parties hereto,
constitutes a valid and binding agreement of Parent, enforceable against Parent
in accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) The execution, delivery and performance of this Agreement by Parent
do not, and the consummation by Parent of the Merger and the other transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of, or a default under, or the creation of any rights in favor of any party
under, the certificate of incorporation or bylaws of Parent or the comparable
governing instruments of any of its Subsidiaries, (ii) a breach or violation of,
or a default under, or an acceleration of any obligations under, or the creation
of a lien, pledge, security interest or other encumbrance on the assets of
Parent or any of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to, any Contract binding upon Parent or any of its Subsidiaries
("Parent Contracts") or (provided, as to consummation, the filings and notices
are made, and approvals are obtained, as referred to in Section 4.3(c)) any
applicable Law or Decree or governmental permit or license to which Parent or
any of its Subsidiaries is subject, or (iii) any change in the rights or
obligations of any party under any of the Parent Contracts, except for any
breach, violation, default, acceleration, creation or change that does not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act, the Exchange Act, the HSR Act, and the securities or blue
sky Laws of the various states and other than the filing of the Delaware
Certificate of Merger with the Delaware Secretary of State and the New York
Certificate of Merger with the New York Department of State, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by Parent of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings that, if not
obtained or made, would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
Section 4.4. Reports and Financial Statements. Parent has timely filed
with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1995 under the Securities Act or
the Exchange Act (such documents, as supplemented or amended since the time of
filing, the "Parent SEC Reports"). As of their respective dates, Parent SEC
Reports, including without limitation, any financial statements or schedules
included or incorporated by reference therein, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (i) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included or incorporated by
reference in Parent SEC Reports (including any related notes and schedules)
fairly present, in all material respects, the financial position of Parent and
its consolidated Subsidiaries as of the dates thereof and the results of their
operations and their cash flows for the periods set forth therein, in each case
in accordance with past practice and GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto and
subject, where appropriate, to normal year-end adjustments that would not be
material in amount or effect).
Section 4.5. No Undisclosed Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except (a) liabilities or obligations
disclosed or reserved against in the unaudited consolidated interim financial
statements of Parent as of and for the three months ended March 31, 1998
included in Parent SEC Reports or disclosed in the footnotes thereto or in the
footnotes to the audited consolidated financial statements of Parent as of and
for the fiscal year ended December 31, 1997 included in Parent SEC Reports or
otherwise disclosed in Parent's 1997 Form 10-K or in Parent's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, and (b) liabilities or
obligations which do not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
<PAGE> 136
Section 4.6. Compliance with Laws. Parent and each of its Subsidiaries
each:
(a) in the conduct of its businesses is in compliance with all Laws and
Decrees applicable thereto or to the employees conducting such businesses;
(b) has all permits, licenses, authorizations, orders and approvals of,
and have made all filings, applications and registrations with, all Governmental
Entities that are required in order to permit it to conduct its businesses
substantially as presently conducted; all such permits, licenses,
authorizations, orders and approvals are in full force and effect and, to the
best of Parent's knowledge, no suspension or cancellation of any of them is
threatened; and
(c) has received, since December 31, 1995, no notification or
communication from any Governmental Entity (i) asserting that it is not in
compliance with any of the Laws or Decrees which such Governmental Entity
enforces, or (ii) threatening to revoke any permit, license, authorization,
order or approval; except where the failure of any of the foregoing to be true
does not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
Section 4.7. Environmental Laws. (a) To Parent's knowledge, neither
Parent nor any of its Subsidiaries is the subject of any pending or threatened
Litigation (whether civil, criminal, administrative or arbitral) by any
Governmental Entity or other person alleging liability or damages under or
non-compliance with any Environmental Law which, individually or in the
aggregate, has a Material Adverse Effect on Parent; (b) neither the conduct nor
the operation of Parent or its Subsidiaries violates or has in the past violated
any applicable Environmental Law or applicable Environmental Decree except as
does not, individually or in the aggregate, have a Material Adverse Effect on
Parent; and (c) to the knowledge of Parent, there is not now on, in or under any
property owned, leased or operated by Parent or any of its Subsidiaries any of
the following: (1) underground storage tanks or surface impoundments, (2)
asbestos-containing materials, (3) polychlorinated biphenyls, or (4) other
Hazardous Substances or petroleum products, in each case which would reasonably
be expected to form the basis of liability or other obligation of Parent or any
of its Subsidiaries under any applicable Environmental Laws, except for such
liabilities or obligations which do not, individually or in the aggregate, have
a Material Adverse Effect on Parent.
Section 4.8. Employee Benefit Plans. (a) Section 4.8 of the Parent
Disclosure Schedule contains a complete list of all material written bonus,
vacation, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, employment or severance contracts, medical, dental,
disability, health and life insurance plans, and other employee benefit and
fringe benefit plans, or other Contracts maintained or contributed to by Parent
or any of its Subsidiaries for the benefit of officers, former officers,
employees, former employees, directors, former directors, or the beneficiaries
of any of the foregoing or pursuant to which Parent or any of its Subsidiaries
may have any liability (collectively (whether or not material), the "Parent
Compensation and Benefit Plans") that are Contracts with, or plans maintained
primarily for the benefit of, individuals employed or rendering services in the
United States and are not Multiemployer Plans (the "U.S. Parent Compensation and
Benefit Plans").
(b) Parent has used its reasonable best efforts to have provided or
made available to the Company copies of all Parent Compensation and Benefit
Plans listed on Section 4.8 of the Parent Disclosure Schedule (excluding,
however, Multiemployer Plans and Parent Compensation and Benefit Plans which
have been filed with or incorporated by reference into Parent's 1997 Form 10-K),
including, but not limited to, all amendments thereto, and all of such copies
that have been delivered are true and correct.
(c) Each of the Parent Compensation and Benefit Plans has been and is
being administered in accordance with the terms thereof and all applicable Law
except where the failure to do so does not, individually or in the aggregate,
have a Material Adverse Effect on Parent. Each Pension Plan included in the U.S.
Parent Compensation and Benefit Plans (a "Parent Pension Plan") which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and Parent is
not aware of any circumstances which could result in the revocation or denial of
any such favorable determination letter. To Parent's knowledge, no material
"prohibited transaction," within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any U.S. Parent Compensation
and Benefit Plan. There is no pending or, to the Parent's knowledge, threatened
Litigation relating to any of the U.S. Parent Compensation and Benefit Plans
which, individually or in the aggregate, has a Material Adverse Effect on
Parent.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Parent or any of its Subsidiaries or any
entity which is considered one employer with Parent under Section 4001(a)(15) of
ERISA or Section 414 of the Code (any such entity, a "Parent
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ERISA Affiliate"), other than such liabilities that have previously been
satisfied. No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived has
been required to be filed for any Parent Pension Plan or by any Parent ERISA
Affiliate within the past 12 months.
(e) All contributions, premiums and payments required to be made under
the terms of any Parent Compensation and Benefit Plan have been made, except
where the failure to do so does not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Neither any Parent Pension Plan nor any
single-employer plan of a Parent ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither Parent nor any of its Subsidiaries has
provided, or is required to provide, security to any Parent Pension Plan or to
any single-employer plan of a Parent ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(f) Under each Parent Pension Plan which is a defined benefit plan, as
of the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Parent Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Parent Pension Plan, and there has been no adverse change in the financial
condition of such Parent Pension Plan (with respect to either assets or
benefits) since the last day of the most recent plan year.
(g) Neither Parent nor any of its Subsidiaries contributes to or is
required to contribute to any Multiemployer Plan. Neither Parent nor any of its
Subsidiaries has incurred any material withdrawal liability (within the meaning
of Section 4201 of ERISA) under any Multiemployer Plan within the past 5 years
that has not been satisfied, nor could any such material withdrawal liability
reasonably be expected to be incurred.
(h) Except as set forth in the Parent Compensation and Benefit Plans
listed in Section 4.8 of the Parent Disclosure Schedule or filed with or
incorporated by reference into Parent's 1997 Form 10-K, the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) (i)
constitute a Parent Change in Control Event with respect to officers and
directors of Parent, or (ii) result in any payment or benefit that will or may
be made by Parent or any of its Subsidiaries or any of their respective
affiliates that will be characterized as an "excess parachute payment," within
the meaning of Section 280G(b)(1) of the Code. "Parent Change in Control Event"
shall mean an event under any Parent Compensation and Benefit Plan, trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee.
(i) The contributions of Parent and any of its Subsidiaries to any
trust described in Section 501(c)(9) of the Code have complied with Section 419A
of the Code.
Section 4.9. Absence of Certain Changes or Events. Since December 31,
1997 the businesses of Parent and its Subsidiaries have been conducted in all
material respects in the ordinary course consistent with past practice, Parent
and its Subsidiaries have not engaged in any transaction or series of related
transactions material to Parent and its Subsidiaries taken as a whole other than
in the ordinary course consistent with past practice, and there has not been any
event, occurrence or development, alone or taken together with all other
existing facts, that, individually or in the aggregate, has a Material Adverse
Effect on Parent.
Section 4.10. Litigation. There is no Litigation pending (or, to
Parent's knowledge, threatened) against Parent or any of its Subsidiaries or any
of their respective properties which, individually or in the aggregate, has a
Material Adverse Effect on Parent. Parent is not subject to any Decree that,
individually or in the aggregate, has a Material Adverse Effect on Parent.
Section 4.11. Material Contracts. All of the Parent Contracts that are
required to be described in the Parent SEC Reports or to be filed as exhibits
thereto are described in the Parent SEC Reports or filed as exhibits thereto.
Neither Parent nor any of its Subsidiaries nor any other party is in breach of
or in default under any Parent Contract except for such breaches and defaults
which do not, individually or in the aggregate, have a Material Adverse Effect
on Parent.
Section 4.12. Labor Matters. As of the date of this Agreement, Parent
and its U.S. Subsidiaries do not have any collective bargaining agreements with
any persons employed by Parent or any of its U.S. Subsidiaries or any persons
otherwise performing services primarily for Parent or any of its U.S.
Subsidiaries, nor is Parent or any of its U.S. Subsidiaries in the process of
negotiating any such agreement. There is no labor strike, dispute or stoppage
pending or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries which, individually or in the aggregate, has a Material Adverse
Effect on Parent. None of Parent
<PAGE> 138
or its Subsidiaries is the subject to a proceeding asserting that it has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel it to bargain with any labor organization as
to wages and conditions of employment, which proceeding, individually or in the
aggregate, has a Material Adverse Effect on Parent. As of the date of this
Agreement, there are, to the knowledge of Parent, no organizational efforts
currently being made involving any of the employees of Parent or any of its
Subsidiaries.
Section 4.13. Tax Matters. (a) Parent and each of its Subsidiaries have
(i) filed all federal, state, local and foreign Tax Returns required to be filed
by them (taking into account extensions), (ii) paid or accrued all Taxes shown
to be due on such Returns or which are otherwise due and payable and (iii) paid
or accrued all Taxes for which a notice of assessment or collection has been
received, except in the case of clause (i), (ii) or (iii) for any such filings,
payments or accruals which do not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Neither the Internal Revenue Service nor any
other taxing authority has asserted in writing any claim for Taxes, or to the
knowledge of Parent, is threatening to assert any claims for Taxes, against
Parent or any of its Subsidiaries which claims, if determined adversely to
Parent or such Subsidiary, would, individually or in the aggregate, have a
Material Adverse Effect on Parent. Parent and each of its Subsidiaries have
withheld or collected and paid over to the appropriate Governmental Entities (or
are properly holding for such payment) all Taxes required by Law to be withheld
or collected, except for amounts which do not, individually or in the aggregate,
have a Material Adverse Effect on Parent. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any material
Tax Return of Parent or any of its Subsidiaries. Neither Parent nor any of its
Subsidiaries has made an election under Section 341(f) of the Code. There are no
liens for Taxes upon the assets of Parent or any of its Subsidiaries (other than
liens for Taxes that are not yet due), except for liens which do not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Neither Parent nor any of its Subsidiaries (i) has any liability under Treasury
Regulation Section 1.1502-6 or analogous state, local, or foreign law provision,
except to the extent any such liabilities, individually or in the aggregate, do
not have a Material Adverse Effect on the Parent, or (ii) is a party to a Tax
sharing or Tax indemnity agreement or any other agreement of a similar nature
with any entity other than Parent or any of its Subsidiaries that remains in
effect and under which the Parent or any such Subsidiary could have any material
liability for Taxes. No claim has been made in writing by a taxing authority in
a jurisdiction where Parent or any of its Subsidiaries does not file Tax Returns
that Parent or any of its Subsidiaries is or may be subject to taxation by that
jurisdiction where such claim, if determined adversely to Parent or such
Subsidiary, would, individually or in the aggregate have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries is the subject of
any currently ongoing audit or examination with respect to a material amount of
Taxes, nor, to the knowledge of Parent, has any such audit been threatened or
proposed by any taxing authority.
(b) Parent does not know of any fact with respect to Parent and its
Subsidiaries that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.14. Opinion of Financial Advisor. The Board of Directors of
Parent has received, on the date of this Agreement, the oral opinion of Stern
Stewart & Company, to be confirmed in writing, to the effect that, as of such
date, the aggregate Merger Consideration is fair to Parent from a financial
point of view. A copy of the written opinion of Stern Stewart & Company will be
delivered to the Company as soon as practicable after the date of this
Agreement.
Section 4.15. Takeover Laws; Parent Rights Agreement. (a) Parent has
taken all action required to be taken by it in order to exempt this Agreement
and the transactions contemplated hereby from, and this Agreement is exempt
from, the requirements of all applicable "moratorium", "control share", "fair
price" and other anti-takeover Laws and regulations of (i) the State of
Delaware, including without limitation Section 203 of the DGCL and (ii) the
State of Michigan, including without limitation Sections 450.1775 to 450.1784
and Sections 450.1790 to 450.1799.
(b) Parent's entering into of this Agreement and the consummation of
the transactions contemplated hereby (including the Merger) do not and will not
result in the ability of any person to exercise any Parent Rights under the
Parent Rights Agreement or enable or require the Parent Rights to separate from
the shares of Parent Common Stock to which they are attached or to be triggered
or become exercisable.
(c) No "Distribution Date" or "Shares Acquisition Date" (as such terms
are defined in the Parent Rights Agreement) has occurred.
Section 4.16. Required Vote of Parent Stockholders. The affirmative
vote of the holders of a majority of the total number of shares of Parent Common
Stock present in person or by proxy and entitled to vote at the Parent Meeting
is required to approve the Parent Stockholder Proposal (such affirmative vote,
or such other affirmative vote as may be
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required pursuant to applicable Law, NYSE rule or regulation or Parent's
certificate of incorporation or bylaws in connection with an Alternative
Transaction adopted pursuant to Section 1.7, the "Parent Stockholder Approval").
Other than the Parent Stockholder Approval, no other vote of the stockholders of
Parent is required by Law, the certificate of incorporation or bylaws of Parent
or otherwise in order for Parent to consummate the Merger and the other
transactions contemplated hereby.
Section 4.17. Finders or Brokers. Except for Stern Stewart & Company, a
true and complete copy of whose engagement agreement has been provided to the
Company, and Chase Securities Inc., neither Parent nor any of its Subsidiaries
has employed any investment banker, broker, finder or intermediary who might be
entitled to any fee or any commission in connection with or upon consummation of
the Merger.
Section 4.18. Financing. Parent has received written commitments dated
the date hereof (the "Financing Commitments") to obtain the funds necessary for
the consummation of transactions contemplated hereby, including payment of the
aggregate cash to be paid in respect of Shares converted into the right to
receive cash in the Merger and all related costs (the "Financing Funds"), true
and complete copies of which have been delivered to the Company.
ARTICLE V
COVENANTS AND AGREEMENTS
Parent, Merger Sub and the Company hereby covenant and agree with one
another as follows:
Section 5.1. Conduct of Business by the Company and Parent. During the
period between the date hereof and the Effective Time, except as may otherwise
be consented to in writing by the other parties hereto (which consent shall not
be unreasonably withheld) or as may be expressly permitted pursuant to this
Agreement or as set forth in Section 5.1 of the Company Disclosure Letter or
Section 5.1 of the Parent Disclosure Letter, as applicable:
(a) The Company shall, and shall cause each of its Subsidiaries to,
conduct its operations in the ordinary and usual course of business in
substantially the same manner as heretofore conducted and use its reasonable
best efforts to preserve intact its business organization and goodwill in all
material respects, keep available the services of its officers and employees as
a group, subject to changes in the ordinary course, and maintain its existing
relationships with suppliers, distributors, customers and others having business
relationships with it. Without limiting the generality of the foregoing, the
Company shall not, and shall cause its Subsidiaries not to (i) authorize,
declare, set aside or pay any dividends on or make any distribution with respect
to its outstanding shares of stock, except that (1) wholly owned U.S.
Subsidiaries of the Company may pay dividends on or make distributions of cash
to the Company or another wholly owned U.S. Subsidiary of the Company and (2)
wholly owned (except for directors' qualifying shares) non-U.S. Subsidiaries of
the Company may pay dividends to other wholly owned (except for directors'
qualifying shares) Subsidiaries of the Company so long as such dividends do not
have adverse tax consequences to the Company or any of its Subsidiaries; (ii)
except in the ordinary course of business consistent with past practice, enter
into or amend any employment, severance or similar agreements or arrangements
with, or grant any bonus or salary increases or otherwise increase the
compensation or benefits provided to, any of their respective employees;
provided, however, that, except as otherwise provided in Section 2.4(c), (A) any
of the foregoing actions with respect to any director or executive officer and
(B) any new change-of-control agreement or amendment of any existing
change-of-control agreement with any person shall in all cases require Parent's
consent; (iii) except as expressly permitted by Section 5.8, authorize or
publicly announce an intention to authorize, or enter into an agreement with
respect to, or take any action to consummate any agreement or arrangement with
respect to (1) any merger, consolidation or business combination (other than the
Merger), (2) any liquidation, dissolution, restructuring, recapitalization or
other reorganization or (3) any acquisition or disposition of a material amount
of assets (other than purchases and sales of raw materials, supplies, inventory,
products or services in the ordinary course of business consistent with past
practice) or securities, or any release or relinquishment of any material rights
under any material Contracts; (iv) propose or adopt any amendments to its
certificate of incorporation, bylaws or the Company Rights Agreement or take any
action with respect to, or make any determination under, the Company Rights
Agreement (including redeeming the Company Rights or declaring the Company
Rights Agreement or the Company Rights inapplicable to a third party); (v)
issue, sell, pledge or otherwise dispose of or encumber any capital stock owned
by it in any of its Subsidiaries or any interests in the EGS Electrical Group
LLC; (vi) except, in the case of the Company, upon exercise of Company Options
or Company Warrants outstanding on the date hereof and set forth in Section 3.2,
issue, sell or otherwise permit to become outstanding any shares of its capital
stock, or effect any stock split or reverse stock split or otherwise change its
equity capitalization as it existed on July 13, 1998, or redeem, repurchase or
otherwise acquire any shares of its capital stock; (vii) grant or award any
options,
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warrants, conversion rights or other rights to acquire any shares of capital
stock of the Company or its Subsidiaries, or enter into any other Share
Arrangement relating to its capital stock; (viii) except as required by
applicable Law or an existing Contract disclosed to Parent, amend the terms of
any Company Compensation or Benefit Plan, including the Company Plans (except as
provided in Section 2.4(b)) or adopt any new employee benefit or compensation
plan; (ix) except pursuant to existing credit agreements or other agreements of
the type disclosed in Section 5.1 of the Company Disclosure Letter and entered
into in the ordinary course consistent with past practice, incur, create, assume
or otherwise become liable for any indebtedness for borrowed money; (x) except
in the ordinary course of business, consistent with past practice, transfer,
lease, license, mortgage, pledge or encumber any material asset or material
amount of assets; (xi) make any material Tax election or settle or compromise
any material Tax liability or take any action which could reasonably be expected
to cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code; (xii) incur or commit to any capital expenditure;
(xiii) implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by GAAP or Regulation S-X promulgated
under the Exchange Act; or (xiv) agree or commit to do anything prohibited by
this Section 5.1(a).
(b) Parent shall, and shall cause each of its Subsidiaries to, conduct
its operations in the ordinary and usual course of business in substantially the
same manner as heretofore conducted and use its reasonable best efforts to
preserve intact its business organization and goodwill in all material respects,
keep available the services of its officers and employees as a group, subject to
changes in the ordinary course, and maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
it. Without limiting the generality of the foregoing, Parent shall not, and in
the case of clauses (ii), (v), (vi), (vii), (viii), (ix), (x) and (xi) shall
cause its Subsidiaries not to, (i) authorize, declare, set aside or pay any
dividends on, or make any distribution with respect to, its outstanding shares
of stock, other than a dividend or distribution of stock for which there would
be an adjustment in the Per Share Stock Amount pursuant to Section 2.1(d); (ii)
authorize, or publicly announce an intention to authorize, or enter into an
agreement with respect to (1) mergers, consolidations, acquisitions of a
business, an operation, a product line or all or substantially all of the assets
of an entity, or other business combinations, involving aggregate consideration
in excess of $75 million (of which not more that $50 million shall be in cash
and not more than $25 million shall be in Parent Common Stock); or (2) any
liquidation, dissolution, restructuring, recapitalization or other
reorganization, other than any stock dividend, subdivision, split or combination
of shares for which there would be an adjustment in the Per Share Stock Amount
pursuant to Section 2.1(d); (iii) propose or adopt any amendments to its
certificate of incorporation, or any amendments to its bylaws that would
adversely affect in any material respect the rights and preferences of the
holders of shares of Parent Common Stock; (iv) propose or adopt any amendment to
the Parent Rights Agreement or take any action with respect to, or make any
determination under, the Parent Rights Agreement (including redeeming the Parent
Rights or declaring the Parent Rights Agreement or Parent Rights inapplicable to
any third party; (v) take any action which could reasonably be expected to cause
the Merger to fail to qualify as a reorganization within the meaning of 368(a)
of the Code; (vi) issue, sell or otherwise permit to become outstanding any
shares of its capital stock except (x) upon exercise of options or other rights
to acquire Parent Common Stock or (y) issuances or sales of up to $25 million of
Parent Common Stock in connection with an acquisition; (vii) other than
acquisitions of shares of Parent Common Stock held by employees of Parent or its
Subsidiaries in the ordinary course, redeem, repurchase or otherwise acquire any
shares of Parent Common Stock other than acquisitions of up to 200,000 shares of
Parent Common Stock in transactions complying with Rule 10b-18 of the Exchange
Act; (viii) grant or award any options, warrants, conversion rights or other
rights to acquire any shares of capital stock of Parent or any of its
Subsidiaries, or enter into any other Share Arrangement relating to such capital
stock, except in the ordinary course of business; (ix) implement or adopt any
change in its accounting principles, practices or methods, other than as may be
required by GAAP or Regulation S-X promulgated under the Exchange Act; (x) incur
or commit to any capital expenditures in excess of $40 million, in the
aggregate; or (xi) agree or commit to do anything prohibited to it by this
Section 5.1(b).
Section 5.2. Investigation. During the period between the date hereof
and the Effective Time, except as set forth in the Company Disclosure Schedule
or the Parent Disclosure Schedule each of the Company and Parent shall afford to
one another and to one another's officers, employees, accountants, counsel and
other authorized representatives reasonable access, during normal business
hours, to its and its Subsidiaries' (a) plants, properties, Contracts, books and
records (including but not limited to (i) Tax Returns, (ii) audits, assessments,
reports, studies, monitoring results and any other information or documents
relevant to the environment or occupational health and safety and (iii)
accountants work papers), (b) any report, schedule or other document filed or
received by it pursuant to the requirements of federal or state securities Laws
and (c) any other information concerning its business, properties and personnel
as the other may reasonably request; provided,
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however, that no investigation pursuant to this Section 5.2 shall affect or be
deemed to modify any representation or warranty made by the Company, Parent or
Merger Sub. The parties hereby agree that each of them will treat any such
information in accordance with the applicable Confidentiality Agreement between
the Company and Parent (each, a "Confidentiality Agreement"). Notwithstanding
any provision of this Agreement to the contrary, no party shall be obligated to
make any disclosure in violation of applicable Laws or if disclosure would
cause a forfeiture of attorney-client privilege. The Company and Parent will
make appropriate substitute disclosure arrangements if the circumstances of the
preceding sentence apply.
Section 5.3. Stockholder Approval; Filings. (a) Subject to the terms
and conditions contained herein, (i) the Company shall submit this Agreement and
the Merger for approval to the holders of Shares at a meeting to be duly held
for this purpose by the Company (the "Company Meeting"), and (ii) Parent shall
submit the proposed issuance of Parent Common Stock in connection with the
Merger (or shall submit this Agreement and the Merger, if required because an
Alternative Transaction has been adopted pursuant to Section 1.7) (the matter
submitted, the "Parent Stockholder Proposal") for the Parent Stockholder
Approval to the holders of shares of Parent Common Stock at a meeting to be duly
held for this purpose by Parent (the "Parent Meeting"). The Company and Parent
shall take all action in accordance with the federal securities Laws, the NYBCL,
the DGCL and their respective certificates of incorporation and bylaws necessary
to duly convene the Company Meeting and the Parent Meeting. The Company and
Parent shall coordinate and cooperate with respect to the timing of such
meetings and shall use their reasonable best efforts to hold such meetings on
the same day and as soon as reasonably practicable after the date hereof.
Subject to the fiduciary duties of the respective Boards of Directors under
applicable Law as advised by counsel in connection with a Company Competing
Transaction or a Parent Business Combination, as applicable, the Boards of
Directors of the Company and Parent shall recommend that their respective
stockholders approve such matters, which recommendation shall be contained in
the Joint Proxy Statement (as defined below), and use their reasonable best
efforts to take all lawful action to solicit such approval by its respective
stockholders.
(b) Each of Parent and the Company agrees to cooperate in the
preparation of a registration statement on Form S-4 (the "Registration
Statement") to be filed by Parent with the SEC in connection with the issuance
of Parent Common Stock in the Merger (including the joint proxy statement and
other proxy solicitation materials of Parent and the Company constituting a part
thereof (the "Joint Proxy Statement") and all related documents). Provided the
Company has cooperated as required above, Parent agrees to file the Registration
Statement with the SEC as promptly as practicable. Each of the Company and
Parent agrees to use its reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after filing thereof, and to cause the Joint Proxy Statement to be
mailed as promptly as practicable to the shareholders of the Company and the
stockholders of Parent. Parent also agrees to use its reasonable best efforts to
obtain all necessary state securities Law or "blue sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. Parent
and the Company each agrees to furnish to the other all information concerning
itself and its Subsidiaries, officers, directors and shareholders as may be
reasonably requested by the other in connection with the foregoing.
(c) Each of the Company and Parent agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, is filed with the SEC and at the time the Registration Statement becomes
effective under the Securities Act, and at the times of the Company Meeting and
the Parent Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Joint Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to stockholders and
at the times of the Parent Meeting and the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which such statements are made, not misleading. Each of the Company and Parent
further agrees that if it shall become aware prior to the times of the Company
Meeting and the Parent Meeting of any information that would cause any of the
statements in the Joint Proxy Statement or in the Registration Statement to be
false or misleading with respect to any material fact, or to omit to state any
material fact necessary in order to make the statements made therein not false
or misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Joint Proxy Statement.
(d) Parent will advise the Company, promptly after Parent receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the Parent Common Stock for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration
<PAGE> 142
Statement or for additional information.
(e) Promptly after the execution of this Agreement, Parent shall
prepare and file with the NYSE, and such other stock exchanges as shall be
agreed upon, listing applications covering the shares of Parent Common Stock
issuable in the Merger or upon exercise of the Company Options, and use its
reasonable best efforts to obtain, prior to the Effective Time, approval for the
listing of such shares of Parent Common Stock, subject only to official notice
of issuance. The Company shall as promptly as practicable furnish Parent with
all information concerning the Company and its Subsidiaries as may be required
for inclusion in such listing applications.
(f) Parent and the Company shall cooperate with one another in
obtaining opinions of Wachtell, Lipton, Rosen & Katz, counsel to the Company,
and Fried, Frank, Harris, Shriver & Jacobson, counsel to Parent, each dated as
of the Closing Date, (i) in the form of Exhibits B and C, respectively, or (ii)
if the form of combination of Parent and the Company is changed pursuant to
Section 1.7, such other legal opinions as are customary for the Alternative
Transaction and are reasonably acceptable to the Company or Parent, as
applicable ("Alternate Legal Opinions") (and, in connection therewith, each of
the Company and Parent shall deliver to Wachtell, Lipton, Rosen & Katz, and
Fried, Frank, Harris, Shriver & Jacobson certificates of officers of the
Company, Parent and Merger Sub in form and substance reasonably satisfactory to
such counsel).
Section 5.4. Additional Reports. The Company and Parent shall each
furnish to the other copies of any Company SEC Reports or Parent SEC Reports, as
the case may be, which it files with the SEC on or after the date hereof, and
the Company and Parent, as the case may be, represents and warrants that as of
the respective dates thereof, such reports will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present, in all material respects,
the financial position of the Company and its consolidated Subsidiaries or
Parent and its consolidated Subsidiaries, as the case may be, as of the dates
thereof and the results of operations and changes in financial position or other
information included therein for the periods or as of the dates then ended, in
each case in accordance with past practice and GAAP consistently applied during
the periods involved (except as otherwise disclosed in the notes thereto and
subject, where appropriate, to normal year-end adjustments).
Section 5.5. Reasonable Best Efforts. Each of the parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (A) the obtaining of (and
cooperating with the other parties to obtain) waivers, consents, exemptions,
licenses, permits, authorizations, orders and approvals from, and the making of
all other necessary registrations and filings with, Governmental Entities
(including, without limitation, filings required to be made pursuant to the HSR
Act), (B) the obtaining of (and cooperating with the other parties to obtain)
all waivers, consents, exemptions, licenses, authorizations and approvals from
third parties which may be necessary or desirable to be obtained by reason of
the Merger or in order to consummate the transactions contemplated by, and to
fully carry out the purposes of and realize the benefits of, this Agreement, and
(C) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the purposes
of and realize the benefits of, this Agreement.
Section 5.6. Accountants' "Comfort" Letters. The Company and Parent
will each use its reasonable best efforts to cause to be delivered to each other
letters from its respective independent accountants, dated a date within two
business days before the effective date of the Registration Statement, in form
reasonably satisfactory to the recipient and customary in scope for comfort
letters delivered by independent accountants in connection with registration
statements on Form S-4 under the Securities Act.
Section 5.7. Takeover Statutes. None of the parties shall take any
action that would cause the transactions contemplated by this Agreement to be
subject to the requirements of any Takeover Law. If any Takeover Law shall
become applicable to the transactions contemplated by this Agreement, each of
the Company and Parent and the members of their respective Boards of Directors
shall grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby, and otherwise act to eliminate or minimize the
effects of such Takeover Law on the transactions contemplated hereby.
Section 5.8. No Solicitation. (a) During the term of this Agreement,
the Company shall not, and shall not authorize or permit any of its Subsidiaries
or any of its or its Subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit,
<PAGE> 143
initiate, encourage or facilitate, or furnish or disclose non-public information
in furtherance of, any inquiries or the making of any proposal with respect to
any recapitalization, merger, consolidation or other business combination
involving the Company, or the acquisition of 10% or more of the outstanding
capital stock of the Company (other than upon exercise of Company Options and
Company Warrants which are outstanding as of the date hereof) or any Significant
Subsidiary of the Company or, except as permitted under Section 5.1 of the
Company Disclosure Letter, the acquisition of 15% or more of the assets of the
Company and its Subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or any combination of the foregoing (a "Company
Competing Transaction"), or negotiate or otherwise engage in discussions with
any person (other than Parent, Merger Sub or their respective directors,
officers, employees, agents or representatives) with respect to any Company
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement, and will immediately cease all
existing activities, discussions and negotiations with any parties conducted
heretofore with respect to any proposal for a Company Competing Transaction;
provided that, at any time prior to the approval of the Merger by the
shareholders of the Company, the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party (a "Company Third
Party") who (x) delivers a bona fide written proposal for a Company Competing
Transaction which was not solicited, initiated, encouraged or facilitated by the
Company, directly or indirectly, after the date of this Agreement and (y) enters
into an appropriate confidentiality agreement with the Company (which agreement
shall be no less favorable to the Company than the Confidentiality Agreement,
and a copy of which will be delivered to Parent promptly after the execution
thereof), if, but only if, the Board of Directors of the Company determines in
good faith by a majority vote, (i) after consultation with and receipt of advice
from its outside legal counsel, that failing to take such action would
constitute a breach of the fiduciary duties of the Board of Directors of the
Company under applicable Law, and (ii) after consultation with the Company's
independent financial advisors, that such proposal could reasonably be expected
to lead to a Superior Transaction (as defined in Section 5.8(d)).
(b) From and after the execution of this Agreement, the Company shall
promptly advise Parent in writing of the receipt, directly or indirectly, of any
inquiries or proposals relating to a Company Competing Transaction (including
the specific terms thereof and the identity of the third party), shall keep
Parent reasonably informed of the status of any such inquiries or proposals, of
the furnishing of information to the Company Third Party, and of any
negotiations or discussions relating thereto (including any changes or
adjustments to the material terms of such Company Competing Transaction as a
result of negotiations or otherwise).
(c) If, prior to the approval of the Merger by the shareholders of the
Company, the Board of Directors of the Company determines in good faith by a
majority vote, with respect to any written proposal from a Company Third Party
for a Company Competing Transaction received after the date hereof that was not
solicited, initiated, encouraged or facilitated by the Company, directly or
indirectly, after the date of this Agreement, that such Company Competing
Transaction is a Superior Transaction and is in the best interest of the Company
and its shareholders and that failure to enter into such Company Competing
Transaction would constitute a breach of the fiduciary duties of the Board of
Directors of the Company under applicable Law, and the Board of Directors of the
Company has received (x) a written opinion (a copy of which shall have been
delivered to Parent) from the Company's independent financial advisors that the
Company Competing Transaction is a Superior Transaction and (y) the advice of
its outside legal counsel that failure to enter into such a Company Competing
Transaction would constitute a breach of the Board of Directors' fiduciary
duties under applicable Law, then the Company may terminate this Agreement and
enter into an acquisition agreement for the Superior Transaction; provided that,
prior to any such termination, and in order for such termination to be
effective, (i) the Company shall provide Parent two business days' written
notice that it intends to terminate this Agreement pursuant to this Section
5.8(c), identifying the Superior Transaction and the parties thereto and
delivering an accurate description of all material terms of the Superior
Transaction to be entered into and (ii) on the date of termination (provided
that the opinion and advice referred to in clauses (x) and (y) above shall
continue in effect without revocation, revision or modification), the Company
shall deliver to Parent (A) a written notice of termination of this Agreement
pursuant to this Section 5.8(c), (B) a wire transfer of immediately available
funds in the amount of the Company Termination Fee and the Commitment Expenses
(each as defined in Section 7.3), and (C) a written acknowledgment from the
Company and each other party to the Superior Transaction that it will not
contest the payment of the Company Termination Fee and Commitment Expenses.
(d) "Superior Transaction" shall mean a Company Competing Transaction
which the Board of Directors of the Company reasonably determines is more
favorable to the Company and its shareholders than the Merger and which is not
subject to any financing condition. Reference in the foregoing definition to the
"Merger" shall include any proposed alteration of the terms of this Agreement
committed to in writing by Parent in response to such Company Competing
Transaction.
<PAGE> 144
(e) During the term of this Agreement, Parent shall not, and shall not
authorize or permit any of its Subsidiaries or any of its or its Subsidiaries'
directors, officers, employees, agents or representatives, directly or
indirectly, to solicit or initiate any inquiries or the making of any proposal
with respect to any Parent Business Combination; provided that nothing herein
shall prohibit any of the foregoing persons from responding to unsolicited
inquiries or proposals, including by furnishing non-public information.
Section 5.9. Public Announcements. Each of the parties agrees that it
shall not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the transactions contemplated hereby without the
prior approval of the other party, except such disclosure as may be required by
Law or by any listing agreement with a national securities exchange; provided,
if such disclosure is required by Law or any such listing agreement, such
disclosure shall not be made without prior consultation of the other parties.
Section 5.10. Indemnification and Insurance. (a) Parent and Merger Sub
agree that all rights to exculpation and indemnification for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the current
or former directors or officers of the Company or any of its Subsidiaries (the
"Indemnified Parties") as provided in its certificate of incorporation or bylaws
or in any agreement shall survive the Merger and shall continue in full force
and effect in accordance with their terms.
(b) For six years from the Effective Time, Parent shall indemnify,
defend and hold harmless each of the Indemnified Parties for acts or omissions
occurring at or prior to the Effective Time to the fullest extent permitted by
applicable Law, including with respect to taking all actions necessary to
advance expenses to the extent permitted by applicable Law.
(c) Parent shall use its reasonable best efforts to obtain and maintain
in effect, or cause the Surviving Corporation to obtain and maintain in effect,
for six years from the Effective Time, the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to Parent); provided, however, that in no
event shall Parent or the Surviving Corporation be required to expend in any
year an amount in excess of 200% of the annual premiums currently paid by the
Company for such insurance, and, provided, further, that if the annual premiums
of such insurance coverage exceed such amount, Parent shall or shall cause the
Surviving Corporation to obtain a policy with the greatest coverage available
for a cost not exceeding such amount.
(d) The provisions of this Section 5.10 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
Section 5.11. Notification of Certain Matters. Each of the Company and
Parent shall give prompt notice to the other of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other existing facts, events and circumstances known to it, to result in any
Material Adverse Effect with respect to it, or (ii) would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein.
Section 5.12. Board of Directors and Officers of Parent. The Board of
Directors of Parent shall take all action necessary to elect as of the Effective
Time the following persons to the Board of Directors of Parent: (i) Emerson U.
Fullwood, who shall be assigned to the class of directors whose term of office
expires at Parent's first annual meeting of stockholders after the Effective
Time and (ii) H. Kent Bowen, who shall be assigned to the class of directors
whose term of office expires at Parent's second annual meeting of stockholders
after the Effective Time.
Section 5.13. Employee Plans and Benefit Arrangements. (a) From and
after the Effective Time, subject to applicable Law, Parent shall cause the
Surviving Corporation and its Subsidiaries to honor the obligations of the
Company and its Subsidiaries under all existing Company Compensation and Benefit
Plans.
(b) Parent agrees that, for at least one year from the Effective Time,
subject to applicable Law, the Surviving Corporation and its Subsidiaries shall
provide benefits to the individuals who, as of the Effective Time, were
employees of the Company or any of its Subsidiaries which will, in the
aggregate, be comparable to those currently provided by the Company and its
Subsidiaries to their employees (excluding, however, any stock option or any
other equity-based compensation plans and any individual employment, severance,
change in control or other similar agreement currently maintained by the Company
or its Subsidiaries). Nothing herein shall be construed to prevent the
termination of employment of any employee or any amendment or termination of any
Company Compensation and Benefit Plan to the extent permitted by the terms and
conditions thereof as
<PAGE> 145
in effect on the date hereof.
(c) After the Effective Time, Parent shall grant (if applicable), and
shall cause the Surviving Corporation and its Subsidiaries to grant, to all
individuals who are, as of the Effective Time, employees of the Company or any
of its Subsidiaries credit for all service with the Company, any of its present
and former Subsidiaries, any other affiliate of the Company and their respective
predecessors (collectively, the "Company Affiliated Group") prior to the
Effective Time for purposes of eligibility and vesting (but not benefit accrual)
to the extent that prior service with Parent or its Subsidiaries is recognized
in respect of employees other than the employees of the Company Affiliated
Group. Any employee benefit plan which provides medical, dental or life
insurance benefits after the Effective Time to any individual who is a current
or former employee of the Company Affiliated Group as of the Effective Time or a
dependent thereof shall, with respect to such individuals, waive any waiting
periods and any pre-existing conditions and actively-at-work exclusions to the
extent so waived under present policy of the Company Affiliated Group and shall
provide that any expenses incurred on or before the Effective Time by such
individuals shall be taken into account under such plans for purposes of
satisfying applicable deductible or coinsurance provisions to the extent taken
into account under present policy of the Company Affiliated Group.
(d) The Company shall amend all trusts and other funding arrangements
(including but not limited to the Change in Control Benefits Trust Agreement
entered into by the Company and The Chase Manhattan Bank) to the extent
necessary to provide that no event which occurs in connection with the
transactions contemplated by this Agreement shall require the Company, the
Surviving Corporation, or any of their affiliates to make any payment of cash or
other property to any such trust or funding arrangement.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date (or waiver by the
party for whose benefit the applicable condition exists) of the following
conditions:
(a) The holders of the issued and outstanding Shares shall have duly
approved this Agreement and the Merger, and the holders of the issued and
outstanding shares of Parent Common Stock shall have duly approved the Parent
Stockholder Proposal, all in accordance with applicable Law, the respective
certificates of incorporation and bylaws of the Company and Parent, and the
rules of the NYSE.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending such effectiveness shall have been issued and remain in effect and no
proceedings for that purpose shall have been initiated or threatened by the SEC
or any other Governmental Entity.
(c) The shares of Parent Common Stock issuable in the Merger shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
(d) All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect and all statutory waiting periods in respect thereof shall have expired
or been terminated, other than any such regulatory approvals the failure to
obtain which are not reasonably likely, individually, in the aggregate or
together with all other existing facts, events and circumstances, to result in
any Material Adverse Effect on the Company (in the case of Parent's obligation
to close) or on Parent (in the case of the Company's obligation to close).
(e) No Law or Decree shall have been enacted, entered, promulgated, or
enforced by any court or other tribunal or Governmental Entity which prohibits
or makes illegal the consummation of any of the transactions contemplated
hereby. In the event any such Decree shall have been issued, each party shall
use its reasonable efforts to remove any such Decree.
(f) The Company shall have received from Wachtell, Lipton, Rosen & Katz
(in the case of the Company's obligation to close) and Parent shall have
received from Fried, Frank, Harris, Shriver & Jacobson (in the case of Parent's
obligation to close), dated the Closing Date, (i) opinions in the form of
Exhibit B (in the case of the Company) and Exhibit C (in the case of Parent) or
(ii) if applicable, an Alternate Legal Opinion. In rendering such opinions,
Wachtell, Lipton Rosen & Katz and Fried, Frank, Harris, Shriver & Jacobson may
require and rely upon representations and covenants, including those contained
in certificates of officers of the Company, Parent and Merger Sub, which
representations and covenants are in form and substance reasonably satisfactory
to such counsel.
Section 6.2. Conditions to Obligations of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further
<PAGE> 146
subject to the conditions that (a) the representations and warranties of Parent
contained herein (which for purposes of this clause (a) shall be read as though
none of them contained any Material Adverse Effect or materiality qualification)
shall be true and correct in all respects as of the Closing Date with the same
effect as though made as of the Closing Date (provided that any representations
and warranties made as of a specified date shall be required only to continue on
the Closing Date to be true and correct as of such specified date) except (i)
for changes specifically permitted by the terms of this Agreement and (ii) where
the failure of the representations and warranties to be true and correct in all
respects would not in the aggregate have a Material Adverse Effect on Parent;
(b) Parent shall have in all material respects performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date, (c) each of the
representations and warranties of Parent contained in Sections 4.15(b) and (c)
shall be true and correct as of the Closing Date in all respects with the same
effect as though such representations and warranties had been made at the
Closing Date; and (d) Parent shall have delivered to the Company a certificate,
dated the Closing Date and signed by its Chief Executive Officer or a Vice
President, certifying the satisfaction of the conditions set forth in the
foregoing clauses (a) through (c).
Section 6.3. Conditions to Obligations of Parent to Effect the Merger.
The obligation of Parent to effect the Merger is further subject to the
conditions that (a) the representations and warranties of the Company contained
herein (which for purposes of this clause (a) shall be read as though none of
them contained any Material Adverse Effect or materiality qualification) shall
be true and correct in all respects as of the Closing Date with the same effect
as though made as of the Closing Date (provided that any representations and
warranties made as of a specified date shall be required only to continue on the
Closing Date to be true and correct as of such specified date) except (i) for
changes specifically permitted by the terms of this Agreement and (ii) where the
failure of the representations and warranties to be true and correct in all
respects would not in the aggregate have a Material Adverse Effect on the
Company; (b) the Company shall have in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date; (c) each of
the representations and warranties of the Company contained in Section 3.15(b)
and (c) shall be true and correct as of the Closing Date in all respects with
the same effect as though such representations and warranties had been made at
the Closing Date; and (d) the Company shall have delivered to Parent a
certificate, dated the Closing Date and signed by its Chief Executive Officer
and President or a Vice President, certifying the satisfaction of the conditions
set forth in the foregoing clauses (a) through (c).
ARTICLE VII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 7.1. Termination or Abandonment. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of this Agreement by the shareholders of the
Company or any Parent Stockholder Approval):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated before December 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to perform any covenant or obligation under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on or
before such date;
(c) by Parent if (i) the Board of Directors of the Company shall
or shall resolve to (A) withdraw the Company Board Recommendation, (B) modify
such recommendation in a manner adverse to Parent or Merger Sub or refuse to
affirm the Company Board Recommendation as promptly as practicable (but in any
case within 10 business days) after receipt of any written request from Parent
which request was made on a reasonable basis, or (C) approve or recommend any
proposed Company Business Combination (as defined in Section 7.3(e)), or (ii)
the Company has failed, as promptly as practicable after the Registration
Statement is declared effective by the SEC, to call the Company Meeting or to
mail the Joint Proxy Statement to its shareholders, or failed to include in such
statement the Company Board Recommendation;
(d) by the Company if (i) the Board of Directors of Parent shall
or shall resolve to (A) withdraw the Parent Board Recommendation, (B) modify
such recommendation in a manner adverse to the Company or refuse to affirm the
Parent Board Recommendation as promptly as practicable (but in any case within
10 business days) after receipt of any written request from the Company which
request was made on a reasonable basis, or (C) approve or recommend any proposed
Parent Business Combination (as defined in Section 7.3(f)), or (ii) Parent has
failed, as promptly as practicable after the Registration Statement is declared
effective by the SEC, to call the Parent Meeting or to mail the Joint Proxy
Statement to its shareholders, or failed to include in such statement the Parent
Board Recommendation;
<PAGE> 147
(e) by Parent or the Company if at the Company Meeting (including
any adjournment or postponement thereof) the requisite vote of the shareholders
of the Company to approve this Agreement and the Merger shall not have been
obtained;
(f) by Parent or the Company if at the Parent Meeting (including
any adjournment or postponement thereof) the Parent Stockholder Approval shall
not have been obtained;
(g) by either the Company or Parent, if there shall be any Law or
Decree that prohibits or makes illegal consummation of the Merger or if any
Decree enjoining Parent or the Company from consummating the Merger is entered
and such Decree shall become final and nonappealable;
(h) by Parent or the Company if there shall have been a material
breach by the other of any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would result in the failure
to satisfy one or more of the conditions set forth in Section 6.2 (in the case
of a breach by Parent) or Section 6.3 (in the case of a breach by the Company),
and such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the party alleged to be in breach; or
(i) by the Company pursuant to, but only in compliance with,
Section 5.8.
Section 7.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of the second sentence of Section 5.2, this Section 7.2 and Sections
7.3, 8.2 and 8.4 shall become void and have no effect, without any liability on
the part of any party or any of its affiliates. Notwithstanding the foregoing,
nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for any willful breach of any provision of this Agreement.
Section 7.3. Termination Payments. (a) Upon the happening of a Company
Triggering Event, the Company shall pay to Parent (or to any Subsidiary of
Parent designated in writing by Parent to the Company) the amount of $60 million
(the "Company Termination Fee") (less any Expense Fee that may previously have
been paid or is payable in the same circumstances), by wire transfer of
immediately available funds (1) on the second business day after such
termination in the case of clause (i) of the definition of Company Triggering
Event, (2) on or prior to the date of such termination, in the case of clause
(iii) of the definition of Company Triggering Event, or (3) on the earlier of
the date an agreement is entered into with respect to a Company Business
Combination or a Company Business Combination is consummated, in the case of
clauses (ii) or (iv) of the definition of Company Triggering Event. In no event
shall more than one Company Termination Fee be payable under this Agreement.
"Company Triggering Event" means any one of the following:
(i) a termination of this Agreement by Parent pursuant to
Section 7.1(c);
(ii) a termination of this Agreement by Parent or the Company
pursuant to Section 7.1(e), if (A) any Company Business Combination is
publicly proposed or announced on or after the date hereof and prior to the
Company Meeting and (B) any Company Business Combination is entered into,
agreed to or consummated by the Company or any of its Subsidiaries within 12
months of such termination of this Agreement;
(iii) a termination of this Agreement by the Company pursuant
to Section 7.1(i); or
(iv) a termination of this Agreement by Parent or the Company
pursuant to Section 7.1(e) or by Parent pursuant to Section 7.1(h) (but only
if the breach of warranty, representation, covenant or agreement that gives
rise to such termination arises out of bad faith or willful misconduct of
the Company), if any Company Business Combination is entered into, agreed to
or consummated by the Company within 3 months of such termination of this
Agreement.
(b) Upon the happening of a Parent Triggering Event, Parent shall
pay to the Company (or to any Subsidiary of the Company designated in writing by
the Company to Parent) the amount of $25 million (the "Parent Termination Fee")
(less any Expense Fee that may previously have been paid or is payable in the
same circumstances) by wire transfer of immediately available funds, (1) on the
second business day following such termination, in the case of clause (i) of the
definition of Parent Triggering Event, or (2) on the earlier of the date an
agreement is entered into with respect to a Parent Business Combination or a
Parent Business Combination is consummated, in the case of clause (ii) of the
definition of Parent Triggering Event. In no event shall more than one Parent
Termination Fee be payable under this Agreement. "Parent Triggering Event" means
either of the following:
<PAGE> 148
(i) a termination of this Agreement by the Company pursuant
to Section 7.1(d); or
(ii) a termination of this Agreement by Parent or the Company
pursuant to Section 7.1(f), if (A) any Parent Business Combination with a
person other than the Company is publicly proposed or announced on or after
the date hereof and prior to the Parent Meeting and (B) a Parent Business
Combination is entered into, agreed to or consummated by Parent or any of
its Subsidiaries with such person or an affiliate thereof within 12 months
of the termination of this Agreement.
(c) Notwithstanding Section 8.2:
(i) If this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(e), then the Company shall pay to Parent, and if
this Agreement is terminated by Parent or the Company pursuant to Section
7.1(f), then Parent shall pay to the Company (or, in each case, to any
Subsidiary thereof designated in writing to the payor), on the second
business day after such termination, by wire transfer of immediately
available funds, the amount of $5 million (the "Expense Fee") representing
the cash amount necessary to compensate the payee for all fees and expenses
incurred at any time prior to such termination by it or on its behalf in
connection with the Merger, the preparation of this Agreement and the
transactions contemplated by this Agreement.
(ii) The Company shall pay to Parent (or to any Subsidiary of
Parent designated in writing to the Company), on the second business day
after the Company receives a reasonably documented statement therefor (a
letter from the lenders being conclusive in the absence of manifest error),
by wire transfer of immediately available funds, all amounts incurred by
Parent and Merger Sub in respect of underwriting, placement, commitment and
other fees and payments (including any payment based on a percentage of the
Company Termination Fee, if any, required to be paid by the Company) not to
exceed the amounts set forth in that certain fee letter dated the date
hereof with respect to the Financing Commitments, and related expenses of
the lenders (including fees and expenses of lenders' counsel) required to be
paid by Parent or Merger Sub in connection with the obtaining of the
Financing Commitments (the "Commitment Expenses"), if this Agreement is
terminated: (A) by Parent pursuant to Section 7.1(c) or 7.1(h); (B) by
Parent or the Company pursuant to Section 7.1(e); or (C) by the Compaty
pursuant to Section 7.1(i).
(iii) The Company shall pay to Parent (or to any Subsidiary
of Parent designated in writing to the Company), on the second business day
after the Company receives a reasonably documented statement therefor (a
letter from the lenders being conclusive in the absence of manifest error),
by wire transfer of immediately available funds, the lesser of (x) one-half
of the Commitment Expenses or (y) $5 million, if this Agreement is
terminated by Parent or the Company pursuant to Section 7.1(b) or 7.1(g).
(d) The parties acknowledge that the agreements contained in
paragraphs (a) through (c) of this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
they would not enter into this Agreement; accordingly, if either of the Company
or Parent fails to pay promptly any fee payable by it pursuant to this Section
7.3, then the party owing such fee shall pay to the party owed such fee its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest on the amount of the fee at the prime or base rate of The
Chase Manhattan Bank from the date such payment was due under this Agreement
until the date of payment.
(e) "Company Business Combination" shall mean:
(i) any merger, consolidation or other business combination
as a result of which the shareholders of the Company would hold less than
50% of the voting securities outstanding following that transaction;
(ii) the acquisition of 50% or more of the outstanding
capital stock of the Company; or
(iii) the acquisition of 50% or more of the assets of the
Company and its Subsidiaries taken as a whole (including capital stock of
any Subsidiary);
provided that solely for purposes of clause (ii)(A) of Section 7.3(a), the
percentage in clause (i) of this definition shall be deemed to be 75% and the
percentage in clauses (ii) and (iii) of this definition shall be deemed to be
25%.
(f) "Parent Business Combination" shall mean:
(i) any merger, consolidation or other business combination
as a result of which the stockholders of Parent would hold less than 50% of
the voting securities outstanding following that
<PAGE> 149
transaction;
(ii) the acquisition of 50% or more of the outstanding
capital stock of Parent; or
(iii) the acquisition of 50% or more of the assets of Parent
and its Subsidiaries taken as a whole (including capital stock of any
Subsidiary);
provided that solely for purposes of clause (ii)(A) of Section 7.3(b), the
percentage in clause (i) of this definition shall be deemed to be 75% and the
percentage in clauses (ii) and (iii) of this definition shall be deemed to be
25%.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. No Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article II, the provisions of Section 5.10,
Section 5.13 and this Section 8.1.
Section 8.2. Expenses. Subject to the provisions of Section 7.3, (a)
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that the
expenses incurred in connection with the filing, printing and mailing of the
Registration Statement and the Joint Proxy Statement (including registration and
filing fees relating thereto) shall be shared equally by the Company and Parent
and (b) if the Merger is consummated, all transfer taxes shall be paid by the
Company.
Section 8.3. Counterparts; Effectiveness. This Agreement may be
executed in two or more consecutive counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered (by telecopy or otherwise)
to the other parties.
Section 8.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York, except that New
York Law and Delaware Law shall apply to the Merger, in each case, without
regard to the principles of conflicts of Laws thereof.
Section 8.5. Notices. All notices and other communications hereunder
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.5 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.5:
To the Company or Merger Sub:
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904-2010
Attention: Joanne L. Bober
Senior Vice President, General Counsel and Secretary
Telecopier: (203) 329-4396
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Eric S. Robinson, Esq.
Telecopier: (212) 403-2000
To Parent:
SPX Corporation
700 Terrace Point Drive
P.O. Box 3301
Muskegon, Michigan 49443-3301
Attention: Christopher J. Kearney
Senior Vice President, General Counsel and Secretary
Telecopier: (616) 724-5940
copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Aviva Diamant, Esq.
Telecopier: (212) 859-4000
<PAGE> 150
Section 8.6. Assignment; Binding Effect. Except as may be required by
any Alternative Transaction adopted pursuant to Section 1.7, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise)
without the prior written consent of the other parties; provided however, that
Merger Sub may assign all of its rights and obligations under this Agreement and
the transactions contemplated hereby to any other wholly owned Subsidiary of
Parent. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 8.7. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
Section 8.8. Enforcement of Agreement. The parties hereto agree that
money damages or other remedy at Law would not be sufficient or adequate remedy
for any breach or violation of, or a default under, this Agreement by them and
that in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by Law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 8.9. Miscellaneous. This Agreement:
(a) along with the Confidentiality Agreements, Exhibits and Disclosure
Letters hereto, constitutes the entire agreement, and supersedes all other prior
agreements and understandings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof and thereof; and
(b) except for the provisions of Section 5.10, is not intended to and
shall not confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 8.10. Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11. Certain Definitions. References in this Agreement to
"Subsidiaries" of the Company or Parent shall mean any corporation or other form
of legal entity of which more than 50% of the outstanding voting securities are
on the date hereof directly or indirectly owned by the Company or Parent, as the
case may be. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
"U.S. Subsidiary" shall mean a Subsidiary organized under the laws of any state
of the United States or the District of Columbia.
Section 8.12. Knowledge. Reference to the "knowledge" of any person
that is not an individual shall be to the knowledge of the executive officers of
such person and, with respect to representations and warranties made or deemed
to be made as of the Closing Date, unless expressly limited to a specified date
of this Agreement, shall include knowledge obtained at any time after the date
hereof and prior to the Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
SPX CORPORATION
By: /s/ Christopher J. Kearney
--------------------------------------
Name: Christopher J. Kearney
Title: Vice President, Secretary
and General Counsel
SAC CORP.
By: /s/ Christopher J. Kearney
<PAGE> 151
--------------------------------------
Name: Christopher J. Kearney
Title: Vice President and Secretary
GENERAL SIGNAL CORPORATION
By: /s/ Michael D. Lockhart
--------------------------------------
Name: Michael D. Lockhart
Title: Chairman, President and
Chief Executive Officer
<PAGE> 152
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
SAC Corp.
Pursuant to ss. 102 of the General Corporation Law
of the State of Delaware
The undersigned, in order to form a corporation pursuant to Section 102
of the General Corporation Law of Delaware, does hereby certify:
FIRST: The name of the Corporation is SAC Corp.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 1000 shares of Common Stock, par value $.01 per share.
FIFTH: The name and mailing address of the Incorporator is as follows:
Name Mailing Address
---- ---------------
David M. Susswein Fried, Frank, Harris, Shriver &
Jacobson
One New York Plaza
New York, New York 10004-1980
SIXTH: The Board of Directors is expressly authorized to adopt, amend,
or repeal the by-laws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall otherwise provide.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of Delaware is hereafter amended to
permit further elimination or limitation of the personal liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of
Delaware as so amended. Any repeal or modification of this Article EIGHTH by the
stockholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
NINTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
# # #
IN WITNESS WHEREOF, I have hereunto set my hand this day of , 1998 and
I affirm that the foregoing certificate is my act and deed and that the facts
stated therein are true.
--------------------------------------
<PAGE> 153
EXHIBIT B
[FORM OF TAX OPINION OF WACHTELL, LIPTON, ROSEN & KATZ]
, 1998
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, Connecticut 06904
Ladies and Gentlemen:
We have acted as special counsel to General Signal Corporation, a New
York corporation ("General Signal"), in connection with the proposed merger of
General Signal and Sac Corp. ("Subcorp"), a Delaware corporation and a wholly
owned subsidiary of SPX Corporation, a Delaware corporation ("SPX"), in which
General Signal will merge with and into Subcorp (the "Merger") with Subcorp
surviving as a wholly owned subsidiary of SPX, pursuant to the Agreement and
Plan of Merger dated as of July 19, 1998 (the "Agreement"). At your request, and
pursuant to Section 6.1(f) of the Agreement, we are rendering our opinion
concerning certain federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of SPX and the consent of General Signal, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of SPX and General Signal
dated the date hereof, and have assumed that such statements and representations
will be complete and accurate as of the Effective Time. We have also relied upon
the accuracy of the Registration Statement of SPX on Form S-4 (the "Registration
Statement") and the joint proxy statement/prospectus of SPX and General Signal
(the "Joint Proxy Statement/Prospectus") filed with the Securities and Exchange
Commission in connection with the Merger. Any capitalized term used and not
defined herein has the meaning given to it in the Joint Proxy
Statement/Prospectus or the appendices thereto (including the Agreement).
We have also assumed that (i) the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement/Prospectus, (ii) the Merger will be reported by SPX and
General Signal on their respective federal income tax returns in a manner
consistent with the opinion set forth below, and (iii) the Merger will qualify
as a statutory merger under the applicable laws of the State of New York and the
State of Delaware.
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that the Merger will
be treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us in the Joint Proxy Statement/Prospectus. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
<PAGE> 154
EXHIBIT C
[FORM OF OPINION OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
, 1998
SPX Corporation
700 Terrace Point Drive
P.O. Box 3301
Muskegan, MI 49443
Ladies and Gentlemen:
We have acted as special counsel to SPX Corporation, a Delaware
corporation ("SPX"), in connection with the proposed merger (the "Merger") of
General Signal Corporation, a New York corporation ("General Signal") into SAC
Corp., a Delaware corporation ("Merger Sub"), and a wholly owned subsidiary of
Sam pursuant to the Agreement and Plan of Merger dated as of July 19, 1998 (the
"Merger Agreement").
In reaching the opinion expressed below, we have relied upon the
completeness and accuracy of the representations and statements made by General
Signal and SPX contained, respectively, in the certificates of the officers of
General Signal and SPX dated the date hereof (which representations and
statements we have neither investigated nor verified) and we have assumed that
such representations and statements will be complete and accurate as of the
Effective Time. We have also relied upon the accuracy of the Registration
Statement of SPX on Form S-4 (the "Registration Statement") and the joint proxy
statement/prospectus of SPX and General Signal (the "Joint Proxy
Statement/Prospectus") filed with the Securities and Exchange Commission in
connection with the Merger. Any capitalized term used and not defined herein has
the meaning given to it in the Joint Proxy Statement/Prospectus or the
appendices thereto (including the Merger Agreement).
We have also assumed that the Merger and related transactions will take
place in accordance with all of the terms of the Merger Agreement and as
described in the Joint Proxy Statement/Prospectus, and that the Merger will
qualify as a statutory Merger under the applicable laws of the State of New York
and the State of Delaware.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable United States federal income tax law, the Merger will
constitute a reorganization for federal income tax purposes within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us in the Joint Proxy Statement/Prospectus. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By:
-----------------------------------
<PAGE> 155
APPENDIX B
OPINION OF STERN STEWART & CO.
<PAGE> 156
July 19, 1998
The Board of Directors
SPX Corporation
700 Terrace Point Drive
Muskegon, Michigan 49443
Attention: Mr. John B. Blystone
President, Chief Executive Officer
and Chairman of the Board
Gentlemen and Madam:
You have requested our opinion as to the fairness, from a financial point of
view, to SPX Corporation ("SPX" or "the Company") of the consideration to be
paid by the Company in the proposed acquisition of General Signal Corporation
("General Signal"), pursuant to the Agreement and Plan of Merger, dated as of
July 19, 1998, among SPX, SAC Corp., a wholly owned subsidiary of SPX, and
General Signal (the "Definitive Agreement"). Pursuant to the Definitive
Agreement, General Signal will be merged with and into SAC Corp., and each
outstanding share of General Signal common stock will be converted into, subject
to the allocation and election procedures set forth in the Definitive Agreement,
(i) $45.00 in cash, or (ii) 0.4186 shares of SPX common stock and $18.00 in
cash, or (iii) 0.6977 shares of SPX common stock (the "Merger Consideration").
Stern Stewart & Co., as part of its corporate financial advisory business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. We presently are serving as financial
advisor to SPX and will receive a fee for rendering this opinion. We previously
have advised the management and the Board of Directors of the Company with
respect to financial strategy and dividend policy, and the leveraged stock
repurchase that was executed in April 1997.
In connection with our opinion, we have reviewed financial and other information
that was furnished to us by the Company, including information provided during
discussions with management and forward-looking projections. Our valuation
calculations were based upon Stern Stewart's proprietary EVA(R) valuation
methodology and discounted cash flow analysis. In addition, we have compared
certain financial data of General Signal with various other companies whose
securities are publicly traded, reviewed prices and premiums paid in other
similar transactions, and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion. Such other
studies included a comparison of the historical stock price performance of
General Signal with selected peer companies and with the Standard & Poor's 500
Index, and a calculation of the implied growth value in the present stock price
of General Signal, as well as the proposed purchase price, and a comparison of
such findings to similar analyses of the peer companies' market capitalizations.
We have not made an independent evaluation or appraisal of any of the assets or
liabilities of General Signal, nor have we been furnished with such appraisals.
In rendering this opinion, we have relied, without independent verification, on
the accuracy and completeness of all financial and other information that was
furnished or otherwise communicated to us by the Company. With respect to the
financial information and forecasts examined by us, we have assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgement of SPX's management as to the future
performance of General Signal.
On the basis of and subject to the foregoing, as of the date hereof, it is our
opinion that the aggregate Merger Consideration to be paid in the acquisition of
General Signal is fair, from a financial point of view, to SPX.
Sincerely yours,
STERN STEWART & CO.
By: /s/ Dennis Soter
---------------------------
Dennis Soter
Partner
<PAGE> 157
APPENDIX C
OPINION OF LAZARD FRERES & CO. LLC
<PAGE> 158
July 19, 1998
The Board of Directors
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, CT 06904
Dear Members of the Board:
We understand that General Signal Corporation ("GSX") and SPX
Corporation ("SPX") have entered into an Agreement and Plan of Merger dated as
of July 19, 1998 (the "Agreement"), pursuant to which GSX will merge with and
into a subsidiary of SPX (the "Merger") for a combination of shares of SPX
Common Stock and cash. Pursuant to the Agreement, subject to proration, each
share of GSX Common Stock will be converted into either (i) 0.6977 of a share of
SPX Common Stock together with related rights, (ii) $45.00 in cash or (iii)
0.4186 of a share of SPX Common Stock and related rights and $18.00 in cash
(collectively, the "Merger Consideration").
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of shares of GSX Common Stock of the aggregate
Merger Consideration. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to GSX and SPX;
(iii) Reviewed various financial forecasts and other data provided to
us by GSX and SPX relating to their respective businesses;
(iv) Held discussions with members of the senior managements of GSX
and SPX with respect to the businesses and prospects of GSX and
SPX, respectively, the strategic objectives of each, and
possible benefits which might be realized following the Merger;
(v) Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the businesses of GSX and SPX;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to those of GSX and SPX, and in other
industries generally;
(vii) Reviewed the historical stock prices and trading volumes of the
shares of GSX Common Stock and the shares of SPX Common Stock;
and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of GSX or SPX, or concerning the solvency of,
or other related solvency issues with respect to, either of the foregoing
entities. With respect to financial forecasts, including the potential benefits
projected to be realized following the Merger, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of GSX and SPX as to the future financial
performance of GSX and SPX, respectively. We assume no responsibility for and
express no view as to such forecasts or the assumptions on which they are based.
In addition, we are not expressing any opinion as to the prices at which shares
of SPX Common Stock may trade following the date of this opinion.
Further, our opinion is necessarily based on accounting standards,
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by GSX, that the Merger will be consummated using
reverse purchase accounting, and that obtaining the necessary regulatory
approvals for the Merger will not have an adverse effect on GSX or SPX.
We are acting as investment banker to GSX in connection with the
Merger and will receive a fee for our services, a substantial portion of which
is contingent upon consummation of the Merger. We have in the past provided, and
are currently providing, investment banking services to GSX
<PAGE> 159
for which we have received and anticipate receiving customary fees.
Our engagement and the opinion expressed herein are for the benefit of
the Board of Directors of GSX and our opinion is rendered to GSX's Board in
connection with its consideration of the Merger.
This opinion is not intended to and does not constitute a
recommendation to any holder of shares of GSX Common Stock as to whether such
stockholder should vote for the Merger or with regard to any election of
alternative forms of Merger Consideration. It is understood that this letter
may not be disclosed or otherwise referred to without our prior consent, except
as may otherwise be required by law or by a court of competent jurisdiction;
provided, however, that this opinion may be reproduced in full in the Proxy
Statement of GSX relating to a vote of the holders of GSX Common Stock with
respect to the Agreement.
Based on and subject to the foregoing, we are of the opinion that, as
of the date hereof, the aggregate Merger Consideration is fair to the holders of
shares of GSX Common Stock from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ J. Robert Lovejoy
--------------------------------
J. Robert Lovejoy
Managing Director
<PAGE> 160
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
authorizes and empowers SPX to indemnify the directors, officers, employees and
agents of SPX against liabilities incurred in connection with, and related
expenses resulting from, any claim, action or suit brought against any such
person as a result of his relationship with SPX, provided that such persons
acted in good faith and in a manner such person reasonably believed to be in,
and not opposed to, the best interests of SPX in connection with the acts or
events on which such claim, action or suit is based. The finding of either civil
or criminal liability on the part of such persons in connection with such acts
or events is not necessarily determinative of the question of whether such
persons have met the required standard of conduct and are, accordingly, entitled
to be indemnified. The foregoing statements are subject to the detailed
provisions of Section 145 of the General Corporation Law of the State of
Delaware.
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. 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, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise. SPX is authorized
to purchase and maintain insurance on behalf of its directors and officers.
In the Merger Agreement, SPX and MergerSub have agreed that all rights to
exculpation and indemnification for acts or omissions occurring at or prior to
the Effective Time now existing in favor of the current or former directors or
officers of General Signal or any of its subsidiaries as provided in General
Signal's Certificate of Incorporation or By-Laws or in any agreement will
survive the Merger and continue in full force and effect. For six years from the
Effective Time, SPX will indemnify such persons to the fullest extent permitted
by applicable law and will use its reasonable best efforts to obtain and
maintain in effect, or cause the Surviving Corporation to obtain and maintain in
effect, General Signal's current directors' and officers' liability insurance
covering those persons who are currently covered by General Signal's insurance
policy, provided that SPX will not be required to pay an annual premium for such
insurance in excess of 200% of the annual premiums currently paid by General
Signal, but in that case must purchase as much coverage as possible for that
amount.
II - 1
<PAGE> 161
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Set forth below is a list of the exhibits included as part of this
Registration Statement.
EXHIBIT NO. DESCRIPTION
----------- -----------
2* Agreement and Plan of Merger, dated as of July 19,
1997, among SPX, MergerSub and General Signal
(included as Appendix A to the Joint Proxy
Statement/Prospectus).
3(i) Restated Certificate of Incorporation, incorporated
herein by reference from the Registrant's Quarterly
Report on Form 10-Q, file No. 1-6948, for the
quarter ended June 30, 1998.
(ii) Certificate of Ownership and Merger dated April 25,
1988, incorporated herein by reference from the
Registrant's Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(iii) By-Laws as amended through October 25, 1995,
incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q, file
No. 1-6948, for the quarter ended September 30,
1995.
4(i) 11 3/4% Senior Subordinated Notes due 2002,
incorporated herein by reference from the
Registrant's Amendment No. 2 to Form S-3
Registration Statement 33-52833, filed on
May 27, 1994.
(ii) Indenture, dated as of June 6, 1994, between the
Registrant and The Bank of New York, as trustee,
relating to the 11 3/4% Senior Subordinated Notes
due 2002, incorporated herein by reference from the
Registrant's Amendment No. 2 to Form S-3
Registration Statement 33-52833, filed on May 27,
1994.
(iii) Rights Agreement, dated as of June 25, 1996 between
the Registrant and The Bank of New York, as Rights
Agent, relating to Rights to purchase preferred
stock under certain circumstances, incorporated
herein by reference from the Registrant's
Registration Statement on Form 8-A, filed on June
26, 1996.
(iv) Amendment No. 1 to Rights Agreement, effective
October 22, 1997, between the Registrant and The
Bank of New York, incorporated herein by reference
from the Registrant's Registration Statement on
Form 8-A/A, filed on January 9, 1998.
(v) Credit Agreement between the Registrant and The
First National Bank of Chicago, as agent for the
banks named therein, dated as of May 7, 1997,
incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q, file
No. 1-6948, for the quarter ended March 31, 1997.
(vi) Amendment No. 1 and Waiver to Credit Agreement
between SPX Corporation and The First National Bank
of Chicago, as agent for the banks named therein,
dated as of December 19, 1997, incorporated herein
by reference to the Registrant's Annual Report on
Form 10-K, file No. 1-6948, for the year ended
December 31, 1997.
5** Opinion of Fried, Frank, Harris, Shriver &
Jacobson as to the legality of the shares
of common stock being offered.
8(i)** Opinion of Fried, Frank, Harris, Shriver & Jacobson
(ii)** Opinion of Wachtell, Lipton, Rosen & Katz
10(i) Sealed Power Corporation Executive Performance
Unit Plan, incorporated herein by reference from
the Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
II - 2
<PAGE> 162
(ii) SPX Corporation Retirement Plan for Directors, as
amended and restated, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(iii) SPX Corporation Supplemental Retirement Plan for
Top Management, as amended and restated,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(iv) SPX Corporation Excess Benefit Plan No. 3, as
amended and restated, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(v) SPX Corporation Executive Severance Agreement,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(vi) SPX Corporation Trust Agreement for Supplemental
Retirement Plan for Top Management, Excess Benefit
Plan No. 3, and Retirement Plan for Directors,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(vii) SPX Corporation Trust Agreement for Participants in
Executive Severance Agreements, Special Separation
Pay Plan for Corporate Staff Executive Personnel
Agreements and Special Separation Pay Plan for
Corporate Staff Management and Administrative
Personnel Agreements, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(viii) SPX Corporation Stock Compensation Plan Limited
Stock Appreciation Rights Award, incorporated
herein by reference from the Registrant's Amendment
No. 1 on Form 8 to the Annual Report on Form 10-K,
file No. 1-6948, for the year ended December 31,
1988.
(ix) SPX Corporation Stock Ownership Plan, incorporated
herein by reference from the Registrant's Current
Report on Form 8-K, file No. 1-6948, filed on July
26, 1989.
(x) SPX Corporation Stock Ownership Trust, incorporated
herein by reference from the Registrant's Current
Report on Form 8-K, file No. 1-6948, filed on July
26, 1989.
(xi) SPX Corporation 1992 Stock Compensation Plan,
incorporated herein by reference from Exhibit
10(iii)(n) to the Registrant's Annual Report on
Form 10-K, file No. 1-6948, for the year ended
December 31, 1992.
(xii) SPX Corporation Supplemental Employee Stock
Ownership Plan, incorporated herein by reference
from the Registrant's Annual Report on Form 10-K,
file No. 1-6948, for the year ended December 31,
1990.
(xiii) Employment agreement, and related Nonqualified
Stock Option Agreement and Restricted Shares
Agreement, between the Registrant and John B.
Blystone dated as of November 24, 1995,
incorporated herein by reference to the
Registrant's Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1995.
(xiv) Employment agreement between the Registrant and
John B. Blystone dated as of January 1, 1997,
incorporated herein by reference to the
Registrant's Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1996.
21 Subsidiaries of the Registrant incorporated herein
by reference to the Registrant's Annual Report on
Form 10-K, file No. 1-6948, for the year ended
December 31, 1997
II - 3
<PAGE> 163
23(i)* Consent of Arthur Andersen LLP, independent public
accountants for SPX Corporation.
(ii)* Consent of Ernst & Young LLP, independent auditors for
General Signal Corporation.
(iii)** Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(ii))
(iv)** Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibits 5 and 8(i)).
(v)* Consent of Lazard Freres & Co. LLC.
(vi)* Consent of Stern Stewart & Co.
24* Powers of Attorney.
99(i)** SPX Proxy Card.
(ii)** General Signal Proxy Card.
(iii)** Form of Election.
(iv)** Form of Transmittal Letter.
(v)* Opinion of Stern Stewart & Co., financial advisor of
SPX (included as Appendix B to the Joint Proxy
Statement/Prospectus).
(vi)* Opinion of Lazard Freres & Co. LLC, investment banker
of General Signal (included as Appendix C to the Joint
Proxy Statement/Prospectus).
(vii)* Consent of Emerson U. Fullwood.
(viii)** Consent of H. Kent Bowen.
- -----------------------------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
All the schedules are omitted because they are not required, are not
applicable or the information is included in the selected consolidated financial
data or notes thereto contained herein.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
II - 4
<PAGE> 164
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that the undertakings set forth in paragraphs
(1)(i) and (ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulations S-X is not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference to
provide such interim financial information.
(6) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of
the applicable form.
(7) That every prospectus (i) that is filed pursuant to the
immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13
of this Form within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
II - 5
<PAGE> 165
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by the
Registrant of expenses incurred by a director, officer or controlling person of
the Registrant of expenses incurred by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
II - 6
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Muskegon,
State of Michigan, on August 6, 1998.
SPX Corporation
By: /s/ Christopher J. Kearney
-----------------------------
Christopher J. Kearney
Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons (who
include all members of the Board of Directors) in the capacities indicated on
August 6, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman, President and Chief Executive Officer
________________________ and Director (Principal Executive Officer)
John B. Blystone
*
________________________ Director
J. Kermit Campbell
*
________________________ Director
Frank A. Ehmann
*
________________________ Director
Charles E. Johnson II
*
________________________ Director
Peter H. Merlin
*
________________________ Director
Sarah R. Coffin
*
________________________ Director
Ronald L. Kerber
*
________________________ Director
David P. Williams
*
________________________ Vice President - Finance, Treasurer and
Patrick J. O'Leary Chief Financial Officer (Principal Financial Officer)
*
________________________ Controller (Principal Accounting Officer)
Kenneth C. Dow
*By /s/ Christopher J. Kearney
-----------------------------
Christopher J. Kearney
As Attorney-In-Fact
</TABLE>
II - 7
<PAGE> 167
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<S> <C> <C>
2* Agreement and Plan of Merger, dated as of July 19,
1997, among SPX, MergerSub and General Signal
(included as Appendix A to the Joint Proxy
Statement/Prospectus).
3(i) Restated Certificate of Incorporation, incorporated
herein by reference from the Registrant's Quarterly
Report on Form 10-Q, file No. 1-6948, for the
quarter ended June 30, 1998.
(ii) Certificate of Ownership and Merger dated April 25,
1988, incorporated herein by reference from the
Registrant's Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(iii) By-Laws as amended through October 25, 1995,
incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q, file
No. 1-6948, for the quarter ended September 30,
1995.
4(i) Rights Agreement, dated as of June 25, 1996 between
the Registrant and The Bank of New York, as Rights
Agent, relating to Rights to purchase preferred
stock under certain circumstances, incorporated
herein by reference from the Registrant's
Registration Statement on Form 8-A, filed on June
26, 1996.
(ii) Amendment No. 1 to Rights Agreement, effective
October 22, 1997, between the Registrant and The
Bank of New York, incorporated herein by reference
from the Registrant's Registration Statement on
Form 8-A/A, filed on January 9, 1998.
(iii) Credit Agreement between the Registrant and The
First National Bank of Chicago, as agent for the
banks named therein, dated as of May 7, 1997,
incorporated herein by reference from the
Registrant's Quarterly Report on Form 10-Q, file
No. 1-6948, for the quarter ended March 31, 1997.
(iv) Amendment No. 1 and Waiver to Credit Agreement
between SPX Corporation and The First National Bank
of Chicago, as agent for the banks named therein,
dated as of December 19, 1997, incorporated herein
by reference to the Registrant's Annual Report on
Form 10-K, file No. 1-6948, for the year ended
December 31, 1997.
5** Opinion of Fried, Frank, Harris, Shriver & Jacobson
as to the legality of the shares of common stock
being offered.
8(i)** Opinion of Fried, Frank, Harris, Shriver & Jacobson.
(ii)** Opinion of Wachtell, Lipton, Rosen & Katz
10(i) Sealed Power Corporation Executive Performance Unit
Plan, incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
</TABLE>
<PAGE> 168
(ii) SPX Corporation Retirement Plan for Directors, as
amended and restated, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(iii) SPX Corporation Supplemental Retirement Plan for
Top Management, as amended and restated,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(iv) SPX Corporation Excess Benefit Plan No. 3, as
amended and restated, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(v) SPX Corporation Executive Severance Agreement,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(vi) SPX Corporation Trust Agreement for Supplemental
Retirement Plan for Top Management, Excess Benefit
Plan No. 3, and Retirement Plan for Directors,
incorporated herein by reference from the
Registrant's Amendment No. 1 on Form 8 to the
Annual Report on Form 10-K, file No. 1-6948, for
the year ended December 31, 1988.
(vii) SPX Corporation Trust Agreement for Participants in
Executive Severance Agreements, Special Separation
Pay Plan for Corporate Staff Executive Personnel
Agreements and Special Separation Pay Plan for
Corporate Staff Management and Administrative
Personnel Agreements, incorporated herein by
reference from the Registrant's Amendment No. 1 on
Form 8 to the Annual Report on Form 10-K, file No.
1-6948, for the year ended December 31, 1988.
(viii) SPX Corporation Stock Compensation Plan Limited
Stock Appreciation Rights Award, incorporated
herein by reference from the Registrant's Amendment
No. 1 on Form 8 to the Annual Report on Form 10-K,
file No. 1-6948, for the year ended December 31,
1988.
(ix) SPX Corporation Stock Ownership Plan, incorporated
herein by reference from the Registrant's Current
Report on Form 8-K, file No. 1-6948, filed on July
26, 1989.
(x) SPX Corporation Stock Ownership Trust, incorporated
herein by reference from the Registrant's Current
Report on Form 8-K, file No. 1-6948, filed on July
26, 1989.
(xi) SPX Corporation 1992 Stock Compensation Plan,
incorporated herein by reference from Exhibit
10(iii)(n) to the Registrant's Annual Report on
Form 10-K, file No. 1-6948, for the year ended
December 31, 1992.
(xii) SPX Corporation Supplemental Employee Stock
Ownership Plan, incorporated herein by reference
from the Registrant's Annual Report on Form 10-K,
file No. 1-6948, for the year ended December 31,
1990.
- 2 -
<PAGE> 169
(xiii) Employment agreement, and related Nonqualified Stock
Option Agreement and Restricted Shares Agreement,
between the Registrant and John B. Blystone dated as
of November 24, 1995, incorporated herein by reference
to the Registrant's Annual Report on Form 10-K, file
No. 1-6948, for the year ended December 31, 1995.
(xiv) Employment agreement between the Registrant and John
B. Blystone dated as of January 1, 1997, incorporated
herein by reference to the Registrant's Annual Report
on Form 10-K, file No. 1-6948, for the year ended
December 31, 1996.
21 Subsidiaries of the Registrant incorporated herein by
reference to the Registrant's Annual Report on Form
10-K, file No. 1-6948, for the year ended December 31,
1997
23(i)* Consent of Arthur Andersen LLP, independent public
accountants for SPX Corporation.
(ii)* Consent of Ernst & Young LLP, independent auditors for
General Signal Corporation.
(iii)** Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(ii))
(iv)** Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibits 5 and 8(i)).
(v)* Consent of Lazard Freres & Co. LLC.
(vi)* Consent of Stern Stewart & Co.
24* Powers of Attorney.
99(i)** SPX Proxy Card.
(ii)** General Signal Proxy Card.
(iii)** Form of Election.
(iv)** Form of Transmittal Letter.
(v)* Opinion of Stern Stewart & Co., financial advisor of
SPX (included as Appendix B to the Joint Proxy
Statement/Prospectus).
(vi)* Opinion of Lazard Freres & Co. LLC, investment banker
of General Signal (included as Appendix C to the Joint
Proxy Statement/Prospectus).
(vii)* Consent of Emerson U. Fullwood.
(viii)** Consent of H. Kent Bowen.
- --------------------
* Filed herewith.
** To be filed by amendment.
- 3 -
<PAGE> 1
Exhibit 23(i)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 5, 1998
(except with respect to the matter discussed in Note 17, as to which the date is
February 17, 1998), included in SPX Corporation's Form 10-K for the year ended
December 31, 1997, and to all references to our Firm included in or made a part
of this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 6, 1998
<PAGE> 1
Exhibit 23(ii)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of SPX Corporation for the registration of
18,227,270 shares of its common stock.
We also consent to the incorporation by reference therein of our report dated
January 23, 1998 with respect to the financial statements and schedule of
General Signal Corporation for the years ended December 31, 1997, 1996, and 1995
included in the General Signal Corporation Annual Report (Form 10-K) for 1997
filed with the Securities and Exchange Commission.
Ernst & Young LLP
Stamford, Connecticut
August 5, 1998
<PAGE> 1
Exhibit 23(v)
August 5, 1998
General Signal Corporation
One High Ridge Park
P.O. Box 10010
Stamford, CT 06904
We hereby consent to (i) the inclusion of our opinion letter to the
Board of Directors of General Signal Corporation as Annex C to the Joint Proxy
Statement/Prospectus and (ii) the reference to such opinion in the Joint Proxy
Statement/Prospectus. In giving such consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ J. Robert Lovejoy
-------------------------
J. Robert Lovejoy
Managing Director
<PAGE> 1
Exhibit 23(vi)
[Stern Stewart Letterhead]
August 3, 1998
SPX Corporation
700 Terrace Point Drive
Muskegon, MI 49443
We hereby consent to the (i) inclusion of our opinion letter to the
Board of Directors of SPX Corporation as Appendix B to the Proxy Statement /
Prospectus and (ii) the reference to such opinion in the Proxy Statement /
Prospectus. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Sincerely yours,
STERN STEWART & CO.
By: /s/ Dennis Soter
-----------------
Dennis Soter
Partner
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT the undersigned directors and
officers of SPX Corporation, a Delaware corporation (the "Company"), do hereby
constitute and appoint Christopher J. Kearney and Patrick J. O'Leary his or her
true and lawful attorney and agent, each with full power and authority (acting
alone and without the other) to execute in the name and on behalf of the
undersigned as such Director and/or Officer, a Registration Statement on Form
S-4 under the Securities Act of 1933, as amended, with respect to the
registration of shares of the Company's Common Stock that may be issued in
connection with the proposed merger of General Signal Corporation into a wholly
owned subsidiary of the Company, and to execute any and all amendments to such
Registration Statement, whether filed prior or subsequent to the time such
Registration Statement becomes effective. The undersigned hereby grants unto
such attorneys and agents, and each of them, full power of substitution and
revocation in the premises and hereby ratifies and confirms all that such
attorneys and agents may do or cause to be done by virtue of these presents.
Signature Capacity
--------- --------
/s/ John B. Blystone Chairman, President, Chief Executive
------------------------------ Officer and Director
John B. Blystone
/s/ Patrick J. O'Leary Vice President - Finance, Treasurer and
------------------------------ Chief Financial Officer
Patrick J. O'Leary
/s/ Kenneth C. Dow Controller
------------------------------
Kenneth C. Dow
/s/ J. Kermit Campbell Director
------------------------------
J. Kermit Campbell
/s/ Sarah R. Coffin Director
------------------------------
Sarah R. Coffin
/s/ Frank A. Ehmann Director
------------------------------
Frank A. Ehmann
/s/ Charles E. Johnson, II Director
------------------------------
Charles E. Johnson, II
/s/ Ronald L. Kerber Director
------------------------------
Ronald L. Kerber
/s/ Peter H. Merlin Director
------------------------------
Peter H. Merlin
/s/ David P. Williams Director
------------------------------
David P. Williams
Dated: August 6, 1998
<PAGE> 1
Exhibit 99(vii)
Consent
Reference is made to the Registration Statement on Form S-4 , and to
the Joint Proxy Statement/Prospectus which forms a part thereof (together, the
"Registration Statement"), to be filed with the Securities and Exchange
Commission by SPX Corporation in connection with its combination with General
Signal Corporation. In accordance with Rule 438 under the Securities Act of
1933, as amended, the undersigned hereby consents to being named in the
Registration Statement, and any subsequent amendments thereto, as a person who
is about to become a director of SPX Corporation.
/s/ Emerson U. Fullwood
-----------------------
August 6, 1998 Emerson U. Fullwood
