-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlpekkBSdy/AgfDfzdUy6sua2k7tnI76gPTr9O9Ir320lMK8wp5NbWLhYXnSZvjX MhtpL+HW0L3c8ZkIcBvtsw== 0000040834-96-000004.txt : 19960326 0000040834-96-000004.hdr.sgml : 19960326 ACCESSION NUMBER: 0000040834-96-000004 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960325 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 160445660 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 96537880 BUSINESS ADDRESS: STREET 1: ONE HIGH RIDGE PARK CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2033578800 MAIL ADDRESS: STREET 1: P O BOX 10010 CITY: STAMFORD STATE: CT ZIP: 06904 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL RAILWAY SIGNAL CO DATE OF NAME CHANGE: 19710926 10-K405 1 GENERAL SIGNAL CORPORATION 1995 10-K U.S. Securities and Exchange Commission Washington, DC 20549 General Signal Corporation 1995 Form 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File No. 1-996 General Signal Corporation Box 10010 High Ridge Park, Stamford, Connecticut 06904 Telephone Number (203) 329-4100 IRS Employer Identification No. 16-0445660 State of Incorporation: New York Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - -------------------------------------------------------------------------------- Common Stock New York Stock Exchange par value $1.00 (Par value reduced Pacific Stock Exchange from $6.67 effective April 21, 1969) 5.75% Convertible New York Stock Exchange Subordinated Debentures due June 1, 2002 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates as of March 15, 1996 was approximately $1.8 billion. As of March 15, 1996, there were 49.6 million shares of General Signal Corporation common stock outstanding. Documents incorporated by reference Part - -------------------------------------------------------------------------------- Annual Report to Shareholders for the Fiscal Year Ended December 31, 1995 I, II, IV Proxy Statement for 1996 Annual Meeting III Table of Contents Item Page 1 Business ..................................................... 1 2 Properties ................................................... 4 3 Legal Proceedings ............................................ 4 4 Submission of Matters to a Vote of Security Holders ..................................... 4 5 Market for the Registrant's Common Stock and Related Shareholder Matters ........................ 4 6 Selected Financial Data ...................................... 4 7 Management's Discussion and Analysis of Financial Condition and Results of Operations .................................... 4 8 Financial Statements and Supplementary Data ........................................... 4 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..................................... 4 10 Directors and Executive Officers ............................. 4 11 Executive Compensation ....................................... 4 12 Security Ownership of Certain Beneficial Owners and Management ............................. 4 13 Certain Relationships and Related Transactions ......................................... 4 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K ............................ 5 Note: Some of the information required in this Form 10-K report ("10-K") was presented in the General Signal Corporation 1995 Annual Report to Shareholders ("Shareholders' Report") and is incorporated herein by reference. A complete copy of the Shareholders' Report is bound on the outside of this 10-K to facilitate reference. Except for those sections specifically referred to as being incorporated herein by reference, the Shareholders' Report shall not be deemed to be "filed" as part of this 10-K. The registrant is also referred to as "the company." Part I - ------ Item 1. Business General Developments General Signal Corporation, incorporated in New York in 1904, is a manufacturer of equipment for the Process Controls, Electrical Controls and Industrial Technology industries. The company's key Process industry products include pumps, mixers, and valves for municipal water supply and wastewater treatment, pulp, paper, food, pharmaceutical and chemical manufacturing and ultra low-temperature freezers for life science research. In the Electrical industry, key products include uninterruptible power supply and conditioning 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. In November 1994, the company adopted a plan to sell Leeds & Northrup, formerly a part of the Process Controls business sector, and Dynapower/Stratopower, formerly a part of the Industrial Technology business sector. In 1995, the Company sold the majority of these businesses. The remainder are expected to be sold or shut down in 1996. During the last five years, the company invested approximately $440 million in cash and 4.4 million shares of common stock to acquire 20 businesses and/or product lines. The notes to the financial statements on pages 32 and 33 of the Shareholders' Report provide additional information for significant acquisitions during the last three years and are incorporated herein by reference. Financial Information about Business Segments Selected business segment information for the last five fiscal years is summarized on page 35 of the Shareholders' Report and is incorporated herein by reference. There were no classes of similar products or services that exceeded 10 percent of consolidat ed sales. A summary of information by geographic area for the last five fiscal years is included on page 36 of the Shareholders' Report and is incorporated herein by reference. Narrative Description of Business Major Markets and Products and Method of Distribution A description of the registrant's business is included on pages 6 and 7 of the Shareholders' Report and is incorporated herein by reference. The company's products are sold by its own sales organization and through distributors and manufacturers' representatives. Materials and Supplies The company manufactures many of the components used in its products, but it also purchases a variety of basic materials and component parts. Although some basic materials and components have been and may be in short supply from time to time, the company believes that generally it will be able to obtain adequate supplies of major items or reasonable substitutes. Patents The company holds many patents and has continued to secure other patents that cover many of its products. While patents are important in the aggregate to the company's competitive position, the loss of any single patent, patent application or patent license agreement, or group thereof, would not materially affect the conduct of its business as a whole. The company is both a licensor and licensee of patents. Working Capital A discussion of working capital is included on pages 19 and 20 of the Shareholders' Report and is incorporated herein by reference. Backlog The amount of unfilled orders was approximately $435.8 million as of December 31, 1995 and $307.2 million as of December 31, 1994 (excluding unfilled orders of businesses sold or discontinued). All unfilled orders are expected to be filled within the next succeeding year. Competition Although the businesses of the company are highly competitive, the competitive position cannot be determined accurately in the aggregate or by segment since none of its competitors offers all of the same product lines or serves all of the same markets, nor are reliable comparative figures available for its competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are price, service, product performance and technical innovation. These methods vary with the type of product sold. The company believes that it can compete effectively on the basis of each of these factors as they apply to the various products offered. Research and Development Research and development information for the last three years is included on page 36 of the Shareholders' Report and is incorporated herein by reference. Environmental Matters The company is involved in various stages of investigation and remediation relative to environmental protection matters, arising from its own initiative, from indemnification of purchasers of divested operations, or from legal or administrative proceedings, some of which involve waste disposal sites. The company has a comprehensive environmental compliance program which includes environmental audits conducted by internal and outside independent environmental professionals and regular communications with the company's operating units regarding environmental compliance requirements and anticipated regulations. Pursuant to the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the company has been notified that it has been named as a potentially responsible party ("PRP") at 34 CERCLA sites which are listed on the National Priorities List ("NPL") maintained by the U.S. Environmental Protection Agency ("EPA"). The law governing CERCLA sites provides that PRPs may be jointly and severally liable for the total costs of investigation and remediation. Based on information available to the company, at five of these sites (Byron Barrell in Byron, NY; Iron Horse Park in Billerica, MA; M.T. Richards in Crossville, IL; Doepke-Holliday in Holliday, KS; and North Penn Water Authority in Montgomery Co., PA), the company believes that its aggregate probable remaining liability will not exceed $3.0 million. At five sites (Berks Associates in Douglasville, PA; 1 Commercial Oil Services in Oregon, OH; West KL in Kalamazoo, MI; Spectron in Elkton, MD; and Stringfellow in Riverside, CA) the company is of the opinion, based on information currently available, that it contributed less than one percent of the total volume, weight or other allocation criteria at each site and the company believes its aggregate probable remaining liability for these sites will not exceed $350,000. At 16 of the remaining 24 CERCLA NPL sites, the company has resolved its liability by entering into de minimis settlements or buy-out agreements with either the EPA or PRP groups and paying its proportionate share of costs of site investigation and remediation (at an aggregate cost to the company of less than $600,000). The company believes, based on information currently available, that it has no liability at seven CERCLA NPL sites since the company's investigation has not revealed either a record of its having transported or arranged for disposal of hazardous substances to such sites or verifiable evidence of its responsibility for the release or threatened release of hazardous substances at these sites, but the company believes that it could incur future costs (including legal expenses) related to the foregoing which would not exceed approximately $100,000 in the aggregate. Finally, the company received a contractual indemnification claim with respect to a CERCLA NPL site (Cork Street, Kalamazoo Co., MI). No information regarding the company's involvement at such site is currently available. The company has also received requests for information from the EPA at nine NPL sites for which the company believes, based on its investigation of such matters, that its potential aggregate remaining liability will not exceed $200,000. The company recently received a notification of potential liability from the EPA under the Toxic Substances Control Act of 1976 with respect to a multi-party site, which is not a CERCLA site, based on the company's alleged generation of toxic substances present at the site. The company's liability, based on currently available information, is estimated to be approximately $100,000. At six sites which are not CERCLA NPL sites, the company has been cited by the EPA with respect to removal actions. The company has entered into settlements and paid its proportionate share of costs at five of these sites, and the company believes that its probable remaining liability at the sixth site is less than $50,000. The company has received notices of potential liability from various state environmental authorities pursuant to state environmental laws regarding ten multi-party sites based on the company's alleged generation of hazardous materials present at those sites. The company's liability has been resolved and satisfied at two sites and, based on the company's investigation, the company believes that its aggregate probable remaining liability at the eight other sites will not exceed $2.5 million. Although the company has received requests for information from state environmental authorities at two additional sites, the company's investigation has revealed no record of its having disposed of hazardous substances at, or arranged for transportation of hazardous substances to, such sites. The company is engaged in site investigation and/or remediation at the following sites presently or formerly owned by the company: New York Air Brake Landfill/Kelsey Creek Site In February 1990, the company entered into a consent order with the New York State Department of Environmental Conservation ("NYSDEC") to conduct an investigation and remediation at the company's discontinued New York Air Brake facility in Watertown, New York. On March 30, 1994, NYSDEC issued a Record of Decision ("ROD") with respect to site remediation. The remedial action will consist of consolidation of contamination in the existing industrial landfill, capping the landfill, collecting contaminated groundwater downgradient of the landfill, and the removal of certain sediments in Kelsey Creek and a tributary creek. The future cost estimated by the company for site remediation is approximately $11 million. The company has filed litigation against the City of Watertown to challenge an increase in sewer discharge fees for leachate at the landfill and believes that it will ultimately prevail in such litigation. Hevi-Duty Facility In August 1990, the EPA placed this manufacturing facility of the company, located in Goldsboro, North Carolina, on the NPL; subsequently, the company challenged the listing and the EPA delisted the facility in June 1993. Following the delisting, the company investigated site contamination at this facility and conducted limited initial remediation. The company is participating in a voluntary clean-up program of the state of North Carolina and has entered into an Administrative Order on Consent with the North Carolina Department of Environmental Health and Natural Resources. The company currently believes that the probable aggregate remaining liability for clean-up of this site will be approximately $3 million. 2 Fairbanks Morse Facility On December 2, 1994, the company acquired Fairbanks Morse, Inc. Based on the company's pre-acquisition environmental assessment and site testing performed at the Fairbanks Morse facility located in Kansas City, Kansas, the company determined that there is soil and groundwater contamination at the site. The company has entered into an Interim Agreement with the Kansas Department of Environment and Health with respect to additional site investigation. The company believes that up to $5 million could be required to investigate and remediate contaminated soil and groundwater at the site. The company is accounting for the foregoing, and for any liability of Fairbanks Morse at the Doepke-Holliday and Stringfellow sites discussed above, under purchase accounting. The company has reported site contamination to environmental authorities with respect to eight sites which the company formerly owned or operated. The company is undertaking site investigations and remediations at seven of those sites and site investigations at one site. The company believes that the probable aggregate remaining liability for investigation and remediation will not exceed approximately $1.4 million. At one present manufacturing facility and two former manufacturing facilities, the company is performing voluntary site investigation and remediation at a remaining cost not estimated to exceed approximately $600,000, based on information currently available. It is the company's policy not to offset expected insurance recoveries against expected obligations when determining the amount of environmental accruals. The potential costs related to the matters described above and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of clean-up technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the company's responsibility. In management's opinion, after considering reserves established for such purposes, remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material adverse impact on the company's results of operations or financial position. Employees At December 31, 1995, the company had approximately 12,900 employees, excluding employees of businesses held for sale. Approximately 2,600 employees are represented by 33 different collective bargaining units. The company has generally experienced satisfactory labor relations at its various locations. Executive Officers of the Registrant Name, Position, Age at December 31 and Other Information Age - -------------------------------------------------------------------------------- Michael D. Lockhart...................................................... 46 Chairman and Chief Executive Officer since October 19, 1995. Previously President and Chief Operating Officer since October 3, 1994. Prior to joining the company, Vice President and General Manager of General Electric's Commercial Engines and Services division, along with several other key executive positions at GE. Prior to joining GE, served as vice president and director, The Boston Consulting Group. Terence D. Martin........................................................ 52 Executive Vice President and Chief Financial Officer since February 2, 1995. Previously, Chief Financial Officer of American Cyanamid Company since 1991 and Treasurer since 1988. Elizabeth D. Conklyn..................................................... 48 Senior Vice President Human Resources since December 14, 1995. Previously, Senior Vice President, Human Resources and Organization for Mobile Telecommunications Technologies since 1994. Served in various human resource management positions with IBM from 1977 to 1994. William W. Clark......................................................... 54 Vice President - Sourcing since June 15, 1995. Previously, Vice President - Operations of Tau-tron unit since 1992. Served in various management positions with Eastman Kodak Company from 1968 to 1992. Nino J. Fernandez........................................................ 54 Vice President - Investor Relations since May 1, 1987. Previously, Director of Communications since 1974. Terry J. Mortimer........................................................ 50 Vice President and Controller since May 25, 1990. Previously Director Finance and Chief Accountant for Apple Computer since June, 1988. Previously with Becton Dickinson and Company from January, 1981 to June, 1988, most recently as Medical Sector Controller. Edgar J. Smith, Jr....................................................... 61 Vice President, General Counsel, and Secretary since April 19, 1984, and Vice President and General Counsel since January 1, 1980. Previously, Assistant General Counsel since 1967. Thomas E. Taylor......................................................... 49 Vice President - Taxes since September 1, 1993. Previously with Elf Aquitaine, Inc. as Vice President - Taxes since 1985. Julian B. Twombly........................................................ 49 Vice President and Treasurer since December 17, 1991. Prior to joining the company, associated with United Dominion Industries, Ltd. since 1974, most recently as Senior Vice President and Treasurer. 3 The executive officers are elected annually by the Board of Directors. There are no family relationships between any of the directors or executive officers of the company. Item 2. Properties The Process Controls sector's operations consist of 27 manufacturing facilities in 11 states and eight foreign countries, containing approximately 2.9 million square feet, of which 91 percent is owned and nine percent is leased. The Electrical Controls sector's operations consist of 39 manufacturing facilities in 14 states and seven foreign countries, containing approximately 3.4 million square feet, of which approximately 72 percent is owned and 28 percent is leased. The Industrial Technology sector's operations consist of 11 manufacturing facilities in four states, containing approximately 0.9 million square feet, of which approximately 88 percent is owned and 12 percent is leased. In addition to manufacturing plants, the company as lessee occupies executive offices in Stamford, Connecticut, and various sales and service locations throughout the world. All of these properties, as well as the related machinery and equipment, are considered to be well maintained, suitable and adequate for their intended purposes. Assets subject to lien are not significant. As a result of business divestitures and restructuring activities, the company holds 1.7 million square feet of idle facilities and facilities related to discontinued operations for sale or sublease. Item 3. Legal Proceedings The company and certain of its subsidiaries are defendants in legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position. Item 4. Submission of Matters to a Vote of Security Holders None. Part II - ------- Item 5. Market for Registrant's Common Stock and Related Shareholder Matters The company's common stock is listed on the New York and Pacific stock exchanges under the symbol "GSX". Information as to quarterly prices for the last two years, and dividends paid is included on pages 24 and 37 of the Shareholders' Report and is incorporated herein by reference. There were approximately 14,400 holders of record of the company's common stock on March 15, 1996. Item 6. Selected Financial Data Selected financial data of the company for the last five fiscal years are incorporated herein by reference to pages 38 and 39 of the Shareholders' Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations "Management's Discussion and Analysis of Financial Condition and Results of Operations" appears on pages 17 through 20 of the Shareholders' Report and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The financial statements and related notes are incorporated herein by reference to pages 22 through 37 of the Shareholders' Report. Quarterly financial information is incorporated herein by reference to page 37 of the Shareholders' Report. The Report of Independent Auditors, dated January 25, 1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, is incorporated herein by reference to page 21 of the Shareholders' Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III - -------- Item 10. Directors and Executive Officers This information is incorporated herein by reference to pages 5 through 10 of the Proxy Statement for the 1996 annual meeting of shareholders. Also see page 3 of this 10-K as to information related to executive officers. Item 11. Executive Compensation This information is incorporated by reference to pages 11 through 20 of the Proxy Statement for the 1996 annual meeting of shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management This information is incorporated by reference to pages 2 through 4 of the Proxy Statement for the 1996 annual meeting of shareholders. Item 13. Certain Relationships and Related Transactions Not applicable. 4 Part IV - ------- Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K (a) (1) Financial Statements and Other Financial Data. The financial statements of the company and consolidated subsidiaries are incorporated herein by reference to pages 22 through 37 of the Shareholders' Report. The Independ-ent Auditors' Report of Ernst & Young LLP, dated January 25, 1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, is incorporated herein by reference to page 21 of the Shareholders' Report. Page (2) Schedule II Valuation and Qualifying Accounts...................... 8 All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes. (3) Exhibits. 3.1 Restated Certificate of Incorporation of General Signal Corporation, as amended through April 21, 1994 incorporated herein by reference to Exhibit 3.1 of the registrant's 1994 10-K filed March 21, 1995. 3.2 By-laws of General Signal Corporation, as amended through February 1, 1996. 4.1 Copies of the instruments with respect to the company's long-term debt are available to the Securities and Exchange Commission upon request. 4.2 Copies of the Credit Agreements among General Signal Corporation and Various Commercial Banking Institutions, through June 1, 1995, as described in the Notes to Financial Statements incorporated herein by reference in (a)(1) above, are available to the Securities and Exchange Commission upon request. 10.1 Description of General Signal Corporation Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.1 of the registrant's 1991 Form 10-K filed March 25, 1992. 10.2 Retirement Plan for Directors of General Signal Corporation is incorporated herein by reference to Exhibit 10.7 of the registrant's 1988 Form 10-K filed March 17, 1989. 10.3 General Signal Corporation Change in Control Severance Pay Plan, as amended, is incorporated herein by reference to Exhibit 10.8 of the registrant's 1989 Form 10-K filed March 16, 1990. 10.4 General Signal Corporation Deferred Compensation Plan, dated October 14, 1993, is incorporated herein by reference to Exhibit 10.4 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.5 General Signal Corporation Benefit Equalization Plan as amended and restated October 14, 1993, is incorporated herein by reference to Exhibit 10.5 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.6 General Signal Corporation 1992 Stock Incentive Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.6 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.7 General Signal Corporation 1989 Stock Option and Incentive Plan as amended July 7, 1993, is incorporated herein by reference to Exhibit 10.7 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.8 General Signal Corporation 1985 Stock Option Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.8 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.9 General Signal Corporation 1981 Stock Option Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.9 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.10 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994 is incorporated herein by reference to exhibit 10.12 of the registrant's 1994 Form 10-K filed March 21, 1995. 10.11 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995 is incorporated herein by reference to exhibit 10.13 of the registrant's 1994 Form 10-K filed March 21, 1995. 10.12 Severance agreement between Edmund M. Carpenter and the registrant dated October 19, 1995. 10.13 Severance agreement between Joel S. Friedman and the registrant dated December 21, 1995. 5 10.14 Severance agreement between George Falconer and the registrant dated November 7, 1995. 10.15 Shareholder Rights Plan dated February 1, 1996. 11.0 Computation of Earnings per Share. See page 9 of this report. 12.0 Calculation of Ratios of Earnings to Fixed Charges. See page 10 of this report. 13.0 1995 Annual Report to Shareholders. Except for those portions specifically incorporated herein by reference, the company's 1995 Annual Report to Shareholders is furnished for the information of the Commission and is not deemed to be "filed." Pages 17 through 39, including the Independent Auditors' Report on page 21, are specifically incorporated herein by reference. 21.0 Subsidiaries. See pages 10 through 12 of this report. 23.0 Consent of Ernst & Young LLP. See page 13. 27 Financial Data Schedule (EDGAR version only) (b) Reports on Form 8-K A report on Form 8-K was filed on November 2, 1995, reporting the resignation of Edmund M. Carpenter as chairman, chief executive officer and director of the registrant. 6 Signatures Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. General Signal Corporation /s/ Michael D. Lockhart - ------------------------------ (Michael D.Lockhart, Chairman) March 21, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Michael D. Lockhart - ------------------------------ (Michael D. Lockhart) March 21, 1996 Chairman and Director (Principal Executive Officer) /s/ Terence D. Martin - ------------------------------ (Terence D. Martin) March 21, 1996 Executive Vice President and Chief Financial Officer /s/ Terry J. Mortimer - ------------------------------ (Terry J. Mortimer) March 21, 1996 Vice President and Controller (Chief Accounting Officer) /s/ Ralph E. Bailey - ------------------------------ (Ralph E. Bailey) March 21, 1996 Director /s/ Van C. Campbell - ------------------------------ (Van C. Campbell) March 21, 1996 Director /s/ Ursula F. Fairbairn - ------------------------------ (Ursula F. Fairbairn) March 21, 1996 Director /s/ Ronald E. Ferguson - ------------------------------ (Ronald E. Ferguson) March 21, 1996 Director /s/ John P. Horgan - ------------------------------ (John P. Horgan) March 21, 1996 Director /s/ Roland W. Schmitt - ------------------------------ (Roland W. Schmitt) March 21, 1996 Director /s/ John R. Selby - ------------------------------ (John R. Selby) March 21, 1996 Director 7 Schedule II Valuation and Qualifying Accounts
- ---------------------------------------------------------------------------- General Signal Corporation and Consolidated Subsidiaries Years Ended December 31, 1995, 1994 and 1993 (In millions) Additions charged Balance at (credited) Balance at beginning to cost and end of of period expense Deductions period - --------------------------------------------------------------------------------------------- 1995 Reserves deducted from assets: Allowance for doubtful accounts ..... $ 10.7(7) $ 4.9 $ (5.0)(1) $ 10.6 Assets held for sale ................ $ 8.6 59.5 (0.2)(2) $ 67.9 Dispositions and special items: Consolidation of operations and other $ 15.9 40.4 (31.6)(1) 24.7 Acquisition related ................. 0.6 5.6 (2.1)(4) 4.1 Semiconductor ....................... 18.1 -- (14.9)(4) 3.2 Restructuring ....................... 2.5 -- (1.8)(4) 0.7 - --------------------------------------------------------------------------------------------- $ 37.1 $ 46.0 $ (50.4) $ 32.7 - --------------------------------------------------------------------------------------------- 1994 Reserves deducted from assets: Allowance for doubtful accounts ..... $ 10.5 $ 4.5 $ (4.9)(1) $ 10.1 - --------------------------------------------------------------------------------------------- Assets held for sale ................ $ 14.4 $ 8.6 $ (14.4)(3) $ 8.6 - --------------------------------------------------------------------------------------------- Dispositions and special items: Consolidation of operations and other $ -- $ 19.3 $ (3.4)(4) $ 15.9 Acquisition related ................. 8.8 (1.5) (6.7)(4) 0.6 Semiconductor ....................... 13.3 (0.6) 5.4(4),(5) 18.1 Restructuring ....................... 13.0 (3.5) (7.0)(4) 2.5 - --------------------------------------------------------------------------------------------- $ 35.1 $ 13.7 $ (11.7) $ 37.1 - --------------------------------------------------------------------------------------------- 1993 Reserves deducted from assets: Allowance for doubtful accounts ..... $ 8.9 $ 4.6 $ (3.0)(1) $ 10.5 - --------------------------------------------------------------------------------------------- Assets held for sale ................ $ 18.6 $ -- $ (4.2)(3) $ 14.4 - --------------------------------------------------------------------------------------------- Dispositions and special items: Acquisition related ................. $ -- $ 13.2 $ (4.4)(4) $ 8.8 Semiconductor ....................... 57.3 (53.2) 9.2(4),(6) 13.3 Restructuring ....................... -- 30.5 (17.5)(4) 13.0 - --------------------------------------------------------------------------------------------- $ 57.3 $ (9.5) $ (12.7) $ 35.1 - --------------------------------------------------------------------------------------------- (1) Write-off of bad debts, net of recoveries. Includes reclassifications in 1994 of discontinued operations to assets held for sale. (2) Reflects reclassification to accruals. (3) Charges to reserve related to businesses divested during 1993 and 1994. (4) Charges to reserve for related costs incurred during the year. (5) Includes reclassification of $8.4 credit balance of GS Japan's cumulative translation adjustment as of December 31, 1994. (6) Includes $47.6 of excess proceeds on disposal of businesses divested during 1993. (7) Includes $0.6 of reserves recorded by Data Switch which were consolidated effective January 1, 1995.
8 EX-11.0 2 Computation of Earnings Per Share Exhibit (11.0)
General Signal Corporation and Consolidated Subsidiaries (In millions, except per-share data) Year Ended December 31, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------- I. Earnings (loss) per share of common stock (used for financial reporting): Continuing operations .............................................. $ 100.1 $ 104.1 $ 98.1 Earnings (loss) from discontinued operations ....................... -- 2.4 (31.5) Loss on disposal of discontinued operations ........................ (64.0) (25.8) -- Extraordinary charges .............................................. -- -- (6.6) Cumulative effect of accounting changes ............................ -- -- (25.3) - -------------------------------------------------------------------------------------------------------- Net Earnings (loss) ................................................ $ 36.1 $ 80.7 $ 34.7 - -------------------------------------------------------------------------------------------------------- Average number of common shares outstanding(a) ..................... 49.2 47.3 45.2 - -------------------------------------------------------------------------------------------------------- Earnings (loss) per average share of common stock: Continuing operations .......................................... $ 2.03 $ 2.20 $ 2.17 Earnings (loss) from discontinued operations ................... -- 0.05 (0.70) Loss on disposal of discontinued operations .................... (1.30) (0.54) -- Extraordinary charges .......................................... -- -- (0.14) Cumulative effect of accounting changes ........................ -- -- (0.56) - -------------------------------------------------------------------------------------------------------- $ 0.73 $ 1.71 $ 0.77 - -------------------------------------------------------------------------------------------------------- II. Primary earnings per share(b) (including common stock equivalents): Average number of common shares outstanding ........................ 49.2 47.3 45.2 Dilutive effect of outstanding options (as determined by application of the treasury stock method) .... 0.2 0.3 0.3 - -------------------------------------------------------------------------------------------------------- Total shares used in calculation of primary earnings per share ..... 49.4 47.6 45.5 - -------------------------------------------------------------------------------------------------------- Primary earnings (loss) per share: Continuing operations .............................................. $ 2.03 $ 2.19 $ 2.16 Earnings (loss) from discontinued operations ....................... -- 0.05 (0.69) Loss on disposal of discontinued operations ........................ (1.30) (0.54) -- Extraordinary charges .............................................. -- -- (0.15) Cumulative effect of accounting changes ............................ -- -- (0.56) - -------------------------------------------------------------------------------------------------------- $ 0.73 $ 1.70 $ 0.76 - -------------------------------------------------------------------------------------------------------- III. Fully diluted earnings per share(b): Average number of shares used in calculation of primary earnings per share above ....................................... 49.4 47.6 45.5 Additional dilutive effect of outstanding options (as determined by application of the treasury stock method) .... -- -- -- - -------------------------------------------------------------------------------------------------------- Total shares used in calculation of fully diluted earnings per share 49.4 47.6 45.5 - -------------------------------------------------------------------------------------------------------- Fully diluted earnings (loss) per share: Continuing operations .......................................... $ 2.03 $ 2.19 $ 2.16 Earnings (loss) from discontinued operations ................... -- 0.05 (0.69) Loss on disposal of discontinued operations .................... (1.30) (0.54) -- Extraordinary charges .......................................... -- -- (0.15) Cumulative effect of accounting changes ........................ -- -- (0.56) - -------------------------------------------------------------------------------------------------------- $ 0.73 $ 1.70 $ 0.76 - -------------------------------------------------------------------------------------------------------- (a) Excludes common stock equivalents in accordance with provisions of APB Opinion No. 15 because such equivalent shares result in dilution of less than 3%. (b) This calculation is presented in accordance with Regulation S-K although the effect of the options deemed to be common stock equivalents is antidilutive in 1992. 9
EX-12.0 3 Calculations of Ratios of Earnings to Fixed Charges Exhibit (12.0)
General Signal Corporation and Consolidated Subsidiaries Year Ended December 31, (Dollars in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------- Earnings Earnings (loss) before income taxes $ 156.4 $ 160.3 $ 139.1 $ 9.5 $ 97.4 Added fixed charges ............... 34.7 20.2 22.6 35.3 39.3 - ------------------------------------------------------------------------------------------- $ 191.1 $ 180.5 $ 161.7 $ 44.8 $ 136.7 - ------------------------------------------------------------------------------------------- Fixed charges Interest expense (gross) .......... $ 27.7 $ 14.4 $ 18.0 $ 28.6 $ 31.8 One-third of rent expense ......... 7.0 5.8 4.6 6.7 7.5 - ------------------------------------------------------------------------------------------- $ 34.7 $ 20.2 $ 22.6 $ 35.3 $ 39.3 - ------------------------------------------------------------------------------------------- Ratio ................................. 5.51 8.94 7.15 1.27 3.48 - -------------------------------------------------------------------------------------------
EX-21.0 4 Subsidiaries of Registrant 1. Consolidated Subsidiaries Exhibit (21.0) Percent Organized Under Owned the Laws of - -------------------------------------------------------------------------------- Aurora/Hydromatic Pumps, Inc. 100 Delaware Borri Elettronica Industriale S.p.A 100 Italy DeZurik of Australia Proprietary Ltd. 100 Australia DeZurik Vertriebsgesellschaft mbH 100 Austria Data Switch Corporation 100 Delaware Data Switch Intellectual Property, Inc. 100 Delaware Data Switch Subsidiary Stock Corporation 100 Delaware Data Switch Collections, Inc. 100 Delaware Data Switch, Inc. 100 Canada Data Switch Italia,S.r.L 100 Italy Data Switch GmbH 100 Germany Data Switch Limited 100 England Data Switch (UK) Limited 100 England Fairbanks Morse Pump Corporation 100 Kansas Subsidiary of Fairbanks Morse Pump Corporation: Fairbanks Morse Limited (India) 100 India GCA International Corporation 100 New Jersey GSR Merger Sub., Inc. 100 Delaware G.S. Building Corporation 100 Connecticut Subsidiaries of G.S. Building Corporation: Dual Lite Manufacturing, Inc. 100 Delaware General Signal FSC, Inc. 100 Virgin Islands General Signal Holding Company 100 Delaware Subsidiaries of General Signal Holding Company: General Signal Technology Corporation 100 Delaware Subsidiaries of General Signal Technology Corporation: General Farebox of Atlanta, Inc. 100 Delaware General Signal Limited 100 Canada General Signal S.E.G - Asia, Ltd. 100 Hong Kong General Signal S.E.G. SARL 100 France General Signal Power Systems, Inc. 100 Wisconsin Subsidiaries of General Signal Power Systems, Inc.: Best Power Technology of Canada Limited 100 Canada Best Power Technology SARL (France) 100 France Best Power Technology GmbH (Germany) 100 Germany Best Power Technology Mexico SA 100 Mexico 10 Percent Organized Under Owned the Laws of - -------------------------------------------------------------------------------- Best Power Technology Limited (UK) 100 England Best Power Technology Export Corp. 100 Barbados Best Power Asia Trading Co., Ltd. 100 Taiwan Best Power Technology Asia Limited 100 Taiwan Best Power Technology Pte. Limited 100 Singapore India Best Power Technology Pvt. Limited 100 India General Signal UK Limited 100 England Subsidiaries of General Signal UK Limited: Dezurik International Limited 100 England GCA Limited 100 England G.S. Iona Ltd. 100 England General Signal SEG, Ltd. 100 England Leeds & Northrup Limited 100 England Lightnin (Europe) Limited 100 England General Signal Europe Limited (formerly Lightnin Mixers Limited) 100 England Subsidiaries of General Signal Europe Limited: General Signal Verwaltungsgesellschaft GmbH 90 Germany (Remaining l0% owned by General Signal Corporation) General Signal GmbH & Co KG 100 Germany Deutsche Lightnin GmbH 100 Germany Tau-Tron (UK) Limited 100 England Telenex Europe Limited 100 England Lightnin Mixers Limited 100 England Leeds & Northrup Company 100 Delaware Subsidiaries of Leeds & Northrup Company: Leeds & Northrup GmbH 100 Germany Leeds & Northrup Mexicanna, S.A 100 Mexico Leeds & Northrup S.A 100 Spain LDN, Ltd. 100 Delaware Subsidiaries of LDN,Ltd: Leeds & Northrup S.A.R.L 100 France L.D.N. Netherlands, B.V 100 Netherlands L&N Singapore, Pte., Ltd. 100 Singapore L&N Products Pty Ltd. 100 Australia Subsidiaries of L&N Products Pty Ltd: Leeds & Northrup (New Zealand) Ltd 100 New Zealand Leeds & Northrup Italy, S.p.A 53 Italy (Remaining 47% owned by Leeds & Northrup Company) Lightnin China Mixers Co. Ltd. 100 China Lightnin Mixers Pty. Ltd. 60 Australia (Remaining 40% owned by General Signal Ltd) Lightnin Private Limited 100 Singapore Metal Forge Company, Inc. 100 Delaware Shenyang Stock Electric Power Equipment Company, Limited 100 China Sola Australia, Limited 100 Australia Sola Electric AG 100 Switzerland Subsidiary of Sola Electric AG: Sola Stromversorgunanlagen GmbH 100 Germany Stock Japan, Ltd. 100 Japan Telenex Corporation 100 New Jersey 11 2. Other Subsidiaries The following minor foreign subsidiaries and the investment of 50 percent or less owned companies, which are not material individually or in the aggregate in relation to the financial statements are carried at cost plus equity in undistributed earnings since acquisition. Subsidiaries of General Signal Corporation: DeZurik - India 40 India DeZurik Japan Co., Ltd. 48 Japan DeZurik Mexico, S.A. de C.V 49 Mexico General Signal Corporation 100 Delaware General Signal International Corporation 100 Delaware HMS Ventures Ltd 14 California High Ridge Company, Limited 100 Bermuda Industrias Sola Basic, S.A 49 Mexico Koyo Lindberg Ltd. 50 Japan New Signal, Inc. 100 Delaware Solamex, S.A. de C.V 48 Mexico Subsidiary of Solamex S.A. de C.V.: Inmobiliaria S-Tres, S.A. de C.V 99 Mexico Inmobiliaria S-Dos, S.A. de C.V 99 Mexico Inmobiliaria Solamex, S.A. de C.V 99 Mexico Productora Y Maquiladora Queretana 99 Mexico S.A. de C.V Teraski Nelson Ltd. 50 Japan Maquiladora Solamex S.A. de C.V 48 Mexico 12 EX-23.0 5 Consent of Ernst & Young LLP Exhibit (23.0) The Board of Directors and Shareholders General Signal Corporation We consent to the incorporation by reference in this Annual Report (Form 10-K) of General Signal Corporation of our report dated January 25,1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, included in the 1995 Annual Report to Shareholders of General Signal Corporation. Our audits also included the financial statement schedule of General Signal Corporation and consolidated subsidiaries listed in Item 14(a). This schedule is the responsibility of the company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-3 No. 33-33929) pertaining to the universal shelf registration dated May, 1994, (Form S-8 No. 33-46613) pertaining to the General Signal Corporation Savings and Stock Ownership Plan, (Form S-8 No. 33-47495) pertaining to General Signal Corporation's stock incentive plans, (Form S-4 No. 33-62437) pertaining to the merger agreement with Data Switch Corporation, (Form S-8 to Form S-4 No. 33-62437-01) pertaining to stock options assumed as a result of the merger with Data Switch Corporation, (Form S-3 to Form S-4 No. 33-62437-02) pertaining to the outstanding stock warrants as a result of the merger with Data Switch Corporation and related prospectuses of our report dated January 25,1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, with respect to the financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of General Signal Corporation. /s/ Ernst & Young LLP Stamford, Connecticut March 21, 1996 EX-27 6
5 0000040834 GENERAL SIGNAL CORP. 1,000,000 YEAR 9-MOS 6-MOS 3-MOS DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995 SEP-30-1995 JUN-30-1995 MAR-31-1995 1 16 16 12 1 1 2 2 339 334 321 298 16 15 17 15 235 250 246 231 721 735 791 778 718 710 687 648 405 394 379 360 1613 1618 1609 1421 432 367 371 332 429 525 509 330 0 0 0 0 0 0 0 0 78 78 78 78 578 479 481 512 1613 1618 1609 1421 1863 1362 880 434 1863 1362 880 424 1308 959 623 309 1683 1219 790 387 0 0 0 0 0 0 0 0 24 17 10 5 156 125 81 43 56 45 28 15 100 80 53 28 (64) (64) (50) 0 0 0 0 0 0 0 0 0 36 16 3 28 0.73 0.55 0.50 0.57 0.73 0.55 0.50 0.57
EX-10.15 7 GENERAL SIGNAL CORPORATION and First Chicago Trust Company of New York, Rights Agent RIGHTS AGREEMENT Dated as of February 1, 1996 TABLE OF CONTENTS Page RIGHTS AGREEMENT Section 1. Certain Definitions . . . . . . . . . . . . . 1 Section 2. Appointment of Rights Agent . . . . . . . . . 7 Section 3. Issue of Right Certificates . . . . . . . . . 7 Section 4. Form of Right Certificates. . . . . . . . . . 9 Section 5. Countersignature and Registration . . . . . . 11 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. . . . . . . . . . . . . . 12 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights . . . . . . . . . . 13 Section 8. Cancellation and Destruction of Right Certificates. . . . . . . . . . . . . . 15 Section 9. Reservation and Availability of Shares of Common Stock. . . . . . . . . . . . 16 Section 10. Common Stock Record Date. . . . . . . . . . . 18 Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights . . . . . . . . 18 Section 12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . . . . 28 Section 13. Combination, Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . . . . . . . . . . . . . . . 28 Section 14. Fractional Rights and Fractional Shares. . . . . . . . . . . . . . . . . . . . 31 Section 15. Rights of Action. . . . . . . . . . . . . . . 32 Section 16. Agreement of Right Holders. . . . . . . . . . 33 Section 17. Right Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . . . . . . . 34 Section 18. Concerning the Rights Agent . . . . . . . . . 34 Section 19. Merger or Consolidation or Change of Name of Rights Agent. . . . . . . . . . . . . 35 Section 20. Duties of Rights Agent. . . . . . . . . . . . 36 Section 21. Change of Rights Agent. . . . . . . . . . . . 39 Section 22. Issuance of New Right Certificates. . . . . . 40 Section 23. Redemption and Termination. . . . . . . . . . 40 Section 24. Exchange. . . . . . . . . . . . . . . . . . . 42 Section 25. Notice of Certain Events. . . . . . . . . . . 43 Section 26. Notices . . . . . . . . . . . . . . . . . . . 44 Section 27. Supplements and Amendments. . . . . . . . . . 45 Section 28. Successors. . . . . . . . . . . . . . . . . . 46 Section 29. Determinations and Actions by the Board of Directors, etc.. . . . . . . . . . . 46 Section 30. Benefits of This Agreement. . . . . . . . . . 46 Section 31. Severability. . . . . . . . . . . . . . . . . 46 Section 32. Governing Law . . . . . . . . . . . . . . . . 47 Section 33. Counterparts. . . . . . . . . . . . . . . . . 47 Section 34. Descriptive Headings. . . . . . . . . . . . . 47 Exhibit A - Form of Right Certificate . . . . . . . . . . A-1 - Form of Assignment. . . . . . . . . . . . . . A-5 - Certificate . . . . . . . . . . . . . . . . . A-6 - Notice. . . . . . . . . . . . . . . . . . . . A-7 - Form of Election to Purchase. . . . . . . . . A-8 - Certificate . . . . . . . . . . . . . . . . . A-9 - Notice. . . . . . . . . . . . . . . . . . . . A-9 Exhibit B - Summary of Rights to Purchase Common Stock. . . . . . . . . . . . . . . . . B-1 RIGHTS AGREEMENT Rights Agreement, dated as of February 1, 1996 (the "Agreement"), between GENERAL SIGNAL CORPORATION, a New York corporation (the "Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, a New York corporation (the "Rights Agent"). W I T N E S S E T H : WHEREAS, the Board of Directors of the Company on February 1, 1996 (the "Rights Dividend Declaration Date") authorized and declared a dividend distribution (the "Distribution") of one Right for each outstanding share of the Common Stock, $1.00 par value, of the Company (the "Common Stock") outstanding at the close of business on March 21, 1996 (the "Record Date") and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(i) hereof) in respect of each share of Common Stock issued (whether originally issued or delivered from the Company's treasury shares) between the Record Date and the earlier of the Distribution Date or the Expiration Date (as such terms are hereinafter defined), each Right initially representing the right to purchase, under certain circumstances, one share of the Common Stock, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates (as such term is hereinafter defined) and Associates (as such term is hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of securities of the Company constituting a Substantial Block (as such term is hereinafter defined), but shall not include (i) the Company, any Subsidiary (as such term is hereinafter defined) of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any Person organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan, (ii) any Person who or which, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a Substantial Block solely as a result of a change in the aggregate number of shares of the Common Stock or other voting securities of the Company outstanding since the last date on which such Person acquired Beneficial Ownership of any securities of the Company constituting such Substantial Block, or (iii) any Person who or which, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a Substantial Block in the good faith belief that such acquisition would not (x) cause such Person and its Affiliates and Associates to become the Beneficial Owner of a Substantial Block and such Person relied in good faith in computing the percentage of its voting power on publicly filed reports or documents of the Company which are inaccurate or out-of-date or (y) otherwise cause a Distribution Date or the adjustment provided for in Section 11(a) to occur. Notwithstanding clause (iii) of the prior sentence, if any Person that is not an Acquiring Person due to such clause (iii) does not cease to be the Beneficial Owner of a Substantial Block by the close of business on the last Business Day of a period to be determined by the Board of Directors of the Company and specified in a notice from the Company that such Person is the Beneficial Owner of a Substantial Block, such Person shall, at the end of such specified period, become an Acquiring Person (and such clause (iii) shall no longer apply to such Person). No failure by the Board of Directors of the Company to give such notice for a period of time, and no notice specifying a particular time period by which such Person must cease to be the Beneficial Owner of a Substantial Block, shall be deemed a waiver of the right of the Board of Directors to subsequently give or modify such notice. For purposes of this definition, the determination whether any Person acted in "good faith" shall be conclusively determined by the Board of Directors of the Company, acting by a vote of those directors of the Company whose approval would be required to redeem the Rights under Section 23 hereof. (b) "Act" shall have the meaning set forth in Section 9(c) hereof. (c) "Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii) hereof. (d) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof. (e) "Agreement" shall have the meaning set forth in the introduction hereto. (f) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates has, directly or indirectly, the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise, provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (1) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (2) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event or (3) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event (as such term is hereinafter defined), which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) hereof ("Original Rights") or pursuant to Section 11(i) or Section 22 hereof in connection with an adjustment made with respect to Original Rights; or (ii) which such Person or any of such Person's Affiliates or Associates has, directly or indirectly, the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing), provided, however, that a Person shall not be deemed the Beneficial Owner of, or to "beneficially own," any security under this subparagraph (ii) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (f)) or disposing of any securities of the Company; or (iv) which are directly, indirectly or constructively owned by such Person or any of such Person's Affiliates or Associates, within the meaning of Section 958 of the Internal Revenue Code of 1986, as amended. Notwithstanding the foregoing, nothing contained in this definition shall cause a Person ordinarily engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired in a bona fide firm commitment underwriting pursuant to an underwriting agreement with the Company. (g) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (h) "Certification" shall have the meaning set forth in Section 18 hereof. (i) "close of business" on any given date shall mean 5:00 P.M., New York City time, on such date, provided, however, if such date is not a Business Day it shall mean 5:00 P.M. on the next succeeding Business Day. (j) "Company" shall have the meaning set forth in the introduction hereto. (k) "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. (l) "Distribution" shall have the meaning set forth in the recitals hereto. (m) "Distribution Date" shall have the meaning set forth in Section 3(a) hereof. (n) "equivalent shares of common stock" shall have the meaning set forth in Section 11(b) hereof. (o) "Exchange Act" shall have the meaning set forth in the definitions of "Affiliate" and "Associate" above. (p) "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof. (q) "Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (r) "Final Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (s) "Independent Director" shall mean any member of the Board of Directors of the Company, while such person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate, and was a member of the Board prior to the time that any Person becomes an Acquiring Person, and any successor of an Independent Director while such successor is a member of the Board, who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person, or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate, and is recommended or elected to succeed the Independent Director by a majority of the Independent Directors. (t) "common stock equivalent" shall have the meaning set forth in Section 11(a)(iii). (u) "Common Stock" when used with reference to the Company shall mean the Common Stock, $1.00 par value, of the Company. "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock with the greatest voting power of such Person or the equity securities or other equity interest having power to control or direct the management of such Person. (v) "Original Rights" shall have the meaning set forth in the definition of "Beneficial Owner" above. (w) "Person" shall mean any individual, firm, corporation, partnership or other entity, including any "group" within the meaning of Section 13(d)(3) of the Exchange Act and the General Rules and Regulations thereunder. (x) "Principal Party" shall have the meaning set forth in Section 13(b) hereof. (y) "Purchase Price" shall have the meaning set forth in Section 4(a) hereof. (z) "Record Date" shall have the meaning set forth in the recitals hereto. (aa) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (bb) "Right Certificate" shall have the meaning set forth in Section 3(a) hereof. (cc) "Rights" shall have the meaning set forth in the recitals hereto. (dd) "Rights Agent" shall have the meaning set forth in the introduction hereto. (ee) "Rights Dividend Declaration Date" shall have the meaning set forth in the recitals hereto. (ff) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii). (gg) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii). (hh) "Section 13 Event" shall mean any event described in Section 13(a). (ii) "Shares Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, includes a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (jj) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. (kk) "Subsidiary" shall mean, with reference to any Person, any company (or other entity) of which an amount of voting securities (or comparable ownership interests) sufficient to elect at least a majority of the directors (or comparable persons) of such company (or other entity) is beneficially owned or otherwise controlled, directly or indirectly, by such Person. (ll) "Substantial Block" shall mean a number of shares of the Common Stock equal to or in excess of 20% of the number of shares of the Common Stock then outstanding. (mm) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. (nn) "Summary of Rights" shall have the meaning set forth in Section 3(b) hereof. (oo) "Trading Day" shall have the meaning set forth in Section 11(d) hereof. (pp) "Triggering Event" shall mean any Section 11(a)(ii) Event or Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company shall act as Co-Rights Agent and may from time to time appoint such other Co- Rights Agents as it may deem necessary or desirable upon ten calendar days' written notice to the Rights Agent. In no event shall the Rights Agent have any duty to supervise or in any way be liable for such Co-Rights Agents. Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the close of business on the tenth calendar day after the Shares Acquisition Date (or, if the tenth day after the Shares Acquisition Date occurs before the Record Date, the close of business on the Record Date) or (ii) the close of business on the tenth calendar day after the date of the commencement of, or first public announcement of the intent of any Person to commence, a tender or exchange offer if, upon consummation thereof, such Person would be an Acquiring Person (the earlier of the dates in subsection (i) and (ii) hereof being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for the Common Stock shall be deemed also to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of the Common Stock. As soon as practicable after receipt by the Rights Agent of written notice from the Company of the Distribution Date, the Rights Agent, at the Company's expense, will send by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit A hereto, evidencing one Right for each share of the Common Stock so held, subject to adjustment as provided herein. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) As soon as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Common Stock, in substantially the form attached hereto as Exhibit B (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock, and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the certificates for the Common Stock outstanding on the Record Date shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. (c) Rights shall be issued in respect of all shares of Common Stock issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date (as such term is defined in Section 7), or, in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between GENERAL SIGNAL CORPORATION and FIRST CHICAGO TRUST COMPANY OF NEW YORK dated as of February 1, 1996 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of GENERAL SIGNAL CORPORATION. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. GENERAL SIGNAL CORPORATION will mail to the holder of this certificate a copy of the Rights Agreement (as in effect on the date of mailing) without charge promptly after receipt of a written request therefor. Under certain circumstances, Rights which are or were beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) and any subsequent holder of such Rights may become null and void. After the due execution of any supplement or amendment to this Agreement in accordance with the terms hereof, the reference to this Agreement in the foregoing legend shall mean the Agreement as so supplemented or amended. Until the Distribution Date, the Rights associated with the Common Stock represented by certificates containing the foregoing legend shall be evidenced by such certificates alone, and the surrender for transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. Section 4. Form of Right Certificates. (a) The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. The Right Certificates shall be in machine-printable format and in a form reasonably satisfactory to the Rights Agent. Subject to the provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever distributed, shall be dated as of the Record Date, shall show the date of countersignature, and on their face shall entitle the holders thereof to purchase such number of shares of the Common Stock (or following a Triggering Event, other securities, cash or other assets, as the case may be) as shall be set forth therein at the price per share set forth therein (the "Purchase Price"), but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein. (b) Any Right Certificate issued pursuant to Section 3(a) or 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Right Certificate issued pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by one of its authorized officers, either manually or by facsimile signature. The Right Certificates shall be countersigned by an authorized signatory of the Rights Agent either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless may be countersigned by the Rights Agent, issued and delivered with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. In case any authorized signatory of the Rights Agent who shall have countersigned any of the Right Certificates shall cease to be such signatory before delivery by the Company, such Right Certificates, nevertheless, may be issued and delivered by the Company with the same force and effect as though the person who countersigned such Right Certificates had not ceased to be such signatory; and any Right Certificates may be countersigned on behalf of the Rights Agent by any person who, at the actual date of the countersignature of such Right Certificate, shall be a proper signatory of the Rights Agent to countersign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such a signatory. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates, the date of each of the Right Certificates and the date of countersignature of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Right Certificate or Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of shares of the Common Stock (or following a Triggering Event, other securities, cash or other assets, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence, as the Company shall reasonably request of the identity of the Beneficial Owner, Affiliates or Associates of such Beneficial Owner or holder, or of any other Person with which such holder or any of such holder's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company. Thereupon the Rights Agent shall, subject to Section 14 and Section 20(k) hereof, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment from a Right Certificates holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request, and if requested by the Company, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Sections 9(c), 11(a)(iii), 23(a) and 24(b) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the designated office of the Rights Agent, together with payment of the aggregate Purchase Price for the total number of shares of the Common Stock (or other securities, cash or other assets, as the case may be) as to which the Rights are then exercisable, at or prior to the earliest of (i) the close of business on March 21, 2006 (the "Final Expiration Date"), or (ii) the time at which the Rights are redeemed as provided in Section 23 hereof or (iii) the time at which all exercisable Rights are exchanged as provided in Section 24 hereof (such earliest date being herein referred to as the "Expiration Date"). (b) The Purchase Price for each share of the Common Stock pursuant to the exercise of a Right shall initially be $150.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed and completed accompanied by payment of the Purchase Price for the number of shares of the Common Stock (or other securities, cash or other assets, as the case may be) to be purchased and an amount equal to any applicable transfer tax, the Rights Agent shall thereupon, subject to Section 20(k), promptly (i) requisition from the Company certificates for the number of shares of the Common Stock to be purchased, (ii) if the Company shall have elected to deposit the total number of shares of the Common Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of shares of the Common Stock as are to be purchased (in which case certificates for the shares of the Common Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (iii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iv) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (v) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. The payment of the then Purchase Price must be made in cash or by certified bank check or bank draft or money order payable to the order of the Company or the Rights Agent. In the event that the Company is obligated to issue securities, distribute property or pay cash pursuant to Section 11(a)(iii) hereof, the Company will make all arrangements necessary so that cash, property or securities are available for issuance, distribution or payment by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person which whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person, or any of its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner, Affiliates or Associates of such Beneficial Owner or holder, or of any other Person with which such holder or any of such holder's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of any securities of the Company as the Company shall reasonably request. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Shares of Common Stock. (a) The Company covenants and agrees that it will, subject to Section 11(a)(iii), prior to the Distribution Date, seek to cause to be reserved and kept available out of its authorized and unissued Common Stock (and following the occurrence of a Triggering Event, out of its authorized and unissued other securities) or out of its authorized and issued Common Stock (and, following the occurrence of a Triggering Event, out of its authorized and issued other securities) held in its treasury, the number of shares of the Common Stock (and, following the occurrence of a Triggering Event, Common Stock and other securities) that will be sufficient to permit the exercise in full of all outstanding Rights (it being understood that any of the foregoing shares or securities may also be reserved for other purposes) or will take such other steps as are appropriate to assure that the number of such shares or securities (or their equivalents) sufficient to permit the exercise in full of all outstanding Rights will be available upon such exercise. (b) So long as the Common Stock (and, following the occurrence of a Triggering Event, other securities) issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the first occurrence of a Section 11(a)(ii) Event, or as soon as required by law, as the case may be, a registration statement under the Securities Act of 1933, as amended (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the Expiration Date. The Company will also take such action as may be appropriate under the blue sky laws of the various states. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement and shall give simultaneous written notice to the Rights Agent stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notice to the Rights Agent at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualifications in such jurisdiction shall have been obtained. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of the Common Stock (and following the occurrence of a Triggering Event, other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any shares of the Common Stock (or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required (a) to pay any transfer tax which may be payable in respect of any transfer involved in the transfer or delivery of Right Certificates or the issuance or delivery of certificates for the shares of the Common Stock (or other securities, as the case may be) in a name other than that of the registered holder of the Right Certificate evidencing Rights surrendered for exercise or (b) to issue or deliver any certificates for shares of the Common Stock (or other securities, as the case may be) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Common Stock Record Date. Each person in whose name any certificate for shares of the Common Stock (or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such whole and/or fractional shares of the Common Stock (or other securities, as the case may be) represented thereby on, and such certificate shall be dated the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made and shall show the date of countersignature; provided, however, that if the date of such surrender and payment is a date upon which the Common Stock (or other securities, as the case may be) transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Stock (or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of the Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares or (D) issue any share capital in a reclassification of the Common Stock (including any such reclassification in connection with a combination, consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of the Common Stock or share capital, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive upon payment of the Purchase Price then in effect the aggregate number and kind of share capital which, if such Right had been exercised immediately prior to such date and at a time when the Common Stock (or other securities) transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior, to any adjustment required pursuant to Section 11(a)(ii). (ii) Subject to Section 24 of this Agreement, in the event any Person, alone or together with its Affiliates and Associates, becomes at any time after the Rights Dividend Declaration Date, an Acquiring Person except as the result of a transaction set forth in Section 13(a) hereof, then, (x) prior to the date on which the Company's right of redemption pursuant to Section 23(a) expires (as the same may be extended pursuant to Section 27) with respect to an event described in this Section 11(a)(ii), proper provision shall be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have a right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of shares of the Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of shares of the Common Stock for which a Right is then exercisable and dividing that product by (y) 50% of the current market price per share of the Common Stock of the Company (determined pursuant to Section 11(d)) on the date of the occurrence of any one of the events listed above in this subparagraph (ii) (such number of shares is hereinafter referred to as the "Adjustment Shares"), provided that the Purchase Price and the number of Adjustment Shares shall be further adjusted as provided in this Agreement to reflect any events occurring after the date of such first occurrence. (iii) In the event that the number of shares of the Common Stock which are authorized by the Company's certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraphs (i) and (ii), the Company shall (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon exercise of the Rights and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of the Company (including, without limitation, preference shares, or units of preference shares, which a majority of the Independent Directors and the Board of Directors of the Company have deemed to have the same value as the Common Stock (such preference shares, "common stock equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by a majority of the Independent Directors and the Board of Directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires, as the same may be extended pursuant to Section 27 (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of the Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional shares of the Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement and shall give concurrent written notice to the Rights Agent stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notice to the Rights Agent at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the shares of the Common Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per share on the Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be deemed to be the same as the value of the Common Stock on such date. The Company shall give the Rights Agent notice of the selection of any "common stock equivalent" under this Section 11(a)(iii). (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of the Common Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase the Common Stock (or securities having substantially the same rights, privileges and preferences as the Common Stock ("equivalent common stock") or convertible into the Common Stock or equivalent common stock) at a price per share or equivalent common stock (or having a conversion price per share, if a security convertible into the Common Stock or equivalent common stock) less than the current market price (as defined in Section 11(d) per share or equivalent common stock, as the case may be) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of the Common Stock outstanding on such record date plus the number of shares of the Common Stock or equivalent common stock which the aggregate offering price of the total number of shares of the Common Stock or equivalent common stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and of which the denominator shall be the number of shares of the Common Stock outstanding on such record date plus the number of additional shares of the Common Stock and/or equivalent common stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Shares of the Common Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Common Stock (including any such distribution made in connection with a combination, consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular periodic cash dividend or a dividend payable in the Common Stock) or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the current market price per share of the Common Stock (as defined in Section 11(d)) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of the Common Stock and of which the denominator shall be such current market price per share of the Common Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii), the "current market price" per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter defined in this paragraph (d)) immediately prior to such date and, for purposes of computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of the Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the current market price per share of the Common Stock is determined during the period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into such Common Stock (other than the Rights) or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite 30 Trading Day or 10 Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the current market price shall be appropriately adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of the Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of the Common Stock are listed or admitted to trading or, if the shares of the Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of the Common Stock are not quoted by such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares of the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the shares of the Common Stock, the fair value of such shares on such date shall be as determined in good faith by the Independent Directors if the Independent Directors constitute a majority of the Board of Directors or, in the event the Independent Directors do not constitute a majority of the Board of Directors, by an independent investment banking firm selected by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of the Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of the Common Stock are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York, are not authorized or obligated by law or executive order to close. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Independent Directors if the Independent Directors constitute a majority of the Board of Directors or, in the event the Independent Directors do not constitute a majority of the Board of Directors, by an independent investment banking firm selected by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a) or Section 13(a), the holder of any Right thereafter exercised shall become entitled to receive any share capital other than shares of the Common Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 11(a) through (p), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the shares of the Common Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of the Common Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares (calculated to the nearest ten-thousandth) obtained by (i) multiplying (x) the number of shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of shares of the Common Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of shares of the Common Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after the adjustment of the Purchase Price. The Company shall make a public announcement and shall give simultaneous written notice to the Rights Agent of its election to adjust the number of Rights, indicating the record date for the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of Right Certificates on such record date Right Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of shares of the Common Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the shares of the Common Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such number of fully paid and nonassessable shares of such Common Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of the shares of the Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the shares of the Common Stock and other share capital or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the ocurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors of the Company shall determine to be advisable in order that any consolidation or subdivision of the Common Stock, issuance wholly for cash of any of the Common Stock at less than the current market price, issuance wholly for cash of the Common Stock or securities which by their terms are convertible into or exchangeable for Common Stock, dividends of shares or issuance of rights, options or warrants referred to hereinabove in this Section 11 hereafter made by the Company to holders of its Common Stock shall not be taxable to such shareholders. (n) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Sections 23, 24 and 27 hereof, take (nor will it permit any of its Subsidiaries to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (o) The Company covenants and agrees that it shall not, at any time after a Section 11(a)(ii) Event, (i) combine or consolidate with any other Person, (ii) merge with or into any other Person, or (iii) sell or transfer (or permit any of its Subsidiaries to sell or transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its wholly-owned Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(n)) if (x) at the time of or immediately after such combination, consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such combination, consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (p) Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date, the Company may, in lieu of making any adjustment to the Purchase Price, the number of shares of the Common Stock eligible for purchase on exercise of each Right or the number of Rights outstanding, which adjustment would otherwise be required by Sections 11(a)(i), 11(b), 11(c), 11(h) or 11(i), make such other equitable adjustment or adjustments thereto as the Board of Directors (whose determination shall be conclusive) deems appropriate in the circumstances and not inconsistent with the objectives of the Board of Directors in adopting this Agreement and such Sections. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment and the adjusted Purchase Price, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 26. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. Section 13. Combination, Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event that, following a Section 11(a)(ii) Event, directly or indirectly, (x) the Company shall combine or consolidate with, or merge with or into, any other Person and the Company shall not be the continuing or surviving corporation of such combination, consolidation or merger, (y) any Person shall combine, consolidate or merge with or into the Company and the Company shall be the continuing or surviving corporation of such combination, consolidation or merger and, in connection with such combination, consolidation or merger, all or part of the Common Stock shall be changed into or exchanged for shares or other securities of the Company of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or any of its wholly-owned Subsidiaries in one or more transactions each of which complies with Section 11(n) hereof), then, and in each such case, proper provision shall be made so that (i) each holder of a Right (except as provided in Section 7(e)) shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly issued, fully paid, nonassessable and freely tradeable Common Stock of the Principal Party (as hereinafter defined), not subject to any liens, encumbrances, rights of call or first refusal, or other adverse claims as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of shares of Common Stock for which a Right is then exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such shares for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) 50% of the current market price per share of Common Stock of such Principal Party (determined in the manner described in Section 11(d)) on the date of consummation of such combination, consolidation, merger, sale or transfer; (ii) the Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall thereafter apply to such Principal Party, (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to shares of its Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (1) in the case of any transaction described in (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger, combination or consolidation and, if no securities are so issued, the Person that is the other party to the merger, combination or consolidation; and (2) in the case of any transaction described in (z) of the first sentence in Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (x) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another corporation the Common Stock of which are and have been so registered, "Principal Party" shall refer to such other corporation; and (y) if such Person is a Subsidiary, directly or indirectly, of more than one corporation, the Common Stock of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such corporations is the issuer of the Common Stock having the greatest market value. (c) The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of Common Stock which are neither outstanding nor reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any combination, consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party (i) will prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and (ii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive Section 13 Events. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use, or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of shares or "common stock equivalents" upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Company may pay to the registered holders of Right Certificates at the time the Rights evidenced thereby are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of one share or "common stock equivalent." For purposes of this Section 14(b), the current market value of one share of the Common Stock shall be the closing price of a share of the Common Stock (as determined pursuant to Section 11(d)) for the Trading Day immediately prior to the date of such exercise or exchange, as the case may be, and the current market value of any "common stock equivalent" shall be the same as the current market value of a share of the Common Stock on such date. (c) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise or exchange of a Right, except as otherwise permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of this Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Right Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Stock; (b) after the Distribution Date, the Right Certificates will be transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request; (c) subject to Section 6 and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatever, and neither the Company nor the Rights Agent shall be required to be affected by any notice to the contrary; (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised or exchanged for Common Stock in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent (including the reasonable fees and expenses of counsel), for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for the Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, instruction, adjustment notice, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. In addition to the foregoing, the Rights Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement in reliance upon (i) the proper execution of the certification appended to the Form of Assignment and the Form of Election to Purchase included as part of Exhibit A hereto (the "Certification"), unless the Rights Agent shall have actual knowledge that, as executed, the Certification is untrue or (ii) the non-execution or failure to complete the Certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution or failure. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business and/or the stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct, and the issuance or non-issuance of a Right Certificate or share of the Common Stock or other security issued in lieu of Common Stock in accordance with instructions given to the Rights Agent by the Company pursuant to Section 20(k) hereof or in accordance with the terms hereof shall not constitute negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or 13 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of the Common Stock to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of the Common Stock will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any one of the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. An application by the Rights Agent for instructions may set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties and obligations under this Agreement and the date on and/or after which such action shall be taken, and the Rights Agent shall not be liable for any action taken or omitted in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than one Business Day after the Company receives such application) without the consent of the Company unless, prior to taking or omitting such action, the Rights Agent has received written instructions in response to an application specifying the actions to be taken or omitted. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either by itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided, however, that reasonable care was exercised in the selection thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting the Company. The Company shall give the Rights Agent prompt written instructions as to the action to be taken regarding the Right Certificates involved. The Rights Agent shall not be liable for acting in accordance with such instructions. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company by registered or certified mail, and, at the Company's expense, to the holders of the Right Certificates by first class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the Company shall become the temporary Rights Agent and the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York), in good standing, having a principal office in the State of New York, which is authorized under such laws to exercise corporate trust powers and/or stock transfer powers and is subject to supervision or examination by federal or state authority or which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $25 million or (b) a subsidiary of the corporation described in clause (a) above. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of the Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of the Common Stock so issued or sold pursuant to the exercise of options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (x) the close of business on the tenth day following the Shares Acquisition Date (or if the Shares Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date), or (y) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $.01 per Right as appropriately adjusted to reflect any stock split, dividend of shares or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"), and the Company may, at its option, pay the Redemption Price either in shares of the Common Stock (valued at their current market price as defined in Section 11(d) on the date of the redemption), other securities, cash or other assets; provided, however, that if the Board of Directors of the Company authorizes redemption of the Rights in either of the circumstances set forth in clauses (x) or (y) below then there must be Independent Directors in office and such authorization shall require the concurrence of a majority of the Independent Directors: (x) such authorization occurs on or after the Shares Acquisition Date or (y) such authorization occurs on or after the date of a change (resulting from a proxy or consent solicitation) in a majority of the Directors of the Company in office at the commencement of such solicitation if any Person who is a participant in such solicitation has stated (or if upon the commencement of such solicitation a majority of the directors of the Company has determined in good faith) that such Person (or any of its Affiliates or Associates) intends to take, or may consider taking, any action which would result in such Person becoming an Acquiring Person or which would cause the occurrence of a Triggering Event. Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired, as the same may be extended pursuant to Section 27. (b) In deciding whether or not to exercise the Company's right of redemption hereunder, the directors of the Company shall act in good faith, in a manner they reasonably believe to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances, and they may consider the long-term and short-term effects of any action upon employees, customers and creditors of the Company and upon communities in which offices or other establishments of the Company are located, and all other pertinent factors. (c) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right held. Within 10 days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to the Rights Agent and to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Comany nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23, and other than in connection with the repurchase of Common Stock prior to the Distribution Date. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option (provided that there are then Independent Directors in office and a majority of the Independent Directors concur), at any time and from time to time on or after a Section 11(a)(ii) Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of the Common Stock at an exchange ratio of one share of the Common Stock per Right, appropriately adjusted to reflect any stock split, dividend of shares or similar transaction occurring after the date of this Agreement (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of the Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute for any share of the Common Stock exchangeable for a Right (i) "common stock equivalents," (ii) cash, (iii) debt securities of the Company, (iv) other assets, or (v) any combination of the foregoing, having an aggregate value which a majority of the Independent Directors and the Board of Directors of the Company shall have determined in good faith to be equal to the current market price of one share of the Common Stock (determined pursuant to Section 11(d) hereof) on the Trading Date immediately preceding the date of exchange pursuant to this Section 24. Section 25. Notice of Certain Events. In case the Company shall propose at any time following the Distribution Date (a) to pay any dividend payable in shares of any class to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock (other than a regular periodic cash dividend), or (b) to offer to the holders of its Common Stock rights or warrants to subscribe for or to purchase any additional shares of the Common Stock or share capital of any class or any other securities, rights or options, or (c) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision of outstanding Common Stock), or (d) to effect any combination, consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Sections 11(n) hereof), or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to the Rights Agent and to each holders of a Right, in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such dividend of shares, distribution of rights or Rights, or the date on which such reclassification, combination, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to to take place and the date of participation therein by the holders of its Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least twenty (20) days prior to the record date for determining holders of its Common Stock for purposes of such action, and in the case of any such other action, at least twenty (20)) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of its Common Stock, whichever shall be the earlier. In case a Section 11(a)(ii) Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to the Rights Agent and to each holder of a Right, to the extent feasible and in accordance with Section 26, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) and all references in the preceding paragraph to Common Stock shall be deemed to thereafter refer to other securities. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: General Signal Corporation High Ridge Park, Box 10010 Stamford, Connecticut 06904 Attention: General Counsel Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: First Chicago Trust Company of New York 525 Washington Boulevard Suite 4660 Jersey City, New Jersey 07310 Attention: Tenders and Exchanges Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the earlier of the Distribution Date or the Shares Acquisition Date and subject to the penultimate sentence of this Section 27, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates. From and after the earlier of the Distribution Date or the Shares Acquisition Date, and subject to the penultimate sentence of this Section 27, the Company may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to lengthen the time period during which the Rights may be redeemed following the Shares Acquisition Date for up to an additional twenty days beyond the time period set forth in Section 23(a) (provided, however, that any such lengthening shall be effective only if there are Independent Directors and shall require the concurrence of a majority of such Independent Directors) or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment unless the Rights Agent shall have determined in good faith that such supplement or amendment would adversely affect its interests under this Agreement. Notwithstanding anything in this Agreement to the contrary, no supplement or amendment shall be made on or after the Distribution Date which changes the Redemption Price, the Final Expiration Date, the Purchase Price or the number of shares of the Common Stock for which a Right is then exercisable. Prior to the earlier of the Shares Acquisition Date or the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the provisions of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (and, where specifically provided for herein, the Independent Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or the Company (or, as expressly provided, the Independent Directors), or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for the purpose of clause (ii) below, all omissions with respect to the foregoing) which are done or made by the Board (or, as provided for, by the Independent Directors) in good faith, shall (i) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Right Certificates and all other parties, and (ii) not subject the Board or the Independent Directors to any liability to the holders of the Right Certificates. Section 30. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, registered holders of the Common Stock). Section 31. Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors. Section 32. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. [SEAL] GENERAL SIGNAL CORPORATION Attest: /s/ Michael D. Lockhart By: Name: Michael D. Lockhart Title: President and Chief Operating Officer /s/ Edgar J. Smith, Jr. By: __________________________ Name: Edgar J. Smith, Jr. Title: Vice President, General Counsel and Secretary [SEAL] FIRST CHICAGO TRUST COMPANY OF NEW YORK Attest: /s/ Kebin Laurita By: Name: Kevin Laurita Title: Assistant Vice President /s/ Thomas Ferrari By: _____________________ Name: Thomas Ferrari Title: Vice President EXHIBIT A [Form of Right Certificate] Certificate No. R- ________ Rights NOT EXERCISABLE AFTER MARCH 21, 2006 OR EARLIER IF NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES RIGHTS MAY NOT BE EXERCISABLE. FIRST CHICAGO TRUST COMPANY Right Certificate This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of February 1, 1996 (the "Rights Agreement") between GENERAL SIGNAL CORPORATION, a New York corporation (the "Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, a New York corporation (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M. (New York City time) on March 21, 2006 at the designated office of the Rights Agent, or its successors as Rights Agent, in New York, New York, one fully paid and nonassessable share of the Common Stock, $1.00 par value (the "Common Stock"), of the Company, at a purchase price of $150.00 per share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase and related certificate duly executed, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of March 21, 1996, based on the shares of the Common Stock of the Company as constituted at such date. Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Right Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate of Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who after such transfer, became an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. As provided in the Rights Agreement, the Purchase Price and the number of shares of the Common Stock (or, in certain circumstances, other securities) which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as such term is defined in the Rights Agreement). This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent, and at the executive offices of the Company. This Right Certificate, with or without other Right Certificates, upon surrender at the designated office of the Rights Agent, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of the Common Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof, along with a signature guarantee and such other and further documentation as the Rights Agent may reasonably request, another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (a) may be redeemed by the Company at its option at a redemption price of $.01 per Right prior to the earlier of the close of business on (i) the tenth day following the Shares Acquisition Date and (ii) the Final Expiration Date or (b) may be exchanged in whole or in part for shares of the Common Stock, and/or other securities, cash or other assets of the Company deemed to have the same value as shares of the Common Stock, at any time after a Section 11(a)(ii) Event. No fractional shares of the Common Stock (or other securities) will be issued upon the exercise or exchange of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised or exchanged for shares of the Common Stock as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of , . [SEAL] ATTEST: GENERAL SIGNAL CORPORATION By: ________________________ By: Name: Name: Title: Title: Countersigned: FIRST CHICAGO TRUST COMPANY OF NEW YORK, as Rights Agent By: _______________________ Authorized Signature Date: [Form of Reverse Side of Right Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificates.) FOR VALUE RECEIVED __________________________ hereby sells, assigns and transfers unto (please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _____________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: _______________, ____ Signature Signature Guaranteed: (Signatures must be guaranteed.) CERTIFICATE The undersigned hereby certifies by checking the appropriate box that: Exercising this Right Certificate will not enable the undersigned, its Affiliates, its Associates and/or any other Person with which the undersigned or any of the undersigned's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company to obtain individually or in the aggregate in excess of ____ shares of the Common Stock of the Company. Dated: __________, ____ Signature Signature Guaranteed: (Signatures must be guaranteed.) NOTICE The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsover. FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights evidenced by the Right Certificate.) To General Signal Corporation: The undersigned hereby irrevocably elects to exercise __________________ Rights represented by this Right Certificate to purchase the shares of the Common Stock issuable upon the exercise of such Rights (or such other securities of the Company or of any other Person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of: Please insert social security or other taxpayer identifying number (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other taxpayer identifying number (Please print name and address) Dated: ____________, ____ Signature Signature Guaranteed: (Signatures must be guaranteed.) CERTIFICATE The undersigned hereby certifies by checking the appropriate box that: Exercising the Rights evidenced by this Right Certificate will not enable the undersigned, its Affiliates, its Associates and/or any other Person with which the undersigned or any of the undersigned's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of securities of the Company to obtain individually or in the aggregate in excess of ____ shares of the Common Stock of the Company. Dated: ________________, ____ ________________________ Signature NOTICE The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. EXHIBIT B SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK On February 1, 1996 the Board of Directors of GENERAL SIGNAL CORPORATION (the "Company") declared a dividend distribution of one Right for each outstanding share of Common Stock, $1.00 par value (the "Common Stock"), of the Company. The distribution is payable on March 21, 1996 (the "Record Date") to the shareholders of record on the Record Date. Each Right entitles the registered holder to purchase from the Company one share of the Common Stock at a price of $150.00 per share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and First Chicago Trust Company of New York, as Rights Agent (the "Rights Agent"). Distribution Date; Transfer of Rights Until the earlier to occur of (i) ten days following the date (the "Shares Acquisition Date") of the public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of a number of shares of the Common Stock equal to 20% or more of the outstanding shares of the Common Stock or (ii) ten days following the commencement or announcement of an intention to make a tender offer or exchange offer if, upon consummation thereof, such person would be an Acquiring Person (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Stock certificates outstanding as of the Record Date, by such Common Stock certificate. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after the Record Date upon transfer or new issuance of the Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the Common Stock certificates outstanding as of the Record Date will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire at the close of business on March 21, 2006, unless earlier redeemed or exchanged by the Company as described below. Exercise of Rights for Shares of the Common Stock of the Company_ In the event that a Person becomes an Acquiring Person at any time following the Distribution Date, each holder of a Right will thereafter have the right to receive, upon exercise, shares of the Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the Purchase Price of the Right then in effect. Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. Exercise of Rights for Shares of the Acquiring Company In the event that, at any time following a Section 11(a)(ii) Event, (i) the Company is acquired in a merger or other business combination transaction, or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, ordinary shares of the acquiring company having a value equal to two times the Purchase Price of the Right then in effect. The events set forth in this paragraph and in the preceding paragraph are referred to as the "Triggering Events." Adjustments to Purchase Price The Purchase Price payable, and the number of shares of the Common Stock (or other securities, as the case may be) issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a dividend of shares on, or a subdivision, combination or reclassification of, the Common Stock, (ii) upon the grant to holders of the Common Stock of certain rights or warrants to subscribe for shares of the Common Stock or convertible securities at less than the current market price of the Common Stock or (iii) upon the distribution to holders of the Common Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in the Common Stock) or of subscription rights or warrants (other than those referred to above). Prior to the Distribution Date, the Board of Directors of the Company may make such equitable adjustments as it deems appropriate in the circumstances in lieu of any adjustment otherwise required by the foregoing. With certain exceptions, no adjustment in the Purchase Price will be required until the earlier of (i) three years from the date of the event giving rise to such adjustment or (ii) the time at which cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Common Stock on the last trading date prior to the date of exercise. Redemption and Exchange of Rights At any time prior to 5:00 P.M. New York City time on the tenth day following the Shares Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"). Under certain circumstances set forth in the Rights Agreement, the decision to redeem shall require the concurrence of a majority of the Independent Directors. Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights with, if required, the concurrence of the Independent Directors, the Company shall make announcement thereof, and upon such action, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. At any time after the occurrence of any of the events set forth under the heading "Exercise of Rights for shares of the Common Stock of the Company" above, the Board of Directors may exchange the Rights (other than Rights owned by an Acquiring Person, which have become void), in whole or in part, at an exchange ratio of one share of the Common Stock, and/or other securities, cash or other assets deemed to have the same value as one share of the Common Stock, per Right, subject to adjustment. Until the Rights are exercised or exchanged for shares of the Common Stock, the holders thereof, as such, will have no rights as shareholders of the Company, including, without limitation, the right to vote or to receive dividends. Amendments to Terms of the Rights Any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, defect or inconsistency, or to make changes which do not adversely affect the interests of holders of Rights (excluding the interest of any Acquiring Person); provided, that no supplement or amendment may be made on or after the Distribution Date which changes those provisions relating to the principal economic terms of the Rights. The Board may also, with the concurrence of a majority of the Independent Directors, extend the redemption period for up to an additional 20 days. The term "Independent Directors" means any member of the Board of Directors of the Company who was a member of the Board prior to the time that any person becomes an Acquiring Person, and any person who is subsequently elected to the Board if such person is recommended or elected by a majority of the Independent Directors, but shall not include an Acquiring Person or any representative thereof. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated February 7, 1996. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. EX-13 8 Financial Highlights - -------------------------------------------------------------------------------- For the years ended December 31, (dollars in millions, except per share data) 1995 1994 1993 - -------------------------------------------------------------------------------- Net Sales ................................... $1,863.2 $1,527.7 $1,354.2 Earnings from continuing operations ......... $ 100.1 $ 104.1 $ 98.1 Net Earnings ................................ $ 36.1 $ 80.7 $ 34.7 Earnings per share from continuing operations $ 2.03 $ 2.20 $ 2.17 Earnings per common share ................... $ 0.73 $ 1.71 $ 0.77 Cash dividends per share .................... $ 0.96 $ 0.90 $ 0.90 Total assets ................................ $1,613.2 $1,357.9 $1,224.9 Shareholders' equity ........................ $ 578.1 $ 547.9 $ 525.2 Average common shares outstanding ........... 49.2 47.3 45.2 Return on average shareholders' equity ...... 6.3% 15.0% 7.7% Long-term debt to capitalization ............ 42.6% 32.9% 26.7% Employees (thousands) ....................... 12.9 12.2 11.2 - -------------------------------------------------------------------------------- Net Sales (dollars in millions) [GRAPH] 93: $1,354 94: $1,528 95: $1,863 Earnings from Continuing Operations (dollars in millions) [GRAPH] 93: $98 94: $104 95: $100 Earnings Per Share from Continuing Operations (dollars) [GRAPH] 93: $2.17 94: $2.20 95: $2.03 Return on Equity (percent) [GRAPH] 93: 7.7% 94: 15.0% 95: 6.3% 1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, except per-share data) The following discussion should be read in conjunction with the company's consolidated financial statements and notes thereto. RESULTS OF OPERATIONS The amounts in the table below were derived from the Consolidated Financial Statements. 1995 1994 1993 Year ended December 31, REPORTED Reported Reported - -------------------------------------------------------------------------------- Net sales ................................ $1,863.2 $1,527.7 $1,354.2 Gross margin ............................. 555.2 418.2 395.2 Selling, general and administrative expenses ............................... 354.4 292.3 259.3 Transaction and consolidation charges, merger break-up fee and other special items .......................... 20.1 (46.2) (19.8) Operating earnings ....................... 180.7 172.1 155.7 Earnings from continuing operations ...... 100.1 104.1 98.1 Net earnings ............................. 36.1 80.7 34.7 Earnings per share from continuing operations ............................. 2.03 2.20 2.17 Earnings per share ....................... $ 0.73 $ 1.71 $ 0.77 - -------------------------------------------------------------------------------- Over the last three years, the company recorded the following charges and credits in net earnings: TRANSACTION AND CONSOLIDATION CHARGES: During 1995, the company recorded charges of $20.1 for the acquisition of Best Power Technology Inc. (Best Power) and the merger with Data Switch Corporation (Data Switch). The Best Power charge of $7.4 was primarily for severance and other consolidation costs related to the combination of General Signal and Best Power locations. The Data Switch charge of $12.7 was primarily for severance and balance sheet valuation adjustments. During 1993, the company recorded a charge of $13.2 for transaction costs and for consolidation of its Lindberg unit with Revco. DISCONTINUED OPERATIONS: The company adopted a plan to sell Leeds & Northrup company (L&N) and Dynapower/Stratopower (Dynapower) in November 1994. In 1995, the company recorded net losses of $64.0 ($1.30 per share) in connection with the divestiture of these businesses. During 1994 and 1993, the company recorded net losses of $23.4 ($0.49 per share) and $31.5 ($0.70 per share), respectively, for losses on the expected disposal and operating losses of these operations. SPECIAL ITEMS: RELIANCE MERGER BREAK-UP FEE - During the fourth quarter of 1994, the company's planned merger with Reliance Electric was not successfully concluded, and, as a result, the company received a break-up fee of $50.0.The company also incurred $3.8 of net expenses related to the merger. SEMICONDUCTOR EQUIPMENT OPERATIONS - During 1993, the company 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. At December 31, 1995, the SEO reserves remaining were $3.2, which the company anticipates will be expended in 1996. PREVIOUSLY DIVESTED BUSINESSES - In 1993, the company recognized a $5.2 charge related to previously divested businesses. RESTRUCTURING - In 1993, the company provided $15.0 primarily for factory and administrative consolidation and rearrangement as well as product restructuring and realignment, all related to continuing operations. Net Sales (Dollars in millions) [GRAPH] 93: $1,354 94: $1,528 95: $1,863 17 CONSOLIDATION OF OPERATIONS, ASSET VALUATIONS AND OTHER CHARGES: During the fourth quarter of 1994, the company recorded $46.2 of charges for the consolidation of certain operations ($11.8), asset valuations ($24.1) and environmental and other issues ($10.3). During 1993, the company recorded a $4.4 charge to cost of sales to reflect permanent declines in the value of assets. EXTRAORDINARY CHARGE: During 1993, the company extinguished certain high-rate debt, resulting in an extraordinary charge of $6.6. ADOPTION OF NEW ACCOUNTING STANDARD: Effective January 1, 1993, the company adopted SFAS 112, "Employers' Accounting for Postemployment Benefits". The impact of adopting this standard (shown as the cumulative effect of accounting change in the statement of earnings) was a non-cash, after-tax charge of $25.3 in 1993. To facilitate a more meaningful comparison, the charges and credits discussed above have been excluded from the following discussion of results of operations. 1995 1994 1993 Year ended December 31, ADJUSTED(1) Adjusted(2) Adjusted(3) - -------------------------------------------------------------------------------- Net sales ............................... $1,863.2 $1,527.7 $1,354.2 Gross margin ............................ 555.2 445.9 399.6 Selling, general and administrative expenses ............... 354.4 276.2 259.3 Operating earnings ...................... 200.8 169.7 140.3 Earnings from continuing operations ..... 113.0 104.1 86.4 Earnings per share from continuing operations ............................ $ 2.30 $ 2.20 $ 1.91 - -------------------------------------------------------------------------------- (1) Excludes transaction and consolidation charges related to the acquisition of Best Power and the merger with Data Switch. (2) Excludes Reliance merger break-up fee and consolidation of operations charges. (3) Excludes 1993 special items and transaction and consolidation charges related to the merger with Revco. 1995 COMPARED WITH 1994 (ADJUSTED TO EXCLUDE NON-RECURRING CHARGES AND CREDITS) REVENUES: Sales improved 22.0 percent over 1994 levels to $1,863.2, primarily related to acquisitions with the remainder reflecting improved order activity. International sales in 1995 totaled 22.3 percent of the company's net sales as compared to 19.4 percent in 1994. Export sales increased 59 percent to $199.1, reflecting greater export activity in Process and Electrical Controls and the acquisitions of Fairbanks Morse Pump Corporation (Fairbanks), Best Power and Data Switch. Price changes, volume changes, and acquisitions accounted for approximately 10 percent, 6 percent, and 84 percent of the revenue increase, respectively. Process Controls sector sales increased 18.7 percent to $719.7 from increased shipments of pumps, valves, industrial mixers, crystal growing furnaces and laboratory equipment. The increased pump sales resulted primarily from the acquisition of Fairbanks. The increased mixer business sales were primarily a result of higher domestic sales. Sales in the Electrical Controls sector rose 25.6 percent to $777.0. The acquisitions of Best Power and MagneTek Electric Inc. (Waukesha Electric) accounted for approximately 80 percent of the sector's increase. The remainder resulted from improved volume in building and life safety products, broadcast equipment and power transformers. These improvements were offset by lower volume as a result of a major floor care customer's production curtailments. Industrial Technology sector sales increased 21.1 percent to $366.5 due mainly to the Data Switch merger, recorded effective January 1, 1995, which added $97.8 in revenue. This addition was partially offset by decreases in sales due to the completion of the U.S. Postal Service stamp vending machine contract in early 1995 as well as declines in the telecommunications and OEM bicycle and automotive component products. COSTS AND EXPENSES: Gross profit as a percentage of sales improved from 29.2 percent to 29.8 percent. Higher margins at acquired companies as well as improved cost structures at several operating units were the primary reasons for the improvement. Margin improvements were strongest for valve, broadcast equipment and telecommunication products. Margin improvements also were realized as a result of the completion of the lower margin U.S. Postal Service contract. Spending on research and development ranged from two to three percent of sales in both years. Gross Profit (Dollars in millions) [GRAPH] 93: $395 94: $418 95: $555 Net Interest Expense (Dollars in millions) [GRAPH] 93: $17 94: $12 95: $24 18 Selling, general and administrative expenses as a percentage of sales increased from 18.1 percent to 19.0 percent primarily due to higher operating expenses-to-sales of acquired companies, which included $2.7 of integration charges for Best Power and Waukesha Electric, as well as incremental spending related to acquisitions. These higher expenses were offset by insurance recoveries of $6.8 and gains on asset sales of $4.1. SG&A expenses included pension credits of $9.3 in 1995 and $9.7 in 1994. These credits resulted from the company's overfunded pension plans and favorable long-term investment results. The company anticipates pension credits in 1996 to be lower than 1995 due primarily to an increase in the total number of employees added via acquisitions and decreases in discount rates, offset by improved investment return rates. Net interest expense increased as a result of higher average debt levels resulting from acquisitions, the addition of higher-rate debt from Data Switch and an overall increase in borrowing rates. The 1995 effective tax rate rose to 36 percent from 35 percent in 1994 for a number of reasons, including an increase in non-deductible goodwill and a $7.0 reduction in the deferred tax valuation allowance (see reconciliation of federal and effective tax rates on page 27). Without the reduction in the deferred tax valuation allowance, the 1995 rate would have been approximately 40 percent. 1994 COMPARED WITH 1993 (ADJUSTED TO EXCLUDE NON-RECURRING CHARGES AND CREDITS) REVENUES: Sales rose 12.8 percent from 1993 to $1,527.7. Domestic sales increased 14.2 percent, reflecting the strength of the domestic economy. Exports increased 13.2 percent, and foreign shipments increased 3.4 percent. Price changes, volume changes and acquisitions accounted for approximately 5 percent, 61 percent and 34 percent of the revenue increase, respectively. Sales in the Process Controls sector were $606.4, up 11.1 percent from 1993. The sector saw increased sales in its vacuum pump lines and its non-ferrous and heat-treat products. In addition, almost one-third of the increase was from the late 1993 acquisition of Layne & Bowler, a municipal water pump manufacturer. Sales in the Electrical Controls sector rose 13.1 percent to $618.6 in 1994, primarily from higher shipments of life safety products, conduit fittings and other electrical wholesale products, and electrical motors. 1994 acquisitions contributed $20.0 of the growth in sales of conduit fittings and other electrical wholesale products. Industrial Technology sector sales grew 15.8 percent to $302.7. Accounting for this growth were greater shipments of OEM automotive components and bus and rail fare equipment. A significant portion of the increased sales in 1994 resulted from the shipment of U.S. Postal Service stamp vending machines. COSTS AND EXPENSES: In 1994, gross margins were flat at 29 percent of sales (excluding unit consolidation, asset valuation and other charges in 1994 of $27.7 and asset valuation charges in 1993 of $4.4). The ratio of selling, general and administrative expenses to sales improved to 18.1 percent from 19.1 percent (excluding unit consolidation, asset valuation and other charges in 1994 of $16.1). Contributing to the lower rate of SG&A expenses to sales were the successful cost reduction efforts undertaken by the company in 1993 and prior years. SG&A expenses included pension credits of $9.7 in 1994 and $8.6 in 1993. Net interest expense of $11.8 decreased from 1993 because of the extinguishment of higher-rate debt in 1993 and generally lower average debt levels in 1994. The effective income tax rate was 35 percent in 1994 compared with 29.5 percent in 1993. 1993 income taxes included benefits from adjustments of prior year tax reserves and an increase in the company's deferred tax assets arising from 1993 tax legislation. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $160.7 in 1995 compared with $115.7 in 1994. Included in 1994 cash from operations was the Reliance break-up fee of $50.0 less net expenses of $3.8 incurred in connection with the planned merger. 1995 operating cash flow improved primarily from better working capital management along with proceeds from environmental insurance recoveries ($6.8). Included in operating cash flows for 1995 and 1994 were expenditures of $40.8 and $47.6, respectively, related to previously divested operations and $7.5 and $8.2, respectively, for severance pay. Earnings from Continuing Operations (Dollars in millions) [GRAPH] 93: $98 94: $104 95: $100 Working Capital (Dollars in millions) [GRAPH] 93: $269 94: $349 95: $298 19 Capital expenditures were $49.0 in 1995 compared with $74.8 in 1994. 1995 capital expenditures were primarily comprised of upgrades to manufacturing facilities and purchases of MIS equipment. The company anticipates capital expenditures in 1996 to approximate depreciation. During 1995, the company acquired Best Power for $206.3 and Waukesha Electric for $73.9. Cash paid for acquisitions in 1994 totaled $83.3. Proceeds from dispositions were $53.4 in 1995 compared with $26.2 in 1994. Included in 1995 cash flow from investing activities were long-term receivable collections and fixed asset sales totalling approximately $14.5. On January 11, 1996, the company sold Kinney Vacuum Company (Kinney) for approximately $28.0 and expects to record a pre-tax gain of approximately $21.0 in the first quarter of 1996. Net cash provided from financing activities was $92.7 in 1995, which included net borrowings of $139.2, offset by dividend payments of $45.6 and cash used to repurchase common shares of $18.0. In 1994, net cash provided by financing activities was $14.7, including net borrowings of $70.9, dividend payments of $42.6, and repurchased shares of $18.5. Long-term debt-to-capitalization increased to 42.6 percent at December 31, 1995 from 32.9 percent at December 31, 1994, principally as a result of the company's acquisitions during 1995. The company expects to use the proceeds from the disposition of Kinney and the remaining discontinued businesses to reduce debt. At the end of 1995, the company had unused lines of credit of $621.6, consisting primarily of committed borrowing facilities of $190.0 and $360.0 that expire in 1996 and 2000, respectively. The company has $300.0 of unissued securities under a universal shelf registration with the Securities and Exchange Commission, providing the flexibility to issue a broad variety of securities. The company expects that cash provided from operations will be sufficient to provide for the company's financing needs for the next year. Additional financing may be undertaken as required. At December 31, 1995, the company's balance sheet reflected net deferred tax assets of $223.9 that are reduced by deferred tax liabilities of $107.2 and a valuation allowance of $33.6. The carrying amount of the net deferred tax asset was based on management's assessment of the realizability of the net operating loss carryforwards and deductible items through future taxable earnings or alternative tax planning strategies. The company enters into forward foreign exchange contracts to mitigate the risks of doing business in foreign currencies. The company hedges currency exposures of firm commitments and specific assets and liabilities denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impact on earnings. The company's currency exposures vary, but are primarily concentrated in the Canadian dollar, British pound, Australian dollar, German mark, French franc and Singapore dollar. Translation exposures are rarely hedged. ENVIRONMENTAL MATTERS The company is involved in various stages of investigation and remediation relative to environmental protection matters. A more detailed discussion of environmental matters appears on page 30 of the Notes to the Financial Statements. ACCOUNTING CHANGES In 1995, the Financial Accounting Standards Board issued Statement Nos. 121 and 123 that relate to accounting for impairment of long-lived assets and stock compensation, respectively. The company plans to adopt these statements in 1996 and is currently studying their impact. OTHER MATTERS Since the company is a producer of capital goods and equipment, its results can vary with the relative strength of the economy. Demand for products in the Process Controls sector follows the demand for capital goods orders. The Electrical Controls sector depends upon several markets, principally the nonresidential construction and computer equipment industries. The Industrial Technology sector depends on several markets, primarily automotive, mass transportation, and telecommunications equipment. Mass transportation depends upon continued federal and local government spending, and telecommunications is dependent upon continued research and development and the continued success of new products. While no one marketplace or industry has a major impact on the company's operations or results, the inherent pace of technological changes presents certain risks that the company monitors carefully. Success within all of the company's businesses is dependent upon the timely introduction and acceptance of new products. Capital Expenditures and Research and Development (Dollars in millions) [GRAPH] Research and Development Capital Expenditures 93: $53 $55 94: $50 $75 95: $47 $49 Capitalization (Dollars in millions) [GRAPH] LTD-to-Cap Capitalization 93: 26.7% $717 94: 32.9% $817 95: 42.6% $1,007 20 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS Management is responsible for the preparation of the company's consolidated financial statements and related information appearing in this annual report. Management considers that the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements reasonably present the company's financial position and results of operations in conformity with generally accepted accounting principles. Management also has included in the company's financial statements amounts that are based on estimates and judgments which it views as reasonable under the circumstances. The independent auditors perform an audit of the company's consolidated financial statements in accordance with generally accepted auditing standards and provide an objective, independent review of the fairness of reported operating results and financial position. The Board of Directors of the company has an Audit Committee composed of four non-management Directors. The Committee meets at least three times annually with financial management, the internal auditors and the independent auditors to review accounting, control, auditing and financial reporting matters. /s/ Michael D. Lockhart Michael D. Lockhart Chairman and Chief Executive Officer /s/ Terence D. Martin /s/ Terry J. Mortimer Terence D. Martin Terry J. Mortimer Executive Vice President and Vice President Chief Financial Officer and Controller REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders General Signal Corporation We have audited the accompanying balance sheet of General Signal Corporation and consolidated subsidiaries as of December 31, 1995 and 1994, and the related statements of earnings, shareholders' equity, and cash flow for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of General Signal Corporation and consolidated subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flow for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in the notes to the financial statements, in 1993 the company changed its method of accounting for postemployment benefits. /s/ Ernst & Young LLP Stamford, Connecticut January 25, 1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996. 21 STATEMENT OF EARNINGS
General Signal Corporation and Consolidated Subsidiaries Year ended December 31, (In millions, except per-share data) 1995 1994 1993 ==================================================================================================================================== NET SALES ............................................................................. $ 1,863.2 $ 1,527.7 $ 1,354.2 - ------------------------------------------------------------------------------------------------------------------------------------ Cost of sales ......................................................................... 1,308.0 1,109.5 959.0 Selling, general and administrative expenses .......................................... 354.4 292.3 259.3 Transaction and consolidation charges ................................................. 20.1 -- 13.2 Merger break-up fee and other special items ........................................... -- (46.2) (33.0) - ------------------------------------------------------------------------------------------------------------------------------------ Total operating costs and expenses .................................................... 1,682.5 1,355.6 1,198.5 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EARNINGS .................................................................... 180.7 172.1 155.7 Interest expense, net ................................................................. 24.3 11.8 16.6 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ............................... 156.4 160.3 139.1 Income taxes .......................................................................... 56.3 56.2 41.0 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations ................................................... 100.1 104.1 98.1 Earnings (loss) from discontinued operations, net of income taxes: Operations ........................................................................ -- 2.4 (31.5) Disposal .......................................................................... (64.0) (25.8) -- - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE EXTRAORDINARY CHARGE AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ....... 36.1 80.7 66.6 Extraordinary charge .................................................................. -- -- (6.6) Cumulative effect of accounting change ................................................ -- -- (25.3) - ------------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS ...................................................................... $ 36.1 $ 80.7 $ 34.7 ==================================================================================================================================== EARNINGS (LOSS) PER SHARE OF COMMON STOCK: Continuing operations ............................................................. $ 2.03 $ 2.20 $ 2.17 Discontinued operations ........................................................... -- 0.05 (0.70) Disposal of discontinued operations ............................................... (1.30) (0.54) -- Extraordinary charge .............................................................. -- -- (0.14) Cumulative effect of accounting change ............................................ -- -- (0.56) - ------------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS ...................................................................... $ 0.73 $ 1.71 $ 0.77 ==================================================================================================================================== AVERAGE COMMON SHARES OUTSTANDING ..................................................... 49.2 47.3 45.2 ==================================================================================================================================== See accompanying notes to the financial statements. 22
BALANCE SHEET
General Signal Corporation and Consolidated Subsidiaries December 31, (In millions) 1995 1994 ==================================================================================================================================== ASSETS CURRENT ASSETS: Cash and cash equivalents .............................................................. $ 1.0 $ 0.3 Accounts receivable .................................................................... 323.6 258.3 Inventories ............................................................................ 234.7 213.3 Prepaid expenses and other current assets .............................................. 30.1 44.5 Assets held for sale at estimated realizable value ..................................... 60.4 153.6 Deferred income taxes .................................................................. 71.6 47.2 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS ............................................................... 721.4 717.2 PROPERTY, PLANT AND EQUIPMENT .......................................................... 312.7 280.5 INTANGIBLES ............................................................................ 406.0 194.3 OTHER ASSETS ........................................................................... 161.6 149.8 DEFERRED INCOME TAXES .................................................................. 11.5 16.1 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS ....................................................................... $ 1,613.2 $ 1,357.9 ==================================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings and current maturities of long-term debt ......................... $ 9.0 $ 2.2 Accounts payable ....................................................................... 158.1 152.9 Accrued expenses ....................................................................... 233.8 194.0 Income taxes ........................................................................... 31.2 18.9 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES .......................................................... 432.1 368.0 - ------------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT, LESS CURRENT MATURITIES ................................................ 428.6 269.1 ACCRUED POSTRETIREMENT AND POSTEMPLOYMENT OBLIGATIONS .................................. 146.9 161.2 OTHER LIABILITIES ...................................................................... 27.5 11.7 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LONG-TERM LIABILITIES ........................................................ 603.0 442.0 - ------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDERS' EQUITY: Common stock: authorized 150.0 shares; issued 64.3 in 1995 and 63.7 in 1994 ...................................................... 77.9 77.4 Additional paid-in capital ............................................................. 304.2 281.1 Retained earnings ...................................................................... 582.9 620.5 Cumulative translation adjustments ..................................................... (3.9) (12.1) - ------------------------------------------------------------------------------------------------------------------------------------ 961.1 966.9 Common stock in treasury, at cost: 15.0 shares in 1995 and 16.6 shares in 1994 ......... (383.0) (419.0) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY ......................................................... 578.1 547.9 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................................... $ 1,613.2 $ 1,357.9 ====================================================================================================================================
See accompanying notes to the financial statements. 23 STATEMENT OF SHAREHOLDERS' EQUITY
Additional Cumulative Common General Signal Corporation and Consolidated Subsidiaries Common Paid-In Retained Translation Stock In (In millions, except per-share data) Stock Capital Earnings Adjustments Treasury ==================================================================================================================================== Balance at December 31, 1992 ................................................... $ 45.1 $ 262.8 $ 588.1 $ (9.0) $ (512.0) Net earnings ................................................................... -- -- 34.7 -- -- Dividends declared ($0.90 per share) ........................................... -- -- (39.7) -- -- Sale of common stock ........................................................... -- 20.4 -- -- 102.9 Stock split .................................................................... 31.6 (31.6) -- -- -- Exercise of stock options and savings and stock ownership plan funding ......... 0.4 20.4 -- -- 10.6 Translation adjustments ........................................................ -- -- -- 0.5 -- - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1993 ................................................... 77.1 272.0 583.1 (8.5) (398.5) Net earnings ................................................................... -- -- 80.7 -- -- Dividends declared ($0.90 per share) ........................................... -- -- (43.3) -- -- Purchase of common stock ....................................................... -- -- -- -- (18.5) Exercise of stock options and savings and stock ownership plan funding ......... 0.3 9.1 -- -- (2.0) Translation adjustments ........................................................ -- -- -- (3.6) -- - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1994 ................................................... 77.4 281.1 620.5 (12.1) (419.0) Restatement for Data Switch merger ............................................. -- 4.8 (27.7) (0.1) 45.7 Net earnings ................................................................... -- -- 36.1 -- -- Dividends declared ($0.96 per share) ........................................... -- -- (46.0) -- -- Purchase of common stock ....................................................... -- -- -- -- (18.0) Exercise of stock options and savings and stock ownership plan funding ......... 0.5 18.3 -- -- 8.3 Discontinued operations ........................................................ -- -- -- 7.4 -- Translation adjustments ........................................................ -- -- -- 0.9 -- - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1995 ................................................... $ 77.9 $ 304.2 $ 582.9 $ (3.9) $ (383.0) ====================================================================================================================================
See accompanying notes to the financial statements. 24 STATEMENT OF CASH FLOW
General Signal Corporation and Consolidated Subsidiaries Increase (Decrease) in Cash and Cash Equivalents Year ended December 31, (In millions) 1995 1994 1993 ==================================================================================================================================== CASH FLOW FROM OPERATING ACTIVITIES: Earnings from continuing operations ................................................... $ 100.1 $ 104.1 $ 98.1 Adjustments to reconcile earnings from continuing operations to net cash from operating activities: Discontinued operations ........................................................... -- 2.4 (31.5) Transaction and consolidation charges ............................................. 20.1 -- 13.2 Deferred income taxes ............................................................. 32.0 36.8 (3.7) Depreciation and amortization ..................................................... 62.8 48.4 46.4 Pension credits ................................................................... (9.3) (9.7) (8.6) Extraordinary charge on early extinguishment of debt .............................. -- -- (6.6) Other, net ........................................................................ 4.4 (0.2) 6.6 Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable ............................................................. (15.4) (25.2) 5.3 Inventories ..................................................................... 21.4 (26.8) 12.9 Prepaid expenses and other current assets ....................................... 18.1 (1.0) 5.4 Accounts payable ................................................................ (14.2) 29.5 (2.4) Accrued expenses and other ...................................................... (71.6) (50.5) (78.4) Income taxes .................................................................... 12.3 7.9 (13.7) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash from operating activities ................................................ 160.7 115.7 43.0 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOW FROM INVESTING ACTIVITIES: Divestitures ...................................................................... 53.4 26.2 97.6 Capital expenditures .............................................................. (49.0) (74.8) (55.1) Acquisitions, net of cash acquired ................................................ (272.4) (83.3) (20.0) Other, net ........................................................................ 15.3 0.5 (1.1) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash from investing activities ................................................ (252.7) (131.4) 21.4 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOW FROM FINANCING ACTIVITIES: Issuance of long-term debt ........................................................ 273.2 77.9 9.3 Redemption of long-term debt ...................................................... (134.0) (7.0) (189.8) Purchase of common stock .......................................................... (18.0) (18.5) -- Issuance of common stock .......................................................... 17.1 4.9 138.8 Dividends paid .................................................................... (45.6) (42.6) (37.9) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash from financing activities ................................................ 92.7 14.7 (79.6) - ------------------------------------------------------------------------------------------------------------------------------------ Net changes in cash and cash equivalents .......................................... 0.7 (1.0) (15.2) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ........................................ 0.3 1.3 16.5 - ------------------------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF YEAR .............................................. $ 1.0 $ 0.3 $ 1.3 ==================================================================================================================================== Interest paid ......................................................................... $ 27.3 $ 12.4 $ 23.6 ==================================================================================================================================== Income taxes paid ..................................................................... $ 15.7 $ 21.5 $ 26.7 ====================================================================================================================================
See accompanying notes to the financial statements. 25 NOTES TO THE FINANCIAL STATEMENTS (Dollars in millions, except per-share data) ACCOUNTING POLICIES CONSOLIDATION: The financial statements include the accounts of General Signal Corporation and consolidated subsidiaries after elimination of intercompany accounts and transactions. Investments in unconsolidated companies where management exercises significant influence are accounted for using the equity method. CASH EQUIVALENTS: The company considers its highly liquid money market investments with original maturities of three months or less to be cash equivalents. INVENTORIES: Inventories are stated at the lower of cost or market. Cost is primarily determined using the first-in, first-out (FIFO) method. All other inventories are valued using the last-in, first-out (LIFO) method. PROPERTY: Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of assets. Leasehold improvements are amortized over the life of the related asset or the life of the lease, whichever is shorter. INTANGIBLES: Intangible assets (primarily the excess of purchase price over the fair value of net assets acquired) are amortized on a straight-line basis over periods not exceeding 40 years. The company periodically reviews the carrying value of intangibles for recoverability in relation to future undiscounted cash flow. REVENUE RECOGNITION: Revenues are primarily recognized as products are shipped and services are rendered. The percentage-of-completion method of accounting is followed for long-term contracts. Under this method, earnings accrue as contracts progress toward completion, generally based on the percentage of costs incurred or the units of product delivered. ENVIRONMENTAL: The company's environmental accruals cover all anticipated costs, including capital expenditures, investigation, remediation, and operation and maintenance of clean-up sites. Environmental obligations generally are not discounted and are not reduced by anticipated insurance recoveries. STOCK COMPENSATION: The company accounts for the options granted under its stock incentive program by recognizing as compensation any excess of quoted market price over exercise price at the date of grant. The exercise price of General Signal stock options granted equals the market value on the date of grant. EARNINGS PER SHARE: Earnings per share of common stock was calculated by dividing net earnings by the weighted average number of common shares outstanding. There was no dilutive impact from stock options or convertible debt securities outstanding during the periods. MERGER AND ACQUISITION INCOME AND EXPENSES: The company recognizes costs associated with potential mergers and acquisitions, along with proceeds from break-up fee provisions, as components of operating income. USE OF ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain reclassifications were made to conform prior years' data to the current presentation. ACCOUNTS RECEIVABLE Accounts receivable are net of allowances for doubtful accounts of $10.6 and $10.1 at December 31, 1995 and 1994, respectively. INVENTORIES December 31, 1995 1994 ================================================================================ Finished goods ................................. $ 73.9 $ 62.1 Work in process ................................ 66.5 68.0 Raw material and purchased parts ............... 117.6 106.4 - -------------------------------------------------------------------------------- Total FIFO cost ................................ 258.0 236.5 Excess of FIFO cost over LIFO inventory value ............................ (23.3) (23.2) - -------------------------------------------------------------------------------- $ 234.7 $ 213.3 ================================================================================ Inventories valued using LIFO are approximately $69.4 and $66.4 at December 31, 1995 and 1994, respectively. During 1994, $3.9 of LIFO reserves related to discontinued operations was reclassified to assets held for sale at estimated realizable value. Progress payments, netted against work in process at year-end, are $8.7 in 1995 and $4.7 in 1994. 26 CONTRACTS IN PROGRESS Prepaid expenses and other current assets include contracts in progress of $20.5 and $30.8 at December 31, 1995 and 1994, respectively. Contracts in progress represent revenue recognized on a percentage-of-completion basis over related progress billings of $83.7 and $72.6 at December 31, 1995 and 1994, respectively. Substantially all contracts in progress at year-end are billed during the subsequent year. PROPERTY, PLANT AND EQUIPMENT December 31, 1995 1994 ================================================================================ Land ....................................... $ 14.1 $ 9.1 Buildings and leasehold improvements ........................... 167.6 138.4 Machinery and equipment .................... 536.1 464.3 - -------------------------------------------------------------------------------- 717.8 611.8 - -------------------------------------------------------------------------------- Accumulated depreciation and amortization ....................... (405.1) (331.3) - -------------------------------------------------------------------------------- $ 312.7 $ 280.5 ================================================================================ INCOME TAXES For financial reporting purposes, earnings from continuing operations before income taxes includes the following components: Year ended December 31, 1995 1994 1993 ================================================================================ Pretax income: United States .................. $ 151.5 $ 159.3 $ 137.9 Foreign ....................... 4.9 1.0 1.2 - -------------------------------------------------------------------------------- $ 156.4 $ 160.3 $ 139.1 ================================================================================ The reconciliation of income tax from continuing operations computed at the U.S. federal statutory tax rate to the company's effective income tax rate is as follows: Year ended December 31, 1995 1994 1993 ================================================================================ Tax at U.S. federal statutory rate ...... 35.0% 35.0% 35.0% State and local income taxes, net of U.S. federal benefit ......... 5.5 3.4 2.7 Foreign sales corporation ............... (1.7) (1.4) (1.5) Goodwill amortization ................... 2.1 1.0 1.3 Income from Puerto Rican operations ..... (0.7) (0.8) (0.7) Foreign rates and foreign dividends ..... (1.4) (1.1) (0.9) Reduction in valuation allowance ........ (4.5) -- -- Effect of enacted U.S. federal rate change on deferred taxes ................... -- -- (2.0) Adjustments to prior years' tax liabilities .............. -- -- (2.6) Other ................................... 1.7 (1.1) (1.8) - -------------------------------------------------------------------------------- 36.0% 35.0% 29.5% ================================================================================ The components of the provision for income taxes are as follows: Year ended December 31, 1995 1994 1993 ================================================================================ Current: Federal ........................ $ 14.2 $ 11.5 $ (1.1) Foreign ........................ 3.4 4.6 (0.4) State .......................... 6.7 3.3 0.5 - -------------------------------------------------------------------------------- Total current .................. 24.3 19.4 (1.0) - -------------------------------------------------------------------------------- Deferred: Federal ........................ (6.5) 51.5 9.9 Foreign ........................ (2.6) 0.4 (0.9) State .......................... 5.2 9.5 3.0 - -------------------------------------------------------------------------------- Total deferred ................. (3.9) 61.4 12.0 - -------------------------------------------------------------------------------- $ 20.4 $ 80.8 $ 11.0 ================================================================================ 27 Income tax expense is included in the financial statements as follows: Year ended December 31, 1995 1994 1993 ================================================================================ Continuing operations .............. $ 56.3 $ 56.2 $ 41.0 Discontinued operations ............ (35.9) 24.6 (13.2) Extraordinary charge ............... -- -- (4.1) Cumulative effect of accounting change .............. -- -- (12.7) - -------------------------------------------------------------------------------- $ 20.4 $ 80.8 $ 11.0 ================================================================================ Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the company's deferred tax assets and liabilities are as follows: December 31, 1995 1994 ================================================================================ Deferred tax assets: Acquired tax benefits and basis differences ...... $ 45.1 $ 52.0 Other postretirement and postemployment benefits ........................ 63.6 70.0 Losses on dispositions and restructuring ......... 22.4 21.0 Inventories ...................................... 15.7 15.1 NOL and credit carryforwards ..................... 42.9 46.0 Other ............................................ 34.2 24.1 - -------------------------------------------------------------------------------- Total deferred tax assets ...................... 223.9 228.2 Valuation allowance .............................. (33.6) (43.2) - -------------------------------------------------------------------------------- Net deferred tax assets ........................ 190.3 185.0 Deferred tax liabilities: Accelerated depreciation ......................... 32.5 28.8 Pension credits .................................. 36.2 34.0 Reliance gain .................................... 19.8 19.8 Discontinued operations .......................... -- 23.0 Other ............................................ 18.7 16.1 - -------------------------------------------------------------------------------- Total deferred tax liabilities ................ 107.2 121.7 - -------------------------------------------------------------------------------- $ 83.1 $ 63.3 ================================================================================ Realization of deferred tax assets associated with the NOL and credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration. Management believes that there is a risk that certain of these NOL and credit carryforwards may expire unused and, accordingly, has established a valuation allowance against them. Although realization is not assured for the remaining deferred tax assets, management believes it is more likely than not that they will be realized through future taxable earnings or alternative tax strategies. However, the net deferred tax assets could be reduced in the near term if management's estimates of taxable income during the carryforward period are significantly reduced or alternative tax strategies are no longer viable. In the event that the tax benefits relating to the valuation allowance are realized, $1.0 of such benefits would reduce goodwill. At December 31, 1995, the following net federal operating loss and tax credit carryforwards are available: Expiration Operating Tax Dates Losses Credits ================================================================================ 1996 - 1997 .............................. $-- $ 14.3 1998 - 1999 .............................. 2.7 14.4 2000 - 2001 .............................. 35.1 -- 2002 - 2003 .............................. 11.4 -- No expiration ............................ -- 0.6 - -------------------------------------------------------------------------------- Undistributed earnings of the company's foreign subsidiaries amounted to approximately $60.8 at December 31, 1995. Those earnings are considered to be indefinitely reinvested and accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. Upon distribution of those earnings, the company would be subject to U.S. income taxes (subject to a reduction for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable; however, unrecognized foreign tax credit carryovers would be available to reduce some portion of the U.S. liability. Withholding taxes of approximately $5.3 would be payable upon remittance of all previously unremitted earnings at December 31, 1995. DEBT December 31, 1995 1994 ================================================================================ 5.75% Convertible Subordinated Notes due 2002 (convertible at approximately $39.50 per share) ................ $ 100.0 $ 100.0 Commercial paper 1995, 5.9%; 1994, 6.1% ......................... 249.0 85.7 Industrial Revenue Bonds due 2000-2014; no stipulated principal repayments prior to maturity (primarily variable rate) ............. 44.5 45.7 Other long-term borrowings ......................... 39.9 38.8 - -------------------------------------------------------------------------------- 433.4 270.2 - -------------------------------------------------------------------------------- Less current maturities ............................ 4.8 1.1 - -------------------------------------------------------------------------------- $ 428.6 $ 269.1 ================================================================================ Short-term notes payable to banks .................. $ 4.2 $ 1.1 ================================================================================ Maturities of long-term debt through 2000 are: 1996-$4.8; 1997-$1.1; 1998-$1.0; 1999-$0.9; and 2000-$286.0. 28 During 1993, a portion of the proceeds from the issuance of common stock and the sale of SEO was used for the early extinguishment of higher-rate debt and swap agreements, which resulted in an extraordinary charge of $10.7 ($6.6 after tax). The company maintains credit arrangements with banks in the U.S. and abroad, which aggregated $621.6 and $382.9 at December 31, 1995 and 1994, respectively. At year-end 1995, the company had a committed revolving credit agreement of $360.0 that matures on January 11, 2000 and a committed revolving credit agreement of $190.0 that matures on May 31, 1996. The agreements permit domestic and Eurodollar borrowings at interest rates offered to investment grade customers. The agreements also are convertible int o one-year term loans at maturity. Commercial paper is classified as long-term debt as the company maintains long-term committed credit agreements to support these borrowings and intends to refinance them on a long-term basis either through continued commercial paper borrowings or the issuance of medium-term notes. In May 1994, the company established a $300.0 financing program under a universal shelf registration that permits the issuance of debt, equity and equity-linked securities, replacing an earlier shelf registration for only debt securities that had been in place since April 1990. The universal shelf registration permits the company to issue junior or senior debt, convertibles, equity warrants, preferred shares and medium-term notes under one filing without specifying any dollar amounts for any security. As of December 31, 1995, no amounts have been issued under the shelf registration. The company entered into an interest rate exchange agreement, expiring in 2000, with a financial institution to limit exposure to interest rate volatility. The agreement involved a transaction with a notional principal amount of $25.0 at December 31, 1995 and 1994. The company monitors the risk of default by the swap counterparty and does not anticipate non-performance. FOREIGN EXCHANGE CONTRACTS The company conducts its business in various foreign currencies. Accordingly, the company is subject to the typical currency risks and exposures that arise as a result of changes in the relative value of currencies. The risks are often referred to as transactional, commitment, translational and economic currency exposures. The company's policy stresses risk reduction and specifically prohibits speculation. The policy's three basic objectives are to reduce currency risk on a consolidated basis, to protect the functional currency value of foreign currency-denominated cash flows, and to reduce the volatility that changes in foreign exchange rates may present to operating income. The company utilizes natural hedges and offsets to reduce exposures and also combines positions to reduce the frictional cost of hedging. The company entered into forward exchange contracts to hedge net consolidated currency transaction exposure for periods consistent with the terms of the underlying transactions, extending through September, 1996. These contracts do not subject the company to currency risk from exchange rate movements, as changes in value are deferred and offset against losses and gains on the underlying transactions. At December 31, 1995, the company had approximately $62.8 of such contracts outstanding, including $4.3 related to discontinued operations. FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and cash equivalents, short- and long-term debt, and foreign currency and interest rate exchange contracts had fair values, based upon quoted prices or discounted cash flow analyses, that approximated their carrying amounts. Financial guarantees and letters of credit were issued by the company in the ordinary course of business and had a fair value of approximately $67.0 as of December 31, 1995. The fair values of financial guarantees and letters of credit were based on the face value of the underlyin g instruments and the related amounts accrued. CONTINGENCIES AND COMMITMENTS LITIGATION: The company and certain of its subsidiaries are defendants in legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position or results of operations. LEASES: The future minimum rental payments under leases with remaining noncancelable terms in excess of one year are: Year ending December 31, ================================================================================ 1996 ....................................................... $ 11.6 1997 ....................................................... 9.4 1998 ....................................................... 7.1 1999 ....................................................... 6.4 2000 ....................................................... 5.3 Subsequent to 2000 ......................................... 11.3 - -------------------------------------------------------------------------------- Total minimum payments ..................................... $ 51.1 ================================================================================ Total rent expense in 1995, 1994, and 1993 was $21.1, $17.4, and $13.8, respectively. 29 ENVIRONMENTAL MATTERS The company is involved in various stages of investigation and remediation relative to environmental protection matters, arising from its own initiative, from indemnification of purchasers of divested operations, or from legal or administrative proceedings, some of which include waste disposal sites. In certain instances, the company may be exposed to joint and several liability for remedial action or damages. The company, along with several other entities, has been named as a Potentially Responsible Party for remedial costs at certain third-party sites listed on the National Priorities List under CERCLA. The potential costs related to such matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of clean-up technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the company's responsibility. The company estimates that clean-up costs will be $22.5 and has included this amount in accrued expenses in the accompanying balance sheet. It is at least reasonably possible, however, that a change in this estimate will occur. In management's opinion, after considering reserves established for such purposes, remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material adverse impact on the company's results of operations or financial position. CAPITAL STOCK PREFERRED STOCK: Ten million shares of cumulative preferred stock, par value $1.00 per share, are authorized but unissued. COMMON STOCK: The 1.96 million shares issued through 1969 have a par value of $6.67 per share. Shares issued since then have a par value of $1.00 per share. TREASURY STOCK: Number of shares (In millions) 1995 1994 1993 ================================================================================ Balance at beginning of year ................ 16.6 16.0 20.6 Restatement for Data Switch merger ...................... (1.8) -- -- Common stock reacquired ..................... 0.5 0.6 -- Common stock sold ........................... -- -- (4.1) Common stock issued under the company's incentive compensation and savings and stock ownership plans ............... (0.3) -- (0.5) - -------------------------------------------------------------------------------- Balance at end of year ...................... 15.0 16.6 16.0 ================================================================================ In March 1994, the company's Board of Directors approved a program to repurchase up to 3.4 percent or 1.6 million shares of the common stock outstanding at that time. These shares have been purchased systematically in open market transactions since the board's approval and have been used to offset dilution from the increased exercise of employee stock options arising from the company's executive stock ownership program. Through December 31, 1995, approximately 1.1 million shares have been repurchased under the program. WARRANTS: In connection with the Data Switch merger, the company assumed 1,452 warrants that are redeemable at $34.83 per share and 14,357 warrants that are redeemable at $16.54 per share. SHAREHOLDER RIGHTS PLAN: On February 1, 1996, the company adopted a substantially similar shareholder rights plan that replaces the 1986 plan which expires on March 21, 1996. Under the new plan, a dividend distribution was declared of one common stock purchase right for each share of common stock held of record on March 21, 1996. The rights trade with the common stock and are not currently exercisable. Each right entitles the shareholder to buy the company's or the acquiring company's stock valued at $300 for a price of $150 upon the occurrence of specific events. The company may redeem the rights for 10 days (subject to a further 20-day extension) for one cent per right after a person acquires 20 percent or more of the common stock. The provisions do not apply to rights that are beneficially owned by the acquirer. EMPLOYEE BENEFIT PLANS PENSION PLANS: The company's pension plans cover substantially all salaried and hourly paid employees, including certain employees in foreign countries. The plans generally provide benefit payments using a formula based on an employee's compensation and length of service or, in some cases, stated amounts for each year of service. The company funds United States pension plans in amounts equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts that may be approved from time to time. Substantially all plan assets are invested in cash and short-term investments or listed stocks and bonds and real estate. Plan assets and obligations of non-U.S. subsidiaries are not material. The periodic net pension income related to continuing operations is comprised of the following: 30 The periodic net pension income related to continuing operations is comprised of the following: Year ended December 31, 1995 1994 1993 ================================================================================ Service cost-benefits earned during the period ............... $ 8.9 $ 10.0 $ 9.6 Interest cost on projected benefit obligation ..................... 32.6 23.6 24.4 Actual return on assets .................... (45.7) 9.6 (45.1) Net amortization and deferral .............. (5.1) (52.9) 2.5 - -------------------------------------------------------------------------------- Net pension income ......................... $ (9.3) $ (9.7) $ (8.6) ================================================================================ The actuarial assumptions used were: Discount rate .............................. 7.00% 8.75% 7.40% Rate of increase in compensation levels .... 5.00% 5.00% 5.00% Expected long-term rate of return on assets .............................. 9.50% 9.50% 9.50% - -------------------------------------------------------------------------------- The following table sets forth the plans' funded status and amounts recognized in the balance sheet: December 31, 1995 1994 - -------------------------------------------------------------------------------- Over Under Over Under Funded Funded Funded Funded ================================================================================ Actuarial present value of benefit obligations: Vested benefit obligation ........... $ (314.2) $ (123.6) $ (300.0) $ (59.9) - -------------------------------------------------------------------------------- Accumulated benefit obligation .......... $ (333.6) $ (127.7) $ (316.5) $ (62.0) - -------------------------------------------------------------------------------- Fair value of plan assets ............... $ 449.9 $ 108.8 $ 450.1 $ 53.0 Projected benefit obligation ............ (355.2) (130.8) (333.8) (63.6) - -------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation ........ 94.7 (22.0) 116.3 (10.6) Unrecognized net loss ................... 28.8 16.9 6.7 3.3 Prior service cost not yet recognized in net pension cost ........................ 5.7 3.3 6.9 2.1 Unrecognized net asset .................. (28.1) (17.1) (37.0) (3.8) - -------------------------------------------------------------------------------- Prepaid (accrued) pension ............... $ 101.1 $ (18.9) $ 92.9 $ (9.0) ================================================================================ Under the Savings and Stock Ownership Plan and other supplemental plans, the company matches employee contributions in cash and common stock equal to a percentage of certain amounts contributed by employees. The company contributions under these plans amounted to $8.2 in 1995, $7.9 in 1994, and $8.3 in 1993 and were invested in shares of the company's common stock. At December 31, 1995, 1.0 million shares were reserved for issuance under these plans. NONPENSION RETIREMENT BENEFITS: The company and its U.S. subsidiaries have postretirement plans that provide health and life insurance benefits for retirees. Some of these plans require employee contributions at varying rates. Not all employees are eligible to receive these benefits, with eligibility governed by the plan in effect at a particular location. The accumulated postretirement benefit obligation at December 31, 1995 was determined using the terms of the company's various plans, together with relevant actuarial assumptions and health care cost trend rates projected at estimated annual rates ranging from 7.6 percent in 1995 and 7.1 percent in 1996 to 5.0 percent through the year 2004 and a weighted average discount rate of 7.0 percent. Generally, where applicable, the discount rate and the actuarial assumptions used for pension plans also apply to the non-pension retirement plans. A one-percent annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation by approximately $1.6 and annual service costs by approximately $0.2. Certain of the company's non-U.S. subsidiaries have similar plans for retirees. The company's obligations for such plans are not material. Effective January 1, 1993, the company adopted the accrual method (FAS 112) of accounting for postemployment benefits, primarily severance and long-term disability. Previously, the company had used the pay-as-you-go method. The cumulative effect at January 1, 1993 of adopting FAS 112 reduced 1993 net income by $25.3, net of $12.7 of income tax benefits. The net periodic postretirement benefit cost related to continuing operations is comprised of the following: Year ended December 31, 1995 1994 1993 ================================================================================ Service cost for benefits attributed to service during the period ........... $ 0.4 $ 0.6 $ 0.8 Interest cost on the accumulated postretirement benefit obligation ...... 4.5 4.7 5.8 Net amortization and deferral .............. (5.5) (6.2) (4.5) - -------------------------------------------------------------------------------- Net periodic postretirement benefits ....... $ (0.6) $ (0.9) $ 2.1 ================================================================================ The unrecognized prior service cost at December 31, 1995 and 1994 represents unamortized amounts for plan amendments resulting from revisions to company-sponsored health plans, which reduced benefit levels. 31 The following table shows the plans' funded status and amounts recognized in the balance sheet. December 31, 1995 1994 - -------------------------------------------------------------------------------- HEALTH LIFE Health Life ================================================================================ Accumulated postretirement benefit obligation: Retirees .................... $ (59.5) $ (15.6) $ (68.7) $ (14.5) Fully eligible active plan participants ......... (3.5) (0.3) (2.3) (0.7) Other active plan participants .............. (10.6) (4.0) (10.4) (6.5) - -------------------------------------------------------------------------------- Total ....................... (73.6) (19.9) (81.4) (21.7) Unrecognized net (gain) loss ...... (16.3) (0.5) (12.3) 1.2 Unrecognized prior service cost ... (26.6) 0.1 (30.4) -- - -------------------------------------------------------------------------------- Accrued postretirement benefit cost (116.5) (20.3) (124.1) (20.5) Less amounts classified as current .................... 7.3 1.3 8.0 0.6 - -------------------------------------------------------------------------------- $ (109.2) $ (19.0) $ (116.1) $ (19.9) ================================================================================ STOCK INCENTIVE PROGRAM: The company has a stock incentive program whereby executive officers and designated employees have been or may be granted restricted stock and options to purchase shares of company common stock. Restricted stock awards were granted during 1995 and 1994 for 168,700 shares and 22,850 shares of company common stock, respectively. The shares covered by the restricted stock award granted in 1995 vest at certain rates over a three to five-year period, or are based on performance criteria and time over a period from September 1, 1995 to March 25, 2014. The awards granted in 1994 vest at a rate of 33 1/3 percent per year over a three-year period. In addition, non-employee directors may elect to defer all or part of their cash compensation as a director and to receive in lieu thereof restricted stock. During 1995, four non-employee directors received 3,829 shares of company common stock subject to a five-year restriction period. Options under all the plans are exercisable during specified dates at prices at least equal to 100 percent of the fair market value on the date of grant. 2.7 million and 3.1 million shares of company common stock are reserved for issuance as of December 31, 1995 and 1994, respectively. OPTION ACTIVITY: The following table shows the option activity for each of the three years ended December 31, 1995. Options granted and exercised by Data Switch prior to the merger date are included in the 1995 activity. Shares Option Price (In millions) per Share ================================================================================ Options outstanding at December 31, 1992 ............................. 2.2 $19.44 - $36.20 Options granted ................................... 0.3 $32.25 - $34.88 Options exercised ................................. (0.6) $19.44 - $30.32 - -------------------------------------------------------------------------------- Options outstanding at December 31, 1993 ............................. 1.9 $19.44 - $36.20 Options granted ................................... 0.6 $31.88 - $37.25 Options exercised ................................. (0.3) $19.44 - $32.25 - -------------------------------------------------------------------------------- Options outstanding at December 31, 1994 ............................. 2.2 $19.44 - $37.25 Restatement for Data Switch merger ................ 0.2 $13.94 - $56.63 Options granted ................................... 0.7 $21.80 - $38.25 Options exercised ................................. (0.5) $13.94 - $35.38 Options terminated ................................ (0.2) $13.94 - $53.98 - -------------------------------------------------------------------------------- Options outstanding at December 31, 1995 ............................. 2.4 $13.94 - $56.63 ================================================================================ Options exercisable: 1995 .......................................... 1.1 $13.94 - $56.63 1994 .......................................... 1.0 $19.44 - $34.88 - -------------------------------------------------------------------------------- BUSINESS COMBINATIONS During the three-year period ended December 31, 1995, the company acquired ten entities for cash and common stock valued at $520.7 plus the assumption of liabilities. The acquisitions, except Revco and Data Switch, were accounted for as purchases and accordingly, the results of operations of the acquired companies are included in the statement of earnings for the periods during which they were owned by the company. Revco and Data Switch were accounted for as pooling of interests. The following paragraphs discuss significant mergers and acquisitions made during the three years ended December 31, 1995. 32 On June 13, 1995, the company completed a cash tender offer for Best Power Technology, Inc. Best Power is a manufacturer of uninterruptible power supply products, which provide backup power to protect computers, information networks, and other critical systems from power line disturbances. The aggregate purchase price was $206.3, creating goodwill of $164.4. The purchase price was financed through the issuance of commercial paper. The company recorded a $7.4 before-tax charge ($4.8 after-tax) during the second quarter of 1995 primarily for severance and other consolidation costs relating to the combination of General Signal and Best Power locations. On July 27, 1995, the company acquired MagneTek Electric Inc. (Waukesha Electric) for $73.9, creating goodwill of $46.2. Waukesha Electric designs, manufactures, and installs medium-power transformers and related products. The purchase price was financed through the issuance of commercial paper. Unaudited pro forma data giving effect to the acquisitions of Best Power and Waukesha Electric as if they had been acquired at the beginning of 1994 are shown below: Year ended December 31, 1995 1994 ================================================================================ Net sales .............................. $ 1,974.3 $ 1,773.4 Net earnings ........................... $ 36.2 $ 90.3 Earnings per share ..................... $ 0.74 $ 1.91 - -------------------------------------------------------------------------------- On November 9, 1995, the company merged with Data Switch Corporation by exchanging 1.8 million shares of common stock and 0.2 million rights to receive common stock for all of the outstanding common stock and related options and warrants of Data Switch. Data Switch designs, develops, manufactures, markets and services products for large scale data center networks. The company's consolidated financial statements for 1995 have been restated to include results of operations, financial position and cash flow of Data Switch. Data Switch's financial position and results of operations are not material to the company for any period presented. As a result of the merger, the company incurred transaction and consolidation costs of $12.7 ($8.1 after tax). The transaction costs included investment banker and other professional fees. The consolidation costs included severance pay primarily for Data Switch and asset valuation adjustments. During 1993, the company merged with Revco Scientific, Inc. by exchanging 2.6 million shares of common stock for all of the outstanding common stock of Revco. Revco manufactures low-temperature freezers, laboratory refrigerators, and CO2 incubators. As a result of the acquisition, the company incurred transaction and consolidation costs of $13.2 ($9.3 after tax). The transaction costs included investment banker and other professional fees. The consolidation costs included provisions for streamlining marketing and distribution arrangements, consolidation of field service and sales offices, relocation of certain product lines and key personnel, and severance-related costs, primarily at the company's locations existing prior to the merger. DISCONTINUED OPERATIONS In November 1994, the company adopted a plan to sell Leeds & Northrup Company (L&N), formerly a part of the Process Controls sector, and Dynapower/Stratopower, formerly a part of the Industrial Technology sector. These operations have been accounted for as discontinued operations, and the consolidated financial statements have reported separately their net assets and operating results. The 1994 loss on disposal of these operations of $25.8 included $23.4 of tax charges primarily resulting from differences in carrying values for financial reporting and tax purposes, and from adjustments related to tax planning strategies that will not be utilized as a result of the planned disposal of the operations. From the measurement date to the end of the year, the operations incurred after-tax operating losses of $1.6. Sales of the discontinued operations from January 1, 1994 to the measurement date and for the year ended December 31, 1993 were $155.2 and $175.8, respectively. In the second and third quarters of 1995, the company recorded a total of $99.9 before tax charges ($64.0 after tax) for additional expected losses relating to the disposal of L&N and Dynapower. While it is at least reasonably possible that the actual losses will differ from the recorded amounts, the provisions for losses recorded represent management's best estimate of the likely outcome based on contracts signed and current negotiations since the final sales proceeds are subject to purchase price adjustments. 33 During 1994, the company recognized as part of earnings from discontinued operations $6.1 of before-tax curtailment gains related to L& N's nonpension postretirement benefits plan. During 1993, the company recorded a $14.4 before-tax charge related to the remaining portion of the discontinued transportation businesses, primarily Dynapower, and for environmental and contractual obligations retained related to New York Air Brake and General Railway Signal. This provision was made primarily to write these operations down to estimated realizable value and to recognize 1993 operating losses. At December 31, 1995, other assets included claims amounting to $6.7 and receivables amounting to $6.0 related to the estimated proceeds from contractual obligations retained from previously discontinued operations. Actual proceeds may differ from recorded amounts. MERGER BREAK-UP FEE AND OTHER SPECIAL ITEMS In August 1994, the company negotiated an agreement to merge with Reliance Electric Company. However, 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, the company received $50.0 for break-up fees and $5.2 for partial reimbursement of expenses. The company incurred $9.0 of transaction costs in connection with the merger. During the fourth quarter of 1994, the company recognized $46.2 of charges for the consolidation of operations ($11.8), asset valuations ($24.1), environmental matters ($4.9) and other issues ($5.4), all related to the continuing operations of the company. The charges are included in cost of sales ($27.7), selling, general and administrative expenses ($16.1), and income taxes ($2.4). During 1993, $30.5 was provided for factory consolidation and rearrangement ($20.9), product restructuring and realignment ($6.8), and reorganization of lines of distribution and administration ($2.8). The activities related to these charges were substantially completed during 1994, and $3.5 of excess provisions were returned to earnings. Included in this charge was $15.5 related to operations discontinued in 1994. During 1993, the company provided a $22.5 charge in cost of sales to reflect a continuing review of worldwide assets to identify any permanent declines in the value of assets. Included in this charge was $18.1 related to operations discontinued in 1994. Also in 1993, the company recorded a charge of $5.2 related to other previously divested operations. During 1993 and 1994, the company completed the sale of the semiconductor businesses. In connection with these operations, the company incurred approximately $13.8 in 1994 and $38.4 in 1993 of operating losses, severance payments, idle facility costs, and restructuring costs. The company also realized $53.2 in 1993 of excess provisions relating to the disposition of the semiconductor equipment operations as a result of higher proceeds from the sale of units and lower severance costs. 34 BUSINESS SECTOR INFORMATION The company manufactures industrial products and components in the process control, electrical control, and industrial technology (primarily transportation and telecommunication) industries. See pages 6 and 7 of the annual report for a description of major products and markets served.
PRODUCT SECTORS 1995 1994 1993 1992 1991 ============================================================================================================================== Net sales: Process Controls ...................................... $ 719.7 $ 606.4 $ 545.8 $ 548.7 $ 515.8 Electrical Controls ................................... 777.0 618.6 547.1 567.5 515.4 Industrial Technology ................................. 366.5 302.7 261.3 226.7 212.7 Dispositions .......................................... -- -- -- 134.9 180.2 - ------------------------------------------------------------------------------------------------------------------------------ $ 1,863.2 $ 1,527.7 $ 1,354.2 $ 1,477.8 $ 1,424.1 ============================================================================================================================== OPERATING EARNINGS: Process Controls ...................................... $ 92.0 $ 66.8(3) $ 45.1(4) $ 60.5 $ 73.3 Electrical Controls ................................... 62.1(1) 30.7(3) 29.2(4) 43.1 43.9 Industrial Technology ................................. 51.1(2) 47.4(3) 44.8 33.1 25.0 Other charges and credits ............................. -- 46.2 48.0(5) (93.0) (6.7) - ------------------------------------------------------------------------------------------------------------------------------ 205.2 191.1 167.1 43.7 135.5 Equity income ......................................... 0.9 1.0 0.2 1.9 2.1 Interest expense, net ................................. (24.3) (11.8) (16.6) (24.8) (28.0) Unallocated expenses .................................. (25.4) (20.0) (11.6) (11.3) (12.2) - ------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations before income taxes $ 156.4 $ 160.3 $ 139.1 $ 9.5 $ 97.4 ============================================================================================================================== IDENTIFIABLE ASSETS: Process Controls ...................................... $ 420.9 $ 391.4 $ 474.3 $ 477.0 $ 473.9 Electrical Controls ................................... 692.0 399.4 326.5 330.8 295.7 Industrial Technology ................................. 209.0 181.3 167.2 181.7 305.4 - ------------------------------------------------------------------------------------------------------------------------------ 1,321.9 972.1 968.0 989.5 1,075.0 General corporate assets .............................. 210.3 211.8 213.1 160.3 89.0 Assets held for sale at estimated realizable value .... 60.4 153.6 25.7 91.1 -- Investments in and advances to affiliates ............. 20.6 20.4 18.1 17.5 16.2 - ------------------------------------------------------------------------------------------------------------------------------ Total assets .......................................... $ 1,613.2 $ 1,357.9 $ 1,224.9 $ 1,258.4 $ 1,180.2 ============================================================================================================================== DEPRECIATION AND AMORTIZATION OF FIXED ASSETS(6): Process Controls ...................................... $ 17.9 $ 16.6 $ 12.4 $ 12.9 $ 11.4 Electrical Controls ................................... 19.0 14.5 13.0 12.3 11.8 Industrial Technology ................................. 13.4 6.4 6.4 6.7 14.7 CAPITAL EXPENDITURES(6): Process Controls ...................................... $ 15.0 $ 28.7 $ 23.1 $ 19.7 $ 16.4 Electrical Controls ................................... 21.1 21.8 22.3 19.5 15.1 Industrial Technology ................................. 12.9 11.4 7.7 5.0 10.9 - ------------------------------------------------------------------------------------------------------------------------------ (1) Includes $7.4 of one-time charges related to the acquisition of Best Power. (2) Includes $12.7 of one-time charges related to the merger with Data Switch. (3) Includes 1994 charges in Process Controls ($11.9), Electrical Controls ($19.2) and Industrial Technology ($9.9) for the consolidation of operations, asset valuations, environmental and other. (4) Includes 1993 charges in Process Controls ($22.1) and Electrical Controls ($10.5) for asset valuations, restructuring, and transaction and consolidation charges related to Revco. (5) Represents credits for the divested semiconductor operations ($53.2) and charges for the transportation businesses ($5.2). (6) Excludes discontinued operations.
35
GEOGRAPHIC AREAS 1995 1994 1993 1992 1991 ======================================================================================================== NET SALES: United States ............................ $ 1,699.8 $ 1,390.0 $ 1,218.9 $ 1,290.4 $ 1,225.4 Foreign .................................. 239.9 180.7 173.7 238.5 257.7 Intergeographic .......................... (76.5) (43.0) (38.4) (51.1) (59.0) - -------------------------------------------------------------------------------------------------------- $ 1,863.2 1,527.7 $ 1,354.2 $ 1,477.8 $ 1,424.1 ======================================================================================================== OPERATING EARNINGS: United States ............................ $ 212.0 $ 135.7 $ 113.4 $ 118.5 $ 118.1 Other charges and credits ................ (20.1) 46.2 48.0 (85.6) -- Foreign .................................. 13.3 9.2 5.7 10.8 17.4 - -------------------------------------------------------------------------------------------------------- $ 205.2 $ 191.1 $ 167.1 $ 43.7 $ 135.5 ======================================================================================================== IDENTIFIABLE ASSETS: United States ............................ $ 1,175.6 $ 875.8 $ 822.5 $ 769.2 $ 838.5 Foreign .................................. 146.3 96.3 145.5 220.3 236.5 - -------------------------------------------------------------------------------------------------------- $ 1,321.9 $ 972.1 $ 968.0 $ 989.5 $ 1,075.0 - -------------------------------------------------------------------------------------------------------- Export sales to unaffiliated customers(1) $ 199.1 $ 125.4 $ 110.9 $ 131.9 $ 130.5 ======================================================================================================== (1) Included in United States sales.
SUPPLEMENTARY INFORMATION
December 31, 1995 1994 ======================================================================================== Intangibles: Excess of cost over net assets acquired ......... $ 474.3 $ 210.9 Other intangibles ............................... 42.9 35.0 - ---------------------------------------------------------------------------------------- 517.2 245.9 Accumulated amortization ........................ (111.2) (51.6) - ---------------------------------------------------------------------------------------- $ 406.0 $ 194.3 - ---------------------------------------------------------------------------------------- Accrued expenses: Dispositions and special items .................. $ 32.7 $ 37.1 Payroll and compensation ........................ 64.4 57.0 Environmental and legal ......................... 24.1 18.5 - ---------------------------------------------------------------------------------------- Year ended December 31, ............................. 1995 1994 1993 ======================================================================================== Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired ................... $ 332.1 $ 105.4 $ 24.4 Cash paid ....................................... (280.2) (83.3) (20.0) - ---------------------------------------------------------------------------------------- $ 51.9 $ 22.1 $ 4.4 - ---------------------------------------------------------------------------------------- Research and development ............................ $ 46.9 $ 49.7 $ 53.1 - ---------------------------------------------------------------------------------------- Advertising expense ................................. $ 14.1 $ 10.1 $ 8.7 - ----------------------------------------------------------------------------------------
36 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth 1995 1994 1995 1994 1995 1994 1995 1994 ================================================================================================================================= Net sales ................................ $434.1 $342.4 $446.3 $378.6 $481.1 $390.0 $501.7 $416.7 Gross profit ............................. 125.2 99.4 132.6 109.7 144.7 113.7 152.7 95.4 Earnings from continuing operations ...... 28.1 22.2 24.6 25.3 27.2 27.5 20.2 29.1 Discontinued operations .................. -- 2.4 -- (0.3) -- 0.3 -- -- Disposal of discontinued operations ...... -- -- (49.6) -- (14.4) -- -- (25.8) - --------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) ...................... $ 28.1 $ 24.6 $(25.0) $ 25.0 $ 12.8 $ 27.8 $ 20.2 $ 3.3 ================================================================================================================================= Earnings (loss) per share of common stock: Continuing operations ................ $ 0.57(1) $ 0.47 $ 0.50(2) 0.53 $ 0.55 $ 0.58 $ 0.41(3) 0.62(4) Discontinued operations .............. -- 0.05 -- -- -- 0.01 -- -- Disposal of discontinued operations .. -- -- (1.01) -- (0.29) -- -- (0.55) - --------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) ...................... $ 0.57 $ 0.52 $(0.51) $ 0.53 $ 0.26 $ 0.59 $ 0.41 $ 0.07 ================================================================================================================================= Common stock price range - high .......... 36 3/8 38 40 34 5/8 42 1/2 37 1/2 33 7/8 37 1/4 - low ........... 31 32 1/2 35 1/8 30 1/8 28 32 1/4 28 31 - --------------------------------------------------------------------------------------------------------------------------------- Note: The sum of the quarters' earnings per share may not equal the full year per-share amounts. (1) Includes $0.08 of credits related to non-recurring items, primarily cash settlements of royalty and insured matters. (2) Includes $0.10 of charges related to the acquisition of Best Power and $0.04 of credits related to accrual adjustments. (3) Includes $0.17 of transaction and consolidation charges related to the merger with Data Switch. (4) Includes $0.64 of charges for consolidation of operations, asset valuations, environmental and other, $0.64 of proceeds from Reliance Electric, $0.07 of credits for reversal of excess restructuring and consolidation reserves upon completion of those programs, and $0.03 of charges for acquisition integration activities.
1995 amounts have been restated to reflect the merger with Data Switch. The following table illustrates the effect of the merger: First Second Third Quarter Quarter Quarter ================================================================================ Net sales: Previously reported ...................... $ 411.0 $ 421.4 $ 455.5 Impact of merger ......................... 23.1 24.9 25.6 - -------------------------------------------------------------------------------- Restated ............................... $ 434.1 $ 446.3 $ 481.1 ================================================================================ Earnings from continuing operations: Previously reported ...................... $ 27.3 $ 23.4 $ 25.6 Impact of merger ......................... 0.8 1.2 1.6 - -------------------------------------------------------------------------------- Restated ............................... $ 28.1 $ 24.6 $ 27.2 ================================================================================ Earnings per share from continuing operations: Previously reported ...................... $ 0.58 $ 0.50 $ 0.54 Impact of merger ......................... (0.01) -- 0.01 - -------------------------------------------------------------------------------- Restated ............................... $ 0.57 $ 0.50 $ 0.55 ================================================================================ 37 ELEVEN-YEAR FINANCIAL SUMMARY
General Signal Corporation and Consolidated Subsidiaries Year ended December 31, (dollars in millions, except per share data) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 ==================================================================================================================================== SUMMARY OF OPERATIONS NET SALES $1,863.2 $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.3 $1,522.4 $1,397.7 $1,249.2 $1,210.2 $1,407.0 - ------------------------------------------------------------------------------------------------------------------------------------ Cost of sales 1,308.0 1,109.5 959.0 1,070.2 1,015.7 1,061.8 1,075.7 983.6 885.0 846.1 996.7 Selling, general and administrative expense 354.4 292.3 259.3 287.7 282.7 304.9 326.7 335.8 276.0 263.2 289.1 Other charges and credits 20.1 (46.2) (19.8) 85.6 -- 83.3 (8.7) 24.1 -- -- 72.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total operating cost and expenses 1,682.5 1,355.6 1,198.5 1,443.5 1,298.4 1,450.0 1,393.7 1,343.5 1,161.0 1,109.3 1,357.8 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING EARNINGS 180.7 172.1 155.7 34.3 125.7 47.3 128.7 54.2 88.2 100.9 49.2 Interest (income) expense, net 24.3 11.8 16.6 24.8 28.3 31.8 38.7 (1.9) (1.7) 2.3 1.4 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 156.4 160.3 139.1 9.5 97.4 15.5 90.0 56.1 89.9 98.6 47.8 Income taxes 56.3 56.2 41.0 3.2 28.2 7.3 23.4 25.9 25.5 36.0 18.4 - ------------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations 100.1 104.1 98.1 6.3 69.2 8.2 66.6 30.2 64.4 62.6 29.4 Earnings (loss) from discontinued operations, net of income taxes -- 2.4 (31.5) 6.1 (5.2) (26.9) 11.9 (5.0) 5.1 12.0 19.9 Loss on disposal of discontinued operations, net of income taxes (64.0) (25.8) -- -- (9.8) (14.2) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS (LOSS) BEFORE EXTRAORDINARY CHARGES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 36.1 80.7 66.6 12.4 54.2 (32.9) 78.5 25.2 69.5 74.6 49.3 Extraordinary charges -- -- (6.6) (0.3) -- -- -- -- -- -- -- Cumulative effect of accounting changes -- -- (25.3) (92.4) -- -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) $ 36.1 $ 80.7 $ 34.7 $ (80.3) $ 54.2 $ (32.9) $ 78.5 $ 25.2 $ 69.5 $ 74.6 $ 49.3 ==================================================================================================================================== PER-SHARE DATA EARNINGS (LOSS) PER SHARE OF COMMON STOCK Continuing operations $ 2.03 $ 2.20 $ 2.17 $ 0.15 $ 1.80 $ 0.21 $ 1.75 $ 0.55 $ 1.14 $ 1.09 $ 0.51 Discontinued operations (1.30) (0.49) (0.70) 0.15 (0.40) (1.07) 0.31 (0.09) 0.09 0.21 0.35 Extraordinary charges -- -- (0.14) (0.01) -- -- -- -- -- -- -- Cumulative effect of accounting changes -- -- (0.56) (2.21) -- -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) $ 0.73 $ 1.71 $ 0.77 $ (1.92) $ 1.40 $ (0.86) $ 2.06 $ 0.46 $ 1.23 $ 1.30 $ 0.86 ==================================================================================================================================== Cash dividends per share 0.96 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 Book value per share 11.71 11.64 11.09 8.90 12.32 11.69 13.25 12.09 16.51 16.16 15.73 - ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF FINANCIAL POSITION Working capital 289.3 349.2 268.8 347.8 243.9 310.6 328.8 496.3 540.8 536.3 520.6 Property, plant and equipment 312.7 280.5 263.4 246.9 263.7 283.0 325.1 312.5 310.6 345.6 361.5 Total assets 1,613.2 1,357.9 1,224.9 1,258.4 1,180.2 1,294.6 1,324.3 1,396.6 1,397.4 1,458.1 1,483.2 Total long-term liabilities 603.0 442.0 373.9 537.7 345.7 440.8 373.1 539.9 163.3 179.8 172.9 Shareholders' equity 578.1 547.9 525.2 374.8 476.4 450.3 506.1 461.0 907.2 927.4 904.0 ==================================================================================================================================== FINANCIAL RATIOS Working capital to sales 15.5% 22.9% 19.8% 23.5% 17.1% 20.7% 21.6% 35.5% 43.3% 44.3% 37.0% Selling, general and administrative expenses to sales 19.0% 19.1% 19.1% 19.5% 19.9% 20.4% 21.5% 24.0% 22.1% 21.7% 20.6% Operating margin 9.7% 11.3% 11.5% 2.3% 8.8% 3.2% 8.5% 3.9% 7.1% 8.3% 3.5% After-tax return on net sales 5.4% 6.8% 7.2% 0.4% 4.9% 0.5% 4.4% 2.2% 5.1% 5.2% 2.1% Return on average shareholders' equity 6.3% 15.0% 7.7% (18.9%) 11.7% (6.9%) 16.2% 3.7% 7.6% 8.1% 5.5% Current ratio 1.7 1.9 1.8 2.0 1.7 1.8 1.7 2.3 2.7 2.5 2.3 Long-term debt to capitalization 42.6% 32.9% 26.7% 49.5% 37.8% 46.9% 39.6% 51.6% 10.9% 11.8% 12.1% ==================================================================================================================================== SUPPLEMENTAL INFORMATION Capital expenditures 49.0 74.8 55.1 49.9 48.1 68.8 62.0 38.8 34.0 45.7 68.1 Depreciation and amortization of fixed assets 50.3 41.7 35.4 40.6 42.1 44.5 44.7 42.1 42.4 41.4 37.6 Research and development 46.9 49.7 53.1 56.2 87.3 93.4 92.8 93.7 84.1 74.4 79.4 Common stock price range: High 42 1/2 38 37 7/8 32 5/8 26 7/8 29 5/8 28 7/8 28 1/8 30 5/8 27 1/8 26 7/8 Low 28 30 1/8 30 25 7/8 17 5/8 15 5/8 22 7/8 20 16 5/8 19 5/8 18 1/2 Price-earnings ratio range - continuing operations 20.9-13.8 17.3-13.7 17.5-13.8 21.1-16.8 14.9-9.8 21.7-11.5 16.5-13.1 36.1-25.7 26.9-14.6 24.9-18.0 20.9-14.4 (1) (1) (1) (1) Average common shares outstanding 49.2 47.3 45.2 41.8 38.6 38.4 38.1 55.4 56.5 57.5 57.4 Employees (in thousands) 12.9 12.2 11.2 12.1 12.6 11.6 16.9 16.6 16.6 17.5 19.3 ==================================================================================================================================== (1) Excludes the impact of after-tax charges related to dispositions of businesses. 38 39
SHAREHOLDER INFORMATION ANNUAL MEETING The 1996 annual meeting of shareholders will be held at 10:00 a.m. on Thursday, April 18, 1996 at General Signal Headquarters, One High Ridge Park, Stamford, Connecticut. FORM 10-K The company's 1995 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, will be available after April 1, 1996. A copy of this report may be obtained by writing to the Secretary of the Corporation. TRANSFER AGENT First Chicago Trust Company of New York P.O. Box 2500 Jersey City, NJ 07303-2500 800-756-8200 INDEPENDENT AUDITORS Ernst & Young LLP 1111 Summer Street Stamford, Connecticut 06905 LISTINGS General Signal Corporation common stock is listed and traded on the New York and Pacific Stock Exchanges under the symbol GSX. DIVIDEND REINVESTMENT PLAN A fee-paid Automatic Dividend Reinvestment and Cash Payment Plan is available to shareholders of record. Through voluntary participation, shareholders may purchase additional shares of the company's stock by reinvesting their dividends or by making cash payments directly to First Chicago. Under the latter option, shareholders may purchase shares with cash payments from $25 to $10,000 per quarter whenever a shareholder desires. General Signal pays all brokerage commissions and fees. Additional information about this plan is available from: First Chicago Trust Company of New York General Signal Dividend Reinvestment Plan P.O. Box 2500 Jersey City, NJ 07303-2500 800-756-8200 An Equal Opportunity Employer Printed in the U.S.A. 40 EX-3.2 9 GENERAL SIGNAL CORPORATION __________ BY-LAWS __________ As Amended Through February 1, 1996 ARTICLE I SHAREHOLDERS' MEETING SECTION 1. Annual Meeting: The Annual Meeting of the shareholders of this Corporation for the election of directors and the transaction of such other business as may properly come before such meeting shall be held each year on such date and at such time and place, whether within or without the State of New York, as shall be determined by the Board of Directors. SECTION 2. Special Meeting: A Special Meeting of the shareholders may be held at any time upon the call of the Board of Directors or the Chairman of the Board and shall be called by the Secretary at the written request of shareholders owning at least two-thirds of the outstanding shares of stock entitled to vote, which request shall specify the matters to be presented to such meeting. SECTION 3. Notice of Annual or Special Meeting: Written notice of the holding of each Annual or Special Meeting of the shareholders shall be given by the Secretary. Such notice shall state the place, date and hour of the meeting, and the purpose or purposes for which the meeting is called, and shall be signed by the Secretary, and shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. A copy of such notice shall be mailed, postage prepaid, not less than ten nor more than fifty days before the date of the meeting, to each shareholder of record as of such record date, not less than ten nor more than fifty days before the date of the meeting, as may be fixed by the Board of Directors for determining the shareholders entitled to notice of, or to vote at, the meeting. Such notice shall be directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. If, at any meeting, action is proposed to be taken which would, if taken, entitle certain shareholders to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. At any meeting of shareholders or any such adjourned meeting, only such business shall be conducted as shall have been properly brought before such meeting or any such adjourned meeting. To be properly brought before any meeting of shareholders or any such adjourned meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before such meeting or any such adjourned meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before such meeting or any such adjourned meeting by a shareholder. For business to be properly brought before any meeting of shareholders or any such adjourned meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five days nor more than sixty days prior to such meeting; provided, however, that in the event less than fifty-five days prior public disclosure of the date of such meeting is made to the shareholders or in the event the only public disclosure of the date of the meeting is written notice in accordance with this Article 1, Section 3, notice by such shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of such meeting was mailed or such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before such meeting (a) a brief description of the business desired to be brought before such meeting and the reasons for conducting such business at such meeting, (b) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (c) the class and number of shares of the securities of the Corporation which are beneficially owned by such shareholder, and (d) any material interest of such shareholder in such business. No business shall be conducted at any meeting of shareholders or any such adjourned meeting except in accordance with the procedures set forth in this Article 1, Section 3. In the event that a shareholder seeks to bring one or more matters before a meeting of shareholders or any such adjourned meeting, the Board of Directors shall establish a committee consisting of non-management directors for the purpose of reviewing compliance with this Article 1, Section 3; provided, however, that if the business to be brought before such meeting or any such adjourned meeting by a shareholder relates to the removal, replacement or election of one or more directors, the Secretary shall appoint two or more inspectors, neither of whom shall be an affiliate of the Corporation, to act in lieu of such committee to review compliance with this Article 1, Section 3. If the committee or the inspectors (as the case may be) shall determine that a shareholder has not complied with this Article 1, Section 3, the committee or the inspectors (as the case may be) shall direct the chairman of such meeting to declare to such meeting or any such adjourned meeting that such business was not properly brought before such meeting or any such adjourned meeting in accordance with the provisions of this Article 1, Section 3; and the chairman shall so declare to such meeting or any such adjourned meeting and any such business not properly brought before such meeting or any such adjourned meeting shall not be transacted. Only individuals who are nominated in accordance with the procedures set forth in this Article 1, Section 3, shall be eligible for election as directors. Nominations of individuals for election to the Board of Directors may be made at a meeting of shareholders or any such adjourned meeting by or at the direction of the board of Directors or by any shareholder of the Corporation entitled to vote for the election of directors at such meeting or any such adjourned meeting who complies with the notice procedures set forth in this Article 1, Section 3. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five days nor more than sixty days prior to such meeting; provided, however, that in the event less than fifty-five days prior public disclosure of the date of such meeting is made to the shareholders or in the event the only public disclosure of the date of the meeting is written notice in accordance with this Article 1, Section 3, notice by such shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of such meeting was mailed or such public disclosure was made. Such shareholder's notice shall set forth (a) as to each individual whom such shareholder proposes to nominate for election or re-election as director, (i) the name, age, business address and residence address of such individual, (ii) the principal occupation or employment of such individual, (iii) the class and number of shares, or the amount of any securities of the Corporation which are beneficially owned by such individual and (iv) any other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such individual's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the shareholder giving the notice, (i) the name and address, as they appear on the Corporation's books, of such shareholder and (ii) the class and number of shares of the securities of the Corporation which are beneficially owned by such shareholder. At the request of the Board of Directors, any individual nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No individual shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Article 1, Section 3. In the event that a shareholder seeks to nominate one or more directors, the Secretary shall appoint two inspectors, neither of whom shall be an affiliate of the Corporation, to determine whether such shareholder has complied with this Article 1, Section 3. If the inspectors shall determine that such shareholder has not complied with this Article 1, Section 3, the inspector shall direct the chairman of such meeting or any such adjourned meeting to declare to such meeting or any such adjourned meeting that a nomination was not made in accordance with the prescribed procedures, and the chairman shall so declare to such meeting or any such adjourned meeting and the defective nomination shall be disregarded. SECTION 4. Presiding Officer: At all meetings of shareholders the Chairman of the Board shall preside, or in his absence, the Chairman of the Executive Committee, the President or any Vice President may preside. SECTION 5. Inspectors: Prior to each meeting of the shareholders, the Board of Directors may appoint two Inspectors of Election and two or more Alternate Inspectors, to serve at such meeting and any adjournment thereof. If any Inspector refuses to serve, or shall not be present at the meeting of the shareholders, the Alternate Inspectors shall act in the order of their appointment. SECTION 6. Voting and Method of: Except as otherwise provided in the Certificate of Incorporation, at all meetings of the shareholders, each shareholder entitled to vote shall be entitled to one vote for every share standing in his name on the record of shareholders, and all questions to be decided by the shareholders, except the question of election of directors and such other questions the manner of deciding which is specifically regulated by statute, shall be decided by a majority of the votes cast at the meeting in person or by proxy by the holders of shares entitled to vote thereon. All voting shall be viva-voce, except that any qualified voter may require a vote by ballot on any question to be decided. In case of a vote by ballot, each ballot shall state the name of the shareholder voting and the number, class and series (if any) of shares owned by him, and in addition, if such ballot be cast by a proxy, the name of the proxy shall be stated. SECTION 7. Quorum: Except as may be otherwise provided by law or by the Certificate of Incorporation, at all meetings of the shareholders, the holders of a majority of the shares entitled to vote thereat shall constitute a quorum for the transaction of any business. SECTION 8. Fiscal Year: The fiscal year of the Corporation shall close on the 31st day of December in each year. The officers of the Corporation shall prepare and cause to be submitted to the shareholders at the Annual Meeting a detailed statement showing the financial condition of the Corporation. ARTICLE II DIRECTORS SECTION 1. Election of Directors: The directors shall be classified with respect to their terms of office by dividing them into three classes. All classes shall be as nearly equal in number as possible, and no class shall include less than three directors. Subject to such limitations, the size of each class may be fixed by action of the shareholders or of the Board of Directors. At each Annual Meeting of shareholders, directors to replace those whose terms expire at such Annual Meeting shall be elected to hold office until the expiration of the term of whatever class they are assigned to provided that no director may be assigned to a class the term of which will expire later than the Annual Meeting next succeeding the Director's attaining age 72. Notwithstanding the foregoing, Ralph E. Bailey, John P. Horgan and Roland W. Schmitt shall be permitted to be nominated for a one-year term at the 1996 Annual Meeting of Shareholders. Each director shall hold office until the expiration of the term for which he is elected, and until his successor has been elected and qualified, provided, however, that a director may be removed from office as a director, but only for cause, by action of the shareholders or of the Board of Directors. SECTION 2. Number of Directors: The number of the directors of the Corporation shall be not less than 9 nor more than 15 as shall be determined from time to time by the Board of Directors. SECTION 3. Newly Created Directorships and Vacancies: Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason may be filled by the vote of a majority of the directors then in office, although less than a quorum may exist. A director elected to fill a newly created directorship or a vacancy shall be elected to hold office until the next Annual Meeting of the shareholders, and (if he is to have a successor) until his successor has been elected and qualified. SECTION 4. Regular Meetings: Regular Meetings of the Board of Directors shall be held at such times and places as may be fixed by the Board of Directors provided that the Organization Meeting of the newly elected Board of Directors shall be held on the same day as the Annual Meeting of the shareholders, at which time the Executive Committee and other Committees of the Board and Officers shall be elected or appointed. Unless otherwise required by appropriate resolution of the Board of Directors, or by law, notice of any such meetings need not be given. SECTION 5. Special Meetings: Special Meetings of the Board of Directors shall be called by the Secretary upon the order of the Chairman of the Board, the President, or the Chairman of the Executive Committee, or upon the written request of five (5) directors. SECTION 6. Presiding Officer: At all meetings of the Board of Directors, the Chairman of the Board of Directors shall preside, or in his absence, the Chairman of the Executive Committee, the President or any Vice President who is a member thereof may preside. SECTION 7. Quorum: A majority of the directors then in office or half of such number when the number of directors then in office is even, but not less than one-third of the entire Board, shall constitute a quorum for the transaction of business at all meetings of the Board. SECTION 8. Notice: The Secretary shall mail to each director notice of any Special Meeting, or of any Regular Meeting, if required, at least two days before the meeting, or shall telegraph or telephone such notice not later than the day before such meeting. Each director shall file with the Secretary a designation of the address to which such notice to him shall be sent, and any such notice to him thereafter shall be addressed in accordance with his latest designation. SECTION 9. Designation of Executive and Other Committees: The Board of Directors shall by resolution adopted by a majority of the entire Board, designate an Executive Committee of not less than three of its members of whom the Chairman of the Board, the Chairman of the Executive Committee, and the President shall be ex officio members, and said Executive Committee shall have authority to exercise and shall exercise in the interim between the Regular and Special meetings of the Board of Directors all of the rights, powers and duties of the Board of Directors, except such as cannot be lawfully delegated. The Board of Directors may by resolution adopted by a majority of the entire Board, designate one or more directors as alternate members of the Executive Committee, who may replace any absent member or members of the Executive Committee, at any meeting thereof, when required to constitute a quorum. Meetings of the Executive Committee may be called by the Secretary upon order by the Chairman of the Executive Committee or in his absence by the Chairman of the Board, the President, or upon written request of two (2) members of the Executive Committee. At all meetings of the Executive Committee, the Chairman of the Executive Committee shall preside, or in his absence the Chairman of the Board or the President may preside. At all meetings of the Executive Committee, a majority of the full membership of the Executive Committee, including vacancies not filled or eliminated, shall constitute a quorum for the transaction of business. The Board of Directors may by resolution adopted by a majority of the entire Board, designate other Committees, each consisting of three or more directors, and delegate to them such powers and duties of the Board as may be lawfully delegated and determined to be appropriate by the Board. The Executive Committee and each other Committee designated pursuant to this Section, and each member or alternate member thereof, shall serve until the next Annual Meeting of the shareholders and at the pleasure of the Board of Directors. Vacancies in the Executive Committee or any other Committee, occurring for any reason, may by resolution adopted by a majority of the entire Board at any meeting of the Board of Directors, be filled or may be eliminated by reducing the number constituting the membership of such Committee, provided, however, that the membership of any Committee shall not be reduced to less than three. Notice of the time and place of any meeting of the Executive Committee shall be given in the manner provided in Section 8 of this Article for the giving of notice of meetings of the Board of Directors. Meetings of any other Committee designated pursuant to this Section 9 shall be held in such manner, and at such times and places, and upon such notice, if any, as shall be provided in the resolution of the Board creating such Committee. SECTION 10. Compensation: Each director who is not a full-time employee of the Corporation or of any consolidated subsidiary shall be paid such compensation for serving as a director as the Board of Directors may, from time to time, determine. Section 11. Action by Unanimous Written Consent: Any action required to be or permitted to be taken by the Board of Directors or any Committee thereof may be taken without a meeting if all members of the Board of Directors or the Committee consent in writing to the adoption of a resolution authorizing the action. The resolution and written consents thereto by the members of the Board of Directors or Committee shall be filed with the minutes of the proceedings of the Board of Directors or Committee. Section 12. Participation in Meetings by Means of Conference Telephone: Any one or more members of the Board of Directors or any Committee thereof may participate in a meeting of the Board of Directors or Committee by means of a conference telephone or similar communication equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. ARTICLE III OFFICERS SECTION 1. Executive Officers: The Officers of the Corporation shall consist of a Chairman of the Board of Directors, a President, a Vice President-Finance, one or more other Vice Presidents, one or more of whom may also be designated Executive Vice President or Senior Vice President, a Secretary, a Treasurer and a Controller, all of whom shall be elected annually by the Board at a meeting following the Annual Meeting of the shareholders. The Board may also elect one or more Assistant Treasurers and one or more Assistant Secretaries and such subordinate officers and agents of the Corporation as it may from time to time determine. The same person may hold two or more offices, except that the Chairman of the Board and President shall not hold the office of Secretary. SECTION 2. Duties of Chairman of the Board: The Chairman of the Board shall be a director and shall be chief executive officer of the Corporation and, subject to the direction of the Board, shall exercise general supervision over the business and affairs of the Corporation and shall perform such other duties as may be assigned to him from time to time by the Board. If the office of the President is not independently established, he shall perform all duties of that office. He shall preside at all meetings of the Board of Directors and shall also preside at all meetings of the shareholders of the Corporation. SECTION 3. Duties of President: The President shall be a director and shall be the chief operating officer of the Corporation and, subject to the direction of the Board of Directors and the Chairman of the Board, shall direct and supervise the business operations of the Corporation and shall perform such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board may assign to him. The office of the President will normally be vested in the Chairman of the Board, provided, however, that in the discretion of the Board of Directors, the position of President may be established independent of, but reporting to, the Chairman of the Board. SECTION 4. Duties of Vice President-Finance, and other Vice Presidents: The Vice President-Finance shall serve as principal financial officer of the Corporation and shall perform such other duties as shall from time to time be prescribed by the Board of Directors or assigned to him by the Chairman of the Board or by the President. Each other Vice President shall perform such duties as from time to time may be by the Board of Directors or assigned to him by the Chairman of the Board or the Officer to whom he reports. SECTION 5. Duties of Treasurer and Controller: The Treasurer shall have the care and custody of all the funds and securities of the Corporation and, in general, shall perform all the duties incident to the office of Treasurer including the appointment of depository and disbursement banks. The Controller shall have charge of the books of account of the Corporation and, in general, perform all the duties incident to the office of Controller. The Treasurer and the Controller shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, the President, or the Vice President-Finance may assign. SECTION 6. Duties of Secretary: The Secretary shall keep the minutes of the meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders, and shall attend to the giving and service of all notices for meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders and otherwise whenever required, except to the extent, that such duties shall have been specifically delegated to another officer by the Board of Directors or by the Chairman of the Board. He shall have the custody of such books and papers as the Board of Directors, the Chairman of the Board, or the President may provide. He shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, or the President may assign to him. SECTION 7. Assistant Officers: The Board of Directors may elect one or more Assistant Secretaries or one or more Assistant Treasurers. Each Assistant Secretary, if any, and each Assistant Treasurer, if any, shall have such authority and perform such duties as from time to time the Board of Directors may prescribe or the Chairman of the Board or the President may assign. SECTION 8. Subordinate Officers: The Board of Directors may elect such subordinate officers as it may deem desirable. Each such officer shall have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and prescribe the powers and duties thereof. SECTION 9. Surety Bonds of Officers: The Board of Directors may require from any officer of the Corporation a bond in such amount as it may determine for the faithful discharge of the duties of any such officer; such bond to be approved by the Board and to be obtained at the expense of the Corporation. SECTION 10. Compensation of Officers: The Chairman of the Board, with the advice of the President of the Corporation, shall have power to fix the compensation of all officers of the Corporation, except the Chairman of the Board, the President and the officers reporting directly to either of them. The Board of Directors shall have power to fix the compensation of the Chairman of the Board, the President and of the officers reporting directly to either of them. The Board of Directors may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Notwithstanding the foregoing, the Board of Directors may delegate to a Committee of the Board the responsibility of determining the incentive compensation and stock awards of the Chairman of the Board, the President and the officers reporting directly to either of them. SECTION 11. Vacancy: Any vacancy of an office occurring may be filled at any Regular or Special Meeting of the Board of Directors. SECTION 12. Removal of Officers: Any officer of the Corporation may be removed, with or without cause, by the vote of the Board of Directors at any meeting thereof. SECTION 13. Checks and Obligations: All notes and all checks, drafts, or other orders for the payment of money, and all endorsements thereof, executed on behalf of the Corporation shall be signed by any person or persons designated for the purpose either by the Board or by an officer or officers of the Corporation pursuant to authority delegated by the Board of Directors. SECTION 14. Execution of Contracts, Assignments, Deeds and other Documents: All contracts, agreements, assignments, transfers, guaranties, deeds, stock powers or other instruments of the Corporation may be executed and delivered by the Chairman of the Board, the President, or any Vice President or by such other officer or officers, or agent or agents, of the Corporation as shall be thereunto authorized from time to time either by the Board or by power of attorney executed by the Chairman of the Board, the President, any Senior Vice President, or by any person pursuant to authority granted by the Board; and the Secretary or any Assistant Secretary, the Treasurer or any Assistant Treasurer may affix the seal of the Corporation thereto and attest same. SECTION 15. Execution of Proxies: The Chairman of the Board, the President, or any Vice President or any other person designated by the Board of Directors, may authorize from time to time the execution and issuance of proxies to vote upon shares of stock of other corporations owned by the corporation, or authorize the execution of a consent to action taken or to be taken by such other corporation. All such proxies or consents may be signed in the name of the Corporation by any of the persons above- mentioned in this Section 15 or by any other person or persons designated for the purpose either by the Board of Directors or by power of attorney executed by any person pursuant to authority granted by the Board. SECTION 16. Facsimile Signatures: Any signature which is authorized by Section 13, 14 or 15 of this Article may be facsimile, if so determined by the Board of Directors, or by an officer or officers of the Corporation pursuant to authority delegated by the Board of Directors. ARTICLE IV CREATION OF DIVISIONS SECTION 1. Creation of Divisions: The Board of Directors may from time to time create divisions and may set apart to such divisions such aspects or portions of the business, affairs and properties of the Corporation as the Board may from time to time determine. Each division of the Corporation shall be organized and regulated as hereinafter provided in this Article IV. As used in the succeeding Sections of this Article, the term "Company" shall refer to any division of the Corporation. SECTION 2. Executive Officers of Company: The Chairman of the Board of the Corporation may appoint, with the advice of the President of the Corporation, as Executive Officers of the Company, a President, one or more Vice Presidents, appropriate Financial Officers and a Secretary and in his discretion, one or more Assistant Secretaries and Assistant Financial Officers and such subordinate officers as may from time to time be deemed desirable. Such officers shall be appointed as soon as practicable following the creation of the Company and thereafter shall hold office at the discretion of the Chairman of the Board of the Corporation. The same person may hold two or more offices of the Company, except the offices of President and Secretary of the Company, and any person holding an office of the Company may also be elected by the Board as an officer of the Corporation. Vacancies occurring in any office may be filled at any time by the Chairman of the Board of the Corporation, with the advice of the President of the Corporation. The Executive Officers and all other persons who shall serve the Company in the capacities set forth in this Article are hereby appointed agents of the Corporation with the powers and duties herein set forth. However, the authority of said agents shall be limited to matters related to the properties, business and affairs of the Company, and shall not extend to any other portion of the properties, business and affairs of the Corporation nor are such Executive Officers or other persons to be considered officers of the Corporation. SECTION 3. Authority of the Executive Officers of the Company: The President of the Company shall be the Chief Executive Officer of the Company. He shall exercise general supervision over the business, affairs and properties of the Company and shall be directly responsible to, and shall perform such other duties as may be assigned to him from time to time by, the Chairman of the Board or the assigned Officer or other employee of the Corporation to whom the President of the Company reports. All Executive Officers other than the President of the Company, and any subordinate officers, shall be directly responsible to the President of the Company and any Officer or other employee of the Corporation as the Chairman of the Board or the assigned Officer or other employee of the Corporation to whom the President of the Company reports shall direct. SECTION 4. Use of Divisional Names: In executing any document on behalf of any division of the Corporation, the name of such division shall be followed by the words "a division of General Signal Corporation." In any instance in which a division of the Corporation shall use the name of the division followed by the words, "a unit of General Signal," such words shall have the same meaning as "a division of General Signal Corporation." ARTICLE V INDEMNIFICATION SECTION 1. Indemnification: Except to the extent expressly prohibited by the New York Business Corporation Law, the Corporation shall indemnify each person made or threatened to be made a party to any action or proceeding, whether civil or criminal, and whether by or in the right of the Corporation or otherwise, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation, or serves or served at the request of the Corporation any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity while he or she was such a director or officer (hereinafter referred to as "Indemnified Person"), against judgments, fines, penalties, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred in connection with such action or proceeding, or any appeal therein, provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such Indemnified Person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and deliberate dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. The Corporation shall advance or promptly reimburse upon request any Indemnified Person for all expenses, including attorneys' fees, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if such Indemnified Person is ultimately found not be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or eimbursed exceed the amount to which such Indemnified Person is entitled. Nothing herein shall limit or affect any right of any Indemnified Person otherwise than hereunder to indemnification or expenses, including attorneys' fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise. Anything in these by-laws to the contrary notwithstanding, no elimination of this by- law, and no amendment of this by-law adversely affecting the right of any Indemnified Person to indemnification or advancement of expenses hereunder shall be effective until the 60th day following notice to such Indemnified Person of such action, and no elimination of or amendment to this by-law shall thereafter deprive any Indemnified Person of his or her rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day. The Corporation shall not, except by elimination or amendment of this by-law in a manner consistent with the preceding paragraph, take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any Indemnified Person to, indemnification in accordance with the provisions of this by-law. The indemnification of any Indemnified Person provided by this by-law shall be deemed to be a contract between the Corporation and each Indemnified Person and shall continue after such Indemnified Person has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnified Person's heirs, executors, administrators and legal representatives. If the Corporation fails timely to make any payment pursuant to the indemnification and advancement or reimbursement of expenses provisions of this Article V and an Indemnified Person commences an action or proceeding to recover such payment, the Corporation in addition shall advance or reimburse such Indemnified Person for the legal fees and other expenses of such action or proceeding. The Corporation is authorized to enter into agreements with any of its directors or officers extending rights to indemnification and advancement of expenses to such Indemnified Person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of such Indemnified Person pursuant to this by-law, it being expressly recognized hereby that all directors or officers of the Corporation, by serving as such after the adoption hereof, are acting in reliance hereon and that the Corporation is estopped to contend otherwise. Persons who are not directors or officers of the Corporation shall be similarly indemnified and entitled to advancement or reimbursement of expenses to the extent authorized at any time by the Board of Directors. In case any provision in this by-law shall be determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford indemnification and advancement of expenses to its directors or officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law whether arising from alleged or actual occurrences, acts or failures to act occurring before or after the adoption of this Article V. For purposes of this by-law, the Corporation shall be deemed to have requested an Indemnified Person to serve an employee benefit plan where the performance by such Indemnified Person of his or her duties to the Corporation also imposes duties on, or otherwise involves services by, such Indemnified Person to the plan or participants or beneficiaries of the plan, and excise taxes assessed on an Indemnified Person with respect to an employee benefit plan pursuant to applicable law shall be considered indemnifiable fines. For purposes of this by-law, the term "Corporation" shall include any legal successor to the Corporation, including any corporation which acquires all or substantially all of the assets of the Corporation in one or more transactions. ARTICLE VI CAPITAL STOCK SECTION 1. Certificates of Capital Stock: All certificates of stock of the Corporation, both preferred and common, shall be separately numbered and the facsimile signature of the Chairman of the Board, or the President, or a Vice President and the facsimile counter-signature of the Treasurer, or an Assistant Treasurer, or the Secretary or an Assistant Secretary and the facsimile seal of the Corporation shall appear thereon, all in manner as authorized under the laws of the State of New York and approved by the New York Stock Exchange. SECTION 2. Transfer Agent and Registrar: All certificates of stock of the Corporation shall be issued only through a Transfer Agent of the Corporation's stock, consisting of a Bank or Trust Company, duly appointed by the Board of Directors to act as Transfer Agent and bear the counter-signature of the Registrar of the Corporation's stock duly appointed by the Board of Directors to act as Registrar. Endorsement to the foregoing effect shall be made upon all certificates issued. SECTION 3. Transfer of Shares: Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or pursuant to a power of attorney duly executed and filed with the Transfer Agent, upon the surrender of the certificate representing the shares to be transferred, properly endorsed. All certificates surrendered for transfer shall be cancelled by the Transfer Agent. SECTION 4. Lost, Destroyed or Stolen Certificates: No certificate for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation, if the Board of Directors shall so require, of a bond of indemnity upon such terms and secured by such surety as the Board of Directors may in its discretion determine to be satisfactory. SECTION 5. Seal of Corporation: The seal of the Corporation shall be circular in form and bear the words "GENERAL SIGNAL CORPORATION" next inside the line of its circumference and the words "Incorporated June 13th, 1904" in the center within the line of an inner circle. ARTICLE VII AMENDMENTS SECTION 1. Amendments: Except as otherwise provided by the Certificate of Incorporation, any provision or provisions of these By-Laws, including any amendment thereof, regardless of the manner in which any such provision or amendment may have been adopted, may be deleted or amended in any respect at any Annual Meeting of the shareholders, or at any Special Meeting called for that purpose, by a majority of the votes cast at such meeting in person or by proxy by the holders of shares entitled to vote thereon, or with the exception of this Section 1 of Article VII, by a majority of the Board of Directors then in office at any meeting thereof. ARTICLE VIII WAIVER OF NOTICE SECTION 1. Waiver of Notice: Any notice required by these By-Laws may be waived in writing, either before or after the action requiring such notice is taken. EX-10.13 10 December 8, 1995 PERSONAL & CONFIDENTIAL Mr. Joel S. Friedman 320 Wildwood Road Stamford, Connecticut 06903 Dear Joel: The severance provisions offered to you on behalf of General Signal are listed below. These have assumed that you are retiring based on your comments. 1. Termination of Active Employment You will remain on the payroll as an active employee through December 31, 1995. During that time, you will be able to answer questions and contribute to an orderly transition of your duties and responsibilities. It should not be necessary for you to come into the office on a regular basis to accomplish this transition. 2. Incentive Compensation You will be eligible for the 1995 Incentive Compensation payment as determined and paid in 1996. 3. Transition Payment Since you do not wish to take advantage of outplacement services, you will be paid a one-time lump sum of $84,000. In addition, title for the company car which you are now using will be transferred to you as soon as practicable in January, 1996. 4. Pension Benefits Effective December 31, 1995, you will elect early retirement under the qualified Corporate Retirement Plan of the Company (supplemented by the Company's Benefit Equalization Plan to the extent necessary). Your pension benefits will commence on January 1, 1996 in the form you elect. It is understood that, provided you meet the life expectancy requirement, you will be able to receive your pension benefits in a lump sum distribution. Under the Corporate Retirement Plan, your pension calculation will be based on your age and service as of January 1, 1996 and the highest earnings years would be 1991-1995. In addition, the Company will supplement the pension benefits payable to you under the Corporate Retirement Plan and under the Company s Benefit Equalization Plan (the Pension Plans ), by providing to you the additional pension benefits that you would have been entitled to receive under the Pension Plans if you remained in employment with the Company until November 1, 1999 by giving recognition to such additional age and service credit. Such supplemental benefits will be treated as additional benefits under the Benefit Equalization Plan and will commence on November 1, 1999 in the form you elect. 5. Severance Payment A severance payment of $525,000 will be paid to you through the bi-weekly payroll for 18 months. If you would prefer that this payment be extended for up to four years, please contact Liz Conklyn to make these arrangements. Because you will not be an employee during this period, you will not be able to participate in the Company s qualified savings plan nor accrue additional credit for the qualified pension plan. 6. Deferred Compensation Plan You will be paid all Company matching contributions that will be forfeited under the Company s Deferred Compensation Plan made in respect to deferrals prior to December 31, 1995 in January 1996. You will not be permitted to make any contributions to the Deferred Compensation Plan or to have any Company matching contributions credited on your behalf with respect to any periods after December 31, 1995. 7. Stock Options Upon retirement, you will have five years (or the expiration of the term if that comes first) to exercise your vested options. Options that have been held by you for one year but not completely vested will continue to vest according to their original vesting schedule and be exercisable as indicated above. I will request that the Personnel and Compensation Committee consider extending this treatment to options that have been held by you for less than one year at the December 14, 1995 meeting (such options normally terminate at retirement) by authorizing the Company to amend such option agreements. 8. Confidential Information You will keep confidential all confidential and trade secret information concerning the Company, its businesses, and its prospects which has become known to you. 9. Waiver and Release In consideration of the terms of the severance agreement and the payments referred to in it, you waive and release any and all rights or claims that you have, as of the date of the execution of the agreement, against the Company, its affiliated companies or any of their respective officers, directors, agents, employees, successors or assigns. The rights and claims so waived and released shall include, but not be limited to, those arising under local, state and federal statute or common law (including claims of breach of promise and wrongful discharge), and any law relating to sex, age, race, religious, handicap or national origin discrimination (including any claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act and the Older Worker s Benefit Protection Act). Please feel free to call either me or Liz Conklyn if you have any questions. After your review, if you agree to the terms outlined in this letter, please sign and return to me the enclosed copy of this letter. Sincerely, /s/ Michael Lockhart ------------------- Michael D. Lockhart MDL:cm /s/ Joel S. Friedman Agreed to: _____________________________ Joel S. Friedman December 21, 1995 Date: _____________________________ EX-10.12 11 SEPARATION AGREEMENT AND GENERAL RELEASE THIS SEPARATION AGREEMENT AND GENERAL RELEASE is made and entered into as of this 19th day of October, 1995 by and between EDMUND M. CARPENTER (the "Executive") and GENERAL SIGNAL CORPORATION, a New York corporation (the "Company"). W I T N E S S E T H : WHEREAS, the Executive has been employed by the Company as its Chairman and Chief Executive Officer and in other capacities; and WHEREAS, on October 19, 1995 the Executive ceased to be the Chairman and Chief Executive Officer of the Company, ceased all other officer and employee positions with the Company and its subsidiaries, and resigned his membership on the Boards of Directors and all Committees of the Company and its subsidiaries; and WHEREAS, the Executive and the Company desire to settle fully and finally all matters between them to date, including, but in no way limited to, any issues that might arise out of the Executive's employment or the termination of his employment; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto, intending to be legally bound hereby, agree as follows: 1. The Company shall pay to the Executive, in accordance with the Company's standard payroll practices, his base salary (at the rate in effect on October 19, 1995) until the earlier of (i) December 31, 1996 or (ii) the date on which the Executive commences substantially full-time employment as an employee with any employer. The Executive shall notify the Company immediately upon his acceptance of any employment prior to December 31, 1996. The Executive has no duty or obligation to seek any new employment. 2. The Executive shall receive a cash bonus for 1995 in an amount equal to the product of (i) $612,692.37, multiplied by (ii) the average percentage of target bonuses treated as earned by other corporate officers participating in the General Signal Corporation Incentive Compensation Plan (the "Bonus Plan") for 1995 (but excluding any guaranteed minimum bonus received by any corporate officer pursuant to a contractual obligation of the Company if such guaranteed minimum bonus represents a greater percentage of the applicable target bonus than the percentage determined pursuant to this subclause (ii) without regard to any such minimum bonus or bonuses), multiplied by (iii) .8. Said bonus shall be paid to the Executive at the same time that other 1995 bonuses are paid under the Bonus Plan. 3. The Company shall supplement the benefits payable in respect of the Executive under the Corporate Retirement Plan of General Signal Corporation and under the General Signal Corporation Benefit Equalization Plan, as augmented pursuant to the Executive's letter agreement with the Company dated April 15, 1988 (collectively, the "Pension Plans"), by providing to the Executive (or to the Executive's beneficiary if applicable under the applicable form of payment) the additional benefits that he would have been entitled to receive under the Pension Plans if he remained in employment with the Company until December 31, 1996 earning base salary at the rate in effect on October 19, 1995, received the cash bonus payment described in Section 2 above, and retired on December 31, 1996; provided, however, that the benefits payable under the Pension Plans as modified by this Section 3 shall be reduced by the actuarially equivalent value (as determined in good faith by the Company and the enrolled actuary for the General Signal Corporation Benefit Equalization Plan using the actuarial assumptions and tables that apply to the respective Pension Plans) of the benefits payable in respect of the Executive under the ITT pension plans. Such supplemental benefits shall be treated as additional benefits under the General Signal Corporation Benefit Equalization Plan and shall be payable in the same form and commencing at the same time as benefits payable under said Benefit Equalization Plan. 4. In respect of all stock options granted to the Executive under the General Signal Corporation 1985 Stock Option Plan, under the General Signal Corporation 1989 Stock Option and Incentive Plan and under the General Signal Corporation 1992 Stock Incentive Plan and still outstanding on October 19, 1995 (the "Options"), the Executive (or, in the event of his death, the person entitled to exercise the applicable Option following his death) shall have the right to exercise such Options until the earlier of (i) October 19, 2000 or (ii) the expiration of the stated option term of the applicable Option (without regard to and without giving effect to any earlier expiration that could result from the Executive's ceasing to be the Chief Executive Officer of the Company, but giving effect to any earlier expiration by reason of the Executive's death), provided, however, that in no event may the Executive exercise any such Option unless it either was exercisable on October 19, 1995 or became exercisable pursuant to its terms prior to January 1, 1997 (as if he remained in employment with the Company through December 31, 1996) and on or before the date of exercise. The Executive shall have no right to exercise any Option that would not have become exercisable prior to January 1, 1997 if he had remained in employment through and continuing beyond December 31, 1996. By executing this Agreement, the Company and the Executive agree that all of the Executive's Options and the related option agreements are amended in accordance with the foregoing provisions of this Section 4, and that all provisions of such Options and option agreements shall remain in full force and effect except as so amended. 5. The Executive shall continue to vest in all Company matching contributions under the General Signal Corporation Deferred Compensation Plan made in respect of deferrals prior to October 20, 1995 as if he remained in employment with the Company until October 19, 1996. The Executive shall not be permitted to make any contributions to said Deferred Compensation Plan or to have any Company matching contributions credited on his behalf with respect to any periods after October 19, 1995. 6. The Executive has elected or will elect to convert his coverage under the Company's group-term life insurance program to an individual universal life insurance policy with a death benefit equal to $1,580,000. The Company shall pay the Executive's premiums for such policy, but not beyond the earlier of (i) December 31, 1996 or (ii) the date on which the Executive commences substantially full-time employment as an employee with any employer. If the Executive dies prior to the earlier of the dates set forth in the preceding sentence, any remaining payments under Section 1 or Section 2 of this Agreement shall be paid to his estate or his personal representative at the time or times such payments would have been made if the Executive had not died. In addition, if the Executive elects continuation coverage under any of the Company's group health plans pursuant to Part 6 of Subtitle B of Title I of the Executive Retirement Income Security Act of 1974, as amended ("ERISA"), the Company shall pay the difference between the full amount of the Executive's premiums for such continuation coverage and the amount that the Executive would have been required to pay for coverage if he had remained an employee of the Company, but not beyond the earlier of (i) December 31, 1996 or (ii) the date on which the Executive commences substantially full- time employment as an employee with any employer. The Executive shall pay the balance of such premiums, and such coverage shall continue for the period provided under ERISA even though the Company may cease to pay premiums under this Section 6 (provided the Executive pays all the required premiums and otherwise satisfies the requirements for continuation coverage). 7. Within 60 days after the execution of this Agreement, the Company shall convey to the Executive ownership of the automobile that the Company was providing for the use of the Executive on October 19, 1995. 8. The Company shall reimburse the Executive for the reasonable expenses (not including income taxes) incurred by the Executive in renting an office in the Stamford/Greenwich, Connecticut area and in obtaining shared secretarial, reception and similar support services, but not beyond the earlier of (i) December 31, 1996 or (ii) the date on which the Executive commences substantially full-time employment as an employee with any employer; provided, however, that any expenses pursuant to this Section 8 shall be reimbursed by the Company only to the extent the Company has approved in writing the amount of such expenses prior to their being incurred. The Company's response to a request for approval of such expenses shall not be unreasonably delayed. 9. The Executive understands and agrees that the consideration described in the preceding Sections of this Agreement is more than the Executive would otherwise be entitled to under the Company's existing plans and policies. Except as otherwise expressly provided in this Agreement, the Executive after October 19, 1995 shall be entitled to none of the benefits or other perquisites of employment extended to employees by the Company, and the Executive shall have no right to any benefits under any plan, program, policy or arrangement of the Company which are conditioned on retirement or that would be available only if termination of employment occurred after October 19, 1995. The payments and benefits provided and to be provided to the Executive under Sections 3, 4 and 5 of this Agreement shall be unaffected by any new employment of the Executive after the effective date of this Agreement. 10. The Executive, to the best of his knowledge, has returned or will as soon as practicable (but in any event no later than 30 days after execution of this Agreement) return to the Company all Company Information and related reports, files, memoranda, and records; credit cards, cardkey passes; door and file keys; computer access codes; software; and other physical or personal property which the Executive received or prepared or helped prepare in connection with his employment and which are in his actual possession or control on the date of this Agreement. The Executive has not, to the best of his knowledge, retained and will not intentionally retain any copies, duplicates, reproductions, or excerpts thereof. The term "Company Information" as used in this Agreement means all information relating to the Company or any of its subsidiaries which is not already in the public domain and which is regarded by the Company as confidential, proprietary or private in nature, including, without limitation, information received from third parties under confidential conditions, technical, business, or financial information, and other information concerning the business, contemplated future business prospects, and other affairs of the Company. The Company shall not treat information as confidential, proprietary or private for purposes of this Agreement if it has treated the same information as not being confidential, proprietary or private with respect to any other former employee. 11. The Executive agrees that in the course of his employment with the Company, he has acquired Company Information as defined in Section 10. The Executive understands and agrees that such Company Information has been disclosed to the Executive in confidence and for Company use only. Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power, or as is reasonably necessary in connection with any adversarial process between the Executive and the Company, the Executive understands and agrees that he (i) will keep Company Information confidential at all times after his employment with the Company, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on the Executive's own behalf, or on behalf of any third party. In view of the nature of the Executive's employment and the nature of Company Information which the Executive has received during the course of his employment, the Executive agrees that any unauthorized disclosure to third parties of Company Information or other violation, or threatened violation, of this Agreement would cause irreparable damage to the trade secret status of Company Information and to the Company, and that, therefore, the Company shall be entitled to an injunction prohibiting the Executive from any such disclosure, attempted disclosure, violation, or threatened violation. When Company Information becomes generally available to the public other than by the Executive's acts or omissions, it is no longer subject to these restrictions. However, Company Information shall not be deemed to come under this exception merely because it is embraced by more general information which is or becomes generally available to the public. The undertakings set forth in this Section 11 shall survive the termination of this Agreement or other arrangements contained in this Agreement. 12. Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power or as is reasonably necessary in connection with any adversarial process between the Executive and the Company, the Executive agrees and promises that he will not make any oral or written statements or reveal any information to any person, company, or agency which may be construed to be negative, disparaging or damaging to the reputation or business of the Company, its subsidiaries, directors, officers or affiliates, or which would interfere in any way with the business relations between the Company or any of its subsidiaries or affiliates and any of their customers or potential customers. 13. Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power or as is reasonably necessary in connection with any adversarial process between the Executive and the Company, the Company agrees and promises that neither it nor its directors or officers will make any oral or written statements or reveal any information to any person, company, or agency which may be construed to be negative, disparaging or damaging to the reputation or business of the Executive or any member of his family or which would interfere in any way with the future business relationships of the Executive. 14. The Executive represents and agrees that, unless compelled by legal process or as is reasonably necessary in connection with any adversarial process between the Company and the Executive, he will keep the terms of this Agreement completely confidential, and that he will not hereafter disclose any information concerning this Agreement to anyone except his financial, legal or tax advisor(s), his accountants, and his immediate family; provided that these individuals agree to keep said information confidential and not disclose it to others. 15. The Company represents and agrees that, unless compelled by legal process or applicable legal requirements, or as is reasonably necessary in connection with any adversarial process between the Company and the Executive, it will keep the terms of this Agreement completely confidential, and that it will not hereafter disclose any information concerning this Agreement to anyone except its financial, legal or tax advisor(s), its accountants, its directors, and those employees of the Company who have a need to know about its terms; provided that these individuals agree to keep said information confidential and not disclose it to others; and provided further that the Executive shall have the opportunity to review and comment upon any proposed public disclosure pursuant to applicable legal requirements with respect to any of the terms of this Agreement. 16. In consideration of the payments and benefits to the Executive under this Agreement (including, without limitation, the right to exercise Options as set forth in Section 4 hereof), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Executive, the Executive shall not, during the Noncompetition Period (as hereinafter defined), directly or indirectly, act as a director, officer, employee, manager, trustee, agent, partner, advisor, joint venturer, or consultant of, with or to, or otherwise engage in, any business or businesses that actually compete to a substantial extent with those businesses the Company and its subsidiaries engaged in on October 19, 1995 which competition is reasonably likely to have a material adverse effect on the Company and its subsidiaries taken as a whole. For purposes of this Section 16, the "Noncompetition Period" shall mean the period beginning on October 19, 1995 and ending on December 31, 1997. 17. For a period of five years from the date of this Agreement (the "Restricted Period"), except as specifically requested in writing by the Company, the Executive, singly or with any other person or directly or indirectly, shall not propose, enter into, or agree to enter into, or encourage any other person to propose, enter into, or agree to enter into (i) any form of business combination, acquisition or other transaction relating to the Company, (ii) any form of restructuring, recapitalization or similar transaction with respect to the Company, or (iii) any demand, request or proposal to amend, waive or terminate any provision of this Section 17 of this Agreement. Furthermore, during the Restricted Period, except as specifically requested in writing by the Company, the Executive shall not, singly or with any other person or directly or indirectly, (1) acquire, or offer, propose or agree to acquire, by tender offer, purchase or otherwise, any voting securities of the Company except through the exercise of Options, (2) make, or in any way participate in, any solicitation of proxies or written consents with respect to voting securities of the Company (it being understood that the mere execution of a proxy or written consent shall not be treated as constituting participation in such a solicitation), (3) become a participant in any election contest with respect to the Company, (4) seek to influence any person with respect to the voting or disposition of any voting securities of the Company, (5) demand a copy of the Company's list of stockholders or its other books and records, (6) participate in or encourage the formation of any partnership, syndicate or other group that owns or seeks or offers to acquire beneficial ownership of any voting securities of the Company or that seeks to affect control of the Company or for the purpose of circumventing any provision of this Agreement or (7) otherwise act to seek or to offer to control or influence, in any manner, the management, Board of Directors or policies of the Company. During the period beginning on October 19, 1995 and ending on December 31, 1997, the Executive shall not directly or indirectly solicit for employment any of the current directors, officers or managers of the Company. 18. In consideration of the payments and benefits to the Executive under this Agreement (including, without limitation, the right to exercise Options as set forth in Section 4 hereof), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Executive, the Executive knowingly, voluntarily and unconditionally hereby forever waives, releases and discharges, and covenants never to sue on, any and all claims, liabilities, causes of actions, judgments, orders, assessments, penalties, fines, expenses and costs (including without limitation attorneys' fees) and/or suits of any kind arising out of any actions, events or circumstances before the date of execution of this Agreement ("Claims") which the Executive has, ever had or may have, including, without limitation, any Claims arising in whole or in part from the Executive's employment or the termination of the Executive's employment with the Company or the manner of said termination; provided, however, that this Section 18 shall not apply to any of the obligations of the Company specifically provided for in this Agreement. This Agreement is intended as a full and final settlement and compromise of each, every and all Claims of every kind and nature, whether known or unknown, which have been or could be asserted against the Company and/or any of its subsidiaries, shareholders, officers, directors, agents, and employees, past or present, and their respective heirs, successors and assigns (collectively, the "Releasees"), including, without limitation -- (1) any Claims arising out of any employment agreement or other contract, side-letter, resolution, promise or understanding of any kind, whether written or oral or express or implied; (2) any Claims arising under the Age Discrimination in Employment Act ("ADEA"), as amended, 29 U.S.C. 621 et seq.; and (3) any Claims arising under any federal, state, or local civil rights, human rights, anti- discrimination, labor, employment, contract or tort law, rule, regulation, order or decision, including, without limitation, the Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq., and Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., and as each of these laws have been or will be amended, except to the extent that any governmental authority or other third party, i.e., other than one of the Releasees, files a charge or institutes an investigation, lawsuit or any proceeding against the Executive based on any event, occurrence or omission during the period of the Executive's employment with the Company, in which case the Executive will be permitted to implead or bring a court action against the Company and/or any of the Releasees for indemnification of any liability or other appropriate remedy, provided such impleader or court action would be available but for this Agreement. Notwithstanding anything to the contrary in this Section 18, the Executive does not release (i) any claim he may have under any employee benefit plan in which he was a participant during his employment with the Company for the payment of a benefit thereunder to which he would be entitled upon his termination of employment on October 19, 1995 in accordance with the terms of such plan or (ii) any claim that he may have under this Agreement. 19. The Executive understands that this Agreement affects significant rights and represents and agrees that he has carefully read and fully understands all of the provisions of this Agreement, that he is voluntarily entering into this Agreement, and that he has been advised to consult with and has in fact consulted with legal counsel before entering into this Agreement. In particular, the Executive acknowledges that he has been given twenty-one (21) days during which time he has carefully considered and voluntarily approved the terms of this Agreement. The Executive understands that, pursuant to the provisions of the ADEA, he shall have a period of seven (7) days from the date of execution of this Agreement during which he may revoke this Agreement via hand delivery of a notice of revocation to the Company's offices to the attention of Edgar J. Smith, Jr., General Counsel. This Agreement shall not become effective or enforceable until the revocation period has expired. 20. In the event of any breach by the Executive of this Agreement, the Executive shall forfeit (to the extent permitted by law) all payments and benefits hereunder (including, without limitation, payments and benefits already received, any profits realized with respect to shares of Company stock acquired upon exercise after January 19, 1996 of an Option that was exercisable on October 19, 1995, and any profits realized with respect to shares of Company stock acquired upon exercise after October 19, 1995 of an Option that was not exercisable on October 19, 1995) to the extent in excess of the payments and benefits he would have received following termination of his employment on October 19, 1995 in the absence of this Agreement. To the extent that any payments or benefits already received or any profits with respect to Company stock are forfeited, the Executive shall promptly pay all such forfeited payments and benefits and all such forfeited profits to the Company. In addition, either party to this Agreement may seek other legal and equitable relief in the event of any breach of this Agreement by the other party. 21. The Company's obligations to make payments, to transfer property, and to provide benefits hereunder shall be subject to the Executive's satisfaction of any applicable withholding requirements. 22. Nothing in this Agreement shall be construed as limiting or in any other way affecting the Executive's rights to indemnification under the Company's charter or bylaws or under the Indemnification Agreement dated May 1, 1988 between the Company and the Executive. Notwithstanding any other provision of this Agreement, to the extent that the Executive is by reason of his status as an officer, director or employee of the Company or any of its subsidiaries prior to October 19, 1995, a witness or interviewed or deposed as a potential witness in any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative, or investigative, other than one initiated by the Executive, the Executive will be indemnified by the Company against all expenses actually and reasonably incurred by the Executive in connection therewith or as a result thereof. In addition, for 1995 and for at least six years thereafter, the Company agrees to include the Executive within the coverage of any directors' and officers' liability insurance policy covering officers and directors of the Company generally with respect to his services to the Company as an officer and director through October 19, 1995. 23. The Company shall from time to time designate a specific officer of the Company who shall be the principal contact at the Company for the Executive in matters dealing with the operation of this Agreement and shall notify the Executive of such designation. Until further notice to the Executive, such designatee shall be Elizabeth D. Conklyn. 24. This Agreement constitutes the entire understanding and agreement between the Company and the Executive with regard to all matters herein and supersedes all prior oral and written agreements and understandings of the parties with respect to such matters, whether express or implied. There are no other agreements, conditions, or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only in a writing of even or subsequent date, signed by all parties hereto. 25. If any term or provision of this Agreement, or the application thereof to any person or circumstances, will to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such terms to persons or circumstances other than those as to which it is invalid or unenforceable, will not be affected thereby, and each term of this Agreement will be valid and enforceable to the fullest extent permitted by law. 26. This Agreement shall be construed and enforced in accordance with the laws of the State of Connecticut without reference to its choice of law provisions and shall be binding upon the parties and their respective heirs, executors, successors and assigns. 27. This Agreement does not constitute any admission of wrongdoing, or evidence thereof, on the part of any parties hereto or the Releasees. Except as required by court order, or to enforce the terms of this Agreement, this Agreement may not be used in any court or administrative proceeding. 28. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as of the date first above written. GENERAL SIGNAL CORPORATION /s/ Michael Lockhart By:____________________________ Its WITNESS: /s/ Mark Hill /s/ Edmund M. Carpenter _____________________ _______________________________ Edmund M. Carpenter EX-10.14 12 AGREEMENT AGREEMENT dated the 7th day of November, 1995, between GENERAL SIGNAL CORPORATION (hereinafter the "Corporation") and GEORGE FALCONER, (hereinafter "Falconer"). 1. Falconer will retire effective February 1, 1996. 2. Consultation Compensation. (a) During the period February 1, 1996 through January 31, 1997, Falconer will be compensated by the Corporation at the rate of $100,000.00 per annum for consulting services, payable monthly commencing February 1, 1996. (b) For the year January 1, 1995 through December 31, 1995, Falconer will be fully included in the Company's Incentive Compensation Program as though he had worked full time throughout the year. His bonus will be on the same basis as those employee officers on his level. (c) The parties acknowledge that as a consultant, Falconer will be an independent contractor and shall receive a 1099 statement at year end. 3. Automobile. The Corporation shall transfer title to the Company car Falconer presently uses free and clear of all liens and encumbrances to Falconer on February 1, 1996. Falconer will be responsible for income tax liability arising out of this transfer, if any. Falconer will pay all other taxes including but not limited to all sales and use taxes arising by virtue of this transfer, if any. 4. Consulting Services and Expenses Incurred by Falconer in Connection Therewith. Falconer's consulting services will be reasonably related to his previous work experience with the Corporation, and will be reasonable in time and duration and performed only as authorized and requested by the Chief Executive Officer of the Corporation. Falconer will be reimbursed for reasonable business expenses associated with his consulting services by the Corporation. It is understood that Falconer will pre-clear the particular expenses with the Chief Executive Officer of the Corporation before undertaking those consulting services, and the Corporation agrees not to unreasonably withhold consent to same. 5. Death or Disability of Falconer. In the event that Falconer dies, or becomes permanently or partially disabled, during the period February 1, 1996 through January 31, 1997, all rights to consulting payments shall cease. 6. In consideration of the Corporation's compliance with its obligations under this Agreement, Falconer agrees as follows: (a) His last day of active day-to-day employment with the Corporation will be January 31, 1996. (b) Not to disclose, except with the Corporation's prior written consent, any trade secret including marketing strategy, sales strategy, or confidential and proprietary information that relates in any way to any Corporation actual or anticipated business, research, development, product, sales, financial or human resource activity that he learned of as a result of being an employee of the Company or otherwise. (c) Not to make slanderous remarks about the Corporation, its products or employees; provided that, if subpoenaed to give testimony, he shall not be prevented from giving truthful testimony. (d) Waives and releases any and all rights or claims that he has, as of the date of the execution of this Agreement, against the Corporation, its affiliated companies or any of their respective officers, directors, agents, employees, successors or assigns. The rights and claims so waived and released shall include, but not be limited to, those arising under local, state and federal statute or common law (including claims of breach of promise and wrongful discharge), and any law relating to sex, age, race, religious, handicap or national origin discrimination (including any claims under Title VII of the Civile Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination Employment Act and the Older Worker's Benefit Protection Act). 7. The Corporation and Falconer agree that this Agreement supersedes any and all prior agreements between them with respect to his early retirement, and this Agreement shall not be modified or altered except in writing by Falconer and a duly authorized representative of the Corporation. 8. The Corporation and Falconer agree that the purpose of this Agreement is to amicably conclude the employment relationship of the parties as well as to define the rights and obligations of the parties during the life of this Agreement. General Signal further agrees that Falconer shall be entitled to any and all medical, dental, and life insurance benefits which are available to other retirees of General Signal in Falconer's same or similar job level, subject to General Signal's retained right to change, suspend, or terminate such benefits for any or all classes of retirees. 9. The individual executing this Agreement on behalf of the Corporation represents that he is authorized to enter into this Agreement. 10. In the event of a breach of this Agreement by any party, the successful party in any litigation shall be entitled to reasonable attorneys fees from the breaching party. 11. Falconer is advised to consult with an attorney prior to executing this Agreement. By signing this Agreement, Falconer acknowledges that he was afforded a period of at least 21 days within which to consider this Agreement, that he has had sufficient opportunity to consult with the advisors of his choice, and that he has freely, knowingly and voluntarily entered into this Agreement. 12. To enter into this Agreement, Falconer must execute it by signing and dating it below. Falconer may revoke this Agreement during the seven days after his execution of it. Unless revoked, this Agreement shall become effective and enforceable on the eighth day after it is executed by Falconer. 13. This Agreement shall be governed by the laws of the State of New York. 14. If any provision of this Agreement is contrary to, prohibited by, or deemed invalid under any applicable laws or regulations, then such provision shall be deemed severed and deemed omitted but shall not invalidate the remaining provisions hereof. Dated: Stamford, Connecticut November 7, 1995 GENERAL SIGNAL CORPORATION By: ______________________ /s/ George Falconer __________________________ GEORGE FALCONER -----END PRIVACY-ENHANCED MESSAGE-----